[Congressional Bills 104th Congress]
[From the U.S. Government Publishing Office]
[S. 168 Introduced in Senate (IS)]







104th CONGRESS
  1st Session
                                 S. 168

   To ensure individual and family security through health insurance 
                      coverage for all Americans.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                            January 5, 1995

  Mr. Kennedy introduced the following bill; which was read twice and 
         referred to the Committee on Labor and Human Resources

_______________________________________________________________________

                                 A BILL


 
   To ensure individual and family security through health insurance 
                      coverage for all Americans.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled, 

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Affordable Health 
Care for All Americans Act''.
    (b) Table of Contents.--The table of contents of this Act is as 
follows:

                     TITLE I--HEALTH CARE SECURITY

      Subtitle A--Universal Coverage and Individual Responsibility

                       Part 1--Universal Coverage

Sec. 1001. Entitlement to health benefits.
Sec. 1002. Individual responsibilities.
Sec. 1003. Protection of consumer choice.
Sec. 1004. Applicable health plan providing coverage.
Sec. 1005. Treatment of other nonimmigrants.
Sec. 1006. Effective date of entitlement.
            Part 2--Treatment of Families and Special Rules

Sec. 1011. General rule of enrollment of family in same health plan.
Sec. 1012. Treatment of certain families.
Sec. 1013. Multiple employment situations.
                          Subtitle B--Benefits

Sec. 1101. Provision of comprehensive benefits by plans.
Sec. 1102. Provision of items or services contrary to religious belief 
                            or moral conviction.
Sec. 1103. Balance billing.
                    Subtitle C--State Role in Reform

Sec. 1200. Participating State.
                      Part 1--State Market Reform

Sec. 1201. Establishment of State market reform programs.
Sec. 1202. Certification of insured health plans.
Sec. 1203. Establishment of community rating areas.
Sec. 1204. Procedures for certification of purchasing cooperatives.
Sec. 1205. Coordination among purchasing cooperatives.
Sec. 1206. Preparation of information concerning plans and purchasing 
                            cooperatives.
Sec. 1207. Risk adjustment program.
Sec. 1208. Specification of annual general and initial enrollment 
                            periods.
Sec. 1209. Special rules regarding network plans.
Sec. 1210. Application of certain State laws.
Sec. 1211. Consumer advocate.
Sec. 1212. Election procedure for community-rated employers.
          Part 2--Requirements for State Single-payer Systems

Sec. 1221. Single-payer system described.
Sec. 1222. General requirements for single-payer systems.
Sec. 1223. Additional rules for single-payer system.
              Subtitle D--Expanded Access to Health Plans

                    Part 1--Access Through Employers

Sec. 1301. Employer access and enrollment requirements.
Sec. 1302. Small employer requirements.
               Part 2--Access to Purchasing Cooperatives

Sec. 1311. Establishment of cooperatives.
Sec. 1312. Conflict of interest.
Sec. 1313. Membership.
Sec. 1314. Board of directors.
Sec. 1315. Choice of health plans.
Sec. 1316. Limitation on activities.
Sec. 1317. Voluntary participation.
                Psubpart a--certified association planss
Sec. 1321. Treatment of certified association plans.
Sec. 1322. Modifications of standards applicable to certified 
                            association plans.
Sec. 1323. Association plan defined.
Sec. 13subpart b--special rule for church and multiemployer plans
Sec. 1325. Special rule for church and multiemployer plans.
                      Part 4--Access Through FEHBP

Sec. 1331. Access through FEHBP plans.
                    Subtitle E--Standards for Reform

           Part 1--Establishment and Application of Standards

Sec. 1401. Certified health plans.
Sec. 1402. General rules.
     Part 2--Standards Applicable to Certified Insured Health Plans

Sec. 1411. Guaranteed issue and renewal.
Sec. 1412. Enrollment.
Sec. 1413. Rating limitations for community-rated market.
Sec. 1414. Nondiscrimination based on health status.
Sec. 1415. Benefits offered.
Sec. 1416. Requirements of supplementals.
Sec. 1417. Risk adjustment.
Sec. 1418. Financial requirements.
Sec. 1419. Collection and provision of standardized information.
Sec. 1420. Quality improvement and assurance.
Sec. 1421. Patient protections and provider selection.
Sec. 1422. Arrangements with essential community providers.
Sec. 1423. Access to specialized services.
Sec. 1424. Community rating area capacity.
Sec. 1425. Out-of-area coverage.
  Part 3--Standards Applicable to Certified Self-Insured Health Plans

Sec. 1431. Standards applicable to certified self-insured health plans.
                Part 4--Preemption of Certain State Laws

Sec. 1441. Preemption from State benefit mandates.
Sec. 1442. Preemption of State law restrictions on certified health 
                            plans.
                       Part 5--Interim Standards

Sec. 1451. Application of interim standards.
                  Subtitle F--Federal Responsibilities

Part 1--Establishment of Federal Standards for Certified Insured Health 
                                 Plans

Sec. 1500. Establishment.
           Part 2--Certification of Self-Insured Health Plans

Sec. 1501. Establishment and certification of standards applicable to 
                            self-insured certified health plans.
Sec. 1502. Corrective actions for self-insured health plans.
Sec. 1503. ERISA applicability to self-insured health plans.
                     Part 3--Other Responsibilities

Sec. 1521. Federal role in the case of a default by a State.
Sec. 1522. Rules determining separate employer status.
Sec. 1523. Workplace wellness program.
            Part 4--Collective Bargaining Dispute Resolution

Sec. 1531. Findings and purpose.
Sec. 1532. Application limited to transition period.
Sec. 1533. Request for appointment of board of inquiry.
Sec. 1534. Appointment of board of inquiry.
Sec. 1535. Public factfinding.
Sec. 1535A. Compensation of members of boards of inquiry.
Sec. 1535B. Maintenance of status quo.
            Subtitle G--Miscellaneous Employer Requirements

Sec. 1601. Auditing of records.
Sec. 1602. Prohibition of certain employer discrimination.
Sec. 1603. Evasion of obligations.
Sec. 1604. Prohibition on self-funding of cost sharing benefits.
Sec. 1605. Enforcement.
       Subtitle H--General Definitions; Miscellaneous Provisions

                      Part 1--General Definitions

Sec. 1700. Definitions and special rules relating to health plans.
Sec. 1701. Definitions relating to employment and income.
Sec. 1702. Other general definitions.
                    Part 2--Miscellaneous Provisions

Sec. 1711. Regulatory authority.
Sec. 1712. Neutrality concerning union organizing.
Sec. 1713. Social Security Act references.
Sec. 1714. Coverage of benefits under Affordable Health Care for All 
                            Americans Act.
Sec. 1715. Sense of the Committee concerning funding sources.
                         TITLE II--NEW BENEFITS

             Subtitle A--Home and Community-Based Services

    Part 1--Home and Community-Based Services for Individuals With 
                              Disabilities

Sec. 2101. State plans.
Sec. 2102. Individuals with disabilities defined.
Sec. 2103. Home and community-based services covered under State plan.
Sec. 2104. Cost sharing.
Sec. 2105. Quality assurance and safeguards.
Sec. 2106. Advisory groups.
Sec. 2107. Payments to States.
Sec. 2108. Appropriations; allotments to States.
                         Subtitle B--Life Care

Sec. 2201. Short title.
Sec. 2202. Life care: public insurance program for nursing home care.
  Subtitle C--Sense of the Committee with Regard to Prescription Drugs

Sec. 2301. Sense of the Committee with regard to prescription drugs
                  TITLE III--PUBLIC HEALTH INITIATIVES

        Subtitle A--Workforce Priorities Under Federal Payments

 Part 1--Institutional Costs of Graduate Medical Education; Workforce 
       subpart a--national council regarding workforce priorities
Sec. 3001subpart b--authorized positions in specialty training
Sec. 3011. Cooperation regarding approved physician training programs.
Sec. 3012. Annual authorization of number of specialty positions; 
                            requirements regarding primary health care.
Sec. 3013. Allocations among specialities and programs.
      Chapter 1--Operation Of Approved Physician Training Programs

Sec. 3031. Federal formula payments to qualified entities for the costs 
                            of the operation of approved physician 
                            training programs.
Sec. 3032. Application for payments.
Sec. 3033. Availability of funds for payments; annual amount of 
                            payments.
                 Chapter 2--Medical School Fund Account

Sec. 3041. Federal payments to the medical school fund.
Sec. 3042. Application for payments.
Sec. 3043. Availability of funds for payments; annual amount of 
                            payments.
                   Chapter 3--Academic Health Centers

Sec. 3051. Federal formula payments to academic health centers.
Sec. 3052. Request for payments.
Sec. 3053. Availability of funds for payments; annual amount of 
                   subpart d--transitional provisions
Sec. 3061. Transitional payments to institutions.
 Part 2--Institutional Costs of Graduate Nursing Education; Workforce 
                               Priorities

Sec. 3071. Authorized graduate nurse training positions; institutional 
                            costs.
Sec. 3072. Applicability of part 1 provisions.
Sec. 30subpart b--transitional provisions for workforce stability
Sec. 3081. Application.
Sec. 3082. Definitions.
Sec. 3083. Obligations of displacing employer and affiliated 
                            enterprises in event of displacement.
Sec. 3084. Employment with successors.
Sec. 3085. Collective bargaining obligations during transition period.
Sec. 3086. General provisions.
                Subtitle B--Health Research Initiatives

                 Part 1--Programs for Certain Agencies

Sec. 3101. Biomedical and behavioral research.
Sec. 3102. Health services research.
                      Part 2--Funding for Program

Sec. 3111. Authorizations of appropriations.
   Subtitle C--Health Services for Medically Underserved Populations

             Pasubpart a--authorization of appropriationse
subpart b--development of community health groups and health care sites 
                              and services
Sec. 3321. Grants and contracts for development of plans and networks 
                            and the expansion and development of health 
                            care sites and services.
Sec. 3322. Certain uses of awards.
Ssubpart c--capital cost of development of community health groups and 
                             other purposes
Sec. 3341. Direct loans and grants.
Sec. 3342. Certain requirements.
Sec. 3343. Defaults; right of recovery.
Sec. 3344. Apsubpart d--enabling and supplemental services
Sec. 3361. Grants and contracts for enabling and supplemental services.
Sec. 3362. Authorizations of appropriations.
                 Part 2--National Health Service Corps

Sec. 3371. Authorizations of appropriations.
Sec. 3372. Allocation for participation of nurses in scholarship and 
                            loan repayment programs.
Sec. 3373. Allocation for participation of psychiatrists, 
                            psychologists, and clinical social workers 
                            in scholarship and loan repayment programs.
      Part 3--Payments to Hospitals Serving Vulnerable Populations

Sec. 3381. Payments to hospitals.
Sec. 3382. Identification of eligible hospitals.
Sec. 3383. Amount of payments.
Sec. 3384. Base year.
                     Part 4--Sense of the Committee

Sec. 3391. Sense of the Committee.
 Subtitle D--Assistance For State Managed Mental Health And Substance 
                             Abuse Programs

Sec. 3431. Availability of assistance.
Sec. 3432. Plan requirements.
Sec. 3433. Additional Federal responsibilities.
Sec. 3434. Authorization of appropriations.
   Subtitle E--Comprehensive School Health Education; School-Related 
                            Health Services

   Part 1--Healthy Students-Healthy Schools Grants for School Health 
                               Education

Sec. 3501. Purposes.
Sec. 3502. Healthy students-healthy schools grants.
Sec. 3503. Healthy students-healthy schools interagency task force.
Sec. 3504. Duties of the Secretary.
                 Psubpart a--development and operations
Sec. 3581. Authorization of appropriations.
Sec. 3582. Eligibility for grants.
Sec. 3583. Preferences.
Sec. 3584. Planning and development grants.
Sec. 3585. Grants for operation of school health services.
              Subtitle F--Public Health Service Initiative

Sec. 3601. Public Health Service initiative.
                     TITLE IV--MEDICAL MALPRACTICE

                      Subtitle A--Liability Reform

Sec. 4001. Federal tort reform.
Sec. 4002. State-based alternative dispute resolution mechanisms.
Sec. 4003. Limitation on amount of attorney's contingency fees.
Sec. 4004. Reduction of awards for recovery from collateral sources.
Sec. 4005. Periodic payment of awards.
Sec. 4006. Construction.
 Subtitle B--Other Provisions Relating to Medical Malpractice Liability

Sec. 4101. State malpractice reform demonstration projects.
TITLE V--FALL-BACK PREMIUM LIMITS IN CASES OF INEFFECTIVE COMPETITION; 
 PREMIUM-BASED FINANCING; ASSISTANCE TO LOW INCOME INDIVIDUALS AND TO 
                               BUSINESSES

Sec. 5000. General definitions.
                  Subtitle A--Fall-Back Premium Limits

         Psubpart a--computation of targets and accepted bidss
Sec. 5001. Computation of area inflation factors.
Sec. 5002. Establishment of baseline premiums.
Sec. 5003. Determination of area baseline premiums.
Sec. 5004. Initial rate filing and bid negotiation process.
Ssubpart b--plan and provider payment reductions to maintain adequate 
                               financing
Sec. 5011. Plan payment reduction.
Sec. 5012. Provider payment agreements.
             Part 2--Health Expenditures of Large Employers

Sec. 5021. Calculation of premium equivalents.
Sec. 5022. Sanctions for large employer for excess increase in 
                            expenditures.
                Part 3--Treatment of Single-Payer States

Sec. 5031. Special rules for single-payer States.
                 Subtitle B--Premium-Related Financings

                    Partsubpart a--family shareents
Sec. 5101. Family share of premium.
Sec. 5102. Family credit.
Sec. 51subpart b--repayment of family credit by certain families
Sec. 5110. Repayment of family credit by certain families.
Sec. 5111. No liability for families employed full-time; reduction in 
                            liability for part-time employment.
Sec. 5112. Limitation of liability based on income.
Sec. 5113. Payments by nonqualifying employees.
Sec. 5114. Special treatment of certain medicare beneficiaries.
                  subpart a--small business exemption
Sec. 5116. Exemption from coverage obligations.
Sec. 5117. Exempt employer defined.
Sec. 5118. Election.
Sec. 5119. Treatment of exempt employers.
Sec. 5120. Nonelecsubpart b--community-rated employers
Sec. 5121. Employer premium payment required.
Sec. 5122. Computation of base employment monthly premium.
Sec. 5123. Premium discount for certain employers.
Sec. 5124. Payment adjustment for certain large employers.
Sec. 5125. Application subpart c--large employersls.
Sec. 5131. Large employer premium payment required.
   Subtitle C--Payments to Health Plans and Miscellaneous Provisions

Sec. 5201. Assistance to plans.
Sec. 5202. Computation of blended plan payment amount.
Sec. 5203. Adjustment to health plan revenues
Sec. 5204. Calculation and publication of general family share and 
                            general employer premium amounts.
Sec. 5205. Employer payment requirement.
Sec. 5206. Requirement for employer payment and reconciliation 
                            reporting.
Sec. 5207. Equal voluntary contribution requirement.
Sec. 5208. Payment arrangements.
  Subtitle D--Cost-Sharing Assistance, Application for Assistance and 
              Premium Discounts, and Income Reconciliation

Sec. 5301. Reduction in cost sharing for low-income families.
Sec. 5302. Application process for cost-sharing reductions and premium 
                            discounts.
Sec. 5303. End-of-year reconciliation.
Sec. 5304. Eligibility error rates.
                TITLE VI--AGGREGATE GOVERNMENT PAYMENTS

     Subtitle A--Aggregate Federal Payments to Participating State

Sec. 6001. Capped Federal payments.
     Subtitle B--Borrowing Authority to Cover Cash-flow Shortfalls

Sec. 6101. Borrowing authority to cover cash-flow shortfalls.
Sec. 6102. Contingencies.
                  Subtitle C--Miscellaneous Provisions

Sec. 6201. Sense of the Committee on Labor and Human Resources.

                     TITLE I--HEALTH CARE SECURITY

      Subtitle A--Universal Coverage and Individual Responsibility

                       PART 1--UNIVERSAL COVERAGE

SEC. 1001. ENTITLEMENT TO HEALTH BENEFITS.

    (a) In General.--In accordance with this part, each eligible 
individual is entitled to the benefits required under subtitle B 
through the applicable health plan in which the individual is enrolled 
consistent with this title.
    (b) Health Security Card.--Each eligible individual is entitled to 
a health security card to be issued in accordance with this Act.
    (c) Eligible Individual Defined.--In this Act, the term ``eligible 
individual'' means an individual who is residing in the United States 
and who is--
            (1)(A) a citizen or national of the United States;
            (B) a citizen of another country legally residing in the 
        United States (as defined in section 1702(2)); or
            (C) a long-term nonimmigrant (as defined in section 
        1702(6)); and
            (2) not an exempt individual (as defined in section 
        1702(4)).
    (d) Treatment of Medicare-Eligible Individuals.--Subject to section 
1012(a), a medicare-eligible individual is entitled to health benefits 
under the medicare program instead of the entitlement under subsection 
(a).

SEC. 1002. INDIVIDUAL RESPONSIBILITIES.

    In accordance with this Act, each eligible individual (other than a 
medicare-eligible individual)--
            (1) must enroll in an applicable health plan for the 
        individual, and
            (2) must pay any premium required, consistent with this 
        Act, with respect to such enrollment.

SEC. 1003. PROTECTION OF CONSUMER CHOICE.

    Nothing in this Act shall be construed as prohibiting the 
following:
            (1) An individual from purchasing any health care services.
            (2) An individual from purchasing supplemental insurance 
        (offered consistent with this Act) to cover health care 
        services not required to be included in the plan under subtitle 
        B.
            (3) An individual who is not an eligible individual from 
        purchasing health insurance.
            (4) Employers from providing coverage for benefits in 
        addition to the those described in subtitle B (subject to 
        section 1604).
            (5) An individual from obtaining (at the expense of such 
        individual) health care from any health care provider of such 
        individual's choice.

SEC. 1004. APPLICABLE HEALTH PLAN PROVIDING COVERAGE.

    Except as otherwise provided:
            (1) General rule: community-rated health plans.--Except as 
        provided for in regulations promulgated by the Secretary to 
        further the purposes of this Act, the applicable health plan 
        for a family is a community-rated health plan for the 
        community-rating area in which the family resides.
            (2) Experience-rated health plans.--In the case of a family 
        member that is eligible to enroll in an experienced-rated 
        health plan under this title, the applicable health plan for 
        the family is such an experienced-rated health plan.
            (3) Multiple choice.--Eligible individuals who are 
        permitted to elect coverage under more than one health plan or 
        program referred to in this subsection may elect which of such 
        plans or programs will be the applicable health plan under this 
        Act.

SEC. 1005. TREATMENT OF OTHER NONIMMIGRANTS.

    (a) Certain Aliens Ineligible for Benefits.--An alien who is not an 
eligible individual or otherwise not made eligible under this Act for 
benefits is not eligible to obtain the benefits required under subtitle 
B through enrollment in a health plan under this Act.
    (b) Reciprocal Treatment of Other Nonimmigrants.--With respect to 
those classes of individuals who are lawful nonimmigrants but who are 
not long-term nonimmigrants (as defined in section 1702), such 
individuals may obtain such benefits through enrollment with community-
rated health plans only in accordance with such reciprocal agreements 
between the United States and foreign states as may be entered into.

SEC. 1006. EFFECTIVE DATE OF ENTITLEMENT.

    (a) In General.--In the case of eligible individuals residing in a 
State, the entitlement under this part (and requirements under section 
1002) shall not take effect until the State becomes a participating 
State (as defined in section 1200.
    (b) General Effective Date Defined.--In this Act, the term 
``general effective date'' means January 1, 1999.

            PART 2--TREATMENT OF FAMILIES AND SPECIAL RULES

SEC. 1011. GENERAL RULE OF ENROLLMENT OF FAMILY IN SAME HEALTH PLAN.

    (a) In General.--Except as provided in this part or otherwise in 
regulations promulgated by the Secretary to further the purposes of 
this Act, all members of the same family (as defined by the Secretary) 
shall be enrolled in the same applicable health plan.
    (b) Child Defined.--
            (1) In general.--In this Act, except as otherwise provided, 
        the term ``child'' means an eligible individual who (consistent 
        with paragraph (3))--
                    (A) is under 25 years of age, and
                    (B) is a dependent of an eligible individual.
            (2) Application of state law.--Subject to paragraph (3), 
        determinations of whether a person is the child of another 
        person shall be made in accordance with applicable State law.
            (3) National rules.--The Secretary may establish such 
        national rules respecting individuals who will be treated as 
        children under this Act as the Secretary determines to be 
        necessary. Such rules shall be consistent with the following 
        principles:
                    (A) Step child.--A child includes a step child who 
                is an eligible individual living with an adult in a 
                regular parent-child relationship.
                    (B) Disabled child.--A child includes an unmarried 
                dependent eligible individual regardless of age who is 
                incapable of self-support because of mental or physical 
                disability which existed before age 21.
                    (C) Certain intergenerational families.--A child 
                includes the grandchild of an individual if--
                            (i) the parent of the grandchild is a child 
                        and the parent and grandchild are living with 
                        the grandparent; or
                            (ii) the grandparent has legal custody of 
                        the grandchild.
                    (D) Treatment of emancipated minors and married 
                individuals.--An emancipated minor or married 
                individual shall not be treated as a child.
                    (E) Children placed for adoption.--A child includes 
                a child who is placed for adoption with an eligible 
                individual, except when the child is a child in State 
                supervised care.

SEC. 1012. TREATMENT OF CERTAIN FAMILIES.

    (a) Treatment of Medicare-Eligible Individuals Who are Qualifying 
Employees or Spouses of Qualifying Employees.--
            (1) In general.--Except as specifically provided, in the 
        case of an individual who is an individual described in 
        paragraph (2) with respect to 2 consecutive months in a year 
        (and it is anticipated would be in the following month and in 
        such following month would be a medicare-eligible individual), 
        the individual shall be treated as an eligible individual under 
        this Act during such following month and the remainder of the 
        year. Nothing in this section shall be construed to affect any 
        entitlement under title XVII of the Social Security Act.
            (2) Individual described.--An individual described in this 
        paragraph with respect to a month is an individual who is a 
        qualifying employee or the spouse or family member of a 
        qualifying employee in the month.
    (b) Separate Treatment for Certain Groups of Individuals.--In the 
case of a family that includes one or more individuals in a group 
described in subsection (c)--
            (1) all the individuals in each such group within the 
        family shall be treated collectively as a separate family, and
            (2) all the individuals not described in any such group 
        shall be treated collectively as a separate family.
    (c) Groups of Individuals Described.--Each of the following is a 
group of individuals described in this subsection:
            (1) AFDC recipients.
            (2) Disabled SSI recipients.
            (3) SSI recipients who are not disabled SSI recipients.
    (d) Qualifying Students.--
            (1) In general.--In the case of a qualifying student 
        (described in paragraph (2)), the student may elect to enroll 
        in a community-rate health plan offered for the health care 
        coverage area in which the school is located.
            (2) Qualifying student.--In paragraph (1), the term 
        ``qualifying student'' means an individual who--
                    (A) but for this subsection would receive coverage 
                under a health plan as a child of another person, and
                    (B) is a full-time student at a school in a health 
                care coverage area that is different from the area (or, 
                in the case of a large group sponsor, such coverage 
                area as the Secretary may specify) providing the 
                coverage described in subparagraph (A).

SEC. 1013. MULTIPLE EMPLOYMENT SITUATIONS.

    In the case of an individual who is eligible as a qualified 
employee, or a spouse of such an employee, for coverage under more than 
one health plan, the individual and the spouse of the individual shall 
elect the applicable health plan.

                          Subtitle B--Benefits

SEC. 1101. PROVISION OF COMPREHENSIVE BENEFITS BY PLANS.

    (a) In General.--A certified health plan shall provide benefits 
that are actuarially equivalent to the benefits provided under the Blue 
Cross/Blue Shield standard option plan which is provided under the 
Federal Employees Health Benefits Program on January 1, 1995.
    (b) Coverage of Services.--A certified health plan shall provide 
coverage under subsection (a) for at least the following services:
            (1) Hospital services.
            (2) Services of health professionals.
            (3) Emergency and ambulatory medical and surgical services.
            (4) Clinical preventive services.
            (5) Mental illness and substance abuse services.
            (6) Family planning services and services for pregnant 
        women.
            (7) Hospice care, home health care, extended care services, 
        outpatient rehabilitation services, and ambulance services.
            (8) Outpatient laboratory, radiology, and diagnostic 
        services.
            (9) Outpatient prescription drugs and biologicals.
            (10) Durable medical equipment, including hearing aids for 
        children, and prosthetic and orthotic devices.
            (11) Vision care and dental care for children.
            (12) Patient care costs of qualified investigational 
        treatments.
    (c) Medical Necessity.--
            (1) In general.--A certified health plan shall not be 
        required to provide services that are not medically necessary 
        or appropriate.
            (2) Scope or duration.--A certified health plan may not 
        impose any limitations on the scope or duration of any 
        medically necessary or appropriate services described in 
        paragraphs (1), (2), (3), (6), (8), (9), or (12). Such a plan 
        may not apply a lifetime limit with respect to any such service 
        and may not exclude people with congenital conditions from the 
        same type of coverage as persons needing care as a result of 
        illness or injury.
            (3) Limitations.--The following services shall not be 
        considered medically necessary or appropriate:
                    (A) In vitro fertilization services.
                    (B) Sex change surgery and related services.
                    (C) Surgery and other procedures performed solely 
                for cosmetic purposes and hospital or other services 
                incident thereto, unless--
                            (i) required to correct a congenital 
                        anomaly; or
                            (ii) required to restore or correct a part 
                        of the body that has been altered as a result 
                        of--
                                    (I) accidental injury;
                                    (II) disease; or
                                    (III) surgery that is otherwise 
                                covered under this subtitle.
    (d) Preventive and Prenatal Services.--
            (1) In general.--The clinical preventive services that are 
        required under subsection (b)(4) are those services specified 
        by the Secretary. Such specifications shall include the 
        periodicity schedules for such services and special coverage or 
        periodicity schedules for high risk populations, if 
        appropriate. In developing such specifications the Secretary 
        shall consult with--
                    (A) medical experts and insurers;
                    (B) the United States Preventive Service Task 
                Force;
                    (C) the American Academy of Pediatrics, with 
                respect to preventive services for children;
                    (D) the American College of Obstetricians and 
                Gynecologists, with respect to preventive services for 
                women.
            (2) Cost sharing.--
                    (A) In general.--Except as provided in subparagraph 
                (B), a certified health plan may not impose any cost-
                sharing requirements with respect to clinical 
                preventive services and pre natal care services.
                    (B) Network plans.--In the case of a certified 
                health plan that is a network plan, the requirement of 
                subparagraph (A) shall not apply if the services 
                described in such subparagraph are obtained from an 
                out-of-network provider.
    (e) Mental Illness and Substance Abuse Services.--The mental 
illness and substance abuse services that are required described under 
subsection (b)(5) are those services that meet the minimum standards 
for coverage of inpatient, residential, intensive nonresidential, and 
outpatient services as specified by the Secretary. Such standards shall 
ensure that effective beginning in 2001, there will be parity in the 
coverage of mental health services.
    (f) Health Professional Services.--As used in subsection (b)(2), 
the term ``health professional services'' means professional services 
that are lawfully provided by a physician or professional services that 
could be lawfully provided by a physician but are provided by another 
health professional who is legally authorized to provide such services 
in the State in which the services are provided.
    (g) Actuarial Equivalency.--In calculating actuarial equivalency 
under subsection (a), a certified health plan shall exclude clinical 
preventive services and mental illness and substance abuse services 
that are provided under the plan or under the Blue Cross/Blue Shield 
standard option plan under the Federal Employees Health Benefits 
Program.
    (h) Model Plans.--The Secretary, in consultation with the NAIC, 
insurers, employers, consumers, and medical experts shall establish 
three model certified health plans for consideration by plan sponsors, 
of which--
            (1) one plan shall have cost-sharing and scope and duration 
        limits that are appropriate for fee-for-service plans that are 
        actuarially equivalent to the Blue Cross/Blue Shield standard 
        option plan;
            (2) one plan shall have cost-sharing and scope and duration 
        limits that are appropriate for preferred provider network 
        plans that are actuarially equivalent to the Blue Cross/Blue 
        Shield standard option plan; and
            (3) one plan shall have cost-sharing and scope and duration 
        limits that are appropriate for health maintenance 
        organizations that are actuarially equivalent to the Blue 
        Cross/Blue Shield standard option plan.
    (i) Qualified Investigational Treatments.--
            (1) In general.--As used in subsection (b)(13), the term 
        ``qualified investigational treatment'' means an 
        investigational treatment that is part of a peer-reviewed and 
        approved research program (as defined by the Secretary) or 
        research trials approved by the Secretary. A certified health 
        plan shall not be required to cover any patient care costs 
        associated with such treatments if such cost would normally be 
        covered by another party as determined under regulations 
        promulgated by the Secretary.
            (2) Approval of research trials.--A research trial is 
        deemed to be approved for purposes of this subsection if such 
        trial is approved by one or more of the following:
                    (A) The National Institutes of Health.
                    (B) The Food and Drug Administration (through an 
                investigational new drug exemption pursuant to section 
                505 of the Federal Food, Drug, and Cosmetic Act (21 
                U.S.C. 355) or an investigational device exemption 
                pursuant to section 520(g) of such Act (21 U.S.C. 
                360j(g))).
                    (C) The Department of Veterans Affairs.
                    (D) The Department of Defense.
                    (E) A qualified nongovernmental research entity as 
                defined in guidelines issued by one or more of the 
                National Institutes of Health, including guidelines for 
                cancer center support grants designated by the National 
Cancer Institute.
    (j) Study and Report.--
            (1) Study.--The Secretary shall conduct a study concerning 
        the provision and enrollment patterns of certified health 
        plans.
            (2) Report.--Not later than 5 years after the date of 
        enactment of this Act, the Secretary shall prepare and submit 
        to the appropriate committees of Congress a report concerning 
        the study conducted under paragraph (1). Such report shall 
        include a determination by the Secretary of whether the 
        standardization of certified health plan offerings would be 
        appropriate to assist consumers in choosing among such plans 
        based on cost and quality or to avoid plan design practices 
        intended to attract better risks and resulting in poorer 
        availability of reasonably priced coverage for individuals 
        needing greater than average utilization of health care 
        services.

SEC. 1102. PROVISION OF ITEMS OR SERVICES CONTRARY TO RELIGIOUS BELIEF 
              OR MORAL CONVICTION.

    A health professional or a health facility may not be required to 
provide an item or service under a certified health plan if the 
professional or facility objects to doing so on the basis of a 
religious belief or moral conviction.

SEC. 1103. BALANCE BILLING.

    The Secretary shall provide for methods to ensure the prohibition 
of balance billing.

                    Subtitle C--State Role in Reform

SEC. 1200. PARTICIPATING STATE.

    (a) In General.--As used in this title, the term ``participating 
State'' means a State that meets the applicable requirements of this 
Act, including the requirement for the establishment of a market reform 
program described in this subtitle and the administration of subsidies 
as provided for in title V.
    (b) Reform Plan.--To become a participating State under this 
section, a State shall submit to the Secretary a reform plan describing 
a health care system meeting the requirements of this Act that the 
State intends to establish (or has established), update such plan at 
time periods and in a manner specified by the Secretary, and implement 
such plan.
    (c) Deadline for Participation.--If a State is not a participating 
State by January 1, 1999, the provisions of section 1521 (relating to 
the Federal government's role in the case of default by a State) shall 
apply to such State. A State may not be a participating State prior to 
January 1, 1997.

                      PART 1--STATE MARKET REFORM

SEC. 1201. ESTABLISHMENT OF STATE MARKET REFORM PROGRAMS.

    (a) In General.--Each State shall establish a State market reform 
program that meets the requirements of this title.
    (b) Deadline.--Each State shall establish and have in operation a 
State market reform program by not later than January 1, 1997, to carry 
out this title. Such program shall provide for the enrollment of 
individuals in certified health plans by not later than such date.
    (c) Periodic Secretarial Review of State Programs.--
            (1) In general.--The Secretary may periodically review 
        State programs established under subsection (a) to determine if 
        such programs meet the requirements of this subtitle.
            (2) Reporting requirements of states.--For purposes of 
        paragraph (1), each State shall submit to the Secretary, at 
        intervals established by the Secretary, a report on the 
        compliance of the State with the requirements of this subtitle.

SEC. 1202. CERTIFICATION OF INSURED HEALTH PLANS.

    (a) In General.--Each State market reform program shall provide for 
the certification of insured health plans as certified health plans if 
the appropriate certifying authority finds that the plan meets the 
applicable requirements for certification under this title.
    (b) Nondiscrimination Against Out-of-State Plans and Providers.--A 
State--
            (1) may not discriminate against any health plan because 
        such plan is domiciled in another State; and
            (2) may not limit the ability of any health plan to 
        contract with a health care provider because such plan or such 
        provider is located outside the boundaries of such State.

SEC. 1203. ESTABLISHMENT OF COMMUNITY RATING AREAS.

    (a) Establishment.--Each State program shall provide, by not later 
than January 1, 1996, for the division of the State into 1 or more 
community rating areas. The program may revise the boundaries of such 
areas from time to time consistent with this section.
    (b) Multiple Areas.--With respect to a community rating area--
            (1) no metropolitan statistical area in a State may be 
        incorporated into more than 1 community rating area in such 
        State;
            (2) the number of individuals residing within a community 
        rating area may not be less than 250,000 (and shall respect the 
        existing referral patterns within market areas); and
            (3) no area incorporated in a community rating area may be 
        incorporated into another community rating area.
    (c) Interstate Areas.--Two or more contiguous States are encouraged 
to provide for the establishment of a common community rating area that 
includes adjoining portions of the States if the market area extends 
across State lines, so long as all portions of any metropolitan 
statistical area within such States are within the same community 
rating area.
    (d) Special or Underserved Populations.--In establishing community 
rating areas, the State shall take into consideration the needs of 
special or underserved populations.
    (e) Discrimination.--A State may not establish boundaries for 
community rating areas in a manner that has the effect of 
discriminating on the basis of any category described in section 1414.

SEC. 1204. PROCEDURES FOR CERTIFICATION OF PURCHASING COOPERATIVES.

    Each State market reform program shall establish a process for the 
certification of purchasing cooperatives consistent with part 2 of 
subtitle D.

SEC. 1205. COORDINATION AMONG PURCHASING COOPERATIVES.

    Each State shall establish rules consistent with part 2 of subtitle 
D for the coordination among purchasing cooperatives with respect to 
enrollment, payment of premiums, and provision of out-of-area benefits 
and services.

SEC. 1206. PREPARATION OF INFORMATION CONCERNING PLANS AND PURCHASING 
              COOPERATIVES.

    (a) In General.--Each State market reform program shall prepare and 
make available to purchasing cooperatives, employers and to individuals 
located in the State information, in standardized comparative form as 
required under the program, concerning the health plans certified by 
such State and purchasing cooperatives operating in the State.
    (b) Access to Plans and Cooperatives.--Each State shall provide 
information to employers and individuals describing how to access each 
community-rated health plan and purchasing cooperative in the area.

SEC. 1207. RISK ADJUSTMENT PROGRAM.

    Each State market reform program shall provide for a risk 
adjustment program for community-rated and association health plans 
that meets the standards developed by the Secretary under section 1417.

SEC. 1208. SPECIFICATION OF ANNUAL GENERAL AND INITIAL ENROLLMENT 
              PERIODS.

    (a) Annual General Enrollment Period.--Each State market reform 
program shall specify an annual period, of not less than 30 days, 
during which an eligible individual in the State may enroll in a 
certified health plan or change the certified health plan in which the 
individual is enrolled.
    (b) Initial Enrollment Period.--Each State market reform program 
shall specify an initial enrollment period in 1996 of not less than 45 
days, during which individuals in the State may enroll in certified 
health plans for coverage beginning as of January 1, 1997.

SEC. 1209. SPECIAL RULES REGARDING NETWORK PLANS.

    A State market reform program may grant a network plan a 
certification to operate in a service area which is not identical to 
the borders of a community rating area if the network plan has 
demonstrated to the satisfaction of the State that the plan has met the 
requirements of section 1411(a)(4).

SEC. 1210. APPLICATION OF CERTAIN STATE LAWS.

    Upon the application of a State, and the approval of such 
application by the Secretary, the State may--
            (1) tighten premium rate bands beyond the variation 
        permitted under section 1413;
            (2) establish rules for association plans that are more 
        restrictive than those provided for under part 3 of subtitle D 
        if, in the judgement of the Secretary, such rules increase the 
        viability of the community-rated market; and
            (3) establish financial solvency requirements that exceed 
        the requirements of section 1418.

SEC. 1211. CONSUMER ADVOCATE.

    (a) In General.--The Secretary shall establish (by grant or 
contract) and oversee a National Center of Consumer Advocacy to provide 
technical assistance, adequate training and support to States and 
Offices of Consumer Advocacy in each State (hereafter referred to in 
this section as the ``Office'') to carry out the duties of this 
section, including providing public education to consumers concerning 
this Act. The National Center of Consumer Advocacy shall be a national 
non-profit organization with public education and health policy 
expertise and shall have sufficient staff to carry out its duties and a 
demonstrated ability to represent and work with a broad spectrum of 
consumers, including vulnerable and under served populations. The 
Office in each State shall perform public outreach and provide 
education and assistance regarding consumer rights and responsibilities 
under this Act, and assist consumers in dealing with problems that 
arise with consumer purchasing cooperatives, experience-rated 
employers, health plans, and health care providers operating in such 
State.
    (b) Contracts.--
            (1) Solicitation.--The Secretary shall solicit contracts 
        from private non-profit organizations to fulfill the duties of 
        the Office in the State. The Secretary may develop such 
        regulations and guidelines as necessary to oversee the process 
        of considering and awarding competitive contracts under this 
        section. In awarding such contracts, the Secretary shall 
        consult with the State and National Center of Consumer 
        Advocacy, and shall, at a minimum, consider the demonstrated 
        ability of the organization to represent and work with a broad 
        spectrum of consumers, including vulnerable and underserved 
        populations.
            (2) Contract period.--The contract period for the State 
        Offices of Consumer Advocacy and the National Center of 
        Consumer Advocacy under this section shall be not less than 4 
        years and not more than 7 years.
    (c) Functions and Responsibilities.--Each Office shall have 
sufficient staff, local offices throughout the State, and a State-wide 
toll-free hotline to carry out the duties of this section. Through 
direct contact and the hotline, the Office shall provide the following 
services in the State, including appropriate assistance to individuals 
with limited English language ability--
            (1) outreach and education relating to consumer rights and 
        responsibilities under this Act, including such rights and 
        services available through the Office;
            (2) assistance with enrollment in health plans, or 
        obtaining services or reimbursement from health plans;
            (3) assistance with filing an application for premium or 
        cost sharing subsidies;
            (4) information to enrollees about existing grievance 
        procedures and coordination with other entities to assist in 
        identifying, investigating, and resolving enrollee grievances 
        under this Act (including grievances before State medical 
        boards);
            (5) regular and timely access in the area to the services 
        provided through the Office and its local offices and timely 
        responses from representatives of the Office to complaints;
            (6) referrals to appropriate local providers of legal 
        assistance and to appropriate State and Federal agencies which 
        may be of assistance to aggrieved individuals in the area; and
            (7) conduct public hearings no less frequently than once a 
        year to identify and address community health care needs.
    (d) Access to Information.--The Secretary and the States shall 
ensure that, for purposes of carrying out the Office's duties under 
this section, the Office (and officers and employees of the Office in 
local offices) have appropriate access to relevant information subject 
to protections for confidentiality of enrollee information.
    (e) Evaluation and Report.--The Secretary shall have the right to 
evaluate the quality and effectiveness of the organization in carrying 
out the functions specified in the contract. The Office shall report to 
the Secretary and the State annually on the nature and patterns of 
consumer complaints received in the Office and its local offices during 
each year and any policy, regulatory, and legislative recommendations 
for needed improvements together with a record of the activities of the 
Office.
    (f) Conflicts of Interest.--The Secretary shall ensure that no 
individual involved in the designation of the Office, the Office 
itself, or of any delegate thereof is subject to a conflict of 
interest, including affiliation with (through ownership or common 
control) a health care facility, managed care organization, health 
insurance company or association of health care facilities or 
providers. No grantee under this part may have a direct involvement 
with the licensing, certification, or accreditation of a health care 
facility, a health care plan, or a provider of health care services.
    (g) Legal Counsel.--The Secretary shall ensure that adequate legal 
counsel is available, and is able, without conflict of interest, to 
assist the Office, and the local offices thereof in the performance of 
their official duties.

SEC. 1212. ELECTION PROCEDURE FOR COMMUNITY-RATED EMPLOYERS.

    (a) In General.--Each participating State shall establish a 
procedure (consistent with rules established by the Board) through 
which exempt employers, as defined in section 6117, may make an 
election to be treated as a community-rated employer. Such procedure 
shall set forth the form and manner that such election shall be made.
    (b) Notification.--The procedure shall require that employees of a 
exempt employer are notified of an election or a termination of an 
election under this section prior to the first annual open enrollment 
period (as defined in section 1660) following such election or 
termination.
    (c) Termination.--The procedures shall permit exempt employers to 
terminate an election made under this section. If an employer 
terminates an election, the termination shall be effective on the first 
date of the year following such termination.

          PART 2--REQUIREMENTS FOR STATE SINGLE-PAYER SYSTEMS

SEC. 1221. SINGLE-PAYER SYSTEM DESCRIBED.

    The Secretary may approve an application of a State to operate a 
single-payer system if the Secretary finds that the system meets the 
requirements of sections 1222 and 1223.

SEC. 1222. GENERAL REQUIREMENTS FOR SINGLE-PAYER SYSTEMS.

    Each single-payer system shall meet the following requirements:
            (1) Establishment by state.--The system is established 
        under State law, and State law provides for mechanisms to 
        enforce the requirements of the system.
            (2) Operation by state.--The system is operated by the 
        State or a designated agency of the State.
            (3) Enrollment of individuals.--
                    (A) Mandatory enrollment.--The system shall provide 
                for the enrollment of all individuals residing in the 
                State who are not medicare-eligible individuals, except 
                that the Secretary may through regulation except 
                appropriate individuals from the requirements of this 
                subparagraph and such requirements shall not apply to 
                the individuals described in subparagraph (B).
                    (B) Exclusion of certain individuals.--A single-
                payer system may not require the enrollment of 
                veterans, active duty military personnel, and American 
                Indians.
            (4) Direct payment to providers.--
                    (A) In general.--With respect to providers who 
                furnish items and services required under subtitle B to 
                individuals enrolled in the system, the State shall 
                make payments directly, or through fiscal 
                intermediaries, to such providers and assume (subject 
                to subparagraph (B)) all financial risk associated with 
                making such payments.
                    (B) Capitated payments permitted.--Nothing in 
                subparagraph (A) shall be construed to prohibit 
                providers furnishing items and services under the 
                system from receiving payments on a capitated, at-risk 
                basis based on prospectively determined rates.
            (5) Provision of benefits.--
                    (A) In general.--The system shall provide for 
                coverage of items and services required under subtitle 
                B, including the cost-sharing provided under the plan 
                (subject to subparagraph (B)), to all individuals 
                enrolled in the system.
                    (B) Imposition of reduced cost-sharing.--The system 
                may decrease the cost-sharing otherwise provided in 
                under subtitle B with respect to any individuals 
                enrolled in the system or any class of services 
                included in the items and services under such subtitle, 
                so long as the system does not increase the cost-
                sharing otherwise imposed with respect to any other 
                individuals or services.
            (6) Cost containment.--The system shall provide for 
        mechanisms to ensure, in a manner satisfactory to the 
        Secretary, that--
                    (A) the rate of growth in health care spending will 
                not be higher than the National rate of growth;
                    (B) the expenditures described in subparagraph (A) 
                are computed and effectively monitored; and
                    (C) Federal payments to a single payer State shall 
                be limited to the payments that would have been made in 
                the absence of the implementation of the single payer 
                system.
            (7) Requirements generally applicable to certified health 
        plans.--The system shall meet the appropriate requirements 
        applicable to a certified health plan, as determined by the 
        Secretary.

SEC. 1223. ADDITIONAL RULES FOR SINGLE-PAYER SYSTEM.

    (a) In General.--In the case of a State operating a single-payer 
system--
            (1) the State shall operate the system throughout the 
        State;
            (2) except as provided in subsection (b), the State shall 
        meet the requirements for participating States under part 1; 
        and
            (3) the State shall not use any funds collected pursuant to 
        section 1221 and 1222 or any earnings on such funds for any 
        reason other than to pay health care claims or provide health 
        care benefits.
    (b) Exceptions to Certain Requirements for Participating States.--
In the case of a State operating a single-payer system, the State is 
not required to meet any requirements that the Secretary determines are 
not appropriate to apply to a State single-payer system.
    (c) Single-Payer State Defined.--In this title, the term ``single-
payer State'' means a State with a single-payer system in effect that 
has been approved by the Secretary in accordance with this part.

              Subtitle D--Expanded Access to Health Plans

                    PART 1--ACCESS THROUGH EMPLOYERS

SEC. 1301. EMPLOYER ACCESS AND ENROLLMENT REQUIREMENTS.

    (a) In General.--Each employer shall--
            (1) make available to each employee of the employer the 
        opportunity to enroll through the employer in one of at least 
        three certified health plans, if available, including either a 
        fee-for-service plan or a health plan with a point-of-service 
        option, and
            (2) to provide payroll withholding of any required employee 
        premiums.
If an employer desires to satisfy the requirement of paragraph (1) by 
offering a point-of-service plan, cost-sharing for out-of-network 
services shall not be substantially greater than those applied by fee-
for-service plans.
    (b) Special rules.--
            (1) Purchasing cooperative.--A small employer may meet the 
        requirements of subsection (a)(1) through a purchasing 
        cooperative.
            (2) Large employer.--
                    (A) In general.--A large employer shall meet the 
                requirements of subsection (a)(1) only through offering 
                experience-rated health plans.
                    (B) Single insurer.--Nothing in this section shall 
                be construed as preventing or requiring a large 
                employer from complying with subsection (a)(1) through 
                the offering of plans by a single insurer.

SEC. 1302. SMALL EMPLOYER REQUIREMENTS.

    (a) Payroll Deduction.--Upon authorization from an employee, a 
small employer shall deduct from the employee's wages the employee's 
share of any premium due to a certified health plan or purchasing 
cooperative. Except as provided in subsection (c), this subsection 
shall only apply to plans made available, either directly or through a 
purchasing cooperative, by the employer.
    (b) No Requirement to Enroll in Employer-Provided Plan.--A 
community-rated individual who is an employee of a small employer may 
elect not to enroll in a certified health plan offered by such employer 
under this section. Such an employee may enroll in any certified health 
plan offered in the community rating area in which the employee works 
or in which the employee resides (including certified health plans 
offered through purchasing cooperatives serving such area).
    (c) Deduction and Contribution in the Case of FEHBP Plans.--In the 
case of an election described in subsection (c) by an employee of a 
small employer to enroll in an FEHBP plan made available under section 
1331, the small employer shall make the payroll deduction described in 
subsection (b) and shall forward the employer's contribution, if any, 
to such FEHBP plan. The employer may charge a reasonable adminstrative 
fee for such activities.

               PART 2--ACCESS TO PURCHASING COOPERATIVES

SEC. 1311. ESTABLISHMENT OF COOPERATIVES.

    A State may establish or charter purchasing cooperatives in 
accordance with this subtitle for the purpose of improving access to 
health plans, reducing the cost of health insurance, and improving the 
quality of care. Each purchasing cooperative established in a State 
shall be certified under State law.

SEC. 1312. CONFLICT OF INTEREST.

    An insurer, agent, broker or any other individual or entity 
otherwise engaged in the sale of health insurance may not form or 
underwrite a purchasing cooperative or hold or control any right to 
vote with respect to a purchasing cooperative.

SEC. 1313. MEMBERSHIP.

    A purchasing cooperative shall accept all small employers and 
individuals eligible for coverage in the community-rated market and 
residing within the area served by the cooperative if such employers or 
individuals request such membership. A purchasing cooperative shall 
conduct enrollment, outreach and marketing activities in a manner that 
provides individuals and employers with ready access and availability 
to cooperative health plans throughout the community-rating area served 
by the cooperative.

SEC. 1314. BOARD OF DIRECTORS.

    A purchasing cooperative established under this part shall be 
governed by a board of directors or receive active input from an 
advisory board consisting of individuals and businesses participating 
in the cooperative.

SEC. 1315. CHOICE OF HEALTH PLANS.

    A purchasing cooperative shall enter into agreements with at least 
three certified health plans (if available) providing the comprehensive 
benefits described in subtitle B, including (if available) at least one 
fee-for-service plan or point-of-service plan meeting the requirements 
described in section 1301.

SEC. 1316. LIMITATION ON ACTIVITIES.

    A purchasing cooperative shall not--
            (1) perform any activity involving approval or enforcement 
        of payment rates for providers;
            (2) perform any activity (other than the reporting of 
        noncompliance) relating to compliance of certified health plans 
        with the requirements of this Act;
            (3) assume financial risk in relation to any such health 
        plan; or
            (4) perform other activities identified by the State as 
        being inconsistent with the performance of its duties under 
        this Act.

SEC. 1317. VOLUNTARY PARTICIPATION.

    Nothing in this part shall be construed as requiring any individual 
or small employer to purchase a certified health plan exclusively 
through a purchasing cooperative.

                PART 3--ACCESS THROUGH ASSOCIATION PLANS

                 Subpart A--Certified Association Plans

SEC. 1321. TREATMENT OF CERTIFIED ASSOCIATION PLANS.

    For purposes of this Act, in the case of a certified association 
plan--
            (1) except as otherwise provided in this subpart, the plan 
        shall be required to meet all applicable requirements of this 
        Act for certified health plans offered by large employers,
            (2) if such plan is certified as meeting such requirements, 
        such plan shall be treated as a health plan established and 
        maintained by a large employer and individuals enrolled in such 
        plan shall be treated as experience-rated individuals,
            (3) any individual who is a member of the association not 
        enrolling in the plan shall not be treated as an experience-
        rated individual solely by reason of membership in such 
        association, and
            (4) such plan shall cover at least 500 lives on and after 
        the date of enactment of this Act.

SEC. 1322. MODIFICATIONS OF STANDARDS APPLICABLE TO CERTIFIED 
              ASSOCIATION PLANS.

    (a) Certifying Authority.--
            (1) Multistate certified association self-insured plans.--
        For purposes of this Act, the Secretary of Labor shall be the 
        appropriate certifying authority with respect to a certified 
        association plan which is a multistate self-insured health 
        plan.
            (2) Single state certified association self-insured 
        plans.--For purposes of this Act, the State shall be the 
        appropriate certifying authority with respect to a certified 
        association plan which is a single State self-insured health 
        plan.
    (b) Risk Adjustment.--The requirements of section 1417 shall apply 
to a plan described in section 1321.
    (c) Capital Requirements.--Not later than 9 months after the date 
of enactment of this Act, the Secretary of Labor, in consultation with 
the NAIC, shall establish solvency standards for health plans described 
in section 1321, and rules for monitoring and enforcing compliance with 
such standards. Such requirements shall be the applicable plan 
standards with respect to such plans in lieu of the requirements of 
section 1418.
    (d) Availability.--A certified association plan may only include in 
coverage any business or individual who is a member of the association 
establishing or maintaining the plan, an employee of such member, or a 
spouse or dependent of either.

SEC. 1323. ASSOCIATION PLAN DEFINED.

    (a) In General.--The term ``association plan'' means a health plan 
which--
            (1) is (or is a continuation of) an existing plan, and
            (2) is established or maintained by a qualified 
        association.
    (b) Existing Plan.--For purposes of this section--
            (1) In general.--A health plan is an existing plan if--
                    (A) on August 1, 1994, the plan was a self-insured 
                health plan which--
                            (i) had been in existence and operating at 
                        all times during the 18-month period ending on 
                        such date as a multiple employer welfare 
                        arrangement,
                            (ii) had an application pending with, or 
                        approved by, the State insurance commissioner 
                        for a certificate of operation as a health 
                        plan, and
                            (iii) covered at least 1000 lives, or
                    (B) on and after the date of enactment of this Act, 
                the plan was an experience-rated insured health plan 
                covering at least 1000 lives.
            (2) Disqualification of certain arrangements.--A health 
        plan shall not be treated as meeting the requirements of 
        paragraph (1)(A) if a State demonstrates that--
                    (A) fraudulent or material misrepresentations have 
                been made by the sponsor in the application,
                    (B) the arrangement that is the subject of the 
                application, on its face, fails to meet the 
                requirements for a complete application, or
                    (C) a financial impairment exists with respect to 
                the applicant that is sufficient to demonstrate the 
                applicant's inability to continue its operations.
    (c) Qualified Association.--For purposes of this section, the term 
``qualified association'' means any organization (or wholly-owned 
subsidiary thereof) which--
            (1) is organized and maintained in good faith by a trade 
        association, an industry association, a professional 
        association, a local chamber of commerce, or public entity 
        association,
            (2) is organized and maintained for substantial purposes 
        other than to provide a health plan and a substantial share of 
        whose revenues do not come from the sale of health plans,
            (3) has a constitution, bylaws, or other similar governing 
        document which specifically states its purpose,
            (4) receives the active support of its members,
            (5) does not have membership policies or practices which 
        have the effect of screening members or prospective members (or 
        their dependents), and does not otherwise limit access to any 
        health plan maintained by it, on the basis of health status or 
        evidence (or lack of evidence) of insurability of an 
        individual, and
            (6) has been in operation continuously during the 3-year 
        period ending August 1, 1994 and has provided health coverage 
        to its members over such period.
    (d) Coordination With Subpart B.--The term ``certified association 
plan'' shall not include a plan to which subpart B applies.
    (e) Definitions.--For purposes of this part, the term ``multiple 
employer welfare arrangement'' has the meaning given such term by 
section 3(40) of the Employee Retirement Income Security Act of 1974 
(as in effect before the date of the enactment of the Health Reform 
Act).

SEC. 1324. REPEAL OF ERISA PROVISIONS.

    (a) Definition.--Paragraph (40) of section 3 of the Employee 
Retirement Income Security Act of 1974 (29 U.S.C. 1002(40)) is 
repealed.
    (b) Preemption.--Paragraph (6) of section 514(b) of such Act (29 
U.S.C. 1144(b)(6)) is repealed.

       Subpart B--Special Rule for Church and Multiemployer Plans

SEC. 1325. SPECIAL RULE FOR CHURCH AND MULTIEMPLOYER PLANS.

    (a) General Rule.--For purposes of this Act, in the case of a 
health plan to which this section applies--
            (1) except as otherwise provided in this part, the plan 
        shall be required to meet all applicable requirements of this 
        Act for certified health plans which are offered by large 
        employers,
            (2) if such plan is certified as meeting such requirements, 
        such plan shall be treated as a health plan established 
and maintained by a large employer and individuals enrolled in such 
plan shall be treated as experience-rated individuals, and
            (3) any individual eligible to enroll in the plan who does 
        not enroll in the plan shall not be treated as an experience-
        rated individual solely by reason of being eligible to enroll 
        in the plan.
    (b) Modified Standards.--
            (1) Certifying authority.--For purposes of this Act, the 
        Secretary of Labor shall be the appropriate certifying 
        authority with respect to a plan to which this section applies.
            (2) Solvency, and availability.--Rules similar to the rules 
        of subsections (c) and (d) of section 1322 shall apply to a 
        plan to which this section applies.
            (3) Access.--An employer which, pursuant to a collective 
        bargaining agreement, offers an employee the opportunity to 
        enroll in a plan described in subsection (c)(2) shall not be 
        required to make any other plan available to the employee.
    (c) Plans to Which Section Applies.--This section shall apply to a 
health plan which--
            (1) is a church plan (as defined in section 414(e) of the 
        Internal Revenue Code of 1986) which covers 100 or more lives 
        in the United States, or
            (2) is a multiemployer plan (as defined in section 3(37) of 
        the Employee Retirement Income Security Act of 1974) which is 
        maintained by a health plan sponsor described in section 
        3(16)(B)(iii) of such Act but only if such plan (or a 
        predecessor plan) as of August 1, 1994--
                    (A) offered health benefits, and
                    (B) covered at least 500 lives in the United 
                States.
Notwithstanding paragraph (2)(B), a multiemployer plan sponsored by one 
or more affiliates of the same labor organization, or one or more 
affiliates of labor organizations representing employees in the same 
industry, may be combined to meet the threshold described in such 
subparagraph.

                      PART 4--ACCESS THROUGH FEHBP

SEC. 1331. ACCESS THROUGH FEHBP PLANS.

    (a) In General.--Any health plan participating in the Federal 
Employees Health Benefits Program under chapter 89 of title 5, United 
States Code (in this Act referred to as ``FEHBP''), shall offer such 
plan to community-rated individuals and small employers in community 
rating areas served by such plan at a premium established in accordance 
with section 1413. In the case of a plan described in section 8903(1) 
of title 5, United States Code, the requirement of this subsection 
shall be deemed to be a requirement on the local carriers providing 
coverage pursuant to an agreement with a national plan.
    (b) Limitation.--A health plan may not be required to offer 
enrollment under subsection (a) if the Director of the Office of 
Personnel Management determines, based on a petition submitted by the 
health plan, that--
            (1) the plan is unable to make such offering because of a 
        limitation in the capacity of the plan to deliver services or 
        assure financial solvency; or
            (2) the plan is not sponsored by a carrier licensed under 
        applicable State law.
The Director shall not make such a determination on the basis of any 
difference in the health status of Federal Government employees and the 
community-rated population.

                    Subtitle E--Standards for Reform

           PART 1--ESTABLISHMENT AND APPLICATION OF STANDARDS

SEC. 1401. CERTIFIED HEALTH PLANS.

    A certified health plan shall meet the applicable reform standards 
established under part 2 for insured health plans and part 3 for self-
insured health plans.

SEC. 1402. GENERAL RULES.

    (a) Construction.--Whenever in this subtitle a requirement or 
standard is imposed on a health plan, the requirement or standard is 
deemed to have been imposed on the insurer or sponsor of the plan in 
relation to that plan.
    (b) Use of Interim, Final Regulations.--In order to permit the 
timely implementation of the provisions of this title, the Secretary 
and the Secretary of Labor are each authorized to issue regulations 
under this title on an interim basis that become final on the date of 
publication, subject to change based on subsequent public comment.
    (c) Reference to Reform Standards.--For purposes of this title, the 
term ``reform standards'' means the standards established and applied 
under this subtitle.

     PART 2--STANDARDS APPLICABLE TO CERTIFIED INSURED HEALTH PLANS

SEC. 1411. GUARANTEED ISSUE AND RENEWAL.

    (a) Issue.--
            (1) In general.--Except as otherwise provided in this 
        section, a certified health plan sponsor--
                    (A) offering--
                            (i) a community-rated certified health 
                        plan, shall offer such plan to any community-
                        rated individual applying for coverage, and
                            (ii) an experience-rated certified health 
                        plan, shall offer such plan to any experience-
                        rated individual eligible for coverage under 
                        the plan; and
                    (B)  shall  offer  such  plan  for  each class of 
                enrollment described in section 1413(b)(2)(B)(ii).
            (2) Availability.--Except as provided in paragraph (4), a 
        community-rated certified health plan shall be made available 
        throughout the entire community rating area in which such plan 
        is offered, including through any purchasing cooperative 
        choosing to offer such plan.
            (3) Application of capacity limits.--
                    (A) In general.--Subject to subparagraph (B), a 
                certified health plan may cease enrolling individuals 
                under the plan if--
                            (i) the plan ceases to enroll any new 
                        individuals; and
                            (ii) the applicable certifying authority 
                        determines that the plan's financial or 
                        provider capacity to serve previously covered 
                        groups or individuals (and additional 
                        individuals who will be expected to enroll 
                        because of affiliation with such previously 
                        covered groups or individuals) will be impaired 
                        if such plan is required to enroll other 
                        individuals.
                    (B) Fair enrollment.--A certified health plan may 
                exercise the limitations provided for in subparagraph 
                (A) only if such plan provides individuals with a fair 
                opportunity to enroll in the plan, regardless of the 
                method by which such individuals seek enrollment or the 
                time during the open enrollment period at which 
                enrollment is sought.
            (4) Network plans.--A network plan may be made available 
        only in a service area not identical to the borders of a 
        community rating area if the State determines that--
                    (A)(i) the plan has not established its service 
                area in a manner that has the effect of discriminating 
                against an individual or groups of individuals on the 
                basis of categories described in section 1414; and
                    (ii) the service area is not smaller than a county, 
                or 3-digit zip code area;
                    (B) the service area has been approved pursuant to 
                title XIII of the Public Health Service Act; and
                    (C) the network plan shall participate in any risk 
                adjustment program established for each community 
                rating area involved.
    (b) Renewal.--
            (1) In general.--Except as provided in paragraph (2), a 
        certified health plan that is issued to an individual shall be 
        renewed at the option of the individual.
            (2) Grounds for refusal to renew.--
                    (A) In general.--Except as provided in subparagraph 
                (B), a certified health plan sponsor may under no 
                circumstances refuse to renew, or for any reason 
                terminate, a certified health plan with respect to any 
                individual, family, or employer under this title.
                    (B) Exception.--Subparagraph (A) shall not apply in 
                the case of--
                            (i) nonpayment of premiums;
                            (ii) fraud on the part of the individual 
                        involved;
                            (iii) misrepresentation of material facts 
                        on the part of the individual relating to an 
                        application for coverage or claim for benefits; 
                        or
                            (iv) exit of the insurer from the market if 
                        pursuant to rules established by the Secretary.
    (c) Certain Excluded Plans.--The provisions of this section (other 
than subsection (b)) and section 1451 (other than subsections 
(b)(1)(B), (b)(2), and (b)(3)), shall not apply to any religious 
fraternal benefit society in existence as of September 1993, which 
bears the risk of providing insurance to its members, and which is an 
organization described in section 501(c)(8) of the Internal Revenue 
Code of 1986 which is exempt from taxation under section 501(a) of such 
Code.

SEC. 1412. ENROLLMENT.

    (a) In General.--A certified health plan shall establish an 
enrollment process consistent rules established by the Secretary.
    (b) Enrollment Requirements.--The rules established under 
subsection (a) shall provide for--
            (1) general enrollment periods;
            (2) special enrollment periods for individuals who 
        experience a change in their employment of family situation or 
        in their residence; and
            (3) disenrollment for cause.

SEC. 1413. RATING LIMITATIONS FOR COMMUNITY-RATED MARKET.

    (a) Standard Premiums With Respect to Community-Rated Eligible 
Individuals.--Each certified health plan which covers community-rated 
individuals shall establish within each community rating area in which 
the plan is to be offered, a standard premium for individual 
enrollment.
    (b) Uniform Premiums Within Community Rating Areas.--
            (1) In general.--Subject to paragraphs (2) and (3), the 
        standard premium for each certified health plan shall be the 
        same, and shall not include the administrative costs described 
        in paragraph (3).
            (2) Application to enrollees.--
                    (A) In general.--The premium charged for coverage 
                in a certified health plan which covers community-rated 
                individuals shall be the product of--
                            (i) the standard premium (established under 
                        paragraph (1));
                            (ii) in the case of enrollment other than 
                        individual enrollment, the family adjustment 
                        factor specified under subparagraph (B); and
                            (iii) the age adjustment factor (specified 
                        under subparagraph (C)).
                    (B) Family adjustment factor.--
                            (i) In general.--The reform standards shall 
                        specify family adjustment factors that reflect 
                        the relative actuarial costs of benefit 
                        packages based on family classes of enrollment 
                        (as compared with such costs for individual 
                        enrollment).
                            (ii) Classes of enrollment.--
                                    (I) In general.--In this Act, each 
                                of the following is a separate class of 
                                family enrollment:
                                            (aa) Coverage only of an 
                                        individual (referred to in this 
                                        Act as the ``individual'' 
                                        enrollment or class of 
                                        enrollment).
                                            (bb) Coverage of a married 
                                        couple without children 
                                        (referred to in this Act as the 
                                        ``couple-only'' enrollment or 
                                        class of enrollment).
                                            (cc) Coverage of an 
                                        unmarried individual and one or 
                                        more children (referred to in 
                                        this Act as the ``single 
                                        parent'' enrollment or class of 
                                        enrollment).
                                            (dd) Coverage of a married 
                                        couple and one or more children 
                                        (referred to in this Act as the 
                                        ``dual parent'' enrollment or 
                                        class of enrollment).
                                    (II) References to family and 
                                couple classes of enrollment.--In this 
                                Act:
                                            (aa) Family.--The terms 
                                        ``family enrollment'' and 
                                        ``family class of enrollment'', 
                                        refer to enrollment in a class 
                                        of enrollment described in item 
                                        (bb), (cc), or (dd) of 
                                        subclause (I).
                                            (bb) Couple.--The term 
                                        ``couple class of enrollment'' 
                                        refers to enrollment in a class 
                                        of enrollment described in item 
                                        (bb) or (dd) of subclause (I).
                                    (III) Spouse; married; couple.--
                                            (aa) In general.--In this 
                                        Act, the terms ``spouse'' and 
                                        ``married'' mean, with respect 
                                        to a person, another individual 
                                        who is the spouse of the person 
                                        or married to the person, as 
                                        determined under applicable 
                                        State law.
                                            (bb) Couple.--The term 
                                        ``couple'' means an individual 
                                        and the individual's spouse.
                    (C) Age adjustment factor.--
                            (i) In general.--The Secretary, in 
                        consultation with the NAIC, shall specify 
                        uniform age categories and maximum rating 
                        increments for age adjustment factors that 
                        reflect the relative actuarial costs of benefit 
                        packages among enrollees. For individuals who 
                        have attained age 18 but not age 65, the 
                        highest age adjustment factor may not exceed 
                        twice the lowest age adjustment factor.
                            (ii) Phase-in period.--The Secretary, in 
                        consultation with the NAIC, shall establish a 
                        schedule for the phase-in of age-adjusted 
                        community rates so as to minimize disruption of 
                        the insurance market.
            (3) Administrative savings.--Nothing in this section shall 
        be construed as preventing a purchasing cooperative from 
        negotiating a unique premium with a certified health plan that 
        reflects administrative and other sources of savings.

SEC. 1414. NONDISCRIMINATION BASED ON HEALTH STATUS.

    Except as otherwise provided in this Act, a certified health plan 
may not deny, limit, or condition the coverage under (or benefits of) 
the plan for any reason, including but not limited to, health status, 
medical condition, claims experience, receipt of health care, medical 
history, anticipated need for health care, disability, or lack of 
evidence of insurability, of an individual.

SEC. 1415. BENEFITS OFFERED.

    A certified health plan shall offer to all enrollees in the plan 
the comprehensive benefits established under subtitle B.

SEC. 1416. REQUIREMENTS OF SUPPLEMENTALS.

    A certified health plan sponsor may only offer benefits that are 
not covered benefits, or a reduction in cost sharing below the cost 
sharing specified under section 1101(h), if--
            (1) such additional coverage is offered and priced 
        separately from the comprehensive benefits package offered by 
        such plan;
            (2) the purchase of the certified health plan is not 
        conditioned upon the purchase of such additional coverage;
            (3) coverage of such additional benefits is also offered to 
        individuals who are not enrolled in the certified health plan; 
        and
            (4) the cost sharing reduction is offered only to 
        individuals enrolled in the certified health plan by such plan 
        for a price which includes any expected increase in utilization 
        resulting from the purchase of such cost sharing reduction.

SEC. 1417. RISK ADJUSTMENT.

    (a) In General.--Each community-rated certified health plan shall 
participate in a risk adjustment program of the State in accordance 
with subsection (b).
    (b) Establishment of Standards for Risk Adjustment Programs.--
            (1) In general.--The Secretary shall develop standards 
        under paragraph (2) for participating States to provide risk 
        adjustment programs under section 1207 for participation by 
        certified health plans.
            (2) Risk adjustment program.--The standards developed by 
        the Secretary under this paragraph shall include a risk 
        adjustment program which--
                    (A) assures that payments to community-rated 
                certified health plans reflect the expected relative 
                utilization and expenditures for health care services 
                by each plan's enrollees compared to the average 
                utilization and expenditures for community-rated 
                individuals; and
                    (B) protects plans that enroll a disproportionate 
                share of such individuals with respect to whom expected 
                utilization of health care services and expected health 
                care expenditures for such services are greater than 
                the average utilization and expenditures for such 
                eligible individuals.

SEC. 1418. FINANCIAL REQUIREMENTS.

    Each sponsor offering a community-rated certified health plan shall 
meet financial solvency requirements to assure protection of enrollees 
with respect to potential insolvency. The Secretary, in consultation 
with the NAIC, shall establish such standards by regulation.

SEC. 1419. COLLECTION AND PROVISION OF STANDARDIZED INFORMATION.

    Each certified health plan that provides coverage for individuals 
residing in a State shall submit to the State and, upon request, to 
community-rated individuals, information regarding--
            (1) certification status of the plan;
            (2) benefits offered under the plan;
            (3) premiums, cost-sharing, and administrative charges 
        under the plan;
            (4) risk and referral arrangements under the plan;
            (5) the number, distribution, and variety of health care 
        providers used under the plan and the availability of such 
        providers;
            (6) the enrollee complaint and appeals process used under 
        the plan;
            (7) the rights and responsibilities of plan enrollees; and
            (8) other information determined appropriate by the 
        Secretary or the State.

SEC. 1420. QUALITY IMPROVEMENT AND ASSURANCE.

    (a) In General.--Each certified health plan shall establish 
procedures, including ongoing quality improvement procedures, to ensure 
that the health care services provided to enrollees under the plan will 
be provided under reasonable standards of quality of care consistent 
with prevailing professionally recognized standards of medical 
practice.
    (b) Internal Quality Assurance Program.--Each certified health plan 
shall establish, and communicate to its enrollees and its providers, an 
ongoing internal program, including periodic reporting, to monitor and 
evaluate the quality and cost effectiveness of its health care 
services, pursuant to standards established by the Secretary.
    (c) Utilization Management Protocols.--The utilization review and 
management activities of each certified health plan, provided either 
directly or through contract, shall meet the following standards as 
defined by the Secretary:
            (1) Personnel.--All review determinations shall be made by 
        licensed, certified, or otherwise credentialed health 
        professionals who are qualified to review utilization of the 
        treatment being sought.
            (2) Review process.--Each certified health plan shall base 
        utilization management on current scientific knowledge, stress 
        the efficient delivery of health care and outcomes, rely 
        primarily on evaluating and comparing practice patterns rather 
        than routine case-by-case review, be consistent and timely in 
        application, and have a process for making review 
        determinations for urgent and emergency care 24 hours a day.
            (3) No financial incentives.--Utilization management by 
        each certified health plan may not create financial incentives 
        for reviewers to reduce or limit medically necessary or 
        appropriate services.
            (4) Consumer disclosure.--Each certified health plan shall 
        disclose, upon request, to enrollees (and prospective 
        enrollees) and to participating providers (and prospective 
        providers) the utilization review protocols and the type of 
        financial arrangements, if any, used by the plan for 
        controlling utilization and costs, while protecting proprietary 
        business information to the extent specified by the Secretary.
    (d) Physician Incentive Plans.--A certified health plan may not 
operate a physician incentive plan unless such incentive plan meets the 
requirements of section 1876(i)(8)(A) of the Social Security Act (42 
U.S.C. 1395mm(i)(8)(A)).
    (e) Credentialing.--Each certified health plan shall--
            (1) verify the credentials of participating physicians and 
        practitioners; and
            (2) ensure that participating providers and facilities are 
        appropriately accredited, certified, and licensed.

SEC. 1421. PATIENT PROTECTIONS AND PROVIDER SELECTION.

    (a) Information Regarding a Patient's Right to Self-Determination 
in Health Care Services.--Each certified health plan shall be 
considered to be an eligible organization under title XVIII of the 
Social Security Act for purposes of applying the rules under section 
1866(f) of such Act (42 U.S.C. 1395cc(f)).
    (b) Gatekeeper.--With respect to each network plan that utilizes a 
gatekeeper or similar process to approve network items and services, 
such plan shall ensure that such gatekeeper or process does not create 
an undue burden for enrollees with complex or chronic health conditions 
and shall ensure access to relevant specialists for the continued care 
of such enrollees when medically indicated. In cases of a patient with 
a severe, complex, or chronic health condition, such plan shall 
determine, in conjunction with the enrollee and the enrollee's primary 
care provider, whether it is medically necessary or appropriate to use 
a specialist or a care coordinator from an interdisciplinary team as 
the gatekeeper or in the health care approval process.
    (c) Confidentiality of Patient Records.--Each certified health plan 
shall have explicit procedures to protect the confidentiality of 
individual patient information.
    (d) Marketing.--A sponsor of a certified health plan may not engage 
in selective marketing that would have the effect of avoiding high-risk 
subscribers within a community-rating area. Marketing materials may not 
contain false or materially misleading information.
    (e) No Patient Liability for Unpaid Plan Obligations.--An 
individual enrolled in a certified health plan shall not be liable to 
any health care provider or practitioner with respect to the provision 
of health services covered by the plan in excess of the amount for 
which the individual would have been liable had the health plan made 
payments to providers in a timely manner.
    (f) Remedies and Enforcement.--
            (1) In general.--Each certified health plan shall comply 
        with the applicable remedies and enforcement requirements.
            (2) Grievance process.--Each certified health plan shall 
        establish a grievance process for enrollees dissatisfied with 
        matters other than the denial of payment or provision of 
        benefits by the plan.
    (g) Enrollment.--A certified health plan may not knowingly accept 
the enrollment of an individual who is enrolled in another certified 
health plan.
    (h) Provider Selection.--
            (1) In general.--In selecting among providers of health 
        services for membership in a provider network, or in 
        establishing the terms and conditions of such membership, a 
        certified health plan may not engage in any practice that 
        discriminates against a provider based on the actual or 
        anticipated health status of the patients of the provider.
            (2) Additional requirements.--No health plan may 
        discriminate on the basis of the provider's status as a member 
        of a health care profession for the purposes of selecting among 
        providers of health services for participation in a provider 
        network, provided that the State authorizes members of that 
        profession to render the services in question and that such 
        services are covered in the comprehensive benefits package 
        described in subtitle B.
            (3) Number and type.--Nothing in this subsection shall--
                    (A) prevent a certified health plan sponsor from 
                matching the number and type of health care providers 
                to the needs of the plan members; or
                    (B) establish any other measure designed to 
                maintain quality or to control costs.
    (i) Physician Participation.--Each certified health plan shall 
establish mechanisms through which physicians have input into matters 
affecting patient care and through which patients have the ability to 
choose any primary care physician from among participating providers.

SEC. 1422. ARRANGEMENTS WITH ESSENTIAL COMMUNITY PROVIDERS.

    (a) Certification.--The Secretary shall certify as an essential 
community provider the following providers and organizations:
            (1) Covered entities as defined in section 340B(a)(4) of 
        the Public Health Service Act (42 U.S.C. 256b(a)(4)), and 
        comparable nonprofit hospitals, except that subsections 
        (a)(4)(L)(iii) and (a)(7) of such section shall not apply.
            (2) A Medicare dependent small rural hospital under section 
        1886(d)(8)(iii) of the Social Security Act.
            (3) Children's hospitals meeting comparable criteria 
        determined appropriate by the Secretary.
            (4) Public and private, nonprofit mental health and 
        substance abuse providers receiving funds under title V or XIX 
        of the Public Health Service Act.
            (5) Runaway homeless youth centers or transitional living 
        programs for homeless youth providing health services under the 
        Runaway Homeless Youth Act of 1974 (42 U.S.C. 5701 et seq.).
            (6) Public or nonprofit maternal and child health providers 
        that receive funding under title V of the Social Security Act.
            (7) Rural health clinics as defined under section 
        1861(aa)(2) of the Social Security Act.
            (8) School health services centers under title III of this 
        Act.
            (9) Nonprofit hospitals with a minimum of 200 beds, located 
        in urban areas where--
                    (A) the cumulative total of its services provided 
                to individuals who are entitled to benefits under title 
                XVIII of the Social Security Act or under a State plan 
                under title XIX of such Act equals a minimum of 65 
                percent; and
                    (B) a minimum of 20 percent of its services are 
                provided to individuals eligible for assistance under 
                such title XIX.
    (b) Requirements Relating to Essential Community Providers.--
            (1) In general.--Each health plan shall, with respect to 
        each electing essential community provider (as defined in 
        paragraph (5), other than a provider of school health services) 
        located within the plan's service area, either--
                    (A) enter into a written provider participation 
                agreement (described in paragraph (3)) with the 
                provider; or
                    (B) enter into a written agreement under which the 
                plan shall make payment to the provider in accordance 
                with paragraph (4).
        The requirements of this paragraph shall not apply to a health 
        plan with respect to any essential community provider for which 
        a demonstration is made pursuant to paragraph (2).
            (2) Waivers.--Effective one year after the date on which a 
        State becomes a participating State, the Secretary shall grant 
        a waiver of the requirements of paragraph (1) to any health 
        plan that demonstrates that it has the capacity to provide 
        services to plan enrollees residing in the area served by an 
        essential community provider that are reasonably equivalent to 
        the services provided by the essential community provider in 
        terms of the scope of services and convenience. Any such waiver 
        shall not become effective until the plan year following the 
        succeeding open enrollment period. Any health plan receiving 
        such a waiver shall notify the essential community provider 
        with respect to which such a waiver has been granted and 
        enrollees of the plan not less than 60 days prior to the 
        commencement of such enrollment period.
            (3) Participation agreement.--A participation agreement 
        between a health plan and an electing essential 
community provider under this paragraph shall provide that the health 
plan agrees to treat the provider in accordance with terms and 
conditions at least as favorable as those that are applicable to other 
providers participating in the health plan with respect to each of the 
following:
                    (A) The scope of services for which payment is made 
                by the plan to the provider.
                    (B) The rate of payment for covered care and 
                services.
                    (C) The availability of financial incentives to 
                participating providers.
                    (D) Limitations on financial risk provided to other 
                participating providers.
                    (E) Assignment of enrollees to participating 
                providers.
                    (F) Access by the provider's patients to providers 
                in medical specialties or subspecialties participating 
                in the plan.
            (4) Payments for providers without participation 
        agreements.--
                    (A) In general.--Payment in accordance with this 
                paragraph is payment based on payment methodologies and 
                rates used under the applicable Medicare payment 
                methodology and rates (or the most closely applicable 
                methodology under such program as the Secretary of 
                Health and Human Services specifies in regulations).
                    (B) No application of gate-keeper limitations.--
                Payment in accordance with this paragraph may be 
                subject to utilization review, but may not be subject 
                to otherwise applicable gate-keeper requirements under 
                the plan.
            (5) Election.--
                    (A) In general.--In this section, the term 
                ``electing essential community provider'' means, with 
                respect to a health plan, an essential community 
                provider that elects this section to apply to the 
                health plan.
                    (B) Form of election.--An election under this 
                paragraph shall be made in a form and manner specified 
                by the Secretary, and shall include notice to the 
                health plan involved. Such an election may be made 
                annually with respect to a health plan, except that the 
                plan and provider may agree to make such an election on 
                a more frequent basis.
    (c) Recommendation on Continuation of Requirement.--
            (1) Studies.--In order to prepare recommendations under 
        paragraph (2), the Secretary shall conduct studies regarding 
        essential community providers, including studies that assess--
                    (A) the definition of essential community provider,
                    (B) the sufficiency of the funding levels for 
                providers, including rules for federally qualified 
                health centers, for both covered and uncovered benefits 
                under this Act,
                    (C) the effects of contracting requirements 
                relating to such providers on such providers, health 
                plans, and enrollees,
                    (D) the impact of the payment rules for such 
                providers, and
                    (E) the impact of national health reform on such 
                providers.
            (2) Recommendations to congress.--The Secretary shall 
        submit to Congress, by not later than March 1, 2001, specific 
        recommendations respecting whether, and to what extent, 
        subsection (b) should continue to apply to some or all 
        essential community providers. Such recommendations may include 
        a description of the particular types of such providers and 
        circumstances under which such section should continue to 
        apply.

SEC. 1423. ACCESS TO SPECIALIZED SERVICES.

    (a) In General.--Each certified health plan shall have within the 
plan's network, or have such other arrangements with, a sufficient 
number, distribution, and variety of providers of specialized services 
to assure that such services are available and accessible to adults, 
infants, children, and persons with disabilities. With respect to 
children such specialized care shall be in pediatrics.
    (b) Eligible Centers of Specialized Treatment Expertise.--
            (1) In general.--Each network plan shall demonstrate that 
        adults, children, and individuals with disabilities have access 
        to specialized treatment expertise when medically indicated by 
        meeting evaluation criteria established by the Secretary. In 
        establishing such criteria, the Secretary may consider a 
        process by which a network plan could be deemed to meet such 
        evaluation criteria if such plan demonstrates referrals to 
        designated centers of specialized care when medically necessary 
        or appropriate and informs enrollees of the availability of 
        referral care.
            (2) Eligible centers.--The Secretary shall establish 
        criteria for designating centers of specialized care and shall 
        designate eligible centers based on such criteria. The criteria 
        shall include requirements for staff credentials and 
        experience, and requirements for measured outcomes in the 
        diagnosis and treatment of patients. The Secretary shall 
        develop additional criteria for outcomes of specialized 
        treatment as research findings become available. To be 
        designated as a center of specialized care, a center shall--
                    (A) attract patients from outside the center's 
                local geographic region, from across the State or the 
                United States; and
                    (B) either sponsor, participate in, or have medical 
                staff who participate in peer-reviewed research.
            (3) Limitation.--A State may not establish rules or 
        policies that require or encourage network plans to give 
        preference to centers of specialized treatment expertise within 
        the State or within the community rating area. A health plan 
        shall not prohibit an academic health center, teaching 
        hospital, or other center for specialized care with which it 
        contracts from contracting with one or more other plans.
            (4) Specialized treatment expertise.--For purposes of this 
        subsection, the term ``specialized treatment expertise'', with 
        respect to the treatment of a health condition by an eligible 
        center, means expertise in diagnosing and treating unusual 
        diseases or conditions, diagnosing and treating diseases or 
        conditions which are unusually difficult to diagnose or treat, 
        and providing other specialized health care.
    (c) Evaluation Criteria for Specialized Services Standards.--A 
certified health plan may choose to provide specialized services within 
a provider network if such provision meets the requirements of this 
section.

SEC. 1424. COMMUNITY RATING AREA CAPACITY.

    Each certified health plan shall have the capacity within the 
plan's network, or through arrangements with a sufficient number, 
distribution, and variety of providers, to deliver the comprehensive 
benefits required under subtitle B throughout the community rating area 
(designated under section 1203) in which such plan is offered. Services 
shall be provided with reasonable promptness and accessibility, in a 
manner which assures continuity, and in a manner which appropriately 
serves the diverse needs of the population.

SEC. 1425. OUT-OF-AREA COVERAGE.

    Each certified health plan shall provide emergency out-of-area and 
out-of-plan coverage for enrollees of the plan and urgent out-of-area 
coverage.

  PART 3--STANDARDS APPLICABLE TO CERTIFIED SELF-INSURED HEALTH PLANS

SEC. 1431. STANDARDS APPLICABLE TO CERTIFIED SELF-INSURED HEALTH PLANS.

    (a) In General.--Subject to subsection (b), the requirements 
applicable to certified self-insured health plans are the requirements 
specified in the following provisions (as modified in regulations 
promulgated by the Secretary of Labor to make such provisions 
applicable to self-insured plans):
            (1) Section 1411, except that such subsections (a) and (b) 
        shall be applied (for purposes of this subsection) only with 
        respect to employees of the employer sponsor or members of the 
        family of such employees.
            (2) Sections 1412 through 1425, except that sections 
        1413(a), 1416, 1417, and 1418 shall not apply.
    (b) Collective Bargaining Exception.--Paragraph (1) of subsection 
(a) shall not apply to a certified self-insured health plan sponsor 
that is providing benefits pursuant to a collective bargaining 
agreement.
    (c) Financial Solvency.--Each certified self-insured health plan 
shall meet the solvency, reserve, and stop-loss requirements 
established by the Secretary of Labor under section 1501.
    (d) Management of Funds.--
            (1) Management of funds.--A certified self-insured health 
        plan sponsor shall, in the management of the plan's funds, be 
        subject to the applicable fiduciary requirements of part 4 of 
        subtitle B of title I of the Employee Retirement Income 
        Security Act of 1974, together with the applicable enforcement 
        provisions of part 5 of subtitle B of title I of such Act.
            (2) Management of finances and records; accounting 
        system.--A certified self-insured health plan sponsor shall 
        comply with standards relating to the management of finances 
        and records and accounting systems as the Secretary of Labor 
        shall specify.
    (e) Additional Standards.--In addition to the requirements 
applicable to certified self-insured health plans under subsection (a), 
the Secretary of Labor shall establish standards to ensure that such 
health plans and insured, experience-rated health plans--
            (1) do not vary premiums for any reason described in 
        section 1414(a);
            (2) do not discriminate on a basis described in section 
        1203(e) (relating to geographic discrimination); and
            (3) provide information to employees of the employer 
        sponsor of the plans offered.

                PART 4--PREEMPTION OF CERTAIN STATE LAWS

SEC. 1441. PREEMPTION FROM STATE BENEFIT MANDATES.

    Effective as of January 1, 1997, no State shall establish or 
enforce any law or regulation that--
            (1) requires the offering, as part of a certified health 
        plan, of any services, category of care, or services of any 
        class or type of provider that is different from the benefit 
        categories specified under this Act; or
            (2) requires a right of conversion from a group health plan 
        that is a certified health plan to an individual certified 
        health plan.

SEC. 1442. PREEMPTION OF STATE LAW RESTRICTIONS ON CERTIFIED HEALTH 
              PLANS.

    Effective as of January 1, 1997--
            (1) a State may not prohibit or limit a certified health 
        plan from including incentives for enrollees to use the 
        services of participating providers;
            (2) a State may not prohibit or limit such plans from 
        limiting coverage of services to those provided by a 
        participating provider;
            (3) a State may not prohibit or limit the negotiation of 
        rates and forms of payments for providers under such plans;
            (4) a State may not prohibit or limit such plans from 
        limiting the number of participating providers;
            (5) a State may not prohibit or limit such plans from 
        requiring that services be provided (or authorized) by a 
        practitioner selected by the enrollee from a list of available 
        participating providers;
            (6) a State may not prohibit or limit the corporate 
        practice of medicine;
            (7) a State may not regulate utilization management and 
        review programs of any health plan to the extent not provided 
        by this title;
            (8) a State may not prohibit or limit a health plan from 
        using single source suppliers for pharmacy services, non-
        serviced medical equipment, and other supplies and services; 
        and
            (9) a State may not prohibit a certified health plan, 
        including a Federally qualified health maintenance 
        organization, from offering a point of service option.

                       PART 5--INTERIM STANDARDS

SEC. 1451. APPLICATION OF INTERIM STANDARDS.

    (a) In General.--During the interim standards application period, a 
health plan sponsor may only offer a health plan in a State if such 
plan meets the standards specified in subsections (b) and (c).
    (b) Specified Standards.--
            (1) Guaranteed issue and nondiscrimination.--The standards 
        specified in--
                    (A) section 1411(a), and
                    (B) section 1414.
            (2) Renewal.--The standards specified in section 1411(b).
            (3) Coverage.--A self-insured health plan may not reduce or 
        limit coverage of any condition or course of treatment that is 
        expected to cost not less than $5,000 during any 12-month 
        period.
    (c) Treatment of Preexisting Condition Exclusions Prior to 
Universal Coverage.--
            (1) In general.--Notwithstanding section 1414, prior to the 
        achievement of universal coverage, a certified health plan may 
        impose a limitation or exclusion of benefits relating to 
        treatment of a condition based on the fact that the condition 
        preexisted the effective date of the plan with respect to an 
        individual only if--
                    (A) the condition was diagnosed or treated during 
                the 3-month period ending on the day before the date of 
                enrollment under the plan;
                    (B) the limitation or exclusion extends for a 
                period not more than 6 months after the date of 
                enrollment under the plan;
                    (C) the limitation or exclusion does not apply to 
                an individual who, as of the date of birth, was covered 
                under the plan; or
                    (D) the limitation or exclusion does not apply to 
                pregnancy.
            (2) Crediting of previous coverage.--A certified health 
        plan shall provide that if an individual under such plan is in 
        a period of continuous coverage as of the date of enrollment 
        under such plan, any period of exclusion of coverage with 
        respect to a preexisting condition shall be reduced by 1 month 
        for each month in the period of continuous coverage.
            (3) Definitions.--As used in this subsection:
                    (A) Period of continuous coverage.--The term 
                ``period of continuous coverage'' means the period 
                beginning on the date an individual is enrolled under a 
                health plan or health care program which provides 
                benefits similar to those provided by the certified 
                health plan in which the individual is seeking to 
                enroll with respect to coverage of a preexisting 
                condition and ends on the date the individual is not so 
                enrolled for a continuous period of more than 3 months.
                    (B) Preexisting condition.--The term ``preexisting 
                condition'' means, with respect to coverage under a 
                certified health plan, a condition which was diagnosed, 
                or which was treated, within the 3-month period ending 
                on the day before the date of enrollment (without 
                regard to any waiting period).
    (d) Interim Standards Application Periods.--The interim standards 
application period is--
            (1) in the case of the standard specified in subsection (b) 
        and (c), on or after January 1, 1996, and before the State 
        becomes a participating State; and
            (2) in the case of the standard specified in subsection 
        (b)(3), on or after the date of the enactment of this Act, and 
        before January 1, 1997.
    (d) Preemption.--The requirements of this section do not preempt 
any State law unless State law directly conflicts with such 
requirements. The provision of additional protections under State law 
shall not be considered to directly conflict with such requirements. 
The Secretary may issue letter determinations with respect to whether 
this section preempts a provision of State law.
    (e) Construction.--The provisions of this section shall be 
construed in a manner that assures, to the greatest extent practicable, 
continuity of health benefits under health plans in effect on the 
effective date of this Act.
    (f) Special Rules for Acquisitions and Transfers.--The Secretary 
may issue regulations regarding the application of this section in the 
case of health plans (or groups of such plans) which are transferred 
from one health plan sponsor to another sponsor through assumption, 
acquisition, or otherwise.

                  Subtitle F--Federal Responsibilities

PART 1--ESTABLISHMENT OF FEDERAL STANDARDS FOR CERTIFIED INSURED HEALTH 
                                 PLANS

SEC. 1500. ESTABLISHMENT.

    The Secretary, in consultation with the NAIC and other qualified 
experts, shall develop and publish the standards specified in part 2 of 
subtitle E by not later than June 1, 1996.

           PART 2--CERTIFICATION OF SELF-INSURED HEALTH PLANS

SEC. 1501. ESTABLISHMENT AND CERTIFICATION OF STANDARDS APPLICABLE TO 
              SELF-INSURED CERTIFIED HEALTH PLANS.

    (a) Establishment of Standards by Secretary of Labor.--The 
Secretary of Labor, in consultation with the Secretary, shall develop 
and publish standards applicable to certified self-insured health plans 
relating to the requirements specified in part 3 of subtitle E. The 
Secretary shall develop and publish such standards by not later than 
June 1, 1996.
    (b) Certification of Health Plans.--In the case of self-insured 
health plans, the Secretary of Labor shall provide for the 
certification of self-insured health plans as certified health plans.
    (c) Financial Standards.--The Secretary of Labor shall develop, by 
not later than January 1, 1996, standards for the solvency, reserve, 
and stop-loss requirements for certified self-insured health plans and 
for qualified association plans.

SEC. 1502. CORRECTIVE ACTIONS FOR SELF-INSURED HEALTH PLANS.

    (a) In General.--The Secretary of Labor shall by regulation 
establish procedures for the filing and implementation of corrective 
action plans in any case in which such Secretary or a self-insured plan 
sponsor determines that a self-insured plan has failed to meet the 
requirements of this Act, or expects such a failure.
    (b) Disqualified or Termination of Plan.--
            (1) In general.--In any case in which the plan sponsor of a 
        self-insured health plan determines that there is reason to 
        believe that the plan will cease to be a certified self-insured 
        health plan or will terminate, the plan sponsor shall so inform 
        the Secretary of Labor, shall develop a plan for winding up the 
        affairs of the plan in connection with such disqualification or 
        termination in a manner which will result in timely payment of 
        all benefits for which the plan is obligated, and shall submit 
        such plan in writing to such Secretary. Actions required under 
        this subparagraph shall be taken in such form and manner as may 
        be prescribed in regulations by such Secretary.
            (2) Actions required in connection with disqualification or 
        termination.--
                    (A) Actions by plan sponsor.--Upon a determination 
                by the Secretary of Labor that a corrective action plan 
                has not been implemented or that such a plan cannot 
                reasonably be expected to bring the health plan into 
                compliance with this Act, the plan sponsor shall, at 
                the direction of such Secretary, terminate the plan 
                and, in the course of the termination, take such 
                actions as such Secretary may require as necessary to 
                ensure timely payment of all benefits for which the 
                plan is obligated.
                    (B) Actions by large employer.--Upon a 
                determination by the Secretary of Labor under 
                subparagraph (A), the large employer shall provide for 
                such contingency coverage for all employees of the 
                employer in accordance with regulations which shall be 
                prescribed in regulations of such Secretary.

SEC. 1503. ERISA APPLICABILITY TO SELF-INSURED HEALTH PLANS.

    (a) In General.--Part 1 of subtitle B of title I of the Employee 
Retirement Income Security Act of 1974 is amended--
            (1) in the heading for section 110, by adding ``by pension 
        plans'' at the end;
            (2) by redesignating section 111 as section 112; and
            (3) by inserting after section 110 the following new 
        section:

                 ``special rules for group health plans

    ``Sec. 111. (a) In General.--The Secretary may by regulation 
provide special rules for the application of this part to group health 
plans which are consistent with the purposes of the Affordable Health 
Care for All Americans Act and which take into account the special 
needs of participants, beneficiaries, and health care providers under 
such plans.
    ``(b) Additional Requirements.--Such special rules may include 
rules providing for reporting and disclosure to the Secretary and to 
participants and beneficiaries of additional information or at 
additional times with respect to group health plans to which this part 
applies under section 4(c)(2), if such reporting and disclosure would 
be comparable to and consistent with similar requirements applicable 
under the Health Reform Act with respect to community-rated health 
plans and applicable regulations of the Secretary of Health and Human 
Services prescribed thereunder.''.
    (b) Clerical Amendment.--The table of contents in section 1 of such 
Act is amended by striking the items relating to sections 110 and 111 
and inserting the following new items:

``Sec. 110. Alternative methods of compliance by pension plans.
``Sec. 111. Special rules for group health plans.
``Sec. 112. Repeal and effective date.''.

                     PART 3--OTHER RESPONSIBILITIES

SEC. 1521. FEDERAL ROLE IN THE CASE OF A DEFAULT BY A STATE.

    If a State fails to become a participating State under section 1200 
or, having become a participating State, the State fails to continue to 
meet the requirements of such section, the Secretary shall, after 
notice and opportunity for correction, impose intermediate sanctions, 
order corrective actions, and may, if necessary to fulfill the purposes 
of this Act, carry out activities under this Act in the same manner as 
a participating State would carry out such activities.

SEC. 1522. RULES DETERMINING SEPARATE EMPLOYER STATUS.

    Under rules of the Secretary, employers that are related (as 
defined under such rules) shall be treated under this Act as a single 
employer if a reason for their separation relates to the health risk 
characteristics of eligible employees of such employers.

SEC. 1523. WORKPLACE WELLNESS PROGRAM.

    (a) In General.--The Secretary shall develop certification criteria 
for workplace wellness programs.
    (b) Application of Section.--Any health plan may offer a uniform 
premium discount, not to exceed 10 percent, to employers maintaining 
certified workplace wellness programs.

            PART 4--COLLECTIVE BARGAINING DISPUTE RESOLUTION

SEC. 1531. FINDINGS AND PURPOSE.

    (a) Finding.--Congress finds that--
            (1) consistent with the intention of this Act to eliminate 
        waste and inefficiency in the health care industry, it is 
        important to avoid costly and disruptive labor disputes; and
            (2) such disputes are particularly likely to take place 
        during the period of transition to a restructured health care 
        delivery system because of disruptions to established 
        employment relationships resulting from that restructuring.
    (b) Purpose.--It is the purpose of this part to expand the role of 
the Federal Mediation and Conciliation Service, acting through the 
Boards of Inquiry provided for in limited terms under section 8(g) of 
the National Labor Relations Act (29 U.S.C. 158(g)) and section 213 of 
the Labor Management Relations Act of 1947 (29 U.S.C. 183), to avoid 
labor disputes by providing for public fact finding in contract 
negotiations.

SEC. 1532. APPLICATION LIMITED TO TRANSITION PERIOD.

    The provisions of this part are intended to avoid costly and 
disruptive labor disputes during the period of transition to a 
restructured health care delivery system, and shall be repealed 
effective upon the end of calendar year 2000.

SEC. 1533. REQUEST FOR APPOINTMENT OF BOARD OF INQUIRY.

    (a) In General.--A health care entity (as defined in section 
3082(a)) or a labor organization that has been lawfully certified or 
recognized as the representative of the employees of a health care 
entity for the purpose of engaging in collective bargaining concerning 
wages, hours and other terms and conditions of employment, may request 
that the Director of the Federal Mediation and Conciliation Service 
(hereafter referred to in this part as the ``Director'') appoint an 
impartial Health Care Board of Inquiry to investigate the issues 
involved in a collective bargaining dispute between the entity and the 
labor organization.
    (b) Time for Request.--Such request may be made no earlier than 60 
days after notice of the existence of a contract dispute has been 
provided to--
            (1) the Federal Mediation and Conciliation Service in 
        accordance with clause (A) or (B) of the last sentence of 
        section 8(d) of the Labor Management Relations Act (29 U.S.C. 
        158(d)); or
            (2) where the health care entity is otherwise exempt from 
        coverage under such Act, any comparable State or territorial 
        agency established to mediate and conciliate disputes to which 
        notice is required to be given under applicable State law.

SEC. 1534. APPOINTMENT OF BOARD OF INQUIRY.

    (a) In General.--Except as provided in subsection (b), the Director 
shall appoint a Health Care Board of Inquiry not later than 10 days 
after receipt of a request under section 1532. Each such Board shall be 
composed of such number of individuals as the Director may deem 
desirable. No member appointed under this section shall have any 
interest or involvement in the health care institutions or the employee 
organizations involved in the dispute.
    (b) Limitation.--With respect to the appointment of a Health Care 
Board of Inquiry under paragraph (1), if the Director determines that--
            (1) the health care entity is--
                    (A) otherwise exempt from coverage under the Labor 
                Management Relations Act, as amended (29 U.S.C. 141 et 
                seq.); and
                    (B) subject to State laws containing procedures for 
                the resolution of impasses in collective bargaining 
                that are comparable to those that would be followed by 
                a Board of Inquiry under this section; or
            (2) the parties involved have agreed to procedures for the 
        resolution of the impasse in collective bargaining that are 
        comparable to those that would be followed by a Board of 
        Inquiry;
the Director may refuse the request for the appointment of such a 
Board.

SEC. 1535. PUBLIC FACTFINDING.

    A Health Care Board of Inquiry appointed under this part shall 
investigate the issues involved in the dispute and make a written 
report thereon to the parties and to the Director within 30 days after 
the establishment of such a Board. The written report shall contain the 
findings of fact together with the Board's recommendations for settling 
the dispute, with the objective of achieving a prompt, peaceful and 
just settlement of the dispute. The Board shall arrange for publication 
of such report within the community served by the health care entity 
involved.

SEC. 1535A. COMPENSATION OF MEMBERS OF BOARDS OF INQUIRY.

    (a) Employees if Federal Government.--Members of any board 
established under this part who are otherwise employed by the Federal 
Government shall serve without compensation but shall be reimbursed for 
travel, subsistence, and other necessary expenses incurred by such 
members in carrying out its duties under this section.
    (b) Other Members.--Members of any board established under this 
section who are not subject to subsection (a) shall receive 
compensation at a rate prescribed by the Director but not to exceed the 
daily rate prescribed for GS-12 of the General Schedule under section 
5332 of title 5, United States Code, including travel for each day they 
are engaged in the performance of their duties under this section and 
shall be entitled to reimbursement for travel, subsistence, and other 
necessary expenses incurred by them in carrying out their duties under 
this part.

SEC. 1535B. MAINTENANCE OF STATUS QUO.

    After the establishment of a board under section 1533, and for 15 
days after any such board has issued its report, no change in the 
status quo in effect prior to the expiration of the contract in the 
case of negotiations for a contract renewal, or in effect prior to the 
time the parties began their bargaining in the case of an initial 
beginning negotiation, except by agreement, shall be made by the 
parties to the controversy.

            Subtitle G--Miscellaneous Employer Requirements

SEC. 1601. AUDITING OF RECORDS.

    Each community-rated employer shall maintain such records, and 
provide the State for the area in which the employer maintains the 
principal place of employment (as specified by the Secretary of Labor) 
with access to such records, as may be necessary to verify and audit 
the information reported under this Act.

SEC. 1602. PROHIBITION OF CERTAIN EMPLOYER DISCRIMINATION.

    No employer may discriminate with respect to an employee on the 
basis of the family status of the employee or on the basis of the class 
of family enrollment selected with respect to the employee.

SEC. 1603. EVASION OF OBLIGATIONS.

    It shall be unlawful for any employer or other person to discharge, 
fine, suspend, expel, discipline, discriminate or otherwise take 
adverse action against any employee if a purpose of such action is to 
interfere with the employee's attainment of status as a qualifying 
employee, as a full time employee, or as a part-time employee, or if a 
purpose of such action is to evade or avoid any obligation under this 
Act.

SEC. 1604. PROHIBITION ON SELF-FUNDING OF COST SHARING BENEFITS.

    (a) Prohibition.--A community-rated employer (and an experience-
rated employer with respect to employees who are community rated 
eligible individuals) may provide benefits to employees that consist of 
the benefits included in a cost sharing policy only through a 
contribution toward the purchase of a cost sharing policy which is 
funded primarily through insurance.
    (b) Individual and Employer Responsibilities.--In the case of an 
individual who resides in a single-payer State and an employer with 
respect to employees who reside in such a State, the responsibilities 
of such individual and employer under such system shall supersede the 
obligations of the individual and employer under this subtitle.

SEC. 1605. ENFORCEMENT.

    In the case of a person that violates a requirement of this 
subtitle, the Secretary of Labor may impose a civil money penalty, in 
an amount not to exceed $10,000, for each violation with respect to 
each individual.

       Subtitle H--General Definitions; Miscellaneous Provisions

                      PART 1--GENERAL DEFINITIONS

SEC. 1700. DEFINITIONS AND SPECIAL RULES RELATING TO HEALTH PLANS.

    For purposes of this Act--
            (1) Health plan.--
                    (A) In general.--The term ``health plan'' means an 
                insured health plan or a self-insured health plan which 
                provides, or pays the cost of, health benefits. Such 
                term does not include the following, or any combination 
                thereof:
                            (i) Coverage only for accidental death or 
                        dismemberment.
                            (ii) Coverage providing wages or payments 
                        in lieu of wages for any period during which 
                        the employee is absent from work on account of 
                        sickness or injury.
                            (iii) A medicare supplemental policy (as 
                        defined in section 1882(g)(1) of the Social 
                        Security Act).
                            (iv) Coverage issued as a supplement to 
                        liability insurance.
                            (v) General liability insurance.
                            (vi) Worker's compensation or similar 
                        insurance.
                            (vii) Automobile or automobile medical-
                        payment insurance.
                            (viii) A long-term care policy, including a 
                        nursing home fixed indemnity policy (unless the 
                        Secretary determines that such a policy 
                        provides sufficiently comprehensive coverage of 
                        a benefit so that it should be treated as a 
                        health plan).
                            (ix) A specified disease or illness 
                        insurance policy.
                            (x) A hospital or fixed indemnity income-
                        protection policy.
                            (xi) A disability income policy.
                            (xii) Insurance with respect to accidents.
                            (xiii) An equivalent health care program.
                            (xiv) Such other plan or arrangement as the 
                        Secretary determines is not a health plan.
                    (B) Insured health plan.--
                            (i) In general.--The term ``insured health 
                        plan'' means any health plan which is a 
                        hospital or medical service policy or 
                        certificate, hospital or medical service plan 
                        contract, or health maintenance organization or 
                        preferred provider organization group contract 
                        offered by an insurer.
                            (ii) Insurer.--The term ``insurer'' means--
                                    (I) a licensed insurance company,
                                    (II) a prepaid hospital or medical 
                                service plan,
                                    (III) a preferred provider 
                                organization,
                                    (IV) a health maintenance 
                                organization, or
                                    (V) any similar entity (other than 
                                an entity described in subparagraph 
                                (C)),
                        which is engaged in the business of providing a 
                        plan of health insurance or health benefits.
                    (C) Self-insured health plan.--The term ``self-
                insured health plan'' means a health plan--
                            (i) which is established and maintained by 
                        a large employer, and
                            (ii) under which the large employer retains 
                        a substantial risk for the providing of health 
                        benefits under the plan.
                    (D) Network plan.--The term ``network plan'' means 
                a health plan with which providers have entered into an 
                agreement that obligates such providers to provide 
                items and services to individuals enrolled in the plan, 
                or an agreement to provide items and services on a fee-
                for-service basis.
                    (E) Point-of-service plan.--The term ``point-of-
                service plan'' means a network plan that provides 
                reimbursement for items and services provided out-of-
                network at increased cost-sharing levels.
                    (F) Fee-for-service plan.--The term ``fee-for-
                service plan'' means a health plan that--
                            (i) provides coverage for all items and 
                        services included in the comprehensive benefit 
                        package that are furnished by any lawful health 
                        care provider of the enrollee's choice, subject 
                        to reasonable restrictions, as determined by 
                        the Secretary, and
                            (ii) makes payment to such a provider 
                        without regard to whether or not there is a 
                        contractual arrangement between the plan and 
                        the provider.
            (2) Certified health plan.--The term ``certified health 
        plan'' means a health plan which is certified by the 
        appropriate certifying authority as meeting the applicable 
        requirements of this Act, including the offering of the 
        comprehensive benefits described in subtitle B. A health plan 
        shall not fail to be treated as a certified health plan if such 
        plan offers a medicare-eligible benefits package to medicare 
        beneficiaries under--
                    (A) a contract entered into with the Secretary 
                under section 1876 of the Social Security Act, or
                    (B) a plan of an organization providing benefits 
                pursuant to an agreement under section 1833(a)(1)(A) of 
                such Act.
            (3) Terms and rules relating to community and experience 
        rating.--
                    (A) Community-rated health plan.--The term 
                ``community-rated health plan'' means a health plan 
                which meets the requirements of section 1013.
                    (B) Community-rated individual.--The term 
                ``community-rated individual'' means an individual--
                            (i) who is not an experience-rated 
                        individual, or
                            (ii) who is an experience-rated individual 
                        (determined without regard to this 
                        subparagraph) who is not a full-time employee 
                        of a large employer and who does not enroll in 
                        a certified health plan offered by the 
                        employer.
                    (C) Small employer.--The term ``small employer'' 
                means, with respect to any calendar year, any employer 
                if, on each of 20 days during the preceding calendar 
                year (each day being in a different week), such 
                employer (or any predecessor) employed less than 100 
                full-time employees for the day.
                    (D) Experience-rated health plan.--The term 
                ``experience-rated health plan'' means an insured or 
                self-insured health plan covering only experience-rated 
                individuals.
                    (E) Experience-rated individual.--The term 
                ``experience-rated individual'' means an individual who 
                is--
                            (i) an employee (or the dependent of an 
                        employee) of a large employer,
                            (ii) a member (or the dependent of a 
                        member) of a qualified association plan (as 
                        defined in section 1323), or
                            (iii) an individual enrolled in a plan to 
                        which section 1325 applies.
                    (F) Large employer.--
                            (i) In general.--The term ``large 
                        employer'' means, with respect to any calendar 
                        year, any employer if, on each of 20 days 
                        during the preceding calendar year (each day 
                        being in a different week), such employer (or 
                        any predecessor) employed 100 or more full-time 
                        employees for the day.
                            (ii) Election not to aggregate.--Any 
                        employer may elect not to aggregate its 
                        employees across community rating areas. Upon 
                        such election, the employer shall be treated as 
                        a small employer in any community rating area 
                        in which it employs less than 100 full-time 
                        employees and as a large employer in any 
                        community rating area in which it employs 100 
                        or more full-time employees. Such election 
shall remain in effect for a period of not less than 5 years. An 
employer may revoke such election after a 5-year period by notifying 
the Secretary of Labor under rules prescribed by the Secretary.
                    (G) Special rule for spouses and dependents.--If 
                any individual is offered coverage under a health plan 
                as the spouse or a dependent of a primary enrollee of 
                such plan, such individual shall have the status of 
                such enrollee unless such individual is eligible to 
                elect other coverage and so elects.

SEC. 1701. DEFINITIONS RELATING TO EMPLOYMENT AND INCOME.

    (a) In General.--Except as otherwise specifically provided, in this 
Act the following definitions and rules apply:
            (1) Employer, employee, employment, and wages defined.--
        Except as provided in this section--
                    (A) the terms ``wages'' and ``employment'' have the 
                meanings given such terms under section 3121 of the 
                Internal Revenue Code of 1986,
                    (B) the term ``employee'' has the meaning given 
                such term under section 3121 of such Code, subject to 
                the provisions of chapter 25 of such Code, and
                    (C) the term ``employer'' has the same meaning as 
                the term ``employer'' as used in such section 3121.
            (2) Exceptions.--For purposes of paragraph (1)--
                    (A) Employment.--
                            (i) Employment included.--Paragraphs (1), 
                        (2), (5), (7) (other than clauses (i) through 
                        (iv) of subparagraph (C) and clauses (i) 
                        through (v) of subparagraph (F)), (8), (9), 
                        (10), (11), (13), (15), (18), and (19) of 
                        section 3121(b) of the Internal Revenue Code of 
                        1986 shall not apply.
                            (ii) Exclusion of inmates as employees.--
                        Employment shall not include services performed 
                        in a penal institution by an inmate thereof or 
                        in a hospital or other health care institution 
                        by a patient thereof.
                    (B) Wages.--
                            (i) In general.--Paragraph (1) of section 
                        3121(a) of the Internal Revenue Code of 1986 
                        shall not apply.
                            (ii) Tips not included.--The term ``wages'' 
                        does not include cash tips.
                    (C) Exclusion of certain foreign employment.--The 
                term ``employee'' does not include an individual with 
                respect to service, if the individual is not a citizen 
                or resident of the United States and the service is 
                performed outside the United States.
            (3) Aggregation rules for employers.--For purposes of this 
        Act--
                    (A) all employers treated as a single employer 
                under subsection (a) or (b) of section 52 of the 
                Internal Revenue Code of 1986 shall be treated as a 
                single employer, and
                    (B) under regulations of the Secretary of Labor, 
                all employees of organizations which are under common 
                control with one or more organizations which are exempt 
                from income tax under subtitle A of the Internal 
                Revenue Code of 1986 shall be treated as employed by a 
                single employer.
        The regulations prescribed under subparagraph (B) shall be 
        based on principles similar to the principles which apply to 
        taxable organizations under subparagraph (A).
            (4) Employer premium.--The term ``employer premium'' refers 
        to the premium established and imposed under part 2 of subtitle 
        B of title V.
    (b) Qualifying Employee; Full-Time Employment.--
            (1) Qualifying employee.--
                    (A) In general.--In this Act, the term ``qualifying 
                employee'' means, with respect to an employer for a 
                month, an employee (other than a covered child, as 
                defined in subparagraph (C)) who is employed by the 
                employer for at least 40 hours (as determined under 
                paragraph (3)) in the month, subject to the limitation 
                set forth in subparagraph (D).
                    (B) No special treatment of medicare beneficiaries, 
                ssi recipients, afdc recipients, and others.--
                Subparagraph (A) shall apply regardless of whether or 
                not the employee is a medicare-eligible individual, an 
                SSI recipient, an AFDC recipient, an eligible 
                individual or is authorized to be so employed.
                    (C) Covered child defined.--In subparagraph (A), 
                the term ``covered child'' means an eligible individual 
                who is a child and is enrolled under a health plan as a 
                family member described in section 1011(b).
                    (D) Qualifying employees.--As used in this Act--
                            (i) the term qualifying employee shall not 
                        include, with respect to an employer for a 
                        month, an employee of a nonelecting small 
                        employer (as defined in section 6120); and
                            (ii) the term ``qualifying employee'' shall 
                        include, with respect to an employer for a 
                        month, a part-time employee beginning with the 
                        second month of such employee's employment.
            (2) Full-time equivalent employees; part-time employees.--
                    (A) In general.--For purposes of this Act, a 
                qualifying employee who is employed by an employer--
                            (i) for at least 120 hours in a month, is 
                        counted as 1 full-time equivalent employee for 
                        the month and shall be deemed to be employed on 
                        a full-time basis, or
                            (ii) for at least 40 hours, but less than 
                        120 hours, in a month, is counted as a fraction 
                        of a full-time equivalent employee in the month 
                        equal to the full-time employment ratio for the 
                        employee and shall be deemed to be employed on 
                        a part-time basis.
                    (B) Full-time employee.--For purposes of this Act, 
                the term ``full-time employee'' means, with respect to 
                an employer, an employee who is employed on a full-time 
                basis (as specified in subparagraph (A)) by the 
                employer.
                    (C) Part-time employee.--For purposes of this Act, 
                the term ``part-time employee'' means, with respect to 
                an employer, an employee who is employed on a part-time 
                basis (as specified in subparagraph (A)) by the 
                employer.
                    (D) Consideration of industry practice.--As 
                provided under rules established by the Secretary, an 
                employee who is not described in subparagraph (B) or 
                (C) shall be considered to be employed on a full-time 
                or part-time basis by an employer (and to be a full-
                time or part-time employee of an employer) for a month 
                (or for all months in a 12-month period) if the 
                employee is employed by that employer on a continuing 
                basis that, taking into account the structure or nature 
                of employment in the industry, represents full or part-
                time employment in that industry.
                    (E) Institutions of higher education.--
                Notwithstanding any other provision in this section--
                            (i)(I) employees of an Institution of 
                        higher education (as defined in section 1201(a) 
                        of the Higher Education Act of 1965), or of an 
                        elementary or secondary school (as defined in 
                        section 1471 of the Elementary and Secondary 
                        Education Act of 1965), who are exempt under 
                        section 13 of the Fair Labor Standards Act, 
                        shall be deemed to be full-time employees if 
                        they work the hours that constitute full-time 
employment as defined at such institution;
                            (II) part-time employment shall be 
                        considered proportional to such hours for full-
                        time employees; and
                            (III) part-time employees who work at least 
                        one-third of the hours that constitute full-
                        time employment as defined at such institution 
                        shall be eligible for proportional employer 
                        premium contributions; and
                            (ii) regular employees of institutions of 
                        higher education or elementary and secondary 
                        schools who are not paid during the summer 
                        months or other periods of the year, but are 
                        assured employment at the end of such periods, 
                        shall be eligible for year-round employer 
                        premium contributions if such individuals are 
                        not eligible to collect unemployment 
                        compensation for the periods for which they 
                        would receive health care premium contributions 
                        from the employer covered by this subsection.
            (3) Treatment of salaried employees and employees paid on 
        contingent or bonus arrangements.--In the case of an employee 
        who receives compensation on a salaried basis or on the basis 
        of a commission (or other contingent or bonus basis), rather 
        than an hourly wage, the Secretary shall establish rules for 
        the conversion of the compensation to hours of employment.
    (c) Definitions Relating to Self-Employment.--In this Act:
            (1) Net earnings from self-employment.--The term ``net 
        earnings from self-employment'' has the meaning given such term 
        under section 1402(a) of the Internal Revenue Code of 1986.
            (2) Self-employed individual.--The term ``self-employed 
        individual'' means, for a year, an individual who has net 
        earnings from self-employment for the year.
    (d) Consumer Price Index; CPI.--The terms ``consumer price index'' 
and ``CPI'' mean the Consumer Price Index for all urban consumers (U.S. 
city average), as published by the Bureau of Labor Statistics.

SEC. 1702. OTHER GENERAL DEFINITIONS.

    Except as otherwise specifically provided, in this Act the 
following definitions apply:
            (1) Applicable health plan.--The term ``applicable health 
        plan'' means, with respect to an eligible individual, the 
        health plan specified pursuant to section 1004 and part 2 of 
        subtitle A.
            (2) Citizen of another country legally residing in the 
        united states.--The term ``citizen of another country legally 
        residing in the United States'' means an alien lawfully 
        admitted for permanent residence, or otherwise permanentlty 
        residing, in the United States under color of law as included 
        in regulations in effect under title XIX of the Social Security 
        Act as of December 1, 1994.
            (3) Covered wages defined.--In this section, the term 
        ``covered wages'' means wages paid an employee of an employer 
        during a month in which the employee was a qualifying employee 
        of the employer.
            (4) Exempt individual.--The term ``exempt individual'' 
        means an individual that has been granted an exemption from 
        paying Social Security Taxes under section 1402(g) of the 
        Internal Revenue Code of 1986, or an individual who would be 
        eligible for an exemption under such section if the individual 
        were self-employed.
            (5) Health plan sponsor.--The term ``health plan sponsor'' 
        means--
                    (A) with respect to a community-rated plan, the 
                carrier providing the plan,
                    (B) with respect to an insured experience-rated 
                plan, the carrier providing the plan, and
                    (C) with respect to a self-funded experience-rated 
                plan, the employer providing the plan.
            (6) Long-term nonimmigrant.--The term ``long-term 
        nonimmigrant'' means a nonimmigrant described in subparagraph 
        (E), (H), (I), (J), (K), (L), (M), (N), (O), (Q), or (R) of 
        section 101(a)(15) of the Immigration and Nationality Act or an 
        alien within such other classification of nonimmigrant as the 
        Secretary may establish by regulation.
            (7) Poverty level.--The term ``applicable poverty level'' 
        means, for a family for a year, the official poverty line (as 
        defined by the Office of Management and Budget, and revised 
        annually in accordance with section 673(2) of the Omnibus 
        Budget Reconciliation Act of 1981) applicable to a family of 
        the size involved for 1994.
            (8) Secretary.--The term ``Secretary'' unless expressly 
        provided otherwise, means the Secretary of Health and Human 
        Services.

                    PART 2--MISCELLANEOUS PROVISIONS

SEC. 1711. REGULATORY AUTHORITY.

    The Secretary of Health and Human Services and the Secretary of 
Labor are each authorized to issue regulations as are necessary to 
implement this Act. In order to permit the timely implementation of the 
provisions of this Act, such regulations may be issued on an interim 
basis. Such regulations shall become final on the date of publication, 
subject to change based on subsequent public comment.

SEC. 1712. NEUTRALITY CONCERNING UNION ORGANIZING.

    Amounts appropriated to carry out this Act may not be utilized to 
assist, promote or deter union organizing.

SEC. 1713. SOCIAL SECURITY ACT REFERENCES.

    Except as may otherwise be provided, any reference in this title, 
or in title V, to a provision of the Social Security Act shall be to 
that provision of the Social Security Act as in effect on the date of 
the enactment of this Act.

SEC. 1714. COVERAGE OF BENEFITS UNDER AFFORDABLE HEALTH CARE FOR ALL 
              AMERICANS ACT.

    (a) Davis-Bacon Act.--Subsection (b)(2) of the first section of the 
Davis Bacon Act (40 U.S.C. 276a(b)(2)) is amended in the matter 
following subparagraph (B) by inserting after ``local law'' the 
following: ``(other than benefits provided pursuant to the Affordable 
Health Care For all Americans Act)''.
    (b) Service Contract Act of 1965.--The second sentence of section 
2(a)(2) of the Service Contract Act of 1965 (41 U.S.C. 351(a)(2)) is 
amended by inserting after ``local law'' the following: ``(other than 
benefits provided pursuant to the Affordable Health Care for All 
Americans Act)''.

SEC. 1715. SENSE OF THE COMMITTEE CONCERNING FUNDING SOURCES.

    It is the sense of the Committee on Labor and Human Resources of 
the Senate that when the Affordable Health Care for All Americans Act 
is enacted it should include the following sources of financing not 
within the jurisdiction of the Committee:
            (1) The net savings and revenues included in S.1757, the 
        Health Security Act (as introduced in the 103d Congress) which 
        are outside the jurisdiction of the Committee.
            (2) An increase in the cigarette tax of 75 cents per pack 
        in excess of the amount specified in S.1757, the Health 
        Security Act.
            (3) A phased-in premium assessment, not to exceed 1 
        percent, equal to the additional amount provided for biomedical 
        research under title III of this Act.
            (4) Such other savings or revenues as are necessary, if 
        any, to provide budget neutrality based on estimates of the 
        Congressional Budget Office.
            (5) A one percent payroll assessment on exempt employers 
        with five or fewer workers and a two percent payroll assessment 
        on exempt employers with six to 10 workers payable to the State 
        to defray a portion of the additional subsidy costs for 
        employees of such employers.

                         TITLE II--NEW BENEFITS

             Subtitle A--Home and Community-Based Services

    PART 1--HOME AND COMMUNITY-BASED SERVICES FOR INDIVIDUALS WITH 
                              DISABILITIES

SEC. 2101. STATE PLANS.

    (a) Plan Requirements.--In order to be approved under subsection 
(b), a State plan for home and community-based services for individuals 
with disabilities must meet the following requirements:
            (1) State maintenance of effort.--
                    (A) In general.--A State plan under this subtitle 
                shall provide that the State will, during any fiscal 
                year that the State is furnishing services under this 
                subtitle, make expenditures of State funds in an amount 
                equal to the State maintenance of effort amount for the 
                year determined under subparagraph (B) for furnishing 
                the services described in subparagraph (C) under the 
                State plan under this subtitle and the State plan under 
                title XIX of the Social Security Act.
                    (B) State maintenance of effort amount.--
                            (i) In general.--The maintenance of effort 
                        amount for a State for a fiscal year is an 
                        amount equal to--
                                    (I) for fiscal year 1999, the base 
                                amount for the State (as determined 
                                under clause (ii)) updated through the 
                                midpoint of fiscal year 1998 by the 
                                estimated percentage change in the 
                                consumer price index during the period 
                                beginning on October 1, 1994 and ending 
                                at that midpoint; and
                                    (II) for succeeding fiscal years, 
                                an amount equal to the amount 
                                determined under this clause for the 
                                previous fiscal year updated through 
                                the midpoint of the year by the 
                                estimated percentage change in the 
                                consumer price index during the 12-
                                month period ending at that midpoint, 
                                with appropriate adjustments to reflect 
                                previous underestimations or 
                                overestimations under this clause in 
                                the projected percentage change in the 
                                consumer price index.
                            (ii) State base amount.--The base amount 
                        for a State is an amount equal to the total 
                        expenditures from State funds made under the 
                        State plan under title XIX of the Social 
                        Security Act during fiscal year 1994 with 
                        respect to medical assistance consisting of the 
                        services described in subparagraph (C).
                    (C) Medicaid services described.--The services 
                described in this subparagraph are the following:
                            (i) Personal care services (as described in 
                        section 1905(a)(24) of the Social Security 
                        Act).
                            (ii) Home or community-based services 
                        furnished under a waiver granted under 
                        subsection (c), (d), or (e) of section 1915 of 
                        such Act.
                            (iii) Home and community care furnished to 
                        functionally disabled elderly individuals under 
                        section 1929 of such Act.
                            (iv) Community supported living 
                        arrangements services under section 1930 of 
                        such Act.
            (2) Eligibility.--
                    (A) In general.--Except as provided in subparagraph 
                (B), within the amounts provided by the State and under 
                section 2107 for such plan, the plan shall provide that 
                services under the plan will be available to 
                individuals with disabilities (as defined in section 
                2102(a)) in the State.
                    (B) Initial screening.--The plan shall provide a 
                process for the initial screening of an individual who 
                appears to have some reasonable likelihood of being an 
                individual with disabilities. Any such process shall 
                require the provision of assistance to individuals who 
                wish to apply but whose disability limits their ability 
                to apply. The initial screening and the determination 
                of disability (as defined under section 2102(b)(1)) 
                shall be conducted by a public agency.
                    (C) Restrictions.--The plan may not limit the 
                eligibility of individuals with disabilities based on--
                            (i) income,
                            (ii) age,
                            (iii) residential setting (other than an 
                        institutional setting), or
                            (iv) other grounds specified by the 
                        Secretary.
                    (D) Continuation of services.--The plan must 
                provide assurances that, in the case of an individual 
                receiving medical assistance for home and community-
                based services under the State medicaid plan under 
                title XIX of the Social Security Act as of the date a 
                State's plan is approved under this subtitle, the State 
                will continue to make available (either under this 
                plan, under the State medicaid plan, or otherwise) to 
                such individual an appropriate level of assistance for 
                home and community-based services, taking into account 
                the level of assistance provided as of such date and 
                the individual's need for home and community-based 
                services.
            (3) Services.--
                    (A) Needs assessment.--Not later than the end of 
                the second year of implementation, the plan or its 
                amendments shall include the results of a statewide 
                assessment of the needs of individuals with 
                disabilities in a format required by the Secretary. The 
                needs assessment shall include demographic data 
                concerning the number of individuals within each 
                category of disability described in this subtitle, and 
                the services available to meet the needs of such 
                individuals.
                    (B) Specification.--Consistent with section 2103, 
                the plan shall specify--
                            (i) the services made available under the 
                        plan,
                            (ii) the extent and manner in which such 
                        services are allocated and made available to 
                        individuals with disabilities, and
                            (iii) the manner in which services under 
                        the plan are coordinated with each other and 
                        with health and long-term care services 
                        available outside the plan for individuals with 
                        disabilities.
                    (C) Taking into account informal care.--A State 
                plan may take into account, in determining the amount 
                and array of services made available to covered 
                individuals with disabilities, the availability of 
                informal care.
                    (D) Allocation.--The State plan--
                            (i) shall specify how services under the 
                        plan will be allocated among covered 
                        individuals with disabilities,
                            (ii) shall attempt to meet the needs of 
                        individuals with a variety of disabilities 
                        within the limits of available funding,
                            (iii) shall include services that assist 
                        all categories of individuals with 
                        disabilities, regardless of their age or the 
                        nature of their disabling conditions,
                            (iv) shall demonstrate that services are 
                        allocated equitably, in accordance with the 
                        needs assessment required under subparagraph 
                        (A), and
                            (v) shall ensure that--
                                    (I) the proportion of the 
                                population of low-income individuals 
                                with disabilities in the State that 
                                represents individuals with 
                                disabilities who are provided home and 
                                community-based services either under 
                                the plan, under the State medicaid 
                                plan, or under both, is not less than,
                                    (II) the proportion of the 
                                population of the State that represents 
                                individuals who are low-income 
                                individuals.
                    (E) Limitation on licensure or certification.--The 
                State may not subject consumer-directed providers of 
                personal assistance services to licensure, 
                certification, or other requirements which the 
                Secretary finds not to be necessary for the health and 
                safety of individuals with disabilities.
                    (F) Consumer choice.--To the extent feasible, the 
                State shall follow the choice of an individual with 
                disabilities (or that individual's designated 
                representative who may be a family member) regarding 
                which covered services to receive and the providers who 
                will provide such services.
            (4) Cost sharing.--The plan shall impose cost sharing with 
        respect to covered services in accordance with section 2104.
            (5) Types of providers and requirements for 
        participation.--The plan shall specify--
                    (A) the types of service providers eligible to 
                participate in the program under the plan, which shall 
                include consumer-directed providers of personal 
                assistance services, except that the plan--
                            (i) may not limit benefits to services 
                        provided by registered nurses or licensed 
                        practical nurses; and
                            (ii) may not limit benefits to services 
                        provided by agencies or providers certified 
                        under title XVIII; and
                    (B) any requirements for participation applicable 
                to each type of service provider.
            (6) Provider reimbursement.--
                    (A) Payment methods.--The plan shall specify the 
                payment methods to be used to reimburse providers for 
                services furnished under the plan. In the case of 
                payment to consumer-directed providers of personal 
                assistance services, including payment through the use 
                of cash or vouchers, the plan shall specify how the 
                plan will assure compliance with applicable employment 
                tax and health care coverage provisions.
                    (B) Payment rates.--The plan shall specify the 
                methods and criteria to be used to set payment rates.
                    (C) Plan payment as payment in full.--The plan 
                shall restrict payment under the plan for covered 
                services to those providers that agree to accept the 
                payment under the plan (at the rates established 
                pursuant to subparagraph (B)) and any cost sharing 
                permitted or provided for under section 2104 as payment 
                in full for services furnished under the plan.
            (7) Quality assurance and safeguards.--The State plan shall 
        provide for quality assurance and safeguards for applicants and 
        beneficiaries in accordance with section 2105.
            (8) Advisory group.--The State plan shall assure the 
        establishment and maintenance of an advisory group under 
        section 2106(b).
            (9) Administration and access.--
                    (A) State agency.--The plan shall designate a State 
                agency or agencies to administer (or to supervise the 
                administration of) the plan.
                    (B) Coordination.--The plan shall specify how it 
                will--
                            (i) coordinate services provided under the 
                        plan, including eligibility prescreening, 
                        service coordination, and referrals for 
                        individuals with disabilities who are 
                        ineligible for services under this subtitle 
                        with other Federal or State programs that 
                        provide services or assistance targeted to 
                        individuals with disabilities; and
                            (ii) coordinate with health plans.
                    (C) Administrative expenditures.--Effective 
                beginning with fiscal year 2004, the plan shall contain 
                assurances that not more than 10 percent of 
                expenditures under the plan for all quarters in any 
                fiscal year shall be for administrative costs.
            (10) Reports and information to secretary; audits.--The 
        plan shall provide that the State will furnish to the Secretary 
        such data and information as the Secretary may require in a 
        uniform format as specified by the Secretary.
            (11) Use of state funds for matching.--The plan shall 
        provide assurances that Federal funds will not be used to 
        provide for the State share of expenditures under this 
        subtitle.
            (12) Health care worker redeployment.--The plan shall 
        provide for the following:
                    (A) Before initiating the process of implementing 
                the State program under such plan, negotiations will be 
                commenced with labor unions representing the employees 
                of the affected hospitals or other facilities.
                    (B) Negotiations under subparagraph (A) will 
                address the following:
                            (i) The impact of the implementation of the 
                        program upon the workforce.
                            (ii) Methods to redeploy workers to 
                        positions in the proposed system, in the case 
                        of workers affected by the program.
                    (C) The plan will provide evidence that there has 
                been compliance with subparagraphs (A) and (B), 
                including a description of the results of the 
                negotiations.
            (13) Terminology.--The plan shall adhere to uniform 
        definitions of terms, as specified by the Secretary.
    (b) Approval of Plans.--The Secretary shall approve a plan 
submitted by a State if the Secretary determines that the plan--
            (1) was developed by the State after a public comment 
        period of not less than 30 days, and
            (2) meets the requirements of subsection (a).
The approval of such a plan shall take effect as of the first day of 
the first fiscal year beginning after the date of such approval (except 
that any approval made before January 1, 1998, shall be effective as of 
January 1, 1998). In order to budget funds allotted under this 
subtitle, the Secretary shall establish a deadline for the submission 
of such a plan before the beginning of a fiscal year as a condition of 
its approval effective with that fiscal year. Any significant changes 
to the State plan shall be submitted to the Secretary in the form of 
plan amendments and shall be subject to approval by the Secretary.
    (c) Monitoring.--The Secretary shall annually monitor the 
compliance of State plans with the requirements of this subtitle 
according to specified performance standards. In accordance with 
section 2107(e), States that fail to comply with such requirements may 
be subject to a reduction in the Federal matching rates available to 
the State under section 2107(a) or the withholding of Federal funds for 
services or administration until such time as compliance is achieved.
    (d) Regulations.--The Secretary shall issue such regulations as may 
be appropriate to carry out this subtitle on a timely basis.

SEC. 2102. INDIVIDUALS WITH DISABILITIES DEFINED.

    (a) In General.--For purposes of this subtitle, the term 
`individual with disabilities' means any individual within one or more 
of the following categories of individuals:
            (1) Individuals requiring help with activities of daily 
        living.--An individual of any age who--
                    (A) requires hands-on or standby assistance, 
                supervision, or cueing (as defined in regulations) to 
                perform three or more activities of daily living (as 
                defined in subsection (d)), and
                    (B) is expected to require such assistance, 
                supervision, or cueing over a period of at least 90 
                days.
            (2) Individuals with severe cognitive or mental 
        impairment.--An individual of any age--
                    (A) whose score, on a standard mental status 
                protocol (or protocols) appropriate for measuring the 
                individual's particular condition specified by the 
                Secretary, indicates either severe cognitive impairment 
                or severe mental impairment, or both;
                    (B) who--
                            (i) requires hands-on or standby 
                        assistance, supervision, or cueing with one or 
                        more activities of daily living;
                            (ii) requires hands-on or standby 
                        assistance, supervision, or cueing with at 
                        least such instrumental activity (or 
                        activities) of daily living related to 
                        cognitive or mental impairment as the Secretary 
                        specifies; or
                            (iii) displays symptoms of one or more 
                        serious behavioral problems (that is on a list 
                        of such problems specified by the Secretary) 
                        which create a need for supervision to prevent 
                        harm to self or others; and
                    (C) who is expected to meet the requirements of 
                subparagraphs (A) and (B) over a period of at least 90 
                days.
        Not later than 2 years after the date of enactment of this 
        subtitle, the Secretary shall make recommendations regarding 
        the most appropriate duration of disability under this 
        paragraph.
            (3) Individuals with severe or profound mental 
        retardation.--An individual of any age who has severe or 
        profound mental retardation (as determined according to a 
        protocol specified by the Secretary).
            (4) Young children with severe disabilities.--An individual 
        under 6 years of age who--
                    (A) has a severe disability or chronic medical 
                condition that limits functioning in a manner that is 
                comparable in severity to the standards established 
                under paragraphs (1), (2), or (3), and
                    (B) is expected to have such a disability or 
                condition and require such services over a period of at 
                least 90 days.
    (b) Determination.--
            (1) In general.--In formulating eligibility criteria under 
        subsection (a), the Secretary shall establish criteria for 
        assessing the functional level of disability among all 
        categories of individuals with disabilities that are comparable 
        in severity, regardless of the age or the nature of the 
        disabling condition of the individual. The determination of 
        whether an individual is an individual with disabilities shall 
        be made by a public or nonprofit agency that is specified under 
        the State plan and that is not a provider of home and 
        community-based services under this subtitle and by using a 
        uniform protocol consisting of an initial screening and a 
        determination of disability specified by the Secretary. A State 
        may not impose cost sharing with respect to a determination of 
        disability. A State may collect additional information, at the 
        time of obtaining information to make such determination, in 
        order to provide for the assessment and plan described in 
        section 2103(b) or for other purposes.
            (2) Periodic reassessment.--The determination that an 
        individual is an individual with disabilities shall be 
        considered to be effective under the State plan for a period of 
        not more than 6 months (or for such longer period in such cases 
        as a significant change in an individual's condition that may 
        affect such determination is unlikely). A reassessment shall be 
        made if there is a significant change in an individual's 
        condition that may affect such determination.
    (c) Activity of Daily Living Defined.--For purposes of this 
subtitle, the term `activity of daily living' means any of the 
following: eating, toileting, dressing, bathing, and transferring.

SEC. 2103. HOME AND COMMUNITY-BASED SERVICES COVERED UNDER STATE PLAN.

    (a) Specification.--
            (1) In general.--Subject to the succeeding provisions of 
        this section, the State plan under this subtitle shall 
        specify--
                    (A) the home and community-based services available 
                under the plan to individuals with disabilities (or to 
                such categories of such individuals), and
                    (B) any limits with respect to such services.
            (2) Flexibility in meeting individual needs.--Subject to 
        subsection (f)(2), such services may be delivered in an 
        individual's home, a range of community residential 
        arrangements, or outside the home.
    (b) Requirement for Needs Assessment and Plan of Care.--
            (1) In general.--The State plan shall provide for home and 
        community-based services to an individual with disabilities 
        only if the following requirements are met:
                    (A) Comprehensive assessment.--A comprehensive 
                assessment of an individual's need for home and 
                community-based services (regardless of whether all 
                need services are available under the plan) shall be 
                made in accordance with a uniform, comprehensive 
                assessment tool that shall be used by a State under 
                this paragraph with the approval of the Secretary. The 
                Secretary shall provide guidance to the States with 
                regard to the appropriate qualifications for 
                individuals who conduct comprehensive assessments.
                    (B) Individualized plan of care.--An individualized 
                plan of care based on the assessment made under 
                subparagraph (A) shall be developed. A plan of care 
                under this subparagraph shall--
                            (i) specify which services included under 
                        the individual plan will be provided under the 
                        State plan under this subtitle;
                            (ii) identify (to the extent possible) how 
                        the individual will be provided any services 
                        specified under the plan of care and not 
                        provided under the State plan;
                            (iii) specify how the provision of services 
                        to the individual under the plan will be 
                        coordinated with the provision of other health 
                        care services to the individual; and
                            (iv) be reviewed and updated every 6 months 
                        (or more frequently if there is a change in the 
                        individual's condition).
                The State shall make reasonable efforts to identify and 
                arrange for services described in clause (ii). Nothing 
                in this subsection shall be construed as requiring a 
                State (under the State plan or otherwise) to provide 
                all the services specified in such a plan.
                    (C) Involvement of individuals.--The individualized 
                plan of care under subparagraph (B) for an individual 
                with disabilities shall--
                            (i) be developed by qualified individuals 
                        (specified under the State plan);
                            (ii) be developed and implemented in close 
                        consultation with the individual (or the 
                        individual's designated representative); and
                            (iii) be approved by the individual (or the 
                        individual's designated representative).
    (c) Requirement for Care Management.--
            (1) In general.--The State shall make available to each 
        category of individuals with disabilities care management 
        services that at a minimum include--
                    (A) arrangements for the provision of such 
                services, and
                    (B) monitoring of the delivery of services.
            (2) Care management services.--
                    (A) In general.--Except as provided in subparagraph 
                (B), the care management services described in 
                paragraph (1) shall be provided by a public or private 
                entity that is not providing home and community-based 
                services under this subtitle.
                    (B) Exception.--A person who provides home and 
                community-based services under this subtitle may 
                provide care management services if--
                            (i) the State determines that there is an 
                        insufficient pool of entities willing to 
                        provide such services in an area due to a low 
                        population of individuals eligible for home and 
                        community-based services under this subtitle 
                        residing in such area; and
                            (ii) the State plan specifies procedures 
                        that the State will implement in order to avoid 
                        conflicts of interest.
    (d) Mandatory Coverage of Personal Assistance Services.--The State 
plan shall include, in the array of services made available to each 
category of individuals with disabilities, both agency-administered and 
consumer-directed personal assistance services (as defined in 
subsection (h)).
    (e) Additional Services.--Subject to subsection (f), services 
available under a State plan under this subtitle may include any (or 
all) of the following:
            (1) Homemaker and chore assistance.
            (2) Home modifications.
            (3) Respite services.
            (4) Assistive devices, as defined in the Technology Related 
        Assistance for Individuals with Disabilities Act.
            (5) Adult day services.
            (6) Habilitation and rehabilitation.
            (7) Supported employment.
            (8) Home health services.
            (9) Transportation.
            (10) Any other care or assistive services specified by the 
        State and approved by the Secretary that will help individuals 
        with disabilities to remain in their homes and communities.
    (f) Exclusions and Limitations.--A State plan may not provide for 
coverage of--
            (1) room and board,
            (2) services furnished in a hospital, nursing facility, 
        intermediate care facility for the mentally retarded, or other 
        institutional setting specified by the Secretary, or
            (3) items and services to the extent coverage is provided 
        for the individual under a health plan or the medicare program.
    (g) Payment for Services.--In order to pay for covered services, a 
State plan may provide for the use of--
            (1) vouchers,
            (2) cash payments directly to individuals with 
        disabilities,
            (3) capitation payments to health plans, and
            (4) payment to providers.
    (h) Personal Assistance Services.--
            (1) In general.--For purposes of this subtitle, the term 
        ``personal assistance services'' means those services specified 
        under the State plan as personal assistance services and shall 
        include at least hands-on and standby assistance, supervision, 
        and cueing with activities of daily living, whether agency-
        administered or consumer-directed (as defined in paragraph 
        (2)).
            (2) Consumer-directed.--For purposes of this subtitle:
                    (A) In general.--The term ``consumer-directed'' 
                means, with reference to personal assistance services 
                or the provider of such services, services that are 
                provided by an individual who is selected and managed 
                (and, at the option of the service recipient, trained) 
                by the individual receiving the services.
                    (B) State responsibilities.--A State plan shall 
                ensure that where services are provided in a consumer-
                directed manner, the State shall create or contract 
                with an entity, other than the consumer or the 
                individual provider, to--
                            (i) inform both recipients and providers of 
                        rights and responsibilities under all 
                        applicable Federal labor and tax law; and
                            (ii) assume responsibility for providing 
                        effective billing, payments for services, tax 
                        withholding, unemployment insurance, and 
                        workers' compensation coverage, and act as the 
                        employer of the home care provider.
                    (C) Right of consumers.--Notwithstanding the State 
                responsibilities described in subparagraph (B), service 
                recipients, and, where appropriate, their designated 
                representative, shall retain the right to independently 
                select, hire, terminate, and direct (including manage, 
                train, schedule, and verify services provided) the work 
                of a home care provider.
            (3) Agency administered.--For purposes of this subtitle, 
        the term `agency-administered' means, with respect to such 
        services, services that are not consumer-directed.

SEC. 2104. COST SHARING.

    (a) No Cost Sharing for Poorest.--
            (1) In general.--The State plan may not impose any cost 
        sharing for individuals with income (as determined under 
        subsection (d)) less than 150 percent of the official poverty 
        level (referred to in paragraph (2)) applicable to a family of 
        the size involved.
            (2) Official poverty level.--The term `applicable poverty 
        level' means, for a family for a year, the official poverty 
        line (as defined by the Office of Management and Budget, and 
        revised annually in accordance with section 673(2) of the 
        Omnibus Budget Reconciliation Act of 1981) applicable to a 
        family of the size involved.
    (b) Sliding Scale for Remainder.--
            (1) Required coinsurance.--The State plan shall impose cost 
        sharing in the form of coinsurance (based on the amount paid 
        under the State plan for a service)--
                    (A) at a rate of 10 percent for individuals with 
                disabilities with income not less than 150 percent, and 
                less than 175 percent, of such official poverty line 
                (as so applied);
                    (B) at a rate of 15 percent for such individuals 
                with income not less than 175 percent, and less than 
                225 percent, of such official poverty line (as so 
                applied);
                    (C) at a rate of 25 percent for such individuals 
                with income not less than 225 percent, and less than 
                275 percent, of such official poverty line (as so 
                applied);
                    (D) at a rate of 30 percent for such individuals 
                with income not less than 275 percent, and less than 
                325 percent, of such official poverty line (as so 
                applied);
                    (E) at a rate of 35 percent for such individuals 
                with income not less than 325 percent, and less than 
                400 percent, of such official poverty line (as so 
                applied); and
                    (F) at a rate of 40 percent for such individuals 
                with income equal to at least 400 percent of such 
                official poverty line (as so applied).
            (2) Required annual deductible.--The State plan shall 
        impose cost sharing in the form of an annual deductible--
                    (A) of $100 for individuals with disabilities with 
                income not less than 150 percent, and less than 175 
                percent, of such official poverty line (as so applied);
                    (B) of $200 for such individuals with income not 
                less than 175 percent, and less than 225 percent, of 
                such official poverty line (as so applied);
                    (C) of $300 for such individuals with income not 
                less than 225 percent, and less than 275 percent, of 
                such official poverty line (as so applied);
                    (D) of $400 for such individuals with income not 
                less than 275 percent, and less than 325 percent, of 
                such official poverty line (as so applied);
                    (E) of $500 for such individuals with income not 
                less than 325 percent, and less than 400 percent, of 
                such official poverty line (as so applied); and
                    (F) of $600 for such individuals with income equal 
                to at least 400 percent of such official poverty line 
                (as so applied).
    (c) Recommendation of the Secretary.--The Secretary shall make 
recommendations to the States as to how to reduce cost-sharing for 
individuals with extraordinary out-of-pocket costs for whom the cost-
sharing provisions of this section could jeopardize their ability to 
take advantage of the services offered under this subtitle. The 
Secretary shall establish a methodology for reducing the cost-sharing 
burden under this subtitle for individuals with exceptionally high out-
of-pocket costs.
    (d) Determination of Income for Purposes of Cost Sharing.--The 
State plan shall specify the process to be used to determine the income 
of an individual with disabilities for purposes of this section. Such 
standards shall include a uniform Federal definition of income and any 
allowable deductions from income.

SEC. 2105. QUALITY ASSURANCE AND SAFEGUARDS.

    (a) Quality Assurance.--
            (1) In general.--The State plan shall specify how the State 
        will ensure and monitor the quality of services.
            (2) Issuance of regulations.--Not later than 1 year after 
        the date of enactment of this subtitle, the Secretary shall 
        issue regulations implementing the quality provisions of this 
        subsection.
    (b) Federal Standards.--The State plan shall adhere to Federal 
quality standards in the following areas:
            (1) Case review of a specified sample of client records.
            (2) The mandatory reporting of abuse, neglect, or 
        exploitation.
            (3) The development of a registry of provider agencies or 
        home care workers and consumer directed providers of personal 
        assistance services against whom any complaints have been 
        sustained, which shall be available to the public.
            (4) Sanctions to be imposed on States or providers, 
        including disqualification from the program, if minimum 
        standards are not met.
            (5) Surveys of client satisfaction.
            (6) State optional training programs for informal 
        caregivers.
    (c) Client Advocacy.--The State plan shall provide that the State 
will expend the amount allocated under section 2108(b)(2) for client 
advocacy activities. The State may use such funds to augment the 
budgets of the long-term care ombudsman (under the Older Americans Act 
of 1965) and the Protection and Advocacy Agency (under the 
Developmental Disabilities Assistance and Bill of Rights Act) or may 
establish a separate and independent client advocacy office to 
administer a new program designed to advocate for client rights.

SEC. 2106. ADVISORY GROUPS.

    (a) Federal Advisory Group.--
            (1) Establishment.--The Secretary shall establish an 
        advisory group, to advise the Secretary and States on all 
        aspects of the program under this subtitle.
            (2) Composition.--The group shall be composed of 
        individuals with disabilities and their representatives, 
        providers, Federal and State officials, and local community 
        implementing agencies. A majority of its members shall be 
        individuals with disabilities and their representatives.
    (b) State Advisory Groups.--
            (1) In general.--Each State plan shall provide for the 
        establishment and maintenance of an advisory group to advise 
        the State on all aspects of the State plan under this subtitle.
            (2) Composition.--Members of each advisory group shall be 
        appointed by the Governor (or other chief executive officer of 
        the State) and shall include individuals with disabilities and 
        their representatives, providers, State officials, and local 
        community implementing agencies. A majority of its members 
        shall be individuals with disabilities and their 
        representatives. The members of the advisory group shall be 
        selected from those nominated as described in paragraph (3).

SEC. 2107. PAYMENTS TO STATES.

    (a) In General.--Subject to section 2101(a)(9)(C) (relating to 
limitation on payment for administrative costs), the Secretary, in 
accordance with the Cash Management Improvement Act, shall authorize 
payment to each State with a plan approved under this subtitle, for 
each quarter (beginning on or after January 1, 1998), from its 
allotment under section 2108(b), an amount equal to--
            (1)(A) if the amount demonstrated by State claims to have 
        been expended during the year for home and community-based 
        services under the plan for individuals with disabilities does 
        not exceed 20 percent of the amount allotted to the State under 
        section 2108(b), 100 percent of the amount demonstrated by 
        State claims to have been expended during the quarter for such 
        services for such individuals; or
            (B) for the amount demonstrated by State claims to have 
        been expended during the year for home and community-based 
        services under the plan for individuals with disabilities that 
        exceeds 20 percent of the amount allotted to the State under 
        section 2108(b), the Federal home and community-based services 
        matching percentage (as defined in subsection (b)) of such 
        amount; plus
            (2) an amount equal to 90 percent of the amount 
        demonstrated by the State to have been expended during the 
        quarter for quality assurance activities under the plan; plus
            (3) an amount equal to 90 percent of amount expended during 
        the quarter under the plan for activities (including 
        preliminary screening) relating to determination of eligibility 
        and performance of needs assessment; plus
            (4) an amount equal to 90 percent (or, beginning with 
        quarters in fiscal year 2004, 75 percent) of the amount 
        expended during the quarter for the design, development, and 
        installation of mechanical claims processing systems and for 
        information retrieval; plus
            (5) an amount equal to 50 percent of the remainder of the 
        amounts expended during the quarter as found necessary by the 
        Secretary for the proper and efficient administration of the 
        State plan.
    (b) Federal Home and Community-Based Services Matching 
Percentage.--In subsection (a), the term ``Federal home and community-
based services matching percentage'' means, with respect to a State, 
the State's Federal medical assistance percentage (as defined in 
section 1905(b) of the Social Security Act) increased by 15 percentage 
points, except that the Federal home and community-based services 
matching percentage shall in no case be more than 95 percent.
    (c) Payments on Estimates with Retrospective Adjustments.--The 
method of computing and making payments under this section shall be as 
follows:
            (1) The Secretary shall, prior to the beginning of each 
        quarter, estimate the amount to be paid to the State under 
        subsection (a) for such quarter, based on a report filed by the 
        State containing its estimate of the total sum to be expended 
        in such quarter, and such other information as the Secretary 
        may find necessary.
            (2) From the allotment available therefore, the Secretary 
        shall provide for payment of the amount so estimated, reduced 
        or increased, as the case may be, by any sum (not previously 
        adjusted under this section) by which the Secretary finds that 
        the estimate of the amount to be paid the State for any prior 
        period under this section was greater or less than the amount 
        which should have been paid.
    (d) Application of Rules Regarding Limitations on Provider-Related 
Donations and Health Care Related Taxes.--The provisions of section 
1903(w) of the Social Security Act shall apply to payments to States 
under this section in the same manner as they apply to payments to 
States under section 1903(a) of such Act.
    (e) Failure to Comply with State Plan.--If a State furnishing home 
and community-based services under this subtitle fails to comply with 
the State plan approved under this subtitle, the Secretary may either 
reduce the Federal matching rates available to the State under 
subsection (a) or withhold an amount of funds determined appropriate by 
the Secretary from any payment to the State under this section.

SEC. 2108. APPROPRIATIONS; ALLOTMENTS TO STATES.

    (a) Appropriations.--
            (1) Fiscal years 1998 through 2003.--Subject to paragraph 
        (5)(C), for purposes of this subtitle, the appropriation 
        authorized under this subtitle for each of fiscal years 1997 
        through 2004 is the following:
                    (A) For fiscal year 1997, $3,900,000,000.
                    (B) For fiscal year 1998, $6,800,000,000.
                    (C) For fiscal year 1999, $9,600,000,000.
                    (D) For fiscal year 2000, $12,900,000,000.
                    (E) For fiscal year 2001, $16,400,000,000.
                    (F) For fiscal year 2002, $23,400,000,000.
                    (G) For fiscal year 2003, $31,100,000,000.
                    (H) For fiscal year 2004, $33,600,000,000.
            (2) Subsequent fiscal years.--For purposes of this 
        subtitle, the appropriation authorized for State plans under 
        this subtitle for each fiscal year after fiscal year 2003 is 
        the appropriation authorized under this subsection for the 
        preceding fiscal year multiplied by--
                    (A) a factor (described in paragraph (3)) 
                reflecting the change in the consumer price index for 
                the fiscal year, and
                    (B) a factor (described in paragraph (4)) 
                reflecting the change in the number of individuals with 
                disabilities for the fiscal year.
            (3) CPI increase factor.--For purposes of paragraph (2)(A), 
        the factor described in this paragraph for a fiscal year is the 
        ratio of--
                    (A) the annual average index of the consumer price 
                index for the preceding fiscal year, to--
                    (B) such index, as so measured, for the second 
                preceding fiscal year.
            (4) Disabled population factor.--For purposes of paragraph 
        (2)(B), the factor described in this paragraph for a fiscal 
        year is 100 percent plus (or minus) the percentage increase (or 
        decrease) change in the disabled population of the United 
        States (as determined for purposes of the most recent update 
        under subsection (b)(3)(D)).
            (5) Additional funds due to medicaid offsets.--
                    (A) In general.--Each participating State must 
                provide the Secretary with information concerning 
                offsets and reductions in the medicaid program 
                resulting from home and community-based services 
                provided disabled individuals under this subtitle, that 
                would have been paid for such individuals under the 
                State medicaid plan but for the provision of similar 
                services under the program under this subtitle. At the 
                time a State first submits its plan under this subtitle 
                and before each subsequent fiscal year (through fiscal 
                year 2005), the State also must provide the Secretary 
                with such budgetary information (for each fiscal year 
                through fiscal year 2005), as the Secretary determines 
                to be necessary to carry out this paragraph.
                    (B) Reports.--Each State with a program under this 
                subtitle shall submit such reports to the Secretary as 
                the Secretary may require in order to monitor 
                compliance with subparagraph (A). The Secretary shall 
                specify the format of such reports and establish 
                uniform data reporting elements.
                    (C) Adjustments to appropriation.--
                            (i) In general.--For each fiscal year 
                        (beginning with fiscal year 1998 and ending 
                        with fiscal year 2004) and based on a review of 
                        information submitted under subparagraph (A), 
                        the Secretary shall determine the amount by 
                        which the appropriation authorized under 
                        subsection (a) will increase. The amount of 
                        such increase for a fiscal year shall be 
                        limited to the reduction in Federal 
                        expenditures of medical assistance (as 
                        determined by Secretary) that would have been 
                        made under part A of title XIX for home and 
                        community based services for disabled 
                        individuals but for the provision of similar 
                        services under the program under this subtitle.
                            (ii) Annual publication.--The Secretary 
                        shall publish before the beginning of such 
                        fiscal year, the revised appropriation 
                        authorized under this subsection for such 
                        fiscal year.
                    (D) Construction.--Nothing in this subsection shall 
                be construed as requiring States to determine 
                eligibility for medical assistance under the State 
                medicaid plan on behalf of individuals receiving 
                assistance under this subtitle.
    (b) Allotments to States.--
            (1) In general.--The Secretary shall allot the amounts 
        available under the appropriation authorized for the fiscal 
        year (specified in subsection (a)) to the States with plans 
        approved under this subtitle in accordance with an allocation 
        formula developed by the Secretary which takes into account--
                    (A) the percentage of the total number of 
                individuals with disabilities in all States that reside 
                in a particular State;
                    (B) the per capita costs of furnishing home and 
                community-based services to individuals with 
                disabilities in the State; and
                    (C) the percentage of all individuals with incomes 
                at or below 150 percent of the official poverty line 
                (as described in section 2104(a)(2)) in all States that 
                reside in a particular State.
            (2) Allocation for client advocacy activities.--Each State 
        with a plan approved under this subtitle shall allocate one-
        half of one percent of the State's total allotment under 
        paragraph (1) for client advocacy activities as described in 
        section 2105(c).
            (3) No duplicate payment.--No payment may be made to a 
        State under this section for any services provided to an 
        individual to the extent that the State received payment for 
        such services under section 1903(a) of the Social Security Act.
            (4) Reallocations.--Any amounts allotted to States under 
        this subsection for a year that are not expended in such year 
        shall remain available for State programs under this subtitle 
        and may be reallocated to States as the Secretary determines 
        appropriate.
    (c) State Entitlement.--This subtitle constitutes budget authority 
in advance of appropriations Acts, and represents the obligation of the 
Federal Government to provide for the payment to States of amounts 
described in subsection (a).

                         Subtitle B--Life Care

SEC. 2201. SHORT TITLE.

    This subtitle may be cited as the ``Life Care Act''.

SEC. 2202. LIFE CARE: PUBLIC INSURANCE PROGRAM FOR NURSING HOME CARE.

    The Public Health Service Act is amended by adding at the end 
thereof the following new title:

  ``TITLE XXVII--LIFE CARE: PUBLIC INSURANCE PROGRAM FOR NURSING HOME 
                                  CARE

``SEC. 2701. ESTABLISHMENT OF VOLUNTARY LONG-TERM CARE INSURANCE 
              PROGRAM.

    ``The Secretary shall establish a voluntary insurance program for 
individuals 35 years of age and over to cover the nursing home stays of 
such individuals. The Secretary shall establish a process for 
enrollment in the Life Care program.

``SEC. 2702. BENEFITS.

    ``(a) In General.--
            ``(1) Eligibility for coverage.--Subject to subsection (c), 
        an individual who meets the eligibility criteria prescribed in 
        section 2703 shall be eligible under the program established 
        under this title for coverage for necessary services described 
        in subsection (b) (in the amounts described in subsection (c)) 
        that are provided to the individual by a nursing facility while 
        the individual is an inpatient of the facility.
            ``(2) Nonforfeiture.--The Secretary shall establish 
        standards to ensure the nonforfeiture of benefits for which 
        premiums have been paid.
    ``(b) Types.--Coverage may be provided under this title for--
            ``(1) nursing care provided by or under the supervision of 
        a registered professional nurse;
            ``(2) physical, occupational, or speech therapy furnished 
        by a facility or by others under arrangements with a facility;
            ``(3) medical social work services;
            ``(4) drug, biological, supply, appliance, and equipment 
        for use in the facility, that is ordinarily furnished by the 
        facility for the care and treatment of an inpatient;
            ``(5) such other services necessary to the functioning of a 
        patient, including personal care and assistance with activities 
        of daily living, as are generally provided by a nursing home 
        facility; and
            ``(6) with respect to the initial 6 months of covered 
        residence in a nursing facility, such room and board costs as 
        are not covered by beneficiary copayment.
    ``(c) Coverage Amount.--
            ``(1) In general.--The amount of coverage provided with 
        respect to an eligible individual for the services described in 
        subsection (b) shall, based on an election made by the 
        individual, not exceed $30,000, $60,000, or $90,000 over the 
        lifetime of the eligible individual. Such amounts shall be 
        adjusted by the Secretary to reflect increases in the Consumer 
        Price Index.
            ``(2) Asset protection.--An eligible individual shall be 
        entitled to the asset protection provided under section 2708.
    ``(d) Payment.--Amounts provided under this title with respect to 
an eligible individual for the services described in subsection (b) 
shall be paid from the general fund of the Treasury of the United 
States.
    ``(e) Residential Care Facilities.--The Secretary shall consider 
the feasibility of making payments under this title for services 
delivered in residential care facilities. Not later than 2 years after 
the date of enactment of this Act, the Secretary shall report the 
findings of the Secretary to the Congress with respect to the 
feasibility of making such payments.

``SEC. 2703. ELIGIBILITY.

    ``(a) In General.--An individual shall be eligible for benefits 
under this title if--
            ``(1) the individual--
                    ``(A) is a legal resident of the United States and 
                has elected coverage under subsection (c); and
                    ``(B) has been determined by a Screening Agency 
                through a screening process (conducted in accordance 
                with section 2707)--
                            ``(i)(I) to require hands-on or standby 
                        assistance, supervision, or cueing (as defined 
                        in regulations) to perform three or more 
                        activities of daily living; or
                            ``(II) to require hands-on or standby 
                        assistance, supervision, or cueing with at 
                        least such instrumental activity (or 
                        activities) of daily living related to 
                        cognitive or mental impairment as the Secretary 
                        specifies; or
                            ``(III) to display symptoms of one or more 
                        serious behavioral problems (that is on a list 
                        of such problems specified by the Secretary) 
                        which create a need for supervision to prevent 
                        harm to self or others; or
                            ``(IV) has achieved a score, on a standard 
                        mental status protocol (or protocols) 
                        appropriate for measuring the individual's 
                        particular condition specified by the 
                        Secretary, that indicates either severe 
                        cognitive impairment or severe mental 
                        impairment, or both; and
                            ``(ii) to require such assistance, 
                        supervision, or cueing over a period of at 
                        least 90 days; and
            ``(2)(A) the individual has filed an application for such 
        benefits, and is in need of, benefits covered under this title; 
        or
            ``(B) the legal guardian of the individual has filed an 
        application on behalf of an individual who is in need of 
        benefits covered under this title; or
            ``(C) the representative of an individual who is 
        cognitively impaired and who is in need of benefits covered 
        under this title has filed an application on behalf of the 
        individual.
    ``(b) Current Individuals.--An individual who is in a hospital or 
nursing home on the date of the enrollment of the individual in the 
program established under this title shall be ineligible for coverage 
under this section until the individual's first spell of illness 
beginning after such date.
    ``(c) Election of Coverage.--
            ``(1) In general.--Subject to this subsection, an 
        individual shall have the option to purchase coverage under 
        this title when the individual is 35 years of age, 45 years of 
        age, 55 years of age, or 65 years of age.
            ``(2) Initial year.--During the 1-year period beginning on 
        the date on which final regulations that implement this title 
        are issued, an individual who is 35 years of age or older shall 
        be eligible to purchase insurance under this title, except that 
        such an individual shall not be eligible to purchase such 
        insurance--
                    ``(A) while confined to a hospital or nursing home;
                    ``(B) within the 6-month period after the 
                individual's confinement in a nursing home; or
                    ``(C) within the 90-day period after the 
                individual's confinement in a hospital.
        Individuals described in the matter preceding subparagraph (A) 
        shall become eligible to receive benefits under this title on 
        the expiration of the 3-year period beginning on the date such 
        individuals purchase insurance under this title.
            ``(3) Extension beyond initial year.--If an individual is 
        confined to a nursing home or hospital during a period that 
        extends beyond the first year after the effective date of this 
        title, an individual shall be eligible to enroll in the program 
        established by this title during the 60-day period beginning 
        after the individual's spell of illness.
            ``(4) Subsequent years.--During years subsequent to the 1-
        year period referred to in paragraph (2), an individual shall 
        be eligible to purchase insurance under this title within 6 
        months of the 35th, 45th, 55th, or 65th birthday of the 
        individual.
            ``(5) Activation of benefits.--To receive coverage under 
        the insurance program established by this title, an individual 
        shall have purchased such coverage not later than 1 month prior 
        to admission to a nursing facility, unless the reason for the 
        need of services is a result of an accident or stroke 
        subsequent to the date that such individual enrolled for 
        coverage under this title.
    ``(d) Public Education.--In the 12 months preceding the initial 
enrollment period, the Secretary shall, either directly or through 
grants and contracts, conduct a public service and education campaign 
designed to inform potentially eligible individuals as to the nature of 
the benefits and the limited enrollment period. In conducting such 
campaigns the Secretary shall make information available to individuals 
through the open enrollment process for obtaining health care benefits 
under this Act.

``SEC. 2704. PREMIUM RATES.

    ``(a) In General.--The Secretary shall determine one premium rate 
for individuals electing to purchase coverage under this title at age 
35 (or between the ages of 35 and 44 during the initial enrollment 
period), a separate rate for those individuals who elect coverage at 
age 45 (or between the ages of 45 and 54 during the initial enrollment 
period), a separate rate for those individuals who elect such coverage 
at age 55 (or between that ages of 55 and 64 during the initial 
enrollment period), and a separate rate for those individuals who elect 
such coverage at age 65 (or at age 65 and over during the initial 
enrollment period). During the initial enrollment period, the Secretary 
shall establish actuarily fair, age-rated premiums for persons age 65 
and over.
    ``(b) Revision.--The Secretary shall revise premium rates annually 
to increase such rates to reflect the amount of the increase in the 
cost of living adjustment with respect to benefits under title II of 
the Social Security Act.
    ``(c) Rates.--In developing premium rates under the program 
established under this title, the Secretary shall establish rates that 
are expected to cover 100 percent of the reimbursement amount provided 
under this title for nursing home stays for those individuals enrolled 
in the program.
    ``(d) Waiver.--An individual electing to purchase coverage under 
this title shall not be required to pay premiums during any period in 
which such individual is receiving benefits under this title.
    ``(e) Payment.--Premiums shall be paid under this section into the 
general fund of the Treasury of the United States.

``SEC. 2705. QUALIFIED SERVICE PROVIDERS.

    ``(a) In General.--To be considered as a covered nursing home 
service under this title, such service must have been provided by a 
qualified service provider.
    ``(b) Types.--A provider shall be considered a qualified service 
provider under this title if the provider is a nursing facility that is 
certified by the State and meets the requirements of this title and any 
other standards established by the Secretary by regulation for the safe 
and efficient provision of services covered under this title.

``SEC. 2706. REIMBURSEMENT.

    ``(a) Amount.--Monthly reimbursement for nursing facility services 
under this title shall equal 65 percent (or during the initial 6 months 
of coverage, 80 percent) of the amount the Secretary determines to be 
reasonable and appropriate to cover the cost of care provided under 
this title.
    ``(b) Prospective Payment.--To the extent feasible, the Secretary 
shall establish a prospective payment mechanism for payment for nursing 
home services under this title that takes into account the expected 
resource utilization of individual patients based on their degree of 
disability, the methodology recommended for reimbursement of skilled 
nursing facilities under title XVIII of the Social Security Act, and 
other factors determining service requirements.
    ``(c) Room and Board Payment.--An individual receiving benefits 
under this program shall be responsible for the payment of an amount 
for room and board that is equal to--
            ``(1) with respect to the initial 6 months of residence in 
        a nursing facility, 20 percent of the average per diem rate 
        paid by the Secretary to nursing facilities receiving 
        reimbursement under this title; and
            ``(2) with respect to subsequent periods of residence, 35 
        percent of the average per diem rate paid by the Secretary to 
        nursing facilities receiving reimbursement under this title. 
        Payments under subsections (a) and (c) shall be considered 
        payment in full for services received under this section.
    ``(d) Priority Payers.--Notwithstanding any other provision of this 
title, reimbursement for nursing facility services provided under this 
title to an individual shall, to the extent available, be made under 
the Medicare program, under Department of Veterans Affairs' programs, 
or under private insurance policies prior to reimbursement under this 
title.

``SEC. 2707. LONG-TERM CARE SCREENING AGENCY.

    ``(a) Establishment.--The Secretary shall contract with entities to 
act as Long-Term Care Screening Agencies (hereafter referred to in this 
title as the `Screening Agency') for each designated area of a State. 
It shall be the responsibility of such agency to assess the eligibility 
of individuals residing in the geographic jurisdiction of the Agency, 
for services provided under this title according to the requirements of 
this title and regulations prescribed by the Secretary. In entering 
into such contracts, the Secretary shall give preference to State 
governmental entities and private nonprofit agencies.
    ``(b) Eligibility.--The Screening Agency shall determine the 
eligibility of an individual under this title based on the results of a 
preliminary telephone interview or written questionnaire (completed by 
the applicant, by the caregiver of the applicant, or by the legal 
guardian or representative of the applicant) that shall be validated 
through the use of a screening tool administered in person to each 
applicant determined eligible through initial telephone or written 
questionnaire interviews not later than 15 days from the date on which 
such individual initially applied for services under this title.
    ``(c) Questionnaires and Screening Tools.--
            ``(1) In general.--The Secretary shall establish a 
        telephone or written questionnaire and a screening tool to be 
        used by the Screening Agency to determine the eligibility of an 
        individual for services under this title consistent with 
        requirements of this title and the standards established by the 
        Secretary by regulation.
            ``(2) Questionnaires.--The questionnaire shall include 
        questions about the functional impairment and mental status of 
        an individual and other criteria that the Secretary shall 
        prescribe by regulation.
            ``(3) Screening tools.--The screening tool should measure 
        functional impairment caused by physical or cognitive 
        conditions as well as information concerning cognition 
        disability, behavioral problems (such as wandering or abusive 
        and aggressive behavior), and any other criteria that the 
        Secretary shall prescribe by regulation. The screening tool 
        shall be administered in person.
    ``(d) Notification.--Not later than 15 days after the date on which 
an individual initially applied for services under this title (by 
telephone or written questionnaire), the Screening Agency shall notify 
such individual that such individual is not eligible for benefits, or 
that such individuals must schedule an in-person screening to determine 
final eligibility for benefits under this title. The Screening Agency 
shall notify such individual of its final decision not later than 2 
working days after the in-person screening.
    ``(e) In-Person Screening.--An individual (or the legal guardian or 
representative of such individual) whose application for benefits under 
this title is denied on the basis of information provided through a 
telephone or written questionnaire, shall be notified of such 
individual's right to an in-person screening by a nurse or appropriate 
health care professionals.
    ``(f) Appeals.--The Secretary shall establish a mechanism for 
hearings and appeals in cases in which individuals contest the 
eligibility findings of the Screening Agency.
    ``(g) Payment.--
            ``(1) Payment for screening.--The Screening Agency may 
        require payment from individuals only in accordance with 
        standards established by the Secretary.
            ``(2) No payment for poorest.--The Screening Agency may not 
        require payment for individuals with incomes of less than 150 
        percent of the official poverty line.

``SEC. 2708. ASSET PROTECTION.

    ``Notwithstanding any other provision of law, the assets an 
eligible individual may retain and be determined eligible for nursing 
facility benefits, including payments of room and board under this 
title, under State Medicaid programs (in accordance with section 
1902(a)(10)) shall be increased by the amount of coverage ($30,000, 
$60,000, or $90,000) elected under section 2702.

``SEC. 2709. RELATION TO PRIVATE INSURANCE.

    ``(a) In General.--Except as provided in subsection (b), an insurer 
may not offer a long-term care insurance policy to an individual who 
has purchased coverage under this title if the coverage under such 
policy duplicates the coverage provided under this title.
    ``(b) Development of Standard Packages.--The Secretary shall 
develop standard long-term care insurance benefits packages that 
insurers may offer to insured individuals under this title. Such 
packages shall provide coverage for benefits that compliment, but do 
not duplicate, those covered under this title.

``SEC. 2710. DEFINITIONS.

    ``As used in this title:
            ``(1) Nursing facility.--The term `nursing facility' 
        means--
                    ``(A) a skilled nursing facility (as defined in 
                section 1819(a) of the Social Security Act); or
                    ``(B)  a  facility  that  is  a  nursing  facility 
                (as defined in section 1919(a) of such Act) which meets 
                the requirements of section 1819(b)(4)(C) of such Act 
                (relating to nursing care).
            ``(2) Spell of illness.--The term `spell of illness' means 
        a period of consecutive days beginning with the first day on 
        which an individual is furnished services as an inpatient in a 
        hospital or nursing facility and ending with the close of the 
        first 6 consecutive months thereafter during which the 
        individual is no longer an inpatient of a nursing facility, or 
        90 days after the individual is no longer an inpatient in a 
        hospital.

``SEC. 2711. REPORTS.

    ``(a) In General.--Prior to the promulgation of regulations 
implementing this title, the Secretary shall report to Congress on--
            ``(1) the actuarially-sound premium rates to be used in the 
        implementation of this Act, including whether the premiums and 
        interest accrued thereon will cover 100 percent of the benefits 
        paid out, and whether Federal funds will be required to support 
        the payment of benefits;
            ``(2) an assessment of the impact of such premium rates on 
        the affordability of coverage under this Act;
            ``(3) a projected enrollment of individuals by age 
        category; and
            ``(4) an estimate of current and projected enrollment of 
        individuals, by age category in coverage under private long-
        term care insurance.
    ``(b) Life Care Report.--Not later than 2 years after the 
promulgation of regulations implementing this title, the Secretary 
shall report to Congress on the following aspects of the Life Care Act:
            ``(1) The current and projected premium rates.
            ``(2) The current and projected enrollment of individuals, 
        by age category and an estimate of current and projected 
        enrollment of individuals by age category in private long-term 
        care insurance.
            ``(3) The projected use of benefits and the impact of use 
        on premium rates.
            ``(4) An assessment of the impact of projected premium 
        rates on the affordability of coverage under this Act.
    ``(c) Recommendations.--The Secretary shall make recommendations to 
Congress regarding necessary revisions to the Life Care Act as a result 
of the findings provided in the reports submitted under this 
section.''.

  Subtitle C--Sense of the Committee with Regard to Prescription Drugs

SEC. 2301. SENSE OF THE COMMITTEE WITH REGARD TO PRESCRIPTION DRUGS.

    It is the Sense of the Committee on Labor and Human Resources of 
the Senate that when the Affordable Health Care for All Americans Act 
is enacted it should include a provision for coverage of outpatient 
prescription drugs under the medicare program comparable to the 
provision included in S. 1757, the Health Security Act (as introduced 
in the 103rd Congress) and providing for a drug deductible of not more 
than $200, coinsurance of not more than 20 percent, and an out-of-
pocket limit of not more than $1,000.

                  TITLE III--PUBLIC HEALTH INITIATIVES

        Subtitle A--Workforce Priorities Under Federal Payments

 PART 1--INSTITUTIONAL COSTS OF GRADUATE MEDICAL EDUCATION; WORKFORCE 
                               PRIORITIES

       Subpart A--National Council Regarding Workforce Priorities

SEC. 3001. NATIONAL COUNCIL ON GRADUATE MEDICAL EDUCATION.

    (a) In General.--There is established within the Department of 
Health and Human Services a council to be known as the National Council 
on Graduate Medical Education.
    (b) Duties.--The Secretary shall carry out subpart B acting through 
the National Council.
    (c) Composition.--
            (1) In general.--The membership of the National Council 
        shall include between 12 and 18 individuals who are appointed 
        to the Council from among individuals who are not officers or 
        employees of the United States. Such individuals shall be 
        appointed by the Secretary, and shall include individuals from 
        each of the following categories:
                    (A) Consumers of health care services, at least one 
                of whom resides in a rural area.
                    (B) Physicians who are faculty members of medical 
                schools.
                    (C) Physicians in private practice who are not 
                physicians described in subparagraph (B).
                    (D) Officers or employees of regional and corporate 
                health alliances.
                    (E) Officers or employees of health care plans that 
                participate in such alliances.
                    (F) Executives of teaching hospitals.
                    (G) Nurses.
                    (H) Primary care physicians, at least one of whom 
                practices in a rural area.
                    (I) Such other individuals as the Secretary 
                determines to be appropriate.
            (2) Ex officio members; other federal officers or 
        employees.--The membership of the National Council shall 
        include individuals designated by the Secretary to serve as 
        members of the Council from among Federal officers or employees 
        who are appointed by the President, or by the Secretary or 
        other Federal officers who are appointed by the President with 
        the advice and consent of the Senate.
    (d) Chair.--The Secretary shall, from among members of the National 
Council appointed under subsection (c)(1), designate an individual to 
serve as the Chair of the Council.
    (e) Definitions.--For purposes of this subtitle:
            (1) The term ``academic health center'' means an entity 
        defined in section 3051(c)(1).
            (2) The term ``medical school'' means a school of medicine 
        (as defined in section 799 of the Public Health Service Act) or 
        a school of osteopathic medicine (as defined in such section).
            (3) The term ``National Council'' means the council 
        established in subsection (a).
    (f) Conforming Amendment Repealing the Council on Graduate Medical 
Education (COGME).--Effective on the date of the first meeting of the 
National Council, section 30 of the Health Professions Education 
Extension Amendments of 1992 (Public Law 102-408) is repealed.

         Subpart B--Authorized Positions in Specialty Training

SEC. 3011. COOPERATION REGARDING APPROVED PHYSICIAN TRAINING PROGRAMS.

    (a) In General.--With respect to an approved physician training 
program in a medical specialty, a funding agreement with a qualified 
applicant for payments under section 3031 for a calendar year is that 
the qualified applicant will ensure that the number of individuals 
enrolled in the program in the subsequent academic year is in 
accordance with this subpart.
    (b) Definitions.--
            (1) Approved program.--For purposes of this subtitle:
                    (A) The term ``approved physician training 
                program'', with respect to the medical speciality 
                involved, means a residency or other postgraduate 
                program that trains physicians and meets the following 
                conditions:
                            (i) Participation in the program may be 
                        counted toward certification in the medical 
                        specialty.
                            (ii) The program is accredited by the 
                        Accreditation Council on Graduate Medical 
                        Education, or approved by the Council on 
                        Postgraduate Training of the American 
                        Osteopathic Association.
                    (B) The term ``approved physician training 
                program'' includes any postgraduate program described 
                in subparagraph (A) that provides health services in an 
                ambulatory setting, without regard to whether the 
                program provides inpatient hospital services.
                    (C) The term ``approved physician training 
                program'' includes any postgraduate program described 
                in subparagraph (A), whether operated by academic 
                health centers, teaching hospitals, multispecialty 
                group practices, ambulatory care providers, prepaid 
                health plans, or other entities.
                    (D) The term ``approved physician training 
                program'' includes any postgraduate program described 
                in subparagraph (A) that provides fellowship training 
                in family medicine, general internal medicine or 
                general pediatrics, and provides training for a faculty 
                position in family medicine, general medicine or 
                general pediatrics.
            (2) Qualified applicant; subpart definition.--For purposes 
        of this subpart, the term ``qualified applicant'', with respect 
        to an academic year, means an entity that trains individuals in 
        an approved physician program that receives payments under 
        subpart C for the calendar year in which the academic year 
        begins.
            (3) Other definitions.--For purposes of this subtitle:
                    (A)(i) The term ``academic year'' means the 1-year 
                period beginning on July 1. The academic year beginning 
                July 1, 1993, is academic year 1993-94.
                    (ii) With respect to the funding agreement 
                described in subsection (a), the term ``subsequent 
                academic year'' means the academic year beginning July 
                1 of the calendar year for which payments are to be 
                made under the agreement.
                    (B) The term ``funding agreement'', with respect to 
                payments under section 3031 to a qualified applicant, 
                means that the Secretary may make the payments only if 
                the qualified applicant makes the agreement involved.
                    (C) The term ``medical specialty'' includes all 
                medical, surgical, and other physician specialties and 
                subspecialties.

SEC. 3012. ANNUAL AUTHORIZATION OF NUMBER OF SPECIALTY POSITIONS; 
              REQUIREMENTS REGARDING PRIMARY HEALTH CARE.

    (a) Annual Authorization of Number of Positions.--In the case of 
each medical specialty, the National Council shall designate for each 
academic year the number of individuals nationwide who are authorized 
to be enrolled in eligible programs. The preceding sentence is subject 
to subsection (c)(2).
    (b) Primary Health Care.--
            (1) In general.--Subject to paragraph (2), in carrying out 
        subsection (a) for an academic year, the National Council shall 
        ensure that, of the class of training participants entering 
        eligible programs for academic year 2001-2002 or any subsequent 
        academic year, the percentage of such class that completes 
        eligible programs in primary health care is not less than 55 
        percent (without regard to the academic year in which the 
        members of the class complete the programs).
            (2) Rule of construction.--The requirement of paragraph (1) 
        regarding a percentage applies in the aggregate to training 
        participants entering eligible programs for the academic year 
        involved, and not individually to any eligible program.
    (c) Designations Regarding 3-Year Periods.--
            (1) Designation periods.--For each medical specialty, the 
        National Council shall make the annual designations under 
        subsection (a) for periods of 3 academic years.
            (2) Initial period.--The first designation period 
        established by the National Council after the date of the 
        enactment of this Act shall be the academic years 2001-2002 
        through 2003-2004.
    (d) Certain Considerations in Designating Annual Numbers.--
            (1) In general.--Factors considered by the National Council 
        in designating the annual number of specialty positions for an 
        academic year for a medical specialty shall include the extent 
        to which there is a need for additional practitioners in the 
        speciality, as indicated by the following:
                    (A) The characteristics of diseases, disorders, or 
                health conditions treated, including--
                            (i) the incidence and prevalence (in the 
                        general population and in various other 
                        populations) of the diseases, disorders, or 
                        other health conditions with which the 
                        specialty is concerned;
                            (ii) the intensity of care required for 
                        each of these diseases, disorders, or health 
                        conditions;
                            (iii) the relevant training received and 
                        experience attained by primary care and 
                        specialist physicians in caring for each of 
                        these diseases, disorders, or health 
                        conditions; and
                            (iv) when sufficient data becomes 
                        available, the extent to which individuals with 
                        certain diseases, disorders, or health 
                        conditions have better health outcomes when 
                        treated by health specialists than by primary 
                        care physicians.
                    (B) The number of physicians who will be practicing 
                in the specialty in the academic year.
                    (C) The number of physicians who will be practicing 
                in the specialty at the end of the 5-year period 
                beginning on the first day of the academic year.
            (2) Recommendations of private organizations.--In 
        designating the annual number of specialty positions for an 
        academic year for a medical specialty, the National Council 
        shall consider the recommendations of organizations 
        representing physicians in the specialty, organizations 
        representing academic medicine, and the recommendations of 
        organizations representing consumers of the services of such 
        physicians.
            (3) Total of respective annual numbers.--
                    (A) For academic year 2001-2002 and subsequent 
                academic years, the National Council shall ensure that 
                the total of the respective annual numbers designated 
                under subsection (a) for an academic year is a total 
                that--
                            (i) bears a relationship to the number of 
                        individuals who graduated from medical schools 
                        in the United States in the preceding academic 
                        year; and
                            (ii) is consistent with the purposes of 
                        this subpart.
                    (B) For each of the academic years 2001-2002 
                through 2005-2006, the total determined under 
                subparagraph (A) shall be reduced by a percentage 
                determined by the National Council.
    (e) Interim Voluntary Targets.--
            (1) Establishment.--Not later than July 1, 1998, the 
        National Council shall establish targets with respect to the 
        aggregate number of individuals enrolled in approved physician 
        training programs for each specialty to be achieved by the year 
        2001.
            (2) Voluntary compliance.--Specialties that meet and 
        continue to be in compliance with the aggregate targets 
        established under paragraph (1), as determined by the National 
        Council, shall not be subject to the mandatory allocation 
        system described in section 3013.
            (3) Measure of compliance.--To be considered in compliance 
        with the targets under paragraph (2), a specialty shall 
        demonstrate, not later than July 1, 2000, that the number of 
        individuals enrolled in approved physician training programs of 
        the specialty is not less than the number of individuals 
        enrolled in such programs as of July 1, 1995, increased or 
        decreased, as the case may be, by 45 percent of the difference 
        between such enrollment and the target enrollment established 
        under paragraph (1) and, not later than January 1, 2001, have 
        increased or decreased by 90 percent of such difference, and, 
        by January 1, 2002, are deemed by the National Council to be in 
        compliance with the target.
            (4) Loss of compliance.--The National Council may, at any 
        time, determine that a specialty is not in compliance with the 
        targets established under paragraph (1) and initiate, with 
        respect to that specialty, the system of allocations described 
        under section 3013.
    (f) Study.--Not later than January 1, 2005, the Secretary shall 
arrange for the completion, by the Institute of Medicine or other 
similar entity, of an independent study concerning the effect of 
medical workforce planning. The results of such study together with 
recommendations concerning the appropriateness of modifying or 
eliminating the planning program included in this Act shall be compiled 
in a report and transmitted by the Secretary to the President and the 
Congress.
    (g) Definitions.--For purposes of this subtitle:
            (1) The term ``annual number of specialty positions'', with 
        respect to a medical specialty, means the number designated by 
        the National Council under subsection (a) for eligible programs 
        for the academic year involved.
            (2) The term ``designation period'' means a 3-year period 
        under subsection (c)(1) for which designations under subsection 
        (a) are made by the National Council.
            (3) The term ``primary health care'' means the following 
        medical specialties: Family medicine, general internal 
        medicine, general pediatrics, geriatric medicine, obstetrics 
        and gynecology, and medical specialties (including psychiatry), 
        if any, that have been designated to be medical shortage 
        specialties or protected medical specialties by the Council on 
        Graduate Medical Education, or other similar physician advisory 
        body authorized by Congress to provide an ongoing assessment of 
        physician workforce trends, and identify needs and be advisory 
        to the Secretary, the Committee on Labor and Human Resources 
        and the Committee on Finance of the Senate and the Committee on 
        Energy and Commerce and the Committee on Ways and Means of the 
        House of Representatives. Only those participants in programs 
        with a significant primary care training emphasis will be 
        considered to have completed an eligible program in primary 
        care for the purposes of subsection (b)(1). Determination of 
        meeting the definition of a ``significant primary care training 
        emphasis'' will be made by the National Board.
            (4) The term ``specialty position'' means a position as a 
        training participant.
            (5) The term ``training participant'' means an individual 
        who is enrolled in an approved physician training program.

SEC. 3013. ALLOCATIONS AMONG SPECIALTIES AND PROGRAMS.

    (a) In General.--For each academic year, the National Council shall 
for each medical specialty make allocations among eligible programs of 
the annual number of specialty positions that the Council has 
designated for such year. The preceding sentence is subject to 
subsection (b)(3).
    (b) Allocations Regarding 3-Year Period.--
            (1) In general.--For each medical specialty, the National 
        Council shall make the annual allocations under subsection (a) 
        for periods of 3 academic years.
            (2) Advance notice to programs.--With respect to the first 
        academic year of an allocation period established by the 
        National Council, the National Council shall, not later than 
        July 1 of the preceding academic year, notify each eligible 
        program of the allocations made for the program for each of the 
        academic years of the period.
            (3) Initial period.--The first allocation period 
        established by the National Council after the date of the 
        enactment of this Act shall be the academic years 2001-2002 
        through 2003-2004.
    (c) Certain Considerations.--
            (1) Geographic areas; quality of programs.--In making 
        allocations under subsection (a) for eligible programs of the 
        various geographic areas, the National Council shall include 
        among the factors considered the historical distribution among 
        the areas of approved physician training programs, and the 
        quality of such programs.
            (2) Underrepresentation of minority groups and women.--In 
        making an allocation under subsection (a) for an eligible 
        program, the National Council shall include among the factors 
        considered the following:
                    (A) The extent to which the population of training 
                participants in the program includes training 
                participants who are members of racial or ethnic 
                minority groups and women.
                    (B) With respect to a racial or ethnic group or 
                women represented among the training participants, the 
                extent to which the group is underrepresented in the 
                field of medicine generally and in the various medical 
                specialities.
            (3) Underserved rural and inner-city communities.--In 
        making allocations under subsection (a) for eligible programs, 
        the National Council shall consider the extent to which the 
        population of training participants in the program includes 
        training participants who have resided in rural or inner-city 
        communities and the proportion of past participants in the 
        program who are practicing in rural or inner-city communities.
            (4) Recommendations of private organizations.--In making 
        allocations under subsection (a) for eligible programs, the 
        National Council shall consider the recommendations of 
        organizations representing physicians in the medical 
        specialties, the recommendations of organizations representing 
        academic medicine and the recommendations of organizations 
        representing consumers of the services of such physicians.
    (d) Definitions.--For purposes of this subtitle, the term 
``allocation period'' means a 3-year period under subsection (b)(1) for 
which allocations under subsection (a) are made by the National 
Council.

             Subpart C--Costs of Graduate Medical Education

      CHAPTER 1--OPERATION OF APPROVED PHYSICIAN TRAINING PROGRAMS

SEC. 3031. FEDERAL FORMULA PAYMENTS TO QUALIFIED ENTITIES FOR THE COSTS 
              OF THE OPERATION OF APPROVED PHYSICIAN TRAINING PROGRAMS.

    (a) In General.--In the case of a qualified entity that in 
accordance with section 3032 submits to the Secretary an application 
for calendar year 1997 or any subsequent calendar year, the Secretary 
shall make payments for such year to the qualified entity for the 
purpose specified in subsection (b). The Secretary shall make the 
payments in an amount determined in accordance with section 3033, and 
may administer the payments as a contract, grant, or cooperative 
agreement.
    (b) Payments for Operation of Approved Physician Training 
Programs.--The purpose of payments under subsection (a) is to assist a 
qualified applicant with the costs of operation of an approved 
physician training program. A funding agreement for such payments is 
that the qualified applicant involved will expend the payments only for 
such purpose.
    (c) Qualified Applicant; Subpart Definition.--
            (1) In general.--For purposes of this subpart, the term 
        ``qualified applicant'', with respect to the calendar year 
        involved, means an entity--
                    (A) that trains individuals in approved physician 
                training programs;
                    (B) that submits to the Secretary an application 
                for such year in accordance with section 3032; and
                    (C) if the entity has an approved physician 
                training program in primary health care, that rotates 
                individuals enrolled in the program to health centers 
                or other community programs in underserved urban or 
                rural areas.
            (2) Entities included.--The term ``qualified applicant'' 
        may include a teaching hospital, medical school, group 
        practice, an entity representing two or more parties engaged in 
        a formal association, a community health center or another 
        entity operating an approved physician training program.
    (d) Treatment of Podiatric and Dental Residency Programs.--For the 
purposes of chapters 1 and 3 of subpart C, an approved physician 
training program includes training programs approved by the Commission 
on Dental Accreditation or the Council of Podiatric Medical Education 
of the American Podiatric Medical Association. This subsection shall 
not apply for purposes of subpart B.

SEC. 3032. APPLICATION FOR PAYMENTS.

    (a) In General.--
            (1) In general.--For purposes of section 3031(a), an 
        application for payments under such section for a calendar year 
        is in accordance with this section if--
                    (A) the eligible entity involved submits the 
                application not later than the date specified by the 
                Secretary;
                    (B) the application demonstrates that the condition 
                described in subsection (b) is met with respect to the 
                program;
                    (C) the application contains each funding agreement 
                described in this part and the application provides 
                such assurances of compliance with the agreements as 
                the Secretary may require; and
                    (D) the application is in such form, is made in 
                such manner, and contains such agreements, assurances, 
                and information as the Secretary determines to be 
                necessary to carry out this part.
            (2) Certain entities.--If an applicant under paragraph (1) 
        is an entity representing two or more parties--
                    (A) the application shall contain a written 
                agreement, signed by all participants, in which all of 
                the participants agree as to the manner in which the 
                payments will be allocated; and
                    (B) the applicant shall agree to submit additional 
                documentation, if requested by the National Council, 
                that demonstrates that the funds are distributed in the 
                manner agreed upon by all participants.
    (b) Certain Conditions.--An eligible entity meets the condition 
described in this subsection for receiving payments under section 3031 
for a calendar year if--
            (1) the entity agrees to use such funds only to support an 
        approved physician training program;
            (2) with respect to--
                    (A) a specialty for which programs have received 
                allocations under section 3013, the entity agrees that 
                funds will only be used to support approved training 
                programs for which the number of specialists in 
                training is consistent with the allotment under section 
                3013; and
                    (B) a specialty for which a voluntary program has 
                received allocations under section 3012(e), the entity 
                agrees that funds will only be used to support approved 
                training programs for which the number of specialists 
                in training is consistent with the targets under 
                section 3012(e); and
            (3) the application of the entity contains a written 
        agreement, signed by all participants, in which all 
        participants agree to the manner in which the payments will be 
        allocated; and
            (4) the entity agrees to submit additional documentation, 
        if requested by the National Council, that demonstrates that 
        the funds will be distributed in a manner agreed upon by all 
        participants.

SEC. 3033. AVAILABILITY OF FUNDS FOR PAYMENTS; ANNUAL AMOUNT OF 
              PAYMENTS.

    (a) Annual Health Professions Workforce Account.--Subject to 
paragraph (2), the amount available for a calendar year for making 
payments under sections 3031 and 3061 (constituting an account to be 
known as the annual health professions workforce account) is the 
following, as applicable to the calendar year:
            (1) In the case of calendar year 1997, $3,550,000,000.
            (2) In the case of each of the calendar years 1998, 1999, 
        and 2000, $5,800,000,000.
            (3) In the case of each subsequent calendar year, the 
        amount specified in paragraph (2) increased by the product of 
        such amount and the general health care inflation factor for 
        such year (as defined in subsection (d)).
    (b) Amount of Payments for Individual Eligible Entities.--
            (1) In general.--Payment amounts with respect to any 
        physician training program under this section shall be equal to 
        the product of the number of full time equivalent training 
        participants in the program, and the per resident amount for 
        the training program.
            (2) Per resident amount.--The per resident amount for a 
        training program shall be equal to--
                    (A) with respect to--
                            (i) the first calendar years during which 
                        the program is in operation, 90 percent;
                            (ii) the second calendar years during which 
                        the program is in operation, 80 percent;
                            (iii) the third calendar years during which 
                        the program is in operation, 70 percent;
                            (iv) the fourth calendar years during which 
                        the program is in operation, 60 percent; and
                            (v) the fifth and subsequent calendar years 
                        during which the program is in operation, 50 
                        percent;
                of the all payer hospital per resident cost; and
                    (B) with respect to--
                            (i) the first calendar years during which 
                        the program is in operation, 10 percent;
                            (ii) the second calendar years during which 
                        the program is in operation, 20 percent;
                            (iii) the third calendar years during which 
                        the program is in operation, 30 percent;
                            (iv) the fourth calendar years during which 
                        the program is in operation, 40 percent; and
                            (v) the fifth and subsequent calendar years 
                        during which the program is in operation, 50 
                        percent;
                of the geographically adjusted national average per 
                resident amount.
            (3) Adjustment factor.--Payments under this section shall 
        be subject to an adjustment factor, as determined by the 
        Secretary, so that total payments in any year will not exceed 
        the amounts specified in section 3033(a) and as provided in 
        section 3033(c).
            (4) Additional provisions regarding national average 
        cost.--
                    (A) The Secretary shall in accordance with 
                paragraph (1)(B) determine, for academic year 1992-93, 
                an amount equal to the national average described in 
                such paragraph with respect to training a participant 
                in an approved physician training program in the 
                medical specialty involved. The national average 
                applicable under such paragraph for a calendar year for 
                such programs is, subject to subparagraph (B), the 
                amount determined under the preceding sentence 
                increased by the amount necessary to offset the effects 
                of inflation occurring since academic year 1992-93, as 
                determined through use of the consumer price index.
                    (B) The national average determined under 
                subparagraph (A) and applicable to a calendar year 
                shall, in the case of the eligible entity involved, be 
                adjusted by a factor to reflect regional differences in 
                the applicable wage and wage-related costs.
            (5) Funding level and allocation method.--Not later than 
        January 1, 2000, the Secretary shall complete a study to 
        determine the effect of the funding level and allocation method 
        described in subsection (a) and paragraphs (1) and (2) of this 
        subsection on the operation of training programs and shall 
        compile the findings and recommendations derived from such 
        study in a report to be submitted to the President and the 
        Congress.
    (c) Limitation.--If, subject to subsection (a)(2), the annual 
health professions workforce account available for a calendar year is 
insufficient for providing each eligible entity with the amount of 
payments determined under subsection (b) for the entity for such year, 
the Secretary shall make such pro rata reductions in the amounts so 
determined as may be necessary to ensure that the total of payments 
made under section 3031 for such year equals the total of such account.
    (d) Definitions.--For purposes of this subtitle:
            (1) The term ``annual health professions workforce 
        account'' means the account established pursuant to subsection 
        (a)(1).
            (2) The term ``consumer price index'' has the meaning given 
        such term in section 1702.
            (3) The term ``general health care inflation factor'', with 
        respect to a year, has the meaning given such term in section 
        5001(a)(3) for such year.

                 CHAPTER 2--MEDICAL SCHOOL FUND ACCOUNT

SEC. 3041. FEDERAL PAYMENTS TO THE MEDICAL SCHOOL FUND.

    (a) In General.--In the case of an eligible medical school that in 
accordance with section 3042 submits to the Secretary an application 
for academic year 1997, or any subsequent academic year, the Secretary 
shall make payments for such year to the school for the purpose 
specified in subsection (b). The Secretary shall make the payments in 
an amount determined in accordance with section 3043, and shall 
administer the payments as a grant.
    (b) Payments for the Medical School Fund.--The purpose specified in 
this subsection is to assist an eligible medical school with the direct 
costs of academic programs, including the education of medical students 
(especially in ambulatory and preventive medicine), graduate students 
in biomedical sciences, and otherwise unfunded faculty research. A 
funding agreement for such payments is that the medical school involved 
will expend the payments only for direct expenses determined as 
allowable by the Secretary.
    (c) Eligible Medical School; Subpart Definition.--For purposes of 
this subpart, the term ``eligible medical school'' with respect to the 
academic year involved, means an approved medical school that submits 
to the Secretary an application for such year in accordance with 
section 3043.

SEC. 3042. APPLICATION FOR PAYMENTS.

    For purposes of section 3041(a), an application for payments under 
such section for an academic year is in accordance with this section 
if--
            (1) the dean (or appropriate presiding official) of the 
        eligible medical school submits the application not later than 
        the date specified by the Secretary;
            (2) the application contains each funding agreement 
        described in this subpart and provides such assurances of 
        compliance with the agreements as the Secretary may require; 
        and
            (3) the application is in such form, is made in such 
        manner, and contains such agreements, assurances, and 
        information as the Secretary determines to be necessary to 
        carry out this part.

SEC. 3043. AVAILABILITY OF FUNDS FOR PAYMENTS; ANNUAL AMOUNT OF 
              PAYMENTS.

    (a) Annual Medical School Fund Account.--Subject to section 3043, 
the amount available for an academic year for making payments under 
section 3041 (constituting an account to be known as the annual medical 
school fund account) shall be the following, as applicable to the 
academic year:
            (1) In the case of academic year 1997, $200,000,000.
            (2) In the case of academic year 1998, $300,000,000.
            (3) In the case of academic year 1999, $400,000,000.
            (4) In the case of academic year 2000, $500,000,000.
            (5) In the case of academic year 2001, $600,000,000.
            (6) In the case of each subsequent calendar year, the 
        amount specified in paragraph (5) increased by the product of 
        such amount and the general health care inflation factor (as 
        defined in subsection (d)).
    (b) Amount of Payments for Individual Eligible Programs.--Subject 
to the annual medical school fund account available for an academic 
year, the amount of payment required under section 3041 to be made to 
an eligible medical school for the academic year is an amount equal to 
the sum of--
            (1) the product of \3/4\ of the fund account available and 
        the proportion of full-time equivalent students at the eligible 
        medical school in academic year 1993-1994 compared to all full-
        time equivalent students enrolled in eligible medical schools 
        nationwide in academic year 1993-1994; and
            (2) the product of \1/4\ of the fund account available and 
        the proportion of research conducted by the faculty at the 
        eligible medical school compared to all research conducted by 
        the faculty at all eligible medical schools nationwide.
The Secretary shall establish a method for measuring faculty research 
contributions.
    (c) Studies.--
            (1) Funding level and allocation method.--Not later than 
        January 1, 1999, the Secretary shall arrange for an independent 
        study and report to be completed, by the Institute of Medicine 
        or other similar entity, concerning the amount of and 
        allocation method for medical school funding. Such report shall 
        be submitted to the President and the Congress and shall 
        include findings and recommendation as to the appropriateness 
        of modifying funding levels or allocation.
            (2) Not later than January 1, 2001, the Secretary shall 
        arrange for an independent study and report to be completed, by 
        the Institute of Medicine or other similar entity, concerning 
        the impact of health reform on undergraduate and graduate 
        medical education. Such report shall be submitted to the 
        President and the Congress and shall include appropriate 
        findings and recommendations.
    (d) Definitions.--As used in this subtitle:
            (1) The term ``annual medical school fund account'' means 
        the account established under subsection (a).
            (2) The term ``general health care inflation factor'' with 
        respect to a year, has the meaning given such term in section 
        5001(a)(3) for such year.

                   CHAPTER 3--ACADEMIC HEALTH CENTERS

SEC. 3051. FEDERAL FORMULA PAYMENTS TO ACADEMIC HEALTH CENTERS.

    (a) In General.--In the case of a qualified academic health center 
or qualified teaching hospital that in accordance with section 3052 
submits to the Secretary a written request for calendar year 1997 or 
any subsequent calendar year, the Secretary shall make payments for 
such year to the center or hospital for the purpose specified in 
subsection (b). The Secretary shall make the payments in an amount 
determined in accordance with section 3053, and may administer the 
payments as a contract, grant, or cooperative agreement.
    (b) Payments for Costs Attributable to Academic Nature of 
Institutions.--The purpose of payments under subsection (a) is to 
assist eligible institutions with costs that are not routinely incurred 
by other entities in providing health services, but are incurred by 
such institutions in providing health services by virtue of the 
academic nature of such institutions. Such costs include--
            (1) with respect to productivity in the provision of health 
        services, costs resulting from the reduced rate of productivity 
        of faculty due to teaching responsibilities;
            (2) the uncompensated costs of clinical research; and
            (3) exceptional costs associated with the treatment of 
        health conditions with respect to which an eligible institution 
        has specialized expertise (including treatment of rare 
        diseases, treatment of unusually severe conditions, and 
        providing other specialized health care).
    (c) Definitions.--
            (1) Academic health center.--For purposes of this subtitle, 
        the term ``academic health center'' means an entity that 
        operates a teaching hospital that carries out an approved 
        physician training program.
            (2) Teaching hospital.--For purposes of this subtitle, the 
        term ``teaching hospital'' means a hospital that operates an 
        approved physician training program (as defined in section 
        3011(b) or section 3031(d)).
            (3) Qualified center or hospital.--For purposes of this 
        subtitle:
                    (A) The term ``qualified academic health center'' 
                means an academic health center that operates a 
                teaching hospital.
                    (B) The term ``qualified teaching hospital'' means 
                any teaching hospital other than a teaching hospital 
                that is operated by an academic health center.
            (4) Eligible institution.--For purposes of this subtitle, 
        the term ``eligible institution'', with respect to a calendar 
        year, means a qualified academic health center, or a qualified 
        teaching hospital, that submits to the Secretary a written 
        request in accordance with section 3052.

SEC. 3052. REQUEST FOR PAYMENTS.

  (a) In General.--For purposes of section 3051, a written request for 
payments under such section is in accordance with this section if the 
qualified academic health center or qualified teaching hospital 
involved submits the request not later than the date specified by the 
Secretary; the request is accompanied by each funding agreement 
described in this part; and the request is in such form, is made in 
such manner, and contains such agreements, assurances, and information 
as the Secretary determines to be necessary to carry out this part.
    (b) Continued Status as Academic Health Center.--A funding 
agreement for payments under section 3051 is that the qualified 
academic health center or qualified teaching hospital involved will 
maintain status as such a center or hospital, respectively. For 
purposes of this subtitle, the term ``funding agreement'', with respect 
to payments under section 3051 to such a center or hospital, means that 
the Secretary may make the payments only if the center or hospital 
makes the agreement involved.

SEC. 3053. AVAILABILITY OF FUNDS FOR PAYMENTS; ANNUAL AMOUNT OF 
              PAYMENTS.

    (a) Annual Academic Health Center Account.--The amount available 
for a calendar year for making payments under section 3051 
(constituting an account to be known as the annual academic health 
center account) is the following, as applicable to the calendar year:
            (1) In the case of calendar year 1997, $7,250,000,000.
            (2) In the case of calendar year 1998, $8,220,000,000.
            (3) In the case of calendar year 1999, $9,400,000,000.
            (4) In the case of calendar year 2000, $10,640,000,000.
            (5) In the case of each subsequent calendar year, the 
        amount specified in paragraph (4) increased by the product of 
        such amount and the general health care inflation factor (as 
        defined in subsection (d)).
    (b) Amount of Payments for Individual Eligible Institutions.--
            (1) Formula.--The amount of payments required in section 
        3051 to be made to an eligible institution for a calendar year 
        is an amount equal to the product of--
                    (A) the annual academic health center account 
                available for the calendar year; and
                    (B) the percentage constituted by the ratio of--
                            (i) the product of--
                                    (I) the sum, for all discharges of 
                                individuals, of the amounts otherwise 
                                paid on behalf of such individuals; and
                                    (II) an adjustment factor equal to 
                                1.200 multiplied by (((1+r) to the nth 
                                power) - 1), where ``r'' equals the 
                                ratio of the hospital's full-time 
                                equivalent interns and residents to 
                                beds and ``n'' equals .405; and
                            (ii) the sum of the respective amounts 
                        determined under clause (i) for eligible 
                        institutions.
            (2) Adjustment factor.--Payments under this section shall 
        be subject to an adjustment factor, as determined by 
the Secretary, so that total payments in any year will not exceed the 
amounts specified in section 3053(a).
    (c) Report Regarding Modifications in Formula.--Not later than July 
1, 2001, the Secretary shall submit to the Congress a report containing 
any recommendations of the Secretary for the modification of the 
program of formula payments described in this chapter. In preparing 
such report the Secretary shall consider--
            (1) the costs described in subsection (b) incurred by 
        academic health centers;
            (2) the adequacy of the formula payments established in 
        this chapter to cover such costs, taking into account any 
        additional revenues to cover such costs paid by other payers, 
        including private health plans;
            (3) the importance to the maintenance of a quality national 
        health care system of academic health centers in providing for 
        the training of health professionals, in conducting clinical 
        research, and in providing innovative, technically advanced 
        care; and
            (4) the overall impact of the reformed health care system 
        on the ability of academic health centers to perform such 
        functions.
    (d) Definition.--For purposes of this subtitle:
            (1) The term ``annual academic health center account'' 
        means the account established pursuant to subsection (a).
            (2) The term ``general health care inflation factor'', with 
        respect to a year, has the meaning given such term in section 
        5001(a)(3) for such year.

                   Subpart D--Transitional Provisions

SEC. 3061. TRANSITIONAL PAYMENTS TO INSTITUTIONS.

    (a) Payments Regarding Effects of Subpart B Allocations.--For each 
of the four calendar years specified in subsection (b)(2), in the case 
of an eligible entity that submits to the Secretary an application for 
such year in accordance with subsection (d), the Secretary shall make 
payments for the year to the entity for the purpose specified in 
subsection (c). The Secretary shall make the payments in an amount 
determined in accordance with subsection (e), and may administer the 
payments as a contract, grant, or cooperative agreement.
    (b) Eligible Entities Losing Specialty Positions; Relevant Years 
Regarding Payments.--
            (1) Eligible entities losing specialty positions.--The 
        Secretary may make payments under subsection (a) to an eligible 
        entity only if, with respect to the calendar year involved, the 
        entity meets the following conditions:
                    (A) The entity operates or operated in the year 
                preceding the initiation of transitional payments one 
                or more programs that--
                            (i) are or were at the time they terminated 
                        approved physician training programs; and
                            (ii) are or were at the time they 
                        terminated receiving payments under section 
                        3031 for such year.
                    (B) The aggregate number of speciality positions in 
                such programs (in the medical specialities with respect 
                to which such payments are made) is below the aggregate 
                number of such positions at the entity for academic 
                year 1993-94 as a result of allocations under subpart 
                B, or as a result of voluntary changes under section 
                3012(e) prior to January 1, 2001.
            (2) Relevant years.--The Secretary may make payments under 
        subsection (a) to an eligible entity only for the first four 
        calendar years after the initial calendar year for which the 
        entity meets the conditions described in paragraph (1).
            (3) Eligible entity.--For purposes of this section, the 
        term ``eligible entity'' means an entity that submits to the 
        Secretary an application in accordance with subsection (d).
    (c) Purpose of Payments.--The purpose of payments under subsection 
(a) is to assist an eligible entity with the costs of operation. A 
funding agreement for such payments is that the entity involved will 
expend the payments only for such purpose.
    (d) Application for Payments.--For purposes of subsection (a), an 
application for payments under such subsection is in accordance with 
this subsection if--
            (1) the eligible entity involved submits the application 
        not later than the date specified by the Secretary;
            (2) the application demonstrates that the entity meets the 
        conditions described in subsection (b)(1) and that the entity 
        has cooperated with the approved physician training programs of 
        the entity in meeting the condition described in section 
        3032(b);
            (3) the application contains each funding agreement 
        described in this subpart and the application provides such 
        assurances of compliance with the agreements as the Secretary 
        may require; and
            (4) the application is in such form, is made in such 
        manner, and contains such agreements, assurances, and 
        information as the Secretary determines to be necessary to 
        carry out this subpart.
    (e) Amount of Payments.--
            (1) In general.--Subject to the annual health professions 
        workforce account available for the calendar year involved, the 
        amount of payments required in subsection (a) to be made to an 
        eligible entity for such year is the product of the amount 
        determined under paragraph (2) and the applicable percentage 
        specified in paragraph (3).
            (2) Number of specialty positions lost.--For purposes of 
        paragraph (1), the amount determined under this paragraph for 
        an eligible entity for the calendar year involved is the 
        product of--
                    (A) an amount equal to the aggregate number of 
                full-time equivalent specialty positions lost; and
                    (B) the amount that would be received under section 
                3033 for each speciality position lost.
            (3) Applicable percentage.--For purposes of paragraph (1), 
        the applicable percentage for a calendar year is the following, 
        as applicable to such year:
                    (A) For the first calendar year after calendar year 
                1997 for which the eligible entity involved meets the 
                conditions described in subsection (b)(1), 100 percent.
                    (B) For the second such year, 75 percent.
                    (C) For the third such year, 50 percent.
                    (D) For the fourth such year, 25 percent.
            (4) Determination of specialty positions lost.--
                    (A) For purposes of this subsection, the aggregate 
                number of specialty positions lost, with respect to a 
                calendar year, is the difference between--
                            (i) the aggregate number of specialty 
                        positions described in subparagraph (B) that 
                        are estimated for the eligible entity involved 
                        for the academic year beginning in such 
                        calendar year; and
                            (ii) the aggregate number of such specialty 
                        positions at the entity for academic year 1993-
                        94.
                    (B) For purposes of subparagraph (A), the specialty 
                positions described in this subparagraph are specialty 
                positions in the medical specialities with respect to 
                which payments under section 3031 are made to the 
                approved physician training programs of the eligible 
                entities involved.
            (5) Additional provision regarding national average 
        salary.--
                    (A) The Secretary shall determine, for academic 
                year 1992-93, an amount equal to the national average 
                described in paragraph (2)(B). The national average 
                applicable under such paragraph for a calendar year is, 
                subject to subparagraph (B), the amount determined 
                under the preceding sentence increased by an amount 
                necessary to offset the effects of inflation occurring 
                since academic year 1992-93, as determined through use 
                of the consumer price index.
                    (B) The national average determined under 
                subparagraph (A) and applicable to a calendar year 
                shall, in the case of the eligible entity involved, be 
                adjusted by a factor to reflect regional differences in 
                the applicable wage and wage-related costs.

 PART 2--INSTITUTIONAL COSTS OF GRADUATE NURSING EDUCATION; WORKFORCE 
                               PRIORITIES

SEC. 3071. AUTHORIZED GRADUATE NURSE TRAINING POSITIONS; INSTITUTIONAL 
              COSTS.

    (a) Program Regarding Graduate Nurse Training Programs.--The 
Secretary shall, in accordance with this part, carry out a program with 
respect to graduate nurse training programs that is equivalent to the 
program carried out under part 1 with respect to approved physician 
training programs.
    (b) Definitions.--For purposes of this part:
            (1) The term ``graduate nurse training programs'' means 
        programs for advanced nurse education, programs for education 
        as nurse practitioners, programs for education as nurse 
        midwives, programs for education as nurse anesthetists, and 
        such other programs for training in clinical nurse specialties 
        as are determined by the Secretary to require advanced 
        education.
            (2) The term ``graduate nurse training position'' means a 
        position as an individual who is enrolled in a graduate nurse 
        training program.
            (3) The term ``programs for advanced nurse education'' 
        means programs meeting the conditions to be programs for which 
        awards of grants and contracts may be made under section 821 of 
        the Public Health Service Act.
            (4) The term ``programs for education as nurse 
        practitioners'' means programs meeting the conditions to be 
        programs for which awards of grants and contracts may be made 
        under section 822 of the Public Health Service Act for 
        education as a nurse practitioners.
            (5) The term ``programs for education as nurse midwives'' 
        means programs meeting the conditions to be programs for which 
        awards of grants and contracts may be made under section 822 of 
        the Public Health Service Act for education as nurse midwives.
            (6) The term ``programs for education as nurse 
        anesthetists'' means programs meeting the conditions to be 
        programs for which awards of grants may be made under section 
        831 of the Public Health Service Act for education as nurse 
        anesthetists.

SEC. 3072. APPLICABILITY OF PART 1 PROVISIONS.

    (a) In General.--The provisions of part 1 apply to the program 
carried out under section 3071 to the same extent and in the same 
manner as such provisions apply to the program carried out under part 
1, subject to the subsequent provisions of this section. Section 3061 
does not apply for purposes of the preceding sentence.
    (b) National Council.--With respect to section 3001 as applied to 
this part, the council shall be known as the National Council on 
Graduate Nurse Education (in this part referred to as the ``National 
Council''). The provisions of section 851 of the Public Health Service 
Act regarding the composition of the council under such section apply 
to the composition of the National Council to the same extent and in 
the same manner as such provisions apply to the council under such 
section 851.
    (c) Allocation of Graduate Nurse Training Positions; Formula 
Payments for Operating Costs.--With respect to subparts B and C of part 
1 as applied to this part--
            (1) the funding agreement described in section 3011 is to 
        be made by graduate nurse training programs;
            (2) the applicable accrediting bodies described in section 
        3011 for graduate nurse training programs are the National 
        League of Nursing and others determined to be appropriate by 
        the Secretary;
            (3) designations under section 3012 and allocations under 
        section 3013 apply to graduate nurse training positions; and
            (4) payments under section 3031 are to be made to graduate 
        nurse training programs, subject to the requirements for such 
        payments.

SEC. 3073. FUNDING.

    (a) In General.--With respect to section 3033 as applied to this 
part, the provisions of this section apply.
    (b) Annual Graduate Nurse Training Account.--The amount available 
for each of the calendar years 1997 through 2000 for making payments 
pursuant to section 3072(c)(4) to graduate nurse training programs 
(constituting an account to be known as the annual graduate nurse 
training account) is $200,000,000.

       Subpart B--Transitional Provisions for Workforce Stability

SEC. 3081. APPLICATION.

    (a) Limitation to Transition Period.--The provisions of this 
subpart are intended to minimize, to the extent possible, disruptions 
in established employment relationships during the period of transition 
to a restructured health care delivery system, and shall terminate 
December 31, 2000.
    (b) Health Care Entities Covered by Subpart.--The provisions of 
this subpart, including references to displacing employers, hiring 
employers, successors and contractors, apply only to health care 
entities that employ more than 25 individuals.

SEC. 3082. DEFINITIONS.

    (a) Health Care Entity.--As used in this subpart, the term ``health 
care entity'' includes individuals, sole proprietorships, partnerships, 
associations, business trusts, corporations, governmental institutions, 
and public agencies (including state governments and political 
subdivisions thereof) that--
            (1) provide health care services under title I (including 
        nonmandatory health care services under title I) or under the 
        amendments made or programs referred to in titles IV and VIII; 
        or
            (2) provide necessary related services, including 
        administrative, food service, janitorial or maintenance 
        services, to an entity that provides health care services (as 
        described in subparagraph (1));
except that an entity that solely manufactures or provides goods or 
equipment to a health care entity shall not be considered a health care 
entity.
    (b) Affiliated Enterprise.--As used in this subpart, the term 
``affiliated enterprise'' means a health care entity that, together 
with the displacing employer, is considered a single employer as 
defined under 414 of the Internal Revenue Code of 1986.
    (c) Preference Eligible Employee.--As used in this subpart, the 
term ``preference eligible employee'' means an employee who--
            (1) has been employed for in excess of 1 year by a health 
        care entity; and
            (2) has been displaced by or has received notice of an 
        impending displacement by such entity.
    (d) Displacement.--As used in this subpart, the term 
``displacement'' includes a layoff, termination, significant cutback in 
paid work hours, or other loss of employment, except that a discharge 
for just cause shall not constitute a displacement within the meaning 
of this paragraph.

SEC. 3083. OBLIGATIONS OF DISPLACING EMPLOYER AND AFFILIATED 
              ENTERPRISES IN EVENT OF DISPLACEMENT.

    (a) Notice.--A health care entity which displaces a preference 
eligible employee shall provide such employee with--
            (1) written notice, no later than the date of displacement, 
        of employment rights under this subpart, including employment 
        rights with respect to affiliated enterprises of the displacing 
        employer; and
            (2) notice of any existing or subsequent vacancies with the 
        displacing employer or an affiliated enterprise, which notice 
        may be given by posting of such vacancies wherever notices to 
        applicants for employment are customarily posted, by listing 
        such vacancies with the local employment services agency, or in 
        such other manner as the Secretary of Labor, by regulation, may 
        hereafter specify.
Any such vacancy shall remain open for applications by preference 
eligible employees for not less than 14 calendar days from the date on 
which the initial notice is provided.
    (b) Hiring Preference.--
            (1) In general.--A qualified preference eligible employee 
        who applies during the notice period described in subsection 
        (a)(2) for a vacant position with the displacing employer or an 
        affiliated enterprise, which position is in the employee's 
        occupational specialty and is located in the same State or 
        Standard Metropolitan Statistical Area in which the employee 
        was employed prior to the displacement, shall be given the 
        right to accept or decline the position before the employer may 
        offer the position to a nonpreference eligible employee.
            (2) Multiple applications.--When considering applications 
        from more than one qualified preference eligible employee, the 
        hiring health care entity shall have discretion as to which of 
        such employees will be offered the position.
            (3) Employment qualifications.--Nothing in this subsection 
        shall be construed to prohibit the hiring health care entity 
        from establishing reasonable employment qualifications for a 
        vacancy to which this subpart applies, except that employees 
        who performed essentially the same work prior to their 
        displacement shall be deemed presumptively qualified for 
        comparable positions.
    (c) Termination of Preference Eligibility.--A displaced employee's 
preference eligibility shall terminate--
            (1) at such time as the displaced employee obtains 
        substantially equivalent employment with the displacing 
        employer; or
            (2) if the employee does not obtain such employment--
                    (A) with respect to health care entities other than 
                the displacing employer, 2 years after the date of the 
                displacement; or
                    (B) with respect to the displacing employer, upon 
                the termination of this subpart pursuant to section 
                3081(a).

SEC. 3084. EMPLOYMENT WITH SUCCESSORS.

    A health care entity that succeeds another health care entity 
through merger, consolidation, acquisition, contract, or other similar 
manner shall provide employees of the previous health care entity who 
would otherwise be displaced the right to continued employment in the 
job positions held by such employees prior thereto, unless the employer 
can establish that such positions no longer exist.

SEC. 3085. COLLECTIVE BARGAINING OBLIGATIONS DURING TRANSITION PERIOD.

    (a) Continuation of Previously Recognized Bargaining 
Representatives and Agreements.--If a majority of the employees in an 
appropriate bargaining unit consists of employees who were previously 
covered by a bargaining agreement or represented by an exclusive 
representative with respect to terms and conditions of employment, and 
there has not been a substantial change in the operations performed by 
the employees in that unit, the employer shall recognize such 
representative as the exclusive representative for the unit and shall 
assume the bargaining agreement, except that where application of this 
subsection would result in the recognition of more than one bargaining 
representative for a single unit, the question concerning which 
representative shall be recognized as the exclusive representative for 
the unit shall be resolved in accordance with applicable Federal or 
State law.
    (b) Joint Employer Status.--If employees of a contractor are 
assigned on a regular basis to perform work on the premises of a 
contracting entity and the tasks performed by these employees are 
functionally integrated with the operations of the contracting entity 
on whose premises such employees work, both the contractor and the 
contracting entity shall be considered joint employers of the employees 
with respect to work performed on those premises for purposes of 
determining compliance with labor relations laws. Employees of such 
joint employers may not be excluded from a bargaining unit within 
either entity on the basis of such joint employer status.

SEC. 3086. GENERAL PROVISIONS.

    (a) Regulations.--Not later than 120 days after the date of 
enactment of this Act, the Secretary shall promulgate regulations to 
implement the requirements of section 3083.
    (b) Other Laws.--The standards and requirements of this subpart 
shall not preempt or excuse noncompliance with any other applicable 
Federal or State law, regulation or municipal ordinance that 
establishes additional notice and preference standards or requirements 
concerning employee dislocation, employee representation, or collective 
bargaining.
    (c) Rules of Construction.--Nothing in this subpart shall be 
construed--
            (1) to excuse or otherwise limit the obligation of an 
        employer to comply with any collective bargaining agreement or 
        any employment benefit plan that provides rights to employees 
        in addition to those provided under this subpart; or
            (2) to require an employer to recognize or bargain with a 
        labor organization in violation of State law.
    (d) Enforcement.--Unless otherwise specifically provided in this 
subpart, the enforcement provisions of section 107 of the Family and 
Medical Leave Act of 1993 (29 U.S.C. 2617) shall apply with respect to 
the enforcement of the individual rights, including notice 
requirements, provided under section 3083. The collective bargaining 
and contractual rights provided under sections 3084 and 3085 shall be 
enforced through administrative and judicial procedures otherwise 
provided under Federal or State law with respect to such rights.

                Subtitle B--Health Research Initiatives

                 PART 1--PROGRAMS FOR CERTAIN AGENCIES

SEC. 3101. BIOMEDICAL AND BEHAVIORAL RESEARCH.

    (a) Availability of Funds.--
            (1) In general.--With respect to each calendar year, the 
        Secretary shall pay, from funds in the Treasury not otherwise 
        appropriated, for activities under this section in an amount 
        equal to 0.25 percent in 1997, 0.50 percent in 1998, 0.75 
        percent in 1999, and 1.0 percent in 2000 and subsequent years, 
        of all private premiums required to be paid under this Act.
            (2) For purposes of this subsection, the term ``private 
        health premiums'' means all premium related payments made by 
        employers, individuals, and families for coverage under this 
        Act.
    (b) Purposes for Expenditures.--Part A of title IV of the Public 
Health Service Act (42 U.S.C. 281 et seq.) is amended by adding at the 
end thereof the following new section:

``SEC. 404F. EXPENDITURES FOR HEALTH RESEARCH.

    ``(a) In General.--From amounts made available under section 3101 
of the Affordable Health Care for All Americans Act, the Secretary 
shall distribute--
            ``(1) 2 percent of such amounts during any fiscal year to 
        the Office of the Director of the National Institutes of Health 
        to be allocated at the Director's discretion for the following 
        activities:
                    ``(A) for carrying out the responsibilities of the 
                Office of the Director, in including the Office of 
                Research on Women's Health and the Office of Research 
                on Minority Health, the Office of Alternative Medicine 
                and the Office of Rare Diseases Research; and
                    ``(B) for construction and acquisition of equipment 
                for or facilities of or used by the National Institutes 
                of Health;
            ``(2) 2 percent of such amounts for transfer to the 
        National Center for Research Resources to carry out section 
        1502 of the National Institutes of Health Revitalization Act of 
        1993 concerning Biomedical and Behavioral Research Facilities;
            ``(3) 1 percent of such amounts during any fiscal year for 
        carrying out section 301 and part D of title IV with respect to 
        health information communications; and
            ``(4) the remainder of such amounts during any fiscal year 
        to member institutes of the National Institutes of Health and 
        Centers in the same proportion to the total amount received 
        under this section, as the amount of annual appropriations 
        under appropriations Acts for each member institute and Centers 
        for the fiscal year bears to the total amount of appropriations 
        under appropriations Acts for all member institutes and Centers 
        of the National Institutes of Health for the fiscal year.
    ``(b) Plans of Allocation.--The amounts transferred under 
subsection (a) shall be allocated by the Director of NIH or the various 
directors of the institutes and centers, as the case may be, pursuant 
to allocation plans developed by the various advisory councils to such 
directors, after consultation with such directors.''.

SEC. 3102. HEALTH SERVICES RESEARCH.

    Section 902 of the Public Health Service Act (42 U.S.C. 299a), as 
amended by section 2(b) of Public Law 102-410 (106 Stat. 2094), is 
amended by adding at the end the following subsection:
    ``(f) Research on Health Care Reform.--
            ``(1) In general.--In carrying out section 901(b), the 
        Administrator shall conduct and support research on the reform 
        of the health care system of the United States, as directed by 
        the Secretary.
            ``(2) Priorities.--In carrying out paragraph (1), the 
        Administrator shall give priority to the following:
                    ``(A) Conducting and supporting research on the 
                appropriateness and effectiveness of alternative 
                clinical strategies (including community-based programs 
                and preventive services), the quality and outcomes of 
                care, and administrative simplification.
                    ``(B) Conducting and supporting research on the 
                appropriateness and effectiveness of alternative 
                community-based and clinical strategies including 
                integrating preventive services into primary care, the 
                effectiveness of preventive counseling and health 
                education, and the efficacy and cost-effectiveness of 
                clinical preventive services.
                    ``(C) Conducting and supporting research on 
                consumer choice and information resources; the effects 
                of health care reform on health delivery systems; 
                workplace injury and illness prevention; intentional 
                and unintentional injury prevention; methods for risk 
                adjustment; factors influencing access to health care 
                for vulnerable populations, including children, persons 
                with low-income, persons with disabilities, or 
                individuals with chronic or complex health conditions, 
                and primary care.
                    ``(D) The development of clinical practice 
                guidelines consistent with section 913, the 
                dissemination of such guidelines consistent with 
                section 903, and the assessment of the effectiveness of 
                such guidelines.''.

                      PART 2--FUNDING FOR PROGRAM

SEC. 3111. AUTHORIZATIONS OF APPROPRIATIONS.

    (a) Health Services Research.--For the purpose of carrying out 
activities pursuant to the amendments made by section 3102, there are 
authorized to be appropriated $150,000,000 for fiscal year 1996, 
$400,000,000 for fiscal year 1997, $500,000,000 for fiscal year 1998, 
and $600,000,000 for each of the fiscal years 1999 through 2001.
    (b) Relation to Other Funds.--The authorization of appropriations 
established in subsection (a) are in addition to any other 
authorizations of appropriations that are available for the purposes 
described in such subsection.
    (c) Trigger and Release of Monies.--No expenditure shall be made 
pursuant to section 3101(c) during any fiscal year in which the annual 
amount appropriated for the National Institutes of Health is less than 
the amount so appropriated for the prior fiscal year. With respect to 
amounts available for expenditure pursuant to section 3101(c) which, as 
a result of the application of this subsection remain unexpended, such 
amounts shall be obligated by the Secretary of Health and Human 
Services under the public health initiative under subtitle F.

   Subtitle C--Health Services for Medically Underserved Populations

             PART 1--INITIATIVES FOR ACCESS TO HEALTH CARE

               Subpart A--Authorization of Appropriations

SEC. 3311. AUTHORIZATIONS OF APPROPRIATIONS.

    (a) Improving Access to Health Services.--
            (1) Subpart b.--
                    (A) Except as provided in subparagraph (B), for the 
                purpose of carrying out subpart B, there are authorized 
                to be appropriated $52,500,000 for fiscal year 1996, 
                $122,500,000 for fiscal year 1997, $192,500,000 for 
                fiscal year 1998, $157,500,000 for fiscal year 1999, 
                $122,500,000 for fiscal year 2000, and $52,500,000 for 
                fiscal year 2001.
                    (B) With respect to awards to federally qualified 
                health centers (as defined in section 1861(aa)(4) of 
                the Social Security Act) under subpart B, there are 
                authorized to be appropriated $97,500,000 for fiscal 
                year 1996, $227,500,000 for fiscal year 1997, 
                $357,500,000 for fiscal year 1998, $292,500,000 for 
                fiscal year 1999, $227,500,000 for fiscal year 2000, 
                and $97,500,000 for fiscal year 2001.
            (2) Subpart c.--
                    (A) For the purpose of providing loans under 
                subpart C, there are authorized to be appropriated such 
                sums as may be necessary to support a loan level of 
                $200,000,000 for each of the fiscal years 1996 through 
                2001.
                    (B) For the purpose of making grants under subpart 
                C, there are authorized to be appropriated $35,000,000 
                for each of the fiscal year 1996 through 2001.
    (b) Relation to Other Funds.--The authorizations of appropriations 
established in subsection (a) are in addition to any other 
authorizations of appropriations that are available for the purpose 
described in such subsection.
    (c) Eligible Entities.--For purposes of this part, the term 
``eligible entities'' means--
            (1) covered entities as defined in section 340B(a)(4) of 
        the Public Health Service Act (42 U.S.C. 256b(a)(4)), except 
        that subsection (a)(4)(L)(iii) and (a)(7) of such section shall 
        not apply;
            (2) nonprofit hospitals meeting the criteria for public 
        hospitals which are eligible entities under section 340B of the 
        Public Health Service Act, except that subsection 
        (a)(4)(L)(iii) of such section shall not apply, and children's 
        hospitals meeting comparable criteria as determined appropriate 
        by the Secretary;
            (3) public and private, nonprofit community mental health 
        centers and substance abuse treatment providers receiving funds 
        from the Substance Abuse and Mental Health Services 
        Administration;
            (4) runaway homeless youth centers or transitional living 
        programs for homeless youth for the provision of health 
        services under the Runaway Homeless Youth Act of 1974 (42 
        U.S.C. 5701 et seq.);
            (5) rural referral centers under section 1886(d)(5)(C) of 
        the Social Security Act, except that such eligibility is 
        restricted to the receipt of grants under section 3341; and
            (6) public or nonprofit entities in nonmetropolitan areas 
        (as defined by the Department of Commerce) in a consortium of 
        community-based providers that includes at least three of the 
        following:
                    (A) community or migrant health centers;
                    (B) local health departments;
                    (C) community mental health centers;
                    (D) nonprofit hospitals;
                    (E) private practice health professionals, 
                including rural health clinics; or
                    (F) other publicly funded health or social services 
                agencies.
    (d) Priority.--In making awards from amounts appropriated under 
subsection (a)(1)(B) and section 3362, the Secretary shall give the 
highest priority to providing adequate assistance to federally 
qualified health centers in order to ensure the provision of 
comprehensive primary health care services, other covered services and 
benefits, and enabling services to medically underserved populations 
that were served by such centers prior to the date of enactment of this 
Act, except that such federally qualified health centers must continue 
to meet the requirements for designation under section 1861(aa)(4) of 
the Social Security Act.
    (e) Equitable Distribution.--The Secretary shall, in awarding 
grants, entering into contracts, and making loans under this part, 
assure an equitable distribution of funds between rural and urban 
areas.

Subpart B--Development of Community Health Groups and Health Care Sites 
                              and Services

SEC. 3321. GRANTS AND CONTRACTS FOR DEVELOPMENT OF PLANS AND NETWORKS 
              AND THE EXPANSION AND DEVELOPMENT OF HEALTH CARE SITES 
              AND SERVICES.

    (a) In General.--The Secretary may make grants to and enter into 
contracts with eligible entities described in section 3311(c) for--
            (1) the development of community health groups whose 
        principal purpose is to provide the benefits required under 
        subtitle B of title I in one or more health professional 
        shortage areas or to provide such items and services to a 
        significant number of individuals who are members of a 
        medically underserved population; and
            (2) the expansion of existing health delivery sites and 
        services and the development of new health delivery sites and 
        services.
    (b) Service Area.--In making an award under subsection (a), the 
Secretary shall designate the geographic area with respect to which the 
community health group involved is to provide health services.
    (c) Priority.--In making awards under subsection (a)(1), the 
Secretary shall give priority to proposals in which a greater number of 
eligible entities and other health care providers are participants in 
the community health group, except in areas such as rural areas, where 
providers are severely limited in number.
    (d) Limitation on Awards.--The Secretary may not make awards under 
subsection (a)(1) for more than 5 years to the same community health 
group.
    (e) Definitions.--For purposes of this subpart:
            (1) The term ``community health group'' means--
                    (A) a community health network that--
                            (i) is a public or nonprofit private 
                        consortium of health care providers that 
                        principally provides some of the items and 
                        services of the basic benefit package to 
                        medically underserved populations, and 
                        residents of health professional shortage 
                        areas; and
                            (ii) has a written agreement governing the 
                        participation of health care providers in the 
                        consortium to which each participating provider 
                        is a party; or
                    (B) a community health plan that--
                            (i) is a public or nonprofit private entity 
                        that principally provides all of the items and 
                        services of the basic benefit package to 
                        medically underserved populations, and 
                        residents of health professional shortage 
                        areas;
                            (ii) is a participant in one or more health 
                        alliances; and
                            (iii) has a written agreement governing the 
                        participation of health care providers in the 
                        consortium to which each participating provider 
                        is a party.
            (2) The term ``health professional shortage areas'' means 
        health professional shortage areas designated under section 332 
        of the Public Health Service Act.
            (3) The term ``medically underserved population'' means a 
        medically underserved population designated under section 
        330(b)(3) of the Public Health Service Act, populations 
        residing in health professional shortage areas under section 
        332 of the Public Health Service Act, and populations eligible 
        for premium subsidies and cost sharing reductions based on 
        income under title I.

SEC. 3322. CERTAIN USES OF AWARDS.

    (a) In General.--Amounts awarded under section 3321 may be expended 
for--
            (1) the development of a community health group, including 
        entering into contracts between the recipient of the award and 
        health care providers who are to participate in the group;
            (2) the expansion, development and on-going operation of 
        health delivery sites and services; and
            (3) activities under paragraphs (1) and (2) which include--
                    (A) the recruitment, compensation, and training of 
                health professionals and administrative staff;
                    (B) the purchase and upgrading of equipment, 
                supplies, and information systems including 
                telemedicine systems; and
                    (C) the establishment of reserves required for 
                furnishing services on a prepaid or capitated basis, 
                except that eligible entities may use non-cash 
                mechanisms (including bonds, letters of credit and 
                federally guaranteed reinsurance pools) for 
                establishing and maintaining financial reserves.
    (b) Loans and Grants.--The Secretary may expend, in any fiscal 
year, not to exceed 10 percent of the amounts appropriated to carry out 
this subpart to make loans and grants to eligible entities to support 
the types of activities described in section 3341, subject to the 
requirements of subpart C, except that, with respect to amounts 
available for non-federally qualified health center activities, such 
funds may be used to convert facilities from providers of acute care 
service to providers of primary, emergency or long-term care.

SEC. 3323. PURPOSES AND CONDITIONS.

    Grants shall be made under this subpart for the purposes and 
subject to all of the conditions under which eligible entities 
otherwise receive funding to provide health services to medically 
underserved populations under the Public Health Service Act. The 
Secretary shall prescribe comparable purposes and conditions for 
eligible entities not receiving funding under the Public Health Service 
Act.

 Subpart C--Capital Cost of Development of Community Health Groups and 
                             Other Purposes

SEC. 3341. DIRECT LOANS AND GRANTS.

    (a) In General.--The Secretary shall make grants and loans to--
            (1) eligible entities (as defined in section 3312(c));
            (2) hospitals designated by the Secretary as essential 
        access community hospitals under section 1820(i)(1) of the 
        Social Security Act; or
            (3) rural primary care hospitals under section 1820(i)(2) 
        of such Act;
for the capital costs of developing community health groups (as defined 
in section 3321(e)) and expanding existing health delivery sites or 
developing new health delivery sites.
    (b) Use of Assistance.--
            (1) In general.--The capital costs for which grants and 
        loans made pursuant to subsection (a) may be expended are, 
        subject to paragraphs (2) and (3), the following:
                    (A) The acquisition, modernization, expansion or 
                construction of facilities, or the conversion of 
                unneeded hospital facilities to facilities that will 
                assure or enhance the provision and accessibility of 
                health care and enabling services to medically 
                underserved populations.
                    (B) The purchase of major equipment, including 
                equipment necessary for the support of external and 
                internal information systems.
                    (C) The establishment of reserves required for 
                furnishing services on a prepaid or capitated basis.
                    (D) Such other capital costs as the Secretary may 
                determine are necessary to achieve the objectives of 
                this section.
            (2) Priorities regarding use of funds.--In providing grants 
        and loans under subsection (a) for an entity, the Secretary 
        shall give priority to authorizing the use of amounts for 
        projects for the renovation and modernization of medical 
        facilities necessary to prevent or eliminate safety hazards 
        including asbestos removal, avoid noncompliance with licensure 
        or accreditation standards, or projects to replace obsolete 
        facilities.
            (3) Limitation.--The Secretary may authorize the use of 
        grants and loans under subsection (a) for the construction of 
        new buildings only if the Secretary determines that appropriate 
        facilities are not available through acquiring, modernizing, 
        expanding or converting existing buildings, or that 
        construction new buildings will cost less.
    (c) Amount of Assistance.--
            (1) In general.--The principal amount of loans under 
        subsection (a) may cover up to 90 percent of the costs 
        involved.
            (2) Grants.--Grants under this subsection may not exceed 75 
        percent of the costs involved.
    (d) Interest Subsidies.--Amounts provided under this section may be 
used to provide interest subsidies for loans provided under this 
section where such subsidies are necessary to make a project financial 
feasible.

SEC. 3342. CERTAIN REQUIREMENTS.

    (a) In General.--The Secretary may approve a loan under section 
3341 only if--
            (1) the Secretary is reasonably satisfied that the 
        applicant for the project for which the loan would be made will 
        be able to make payments of principal and interest thereon when 
        due; and
            (2) the applicant provides the Secretary with reasonable 
        assurances that there will be available to it such additional 
        funds as may be necessary to complete the project or 
        undertaking with respect to which such loan is requested.
    (b) Terms and Conditions.--Any loan made under section 3341 shall, 
subject to the Federal Credit Reform Act of 1990, meet such terms and 
conditions (including provisions for recovery in case of default) as 
the Secretary, in consultation with the Secretary of the Treasury, 
determines to be necessary to carry out the purposes of such section 
while adequately protecting the financial interests of the United 
States. Terms and conditions for such loans shall include provisions 
regarding the following:
            (1) Security.
            (2) Maturity date.
            (3) Amount and frequency of installments.
            (4) Rate of interest, which shall be at a rate comparable 
        to the rate of interest prevailing on the date the loan is 
        made.

SEC. 3343. DEFAULTS; RIGHT OF RECOVERY.

    (a) Defaults.--The Secretary may take such action as may be 
necessary to prevent a default on loans under section 3341, including 
the waiver of regulatory conditions, deferral of loan payments, 
renegotiation of loans, and the expenditure of funds for technical and 
consultative assistance, for the temporary payment of the interest and 
principal on such a loan, and for other purposes.
    (b) Foreclosure.--The Secretary may take such action, consistent 
with State law respecting foreclosure procedures, as the Secretary 
deems appropriate to protect the interest of the United States in the 
event of a default on a loan made pursuant to section 3341, including 
selling real property pledged as security for such a loan and for a 
reasonable period of time taking possession of, holding, and using real 
property pledged as security for such a loan.

SEC. 3344. APPLICATION FOR ASSISTANCE.

    The Secretary may provide loans under section 3341 only if an 
application for such assistance is submitted to the Secretary, the 
application meets such requirements, and the application is in such 
form, is made in such manner, and contains such agreements, assurances, 
and information as the Secretary determines to be necessary to carry 
out this subpart.

             Subpart D--Enabling and Supplemental Services

SEC. 3361. GRANTS AND CONTRACTS FOR ENABLING AND SUPPLEMENTAL SERVICES.

    (a) In General.--The Secretary may make grants to and enter into 
contracts with eligible entities to assist such entities in providing 
the services described in subsections (b) and (c) for the purpose of 
increasing the capacity of individuals to utilize the items and 
services included in the benefits package required under title I, and 
to provide access to essential supplemental services that are not fully 
reimbursable under title I prior to January 2002.
    (b) Enabling Services.--Enabling services shall include 
transportation, community and patient outreach, patient and family 
education, translation services, case management, home visiting, and 
such other services as the Secretary determines to be appropriate in 
carrying out the purpose described in such subsection.
    (c) Supplemental Services.--Supplemental services shall include 
items or services described in section 1101 of this Act that would 
otherwise be excluded from coverage.
    (d) Certain Requirements Regarding Project Area.--The Secretary may 
make an award of a grant or contract under subsection (a) only if the 
applicant involved--
            (1) submits to the Secretary--
                    (A) information demonstrating that the medically 
                underserved populations in the community to be served 
                under the award have a need for enabling services; and
                    (B) a proposed budget for providing such services;
            (2) the applicant for the award agrees that the medically 
        underserved residents of the community will be consulted with 
        respect to the design and implementation of the project carried 
        out with the award;
            (3) agrees that the services will not be denied because the 
        individual is unable to pay for such services; and
            (4) agrees that the applicant will utilize existing 
        resources to the maximum extent practicable.
    (e) Application for Awards of Assistance.--The Secretary may make 
an award of a grant or contract under subsection (a) only if an 
application for the award is submitted to the Secretary, the 
application contains each agreement described in this subpart, and the 
application is in such form, is made in such manner, and contains such 
agreements, assurances, and information as the Secretary determines to 
be necessary to carry out this subpart.

SEC. 3362. AUTHORIZATIONS OF APPROPRIATIONS.

    (a) Enabling Services.--For the purpose of carrying out section 
3361(b), there are authorized to be appropriated $35,000,000 for fiscal 
year 1997, $140,000,000 for each of the fiscal years 1998 through 2000, 
and $175,000,000 for fiscal year 2001.
    (b) Supplemental Services.--For the purpose of carrying out section 
3361(c), there are authorized to be appropriated $100,000,000 for 
fiscal year 1996, $150,000,000 for fiscal year 1997, and $250,000,000 
for each of the fiscal years 1998 through 2001.
    (c) Federally Qualified Health Centers.--With respect to federally 
qualified health centers (as defined in section 1861(aa)(4) of the 
Social Security Act), for the purpose of carrying out section 3361(b), 
there are authorized to be appropriated $65,000,000 for fiscal year 
1997, $260,000,000 for each of the fiscal years 1998 through 2000, and 
$325,000,000 for fiscal year 2001.
    (d) Relation to Other Funds.--The authorizations of appropriations 
established in subsection (a) are in addition to any other 
authorizations of appropriations that are available for the purpose 
described in such subsection.

                 PART 2--NATIONAL HEALTH SERVICE CORPS

SEC. 3371. AUTHORIZATIONS OF APPROPRIATIONS.

    (a) Additional Funding; General Corps Program; Allocations 
Regarding Nurses.--For the purpose of carrying out subpart II of part D 
of title III of the Public Health Service Act, and for the purpose of 
carrying out section 3372, there are authorized to be appropriated 
$150,000,000 for fiscal year 1997, $150,000,000 for fiscal year 1998, 
and $250,000,000 for each of the fiscal years 1999 through 2001.
    (b) Relation to Other Funds.--The authorizations of appropriations 
established in subsection (a) are in addition to any other 
authorizations of appropriations that are available for the purpose 
described in such subsection.

SEC. 3372. ALLOCATION FOR PARTICIPATION OF NURSES IN SCHOLARSHIP AND 
              LOAN REPAYMENT PROGRAMS.

    Of the amounts appropriated under section 3371, the Secretary shall 
reserve such amounts as may be necessary to ensure that, of the 
aggregate number of individuals who are participants in the Scholarship 
Program under section 338A of the Public Health Service Act, or in the 
Loan Repayment Program under section 338B of such Act, the total number 
who are being educated as nurse practitioners, nurse midwives, or nurse 
anesthetists or are serving as nurse practitioners, nurse midwives, or 
nurse anesthetists, respectively, is increased to 20 percent.

SEC. 3373. ALLOCATION FOR PARTICIPATION OF PSYCHIATRISTS, 
              PSYCHOLOGISTS, AND CLINICAL SOCIAL WORKERS IN SCHOLARSHIP 
              AND LOAN REPAYMENT PROGRAMS.

    Of the amounts appropriate under section 3371, the Secretary shall 
reserve such amounts as may be necessary to ensure that of the 
aggregate number of individuals who are participants in the scholarship 
program under section 338A of the Public Health Service Act, the number 
who are being educated as psychiatrists, psychologists, and clinical 
social workers or are serving as psychiatrists, psychologists, and 
clinical social workers, respectively, is increased to 15 percent.

      PART 3--PAYMENTS TO HOSPITALS SERVING VULNERABLE POPULATIONS

SEC. 3381. PAYMENTS TO HOSPITALS.

    (a) Entitlement Status.--The Secretary shall make payments in 
accordance with this part to eligible hospitals described in section 
3382. The preceding sentence--
            (1) is an entitlement in the Secretary on behalf of such 
        eligible hospitals (but is not an entitlement in the State in 
        which any such hospital is located or in any individual 
        receiving services from any such hospital); and
            (2) constitutes budget authority in advance of 
        appropriations Acts and represents the obligation of the 
        Federal Government to provide funding for such payments in the 
        amounts, and for the fiscal years, specified in subsection (b).
    (b) Appropriations.--
            (1) In general.--For purposes of subsection (a)(2), the 
        amounts and fiscal years specified in this subsection are (in 
        the aggregate for all eligible hospitals) $1,300,000,000 for 
        the fiscal year in which the general effective date occurs and 
        for each subsequent fiscal year.
            (2) Special rule for years before general effective date.--
                    (A) In general.--For each of the fiscal years 1997 
                and 1998, the amount specified in this subsection for 
                purposes of subsection (a)(2) shall be equal to the 
                aggregate DSH percentage of the amount otherwise 
                determined under paragraph (1).
                    (B) Aggregate dsh percentage defined.--In 
                subparagraph (A), the ``aggregate DSH percentage'' for 
                a year is the amount (expressed as a percentage) equal 
                to--
                            (i) the total amount of payment made by the 
                        Secretary under section 1903(a) of the Social 
                        Security Act during the base year with respect 
                        to payment adjustments made under section 
                        1923(c) of such Act for hospitals in the States 
                        in which eligible hospitals for the year are 
                        located; divided by
                            (ii) the total amount of payment made by 
                        the Secretary under section 1903(a) of such Act 
                        during the base year with respect to payment 
                        adjustments made under section 1923(c) of such 
                        Act for hospitals in all States.
    (c) Payments Made on Quarterly Basis.--Payments to an eligible 
hospital under this section for a year shall be made on a quarterly 
basis during the year.

SEC. 3382. IDENTIFICATION OF ELIGIBLE HOSPITALS.

    (a) State Identification.--In accordance with the criteria 
described in subsection (b) and such procedures as the Secretary may 
require, each State shall identify the hospitals in the State that meet 
such criteria and provide the Secretary with a list of such hospitals.
    (b) Criteria for Eligibility.--A hospital meets the criteria 
described in this subsection if the hospital's low-income utilization 
rate for the base year under section 1923(b)(3) of the Social Security 
Act (as such section is in effect on the day before the date of the 
enactment of this Act) is not less than 25 percent.

SEC. 3383. AMOUNT OF PAYMENTS.

    (a) Distribution of Allocation for Low-Income Assistance.--
            (1) Allocation from total amount.--Of the total amount 
        available for payments under this section in a year, 66.66 
        percent shall be allocated to hospitals for low-income 
        assistance in accordance with this subsection.
            (2) Determination of hospital payment amount.--The amount 
        of payment to an eligible hospital from the allocation made 
        under paragraph (1) during a year shall be the equal to the 
        hospital's low-income percentage of the allocation for the 
        year.
    (b) Distribution of Allocation for Assistance for Uncovered 
Services.--
            (1) Allocation from total amount; determination of state-
        specific portion of allocation.--Of the total amount available 
        for payments under this section in a year, 33.33 percent shall 
        be allocated to hospitals for assistance in furnishing hospital 
        services that are not covered services under title I (in 
        accordance with regulations of the Secretary) or in furnishing 
        hospital services to individuals, including those residing in 
        Southwestern border States, who are not eligible individuals 
        under title I, in accordance with this subsection. The amount 
        available for payments to eligible hospitals in a State shall 
        be equal to an amount determined in accordance with a 
        methodology specified by the Secretary that shall take into 
        consideration the volume of such services provided by hospitals 
        in the State as compared to the volume of such services 
        provided by all eligible hospitals.
            (2) Determination of hospital payment amount.--The amount 
        of payment to an eligible hospital in a State from the amount 
        available for payments to eligible hospitals in the State under 
        paragraph (1) during a year shall be the equal to the 
        hospital's low-income percentage of such amount for the year.
    (c) Low-Income Percentage Defined.--
            (1) In general.--In this subsection, an eligible hospital's 
        ``low-income percentage'' for a year is equal to the amount 
        (expressed as a percentage) of the total low-income days for 
        all eligible hospitals for the year that are attributable to 
        the hospital.
            (2) Low-income days described.--For purposes of paragraph 
        (1), an eligible hospital's low-income days for a year shall be 
        equal to the product of--
                    (A) the total number of inpatient days for the 
                hospital for the year (as reported to the Secretary by 
                the State in which the hospital is located, in 
                accordance with a reporting schedule and procedures 
                established by the Secretary); and
                    (B) the hospital's low-income utilization rate for 
                the base year under section 1923(b)(3) of the Social 
                Security Act (as such section is in effect on the day 
                before the date of the enactment of this Act).

SEC. 3384. BASE YEAR.

    In this part, the ``base year'' is, with respect to a State and 
hospitals in a State, the year immediately prior to the year in which 
the general effective date occurs.

                     PART 4--SENSE OF THE COMMITTEE

SEC. 3391. SENSE OF THE COMMITTEE.

    It is the sense of the Committee on Labor and Human Resources of 
the Senate that when the Affordable Health Care for All Americans Act 
is enacted, it and subsequent appropriations Acts should appropriately 
recognize the success of community and migrant health centers as a 
proven, cost-effective model for the delivery of health care services 
to those populations which are medically underserved because of 
economic, geographic, and cultural barriers.

 Subtitle D--Assistance For State Managed Mental Health And Substance 
                             Abuse Programs

SEC. 3431. AVAILABILITY OF ASSISTANCE.

    (a) In General.--The Secretary shall make grants to States for the 
development and operation of comprehensive managed mental health and 
substance abuse programs that are integrated with the health delivery 
system established under this Act. Such programs shall--
            (1) promote the development of integrated delivery systems 
        for the management of the mental health and substance abuse 
        services provided under the comprehensive benefits package;
            (2) give priority to providing services to low-income 
        adults with serious mental illness or substance abuse disorders 
        and children with serious emotional disturbance or substance 
        abuse disorders and provide for the phase-in of such services 
        for all eligible persons within 5 years;
            (3) ensure that individuals participating in the program 
        have access to all medically necessary mental health and 
        substance abuse services;
            (4) promote the linkage of mental health and substance 
        abuse services with primary and preventive health care 
        services; and
            (5) meet such other requirements as the Secretary may 
        impose.
    (b) Exception.--Nothing in this subtitle shall be construed as 
preventing States that have separate administrative entities for mental 
health and for substance abuse services from establishing separate 
comprehensive managed care programs for such services and receiving 
assistance under this subtitle for either or both programs.

SEC. 3432. PLAN REQUIREMENTS.

    In order to receive a grant under this subtitle, a State must have 
a plan for a comprehensive managed mental health and substance abuse 
program which is approved by the Secretary. Such plan shall--
            (1) describe the management, access, and referral structure 
        that the State will use to promote and achieve integration of 
        mental health and substance abuse services with the health 
        delivery system established under this Act for eligible 
        individuals in the State;
            (2) describe how the State will ensure that providers of 
        specialized services will meet appropriate standards;
            (3) describe payment, utilization review, and other 
        mechanisms that the State will use to encourage appropriate 
        service delivery and management of costs;
            (4) describe uniform patient placement criteria that the 
        State will use to ensure placement in appropriate substance 
        abuse treatment programs;
            (5) describe the processes the State will use to ensure 
        that individuals will continue to have access to treatment 
        through referrals from nonhealth public entities, such as the 
        juvenile or criminal justice systems, or social service 
        systems;
            (6) specify the methods the State will use to ensure that 
        individuals receiving services under the program have access to 
        all medically necessary and appropriate mental health and 
        substance abuse services;
            (7) define terms that will be used by the State in 
        determining the eligibility of individuals for services under 
        the program;
            (8) describe how health plans will use services under the 
        comprehensive managed mental health and substance abuse 
        programs established under this subtitle;
            (9) describe the role of local government in financing and 
        managing the integrated mental illness and substance abuse 
        treatment system;
            (10) describe the sources of funding, including Medicaid 
        and the block grants authorized by title XIX of the Public 
        Health Service Act, that will be used by the State, other than 
        the grant received under this subtitle, to operate the program, 
        and provide the status of any request for a Medicaid waiver 
        made by the State to the Secretary;
            (11) describe how the State provided for broad-based public 
        input in the development of the plan, and the mechanism that 
        will be used for ongoing public comment on and review of 
        amendments to the plan; and
            (12) describe grievance procedures that will be available 
        for individuals dissatisfied with their health plan's 
        participation in the comprehensive managed mental health and 
        substance abuse program, and mechanisms that will be available 
        to review the performance of health plans and fee-for-service 
        arrangements to ensure against under treatment.

SEC. 3433. ADDITIONAL FEDERAL RESPONSIBILITIES.

    The Secretary shall, upon the submission of a State's plan under 
section 3432, ensure the timely consideration of any Medicaid waiver 
requests submitted by the State, affirm that [section 1504] has been 
implemented, and ensure the timely implementation of [section 
1641(b)(5)].

SEC. 3434. AUTHORIZATION OF APPROPRIATIONS.

    There are authorized to be appropriated for grants under this 
subtitle, $100,000,000 for each of the fiscal years 1996 through 2001.

   Subtitle E--Comprehensive School Health Education; School-Related 
                            Health Services

   PART 1--HEALTHY STUDENTS-HEALTHY SCHOOLS GRANTS FOR SCHOOL HEALTH 
                               EDUCATION

SEC. 3501. PURPOSES.

    It is the purpose of this part--
            (1) to support the development and implementation of 
        comprehensive age appropriate health education programs in 
        public schools for children and youth kindergarten through 
        grade 12; and
            (2) to increase access to preventive and primary health 
        care services for children and youth through school-based or 
        school-linked health service sites in accordance with locally 
        determined needs.

SEC. 3502. HEALTHY STUDENTS-HEALTHY SCHOOLS GRANTS.

    (a) In General.--The Secretary, in consultation with the Secretary 
of Education, shall award grants to State educational agencies in 
eligible States to integrate comprehensive school health education in 
schools within the State, with priority given within States to those 
communities in greatest need as defined by section 3583(a).
    (b) Eligible Uses of Funds.--Funds made available under this 
section shall be used--
            (1) to implement comprehensive school health education 
        programs, as defined in subsection (f)(1) through grants to 
        local educational agencies;
            (2) to provide staff development and technical assistance 
        to local educational agencies, schools, local health agencies, 
        and other community organizations involved in providing 
        comprehensive school health education programs;
            (3) to evaluate and report to the Secretary on the progress 
        made towards attaining the goals and objectives described under 
        subsection (c)(1)(A); and
            (4) to conduct such other activities to achieve the 
        objectives of this subpart as the Secretary may require.
    (c) Application.--An application for a grant under subsection (a), 
shall be jointly developed by the State educational agency and the 
State health agencies of the State involved, and shall contain--
            (1) a State plan for comprehensive school health education 
        programs, that outlines--
                    (A) the goals and objectives of the State for 
                school health education programs, and the manner in 
                which the State will allocate funds to local 
                educational agencies in order to achieve these goals 
                and objectives;
                    (B) the manner in which the State will coordinate 
                programs under this part with other Federal, State and 
                local health education programs and resources, and 
                school health services;
                    (C) the manner in which comprehensive school health 
                education programs will be coordinated with other 
                Federal, State and local education programs (such as 
                programs under titles I, II, and IV of the Elementary 
                and Secondary Education Act of 1965), with the school 
                improvement plan of the State, if any, under title III 
                of the Goals 2000: Educate America Act, and with any 
                similar programs;
                    (D) the manner in which the State shall work with 
                State and local educational agencies and with State and 
                local health agencies to reduce barriers to 
                implementing school health education programs;
                    (E) the manner in which the State will monitor the 
                implementation of such programs by local educational 
                agencies and establish outcome criteria by which to 
                evaluate their effectiveness in achieving progress 
                towards the goals and objectives described in 
                subparagraph (A);
                    (F) the manner in which the State will provide 
                staff development and technical assistance to local 
                educational agencies, and build capacity for 
                professional development of health educators; and
                    (G) the manner in which such school health 
                education programs will be, to the extent practicable, 
                culturally competent and linguistically appropriate and 
                responsive to the diverse needs of the students served;
            (2) a description of the respective roles of the State 
        educational agency, local educational agencies, the State 
        health agency and local health agencies in developing and 
        implementing the State's school health education plan and 
        resulting programs;
            (3) a description of the input of the local community 
        (including students and parents) in the development and 
        operation of comprehensive school health education programs;
            (4) an assurance that communities identified in section 
        3583 receive priority as locations for comprehensive school 
        health education programs for all grades to the extent that a 
        State does not implement a statewide program; and
            (5) an assurance that grants to local educational agencies 
        under subsection (b)(1) are contingent upon submission by such 
        agencies of a plan consistent with the requirements for the 
        State plan as required under this subsection.
    (d) Waivers of Statutory and Regulatory Requirements.--
            (1) Waivers.--Except as provided in paragraph (4), upon the 
        request of an entity and under a relevant program described in 
        paragraph (2), the Secretary of Health and Human Services and 
        the Secretary of Education may grant to the entity a waiver of 
        any requirement of such program regarding the use of funds, or 
        of the regulations issued for the program by the Secretary 
        involved, if the following conditions are met with respect to 
        such program:
                    (A) The Secretary involved determines that the 
                requirements of such program impede the ability of the 
                State educational agency to achieve more effectively 
                the purposes described in section 3501.
                    (B) The Secretary involved determines that, with 
                respect to the use of funds under such program, the 
                requested use of the funds by the entity would be 
                consistent with the purposes described in section 3501.
                    (C) The State educational agency provides all 
                interested local educational agencies in the State with 
                notice and an opportunity to comment on the proposal 
                and makes these comments available to the Secretary.
            (2) Relevant programs.--For purposes of paragraph (1), the 
        programs described in this subparagraph are the following:
                    (A) In the case of programs administered by the 
                Secretary of Health and Human Services, the following:
                            (i) The program known as the Prevention, 
                        Treatment, and Rehabilitation Model Projects 
                        for High Risk Youth, carried out under section 
                        517 of the Public Health Service Act.
                            (ii) The program known as the State and 
                        Local Comprehensive School Health Programs to 
                        Prevent Important Health Problems and Improve 
                        Educational Outcomes, carried out under such 
                        Act.
                    (B) In the case of programs administered by the 
                Secretary of Education, any program carried out under 
                part B of the Drug-Free Schools and Communities Act of 
                1986, except that a component of such comprehensive 
                school health education must be consistent with the 
                statutory intent and purposes of such Act.
            (3) Waiver period.--A waiver under this paragraph shall be 
        for a period not to exceed 3 years, unless the Secretary 
        involved determines that--
                    (A) the waiver has been effective in enabling the 
                State to carry out the activities for which it was 
                requested and has contributed to improved performance 
                of comprehensive health education programs; and
                    (B) such extension is in the public interest;
            (4) Waivers not authorized.--The Secretary involved under 
        paragraph (1), may not waive, under this section, any statutory 
        or regulatory requirements relating to--
                    (A) comparability of services;
                    (B) maintenance of effort;
                    (C) parental participation and involvement;
                    (D) the distribution of funds to States or to local 
                educational agencies or other recipients of funds under 
                the programs described in paragraph (2);
                    (E) maintenance of records;
                    (F) applicable civil rights requirements; or
                    (G) the requirements of sections 438 and 439 of the 
                General Education Provisions Act.
            (5) Termination of waiver.--The Secretary involved under 
        paragraph (1) shall terminate a waiver under this subsection if 
        the Secretary determines that the performance of the State 
        affected by the waiver has been inadequate to justify a 
        continuation of the waiver or if it is no longer necessary to 
        achieve its original purpose.
    (e) Definitions.--As used in this section:
            (1) Comprehensive school health education.--The term 
        ``comprehensive school health education'' means a planned, 
        sequential program of health education that addresses the 
        physical, emotional and social dimensions of student health in 
        kindergarten through grade 12. Such program shall--
                    (A) be designed to assist students in developing 
                the knowledge and behavioral skills needed to make 
                positive health choices and maintain and improve their 
                health, prevent disease and injuries, and reduce risk 
                behaviors which adversely impact health;
                    (B) be comprehensive and include a variety of 
                components addressing personal health, community and 
                environmental health, injury prevention and safety, 
                nutritional health, the effects of substance use and 
                abuse, consumer health regarding the benefits and 
                appropriate use of medical services including 
                immunizations and other clinical preventive services, 
                and other components deemed appropriate by the local 
                educational agencies;
                    (C) be designed to be linguistically and culturally 
                competent and responsive to the needs of the students 
                served; and
                    (D) address locally relevant priorities as 
                determined by parents, students, teachers, and school 
                administrators and health officials.
            (2) Eligible state.--The term ``eligible State'' means a 
        State with a memorandum of understanding or a written 
        cooperative agreement entered into by the agencies responsible 
        for health and education concerning the planning and 
        implementation of comprehensive school health education 
        programs. Among these States a priority shall be given to 
        qualified States as defined in section 3582(c).
            (3) State educational agency.--The term ``State educational 
        agency'' means the officer or agency primarily responsible for 
        the State supervision of public elementary and secondary 
        schools.
            (4) Local educational agency.--The term ``local educational 
        agency'' means a public board of education or other public 
        authority legally constituted within a State for either 
        administrative control or direction of, or to perform a service 
        function for, public elementary or secondary schools in a city, 
        county, township, school district, or other political 
        subdivision of a State, or such combination of school districts 
        or counties as are recognized in a State as an administrative 
        agency for its public elementary or secondary schools. Such 
        term includes any other public institution or agency having 
        administrative control and direction of a public elementary or 
        secondary school.
    (f) Authorized Funding.--For the purpose of carrying out this 
section, out of the funds available under section 3581, there are made 
available, not to exceed $15,000,000 for fiscal year 1996, $20,000,000 
for fiscal year 1997, $25,000,000 for fiscal year 1998, $30,000,000 for 
fiscal year 1999, $40,000,000 for fiscal year 2000, and $50,000,000 for 
fiscal year 2001.

SEC. 3503. HEALTHY STUDENTS-HEALTHY SCHOOLS INTERAGENCY TASK FORCE.

    (a) Establishment.--Not later than 120 days after the date of 
enactment of this Act, the Secretary shall establish a Healthy 
Students-Healthy Schools Interagency Task Force to be composed of 
representatives of the Office of Disease Prevention and Health 
Promotion, the National Institutes of Health, the Centers for Disease 
Control and Prevention, the Health Resources and Services 
Administration, the Office of School Health Education within the 
Department of Education, and other Federal agencies and departments 
which have responsibility for components of school health and 
education.
    (b) Co-chairpersons.--The Assistant Secretary for Health and the 
Assistant Secretary for Elementary and Secondary Education shall serve 
as co-chairpersons of the task force established under subsection (a).
    (c) Functions and Activities.--The task force established under 
subsection (a) shall--
            (1) review and coordinate all Federal efforts in school 
        health education and health services;
            (2) provide scientific and technical advice concerning the 
        development and implementation of model comprehensive school 
        health education programs and curricula;
            (3) develop model student learning objectives and 
        assessment instruments that shall be made available to all 
        States;
            (4) develop a uniform grant application form (a form that 
        serves as the principal document containing the core 
        information concerning a particular entity) and procedures that 
        may be used with respect to all school health education-related 
        programs (including supplementary information procedures to be 
        implemented when an entity that has already submitted an 
        application form is applying for additional assistance) that 
        require the submission of an application; and
            (5) recommend to the Secretary, for inclusion in the 
        biennial report required by section 3504(2), methods for 
        effectively linking school health education and health services 
        research findings at the Federal level with implementation at 
        the State and local levels.
    (d) Consolidation of Initiatives.--Not later than 12 months after 
the date of enactment of this Act, the task force established under 
subsection (a) shall prepare and submit to the Congress a report 
containing the recommendations of the task force for the consolidation 
of Federal school health education initiatives.

SEC. 3504. DUTIES OF THE SECRETARY.

    The Secretary shall--
            (1) establish and maintain a national clearinghouse, using 
        advanced technologies to the maximum extent practicable, and 
        mechanisms for the diverse dissemination of school health 
        education material, including written, audio-visual, and 
        electronically conveyed information to educators, schools, 
        health care providers, and other individuals, organizations, 
        and governmental entities;
            (2) submit a biennial report to the Committee on Labor and 
        Human Resources of the Senate and the appropriate committees of 
        the House of Representatives on the implementation and 
        contribution of comprehensive school health education programs 
        funded under this part toward achieving relevant National 
        Healthy People 2000 objectives established by the Secretary; 
        and
            (3) encourage coordination among Federal agencies, State 
        and local governments, educators, school health providers, 
        community-based organizations, and private sector entities to 
        support development of comprehensive school health education 
        programs and school health services.

                 PART 5--SCHOOL-RELATED HEALTH SERVICES

                  Subpart A--Development and Operation

SEC. 3581. AUTHORIZATION OF APPROPRIATIONS.

    (a) Funding for School-Related Health Services.--For the purpose of 
carrying out this subpart, there are authorized to be appropriated 
$100,000,000 for fiscal year 1996, $200,000,000 for fiscal year 1997, 
$325,000,000 for fiscal year 1998, $450,000,000 for fiscal year 1999, 
$575,000,000 for fiscal year 2000, and $700,000,000 for fiscal year 
2001.
    (b) Funding for Planning and Development Grants.--Of amounts made 
available under this section, not to exceed $10,000,000 for each of 
fiscal years 1996 and 1997 may be utilized to carry out section 3584.

SEC. 3582. ELIGIBILITY FOR GRANTS.

    (a) In General.--
            (1) Planning and development grants.--Entities eligible to 
        apply for and receive grants under section 3584 are--
                    (A) State health agencies that apply on behalf of 
                local community partnerships; or
                    (B) local community partnerships in States in which 
                health agencies have not successfully applied.
            (2) Operational grants.--Entities eligible to apply for and 
        receive grants under section 3585 are--
                    (A) a qualified State as designated under 
                subsection (c) that apply on behalf of local community 
                partnerships; or
                    (B) local community partnerships in States that are 
                not designated under subparagraph (A).
    (b) Local Community Partnerships.--
            (1) In general.--A local community partnership under 
        subsection (a)(1)(B) and (a)(2)(B) is an entity that, at a 
        minimum includes--
                    (A) a local health care provider, which may be a 
                local public health department, with experience in 
                delivering services to children and youth or medically 
                underserved populations;
                    (B) local educational agency on behalf of one or 
                more public schools; and
                    (C) one community-based organization located in the 
                community to be served that has a history of providing 
                services to at-risk children and youth.
            (2) Rural communities.--In rural communities, local 
        partnerships should seek to include, to the fullest extent 
        practicable, providers and community-based organizations with 
        experience in serving the target population.
            (3) Parent and community participation.--An applicant 
        described in subsection (a) shall, to the maximum extent 
        feasible, involve broad-based community participation 
        (including parents of the youth to be served).
    (c) Qualified State.--A qualified State under subsection (a)(2)(A) 
is a State that, at a minimum--
            (1) demonstrates an organizational commitment (including a 
        strategic plan) to providing a broad range of health, health 
        education and support services to at-risk youth; and
            (2) has a memorandum of understanding or cooperative 
        agreement jointly entered into by the State agencies 
        responsible for health and education regarding the planned 
        delivery of health and support services in school-based or 
        school-linked centers.

SEC. 3583. PREFERENCES.

    In making grants under sections 3584 and 3585, the Secretary shall 
give priority to applicants whose communities to be served show the 
most substantial level of need for health services among children and 
youth.

SEC. 3584. PLANNING AND DEVELOPMENT GRANTS.

    (a) In General.--The Secretary may make grants during fiscal years 
1996 and 1997 to entities eligible under section 3862 to develop 
school-based or school-linked health service sites.
    (b) Use of Funds.--Amounts provided under a grant under this 
section may be used for the following:
            (1) Planning for the provision of school health services, 
        including--
                    (A) an assessment of the need for health services 
                among youth in the communities to be served;
                    (B) the health services to be provided and how new 
                services will be integrated with existing services;
                    (C) assessing and planning for the modernization 
                and expansion of existing facilities and equipment to 
                accommodate such services; and
                    (D) an affiliation with relevant health plans.
            (2) recruitment and training of staff for the 
        administration and delivery of school health services;
            (3) the establishment of local community partnerships as 
        described in section 3582 (b);
            (4) in the case of States, the development of memorandums 
        of understanding or cooperative agreements for the coordinated 
        delivery of health and support services through school health 
        service sites; and
            (5) other activities necessary to assume operational 
        status.
    (c) Application for Grants.--To be eligible to receive a grant 
under this section an entity described in section 3582(a) shall submit 
an application in a form and manner prescribed by the Secretary.
    (d) Number of Grants.--Not more than one planning grant may be made 
to a single applicant. A planning grant may not exceed 2 years in 
duration.
    (e) Amount Available for Development Grant.--The Secretary may 
award not to exceed--
            (1) $150,000 to entities under section 3582(a)(1)(A) and to 
        localities planning for a citywide or countywide school health 
        services delivery system; and
            (2) $50,000 to entities under section 3582(a)(1)(B).

SEC. 3585. GRANTS FOR OPERATION OF SCHOOL HEALTH SERVICES.

    (a) In General.--The Secretary may make grants to eligible entities 
described in section 3582(a)(2) that submit applications consistent 
with the requirements of this section, to pay the cost of operating 
school-based or school-linked health service sites.
    (b) Use of Grant.--Amounts provided under a grant under this 
section may be used for the following--
            (1) health services, including diagnosis and treatment of 
        simple illnesses and minor injuries;
            (2) preventive health services, including health 
        screenings, follow-up health care, mental health, and 
        preventive health education;
            (3) enabling services, as defined in section 3361, and 
        other necessary support services;
            (4) training, recruitment, and compensation of health 
        professionals and other staff necessary for the administration 
        and delivery of school health services; and
            (5) referral services, including the linkage of individuals 
        to health plans, and community-based health and social service 
        providers.
    (c) Application for Grant.--To be eligible to receive a grant under 
this section an entity described in section 3582(a)(2) shall submit an 
application in a form and manner prescribed by the Secretary. In order 
to receive a grant under this section, an applicant must include in the 
application the following information--
            (1) a description of the services to be furnished by the 
        applicant;
            (2) the amounts and sources of funding that the applicant 
        will expend, including estimates of the amount of payments the 
        applicant will receive from health plans and other sources;
            (3) a description of local community partnerships, 
        including parent and community participation;
            (4) a description of the linkages with other health and 
        social service providers; and
            (5) such other information as the Secretary determines to 
        be appropriate.
    (d) Assurances.--In order to receive a grant under this section, an 
applicant must meet the following conditions--
            (1) school health service sites will, directly or 
        indirectly, provide a broad range of health services, in 
        accordance with the determinations of the local community 
        partnership, that may include--
                    (A) diagnosis and treatment of simple illnesses and 
                minor injuries;
                    (B) preventive health services, including health 
                screenings and follow-up health care, mental health and 
                preventive health education;
                    (C) enabling services, as defined in section 3361;
                    (D) referrals (including referrals regarding mental 
                health and substance abuse) with follow-up to ensure 
                that needed services are received;
            (2) the applicant provides services recommended by the 
        health provider, in consultation with the local community 
        partnership, and with the approval of the local education 
        agency;
            (3) the applicant provides the services under this 
        subsection to adolescents, and other school age children and 
        their families as deemed appropriate by the local partnership;
            (4) the applicant maintains agreements with community-based 
        health care providers with a history of providing services to 
        such populations for the provision of health care services not 
        otherwise provided directly or during the hours when school 
        health services are unavailable;
            (5) the applicant establishes an affiliation with relevant 
        health plans and will establish reimbursement procedures and 
        will make every reasonable effort to collect appropriate 
        reimbursement for services provided; and
            (6) the applicant agrees to supplement and not supplant the 
        level of State or local funds under the direct control of the 
        applying State or participating local education or health 
        authority expended for school health services as defined by 
        this Act;
            (7) services funded under this Act will be coordinated with 
        existing school health services provided at a participating 
        school; and
            (8) for applicants in rural areas, the assurances required 
        under paragraph (4) shall be fulfilled to the maximum extent 
        possible.
    (e) State Laws.--Notwithstanding any other provision in this part, 
no school based health clinic may provide services, to any minor, when 
to do so is a violation of State laws or regulations pertaining to 
informed consent for medical services to minors.
    (f) Limitation on Administrative Funds.--In the case of a State 
applying on behalf of local educational partnerships, the applicant may 
retain not more than 5 percent of grants awarded under this subpart for 
administrative costs.
    (g) Duration of Grant.--A grant under this section shall be for a 
period determined appropriate by the Secretary.
    (h) Amount of Grant.--The annual amount of a grant awarded under 
this section shall not be more than $200,000 per school-based or 
school-linked health service site.
    (i) Federal Share.--
            (1) In general.--Subject to paragraph (3), a grant for 
        services awarded under this section may not exceed--
                    (A) 90 percent of the non-reimbursed cost of the 
                activities to be funded under the program for the first 
                2 fiscal years for which the program receives 
                assistance under this section; and
                    (B) 75 percent of the non-reimbursed cost of such 
                activities for subsequent years for which the program 
                receives assistance under this section.
The remainder of such costs shall be made available as provided in 
paragraph (2).
            (2) Form of non-federal share.--The non-Federal share 
        required by paragraph (1) may be in cash or in-kind, fairly 
        evaluated, including facilities, equipment, personnel, or 
        services, but may not include amounts provided by the Federal 
        Government. In-kind contributions may include space within a 
        school facilities, school personnel, program use of school 
        transportation systems, outposted health personnel, and 
        extension of health provider medical liability insurance.
            (3) Waiver.--The Secretary may waive the requirements of 
        paragraph (1) for any year in accordance with criteria 
        established by regulation. Such criteria shall include a 
        documented need for the services provided under this section 
        and an inability of the grantee to meet the requirements of 
        paragraph (1) despite a good faith effort.
    (j) Training and Technical Assistance.--Entities that receive 
assistance under this section may use not to exceed 10 percent of the 
amount of such assistance to provide staff training and to secure 
necessary technical assistance. To the maximum extent feasible, 
technical assistance should be sought through local community-based 
entities. The limitation contained in this subsection shall apply to 
individuals employed to assist in obtaining funds under this part. 
Staff training should include the training of teachers and other school 
personnel necessary to ensure appropriate referral and utilization of 
services, and appropriate linkages between class-room activities and 
services offered.
    (k) Report and Monitoring.--The Secretary will submit to the 
Committee on Labor and Human Resources in the Senate and the Committee 
on Energy and Commerce in the House of Representatives a biennial 
report on the activities funded under this Act, consistent with the 
ongoing monitoring activities of the Department. Such reports are 
intended to advise the relevant Committees of the availability and 
utilization of services, and other relevant information about program 
activities.

              Subtitle F--Public Health Service Initiative

SEC. 3601. PUBLIC HEALTH SERVICE INITIATIVE.

    (a) In General.--Subject to subsection (c), the Secretary of Health 
and Human Services shall pay, from funds in the Treasury not otherwise 
appropriated, individuals and entities that are eligible to receive 
assistance pursuant to the provisions referred to in paragraphs (1) 
through (8) of subsection (b), to the extent of the amounts specified 
under subsection (b).
    (b) Amounts Specified.--The amounts specified in subsection (a) 
with respect to a fiscal year shall be--
            (1) with respect to the health services research activities 
        authorized under the amendments made by section 3102, 
        $150,000,000 for fiscal year 1996, $400,000,000 for fiscal year 
        1997, $500,000,000 for fiscal year 1998, and $600,000,000 for 
        each of the fiscal years 1999 through 2001;
            (2) with respect to activities for the development of plans 
        and networks under subpart B of part 1 of subtitle C of title 
        III--
                    (A) $52,500,000 for fiscal year 1996, $122,500,000 
                for fiscal year 1997, $192,500,000 for fiscal year 
                1998, $157,500,000 for fiscal year 1999, $122,500,000 
                for fiscal year 2000, and $52,500,000 for fiscal year 
                2001; and
                    (B) with respect to awards to federally qualified 
                health centers (as defined in section 1861(aa)(4) of 
                the Social Security Act) under such subpart, 
                $97,500,000 for fiscal year 1996, $227,500,000 for 
                fiscal year 1997, $357,500,000 for fiscal year 1998, 
                $292,500,000 for fiscal year 1999, $227,500,000 for 
                fiscal year 2000, and $97,500,000 for fiscal year 2001;
            (3) with respect to capital costs under subpart C of part 1 
        of subtitle C of title III, $50,000,000 for each of the fiscal 
        years 1996 through 2001;
            (4) with respect to enabling services under subpart D of 
        part 1 of subtitle C of title III--
                    (A) $35,000,000 for fiscal year 1997, $140,000,000 
                for each of the fiscal years 1998 through 2000, and 
                $175,000,000 for fiscal year 2001; and
                    (B) with respect to awards to federally qualified 
                health centers (as defined in section 1861(aa)(4) of 
                the Social Security Act) under such subpart, 
                $65,000,000 for fiscal year 1997, $260,000,000 for each 
                of the fiscal years 1998 through 2000, and $325,000,000 
                for fiscal year 2001;
            (5) with respect to supplemental services under subpart D 
        of part 1 of subtitle C of title III, $100,000,000 for fiscal 
        year 1996, $150,000,000 for fiscal year 1997, and $250,000,000 
        for each of the fiscal years 1998 through 2001;
            (6) with respect to the National Health Service Corps 
        program referred to under section 3371, $150,000,000 for each 
        of the fiscal years 1997 and 1998, and $250,000,000 for each of 
        the fiscal years 1999 through 2001;
            (7) with respect to the development and operation of 
        comprehensive managed mental health and substance abuse 
        programs under section 3434, $100,000,000 for each of the 
        fiscal years 1996 through 2001; and
            (8) with respect to school-related health service programs 
        under subpart A of part 5 of subtitle E of title III, 
        $100,000,000 for fiscal year 1996, $200,000,000 for fiscal year 
        1997, $325,000,000 for fiscal year 1998, and $450,000,000 for 
        fiscal year 1999, $575,000,000 for fiscal year 2000, and 
        $700,000,000 for fiscal year 2001.
    (c) Authority to Transfer Funds.--The Committee on Appropriations 
of the House of Representatives and the Committee on Appropriations of 
the Senate, acting through appropriations Acts, may transfer the 
amounts specified under subsection (b) in each fiscal year among the 
programs referred to in such subsection.

                     TITLE IV--MEDICAL MALPRACTICE

                      Subtitle A--Liability Reform

SEC. 4001. FEDERAL TORT REFORM.

    (a) Applicability.--
            (1) In general.--Except as provided in section 4002, this 
        subtitle shall apply with respect to any medical malpractice 
        liability action brought in any State or Federal court, except 
        that this subtitle shall not apply to a claim or action for 
        damages arising from a vaccine-related injury or death to the 
        extent that title XXI of the Public Health Service Act applies 
        to the claim or action.
            (2) Effect on sovereign immunity and choice of law or 
        venue.--Nothing in this subtitle shall be construed to--
                    (A) waive or affect any defense of sovereign 
                immunity asserted by any State under any provision of 
                law;
                    (B) waive or affect any defense of sovereign 
                immunity asserted by the United States;
                    (C) affect the applicability of any provision of 
                the Foreign Sovereign Immunities Act of 1976;
                    (D) preempt State choice-of-law rules with respect 
                to claims brought by a foreign nation or a citizen of a 
                foreign nation; or
                    (E) affect the right of any court to transfer venue 
                or to apply the law of a foreign nation or to dismiss a 
                claim of a foreign nation or of a citizen of a foreign 
                nation on the ground of inconvenient forum.
            (3) Federal court jurisdiction not established on federal 
        question grounds.--Nothing in this subtitle shall be construed 
        to establish any jurisdiction in the district courts of the 
        United States over medical malpractice liability actions on the 
        basis of section 1331 or 1337 of title 28, United States Code.
    (b) Definitions.--In this subtitle, the following definitions 
apply:
            (1) Alternative dispute resolution system; ADR.--The term 
        ``alternative dispute resolution system'' or ``ADR'' means a 
        system that provides for the resolution of medical malpractice 
        claims in a manner other than through medical malpractice 
        liability actions.
            (2) Claimant.--The term ``claimant'' means any person who 
        alleges a medical malpractice claim, and any person on whose 
        behalf such a claim is alleged, including the decedent in the 
        case of an action brought through or on behalf of an estate.
            (3) Health care professional.--The term ``health care 
        professional'' means any individual who provides health care 
        services in a State and who is required by the laws or 
        regulations of the State to be licensed or certified by the 
        State to provide such services in the State.
            (4) Health care provider.--The term ``health care 
        provider'' means any organization or institution that is 
        engaged in the delivery of health care services in a State and 
        that is required by the laws or regulations of the State to be 
        licensed or certified by the State to engage in the delivery of 
        such services in the State.
            (5) Injury.--The term ``injury'' means any illness, 
        disease, or other harm that is the subject of a medical 
        malpractice liability action or a medical malpractice claim.
            (6) Medical malpractice liability action.--The term 
        ``medical malpractice liability action'' means a cause of 
        action brought in a State or Federal court against a health 
        care provider or health care professional by which the 
        plaintiff alleges a medical malpractice claim.
            (7) Medical malpractice claim.--The term ``medical 
        malpractice claim'' means a claim brought against a health care 
        provider or health care professional in which a claimant 
        alleges that injury was caused by the provision of (or the 
        failure to provide) health care services, except that such term 
        does not include--
                    (A) any claim based on an allegation of an 
                intentional tort; or
                    (B) any claim based on an allegation that a product 
                is defective that is brought against any individual or 
                entity that is not a health care professional or health 
                care provider.

SEC. 4002. STATE-BASED ALTERNATIVE DISPUTE RESOLUTION MECHANISMS.

    (a) Application to Malpractice Claims Under Plans.--Prior to or 
immediately following the commencement of any medical malpractice 
action, the parties shall participate in the alternative dispute 
resolution system administered by the State under subsection (b). Such 
participation shall be in lieu of any other provision of Federal or 
State law or any contractual agreement made by or on behalf of the 
parties prior to the commencement of the medical malpractice action.
    (b) Adoption of Mechanism by State.--Each State shall--
            (1) maintain or adopt at least one of the alternative 
        dispute resolution methods satisfying the requirements 
        specified under subsection (c) and (d) for the resolution of 
        medical malpractice claims arising from the provision of (or 
        failure to provide) health care services to individuals 
        enrolled in a health plan; and
            (2) clearly disclose to enrollees (and potential enrollees) 
        the availability and procedures for consumer grievances, 
        including a description of the alternative dispute resolution 
        method or methods adopted under this subsection.
    (c) Specification of Permissible Alternative Dispute Resolution 
Methods.--
            (1) In general.--The Board shall, by regulation, develop 
        alternative dispute resolution methods for the use by States in 
        resolving medical malpractice claims under subsection (a). Such 
        methods shall include at least the following:
                    (A) Arbitration.--The use of arbitration, a nonjury 
                adversarial dispute resolution process which may, 
                subject to subsection (d), result in a final decision 
                as to facts, law, liability or damages.
                    (B) Claimant-requested binding arbitration.--For 
                claims involving a sum of money that falls below a 
                threshold amount set by the Board, the use of 
                arbitration not subject to subsection (d). Such binding 
                arbitration shall be at the sole discretion of the 
                claimant.
                    (C) Mediation.--The use of mediation, a settlement 
                process coordinated by a neutral third party without 
                the ultimate rendering of a formal opinion as to 
                factual or legal findings.
                    (D) Early neutral evaluation.--The use of early 
                neutral evaluation, in which the parties make a 
                presentation to a neutral attorney or other neutral 
                evaluator for an assessment of the merits, to encourage 
                settlement. If the parties do not settle as a result of 
                assessment and proceed to trial, the neutral 
                evaluator's opinion shall be kept confidential.
                    (E) Certificate of merit.--The requirement that a 
                medical malpractice plaintiff submit to the court 
                before trial a written report by a qualified specialist 
                that includes the specialist's determination that, 
                after a review of the available medical record and 
                other relevant material, there is a reasonable and 
                meritorious cause for the filing of the action against 
                the defendant.
            (2) Standards for establishing methods.--In developing 
        alternative dispute resolution methods under paragraph (1), the 
        Board shall assure that the methods promote the resolution of 
        medical malpractice claims in a manner that--
                    (A) is affordable for the parties involved;
                    (B) provides for timely resolution of claims;
                    (C) provides for the consistent and fair resolution 
                of claims; and
                    (D) provides for reasonably convenient access to 
                dispute resolution for individuals enrolled in plans.
            (3) Waiver authority.--Upon application of a State, the 
        Board may grant the State the authority to fulfill the 
        requirement of subsection (b) by adopting a mechanism other 
        than a mechanism established by the Board pursuant to this 
        subsection, except that such mechanism must meet the standards 
        set forth in paragraph (2).
    (d) Further Redress.--Except with respect to the claimant-requested 
binding arbitration method set forth in subsection (c)(1)(B), and 
notwithstanding any other provision of a law or contractual agreement, 
a plan enrollee dissatisfied with the determination reached as a result 
of an alternative dispute resolution method applied under this section 
may, after the final resolution of the enrollee's claim under the 
method, bring a cause of action to seek damages or other redress with 
respect to the claim to the extent otherwise permitted under State law. 
The results of any alternative dispute resolution procedure are 
inadmissible at any subsequent trial, as are all statements, offers, 
and other communications made during such procedures, unless otherwise 
admissible under State law.

SEC. 4003. LIMITATION ON AMOUNT OF ATTORNEY'S CONTINGENCY FEES.

    (a) In General.--An attorney who represents, on a contingency fee 
basis, a plaintiff in a medical malpractice liability action may not 
charge, demand, receive, or collect for services rendered in connection 
with such action (including the resolution of the claim that is the 
subject of the action under any alternative dispute resolution system) 
in excess of--
            (1) 33\1/3\ percent of the first $150,000 of the total 
        amount recovered by judgment or settlement in such action; plus
            (2) 25 percent of any amount recovered above the amount 
        described in paragraph (1);
unless otherwise determined under State law. Such amount shall be 
computed after deductions are made for all the expenses associated with 
the claim other than those attributable to the normal operating 
expenses of the attorney.
    (b) Calculation of Periodic Payments.--In the event that a judgment 
or settlement includes periodic or future payments of damages, the 
amount recovered for purposes of computing the limitation on the 
contingency fee under subsection (a) may, in the discretion of the 
court, be based on the cost of the annuity or trust established to make 
the payments. In any case in which an annuity or trust is not 
established to make such payments, such amount shall be based on the 
present value of the payments.
    (c) Contingency Fee Defined.--As used in this section, the term 
``contingency fee'' means any fee for professional legal services which 
is, in whole or in part, contingent upon the recovery of any amount of 
damages, whether through judgment or settlement.

SEC. 4004. REDUCTION OF AWARDS FOR RECOVERY FROM COLLATERAL SOURCES.

    (a) Reduction of Award.--The total amount of damages recovered by a 
plaintiff in a medical malpractice liability action shall be reduced by 
an amount that equals--
            (1) the amount of any payment which the plaintiff has 
        received or to which the plaintiff is presently entitled on 
        account of the same injury for which the damages are awarded, 
        including payment under--
                    (A) Federal or State disability or sickness 
                programs;
                    (B) Federal, State, or private health insurance 
                programs;
                    (C) private disability insurance programs;
                    (D) employer wage continuation programs; and
                    (E) any other program, if the payment is intended 
                to compensate the plaintiff for the same injury for 
                which damages are awarded; less
            (2) the amount of any premiums or any other payments that 
        the plaintiff has paid to be eligible to receive the payment 
        described in paragraph (1) and any portion of the award subject 
        to a subrogation lien or claim.
    (b) Subrogation.--The court may reduce a subrogation lien or claim 
described in subsection (a)(2) by an amount representing reasonable 
costs incurred in securing the award subject to the lien or claim.
    (c) Inapplicability of Section.--This section shall not apply to 
any case in which the court determines that the reduction of damages 
pursuant to subsection (a) would compound the effect of any State law 
limitation on damages so as to render the plaintiff less than fully 
compensated for his or her injuries.

SEC. 4005. PERIODIC PAYMENT OF AWARDS.

    (a) In General.--A party to a medical malpractice liability action 
may petition the court to instruct the trier of fact to award any 
future damages on an appropriate periodic basis. If the court, in its 
discretion, so instructs the trier of fact, and damages are awarded on 
a periodic basis, the court may require the defendant to purchase an 
annuity or other security instrument (typically based on future damages 
discounted to present value) adequate to assure payments of future 
damages.
    (b) Failure or Inability To Pay.--With respect to an award of 
damages described in subsection (a), if a defendant fails to make 
payments in a timely fashion, or if the defendant becomes or is at risk 
of becoming insolvent, upon such a showing the claimant may petition 
the court for an order requiring that remaining balance be discounted 
to present value and paid to the claimant in a lump-sum.
    (c) Modification of Payment Schedule.--The court shall retain 
authority to modify the payment schedule based on changed 
circumstances.
    (d) Future Damages Defined.--As used in this section, the term 
``future damages'' means any economic or noneconomic loss other than 
that incurred or accrued as of the time of judgment.

SEC. 4006. CONSTRUCTION.

    Nothing in this subtitle shall be construed to preempt any State 
law that sets a maximum limit on total damages.

 Subtitle B--Other Provisions Relating to Medical Malpractice Liability

SEC. 4101. STATE MALPRACTICE REFORM DEMONSTRATION PROJECTS.

    (a) Establishment.--The Secretary shall award grants to States for 
the establishment of malpractice reform demonstration projects in 
accordance with this section. Each such project shall be designed to 
assess the fairness and effectiveness of one or more of the following 
models:
            (1) No-fault liability.
            (2) Enterprise liability.
            (3) Practice guidelines.
    (b) Definitions.--For purposes of this section:
            (1) Medical adverse event.--The term ``medical adverse 
        event'' means an injury that is the result of medical 
        management as opposed to a disease process that creates 
        disability lasting at least one month after discharge, or that 
        prolongs a hospitalization for more than one month, and for 
which compensation is available under a no-fault medical liability 
system established under this section.
            (2) No-fault medical liability system.--The terms ``no-
        fault medical liability system'' and ``system'' mean a system 
        established by a State receiving a grant under this section 
        which replaces the common law tort liability system for medical 
        injuries with respect to certain qualified health care 
        organizations and qualified insurers and which meets the 
        requirements of this section.
            (3) Provider.--The term ``provider'' means physician, 
        physician assistant, or other individual furnishing health care 
        services in affiliation with a qualified health care 
        organization.
            (4) Qualified health care organization.--The term 
        ``qualified health care organization'' means a hospital, a 
        hospital system, a managed care network, or other entity 
        determined appropriate by the Secretary which elects in a State 
        receiving a grant under this section to participate in a no-
        fault medical liability system and which meets the requirements 
        of this section.
            (5) Qualified insurer.--The term ``qualified insurer'' 
        means a health care malpractice insurer, including a self-
        insured qualified health care organization, which elects in a 
        State receiving a grant under this section to participate in a 
        no-fault medical liability system and which meets the 
        requirements of this section.
            (6) Enterprise liability.--The term ``enterprise 
        liability'' means a system in which State law imposes 
        malpractice liability on the health plan in which a physician 
        participates in place of personal liability on the physician in 
        order to achieve improved quality of care, reductions in 
        defensive medical practices, and better risk management.
            (7) Practice guidelines.--The term ``practice guidelines'' 
        means guidelines established by the Agency for Health Care 
        Policy and Research pursuant to the Public Health Service Act 
        or this Act.
    (c) Applications by States.--
            (1) In general.--Each State desiring to establish a 
        malpractice reform demonstration project shall submit an 
        application to the Secretary at such time and in such manner as 
        the Secretary shall require.
            (2) Contents of application.--An application under 
        paragraph (1) shall include--
                    (A) an identification of the State agency or 
                agencies that will administer the demonstration project 
                and be the grant recipient of funds for the State;
                    (B) a description of the manner in which funds 
                granted to a State will be expended and a description 
                of fiscal control, accounting, and audit procedures to 
                ensure the proper dispersal of and accounting for funds 
                received under this section; and
                    (C) such other information as the Secretary 
                determines appropriate.
            (3) Consideration of applications.--In reviewing all 
        applications received from States desiring to establish 
        malpractice demonstration projects under paragraph (1), the 
        Secretary shall consider--
                    (A) data regarding medical malpractice and 
                malpractice litigation patterns in each State;
                    (B) the contributions that any demonstration 
                project will make toward reducing malpractice and costs 
                associated with health care injuries;
                    (C) diversity among the populations serviced by the 
                systems;
                    (D) geographic distribution; and
                    (E) such other criteria as the Secretary determines 
                appropriate.
    (d) Evaluation and Reports.--
            (1) By the states.--Each State receiving a grant under this 
        section shall conduct on-going evaluations of the effectiveness 
        of any demonstration project established in such State and 
        shall submit an annual report to the Secretary concerning the 
        results of such evaluations at such times and in such manner as 
        the Secretary shall require.
            (2) By the secretary.--The Secretary shall submit an annual 
        report to Congress concerning the fairness and effectiveness of 
        the demonstration projects conducted under this section. Such 
        report shall analyze the reports received by the Secretary 
        under paragraph (1).
    (e) Funding.--
            (1) In general.--There are authorized to be appropriated 
        such sums as may be necessary to carry out the purposes of this 
        section.
            (2) Limitations on expenditures.--
                    (A) Administrative expenses.--Not more than 10 
                percent of the amount of each grant awarded to a State 
                under this section may be used for administrative 
                expenses.
                    (B) Waiver of cost limitations.--The limitation 
                under subparagraph (A) may be waived as determined 
                appropriate by the Secretary.
    (f) Eligibility for No-Fault Demonstration.--A State is eligible to 
receive a no-fault liability demonstration grant if the application of 
the State under subsection (c) includes--
            (1) an identification of each qualified health care 
        organization selected by the State to participate in the 
        system, including--
                    (A) the location of each organization;
                    (B) the number of patients generally served by each 
                organization;
                    (C) the types of patients generally served by each 
                organization;
                    (D) an analysis of any characteristics of each 
                organization which makes such organization appropriate 
                for participation in the system;
                    (E) whether the organization is self-insured for 
                malpractice liability; and
                    (F) such other information as the Secretary 
                determines appropriate;
            (2) an identification of each qualified insurer selected by 
        the State to participate in the system, including--
                    (A) a schedule of the malpractice insurance 
                premiums generally charged by each insurer under the 
                common law tort liability system; and
                    (B) such other information as the Secretary 
                determines appropriate;
            (3) a description of the procedure under which qualified 
        health care organizations and insurers elect to participate in 
        the system;
            (4) a description of the system established by the State to 
        assure compliance with the requirements of this section by each 
        qualified health care organization and insurer; and
            (5) a description of procedures for the preparation and 
        submission to the State of an annual report by each qualified 
        health care organization and qualified insurer participating in 
        a system that shall include--
                    (A) a description of activities conducted under the 
                system during the year; and
                    (B) the extent to which the system exceeded or 
                failed to meet relevant performance standards including 
                compensation for and deterrence of medical adverse 
                events.
    (g) Eligibility for Enterprise Liability Demonstration.--A State is 
eligible to receive an enterprise liability demonstration grant if the 
State--
            (1) has entered into an agreement with a health plan (other 
        than a fee-for-service plan) operating in the State under which 
        the plan assumes legal liability with respect to any medical 
        malpractice claim arising from the provision of (or failure to 
        provide) services under the plan by any physician participating 
        in the plan; and
            (2) has provided that, under the law of the State, a 
        physician participating in a plan that has entered into an 
        agreement with the State under paragraph (1) may not be liable 
        in damages or otherwise for such a claim and the plan may not 
        require such physician to indemnify the plan for any such 
        liability.
    (h) Eligibility for Practice Guidelines Demonstration.--A State is 
eligible to receive a practice guidelines demonstration grant if the 
law of the State provides that in the resolution of any medical 
malpractice action, compliance or non-compliance with an appropriate 
practice guideline shall be admissible at trial as a rebuttable 
presumption regarding medical negligence.

TITLE V--FALL-BACK PREMIUM LIMITS IN CASES OF INEFFECTIVE COMPETITION; 
 PREMIUM-BASED FINANCING; ASSISTANCE TO LOW INCOME INDIVIDUALS AND TO 
                               BUSINESSES

SEC. 5000. GENERAL DEFINITIONS.

    (a) Definitions Relating to Premium Rates.--In this title:
            (1) Filed community bid.--The term ``filed community bid'' 
        means the premium bid that is filed with a State for a class of 
        enrollment for a community-rated plan offered in a community 
        rating area pursuant to section 1413(b).
            (2) Accepted cooperative bid.--The term ``accepted 
        cooperative bid'' means the premium rate agreed upon by a 
        cooperative and a plan taking into account any discount to such 
        bid.
            (3) Final community rate.--The term ``final community 
        rate'' means the filed community bid, taking into account any 
        voluntary reduction in such bid made under section 5004(e).
            (4) Final cooperative rate.--The term ``final cooperative 
        bid'' means the accepted cooperative bid, taking into account 
        any voluntary reductions in such bid made under section 
        5004(e).
    (b) Definitions Related To Weighted Average Premium Rates.--In this 
title:
            (1) Weighted average accepted bid.--The term ``weighted 
        average accepted bid'' means, for a class of enrollment for a 
        community rating area for a year, the average across all plans 
        of--
                    (A) the filed community bid for such class for each 
                community-rated health plan offered in a community 
                rating area weighted to reflect the relative enrollment 
                (net of any enrollment through a cooperative) of 
                community rate eligible individuals among such plans; 
                and
                    (B) the accepted cooperative bid for such class for 
                each community-rated health plan offered in a community 
                rating area weighted to reflect the relative enrollment 
                of community rate eligible individuals through a 
                cooperative among such plans.
            (2) Weighted average premium.--The term ``weighted average 
        premium'' means, for a class of enrollment for a community 
        rating area for a year, the lesser of--
                    (A) the baseline premium for such class for the 
                community rating area (as defined in section 5003) for 
                the year; or
                    (B) the average across all plans of the lesser of--
                            (i) the final community rate; or
                            (ii) the final cooperative rate, for such 
                        class (applicable only for plans offered 
                        through the cooperative);
                for each community-rated health plan, weighted to 
                reflect the total enrollment of community rate eligible 
                individuals in such class among such plans.
    (d) Incorporation of Other Definitions.--Except as otherwise 
provided in this title, the definitions of terms in subtitle H of title 
I of this Act shall apply to this title.

                  Subtitle A--Fall-Back Premium Limits

         PART 1--HEALTH EXPENDITURES OF COMMUNITY RATING AREAS

          Subpart A--Computation of Targets and Accepted Bids

SEC. 5001. COMPUTATION OF AREA INFLATION FACTORS.

    (a) Computation.--
            (1) In general.--The Secretary shall compute and publish, 
        not later than March 1 of each year (beginning with 1996) the 
        area inflation factor (as defined in paragraph (2)) for each 
        community rating area for the following year.
            (2) Community Rating areas inflation factor.--The term 
        ``area inflation factor'' means, for a year for a community 
        rating area--
                    (A) the general health care inflation factor for 
                the year (as defined in paragraph (3));
                    (B) adjusted under subsection (c) (to take into 
                account material changes in the demographic and socio-
                economic characteristics of the population of community 
                rate eligible individuals); and
                    (C) decreased by the percentage adjustment (if any) 
                provided with respect to the community rating area 
                under subsection (d) (relating to adjustment for 
                previous excess expenditures).
            (3) General health care inflation factor.--
                    (A) 1997 through 2001.--In this part, the term 
                ``general health care inflation factor'', for a year, 
                means the percentage increase in the CPI (as specified 
                under subsection (b)) for the year plus the following:
                            (i) For 1997, 1.5 percentage points.
                            (ii) For 1998, 1.0 percentage points.
                            (iii) For 1999, 0.5 percentage points.
                            (iv) For 2000 and for 2001, 0 percentage 
                        points.
                    (B) Years after 2001.--
                            (i) Recommendation to congress.--In 2000, 
                        the Secretary shall submit to Congress 
                        recommendations, after consultation with the 
                        Federal Reserve Board, on what the general 
                        health care inflation factor should be for 
                        years beginning with 2002.
                            (ii) Failure of congress to act.--If the 
                        Congress fails to enact a law specifying the 
                        general health care inflation factor for a year 
                        after 2001, the Secretary, in January of the 
                        year before the year involved, shall compute 
                        such factor for the year involved. Such factor 
                        shall be the product of the factors described 
                        in subparagraph (C) for that fiscal year, minus 
                        1.
                    (C) Factors.--The factors described in this 
                subparagraph for a year are the following:
                            (i) CPI.--1 plus the percentage change in 
                        the CPI for the year, determined based upon the 
                        percentage change in the average of the CPI for 
                        the 12-month period ending with August 31 of 
                        the previous fiscal year over such average for 
                        the preceding 12-month period.
                            (ii) Real gdp per capita.--1 plus the 
                        average annual percentage change in the real, 
                        per capita gross domestic product of the United 
                        States during the 3-year period ending in the 
                        preceding calendar year, determined by the 
                        Secretary based on data supplied by the 
                        Department of Commerce.
    (b) Projection of Increase in CPI.--
            (1) In general.--For purposes of this section, the 
        Secretary shall specify, as of the time of publication, the 
        annual percentage increase in the CPI (as defined in section 
        1701(d)) for the following year.
            (2) Data to be used.--Such increase shall be the projection 
        of the CPI contained in the budget of the United States 
        transmitted by the President to the Congress in the year.
    (c) Special Adjustment for Material Changes in Demographic 
Characteristics of Population.--
            (1) In general.--The Secretary shall develop a method for 
        adjusting the area inflation factor for each community rating 
        area in order to reflect material changes in the demographic 
        characteristics of community rate eligible individuals residing 
        in the coverage area in comparison to national trend for 
        factors that affect utilization of health care services.
            (2) Neutral adjustment.--Such method (and any annual 
        adjustment under this paragraph) shall be designed to result in 
        the adjustment effected under this paragraph for a year not 
        changing the weighted average of the area inflation factors.
    (d) Consultation Process.--The Secretary shall have a process for 
consulting with representatives of States before establishing the area 
inflation factors for each year under this section.

SEC. 5002. ESTABLISHMENT OF BASELINE PREMIUMS.

    (a) In General.--Not later than January 1, 1996, the Secretary 
shall determine baseline premium amounts applicable under this title. 
Such premiums shall be--
            (1) the premium amount as of January 1, 1995 for employee-
        only coverage under Blue Cross/Blue Shield standard option plan 
        available through the Federal Employees Health Benefits Program 
        (in the case of the individual class of enrollment); and
            (2) such amounts as determined appropriate by the Secretary 
        after making the necessary adjustments to the amount described 
        in (1) to reflect the relative difference in actuarial value 
        among the different classes of family enrollment (in the case 
        of the classes described in section 1413(b)(2)(B);
updated in accordance with sections (b), (c), and (d).
    (b) Adjustment for Eligible Population.--The premium amounts 
described in paragraphs (1) and (2) of subsection (a) shall be adjusted 
to reflect the difference in expected health care spending of the 
population enrolled in the plan described in paragraph (1) of 
subsection (a) and of the population of community rate eligible 
individuals (exclusive of individuals receiving AFDC or SSI).
    (c) Removal of Uncompensated Care.--The premium amounts described 
in paragraphs (1) and (2) of subsection (a) shall be reduced to remove 
assumed uncompensated and undercompensated care that will be eliminated 
by this Act.
    (d) Updating.--
            (1) In general.--Subject to paragraph (3), the Secretary 
        shall update the amount determined under subsection (b)(1) for 
        each of 1995 and 1996 by the update factor described in 
        paragraph (2) for the year.
            (2) Update factor.--In paragraph (1), the update factor for 
        a year is 1 plus the annual percentage increase for the year 
        for the premium charged for individual enrollment in Blue 
        Cross/Blue Shield standard option plan offered through the 
        Federal Employees Health Benefits Program.
            (3) Limit.--The total cumulative update under this 
        subsection shall not exceed 15 percent.

SEC. 5003. DETERMINATION OF AREA BASELINE PREMIUMS.

    (a) Initial Determination.--Not later than January 1, 1996, the 
Secretary shall determine, for each community rating area for 1997, 
area baseline premiums. For each class of enrollment, the baseline 
premium shall equal--
            (1) the national baseline premium for such class 
        (determined by the Secretary under section 5002),
            (2) updated by the area inflation factor (as determined 
        under section 5001) for 1997, and
            (3) adjusted by the adjustment factor for the community 
        rating area (determined under subsection (c)).
    (b) Subsequent Determinations.--
            (1) Determination.--Not later than March 1 of each year 
        (beginning with 1997) the Secretary shall determine, for each 
        community rating area for the succeeding year area baseline 
        premiums.
            (2) General rule.--Subject to subsection (e), such baseline 
        premium shall equal--
                    (A) the area baseline premium determined under this 
                section (without regard to subsection (e)) for the 
                community rating area for the previous year,
                    (B) updated by the area inflation factor (as 
                determined in section 5001) for the year.
            (3) Adjustment for previous excess rate of increase in 
        expenditures.--Such target for a year is subject to a decrease 
        under section 5003(e).
    (c) Adjustment Factors for Community Rating Areas for Initial 
Determination.--
            (1) In general.--The Secretary shall establish an 
        adjustment factor for each community rating area.
            (2) Considerations.--In establishing such factor, the 
        Secretary shall consider, the difference between the national 
        average and the community rating area in such measures as 
        health care expenditures, rates of uninsurance and 
        underinsurance, and in the proportion of expenditures for 
        services provided by academic health centers. The Secretary 
        shall also take into consideration--
                    (A) information on variations in the extent to 
                which States and community rating areas need additional 
                investment because they have successfully controlled 
                health care costs; and
                    (B) information on variations among States and 
                community rating areas due to underutilization of 
                health care services resulting from geographic barriers 
                and lack of access to health care services, 
                particularly in underserved rural and urban areas.
            (3) Application of factors in neutral manner.--The 
        application of the adjustment factors under this subsection for 
        1997 shall be done in a manner so that the weighted average of 
        the area baseline premiums for a class of enrollment for 1997 
        is equal to the national baseline premium for such class 
        determined under section 5002. Such weighted average shall be 
        based on the Secretary's estimate of the expected distribution 
        of community rate eligible individuals (taken into account 
        under section 5002) among the community rating areas.
            (4) Consultation process.--The Secretary shall have a 
        process for consulting with representatives of States and 
        purchasing cooperatives before establishing the adjustment for 
        community rating areas under this subsection.
    (d) Treatment of Certain States.--In the case of a State that is 
not a participating State or otherwise has not established community 
rating areas, the entire State shall be treated under the provisions of 
this part as composing a single community rating area.
    (e) Adjustment for Previous Excess Rate of Increase in 
Expenditures.--If the actual weighted average premium for a community 
rating area for a class of enrollment for a year (as determined by the 
Secretary based on actual enrollment in the first month of the year) 
exceeds the area baseline premiums (determined under this section) for 
the year, then the area baseline premium shall be reduced, by \1/2\ of 
the excess for the year, for each of the 2 succeeding years.

SEC. 5004. INITIAL RATE FILING AND BID NEGOTIATION PROCESS.

    (a) Filing and Bidding Process.--
            (1) Filing community bids.--
                    (A) In general.--Each participating State shall 
                establish rules and procedures for a plan seeking to 
                participate as a community-rated health plan to file a 
                premium rate with the State and submit a premium bid to 
                cooperatives for coverage of the benefits as required 
                under section 1101.
                    (B) Condition.--Each community bid filed and 
                cooperative bid submitted under this subsection with 
                respect to a community-rated health plan shall be 
                conditioned upon the plan's agreement to accept any 
                payment reduction that may be imposed under section 
                5011.
            (2) Negotiation process.--Following the bidding process 
        under paragraph (1), a State or a cooperative may conduct 
        negotiations with health plans relating to the premiums to be 
        charged for such community-rated health plans within a State or 
        cooperative. Such negotiations may result in the resubmission 
        of bids to the State or cooperative, but in no case shall a 
        health plan resubmit a bid that exceeds its prior bid.
            (3) Legally binding bids.--All rates filed and bids 
        submitted under this subsection must be legally binding with 
        respect to the plans involved.
            (4) Acceptance.--
                    (A) Community bid.--The final community rate for a 
                community-rated health plan under this subsection shall 
                be considered to be the accepted bid for such plan, 
                except as provided in subsection (e).
                    (B) Cooperative bid.--The final cooperative bid 
                submitted to a cooperative for a community-rated health 
                plan under this subsection shall be considered to be 
                the accepted bid for such plan, except as provided in 
                subsection (e).
            (5) Assistance.--The Secretary shall provide States and 
        cooperatives with such information and technical assistance as 
        may assist such States and cooperatives in carrying out the 
        provisions of this subsection.
    (b) Submission of Information to the Secretary.--By not later than 
September 1 of each year for which community bids are filed under 
subsection (a), each State shall submit to the Secretary such 
information as the Secretary determines necessary to conduct the 
process described in subsection (c).
    (c) Computation of Weighted Average Accepted Bid.--
            (1) In general.--For each community rating area the 
        Secretary shall determine a weighted average accepted bid for 
        each class of enrollment for each year for which rates are 
        filed with the State under subsection (a). Such determination 
        shall be based on information, submitted under subsection (b).
            (2) Exclusion of worksite health promotion discounts.--For 
        purposes of calculating the weighted average accepted bid and 
        enforcing baseline premiums in a community rating area in a 
        State, the Secretary shall consider the accepted bids for the 
        year, without consideration or inclusion of any worksite health 
        promotion discount.
    (d) Notice to Certain States.--
            (1) In general.--By not later than October 1 of each year 
        for which rates are filed with a State, the Secretary shall 
        notify a State if the weighted average accepted bid for a class 
        of enrollment (determined under subsection (c)) for the 
        community rating area is greater than the area baseline premium 
        for such class for such area (determined under section 5003) 
        for the year.
            (2) Notice of premium reductions.--If notice is provided to 
        a State under paragraph (1), the Secretary shall notify the 
        State and each noncomplying plan of any plan payment reduction 
        computed under section 5011 for such a plan and the opportunity 
        to voluntarily reduce the accepted bid under subsection (e) in 
        order to avoid such a reduction.
    (e) Voluntary Reduction of Accepted Bids.--After the Secretary has 
determined under subsection (c) the weighted average accepted bid for a 
class of enrollment for a community rating area and the Secretary has 
determined plan payment reductions, before such date as the Secretary 
may specify (in order to provide for an open enrollment period), a 
noncomplying plan has the opportunity to voluntarily reduce its filed 
community bid (and if applicable, its accepted cooperative bid) for 
such class by the amount of the plan payment reduction that would 
otherwise apply to the plan. Such reduction shall not affect the amount 
of the plan payment reduction for any other plan for that year.

SEC. 5005. STATE FINANCIAL INCENTIVES.

    (a) Election.--Any participating State may elect to assume 
responsibility for containment of health care expenditures in the State 
consistent with the targets established by this part upon the approval 
of an application by the Secretary.
    (b) Alternative State Provider Payment Systems.--Notwithstanding 
any other provision of law, in the case of an alternative State 
provider payment system that has been approved by the Secretary and in 
continuous operation since July 1, 1977, the payment rates and 
methodologies required under the State system for services provided in 
that State shall apply to all purchasers and payors, including those 
under employee welfare benefit plans authorized under the Employee 
Retirement Income Security Act of 1974, workers' compensation programs 
under State law, the Federal Employees' Compensation Act under chapter 
81 of title 5, United States Code, and Federal employee health benefit 
plans under chapter 89 of title 5, United States Code.

 Subpart B--Plan and Provider Payment Reductions to Maintain Adequate 
                               Financing

SEC. 5011. PLAN PAYMENT REDUCTION.

    (a) Plan Payment Reduction.--In order to assure that premium-
related payments to community-rated health plans offered in a community 
rating area are consistent with the applicable area baseline premium 
for the community rating area (computed under this subtitle), the 
Secretary shall develop and utilize a methodology to reduce payments to 
each noncomplying plan within a noncomplying community rating area 
proportionate to the excess premium of each such plan and the relative 
share of enrollment of community rate eligible individuals in each such 
plan. Such methodology shall include mechanisms for automatic 
reductions in payments made by noncomplying plans to network and 
nonnetwork providers affiliated with such plan. Such mechanism shall 
take into account induced volume offsets.
    (b) Noncomplying Community Rating Area and Noncomplying Plan 
Defined.--In this part:
            (1) Noncomplying community rating area.--The term 
        ``noncomplying community rating area'' means, for a year, a 
        community rating area for which the weighted average accepted 
        bid (computed under section 5004(c)) exceeds the community 
        rating area baseline premium for the year.
            (2) Noncomplying plan.--The term ``noncomplying plan'' 
        means, for a year, a community rated health plan offered in a 
        noncomplying community rating area if the applicable premium 
        rate for a class of enrollment for the plan for the year 
        exceeds the baseline premiums for such class for the year.
    (c) Excess Premium.--In this section, the ``excess premium'', with 
respect to a noncomplying plan for a year for a class of enrollment, is 
the amount by which--
            (1) the accepted bid for the year for such class (taking 
        into account any voluntary reduction under section 5004(e)), 
        exceeds
            (2) the baseline premium for such class (as defined in 
        subsection (d)) for the plan for the year.
    (d) Community-Rated Health Plans With an Accepted Cooperative Bid 
Not Equal to the Final Community Rate for Such Plan.--For the purposes 
of this section (relating to determining plan compliance and plan 
payment reduction), if a community-rated health plan has more than one 
applicable premium rate for a class of enrollment, such health plan 
shall be treated as a separate health plan with respect to each 
applicable premium rate for such class and the enrollment in each such 
health plan shall be considered to be the number of community-rated 
individuals enrolled in the community-rated plan at the applicable 
premium rate.

SEC. 5012. PROVIDER PAYMENT AGREEMENTS.

    (a) Participating Providers.--Each community-rated health plan in 
the community rating area, as part of its contract or agreement with 
any participating provider or provider group of participating providers 
shall include a provision that provides that if the plan is a 
noncomplying plan for a year, payments to the provider (or provider 
group) shall be reduced by an amount determined appropriate by the 
Secretary under section 5011(a).
    (b) Application to Cost Sharing and to Balance Billing 
Restrictions.--For purposes of applying section 1103 (relating to 
balance billing prohibitions) and subtitle B of title I (relating to 
computation of cost sharing), the payment basis otherwise used for 
computing any limitation on billing or cost sharing shall be such 
payment basis as adjusted by any reductions effected under this 
section.

             PART 2--HEALTH EXPENDITURES OF LARGE EMPLOYERS

SEC. 5021. CALCULATION OF PREMIUM EQUIVALENTS.

    (a) In General.--By January 1, 1997, the Secretary shall develop a 
methodology for calculating an annual per capita expenditure equivalent 
for amounts paid for coverage for the benefit package by a large 
employer.
    (b) Adjustment Permitted.--Such methodology shall permit a large 
employer to petition the Secretary of Labor for an adjustment of the 
inflation adjustment that would otherwise apply to compensate for 
material changes in the demographic characteristics of the experience 
rate eligible individuals receiving coverage through plans offered by 
the employer in a community rating area.
    (c) Reporting.--
            (1) In general.--In 1999 and each subsequent year, each 
        large employer offering a health plan prior to 1999, shall 
        report to the Secretary of Labor, in a form and manner 
        specified by the Secretary, the average of the annual per 
        capita expenditure equivalent for the previous 3-year period.
            (2) Other employers.--Each large employer not previously 
        offering a plan shall make such a report in 2002 and in each 
        subsequent year.

SEC. 5022. SANCTIONS FOR LARGE EMPLOYER FOR EXCESS INCREASE IN 
              EXPENDITURES.

    (a) Sanction.--
            (1) Actions against large employers.--If a large employer 
        has two excess years (as defined in subsection (b)) in a 3-
        year-period, then, effective beginning with the second year 
        following the second excess year in such period, the Secretary 
        of Labor shall take action under section 1502, and such 
        employer shall be considered to be a small employer for 
        purposes of this Act and shall be required to make premium 
        payments in accordance with section 5124.
            (2) Termination of sponsorship for other experience-rated 
        plans.--If an association, church, or multi-employer plan has 
        two excess years (as defined in subsection (b)) in a 3-year-
        period, then, effective beginning with the second year 
        following the second excess year in such period--
                    (A) the Secretary of Labor shall terminate the 
                election of the large employer under section 1502; and
                    (B) an employer that was an experience-rated 
                employer with respect to such purchaser shall become a 
                community-rated employer (unless the employer is a 
                large employer).
    (b) Excess Year.--
            (1) In general.--In subsection (a), the term ``excess 
        year'' means, for a large employer referred to in section 
        5021(c)(2), a year (after 2000) and for an employer or plan 
        referred to in section 5021(c)(1) or 5022(a)(2) a year (after 
        1998), for which the rate of increase for the large employer 
        (specified in paragraph (2)) for the year, exceeds the national 
        corporate inflation factor (specified in paragraph (3)) for the 
        year.
            (2) Rate of increase for large employer.--The rate of 
        increase for a large employer for a year, specified in this 
        paragraph, is the percentage by which the average of the annual 
        per capita expenditure equivalent for the large employer 
        (reported under section 5021 (c)) for the 3-year period ending 
        with such year, exceeds the average of the annual per capita 
        expenditure equivalent for the large group purchaser (reported 
        under such subsection) for the 3-year period ending with the 
        previous year adjusted for any changes in the actuarial value 
        of the benefit package provided by such large employer.
            (3) National corporate inflation factor.--The national 
        corporate inflation factor for a year, specified in this 
        paragraph, is the average of the general health care inflation 
        factors (as defined in section 5001(a)(3)) for each of the 3 
        years ending with such year.

                PART 3--TREATMENT OF SINGLE-PAYER STATES

SEC. 5031. SPECIAL RULES FOR SINGLE-PAYER STATES.

    In the case of a Statewide single-payer State, the Secretary shall 
compute a Statewide per capita premium target for each year in the same 
manner as the community rating area per capita premium target is 
determined under section 5003.

                 Subtitle B--Premium-Related Financings

                    PART 1--FAMILY PREMIUM PAYMENTS

                        Subpart A--Family Share

SEC. 5101. FAMILY SHARE OF PREMIUM.

    (a) Requirement.--Each family enrolled in a community-rated health 
plan or in a, experienced-rated health plan in a class of family 
enrollment is responsible for payment of the family share of premium 
payable respecting such enrollment. Such premium may be paid by an 
employer or other person on behalf of such a family.
    (b) Family Share of Premium Defined.--
            (1) In general.--In this subtitle, the term ``family share 
        of premium'' means, with respect to enrollment of a family--
                    (A) in a community-rated health plan, the amount 
                specified in paragraph (2) for the class, or
                    (B) in an experienced-rated health plan, the amount 
                specified in paragraph (3) for the class.
            (2) Community-rated plans.--
                    (A) In general.--The amount specified in this 
                paragraph for a health plan based on a class of family 
                enrollment is the base amount described in subparagraph 
                (B) reduced (but not below zero) by the sum of the 
                amounts described in subparagraph (C).
                    (B) Base.--The base amounts described in this 
                subparagraph (for a plan for a class of enrollment) is 
                the applicable premium with respect to such class of 
                enrollment.
                    (C) Credits and discounts.--The amounts described 
                in this subparagraph (for a plan for a class of 
                enrollment) are as follows:
                            (i) Family credit.--The amount of the 
                        family credit under section 5102(a).
                            (ii) Income related discount.--The amount 
                        of any income-related discount provided under 
                        section 5103.
                    (D) Limit on miscellaneous credits.--In no case 
                shall the family share, due to credits under 
                subparagraph (C), be less than zero.
            (3) Experience-rated plans.--
                    (A) In general.--The amount specified in this 
                paragraph for an experience-rated health plan based on 
                a class of family enrollment is the applicable premium 
                (for a plan for a class of enrollment) reduced (but not 
                below zero) by the sum of the amounts described in 
                subparagraph (B).
                    (B) Credits and discounts.--The amounts described 
                in this subparagraph (for a plan for a class of 
                enrollment) are as follows:
                            (i) Family credit.--The amount of the 
                        family credit under section 5102.
                            (ii) Income related discount.--The amount 
                        of any income-related discount provided under 
                        section 5103.

SEC. 5102. FAMILY CREDIT.

    (a) Community-Rated Plans.--The credit provided under this section 
for a family enrolled in a community-rated plan for a class of family 
enrollment is equal to 80 percent of the weighted average premium (as 
defined in section 5000(b)) for community-rated plans offered in the 
community rating area for the class.
    (b) Experience-Rated Plans.--The credit provided under this section 
for a family enrolled in an experience-rated health plan for a class of 
family enrollment is equal to the minimum employer premium payment 
required under section 5131 with respect to the family.

SEC. 5103. PREMIUM DISCOUNT BASED ON INCOME.

    (a) In General.--
            (1) Enrollees in community-rated plans.--Subject to 
        paragraph (2), each family enrolled with a community-rated or 
        experience-rated plan is entitled to a premium discount under 
        this section, in the amount specified in subsection (b)(1) if 
        the family--
                    (A) is an AFDC or SSI family;
                    (B) is determined, under this title, to have family 
                adjusted income below 150 percent of the applicable 
                poverty level; or
                    (C) is a family described in subsection (c)(3) for 
                which the family obligation amount under subsection (c) 
                for the year would otherwise exceed a specified percent 
                of family adjusted income described in such subsection.
            (2) Monthly application to afdc and ssi families.--
        Paragraph (1)(A) (and the family obligation amount under 
        subsection (c) insofar as it relates to an AFDC or SSI family) 
        shall be applied to the premium or family obligation amount 
        only for months in which the family is such an AFDC or SSI 
        family.
    (b) Amount of Premium Discount.--
            (1) In general.--Subject to the succeeding paragraphs of 
        this subsection, the amount of the premium discount under this 
        subsection for a family under a class of family enrollment is 
        equal to--
                    (A) 20 percent of--
                            (i) for a family enrolled in a community-
                        rated plan offered in a community-rating area, 
                        the weighted average premium for community-
                        rated plans offered in the community-rating 
                        area, increased by any amount provided under 
                        paragraph (2); or
                            (ii) for a family enrolled in an 
                        experience-rated plan offered in a premium 
                        area, the weighted average premium for 
                        experience-rated plans offered by the employer 
                        in the premium area (as determined under 
                        section 5131(b)(1)(A)) or, if less, the amount 
                        determined under clause (i) for the community-
                        rating area in which the family resides;
                reduced (but not below zero) by--
                    (B) the sum of--
                            (i) the family obligation amount described 
                        in subsection (c); and
                            (ii) the amount of any employer payment 
                        (not required under part 2) towards the family 
                        share of premiums for covered members of the 
                        family.
            (2) Increase for community-rated families to assure 
        enrollment in at-or-below-average-cost plan.--In the case of a 
        family enrolled in a community-rated plan, if a State 
        determines that a family eligible for a discount under this 
        section is unable to enroll in an at-or-below-average-cost plan 
        (as defined in paragraph (3)) that serves the area in which the 
        family resides, the amount of the premium discount under this 
        subsection is increased to the extent that such amount will 
        permit the family to enroll in a community-rated plan without 
        the need to pay a family share of premium under this part in 
        excess of the sum described in paragraph (1)(B).
            (3) At-or-below-average-cost plan defined.--In this 
        section, the term ``at-or-below-average-cost plan'' means a 
        community-rated plan the premium for which does not exceed, for 
        the class of family enrollment involved, the weighted average 
        premium for the community-rating area.
    (c) Family Obligation Amount.--
            (1) Determination.--Subject to paragraphs (2) and (3), the 
        family obligation amount under this subsection is determined as 
        follows:
                    (A) No obligation if income below income threshold 
                amount or if afdc or ssi family.--If the family 
                adjusted income (as defined in section 5302(d)) of the 
                family is less than the income threshold amount 
                (specified in paragraph (4)) or if the family is an 
                AFDC or SSI family, the family obligation amount is 
                zero.
                    (B) Income above income threshold amount.--If such 
                income is at least such income threshold amount and the 
                family is not an AFDC or SSI family, the family 
                obligation amount is the sum of the following:
                            (i) For income (above income threshold 
                        amount) up to the poverty level.--The product 
                        of the initial marginal rate (specified in 
                        paragraph (2)) and the amount by which--
                                    (I) the family adjusted income (not 
                                including any portion that exceeds the 
                                applicable poverty level for the class 
                                of family involved), exceeds;
                                    (II) such income threshold amount.
                            (ii) Graduated phase out of discount up to 
                        150 percent of poverty level.--The product of 
                        the final marginal rate (specified in paragraph 
                        (2)) and the amount by which the family 
                        adjusted income exceeds 100 percent (but is 
less than 150 percent) of the applicable poverty level.
            (2) Marginal rates.--In paragraph (1), for a year:
                    (A) Initial marginal rate.--The initial marginal 
                rate is the ratio of--
                            (i) 3 percent of the applicable poverty 
                        level for the class of enrollment involved for 
                        the year; to
                            (ii) the amount by which such poverty level 
                        exceeds such income threshold amount.
                    (B) Final marginal rate.--The final marginal rate 
                is 5.7 percent.
            (3) Limitation to 3.9 percent for all families.--
                    (A) In general.--In no case shall the family 
                obligation amount under this subsection for the year 
                exceed 3.9 percent.
                    (B) Indexing of percentage.--
                            (i) In general.--The percentage specified 
                        in subparagraph (A) shall be adjusted for any 
                        year after 1995 so that the percentage for the 
                        year bears the same ratio to the percentage so 
                        specified as the ratio of--
                                    (I) 1 plus the general health care 
                                inflation factor (as defined in section 
                                5001(a)(3)) for the year, bears to
                                    (II) 1 plus the percentage 
                                specified by the Secretary in the 
                                establishment of cost sharing schedules 
                                in subtitle B of title I (relating to 
                                indexing of dollar amounts related to 
                                cost sharing) for the year.
                            (ii) Rounding.--Any adjustment under clause 
                        (i) for a year shall be rounded to the nearest 
                        multiple of \1/10\ of 1 percentage point.
            (4) Income threshold amount.--
                    (A) In general.--For purposes of this subtitle, the 
                income threshold amount specified in this paragraph is 
                $1,000 (adjusted under subparagraph (B)).
                    (B) Indexing.--For the 1-year period beginning on 
                January 1, 1996, the income threshold amount specified 
                in subparagraph (A) shall be increased or decreased by 
                the same percentage as the percentage increase or 
                decrease by which the average CPI (described in section 
                1702(12)) for the 12-month-period ending with August 31 
                of the preceding year exceeds such average for the 12-
                month period ending with August 31, 1994.
                    (C) Rounding.--Any increase or decrease under 
                subparagraph (B) for a year shall be rounded to the 
                nearest multiple of $10.

       Subpart B--Repayment of Family Credit by Certain Families

SEC. 5110. REPAYMENT OF FAMILY CREDIT BY CERTAIN FAMILIES.

    (a) In General.--Subject to the succeeding provisions of this 
subpart, each family which is provided a family credit under section 
5102 for a class of enrollment is liable for repayment of an amount 
equal to the base employment monthly premium (applicable to such class) 
for the month under section 5122.
    (b) Reduction for Self-Employment Payments.--The liability of a 
family under this section for a year shall be reduced (but not below 
zero) by the amount of any employer payments made in the year under 
section 5126 based on the net earnings from self-employment of a family 
member.

SEC. 5111. NO LIABILITY FOR FAMILIES EMPLOYED FULL-TIME; REDUCTION IN 
              LIABILITY FOR PART-TIME EMPLOYMENT.

    (a) In General.--The amount of any liability under section 5110 
shall be reduced, in accordance with rules established by the Secretary 
consistent with this section, based on employer premiums payable under 
section 5121 with respect to the employment of a family member who is a 
qualifying employee or with respect to a family member. In no case 
shall the reduction under this section result in any payment owing to a 
family.
    (b) Credit for Full-Time and Part-Time Employment.--
            (1) In general.--Under rules of the Secretary, in the case 
        of a family enrolled under a class of family enrollment, if a 
        family member is a qualifying employee for a month and the 
        employer is liable for payment under section 5121 based on such 
        employment--
                    (A) Full-time employment credit.--If the employment 
                is on a full-time basis (as defined in section 
                1701(b)(2)(A)) the liability under section 5110 shall 
                be reduced by the credit amount described in 
                subparagraph (C).
                    (B) Part-time employment credit.--If the employment 
                is on a part-time basis (as defined in section 
                1701(b)(2)(A)) the liability under section 5110 shall 
                be reduced by the employment ratio of the credit amount 
                described in subparagraph (C).
                    (C) Full-time monthly credit.--The amount of the 
                credit under this subparagraph, with respect to 
                employment by an employer in a month, is \1/12\ (or, if 
                applicable, the fraction described in paragraph (2)) of 
                the amount owed under section 5110, based on the class 
                of enrollment, for the year.
            (2) Coverage during only part of a year.--In the case of a 
        family that is not enrolled in a community-rated health plan 
        for all the months in a year, the fraction described in this 
        paragraph is 1 divided by the number of months in the year in 
        which the family was enrolled in such a plan.

SEC. 5112. LIMITATION OF LIABILITY BASED ON INCOME.

    (a) In General.--In the case of an eligible family described in 
subsection (b), the repayment amount required under this subpart (after 
taking into account any work credit earned under section 5111) with 
respect to a year shall not exceed the amount of liability described in 
subsection (c) for the year.
    (b) Eligible Family Described.--An eligible family described in 
this subsection is a family which is determined by the State for the 
community rating area in which the family resides, to have wage-
adjusted income (as defined in subsection (d)) below 300 percent of the 
applicable poverty level.
    (c) Amount of Liability.--
            (1) Determination.--Subject to subsection (f), in the case 
        of a family enrolled in a class of enrollment with wage-
        adjusted income (as defined in subsection (d)), the amount of 
        liability under this subsection is determined as follows:
                    (A) No obligation if income below income threshold 
                amount or if afdc or ssi family.--If such income is 
                than the income threshold amount (specified in section 
                5103(c)(4)) or if the family is an AFDC or SSI family, 
                the amount of liability is zero.
                    (B) Income above income threshold amount.--If such 
                income is at least such income threshold amount and the 
                family is not an AFDC or SSI family, the amount of 
                liability is the sum of the following:
                            (i) Four percent of income (above income 
                        threshold amount) up to the poverty level.--The 
                        initial marginal rate (specified in paragraph 
                        (2)(A)) of the amount by which--
                                    (I) the wage-adjusted income (not 
                                including any portion that exceeds the 
                                applicable poverty level for the class 
                                of family involved), exceeds
                                    (II) such income threshold amount.
                            (ii) Second marginal rate.--The second 
                        marginal rate (specified in paragraph (2)(B) of 
                        the amount by which--
                                    (I) the wage adjusted income (not 
                                including any portion that exceeds 
                                twice the applicable poverty level for 
                                the class of family involved), exceeds
                                    (II) the applicable poverty level 
                                for the class of family enrollment.
                            (iii) Final marginal rate.--Where wage-
                        adjusted income exceeds 200 percent of the 
                        applicable poverty level, the final marginal 
                        rate (specified in paragraph (2)(C)) of the 
                        amount by which the wage-adjusted income 
                        exceeds 100 percent of the applicable poverty 
                        level.
            (2) Marginal rates.--In paragraph (1)--
                    (A) Initial marginal rate.--The initial marginal 
                rate, for a year for a class of enrollment, is the 
                ratio of--
                            (i) 4 percent of the applicable poverty 
                        level for the class of enrollment for the year, 
                        to
                            (ii) the amount by which such poverty level 
                        exceeds such income threshold amount.
                    (B) Second marginal rate.--The second marginal 
                rate, for a year for the class of enrollment, is 7.6 
                percent.
                    (C) Final marginal rate.--The final marginal rate, 
                for a year for a class of enrollment, is the ratio of--
                            (i) the amount by which (I) the amount of 
                        the repayment amount described in section 
                        5111(a) exceeds (II) 5.8 percent of twice the 
                        applicable poverty level (for the class and 
                        year); to
                            (ii) 200 percent of such poverty level.
            (3) Second marginal rate.--
                    (A) In general.--If, for a class of enrollment for 
                a community rating area in a State, the second marginal 
                rate exceeds the final marginal rate, the State may 
                adjust such marginal rates so that the second marginal 
                rate and the final marginal rate are the same and equal 
                to the ratio of--
                            (i) the amount by which (I) the amount of 
                        the repayment amount described in section 
                        5111(a) exceeds (II) 4 percent of the 
                        applicable poverty level (for the class and 
                        year); to
                            (ii) 200 percent of such poverty level.
    (d) Wage-Adjusted Income Defined.--In this subtitle, the term 
``wage-adjusted income'' means, for a family, family adjusted income of 
the family, reduced by the sum of the following:
            (1)(A) Subject to subparagraph (B), the amount of any wages 
        included in such family's income that is received for 
        employment which is taken into account in the computation of 
        the amount of employer premiums under section 5121 (without 
        consideration of section 5125).
            (B) The reduction under subparagraph (A) shall not exceed 
        for a year $5,000 (adjusted under section 5103(c)(3)(B)) 
        multiplied by the number of months (including portions of 
        months) of employment with respect to which employer premiums 
        were payable under section 5121 (determined in a manner 
        consistent with section 1701(b)(3)).
            (2) The amount of net earnings from self employment of the 
        family taken into account under section 5125.
            (3) The amount of unemployment compensation included in 
        income under section 85 of the Internal Revenue Code of 1986.

SEC. 5113. PAYMENTS BY NONQUALIFYING EMPLOYEES.

    (a) In General.--In the case of an eligible family described in 
paragraph (b), the net liability of the family under this section shall 
be the amount described in subsection (c), limited by the amount 
described in subsection (d) plus the amount described in subsection 
(e).
    (b) Eligible Family Described.--The family described in this 
paragraph is a family that has one or more nonqualifying employees and 
has no full-time qualifying employees. The Secretary shall develop 
rules for applying this section to families whose employment status 
with respect to exempt employers changes during the year.
    (c) Amount.--The amount described in this subsection is the sum 
of--
            (1) the family share as defined in section 5101 (including 
        any discounts under 5103); and
            (2) the family credit repayment amount described in subpart 
        B of title VI (including any reductions under section 5103); 
        reduced by--
            (3) the amount (if any) by which that the premium with 
        respect to such family exceeds the weighted average premium 
        (applicable to the family).
    (d) Limit.--The limit described in this subsection is the 
following:
            (1) for a family with family adjusted income of less than 
        150 percent of the applicable poverty level, 4 percent of 
        family adjusted income;
            (2) for a family with family adjusted income of at least 
        150 percent but less than 175 percent of the applicable poverty 
        level, 4.5 percent of family adjusted income;
            (3) for a family with family adjusted income of at least 
        175 percent but less than 225 percent of the applicable poverty 
        level, 5 percent of family adjusted income; and
            (4) for a family with family adjusted income of at least 
        225 percent but less than 400 percent of the applicable poverty 
        level, 6 percent of family adjusted income.
    (e) The amount described in this subsection is the amount in 
subsection (c)(3).
    (f) Indexing of Percentages.--
            (1) In general.--The percentage of family adjusted income 
        specified in paragraphs (1) through (4) of subsection (d) shall 
        be adjusted for any year after 1994 so that the percentage for 
        the year bears the same ratio to the percentage so specified as 
        the ratio of--
                    (A) 1 plus the general health care inflation factor 
                (as defined in section 5001(a)(3)) for the year, bears 
                to
                    (B) 1 plus the percentage specified by the 
                Secretary in the establishment of cost sharing 
                schedules in subtitle B of title I.
            (2) Rounding.--Any adjustment under paragraph (1) for a 
        year shall be rounded to the nearest multiple of \1/10\ of 1 
        percentage point.

SEC. 5114. SPECIAL TREATMENT OF CERTAIN MEDICARE BENEFICIARIES.

    In the case of an individual who would be a medicare-eligible 
individual in a month but for the application of section 1012(a) on the 
basis of employment (in the month or a previous month) of the 
individual or the individual's spouse or parent, the individual (or 
spouse or parent, as the case may be) so employed is considered, for 
purposes of section 5112, to be a full-time employee described in such 
section in such month.

                   PART 2--EMPLOYER PREMIUM PAYMENTS

                  Subpart A--Small Business Exemption

SEC. 5116. EXEMPTION FROM COVERAGE OBLIGATIONS.

    An exempt employer as defined section 5117 shall be exempt from 
requirements described in this part, unless the employer elects under 
section 5118 to be treated as a community-rated employer.

SEC. 5117. EXEMPT EMPLOYER DEFINED.

    (a) In General.--In this section--
            (1) the term ``exempt employer'' means an employer that 
        does not employ, on average, more than 10 full-time equivalent 
        employees;
            (2) and is an employer with average annual wages per full-
        time equivalent employee of less than $24,000; and
            (3) the average number of full-time equivalent employees 
        shall be determined by averaging the number of full-time 
        equivalent employees employed by the employer in each countable 
        month during the year.
    (b) Determinations.--The number of full-time equivalent employees 
shall be determined using the rules under section 1701(b)(2).
    (c) Exempt Employer.--The term ``exempt employer'' shall not 
include an individual described in section 5126(c)(2).

SEC. 5118. ELECTION.

    A exempt employer may elect to be treated as a community-rated 
employer under the procedures determined by the Secretary.

SEC. 5119. TREATMENT OF EXEMPT EMPLOYERS.

    (a) In General.--
            (1) Community rated employer.--An exempt employer shall be 
        treated as a community rated employer as of the first date of 
        the first year following an election made under section 5118.
            (2) Eligibility for discounts.--An exempt employer making 
        an election under section 5118 shall be eligible for discounts 
        under 5123.

SEC. 5120. NONELECTING EXEMPT EMPLOYER.

    (a) In General.--The term ``nonelecting exempt employer'' means an 
exempt employer that has not made an election under section 5118.
    (b) Application of Rules Similar to Medicare Nondiscrimination 
Rules to Non-Electing Employers.--Subject to subsection (b), the 
provisions of paragraphs (1)(A), (1)(D), (1)(E), (3)(A), and (3)(C) of 
section 1862(b) of the Social Security Act shall apply to an individual 
eligible for premium assistance under this title in relation to any 
non-electing employer in the same manner as such provisions apply to an 
individual age 65 or over who is entitled to benefits under title XVIII 
of such Act under section 226(a) of such Act in relation to such 
employer.

                  Subpart B--Community-Rated Employers

SEC. 5121. EMPLOYER PREMIUM PAYMENT REQUIRED.

    (a) Requirement.--
            (1) In general.--Each community-rated employer described in 
        paragraph (2) for a month shall pay at least an amount equal to 
        the sum across all qualifying employees of the amount specified 
        in subsection (b) for each such qualifying employee of the 
        employer.
            (2) Employer described.--An employer described in this 
        paragraph for a month is an employer that--
                    (A) in a month employs one or more qualifying 
                employees (as defined in section 1701(b)(1)); and
                    (B) is not exempt under section 3127 of the 
                Internal Revenue Code of 1986 from the taxes imposed in 
                section 3111 of such code.
            (3) Treatment of certain employment by experience-rated 
        employers.--An experience-rated employer shall be deemed, for 
        purposes of this subpart, to be a community-rated employer with 
        respect to qualifying employees who are not experience rate 
        eligible individuals.
    (b) Premium Payment Amount.--
            (1) In general.--Except as provided in section 5123 
        (relating to a discount for certain employers), the amount of 
        the employer premium payment, for a month for each qualifying 
        employee of the employer who is residing in a community rating 
        area, is the payment amount computed under paragraph (2) with 
        respect to such employee in such area.
            (2) Payment amount for each employee in a class of family 
        enrollment.--The payment amount under this paragraph, for an 
        employer for each qualifying employee residing in a community 
        rating area, is the product of--
                    (A) the base employment monthly premium determined 
                under section 5122 for the applicable class of family 
                enrollment for the previous month for the community 
                rating area, and
                    (B) the full-time employment ratio (as defined in 
                section 1701 for the previous month.
            (3) Special rules for divided families.--In the case of an 
        individual who is a qualifying employee of an employer, if the 
        individual has a spouse or child who is not treated as part of 
        the individual's family because of section 1012--
                    (A) the employer premium payment under this section 
                shall be computed as though such section had not 
                applied, and
                    (B) the State shall provide for proportional 
                payments (consistent with rules established by the 
                Secretary) to the health plans (if different) of the 
                qualifying employee and of the employee's spouse and 
                children.

SEC. 5122. COMPUTATION OF BASE EMPLOYMENT MONTHLY PREMIUM.

    Each State shall provide for the computation for each year 
(beginning with the first year) of a base employment monthly premium 
for each class of family enrollment equal to \1/12\ of 80 percent of 
the weighted average premium for the community rating area for such 
class of enrollment adjusted to account for the average number of 
workers per family within such class. Any such adjustment made 
regarding the dual parent family class of enrollment shall also be made 
to the single parent family class.

SEC. 5123. PREMIUM DISCOUNT FOR CERTAIN EMPLOYERS.

    (a) Employer Discount.--
            (1) In general.--Subject to section 5124(c), the amount of 
        the employer premium payment required under section 5121(b) for 
        a community-rated employer for any year for a qualifying 
        employee shall not exceed the limiting percentage (as defined 
        in subsection (b)) of such qualifying employee's wages for that 
        year.
            (2) Exclusion of federal government employers.--Paragraph 
        (1) shall not apply to the Federal Government.
    (b) Limiting Percentage Defined.--In subsection (a)--
            (1) Any employer.--For an employer that is not a medium-
        sized employer (as defined in subsection (c)) or an exempt 
        employer (as defined in subsection 5117), the limiting 
        percentage is 12 percent.
            (2) Medium-sized employers.--For an employer that is a 
        medium-sized employer and that has an average number of full-
        time equivalent employees and average annual wages per full-
        time equivalent employee (as determined under subsection (d)), 
        the limiting percentage is the applicable percentage determined 
        based on following table:

----------------------------------------------------------------------------------------------------------------
  Average number of                                                                                             
full-time equivalent  $0-$12,000  $12,001-$15,000  $15,001-$18,000  $18,001-$21,000  $21,001-$24,000  $24,001 or
      employees                                                                                          more   
----------------------------------------------------------------------------------------------------------------
Fewer than 15.......     4.2%           5.5%             6.8%             8.1%             9.4%           12%   
15 but fewer than 25     5.5%           6.8%             8.1%             9.4%            10.7%           12%   
25 but fewer than 50     6.8%           8.1%             9.4%            10.7%             12%            12%   
50 but not over 75..     8.1%           9.4%            10.7%             12%              12%            12%   
----------------------------------------------------------------------------------------------------------------

            (3) Small employers.--For an employer that is an exempt 
        employer and elects to be a community-rated employer (in 
        accordance of section 5119), the limiting percentage is the 
        limiting percentage described in paragraph (2).
            (4) Experience-rated employers.--The value of discounts 
        provided to an experience-rated employer shall not exceed the 
        amount that the employer would receive if the employer was 
        treated as a community-rated employer.
    (c) Medium-Sized Employer Defined.--
            (1) In general.--In this section, the term ``medium-sized 
        employer'' means an employer that does not employ, on average, 
        less than 11 full-time equivalent employees or more than 75 
        full-time equivalent employees.
            (2) Determinations.--The number of full-time equivalent 
        employees shall be determined using the rules under section 
        1701(b)(2).
    (d) Average Annual Wages per Full-Time Equivalent Employee 
Defined.--
            (1) In general.--In this section, the term ``average annual 
        wages per full-time equivalent employee'' means, for an 
        employer for a year--
                    (A) the total wages paid in the year to individuals 
                who, at the time of payment of the wages, are 
                qualifying employees of the employer; divided by
                    (B) the number of full-time equivalent employees of 
                the employer in the year.
            (2) Determination.--The Secretary may establish rules 
        relating to the computation of the average annual wages for 
        employers.
    (e) Treatment of Certain Self-Employed Individuals.--In the case of 
an individual who is a partner in a partnership, is a 2-percent 
shareholder in an S corporation (within the meaning of section 1372 of 
the Internal Revenue Code of 1986), or is any other individual who 
carries on a trade or business as a sole proprietorship, for purposes 
of this section--
            (1) the individual is deemed to be an employee of the 
        partnership, S corporation, or proprietorship, and
            (2) the individual's net earnings from self employment 
        attributable to the partnership, S corporation, or sole 
        proprietorship are deemed to be wages from the partnership, S 
        corporation, or proprietorship.
    (f) Application to Employers.--An employer that claims that this 
section applies--
            (1) shall provide notice to the State of the claim at the 
        time of making payments under this subpart; and
            (2) shall make available such information (and provide 
        access to such information) as the State may require (in 
        accordance with regulations of the Secretary of Labor) to audit 
        the determination of--
                    (A) whether the employer is a medium employer, and, 
                if so, the average number of full-time equivalent 
                employees and average annual wages of the employer; and
                    (B) the total wages paid by the employer for 
                qualifying employees.
    (g) Treatment of Multi-Area Employers.--In the case in which this 
section is applied to an employer that makes employer premium payments 
in more than one community rating areas, the reduction under this 
section shall be applied in a pro-rated manner to the premium payments 
made to all such areas.

SEC. 5124. PAYMENT ADJUSTMENT FOR CERTAIN LARGE EMPLOYERS.

    If the Secretary determines that the average anticipated cost for 
employees (and dependents of such employees) of an employer described 
in section 5022 exceeds the anticipated average cost for all community-
rate eligible individuals residing in the area, including costs to the 
government, such employee's payments shall be adjusted by an amount 
determined appropriate by the Secretary.

SEC. 5125. APPLICATION TO SELF-EMPLOYED INDIVIDUALS.

    (a) In General.--A self-employed individual (as defined in section 
1701(c)(2)) shall be considered, for purposes of this subpart to be an 
employer of himself or herself and to pay wages to himself or herself 
equal to the amount of net earnings from self-employment (as defined in 
section 1701(c)(1)).
    (b) Special Rule for Certain Self-Employed Individuals.--
            (1) In general.--In the case of certain self-employed 
        individuals described in paragraph (2), the payment obligation 
        under this section shall be limited to the liability described 
        in subsection (c) of section 5113 (substituting the amount of 
        net earnings from self employment (defined in section 
        1701(c)(1)) of such individual for wage adjusted income).
            (2) Self-employed individuals.--The individuals described 
        in this paragraph are self-employed individuals (as defined in 
        section 1701(c)(2)) for a year who are not employers with 
        respect to other qualifying employees in such year.
            (3) Special rule for certain closely-held businesses.--
                    (A) In general.--In the case of an individual who--
                            (i) has wage-adjusted income (as defined in 
                        section 5113(d), determined without regard to 
                        paragraphs (1)(B) and (2) thereof) that exceeds 
                        300 percent (or such higher percentage as the 
                        Secretary may establish) of the applicable 
                        poverty level, and
                            (ii) is both a substantial owner and an 
                        employee of a closely held business,
                the amount of any reduction under paragraph (1)(A) that 
                is attributable to the individual's employment by that 
                business shall be appropriately reduced in accordance 
                with rules prescribed by the Secretary, in order to 
                prevent individuals from avoiding payment of the full 
                amount owed through fraudulent or secondary employment 
                arrangements.
                    (B) Closely held business.--For purposes of 
                subparagraph (A), a business is ``closely held'' if it 
                is an employer that meets the requirements of section 
                542(a)(2) of the Internal Revenue Code of 1986 or 
                similar requirements as appropriate in the case of a 
                partnership or other entity.

                       Subpart C--Large Employers

SEC. 5131. LARGE EMPLOYER PREMIUM PAYMENT REQUIRED.

    (a) Per Employee Premium Payment.--Subject to section 5124, each 
experience-rated large employer that in a month in a year employs a 
qualifying employee who is--
            (1) enrolled in an experience-rated health plan, shall 
        provide for a payment toward the premium for the plan for such 
        employee in an amount at least equal to the large employer 
        premium payment specified in subsection (b); or
            (2) is not so enrolled, shall make employer premium 
        payments with respect to such employment under subpart B in the 
        same manner as if the employer were a community-rated employer 
        (except as otherwise provided in such subpart).
    (b) Large Employer Premium.--
            (1) Amount.--
                    (A) In general.--The amount of the large employer 
                premium payment for a month in a year for a class of 
                family enrollment for a family residing in a geographic 
                area is 80 percent of the weighted average monthly 
                premium of the experience-rated health plans offered by 
                the large employer for that class of enrollment for 
                families residing in that area.
                    (B) Application to self-insured plans.--In applying 
                this paragraph in the case of one or more experience-
                rated health plans that are self-insured plans--
                            (i) the ``premium'' for the plan is the 
                        actuarial equivalent of such premium, based 
                        upon the methodology (or such other consistent 
                        methodology) used under section 5021(a); and
                            (ii) the premium amount, for different 
                        classes and, if applicable, for different 
                        premium areas, shall be computed in a manner 
                        based on such factors as may bear a reasonable 
                        relationship to costs for the provision of the 
                        benefit package to the different classes in 
                        such areas.
                The Secretary of Labor shall establish rules to carry 
                out this subparagraph.
            (2) Low-income employees.--In the case of a low-income 
        employee entitled to a premium discount under section 5103(a), 
        the amount of the employer premium payment for a month in a 
        year for a class of family enrollment shall be increased by the 
        amount of such premium discount.
    (c) Determinations.--Determinations under this section shall be 
made based on such information as the Secretary of Labor shall specify.

   Subtitle C--Payments to Health Plans and Miscellaneous Provisions

SEC. 5201. ASSISTANCE TO PLANS.

    States shall be responsible for assisting health plans and 
cooperatives in the collection of premium payments. A State may 
establish administrative systems (including arrangements with private 
entities) to facilitate the collection of premiums from employers and 
families and the distribution of such premiums to health plans, 
consistent with rules promulgated by the Secretary.

SEC. 5202. COMPUTATION OF BLENDED PLAN PAYMENT AMOUNT.

    (a) In General.--For purposes of section 5203, the payment amount 
for a community-rated health plan in a community rating area in a year 
is equal to a blended payment amount reflecting the final accepted bid 
for each plan, the number of enrollees in each premium class, and the 
proportion of AFDC and SSI beneficiaries throughout the community 
rating area served by the plan.
    (b) Methodology.--The Secretary shall establish a methodology by 
which the blended payment amount described in subsection (a) shall be 
computed and applied.

SEC. 5203. ADJUSTMENT TO HEALTH PLAN REVENUES

    (a) In General.--States shall develop and implement revenue 
adjustment mechanisms and collect such information as may be necessary 
for ensuring that payments to health plans are appropriate and 
sufficient.
    (b) Adjustments.--Mechanisms under subsection (a) shall include 
methods for risk adjustment and reinsurance (in accordance with title 
I), the payment of premium discounts (in accordance with subtitle B of 
title VI), payment adjustments to reflect each area's share of AFDC and 
SSI beneficiaries (in accordance with section 5202), and other 
adjustments necessary to reconcile the amounts collected by plans with 
the amounts plans are owed.

SEC. 5204. CALCULATION AND PUBLICATION OF GENERAL FAMILY SHARE AND 
              GENERAL EMPLOYER PREMIUM AMOUNTS.

    (a) Family Share.--Each State shall compute and publish the 
following components of the general family share of premiums for each 
community rating area designated by the State:
            (1) Plan premiums.--For each plan offered, the applicable 
        premiums for such plan for each class of family enrollment 
        (including the amount of any family collection shortfall).
            (2) Qualified worksite health promotion.--For each plan 
        offered, the premium discount for each level of qualified 
        worksite health promotion program.
            (3) Family credit.--The family credit amount for each class 
        of family enrollment, under section 5102.
    (b) Employer Premiums.--Each State shall compute and publish the 
following components of the general employer premium payment amount for 
each community rating area designated by the State:
            (1) Base employer monthly premium per worker.--The base 
        employer monthly premium determined under section 5122 for each 
        class of family enrollment.
            (2) Qualified worksite health promotion.--The base monthly 
        premium discount for each level of qualified worksite health 
        promotion program.
    (c) Reconciliation of Family Share.--Each State shall provide for 
the reconciliation of family payments in cases where the State 
determines that there has been an overpayment or underpayment by or on 
the behalf of such families in accordance with rules promulgated by the 
Secretary.

SEC. 5205. EMPLOYER PAYMENT REQUIREMENT.

    (a) In General.--Each employer shall provide for payments required 
under section 5121 or 5131 in accordance with the applicable provisions 
of this Act.
    (b) Employers in Single-Payer States.--In the case of an employer 
with respect to employees who reside in a single-payer State, the 
responsibilities of such employer under such system shall supersede the 
obligations of the employer under subsection (a), except as the 
Secretary may provide.

SEC. 5206. REQUIREMENT FOR EMPLOYER PAYMENT AND RECONCILIATION 
              REPORTING.

    (a) Reconciliation of Employer Premium Payments.--Each employer 
(whether or not the employer claimed (or claims) an employer premium 
discount under section 5123 for a year) that is liable for employer 
premium payments for any month in a year shall provide such information 
as may be required (consistent with rules of the Secretary of Labor) to 
determine--
            (1) the amount of employee premium payments made for all 
        months in the year (taking into account any employer premium 
        discount under section 5123); and
            (2) the appropriate amount of employer premium payments 
        that should have been made for all months in the year. Such 
reconciliation process shall be conducted by the State (with respect to 
community-rated employers) and by the Secretary of Labor (with respect 
to experience-rated employers).
    (b) Notice to Certain Individuals Who Are Not Employees.--
            (1) In general.--A person that carries on a trade or 
        business shall notify in writing each individual described in 
        paragraph (2) that the person is not obligated to make any 
        employer health care premium payment (under section 5121) in 
        relation to the services performed by the individual for the 
        person.
            (2) Individual described.--An individual described in this 
        paragraph, with respect to a person, is an individual who 
        normally performs services for the person in the person's trade 
        or business for more than 40 hours per month but who is not an 
        employee of the person (within the meaning of section 1701(a)).
            (3) Exceptions.--The Secretary shall issue regulations 
        providing exceptions to the notice requirement of paragraph (1) 
        with respect to individuals performing services on an 
        irregular, incidental, or casual basis.
            (4) Model notice.--The Secretary shall publish a model 
        notice that is easily understood by the average reader and that 
        persons may use to satisfy the requirements of paragraph (1).
    (c) Information Clearinghouse Functions.--The Secretary shall 
perform information clearinghouse functions under this section with 
respect to employers, States, the Federal Government, and consumer 
purchasing cooperatives.

SEC. 5207. EQUAL VOLUNTARY CONTRIBUTION REQUIREMENT.

    (a) In General.--
            (1) Equal voluntary employer premium payment requirement.--
                    (A) Community-rated health plans.--If an employer 
                makes available a voluntary employer premium payment 
                (as defined in subsection (d)) on behalf of a full-time 
                employee (as defined in section 1701(b)(2)(C)) who is 
                enrolled in a community-rated health plan of a 
                community rating area in a class of family enrollment, 
                the employer shall make available such a voluntary 
                employer premium payment in the same dollar amount to 
                all qualifying employees (as defined in section 
                1701(b)(1)) of the employer who are enrolled in any 
                community-rated health plan of the same coverage area 
                in the same class of family enrollment.
                    (B) Experience-rated health plans.--If an 
                experience-rated employer makes available a voluntary 
                employer premium payment on behalf of a full-time 
                employee who is enrolled in an experience-rated health 
                plan of a large employer in a class of family 
                enrollment in a premium area, the employer shall make 
                available such a voluntary employer premium payment in 
                the same dollar amount to all qualifying employees of 
                the employer enrolled in any experience-rated health 
                plan of the same purchaser in the same class of family 
                enrollment in the same premium area.
                    (C) Treatment of part-time employees.--In applying 
                subparagraphs (A) and (B) in the case of a qualifying 
                employee employed on a part-time basis (within the 
                meaning of section 1701(b)(2)(A)(ii)), the dollar 
                amount shall be equal to the full-time employment ratio 
                (as defined in section 1701(b)(2)(B)) multiplied by the 
                dollar amount otherwise required.
            (2) Nondiscrimination among plans selected.--An employer 
        may not discriminate in the wages or compensation paid, or 
        other terms or conditions of employment, with respect to an 
        employee based on the health plan (or premium of such a plan) 
        in which the employee is enrolled.
    (b) Rebate Required in Certain Cases.--Subject to subsection (c), 
if--
            (1) an employer makes available a voluntary employer 
        premium payment on behalf of an employee, and
            (2)(A) the sum of the amount of the applicable family 
        credit (under section 5102) and the voluntary employer premium 
        payment, exceeds (B) the premium for the plan selected,
the employer must rebate to the employee an amount equal to the excess 
described in subparagraph (B).
    (c) Exception for Collective Bargaining Agreement.--Subsections (a) 
and (b) shall not apply with respect to voluntary employer premium 
payments made pursuant to a bona fide collective bargaining agreement.
    (d) Voluntary Employer Premium Payment.--In this section, the term 
``voluntary employer premium payment'' means any payment designed to be 
used exclusively (or primarily) towards the cost of the family share of 
premiums for a health plan. Such term does not include any employer 
premiums required to be paid under part 3 of subtitle B of title VI.

SEC. 5208. PAYMENT ARRANGEMENTS.

    (a) Withholding.--
            (1) In general.--In the case of a family that includes a 
        qualifying employee of an employer, the employer shall deduct 
        from the wages of the qualifying employee (in a manner 
        consistent with any rules of the Secretary of Labor) the amount 
        of the family share of the premium for the plan in which the 
        family is enrolled.
            (2) Multiple employment.--In the case of a family that 
        includes more than one qualifying employee, the family shall 
        choose the employer to which paragraph (1) will apply.
            (3) Satisfaction of liability.--An amount deducted from 
        wages of a qualifying employee by an employer is deemed to have 
        been paid by the employee and to have satisfied the employee's 
        obligation under subsection (a) to the extent of such amount.
    (b) Other Methods.--In the case of a family that does not include a 
qualifying employee, the State shall require payment to be made 
prospectively. Such payment may be required to be made not less 
frequently than monthly. The Secretary may issue regulations in order 
to assure the timely and accurate collection of the family share due.

  Subtitle D--Cost-Sharing Assistance, Application for Assistance and 
              Premium Discounts, and Income Reconciliation

SEC. 5301. REDUCTION IN COST SHARING FOR LOW-INCOME FAMILIES.

    (a) Reduction.--
            (1) In general.--Subject to subsection (b), in the case of 
        a family that is enrolled in a health plan and that is either 
        (A) an AFDC or SSI family or (B) is determined under this 
        subpart to have family adjusted income below 200 percent of the 
        applicable poverty level, the family is entitled to a reduction 
        in cost sharing in accordance with this section.
            (2) Timing of reduction.--The reduction in cost sharing 
        shall only apply to items and services furnished after the date 
        the application for such reduction is approved under section 
        5302 and before the date of termination of the reduction under 
        this subpart, or, in the case of an AFDC or SSI family, during 
        the period in which the family is such a family.
            (3) Information to providers and plans.--Each State shall 
        provide, through electronic means and otherwise, health care 
        providers and health plans with access to such information as 
        may be necessary in order to provide for the cost sharing 
        reductions under this section.
    (b) Limitation.--No reduction in cost sharing under subsection 
(c)(1) shall be available for--
            (1) community-rated families residing in a health care 
        coverage area if the State for the area determines that there 
        are sufficient at or below average cost plans (as defined in 
        section 5104(b)(3)), which are plans with cost-sharing similar 
        to the model certified preferred provider network plans or 
        model certified health maintenance organization plans 
        established by the Secretary under section 1101(h), available 
        in the area to enroll AFDC and SSI families and families with 
        family adjusted income below 150 percent of the applicable 
        poverty level;
            (2) experience-rated families whose employer offers a plan 
        described in paragraph (1); or
            (3) for families with family adjusted income between 150 
        and 200 percent of the applicable poverty level.
    (c) Amount of Cost Sharing Reduction.--
            (1) In general.--Subject to paragraph (2), the reduction in 
        cost sharing under this section shall be such reduction as will 
        reduce cost sharing to the level of plans with cost-sharing 
        similar to the model certified preferred provider network plans 
        or model certified health maintenance organization plans 
        established by the Secretary under section 1101(h)
            (2) Special treatment of certain families.--
                    (A) AFDC, ssi and families below poverty.--In the 
                case of a family that--
                            (i) is enrolled in a health plan;
                            (ii) is an AFDC, SSI family or a family 
                        that is determined under this subpart to have a 
                        family adjusted income below 100 percent of the 
                        applicable poverty level; and
                            (iii) is enrolled in a plan with cost-
                        sharing similar to the model certified 
                        preferred provider network plans or model 
                        certified health maintenance organization plans 
                        established by the Secretary under section 
                        1101(h), or receiving a reduction in cost 
                        sharing under paragraph (1);
                the amount of cost sharing applied with respect to an 
                item or service (other than with respect to hospital 
                emergency room services for which there is no emergency 
                medical condition, as defined in section 1867(e)(1) of 
                the Social Security Act) shall be an amount equal to 20 
                percent of the cost sharing amount otherwise applicable 
                under the plan, rounded to the nearest dollar.
                    (B) Families with incomes between 100 and 150 
                percent of poverty.--In the case of a family that--
                            (i) is enrolled in a community-rated health 
                        plan;
                            (ii) is determined under this subpart to 
                        have family adjusted income between 100 and 150 
                        percent of the applicable poverty level;
                            (iii) is not an AFDC or SSI family; and
                            (iv) is enrolled in a plan with cost-
                        sharing similar to the model certified 
                        preferred provider network plans or model 
                        certified health maintenance organization plans 
                        established by the Secretary under section 
                        1101(h), or receiving a reduction in cost 
                        sharing under paragraph (1);
                the amount of cost sharing applied with respect to an 
                item or service (other than with respect to hospital 
                emergency room services for which there is no emergency 
                medical condition, as defined in section 1867(e)(1) of 
                the Social Security Act) shall be an amount equal to 40 
                percent of the cost sharing amount otherwise 
                applicable, rounded to the nearest dollar.
                    (C) Families with incomes between 150 and 200 
                percent of poverty.--In the case of a family that--
                            (i) is enrolled in a community-rated health 
                        plan;
                            (ii) is determined under this subpart to 
                        have family adjusted income between 150 and 200 
                        percent of the applicable poverty level; and
                            (iii) is not an AFDC or SSI family;
                the amount of cost sharing applied with respect to an 
                item or service (other than with respect to hospital 
                emergency room services for which there is no emergency 
                medical condition, as defined in section 1867(e)(1) of 
                the Social Security Act) shall be an amount equal to 40 
                percent of the cost sharing amount otherwise applicable 
                under the plan, rounded to the nearest dollar.
    (d) Administration.--
            (1) In general.--In the case of an approved family (as 
        defined in section 5302(b)(2)) enrolled in a community-rated 
        health plan, the State shall pay the plan for cost sharing 
        reductions (other than cost sharing reductions under subsection 
        (c)(2)(A), (B) and (C)) provided under this section out of 
        Federal subsidy payments provided in section 6001. Payments 
        made by health plans to providers shall include appropriate 
        payments for cost sharing reductions.
            (2) Estimated payments, subject to reconciliation.--Such 
        payment shall be made initially on the basis of reasonable 
        estimates of cost sharing reductions incurred by such a plan 
        with respect to approved families and shall be reconciled not 
        less often than quarterly based on actual claims for items and 
        services provided.

SEC. 5302. APPLICATION PROCESS FOR COST-SHARING REDUCTIONS AND PREMIUM 
              DISCOUNTS.

    (a) In General.--A family may apply for a determination of the 
family adjusted income or wage adjusted income of the family, for the 
purpose of establishing eligibility for cost sharing reductions under 
section 5301, and for premium discounts and reductions in liability 
under sections 5103 and 5112.
    (b) Action on Application.--
            (1) In general.--States shall act on such applications and 
        ensure due process in a timely manner prescribed by the Board.
            (2) Approved family defined.--As used in this part, the 
        term ``approved family'' means a family for which an 
        application under this section has been approved and not yet 
        terminated.
    (c) Help in Completing Applications.--Each State shall ensure 
adequate distribution and assist individuals in the filing of 
applications and income reconciliation statements under this subpart.
    (d) Family Adjusted Income.--
            (1) In general.--Except as otherwise provided, in this Act 
        the term ``family adjusted income'' means, with respect to a 
        family, the sum of the adjusted incomes (as defined in 
        paragraph (2)) for all members of the family (determined 
        without regard to section 1012).
            (2) Adjusted income.--In paragraph (1), the term ``adjusted 
        income'' means, with respect to an individual, adjusted gross 
        income (as defined in section 62(a) of the Internal Revenue 
        Code of 1986)--
                    (A) determined without regard to sections 135, 
                162(l), 911, 931, and 933 of such Code, and
                    (B) increased by the amount of interest received or 
                accrued by the individual which is exempt from tax.
            (3) Presence of additional dependents.--At the option of an 
        individual, a family may include (and not be required to 
        separate out) the income of other individuals who are claimed 
        as dependents of the family for income tax purposes, but such 
        individuals shall not be counted as part of the family for 
        purposes of determining the size of the family.
    (e) Requirement for Periodic Confirmation and Verification and 
Notices.--
            (1) Confirmation and verification requirement.--The 
        continued eligibility of a family for cost sharing reductions, 
        premium discounts and reductions in liability under this 
        section shall be conditioned upon the family's eligibility 
        being--
                    (A) confirmed periodically by the State; and
                    (B) verified (through the filing of a new 
                application under this section) by the State at the 
                time income reconciliation statements are required to 
                be filed under section 5303.
            (2) Notices of changes in income and employment status.--
        Each approved family shall promptly notify the State of any 
        material increase (as defined by the Secretary) in the family 
        adjusted income or wage adjusted income of the family.
    (f) Penalties for Inaccurate Information.--
            (1) Interest for understatements.--Each individual who 
        knowingly understates income reported in an application to a 
        State under this subpart or otherwise makes a material 
        misrepresentation of information in such an application shall 
        be liable to the State for excess payments made based on such 
        understatement or misrepresentation, and for interest on such 
        excess payments at a rate specified by the Secretary.
            (2) Penalties for misrepresentation.--In addition to the 
        liability established under paragraph (1), each individual who 
        knowingly misrepresents material information in an application 
        under this subpart to a State shall be liable to the State for 
        $2,000 or, if greater, three times the excess payments made 
        based on such misrepresentation.
    (g) Termination of Cost Sharing Reduction and Premium Discounts.--
The State shall, after notice to the family, terminate the reduction of 
cost sharing, premium discounts or reduction in liability for an 
approved family if the family fails to provide for confirmation or 
verification on a timely basis or the State otherwise determines that 
the family is no longer eligible for such reduction.
    (h) Treatment of AFDC and SSI Recipients.--
            (1) No application required.--AFDC and SSI families may not 
        be required to submit an application under this section.
            (2) Notice requirement for ssi recipients.--The Secretary 
        shall notify each State, in a manner specified by the Secretary 
        of the identity (and period of eligibility under the SSI 
        program) of each SSI recipient, unless such a recipient elects 
        (in a manner specified by the Secretary) not to accept the 
        reduction in cost sharing or premium discounts under this part.
    (i) Rules.--The Secretary shall issue rules related to the 
application procedure, confirmation and verification of eligibility, 
ensuring due process in enforcement of penalties for inaccurate 
information, and other issues related to the implmentation of cost 
sharing reductions, premium discounts and reductions in liability under 
this subpart.

SEC. 5303. END-OF-YEAR RECONCILIATION.

    (a) In General.--In the case of a family whose application for a 
premium discount or reduction of liability for a year has been approved 
before the end of the year under this subpart, the family shall, 
subject to subsection (c), file with the State an income reconciliation 
statement to verify the family's adjusted income or wage-adjusted 
income, as appropriate, for the previous year. Such a statement shall 
contain such information as the Secretary shall require. Each State 
shall coordinate the submission of such statements with the notice and 
payment of family premium payments.
    (b) Reconciliation of Premium Discount and Liability Assistance 
Based on Actual Income.--Based on and using the income reported in the 
reconciliation statement filed under subsection (a) with respect to a 
family, the State shall compute the amount of premium discount or 
reduction in liability that should have been provided under section 
5103 or section 5112 with respect for the family for the year involved. 
If the amount of such discount or liability reduction computed is--
            (1) greater than the amount that has been provided, the 
        family is liable to pay (directly or through an increase in 
        future family share of premiums or other payments) a total 
        amount equal to the amount of the excess payment, or
            (2) less than the amount that has been provided, the State 
        shall pay to the family (directly or through a reduction in 
        future family share of premiums or other payments) a total 
        amount equal to the amount of the deficit.
    (c) No Reconciliation for AFDC and SSI Families; No Reconciliation 
for Cost Sharing Reductions.--No reconciliation statement is required 
under this section--
            (1) with respect to cost sharing reductions provided under 
        section 5301, or
            (2) for a family that only claims a premium discount or 
        liability reduction under this subpart on the basis of being an 
        AFDC or SSI family.
    (d) Disqualification for Failure To File.--In the case of any 
family that is required to file a statement under this section in a 
year and that fails to file such a statement by the deadline specified, 
members of the family shall not be eligible for premium reductions 
under section 5103 or reductions in liability under section 5112 until 
such statement is filed. A State, using rules established by the 
Secretary, shall waive the application of this subsection if the family 
establishes, to the satisfaction of the State under such rules, good 
cause for the failure to file the statement on a timely basis.
    (e) Penalties for False Information.--Any individual that provides 
false information in a statement under subsection (a) is subject to the 
same liabilities as are provided under section 5302 for a 
misrepresentation of material fact described in such section.
    (f) Notice of Requirement.--Each State shall provide for written 
notice, at the end of each year, of the requirement of this section to 
each family which had received premium discount or reduction in 
liability under this subpart in any month during the preceding year and 
to which such requirement applies.
    (g) Transmittal of Information; Verification.--
            (1) In general.--Each participating State shall transmit 
        annually to the Secretary such information relating to the 
        income of families for the previous year as the Secretary may 
        require to verify such income under this subpart.
            (2) Verification.--Each participating State may use such 
        information as it has available to it, including information 
        made available to the State under section 6103(l)(7)(D)(x) of 
        the Internal Revenue Code of 1986, in verifying income of 
        families with applications filed under this subpart. The 
        Secretary of the Treasury may, consistent with section 6103 of 
        the Internal Revenue Code of 1986, permit return information to 
        be disclosed and used by a participating State in verifying 
        such income but only in accordance with such section.
    (h) Construction.--Nothing in this section shall be construed as 
authorizing reconciliation of any cost sharing reduction provided under 
this subpart.

SEC. 5304. ELIGIBILITY ERROR RATES.

    Each State shall make eligibility determinations for premium 
discounts, liability reductions, and cost sharing reductions under 
sections 5104 and 5123, section 5113, and section 5301, respectively, 
in a manner that maintains the error rates below an applicable maximum 
permissible error rate specified by the Secretary (or the Secretary of 
Labor with respect to section 5123). In specifying such a rate, the 
Secretary shall take into account maximum permissible error rates 
recognized by the Federal Government under comparable State-
administered programs.

                TITLE VI--AGGREGATE GOVERNMENT PAYMENTS

     Subtitle A--Aggregate Federal Payments to Participating State

SEC. 6001. CAPPED FEDERAL PAYMENTS.

    (a) Capped Entitlement.--
            (1) Payment.--The Secretary shall provide for each calendar 
        quarter (beginning on or after January 1, 1997) for payment to 
        each participating State of an amount equal to the capped 
        Federal payment amount (as defined in subsection (b)(1)) for 
        each State for the quarter.
            (2) Entitlement.--This section constitutes budget authority 
        in advance of appropriations Acts, and represents the 
        obligation of the Federal Government to provide for the payment 
        to States of the capped Federal payment amount under this 
        section.
    (b) Capped Federal Payment Amount.--
            (1) In general.--In this section, the term ``capped Federal 
        payment amount'' means, for a State for a calendar quarter in a 
        year and subject to paragraph (6) and subsection (e), the 
        amount by which--
                    (A) \1/4\ of the total payment obligation 
                (described in paragraph (2)) owed to community-rated 
                and experience-rated plans in a State for the year, 
                exceeds
                    (B) \1/4\ of the total amounts receivable 
                (described in paragraph (3)) by community-rated and 
                experience-rated plans for the year.
            (2) Total payment obligation.--The total payment obligation 
        described in this paragraph in a State for a year is the total 
        amount payable to community-rated and experience-rated plans 
        under title V.
            (3) Total amounts receivable.--The total amounts receivable 
        in a State for a year is the sum of the following:
                    (A) Premiums.--The amount payable to community-
                rated and experience-rated plans for the family share 
                of premiums (and premium equivalents), employer 
                premiums (and premium equivalents), and liabilities 
                owed to health plans pursuant to section 6201, not 
                taking into account any failure to make or collect such 
                payments.
                    (B) Other government payments.--The amounts payable 
                to health plans under this section and payable under 
                subparagraph (C).
                    (C) Payment to health plans.--Each participating 
                State is responsible for paying to community-rated 
                health plans a share of its savings under this Act. 
                Such amount shall equal 25 percent of the net reduction 
                in the projected expenditures of the State for health 
                care and related services that the Secretary estimates 
                the State will experience as the result of the 
                enactment of this Act. A State may request the 
                Secretary to review its estimate and shall be entitled 
                to present its case to the Secretary under procedures 
                to be established by the Secretary. This subparagraph 
                shall not be construed as providing a State with a 
                right to bring suit for such payment.
                    (D) Additional amount.--The amount collected by the 
                State under section 1715.
            (4) No payment for certain amounts.--
                    (A) In general.--Each participating State is 
                responsible for the payment of amounts attributable to 
                administrative errors (described in subparagraph (B)).
                    (B) Administrative errors described.--The 
                administrative errors described in this subparagraph 
                include the following:
                            (i) An eligibility error rate for premium 
                        discounts, liability reductions, and cost 
                        sharing reductions to the extent the applicable 
                        error rate exceeds the maximum permissible 
                        error rate, specified by the applicable 
                        Secretary, with respect to the section 
                        involved.
                            (ii) Misappropriations or other State 
                        expenditures that the Secretary finds are 
                        attributable to malfeasance or misfeasance by 
                        the State.
            (5) Special rules for single-payer states.--In applying 
        this subsection in the case of a single-payer State, the 
        Secretary shall develop and apply a methodology for computing 
        an amount of payment (with respect to each calendar quarter) 
        that is equivalent to the amount of payment that would have 
        been made to the State for the quarter if the State were not a 
        single-payer State.
            (6) Large group purchasers.--The Secretary, in consultation 
        with the Secretary of Labor, shall withhold an appropriate 
        amount from the capped Federal payment amount as may be 
        necessary to make payments to plans offered by large group 
        purchasers.
    (c) Determination of Capped Federal Payment Amounts.--
            (1) Reports.--At such time as the Secretary may require 
        before the beginning of each fiscal year, each State shall 
        submit to the Secretary such information as the Secretary may 
        require to estimate the capped Federal payment amount under 
        this section for the succeeding calendar year (and the portion 
        of such year that falls in such fiscal year).
            (2) Estimation.--Before the beginning of each year, the 
        Secretary shall estimate the capped Federal payment amount for 
        calendar quarters in such year. Such estimate shall be based on 
        factors including prior financial experience in the State, 
        future estimates of income, wages, and employment, and other 
        characteristics of the area found relevant by the Secretary. 
        The Secretary shall transmit to Congress, on a timely basis 
        consistent with the timely appropriation of funds under this 
        section, a report that specifies an estimate of the total 
        capped Federal amounts owed to States under this section for 
        the fiscal and calendar year involved.
    (d) Cap on Payments.--
            (1) In general.--The total amount of the capped Federal 
        payments made under this section for quarters in a fiscal year 
        may not exceed the cap specified under paragraph (2) for the 
        fiscal year.
            (2) Cap.--Subject to paragraphs (3) and (6)--
                    (A) Fiscal years 1997 through 2000.--The cap under 
                this paragraph for fiscal years 1997 through 2000 shall 
                be established by the Secretary, in consultation with 
                the Director of the Office of Management and Budget, 
                not later than 6 months prior to the beginning of 
                fiscal year 1997. The cap for each such fiscal year 
                shall be equal to the estimated increase in revenues 
                and savings provided for by this Act to finance the 
                cost of capped Federal payments under this section.
                    (B) Subsequent fiscal year.--The cap under this 
                paragraph for a fiscal year after fiscal year 2000 is 
                the cap under this paragraph for the previous fiscal 
                year (not taking into account paragraph (3)) multiplied 
                by the product of the factors described in subparagraph 
                (C) for that fiscal year and for each previous year 
                after fiscal year 2000.
                    (C) Factor.--The factor described in this 
                subparagraph for a fiscal year is 1 plus the following:
                            (i) CPI.--The percentage change in the CPI 
                        for the fiscal year, determined based upon the 
                        percentage change in the average of the CPI for 
the 12-month period ending with May 31 of the previous fiscal year over 
such average for the preceding 12-month period.
                            (ii) Population.--The average annual 
                        percentage change in the population of the 
                        United States during the 3-year period ending 
                        in the preceding calendar year, determined by 
                        the Secretary based on data supplied by the 
                        Bureau of the Census.
                            (iii) Real gdp per capita.--The average 
                        annual percentage change in the real, per 
                        capita gross domestic product of the United 
                        States during the 3-year period ending in the 
                        preceding calendar year, determined by the 
                        Secretary based on data supplied by the 
                        Department of Commerce.
            (3) Carryforward.--If the total of the capped Federal 
        payment amounts for all States for all calendar quarters in a 
        fiscal year is less than the cap specified in paragraph (2) for 
        the fiscal year, then the amount of such surplus shall be 
        accumulated and will be available in the case of a year in 
        which the cap would otherwise be breached.
            (4) Notification.--
                    (A) In general.--If the Secretary anticipates that 
                the amount of the cap, plus any carryforward from a 
                previous year accumulated under paragraph (3), will not 
                be sufficient for a fiscal year, the Secretary shall 
                notify the President, the Congress, and each State. 
                Such notification shall include information about the 
                anticipated amount of the shortfall and the anticipated 
                time when the shortfall will first occur.
                    (B) Required action.--Within 30 days after 
                receiving such a notice, the President shall submit to 
                Congress a report containing specific legislative 
                recommendations for actions which would eliminate the 
                shortfall.
            (5) Congressional consideration.--
                    (A) Expedited consideration.--If a joint resolution 
                the substance of which approves the specific 
                recommendations submitted under paragraph (4)(B) is 
                introduced, subject to subparagraph (B), the provisions 
                of section 2908 (other than subsection (a)) of the 
                Defense Base Closure and Realignment Act of 1990 shall 
                apply to the consideration of the joint resolution in 
                the same manner as such provisions apply to a joint 
                resolution described in section 2908(a) of such Act.
                    (B) Special rules.--For purposes of applying 
                subparagraph (A) with respect to such provisions, any 
                reference to the Committee on Armed Services of the 
                House of Representatives shall be deemed a reference to 
                an appropriate Committee of the House of 
                Representatives (specified by the Speaker of the House 
                of Representatives at the time of submission of 
                recommendations under paragraph (4)) and any reference 
                to the Committee on Armed Services of the Senate shall 
                be deemed a reference to an appropriate Committee of 
                the Senate (specified by the Majority Leader of the 
                Senate at the time of submission of such 
                recommendations).
            (6) Failure of the congress to act.--If the Congress 
        disapproves the President's recommendations under this section 
        and fails to enact an alternative proposal which is signed to 
        law by the President which is designed to eliminate such 
        shortfall, the Secretary shall provide for a schedule of 
        proportional reductions in discounts to businesses and 
        individuals to be applied by States and an equal reduction in 
        capped Federal payments to States sufficient to eliminate the 
        shortfall within a reasonable period of time.
            (7) Method for adjusting the cap for changes in 
        inflation.--If the inflation rate, as measured by the 
        percentage increase in the CPI, is projected to be 
        significantly different from the inflation rate projected by 
        the Council of Economic Advisors to the President as of October 
        1993, the Secretary may adjust the caps under paragraph (2) so 
        as to reflect such deviation from the projection.

     Subtitle B--Borrowing Authority to Cover Cash-flow Shortfalls

SEC. 6101. BORROWING AUTHORITY TO COVER CASH-FLOW SHORTFALLS.

    The Secretary may make available loans to States in order to cover 
any period of temporary cash-flow shortfall at a rate of interest 
determined by the Secretary of the Treasury. Loans under this section 
shall be repayable with interest over a period not to exceed two years.

SEC. 6102. CONTINGENCIES.

    Each State shall provide that any surplus of funds resulting from 
an estimation discrepancy described in section 6200(e)(1), up to a 
reasonable amount specified by the Secretary, shall be used to fund any 
future shortfalls resulting from such a discrepancy.

                  Subtitle C--Miscellaneous Provisions

SEC. 6201. SENSE OF THE COMMITTEE ON LABOR AND HUMAN RESOURCES.

    It is the sense of the Committee on Labor and Human Resources that 
when the Affordable Health Care for All Americans Act is enacted it 
should include the following provisions:
            (1) A requirement that States pay premiums for AFDC and SSI 
        recipients at a level established in the same manner as that 
        described in title IX of S. 1757 (the Health Security Act), as 
        introduced on November 22, 1993.
            (2) A requirement that States make maintenance of effort 
        payments to be included in the amounts receivable under section 
        6001(b)(3) at a level established in the same manner as that 
        described in title IX of S. 1757 (the Health Security Act), as 
        introduced on November 22, 1993.
                                 <all>
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