[Congressional Bills 105th Congress]
[From the U.S. Government Publishing Office]
[S. 904 Introduced in Senate (IS)]







105th CONGRESS
  1st Session
                                 S. 904

  To amend title XVIII of the Social Security Act to provide medicare 
          beneficiaries with choices, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             June 16, 1997

   Mr. Breaux (for himself, Mr. Mack, and Mr. Kerrey) introduced the 
 following bill; which was read twice and referred to the Committee on 
                                Finance

_______________________________________________________________________

                                 A BILL


 
  To amend title XVIII of the Social Security Act to provide medicare 
          beneficiaries with choices, 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; AMENDMENTS; REFERENCES; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Comprehensive 
Medicare Reform and Improvement Act of 1997''.
    (b) Amendments to Social Security Act.--Except as otherwise 
specifically provided, whenever in this Act an amendment is expressed 
in terms of an amendment to or repeal of a section or other provision, 
the reference shall be considered to be made to that section or other 
provision of the Social Security Act.
    (c) References to OBRA.--In this Act, the terms ``OBRA-1986'', 
``OBRA-1987'', ``OBRA-1990'', and ``OBRA-1993'' refer to the Omnibus 
Budget Reconciliation Act of 1986 (Public Law 99-509), the Omnibus 
Budget Reconciliation Act of 1987 (Public Law 100-203), the Omnibus 
Budget Reconciliation Act of 1989 (Public Law 101-239), the Omnibus 
Budget Reconciliation Act of 1990 (Public Law 101-508), and the Omnibus 
Budget Reconciliation Act of 1993 (Public Law 103-66), respectively.
    (d) Table of Contents.--The table of contents of this Act is as 
follows:

Sec. 1. Short title; amendments; references; table of contents.
Sec. 2. Purposes.
               TITLE I--ESTABLISHMENT OF MEDIHEALTH PLANS

Sec. 101. MediHealth plans.
Sec. 102. Treatment of 1876 organizations.
Sec. 103. MediHealth demonstration projects.
            TITLE II--INCREASE IN FLEXIBILITY UNDER MEDICARE

Sec. 201. Competitive bidding.
Sec. 202. Flexible purchasing.
Sec. 203. Report on use of new authorities.
                 TITLE III--QUALITY IN MEDIHEALTH PLANS

Sec. 301. Definitions.
Sec. 302. Quality Advisory Institute.
Sec. 303. Duties of Director.
Sec. 304. Compliance.
Sec. 305. Payments for value.
Sec. 306. Certification requirement.
Sec. 307. Licensing of certification entities.
Sec. 308. Certification criteria.
Sec. 309. Grievance and appeals.

SEC. 2. PURPOSES.

    The purposes of this Act are--
            (1) to improve the existing medicare program under title 
        XVIII of the Social Security Act (42 U.S.C. 1395 et seq.) by 
        adopting a competitive model to provide medicare beneficiaries 
        with better and broader health care coverage and a greater 
        variety of health care options from which to choose;
            (2) to increase the flexibility of the medicare program to 
        allow health care items and services to be delivered in a 
        progressive, efficient fashion;
            (3) to enable the medicare program to take swift advantage 
        of future market improvements in the means of health care 
        delivery;
            (4) to provide medicare beneficiaries with practical 
        information they and their families can use to make the best 
        health care choices possible;
            (5) to promote high quality, comprehensive, integrated care 
        geared to the needs of beneficiaries within a system that is 
        focused on preventing and ameliorating disease;
            (6) to encourage good health through the efficient delivery 
        of care to an aging population in a variety of settings best 
        suited to the needs of the individual; and
            (7) to develop a medicare plan that will provide quality 
        medical care to medicare beneficiaries while addressing the 
        need to ensure the immediate and long-term viability by 
        developing a competitively based program based on the Federal 
        Employees Health Benefits Plan, a proven model of health care 
        delivery.

               TITLE I--ESTABLISHMENT OF MEDIHEALTH PLANS

SEC. 101. MEDIHEALTH PLANS.

    (a) In General.--Title XVIII of the Social Security Act (42 U.S.C. 
1395 et seq.) is amended by adding at the end the following new part:

                       ``PART D--MEDIHEALTH PLANS

                        ``subpart 1--definitions
```subpart 2--entitlement of medihealth eligible individuals to health 
                              care choices
``Sec. 1895B. Entitlement to medicare choices.
``Sec. 1895C. Enrollment procedures.
``Sec. 1895D. E``subpart 3--medihealth plan requirements
``Sec. 1895G. Availability and enrollment.
``Sec. 1895H. Benefits provided to individuals.
``Sec. 1895I. Licensing and financial requirements.
``Sec. 1895J. Health plan standards.
```subpart 4--office of competition; determination of medicare payment 
                                amounts
``Sec. 1895M. Office of Competition.
``Sec. 1895N. Standardized medicare payment amounts.
````subpart 5--contractual authority; temporary licensing; regulations
``Sec. 1895P. General permission to contract.
``Sec. 1895Q. Renewal and termination of contract.
``Sec. 1895R. Temporary licensing process for coordinated care plans.
``Sec. 1895S. Regulations.

                        ``Subpart 1--Definitions

``SEC. 1895A. DEFINITIONS.

    ``(a) MediHealth Plan.--In this part--
            ``(1) In general.--The term `MediHealth plan' means an 
        eligible health plan with respect to which there is a contract 
        in effect under this part to provide health benefits coverage 
        to MediHealth eligible individuals.
            ``(2) MediHealth plan sponsor.--The terms `MediHealth plan 
        sponsor' and `plan sponsor' mean a public or private entity 
        which establishes or maintains a MediHealth plan.
    ``(b) Eligible Health Plan.--In this part:
            ``(1) In general.--The term `eligible health plan' means a 
        policy, contract, or plan which is capable of providing health 
        benefits coverage of items and services provided under the 
        traditional medicare program to MediHealth eligible 
        individuals.
            ``(2) Types of insurance.--The term `eligible health plan' 
        shall include private managed or coordinated care plans which 
        provide health care services through an integrated network of 
        providers, including--
                    ``(A) qualified health maintenance organizations as 
                defined in section 1310(d) of the Public Health Service 
                Act; and
                    ``(B) preferred provider organization plans, point 
                of service plans, provider-sponsored network plans, or 
                other coordinated care plans.
    ``(c) Other Definitions.--In this part:
            ``(1) Areas.--
                    ``(A) Medicare payment area.--
                            ``(i) In general.--Except as provided in 
                        clause (ii), the term `medicare payment area' 
                        means--
                                    ``(I) a metropolitan statistical 
                                area (whether or not such area is in a 
                                single State) or in the case of a 
                                consolidated metropolitan statistical 
                                area, each primary metropolitan 
                                statistical area within the 
                                consolidated area; or
                                    ``(II) one area within each State 
                                composed of all areas that do not fall 
                                within a metropolitan statistical area.
                            ``(ii) Geographic adjustment.--Upon request 
                        of the chief executive officer of a State, the 
                        Secretary may make a geographic adjustment to a 
                        medicare payment area otherwise determined 
                        under clause (i).
                            ``(iii) Areas.--In this subparagraph, the 
                        terms `metropolitan statistical area', 
                        `consolidated metropolitan statistical area', 
                        and `primary metropolitan statistical area' 
                        mean any area designated as such by the 
                        Secretary of Commerce.
                    ``(B) Medicare service area.--
                            ``(i) In general.--Except as provided in 
                        clause (ii), the term `medicare service area' 
                        means a medicare payment area.
                            ``(ii) Geographic adjustment.--The 
                        Secretary may designate a medicare service area 
                        other than a medicare payment area for a 
                        MediHealth plan if the Secretary determines 
                        that such designation is nondiscriminatory and 
                        consistent with the effective implementation of 
                        this part.
            ``(2) Director.--The term `Director' means the Director of 
        the Office of Competition within the Department of Health and 
        Human Services as established under section 1895M.
            ``(3) Medihealth eligible individual.--
                    ``(A) In general.--The term `MediHealth eligible 
                individual' means an individual who is entitled to 
                benefits under part A and enrolled under part B.
                    ``(B) Special rule for end-stage renal disease.--
                Such term shall not include an individual medically 
                determined to have end-stage renal disease, except that 
                an individual who develops end-stage renal disease 
                while enrolled in a MediHealth plan may continue to be 
                enrolled in that plan. Not later than December 31, 
                1999, the Secretary shall submit to the Congress 
                recommendations on expanding the definition of 
                `MediHealth eligible individual' to include individuals 
                with end-stage renal disease and the enrollment of such 
                individuals in MediHealth plans.
            ``(4) Traditional medicare program.--The term `traditional 
        medicare program' means the program of benefits available to 
        individuals entitled to benefits under part A and enrolled 
        under part B of this title, other than enrollment in a 
        MediHealth plan under this part.

 ``Subpart 2--Entitlement of MediHealth Eligible Individuals to Health 
                              Care Choices

``SEC. 1895B. ENTITLEMENT TO MEDICARE CHOICES.

    ``Each MediHealth eligible individual is entitled to choose to 
receive health care items and services covered under parts A and B--
            ``(1) through the traditional medicare program; or
            ``(2) by receiving payments toward the individual's 
        enrollment in a MediHealth plan under this part.

``SEC. 1895C. ENROLLMENT PROCEDURES.

    ``(a) In General.--Except as provided in section 1895G(a)(2), each 
MediHealth eligible individual shall be entitled to enroll in any 
MediHealth plan with a medicare service area including the geographic 
area in which the individual resides during--
            ``(1) the annual open enrollment period described in 
        section 1895G(b)(1); or
            ``(2) any other enrollment period described in section 
        1895G(b)(2) applicable to the individual.
    ``(b) Method of Enrollment and Disenrollment.--
            ``(1) Notice provided to the secretary.--Each MediHealth 
        eligible individual desiring to enroll or terminate enrollment 
        in a MediHealth plan shall provide the Secretary with notice of 
        such enrollment or disenrollment during any enrollment period 
        applicable to the individual. The Secretary shall, to the 
        extent feasible, provide for the receipt of such notice by 
        telephone, through the mail, and in person at local social 
        security offices.
            ``(2) Information forwarded to the plan.--The Secretary 
        shall promptly provide each MediHealth plan with notice of an 
        individual's enrollment or disenrollment with the plan.
    ``(c) Notices to Individuals To Assist in Enrollment.--
            ``(1) Open season notification.--
                    ``(A) Mailing of notice.--By September 30 of each 
                year beginning after 2001, the Secretary shall mail a 
                notice of eligibility to each MediHealth eligible 
                individual and each individual entitled to benefits 
                under part A prior to the end of the annual open 
                enrollment period described in section 1895G(b)(1).
                    ``(B) Notice described.--The notice described in 
                subparagraph (A) shall include an informational 
                brochure that includes the information described in 
                this section, and any other information that the 
                Secretary determines will assist the individual's 
                enrollment decision.
            ``(2) Notification to newly medihealth eligible 
        individuals.--With respect to an individual who becomes 
        eligible to enroll in a MediHealth plan during the period 
        described in section 1895G(b)(2)(A) and to whom paragraph (1) 
        does not apply, the Secretary shall, not later than 2 months 
        before the date on which the individual becomes eligible, mail 
        to the individual the notice of eligibility described in 
        paragraph (1).
    ``(d) Secretary's Materials; Contents.--The notice and 
informational materials mailed by the Secretary under subsection (c) 
shall be written and formatted in the most easily understandable manner 
possible, and shall include, at a minimum, the following:
            ``(1) General information.--General information with 
        respect to coverage under this part during the next calendar 
        year, including--
                    ``(A) the part B premium rates that will be charged 
                for part B coverage, and a statement of the fact that 
                enrollees in MediHealth plans are not required to pay 
                such premium,
                    ``(B) the deductible, copayment, and coinsurance 
                amounts for coverage under the traditional medicare 
                program,
                    ``(C) a description of the coverage under the 
                traditional medicare program and any changes in 
                coverage under the program from the prior year,
                    ``(D) a description of the individual's medicare 
                payment area, and the standardized medicare payment 
                amount available with respect to such individual,
                    ``(E) information and instructions on how to enroll 
                in a MediHealth plan,
                    ``(F) the right of each MediHealth plan sponsor by 
                law to terminate or refuse to renew its contract and 
                the effect the termination or nonrenewal of its 
                contract may have on individuals enrolled with the 
                MediHealth plan under this part,
                    ``(G) appeal rights of enrollees, including the 
                right to address grievances to the Secretary or the 
                applicable external review entity, and
                    ``(H) the benefits offered by plans in basic 
                benefit plans under section 1895H(a), and how those 
                benefits differ from the benefits offered under parts A 
                and B.
            ``(2) Comparative report.--A copy of the most recent 
        comparative report (as established by the Secretary under 
        subsection (e)) for the MediHealth plans in the individual's 
        medicare payment area.
    ``(e) Comparative Report.--
            ``(1) In general.--The Secretary shall develop an 
        understandable standardized comparative report on the 
        MediHealth plans offered by MediHealth plan sponsors, that will 
        assist MediHealth eligible individuals in their decisionmaking 
        regarding medical care and treatment by allowing such 
        individuals to compare the MediHealth plans that such 
        individuals are eligible to enroll with. In developing such 
        report the Secretary shall consult with outside organizations, 
        including groups representing the elderly, MediHealth plan 
        sponsors, providers of services, and physicians and other 
        health care professionals, in order to assist the Secretary in 
        developing the report.
            ``(2) Report.--The report described in paragraph (1) shall 
        include a comparison for each MediHealth plan of--
                    ``(A) the plan's medicare service area;
                    ``(B) coverage by the plan of emergency services 
                and urgently needed care;
                    ``(C) the amount of any deductibles, coinsurance, 
                or any monetary limits on benefits;
                    ``(D) the number of individuals who disenrolled 
                from the plan within 3 months of enrollment during the 
                previous fiscal year (excluding individuals whose 
                disenrollment was due to death or moving outside of the 
                plan's service area) stated as percentages of the total 
                number of individuals in the plan;
                    ``(E) process, outcome, and enrollee satisfaction 
                measures, as recommended by the Quality Advisory 
                Institute (as established under section 302 of the 
                Comprehensive Medicare Reform and Improvement Act of 
                1997);
                    ``(F) information on access and quality of services 
                obtained from the analysis described in section 
                302(c)(4) of such Act;
                    ``(G) the procedures used by the plan to control 
                utilization of services and expenditures, including any 
                financial incentives;
                    ``(H) the number of applications during the 
                previous fiscal year requesting that the plan cover or 
                pay for certain medical services that were denied by 
                the plan (and the number of such denials that were 
                subsequently reversed by the plan), stated as a 
                percentage of the total number of applications during 
                such period requesting that the plan cover such 
                services;
                    ``(I) the number of times during the previous 
                fiscal year (after an appeal was filed with the 
                Secretary) that the Secretary upheld or reversed a 
                denial of a request that the plan cover certain medical 
                services;
                    ``(J) the restrictions (if any) on payment for 
                services provided outside the plan's health care 
                provider network;
                    ``(K) the process by which services may be obtained 
                through the plan's health care provider network;
                    ``(L) coverage for out-of-area services;
                    ``(M) any exclusions in the types of health care 
                providers participating in the plan's health care 
                provider network;
                    ``(N) whether the plan is, or has within the past 
                two years been, out-of-compliance with any requirements 
                of this part (as determined by the Secretary);
                    ``(O) the plan's premium price for the basic 
                benefit plan submitted under section 1895N(a)(1), an 
                indication of the difference between such premium price 
                and the standardized medicare payment amount, and the 
                portion of the premium an individual must pay out of 
                pocket;
                    ``(P) whether the plan offers any of the optional 
                supplemental benefit plans described in section 
                1895H(b), and if so, the plan's premium price for the 
                plan submitted under section 1895N(a)(1); and
                    ``(Q) any additional information that the Secretary 
                determines would be helpful for MediHealth eligible 
                individuals to compare the MediHealth plans that such 
                individuals are eligible to enroll with.
            ``(3) Additional information.--The comparative report shall 
        also include--
                    ``(A) a comparison of each MediHealth plan to the 
                fee-for-service program under parts A and B;
                    ``(B) an explanation of medicare supplemental 
                policies under section 1882 and how to obtain specific 
                information regarding such policies; and
                    ``(C) a phone number for each MediHealth plan that 
                will enable MediHealth eligible individuals to call to 
                receive a printed listing of all health care providers 
                participating in the plan's health care provider 
                network.
            ``(4) Update.--The Secretary shall, not less than annually, 
        update each comparative report.
            ``(5) Definitions.--In this subsection--
                    ``(A) Health care provider.--The term `health care 
                provider' means anyone licensed under State law to 
                provide health care services under part A or B.
                    ``(B) Network.--The term `network' means, with 
                respect to a MediHealth plan sponsor, the health care 
                providers who have entered into a contract or agreement 
                with the plan sponsor under which such providers are 
                obligated to provide items, treatment, and services 
                under this section to individuals enrolled with the 
                plan sponsor under this part.
                    ``(C) Out-of-network.--The term `out-of-network' 
                means services provided by health care providers who 
                have not entered into a contract agreement with the 
                MediHealth plan sponsor under which such providers are 
                obligated to provide items, treatment, and services 
                under this section to individuals enrolled with the 
                plan sponsor under this part.
            ``(6) Cost sharing.--Each MediHealth plan sponsor shall pay 
        to the Secretary its pro rata share of the estimated costs 
        incurred by the Secretary in carrying out the requirements of 
        this section and section 4360 of the Omnibus Reconciliation Act 
        of 1990. There are hereby appropriated to the Secretary the 
        amount of the payments under this paragraph for purposes of 
        defraying the cost described in the preceding sentence. Such 
        amounts shall remain available until expended.
    ``(f) Agreements With Commissioner of Social Security.--In order to 
promote the efficient administration of this section and this part, the 
Secretary may enter into an agreement with the Commissioner of Social 
Security under which the Commissioner performs administrative 
responsibilities relating to enrollment and disenrollment under this 
section.

``SEC. 1895D. EFFECT OF ENROLLMENT.

    ``(a) Premium Differentials.--If a MediHealth eligible individual 
enrolls in a MediHealth plan, the individual shall be required to pay--
            ``(1) 10 percent of the plan's premium;
            ``(2) if the premium of the plan is higher than the 
        standardized payment amount (as determined under section 
        1895M), 100 percent of such difference; and
            ``(3) an amount equal to cost-sharing under the medicare 
        fee-for-service program, except that such amount shall not 
        exceed the actuarial value of the deductibles and coinsurance 
        under such program less the actual value of nominal copayments 
        for benefits under such plan for basic benefits described in 
        section 1895H(a)(1).
    ``(b) Period of Enrollment.--
            ``(1) Annual enrollment period.--An individual enrolling in 
        a MediHealth plan during the annual open enrollment period 
        under section 1895G(b)(1) shall be enrolled in the plan for the 
        calendar year following the open enrollment period.
            ``(2) Special enrollment periods.--An individual enrolling 
        in a plan under section 1895G(b)(2) shall be enrolled in the 
        plan for the portion of the calender year on and after the 
date on which the enrollment becomes effective (as specified by the 
Secretary).
            ``(3) Terminations.--
                    ``(A) In general.--Except as otherwise provided in 
                this subsection, an individual may not terminate 
                enrollment in a MediHealth plan before the next annual 
                open enrollment period applicable to the individual.
                    ``(B) Qualifying events.--Notwithstanding 
                subparagraph (A), an individual may terminate 
                enrollment in a MediHealth plan if--
                            ``(i) the individual moves to a new 
                        medicare service area, or
                            ``(ii) the individual has experienced a 
                        qualifying event (as determined by the 
                        Secretary).
                    ``(C) For cause.--Notwithstanding subparagraph (A), 
                an individual may terminate enrollment in a MediHealth 
                plan if the plan fails to meet quality or capacity 
                standards or for other cause as determined by the 
                Secretary.
                    ``(D) Termination after initial enrollment.--An 
                individual may terminate enrollment in a MediHealth 
                plan within 90 days of the individual's initial 
                enrollment in such MediHealth plan and enroll in 
                another MediHealth plan or the traditional medicare 
                program.
            ``(4) Seamless enrollment.--If a MediHealth eligible 
        individual is enrolled in a MediHealth plan under this part and 
        such individual fails to provide the Secretary with notice of 
        the individual's enrollment or disenrollment under section 
        1895C(b)(1) during any open enrollment period applicable to the 
        individual, the individual shall be deemed to have reenrolled 
        in the plan.
    ``(c) Sole Payments.--Subject to subsections (d)(2) and (e) of 
section 1895H, payments under a contract to a MediHealth plan under 
section 1895O shall be instead of the amounts which (in the absence of 
the contract) would be otherwise payable under the traditional medicare 
program for items or services furnished to individuals enrolled with 
the plan under this section.
    ``(d) Part B Premium.--An individual enrolled in a MediHealth plan 
under this part shall not be required to pay the premium amount 
(determined under section 1839) under part B for so long as such 
individual is so enrolled.

               ``Subpart 3--MediHealth Plan Requirements

``SEC. 1895G. AVAILABILITY AND ENROLLMENT.

    ``(a) General Availability.--
            ``(1) In general.--Except as provided in paragraph (2), 
        each MediHealth plan sponsor shall provide that each MediHealth 
        eligible individual shall be eligible to enroll under this part 
        in a MediHealth plan of the sponsor during an enrollment period 
        applicable to such individual if the plan's medicare service 
        area includes the geographic area in which the individual 
        resides.
            ``(2) Exceptions.--Each MediHealth plan sponsor shall 
        provide that, at any time during which enrollments are 
        accepted, the plan sponsor will accept MediHealth eligible 
        individuals in the order in which they apply for enrollment up 
        to the limits of the MediHealth plan's certified capacity (as 
        determined by the Secretary) and without restrictions, except 
        as may be authorized in regulations. The preceding sentence 
        shall not apply if it would result in the enrollment of 
        enrollees substantially nonrepresentative, as determined in 
        accordance with regulations of the Secretary, of the medicare 
        population in the medicare service area of the plan.
    ``(b) Enrollment Periods.--
            ``(1) Annual open enrollment period.--Each MediHealth plan 
        sponsor shall offer an annual open enrollment period in 
        November of each year for the enrollment and termination of 
        enrollment of MediHealth eligible individuals for the next 
        year.
            ``(2) Additional periods.--Each MediHealth plan sponsor 
        shall accept the enrollment of an individual in the MediHealth 
        plan--
                    ``(A) during the initial medicare enrollment period 
                specified by section 1837 that applies to the 
                individual (effective as specified by section 1838), 
                and
                    ``(B) during the period specified by the Secretary 
                following any termination of the enrollment of the 
                individual in a MediHealth plan under subparagraph (B), 
                (C), or (D) of section 1895D(b)(3).
    ``(c) Plan Participation in Enrollment Process.--
            ``(1) In general.--In addition to any informational 
        materials distributed by the Secretary under section 1895C(c), 
        a MediHealth plan sponsor may develop and distribute marketing 
        materials and engage in marketing strategies in accordance with 
        this subsection.
            ``(2) Plan marketing and advertising standards.--Any 
        marketing material developed or distributed by a MediHealth 
        plan sponsor and any marketing strategy developed by such plan 
        sponsor--
                    ``(A) shall accurately describe differences between 
                health care coverage available under the plan and the 
                health care coverage available under the traditional 
                medicare program,
                    ``(B) shall be pursued in a manner not intended to 
                violate the nondiscrimination requirement of section 
                1895J(e)(1),
                    ``(C) shall not contain false or materially 
                misleading information, and shall conform to any other 
                fair marketing and advertising standards and 
                requirements applicable to such plans under law, and
                    ``(D) shall, for any written marketing materials, 
                contain an explanation of the MediHealth eligible 
                individual's rights and responsibilities under this 
                part and a copy of the most recent comparative report 
                (as established by the Secretary under section 1895C) 
                for any MediHealth plan offered by the plan sponsor in 
                the individual's medicare payment area.
            ``(3) Prior approval by secretary.--
                    ``(A) In general.--No marketing materials may be 
                distributed by a MediHealth plan sponsor to (or for the 
                use of) individuals eligible to enroll with the plan 
                under this part unless--
                            ``(i) at least 45 days before its 
                        distribution, the plan has submitted the 
                        material to the Secretary for review, and
                            ``(ii) the Secretary has not disapproved 
                        the distribution of the material.
                    ``(B) Review.--The Secretary shall review all 
                marketing materials submitted under guidelines 
                established by the Secretary and shall disapprove such 
                material if the Secretary determines, in the 
                Secretary's discretion, that the material is materially 
                inaccurate or misleading or otherwise makes a material 
                misrepresentation.
                    ``(C) Deemed approval.--If marketing material has 
                been submitted under subparagraph (A) to the Secretary 
                or a regional office of the Department of Health and 
                Human Services and the Secretary or the office has not 
                disapproved the distribution of the materials under 
                subparagraph (B) with respect to an area, the Secretary 
                is deemed not to have disapproved such distribution in 
                all areas covered by the plan, except for information 
                specific to the service area.
    ``(d) Restriction on Enrollment for Certain Medicare Choice 
Plans.--
            ``(1) In general.--In the case of a Medicare Choice 
        religious fraternal benefit society plan described in paragraph 
        (2), notwithstanding any other provision of this part to the 
        contrary and in accordance with regulations of the Secretary, 
        the society offering the plan may restrict the enrollment of 
        individuals under this part to individuals who are members of 
        the church, convention, or group described in paragraph (3)(B) 
        with which the society is affiliated.
            ``(2) Medicareplus religious fraternal benefit society plan 
        described.--For purposes of this subsection, a Medicare Choice 
        religious fraternal benefit society plan described in this 
        paragraph is a Medicare Choice plan described in section 
        1895A(b) that--
                    ``(A) is offered by a religious fraternal benefit 
                society described in paragraph (3) only to members of 
                the church, convention, or group described in paragraph 
                (3)(B); and
                    ``(B) permits all such members to enroll under the 
                plan without regard to health status-related factors.
        Nothing in this subsection shall be construed as waiving any 
        plan requirements relating to financial solvency. In developing 
        solvency standards under section 1895I(c), the Secretary shall 
        take into account open contract and assessment features 
        characteristic of fraternal insurance certificates.
            ``(3) Religious fraternal benefit society defined.--For 
        purposes of paragraph (2)(A), a `religious fraternal benefit 
        society' described in this section is an organization that--
                    ``(A) is exempt from Federal income taxation under 
                section 501(c)(8) of the Internal Revenue Code of 1986;
                    ``(B) is affiliated with, carries out the tenets 
                of, and shares a religious bond with, a church or 
                convention or association of churches or an affiliated 
                group of churches;
                    ``(C) offers, in addition to a Medicare Choice 
                religious fraternal benefit society plan, at least the 
                same level of health coverage to individuals not 
                entitled to benefits under this title who are members 
of such church, convention, or group; and
                    ``(D) does not impose any limitation on membership 
                in the society based on any health status-related 
                factor.
            ``(4) Payment adjustment.--Under regulations of the 
        Secretary, in the case of individuals enrolled under this part 
        under a Medicare Choice religious fraternal benefit society 
        plan described in paragraph (2), the Secretary shall provide 
        for such adjustment to the payment amounts otherwise 
        established under section 1895N as may be appropriate to assure 
        an appropriate payment level, taking into account the actuarial 
        characteristics and experience of such individuals.

``SEC. 1895H. BENEFITS PROVIDED TO INDIVIDUALS.

    ``(a) Basic Benefit Plan.--Each MediHealth plan shall provide to 
members enrolled under this part, through providers and other persons 
that meet the applicable requirements of this title and part A of title 
XI--
            ``(1) those items and services covered under parts A and B 
        of this title which are available to individuals residing in 
        the medicare service area of the plan, subject to nominal 
        copayments as determined by the Secretary,
            ``(2) prescription drugs, subject to such limits as 
        established by the Secretary, and
            ``(3) additional health services as the Secretary may 
        approve.
    ``(b) Supplemental Benefits.--
            ``(1) In general.--Each MediHealth plan may offer any of 
        the optional supplemental benefit plans described in paragraph 
        (2) to an individual enrolled in the basic benefit plan offered 
        by such organization under this part for an additional premium 
        amount. If the supplemental benefits are offered only to 
        individuals enrolled in the sponsor's plan under this part, the 
        additional premium amount shall be the same for all enrolled 
        individuals in the medicare payment area. Such benefits may be 
        marketed and sold by the MediHealth plan sponsor outside of the 
        enrollment process described in section 1895D(b).
            ``(2) Optional supplemental benefit plans described.--The 
        Secretary shall provide for 2 optional supplemental benefit 
        plans. Such plans shall include such standardized items and 
        services that the Secretary determines must be provided to 
        enrollees of such plans described in order to offer the plans 
        to MediHealth eligible individuals.
            ``(3) Limitation.--A MediHealth plan sponsor may not offer 
        an optional benefit plan to a MediHealth eligible individual 
        unless such individual is enrolled in a basic benefit plan 
        offered by such organization.
            ``(4) Limitation on premium.--If a MediHealth plan sponsor 
        provides to individuals enrolled in a MediHealth plan 
        supplemental benefits described in paragraph (1), the sum of--
                    ``(A) the annual premiums for such benefits, plus
                    ``(B) the actuarial value of any deductibles, 
                coinsurance, and copayments charged with respect to 
                such benefits for the year,
        shall not exceed the amount that would have been charged for a 
        plan in the MediHealth payment area which is not a MediHealth 
        plan (adjusted in such manner as the Secretary may prescribe to 
        reflect that only medicare beneficiaries are enrolled in such 
        plan). The Secretary shall negotiate the limitation under this 
        paragraph with each plan to which this paragraph applies.
    ``(c) National Coverage Determination.--If there is a national 
coverage determination made in the period beginning on the date of an 
announcement under section 1895N(b) and ending on the date of the next 
announcement under such section and the Secretary projects that the 
determination will result in a significant change in the costs to the 
MediHealth plan of providing the benefits that are the subject of such 
national coverage determination and that such change in costs was not 
incorporated in the determination of the medicare payment amount 
included in the announcement made at the beginning of such period--
            ``(1) such determination shall not apply to contracts under 
        this part until the first contract year that begins after the 
        end of such period, and
            ``(2) if such coverage determination provides for coverage 
        of additional benefits or coverage under additional 
        circumstances, section 1895I(b)(2) shall not apply to payment 
        for such additional benefits or benefits provided under such 
        additional circumstances until the first contract year that 
        begins after the end of such period,
unless otherwise required by law.
    ``(d) Overlapping Periods of Coverage.--A contract under this part 
shall provide that in the case of an individual who is receiving 
inpatient hospital services from a subsection (d) hospital (as defined 
in section 1886(d)(1)(B)) as of the effective date of the 
individual's--
            ``(1) enrollment with a MediHealth plan under this part--
                    ``(A) payment for such services until the date of 
                the individual's discharge shall be made under this 
                title as if the individual were not enrolled with the 
                plan,
                    ``(B) the plan sponsor shall not be financially 
                responsible for payment for such services until the 
                date after the date of the individual's discharge, and
                    ``(C) the plan sponsor shall nonetheless be paid 
                the full amount otherwise payable to the plan under 
                this part, or
            ``(2) termination of enrollment with a MediHealth plan 
        under this part--
                    ``(A) the plan sponsor shall be financially 
                responsible for payment for such services after such 
                date and until the date of the individual's discharge,
                    ``(B) payment for such services during the stay 
                shall not be made under section 1886(d), and
                    ``(C) the plan sponsor shall not receive any 
                payment with respect to the individual under this part 
                during the period the individual is not enrolled.
    ``(e) Organization as Secondary Payer.--Notwithstanding any other 
provision of law, a MediHealth plan sponsor may (in the case of the 
provision of services to an individual under this part under 
circumstances in which payment is made secondary pursuant to section 
1862(b)(2)) charge or authorize the provider of such services to 
charge, in accordance with the charges allowed under the law, plan, or 
policy which is the primary payer under such circumstances--
            ``(1) the insurance carrier, employer, or other entity 
        which under such law, plan, or policy is to pay for the 
        provision of such services, or
            ``(2) such individual to the extent that the individual has 
        been paid under such law, plan, or policy for such services.

``SEC. 1895I. LICENSING AND FINANCIAL REQUIREMENTS.

    ``(a) Licensing Requirement.--
            ``(1) In general.--A MediHealth plan sponsor shall be 
        organized and licensed under applicable State law as a risk-
        bearing entity eligible to offer health insurance or health 
        benefits coverage in each State in which the MediHealth plan 
        enrolls individuals under this part.
            ``(2) Coordinated care plans.--Paragraph (1) shall apply to 
        a coordinated care plan except to the extent provided in 
        section 1895R.
    ``(b) Assumption of Full Financial Risk.--A MediHealth plan sponsor 
shall assume full financial risk on a prospective basis for the 
provision of health care services for which benefits are required to be 
provided under paragraphs (1) and (2) of section 1895H(a)(1), except 
that such plan sponsor may--
            ``(1) obtain insurance or make other arrangements for the 
        cost of such health care services the aggregate value of which 
        exceeds $5,000 per person in any year,
            ``(2) obtain insurance or make other arrangements for the 
        cost of such health care services provided to its enrolled 
        members other than through the plan sponsor because medical 
        necessity required their provision before they could be secured 
        through the plan sponsor,
            ``(3) obtain insurance or make other arrangements for not 
        more than 90 percent of the amount by which its costs for any 
        of its fiscal years exceed 115 percent of its income for such 
        fiscal year, and
            ``(4) make arrangements with physicians or other health 
        professionals, health care institutions, or any combination of 
        such individuals or institutions to assume all or part of the 
        financial risk on a prospective basis for the provision of 
        basic health services by the physicians or other health 
        professionals or through the institutions.
    ``(c) Protection Against Risk of Insolvency.--
            ``(1) In general.--A MediHealth plan sponsor shall make 
        adequate provision against the risk of insolvency (including 
        provision to prevent enrollees from being held liable to any 
        person or entity for the plan sponsor's debts in the event of 
        the plan sponsor's insolvency)--
                    ``(A) as determined by the Secretary, or
                    ``(B) as determined by a State which the Secretary 
                determines requires solvency standards at least as 
                stringent as the standards under subparagraph (A).
            ``(2) Factors to consider.--In establishing standards under 
        paragraph (1) for coordinated care plans described in section 
        1895A(b)(1)(B)(i), the Secretary shall consult with interested 
        parties and shall take into account--
                    ``(A) a coordinated care plan sponsor's delivery 
                system assets and its ability to provide services 
                directly to enrollees through affiliated providers, and
                    ``(B) alternative means of protecting against 
                insolvency, including reinsurance, unrestricted 
                surplus, letters of credit, guarantees, organizational 
                insurance coverage, and partnerships with other 
                licensed entities.
        The Secretary is not required to include alternative means 
        described in subparagraph (B) in the standards but may consider 
        such alternatives where consistent with the standards.
    ``(d) Payments to the Plan.--
            ``(1) Prepaid payment.--A MediHealth plan sponsor shall be 
        compensated (except for deductibles, coinsurance, and 
        copayments) for the provision of health care services to 
        individuals enrolled under this part by a payment by the 
        Secretary (and if applicable, the individual) which is paid on 
        a periodic basis without regard to the date the health care 
        services are provided and which is fixed without regard to the 
        frequency, extent, or kind of health care service actually 
        provided to a member.
            ``(2) Sole payments.--Subject to subsections (d)(2) and (e) 
        of section 1895H, if an individual is enrolled under this part 
        with a MediHealth plan, only the plan sponsor shall be entitled 
        to receive payments from the Secretary under this title for 
        services furnished to the individual.

``SEC. 1895J. HEALTH PLAN STANDARDS.

    ``(a) In General.--Each MediHealth plan sponsor shall meet the 
requirements of this section.
    ``(b) Quality Assurance and Accreditation.--
            ``(1) Certification.--Each MediHealth plan offered by a 
        MediHealth plan sponsor shall be certified pursuant to title IV 
        of the Comprehensive Medicare Reform and Improvement Act of 
        1997.
            ``(2) External review.--
                    ``(A) In general.--Each MediHealth plan sponsor 
                shall, for each MediHealth plan it operates, have an 
                agreement with an independent quality review and 
                improvement organization approved by the Secretary.
                    ``(B) Functions of organization.--Each independent 
                quality review and improvement organization with an 
                agreement under subparagraph (A) shall--
                            ``(i) provide an alternative mechanism for 
                        addressing enrollee grievances,
                            ``(ii) review plan performance based on 
                        accepted quality performance criteria,
                            ``(iii) promote and make plans accountable 
                        for improved plan performance,
                            ``(iv) integrate into ongoing external 
                        quality assurance activities a new set of 
                        quality indicators and standards appropriate 
                        for the medicare population that would be used 
                        to determine whether a plan is providing 
                        quality care and appropriate continuity and 
                        coordination of care, and
                            ``(v) report to the Secretary on those 
                        plans that have demonstrated unwillingness or 
                        inability to improve their performance.
    ``(c) Access.--Each MediHealth plan sponsor shall--
            ``(1) make the services described in section 1895H(a) (and 
        such other health care services as such individuals have 
        contracted for) either directly or indirectly through providers 
        and other persons that meet the applicable requirements of this 
        title and part A of title XI--
                    ``(A) available and accessible to each such 
                individual, within the medicare service area of the 
                plan, with reasonable promptness, and in a manner which 
                assures continuity, and
                    ``(B) when medically necessary, available and 
                accessible 24 hours a day and 7 days a week,
            ``(2) provide for reimbursement with respect to such 
        services which are provided to such an individual other than 
        through the plan's providers, if--
                    ``(A) the services were medically necessary and 
                immediately required because of an unforeseen illness, 
                injury, or condition, and
                    ``(B) it was not reasonable given the circumstances 
                to obtain the services through the plan's providers,
            ``(3) provide access to appropriate providers, including 
        credentialed specialists, for all medically necessary treatment 
        and services, and
            ``(4) except as provided by the Secretary on a case-by-case 
        basis, in the case of a coordinated care plan described in 
        section 1895A(b)(1)(B)(i), provide primary care services within 
        30 minutes or 30 miles from an enrollee's place of residence if 
        the enrollee resides in a rural area.
    ``(d) Capacity.--Each MediHealth plan sponsor shall provide the 
Secretary with a demonstration of the plan's capacity to adequately 
service the plan's expected enrollment of individuals under this part.
    ``(e) Consumer Protections.--
            ``(1) Nondiscrimination.--Each MediHealth plan sponsor 
        shall provide assurances to the Secretary that it will not deny 
        enrollment to, expel, or refuse to reenroll any such individual 
        because of the individual's health status or requirements for 
        health care services, and that it will notify each such 
        individual of such fact at the time of the individual's 
        enrollment. A MediHealth plan sponsor may not cancel or refuse 
        to renew a beneficiary except in the case of fraud or 
        nonpayment of premium amounts due the plan, or other 
        circumstances specified by the Secretary.
            ``(2) Grievance procedures.--
                    ``(A) In general.--Each MediHealth plan sponsor 
                shall provide meaningful procedures for hearing and 
                resolving grievances between the plan (including any 
                entity or individual through which the plan provides 
                health care services) and members enrolled with the 
                plan under this part.
                    ``(B) Coverage determinations and appeals.--
                            ``(i) Determination by organization.--A 
                        MediHealth plan sponsor shall have a procedure 
                        for determining whether an individual enrolled 
                        with the organization under this part is 
                        entitled to receive a benefit described in 
                        section 1851H and the amount (if any) that the 
                        individual is required to pay for that benefit, 
                        which includes the following elements:
                                    ``(I) Reconsideration.--The 
                                organization shall provide for 
                                reconsideration of an initial adverse 
                                determination.
                                    ``(II) Expedited determinations in 
                                urgent cases.--The organization shall 
                                have an expedited process for 
                                determinations and reconsiderations in 
                                cases in which delayed treatment could 
                                seriously jeopardize the life or health 
                                of the individual, or the individual's 
                                ability to regain maximum function.
                                    ``(III) Time limits.--The Secretary 
                                may establish time limitations for 
                                determinations and reconsiderations 
                                under this clause.
                            ``(ii) Review by external contractor.--The 
                        Secretary shall establish procedures for the 
                        independent review of reconsiderations under 
                        clause (i) that are adverse to the individual.
                            ``(iii) Appeal to secretary.--An individual 
                        dissatisfied with a determination under clause 
                        (ii) concerning the individual's coverage under 
                        a plan under this part is entitled, if the 
                        amount in controversy is $100 or more, to a 
                        hearing before the Secretary to the same extent 
                        as is provided in section 205(b), and in such a 
                        hearing the Secretary shall make the MediHealth 
                        plan sponsor a party. If the amount in 
                        controversy is $1,000 or more, the individual 
                        or sponsor, upon notifying the other party, 
                        shall be entitled to judicial review of the 
                        Secretary's final decision as provided in 
                        section 205(g), and both the individual and the 
                        sponsor shall be entitled to be parties to that 
                        judicial review. In applying sections 205(b) 
                        and 205(g) as provided in this paragraph, and 
                        in applying section 205(l) thereto, any 
                        reference to the Commissioner of Social 
                        Security or the Social Security Administration 
                        shall be considered a reference to the 
                        Secretary or the Department of Health and Human 
                        Services, respectively.
            ``(3) Supplemental coverage if plan terminates the 
        contract.--Each MediHealth plan sponsor that provides items and 
        services pursuant to a contract under this part shall provide 
        assurances to the Secretary that in the event the contract is 
        terminated, the sponsor shall provide or arrange for 
        supplemental coverage of benefits under this title related to a 
        preexisting condition with respect to any exclusion period, to 
        all individuals enrolled with the entity who receive benefits 
        under this title, for the lesser of 6 months or the duration of 
        such period.
    ``(f) Prompt Payment.--
            ``(1) In general.--Each MediHealth plan sponsor shall 
        provide prompt payment (consistent with the provisions of 
        sections 1816(c)(2) and 1842(c)(2)) of claims submitted for 
        services and supplies furnished to individuals pursuant to such 
contract, if the services or supplies are not furnished under a 
contract between the plan and the provider or supplier.
            ``(2) Direct payment.--In the case of a MediHealth plan 
        sponsor which the Secretary determines, after notice and 
        opportunity for a hearing, has failed to make payments of 
        amounts in compliance with paragraph (1), the Secretary may 
        provide for direct payment of the amounts owed to providers and 
        suppliers for such covered services furnished to individuals 
        enrolled under this part under the contract. If the Secretary 
        provides for such direct payments, the Secretary shall provide 
        for an appropriate reduction in the amount of payments 
        otherwise made to the plan sponsor under this part to reflect 
        the amount of the Secretary's payments (and costs incurred by 
        the Secretary in making such payments).
    ``(g) Minimum Private Enrollment.--The MediHealth plan sponsor 
shall have at least 5,000 enrollees that are not eligible for benefits 
under this title or under title XIX, except that the Secretary may 
waive such requirement--
            ``(1) if the MediHealth plan sponsor primarily serves 
        enrollees residing outside urban areas; or
            ``(2) in situations and under conditions that the Secretary 
        determines are in the best interest of individuals entitled to 
        benefits under this title.

``SEC. 1895K. MEDIHEALTH PLANS IN RURAL AREAS.

    ``(a) In General.--The Secretary may waive or modify any 
requirement of a MediHealth plan under this part for a MediHealth plan 
that is offered in a rural area (as defined in section 1886(d)(2)(D)) 
to--
            ``(1) reflect any differences between the provision of 
        health care items and services in rural and nonrural areas; and
            ``(2) encourage organizations to offer MediHealth plans in 
        rural areas.
    ``(b) Quality.--If the Secretary waives or modifies any requirement 
of a MediHealth plan pursuant to subsection (a), the Secretary shall 
ensure that such waiver or modification does not undermine the quality 
of the health care items and services provided under such plan.

 ``Subpart 4--Office of Competition; Determination of Medicare Payment 
                                Amounts

``SEC. 1895M. OFFICE OF COMPETITION.

    ``(a) Establishment.--There is established within the Department of 
Health and Human Services an office to be known as the `Office of 
Competition'.
    ``(b) Director.--The Secretary shall appoint the Director of the 
Office of Competition.
    ``(c) Duties.--
            ``(1) In general.--The Director shall administer this part 
        and section 1876.
            ``(2) Transfer authority.--The Secretary shall transfer 
        such personnel, administrative support systems, assets, 
        records, funds, and other resources in the Health Care 
        Financing Administration to the Office of Competition as are 
        used in the administration of section 1876 and as may be 
        required to implement the provisions of this part promptly and 
        efficiently.
    ``(d) Use of Non-Federal Entities.--The Secretary shall, to the 
maximum extent feasible, enter into contracts with appropriate non-
Federal entities to carry out activities under this part.

``SEC. 1895N. STANDARDIZED MEDICARE PAYMENT AMOUNTS.

    ``(a) Submission and Charging of Premiums.--
            ``(1) In general.--Not later than June 1 of each calendar 
        year, each MediHealth plan sponsor shall file with the 
        Secretary, in a form and manner and at a time specified by the 
        Secretary, a bid which contains the amount of the monthly 
        premium for coverage under each MediHealth plan it offers under 
        this part in each medicare payment area in which the plan is 
        being offered.
            ``(2) Uniform premium.--The premiums charged by a 
        MediHealth plan sponsor under this part may not vary among 
        individuals who reside in the same medicare payment area.
            ``(3) Terms and conditions of imposing premiums.--Each 
        MediHealth plan sponsor shall permit the payment of premiums on 
        a monthly basis.
    ``(b) Announcement of Standardized Medicare Payment Amounts.--
            ``(1) Authority to negotiate.--After bids are submitted 
        under subsection (a), the Secretary may negotiate with 
        MediHealth plan sponsors in order to modify such bids if the 
        Secretary determined that the bids do not provide enough 
        revenues to ensure the plan's actuarial soundness, are too high 
        relative to the medicare payment area, foster adverse 
selection, or otherwise require renegotiation under this paragraph.
            ``(2) In general.--Not later than July 31 of each calendar 
        year (beginning with 2002), the Secretary shall determine, and 
        announce in a manner intended to provide notice to interested 
        parties, a standardized medicare payment amount determined in 
        accordance with this section for the following calendar year 
        for each medicare payment area.
    ``(c) Calculation of Standardized Medicare Payment Amounts.--
            ``(1) In general.--The standardized medicare payment amount 
        for a calendar year after 2002 for any medicare payment area 
        shall be equal to the maximum premium determined for such area 
        under paragraph (2).
            ``(2) Maximum premium.--The maximum premium for any 
        medicare payment area shall be equal to the amount determined 
        under paragraph (3) for the payment area, but in no case shall 
        such amount be greater than the sum of--
                  ``(A) the average per capita amount, as determined by 
                the Secretary as appropriate for the population 
                eligible to enroll in MediHealth plans in such payment 
                area, for such calendar year that the Secretary would 
                have expended for an individual in such payment area 
                enrolled under the medicare fee-for-service program 
                under parts A and B, plus
                    ``(B) the amount equal to the actuarial value of 
                deductibles, coinsurance, and copayments charged an 
                individual for services provided under the medicare 
                fee-for-service program (as determined by the 
                Secretary).
            ``(3) Determination of amount.--
                    ``(A) In general.--The Secretary shall determine 
                for each medicare payment area for each calendar year 
                an amount equal to the average of the bids (weighted 
                based on capacity) submitted to the Secretary under 
                subsection (a)(1) for that payment area.
                    ``(B) Disregard certain plans.--In determining the 
                amount under subparagraph (A), the Secretary may 
                disregard any plan that the Director determines would 
                unreasonably distort the amount determined under such 
                subparagraph.
    ``(d) Adjustments for Payments to Plan Sponsors.--
            ``(1) In general.--For purposes of determining the amount 
        of payment under section 1895O to a MediHealth plan sponsor 
        with respect to any MediHealth eligible individual enrolled in 
        a MediHealth plan of the sponsor, the standardized medicare 
        payment amount for the medicare payment area and the premium 
        charged by the plan sponsor shall be adjusted with respect to 
        such individual for such risk factors as age, disability 
        status, gender, institutional status, health status, and such 
        other factors as the Secretary determines to be appropriate, so 
        as to ensure actuarial equivalence. The Secretary may add to, 
        modify, or substitute for such classes, if such changes will 
        improve the determination of actuarial equivalence.
            ``(2) Recommendations.--
                    ``(A) In general.--In addition to any other duties 
                required by law, the Physician Payment Review 
                Commission and the Prospective Payment Assessment 
                Commission shall each develop recommendations on--
                            ``(i) the risk factors that the Secretary 
                        should use in adjusting the standardized 
                        medicare payment amount and premium under 
                        paragraph (1), and
                            ``(ii) the methodology that the Secretary 
                        should use in determining the risk factors to 
                        be used in adjusting the standardized medicare 
                        payment amount and premium under paragraph (1).
                    ``(B) Time.--The recommendations described in 
                subparagraph (A) shall be developed not later than 
                January 1, 1999.
                    ``(C) Annual report.--The Physician Payment Review 
                Commission and the Prospective Payment Assessment 
                Commission shall include the recommendations described 
                in subparagraph (A) in their respective annual reports 
                to Congress.

``SEC. 1895O. PAYMENTS TO PLAN SPONSORS.

    ``(a) Monthly Payments.--
            ``(1) In general.--Subject to subsection (d), for each 
        individual enrolled with a plan under this part, the Secretary 
        shall make monthly payments in advance to the MediHealth plan 
        sponsor of the MediHealth plan with which the individual is 
        enrolled in an amount equal to \1/12\ of the amount determined 
        under subsection (b).
            ``(2) Retroactive adjustments.--The amount of payment under 
        this paragraph may be retroactively adjusted to take into 
account any difference between the actual number of individuals 
enrolled in the plan under this section and the number of such 
individuals estimated to be so enrolled in determining the amount of 
the advance payment.
    ``(b) Amount of Payment to MediHealth Plans.--The amount determined 
under this subsection with respect to any individual shall be equal to 
the sum of--
            ``(1) the lesser of--
                    ``(A) the standardized medicare payment amount for 
                the medicare payment area, as adjusted for such 
                individual under section 1895N(d), or
                    ``(B) the premium charged by the plan for such 
                individual, as adjusted for such individual under 
                section 1895N(d), minus
            ``(2) the amount such individual paid to the plan pursuant 
        to section 1895D(a)(1) (relating to 10 percent of the premium).
    ``(c) Payments From Trust Funds.--The payment to a MediHealth plan 
sponsor or to a MediHealth account under this section for a medicare-
eligible individual shall be made from the Federal Hospital Insurance 
Trust Fund and the Federal Supplementary Medical Insurance Trust Fund 
in such proportion as the Secretary determines reflects the relative 
weight that benefits under parts A and B are representative of the 
actuarial value of the total benefits under this part.
    ``(d) Limitation on Amounts an Out-Of-Plan Physician or Other 
Entity May Collect.--
            ``(1) In general.--A physician or other entity (other than 
        a provider of services) that does not have a contract 
        establishing payment amounts for services furnished to an 
        individual enrolled under this part with an eligible 
        organization shall accept as payment in full for services that 
        are furnished to such an individual the amounts that the 
        physician or other entity could collect if the individual were 
        not so enrolled. Any penalty or other provision of law that 
        applies to such a payment with respect to an individual 
        entitled to benefits under this title (but not enrolled with an 
        eligible organization under this part) also applies with 
        respect to an individual so enrolled.
            ``(2) Cross reference.--For similar requirements applicable 
        to providers of services, see section 1866(a)(1)(O).

  ``Subpart 5--Contractual Authority; Temporary Licensing; Regulations

``SEC. 1895P. GENERAL PERMISSION TO CONTRACT.

    ``The Secretary shall enter into a contract with any MediHealth 
plan sponsor in a medicare payment area if the requirements of this 
part are met with respect to the MediHealth plan and the plan sponsor.

``SEC. 1895Q. RENEWAL AND TERMINATION OF CONTRACT.

    ``(a) In General.--Except as provided in subsection (b), each 
contract under this part may be made automatically renewable from term 
to term in the absence of notice by either party of intention to 
terminate at the end of the current term.
    ``(b) Termination for Cause.--
            ``(1) In general.--In accordance with procedures 
        established under paragraph (2), the Secretary may terminate 
        any contact with a MediHealth plan sponsor at any time or may 
        impose the intermediate sanctions described in paragraph (2) or 
        (3) or subsection (f) (whichever is applicable) on the plan 
        sponsor, if the Secretary finds that the plan sponsor--
                    ``(A) has failed substantially to carry out the 
                contract,
                    ``(B) is carrying out the contract in a manner 
                substantially inconsistent with the efficient and 
                effective administration of this part, or
                    ``(C) no longer substantially meets the applicable 
                conditions of this part.
            ``(2) Procedures.--The Secretary may terminate a contract 
        with a MediHealth plan sponsor under this part in accordance 
        with formal investigation and compliance procedures established 
        by the Secretary under which--
                    ``(A) the Secretary first provides the MediHealth 
                plan sponsor with the reasonable opportunity to develop 
                and implement a corrective action plan to correct the 
                deficiencies that were the basis of the Secretary's 
                determination under paragraph (1) and the MediHealth 
                plan sponsor fails to develop or implement such a 
                corrective action plan, and
                    ``(B) the Secretary provides the plan sponsor with 
                reasonable notice and opportunity for hearing 
                (including the right to appeal an initial decision) 
                before imposing any sanction or terminating the 
                contract.
    ``(c) Terms of Contract.--Each contract under this part shall--
            ``(1) provide that the Secretary, or any person or 
        organization designated by the Secretary--
                    ``(A) shall have the right to inspect or otherwise 
                evaluate--
                            ``(i) the quality, appropriateness, and 
                        timeliness of services performed under the 
                        contract, and
                            ``(ii) the facilities of the plan sponsor 
                        when there is reasonable evidence of some need 
                        for such inspection,
                    ``(B) shall have the right to audit and inspect any 
                books and records of the plan sponsor that pertain to 
                the ability of the plan sponsor to bear the risk of 
                potential financial losses,
            ``(2) require the plan sponsor with a contract to provide 
        (and pay for) written notice in advance of the contract's 
        termination, as well as a description of alternatives for 
        obtaining benefits under this title, to each individual 
        enrolled under this part with the plan sponsor,
            ``(3) except as provided by the Secretary, require the plan 
        sponsor to comply with requirements similar to the requirements 
        of subsections (a) and (c) of section 1318 of the Public Health 
        Service Act (relating to disclosure of certain financial 
        information) and section 1301(c)(8) of such Act (relating to 
        liability arrangements to protect members),
            ``(4) require the plan sponsor to provide and supply 
        information (described in section 1866(b)(2)(C)(ii)) in the 
        manner such information is required to be provided or supplied 
        under that section,
            ``(5) require the plan sponsor to notify the Secretary of 
        loans and other special financial arrangements which are made 
        between the plan sponsor and subcontractors, affiliates, and 
        related parties, and
            ``(6) contain such other terms and conditions not 
        inconsistent with this part (including requiring the plan 
        sponsor to provide the Secretary with such information) as the 
        Secretary may find necessary and appropriate.
    ``(d) 5-Year Lockout.--The Secretary may not enter into a contract 
under this part with a MediHealth plan sponsor if a previous contract 
with that plan sponsor under this part was terminated at the request of 
the plan sponsor within the preceding 5-year period, except in 
circumstances which warrant special consideration, as determined by the 
Secretary.
    ``(e) Application of Other Federal Laws.--The authority vested in 
the Secretary by this part may be performed without regard to such 
provisions of law or regulations relating to the making, performance, 
amendment, or modification of contracts of the United States as the 
Secretary may determine to be inconsistent with the furtherance of the 
purpose of this title.
    ``(f) Remedies for Failure To Comply.--
            ``(1) Failure of plan sponsor to comply with contract.--If 
        the Secretary determines that a MediHealth plan sponsor--
                    ``(A) fails substantially to provide medically 
                necessary items and services that are required (under 
                law or under the contract) to be provided to an 
                individual covered under the contract, and the failure 
                has adversely affected (or has substantial likelihood 
                of adversely affecting) the individual,
                    ``(B) imposes cost-sharing on individuals enrolled 
                under this part in excess of the cost-sharing 
                permitted,
                    ``(C) acts to expel or to refuse to reenroll an 
                individual in violation of the provisions of this part,
                    ``(D) engages in any practice that would reasonably 
                be expected to have the effect of denying or 
                discouraging enrollment (except as permitted by this 
                part) by eligible individuals with the plan whose 
                medical condition or history indicates a need for 
                substantial future medical services,
                    ``(E) misrepresents or falsifies information that 
                is furnished--
                            ``(i) to the Secretary under this section, 
                        or
                            ``(ii) to an individual or to any other 
                        entity under this section,
                    ``(F) fails to comply with the requirements of 
                section 1895J(f), or
                    ``(G) employs or contracts with any individual or 
                entity that is excluded from participation under this 
                title under section 1128 or 1128A for the provision of 
                health care, utilization review, medical social work, 
                or administrative services or employs or contracts with 
                any entity for the provision (directly or indirectly) 
                through such an excluded individual or entity of such 
                services,
        the Secretary may provide, in addition to any other remedies 
        authorized by law, for any of the remedies described in 
        paragraph (2).
            ``(2) Remedies.--The remedies described in this paragraph 
        are--
                    ``(A) civil money penalties of not more than 
                $25,000 for each determination under paragraph (1) or, 
                with respect to a determination under subparagraph (D) 
                or (E)(i) of such paragraph, of not more than $100,000 
                for each such determination, plus, with respect to a 
                determination under paragraph (1)(B), double the excess 
                amount charged in violation of such subparagraph (and 
                the excess amount charged shall be deducted from the 
                penalty and returned to the individual concerned), and 
                plus, with respect to a determination under paragraph 
                (1)(D), $15,000 for each individual not enrolled as a 
                result of the practice involved,
                    ``(B) suspension of enrollment of individuals under 
                this section after the date the Secretary notifies the 
                plan sponsor of a determination under paragraph (1) and 
                until the Secretary is satisfied that the basis for 
                such determination has been corrected and is not likely 
                to recur, or
                    ``(C) suspension of payment to the plan sponsor 
                under this section for individuals enrolled after the 
                date the Secretary notifies the plan sponsor of a 
                determination under paragraph (1) and until the 
                Secretary is satisfied that the basis for such 
                determination has been corrected and is not likely to 
                recur.
            ``(3) Intermediate sanctions.--In the case of a MediHealth 
        plan sponsor for which the Secretary makes a determination 
        under subsection (b)(1) the basis of which is not described in 
        subparagraph (A) thereof, the Secretary may apply the following 
        intermediate sanctions:
                    ``(A) Civil money penalties of not more than 
                $25,000 for each determination under subsection (b)(1) 
                if the deficiency that is the basis of the 
                determination has directly adversely affected (or has 
                the substantial likelihood of adversely affecting) an 
                individual covered under the plan's contract.
                    ``(B) Civil money penalties of not more than 
                $10,000 for each week beginning after the initiation of 
                procedures by the Secretary under subsection (b)(2) 
                during which the deficiency that is the basis of a 
                determination under subsection (b)(1) exists.
                    ``(C) Suspension of enrollment of individuals under 
                this section after the date the Secretary notifies the 
                plan sponsor of a determination under subsection (b)(1) 
                and until the Secretary is satisfied that the 
                deficiency that is the basis for the determination has 
                been corrected and is not likely to recur.
            ``(4) Proceedings.--The provisions of section 1128A (other 
        than subsections (a), (b), and (m)) shall apply to a civil 
        money penalty under paragraph (2)(A) or (3)(A) in the same 
        manner as they apply to a civil money penalty or proceeding 
        under section 1128A(a).

``SEC. 1895R. TEMPORARY LICENSING PROCESS FOR COORDINATED CARE PLANS.

    ``(a) Federal Action on Licensing.--
            ``(1) In general.--If--
                    ``(A) a State fails to substantially complete 
                action on a licensing application of a coordinated care 
                plan sponsor within 120 days of receipt of the 
                completed application, or
                    ``(B) a State denies a licensing application and 
                the Secretary determines that the State's licensing 
                standards or review process create an unreasonable 
                barrier to market entry,
        the Secretary shall evaluate such application pursuant to the 
        procedures established under subsection (b).
            ``(2) Unreasonable barriers to market entry.--A State's 
        licensing standards and review process shall not be treated as 
        unreasonable barriers to market entry under paragraph (1) if 
        they--
                    ``(A) are applied on a nondiscriminatory basis to 
                all coordinated care MediHealth plan applications, and
                    ``(B) are not directly in conflict, or inconsistent 
                with, the Federal standards.
    ``(b) Federal Licensing Procedures.--
            ``(1) In general.--The Secretary shall establish a process 
        for the licensing of a coordinated care plan and its sponsor as 
        meeting the requirements of this part in cases described in 
        subsection (a)(1).
            ``(2) Requirements.--Such process shall--
                    ``(A) set forth the standards for the licensing,
                    ``(B) provide that final action will be taken on an 
                application for licensing within 120 business days of 
                receipt of the completed application,
                    ``(C) provide that State law and regulations shall 
                apply to the extent they have not been found to be an 
                unreasonable barrier to market entry under subsection 
                (a)(1)(B), and
                    ``(D) require any person receiving a license to 
                provide the Secretary with all reasonable information 
                in order to ensure compliance with the licensing.
            ``(3) Effect of licensing.--
                    ``(A) In general.--A license under this section 
                shall be issued for not more than 36 months and may not 
                be renewed.
                    ``(B) Coordination with state.--A person receiving 
                a license under this section shall continue to seek 
                State licensure under subsection (a) during the period 
                the license is in effect.
                    ``(C) Sunset.--No license shall be issued under 
                this section after December 31, 2006, and no license 
                under this section shall remain in effect after 
                December 31, 2007.
    ``(c) Report.--Not later than December 31, 2004, the Secretary 
shall report to Congress on the temporary Federal licensing system 
under subsection (b), including an analysis of State efforts to adopt 
licensing standards and review processes that take into account the 
fact that coordinated care plan sponsors provide services directly to 
enrollees through affiliated providers.
    ``(d) Coordinated Care Plan.--In this section, the term 
`coordinated care plan' means a plan described in section 
1895A(b)(1)(B)(i).
    ``(e) Transition Rule for Certain Risk Contractors.--A MediHealth 
plan sponsor that is an eligible organization (as defined in section 
1876(b)) and that--
            ``(1) has a risk-sharing contract in effect under section 
        1876 as of the date of enactment of this part, or
            ``(2) has an application for such a contract filed before 
        such date and the contract is entered into before July 1, 2002,
shall be treated as meeting the Federal standards in effect under this 
section for any contract year beginning before January 1, 2006.

``SEC. 1895S. REGULATIONS.

    ``(a) In General.--The Secretary shall establish such regulations 
as may be necessary to carry out the purposes of this part, including 
regulations setting forth the requirements to meet all quality, access, 
and solvency standards specified in sections 1895I and 1895J.
    ``(b) Use of Interim, Final Regulations.--In order to carry out the 
provisions of this part in a timely manner, the Secretary may, within 
120 days after the date of enactment of this part, promulgate 
regulations described in subsection (a) that take effect on an interim 
basis, after notice and opportunity for public comment.''.
    (b) Conforming Amendments.--
            (1) In general.--Not later than 90 days after the date of 
        enactment of this Act, the Secretary of Health and Human 
        Services shall submit to the appropriate committees of Congress 
        a legislative proposal providing for such technical and 
        conforming amendments in the law as are required by the 
        provisions of this chapter.
            (2) Other amendments.--(A) Section 1866(a)(1)(O) (42 U.S.C. 
        1395cc(a)(1)(O)) is amended--
                    (i) in the matter preceding clause (i), by 
                inserting ``or MediHealth plan under part D'' after 
                ``eligible organization'', and
                    (ii) in clause (i), by inserting ``or under a 
                contract under part D,'' after ``1972,''.
            (B) Section 1882(g)(1) (42 U.S.C. 1395ww(g)(1)) is amended 
        in the first sentence by inserting ``, or under a MediHealth 
        plan under part D'' before the end period.
            (C) Section 1839 (42 U.S.C. 1395r) is amended by adding at 
        the end the following:
    ``(h) An individual enrolled in a MediHealth plan under part D 
shall not be required to pay the premium (determined under this 
section) under this part for so long as the individual is so 
enrolled.''.
    (c) Effective Date.--The amendments made by this section shall 
apply with respect to contracts effective on and after January 1, 2003.

SEC. 102. TREATMENT OF 1876 ORGANIZATIONS.

    Section 1876 (42 U.S.C. 1395mm) is amended by adding at the end the 
following new subsection:
    ``(k)(1) Except as provided in paragraph (2), this section shall 
not apply to risk-sharing contracts effective for contract years 
beginning on or after January 1, 2003.
    ``(2) An individual who is enrolled in part B only and is enrolled 
in an eligible organization with a risk-sharing contract under this 
section on December 31, 2002, may continue enrollment in such 
organization. Not later than July 1, 2002, the Secretary shall issue 
regulations relating to such individuals and such organizations.''.

SEC. 103. MEDIHEALTH DEMONSTRATION PROJECTS.

    (a) Demonstration Projects.--
            (1) In general.--The Secretary shall conduct demonstration 
        projects in applicable areas, as defined in paragraph (2), for 
        the purpose of conducting a demonstration project as described 
        in paragraph (3). Such projects shall provide for payments 
        under the projects to begin on January 1, 1999.
            (2) Applicable area defined.--In paragraph (1), the term 
        ``applicable area'' means, as determined by the Secretary of 
        Health and Human Services--
                    (A) 10 urban areas with respect to which less than 
                25 percent of medicare beneficiaries are enrolled with 
                an eligible organization under section 1876 of the 
                Social Security Act (42 U.S.C. 1395mm); and
                    (B) 3 rural areas not described in subparagraph 
                (A).
            (3) Demonstration project.--A demonstration project 
        described in this paragraph is a demonstration project that 
        implements the amendments made to title XVIII of the Social 
        Security Act (42 U.S.C. 1395 et seq.) by this Act, as if such 
        amendments had become effective on the date of enactment of 
        this Act.
    (b) Report to Congress.--
            (1) In general.--Not later than December 31, 2000, the 
        Secretary shall submit to the President a report regarding the 
        demonstration projects conducted under this section.
            (2) Contents of report.--The report described in paragraph 
        (1) shall include the following:
                    (A) A description of the demonstration projects 
                conducted under this section.
                    (B) An evaluation of the effectiveness of the 
                demonstration projects conducted under this section and 
                any legislative recommendations determined appropriate 
                by the Secretary.
                    (C) Any other information regarding the 
                demonstration projects conducted under this section 
                that the Secretary determines to be appropriate.
                    (D) An evaluation as to whether the method of 
                payment under section 1895N of the Social Security Act 
                (as added by section 101) which was used in the 
                demonstration projects for payment to MediHealth plans 
                should be extended to the entire medicare population 
                and if such evaluation determines that such method 
                should not be extended, legislative recommendations to 
                modify such method so that it may be applied to the 
                entire medicare population.
            (3) Submission to congress.--The President shall submit the 
        report under paragraph (2) to the Congress and if the President 
        determines appropriate, an implementing bill with respect to 
        any legislative recommendations under paragraph (2) (B) or (D).
            (4) Expedited congressional consideration of legislation.--
                    (A) In general.--An implementing bill submitted 
                under paragraph (3) shall--
                            (i) not later than 3 days after it is 
                        submitted, be introduced (by request) in the 
                        House of Representatives by the Majority Leader 
                        of the House and shall be introduced (by 
                        request) in the Senate by the Majority Leader 
                        of the Senate; and
                            (ii) be given expedited consideration under 
                        the same provisions and in the same way, 
                        subject to subparagraph (B), as a joint 
                        resolution under section 2908 of the Defense 
                        Base Closure and Realignment Act of 1990 (10 
                        U.S.C. 2678 note).
                    (B) Special rules.--For purposes of applying 
                subparagraph (A) with respect to such provisions, the 
                following rules shall apply:
                            (i) Section 2908(a) of the Defense Base 
                        Closure and Realignment Act of 1990 (10 U.S.C. 
                        2678 note) shall not apply.
                            (ii) Any reference to the resolution 
                        described in subparagraph (A) shall be deemed 
                        to be a reference to the bill submitted under 
                        paragraph (3).
                            (iii) Any reference to the Committee on 
                        National Security of the House of 
                        Representatives shall be deemed to be a 
                        reference to the Committee on Ways and Means of 
                        the House of Representatives and any reference 
                        to the Committee on Armed Services of the 
                        Senate shall be deemed to be a reference to the 
                        Committee on Finance of the Senate.
                            (iv) Any reference to the date on which the 
                        President transmits a report shall be deemed to 
                        be a reference to the date on which the 
                        implementing bill is submitted under paragraph 
                        (3).
                            (v) Notwithstanding section 2908(d)(2) of 
                        the Act--
                                    (I) debate on the bill in the House 
                                of Representatives, and on all 
                                debatable motions and appeals in 
                                connection with the bill, shall be 
                                limited to not more than 10 hours, 
                                divided equally between those favoring 
                                and those opposing the bill;
                                    (II) debate on the bill in the 
                                Senate, and on all debatable motions 
                                and appeals in connection with the 
                                bill, shall be limited to not more than 
                                10 hours, divided equally between those 
                                favoring and those opposing the bill; 
                                and
                                    (III) debate in the Senate on any 
                                single debatable motion and appeal in 
                                connection with the bill shall be 
                                limited to not more than 1 hour, 
                                divided equally between the proponent 
                                of the motion and the manager of the 
                                bill, except that if the manager of the 
                                bill is in favor of the motion or 
                                appeal, the time in opposition to the 
                                motion or appeal shall be controlled by 
                                the Minority Leader or the Leader's 
                                designee, and the Majority and Minority 
                                Leader may each allot additional time 
                                from time under such Leader's control 
                                to any Senator during the consideration 
                                of any debatable motion or appeal.
    (c) Waiver Authority.--The Secretary shall waive compliance with 
the requirements of titles XI, XVIII, and XIX of the Social Security 
Act (42 U.S.C. 1301 et seq., 1395 et seq., 1396 et seq.) to such extent 
and for such period as the Secretary determines is necessary to conduct 
demonstration projects under this section.
    (d) Duration.--A demonstration project under this section shall be 
conducted for a period to be determined by the Secretary of Health and 
Human Services except that the demonstration project shall not be 
conducted after December 31, 2002. The Secretary may terminate a 
project if the Secretary determines that the consortium conducting the 
project is not in substantial compliance with the terms of the 
application approved by the Secretary.
    (e) Funding.--The Secretary shall provide for the transfer from the 
Federal Hospital Insurance Trust Fund and the Federal Supplementary 
Insurance Trust Fund under title XVIII of the Social Security Act (42 
U.S.C. 1395i, 1395t), in such proportions as the Secretary determines 
to be appropriate, of such funds as are necessary for the costs of 
carrying out the demonstration projects under this section.

            TITLE II--INCREASE IN FLEXIBILITY UNDER MEDICARE

SEC. 201. COMPETITIVE BIDDING.

    (a) General Rule.--Part B of title XVIII (42 U.S.C. 1395j et seq.) 
is amended by inserting after section 1846 the following:

``SEC. 1847. COMPETITIVE ACQUISITION OF ITEMS AND SERVICES.

    ``(a) Establishment of Bidding Areas.--
            ``(1) In general.--The Secretary shall establish 
        competitive acquisition areas for contract award purposes for 
        the furnishing under this part of the items and services 
        described in subsection (c). The Secretary may establish 
        different competitive acquisition areas under this subsection 
        for different classes of items and services.
            ``(2) Criteria for establishment.--The competitive 
        acquisition areas established under paragraph (1) shall be 
        chosen based on the availability and accessibility of entities 
        able to furnish items and services, and the probable savings to 
        be realized by the medicare program established under this 
        title from the use of competitive bidding in the furnishing of 
        items and services in the area.
    ``(b) Awarding of Contracts in Areas.--
            ``(1) In general.--The Secretary shall conduct a 
        competition among individuals and entities supplying items and 
        services described in subsection (c) for each competitive 
        acquisition area established under subsection (a) for each 
        class of items and services.
            ``(2) Conditions for awarding contract.--The Secretary may 
        not award a contract to any entity under the competition 
        conducted pursuant to paragraph (1) to furnish an item or 
        service unless the Secretary finds that the entity meets 
        quality standards specified by the Secretary, and that the 
        total amounts to be paid under the contract are expected to be 
        less than the total amounts that would otherwise be paid.
            ``(3) Contents of contract.--A contract entered into with 
        an individual or an entity under the competition conducted 
        pursuant to paragraph (1) is subject to terms and conditions 
that the Secretary may specify.
            ``(4) Limit on number of contractors.--The Secretary may 
        limit the number of contractors in a competitive acquisition 
        area to the number needed to meet projected demand for items 
        and services covered under the contracts.
    ``(c) Services Described.--The items and services to which this 
section applies are all items and services covered under this part 
(except for physician services as defined in section 1861(r)) that the 
Secretary may specify.''.
    (b) Items and Services To Be Furnished Only Through Competitive 
Acquisition.--Section 1862(a) (42 U.S.C. 1395y(a)) is amended--
            (1) by striking ``or'' at the end of paragraph (15),
            (2) by striking the period at the end of paragraph (16) and 
        inserting ``; or'', and
            (3) by inserting after paragraph (16) the following:
            ``(17) where the expenses are for an item or service 
        furnished in a competitive acquisition area (as established by 
        the Secretary under section 1847(a)) by an entity other than an 
        entity with which the Secretary has entered into a contract 
        under section 1847(b) for the furnishing of such an item or 
        service in that area, unless the Secretary finds that the 
        expenses were incurred in a case of urgent need, or in other 
        circumstances specified by the Secretary.''.
    (c) Effective Date.--The amendments made by subsections (a) and (b) 
shall apply to items and services furnished on and after October 1, 
1997.

SEC. 202. FLEXIBLE PURCHASING.

    Title XVIII (42 U.S.C. 1395 et seq.) is amended by adding at the 
end the following:

                         ``flexible purchasing

    ``Sec. 1894. (a) In General.--The Secretary may enter into 
contracts with providers of services, physicians, and other entities 
and individuals that furnish items or services under the medicare 
program established under this title under which the Secretary may 
utilize--
            ``(1) alternative claims processing, administrative, and 
        related procedures; and
            ``(2) reduced payment rates or alternative payment 
        methodologies.
    ``(b) Savings to Beneficiaries.--Contracts under this section may 
provide for reductions in payments required from individuals entitled 
to benefits under this title.
    ``(c) Requirements Under a Contract Under This Section.--The 
following requirements shall apply to any contract entered into 
pursuant to this section:
            ``(1) The provisions of subtitle B of title XI, other 
        provisions concerned with quality of care, and conditions of 
        participation shall apply unchanged.
            ``(2) The Secretary shall certify that the amounts to be 
        paid under such a contract are less than the amounts that 
        otherwise would be paid under this title.
            ``(3) Individuals entitled to benefits under this title may 
        not be required to pay more for services provided pursuant to 
        such a contract than the amounts that such individuals would 
        otherwise be required to pay under this title.
            ``(4) The contract shall be for a fixed term (but may be 
        renewed).
            ``(5) The terms of the contract shall be subject to 
        periodic review by the Secretary.
    ``(d) Waiver of Competition Requirements.--The Secretary may waive 
the applicability of any otherwise applicable competitive procedures 
(as defined in section 4(5) of the Office of Federal Procurement Policy 
Act (41 U.S.C. 403(5)) to any contract entered into under this 
section.''.

SEC. 203. REPORT ON USE OF NEW AUTHORITIES.

    (a) In General.--Not later than 2 years after the date of enactment 
of this Act, and biennially thereafter for 6 years, the Secretary of 
Health and Human Services shall report to Congress on the 
implementation and results of the amendments made to title XVIII of the 
Social Security Act (42 U.S.C. 1395 et seq.) by this title.
    (b) Contents of Report.--Each report described in subsection (a) 
shall contain a detailed description of the impact of such amendments 
on expenditures for, access to, and quality of items and services 
provided under the medicare program under title XVIII of the Social 
Security Act (42 U.S.C. 1395 et seq.).

                 TITLE III--QUALITY IN MEDIHEALTH PLANS

SEC. 301. DEFINITIONS.

    In this title:
            (1) Comparative report.--The term ``comparative report'' 
        means the comparative report developed under section 1895C(e) 
        of the Social Security Act (as added by section 101 of this 
        Act).
            (2) Director.--The term ``Director'' means the Director of 
        the Office of Competition within the Department of Health and 
        Human Services as established under section 1895M(a) of the 
        Social Security Act (as added by section 101 of this Act).
            (3) Medicare program.--The term ``medicare program'' means 
        the program of health care benefits provided under title XVIII 
        of the Social Security Act (42 U.S.C. 1395 et seq.).
            (4) Medihealth plan.--The term ``MediHealth plan'' has the 
        meaning given the term in section 1895A(a)(1) of the Social 
        Security Act (as added by section 101 of this Act).
            (5) Medihealth plan sponsor.--The term ``MediHealth plan 
        sponsor'' has the meaning given the term in section 1895A(a)(2) 
        of the Social Security Act (as added by section 101 of this 
        Act).

SEC. 302. QUALITY ADVISORY INSTITUTE.

    (a) Establishment.--There is established an Institute to be known 
as the ``Quality Advisory Institute'' (in this title referred to as the 
``Institute'') to make recommendations to the Director concerning 
licensing and certification criteria and comparative measurement 
methods under this title.
    (b) Membership.--
            (1) Composition.--The Institute shall be composed of 5 
        members to be appointed by the Director from among individuals 
        who have demonstrable expertise in--
                    (A) health care quality measurement;
                    (B) health plan certification criteria setting;
                    (C) the analysis of information that is useful to 
                consumers in making choices regarding health coverage 
                options, health plans, health care providers, and 
                decisions regarding health treatments; and
                    (D) the analysis of health plan operations.
            (2) Terms and vacancies.--The members of the Institute 
        shall be appointed for 5-year terms with the terms of the 
        initial members staggered as determined appropriate by the 
        Director. Vacancies shall be filled in a manner provided for by 
        the Director.
    (c) Duties.--The Institute shall--
            (1) not later than 1 year after the date on which all 
        members of the Institute are appointed under subsection (b)(2), 
        provide advice to the Director concerning the initial set of 
        criteria for the certification of MediHealth plans;
            (2) analyze the use of the criteria for the certification 
        of MediHealth plans implemented by the Director under this 
        title and recommend modifications in such criteria as needed;
            (3) analyze the use of the comparative measurements 
        implemented by the Director in developing comparative reports 
        and recommend modifications in such measurements as needed;
            (4) perform, or enter into contracts with other entities 
        for the performance of, an analysis of access to services and 
        clinical outcomes based on patient encounter data;
            (5) enter into contracts with other entities for the 
        development of such criteria and measurements and to otherwise 
        carry out its duties under this section; and
            (6) carry out any other activities determined appropriate 
        by the Institute to carry out its duties under this section.
The analysis described in paragraph (4) should focus on conditions and 
procedures of significance to beneficiaries under the medicare program, 
as determined by the Institute, and should be designed, and the results 
summarized, in a manner that facilitates comparisons across health 
plans.
    (d) Compensation of Members.--Section 5315 of title 5, United 
States Code, is amended by adding at the end the following:
            ``Member, Quality Advisory Institute''.
    (e) Conflict of Interest.--No member of the Institute shall engage 
in any other business, vocation, or employment than that of serving as 
a member of the Institute, nor shall any such member participate, 
directly or indirectly, in any operations or transactions of a 
character subject to regulation by the Institute pursuant to this 
title.
    (f) Staff.--The Institute may appoint and fix the compensation of 
such officers and other experts and employees as may be necessary for 
carrying out the functions of the Institute under this title and shall 
fix the salaries of such officers, experts, and employees in accordance 
with chapter 51 and subchapter III of chapter 53 of title 5, United 
States Code.
    (g) Detail of Government Employees.--Any Federal Government 
employee may be detailed to the Institute without reimbursement (other 
than the regular compensation of the employee), and such detail shall 
be without interruption or loss of civil service status or privilege.
    (h) Contracting Authority.--Notwithstanding any other provision of 
law, the Institute may enter directly into contracts with entities as 
the Institute determines necessary to carry out the functions of the 
Institute under this title.
    (i) Procurement of Temporary and Intermittent Services.--The 
members of the Institute may procure temporary and intermittent 
services under section 3109(b) of title 5, United States Code, at rates 
for individuals which do not exceed the daily equivalent of the annual 
rate of basic pay prescribed for level V of the Executive Schedule 
under section 5316 of such title.
    (j) Leasing Authority.--Notwithstanding any other provision of law, 
the Institute may enter directly into leases for real property for 
office, meeting, storage, and such other space as may be necessary to 
carry out the functions of the Institute under this title, and shall be 
exempt from any General Services Administration space management 
regulations or directives.
    (k) Acceptance of Payments.--
            (1) In general.--Notwithstanding any other provision of 
        law, in accordance with regulations which the Institute shall 
        prescribe to prevent conflicts of interest, the Institute may 
        accept payment and reimbursement, in cash or in kind, from non-
        Federal agencies, organizations, and individuals for travel, 
        subsistence, and other necessary expenses incurred by members 
        of the Institute in attending meetings and conferences 
        concerning the functions or activities of the Institute.
            (2) Credit of account.--Any payment or reimbursement 
        accepted shall be credited to the appropriated funds of the 
        Institute.
            (3) Amount.--The amount of travel, subsistence, and other 
        necessary expenses for members and employees paid or reimbursed 
        under this subsection may exceed per diem amounts established 
        in official travel regulations, but the Institute may include 
        in its regulations under this subsection a limitation on such 
        amounts.

SEC. 303. DUTIES OF DIRECTOR.

    (a) In General.--The Director shall--
            (1) adopt, adapt, or develop criteria in accordance with 
        sections 306 through 309 to be used in the licensing of 
        certifying entities and in the certification of MediHealth 
        plans, including any minimum criteria needed for the operation 
        of MediHealth plans during the transition period described in 
        section 306(c);
            (2) issue licenses to certifying entities that meet the 
        criteria developed under paragraph (1) for the purpose of 
        enabling such entities to certify MediHealth plans in 
        accordance with this title;
            (3) develop comparative health care measures in addition to 
        those implemented by the Director in developing comparative 
        reports in order to guide consumer choice under the medicare 
        program and to improve the delivery of quality health care 
        under such program;
            (4) develop procedures, consistent with part D of the 
        Social Security Act (as added by section 101 of this Act), for 
        the dissemination of certification and comparative quality 
        information provided to the Director;
            (5) contract with an independent entity for the conduct of 
        audits concerning certification and quality measurement and 
        require that as part of the certification process performed by 
        licensed certification entities that there include an onsite 
        evaluation, using performance-based standards, of the providers 
        of items and services under a MediHealth plan;
            (6) at least quarterly, meet jointly with the Agency for 
        Health Care Policy and Research to review innovative health 
        outcomes measures, new measurement processes, and other matters 
        determined appropriate by the Director;
            (7) at least annually, meet with the Institute concerning 
        certification criteria;
            (8) not later than January 1, 1999, and each January 1 
        thereafter, prepare and submit to MediHealth plan sponsors and 
        to Congress, a report concerning the activities of the Director 
        for the previous year;
            (9) advise the President and Congress concerning health 
        insurance and health care provided under MediHealth plans and 
        make recommendations concerning measures that may be 
        implemented to protect the health of all enrollees in 
        MediHealth plans; and
            (10) carry out other activities determined appropriate by 
        the Director.
    (b) Rule of Construction.--Nothing in this section shall be 
construed to limit the authority of the Director or the Secretary of 
Health and Human Services with respect to requirements other than those 
applied under this title with respect to MediHealth plans.

SEC. 304. COMPLIANCE.

    (a) In General.--Not later than January 1, 1999, the Director shall 
ensure that a MediHealth plan may not be offered unless it has been 
certified in accordance with this title.
    (b) Contracts or Reimbursements.--In carrying out subsection (a), 
the Director--
            (1) may not enter into a contract with a MediHealth plan 
        sponsor for the provision of a MediHealth plan unless the 
        MediHealth plan is certified in accordance with this title;
            (2) may not reimburse a MediHealth plan sponsor for items 
        and services provided under a MediHealth plan unless the 
        MediHealth plan is certified in accordance with this title; and
            (3) shall, after providing notice to the MediHealth plan 
        sponsor operating a MediHealth plan and an opportunity for such 
        MediHealth plan to be certified, and in accordance with any 
        applicable grievance and appeals procedures under section 309, 
        terminate any contract with a MediHealth plan sponsor for the 
        operation of a MediHealth plan if such MediHealth plan is not 
        certified in accordance with this title.

SEC. 305. PAYMENTS FOR VALUE.

    (a) Establishment of Program.--The Director shall establish a 
program under which payments are made to various MediHealth plans to 
reward such plans for meeting or exceeding quality targets.
    (b) Performance Measures.--In carrying out the program under 
subsection (a), the Director shall establish broad categories of 
quality targets and performance measures. Such targets and measures 
shall be designed to permit the Director to determine whether a 
MediHealth plan is being operated in a manner consistent with this 
title.
    (c) Use of Funds.--The Director shall use amounts allocated under 
section 1895M(k) of the Social Security Act (as added by subsection 
(e)) to make annual payments to those MediHealth plans that have been 
determined by the Director to meet or exceed the quality targets and 
performance measures established under subsection (b). Any amounts 
allocated under such section for a fiscal year and remaining available 
after payments are made under subsection (d), shall be used for deficit 
reduction.
    (d) Amount of Payment.--
            (1) Formula.--The amount of any payment made to a 
        MediHealth plan under this section shall be determined in 
accordance with a formula to be developed by the Director. The formula 
shall ensure that a payment made to a MediHealth plan under this 
section be in an amount equal to--
                    (A) with respect to a MediHealth plan that is 
                determined to be in the first quintile, 1 percent of 
                the amount allocated by the plan under section 1895M(k) 
                of the Social Security Act (as added by subsection 
                (e));
                    (B) with respect to a MediHealth plan that is 
                determined to be in the second quintile, 0.75 percent 
                of the amount allocated by the plan under such section;
                    (C) with respect to a MediHealth plan that is 
                determined to be in the third quintile, 0.50 percent of 
                the amount allocated by the plan under such section; 
                and
                    (D) with respect to a MediHealth plan that is 
                determined to be in the fourth quintile, 0.25 percent 
                of the amount allocated by the plan under such section.
            (2) No payment.--A MediHealth plan that is determined by 
        the Director to be in the fifth quintile shall not be eligible 
        to receive a payment under this section.
            (3) Determination of quintiles.--Not later than April 30 of 
        each calendar year, the Director shall rank each MediHealth 
        plan based on the performance of the plan during the preceding 
        year as determined using the quality targets and performance 
        measures established under subsection (b). Such rankings shall 
        be divided into quintiles with the first quintile containing 
        the highest ranking plans and the fifth quintile containing the 
        lowest ranking plans. Each such quintile shall contain plans 
        that in the aggregate cover an equal number of beneficiaries as 
        compared to another quintile.
    (e) MediHealth Plans.--Section 1895O of the Social Security Act (as 
added by section 101 of this Act) is amended by adding at the end the 
following:
    ``(d) Withholding of Payments To Encourage Quality Performance.--
            ``(1) Withholding.--For each MediHealth plan, the Secretary 
        shall withhold 0.50 percent from any payment that a MediHealth 
        plan sponsor under this part receives with respect to an 
        individual enrolled with such plan with the plan sponsor.
            ``(2) Disbursement.--From the total amount withheld under 
        paragraph (1), the Secretary shall make payments to MediHealth 
        plan sponsors under this part in accordance with the formula 
        established by the Director of the Office of Competition within 
        the Department of Health and Human Services under section 
        305(d) of the Comprehensive Medicare Reform and Improvement Act 
        of 1997.''.

SEC. 306. CERTIFICATION REQUIREMENT.

    (a) In General.--To be eligible to enter into a contract with the 
Director to enroll individuals in a MediHealth plan, a MediHealth plan 
sponsor shall participate in the certification process and have the 
MediHealth plans offered by such plan sponsor certified in accordance 
with this title.
    (b) Effect of Mergers or Purchase.--
            (1) Certified plans.--Where 2 or more MediHealth plan 
        sponsors offering certified MediHealth plans are merged or 
        where 1 such plan sponsor is purchased by another plan sponsor, 
        the resulting plan sponsor may continue to operate and enroll 
        individuals for coverage under the MediHealth plan as if the 
        MediHealth plan involved were certified. The certification of 
        any resulting MediHealth plan shall be reviewed by the 
        applicable certifying entity to ensure the continued compliance 
        of the contract with the certification criteria.
            (2) Noncertified plans.--The certification of a MediHealth 
        plan shall be terminated upon the merger of the MediHealth plan 
        sponsor involved or the purchase of the plan sponsor by another 
        entity that does not offer any certified MediHealth plans. Any 
        MediHealth plans offered through the resulting plan sponsor may 
        reapply for certification after the completion of the merger or 
        purchase.
    (c) Transition for New Plans.--
            (1) In general.--A MediHealth plan that has not provided 
        health insurance coverage to individuals prior to the effective 
        date of this Act shall be permitted to contract with the 
        Director and operate and enroll individuals under a MediHealth 
        plan without being certified for the 2-year period beginning on 
        the date on which such MediHealth plan sponsor enrolls the 
        first individual in the MediHealth plan. Such MediHealth plan 
        must be certified in order to continue to provide coverage 
        under the contract after such period.
            (2) Limitation.--A new MediHealth plan described in 
        paragraph (1) shall, during the period referred to in paragraph 
        (1) prior to certification, comply with the minimum criteria 
        developed by the Director under section 306(a)(1).

SEC. 307. LICENSING OF CERTIFICATION ENTITIES.

    (a) In General.--The Director shall develop procedures for the 
licensing of entities to certify MediHealth plans under this title.
    (b) Requirements.--The procedures developed under subsection (a) 
shall ensure that--
            (1) to be licensed under this section a certification 
        entity shall apply the requirements of this title to MediHealth 
        plans seeking certification;
            (2) a certification entity has procedures in place to 
        suspend or revoke the certification of a MediHealth plan that 
        is failing to comply with the certification requirements; and
            (3) the Director will give priority to licensing entities 
        that are accrediting health plans that contract with the 
        Director on the date of enactment of this Act.

SEC. 308. CERTIFICATION CRITERIA.

    (a) Establishment.--The Director shall establish minimum criteria 
under this section to be used by licensed certifying entities in the 
certification of MediHealth plans under this title.
    (b) Requirements.--Criteria established by the Director under 
subsection (a) shall require that, in order to be certified, a 
MediHealth plan shall comply at a minimum with the following:
            (1) Quality improvement plan.--The MediHealth plan shall 
        implement a total quality improvement plan that is designed to 
        improve the clinical and administrative processes of the 
        MediHealth plan on an ongoing basis and demonstrate that 
        improvements in the quality of items and services provided 
        under the MediHealth plan have occurred as a result of such 
        improvement plan.
            (2) Provider credentials.--The MediHealth plan shall 
        compile and annually provide to the licensed certifying entity 
        documentation concerning the credentials of the hospitals, 
        physicians, and other health care professionals reimbursed 
        under the MediHealth plan.
            (3) Comparative Information.--The MediHealth plan shall 
        compile and provide, as requested by the Secretary of Health 
        and Human Services, to the such Secretary the information 
        necessary to develop a comparative report.
            (4) Encounter data.--The MediHealth plan shall maintain 
        patient encounter data in accordance with standards established 
        by the Institute, and shall provide these data, as requested by 
        the Institute, to the Institute in support of conducting the 
        analysis described in section 302(c)(4).
            (5) Other requirements.--The MediHealth plan shall comply 
        with other requirements authorized under this title and 
        implemented by the Director.

SEC. 309. GRIEVANCE AND APPEALS.

    The Director shall develop grievance and appeals procedures under 
which a MediHealth plan that is denied certification under this title 
may appeal such denial to the Director.
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