[Congressional Bills 104th Congress]
[From the U.S. Government Publishing Office]
[S. 294 Introduced in Senate (IS)]







104th CONGRESS
  1st Session
                                 S. 294

To increase the availability and affordability of health care coverage 
 for individuals and their families, to reduce paperwork and simplify 
the administration of health care claims, to increase access to care in 
 rural and underserved areas, to improve quality and protect consumers 
 from health care fraud and abuse, to promote preventive care, to make 
        long-term care more affordable, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                            January 30, 1995

   Mr. Cohen introduced the following bill; which was read twice and 
                  referred to the Committee on Finance

_______________________________________________________________________

                                 A BILL


 
To increase the availability and affordability of health care coverage 
 for individuals and their families, to reduce paperwork and simplify 
the administration of health care claims, to increase access to care in 
 rural and underserved areas, to improve quality and protect consumers 
 from health care fraud and abuse, to promote preventive care, to make 
        long-term care more affordable, and for other purposes.

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

SECTION 1. SHORT TITLE AND TABLE OF CONTENTS.

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

Sec. 1. Short title and table of contents.
                TITLE I--HEALTH INSURANCE MARKET REFORM

                 Subtitle A--Insurance Market Standards

Sec. 1001. Nondiscrimination based on health status.
Sec. 1002. Guaranteed issue and renewal.
Sec. 1003. Rating limitations.
Sec. 1004. Delivery system quality standards.
Sec. 1005. Risk adjustment.
Sec. 1006. Effective dates.
         Subtitle B--Establishment and Application of Standards

Sec. 1011. General rules.
Sec. 1012. Encouragement of State reforms.
Sec. 1013. Enforcement of standards.
                        Subtitle C--Definitions

Sec. 1021. Definitions.
TITLE II--GRANTS TO STATES FOR SMALL GROUP HEALTH INSURANCE PURCHASING 
                              ARRANGEMENTS

Sec. 2001. Grants to States for small group health insurance purchasing 
                            arrangements.
TITLE III--TAX INCENTIVES TO ENCOURAGE THE PURCHASE OF HEALTH INSURANCE

Sec. 3001. Permanent extension and increase of deduction for health 
                            insurance costs of self-employed 
                            individuals.
Sec. 3002. Credit for health insurance expenses.
 TITLE IV--INCENTIVES TO INCREASE THE ACCESS OF RURAL AND UNDERSERVED 
                          AREAS TO HEALTH CARE

Sec. 4001. Nonrefundable credit for certain primary health services 
                            providers.
Sec. 4002. Expensing of medical equipment.
Sec. 4003. Expanded services for medically underserved individuals.
Sec. 4004. Increase in National Health Service Corps and area health 
                            education center funding.
Sec. 4005. Assistant Secretary for Rural Health.
Sec. 4006. Study on transitional measures to ensure access.
                TITLE V--QUALITY AND CONSUMER PROTECTION

              Subtitle A--Quality Improvement Foundations
Sec. 5001. Quality improvement foundations.
               Subtitle B--Administrative Simplification
                    Part 1--Purpose and Definitions
Sec. 5101. Purpose.
Sec. 5102. Definitions.
    Part 2--Standards for Data Elements and Information Transactions
Sec. 5111. General requirements on secretary.
Sec. 5112. Standards for transactions and data elements.
Sec. 5113. Timetables for adoption of standards.
     Part 3--Requirements With Respect to Certain Transactions and 
                              Information
Sec. 5121. Requirements on health plans.
Sec. 5122. Timetables for compliance with requirements.
                  Part 4--Accessing Health Information
Sec. 5131. Access for authorized purposes.
Sec. 5132. Responding to access requests.
Sec. 5133. Timetables for adoption of standards and compliance.
   Part 5--Standards and Certification for Health Information Network
Sec. 5141. Standards and certification for health information network 
                            services.
Sec. 5142. Ensuring availability of information.
                           Part 6--Penalties
Sec. 5151. General penalty for failure to comply with requirements and 
                            standards.
                    Part 7--Miscellaneous Provisions
Sec. 5161. Effect on State law.
Sec. 5162. Health information continuity.
Sec. 5163. Health Information Advisory Committee.
Sec. 5164. Authorization of appropriations.
               Subtitle C--Privacy of Health Information

                          Part 1--Definitions
Sec. 5201. Definitions.
                     subpart a--general provisionss
Sec. 5206. General rules regarding disclosure.
Sec. 5207. Authorizations for disclosure of protected health 
                            information.
Sec. 5208.subpart b--specific disclosures relating to patient
Sec. 5211. Disclosures for treatment and financial and administrative 
                            transactions.
Sec. 5212. Next of kin and directory information.
Secsubpart c--disclosure for oversight, public health, and research 
                                purposes
Sec. 5216. Oversight.
Sec. 5217. Public health.
subpart d--disclosure for judicial, administrative, and law enforcement 
                                purposes
Sec. 5221. Judicial and administrative purposes.
Sec.subpart e--disclosure pursuant to government subpoena or warrant
Sec. 5226. Government subpoenas and warrants.
Sec. 5227. Access procedures for law enforcement subpoenas and 
                            warrants.
Sec. 5228. Challenge procedures for law enforcement warrants, 
            subpart f--disclosure pursuant to party subpoena
Sec. 5231. Party subpoenas.
Sec. 5232. Access procedures for party subpoenas.
Sec. 5233. Challenge procedures for party subpoenas.
     Part 3--Procedures for Ensuring Security of Protected Health 
                 subpart a--establishment of safeguards
Sec. 5236. Establishment of safeguards.
Ssubpart b--review of protected health information by subjects of the 
                              information
Sec. 5241. Inspection of protected health information.
Sec. 5242. Amendment of protected health information.
Sec. 5243. Nsubpart c--standards for electronic disclosures
Sec. 5246. Standards for electronic disclosures.
            subpart a--no sanctions for permissible actions
Sec. 5251. No liabilitysubpart b--civil sanctionses.
Sec. 5256. Civil penalty.
Sec. 5257. Civil actisubpart c--criminal sanctions
Sec. 5261. Wrongful disclosure of protected health information.
                   Part 5--Administrative Provisions

Sec. 5266. Relationship to other laws.
Sec. 5267. Rights of incompetents.
Sec. 5268. Exercise of rights.
                Subtitle D--Health Care Fraud Prevention

Sec. 5301. Short title; table of contents.
           Part A--All-Payer Fraud and Abuse Control Program

Sec. 5311. All-payer fraud and abuse control program.
Sec. 5312. Application of certain Federal health anti-fraud and abuse 
                            sanctions to fraud and abuse against any 
                            health plan.
Sec. 5313. Health care fraud and abuse guidance.
Sec. 5314. Reporting of fraudulent actions under medicare.
       Part B--Revisions to Current Sanctions for Fraud and Abuse

Sec. 5321. Mandatory exclusion from participation in medicare and State 
                            health care programs.
Sec. 5322. Establishment of minimum period of exclusion for certain 
                            individuals and entities subject to 
                            permissive exclusion from medicare and 
                            State health care programs.
Sec. 5323. Permissive exclusion of individuals with ownership or 
                            control interest in sanctioned entities.
Sec. 5324. Sanctions against practitioners and persons for failure to 
                            comply with statutory obligations.
Sec. 5325. Intermediate sanctions for medicare health maintenance 
                            organizations.
Sec. 5326. Effective date.
          Part C--Administrative and Miscellaneous Provisions

Sec. 5331. Establishment of the health care fraud and abuse data 
                            collection program.
                    Part D--Civil Monetary Penalties

Sec. 5341. Civil monetary penalties.
                   Part E--Amendments to Criminal Law

Sec. 5351. Health care fraud.
Sec. 5352. Forfeitures for Federal health care offenses.
Sec. 5353. Injunctive relief relating to Federal health care offenses.
Sec. 5354. Grand jury disclosure.
Sec. 5355. False Statements.
Sec. 5356. Voluntary disclosure program.
Sec. 5357. Obstruction of criminal investigations of Federal health 
                            care offenses.
Sec. 5358. Theft or embezzlement.
Sec. 5359. Laundering of monetary instruments.
       Part F--Payments for State Health Care Fraud Control Units

Sec. 5361. Establishment of State fraud units.
Sec. 5362. Requirements for State fraud units.
Sec. 5363. Scope and purpose.
Sec. 5364. Payments to States.
                      TITLE VI--MALPRACTICE REFORM

Sec. 6001. Alternative dispute resolution.
Sec. 6002. Basic requirements.
Sec. 6003. Alternative dispute resolution advisory board.
Sec. 6004. Certification of State systems; applicability of alternative 
                            Federal system.
Sec. 6005. Reports on implementation and effectiveness of alternative 
                            dispute resolution systems.
Sec. 6006. Optional application of practice guidelines.
           TITLE VII--HEALTH PROMOTION AND DISEASE PREVENTION

Sec. 7001. Disease prevention and health promotion programs treated as 
                            medical care.
Sec. 7002. Worksite wellness grant program.
Sec. 7003. Expanding and improving school health education.
             TITLE VIII--TAX INCENTIVES FOR LONG-TERM CARE

Sec. 8001. Short title.
Sec. 8002. Amendment of 1986 Code.
         Subtitle A--Tax Treatment of Long-Term Care Insurance

Sec. 8101. Qualified long-term care services treated as medical care.
Sec. 8102. Treatment of long-term care insurance.
Sec. 8103. Treatment of qualified long-term care plans.
Sec. 8104. Tax reserves for qualified long-term care insurance 
                            policies.
Sec. 8105. Tax treatment of accelerated death benefits under life 
                            insurance contracts.
Sec. 8106. Tax treatment of companies issuing qualified accelerated 
                            death benefit riders.
           Subtitle B--Standards For Long-Term Care Insurance

Sec. 8201. National Long-Term Care Insurance Advisory Council.
Sec. 8202. Additional requirements for issuers of long-term care 
                            insurance policies.
Sec. 8203. Coordination with State requirements.
Sec. 8204. Uniform language and definitions.
 Subtitle C--Incentives to Encourage the Purchase of Private Insurance

Sec. 8301. Assets or resources disregarded under the medicaid program.
Sec. 8302. Distributions from individual retirement accounts for the 
                            purchase of long-term care insurance 
                            coverage.
                       Subtitle D--Effective Date

Sec. 8401. Effective date of tax provisions.
                      TITLE IX--BUDGET NEUTRALITY

Sec. 9001. Assurance of budget neutrality.

                TITLE I--HEALTH INSURANCE MARKET REFORM

                 Subtitle A--Insurance Market Standards

SEC. 1001. NONDISCRIMINATION BASED ON HEALTH STATUS.

    (a) In General.--Except as provided in subsection (b) and section 
1003(d), a health plan may not deny, limit, or condition the coverage 
under (or benefits of) the plan, or vary the premium, for an individual 
based on the health status, medical condition, claims experience, 
receipt of health care, medical history, anticipated need for health 
care services, disability, or lack of evidence of insurability.
    (b) Treatment of Preexisting Condition Exclusions for All 
Services.--
            (1) In general.--A 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 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.--For purposes of this subsection:
                    (A) Period of continuous coverage.--
                            (i) In general.--The term ``period of 
                        continuous coverage'' means the period 
                        beginning on the date an individual is enrolled 
                        under a health plan or an equivalent health 
                        care program and ends on the date the 
                        individual is not so enrolled for a continuous 
                        period of more than 3 months.
                            (ii) Equivalent health care program.--The 
                        term ``equivalent health care program'' means--
                                    (I) part A or part B of the 
                                medicare program under title XVIII of 
                                the Social Security Act (42 U.S.C. 1395 
                                et seq.),
                                    (II) the medicaid program under 
                                title XIX of the Social Security Act 
                                (42 U.S.C. 1396 et seq.),
                                    (III) the health care program for 
                                active military personnel under title 
                                10, United States Code,
                                    (IV) the veterans health care 
                                program under chapter 17 of title 38, 
                                United States Code,
                                    (V) the Civilian Health and Medical 
                                Program of the Uniformed Services 
                                (CHAMPUS), as defined in section 
                                1073(4) of title 10, United States 
                                Code, and
                                    (VI) the Indian health service 
                                program under the Indian Health Care 
                                Improvement Act (25 U.S.C. 1601 et 
                                seq.).
                    (B) Preexisting condition.--The term ``preexisting 
                condition'' means, with respect to coverage under a 
                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).
    (c) Limitations Prohibited.--
            (1) In general.--A health plan may not impose a lifetime 
        limitation on the provision of benefits under the plan.
            (2) Rule of construction.--The prohibition contained in 
        paragraph (1) shall not be construed as prohibiting limitations 
        on the scope or duration of particular items or services 
        covered by a health plan.

SEC. 1002. GUARANTEED ISSUE AND RENEWAL.

    (a) Small Group Market.--Each health plan offering coverage in the 
small group market shall guarantee each individual purchaser and small 
employer (and each eligible employee of such small employer) applying 
for coverage in such market the opportunity to enroll in the plan.
    (b) Large Employer Market.--Each health plan offering coverage in 
the large employer market shall guarantee any individual eligible for 
coverage under the plan the opportunity to enroll in such plan.
    (c) Capacity Limits.--Notwithstanding this section, a health plan 
may apply a capacity limit based on limited financial or provider 
capacity if the plan enrolls individuals in a manner that provides 
prospective enrollees with a fair chance of enrollment regardless of 
the method by which the individual seeks enrollment.
    (d) Renewal of Policy.--
            (1) Small group market.--A health plan issued to a small 
        employer or an individual purchaser in the small group market 
        shall be renewed at the option of the employer or individual, 
        if such employer or individual purchaser remains eligible for 
        coverage under the plan.
            (2) Large employer market.--A health plan issued to an 
        individual eligible for coverage under a large employer plan 
        shall be renewed at the option of the individual, if such 
        individual remains eligible for coverage under the plan.
    (e) Grounds for Refusal To Renew.--A health plan may refuse to 
renew a policy only in the case of--
            (1) the nonpayment of premiums;
            (2) fraud on the part of the employer or individual 
        relating to such plan; or
            (3) the misrepresentation by the employer or individual of 
        material facts relating to an application for coverage of a 
        claim or benefit.
    (f) Notification of Availability.--Each health plan sponsor shall 
publicly disclose the availability of each health plan that such 
sponsor provides or offers in a small group market. Such disclosure 
shall be accompanied by information describing the method by which 
eligible employers and individuals may enroll in such plans.

SEC. 1003. RATING LIMITATIONS.

    (a) In General.--A health plan offering coverage in the small group 
market shall comply with the standards developed under this section.
    (b) Role of NAIC.--The Secretary shall request that the NAIC--
            (1) develop specific standards in the form of a model Act 
        and model regulations that provide for the implementation of 
        the rating limitations described in subsection (d); and
            (2) report to the Secretary concerning such standards 
        within 6 months after the date of enactment of this Act.
    (c) Role of the Secretary.--The Secretary, upon review of the 
report received under subsection (b)(2), shall not later than January 
1, 1997, promulgate final standards implementing this section. Such 
standards shall be the applicable health plan standards under this 
section.
    (d) Rating Standards.--The standards described in this section 
shall provide for the following:
            (1) A determination of factors that health plans may use to 
        vary the premium rates of such plans. Such factors--
                    (A) shall be applied in a uniform fashion to all 
                enrollees covered by a plan;
                    (B) shall include age (as specified in paragraph 
                (3)), family type, and geography; and
                    (C) except as provided in paragraph (2)(A), shall 
                not include gender, health status, or health 
                expenditures.
            (2)(A) Factors prohibited under paragraph (1)(C) shall be 
        phased out over a period not to exceed 3 years after the 
        effective date of this section.
            (B) Other rating factors (other than age) may be phased out 
        to the extent necessary to minimize market disruption and 
        maximize coverage rates.
            (3) Uniform age categories and age adjustment factors that 
        reflect the relative actuarial costs of benefit packages among 
        enrollees. By the end of the 3-year period beginning on the 
        effective date of this section, for individuals who have 
        attained age 18 but not age 65, the highest age adjustment 
factor may not exceed 3 times the lowest age adjustment factor.
    (e) Discounts.--Standards developed under this section shall permit 
health plans to provide premium discounts based on workplace health 
promoting activities.

SEC. 1004. DELIVERY SYSTEM QUALITY STANDARDS.

    (a) In General.--Each health plan shall comply with the standards 
developed under this section.
    (b) Role of the Secretary.--Not later than 9 months after the date 
of enactment of this Act, the Secretary, in consultation with the NAIC 
and other organizations with expertise in the areas of quality 
assurance (including the Joint Commission on Accreditation of Health 
Care Organizations, the National Committee for Quality Assurance, and 
peer review organizations), shall establish minimum guidelines 
specified in subsection (c) for the issuance by each State of delivery 
system quality standards. Such standards shall be the applicable health 
plan standards under this section.
    (c) Minimum Guidelines.--The minimum guidelines specified in this 
subsection are as follows:
            (1) Establishing and maintaining health plan quality 
        assurance, including--
                    (A) quality management;
                    (B) credentialing;
                    (C) utilization management;
                    (D) health care provider selection and due process 
                in selection; and
                    (E) practice guidelines and protocols.
            (2) Providing consumer protection for health plan 
        enrollees, including--
                    (A) comparative standardized consumer information 
                with respect to health plan premiums and quality 
                measures, including health care report cards;
                    (B) nondiscrimination in plan enrollment, 
                disenrollment, and service provision;
                    (C) continuation of treatment with respect to 
                health plans that become insolvent; and
                    (D) grievance procedures.
            (3) Ensuring reasonable access to health care services, 
        including access for vulnerable populations in underserved 
        areas.

SEC. 1005. RISK ADJUSTMENT.

    Each health plan offering coverage in the small group market in a 
State shall participate in a risk adjustment program developed by such 
State under standards established by the Secretary.

SEC. 1006. EFFECTIVE DATES.

    (a) In General.--Except as provided in subsection (b), this title 
shall take effect on January 1, 1996.
    (b) Rating Limitations and Risk Adjustments.--The standards 
promulgated under sections 1003 and 1005 shall apply to plans that are 
issued or renewed after December 31, 1996.

         Subtitle B--Establishment and Application of Standards

SEC. 1011. GENERAL RULES.

    (a) Construction.--
            (1) In general.--A requirement or standard imposed on a 
        health plan under this Act shall be deemed to be a requirement 
        or standard imposed on the insurer or sponsor of such plan.
            (2) Preemption of state law.--
                    (A) In general.--No requirement of this title shall 
                be construed as preempting any State law unless such 
                State law directly conflicts with such requirement. The 
                provision of additional consumer protections under 
                State law as described in subparagraph (B) shall not be 
                considered to directly conflict with any such 
                requirement.
                    (B) Consumer protection laws.--State laws referred 
                to in subparagraph (A) that are not preempted by this 
                title include--
                            (i) laws that limit the exclusions or 
                        limitations for preexisting medical conditions 
                        to periods that are less than those provided 
                        for under section 1001;
                            (ii) laws that limit variations in premium 
                        rates beyond the variations permitted under 
                        section 1003; and
                            (iii) laws that would expand the small 
                        group market in excess of that provided for 
                        under this title.
                    (C) Limited preemption of state mandated 
                benefits.--No State law or regulation in effect in a 
                State that requires health plans offered to small 
                employers in the State to include specified items and 
                services other than those described in section 
                1005(b)(2)(B) shall apply with respect to a health plan 
                offered by an insurer to a small employer.
    (b) Regulations.--The Secretary, in consultation with NAIC, and the 
Secretary of Labor are each authorized to issue regulations as are 
necessary to implement this Act.

SEC. 1012. ENCOURAGEMENT OF STATE REFORMS.

    Nothing in this Act shall be construed as prohibiting States from 
enacting health care reform measures that exceed the measures 
established under this Act, including reforms that expand access to 
health care services, control health care costs, and enhance quality of 
care.

SEC. 1013. ENFORCEMENT OF STANDARDS.

    (a) In General.--Except as provided in subsection (b), each State 
shall require that each health plan issued, sold, offered for sale, or 
operated in such State meets the insurance reform standards established 
under this title pursuant to an enforcement plan filed by the State 
with, and approved by, the Secretary. If the State does not file an 
acceptable plan, the Secretary shall enforce such standards until a 
plan is filed and approved.
    (b) Secretary of Labor.--With respect to any health plan for which 
the application of State insurance laws are preempted under section 514 
of Employee Retirement Income Security Act of 1974 (29 U.S.C. 1144), 
the enforcement of the insurance reform standards established under 
this title shall be by the Secretary of Labor.

                        Subtitle C--Definitions

SEC. 1021. DEFINITIONS.

    (a) Health Plan.--For purposes of this title and title II, the term 
``health plan'' means a plan that provides, or pays the cost of, health 
benefits. Such term does not include the following, or any combination 
thereof:
            (1) Coverage only for accidental death, dismemberment, 
        dental, or vision.
            (2) 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.
            (3) A medicare supplemental policy (as defined in section 
        1882(g)(1) of the Social Security Act (42 U.S.C. 1395ss(g)(1)).
            (4) Coverage issued as a supplement to liability insurance.
            (5) Worker's compensation or similar insurance.
            (6) Automobile medical-payment insurance.
            (7) A long-term care insurance 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).
            (8) Any plan or arrangement not described in any preceding 
        subparagraph which provides for benefit payments, on a periodic 
        basis, for a specified disease or illness or period of 
        hospitalization without regard to the costs incurred or 
services rendered during the period to which the payments relate.
            (9) Such other plan or arrangement as the Secretary 
        determines is not a health plan.
    (b) Terms and Rules Relating to the Small Group and Large Employer 
Markets.--For purposes of this title and title II:
            (1) Small group market.--The term ``small group market'' 
        means the market for health plans which is composed of small 
        employers and individual purchasers.
            (2) 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 51 employees for some portion of the day.
            (3) Individual purchaser.--The term ``individual 
        purchaser'' means an individual who is not eligible to enroll 
        in a health plan sponsored by a large or small employer.
            (4) Large employer market.--The term ``large employer 
        market'' means the market for health plans which is composed of 
        large employers.
            (5) Large employer.--The term ``large employer''--
                    (A) means an employer that is not a small employer; 
                and
                    (B) includes a multiemployer plan as defined in 
                section 3(37) of the Employment Retirement Income 
                Security Act of 1974 (29 U.S.C. 1002(37)) and a plan 
                which is maintained by a rural electric cooperative or 
                a rural telephone cooperative association (within the 
                meaning of section 3(40) of such Act (29 U.S.C. 
                1002(40)).
    (c) Additional Definitions.--For purposes of this title and title 
II:
            (1) NAIC.--The term ``NAIC'' means the National Association 
        of Insurance Commissioners.
            (2) Secretary.--The term ``Secretary'' means the Secretary 
        of Health and Human Services.

TITLE II--GRANTS TO STATES FOR SMALL GROUP HEALTH INSURANCE PURCHASING 
                              ARRANGEMENTS

SEC. 2001. GRANTS TO STATES FOR SMALL GROUP HEALTH INSURANCE PURCHASING 
              ARRANGEMENTS.

    (a) In General.--The Secretary shall make grants to States that 
submit applications meeting the requirements of this section for the 
establishment and operation of small group health insurance purchasing 
arrangements.
    (b) Use of Funds.--Grant funds awarded under this section to a 
State may be used to finance administrative costs associated with 
developing and operating a small group health insurance purchasing 
arrangement, including the costs associated with--
            (1) engaging in marketing and outreach efforts to inform 
        individuals and small employers about the small group health 
        insurance purchasing arrangement, which may include the payment 
        of sales commissions;
            (2) negotiating with insurers to provide health insurance 
        through the small group health insurance purchasing 
        arrangement; or
            (3) providing administrative functions, such as eligibility 
        screening, claims administration, and customer service.
    (c) Application Requirements.--An application submitted by a State 
to the Secretary shall describe--
            (1) whether the program will be operated directly by the 
        State or through 1 or more State-sponsored private 
        organizations and the details of such operation;
            (2) program goals for reducing the cost of health insurance 
        for, and increasing insurance coverage in, the small group 
        market;
            (3) the approaches proposed for enlisting participation by 
        insurers and small employers, including any plans to use State 
        funds to subsidize the cost of insurance for participating 
        individuals and employers; and
            (4) the methods proposed for evaluating the effectiveness 
        of the program in reducing the number of uninsured in the State 
        and on lowering the cost of health insurance for the small 
        group market in the State.
    (d) Grant Criteria.--In awarding grants, the Secretary shall 
consider the potential impact of the State's proposal on the cost of 
health insurance for the small group market and on the number of 
uninsured, and the need for regional variation in the awarding of 
grants. To the extent the Secretary deems appropriate, grants shall be 
awarded to fund programs employing a variety of approaches for 
establishing small group health insurance purchasing arrangements.
    (e) Prohibition on Grants.--No grant funds shall be paid to States 
that do not meet the requirements of this title with respect to small 
group health plans, or to States with group purchasing programs 
involving small group health plans that do not meet the requirements of 
this title.
    (f) Annual Report by States.--States receiving grants under this 
section shall report to the Secretary annually on the numbers and rates 
of participation by eligible insurers and small employers, on the 
estimated impact of the program on reducing the number of uninsured, 
and on the cost of insurance available to the small group market in the 
State.
    (g) Authorization of Appropriations.--There are authorized to be 
appropriated for each of the fiscal years 1996, 1997, and 1998, such 
sums as may be necessary to carry out this section.
    (h) Secretarial Report.--The Secretary shall report to Congress by 
not later than January 1, 1997, on the number and amount of grants 
awarded under this section, and include with such report an evaluation 
of the impact of the grant program on the number of uninsured and cost 
of health insurance to small group markets in participating States.

TITLE III--TAX INCENTIVES TO ENCOURAGE THE PURCHASE OF HEALTH INSURANCE

SEC. 3001. PERMANENT EXTENSION AND INCREASE OF DEDUCTION FOR HEALTH 
              INSURANCE COSTS OF SELF-EMPLOYED INDIVIDUALS.

    (a) Deduction Made Permanent.--Section 162(l) of the Internal 
Revenue Code of 1986 (relating to special rules for health insurance 
costs of self-employed individuals) is amended by striking paragraph 
(6).
    (b) Increase in Deduction.--Section 162(l) of such Code, as amended 
by subsection (a), is amended--
            (1) by striking ``25 percent'' in paragraph (1) and 
        inserting ``the applicable percentage'', and
            (2) by adding at the end the following new paragraph:
            ``(6) Applicable percentage.--For purposes of paragraph 
        (1), the applicable percentage shall be determined as follows:

For taxable years beginning in:     The applicable percentage is:
    1994, 1995 and 1996............
                                        25
    1997...........................
                                        50
    1998 and 1999..................
                                        75
    2000 and thereafter............
                                        100.''
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1993.

SEC. 3002. CREDIT FOR HEALTH INSURANCE EXPENSES.

    (a) In General.--Subpart C of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 (relating to refundable personal 
credits) is amended by inserting after section 34 the following new 
section:

``SEC. 34A. HEALTH INSURANCE EXPENSES.

    ``(a) Allowance of Credit.--
            ``(1) In general.--In the case of an eligible individual, 
        there shall be allowed as a credit against the tax imposed by 
        this subtitle for the taxable year an amount equal to the 
        applicable percentage of the qualified health insurance 
        expenses paid by such individual during the taxable year.
            ``(2) Applicable percentage.--For purposes of paragraph 
        (1), the term `applicable percentage' means 60 percent reduced 
        (but not below zero) by 10 percentage points for each $1,000 
        (or fraction thereof) by which the taxpayer's adjusted gross 
        income for the taxable year exceeds the applicable dollar 
        amount.
            ``(3) Applicable dollar amount.--For purposes of this 
        subsection, the term `applicable dollar amount' means--
                    ``(A) in the case of a taxpayer filing a joint 
                return, $28,000,
                    ``(B) in the case of any other taxpayer (other than 
                a married individual filing a separate return), 
                $18,000, and
                    ``(C) in the case of a married individual filing a 
                separate return, zero.
        For purposes of this subsection, the rule of section 219(g)(4) 
        shall apply.
    ``(b) Qualified Health Insurance Expenses.--For purposes of this 
section--
            ``(1) In general.--The term `qualified health insurance 
        expenses' means amounts paid during the taxable year for 
        insurance which constitutes medical care (within the meaning of 
        section 213(d)(1)(C)). For purposes of the preceding sentence, 
        the rules of section 213(d)(6) shall apply.
            ``(2) Dollar limit on qualified health insurance 
        expenses.--The amount of the qualified health insurance 
        expenses paid during any taxable year which may be taken into 
        account under subsection (a)(1) shall not exceed $1,200 ($2,400 
        in the case of a taxpayer filing a joint return).
            ``(3) Election not to take credit.--A taxpayer may elect 
        for any taxable year to have amounts described in paragraph (1) 
        not treated as qualified health insurance expenses.
    ``(c) Eligible Individual.--For purposes of this section, the term 
`eligible individual' means, with respect to any period, an individual 
who is not covered during such period by a health plan maintained by an 
employer of such individual or such individual's spouse.
    ``(d) Special Rules.--For purposes of this section--
            ``(1) Coordination with advance payment and minimum tax.--
        Rules similar to the rules of subsections (g) and (h) of 
        section 32 shall apply to any credit to which this section 
        applies.
            ``(2) Medicare-eligible individuals.--No expense shall be 
        treated as a qualified health insurance expense if it is an 
        amount paid for insurance for an individual for any period with 
        respect to which such individual is entitled (or, on 
        application without the payment of an additional premium, would 
        be entitled to) benefits under part A of title XVIII of the 
        Social Security Act.
            ``(3) Subsidized expenses.--No expense shall be treated as 
        a qualified health insurance expense to the extent--
                    ``(A) such expense is paid, reimbursed, or 
                subsidized (whether by being disregarded for purposes 
                of another program or otherwise) by the Federal 
                Government, a State or local government, or any agency 
                or instrumentality thereof, and
                    ``(B) the payment, reimbursement, or subsidy of 
                such expense is not includible in the gross income of 
                the recipient.
    ``(e) Regulations.--The Secretary shall prescribe such regulations 
as may be necessary to carry out the purposes of this section.''.
    (b) Advance Payment of Credit.--
            (1) In general.--Chapter 25 of the Internal Revenue Code of 
        1986 is amended by inserting after section 3507 the following 
        new section:

``SEC. 3507A. ADVANCE PAYMENT OF HEALTH INSURANCE EXPENSES CREDIT.

    ``(a) General Rule.--Except as otherwise provided in this section, 
every employer making payment of wages with respect to whom a health 
insurance expenses eligibility certificate is in effect shall, at the 
time of paying such wages, make an additional payment equal to such 
employee's dependent care advance amount.
    ``(b) Health Insurance Expenses Eligibility Certificate.--For 
purposes of this title, a health insurance expenses eligibility 
certificate is a statement furnished by an employee to the employer 
which--
            ``(1) certifies that the employee will be eligible to 
        receive the credit provided by section 34A for the taxable 
        year,
            ``(2) certifies that the employee does not have a health 
        insurance expenses eligibility certificate in effect for the 
        calendar year with respect to the payment of wages by another 
        employer,
            ``(3) states whether or not the employee's spouse has a 
        health insurance expenses eligibility certificate in effect, 
        and
            ``(4) estimates the amount of qualified health insurance 
        expenses (as defined in section 34A(b)) for the calendar year.
For purposes of this section, a certificate shall be treated as being 
in effect with respect to a spouse if such a certificate will be in 
effect on the first status determination date following the date on 
which the employee furnishes the statement in question.
    ``(c) Health Insurance Expenses Advance Amount.--
            ``(1) In general.--For purposes of this title, the term 
        `health insurance expenses advance amount' means, with respect 
        to any payroll period, the amount determined--
                    ``(A) on the basis of the employee's wages from the 
                employer for such period,
                    ``(B) on the basis of the employee's estimated 
                qualified health insurance expenses included in the 
                health insurance expenses eligibility certificate, and
                    ``(C) in accordance with tables provided by the 
                Secretary.
            ``(2) Advance amount tables.--The tables referred to in 
        paragraph (1)(C) shall be similar in form to the tables 
        prescribed under section 3402(a) and, to the maximum extent 
        feasible, shall be coordinated with such tables and the tables 
        prescribed under section 3507(c).
    ``(d) Other Rules.--For purposes of this section, rules similar to 
the rules of subsections (d) and (e) of section 3507 shall apply.
    ``(e) Regulations.--The Secretary shall prescribe such regulations 
as may be necessary to carry out the purposes of this section.''.
            (2) Conforming amendment.--The table of sections for 
        chapter 25 of such Code is amended by adding after the item 
        relating to section 3507 the following new item:

                              ``Sec. 3507A. Advance payment of health 
                                        insurance expenses credit.''.
    (c) Coordination With Deductions for Health Insurance Expenses.--
            (1) Self-employed individuals.--Section 162(l) of the 
        Internal Revenue Code of 1986, as amended by section 8001, is 
        further amended by adding after paragraph (6) the following new 
        paragraph:
            ``(7) Coordination with health insurance premium credit.--
        Paragraph (1) shall not apply to any amount taken into account 
        in computing the amount of the credit allowed under section 
        34A.''.
            (2) Medical, dental, etc., expenses.--Subsection (e) of 
        section 213 of such Code is amended by inserting ``or section 
        34A'' after ``section 21''.
    (d) Clerical Amendment.--The table of sections for subpart A of 
part IV of subchapter A of chapter 1 of the Internal Revenue Code of 
1986 is amended by inserting after the item relating to section 34 the 
following new item:

                              ``Sec. 34A. Health insurance expenses.''.
    (e) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1995.

 TITLE IV--INCENTIVES TO INCREASE THE ACCESS OF RURAL AND UNDERSERVED 
                          AREAS TO HEALTH CARE

SEC. 4001. NONREFUNDABLE CREDIT FOR CERTAIN PRIMARY HEALTH SERVICES 
              PROVIDERS.

    (a) In General.--Subpart A of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 (relating to nonrefundable 
personal credits) is amended by inserting after section 22 the 
following new section:

``SEC. 23. PRIMARY HEALTH SERVICES PROVIDERS.

    ``(a) Allowance of Credit.--There shall be allowed as a credit 
against the tax imposed by this chapter for the taxable year an amount 
equal to the product of--
            ``(1) the number of months during such taxable year--
                    ``(A) during which the taxpayer is a qualified 
                primary health services provider, and
                    ``(B) which are within the taxpayer's mandatory 
                service period, and
            ``(2) $1,000 ($500 in the case of a qualified practitioner 
        who is not a physician).
    ``(b) Qualified Primary Health Services Provider.--For purposes of 
this section, the term `qualified primary health services provider' 
means, with respect to any month, any qualified practitioner who--
            ``(1) has in effect a certification by the Bureau as a 
        provider of primary health services and such certification is, 
        when issued, for a health professional shortage area in which 
        the qualified practitioner is commencing the providing of 
        primary health services,
            ``(2) is providing primary health services full time in the 
        health professional shortage area identified in such 
        certification, and
            ``(3) has not received a scholarship under the National 
        Health Service Corps Scholarship Program or any loan repayments 
        under the National Health Service Corps Loan Repayment Program.
For purposes of paragraph (2) and subsection (e)(3), a provider shall 
be treated as providing services in a health professional shortage area 
when such area ceases to be such an area if it was such an area when 
the provider commenced providing services in the area.
    ``(c) Mandatory Service Period.--For purposes of this section, the 
term `mandatory service period' means the period of 60 consecutive 
calendar months beginning with the first month the taxpayer is a 
qualified primary health services provider. A taxpayer shall not have 
more than 1 mandatory service period.
    ``(d) Definitions and Special Rules.--For purposes of this 
section--
            ``(1) Bureau.--The term `Bureau' means the Bureau of 
        Primary Health Care, Health Resources and Services 
        Administration of the United States Public Health Service.
            ``(2) Qualified practitioner.--The term `qualified 
        practitioner' means a physician, a physician assistant, a nurse 
        practitioner, or a certified nurse-midwife.
            ``(3) Physician.--The term `physician' has the meaning 
        given to such term by section 1861(r) of the Social Security 
        Act.
            ``(4) Physician assistant; nurse practitioner.--The terms 
        `physician assistant' and `nurse practitioner' have the 
        meanings given to such terms by section 1861(aa)(5) of the 
        Social Security Act.
            ``(5) Certified nurse-midwife.--The term `certified nurse-
        midwife' has the meaning given to such term by section 
        1861(gg)(2) of the Social Security Act.
            ``(6) Primary health services.--The term `primary health 
        services' has the meaning given such term by section 330(b)(1) 
        of the Public Health Service Act.
            ``(7) Health professional shortage area.--The term `health 
        professional shortage area' has the meaning given such term by 
        section 332(a)(1)(A) of the Public Health Service Act.
    ``(e) Recapture of Credit.--
            ``(1) In general.--If there is a recapture event during any 
        taxable year, then--
                    ``(A) no credit shall be allowed under subsection 
                (a) for such taxable year and any succeeding taxable 
                year, and
                    ``(B) the tax of the taxpayer under this chapter 
                for such taxable year shall be increased by an amount 
                equal to the product of--
                            ``(i) the applicable percentage, and
                            ``(ii) the aggregate unrecaptured credits 
                        allowed to such taxpayer under this section for 
                        all prior taxable years.
            ``(2) Applicable recapture percentage.--
                    ``(A) In general.--For purposes of this subsection, 
                the applicable recapture percentage shall be determined 
                from the following table:

                    ``If the recapture
                                                  The applicable recap-
                      event occurs during:
                                                    true percentage is:
                            Months 1-24..............           100    
                            Months 25-36.............            75    
                            Months 37-48.............            50    
                            Months 49-60.............            25    
                            Month 61 or thereafter...            0.    
                    ``(B) Timing.--For purposes of subparagraph (A), 
                month 1 shall begin on the first day of the mandatory 
                service period.
            ``(3) Recapture event defined.--
                    ``(A) In general.--For purposes of this subsection, 
                the term `recapture event' means the failure of the 
                taxpayer to be a qualified primary health services 
                provider for any month during the taxpayer's mandatory 
                service period.
                    ``(B) Secretarial waiver.--The Secretary, in 
                consultation with the Secretary of Health and Human 
                Services, may waive any recapture event caused by 
                extraordinary circumstances.
            ``(4) No credits against tax; minimum tax.--Any increase in 
        tax under this subsection shall not be treated as a tax imposed 
        by this chapter for purposes of determining the amount of any 
        credit under subpart A, B, or D of this part or for purposes of 
        section 55.''
    (b) Clerical Amendment.--The table of sections for subpart A of 
part IV of subchapter A of chapter 1 of such Code is amended by 
inserting after the item relating to section 22 the following new item:

                              ``Sec. 23. Primary health services 
                                        providers.''
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1994.

SEC. 4002. EXPENSING OF MEDICAL EQUIPMENT.

    (a) In General.--Paragraph (1) of section 179(b) of the Internal 
Revenue Code of 1986 (relating to dollar limitation on expensing of 
certain depreciable business assets) is amended to read as follows:
            ``(1) Dollar limitation.--
                    ``(A) General rule.--The aggregate cost which may 
                be taken into account under subsection (a) for any 
                taxable year shall not exceed $17,500.
                    ``(B) Health care property.--The aggregate cost 
                which may be taken into account under subsection (a) 
                shall be increased by the lesser of--
                            ``(i) the cost of section 179 property 
                        which is health care property placed in service 
                        during the taxable year, or
                            ``(ii) $10,000.''
    (b)  Definition.--Section 179(d) of such Code (relating to 
definitions) is amended by adding at the end the following new 
paragraph:
            ``(11) Health care property.--For purposes of this section, 
        the term `health care property' means section 179 property--
                    ``(A) which is medical equipment used in the 
                screening, monitoring, observation, diagnosis, or 
                treatment of patients in a laboratory, medical, or 
                hospital environment,
                    ``(B) which is owned (directly or indirectly) and 
                used by a physician (as defined in section 1861(r) of 
                the Social Security Act) in the active conduct of such 
                physician's full-time trade or business of providing 
                primary health services (as defined in section 
                330(b)(1) of the Public Health Service Act) in a health 
                professional shortage area (as defined in section 
                332(a)(1)(A) of the Public Health Service Act), and
                    ``(C) substantially all the use of which is in such 
                area.''
    (c) Recapture.--Paragraph (10) of section 179(d) of such Code is 
amended by inserting before the period ``and with respect to any health 
care property which ceases (other than by an area failing to be treated 
as a health professional shortage area) to be health care property at 
any time''.
    (d) Effective Date.--The amendments made by this section shall 
apply to property placed in service in taxable years beginning after 
December 31, 1994.

SEC. 4003. EXPANDED SERVICES FOR MEDICALLY UNDERSERVED INDIVIDUALS.

    (a) In General.--Subpart I of part D of title III of the Public 
Health Service Act (42 U.S.C. 254b et seq.) (as amended by section 313) 
is amended by adding at the end the following new section:

``SEC. 330B. EXPANDED SERVICES FOR MEDICALLY UNDERSERVED INDIVIDUALS.

    ``(a) Establishment of Health Services Access Program.--From 
amounts appropriated under this section, the Secretary shall, acting 
through the Bureau of Health Care Delivery Assistance, award grants 
under this section to federally qualified health centers (hereinafter 
referred to in this section as `FQHC's') and other entities and 
organizations submitting applications under this section (as described 
in subsection (c)) for the purpose of providing access to services for 
medically underserved populations (as defined in section 330(b)(3)) or 
in high impact areas (as defined in section 329(a)(5)) not currently 
being served by a FQHC.
    ``(b) Eligibility for Grants.--
            ``(1) In general.--The Secretary shall award grants under 
        this section to entities or organizations described in this 
        paragraph and paragraph (2) which have submitted a proposal to 
        the Secretary to expand such entities or organizations 
        operations (including expansions to new sites (as determined 
        necessary by the Secretary)) to serve medically underserved 
        populations or high impact areas not currently served by a FQHC 
        and which--
                    ``(A) have as of January 1, 1991, been certified by 
                the Secretary as a FQHC under section 1905(l)(2)(B) of 
                the Social Security Act; or
                    ``(B) have submitted applications to the Secretary 
                to qualify as FQHC's under such section 1905(l)(2)(B); 
                or
                    ``(C) have submitted a plan to the Secretary which 
                provides that the entity will meet the requirements to 
                qualify as a FQHC when operational.
            ``(2) Non fqhc entities.--
                    ``(A) Eligibility.--The Secretary shall also make 
                grants under this section to public or private 
                nonprofit agencies, health care entities or 
                organizations which meet the requirements necessary to 
                qualify as a FQHC except, the requirement that such 
                entity have a consumer majority governing board and 
                which have submitted a proposal to the Secretary to 
                provide those services provided by a FQHC as defined in 
                section 1905(l)(2)(B) of the Social Security Act and 
                which are designed to promote access to primary care 
                services or to reduce reliance on hospital emergency 
                rooms or other high cost providers of primary health 
                care services, provided such proposal is developed by 
                the entity or organizations (or such entities or 
                organizations acting in a consortium in a community) 
                with the review and approval of the Governor of the 
                State in which such entity or organization is located.
                    ``(B) Limitation.--The Secretary shall provide in 
                making grants to entities or organizations described in 
                this paragraph that no more than 10 percent of the 
                funds provided for grants under this section shall be 
                made available for grants to such entities or 
                organizations.
    ``(c) Application Requirements.--
            ``(1) In general.--In order to be eligible to receive a 
        grant under this section, a FQHC or other entity or 
        organization must submit an application in such form and at 
        such time as the Secretary shall prescribe and which meets the 
        requirements of this subsection.
            ``(2) Requirements.--An application submitted under this 
        section must provide--
                    ``(A)(i) for a schedule of fees or payments for the 
                provision of the services provided by the entity 
                designed to cover its reasonable costs of operations; 
                and
                    ``(ii) for a corresponding schedule of discounts to 
                be applied to such fees or payments, based upon the 
                patient's ability to pay (determined by using a sliding 
                scale formula based on the income of the patient);
                    ``(B) assurances that the entity or organization 
                provides services to persons who are eligible for 
                benefits under title XVIII of the Social Security Act, 
for medical assistance under title XIX of such Act or for assistance 
for medical expenses under any other public assistance program or 
private health insurance program; and
                    ``(C) assurances that the entity or organization 
                has made and will continue to make every reasonable 
                effort to collect reimbursement for services--
                            ``(i) from persons eligible for assistance 
                        under any of the programs described in 
                        subparagraph (B); and
                            ``(ii) from patients not entitled to 
                        benefits under any such programs.
    ``(d) Limitations on Use of Funds.--
            ``(1) In general.--From the amounts awarded to an entity or 
        organization under this section, funds may be used for purposes 
        of planning but may only be expended for the costs of--
                    ``(A) assessing the needs of the populations or 
                proposed areas to be served;
                    ``(B) preparing a description of how the needs 
                identified will be met; and
                    ``(C) development of an implementation plan that 
                addresses--
                            ``(i) recruitment and training of 
                        personnel; and
                            ``(ii) activities necessary to achieve 
                        operational status in order to meet FQHC 
                        requirements under 1905(l)(2)(B) of the Social 
                        Security Act.
            ``(2) Recruiting, training and compensation of staff.--From 
        the amounts awarded to an entity or organization under this 
        section, funds may be used for the purposes of paying for the 
        costs of recruiting, training and compensating staff (clinical 
        and associated administrative personnel (to the extent such 
        costs are not already reimbursed under title XIX of the Social 
        Security Act or any other State or Federal program)) to the 
        extent necessary to allow the entity to operate at new or 
        expanded existing sites.
            ``(3) Facilities and equipment.--From the amounts awarded 
        to an entity or organization under this section, funds may be 
        expended for the purposes of acquiring facilities and equipment 
        but only for the cost of--
                    ``(A) construction of new buildings (to the extent 
                that new construction is found to be the most cost-
                efficient approach by the Secretary);
                    ``(B) acquiring, expanding, and modernizing of 
                existing facilities;
                    ``(C) purchasing essential (as determined by the 
                Secretary) equipment; and
                    ``(D) amortization of principal and payment of 
                interest on loans obtained for purposes of site 
                construction, acquisition, modernization, or expansion, 
                as well as necessary equipment.
            ``(4) Services.--From the amounts awarded to an entity or 
        organization under this section, funds may be expended for the 
        payment of services but only for the costs of--
                    ``(A) providing or arranging for the provision of 
                all services through the entity necessary to qualify 
                such entity as a FQHC under section 1905(l)(2)(B) of 
                the Social Security Act;
                    ``(B) providing or arranging for any other service 
                that a FQHC may provide and be reimbursed for under 
                title XIX of such Act; and
                    ``(C) providing any unreimbursed costs of providing 
                services as described in section 330(a) to patients.
    ``(e) Priorities in the Awarding of Grants.--
            ``(1) Certified fqhc's.--The Secretary shall give priority 
        in awarding grants under this section to entities which have, 
as of January 1, 1991, been certified as a FQHC under section 
1905(l)(2)(B) of the Social Security Act and which have submitted a 
proposal to the Secretary to expand their operations (including 
expansion to new sites) to serve medically underserved populations for 
high impact areas not currently served by a FQHC. The Secretary shall 
give first priority in awarding grants under this section to those 
FQHCs or other entities which propose to serve populations with the 
highest degree of unmet need, and which can demonstrate the ability to 
expand their operations in the most efficient manner.
            ``(2) Qualified fqhc's.--The Secretary shall give second 
        priority in awarding grants to entities which have submitted 
        applications to the Secretary which demonstrate that the entity 
        will qualify as a FQHC under section 1905(l)(2)(B) of the 
        Social Security Act before it provides or arranges for the 
        provision of services supported by funds awarded under this 
        section, and which are serving or proposing to serve medically 
        underserved populations or high impact areas which are not 
        currently served (or proposed to be served) by a FQHC.
            ``(3) Expanded services and projects.--The Secretary shall 
        give third priority in awarding grants in subsequent years to 
        those FQHCs or other entities which have provided for expanded 
        services and project and are able to demonstrate that such 
        entity will incur significant unreimbursed costs in providing 
        such expanded services.
    ``(f) Return of Funds to Secretary for Costs Reimbursed From Other 
Sources.--To the extent that an entity or organization receiving funds 
under this section is reimbursed from another source for the provision 
of services to an individual, and does not use such increased 
reimbursement to expand services furnished, areas served, to compensate 
for costs of unreimbursed services provided to patients, or to promote 
recruitment, training, or retention of personnel, such excess revenues 
shall be returned to the Secretary.
    ``(g) Termination of Grants.--
            ``(1) Failure to meet fqhc requirements.--
                    ``(A) In general.--With respect to any entity that 
                is receiving funds awarded under this section and which 
                subsequently fails to meet the requirements to qualify 
                as a FQHC under section 1905(l)(2)(B) or is an entity 
                that is not required to meet the requirements to 
                qualify as a FQHC under section 1905(l)(2)(B) of the 
                Social Security Act but fails to meet the requirements 
                of this section, the Secretary shall terminate the 
                award of funds under this section to such entity.
                    ``(B) Notice.--Prior to any termination of funds 
                under this section to an entity, the entities shall be 
                entitled to 60 days prior notice of termination and, as 
                provided by the Secretary in regulations, an 
                opportunity to correct any deficiencies in order to 
                allow the entity to continue to receive funds under 
                this section.
            ``(2) Requirements.--Upon any termination of funding under 
        this section, the Secretary may (to the extent practicable)--
                    ``(A) sell any property (including equipment) 
                acquired or constructed by the entity using funds made 
                available under this section or transfer such property 
                to another FQHC, provided, that the Secretary shall 
                reimburse any costs which were incurred by the entity 
                in acquiring or constructing such property (including 
                equipment) which were not supported by grants under 
                this section; and
                    ``(B) recoup any funds provided to an entity 
                terminated under this section.
    ``(h) Authorization of Appropriations.--There are authorized to be 
appropriated such sums as may be necessary for each of the fiscal years 
1996 through 1999 to carry out this section.''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
become effective with respect to services furnished by a federally 
qualified health center or other qualifying entity described in this 
section beginning on or after October 1, 1996.

SEC. 4004. INCREASE IN NATIONAL HEALTH SERVICE CORPS AND AREA HEALTH 
              EDUCATION CENTER FUNDING.

    (a) National Health Service Corps.--Section 338H(b)(1) of the 
Public Health Service Act (42 U.S.C. 254q(b)(1)) is amended--
            (1) by striking ``1991, and'' and inserting ``1991,''; and
            (2) by striking ``through 2000'' and inserting ``, 1994, 
        and 1995, and $20,000,000 for each of the fiscal years 1996 
        through 2000''.
    (b) Area Health Education Centers.--Section 746(i)(1) of such Act 
(42 U.S.C. 293j(i)(1)) is amended--
            (1) in subparagraph (A), by striking ``1995'' and inserting 
        ``1995, and $20,000,000 for each of the fiscal years 1996 
        through 2000''; and
            (2) in subparagraph (C), by striking ``and 1995'' and 
        inserting ``1995, and $20,000,000 for each of the fiscal years 
        1996 through 2000''.

SEC. 4005. ASSISTANT SECRETARY FOR RURAL HEALTH.

    (a) Appointment of Assistant Secretary.--
            (1) In general.--Section 711(a) of the Social Security Act 
        (42 U.S.C. 912(a)) is amended--
                    (A) by striking ``by a Director, who shall advise 
                the Secretary'' and inserting ``by an Assistant 
                Secretary for Rural Health (in this section referred to 
                as the `Assistant Secretary'), who shall report 
                directly to the Secretary''; and
                    (B) by adding at the end the following new 
                sentence: ``The Office shall not be a component of any 
                other office, service, or component of the 
                Department.''.
            (2) Conforming amendments.--(A) Section 711(b) of the 
        Social Security Act (42 U.S.C. 912(b)) is amended by striking 
        ``the Director'' and inserting ``the Assistant Secretary''.
            (B) Section 338J(a) of the Public Health Service Act (42 
        U.S.C. 254r(a)) is amended by striking ``Director of the Office 
        of Rural Health Policy'' and inserting ``Assistant Secretary 
        for Rural Health''.
            (C) Section 464T(b) of the Public Health Service Act (42 
        U.S.C. 285p-2(b)) is amended in the matter preceding paragraph 
        (1) by striking ``Director of the Office of Rural Health 
        Policy'' and inserting ``Assistant Secretary for Rural 
        Health''.
            (D) Section 6213 of the Omnibus Budget Reconciliation Act 
        of 1989 (42 U.S.C. 1395x note) is amended in subsection (e)(1) 
        by striking ``Director of the Office of Rural Health Policy'' 
        and inserting ``Assistant Secretary for Rural Health''.
            (E) Section 403 of the Ryan White Comprehensive AIDS 
        Resources Emergency Act of 1990 (42 U.S.C. 300ff-11 note) is 
        amended in the matter preceding paragraph (1) of subsection (a) 
        by striking ``Director of the Office of Rural Health Policy'' 
        and inserting ``Assistant Secretary for Rural Health''.
            (3) Amendment to the executive schedule.--Section 5315 of 
        title 5, United States Code, is amended by striking ``Assistant 
        Secretaries of Health and Human Services (5)'' and inserting 
        ``Assistant Secretaries of Health and Human Services (6)''.
    (b) Expansion of Duties.--Section 711(a) of the Social Security Act 
(42 U.S.C. 912(a)) is amended by striking ``and access to (and the 
quality of) health care in rural areas'' and inserting ``access to, and 
quality of, health care in rural areas, and reforms to the health care 
system and the implications of such reforms for rural areas''.
    (c) Effective Date.--The amendments made by this section shall take 
effect on January 1, 1996.

SEC. 4006. STUDY ON TRANSITIONAL MEASURES TO ENSURE ACCESS.

    (a) In General.--The Prospective Payment Assessment Commission 
shall conduct a study concerning the need for legislation or 
regulations to ensure that vulnerable populations have adequate access 
to health plans and health care providers and services.
    (b) Report.--Not later than 1 year after the date of enactment of 
this Act, the Prospective Payment Assessment Commission shall prepare 
and submit to Congress a report concerning the findings and 
recommendations of the Commission based on the study conducted under 
subsection (a).

                TITLE V--QUALITY AND CONSUMER PROTECTION

              Subtitle A--Quality Improvement Foundations

SEC. 5001. QUALITY IMPROVEMENT FOUNDATIONS.

    (a) Establishment.--
            (1) Grant process.--The Secretary shall, through a 
        competitive grantmaking process, award demonstration grants for 
        the establishment and operation of quality improvement 
        foundations. In awarding such grants the Secretary shall 
        consider geographic diversity, regional economics of scale, 
        population density, regional needs and other regional 
        differences.
            (2) Eligible applicants.--To be eligible to receive a grant 
        for the establishment of a quality improvement foundation under 
        paragraph (1), and applicant entity shall--
                    (A) be a not-for-profit entity; and
                    (B) have a board that includes health care 
                providers, representatives from relevant institutions 
                of higher education in the region, consumers, 
                purchasers of health care, and other interested 
                parties.
    (b) Duties.--
            (1) In general.--Each quality improvement foundation shall 
        carry out the duties described in paragraph (2). The foundation 
        shall establish a program of activities incorporating such 
        duties and shall be able to demonstrate the involvement of a 
        broad cross-section of the providers and health care 
        institutions throughout the State or region.
            (2) Duties described.--The duties described in this 
        paragraph include the following:
                    (A) Collaboration with and technical assistance to 
                providers and health plans in ongoing efforts to 
                improve the quality of health care provided to 
                individuals in the State.
                    (B) Population-based monitoring of practice 
                patterns and patient outcomes, on an other than a case-
                by-case basis.
                    (C) Developing programs in lifetime learning for 
                health professionals to improve the quality of health 
                care by ensuring that health professionals remain 
                informed about new knowledge, acquire new skills, and 
                adopt new roles as technology and societal demands 
                change.
                    (D) Disseminating information about successful 
                quality improvement programs, practice guidelines, and 
                research findings, including information on innovative 
                staffing of health professionals.
                    (E) Assist in developing innovative patient 
                education systems that enhance patient involvement in 
                decisions relating to their health care, including an 
                emphasis on shared decisionmaking between patients and 
                health care providers.
                    (F) Issuing a report to the public regarding the 
                foundation's activities for the previous year including 
                areas of success during the previous year and areas for 
                opportunities in improving health outcomes for the 
                community, and the adoption of guidelines.
    (c) Restrictions on Disclosure.--The restrictions on disclosure of 
information under section 1160 of the Social Security Act shall apply 
to quality improvement foundations under this section, except that--
            (1) such foundations shall make data available to qualified 
        organizations and individuals for research for public benefit 
        under the terms set forth in section 5218;
            (2) individuals and qualified organizations shall meet 
        standards consistent with the Public Health Service Act and 
        policies regarding the conduct of scientific research, 
        including provisions related to confidentiality, privacy, 
protection of humans and shall pay reasonable costs for data; and
            (3) such foundations may exchange information with other 
        quality improvement foundations.
    (d) Authorization of Appropriations.--For the purpose of carrying 
out this section, there are authorized to be appropriated such sums as 
may be necessary for each of the fiscal years 1996 through 2000.

               Subtitle B--Administrative Simplification

                    PART 1--PURPOSE AND DEFINITIONS

SEC. 5101. PURPOSE.

    It is the purpose of this subtitle to improve the efficiency and 
effectiveness of the health care system, including the medicare program 
under title XVIII of the Social Security Act and the medicaid program 
under title XIX of such Act, by encouraging the development of a health 
information network through the establishment of standards and 
requirements for the electronic transmission of certain health 
information.

SEC. 5102. DEFINITIONS.

    For purposes of this subtitle:
            (1) Certified.--The term ``certified'' means, with respect 
        to a health information network service, that such service is 
        certified under section 5141.
            (2) Code set.--The term ``code set'' means any set of codes 
        used for encoding data elements, such as tables of terms, 
        medical concepts, medical diagnostic codes, or medical 
        procedure codes.
            (3) Coordination of benefits.--The term ``coordination of 
        benefits'' means determining and coordinating the financial 
        obligations of health plans when health care benefits are 
        payable under two or more health plans.
            (4) Health care provider.--The term ``health care 
        provider'' includes a provider of services (as defined in 
        section 1861(u) of the Social Security Act), a provider of 
        medical or other health services (as defined in section 1861(s) 
        of the Social Security Act), and any other person furnishing 
        health care services or supplies.
            (5) Health information.--The term ``health information'' 
        means any information, whether oral or recorded in any form or 
        medium that--
                    (A) is created or received by a health care 
                provider, health plan, health oversight agency (as 
                defined in section 5202), health researcher, public 
                health authority (as defined in section 5202), 
                employer, life insurer, school or university, or 
                certified health information network service; and
                    (B) relates to the past, present, or future 
                physical or mental health or condition of an 
                individual, the provision of health care to an 
                individual, or the past, present, or future payment for 
                the provision of health care to an individual.
            (6) Health information network.--The term ``health 
        information network'' means the health information system that 
        is formed through the application of the requirements and 
        standards established under this subtitle.
            (7) Health information protection organization.--The term 
        ``health information protection organization'' means a private 
        entity or an entity operated by a State that accesses standard 
        data elements of health information through the health 
        information network and--
                    (A) processes such information into non-
                identifiable health information and discloses such 
                information;
                    (B) if such information is protected health 
                information (as defined in section 5202), discloses 
                such information only in accordance with subtitle C; 
                and
                    (C) may store such information.
            (8) Health information network service.--The term ``health 
        information network service''--
                    (A) means a private entity or an entity operated by 
                a State that enters into contracts to--
                            (i) process or facilitate the processing of 
                        nonstandard data elements of health information 
                        into standard data elements;
                            (ii) provide the means by which persons are 
                        connected to the health information network for 
                        purposes of meeting the requirements of this 
                        subtitle, including the holding of standard 
                        data elements of health information;
                            (iii) provide authorized access to health 
                        information through the health information 
                        network; or
                            (iv) provide specific information 
                        processing services, such as automated 
                        coordination of benefits and claims transaction 
                        routing; and
                    (B) includes a health information protection 
                organization.
            (9) Health plan.--The term ``health plan'' has the meaning 
        given such term in section 1021(a).
            (10) Non-identifiable health information.--The term ``non-
        identifiable health information'' means health information that 
        is not protected health information as defined in section 5202.
            (11) Patient medical record information.--The term 
        ``patient medical record information'' means health information 
        derived from a clinical encounter that relates to the physical 
        or mental condition of an individual.
            (12) Standard.--The term ``standard'' when referring to an 
        information transaction or to data elements of health 
        information means the transaction or data elements meet any 
        standard adopted by the Secretary under part 2 that applies to 
        such information transaction or data elements.

    PART 2--STANDARDS FOR DATA ELEMENTS AND INFORMATION TRANSACTIONS

SEC. 5111. GENERAL REQUIREMENTS ON SECRETARY.

    (a) In General.--The Secretary shall adopt standards and 
modifications to standards under this subtitle that are--
            (1) consistent with the objective of reducing the costs of 
        providing and paying for health care;
            (2) in use and generally accepted or developed or modified 
        by the standards setting organizations accredited by the 
        American National Standard Institute (ANSI); and
            (3) consistent with the objective of protecting the privacy 
        of protected health information (as defined in section 5202).
    (b) Initial Standards.--The Secretary may develop an expedited 
process for the adoption of initial standards under this subtitle.
    (c) Failsafe.--If the Secretary is unable to adopt standards or 
modified standards in accordance with subsection (a) that meet the 
requirements of this subtitle--
            (1) the Secretary may develop or modify such standards and, 
        after providing public notice and an adequate period for public 
        comment, adopt such standards; and
            (2) if the Secretary adopts standards under paragraph (1), 
        the Secretary shall submit a report to the appropriate 
        committees of Congress on the actions taken by the Secretary 
        under this subsection.
    (d) Assistance to the Secretary.--In complying with the 
requirements of this subtitle, the Secretary shall rely on 
recommendations of the Health Information Advisory Committee 
established under section 5163 and shall consult with appropriate 
Federal agencies.

SEC. 5112. STANDARDS FOR TRANSACTIONS AND DATA ELEMENTS.

    (a) In General.--The Secretary shall adopt standards for 
transactions and data elements to make uniform and able to be exchanged 
electronically health information that is--
            (1) appropriate for the following financial and 
        administrative transactions: claims (including coordination of 
        benefits) or equivalent encounter information, claims 
        attachments, enrollment and disenrollment, eligibility, payment 
        and remittance advice, premium payments, first report of 
        injury, claims status, and referral certification and 
        authorization;
            (2) related to other transactions determined appropriate by 
        the Secretary consistent with the goals of improving the health 
        care system and reducing administrative costs; and
            (3) related to research inquiries by a health researcher 
        with respect to information standardized under paragraph (1) or 
        (2).
    (b) Unique Health Identifiers.--The Secretary shall adopt standards 
providing for a standard unique health identifier for each individual, 
employer, health plan, and health care provider for use in the health 
care system.
    (c) Code Sets.--
            (1) In general.--The Secretary, in consultation with 
        experts from the private sector and Federal agencies, shall--
                    (A) select code sets for appropriate data elements 
                from among the code sets that have been developed by 
                private and public entities; or
                    (B) establish code sets for such data elements if 
                no code sets for the data elements have been developed.
            (2) Distribution.--The Secretary shall establish efficient 
        and low-cost procedures for distribution of code sets and 
        modifications made to such code sets under section 5113(b).
    (d) Electronic Signature.--The Secretary, in coordination with the 
Secretary of Commerce, shall promulgate regulations specifying 
procedures for the electronic transmission and authentication of 
signatures, compliance with which will be deemed to satisfy Federal and 
State statutory requirements for written signatures with respect to 
information transactions required by this subtitle and written 
signatures on medical records and prescriptions.
    (e) Special Rules--
            (1) Coordination of benefits.--Any standards adopted under 
        subsection (a) that relate to coordination of benefits shall 
        provide that a claim for reimbursement for medical services 
        furnished is tested by an algorithm specified by the Secretary 
        against all records that are electronically available through 
        the health information network relating to enrollment and 
        eligibility for the individual who received such services to 
        determine any primary and secondary obligors for payment.
            (2) Clinical laboratory tests.--
                    (A) In general.--Except as provided in subparagraph 
                (B), any standards adopted under subsection (a) shall 
                provide that claims for clinical laboratory tests for 
                which benefits are payable by a plan sponsor shall be 
                submitted directly by the person or entity that 
                performed (or supervised the performance of) the tests 
                to the sponsor in a manner consistent with (and subject 
                to such exceptions as are provided under) the 
                requirement for direct submission of such claims under 
                the medicare program.
                    (B) Exception.--Payment for a clinical laboratory 
                test may be made--
                            (i) to a physician with whom the physician 
                        who performed or supervised the test shares a 
                        practice; or
                            (ii) on a pre-paid, at-risk basis to the 
                        person or entity who performs or supervises the 
                        test.

SEC. 5113. TIMETABLES FOR ADOPTION OF STANDARDS.

    (a) Initial Standards.--The Secretary shall adopt standards 
relating to the data elements and transactions for the information 
described in section 5112(a) not later than 9 months after the date of 
the enactment of this subtitle (except in the case of standards for 
claims attachments which shall be adopted not later than 24 months 
after the date of the enactment of this subtitle).
    (b) Additions and Modifications to Standards.--
            (1) In general.--Except as provided in paragraph (2), the 
        Secretary shall review the standards adopted under this 
        subtitle and shall adopt additional or modified standards as 
        determined appropriate, but no more frequently than once every 
        6 months. Any addition or modification to standards shall be 
        completed in a manner which minimizes the disruption and cost 
        of compliance.
            (2) Special rules.--
                    (A) First 12-month period.--Except with respect to 
                additions and modifications to code sets under 
                subparagraph (B), the Secretary shall not adopt any 
                modifications to standards adopted under this subtitle 
                during the 12-month period beginning on the date such 
                standards are adopted unless the Secretary determines 
                that a modification is necessary in order to permit 
                compliance with requirements relating to the standards.
                    (B) Additions and modifications to code sets.--
                            (i) In general.--The Secretary shall ensure 
                        that procedures exist for the routine 
                        maintenance, testing, enhancement, and 
                        expansion of code sets.
                            (ii) Additional rules.--If a code set is 
                        modified under this subsection, the modified 
                        code set shall include instructions on how data 
                        elements that were encoded prior to the 
                        modification are to be converted or translated 
                        so as to preserve the value of the data 
                        elements. Any modification to a code set under 
                        this subsection shall be implemented in a 
                        manner that minimizes the disruption and cost 
                        of complying with such modification.
    (c) Evaluation of Standards.--The Secretary may establish a process 
to measure or verify the consistency of standards adopted or modified 
under this subtitle. Such process may include demonstration projects 
and analysis of the cost of implementing such standards and 
modifications.

     PART 3--REQUIREMENTS WITH RESPECT TO CERTAIN TRANSACTIONS AND 
                              INFORMATION

SEC. 5121. REQUIREMENTS ON HEALTH PLANS.

    (a) In General.--If a person desires to conduct any of the 
transactions described in section 5112(a) with a health plan as a 
standard transaction, the health plan shall conduct such standard 
transaction in a timely manner and the information transmitted or 
received in connection with such transaction shall be in the form of 
standard data elements.
    (b) Satisfaction of Requirements.--A health plan may satisfy the 
requirement imposed on such plan under subsection (a) by directly 
transmitting standard data elements or submitting nonstandard data 
elements to a certified health information network service for 
processing into standard data elements and transmission.

SEC. 5122. TIMETABLES FOR COMPLIANCE WITH REQUIREMENTS.

    (a) Initial Compliance.--Not later than 12 months after the date on 
which standards are adopted under part 2 with respect to any type of 
transaction or data elements, a health plan shall comply with the 
requirements of this subtitle with respect to such transaction or data 
elements.
    (b) Compliance with Modified Standards.--
            (1) In general.--If the Secretary adopts a modified 
        standard under part 2, a health plan shall be required to 
        comply with the modified standard at such time as the Secretary 
        determines appropriate taking into account the time needed to 
        comply due to the nature and extent of the modification.
            (2) Special rule.--In the case of modifications to 
        standards that do not occur within the 12-month period 
        beginning on the date such standards are adopted, the time 
        determined appropriate by the Secretary under paragraph (1) 
        shall be no sooner than the last day of the 90-day period 
        beginning on the date such modified standard is adopted and no 
        later than the last day of the 12 month period beginning on the 
        date such modified standard is adopted.

                  PART 4--ACCESSING HEALTH INFORMATION

SEC. 5131. ACCESS FOR AUTHORIZED PURPOSES.

    (a) In General.--The Secretary shall adopt technical standards for 
appropriate persons, including health plans, health care providers, 
certified health information network services, health researchers, and 
Federal and State agencies, to locate and access the health information 
that is available through the health information network due to the 
requirements of this subtitle. Such technical standards shall ensure 
that any request to locate or access information shall be authorized 
under subtitle C.
    (b) Government Agencies.--
            (1) In general.--Certified Health information protection 
        organizations shall make available to a Federal or State agency 
        pursuant to a Federal Acquisition Regulation (or an equivalent 
        State system), any non-identifiable health information that is 
        requested by such agency.
            (2) Certain information available at low cost.--If a health 
        information protection organization described in paragraph (1) 
        needs information from a health plan in order to comply with a 
        request of a Federal or State agency that is necessary to 
        comply with a requirement under this Act, such plan shall make 
        such information available to such organization for a charge 
        that does not exceed the reasonable cost of transmitting the 
        information. An organization that receives information under 
        the preceding sentence shall, upon request from any certified 
        health information protection organization, make such 
        information available to such an organization for a charge that 
        does not exceed the reasonable cost of transmitting the 
        information.
    (c) Functional Separation.--The standards adopted by the Secretary 
under subsection (a) shall ensure that any health information disclosed 
under such subsection shall not, after such disclosure, be used or 
released for an administrative, regulatory, or law enforcement purpose 
unless such disclosure was made for such purpose.

SEC. 5132. RESPONDING TO ACCESS REQUESTS.

    (a) In General.--The Secretary shall adopt, and modify as 
appropriate, standards under which a health plan shall respond to 
requests for access to health information consistent with this subtitle 
and subtitle C.
    (b) Standards Described.--The standards under subsection (a) shall 
provide--
            (1) for a standard format under which a plan will respond 
        to each request either by satisfying the request or by 
        responding with a negative response, which may include an 
        explanation of the failure to satisfy the request; and
            (2) that a plan shall respond to a request in a timely 
        manner taking into account the age and amount of the 
        information being requested.
    (c) Length of Time Information Should Be Accessible.--The Secretary 
shall adopt standards with respect to the length of time any standard 
data elements for a type of health information should be accessible 
through the health information network.

SEC. 5133. TIMETABLES FOR ADOPTION OF STANDARDS AND COMPLIANCE.

    (a) Initial Standards.--The Secretary shall adopt standards under 
this part not later than 9 months after the date of the enactment of 
this subtitle and such standards shall be effective upon adoption.
    (b) Modifications to Standards.--The provisions of paragraphs (1) 
and (2)(A) of section 5114(b) shall apply to modifications to standards 
under this part.

   PART 5--STANDARDS AND CERTIFICATION FOR HEALTH INFORMATION NETWORK

SEC. 5141. STANDARDS AND CERTIFICATION FOR HEALTH INFORMATION NETWORK 
              SERVICES.

    (a) Standards for Operation.--The Secretary shall establish 
standards with respect to the operation of health information network 
services ensuring that--
            (1) such services have policies and security procedures 
        that are consistent with the privacy requirements under 
        subtitle C, including secure methods of access to and 
        transmission of data; and
            (2) such services, if they are part of a larger 
        organization, have policies and procedures in place which 
        isolate their activities with respect to processing information 
        in a manner that prevents unauthorized access to such 
        information by such larger organization.
    (b) Certification by the Secretary.--
            (1) Establishment.--Not later than 12 months after the date 
        of the enactment of this subtitle, the Secretary shall 
        establish a certification procedure for health information 
        network services which ensures that certified services are 
        qualified to meet the requirements of this subtitle.
            (2) Audits and reports.--The procedure established under 
        paragraph (1) shall provide for audits and reports as the 
        Secretary determines appropriate in order to monitor such 
        entity's compliance with the requirements of this subtitle.
    (c) Loss of Certification.--
            (1) Mandatory termination.--If a health information network 
        service violates a requirement imposed under subtitle C, its 
        certification under this section shall be terminated unless the 
        Secretary determines that appropriate corrective action has 
        been taken.
            (2) Discretionary termination.--If a health information 
        network service violates a requirement or standard imposed 
        under this subtitle and a penalty has been imposed under 
        section 5151, the Secretary shall review the certification of 
        such service and may terminate such certification.
    (d) Certification by Private Entities.--The Secretary may designate 
private entities to conduct the certification procedures established by 
the Secretary under this section. A health information network service 
certified by such an entity in accordance with such designation shall 
be considered to be certified by the Secretary.

SEC. 5142. ENSURING AVAILABILITY OF INFORMATION.

    The Secretary shall establish a procedure under which a health plan 
which does not have the ability to transmit standard data elements 
directly or does not have access to a certified health information 
network service shall be able to make health information available for 
disclosure as authorized by this subtitle.

                           PART 6--PENALTIES

SEC. 5151. GENERAL PENALTY FOR FAILURE TO COMPLY WITH REQUIREMENTS AND 
              STANDARDS.

    (a) In General.--Except as provided in subsection (b), the 
Secretary shall impose on any person that violates a requirement or 
standard imposed under this subtitle a penalty of not more than $1,000 
for each violation. The provisions of section 1128A of the Social 
Security Act (other than subsections (a) and (b) and the second 
sentence of subsection (f)) shall apply to the imposition of a civil 
money penalty under this subsection in the same manner as such 
provisions apply to the imposition of a penalty under section 1128A of 
the Social Security Act.
    (b) Limitations.--
            (1) Noncompliance not discovered.--A penalty may not be 
        imposed under subsection (a) if it is established to the 
        satisfaction of the Secretary that the person liable for the 
        penalty did not know, and by exercising reasonable diligence 
        would not have known, that such person failed to comply with 
        the requirement or standard described in subsection (a).
            (2) Failures due to reasonable cause.--
                    (A) In general.--Except as provided in subparagraph 
                (B), a penalty may not be imposed under subsection (a) 
                if--
                            (i) the failure to comply was due to 
                        reasonable cause and not to willful neglect; 
                        and
                            (ii) the failure to comply is corrected 
                        during the 30-day period beginning on the 1st 
                        date the person liable for the penalty knew, or 
                        by exercising reasonable diligence would have 
                        known, that the failure to comply occurred.
                    (B) Extension of period.--
                            (i) No penalty.--The period referred to in 
                        subparagraph (A)(ii) may be extended as 
                        determined appropriate by the Secretary based 
                        on the nature and extent of the failure to 
                        comply.
                            (ii) Assistance.--If the Secretary 
                        determines that a health plan failed to comply 
                        because such plan was unable to comply, the 
                        Secretary may provide technical assistance to 
                        such plan during the period described in clause 
                        (i). Such assistance shall be provided in any 
                        manner determined appropriate by the Secretary.
            (3) Reduction.--In the case of a failure to comply which is 
        due to reasonable cause and not to willful neglect, any penalty 
        under subsection (a) that is not entirely waived under 
        paragraph (2) may be waived to the extent that the payment of 
        such penalty would be excessive relative to the compliance 
        failure involved.

                    PART 7--MISCELLANEOUS PROVISIONS

SEC. 5161. EFFECT ON STATE LAW.

    (a) In General.--Except as provided in subsection (b), a provision, 
requirement, or standard under this subtitle shall supersede any 
contrary provision of State law, including--
            (1) a provision of State law that requires medical or 
        health plan records (including billing information) to be 
        maintained or transmitted in written rather than electronic 
        form, and
            (2) a provision of State law which provides for 
        requirements or standards that are more stringent than the 
        requirements or standards under this subtitle;
except where the Secretary determines that the provision is necessary 
to prevent fraud and abuse, with respect to controlled substances, or 
for other purposes.
    (b) Public Health Reporting.--Nothing in this subtitle shall be 
construed to invalidate or limit the authority, power, or procedures 
established under any law providing for the reporting of disease or 
injury, child abuse, birth, or death, public health surveillance, or 
public health investigation or intervention.

SEC. 5162. HEALTH INFORMATION CONTINUITY.

    (a) Health Plans.--If a health plan takes any action that would 
threaten the continued availability of standard data elements of health 
information held by such plan, such data elements shall be transferred 
to a health plan in accordance with procedures established by the 
Secretary.
    (b) Health Information Network Services.--If a certified health 
information network service loses its certified status or takes any 
action that would threaten the continued availability of the standard 
data elements of health information held by such service, such data 
elements shall be transferred to another such service, as designated by 
the Secretary.

SEC. 5163. HEALTH INFORMATION ADVISORY COMMITTEE.

    (a) Establishment.--There is established a committee to be known as 
the Health Information Advisory Committee.
    (b) Duties.--The committee shall--
            (1) provide assistance to the Secretary in complying with 
        the requirements imposed on the Secretary under this subtitle 
        and subtitle C; and
            (2) be generally responsible for advising the Secretary and 
        the Congress on the status and the future of the health 
        information network.
    (c) Membership.--
            (1) In general.--The committee shall consist of 15 members 
        to be appointed by the President not later than 60 days after 
        the date of the enactment of this subtitle. The President shall 
        designate 1 member as the Chair.
            (2) Expertise.--The membership of the committee shall 
        consist of individuals who are of recognized standing and 
        distinction in the areas of information systems, consumer 
        health, or privacy, and who possess the demonstrated capacity 
        to discharge the duties imposed on the committee.
            (3) Terms.--Each member of the committee shall be appointed 
        for a term of 5 years, except that the members first appointed 
        shall serve staggered terms such that the terms of no more than 
        3 members expire at one time.

SEC. 5164. AUTHORIZATION OF APPROPRIATIONS.

    There are authorized to be appropriated such sums as may be 
necessary to carry out the purposes of this subtitle.

               Subtitle C--Privacy of Health Information

                          PART 1--DEFINITIONS

SEC. 5201. DEFINITIONS.

    For purposes of this subtitle:
            (1) Protected health information.--The term ``protected 
        health information'' means any information, including 
        demographic information collected from an individual, whether 
        oral or recorded in any form or medium, that--
                    (A) is created or received by a health care 
                provider, health plan, health oversight agency, health 
                researcher, public health authority, employer, life 
                insurer, school or university, or certified health 
                information network service; and
                    (B) relates to the past, present, or future 
                physical or mental health or condition of an 
                individual, the provision of health care to an 
                individual, or the past, present, or future payment for 
                the provision of health care to an individual, and--
                            (i) identifies an individual; or
                            (ii) with respect to which there is a 
                        reasonable basis to believe that the 
                        information can be used to identify an 
                        individual.
            (2) Disclose.--The term ``disclose'', when used with 
        respect to protected health information, means to provide 
        access to the information, but only if such access is provided 
        to a person other than the individual who is the subject of the 
        information.
            (3) Health information trustee.--The term ``health 
        information trustee'' means--
                    (A) a health care provider, health plan, health 
                oversight agency, certified health information network 
                service, employer, life insurer, or school or 
                university insofar as it creates, receives, maintains, 
                uses, or transmits protected health information;
                    (B) any person who obtains protected health 
                information under section 5213, 5217, 5218, 5221, 5222, 
                5226, or 5231; and
                    (C) any employee or agent of a person covered under 
                subparagraphs (A) or (B).
            (4) Health oversight agency.--The term ``health oversight 
        agency'' means a person who--
                    (A) performs or oversees the performance of an 
                assessment, evaluation, determination, or investigation 
                relating to the licensing, accreditation, or 
                certification of health care providers; or
                    (B)(i) performs or oversees the performance of an 
                assessment, evaluation, determination, investigation, 
                or prosecution relating to the effectiveness of, 
                compliance with, or applicability of legal, fiscal, 
                medical, or scientific standards or aspects of 
                performance related to the delivery of, or payment for 
                health care, health services, equipment, or research or 
                relating to health care fraud or fraudulent claims 
                regarding health care, health services or equipment, or 
                related activities and items; and
                    (ii) is a public agency, acting on behalf of a 
                public agency, acting pursuant to a requirement of a 
                public agency, or carrying out activities under a 
                Federal or State law governing the assessment, 
                evaluation, determination, investigation, or 
                prosecution described in clause (i).
            (5) Public health authority.--The term ``public health 
        authority'' means an authority or instrumentality of the United 
        States, a State, or a political subdivision of a State that is 
        (A) responsible for public health matters; and (B) engaged in 
        such activities as injury reporting, public health 
        surveillance, and public health investigation or intervention.
            (6) Individual representative.--The term ``individual 
        representative'' means any individual legally empowered to make 
        decisions concerning the provision of health care to an 
        individual (where the individual lacks the legal capacity under 
        State law to make such decisions) or the administrator or 
        executor of the estate of a deceased individual.
            (7) Person.--The term ``person'' includes an authority of 
        the United States, a State, or a political subdivision of a 
        State.

                     PART 2--AUTHORIZED DISCLOSURES

                     Subpart A--General Provisions

SEC. 5206. GENERAL RULES REGARDING DISCLOSURE.

    (a) General Rule.--A health information trustee may disclose 
protected health information only for a purpose that is authorized 
under this subtitle.
    (b) Disclosure Within a Trustee.--A health information trustee may 
disclose protected health information to an officer, employee, or agent 
of the trustee for a purpose that is compatible with and related to the 
purpose for which the information was collected or received by that 
trustee.
    (c) Scope of Disclosure.--Every disclosure of protected health 
information by a health information trustee shall be limited to the 
minimum amount of information necessary to accomplish the purpose for 
which the information is disclosed.
    (d) No General Requirement to Disclose.--Nothing in this subtitle 
that permits a disclosure of health information shall be construed to 
require such disclosure.
    (e) Use and Redisclosure of Information.--Protected health 
information about an individual that is disclosed under this subtitle 
may not be used in, or disclosed to any person for use in, any 
administrative, civil, or criminal action or investigation directed 
against the individual unless the action or investigation arises out of 
or is directly related to the law enforcement inquiry for which the 
information was obtained.
    (f) Identification of Disclosed Information as Protected 
Information.--Except as provided in this subtitle, a health information 
trustee may not disclose protected health information unless such 
information is clearly identified as protected health information that 
is subject to this subtitle.
    (g) Information in Which Providers are Identified.--The Secretary 
may issue regulations protecting information identifying providers in 
order to promote the availability of health care services.

SEC. 5207. AUTHORIZATIONS FOR DISCLOSURE OF PROTECTED HEALTH 
              INFORMATION.

    A health information trustee may disclose protected health 
information pursuant to an authorization executed by the individual who 
is the subject of the information pursuant to regulations issued by the 
Secretary with regard to the form of such authorization, the 
information that must be provided to the individual for authorization, 
and the scope of the authorization.

SEC. 5208. CERTIFIED HEALTH INFORMATION NETWORK SERVICES.

    A health information trustee may disclose protected health 
information to a certified health information protection organization 
for the purpose of creating non-identifiable health information.

          Subpart B--Specific Disclosures Relating to Patient

SEC. 5211. DISCLOSURES FOR TREATMENT AND FINANCIAL AND ADMINISTRATIVE 
              TRANSACTIONS.

    (a) Health Care Treatment.--A health care provider, health plan, 
employer, or person who receives protected health information under 
section 5213, may disclose protected health information to a health 
care provider for the purpose of providing health care to an individual 
if the individual who is the subject of the information has been 
notified of the individual's right to object and has not previously 
objected in writing to the disclosure.
    (b) Disclosure for Financial and Administrative Purposes.--A health 
care provider or employer may disclose protected health information to 
a health care provider or health plan for the purpose of providing for 
the payment for, or reviewing the payment of, health care furnished to 
an individual.

SEC. 5212. NEXT OF KIN AND DIRECTORY INFORMATION.

    (a) Next of Kin.--A health care provider or person who receives 
protected health information under section 5213 may disclose protected 
health information to the next of kin, an individual representative of 
the individual who is the subject of the information, or an individual 
with whom that individual has a close personal relationship if--
            (1) the individual who is the subject of the information--
                    (A) has been notified of the individual's right to 
                object and has not objected to the disclosure;
                    (B) is not competent to be notified about the right 
                to object; or
                    (C) exigent circumstances exist such that it would 
                not be practicable to notify the individual of the 
                right to object; and
            (2) the information disclosed relates to health care 
        currently being provided to that individual.
    (b) Directory Information.--A health care provider and a person 
receiving protected health information under section 5213 may disclose 
protected health information to any person if--
            (1) the information does not reveal specific information 
        about the physical or mental condition of the individual who is 
        the subject of the information or health care provided to that 
        person;
            (2) the individual who is the subject of the information--
                    (A) has been notified of the individual's right to 
                object and has not objected to the disclosure;
                    (B) is not competent to be notified about the right 
                to object; or
                    (C) exigent circumstances exist such that it would 
                not be practicable to notify the individual of the 
                right to object; and
            (3) the information consists only of 1 or more of the 
        following items:
                    (A) The name of the individual who is the subject 
                of the information.
                    (B) If the individual who is the subject of the 
                information is receiving health care from a health care 
                provider on a premises controlled by the provider--
                            (i) the location of the individual on the 
                        premises; and
                            (ii) the general health status of the 
                        individual, described as critical, poor, fair, 
                        stable, or satisfactory or in terms denoting 
                        similar conditions.
    (c) Identification of Deceased Individual.--A health care provider, 
health plan, employer, or life insurer, may disclose protected health 
information if necessary to assist in the identification of a deceased 
individual.

SEC. 5213. EMERGENCY CIRCUMSTANCES.

    A health care provider, health plan, employer, or person who 
receives protected health information under this section may disclose 
protected health information in emergency circumstances where there is 
a reasonable belief that such information is needed to protect the 
health or safety of an individual from imminent harm.

   Subpart C--Disclosure for Oversight, Public Health, and Research 
                                Purposes

SEC. 5216. OVERSIGHT.

    (a) In General.--A health information trustee may disclose 
protected health information to a health oversight agency for an 
oversight function authorized by law.
    (b) Use in Action Against Individuals.--Notwithstanding section 
5206(e), protected health information about an individual that is 
disclosed under this section may be used in, or disclosed in, an 
administrative, civil, or criminal action or investigation directed 
against the individual who is the subject of the information if the 
action or investigation arises out of or is directly related to--
            (1) receipt of health care or payment for health care;
            (2) an action involving a fraudulent claim related to 
        health; or
            (3) an action involving a misrepresentation of the health 
        of the individual who is the subject of the information.

SEC. 5217. PUBLIC HEALTH.

    A health care provider, health plan, public health authority, 
employer, or person who receives protected health information under 
section 5213 may disclose protected health information to a public 
health authority or other person authorized by law for use in a legally 
authorized--
            (1) disease or injury reporting;
            (2) public health surveillance; or
            (3) public health investigation or intervention.

SEC. 5218. HEALTH RESEARCH.

    (a) In General.--A health information trustee may disclose 
protected health information to a health researcher if an institutional 
review board determines that the research project engaged in by the 
health researcher--
            (1) requires use of the protected health information for 
        the effectiveness of the project; and
            (2) is of sufficient importance to outweigh the intrusion 
        into the privacy of the individual who is the subject of the 
        information that would result from the disclosure.
    (b) Research Requiring Direct Contact.--A health care provider or 
health plan may disclose protected health information to a health 
researcher for a research project that includes direct contact with an 
individual who is the subject of protected health information if an 
institutional review board determines that direct contact is necessary 
and will be made in a manner that minimizes the risk of harm, 
embarrassment, or other adverse consequences to the individual.
    (c) Special Rule for Trustees other than Academic Centers or Health 
Care Facilities.--If a health researcher described in subsection (a) or 
(b) is not an academic center or a health care facility, the 
determinations required by an institutional review board shall be made 
by such a board that is certified by the Secretary.
    (d) Use of Health Information Network.--A health information 
trustee may disclose protected health information to a health 
researcher using the health information network only if the research 
project satisfies requirements established by the Secretary for 
protecting the confidentiality of information in the health information 
network.

Subpart D--Disclosure For Judicial, Administrative, and Law Enforcement 
                                Purposes

SEC. 5221. JUDICIAL AND ADMINISTRATIVE PURPOSES.

    A health care provider, health plan, health oversight agency, 
employer, or life insurer may disclose protected health information in 
connection with litigation or proceedings to which the individual who 
is the subject of the information--
            (1) is a party and in which the individual has placed the 
        individual's physical or mental condition in issue; or
            (2) is deceased and in which the individual's physical or 
        mental condition is in issue.

SEC. 5222. LAW ENFORCEMENT.

    A health care provider, health plan, health oversight agency, 
employer, life insurer, or person who receives protected health 
information under section 5213 may disclose protected health 
information to a law enforcement agency (other than a health oversight 
agency governed by section 5216) if the information is requested for 
use--
            (1) in an investigation or prosecution of a health 
        information trustee;
            (2) in the identification of a victim or witness in a law 
        enforcement inquiry;
            (3) in connection with the investigation of criminal 
        activity committed against the trustee or on premises 
        controlled by the trustee; or
            (4) in the investigation or prosecution of criminal 
        activity relating to or arising from the provision of health 
        care or payment for health care.

    Subpart E--Disclosure Pursuant to Government Subpoena or Warrant

SEC. 5226. GOVERNMENT SUBPOENAS AND WARRANTS.

    A health care provider, health plan, health oversight agency, 
employer, life insurer, or person who receives protected health 
information under section 5213 shall disclose protected health 
information under this section if the disclosure is pursuant to--
            (1) a subpoena issued under the authority of a grand jury;
            (2) an administrative subpoena or summons or a judicial 
        subpoena or warrant; or
            (3) an administrative subpoena or summons, a judicial 
        subpoena or warrant, or a grand jury subpoena, and the 
        disclosure otherwise meets the conditions of section 5216, 
        5217, 5218, 5221, or 5222.

SEC. 5227. ACCESS PROCEDURES FOR LAW ENFORCEMENT SUBPOENAS AND 
              WARRANTS.

    (a) Probable Cause Requirement.--A government authority may not 
obtain protected health information about an individual under paragraph 
(1) or (2) of section 5226 for use in a law enforcement inquiry unless 
there is probable cause to believe that the information is relevant to 
a legitimate law enforcement inquiry being conducted by the government 
authority.
    (b) Warrants.--A government authority that obtains protected health 
information about an individual under circumstances described in 
subsection (a) and pursuant to a warrant shall, not later than 30 days 
after the date the warrant was executed, serve the individual with, or 
mail to the last known address of the individual, a notice that 
protected health information about the individual was so obtained, 
together with a notice of the individual's right to challenge the 
warrant.
    (c) Subpoena or Summons.--Except as provided in subsection (d), a 
government authority may not obtain protected health information about 
an individual under circumstances described in subsection (a) and 
pursuant to a subpoena or summons unless a copy of the subpoena or 
summons has been served on the individual, if the identity of the 
individual is known, on or before the date of return of the subpoena or 
summons, together with notice of the individual's right to challenge 
the subpoena or summons. If the identity of the individual is not known 
at the time the subpoena or summons is served, the individual shall be 
served not later than 30 days thereafter, with notice that protected 
health information about the individual was so obtained together with 
notice of the individual's right to challenge the subpoena or summons.
    (d) Application for Delay.--
            (1) In general.--A government authority may apply ex parte 
        and under seal to an appropriate court to delay serving a 
        notice or copy of a warrant, subpoena, or summons required 
        under subsection (b) or (c).
            (2) Ex parte order.--The court shall enter an ex parte 
        order delaying or extending the delay of notice, an order 
        prohibiting the disclosure of the request for, or disclosure 
        of, the protected health information, and an order requiring 
        the disclosure of the protected health information if the court 
        finds that--
                    (A) the inquiry being conducted is within the 
                lawful jurisdiction of the government authority seeking 
                the protected health information;
                    (B) there is probable cause to believe that the 
                protected health information being sought is relevant 
                to a legitimate law enforcement inquiry;
                    (C) the government authority's need for the 
                information outweighs the privacy interest of the 
                individual who is the subject of the information; and
                    (D) there is reasonable ground to believe that 
                receipt of notice by the individual will result in--
                            (i) endangering the life or physical safety 
                        of any individual;
                            (ii) flight from prosecution;
                            (iii) destruction of or tampering with 
                        evidence or the information being sought;
                            (iv) intimidation of potential witnesses; 
                        or
                            (v) disclosure of the existence or nature 
                        of a confidential law enforcement investigation 
                        or grand jury investigation is likely to 
                        seriously jeopardize such investigation.

SEC. 5228. CHALLENGE PROCEDURES FOR LAW ENFORCEMENT WARRANTS, 
              SUBPOENAS, AND SUMMONS.

    (a) Motion To Quash.--Within 15 days after the date of service of a 
notice of execution or a copy of a warrant, subpoena, or summons of a 
government authority seeking protected health information about an 
individual under paragraph (1) or (2) of section 5226, the individual 
may file a motion to quash.
    (b) Standard for Decision.--The court shall grant a motion under 
subsection (a) unless the government demonstrates that there is 
probable cause to believe the protected health information is relevant 
to a legitimate law enforcement inquiry being conducted by the 
government authority and the government authority's need for the 
information outweighs the privacy interest of the individual.
    (c) Attorney's Fees.--In the case of a motion brought under 
subsection (a) in which the individual has substantially prevailed, the 
court may assess against the government authority a reasonable 
attorney's fee and other litigation costs (including expert's fees) 
reasonably incurred.
    (d) No Interlocutory Appeal.--A ruling denying a motion to quash 
under this section shall not be deemed to be a final order, and no 
interlocutory appeal may be taken therefrom by the individual.

            Subpart F--Disclosure Pursuant to Party Subpoena

SEC. 5231. PARTY SUBPOENAS.

    A health care provider, health plan, employer, life insurer, or 
person who receives protected health information under section 5213 may 
disclose protected health information under this section if the 
disclosure is pursuant to a subpoena issued on behalf of a party who 
has complied with the access provisions of section 5232.

SEC. 5232. ACCESS PROCEDURES FOR PARTY SUBPOENAS.

    A party may not obtain protected health information about an 
individual pursuant to a subpoena unless a copy of the subpoena 
together with a notice of the individual's right to challenge the 
subpoena in accordance with section 5233 has been served upon the 
individual on or before the date of return of the subpoena.

SEC. 5233. CHALLENGE PROCEDURES FOR PARTY SUBPOENAS.

    (a) Motion To Quash Subpoena.--After service of a copy of the 
subpoena seeking protected health information under section 5231, the 
individual who is the subject of the protected health information may 
file in any court of competent jurisdiction a motion to quash the 
subpoena.
    (b) Standard for Decision.--The court shall grant a motion under 
subsection (a) unless the respondent demonstrates that--
            (1) there is reasonable ground to believe the information 
        is relevant to a lawsuit or other judicial or administrative 
        proceeding; and
            (2) the need of the respondent for the information 
        outweighs the privacy interest of the individual.
    (c) Attorney's Fees.--In the case of a motion brought under 
subsection (a) in which the individual has substantially prevailed, the 
court may assess against the respondent a reasonable attorney's fee and 
other litigation costs and expenses (including expert's fees) 
reasonably incurred.

     PART 3--PROCEDURES FOR ENSURING SECURITY OF PROTECTED HEALTH 
                              INFORMATION

                 Subpart A--Establishment of Safeguards

SEC. 5236. ESTABLISHMENT OF SAFEGUARDS.

    A health information trustee shall establish and maintain 
appropriate administrative, technical, and physical safeguards to 
ensure the integrity and confidentiality of protected health 
information created or received by the trustee.

SEC. 5237. ACCOUNTING FOR DISCLOSURES.

    A health information trustee shall create and maintain, with 
respect to any protected health information disclosed in exceptional 
circumstances, a record of the disclosure in accordance with 
regulations issued by the Secretary.

 Subpart B--Review of Protected Health Information By Subjects of the 
                              Information

SEC. 5241. INSPECTION OF PROTECTED HEALTH INFORMATION.

    (a) In General.--Except as provided in subsection (b), a health 
care provider or health plan shall permit an individual who is the 
subject of protected health information or the individual's designee to 
inspect any such information that the provider or plan maintains. A 
health care provider or health plan may require an individual to 
reimburse the provider or plan for the cost of such inspection.
    (b) Exceptions.--A health care provider or health plan is not 
required by this section to permit inspection or copying of protected 
health information if any of the following conditions apply:
            (1) Mental health treatment notes.--The information 
        consists of psychiatric, psychological, or mental health 
        treatment notes, and the provider or plan determines, based on 
        reasonable medical judgment, that inspection or copying of the 
        notes would cause sufficient harm.
            (2) Endangerment to life or safety.--The provider or plan 
        determines that disclosure of the information could reasonably 
        be expected to endanger the life or physical safety of any 
        individual.
            (3) Confidential source.--The information identifies or 
        could reasonably lead to the identification of a person (other 
        than a health care provider) who provided information under a 
        promise of confidentiality to a health care provider concerning 
        the individual who is the subject of the information.
            (4) Administrative purposes.--The information is used by 
        the provider or plan solely for administrative purposes and not 
        in the provision of health care to the individual who is the 
        subject of the information.
    (c) Deadline.--A health care provider or health plan shall comply 
with or deny (with a statement of the reasons for such denial) a 
request for inspection or copying of protected health information under 
this section within the 30-day period beginning on the date on which 
the provider or plan receives the request.

SEC. 5242. AMENDMENT OF PROTECTED HEALTH INFORMATION.

    A health care provider or health plan shall, within 45 days after 
receiving a written request to correct or amend protected health 
information from the individual who is the subject of the information--
            (1) correct or amend such information; or
            (2) provide the individual with a statement of the reasons 
        for refusing to correct or amend such information and include a 
        copy of such statement in the provider's or plan's records.

SEC. 5243. NOTICE OF INFORMATION PRACTICES.

    A health care provider or health plan shall provide written notice 
of the provider's or plan's information practices, including notice of 
individual rights with respect to protected health information.

            Subpart C--Standards for Electronic Disclosures

SEC. 5246. STANDARDS FOR ELECTRONIC DISCLOSURES.

    The Secretary shall promulgate standards for disclosing protected 
health information in accordance with this subtitle in electronic form.

                           PART 4--SANCTIONS

            Subpart A--No Sanctions for Permissible Actions

SEC. 5251. NO LIABILITY FOR PERMISSIBLE DISCLOSURES.

    A health information trustee who makes a disclosure of protected 
health information about an individual that is permitted by this 
subtitle shall not be liable to the individual for the disclosure under 
common law and shall not be subject to criminal prosecution under this 
subtitle.

                       Subpart B--Civil Sanctions

SEC. 5256. CIVIL PENALTY.

    (a) Violation.--Any health information trustee who the Secretary 
determines has substantially and materially failed to comply with this 
subtitle shall be subject, in addition to any other penalties that may 
be prescribed by law, to a civil penalty of not more than $10,000 for 
each such violation.
    (b) Procedures for Imposition of Penalties.--Section 1128A of the 
Social Security Act, other than subsections (a) and (b) and the second 
sentence of subsection (f) of that section, shall apply to the 
imposition of a civil monetary penalty under this section in the same 
manner as such provisions apply with respect to the imposition of a 
penalty under section 1128A of such Act.

SEC. 5257. CIVIL ACTION.

    (a) In General.--An individual who is aggrieved by negligent 
conduct in violation of this subtitle may bring a civil action to 
recover--
            (1) the greater of actual damages or liquidated damages of 
        $5,000, not to exceed $50,000;
            (2) punitive damages;
            (3) a reasonable attorney's fee and expenses of litigation;
            (4) costs of litigation; and
            (5) such preliminary and equitable relief as the court 
        determines to be appropriate.
    (b) Limitation.--No action may be commenced under this section more 
than 3 years after the date on which the violation was or should 
reasonably have been discovered.

                     Subpart C--Criminal Sanctions

SEC. 5261. WRONGFUL DISCLOSURE OF PROTECTED HEALTH INFORMATION.

    (a) Offense.--A person who knowingly--
            (1) obtains protected health information relating to an 
        individual in violation of this subtitle; or
            (2) discloses protected health information to another 
        person in violation of this subtitle,
shall be punished as provided in subsection (b).
    (b) Penalties.--A person described in subsection (a) shall--
            (1) be fined not more than $50,000, imprisoned not more 
        than 1 year, or both;
            (2) if the offense is committed under false pretenses, be 
        fined not more than $100,000, imprisoned not more than 5 years, 
        or both; and
            (3) if the offense is committed with intent to sell, 
        transfer, or use protected health information for commercial 
        advantage, personal gain, or malicious harm, fined not more 
        than $250,000, imprisoned not more than 10 years, or both.

                   PART 5--ADMINISTRATIVE PROVISIONS

SEC. 5266. RELATIONSHIP TO OTHER LAWS.

    (a) State Law.--Except as provided in subsections (b), (c), and 
(d), this subtitle preempts State law.
    (b) Laws Relating to Public or Mental Health.--Nothing in this 
subtitle shall be construed to preempt or operate to the exclusion of 
any State law relating to public health or mental health that prevents 
or regulates disclosure of protected health information otherwise 
allowed under this subtitle.
    (c) Privileges.--Nothing in this subtitle is intended to preempt or 
modify State common or statutory law to the extent such law concerns a 
privilege of a witness or person in a court of the State. This subtitle 
does not supersede or modify Federal common or statutory law to the 
extent such law concerns a privilege of a witness or person in a court 
of the United States. Authorizations pursuant to section 5207 shall not 
be construed as a waiver of any such privilege.
    (d) Certain Duties Under State or Federal Law.--This subtitle shall 
not be construed to preempt, supersede, or modify the operation of--
            (1) any law that provides for the reporting of vital 
        statistics such as birth or death information;
            (2) any law requiring the reporting of abuse or neglect 
        information about any individual;
            (3) subpart II of part E of title XXVI of the Public Health 
        Service Act (relating to notifications of emergency response 
        employees of possible exposure to infectious diseases); or
            (4) any Federal law or regulation governing confidentiality 
        of alcohol and drug patient records.

SEC. 5267. RIGHTS OF INCOMPETENTS.

    (a) Effect of Declaration of Incompetence.--Except as provided in 
section 5268, if an individual has been declared to be incompetent by a 
court of competent jurisdiction, the rights of the individual under 
this subtitle shall be exercised and discharged in the best interests 
of the individual through the individual's representative.
    (b) No Court Declaration.--Except as provided in section 5268, if a 
health care provider determines that an individual, who has not been 
declared to be incompetent by a court of competent jurisdiction, 
suffers from a medical condition that prevents the individual from 
acting knowingly or effectively on the individual's own behalf, the 
right of the individual to authorize disclosure may be exercised and 
discharged in the best interest of the individual by the individual's 
representative.

SEC. 5268. EXERCISE OF RIGHTS.

    (a) Individuals Who Are 18 or Legally Capable.--In the case of an 
individual--
            (1) who is 18 years of age or older, all rights of the 
        individual shall be exercised by the individual; or
            (2) who, acting alone, has the legal right, as determined 
        by State law, to apply for and obtain a type of medical 
        examination, care, or treatment and who has sought such 
        examination, care, or treatment, the individual shall exercise 
        all rights of an individual under this subtitle with respect to 
        protected health information relating to such examination, 
        care, or treatment.
    (b) Individuals Under 18.--Except as provided in subsection (a)(2), 
in the case of an individual who is--
            (1) under 14 years of age, all the individual's rights 
        under this subtitle shall be exercised through the parent or 
        legal guardian of the individual; or
            (2) 14, 15, 16, or 17 years of age, the rights of 
        inspection and amendment, and the right to authorize disclosure 
        of protected health information of the individual may be 
        exercised either by the individual or by the parent or legal 
        guardian of the individual.

                Subtitle D--Health Care Fraud Prevention

SEC. 5301. SHORT TITLE.

    This title may be cited as the ``Health Care Fraud Prevention Act 
of 1995''.

           PART A--ALL-PAYER FRAUD AND ABUSE CONTROL PROGRAM

SEC. 5311. ALL-PAYER FRAUD AND ABUSE CONTROL PROGRAM.

    (a) Establishment of Program.--
            (1) In general.--Not later than January 1, 1996, the 
        Secretary of Health and Human Services (in this title referred 
to as the ``Secretary''), acting through the Office of the Inspector 
General of the Department of Health and Human Services, and the 
Attorney General shall establish a program--
                    (A) to coordinate Federal, State, and local law 
                enforcement programs to control fraud and abuse with 
                respect to the delivery of and payment for health care 
                in the United States,
                    (B) to conduct investigations, audits, evaluations, 
                and inspections relating to the delivery of and payment 
                for health care in the United States,
                    (C) to facilitate the enforcement of the provisions 
                of sections 1128, 1128A, and 1128B of the Social 
                Security Act and other statutes applicable to health 
                care fraud and abuse, and
                    (D) to provide for the modification and 
                establishment of safe harbors and to issue 
                interpretative rulings and special fraud alerts 
                pursuant to section 5313.
            (2) Coordination with health plans.--In carrying out the 
        program established under paragraph (1), the Secretary and the 
        Attorney General shall consult with, and arrange for the 
        sharing of data with representatives of health plans.
            (3) Regulations.--
                    (A) In general.--The Secretary and the Attorney 
                General shall by regulation establish standards to 
                carry out the program under paragraph (1).
                    (B) Information standards.--
                            (i) In general.--Such standards shall 
                        include standards relating to the furnishing of 
                        information by health plans, providers, and 
                        others to enable the Secretary and the Attorney 
                        General to carry out the program (including 
                        coordination with health plans under paragraph 
                        (2)).
                            (ii) Confidentiality.--Such standards shall 
                        include procedures to assure that such 
                        information is provided and utilized in a 
                        manner that appropriately protects the 
                        confidentiality of the information and the 
                        privacy of individuals receiving health care 
                        services and items.
                            (iii) Qualified immunity for providing 
                        information.--The provisions of section 1157(a) 
                        of the Social Security Act (relating to 
                        limitation on liability) shall apply to a 
                        person providing information to the Secretary 
                        or the Attorney General in conjunction with 
                        their performance of duties under this section.
                    (C) Disclosure of ownership information.--
                            (i) In general.--Such standards shall 
                        include standards relating to the disclosure of 
                        ownership information described in clause (ii) 
                        by any entity providing health care services 
                        and items.
                            (ii) Ownership information described.--The 
                        ownership information described in this clause 
                        includes--
                                    (I) a description of such items and 
                                services provided by such entity;
                                    (II) the names and unique physician 
                                identification numbers of all 
                                physicians with a financial 
                                relationship (as defined in section 
                                1877(a)(2) of the Social Security Act) 
                                with such entity;
                                    (III) the names of all other 
                                individuals with such an ownership or 
                                investment interest in such entity; and
                                    (IV) any other ownership and 
                                related information required to be 
                                disclosed by such entity under section 
                                1124 or section 1124A of the Social 
                                Security Act, except that the Secretary 
                                shall establish procedures under which 
                                the information required to be 
                                submitted under this subclause will be 
                                reduced with respect to health care 
                                provider entities that the Secretary 
                                determines will be unduly burdened if 
                                such entities are required to comply 
                                fully with this subclause.
            (4) Authorization of appropriations for investigators and 
        other personnel.--In addition to any other amounts authorized 
        to be appropriated to the Secretary, the Attorney General, the 
        Director of the Federal Bureau of Investigation, and the 
        Inspectors General of the Departments of Defense, Labor, and 
        Veterans Affairs and of the Office of Personnel Management, for 
        health care anti-fraud and abuse activities for a fiscal year, 
        there are authorized to be appropriated additional amounts, 
        from the Health Care Fraud and Abuse Account described in 
        subsection (b), as may be necessary to enable the Secretary, 
        the Attorney General, and such Inspectors General to conduct 
        investigations and audits of allegations of health care fraud 
        and abuse and otherwise carry out the program established under 
        paragraph (1) in a fiscal year.
            (5) Ensuring access to documentation.--The Inspector 
        General of the Department of Health and Human Services is 
        authorized to exercise the authority described in paragraphs 
        (4) and (5) of section 6 of the Inspector General Act of 1978 
        (relating to subpoenas and administration of oaths) with 
        respect to the activities under the all-payer fraud and abuse 
        control program established under this subsection to the same 
        extent as such Inspector General may exercise such authorities 
        to perform the functions assigned by such Act.
            (6) Authority of inspector general.--Nothing in this Act 
        shall be construed to diminish the authority of any Inspector 
        General, including such authority as provided in the Inspector 
        General Act of 1978.
            (7) Health plan defined.--For the purposes of this 
        subsection, the term ``health plan'' shall have the meaning 
        given such term in section 1128(i) of the Social Security Act.
    (b) Health Care Fraud and Abuse Control Account.--
            (1) Establishment.--
                    (A) In general.--There is hereby established an 
                account to be known as the ``Health Care Fraud and 
                Abuse Control Account'' (in this section referred to as 
                the ``Anti-Fraud Account''). The Anti-Fraud Account 
                shall consist of--
                            (i) such gifts and bequests as may be made 
                        as provided in subparagraph (B);
                            (ii) such amounts as may be deposited in 
                        the Anti-Fraud Account as provided in 
                        subsection (a)(4), sections 5311(b) and 
                        5312(b), and title XI of the Social Security 
                        Act; and
                            (iii) such amounts as are transferred to 
                        the Anti-Fraud Account under subparagraph (C).
                    (B) Authorization to accept gifts.--The Anti-Fraud 
                Account is authorized to accept on behalf of the United 
                States money gifts and bequests made unconditionally to 
                the Anti-Fraud Account, for the benefit of the Anti-
                Fraud Account or any activity financed through the 
                Anti-Fraud Account.
                    (C) Transfer of amounts.--
                            (i) In general.--The Secretary of the 
                        Treasury shall transfer to the Anti-Fraud 
                        Account an amount equal to the sum of the 
                        following:
                                    (I) Criminal fines imposed in cases 
                                involving a Federal health care offense 
                                (as defined in section 982(a)(6)(B) of 
                                title 18, United States Code).
                            (ii) Administrative penalties and 
                        assessments imposed under titles XI, XVIII, and 
                        XIX of the Social Security Act (except as 
                        otherwise provided by law).
                            (iii) Amounts resulting from the forfeiture 
                        of property by reason of a Federal health care 
                        offense.
                            (iv) Penalties and damages imposed under 
                        the False Claims Act (31 U.S.C. 3729 et seq.), 
                        in cases involving claims related to the 
                        provision of health care items and services 
                        (other than funds awarded to a relator or for 
                        restitution).
            (2) Use of funds.--
                    (A) In general.--Amounts in the Anti-Fraud Account 
                shall be available to carry out the health care fraud 
                and abuse control program established under subsection 
                (a) (including the administration of the program), and 
                may be used to cover costs incurred in operating the 
                program, including costs (including equipment, salaries 
                and benefits, and travel and training) of--
                            (i) prosecuting health care matters 
                        (through criminal, civil, and administrative 
                        proceedings);
                            (ii) investigations;
                            (iii) financial and performance audits of 
                        health care programs and operations;
                            (iv) inspections and other evaluations; and
                            (v) provider and consumer education 
                        regarding compliance with the provisions of 
                        this part.
                    (B) Funds used to supplement agency 
                appropriations.--It is intended that disbursements made 
                from the Anti-Fraud Account to any Federal agency be 
                used to increase and not supplant the recipient 
                agency's appropriated operating budget.
            (3) Annual report.--The Secretary and the Attorney General 
        shall submit jointly an annual report to Congress on the amount 
        of revenue which is generated and disbursed by the Anti-Fraud 
        Account in each fiscal year.
            (4) Use of funds by inspector general.--
                    (A) Reimbursements for Investigations.--The 
                Inspector General is authorized to receive and retain 
                for current use reimbursement for the costs of 
                conducting investigations, when such restitution is 
                ordered by a court, voluntarily agreed to by the payer, 
                or otherwise.
                    (B) Crediting.--Funds received by the Inspector 
                General or the Inspectors General of the Departments of 
                Defense, Labor, and Veterans Affairs and of the Office 
                of Personnel Management, as reimbursement for costs of 
                conducting investigations shall be deposited to the 
                credit of the appropriation from which initially paid, 
                or to appropriations for similar purposes currently 
                available at the time of deposit, and shall remain 
                available for obligation for 1 year from the date of 
                their deposit.

SEC. 5312. APPLICATION OF CERTAIN FEDERAL HEALTH ANTI-FRAUD AND ABUSE 
              SANCTIONS TO FRAUD AND ABUSE AGAINST ANY HEALTH PLAN.

    (a) Crimes.--
            (1) Social security act.--Section 1128B of the Social 
        Security Act (42 U.S.C. 1320a-7b) is amended as follows:
                    (A) In the heading, by adding at the end the 
                following: ``or health plans''.
                    (B) In subsection (a)(1)--
                            (i) by striking ``title XVIII or'' and 
                        inserting ``title XVIII,'', and
                            (ii) by adding at the end the following: 
                        ``or a health plan (as defined in section 
                        1128(i)),''.
                    (C) In subsection (a)(5), by striking ``title XVIII 
                or a State health care program'' and inserting ``title 
                XVIII, a State health care program, or a health plan''.
                    (D) In the second sentence of subsection (a)--
                            (i) by inserting after ``title XIX'' the 
                        following: ``or a health plan'', and
                            (ii) by inserting after ``the State'' the 
                        following: ``or the plan''.
            (2) Identification of community service opportunities.--
        Section 1128B of such Act (42 U.S.C. 1320a-7b) is further 
        amended by adding at the end the following new subsection:
    ``(f) The Secretary may--
            ``(1) in consultation with State and local health care 
        officials, identify opportunities for the satisfaction of 
        community service obligations that a court may impose upon the 
        conviction of an offense under this section, and
            ``(2) make information concerning such opportunities 
        available to Federal and State law enforcement officers and 
        State and local health care officials.''.
    (b) Health Plan Defined.--Section 1128 of the Social Security Act 
(42 U.S.C. 1320a-7) is amended by redesignating subsection (i) as 
subsection (j) and by inserting after subsection (h) the following new 
subsection:
    ``(i) Health Plan Defined.--For purposes of sections 1128A and 
1128B, the term `health plan' means a plan that provides health 
benefits, whether through directly, through insurance, or otherwise, 
and includes a policy of health insurance, a contract of a service 
benefit organization, or a membership agreement with a health 
maintenance organization or other prepaid health plan, and also 
includes an employee welfare benefit plan or a multiple employer 
welfare plan (as such terms are defined in section 3 of the Employee 
Retirement Income Security Act of 1974).''.
    (c) Effective Date.--The amendments made by this section shall take 
effect on January 1, 1996.

SEC. 5313. HEALTH CARE FRAUD AND ABUSE GUIDANCE.

    (a) Solicitation and Publication of Modifications to Existing Safe 
Harbors and New Safe Harbors.--
            (1) In general.--
                    (A) Solicitation of proposals for safe harbors.--
                Not later than January 1, 1996, and not less than 
                annually thereafter, the Secretary shall publish a 
                notice in the Federal Register soliciting proposals, 
                which will be accepted during a 60-day period, for--
                            (i) modifications to existing safe harbors 
                        issued pursuant to section 14(a) of the 
                        Medicare and Medicaid Patient and Program 
                        Protection Act of 1987 (42 U.S.C. 1320a-7b 
                        note);
                            (ii) additional safe harbors specifying 
                        payment practices that shall not be treated as 
                        a criminal offense under section 1128B(b) of 
                        the Social Security Act the (42 U.S.C. 1320a-
                        7b(b)) and shall not serve as the basis for an 
                        exclusion under section 1128(b)(7) of such Act 
                        (42 U.S.C. 1320a-7(b)(7));
                            (iii) interpretive rulings to be issued 
                        pursuant to subsection (b); and
                            (iv) special fraud alerts to be issued 
                        pursuant to subsection (c).
                    (B) Publication of proposed modifications and 
                proposed additional state harbors.--After considering 
                the proposals described in clauses (i) and (ii) of 
                subparagraph (A), the Secretary, in consultation with 
                the Attorney General, shall publish in the Federal 
                Register proposed modifications to existing safe 
                harbors and proposed additional safe harbors, if 
                appropriate, with a 60-day comment period. After 
                considering any public comments received during this 
                period, the Secretary shall issue final rules modifying 
                the existing safe harbors and establishing new safe 
                harbors, as appropriate.
                    (C) Report.--The Inspector General of the 
                Department of Health and Human Services (hereafter in 
this section referred to as the ``Inspector General'') shall, in an 
annual report to Congress or as part of the year-end semiannual report 
required by section 5 of the Inspector General Act of 1978 (5 U.S.C. 
App.), describe the proposals received under clauses (i) and (ii) of 
subparagraph (A) and explain which proposals were included in the 
publication described in subparagraph (B), which proposals were not 
included in that publication, and the reasons for the rejection of the 
proposals that were not included.
            (2) Criteria for modifying and establishing safe harbors.--
        In modifying and establishing safe harbors under paragraph 
        (1)(B), the Secretary may consider the extent to which 
        providing a safe harbor for the specified payment practice may 
        result in any of the following:
                    (A) An increase or decrease in access to health 
                care services.
                    (B) An increase or decrease in the quality of 
                health care services.
                    (C) An increase or decrease in patient freedom of 
                choice among health care providers.
                    (D) An increase or decrease in competition among 
                health care providers.
                    (E) An increase or decrease in the ability of 
                health care facilities to provide services in medically 
                underserved areas or to medically underserved 
                populations.
                    (F) An increase or decrease in the cost to 
                Government health care programs.
                    (G) An increase or decrease in the potential 
                overutilization of health care services.
                    (H) The existence or nonexistence of any potential 
                financial benefit to a health care professional or 
                provider which may vary based on their decisions of--
                            (i) whether to order a health care item or 
                        service; or
                            (ii) whether to arrange for a referral of 
                        health care items or services to a particular 
                        practitioner or provider.
                    (I) Any other factors the Secretary deems 
                appropriate in the interest of preventing fraud and 
                abuse in Government health care programs.
    (b)  Interpretive Rulings.--
            (1) In general.--
                    (A) Request for interpretive ruling.--Any person 
                may present, at any time, a request to the Inspector 
                General for a statement of the Inspector General's 
                current interpretation of the meaning of a specific 
                aspect of the application of sections 1128A and 1128B 
                of the Social Security Act (hereafter in this section 
                referred to as an ``interpretive ruling'').
                    (B) Issuance and effect of interpretive ruling.--
                            (i) In general.--If appropriate, the 
                        Inspector General shall in consultation with 
                        the Attorney General, issue an interpretive 
                        ruling in response to a request described in 
                        subparagraph (A). Interpretive rulings shall 
                        not have the force of law and shall be treated 
                        as an interpretive rule within the meaning of 
                        section 553(b) of title 5, United States Code. 
                        All interpretive rulings issued pursuant to 
                        this provision shall be published in the 
                        Federal Register or otherwise made available 
                        for public inspection.
                            (ii) Reasons for denial.--If the Inspector 
                        General does not issue an interpretive ruling 
                        in response to a request described in 
                        subparagraph (A), the Inspector General shall 
                        notify the requesting party of such decision 
                        and shall identify the reasons for such 
                        decision.
            (2) Criteria for interpretive rulings.--
                    (A) In general.--In determining whether to issue an 
                interpretive ruling under paragraph (1)(B), the 
                Inspector General may consider--
                            (i) whether and to what extent the request 
                        identifies an ambiguity within the language of 
                        the statute, the existing safe harbors, or 
                        previous interpretive rulings; and
                            (ii) whether the subject of the requested 
                        interpretive ruling can be adequately addressed 
                        by interpretation of the language of the 
                        statute, the existing safe harbor rules, or 
                        previous interpretive rulings, or whether the 
                        request would require a substantive ruling not 
                        authorized under this subsection.
                    (B) No rulings on factual issues.--The Inspector 
                General shall not give an interpretive ruling on any 
                factual issue, including the intent of the parties or 
the fair market value of particular leased space or equipment.
    (c) Special Fraud Alerts.--
            (1) In general.--
                    (A) Request for special fraud alerts.--Any person 
                may present, at any time, a request to the Inspector 
                General for a notice which informs the public of 
                practices which the Inspector General considers to be 
                suspect or of particular concern under section 1128B(b) 
                of the Social Security Act (42 U.S.C. 1320a-7b(b)) 
                (hereafter in this subsection referred to as a 
                ``special fraud alert'').
                    (B) Issuance and publication of special fraud 
                alerts.--Upon receipt of a request described in 
                subparagraph (A), the Inspector General shall 
                investigate the subject matter of the request to 
                determine whether a special fraud alert should be 
                issued. If appropriate, the Inspector General shall in 
                consultation with the Attorney General, issue a special 
                fraud alert in response to the request. All special 
                fraud alerts issued pursuant to this subparagraph shall 
                be published in the Federal Register.
            (2) Criteria for special fraud alerts.--In determining 
        whether to issue a special fraud alert upon a request described 
        in paragraph (1), the Inspector General may consider--
                    (A) whether and to what extent the practices that 
                would be identified in the special fraud alert may 
                result in any of the consequences described in 
                subsection (a)(2); and
                    (B) the volume and frequency of the conduct that 
                would be identified in the special fraud alert.

SEC. 5314. REPORTING OF FRAUDULENT ACTIONS UNDER MEDICARE.

    Not later than 1 year after the date of the enactment of this Act, 
the Secretary shall establish a program through which individuals 
entitled to benefits under the medicare program may report to the 
Secretary on a confidential basis (at the individual's request) 
instances of suspected fraudulent actions arising under the program by 
providers of items and services under the program.

       PART B--REVISIONS TO CURRENT SANCTIONS FOR FRAUD AND ABUSE

SEC. 5321. MANDATORY EXCLUSION FROM PARTICIPATION IN MEDICARE AND STATE 
              HEALTH CARE PROGRAMS.

    (a) Individual Convicted of Felony Relating to Fraud.--
            (1) In general.--Section 1128(a) of the Social Security Act 
        (42 U.S.C. 1320a-7(a)) is amended by adding at the end the 
        following new paragraph:
            ``(3) Felony conviction relating to fraud.--Any individual 
        or entity that has been convicted after the date of the 
        enactment of the Health Care Fraud Prevention Act of 1995, 
        under Federal or State law, in connection with the delivery of 
        a health care item or service or with respect to any act or 
        omission in a program (other than those specifically described 
        in paragraph (1)) operated by or financed in whole or in part 
        by any Federal, State, or local government agency, of a 
        criminal offense consisting of a felony relating to fraud, 
        theft, embezzlement, breach of fiduciary responsibility, or 
        other financial misconduct.''.
            (2) Conforming amendment.--Section 1128(b)(1) of such Act 
        (42 U.S.C. 1320a-7(b)(1)) is amended--
                    (A) in the heading, by striking ``Conviction'' and 
                inserting ``Misdemeanor conviction''; and
                    (B) by striking ``criminal offense'' and inserting 
                ``criminal offense consisting of a misdemeanor''.
    (b) Individual Convicted of Felony Relating to Controlled 
Substance.--
            (1) In general.--Section 1128(a) of the Social Security Act 
        (42 U.S.C. 1320a-7(a)), as amended by subsection (a), is 
        amended by adding at the end the following new paragraph:
            ``(4) Felony conviction relating to controlled substance.--
        Any individual or entity that has been convicted after the date 
        of the enactment of the Health Care Fraud Prevention Act of 
        1995, under Federal or State law, of a criminal offense 
        consisting of a felony relating to the unlawful manufacture, 
        distribution, prescription, or dispensing of a controlled 
        substance.''.
            (2) Conforming amendment.--Section 1128(b)(3) of such Act 
        (42 U.S.C. 1320a-7(b)(3)) is amended--
                    (A) in the heading, by striking ``Conviction'' and 
                inserting ``Misdemeanor conviction''; and
                    (B) by striking ``criminal offense'' and inserting 
                ``criminal offense consisting of a misdemeanor''.

SEC. 5322. ESTABLISHMENT OF MINIMUM PERIOD OF EXCLUSION FOR CERTAIN 
              INDIVIDUALS AND ENTITIES SUBJECT TO PERMISSIVE EXCLUSION 
              FROM MEDICARE AND STATE HEALTH CARE PROGRAMS.

    Section 1128(c)(3) of the Social Security Act (42 U.S.C. 1320a-
7(c)(3)) is amended by adding at the end the following new 
subparagraphs:
    ``(D) In the case of an exclusion of an individual or entity under 
paragraph (1), (2), or (3) of subsection (b), the period of the 
exclusion shall be 3 years, unless the Secretary determines in 
accordance with published regulations that a shorter period is 
appropriate because of mitigating circumstances or that a longer period 
is appropriate because of aggravating circumstances.
    ``(E) In the case of an exclusion of an individual or entity under 
subsection (b)(4) or (b)(5), the period of the exclusion shall not be 
less than the period during which the individual's or entity's license 
to provide health care is revoked, suspended, or surrendered, or the 
individual or the entity is excluded or suspended from a Federal or 
State health care program.
    ``(F) In the case of an exclusion of an individual or entity under 
subsection (b)(6)(B), the period of the exclusion shall be not less 
than 1 year.''.

SEC. 5323. PERMISSIVE EXCLUSION OF INDIVIDUALS WITH OWNERSHIP OR 
              CONTROL INTEREST IN SANCTIONED ENTITIES.

    Section 1128(b) of the Social Security Act (42 U.S.C. 1320a-7(b)) 
is amended by adding at the end the following new paragraph:
            ``(15) Individuals controlling a sanctioned entity.--Any 
        individual who has a direct or indirect ownership or control 
        interest of 5 percent or more, or an ownership or control 
        interest (as defined in section 1124(a)(3)) in, or who is an 
        officer, director, agent, or managing employee (as defined in 
        section 1126(b)) of, an entity--
                    ``(A) that has been convicted of any offense 
                described in subsection (a) or in paragraph (1), (2), 
                or (3) of this subsection;
                    ``(B) against which a civil monetary penalty has 
                been assessed under section 1128A; or
                    ``(C) that has been excluded from participation 
                under a program under title XVIII or under a State 
                health care program.''.

SEC. 5324. SANCTIONS AGAINST PRACTITIONERS AND PERSONS FOR FAILURE TO 
              COMPLY WITH STATUTORY OBLIGATIONS.

    (a) Minimum Period of Exclusion for Practitioners and Persons 
Failing To Meet Statutory Obligations.--
            (1) In general.--The second sentence of section 1156(b)(1) 
        of the Social Security Act (42 U.S.C. 1320c-5(b)(1)) is amended 
        by striking ``may prescribe)'' and inserting ``may prescribe, 
        except that such period may not be less than 1 year)''.
            (2) Conforming amendment.--Section 1156(b)(2) of such Act 
        (42 U.S.C. 1320c-5(b)(2)) is amended by striking ``shall 
        remain'' and inserting ``shall (subject to the minimum period 
        specified in the second sentence of paragraph (1)) remain''.
    (b) Repeal of ``Unwilling or Unable'' Condition for Imposition of 
Sanction.--Section 1156(b)(1) of the Social Security Act (42 U.S.C. 
1320c-5(b)(1)) is amended--
            (1) in the second sentence, by striking ``and determines'' 
        and all that follows through ``such obligations,''; and
            (2) by striking the third sentence.

SEC. 5325. INTERMEDIATE SANCTIONS FOR MEDICARE HEALTH MAINTENANCE 
              ORGANIZATIONS.

    (a) Application of Intermediate Sanctions for Any Program 
Violations.--
            (1) In general.--Section 1876(i)(1) of the Social Security 
        Act (42 U.S.C. 1395mm(i)(1)) is amended by striking ``the 
        Secretary may terminate'' and all that follows and inserting 
        the following: ``in accordance with procedures established 
        under paragraph (9), the Secretary may at any time terminate 
        any such contract or may impose the intermediate sanctions 
        described in paragraph (6)(B) or (6)(C) (whichever is 
        applicable) on the eligible organization if the Secretary 
        determines that the organization--
                    ``(A) has failed substantially to carry out the 
                contract;
                    ``(B) is carrying out the contract in a manner 
                inconsistent with the efficient and effective 
                administration of this section; or
                    ``(C) no longer substantially meets the applicable 
                conditions of subsections (b), (c), (e), and (f).''.
            (2) Other intermediate sanctions for miscellaneous program 
        violations.--Section 1876(i)(6) of such Act (42 U.S.C. 
        1395mm(i)(6)) is amended by adding at the end the following new 
        subparagraph:
    ``(C) In the case of an eligible organization for which the 
Secretary makes a determination under paragraph (1) the basis of which 
is not described in subparagraph (A), the Secretary may apply the 
following intermediate sanctions:
            ``(i) Civil money penalties of not more than $25,000 for 
        each determination under paragraph (1) if the deficiency that 
        is the basis of the determination has directly adversely 
        affected (or has the substantial likelihood of adversely 
        affecting) an individual covered under the organization's 
        contract.
            ``(ii) Civil money penalties of not more than $10,000 for 
        each week beginning after the initiation of procedures by the 
        Secretary under paragraph (9) during which the deficiency that 
is the basis of a determination under paragraph (1) exists.
            ``(iii) Suspension of enrollment of individuals under this 
        section after the date the Secretary notifies the organization 
        of a determination under paragraph (1) and until the Secretary 
        is satisfied that the deficiency that is the basis for the 
        determination has been corrected and is not likely to recur.''.
            (3) Procedures for imposing sanctions.--Section 1876(i) of 
        such Act (42 U.S.C. 1395mm(i)) is amended by adding at the end 
        the following new paragraph:
    ``(9) The Secretary may terminate a contract with an eligible 
organization under this section or may impose the intermediate 
sanctions described in paragraph (6) on the organization in accordance 
with formal investigation and compliance procedures established by the 
Secretary under which--
            ``(A) the Secretary provides the organization with the 
        opportunity to develop and implement a corrective action plan 
        to correct the deficiencies that were the basis of the 
        Secretary's determination under paragraph (1);
            ``(B) in deciding whether to impose sanctions, the 
        Secretary considers aggravating factors such as whether an 
        entity has a history of deficiencies or has not taken action to 
        correct deficiencies the Secretary has brought to their 
        attention;
            ``(C) there are no unreasonable or unnecessary delays 
        between the finding of a deficiency and the imposition of 
        sanctions; and
            ``(D) the Secretary provides the organization with 
        reasonable notice and opportunity for hearing (including the 
        right to appeal an initial decision) before imposing any 
        sanction or terminating the contract.''.
            (4) Conforming amendments.--Section 1876(i)(6)(B) of such 
        Act (42 U.S.C. 1395mm(i)(6)(B)) is amended by striking the 
        second sentence.
    (b) Agreements With Peer Review Organizations.--
            (1) Requirement for written agreement.--Section 
        1876(i)(7)(A) of the Social Security Act (42 U.S.C. 
        1395mm(i)(7)(A)) is amended by striking ``an agreement'' and 
        inserting ``a written agreement''.
            (2) Development of model agreement.--Not later than July 1, 
        1996, the Secretary shall develop a model of the agreement that 
        an eligible organization with a risk-sharing contract under 
        section 1876 of the Social Security Act must enter into with an 
        entity providing peer review services with respect to services 
        provided by the organization under section 1876(i)(7)(A) of 
        such Act.
            (3) Report by gao.--
                    (A) Study.--The Comptroller General of the United 
                States shall conduct a study of the costs incurred by 
                eligible organizations with risk-sharing contracts 
                under section 1876(b) of such Act of complying with the 
                requirement of entering into a written agreement with 
                an entity providing peer review services with respect 
                to services provided by the organization, together with 
                an analysis of how information generated by such 
                entities is used by the Secretary to assess the quality 
                of services provided by such eligible organizations.
                    (B) Report to congress.--Not later than July 1, 
                1998, the Comptroller General shall submit a report to 
                the Committee on Ways and Means and the Committee on 
                Energy and Commerce of the House of Representatives and 
                the Committee on Finance and the Special Committee on 
Aging of the Senate on the study conducted under subparagraph (A).
    (c) Effective Date.--The amendments made by this section shall 
apply with respect to contract years beginning on or after January 1, 
1996.

SEC. 5326. EFFECTIVE DATE.

    The amendments made by this part shall take effect January 1, 1996.

          PART C--ADMINISTRATIVE AND MISCELLANEOUS PROVISIONS

SEC. 5331. ESTABLISHMENT OF THE HEALTH CARE FRAUD AND ABUSE DATA 
              COLLECTION PROGRAM.

    (a) General Purpose.--Not later than January 1, 1996, the Secretary 
shall establish a national health care fraud and abuse data collection 
program for the reporting of final adverse actions (not including 
settlements in which no findings of liability have been made) against 
health care providers, suppliers, or practitioners as required by 
subsection (b), with access as set forth in subsection (c).
    (b) Reporting of Information.--
            (1) In general.--Each government agency and health plan 
        shall report any final adverse action (not including 
        settlements in which no findings of liability have been made) 
        taken against a health care provider, supplier, or 
        practitioner.
            (2) Information to be reported.--The information to be 
        reported under paragraph (1) includes:
                    (A) The name of any health care provider, supplier, 
                or practitioner who is the subject of a final adverse 
                action.
                    (B) The name (if known) of any health care entity 
                with which a health care provider, supplier, or 
                practitioner is affiliated or associated.
                    (C) The nature of the final adverse action.
                    (D) A description of the acts or omissions and 
                injuries upon which the final adverse action was based, 
                and such other information as the Secretary determines 
                by regulation is required for appropriate 
                interpretation of information reported under this 
                section.
            (3) Confidentiality.--In determining what information is 
        required, the Secretary shall include procedures to assure that 
        the privacy of individuals receiving health care services is 
        appropriately protected.
            (4) Timing and form of reporting.--The information required 
        to be reported under this subsection shall be reported 
        regularly (but not less often than monthly) and in such form 
        and manner as the Secretary prescribes. Such information shall 
        first be required to be reported on a date specified by the 
        Secretary.
            (5) To whom reported.--The information required to be 
        reported under this subsection shall be reported to the 
        Secretary.
    (c) Disclosure and Correction of Information.--
            (1) Disclosure.--With respect to the information about 
        final adverse actions (not including settlements in which no 
        findings of liability have been made) reported to the Secretary 
        under this section respecting a health care provider, supplier, 
        or practitioner, the Secretary shall, by regulation, provide 
        for--
                    (A) disclosure of the information, upon request, to 
                the health care provider, supplier, or licensed 
                practitioner, and
                    (B) procedures in the case of disputed accuracy of 
                the information.
            (2) Corrections.--Each Government agency and health plan 
        shall report corrections of information already reported about 
        any final adverse action taken against a health care provider, 
        supplier, or practitioner, in such form and manner that the 
Secretary prescribes by regulation.
    (d) Access to Reported Information.--
            (1) Availability.--The information in this database shall 
        be available to Federal and State government agencies and 
        health plans pursuant to procedures that the Secretary shall 
        provide by regulation.
            (2) Fees for disclosure.--The Secretary may establish or 
        approve reasonable fees for the disclosure of information in 
        this database. The amount of such a fee may not exceed the 
        costs of processing the requests for disclosure and of 
        providing such information. Such fees shall be available to the 
        Secretary or, in the Secretary's discretion, to the agency 
        designated under this section to cover such costs.
    (e) Protection From Liability for Reporting.--No person or entity, 
including the agency designated by the Secretary in subsection (b)(5) 
shall be held liable in any civil action with respect to any report 
made as required by this section, without knowledge of the falsity of 
the information contained in the report.
    (f) Definitions and Special Rules.--For purposes of this section:
            (1) The term ``final adverse action'' includes:
                    (A) Civil judgments against a health care provider 
                in Federal or State court related to the delivery of a 
                health care item or service.
                    (B) Federal or State criminal convictions related 
                to the delivery of a health care item or service.
                    (C) Actions by Federal or State agencies 
                responsible for the licensing and certification of 
                health care providers, suppliers, and licensed health 
                care practitioners, including--
                            (i) formal or official actions, such as 
                        revocation or suspension of a license (and the 
                        length of any such suspension), reprimand, 
                        censure or probation,
                            (ii) any other loss of license of the 
                        provider, supplier, or practitioner, by 
                        operation of law, or
                            (iii) any other negative action or finding 
                        by such Federal or State agency that is 
                        publicly available information.
                    (D) Exclusion from participation in Federal or 
                State health care programs.
                    (E) Any other adjudicated actions or decisions that 
                the Secretary shall establish by regulation.
            (2) The terms ``licensed health care practitioner'', 
        ``licensed practitioner'', and ``practitioner'' mean, with 
        respect to a State, an individual who is licensed or otherwise 
        authorized by the State to provide health care services (or any 
        individual who, without authority holds himself or herself out 
        to be so licensed or authorized).
            (3) The term ``health care provider'' means a provider of 
        services as defined in section 1861(u) of the Social Security 
        Act, and any entity, including a health maintenance 
        organization, group medical practice, or any other entity 
        listed by the Secretary in regulation, that provides health 
        care services.
            (4) The term ``supplier'' means a supplier of health care 
        items and services described in section 1819(a) and (b), and 
        section 1861 of the Social Security Act.
            (5) The term ``Government agency'' shall include:
                    (A) The Department of Justice.
                    (B) The Department of Health and Human Services.
                    (C) Any other Federal agency that either 
                administers or provides payment for the delivery of 
                health care services, including, but not limited to the 
Department of Defense and the Veterans' Administration.
                    (D) State law enforcement agencies.
                    (E) State medicaid fraud and abuse units.
                    (F) Federal or State agencies responsible for the 
                licensing and certification of health care providers 
                and licensed health care practitioners.
            (6) The term ``health plan'' has the meaning given to such 
        term by section 1128(i) of the Social Security Act.
            (7) For purposes of paragraph (2), the existence of a 
        conviction shall be determined under paragraph (4) of section 
        1128(j) of the Social Security Act.
    (g) Conforming Amendment.--Section 1921(d) of the Social Security 
Act is amended by inserting ``and section 301 of the Health Care Fraud 
Prevention Act of 1995'' after ``section 422 of the Health Care Quality 
Improvement Act of 1986''.

                    PART D--CIVIL MONETARY PENALTIES

SEC. 5341. CIVIL MONETARY PENALTIES.

    (a) General Civil Monetary Penalties.--Section 1128A of the Social 
Security Act (42 U.S.C. 1320a-7a) is amended as follows:
            (1) In subsection (a)(1), by inserting ``or of any health 
        plan (as defined in section 1128(i)),'' after ``subsection 
        (i)(1)),''.
            (2) In subsection (f)--
                    (A) by redesignating paragraph (3) as paragraph 
                (4); and
                    (B) by inserting after paragraph (2) the following 
                new paragraphs:
            ``(3) With respect to amounts recovered arising out of a 
        claim under a health plan, the portion of such amounts as is 
        determined to have been paid by the plan shall be repaid to the 
        plan, and the portion of such amounts attributable to the 
        amounts recovered under this section by reason of the 
        amendments made by the Health Care Fraud Prevention Act of 1995 
        (as estimated by the Secretary) shall be deposited into the 
        Health Care Fraud and Abuse Control Account established under 
        section 101(b) of such Act.''.
            (3) In subsection (i)--
                    (A) in paragraph (2), by inserting ``or under a 
                health plan'' before the period at the end, and
                    (B) in paragraph (5), by inserting ``or under a 
                health plan'' after ``or XX''.
    (b) Excluded Individual Retaining Ownership or Control Interest in 
Participating Entity.--Section 1128A(a) of the Social Security Act (42 
U.S.C. 1320a-7a(a)) is amended--
            (1) by striking ``or'' at the end of paragraph (1)(D);
            (2) by striking ``, or'' at the end of paragraph (2) and 
        inserting a semicolon;
            (3) by striking the semicolon at the end of paragraph (3) 
        and inserting ``; or''; and
            (4) by inserting after paragraph (3) the following new 
        paragraph:
            ``(4) in the case of a person who is not an organization, 
        agency, or other entity, is excluded from participating in a 
        program under title XVIII or a State health care program in 
        accordance with this subsection or under section 1128 and who, 
        at the time of a violation of this subsection, retains a direct 
        or indirect ownership or control interest of 5 percent or more, 
        or an ownership or control interest (as defined in section 
        1124(a)(3)) in, or who is an officer, director, agent, or 
        managing employee (as defined in section 1126(b)) of, an entity 
        that is participating in a program under title XVIII or a State 
        health care program;''.
    (c) Modifications of Amounts of Penalties and Assessments.--Section 
1128A(a) of the Social Security Act (42 U.S.C. 1320a-7a(a)), as amended 
by subsection (b), is amended in the matter following paragraph (4)--
            (1) by striking ``$2,000'' and inserting ``$10,000'';
            (2) by inserting ``; in cases under paragraph (4), $10,000 
        for each day the prohibited relationship occurs'' after ``false 
        or misleading information was given''; and
            (3) by striking ``twice the amount'' and inserting ``3 
        times the amount''.
    (d) Claim for Item or Service Based on Incorrect Coding or 
Medically Unnecessary Services.--Section 1128A(a)(1) of the Social 
Security Act (42 U.S.C. 1320a-7a(a)(1)) is amended--
            (1) in subparagraph (A) by striking ``claimed,'' and 
        inserting the following: ``claimed, including any person who 
        repeatedly presents or causes to be presented a claim for an 
        item or service that is based on a code that the person knows 
        or should know will result in a greater payment to the person 
        than the code the person knows or should know is applicable to 
        the item or service actually provided,'';
            (2) in subparagraph (C), by striking ``or'' at the end;
            (3) in subparagraph (D), by striking ``; or'' and inserting 
        ``, or''; and
            (4) by inserting after subparagraph (D) the following new 
        subparagraph:
                    ``(E) is for a medical or other item or service 
                that a person repeatedly knows or should know is not 
                medically necessary; or''.
    (e) Permitting Secretary To Impose Civil Monetary Penalty.--Section 
1128A(b) of the Social Security Act (42 U.S.C. 1320a-7a(a)) is amended 
by adding the following new paragraph:
            ``(3) Any person (including any organization, agency, or 
        other entity, but excluding a beneficiary as defined in 
        subsection (i)(5)) who the Secretary determines has violated 
        section 1128B(b) of this title shall be subject to a civil 
        monetary penalty of not more than $10,000 for each such 
        violation. In addition, such person shall be subject to an 
        assessment of not more than twice the total amount of the 
        remuneration offered, paid, solicited, or received in violation 
        of section 1128B(b). The total amount of remuneration subject 
        to an assessment shall be calculated without regard to whether 
        some portion thereof also may have been intended to serve a 
        purpose other than one proscribed by section 1128B(b).''.
    (f) Sanctions Against Practitioners and Persons for Failure to 
Comply with Statutory Obligations.--Section 1156(b)(3) of the Social 
Security Act (42 U.S.C. 1320c-5(b)(3)) is amended by striking ``the 
actual or estimated cost'' and inserting the following: ``up to $10,000 
for each instance''.
    (g) Procedural Provisions.--Section 1876(i)(6) of such Act (42 
U.S.C. 1395mm(i)(6)) is further amended by adding at the end the 
following new subparagraph:
    ``(D) The provisions of section 1128A (other than subsections (a) 
and (b)) shall apply to a civil money penalty under subparagraph (A) or 
(B) in the same manner as they apply to a civil money penalty or 
proceeding under section 1128A(a).''.
    (h) Prohibition Against Offering Inducements to Individuals 
Enrolled Under Programs or Plans.--
            (1) Offer of remuneration.--Section 1128A(a) of the Social 
        Security Act (42 U.S.C. 1320a-7a(a)) is amended--
                    (A) by striking ``or'' at the end of paragraph 
                (1)(D);
                    (B) by striking ``, or'' at the end of paragraph 
                (2) and inserting a semicolon;
                    (C) by striking the semicolon at the end of 
                paragraph (3) and inserting ``; or''; and
                    (D) by inserting after paragraph (3) the following 
                new paragraph:
            ``(4) offers to or transfers remuneration to any individual 
        eligible for benefits under title XVIII of this Act, or under a 
        State health care program (as defined in section 1128(h)) that 
        such person knows or should know is likely to influence such 
        individual to order or receive from a particular provider, 
        practitioner, or supplier any item or service for which payment 
        may be made, in whole or in part, under title XVIII, or a State 
        health care program;''.
            (2) Remuneration defined.--Section 1128A(i) of such Act (42 
        U.S.C. 1320a-7a(i)) is amended by adding the following new 
        paragraph:
            ``(6) The term `remuneration' includes the waiver of 
        coinsurance and deductible amounts (or any part thereof), and 
        transfers of items or services for free or for other than fair 
        market value. The term `remuneration' does not include--
                    ``(A) the waiver of coinsurance and deductible 
                amounts by a person, if--
                            ``(i) the waiver is not offered as part of 
                        any advertisement or solicitation;
                            ``(ii) the person does not routinely waive 
                        coinsurance or deductible amounts; and
                            ``(iii) the person--
                                    ``(I) waives the coinsurance and 
                                deductible amounts after determining in 
                                good faith that the individual is in 
                                financial need;
                                    ``(II) fails to collect coinsurance 
                                or deductible amounts after making 
                                reasonable collection efforts; or
                                    ``(III) provides for any 
                                permissible waiver as specified in 
                                section 1128B(b)(3) or in regulations 
                                issued by the Secretary;
                    ``(B) differentials in coinsurance and deductible 
                amounts as part of a benefit plan design as long as the 
                differentials have been disclosed in writing to all 
                third party payors to whom claims are presented and as 
                long as the differentials meet the standards as defined 
                in regulations promulgated by the Secretary; or
                    ``(C) incentives given to individuals to promote 
                the delivery of preventive care as determined by the 
                Secretary in regulations.''.
    (i) Effective Date.--The amendments made by this section shall take 
effect January 1, 1996.

                   PART E--AMENDMENTS TO CRIMINAL LAW

SEC. 5351. HEALTH CARE FRAUD.

    (a) In General.--
            (1)  Fines and imprisonment for health care fraud 
        violations.--Chapter 63 of title 18, United States Code, is 
        amended by adding at the end the following new section:
``Sec. 1347. Health care fraud
    ``(a) Whoever knowingly executes, or attempts to execute, a scheme 
or artifice--
            ``(1) to defraud any health plan or other person, in 
        connection with the delivery of or payment for health care 
        benefits, items, or services; or
            ``(2) to obtain, by means of false or fraudulent pretenses, 
        representations, or promises, any of the money or property 
        owned by, or under the custody or control of, any health plan, 
        or person in connection with the delivery of or payment for 
        health care benefits, items, or services;
shall be fined under this title or imprisoned not more than 10 years, 
or both. If the violation results in serious bodily injury (as defined 
in section 1365(g)(3) of this title), such person shall be imprisoned 
for any term of years.
    ``(b) For purposes of this section, the term `health plan' has the 
same meaning given such term in section 1128(i) of the Social Security 
Act.''.
            (2) Clerical amendment.--The table of sections at the 
        beginning of chapter 63 of title 18, United States Code, is 
        amended by adding at the end the following:

``1347. Health care fraud.''.
    (b) Criminal Fines Deposited in the Health Care Fraud and Abuse 
Control Account.--The Secretary of the Treasury shall deposit into the 
Health Care Fraud and Abuse Control Account established under section 
5311(b) an amount equal to the criminal fines imposed under section 
1347 of title 18, United States Code (relating to health care fraud).

SEC. 5352. FORFEITURES FOR FEDERAL HEALTH CARE OFFENSES.

    (a) In General.--Section 982(a) of title 18, United States Code, is 
amended by adding after paragraph (5) the following new paragraph:
    ``(6)(A) The court, in imposing sentence on a person convicted of a 
Federal health care offense, shall order the person to forfeit 
property, real or personal, that--
            ``(i) is used in the commission of the offense if the 
        offense results in a financial loss or gain of $50,000 or more; 
        or
            ``(ii) constitutes or is derived from proceeds traceable to 
        the commission of the offense.
    ``(B) For purposes of this paragraph, the term `Federal health care 
offense' means a violation of, or a criminal conspiracy to violate--
            ``(i) section 1347 of this title;
            ``(ii) section 1128B of the Social Security Act;
            ``(iii) sections 287, 371, 664, 666, 1001, 1027, 1341, 
        1343, or 1954 of this title if the violation or conspiracy 
        relates to health care fraud; and
            ``(iv) section 501 or 511 of the Employee Retirement Income 
        Security Act of 1974, if the violation or conspiracy relates to 
        health care fraud.''.
    (b) Property Forfeited Deposited in Health Care Fraud and Abuse 
Control Account.--The Secretary of the Treasury shall deposit into the 
Health Care Fraud and Abuse Control Account established under section 
5311(b) an amount equal to amounts resulting from forfeiture of 
property by reason of a Federal health care offense pursuant to section 
982(a)(6) of title 18, United States Code.

SEC. 5353. INJUNCTIVE RELIEF RELATING TO FEDERAL HEALTH CARE OFFENSES.

    (a) In General.--Section 1345(a)(1) of title 18, United States 
Code, is amended--
            (1) by striking ``or'' at the end of subparagraph (A);
            (2) by inserting ``or'' at the end of subparagraph (B); and
            (3) by adding at the end the following:
                    ``(C) committing or about to commit a Federal 
                health care offense (as defined in section 982(a)(6)(B) 
                of this title);''.
    (b) Freezing of Assets.--Section 1345(a)(2) of title 18, United 
States Code, is amended by inserting ``or a Federal health care offense 
(as defined in section 982(a)(6)(B))'' after ``title)''.

SEC. 5354. GRAND JURY DISCLOSURE.

    Section 3322 of title 18, United States Code, is amended--
            (1) by redesignating subsections (c) and (d) as subsections 
        (d) and (e), respectively; and
            (2) by inserting after subsection (b) the following:
    ``(c) A person who is privy to grand jury information concerning a 
Federal health care offense (as defined in section 982(a)(6)(B))--
            ``(1) received in the course of duty as an attorney for the 
        Government; or
            ``(2) disclosed under rule 6(e)(3)(A)(ii) of the Federal 
        Rules of Criminal Procedure;
may disclose that information to an attorney for the Government to use 
in any investigation or civil proceeding relating to health care 
fraud.''.

SEC. 5355. FALSE STATEMENTS.

    (a) In General.--Chapter 47, of title 18, United States Code, is 
amended by adding at the end the following:
``Sec. 1033. False statements relating to health care matters
    ``Whoever, in any matter involving a health plan, knowingly and 
willfully falsifies, conceals, or covers up by any trick, scheme, or 
device a material fact, or makes any false, fictitious, or fraudulent 
statements or representations, or makes or uses any false writing or 
document knowing the same to contain any false, fictitious, or 
fraudulent statement or entry, shall be fined under this title or 
imprisoned not more than 5 years, or both.''.
    (b) Clerical Amendment.--The table of sections at the beginning of 
chapter 47 of title 18, United States Code, is amended by adding at the 
end the following:

``1033. False statements relating to health care matters.''.

SEC. 5356. VOLUNTARY DISCLOSURE PROGRAM.

    In consultation with the Attorney General of the United States, the 
Secretary of Health and Human Services shall publish proposed 
regulations not later than 9 months after the date of enactment of this 
Act, and final regulations not later than 18 months after such date of 
enactment, establishing a program of voluntary disclosure that would 
facilitate the enforcement of sections 1128A and 1128B of the Social 
Security Act (42 U.S.C. 1320a-7a and 1320a-7b) and other relevant 
provisions of Federal law relating to health care fraud and abuse. Such 
program should promote and provide incentives for disclosures of 
potential violations of such sections and provisions by providing that, 
under certain circumstances, the voluntary disclosure of wrongdoing 
would result in the imposition of penalties and punishments less 
substantial than those that would be assessed for the same wrongdoing 
if voluntary disclosure did not occur.

SEC. 5357. OBSTRUCTION OF CRIMINAL INVESTIGATIONS OF FEDERAL HEALTH 
              CARE OFFENSES.

    (a) In General.--Chapter 73 of title 18, United States Code, is 
amended by adding at the end the following new section:
``Sec. 1518. Obstruction of Criminal Investigations of Federal Health 
              Care Offenses.
    ``(a) In General.--Whoever willfully prevents, obstructs, misleads, 
delays or attempts to prevent, obstruct, mislead, or delay the 
communication of information or records relating to a Federal health 
care offense to a criminal investigator shall be fined under this title 
or imprisoned not more than 5 years, or both.
    ``(b) Federal Health Care Offense.--As used in this section the 
term `Federal health care offense' has the same meaning given such term 
in section 982(a)(6)(B) of this title.
    ``(c) Criminal Investigator.--As used in this section the term 
`criminal investigator' means any individual duly authorized by a 
department, agency, or armed force of the United States to conduct or 
engage in investigations for prosecutions for violations of health care 
offenses.''.
    (b) Clerical Amendment.--The table of sections at the beginning of 
chapter 73 of title 18, United States Code, is amended by adding at the 
end the following:

``1518. Obstruction of Criminal Investigations of Federal Health Care 
                            Offenses.''.

SEC. 5358. THEFT OR EMBEZZLEMENT.

    (a) In General.--Chapter 31 of title 18, United States Code, is 
amended by adding at the end the following new section:
``Sec. 669. Theft or Embezzlement in Connection with Health Care.
    ``(a) In General.--Whoever willfully embezzles, steals, or 
otherwise without authority willfully and unlawfully converts to the 
use of any person other than the rightful owner, or intentionally 
misapplies any of the moneys, funds, securities, premiums, credits, 
property, or other assets of a health care benefit program, shall be 
fined under this title or imprisoned not more than 10 years, or both.
    ``(b) Federal Health Care Offense.--As used in this section the 
term `Federal health care offense' has the same meaning given such term 
in section 982(a)(6)(B) of this title.''.
    (b) Clerical Amendment.--The table of sections at the beginning of 
chapter 31 of title 18, United States Code, in amended by adding at the 
end the following:

``669. Theft or Embezzlement in Connection with Health Care.''.

SEC. 5359. LAUNDERING OF MONETARY INSTRUMENTS.

    Section 1956(c)(7) of title 18, United States Code, is amended by 
adding at the end the following new subparagraph:
                    ``(F) Any act or activity constituting an offense 
                involving a Federal health care offense as that term is 
                defined in section 982(a)(6)(B) of this title.''.

       PART F--PAYMENTS FOR STATE HEALTH CARE FRAUD CONTROL UNITS

SEC. 5361. ESTABLISHMENT OF STATE FRAUD UNITS.

    (a) Establishment of Health Care Fraud and Abuse Control Unit.--The 
Governor of each State shall, consistent with State law, establish and 
maintain in accordance with subsection (b) a State agency to act as a 
Health Care Fraud and Abuse Control Unit for purposes of this part.
    (b) Definition.--In this section, a ``State Fraud Unit'' means a 
Health Care Fraud and Abuse Control Unit designated under subsection 
(a) that the Secretary certifies meets the requirements of this part.

SEC. 5362. REQUIREMENTS FOR STATE FRAUD UNITS.

    (a) In General.--The State Fraud Unit must--
            (1) be a single identifiable entity of the State 
        government;
            (2) be separate and distinct from any State agency with 
        principal responsibility for the administration of any 
        Federally-funded or mandated health care program;
            (3) meet the other requirements of this section.
    (b) Specific Requirements Described.--The State Fraud Unit shall--
            (1) be a Unit of the office of the State Attorney General 
        or of another department of State government which possesses 
        statewide authority to prosecute individuals for criminal 
        violations;
            (2) if it is in a State the constitution of which does not 
        provide for the criminal prosecution of individuals by a 
        statewide authority and has formal procedures, (A) assure its 
        referral of suspected criminal violations to the appropriate 
        authority or authorities in the State for prosecution, and (B) 
        assure its assistance of, and coordination with, such authority 
        or authorities in such prosecutions; or
            (3) have a formal working relationship with the office of 
        the State Attorney General or the appropriate authority or 
        authorities for prosecution and have formal procedures 
        (including procedures for its referral of suspected criminal 
        violations to such office) which provide effective coordination 
        of activities between the Fraud Unit and such office with 
respect to the detection, investigation, and prosecution of suspected 
criminal violations relating to any Federally-funded or mandated health 
care programs.
    (c) Staffing Requirements.--The State Fraud Unit shall--
            (1) employ attorneys, auditors, investigators and other 
        necessary personnel; and
            (2) be organized in such a manner and provide sufficient 
        resources as is necessary to promote the effective and 
        efficient conduct of State Fraud Unit activities.
    (d) Cooperative Agreements; Memoranda of Understanding.--The State 
Fraud Unit shall have cooperative agreements with--
            (1) Federally-funded or mandated health care programs.
            (2) similar Fraud Units in other States, as exemplified 
        through membership and participation in the National 
        Association of Medicaid Fraud Control Units or its successor; 
        and
            (3) the Secretary.
    (e) Reports.--The State Fraud Unit shall submit to the Secretary an 
application and an annual report containing such information as the 
Secretary determines to be necessary to determine whether the State 
Fraud Unit meets the requirements of this section.
    (f) Funding Source; Participation in All-Payer Program.--In 
addition to those sums expended by a State under section 5364(a) for 
purposes of determining the amount of the Secretary's payments, a State 
Fraud Unit may receive funding for its activities from other sources, 
the identity of which shall be reported to the Secretary in its 
application or annual report. The State Fraud Unit shall participate in 
the all-payer fraud and abuse control program established under section 
5311.

SEC. 5363. SCOPE AND PURPOSE.

    The State Fraud Unit shall carry out the following activities:
            (1) The State Fraud Unit shall conduct a statewide program 
        for the investigation and prosecution (or referring for 
        prosecution) of violations of all applicable state laws 
        regarding any and all aspects of fraud in connection with any 
        aspect of the administration and provision of health care 
        services and activities of providers of such services under any 
        Federally-funded or mandated health care programs.
            (2) The State Fraud Unit shall have procedures for 
        reviewing complaints of the abuse or neglect of patients of 
        facilities (including patients in residential facilities and 
        home health care programs) that receive payments under any 
        Federally-funded or mandated health care programs, and, where 
        appropriate, to investigate and prosecute such complaints under 
        the criminal laws of the State or for referring the complaints 
        to other State agencies for action.
            (3) The State Fraud Unit shall provide for the collection, 
        or referral for collection to the appropriate agency, of 
        overpayments that are made under any Federally-funded or 
        mandated health care program and that are discovered by the 
        State Fraud Unit in carrying out its activities.

SEC. 5364. PAYMENTS TO STATES.

    (a) Matching Payments to States.--Subject to subsection (c), for 
each year for which a State has a State Fraud Unit approved under 
section 5362(b) in operation the Secretary shall provide for a payment 
to the State for each quarter in a fiscal year in an amount equal to 
the applicable percentage of the sums expended during the quarter by 
the State Fraud Unit.
    (b) Applicable Percentage Defined.--
            (1) In general.--In subsection (a), the ``applicable 
        percentage'' with respect to a State for a fiscal year is--
                    (A) 90 percent, for quarters occurring during the 
                first 3 years for which the State Fraud Unit is in 
                operation; or
                    (B) 75 percent, for any other quarters.
            (2) Treatment of states with medicaid fraud control 
        units.--In the case of a State with a State medicaid fraud 
        control in operation prior to or as of the date of the 
        enactment of this Act, in determining the number of years for 
        which the State Fraud Unit under this part has been in 
        operation, there shall be included the number of years for 
        which such State medicaid fraud control unit was in operation.
    (c) Limit on Payment.--Notwithstanding subsection (a), the total 
amount of payments made to a State under this section for a fiscal year 
may not exceed the amounts as authorized pursuant to section 1903(b)(3) 
of the Social Security Act.

                      TITLE VI--MALPRACTICE REFORM

SEC. 6001. ALTERNATIVE DISPUTE RESOLUTION.

    (a) Establishment.--The Secretary of Health and Human Services 
(hereafter referred to in this title as the ``Secretary'') shall 
establish a program of grants to assist States in establishing 
alternative dispute resolution systems.
    (b) Use of Funds.--A State may use a grant awarded under subsection 
(a) to establish alternative dispute resolution systems that--
            (1) identify claims of professional negligence that merit 
        compensation;
            (2) encourage early resolution of meritorious claims prior 
        to commencement of a lawsuit; and
            (3) encourage early withdrawal or dismissal of 
        nonmeritorious claims.
    (c) Award of Grants.--The Secretary shall allocate grants under 
this section in accordance with criteria issued by the Secretary.
    (d) Application.--To be eligible to receive a grant under this 
section, a State, acting through the appropriate State health 
authority, shall submit an application at such time, in such manner, 
and containing such agreements, assurances, and information as the 
Assistant Secretary determines to be necessary to carry out this 
section, including an assurance that the State system meets the 
requirements of section 6002.
    (e) Authorization of Appropriations.--There are authorized to be 
appropriated to carry out this section such sums as may be necessary 
for each of the 1996 through 1999 fiscal years.

SEC. 6002. BASIC REQUIREMENTS.

    A State's alternative dispute resolution system meets the 
requirements of this section if the system--
            (1) applies to all medical malpractice liability claims 
        under the jurisdiction of the courts of that State;
            (2) requires that a written opinion resolving the dispute 
        be issued not later than 6 months after the date by which each 
        party against whom the claim is filed has received notice of 
        the claim (other than in exceptional cases for which a longer 
        period is required for the issuance of such an opinion), and 
        that the opinion contain--
                    (A) findings of fact relating to the dispute, and
                    (B) a description of the costs incurred in 
                resolving the dispute under the system (including any 
                fees paid to the individuals hearing and resolving the 
                claim), together with an appropriate assessment of the 
                costs against any of the parties;
            (3) requires individuals who hear and resolve claims under 
        the system to meet such qualifications as the State may require 
(in accordance with regulations of the Secretary);
            (4) is approved by the State or by local governments in the 
        State;
            (5) with respect to a State system that consists of 
        multiple dispute resolution procedures--
                    (A) permits the parties to a dispute to select the 
                procedure to be used for the resolution of the dispute 
                under the system, and
                    (B) if the parties do not agree on the procedure to 
                be used for the resolution of the dispute, assigns a 
                particular procedure to the parties;
            (6) provides for the transmittal to the State agency 
        responsible for monitoring or disciplining health care 
        professionals and health care providers of any findings made 
        under the system that such a professional or provider committed 
        malpractice, unless, during the 90-day period beginning on the 
        date the system resolves the claim against the professional or 
        provider, the professional or provider brings an action 
        contesting the decision made under the system; and
            (7) provides for the regular transmittal to the 
        Administrator for Health Care Policy and Research of 
        information on disputes resolved under the system, in a manner 
        that assures that the identity of the parties to a dispute 
        shall not be revealed.

SEC. 6003. ALTERNATIVE DISPUTE RESOLUTION ADVISORY BOARD.

    (a) Establishment.--Not later than 1 year after the date of the 
enactment of this Act, the Secretary shall establish an Alternative 
Dispute Resolution Advisory Board to advise the Secretary regarding the 
establishment of alternative dispute resolution systems at the State 
and Federal levels.
    (b) Composition.--The ADR Advisory Board shall be composed of 
members appointed by the Secretary from among representatives of the 
following:
            (1) Physicians.
            (2) Hospitals.
            (3) Patient advocacy groups.
            (4) State governments.
            (5) Academic experts from applicable disciplines (including 
        medicine, law, public health, and economics) and specialists in 
        arbitration and dispute resolution.
            (6) Health insurers and medical malpractice insurers.
            (7) Medical product manufacturers.
            (8) Pharmaceutical companies.
            (9) Other professions and groups determined appropriate by 
        the Secretary.
    (c) Duties.--The ADR Advisory Board shall--
            (1) examine various dispute resolution systems and provide 
        advice and assistance to States regarding the establishment of 
        such systems;
            (2) not later than 1 year after the appointment of its 
        members, submit to the Secretary--
                    (A) a model alternative dispute resolution system 
                that may be used by a State for purposes of this title, 
                and
                    (B) a model alternative Federal system that may be 
                used by the Secretary; and
            (3) review the applications of States for certification of 
        State alternative dispute resolution systems and make 
        recommendations to the Secretary regarding whether the systems 
        should be certified under section 6004.

SEC. 6004. CERTIFICATION OF STATE SYSTEMS; APPLICABILITY OF ALTERNATIVE 
              FEDERAL SYSTEM.

    (a) Certification.--
            (1) Application by state.--Each State shall submit an 
        application to the ADR Advisory Board describing its 
        alternative dispute resolution system and containing such 
information as the ADR Advisory Board may require to make a 
recommendation regarding whether the system meets the requirements of 
this title.
            (2) Basis for certification.--Not later than October 1 of 
        each year (beginning with 1995), the Secretary, taking into 
        consideration the recommendations of the ADR Advisory Board, 
        shall certify a State's alternative dispute resolution system 
        under this subsection for the following calendar year if the 
        Secretary determines that the system meets the requirements of 
        section 6002.
    (b) Applicability of Alternative Federal System.--
            (1) Establishment and applicability.--Not later than 
        October 1, 1995, the Secretary, taking into consideration the 
        model alternative Federal system submitted by the ADR Advisory 
        Board under section 6003(c)(2)(B), shall establish by rule an 
        alternative Federal ADR system for the resolution of medical 
        malpractice liability claims during a calendar year in States 
        that do not have in effect an alternative dispute resolution 
        system certified under subsection (a) for the year.
            (2) Requirements for system.--Under the alternative Federal 
        ADR system established under paragraph (1)--
                    (A) paragraphs (1), (2), (6), and (7) of section 
                6002(a) shall apply to claims brought under the system;
                    (B) if the system provides for the resolution of 
                claims through arbitration, the claims brought under 
                the system shall be heard and resolved by arbitrators 
                appointed by the Secretary in consultation with the 
                Attorney General; and
                    (C) with respect to a State in which the system is 
                in effect, the Secretary may (at the State's request) 
                modify the system to take into account the existence of 
                dispute resolution procedures in the State that affect 
                the resolution of medical malpractice liability claims.
            (3) Treatment of states with alternative system in 
        effect.--If the alternative Federal ADR system established 
        under this subsection is applied with respect to a State for a 
        calendar year, the State shall make a payment to the United 
        States (at such time and in such manner as the Secretary may 
        require) in an amount equal to 110 percent of the costs 
        incurred by the United States during the year as a result of 
        the application of the system with respect to the State.

SEC. 6005. REPORTS ON IMPLEMENTATION AND EFFECTIVENESS OF ALTERNATIVE 
              DISPUTE RESOLUTION SYSTEMS.

    (a) In General.--Not later than 5 years after the date of the 
enactment of this Act, the Secretary shall prepare and submit to the 
Congress a report describing and evaluating State alternative dispute 
resolution systems operated pursuant to this title and the alternative 
Federal system established under section 6004(b).
    (b) Contents of Report.--The Secretary shall include in the report 
prepared and submitted under subsection (a)--
            (1) information on--
                    (A) the effect of the alternative dispute 
                resolution systems on the cost of health care within 
                each State,
                    (B) the impact of such systems on the access of 
                individuals to health care within the State, and
                    (C) the effect of such systems on the quality of 
                health care provided within the State; and
            (2) to the extent that such report does not provide 
        information on no-fault systems operated by States as 
        alternative dispute resolution systems pursuant to this part, 
        an analysis of the feasibility and desirability of establishing 
        a system under which medical malpractice liability claims shall 
        be resolved on a no-fault basis.

SEC. 6006. OPTIONAL APPLICATION OF PRACTICE GUIDELINES.

    (a) Development and Certification of Guidelines.--Each State may 
develop, for certification by the Secretary if the Secretary determines 
appropriate, a set of specialty clinical practice guidelines.
    (b) Provision of Health Care Under Guidelines.--Notwithstanding any 
other provision of law, in any medical malpractice liability action 
arising from the conduct of a health care provider or health care 
professional, if such conduct was in accordance with a guideline 
developed by the State in which the conduct occurred and certified by 
the Secretary under subsection (a), the guideline--
            (1) may be introduced by any party to the action (including 
        a health care provider, health care professional, or patient); 
        and
            (2) if introduced, shall establish a rebuttable presumption 
        that the conduct was in accordance with the appropriate 
        standard of medical care, which may only be overcome by the 
        presentation of clear and convincing evidence on behalf of the 
        party against whom the presumption operates.
    (c) Restriction on Parameters Considered Appropriate.--
            (1) Parameters sanctioned by secretary.--For purposes of 
        subsection (a), a specialty clinical practice guideline may not 
        be considered appropriate with respect to actions brought 
        during a year unless the Secretary has sanctioned the use of 
        the guideline for purposes of an affirmative defense to medical 
        malpractice liability actions brought during the year in 
        accordance with paragraph (2).
            (2) Process for sanctioning parameters.--Not less 
        frequently than October 1 of each year (beginning with 1996), 
        the Secretary shall review the practice guidelines and 
        standards submitted by the State under subsection (a), and 
        shall sanction those guidelines which the Secretary considers 
        appropriate for purposes of an affirmative defense to medical 
        malpractice liability actions brought during the next calendar 
        year as appropriate practice parameters for purposes of 
        subsection (a).
    (d) Prohibiting Application of Failure to Follow Parameters as 
Prima Facie Evidence of Negligence.--No plaintiff in a medical 
malpractice liability action may be deemed to have presented prima 
facie evidence that a defendant was negligent solely by showing that 
the defendant failed to follow the appropriate practice guidelines.

           TITLE VII--HEALTH PROMOTION AND DISEASE PREVENTION

SEC. 7001. DISEASE PREVENTION AND HEALTH PROMOTION PROGRAMS TREATED AS 
              MEDICAL CARE.

    (a) In General.--For purposes of section 213(d)(1) of the Internal 
Revenue Code of 1986 (defining medical care), qualified expenditures 
(as defined by the Secretary of Health and Human Services) for disease 
prevention and health promotion programs shall be considered amounts 
paid for medical care.
    (b) Effective Date.--Subsection (a) shall apply to amounts paid in 
taxable years beginning after December 31, 1995.

SEC. 7002. WORKSITE WELLNESS GRANT PROGRAM.

    (a) Grants.--The Secretary of Health and Human Services (hereafter 
referred to in this title as the ``Secretary'') shall award grants to 
States (through State health departments or other State agencies 
working in consultation with the State health agency) to enable such 
States to provide assistance to businesses with not to exceed 100 
employees for the establishment and operation of worksite wellness 
programs for their employees.
    (b) Application.--To be eligible for a grant under subsection (a), 
a State shall prepare and submit to the Secretary an application at 
such time, in such manner, and containing such information as the 
Secretary may require, including--
            (1) a description of the manner in which the State intends 
        to use amounts received under the grant; and
            (2) assurances that the State will only use amounts 
        provided under such grant to provide assistance to businesses 
        that can demonstrate that they are in compliance with minimum 
        program characteristics (relative to scope and regularity of 
        services offered) that are developed by the Secretary in 
        consultation with experts in public health and representatives 
        of small business.
Grants shall be distributed to States based on the population of 
individuals employed by small businesses.
    (c) Program Characteristics.--In developing minimum program 
characteristics under subsection (b)(2), the Secretary shall ensure 
that all activities established or enhanced under a grant under this 
section have clearly defined goals and objectives and demonstrate how 
receipt of such assistance will help to achieve established State or 
local health objectives based on the National Health Promotion and 
Disease Prevention Objectives.
    (d) Use of Funds.--Amounts received under a grant awarded under 
subsection (a) shall be used by a State to provide grants to businesses 
(as described in subsection (a)), nonprofit organizations, or public 
authorities, or to operate State-run worksite wellness programs.
    (e) Special Emphasis.--In funding business worksite wellness 
projects under this section, a State shall give special emphasis to--
            (1) the development of joint wellness programs between 
        employers;
            (2) the development of employee assistance programs dealing 
        with substance abuse;
            (3) maximizing the use and coordination with existing 
        community resources such as nonprofit health organizations; and
            (4) encourage participation of dependents of employees and 
        retirees in wellness programs.
    (f) Authorization of Appropriations.--There are authorized to be 
appropriated to carry out this section, such sums as may be necessary 
in each of the fiscal years 1995 through 1999.

SEC. 7003. EXPANDING AND IMPROVING SCHOOL HEALTH EDUCATION.

    (a) Authorization of Appropriations.--There are authorized to be 
appropriated to carry out subsection (b), such sums as may be necessary 
for each of the fiscal years 1995 through 1999.
    (b) General Use of Funds.--The Secretary shall use amounts 
appropriated under subsection (a) to expand comprehensive school health 
education programs administered by the Centers for Disease Control and 
Prevention under sections 301 and 311 of the Public Health Service Act 
(42 U.S.C. 241 and 243).
    (c) Specific Use of Funds.--In meeting the requirement of 
subsection (b), the Secretary shall expand the number of children 
receiving planned, sequential kindergarten through 12th grade 
comprehensive school education as a component of comprehensive programs 
of school health, including--
            (1) physical education programs that promote lifelong 
        physical activity;
            (2) healthy school food service selections;
            (3) programs that promote a healthy and safe school 
        environment;
            (4) schoolsite health promotion for faculty and staff;
            (5) integrated school and community health promotion 
        efforts; and
            (6) school nursing disease prevention and health promotion 
        services.
    (d) Coordination of Existing Programs.--The Secretary of Health and 
Human Services, the Secretary of Education and the Secretary of 
Agriculture shall work cooperatively to coordinate existing school 
health education programs within their Departments in a manner that 
maximized the efficiency and effectiveness of Federal expenditures in 
this area.

             TITLE VIII--TAX INCENTIVES FOR LONG-TERM CARE

SEC. 8001. SHORT TITLE.

    This title may be cited as the ``Private Long-Term Care Family 
Protection Act of 1995''.

SEC. 8002. AMENDMENT OF 1986 CODE.

    Except as otherwise expressly provided, whenever in this title an 
amendment or repeal is expressed in terms of an amendment to, or repeal 
of, a section or other provision, the reference shall be considered to 
be made to a section or other provision of the Internal Revenue Code of 
1986.

         Subtitle A--Tax Treatment of Long-Term Care Insurance

SEC. 8101. QUALIFIED LONG-TERM CARE SERVICES TREATED AS MEDICAL CARE.

    (a) General Rule.--Paragraph (1) of section 213(d) (defining 
medical care) is amended by striking ``or'' at the end of subparagraph 
(B), by striking subparagraph (C), and by inserting after subparagraph 
(B) the following new subparagraphs:
                    ``(C) for qualified long-term care services (as 
                defined in subsection (f)),
                    ``(D) for insurance covering medical care referred 
                to in--
                            ``(i) subparagraphs (A) and (B), or
                            ``(ii) subparagraph (C), but only if such 
                        insurance is provided under a qualified long-
                        term care insurance policy (as defined in 
                        section 7702B(b)) and the deduction under this 
                        section for amounts paid for such insurance is 
                        not disallowed under section 7702B(d)(4), or
                    ``(E) for premiums under part B of title XVIII of 
                the Social Security Act, relating to supplementary 
                medical insurance for the aged.''.
    (b) Qualified Long-Term Care Services Defined.--Section 213 
(relating to the deduction for medical, dental, etc., expenses) is 
amended by adding at the end the following new subsection:
    ``(f) Qualified Long-Term Care Services.--For purposes of this 
section--
            ``(1) In general.--The term `qualified long-term care 
        services' means necessary diagnostic, curing, mitigating, 
        treating, preventive, therapeutic, and rehabilitative services, 
        and maintenance and personal care services (whether performed 
        in a residential or nonresidential setting), which--
                    ``(A) are required by an individual during any 
                period the individual is an incapacitated individual 
                (as defined in paragraph (2)),
                    ``(B) have as their primary purpose--
                            ``(i) the provision of needed assistance 
                        with 1 or more activities of daily living (as 
                        defined in paragraph (3)), or
                            ``(ii) protection from threats to health 
                        and safety due to severe cognitive impairment, 
                        and
                    ``(C) are provided pursuant to a continuing plan of 
                care prescribed by a licensed professional (as defined 
                in paragraph (4)).
            ``(2) Incapacitated individual.--The term `incapacitated 
        individual' means any individual who has been certified by a 
        licensed professional as--
                    ``(A) being unable to perform, without substantial 
                assistance from another individual, at least 2 
                activities of daily living (as defined in paragraph 
                (3)),
                    ``(B) having moderate cognitive impairment as 
                defined by the Secretary in consultation with the 
                Secretary of Health and Human Services, or
                    ``(C) having a level of disability similar (as 
                determined by the Secretary in consultation with the 
                Secretary of Health and Human Services) to the level of 
                disability described in subparagraph (A).
            ``(3) Activities of daily living.--
                    ``(A) In general.--Each of the following is an 
                activity of daily living:
                            ``(i) Eating.
                            ``(ii) Toileting.
                            ``(iii) Transferring.
                            ``(iv) Bathing.
                            ``(v) Dressing.
                            ``(vi) Continence.
                    ``(B) Definitions.--For purposes of this paragraph:
                            ``(i) Eating.--The term `eating' means the 
                        process of getting food from a plate or its 
                        equivalent into the mouth.
                            ``(ii) Toileting.--The term `toileting' 
                        means the act of going to the toilet room for 
                        bowel and bladder function, transferring on and 
                        off of the toilet, cleaning oneself after 
                        elimination, and arranging clothes.
                            ``(iii) Transferring.--The term 
                        `transferring' means the process of getting in 
                        and out of bed or in and out of a chair or 
                        wheelchair.
                            ``(iv) Bathing.--The term `bathing' means 
                        the overall complex behavior of using water for 
                        cleansing the whole body, including cleansing 
                        as part of a bath, shower, or sponge bath, 
                        getting to, in, and out of a tub or shower, and 
                        washing and drying oneself.
                            ``(v) Dressing.--The term `dressing' means 
                        the overall complex behavior of getting clothes 
                        from closets and drawers and then getting 
                        dressed.
                            ``(vi) Continence.--The term `continence' 
                        means the ability to voluntarily control bowel 
                        and bladder function and to maintain a 
                        reasonable level of personal hygiene.
            ``(4) Licensed professional.--
                    ``(A) In general.--The term `licensed professional' 
                means--
                            ``(i) a physician or registered 
                        professional nurse,
                            ``(ii) a qualified community care case 
                        manager (as defined in subparagraph (B)), or
                            ``(iii) any other individual who meets such 
                        requirements as may be prescribed by the 
                        Secretary after consultation with the Secretary 
                        of Health and Human Services.
                    ``(B) Qualified community care case manager.--The 
                term `qualified community care case manager' means an 
                individual or entity which--
                            ``(i) has experience or has been trained in 
                        providing case management services and in 
                        preparing individual care plans,
                            ``(ii) has experience in assessing 
                        individuals to determine their functional and 
                        cognitive impairment, and
                            ``(iii) meets such requirements as may be 
                        prescribed by the Secretary after consultation 
                        with the Secretary of Health and Human 
                        Services.
            ``(5) Certain services not included.--The term `qualified 
        long-term care services' shall not include any services 
        provided to an individual--
                    ``(A) by a relative (directly or through a 
                partnership, corporation, or other entity) unless the 
                relative is a licensed professional with respect to 
                such services, or
                    ``(B) by a corporation or partnership which is 
                related (within the meaning of section 267(b) or 
                707(b)) to the individual.
        For purposes of this paragraph, the term `relative' means an 
        individual bearing a relationship to the individual which is 
        described in paragraphs (1) through (8) of section 152(a).''.
    (c) Technical Amendments.--Paragraph (6) of section 213(d) is 
amended--
            (1) by striking ``subparagraphs (A) and (B)'' and inserting 
        ``subparagraphs (A), (B), and (C)'', and
            (2) by striking ``paragraph (1)(C) applies'' in 
        subparagraph (A) and inserting ``subparagraphs (C) and (D) of 
        paragraph (1) apply''.

SEC. 8102. TREATMENT OF LONG-TERM CARE INSURANCE.

    (a) General Rule.--Chapter 79 (relating to definitions) is amended 
by inserting after section 7702A the following new section:

``SEC. 7702B. TREATMENT OF LONG-TERM CARE INSURANCE.

    ``(a) In General.--For purposes of this subtitle--
            ``(1) a qualified long-term care insurance policy (as 
        defined in subsection (b)) shall be treated as an accident and 
        health insurance contract,
            ``(2) any plan of an employer providing coverage under a 
        qualified long-term care insurance policy shall be treated as 
        an accident and health plan with respect to such coverage,
            ``(3) amounts (other than policyholder dividends (as 
        defined in section 808) or premium refunds) received under a 
        qualified long-term care insurance policy (including 
        nonreimbursement payments described in subsection (b)(6)) shall 
        be treated--
                    ``(A) as amounts received for personal injuries and 
                sickness, and
                    ``(B) as amounts received for the permanent loss of 
                a function of the body and as amounts computed with 
                reference to the nature of injury under section 105(c) 
                to the extent that such amounts do not exceed the 
                dollar amount in effect under subsection (f) for the 
                taxable year,
            ``(4) amounts paid for a qualified long-term care insurance 
        policy described in subsection (b)(11) shall be treated as 
        payments made for insurance for purposes of section 
        213(d)(1)(D), and
            ``(5) a qualified long-term care insurance policy shall be 
        treated as a guaranteed renewable contract subject to the rules 
        of section 816(e).
    ``(b) Qualified Long-Term Care Insurance Policy.--For purposes of 
this title--
            ``(1) In general.--The term `qualified long-term care 
        insurance policy' means any long-term care insurance policy (as 
        defined in paragraph (10)) that--
                    ``(A) limits benefits under such policy to 
                incapacitated individuals (as defined in section 
                213(f)(2)), and
                    ``(B) satisfies the requirements of paragraphs (2) 
                through (9).
            ``(2) Premium requirements.--The requirements of this 
        paragraph are met with respect to a long-term care insurance 
        policy if such policy provides that premium payments may not be 
        made earlier than the date such payments would have been made 
        if the policy provided for level annual payments over the life 
        expectancy of the insured or 20 years, whichever is shorter. A 
        policy shall not be treated as failing to meet the requirements 
        of the preceding sentence solely by reason of a provision in 
        the policy providing for a waiver of premiums if the insured 
        becomes an incapacitated individual (as defined in section 
        213(f)(2)).
            ``(3) Prohibition of cash value.--The requirements of this 
        paragraph are met with respect to a long-term care insurance 
        policy if such policy does not provide for a cash value or 
        other money that can be paid, assigned, pledged as collateral 
        for a loan, or borrowed, other than as provided in paragraph 
        (4).
            ``(4) Refunds of premiums and dividends.--The requirements 
        of this paragraph are met with respect to a long-term care 
        insurance policy if such policy provides that--
                    ``(A) policyholder dividends are required to be 
                applied as a reduction in future premiums or to 
                increase benefits described in subsection (a)(2),
                    ``(B) refunds of premiums upon a partial surrender 
                or a partial cancellation are required to be applied as 
                a reduction in future premiums, and
                    ``(C) any refund on the death of the insured, or on 
                a complete surrender or cancellation of the policy, 
                cannot exceed the aggregate premiums paid under the 
                policy.
        Any refund on a complete surrender or cancellation of the 
        policy shall be includable in gross income to the extent that 
        any deduction or exclusion was allowable with respect to the 
        premiums.
            ``(5) Coordination with other entitlements.--The 
        requirements of this paragraph are met with respect to a long-
        term care insurance policy if such policy does not cover 
        expenses incurred to the extent that such expenses are also 
        covered under title XVIII of the Social Security Act. For 
        purposes of this paragraph, a long-term care insurance policy 
        which coordinates expenses incurred under such policy with 
        expenses incurred under title XVIII of such Act shall not be 
        considered to duplicate such expenses.
            ``(6) Requirements of model regulation and act.--
                    ``(A) In general.--The requirements of this 
                paragraph are met with respect to a long-term care 
                insurance policy if such policy meets--
                            ``(i) Model regulation.--The following 
                        requirements of the model regulation:
                                    ``(I) Section 7A (relating to 
                                guaranteed renewal or 
                                noncancellability), and the 
                                requirements of section 6B of the model 
                                Act relating to such section 7A.
                                    ``(II) Section 7B (relating to 
                                prohibitions on limitations and 
                                exclusions).
                                    ``(III) Section 7C (relating to 
                                extension of benefits).
                                    ``(IV) Section 7D (relating to 
                                continuation or conversion of 
                                coverage).
                                    ``(V) Section 7E (relating to 
                                discontinuance and replacement of 
                                policies).
                                    ``(VI) Section 8 (relating to 
                                unintentional lapse).
                                    ``(VII) Section 9 (relating to 
                                disclosure), other than section 9F 
                                thereof.
                                    ``(VIII) Section 10 (relating to 
                                prohibitions against post-claims 
                                underwriting).
                                    ``(IX) Section 11 (relating to 
                                minimum standards).
                                    ``(X) Section 12 (relating to 
                                requirement to offer inflation 
                                protection), except that any 
                                requirement for a signature on a 
                                rejection of inflation protection shall 
                                permit the signature to be on an 
                                application or on a separate form.
                                    ``(XI) Section 23 (relating to 
                                prohibition against preexisting 
                                conditions and probationary periods in 
                                replacement policies or certificates).
                            ``(ii) Model act.--The following 
                        requirements of the model Act:
                                    ``(I) Section 6C (relating to 
                                preexisting conditions).
                                    ``(II) Section 6D (relating to 
                                prior hospitalization).
                    ``(B) Definitions.--For purposes of this 
                paragraph--
                            ``(i) Model provisions.--The terms `model 
                        regulation' and `model Act' mean the long-term 
                        care insurance model regulation, and the long-
                        term care insurance model Act, respectively, 
                        promulgated by the National Association of 
                        Insurance Commissioners (as adopted in January 
                        of 1993).
                            ``(ii) Coordination.--Any provision of the 
                        model regulation or model Act listed under 
                        clause (i) or (ii) of subparagraph (A) shall be 
                        treated as including any other provision of 
                        such regulation or Act necessary to implement 
                        the provision.
            ``(7) Tax disclosure requirement.--The requirement of this 
        paragraph is met with respect to a long-term care insurance 
        policy if such policy meets the requirements of section 
        4980C(d)(1).
            ``(8) Nonforfeiture requirements.--
                    ``(A) In general.--The requirements of this 
                paragraph are met with respect to a long-term care 
                insurance policy, if the issuer of such policy offers 
                to the policyholder, including any group policyholder, 
                a nonforfeiture provision meeting the requirements 
                specified in subparagraph (B).
                    ``(B) Requirements of provision.--The requirements 
                specified in this subparagraph are as follows:
                            ``(i) The nonforfeiture provision shall be 
                        appropriately captioned.
                            ``(ii) The nonforfeiture provision shall 
                        provide for a benefit available in the event of 
                        a default in the payment of any premiums and 
                        the amount of the benefit may be adjusted 
subsequent to being initially granted only as necessary to reflect 
changes in claims, persistency, and interest as reflected in changes in 
rates for premium paying policies approved by the Secretary for the 
same policy form.
                            ``(iii) The nonforfeiture provision shall 
                        provide at least 1 of the following:
                                    ``(I) Reduced paid-up insurance.
                                    ``(II) Extended term insurance.
                                    ``(III) Shortened benefit period.
                                    ``(IV) Other similar offerings 
                                approved by the Secretary.
            ``(9) Rate stabilization.--
                    ``(A) In general.--The requirements of this 
                paragraph are met with respect to a long-term care 
                insurance policy, including any group master policy, 
                if--
                            ``(i) such policy contains the minimum rate 
                        guarantees specified in subparagraph (B), and
                            ``(ii) the issuer of such policy meets the 
                        requirements specified in subparagraph (C).
                    ``(B) Minimum rate guarantees.--The minimum rate 
                guarantees specified in this subparagraph are as 
                follows:
                            ``(i) Rates under the policy shall be 
                        guaranteed for a period of at least 3 years 
                        from the date of issue of the policy.
                            ``(ii) After the expiration of the 3-year 
                        period required under clause (i), any rate 
                        increase shall be guaranteed for a period of at 
                        least 2 years from the effective date of such 
                        rate increase.
                            ``(iii) In the case of any individual age 
                        75 or older who has maintained coverage under a 
                        long-term care insurance policy for 10 years, 
                        rate increases under such policy shall not 
                        exceed 10 percent in any 12-month period.
                    ``(C) Increases in premiums.--The requirements 
                specified in this subparagraph are as follows:
                            ``(i) In general.--If an issuer of a long-
                        term care insurance policy, including any group 
                        master policy, plans to increase the premium 
                        rates for a policy, such issuer shall, at least 
                        90 days before the effective date of the rate 
                        increase, offer to each individual policyholder 
                        under such policy the option to remain insured 
                        under the policy at a reduced level of benefits 
                        that maintains the premium rate at the rate in 
                        effect on the day before the effective date of 
                        the rate increase.
                            ``(ii) Increases of more than 50 percent.--
                        If an issuer of a long-term care insurance 
                        policy, including any group master policy, 
                        increases premium rates for a policy by more 
                        than 50 percent in any 3-year period--
                                    ``(I) in the case of an individual 
                                long-term care insurance policy, the 
                                issuer shall discontinue issuing all 
                                individual long-term care policies in 
                                any State in which the issuer issues 
                                such policy for a period of 2 years 
                                from the effective date of such premium 
                                increase, and
                                    ``(II) in the case of a group 
                                master long-term care insurance policy, 
                                the issuer shall discontinue issuing 
                                all group master long-term care 
                                insurance policies in any State in 
                                which the issuer issues such policy for 
                                a period of 2 years from the effective 
                                date of such premium increase.
                        This clause shall apply to any issuer of long-
                        term care insurance policies or any other 
                        person that purchases or otherwise acquires any 
                        long-term care insurance policies from another 
                        issuer or person.
                    ``(D) Modifications or waivers of requirements.--
                The Secretary may modify or waive any of the 
                requirements under this paragraph if--
                            ``(i) such requirements will adversely 
                        affect an issuer's solvency,
                            ``(ii) such modification or waiver is 
                        required for the issuer to meet other State or 
                        Federal requirements,
                            ``(iii) medical developments, new disabling 
                        diseases, changes in long-term care delivery, 
                        or a new method of financing long-term care 
                        will result in changes to mortality and 
                        morbidity patterns or assumptions,
                            ``(iv) judicial interpretation of a 
                        policy's benefit features results in unintended 
                        claim liabilities, or
                            ``(v) in the case of a purchase or other 
                        acquisition of long-term care insurance 
                        policies of an issuer or other person, the 
                        continued sale of other long-term care 
                        insurance policies by the purchasing issuer or 
                        person is in the best interests of individual 
                        consumers.
            ``(10) Long-term care insurance policy defined.--
                    ``(A) In general.--For purposes of this section, 
                the term `long-term care insurance policy' means any 
                product which is advertised, marketed, or offered as 
                long-term care insurance (as defined in subparagraph 
                (B)).
                    ``(B) Long-term care insurance.--
                            ``(i) In general.--The term `long-term care 
                        insurance' means any insurance policy or 
                        rider--
                                    ``(I) advertised, marketed, 
                                offered, or designed to provide 
                                coverage for not less than 12 
                                consecutive months for each covered 
                                person on an expense incurred, 
                                indemnity, prepaid or other basis for 1 
                                or more necessary or medically 
                                necessary diagnostic, preventive, 
                                therapeutic, rehabilitative, 
                                maintenance, or personal care services 
                                provided in a setting other than an 
                                acute care unit of a hospital, and
                                    ``(II) issued by insurers, 
                                fraternal benefit societies, nonprofit 
                                health, hospital, and medical service 
                                corporations, prepaid health plans, 
                                health maintenance organizations or any 
                                similar organization to the extent such 
                                organizations are otherwise authorized 
                                to issue life or health insurance.
                        Such term includes group and individual 
                        annuities and life insurance policies or riders 
                        which provide directly or which supplement 
                        long-term care insurance and includes a policy 
                        or rider which provides for payment of benefits 
                        based on cognitive impairment or the loss of 
                        functional capacity.
                            ``(ii) Exclusions.--The term `long-term 
                        care insurance' shall not include--
                                    ``(I) any insurance policy which is 
                                offered primarily to provide basic 
                                coverage to supplement coverage under 
                                the medicare program under title XVIII 
                                of the Social Security Act, basic 
                                hospital expense coverage, basic 
                                medical-surgical expense coverage, 
                                hospital confinement coverage, major 
                                medical expense coverage, disability 
                                income or related asset-protection 
                                coverage, accident only coverage, 
                                specified disease or specified accident 
                                coverage, or limited benefit health 
                                coverage, or
                                    ``(II) life insurance policies--
                                            ``(aa) which accelerate the 
                                        death benefit specifically for 
                                        1 or more of the qualifying 
                                        events of terminal illness or 
                                        medical conditions requiring 
                                        extraordinary medical 
                                        intervention or permanent 
                                        institutional confinement,
                                            ``(bb) which provide the 
                                        option of a lump-sum payment 
                                        for such benefits, and
                                            ``(cc) under which neither 
                                        such benefits nor the 
                                        eligibility for the benefits is 
                                        conditioned upon the receipt of 
                                        long-term care.
            ``(11) Nonreimbursement payments permitted.--For purposes 
        of subsection (a)(4), a policy is described in this paragraph 
        if, under the policy, payments are made to (or on behalf of) an 
        insured individual on a per diem or other periodic basis 
        without regard to the expenses incurred or services rendered 
        during the period to which the payments relate.
    ``(c) Treatment of Long-Term Care Insurance Policies.--For purposes 
of this title, any amount received or coverage provided under a long-
term care insurance policy that is not a qualified long-term care 
insurance policy shall not be treated as an amount received for 
personal injuries or sickness or provided under an accident and health 
plan and shall not be treated as excludable from gross income under any 
provision of this title.
    ``(d) Treatment of Coverage Provided as Part of a Life Insurance 
Contract.--Except as otherwise provided in regulations, in the case of 
any long-term care insurance coverage provided by rider on a life 
insurance contract, the following rules shall apply:
            ``(1) In general.--This section shall apply as if the 
        portion of the contract providing such coverage is a separate 
        contract or policy.
            ``(2) Premiums and charges for long-term care coverage.--
        Premium payments for long-term care insurance policy coverage 
        and charges against the life insurance contract's cash 
        surrender value (within the meaning of section 7702(f)(2)(A)) 
        for such coverage, shall be treated as premiums for purposes of 
        subsection (b)(2).
            ``(3) Application of section 7702.--Section 7702(c)(2) 
        (relating to the guideline premium limitation) shall be applied 
        by increasing, as of any date, the guideline premium limitation 
        with respect to a life insurance contract by an amount equal 
        to--
                    ``(A) the sum of any charges (but not premium 
                payments) described in paragraph (2) made to that date 
                under the contract, reduced by
                    ``(B) any such charges the imposition of which 
                reduces the premiums paid for the contract (within the 
                meaning of section 7702(f)(1)).
            ``(4) Application of section 213.--No deduction shall be 
        allowed under section 213(a) for charges against the life 
        insurance contract's cash surrender value described in 
        paragraph (2), unless such charges are includable in income as 
        a result of the application of section 72(e)(10) and the 
        coverage provided by the rider is a qualified long-term care 
        insurance policy under subsection (b).
For purposes of this subsection, the term `portion' means only the 
terms and benefits under a life insurance contract that are in addition 
to the terms and benefits under the contract without regard to the 
coverage under a qualified long-term care insurance policy.
    ``(e) Employer Plans Not Treated as Deferred Compensation Plans.--
For purposes of this title, a plan of an employer providing coverage 
under a qualified long-term care insurance policy shall not be treated 
as a plan which provides for deferred compensation by reason of 
providing such coverage.
    ``(f) Dollar Amount for Purposes of Gross Income Exclusion.--
            ``(1) Dollar amount.--
                    ``(A) In general.--The dollar amount in effect 
                under this subsection shall be $200 per day.
                    ``(B) Inflation adjustments.--In the case of any 
                taxable year beginning in a calendar year after 1996, 
                the dollar amount contained in subparagraph (A) shall 
                be increased by an amount equal to--
                            ``(i) such dollar amount, multiplied by
                            ``(ii) the cost-of-living adjustment 
                        determined under section 1(f)(3) for the 
                        calendar year in which the taxable year begins, 
                        by substituting `calendar year 1995' for 
                        `calendar year 1992' in subparagraph (B) 
                        thereof.
            ``(2) Aggregation rule.--For purposes of this subsection, 
        all policies issued with respect to the same taxpayer shall be 
        treated as 1 policy.
    ``(g) Regulations.--The Secretary shall prescribe such regulations 
as may be necessary to carry out the requirements of this section, 
including regulations to prevent the avoidance of this section by 
providing long-term care insurance coverage under a life insurance 
contract and to provide for the proper allocation of amounts between 
the long-term care and life insurance portions of a contract.''.
    (b) Clerical Amendment.--The table of sections for chapter 79 is 
amended by inserting after the item relating to section 7702A the 
following new item:

                              ``Sec. 7702B. Treatment of long-term care 
                                        insurance.''.
    (c) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        apply to policies issued after December 31, 1995. Solely for 
        purposes of the preceding sentence, a policy issued prior to 
        January 1, 1996, that satisfies the requirements of a qualified 
        long-term care insurance policy as set forth in section 
        7702B(b) of the Internal Revenue Code of 1986 (as added by this 
        section) shall, on and after January 1, 1996, be treated as 
        having been issued after December 31, 1995.
            (2) Transition rule.--If, after the date of enactment of 
        this Act and before January 1, 1996, a policy providing for 
        long-term care insurance coverage is exchanged solely for a 
        qualified long-term care insurance policy (as defined in such 
        section 7702B(b)), no gain or loss shall be recognized on the 
        exchange. If, in addition to a qualified long-term care 
        insurance policy, money or other property is received in the 
        exchange, then any gain shall be recognized to the extent of 
        the sum of the money and the fair market value of the other 
        property received. For purposes of this paragraph, the 
        cancellation of a policy providing for long-term care insurance 
        coverage and reinvestment of the cancellation proceeds in a 
        qualified long-term care insurance policy within 60 days 
        thereafter shall be treated as an exchange.
            (3) Issuance of certain riders permitted.--For purposes of 
        determining whether section 7702 or 7702A of the Internal 
        Revenue Code of 1986 applies to any contract, the issuance, 
        whether before, on, or after December 31, 1995, of a rider on a 
        life insurance contract providing long-term care insurance 
        coverage shall not be treated as a modification or material 
        change of such contract.

SEC. 8103. TREATMENT OF QUALIFIED LONG-TERM CARE PLANS.

    (a) Exclusion From COBRA Continuation Requirements.--Subparagraph 
(A) of section 4980B(f)(2) (defining continuation coverage) is amended 
by adding at the end the following new sentence: ``The coverage shall 
not include coverage for qualified long-term care services (as defined 
in section 213(f)).''.
    (b) Benefits Included in Cafeteria Plans.--Section 125(f) (defining 
qualified benefits) is amended by adding at the end the following new 
sentence: ``Such term includes coverage under a qualified long-term 
care insurance policy (as defined in section 7702B(b)) which is 
includible in gross income only because it exceeds the dollar 
limitation of section 105(c)(2).''.

SEC. 8104. TAX RESERVES FOR QUALIFIED LONG-TERM CARE INSURANCE 
              POLICIES.

    (a) In General.--Subparagraph (A) of section 807(d)(3) (relating to 
tax reserve methods) is amended by redesignating clause (iv) as clause 
(v) and by inserting after clause (iii) the following new clause:
                            ``(iv) Qualified long-term care insurance 
                        policies.--In the case of any qualified long-
                        term care insurance policy (as defined in 
                        section 7702B(b)), a 1 year full preliminary 
                        term method, as prescribed by the National 
                        Association of Insurance Commissioners.''.
    (b) Conforming Amendments.--Section 807(d)(3)(A) (relating to tax 
reserve methods), is amended--
            (1) in clause (v), as redesignated by subsection (a), by 
        striking ``or (iii)'' each place it appears and inserting 
        ``(iii), or (iv)''; and
            (2) in clause (iii), by inserting ``(other than a qualified 
        long-term care insurance policy)'' after ``insurance 
        contract''.

SEC. 8105. TAX TREATMENT OF ACCELERATED DEATH BENEFITS UNDER LIFE 
              INSURANCE CONTRACTS.

    Section 101 (relating to certain death benefits) is amended by 
adding at the end the following new subsection:
    ``(g) Treatment of Certain Accelerated Death Benefits.--
            ``(1) In general.--For purposes of this section, any amount 
        distributed to an individual under a life insurance contract on 
        the life of an insured who is a terminally ill individual (as 
        defined in paragraph (3)) shall be treated as an amount paid by 
        reason of the death of such insured.
            ``(2) Necessary conditions.--
                    ``(A) In general.--Paragraph (1) shall not apply to 
                any distribution unless--
                            ``(i) the distribution is not less than the 
                        present value (determined under subparagraph 
                        (B)) of the reduction in the death benefit 
                        otherwise payable in the event of the death of 
                        the insured, and
                            ``(ii) the percentage derived by dividing 
                        the cash surrender value of the contract, if 
                        any, immediately after the distribution by the 
                        cash surrender value of the contract 
                        immediately before the distribution is equal to 
                        or greater than the percentage derived by 
                        dividing the death benefit immediately after 
                        the distribution by the death benefit 
                        immediately before the distribution.
                    ``(B) Reduction value.--The present value of the 
                reduction in the death benefit occurring by reason of 
                the distribution shall be determined by--
                            ``(i) using as the discount rate a rate not 
                        in excess of the highest rate set forth in 
                        subparagraph (C), and
                            ``(ii) assuming that the death benefit (or 
                        the portion thereof) would have been paid at 
                        the end of a period that is no more than the 
                        insured's life expectancy from the date of the 
                        distribution or 12 months, whichever is 
                        shorter.
                    ``(C) Rates.--The rates set forth in this 
                subparagraph are the following:
                            ``(i) the 90-day Treasury bill yield,
                            ``(ii) the rate described as Moody's 
                        Corporate Bond Yield Average-Monthly Average 
                        Corporates as published by Moody's Investors 
                        Service, Inc., or any successor thereto, for 
the calendar month ending 2 months before the date on which the rate is 
determined,
                            ``(iii) the rate used to compute the cash 
                        surrender values under the contract during the 
                        applicable period plus 1 percent per annum, and
                            ``(iv) the maximum permissible interest 
                        rate applicable to policy loans under the 
                        contract.
            ``(3) Terminally ill individual.--For purposes of this 
        subsection, the term `terminally ill individual' means an 
        individual who, as determined by the insurer on the basis of an 
        acceptable certification by a licensed physician, has an 
        illness or physical condition which can reasonably be expected 
        to result in death within 12 months of the date of 
        certification.
            ``(4) Application of section 72(e)(10).--For purposes of 
        section 72(e)(10) (relating to the treatment of modified 
        endowment contracts), section 72(e)(4)(A)(i) shall not apply to 
        distributions described in paragraph (1).''.

SEC. 8106. TAX TREATMENT OF COMPANIES ISSUING QUALIFIED ACCELERATED 
              DEATH BENEFIT RIDERS.

    (a) Qualified Accelerated Death Benefit Riders Treated as Life 
Insurance.--Section 818 (relating to other definitions and special 
rules) is amended by adding at the end the following new subsection:
    ``(g) Qualified Accelerated Death Benefit Riders Treated as Life 
Insurance.--For purposes of this part--
            ``(1) In general.--Any reference to a life insurance 
        contract shall be treated as including a reference to a 
        qualified accelerated death benefit rider on such contract.
            ``(2) Qualified accelerated death benefit riders.--For 
        purposes of this subsection, the term `qualified accelerated 
        death benefit rider' means any rider on a life insurance 
        contract which provides for a distribution to an individual 
        upon the insured becoming a terminally ill individual (as 
        defined in section 101(g)(3)).''.
    (b) Definitions of Life Insurance and Modified Endowment 
Contracts.--Paragraph (5)(A) of section 7702(f) (defining qualified 
additional benefits) is amended by striking ``or'' at the end of clause 
(iv), by redesignating clause (v) as clause (vi), and by inserting 
after clause (iv) the following new clause:
                            ``(v) any qualified accelerated death 
                        benefit rider (as defined in section 818(g)), 
                        or''.
    (c) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        apply to contracts issued after December 31, 1995.
            (2) Transitional rule.--For purposes of determining whether 
        section 7702 or 7702A of the Internal Revenue Code of 1986 
        applies to any contract, the issuance, whether before, on, or 
        after December 31, 1995, of a rider on a life insurance 
        contract permitting the acceleration of death benefits (as 
        described in section 101(g) of such Code (as added by section 
        8105)) shall not be treated as a modification or material 
        change of such contract.

           Subtitle B--Standards For Long-Term Care Insurance

SEC. 8201. NATIONAL LONG-TERM CARE INSURANCE ADVISORY COUNCIL.

    (a) In General.--Congress shall appoint an advisory board to be 
known as the National Long-Term Care Insurance Advisory Council 
(hereafter referred to in this subtitle as the ``Advisory Council'').
    (b) Membership.--The Advisory Council shall consist of 5 members, 
each of whom has substantial expertise in matters relating to the 
provision and regulation of long-term care insurance or long-term care 
financing and delivery systems.
    (c) Duties.--The Advisory Council shall--
            (1) provide advice, recommendations on the implementation 
        of standards for long-term care insurance, and assistance to 
        Congress on matters relating to long-term care insurance as 
        specified in this section and as otherwise required by the 
        Secretary of Health and Human Services;
            (2) collect, analyze, and disseminate information relating 
        to long-term care insurance in order to increase the 
        understanding of insurers, providers, consumers, and regulatory 
        bodies of the issues relating to, and to facilitate 
        improvements in, such insurance;
            (3) develop educational models to inform the public on the 
        risks of incurring long-term care expenses and private 
        financing options available to them; and
            (4) monitor the development of the long-term care insurance 
        market and advise Congress concerning the need for statutory 
        changes.
    (d) Administration.--In order to carry out its responsibilities 
under this section, the Advisory Council is authorized to--
            (1) consult individuals and public and private entities 
        with experience and expertise in matters relating to long-term 
        care insurance;
            (2) conduct meetings and hold hearings;
            (3) conduct research (either directly or under grant or 
        contract);
            (4) collect, analyze, publish, and disseminate data and 
        information (either directly or under grant or contract); and
            (5) develop model formats and procedures for insurance 
        products, and develop proposed standards, rules and procedures 
        for regulatory programs, as appropriate.
    (e) Authorization of Appropriations.--There are authorized to be 
appropriated, for activities of the Advisory Council, $1,500,000 for 
fiscal year 1996, and each subsequent year.

SEC. 8202. ADDITIONAL REQUIREMENTS FOR ISSUERS OF LONG-TERM CARE 
              INSURANCE POLICIES.

    (a) In General.--Chapter 43 is amended by adding at the end the 
following new section:

``SEC. 4980C. FAILURE TO MEET REQUIREMENTS FOR QUALIFIED LONG-TERM CARE 
              INSURANCE POLICIES.

    ``(a) General Rule.--There is hereby imposed on the issuer of any 
qualified long-term care insurance policy with respect to which any 
requirement of subsection (c) or (d) is not met a tax in the amount 
determined under subsection (b).
    ``(b) Amount of Tax.--
            ``(1) In general.--
                    ``(A) Per policy.--The amount of the tax imposed by 
                subsection (a) shall be $100 per policy for each day 
                any requirement of subsection (c) or (d) is not met 
                with respect to the policy.
                    ``(B) Limitations.--
                            ``(i) Per carrier.--The amount of the tax 
                        imposed under subparagraph (A) against any 
                        insurance carrier, association, or any 
                        subsidiary thereof, shall not exceed $25,000 
                        per policy.
                            ``(ii) Per agent.--The amount of the tax 
                        imposed under subparagraph (A) against 
                        insurance agent or broker shall not exceed 
                        $15,000 per policy.
            ``(2) Waiver.--In the case of a failure which is due to 
        reasonable cause and not to willful neglect, the Secretary may 
        waive part or all of the tax imposed by subsection (a) to the 
        extent that payment of the tax would be excessive relative to 
        the failure involved.
    ``(c) Additional Responsibilities.--The requirements of this 
subsection with respect to any qualified long-term care insurance 
policy are as follows:
            ``(1) Requirements of model provisions.--
                    ``(A) Model regulation.--The following requirements 
                of the model regulation shall be met:
                            ``(i) Section 13 (relating to application 
                        forms and replacement coverage).
                            ``(ii) Section 14 (relating to reporting 
                        requirements), except that the issuer shall 
                        also report at least annually the number of 
                        claims denied during the reporting period for 
                        each class of business (expended as a 
                        percentage of claims denied), other than claims 
                        denied for failure to meet the waiting period 
                        or because of any applicable preexisting 
                        condition.
                            ``(iii) Section 20 (relating to filing 
                        requirements for marketing).
                            ``(iv) Section 21 (relating to standards 
                        for marketing), including inaccurate completion 
                        of medical histories, other than sections 
                        21C(1) and 21C(6) thereof, except that--
                                    ``(I) in addition to such 
                                requirements, no person shall, in 
                                selling or offering to sell a qualified 
                                long-term care insurance policy, 
                                misrepresent a material fact; and
                                    ``(II) no such requirements shall 
                                include a requirement to inquire or 
                                identify whether a prospective 
                                applicant or enrollee for qualified 
                                long-term care insurance has accident 
                                and sickness insurance.
                            ``(v) Section 22 (relating to 
                        appropriateness of recommended purchase).
                            ``(vi) Section 24 (relating to standard 
                        format outline of coverage).
                            ``(vii) Section 25 (relating to requirement 
                        to deliver shopper's guide).
                    ``(B) Model act.--The following requirements of the 
                model Act must be met:
                            ``(i) Section 6F (relating to right to 
                        return), except that such section shall also 
                        apply to denials of applications and any refund 
                        shall be made within 30 days of the return or 
                        denial.
                            ``(ii) Section 6G (relating to outline of 
                        coverage).
                            ``(iii) Section 6H (relating to 
                        requirements for certificates under group 
                        plans).
                            ``(iv) Section 6I (relating to policy 
                        summary).
                            ``(v) Section 6J (relating to monthly 
                        reports on accelerated death benefits).
                            ``(vi) Section 7 (relating to 
                        incontestability period).
                    ``(C) Definitions.--For purposes of this paragraph, 
                the terms `model regulation' and `model Act' have the 
                meanings given such terms by section 7702B(b)(6)(B).
            ``(2) Delivery of policy.--If an application for a 
        qualified long-term care insurance policy (or for a certificate 
under a group qualified long-term care insurance policy) is approved, 
the issuer shall deliver to the applicant (or policyholder or 
certificate-holder) the policy (or certificate) of insurance not later 
than 30 days after the date of the approval.
            ``(3) Information on denials of claims.--If a claim under a 
        qualified long-term care insurance policy is denied, the issuer 
        shall, within 60 days of the date of a written request by the 
        policyholder or certificate-holder (or representative)--
                    ``(A) provide a written explanation of the reasons 
                for the denial, and
                    ``(B) make available all information directly 
                relating to such denial.
    ``(d) Disclosure.--The requirements of this subsection are met with 
respect to any qualified long-term care insurance policy if the 
following statement is prominently displayed on the front page of the 
policy and in the outline of coverage required under subsection 
(c)(1)(B)(ii):
            ```This is a federally qualified long-term care insurance 
        contract. The policy meets all the Federal consumer protection 
        standards necessary to receive favorable tax treatment under 
        section 7702B(b) of the Internal Revenue Code of 1986.'.
    ``(e) Qualified Long-Term Care Insurance Policy Defined.--For 
purposes of this section, the term `qualified long-term care insurance 
policy' has the meaning given such term by section 7702B(b).''.
    (b) Conforming Amendment.--The table of sections for chapter 43 is 
amended by adding at the end the following new item:

                              ``Sec. 4980C. Failure to meet 
                                        requirements for long-term care 
                                        insurance policies.''.

SEC. 8203. COORDINATION WITH STATE REQUIREMENTS.

    Nothing in this subtitle shall be construed as preventing a State 
from applying standards that provide greater protection of 
policyholders of qualified long-term care insurance policies (as 
defined in section 7702B(b) of the Internal Revenue Code of 1986 (as 
added by section 8102)).

SEC. 8204. UNIFORM LANGUAGE AND DEFINITIONS.

    (a) In General.--Not later than June 30, 1996, the Advisory Council 
shall promulgate standards for the use of uniform language and 
definitions in qualified long-term care insurance policies (as defined 
in section 7702B(b) of the Internal Revenue Code of 1986 (as added by 
section 8102)).
    (b) Variations.--Standards under subsection (a) may permit the use 
of nonuniform language to the extent required to take into account 
differences among States in the licensing of nursing facilities and 
other providers of long-term care.

 Subtitle C--Incentives to Encourage the Purchase of Private Insurance

SEC. 8301. ASSETS OR RESOURCES DISREGARDED UNDER THE MEDICAID PROGRAM.

    (a) Medicaid Estate Recoveries.--
            (1) In general.--Section 1917(b) of the Social Security Act 
        (42 U.S.C. 1396p(b)) is amended--
                    (A) in paragraph (1), by striking subparagraph (C);
                    (B) in paragraph (3), by striking ``(other than 
                paragraph (1)(C))''; and
                    (C) in paragraph (4)(B), by striking ``(and shall 
                include, in the case of an individual to whom paragraph 
                (1)(C)(i) applies)''.
            (2) Effective date.--Section 1917(b) of the Social Security 
        Act (42 U.S.C. 1396p(b)) shall be applied and administered as 
        if the provisions stricken by paragraph (1) had not been 
        enacted.
    (b) Reporting Requirements for Certain Asset Protection Programs.--
Section 1902 of the Social Security Act (42 U.S.C. 1396a) is amended by 
adding at the end the following new subsection:
    ``(aa)(1) The Secretary shall not approve any State plan amendment 
providing for an asset protection program (as described in paragraph 
(2)) unless the State requires all insurers participating in such 
program to submit reports to the State and the Secretary at such times, 
and containing such information, as the Secretary determines 
appropriate. The information included in the reports required to be 
submitted under the preceding sentence shall be submitted in accordance 
with the data standards established by the Secretary under paragraph 
(3).
    ``(2) An asset protection program described in this paragraph is a 
program under which an individual's assets and resources are 
disregarded for purposes of the program under this subtitle--
            ``(A) to the extent that payments are made under a 
        qualified long-term care insurance policy (as defined in 
        section 7702B(b) of the Internal Revenue Code of 1986); or
            ``(B) because an individual has received (or is entitled to 
        receive) benefits under a qualified long-term care insurance 
        policy (as defined in section 7702B(b) of such Code).
    ``(3)(A) Not later than 90 days after the date of the enactment of 
the Private Long-Term Care Family Protection Act of 1995, the Secretary 
shall select data standards for the information required to be included 
in reports submitted in accordance with paragraph (1). Such data 
standards shall be selected from the data standards included in the 
Long-Term Care Insurance Uniform Data Set developed by the University 
of Maryland Center on Aging and Laguna Research Associates, and used by 
the States of California, Connecticut, Indiana, and New York for 
reports submitted by insurers under the asset protection programs 
conducted by such States.
    ``(B) The Secretary shall modify the standards selected under 
subparagraph (A) as the Secretary determines appropriate.''.

SEC. 8302. DISTRIBUTIONS FROM INDIVIDUAL RETIREMENT ACCOUNTS FOR THE 
              PURCHASE OF LONG-TERM CARE INSURANCE COVERAGE.

    (a) Exclusion From Gross Income for Certain Individuals.--
Subsection (d) of section 408 (relating to tax treatment of 
distributions from individual retirement accounts) is amended by adding 
at the end the following new paragraph:
            ``(8) Distributions to purchase long-term care insurance.--
        Paragraph (1) shall not apply to any amount paid or distributed 
        out of an individual retirement account or individual 
        retirement annuity to the individual for whose benefit the 
        account or annuity is maintained if--
                    ``(A) the individual has attained age 59\1/2\ by 
                the date of the payment or distribution, and
                    ``(B) the entire amount received (including money 
                and any other property) is used within 90 days to 
                purchase a qualified long-term care insurance policy 
                (as defined in section 7702B(b)) for the benefit of the 
                individual or the spouse of the individual (if the 
                spouse has attained age 59\1/2\ by the date of the 
                payment or distribution).''.
    (b) No Penalty for Distributions.--
            (1) In general.--Subparagraph (B) of section 72(t)(2) 
        (relating to distributions from qualified retirement plans not 
        subject to 10 percent additional tax) is amended to read as 
        follows:
                    ``(B) Medical expenses.--
                            ``(i) In general.--Distributions made to 
                        the employee (other than distributions 
                        described in clause (ii) or subparagraph (A) or 
                        (C)) to the extent such distributions do not 
                        exceed the amount allowable as a deduction 
                        under section 213 to the employee for amounts 
                        paid during the taxable year for medical care 
                        (determined without regard to whether the 
                        employee itemizes deductions for such taxable 
                        year).
                            ``(ii) Certain distributions to purchase 
                        long-term care insurance.--Distributions made 
                        to the taxpayer out of an individual retirement 
                        plan if the entire amount received (including 
                        money and any other property) is used within 90 
                        days to purchase a qualified long-term care 
                        insurance policy (as defined in section 
                        7702B(b)) for the benefit of the individual or 
                        the spouse of the individual.''.
            (2) Conforming amendment.--Subparagraph (A) of section 
        72(t)(3) is amended by striking ``(B)'' and inserting 
        ``(B)(i)''.
    (c) Deduction for Expenses To Purchase a Qualified Long-Term Care 
Insurance Policy.--
            (1) In general.--Paragraph (8) of section 408(d) (relating 
        to distributions from individual retirement accounts to 
        purchase long-term care insurance), as added by subsection (a), 
        is amended by adding at the end the following new subparagraph:
                    ``(D) Application of section 213.--No deduction 
                shall be allowed under section 213(a) for expenses 
                incurred to purchase a qualified long-term care 
                insurance policy (as defined in section 7702B(b)) using 
                amounts paid or distributed out of an individual 
                retirement account or individual retirement annuity in 
                accordance with this paragraph.''.
            (2) Conforming amendment.--Clause (ii) of section 
        213(d)(1)(D) (relating to definition of medical care), as added 
        by section 8101(a), is amended by striking ``section 
        7702(d)(4)'' and inserting ``section 408(d)(8)(D) or section 
        7702(d)(4)''.

                       Subtitle D--Effective Date

SEC. 8401. EFFECTIVE DATE OF TAX PROVISIONS.

    Except as otherwise provided in this title, the amendments made by 
this title to the Internal Revenue Code of 1986 shall apply to taxable 
years beginning after December 31, 1995.

                      TITLE IX--BUDGET NEUTRALITY

SEC. 9001. ASSURANCE OF BUDGET NEUTRALITY.

    Notwithstanding any other provision of law, this Act and the 
amendments made by this Act shall not become effective until the date 
of the enactment of a provision of law, specifically referring to this 
section, that by its terms provides for the Federal budget neutrality 
of this Act.
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