[Congressional Bills 104th Congress]
[From the U.S. Government Publishing Office]
[S. 7 Introduced in Senate (IS)]

  1st Session
                                  S. 7

   To provide for health care reform through health insurance market 
 reform and assistance for small business and families, and for other 
                               purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                            January 4, 1995

  Mr. Daschle (for himself, Mr. Kennedy, Mr. Reid, Ms. Mikulski, Mr. 
 Rockefeller, Mr. Dodd, Mr. Breaux, Ms. Moseley-Braun, Mr. Pell, Mrs. 
 Murray, and Mr. Inouye) introduced the following bill; which was read 
             twice and referred to the Committee on Finance

_______________________________________________________________________

                                 A BILL


 
   To provide for health care reform through health insurance market 
 reform and assistance for small business and families, 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; TABLE OF CONTENTS.

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

Sec. 1. Short title; 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. Benchmark benefits package.
Sec. 1006. Risk adjustment.
Sec. 1007. Effective dates.
         Subtitle B--Establishment and Application of Standards

Sec. 1011. General rules.
Sec. 1012. Encouragement of State reforms.
Sec. 1013. Grants to States for small group health insurance purchasing 
                            arrangements.
Sec. 1014. Enforcement of standards.
      Subtitle C--Health Care Cost and Access Advisory Commission

Sec. 1021. Health Care Cost and Access Advisory Commission.
Sec. 1022. Duties of Commission.
Sec. 1023. Operation of Commission.
                        Subtitle D--Definitions

Sec. 1031. Definitions.
           TITLE II--IMPROVING ACCESS TO HEALTH CARE COVERAGE

     Subtitle A--Coverage Under Qualified Health Plans and Premium 
                               Assistance

                Part subpart a--general provisions Plans
Sec. 2001. Establishment of State program.
Sec. 2002subpart b--premium assistance to eligible individuals
Sec. 2011. Amount of premium assistance.
Sec. 2012. Assistance to children.
Sec. 2013. Assistance to temporarily unemployed individuals.
                   Part 2--Aggregate Federal Payments

Sec. 2021. Aggregate Federal payments.
            Part 3--Definitions and Determinations of Income

Sec. 2031. Definitions and determinations of income.
Sec. 2032. References to individual.
          Subtitle B--Self-Employed Health Insurance Deduction

Sec. 2101. Deduction for health insurance costs of self-employed 
                            individuals.
               TITLE III--IMPROVING ACCESS IN RURAL AREAS

               Subtitle A--Office of Rural Health Policy

Sec. 3001. Office of Rural Health Policy.
   Subtitle B--Development of Telemedicine in Rural Underserved Areas

Sec. 3101. Grants for development of rural telemedicine.
Sec. 3102. Report and evaluation of telemedicine.
Sec. 3103. Regulations on reimbursement of telemedicine.
Sec. 3104. Authorization of appropriations.
Sec. 3105. Definitions.
          Subtitle C--Rural Health Plan Demonstration Projects

Sec. 3201. Rural health plan demonstration projects.
     Subtitle D--Antitrust Safe Harbors for Rural Health Providers

Sec. 3301. Antitrust safe harbors for rural health providers.
               TITLE IV--QUALITY AND CONSUMER PROTECTION

               Subtitle A--Administrative Simplification

                    Part 1--Purpose and Definitions

Sec. 4001. Purpose.
Sec. 4002. Definitions.
    Part 2--Standards for Data Elements and Information Transactions

Sec. 4011. General requirements on secretary.
Sec. 4012. Standards for health information transactions and data 
                            elements.
     Part 3--Requirements With Respect to Certain Transactions and 
                              Information

Sec. 4021. Requirements on health plans and health care providers.
Sec. 4022. Standards and certification for health information 
                            protection organizations.
                  Part 4--Accessing Health Information

Sec. 4031. Access for authorized purposes.
                           Part 5--Penalties

Sec. 4041. General penalty for failure to comply with requirements and 
                            standards.
                    Part 6--Miscellaneous Provisions

Sec. 4051. Effect on State law.
Sec. 4052. Authorization of appropriations.
               Subtitle B--Privacy of Health Information

                          Part 1--Definitions

Sec. 4101. Definitions.
                     subpart a--general provisionss
Sec. 4106. General rules regarding disclosure.
Sec. 4107. Authorizations for disclosure of protected health 
                            information.
Sec. 4108.subpart b--specific disclosures relating to patient
Sec. 4111. Disclosures for treatment and financial and administrative 
                            transactions.
Secsubpart c--disclosure for oversight, public health, and research 
                                purposes
Sec. 4116. Oversight.
Sec. 4117. Public health.
subpart d--disclosure for judicial, administrative, and law enforcement 
                                purposes
Sec. 4121. Judicial and administrative purposes.
Sec.subpart e--disclosure pursuant to government subpoena or warrant
Sec. 4126. Government subpoenas and warrants.
Sec. 4127. Access procedures for law enforcement subpoenas and 
                            warrants.
Sec. 4128. Challenge procedures for law enforcement warrants, 
            subpart f--disclosure pursuant to party subpoena
Sec. 4131. Party subpoenas.
Sec. 4132. Access procedures for party subpoenas.
Sec. 4133. Challenge procedures for party subpoenas.
     Part 3--Procedures for Ensuring Security of Protected Health 
                 subpart a--establishment of safeguards
Sec. 4136. Establishment of safeguards.
Ssubpart b--review of protected health information by subjects of the 
                              information
Sec. 4141. Inspection of protected health information.
Sec. 4142. Amendment of protected health information.
Sec. 4143. Notice of information practices.
                       subpart a--civil sanctions
Sec. 4151. Civil penalty.
Sec. 4152. Civil actisubpart b--criminal sanctions
Sec. 4161. Wrongful disclosure of protected health information.
                   Part 5--Administrative Provisions

Sec. 4166. Relationship to other laws.
Sec. 4167. Rights of incompetents.
Sec. 4168. Exercise of rights.
          Subtitle C--Enhanced Penalties for Health Care Fraud

Sec. 4201. All-payer fraud and abuse control program.
Sec. 4202. Application of Federal health anti-fraud and abuse sanctions 
                            to all fraud and abuse against any health 
                            plan.
Sec. 4203. Establishment of the health care fraud and abuse data 
                            collection program.
Sec. 4204. Health care fraud.
               Subtitle D--Health Care Malpractice Reform

Sec. 4301. Federal tort reform.
Sec. 4302. State-based alternative dispute resolution mechanisms.
Sec. 4303. Limitation on amount of attorney's contingency fees.
Sec. 4304. Periodic payment of awards.
Sec. 4305. Allocation of punitive damage awards for provider licensing 
                            and disciplinary activities.
                       TITLE V--BUDGET NEUTRALITY

Sec. 5001. 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. BENCHMARK BENEFITS PACKAGE.

    (a) In General.--With respect to an individual eligible for 
enrollment, a sponsor of a health plan--
            (1) shall offer the benchmark benefits package described in 
        subsection (b); and
            (2) may offer any other health benefits package.
    (b) Benchmark Benefits Package Described.--
            (1) In general.--
                    (A) Package described.--The benchmark benefits 
                package described in this subsection is a benefits 
                package that covers all of the items and services under 
                the categories of health care items and services 
                specified by the Secretary under paragraph (2) when 
                medically necessary or appropriate (as determined in 
                accordance with paragraph (3)) and provides for a cost-
                sharing schedule specified by the Secretary under 
                paragraph (4).
                    (B) Actuarial value.--The benchmark benefits 
                package established by the Secretary under this 
                subsection shall have an actuarial value that equals 
                the actuarial value of the benefits package provided 
                under the health benefits plan offered under chapter 89 
                of title 5, United States Code, with the highest 
                enrollment during 1994, adjusted for a national 
                population under 65 years of age (as determined by the 
                Secretary).
            (2) Categories of health care items and services.--
                    (A) In general.--The categories of health care 
                items and services specified by the Secretary under 
                this paragraph shall include at least the categories 
                described in section 1302(1) of the Public Health 
                Service Act (42 U.S.C. 300e-1(a)) and section 8904(a) 
                of title 5, United States Code. The Secretary may add 
                or delete categories of health care items and services 
                under this paragraph as medical practice changes.
                    (B) Specifying items and services.--
                            (i) In general.--The Secretary shall 
                        specify the items and services under the 
                        categories specified under subparagraph (A).
                            (ii) Priorities for the secretary.--In 
                        specifying items and services under this 
                        subparagraph the Secretary shall take into 
                        account the following:
                                    (I) Mental health and substance 
                                abuse services.--With respect to mental 
                                health and substance abuse services, 
                                the Secretary shall give priority to 
                                parity for such services with other 
                                medical services with respect to cost-
                                sharing and duration of treatment.
                                    (II) Vulnerable populations and 
                                underserved areas.--The Secretary shall 
                                give priority to the needs of children 
                                and vulnerable populations, including 
                                those populations in rural, frontier, 
                                and underserved areas.
                                    (III) Prevention.--The Secretary 
                                shall give priority to improving the 
                                health of individuals through 
                                prevention.
            (3) Medical necessity or appropriateness.--The Secretary 
        shall establish general criteria for determining whether an 
        item or service specified by the Secretary under paragraph 
        (2)(B) is medically necessary or appropriate. Health plans 
        shall make coverage decisions regarding procedures and 
        technologies consistent with such general criteria.
            (4) Cost-sharing.--The Secretary shall establish cost-
        sharing schedules to be provided by a benchmark benefits 
        package. In establishing such cost-sharing schedules, the 
        Secretary shall meet the following requirements:
                    (A) Annual basis.--The Secretary shall review and 
                update cost-sharing schedules as determined appropriate 
                by the Secretary, but on at least an annual basis.
                    (B) Preventive services exempted.--The Secretary 
                shall exempt from any cost-sharing schedules clinical 
                preventive services and prenatal care services.
                    (C) Delivery systems.--In establishing cost-sharing 
                schedules for benchmark benefits packages, the 
                Secretary shall ensure that the schedules permit a 
                variety of delivery systems, including fee-for-service, 
                preferred provider organizations, point of service, and 
                health maintenance organizations.

SEC. 1006. 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. 1007. EFFECTIVE DATES.

    (a) In General.--Except as provided in subsection (b), this title 
shall take effect on January 1, 1996.
    (b) Rating Limitations, Benchmark Benefits Packages, and Risk 
Adjustments.--The standards promulgated under sections 1003, 1005, and 
1006 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.
    (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. 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 $200,000,000 for fiscal years 1996, 1997, and 1998.
    (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.

SEC. 1014. 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--Health Care Cost and Access Advisory Commission

SEC. 1021. HEALTH CARE COST AND ACCESS ADVISORY COMMISSION.

    There is established a commission to be known as the Health Care 
Cost and Advisory Commission (in this subtitle referred to as the 
``Commission'').

SEC. 1022. DUTIES OF COMMISSION.

    (a) In General.--The general duties of the Commission are to 
monitor and respond to trends in national health care spending and 
health insurance coverage. The Commission may be advised by individuals 
with expertise concerning the economic, demographic, and insurance 
market factors that affect the cost and availability of health 
insurance.
    (b) Annual Reports.--
            (1) In general.--The Commission shall report to Congress 
        and the President annually on January 15 (beginning in 1999) on 
        the status of health care spending and health insurance 
        coverage in the nation.
            (2) Contents of report.--Each annual report shall include--
                    (A) findings regarding--
                            (i) the characteristics of the insured and 
                        uninsured, including demographic 
                        characteristics, working status, health status, 
                        and geographic distribution;
                            (ii) the effectiveness of insurance reforms 
                        on increasing access to health insurance and 
                        making health insurance more affordable; and
                            (iii) the effectiveness of cost containment 
                        strategies at the Federal and State levels and 
                        in the private sector; and
                    (B) recommendations for improving access to health 
                insurance and reducing health care cost inflation.

SEC. 1023. OPERATION OF COMMISSION.

    (a) Membership.--
            (1) In general.--The Commission shall be composed of 11 
        members appointed by the President and confirmed by the Senate. 
        Members shall be appointed not later than 90 days after the 
        date of enactment of this Act.
            (2) Chairperson.--The President shall designate 1 
        individual described in paragraph (1) who shall serve as 
        Chairperson of the Commission.
    (b) Composition.--The membership of the Commission shall include 
individuals with national recognition for their expertise in health 
care and health care markets. In appointing members of the Commission, 
the President shall ensure that no more than 6 members of the 
Commission are affiliated with the same political party.
    (c) Terms.--
            (1) In general.--The terms of members of the Commission 
        shall be for 6 years, except that of the members first 
        appointed, 4 shall be appointed for an initial term of 4 years 
        and 4 shall be appointed for an initial term of 2 years.
            (2) Continuation in office.--Upon the expiration of a term 
        of office, a member shall continue to serve until a successor 
        is appointed and qualified.
    (d) Vacancies.--
            (1) In general.--A vacancy in the Commission shall be 
        filled in the same manner as the original appointment, but the 
        individual appointed to fill the vacancy shall serve only for 
        the unexpired portion of the term for which the individual's 
        predecessor was appointed.
            (2) No impairment of function.--A vacancy in the membership 
        of the Commission does not impair the authority of the 
        remaining members to exercise all of the powers of the 
        Commission.
            (3) Acting chairperson.--The Commission may designate a 
        member to act as Chairperson during any period in which there 
        is no Chairperson designated by the President.
    (e) Meetings; Quorum.--
            (1) Meetings.--The Chairperson shall preside at meetings of 
        the Commission, and in the absence of the Chairperson, the 
        Commission shall elect a member to act as Chairperson pro 
        tempore.
            (2) Quorum.--Six members of the Commission shall constitute 
        a quorum thereof.
    (f) Administrative Provisions.--
            (1) Pay and travel expenses.--
                    (A) Pay.--Each member shall be paid at a rate equal 
                to the daily equivalent of the minimum annual rate of 
                basic pay payable for level IV of the Executive 
                Schedule under section 5315 of title 5, United States 
                Code, for each day (including travel time) during which 
                the member is engaged in the actual performance of 
                duties vested in the Commission.
                    (B) Travel expenses.--Members shall receive travel 
                expenses, including per diem in lieu of subsistence, in 
                accordance with sections 5702 and 5703 of title 5, 
                United States Code.
            (2) Executive director.--
                    (A) In general.--The Commission shall, without 
                regard to section 5311(b) of title 5, United States 
                Code, appoint an Executive Director.
                    (B) Pay.--The Executive Director shall be paid at a 
                rate equivalent to a rate for the Senior Executive 
                Service.
            (3) Staff.--
                    (A) In general.--Subject to subparagraphs (B) and 
                (C), the Executive Director, with the approval of the 
                Commission, may appoint and fix the pay of additional 
                personnel.
                    (B) Pay.--The Executive Director may make such 
                appointments without regard to the provisions of title 
                5, United States Code, governing appointments in the 
                competitive service, and any personnel so appointed may 
                be paid without regard to the provisions of chapter 51 
                and subchapter III of chapter 53 of such title, 
                relating to classification and General Schedule pay 
                rates, except that an individual so appointed may not 
                receive pay in excess of 120 percent of the annual rate 
                of basic pay payable for GS-15 of the General Schedule.
                    (C) Detailed personnel.--Upon request of the 
                Executive Director, the head of any Federal department 
                or agency may detail any of the personnel of that 
                department or agency to the Commission to assist the 
                Commission in carrying out its duties under this Act.
            (4) Other authority.--
                    (A) Contract services.--The Commission may procure 
                by contract, to the extent funds are available, the 
                temporary or intermittent services of experts or 
                consultants pursuant to section 3109 of title 5, United 
                States Code.
                    (B) Leases and property.--The Commission may lease 
                space and acquire personal property to the extent funds 
                are available.
    (f) Authorization of Appropriations.--There are authorized to be 
appropriated such sums as are necessary for the operation of the 
Commission.

                        Subtitle D--Definitions

SEC. 1031. DEFINITIONS.

    (a) Health Plan.--For purposes of this title, 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:
            (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:
            (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--IMPROVING ACCESS TO HEALTH CARE COVERAGE

     Subtitle A--Coverage Under Qualified Health Plans and Premium 
                               Assistance

                PART 1--ACCESS TO QUALIFIED HEALTH PLANS

                     Subpart A--General Provisions

SEC. 2001. ESTABLISHMENT OF STATE PROGRAM.

    In order to qualify for payments under part 2, each State shall 
establish a program under which the State--
            (1) makes available at least 1 qualified health plan to 
        each premium subsidy eligible individual residing in the State; 
        and
            (2) furnishes premium assistance to such individual in 
        accordance with this part.
The program shall comply with requirements specified under regulations 
issued by the Secretary and may be in effect for calendar years 
beginning after 1996.

SEC. 2002. ASSISTANCE WITH HEALTH PLAN PREMIUMS.

    (a) In General.--An individual who has been determined by a State 
under subsection (b) to be a premium subsidy eligible individual (as 
defined in subpart B) shall be eligible for premium assistance in the 
amount determined under such subpart.
    (b) Determination of Eligibility.--
            (1) In general.--The Secretary shall issue regulations 
        specifying requirements for each State program under this part 
        with respect to determining eligibility for premium assistance, 
        including measures to prevent individuals from knowingly making 
        material misrepresentations of information or providing false 
        information in applications for assistance under the program.
            (2) Employer maintenance of effort.--In order to promote 
        employer-based coverage, the Secretary shall issue regulations 
        that provide that an eligible individual may not be a premium 
        subsidy eligible individual described in subsection (a) if a 
        significant employer contribution toward the premium under a 
        qualified health plan is available to the individual.
            (3) State maintenance of effort.--In order to promote State 
        maintenance of effort, the Secretary shall issue regulations 
        that provide that an eligible individual may not be a premium 
        subsidy eligible individual described in subsection (a) until 
        such individual has been determined to be ineligible for 
        assistance under any other public health insurance program 
        provided by a State or instrumentality thereof.
    (c) Limitation on Use of Assistance.--A premium subsidy eligible 
individual who receives premium assistance under this part shall use 
such assistance only for payments toward the premium under a qualified 
health plan made available by the State under the program established 
under section 2001.

         Subpart B--Premium Assistance to Eligible Individuals

SEC. 2011. AMOUNT OF PREMIUM ASSISTANCE.

    (a) In General.--The amount of premium assistance for a month for a 
premium subsidy eligible individual in a State is an amount equal to 
the lesser of--
            (1) the applicable subsidy percentage multiplied by \1/
        12\th of the annual premium paid for coverage under a qualified 
        health plan in which the individual is enrolled; or
            (2) the applicable subsidy percentage multiplied by \1/
        12\th of the maximum subsidy amount (as determined under 
        subsection (b)).
    (b) Maximum Subsidy Amount.--For purposes of this section, the 
maximum subsidy amount for a State shall be the Secretary's estimate of 
the annual premium of the health plan with the highest enrollment 
offered under chapter 89 of title 5, United States Code, adjusted to 
reflect--
            (1) coverage of the items and services and cost sharing 
        under the benchmark benefits package; and
            (2) the difference in expected health care spending of the 
        population enrolled in such plan offered under such chapter 89 
        and of the population of premium subsidy eligible individuals 
        in such State.

SEC. 2012. ASSISTANCE TO CHILDREN.

    (a) Eligibility.--A child shall be considered a premium eligible 
individual under this part if such child--
            (1) is not eligible for medical assistance under a State 
        plan under title XIX of the Social Security Act;
            (2) has not been enrolled in a health plan offered by an 
        employer (under rules established by the Secretary) during the 
        6-month period ending on the date the individual submits an 
        application to the State for premium assistance under this 
        part, unless such employer coverage was discontinued as a 
        result of a loss of employment by the individual's parent or 
        guardian; and
            (3) has a family income determined under section 2031(3) 
        which does not exceed (except as provided under section 
        2021(b)(3))--
                    (A) with respect to 1997, 133 percent of the 
                applicable Federal poverty level;
                    (B) with respect to 1998, 150 percent of the 
                applicable Federal poverty level;
                    (C) with respect to 1999, 185 percent of the 
                applicable Federal poverty level;
                    (D) with respect to 2000, 200 percent of the 
                applicable Federal poverty level;
                    (E) with respect to 2001 and years thereafter, 240 
                percent of the applicable Federal poverty level.
    (b) Applicable Subsidy Percentage.--For the purposes of this part, 
the term ``applicable subsidy percentage'' for an individual described 
in subsection (a) means 100 percent reduced (but not below zero) by 
1.82 percentage points for every 1 percentage point (or portion 
thereof) by which the premium subsidy eligible individual's family 
income exceeds 185 percent of the applicable Federal poverty level.

SEC. 2013. ASSISTANCE TO TEMPORARILY UNEMPLOYED INDIVIDUALS.

    (a) Eligibility.--An eligible individual shall be considered a 
premium subsidy eligible individual under this part if such 
individual--
            (1) has been employed continuously for a 6-month period 
        ending within a month preceding the date the individual submits 
        an application to the State for premium assistance under this 
        part;
            (2) has been covered under a health plan during such period 
        of employment;
            (3) is not eligible for medical assistance under a State 
        plan under title XIX of the Social Security Act;
            (4) has not received a premium subsidy under a program 
        established under this subtitle for more than a 6-month period 
        beginning with the date described in paragraph (1); and
            (5) has a family income determined under section 2031(3) 
        which does not exceed (except as provided under section 
        2021(b)(3))--
                    (A) with respect to 1997, 100 percent of the 
                applicable Federal poverty level;
                    (B) with respect to 1998, 125 percent of the 
                applicable Federal poverty level;
                    (C) with respect to 1999, 150 percent of the 
                applicable Federal poverty level;
                    (D) with respect to 2000, 200 percent of the 
                applicable Federal poverty level;
                    (E) with respect to 2001 and years thereafter, 240 
                percent of the applicable Federal poverty level.
    (b) Applicable Subsidy Percentage.--For the purposes of this part, 
the term ``applicable subsidy percentage'' for an individual described 
in subsection (a) means 100 percent reduced (but not below zero) by 1 
percentage point for each 1 percentage point (or portion thereof) by 
which the premium subsidy eligible individual's family income exceeds 
100 percent of the applicable Federal poverty level.

                   PART 2--AGGREGATE FEDERAL PAYMENTS

SEC. 2021. AGGREGATE FEDERAL PAYMENTS.

    (a) In General.--Subject to subsection (b), with respect to any 
quarter beginning on or after January 1, 1997, a State shall receive 
payments from the Secretary in an amount equal to the sum of--
            (1) the total premium assistance paid on behalf of 
        individuals eligible for such assistance under part 1 for 
        enrollment in qualified health plans; and
            (2) 75 percent of the total amount estimated by the 
        Secretary to be expended by the State during such quarter for 
        proper and efficient operation and administration of the 
        program established under this subtitle.
    (b) Limitations.--
            (1) Budgetary.--
                    (A) In general.--The total amount of payments under 
                subsection (a) to all States with programs established 
                under this subtitle for any calender year shall not 
                exceed the estimate by the Congressional Budget Office 
                on January 1, 1997, of the total amount of payments 
                under subsection (a) for 1997 (assuming participation 
                levels under full implementation of this subtitle), 
                adjusted for such year by population growth and the 
                increase in health care costs reflected in the cost of 
                providing the benefits package under chapter 89 of 
                title 5, United States Code.
                    (B) Allowable adjustments.--If the total payment to 
                States under subsection (a) for any calender year is 
                estimated to be limited under subparagraph (A), 
                corresponding adjustments shall be made to the family 
                income limits under sections 2012(a)(3) and 2013(a)(5) 
                for such year.
            (2) Reduction in payments for administrative errors.--
                    (A) In general.--In the case of administrative 
                errors described in subparagraph (B), payments 
                available to a State under subsection (a) shall be 
                reduced by an amount determined appropriate by the 
                Secretary.
                    (B) Administrative errors described.--The 
                administrative errors described in this subparagraph 
                include the following:
                            (i) An eligibility error rate for premium 
                        assistance to the extent the applicable error 
                        rate exceeds the maximum permissible error rate 
                        specified by the Secretary.
                            (ii) Misappropriations or other 
                        expenditures that the Secretary finds are 
                        attributable to malfeasance or misfeasance.
    (c) Reports on Unemployment.--If there are significant changes in 
the national unemployment level, the Director of the Office of 
Management and Budget (in consultation with the Secretary) shall issue 
a report to Congress on the implications for coverage under State 
programs established under this subtitle.
    (d) Audits.--The Secretary shall conduct regular audits of the 
activities conducted under this subtitle.
    (e) Budgetary Treatment.--This section constitutes budget authority 
in advance of appropriations Acts, and represents the obligation of the 
Federal Government to provide payments to the States in accordance with 
this section.

           PART 3--DEFINITIONS AND DETERMINATIONS OF INCOME.

SEC. 2031. DEFINITIONS AND DETERMINATIONS OF INCOME.

    For purposes of this subtitle:
            (1) Qualified health plan.--The term ``qualified health 
        plan'' means a health plan providing the benchmark benefits 
        package as described in section 1005.
            (2) Child.--The term ``child'' means an individual who is 
        under 19 years of age.
            (3) Determinations of income.--
                    (A) Family income.--The term ``family income'' 
                means, with respect to an individual who--
                            (i) is not a dependent (as defined in 
                        subparagraph (B)) of another individual, the 
                        sum of the modified adjusted gross incomes (as 
                        defined in subparagraph (D)) for the 
                        individual, the individual's spouse, and 
                        children who are dependents of the individual; 
                        or
                            (ii) is a dependent of another individual, 
                        the sum of the modified adjusted gross incomes 
                        for the other individual, the other 
                        individual's spouse, and children who are 
                        dependents of the other individual.
                    (B) Dependent.--The term ``dependent'' has the 
                meaning given such term in section 152 of the Internal 
                Revenue Code of 1986.
                    (C) Modified adjusted gross income.--The term 
                ``modified adjusted gross income'' means adjusted gross 
                income (as defined in section 62(a) of the Internal 
                Revenue Code of 1986)--
                            (i) determined without regard to sections 
                        135, 162(l), 911, 931, and 933 of such Code, 
                        and
                            (ii) increased by--
                                    (I) the amount of interest received 
                                or accrued by the individual during the 
                                taxable year which is exempt from tax, 
                                and
                                    (II) the amount of the social 
                                security benefits (as defined in 
                                section 86(d) of such Code) received 
                                during the taxable year to the extent 
                                not included in gross income under 
                                section 86 of such Code.
                The determination under the preceding sentence shall be 
                made without regard to any carryover or carryback.
                    (D) Rules relating to disregard of certain 
                income.--The Secretary may promulgate rules under which 
                spousal income may be disregarded in instances in which 
                a spouse is not part of a family unit.
            (4) Eligible individual.--
                    (A) In general.--The term ``eligible individual'' 
                means an individual who is residing in the United 
                States and who is--
                            (i) a citizen or national of the United 
                        States; or
                            (ii) a lawful alien.
                    (B) Exclusion.--The term ``eligible individual'' 
                shall not include an individual who is an inmate of a 
                public institution (except as a patient of a medical 
                institution).
                    (C) Lawful alien.--The term ``lawful alien'' means 
                an individual who is--
                            (i) an alien lawfully admitted for 
                        permanent residence,
                            (ii) an asylee,
                            (iii) a refugee,
                            (iv) an alien whose deportation has been 
                        withheld under section 243(h) of the 
                        Immigration and Nationality Act, or
                            (v) a parolee who has been paroled for a 
                        period of 1 year or more.
            (5) Poverty line.--The term ``poverty line'' means the 
        income official poverty line (as defined by the Office of 
        Management and Budget, and revised annually in accordance with 
        section 673(2) of the Omnibus Budget Reconciliation Act of 
        1981) that--
                    (A) in the case of a family of less than 5 
                individuals, is applicable to a family of the size 
                involved; and
                    (B) in the case of a family of more than 4 
                individuals, is applicable to a family of 4 
                individuals.
            (6) Secretary.--The term ``Secretary'' means the Secretary 
        of Health and Human Services.

SEC. 2032. REFERENCES TO INDIVIDUAL.

    For purposes of this subtitle, any reference to an individual shall 
include a reference to the parent or guardian of such individual.

          Subtitle B--Self-Employed Health Insurance Deduction

SEC. 2101. DEDUCTION FOR HEALTH INSURANCE COSTS OF SELF-EMPLOYED 
              INDIVIDUALS.

    (a) Phase-in Deduction.--Section 162(l) of the Internal Revenue 
Code of 1986 (relating to special rules for health insurance costs of 
self-employed individuals) is amended--
            (1) by striking paragraph (6); and
            (2) by striking paragraph (1) and inserting the following:
            ``(1) Allowance of deduction.--
                    ``(A) In general.--In the case of an individual who 
                is an employee within the meaning of section 401(c)(1), 
                there shall be allowed as a deduction under this 
                section an amount equal to the applicable percentage of 
                the amount paid during the taxable year for insurance 
                which constitutes medical care for the taxpayer, his 
                spouse, and dependents.
                    ``(B) Applicable percentage.--For purposes of 
                subparagraph (A), the applicable percentage shall be 
                determined as follows:

``If the taxable year                                    The applicable
begins in:                                               percentage is:
    1994, 1995, or 1996...........................           25 percent
    1997..........................................           50 percent
    1998..........................................           75 percent
    1999 or thereafter............................      100 percent.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1993.

               TITLE III--IMPROVING ACCESS IN RURAL AREAS

               Subtitle A--Office of Rural Health Policy

SEC. 3001. OFFICE OF RURAL HEALTH POLICY.

    (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) Transfer of Duties.--Effective January 1, 1996, the functions, 
powers, duties, and authority that were carried out in accordance with 
Federal law by the Office of Rural Health Policy in the Department of 
Health and Human Services are transferred to the Office of the 
Assistant Secretary for Rural Health in the Department of Health and 
Human Services.
    (d) Effective Date.--The amendments made by this section shall take 
effect on January 1, 1996.

   Subtitle B--Development of Telemedicine in Rural Underserved Areas

SEC. 3101. GRANTS FOR DEVELOPMENT OF RURAL TELEMEDICINE.

    (a) In General.--
            (1) Grants awarded.--The Secretary, acting through the 
        Office of Rural Health Policy, shall award grants to eligible 
        entities that have applications approved under subsection (b) 
        for the purpose of expanding access to health care services for 
        individuals in rural areas through the use of telemedicine. 
        Grants shall be awarded under this section to encourage the 
        initial development of rural telemedicine networks, expand 
        existing networks, link existing networks together, or link 
        such networks to existing fiber optic telecommunications 
        systems.
            (2) Eligible entity.--For purposes of this section, the 
        term ``eligible entity'' includes hospitals and other health 
        care providers in a health care network of community-based 
        providers that includes at least 3 of the following:
                    (A) Community or migrant health centers.
                    (B) Local health departments.
                    (C) Community mental health centers.
                    (D) Nonprofit hospitals.
                    (E) Private practice health professionals, 
                including rural health clinics.
                    (F) Other publicly funded health or social services 
                agencies.
    (b) Application.--To be eligible to receive a grant under this 
section an entity shall submit to the Secretary an application 
containing such information as the Secretary may require, including the 
anticipated need for the grant and the source and amount of non-Federal 
funds the entity would pledge for the project.
    (c) Preference.--The Secretary shall, in awarding grants under this 
section, give preference to applicants that--
            (1) are health care providers in rural health care networks 
        or providers that propose to form such networks in medically 
        underserved or health professional shortage areas;
            (2) propose to use Federal funds to develop plans for, or 
        to establish, telemedicine systems that will link rural 
        hospitals and rural health care providers to other hospitals 
        and health care providers; and
            (3) demonstrate financial, institutional, and community 
        support for the long range viability of the network.
    (d) Use of Amounts.--Amounts received under a grant awarded under 
this section shall be utilized for the development of telemedicine 
networks. Such amounts may be used to cover the costs associated with 
the development of telemedicine networks and the acquisition of 
telemedicine equipment and modifications or improvements of 
telecommunications facilities as approved by the Secretary.
    (e) Prohibited Uses.--Amounts received under a grant awarded under 
this section may not be used for any of the following:
            (1) Expenditures to purchase or lease equipment to the 
        extent the expenditures would exceed more than 60 percent of 
        the total grant funds.
            (2) Expenditures for indirect costs (as determined by the 
        Secretary) to the extent the expenditures would exceed more 
        than 10 percent of the total grant funds.

SEC. 3102. REPORT AND EVALUATION OF TELEMEDICINE.

    Not later than October 1, 1995, the White House Information 
Infrastructure Task Force shall prepare and submit to Congress a report 
that evaluates the cost effectiveness and utility of telemedicine and 
includes recommendations for a coordinated Federal strategy to increase 
access to health care through telemedicine.

SEC. 3103. REGULATIONS ON REIMBURSEMENT OF TELEMEDICINE.

    Not later than July 1, 1996, the Secretary, in consultation with 
the Assistant Secretary for Rural Health and the Administrator of the 
Health Care Financing Administration, shall issue regulations 
concerning reimbursement for telemedicine services provided under title 
XVIII of the Social Security Act.

SEC. 3104. AUTHORIZATION OF APPROPRIATIONS.

    There are authorized to be appropriated $20,000,000 for each of 
fiscal years 1996, 1997, 1998, 1999, and 2000, to carry out this 
subtitle.

SEC. 3105. DEFINITIONS.

    For purposes of this subtitle:
            (1) Rural health care network.--The term ``rural health 
        care network'' means a group of rural hospitals or other rural 
        health care providers (including clinics, physicians and non-
        physicians primary care providers) that have entered into a 
        relationship with each other or with nonrural hospitals and 
        health care providers for the purpose of strengthening the 
        delivery of health care services in rural areas or specifically 
        to improve their patients' access to telemedicine services. At 
        least 75 percent of hospitals and other health care providers 
        participating in the network shall be located in rural areas.
            (2) Secretary.--The term ``Secretary'' means the Secretary 
        of Health and Human Services.

          Subtitle C--Rural Health Plan Demonstration Projects

SEC. 3201. RURAL HEALTH PLAN DEMONSTRATION PROJECTS.

    (a) In General.--The Secretary of Health and Human Services, in 
consultation with the Secretary of Labor, shall establish and implement 
not more than 3 demonstration projects for the designation of rural 
health plan areas. To be designated as a rural health plan area under 
this section, an area must be a rural area (as defined in section 
1866(d)(2)(D) of the Social Security Act (42 U.S.C. 1395cc(d)(2)(D))) 
or an underserved nonurban area in accordance with other criteria 
specified by the Secretary of Health and Human Services.
    (b) Application.--To be eligible to conduct a demonstration project 
under this section, an entity shall prepare and submit to the Secretary 
of Health and Human Services an application containing such information 
as the Secretary may require to ensure that project participants meet 
the goals described in subsection (d). An application submitted under 
this section shall--
            (1) identify the area in which the demonstration project 
        will be conducted; and
            (2) provide assurances that the area described in paragraph 
        (1) meets the requirements of subsection (a).
    (c) Requirements.--An entity offering a health plan (as defined in 
section 1031(a)) through a demonstration project under this section 
shall--
            (1) have a recognized, long-standing relationship with the 
        rural community in which the project is being conducted; and
            (2) ensure that the plan meets the requirements for health 
        plans under title I.
    (d) Goals.--The goals referred to in this subsection are as 
follows:
            (1) To develop a reliable supply of health care providers 
        and rural health service delivery infrastructures with a sound 
        financial footing.
            (2) To develop a mechanism to begin to provide the benefits 
        of networking found in urban health systems to rural Americans 
        living in rural health plan areas.
    (e) Report.--Not later than 360 days after the date on which the 
first demonstration project is implemented under this section, and 
annually thereafter for each year in which a project is being 
conducted, the Secretary of Health and Human Services shall submit to 
Congress a report that evaluates the effectiveness of such projects. 
Such reports shall include any legislative recommendations determined 
appropriate by the Secretary.

     Subtitle D--Antitrust Safe Harbors for Rural Health Providers

SEC. 3301. ANTITRUST SAFE HARBORS FOR RURAL HEALTH PROVIDERS.

    (a) In General.--The Attorney General of the United States, in 
consultation with the Commissioner of the Federal Trade Commission, 
shall establish policy guidelines to assist rural health care providers 
in complying with safe harbor requirements with respect to the conduct 
of activities relating to the provision of health care services in 
rural areas.
    (b) Dissemination of Information.--The Attorney General, in 
consultation with the Commissioner of the Federal Trade Commission and 
the Assistant Secretary for Rural Health, shall develop methods for the 
dissemination of the guidelines established under subsection (a) to 
rural health care providers.
    (c) Publication of Additional Safe Harbors.--Not later than 120 
days after the date of enactment of this Act, the Attorney General 
shall publish in the Federal Register the guidelines established under 
subsection (a) together with any proposed additional safe harbors for 
rural providers of health care services.

               TITLE IV--QUALITY AND CONSUMER PROTECTION

               Subtitle A--Administrative Simplification

                    PART 1--PURPOSE AND DEFINITIONS

SEC. 4001. PURPOSE.

    (a) In General.--It is the purpose of this subtitle to promote 
administrative simplification, enhance the usefulness of health 
information, and protect privacy through the establishment of a 
national framework for health information.
    (b) Goals of Framework.--By standardizing data elements, code sets, 
and electronic transactions, and by assuring a secure environment for 
the transmission and exchange of health information, it is the goal of 
the national framework to reduce the burden of administrative 
complexity, paper work, and cost on 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. It is the further 
goal of the national framework to enable the information routinely 
collected in the health care and claims processes to be used for other 
health related purposes, including promoting access and quality of 
care, achieving public health objectives, improving the detection of 
fraud and abuse, and advancing medical research.

SEC. 4002. DEFINITIONS.

    (a) Definitions for Title.--For purposes of this title:
            (1) Health care provider.--The term ``health care 
        provider'' means any person furnishing health care services or 
        supplies.
            (2) 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 4101), health researcher, public 
                health authority (as defined in section 4101), 
                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.
            (3) Health information protection organization.--The term 
        ``health information protection organization'' means a private 
        entity or an entity operated by a State, certified under 
        section 4022, that accesses standard data elements of health 
        information through the health information network and--
                    (A) stores such information; and
                    (B) processes such information into non-
                identifiable health information and discloses such 
                information in accordance with subtitle B.
            (4) Health plan.--The term ``health plan'' has the meaning 
        given such term in section 1031(a) except that such term shall 
        include paragraphs (3), (4), (5), (6), (7), (8), and (9) of 
        such section.
            (5) Non-identifiable health information.--The term ``non-
        identifiable health information'' means health information that 
        is not protected health information as defined in section 4101.
            (6) Secretary.--The term ``Secretary'' means the Secretary 
        of Health and Human Services.
    (b) Definitions for Subtitle.--For purposes of this subtitle:
            (1) 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.
            (2) 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 2 or more health plans.
            (3) 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.
            (4) 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. 4011. GENERAL REQUIREMENTS ON SECRETARY.

    The Secretary shall adopt standards and modifications to standards 
under this subtitle relying, if possible, on standards in use and 
generally accepted or developed or modified by the standards setting 
organizations accredited by the American National Standard Institute 
(ANSI).

SEC. 4012. STANDARDS FOR HEALTH INFORMATION TRANSACTIONS AND DATA 
              ELEMENTS.

    (a) In General.--The Secretary shall adopt standards for 
transactions, data elements, and code sets, 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 in the case of 
        health care providers that do not file claims, 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 inquiries by a health information protection 
        organization 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 shall, if possible, select 
        code sets from among the code sets that have been developed, 
        and shall establish efficient and low-cost procedures for 
        distribution of code sets and modifications made to such code 
        sets under section 4013(b).
            (2) Additions and modifications to code sets.--The 
        Secretary shall ensure that procedures exist for the routine 
        maintenance, testing, enhancement, and expansion of code sets 
        to accommodate changes in biomedical science and health care 
        delivery. Modified code sets shall be adopted not more 
        frequently than once every 6 months.
    (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 shall 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 for 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 obligers for payment.

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

SEC. 4021. REQUIREMENTS ON HEALTH PLANS AND HEALTH CARE PROVIDERS.

    (a) In General.--A health plan or health care provider shall 
conduct transactions described in section 4012(a) as standard 
transactions.
    (b) Compliance.--Not later than 12 months after the date on which a 
standard is adopted under part 2, a health plan or health care provider 
shall comply with the requirement under subsection (a) with respect to 
such standard.
    (c) Response to Electronic Inquiry.--If a health plan or health 
care provider conducts a transaction in compliance with subsection (a), 
such transaction and the standard data elements of such transaction 
shall be made available electronically, in accordance with section 
4031, in response to an electronic inquiry from a health information 
protection organization.

SEC. 4022. STANDARDS AND CERTIFICATION FOR HEALTH INFORMATION 
              PROTECTION ORGANIZATIONS.

    (a) Standards for Operation.--The Secretary shall establish 
standards with respect to the operation and certification of health 
information protection organizations, including standards ensuring 
that--
            (1) such organizations have capabilities, policies, and 
        procedures in place that are consistent with the privacy 
        requirements under subtitle B; and
            (2) such organizations, if part of a larger organization, 
        have policies and procedures in place which isolate their 
        information processing activities in a manner that prevents 
        unauthorized access to such information by such larger 
        organization.
    (b) Certification by Private Entities.--The Secretary may designate 
private entities to conduct the certification procedures established by 
the Secretary under this section.

                  PART 4--ACCESSING HEALTH INFORMATION

SEC. 4031. ACCESS FOR AUTHORIZED PURPOSES.

    (a) In General.--The Secretary shall adopt technical standards for 
appropriate persons to locate and access the health information that is 
available through the health information network. Such technical 
standards shall ensure that any request to locate or access information 
shall be authorized under subtitle B.
    (b) Government Agencies.--
            (1) In general.--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, health care provider, or 
        other health information protection organization in order to 
        comply with a request of a Federal or State agency under this 
        Act, such plan, provider, or other organization shall make such 
        information available to such organization for a charge that 
        does not exceed the reasonable cost of transmitting the 
        information.
    (c) Modifications to Standards.--Rules similar to rules under 
section 4012(c)(2) shall apply to modifications to standards under this 
part.

                           PART 5--PENALTIES

SEC. 4041. 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 (42 U.S.C. 1320a-7a) (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 
such section 1128A.
    (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 penalty may not be 
        imposed under subsection (a) if the failure to comply was due 
        to reasonable cause and not to willful neglect, and the failure 
        to comply is corrected during the time period established 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 6--MISCELLANEOUS PROVISIONS

SEC. 4051. 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) any law that requires medical or health plan records 
        (including billing information) to be maintained or transmitted 
        in writing, 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 if 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. 4052. AUTHORIZATION OF APPROPRIATIONS.

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

               Subtitle B--Privacy of Health Information

                          PART 1--DEFINITIONS

SEC. 4101. 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 health information 
                protection organization; 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, health information protection 
                organization, 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 4108, 4111, 4116, 4117, 4118, 
                4121, 4122, 4126, or 4131; 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 or relating to health care fraud or 
                fraudulent claims for payment regarding health care; 
                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 (if 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. 4106. 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.--When engaging in a permitted disclosure, a health 
information trustee shall clearly identify protected health information 
as such and as protected by this subtitle, unless the disclosure is 
made under section 4112 or is a routine disclosure made under a written 
agreement which satisfies this subsection.
    (g) Directory Information.--A health care provider and a person 
receiving protected health information under section 4112 may disclose 
protected health information to any person if the information consists 
only of 1 or more of the following items:
            (1) The name of the individual who is the subject of the 
        information.
            (2) 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--
                    (A) the location of the individual on the premises; 
                and
                    (B) the general health status of the individual, 
                described as critical, poor, fair, stable, or 
                satisfactory, or in terms denoting similar conditions.
    (h) Next of Kin.--A health care provider or person who receives 
protected health information under section 4112 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) is subject to exigent circumstances 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.
    (i) 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. 4107. AUTHORIZATIONS FOR DISCLOSURE OF PROTECTED HEALTH 
              INFORMATION.

    (a) Written Authorizations.--A health information trustee may 
disclose protected health information pursuant to an authorization 
executed by the individual who is the subject of the information under 
regulations issued by the Secretary.
    (b) Written Objections to Disclosure.--Except if required by law, 
nothing in this subtitle that permits a disclosure shall allow such 
disclosure if the subject of the protected health information has 
previously objected to disclosure in writing.

SEC. 4108. HEALTH INFORMATION PROTECTION ORGANIZATIONS.

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

          Subpart B--Specific Disclosures Relating to Patient

SEC. 4111. 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 4112, may disclose protected health information to a health 
care provider for the purpose of providing health care to an 
individual.
    (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. 4112. 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 when necessary 
to protect the health or safety of an individual from imminent harm.

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

SEC. 4116. OVERSIGHT.

    A health information trustee may disclose protected health 
information to a health oversight agency for an oversight function 
authorized by law.

SEC. 4117. PUBLIC HEALTH.

    A health care provider, health plan, public health authority, 
employer, or person who receives protected health information under 
section 4112 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. 4118. 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) Obligations of Recipient.--A person who receives protected 
health information under subsection (a) shall use such information 
solely for the purposes of the approved research project and shall 
remove or destroy, at the earliest opportunity consistent with the 
purposes of the project, information that would enable an individual to 
be identified.

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

SEC. 4121. JUDICIAL AND ADMINISTRATIVE PURPOSES.

    A health care provider, health plan, health oversight agency, or 
employer may disclose protected health information, subject to a 
court's rules of procedure--
            (1) in connection with litigation or proceedings to which 
        the individual who is the subject of the information is a party 
        and in which the individual has placed the individual's 
        physical or mental condition at issue;
            (2) if the protected health information is developed in 
        response to a court-ordered physical or mental examination; or
            (3) pursuant to a law requiring the reporting of specific 
        medical information to law enforcement authorities.

SEC. 4122. LAW ENFORCEMENT.

    (a) In General.--A health care provider, health plan, health 
oversight agency, employer, or person who receives protected health 
information under section 4112 may disclose protected health 
information to a law enforcement agency (other than a health oversight 
agency governed by section 4116) 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; or
            (3) in connection with the investigation of criminal 
        activity committed against the trustee or on premises 
        controlled by the trustee.
    (b) Written Certification.--If a law enforcement agency (other than 
a health oversight agency) requests that a health information trustee 
disclose protected health information under this section, such agency 
shall provide the trustee with a written certification that--
            (1) specifies the information requested;
            (2) states that the information is needed for a lawful 
        purpose under this section; and
            (3) is signed by a supervisory official of a rank 
        designated by the head of the agency.

    Subpart E--Disclosure Pursuant to Government Subpoena or Warrant

SEC. 4126. GOVERNMENT SUBPOENAS AND WARRANTS.

    A health care provider, health plan, health oversight agency, 
employer, or person who receives protected health information under 
section 4112 may disclose protected health information under this 
section if the disclosure is pursuant to--
            (1) an administrative subpoena or summons, a judicial 
        subpoena or warrant, or a grand jury subpoena, and the trustee 
        is provided written certification that section 4127 has been 
        complied with by the person seeking the subpoena or summons; or
            (2) an administrative subpoena or summons, a judicial 
        subpoena or warrant, or a grand jury subpoena, and the 
        disclosure otherwise meets the conditions of section 4116, 
        4117, 4118, 4121, or 4122.

SEC. 4127. 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 4126 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 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. No disclosure 
may be made until after the 15th day after the individual has been 
served or after a court order allowing disclosure.
    (d) Application for Delay.--
            (1) In general.--A government authority may apply ex parte 
        and under seal to an appropriate court to delay (or extend a 
        delay) serving a notice or copy of a warrant, subpoena, or 
        summons required under subsection (b) or (c). The initial 
        period of delay may not exceed 90 days.
            (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. 4128. 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 4126, 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.

            Subpart F--Disclosure Pursuant to Party Subpoena

SEC. 4131. PARTY SUBPOENAS.

    A health care provider, health plan, employer, or person who 
receives protected health information under section 4112 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 4132.

SEC. 4132. 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 4133 has been served upon the 
individual on or before the date of return of the subpoena.

SEC. 4133. CHALLENGE PROCEDURES FOR PARTY SUBPOENAS.

    (a) Motion To Quash Subpoena.--After service of a copy of the 
subpoena seeking protected health information under section 4131, 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.

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

                 Subpart A--Establishment of Safeguards

SEC. 4136. 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. 4137. 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. 4141. 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.

SEC. 4142. 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. 4143. 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.

                           PART 4--SANCTIONS

                       Subpart A--Civil Sanctions

SEC. 4151. CIVIL PENALTY.

    (a) Violation.--Any health information trustee who the Secretary 
determines has substantially 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 (42 U.S.C. 1320a-7a), 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 such section 1128A.

SEC. 4152. 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;
            (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 B--Criminal Sanctions

SEC. 4161. 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. 4166. 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 4107 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 (42 U.S.C. 300ff-81 et seq.) (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. 4167. RIGHTS OF INCOMPETENTS.

    Except as provided in section 4168, 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.

SEC. 4168. 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 C--Enhanced Penalties for Health Care Fraud

SEC. 4201. 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 subtitle 
        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 (42 U.S.C. 1320a-7, 1320a-7a, and 1320a-
                7b) 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.
            (2) Regulations.--The Secretary and the Attorney General 
        shall by regulation establish standards to carry out the 
        program under paragraph (1).
    (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'').
                    (B) Transfer of amounts.--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 subparagraph (C)).
                            (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.) 
                        (except as otherwise provided by law), in cases 
                        involving claims related to the provision of 
                        health care items and services (other than 
                        funds awarded to a relator or for restitution).
                    (C) 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 title 18, United States 
                        Code;
                            (ii) section 1128B of the Social Security 
                        Act (42 U.S.C. 1320a-7b);
                            (iii) sections 287, 371, 664, 666, 1001, 
                        1027, 1341, 1343, or 1954 of title 18, United 
                        States Code, 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 (29 
                        U.S.C. 1131 and 1141), if the violation or 
                        conspiracy relates to health care fraud.
            (2) Use of funds.--
                    (A) In general.--Amounts in the Anti-Fraud Account 
                shall be available without appropriation and until 
                expended as determined jointly by the Secretary and the 
                Attorney General of the United States in carrying 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 subtitle.
            (4) Use of funds by inspector general.--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.

SEC. 4202. APPLICATION OF FEDERAL HEALTH ANTI-FRAUD AND ABUSE SANCTIONS 
              TO ALL FRAUD AND ABUSE AGAINST ANY HEALTH PLAN.

    (a) Application of 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 (b)(1)(A), by inserting ``or under a 
        health plan'' after ``title XIX''.
            (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) 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).''.
    (c) 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' has the meaning given such term in 
section 1031(a) of the Family Health Insurance Protection Act.''.
    (d) Effective Date.--The amendments made by this section shall take 
effect on January 1, 1996.

SEC. 4203. 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 
regulations issued by the Secretary.
    (b) Conforming Amendment.--Section 1921(d) of the Social Security 
Act (42 U.S.C. 1396r-2(d)) is amended by inserting ``and section 4203 
of the Family Health Insurance Protection Act'' after ``section 422 of 
the Health Care Quality Improvement Act of 1986''.

SEC. 4204. HEALTH CARE FRAUD.

    (a)  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 
meaning given such term in section 1128(i) of the Social Security Act 
(42 U.S.C. 1320a-7(i)).''.
    (b) 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.''.

               Subtitle D--Health Care Malpractice Reform

SEC. 4301. FEDERAL TORT REFORM.

    (a) Applicability.--
            (1) In general.--Except as provided in section 4302, this 
        subtitle shall apply with respect to any medical malpractice 
        liability action brought in any State or Federal court, except 
        that this subtitle shall not apply to a claim or action for 
        damages arising from a vaccine-related injury or death to the 
        extent that title XXI of the Public Health Service Act (42 
        U.S.C. 300aa-1 et seq.) applies to the claim or action.
            (2) Effect on sovereign immunity and choice of law or 
        venue.--Nothing in this subtitle shall be construed to--
                    (A) waive or affect any defense of sovereign 
                immunity asserted by any State under any provision of 
                law;
                    (B) waive or affect any defense of sovereign 
                immunity asserted by the United States;
                    (C) affect the applicability of any provision of 
                the Foreign Sovereign Immunities Act of 1976;
                    (D) preempt State choice-of-law rules with respect 
                to claims brought by a foreign nation or a citizen of a 
                foreign nation; or
                    (E) affect the right of any court to transfer venue 
                or to apply the law of a foreign nation or to dismiss a 
                claim of a foreign nation or of a citizen of a foreign 
                nation on the ground of inconvenient forum.
            (3) Federal court jurisdiction not established on federal 
        question grounds.--Nothing in this subtitle shall be construed 
        to establish any jurisdiction in the district courts of the 
        United States over medical malpractice liability actions on the 
        basis of section 1331 or 1337 of title 28, United States Code.
    (b) Definitions.--For purposes of this subtitle:
            (1) Alternative dispute resolution system; adr.--The term 
        ``alternative dispute resolution system'' or ``ADR'' means a 
        system that provides for the resolution of medical malpractice 
        claims in a manner other than through medical malpractice 
        liability actions.
            (2) Claimant.--The term ``claimant'' means any person who 
        alleges a medical malpractice claim, and any person on whose 
        behalf such a claim is alleged, including the decedent in the 
        case of an action brought through or on behalf of an estate.
            (3) Health care professional.--The term ``health care 
        professional'' means any individual who provides health care 
        services in a State and who is required by the laws or 
        regulations of the State to be licensed or certified by the 
        State to provide such services in the State.
            (4) Health care provider.--The term ``health care 
        provider'' means any organization or institution that is 
        engaged in the delivery of health care services in a State and 
        that is required by the laws or regulations of the State to be 
        licensed or certified by the State to engage in the delivery of 
        such services in the State.
            (5) Health plan.--The term ``health plan'' has the meaning 
        given such term in section 1031(a).
            (6) Injury.--The term ``injury'' means any illness, 
        disease, or other harm that is the subject of a medical 
        malpractice liability action or a medical malpractice claim.
            (7) Medical malpractice liability action.--The term 
        ``medical malpractice liability action'' means a cause of 
        action brought in a State or Federal court against a health 
        care provider or health care professional by which the 
        plaintiff brings a medical malpractice claim.
            (8) Medical malpractice claim.--The term ``medical 
        malpractice claim'' means a claim brought against a health care 
        provider or health care professional in which a claimant 
        alleges that injury was caused by the provision of (or the 
        failure to provide) health care services, except that such term 
        does not include--
                    (A) any claim based on an allegation of an 
                intentional tort;
                    (B) any claim based on an allegation that a product 
                is defective that is brought against any individual or 
                entity that is not a health care professional or health 
                care provider; or
                    (C) any claim brought pursuant to a health plan 
                benefit determination review procedure.
            (9) Secretary.--The term ``Secretary'' means the Secretary 
        of Health and Human Services.

SEC. 4302. STATE-BASED ALTERNATIVE DISPUTE RESOLUTION MECHANISMS.

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

SEC. 4303. LIMITATION ON AMOUNT OF ATTORNEY'S CONTINGENCY FEES.

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

SEC. 4304. PERIODIC PAYMENT OF AWARDS.

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

SEC. 4305. ALLOCATION OF PUNITIVE DAMAGE AWARDS FOR PROVIDER LICENSING 
              AND DISCIPLINARY ACTIVITIES.

    (a) In General.--With respect to the total amount of any punitive 
damages awarded in a medical malpractice liability action, 50 percent 
of such amount shall be paid to the State in which the action is 
brought (or, in a case brought in Federal court, in the State in which 
the health care services that caused the injury that is the subject of 
the action were provided) for the purposes of carrying out the 
activities described in subsection (b).
    (b) Activities Described.--A State shall use amounts paid pursuant 
to subsection (a) to carry out activities to ensure the safety and 
quality of health care services provided in the State, including--
            (1) licensing or certifying health care professionals and 
        health care providers in the State;
            (2) implementing health care quality assurance and quality 
        improvement programs;
            (3) carrying out programs to reduce malpractice-related 
        costs for providers volunteering to provide services in 
        medically underserved areas; and
            (4) providing resources for additional investigation and 
        disciplinary activities by the State licensing board.
    (c) Maintenance of Effort.--A State shall use any amounts paid 
pursuant to subsection (a) to supplement and not to replace amounts 
spent by the State for the activities described in subsection (b).

                       TITLE V--BUDGET NEUTRALITY

SEC. 5001. ASSURANCE OF BUDGET NEUTRALITY.

    Notwithstanding any other provision of this Act, no provision of, 
or amendment made by, this Act shall take effect until legislation is 
enacted which by its terms specifically provides for the Federal budget 
neutrality of this Act.
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