[Congressional Record Volume 140, Number 110 (Wednesday, August 10, 1994)]
[House]
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[Congressional Record: August 10, 1994]
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             H O U S E  O F  R E P R E S E N T A T I V E S


Vol. 140


WASHINGTON, WEDNESDAY, AUGUST 10, 1994

No. 110--Part II


House of Representatives

                        AMENDMENTS TO H.R. 3600

      Amendment to H.R. 3600, as Reported Offered by Mr. Gekas of 
                              Pennsylvania

       Strike all after the enacting clause and insert the 
     following:

     SECTION. 1. ESTABLISHMENT OF COMMISSION.

       (a) Establishment.--There is established an independent 
     commission to be known as the Bipartisan Health Care Reform 
     Commission (in this Act referred to as the ``Commission'').
       (b) Appointment.--The Commission shall consist of 3 members 
     appointed by the President, 2 members appointed by the 
     Majority Leader of the Senate, 1 by the Minority Leader of 
     the Senate, 2 members appointed by the Speaker of the House 
     of Representatives, and 1 member by the Minority Leader of 
     the House of Representatives. Members shall be appointed on 
     the basis of their expertise and national recognition in the 
     fields of health economists, provider reimbursement, health 
     insurance, health benefits design, and related field. In 
     selecting members of the Commission, the President shall 
     consult with the Congress.
       (c) Term.--Members of the Commission shall be appointed for 
     a the life of the Commission.
       (d) Vacancy.--A vacancy in the Commission shall not affect 
     its powers, but shall be filled in the same manner as the 
     original appointment.

     SEC. 2. RESPONSIBILITIES.

       (a) Analyses.--The Commission shall--
       (1) conduct an analysis of the health care system reforms 
     proposed or enacted by the States,
       (2) conduct an analysis of the problems and potential 
     solutions to the Federal health care programs, including the 
     programs under titles XVII (medicare) and XIX (medicaid), and 
     the Veterans health programs, and
       (3) make recommendations on additional reforms that the 
     Congress may want to consider in response the findings of the 
     analyses.
       (b) Report.--Not later than 6 months after the date of the 
     enactment of this Act, the Commission shall submit a report 
     to the Congress on the state of health care in the United 
     States. Such report shall include analyses of the following 
     issues:
       (1) The rate of growth in health care costs by type of 
     provider, by type of payer, and by State.
       (2) The success or failure of the private and public 
     sectors in keeping their costs within the Gross Domestic 
     Product Deflator (an inflation indicator).
       (3) The utility of various mechanisms to empower purchasers 
     of health care with information about comparative cost, 
     quality, and access, including the effect of such information 
     on patient's behavior in the medical marketplace.
       (4) The success or failure of different types of group 
     health plans, such as medical savings account/catastrophic 
     insurance plans, managed care plans, voluntary cooperative 
     plans, and traditional indemnity plans in cost, quality, and 
     access.
       (5) The success or failure of various Medicaid reform 
     proposals, including privatization through managed care, 
     voucherization, and government cost controls.

     SEC. 3. CONSIDERATION OF RECOMMENDATIONS.

       (a) In General.--If the recommendations of the Commission 
     under section 2 are accompanied by a statement provided by 
     the Director of the Congressional Budget Office that the 
     recommendations would not increase the deficit, the 
     recommendations shall be considered in accordance with this 
     section.
       (b) Procedure.--The following procedure shall apply to 
     recommendations:
       ``(1) Referral and introduction.--The recommendations shall 
     be referred to the committees with jurisdiction over the 
     matters in the recommendations and the chairmen of such 
     committees shall introduce a bill, within 20 days of the 
     receipt of such recommendations, which carries out such 
     recommendations.
       (2) Committee consideration.--If any committee to which a 
     bill introduced under paragraph (1) is referred has not 
     reported the bill at the close of the 45th day since its 
     introduction, such committee shall be automatically 
     discharged from further consideration of the bill and it 
     shall be place on the appropriate calendar.
       (3) Open rule.--The Committee on Rules shall provide an 
     open rule for consideration of a bill introduced under 
     paragraph (1). If such a bill differs from the recommendation 
     of the Commission, the Committee on Rules shall provide that 
     the recommendation of the Commission shall be considered as 
     an amendment in the nature of a substitute for such bill. 
     Debate shall not be limited.
       (4) Senate consideration.--If a bill introduced under 
     paragraph (1) is a revenue raising bill, the Senate shall be 
     given an additional 15 days following passage by the House 
     for consideration in Committee and an additional 15 days for 
     consideration by the Senate.

                         Amendment To H.R. 3600

                  Offered By Mr. Gephardt of Missouri

       Strike all after the enacting clause and insert the 
     following:

     SECTION 1. SHORT TITLE; TABLE OF TITLES AND SUBTITLES.

       (a) Short Title.--This Act may be cited as the ``Guaranteed 
     Health Insurance Act of 1994''.
       (b) Table of Titles and Subtitles in Act.--The following 
     are the titles and subtitles contained in this Act:

        TITLE I--UNIVERSAL COVERAGE AND SHARED RESPONSIBILITIES

Subtitle A--Universal Coverage and Individual Responsibilities
Subtitle B--Employer Responsibilities

           TITLE II--INDIVIDUAL AND EMPLOYER RESPONSIBILITIES

Subtitle A--Individual Responsibilities
Subtitle B--Employer Responsibilities

                          TITLE III--BENEFITS

Subtitle A--Guaranteed National Benefit Package
Subtitle B--Coverage of Outpatient Prescription Drugs and Other Changes 
              in Medicare Benefits

                        TITLE IV--STATE PROGRAMS

Subtitle A--State Single-Payer Systems
Subtitle B--State Managed Competition Programs
Subtitle C--State Provider Reimbursement Systems
Subtitle D--General Rules, Coordination, and Transition

                 TITLE V--HEALTH PLANS AND COOPERATIVES

Subtitle A--Standards for Carriers and Insured Health Benefit Plans
Subtitle B--Standards for Sponsors and Self-Insured Health Benefit 
              Plans
Subtitle C--Standards for Supplemental Health Plans
Subtitle D--Universal FEHBP
Subtitle E--Consumer Purchasing Cooperatives
Subtitle F--General Provisions
Subtitle G--Transitional Insurance Reforms

        TITLE VI--STANDBY COST CONTAINMENT IN THE PRIVATE SECTOR

Subtitle A--National Health Expenditure Estimates
Subtitle B--State Health Expenditure Estimates
Subtitle C--Stand-By Federal Cost Containment
Subtitle D--Maximum Payment Rates
Subtitle E--Administrative and Judicial Review
Subtitle F--National Health Cost Commission

                  TITLE VII--PUBLIC HEALTH INITIATIVES

Subtitle A--Health Workforce Priorities
Subtitle B--Certain Direct Spending Programs of Public Health Service
Subtitle C--Assistance for Capital Costs of Safety-Net Hospitals
Subtitle D--Other Programs in Public Health Service Act
Subtitle E--Mental Health
Subtitle F--United States-Mexico Border Health Commission
Subtitle G--Comprehensive School Health Education
Subtitle H--Occupational Safety and Health
Subtitle I--Miscellaneous Provisions

                   TITLE VIII--MEDICARE AND MEDICAID

Subtitle A--Medicare Part C Program
Subtitle B--Benefits for Low-Income Individuals; State Maintenance of 
              Effort
Subtitle C--Cost Containment in the Medicare Programs
Subtitle D--Revisions to Medicare Part A and Part B
Subtitle E--Minor and Technical Medicare Amendments
Subtitle F--Provisions Relating to the Medicaid Program
Subtitle G--Miscellaneous and Technical Medicaid Amendments
Subtitle H--Provision Relating to AFDC Program

        TITLE IX--QUALITY AND CONSUMER AND WORKFORCE PROTECTION

Subtitle A--Quality Management and Improvement
Subtitle B--Information Systems and Administrative Simplification
Subtitle C--Fair Health Information Practices
Subtitle D--Remedies
Subtitle E--Fraud and Abuse
Subtitle F--Physician Ownership and Referral
Subtitle G--Workforce Protection and Training

                        TITLE X--LONG-TERM CARE

Subtitle A--Long-Term Care Program
Subtitle B--Federal Standards for Private Long-Term Care Insurance 
              Policies
Subtitle C--Worker Redeployment in Long-Term Care Programs

                      TITLE XI--REVENUE PROVISIONS

Subtitle A--Increase in Excise Taxes on Tobacco Products
Subtitle B--Treatment of Employer-Provided Health Care
Subtitle C--Extending Medicare Coverage of, and Application of Hospital 
              Insurance Tax to, All State and Local Government 
              Employees
Subtitle D--Treatment of Organizations Providing Health Care Services 
              and Related Organizations
Subtitle E--Treatment of Accelerated Death Benefits Under Life 
              Insurance Contracts
Subtitle F--Employment Status Provisions
Subtitle G--Tax Treatment of Funding of Retiree Health Benefits
Subtitle H--Excise Taxes on Insured and Self-Insured Health Plans
Subtitle I--Other Provisions

  TITLE XII--AMENDMENTS TO EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 
                                  1974

 TITLE XIII--COORDINATION OF MEDICAL PORTION WORKERS' COMPENSATION AND 
                          AUTOMOBILE INSURANCE

Subtitle A--Workers' Compensation Insurance
Subtitle B--Automobile Insurance
Subtitle C--Federal Employees' Compensation Act
Subtitle D--Davis-Bacon Act and Service Contract Act
Subtitle E--Effective Dates

          TITLE XIV--FEDERAL EMPLOYEES HEALTH BENEFITS PROGRAM

Subtitle A--General Changes in Health Benefits for Federal Employees 
              and Annuitants
Subtitle B--Provisions Relating to Universal FEHBP
Subtitle C--Transition Rules
Subtitle D--Post-Transition Provisions
Subtitle E--Miscellaneous Provisions

               TITLE XV--DEPARTMENT OF VETERANS' AFFAIRS

                    TITLE XVI--INDIAN HEALTH SERVICE

         TITLE XVII--MEDICAL MALPRACTICE AND ANTITRUST REFORMS

Subtitle A--Medical Malpractice
Subtitle B--McCarran-Ferguson Reform

     SEC. 2. GENERAL DEFINITIONS.

       For purposes of this Act, except as otherwise specifically 
     provided:
       (1) AFDC recipient.--The term ``AFDC recipient'' means, for 
     a month, an individual who is receiving aid or assistance 
     under any plan of the State approved under title I, X, XIV, 
     or XVI, or part A or part E of title IV, of the Social 
     Security Act for the month.
       (2) Certified health plan.--
       (A) In general.--The term ``certified health plan'' means a 
     health plan that is certified (or deemed to be certified) as 
     meeting the requirements of subtitle A or B of title V, and, 
     except as otherwise provided, does not include the medicare 
     program or medicare part C.
       (B) Treatment of certain plans.--Each of the following is 
     deemed to have been certified as meeting the requirements 
     described in subparagraph (A):
       (i) The Civilian Health and Medical Program of the 
     Uniformed Services (as defined in section 1072(4) of title 
     10, United States Code).
       (ii) Any State single-payer system approved under subtitle 
     A of title IV.
       (C) Certification process for certain federal health 
     plans.--For provisions providing for certification of--
       (i) health programs of the Indian Health Service (within 
     the meaning of section 901 of the Indian Health Care 
     Improvement Act), see section 5501(b), and
       (ii) health plans of the Department of Veterans' Affairs, 
     see section 5501(c).
       (3) Class of enrollment.--The term ``class of enrollment'' 
     means a class for enrollment of families specified in section 
     3(b).
       (4) Eligible individual.--The term ``eligible individual'' 
     has the meaning given such term in section 1001(c).
       (5) Guaranteed national benefit package.--The term 
     ``guaranteed national benefit package'' means the package of 
     health benefits described in subtitle A of title III.
       (6) Medicaid program.--The term ``medicaid program'' means 
     a State plan for medical assistance approved under title XIX 
     of the Social Security Act.
       (7) Medicare part A beneficiary.--The term ``medicare part 
     A beneficiary'' means an individual who is entitled to 
     benefits under part A of the medicare program.
       (8) Medicare part c.--The term ``medicare part C'' means 
     the program of health insurance benefits under part A of 
     title XXI of the Social Security Act (as added by section 
     8001).
       (9) Medicare program.--The term ``medicare program'' means 
     the programs under title XVIII of the Social Security Act.
       (10) SSI recipient.--The term ``SSI recipient'' means, for 
     a month, an individual--
       (A) with respect to whom supplemental security income 
     benefits are being paid under title XVI of the Social 
     Security Act for the month,
       (B) who is receiving a supplementary payment under section 
     1616 of such Act or under section 212 of Public Law 93-66 for 
     the month,
       (C) who is receiving monthly benefits under section 1619(a) 
     of the Social Security Act (whether or not pursuant to 
     section 1616(c)(3) of such Act) for the month, or
       (D) who is treated under section 1619(b) of the Social 
     Security Act as receiving supplemental security income 
     benefits in a month for purposes of title XIX of such Act.
       (11) Secretary.--The term ``Secretary'' means the Secretary 
     of Health and Human Services.
       (12) State.--The term ``State'' means the 50 States, the 
     District of Columbia, Puerto Rico, the Virgin Islands, Guam, 
     the Northern Mariana Islands, and American Samoa.
       (13) United States.--The term ``United States'' means the 
     50 States, the District of Columbia, Puerto Rico, the Virgin 
     Islands, Guam, American Samoa, and Northern Mariana Islands.

     SEC. 3. DEFINITIONS AND RULES RELATING TO FAMILY MEMBERS.

       (a) Family Defined.--In this Act, unless otherwise 
     provided, the term ``family''--
       (1) means, with respect to an eligible individual who is 
     not a young dependent, the individual; and
       (2) includes the following persons (if any):
       (A) The individual's spouse if the spouse is an eligible 
     individual.
       (B) The individual's young dependents (and, if applicable, 
     the young dependents of the individual's spouse) if they are 
     eligible individuals.

     In this section, the term ``young dependent'' has the meaning 
     given such term in section 1003(b)(1)(B).
       (b) Classes of Enrollment; Terminology.--In this Act:
       (1) In general.--Each of the following is a separate class 
     of enrollment:
       (A) Coverage only of an individual (referred to in this Act 
     as the ``individual'' enrollment or class of enrollment).
       (B) Coverage of an unmarried individual and one or more 
     children (referred to in this Act as the ``single parent'' 
     enrollment or class of enrollment).
       (C) Coverage of a married couple and one or more children 
     (referred to in this Act as the ``family'' enrollment or 
     class of enrollment).
       (2) Couples enrolled in different plans.--In the case of a 
     couple--
       (A) without young dependents in which each spouse is 
     enrolled in a different health plan, each spouse is 
     considered to be enrolled in an individual class of 
     enrollment, and
       (B) with young dependents in which a spouse is enrolled in 
     one plan and the other spouse and young dependents are 
     enrolled in another plan, the former spouse is considered to 
     be enrolled in an individual class of enrollment and the 
     latter spouse and young dependents are considered to be 
     enrolled in a single parent class of enrollment.
       (c) Spouse; Married; Couple.--In this Act:
       (1) In general.--The terms ``spouse'' and ``married'' mean, 
     with respect to a person, another individual who is the 
     spouse of the person or married to the person, as determined 
     under applicable State law.
       (2) Couple.--The term ``couple'' means an individual and 
     the individual's spouse.
        TITLE I--UNIVERSAL COVERAGE AND SHARED RESPONSIBILITIES

                       table of contents of title

        TITLE I--UNIVERSAL COVERAGE AND SHARED RESPONSIBILITIES

Sec. 1000. Protection of consumer choice.

     Subtitle A--Universal Coverage and Individual Responsibilities

Sec. 1001. Universal health coverage.
Sec. 1002. Satisfaction of responsibility through enrollment in 
              certified health plans, medicare part C, and medicare.
Sec. 1003. Special rules for covered individuals who are not required 
              to contribute.
Sec. 1004. Special rules for individuals neither covered nor required 
              to contribute.
Sec. 1005. Miscellaneous definitions and related provisions.

                 Subtitle B--Employer Responsibilities

               Part 1--Employer Coverage Responsibilities

Sec. 1101. Employer responsibilities.
Sec. 1102. Satisfaction of responsibility by large employers through 
              enrollment in certified health plans.
Sec. 1103. Satisfaction of responsibility for small employers through 
              certified health plans or medicare part C.
Sec. 1104. Qualified employer-covered employee defined.
Sec. 1105. Employees not subject to requirement.
Sec. 1106. Definitions and special rules.

              Part 2--Additional Employer Responsibilities

Sec. 1111. Maintenance-of-effort in providing health benefits to 
              employees.
Sec. 1112. Nondiscrimination requirements in providing additional 
              health benefits to full-time employees.
Sec. 1113. Maintenance-of-effort requirements with respect to former 
              employees.

           TITLE II--INDIVIDUAL AND EMPLOYER RESPONSIBILITIES

Sec. 2001. Amendment of 1986 Code.

                Subtitle A--Individual Responsibilities

Sec. 2101. Individual share of medicare part C premiums.

                 Subtitle B--Employer Responsibilities

Sec. 2201. Health-related employer taxes and credits.
Sec. 2202. Reporting requirements.
Sec. 2203. Transitional continuation coverage requirement for group 
              health plans.

                          TITLE III--BENEFITS

            Subtitle A--Guaranteed National Benefit Package

                       Part 1--Benefits Described

Sec. 3001. Establishment of package.
Sec. 3002. Coverage of items and services not covered under medicare.
Sec. 3003. Modification of mental health and substance abuse benefits 
              under approved managed mental health programs.

                          Part 2--Cost-Sharing

Sec. 3011. Application of cost-sharing schedules.
Sec. 3012. Limits on out-of-pocket expenditures.
Sec. 3013. Standard cost-sharing schedule described.
Sec. 3014. Managed care cost-sharing schedule.

                    Part 3--Miscellaneous Provisions

Sec. 3021. References to medicare provisions.
Sec. 3022. Relation between package and certain State laws.
Sec. 3023. Provision of items or services contrary to religious belief 
              or moral conviction.
Sec. 3024. Establishment of commissions.
Sec. 3025. Study on coverage of emergency dental services.
Sec. 3026. Study on coverage of screening for adult diabetes.

Subtitle B--Coverage of Outpatient Prescription Drugs and Other Changes 
                          in Medicare Benefits

           Part 1--Coverage of Outpatient Prescription Drugs

Sec. 3101. Coverage of outpatient prescription drugs.
Sec. 3102. Payment rules and related requirements for covered 
              outpatient drugs.
Sec. 3103. Medicare rebates for covered outpatient drugs.
Sec. 3104. Prescription drug payment review commission.
Sec. 3105. Coverage of home infusion drug therapy services.

Part 2--Changes in Medicare Benefits to Conform to Guaranteed National 
                            Benefit Package

Sec. 3111. Imposition of cap on out-of-pocket expenditures.
Sec. 3112. Repeal of limit on lifetime reserve days of inpatient 
              hospital services.
Sec. 3113. Coverage of services for infants and children.
Sec. 3114. Expanding coverage of preventive benefits.
Sec. 3115. Coverage of pregnancy-related services and family planning.
Sec. 3116. Expanding coverage of mental health and substance abuse 
              services.
Sec. 3117. Expanded coverage of certain chiropractic services.
Sec. 3118. Managed care options.
Sec. 3119. Effective date.

                        TITLE IV--STATE PROGRAMS

                 Subtitle A--State Single-Payer Systems

Sec. 4001. Standards for State single-payer systems.
Sec. 4002. General requirements for approval.
Sec. 4003. Treatment of medicare beneficiaries.
Sec. 4004. Options relating to payment for premium subsidies and wrap-
              around benefits.
Sec. 4005. Offset to direct payments for outstanding maintenance of 
              effort payments.
Sec. 4006. Termination of approval.

             Subtitle B--State Managed Competition Programs

Sec. 4101. Standards for State managed competition programs.
Sec. 4102. General requirements for State managed competition programs.
Sec. 4103. Termination of approval.

            Subtitle C--State Provider Reimbursement Systems

Sec. 4201. Standards for State provider reimbursement systems.
Sec. 4202. General conditions for State provider requirements for State 
              systems.
Sec. 4203. Control of aggregate expenditures requirement for State 
              systems.
Sec. 4204. Termination of approval of State system.

        Subtitle D--General Rules, Coordination, and Transition

Sec. 4301. Procedures.
Sec. 4302. Availability of private right of action for aggrieved 
              individuals.
Sec. 4303. References to waivers under the medicare programs.
Sec. 4304. Exemptions from ERISA preemption.

                 TITLE V--HEALTH PLANS AND COOPERATIVES

  Subtitle A--Standards for Carriers and Insured Health Benefit Plans

Sec. 5001. Requirements for certification of carriers and plans.
Sec. 5002. Nondiscrimination.
Sec. 5003. Open enrollment.
Sec. 5004. Prohibition on preexisting condition exclusions.
Sec. 5005. Prohibition against waiting periods.
Sec. 5006. Continuation of coverage requirements.
Sec. 5007. Benefit requirements.
Sec. 5008. Requirements relating to community rating of premiums.
Sec. 5009. Special requirements for managed care and point-of-service 
              plans.
Sec. 5010. Standards for marketing of health benefit plans.
Sec. 5011. Collection and dissemination of plan information.
Sec. 5012. Requirements for arrangements with essential community 
              providers.
Sec. 5013. Requirements relating to plan solvency.
Sec. 5014. Utilization review.
Sec. 5015. Acceptance of premium certificates.
Sec. 5016. Additional requirements for insured health benefit plans.

  Subtitle B--Standards for Sponsors and Self-Insured Health Benefit 
                                 Plans

                      Part 1--General Requirements

Sec. 5101. Requirement for certification of sponsors and plans.
Sec. 5102. Limitation on eligible sponsors.
Sec. 5103. Non-discrimination.
Sec. 5104. Requirements relating to enrollment.
Sec. 5105. Prohibition on pre-existing condition exclusions.
Sec. 5106. Prohibition on waiting periods.
Sec. 5107. Benefit requirements.
Sec. 5108. Requirements relating to rating of premiums.
Sec. 5109. Additional standards for managed care plans and point-of-
              service plans.
Sec. 5110. Provision of plan information.
Sec. 5111. Requirements for arrangements with essential community 
              providers.
Sec. 5112. Utilization review.
Sec. 5113. Acceptance of premium certificates.
Sec. 5114. Additional requirements for self-insured health benefit 
              plans.

             Part 2--Responsibilities Relating to Financing

Sec. 5121. Reserve requirements.
Sec. 5122. Trusteeship of insolvent plans by Secretary of Labor.
Sec. 5123. Provision of amounts due providers from insolvent plans.
Sec. 5124. Imposition and collection of periodic assessments on plan 
              sponsors.
Sec. 5125. Management of funds; relations with employees.

          Subtitle C--Standards for Supplemental Health Plans

Sec. 5201. Requirement for certification of carriers and policies.
Sec. 5202. Standardized benefits.
Sec. 5203. Requirements for offering of packages.
Sec. 5204. Non-discrimination requirements.
Sec. 5205. Open enrollment.
Sec. 5206. Prohibition on pre-existing condition exclusions.
Sec. 5207. Continuation of coverage requirement.
Sec. 5208. Community rating requirements.
Sec. 5209. Standards for marketing.

                      Subtitle D--Universal FEHBP

Sec. 5301. Purpose.
Sec. 5302. Contracts with carriers.
Sec. 5303. Eligibility.
Sec. 5304. Premiums for coverage.
Sec. 5305. General administrative provisions.
Sec. 5306. Universal FEHBP Health Benefits Fund.
Sec. 5307. Establishment of Office of Universal FEHBP.
Sec. 5308. Studies; annual report.

              Subtitle E--Consumer Purchasing Cooperatives

                    Part 1--Establishment by States

Sec. 5401. Establishment of cooperatives.
Sec. 5402. Designation of cooperative boundaries and service area.

                    Part 2--Governance Requirements

Sec. 5411. Board of Directors.
Sec. 5412. Provider advisory boards.

        Part 3--Responsibilities and Authorities of Cooperatives

Sec. 5421. Contracts with carriers.
Sec. 5422. Services for participants.
Sec. 5423. Requirements relating to collection of premiums and 
              accounting.
Sec. 5424. Cooperative fee.
Sec. 5425. Antidiscrimination.

     Part 4--Grants for Establishment and Operation of Cooperatives

Sec. 5431. Establishment of grant program.
Sec. 5432. Use of grant for participation of cooperative in capital 
              review program.
Sec. 5433. Authorization of appropriations.

                     Subtitle F--General Provisions

Sec. 5501. Establishment of Federal standards.
Sec. 5502. Enforcement through approved State programs.
Sec. 5503. Federal penalties.
Sec. 5504. Definitions.
Sec. 5505. Preemption of State law.
Sec. 5506. Construction of references.

               Subtitle G--Transitional Insurance Reforms

Sec. 5601. Establishment of standards.
Sec. 5602. Continuation of coverage.
Sec. 5603. Limits on pre-existing condition exclusions.
Sec. 5604. Premium changes to reflect changes in group or individual 
              characteristics or terms of coverage.
Sec. 5605. Limitations on changes in premiums for plans in individual 
              sector and small group sector related to increases in 
              health care costs and utilization.
Sec. 5606. More stringent State laws not preempted.
Sec. 5607. Limit on changes in self-insured health benefit plans.
Sec. 5608. Definitions.
Sec. 5609. Effective date.

        TITLE VI--STANDBY COST CONTAINMENT IN THE PRIVATE SECTOR

           Subtitle A--National Health Expenditure Estimates

Sec. 6001. National private sector per capita health expenditure 
              estimate.
Sec. 6002. Classes of health care services.
Sec. 6003. Allocation of per capita estimates by class of service.
Sec. 6004. National health expenditures reporting system.

             Subtitle B--State Health Expenditure Estimates

Sec. 6101. State private sector per capita health expenditure estimate.

             Subtitle C--Stand-By Federal Cost Containment

Sec. 6201. Application of maximum payment rates in States that fail to 
              control costs.

                   Subtitle D--Maximum Payment Rates

     Part 1--Establishment and Application of Maximum Payment Rates

Sec. 6301. Process.
Sec. 6302. Payment methodology; relation to estimate allocation.
Sec. 6303. General application and enforcement of maximum payment 
              rates.

      Part 2--Methodologies for Determining Maximum Payment Rates

Sec. 6311. Basis for maximum payment rates for inpatient hospital 
              services.
Sec. 6312. Basis for maximum payment rates for class of physicians' 
              services and other professional medical services.
Sec. 6313. Basis for other maximum payment rates for services using 
              certain medicare payment methodologies.
Sec. 6314. Services provided by managed care organizations.
Sec. 6315. Other services.

             Subtitle E--Administrative and Judicial Review

Sec. 6401. Limitation on administrative and judicial review.
Sec. 6402. References to medicare provisions.

              Subtitle F--National Health Cost Commission

Sec. 6501. National Health Cost Commission.
Sec. 6502. Expedited consideration of recommendations and alternatives.

                  TITLE VII--PUBLIC HEALTH INITIATIVES

                Subtitle A--Health Workforce Priorities

      Part 1--National Plan Regarding Physicians and Other Health 
                             Professionals


              SUBPART A--NATIONAL PLAN; GENERAL PROVISIONS

Sec. 7001. Development of Plan.


       SUBPART B--NATIONAL PLAN; PROVISIONS REGARDING PHYSICIANS

Sec. 7011. National Advisory Council on Graduate Medical Education.
Sec. 7012. Annual designation of authorized per-specialty number of 
              specialty positions; requirements regarding primary 
              health care.
Sec. 7013. Allocation of specialty positions among approved physician 
              training programs.

                 Part 2--Payments to Teaching Hospitals

Sec. 7021. Formula payments regarding private-sector share of costs of 
              graduate of medical education.
Sec. 7022. Agreement regarding compliance with allocation system.
Sec. 7023. Application for payments.
Sec. 7024. Annual amount of payments.
Sec. 7025. Transitional provisions regarding direct-cost payments.
Sec. 7026. Rule of construction regarding medicare amendments.

            Part 3--Qualifying Physician Training Consortia

Sec. 7031. Special rules regarding allocation of specialty positions 
              and receipt of direct-cost payments.

 Part 4--Transitional Payments for Teaching Hospitals Losing Specialty 
                               Positions

Sec. 7041. Transitional payments to teaching hospitals.

               Part 5--Other Health Professions Programs


                 SUBPART A--GRADUATE NURSING EDUCATION

Sec. 7051. Federal payments for graduate nursing education.


                       SUBPART B--MEDICAL SCHOOLS

Sec. 7061. Federal payments for medical schools.

                    Part 6--Miscellaneous Provisions

Sec. 7071. Study of funding needs of health professions schools.
Sec. 7072. Additional studies.

                       Part 7--General Provisions

Sec. 7081. Definitions.

 Subtitle B--Certain Direct Spending Programs of Public Health Service

                      Part 1--Biomedical Research

Sec. 7101. Additional funding.

            Part 2--Core Functions of Public Health Programs

Sec. 7111. Table of contents regarding revised provisions of title XIX 
              of Public Health Service Act.
Sec. 7112. Direct spending regarding formula grants to States.

   Part 3--Health Centers for Populations Lacking Access to Services

Sec. 7121. Purpose of program.
Sec. 7122. Table of contents regarding new title XXVII of Public Health 
              Service Act.
Sec. 7123. Direct spending regarding federally qualified health 
              centers; development of additional centers.
Sec. 7124. Conforming amendments.

                 Part 4--National Health Service Corps

Sec. 7131. Purpose of program.
Sec. 7132. Direct spending regarding general program and scholarship 
              and loan repayment programs.

           Part 5--Consumer Resources Regarding Health Plans

Sec. 7141. Consumer resources.

           Part 6--Reduction in Discretionary Spending Limits

Sec. 7151. Conforming reductions regarding certain direct spending 
              programs of Public Health Service.

    Subtitle C--Assistance for Capital Costs of Safety-Net Hospitals

Sec. 7201. Table of contents regarding new title XXVIII of Public 
              Health Service Act.
Sec. 7202. Direct spending regarding certain hospitals.

        Subtitle D--Other Programs in Public Health Service Act

Sec. 7301. School-based health clinics.
Sec. 7302. Rural and urban managed care program.
Sec. 7303. Emergency medical services in rural areas.
Sec. 7304. Allied health professions.
Sec. 7305. Community health advisors.
Sec. 7306. Training of health professionals for rural areas.
Sec. 7307. COBRA continuation coverage; transitional coverage 
              requirement for group health plans.

                       Subtitle E--Mental Health

Sec. 7401. State comprehensive managed mental health and substance 
              abuse programs.
Sec. 7402. Comprehensive community mental health services for children 
              with serious emotional disturbances.

       Subtitle F--United States-Mexico Border Health Commission

Sec. 7501. Agreement to establish binational commission.
Sec. 7502. Duties.
Sec. 7503. Other authorized functions.
Sec. 7504. Membership.
Sec. 7505. Regional offices.
Sec. 7506. Reports.
Sec. 7507. Definitions.

           Subtitle G--Comprehensive School Health Education

                       Part 1--General Provisions

Sec. 7601. Purposes.
Sec. 7602. Definitions.
Sec. 7603. Prohibition against Federal control of education.
Sec. 7604. Prohibition against distribution of obscene materials.Sec. 

          Part 2--School Health Education; General Provisions

Sec. 7611. Authorizations of appropriations.
Sec. 7612. Waivers of statutory and regulatory requirements.

  Part 3--School Health Education; Grants to State Education Agencies

Sec. 7621. Application for grant.
Sec. 7622. Selection of grantees.
Sec. 7623. Amount of grant.
Sec. 7624. Authorized activities; limitation on administrative costs.
Sec. 7625. Subgrants to local educational agencies.

               Subtitle H--Occupational Safety and Health

Sec. 7701. Occupational injury and illness prevention.

                  Subtitle I--Miscellaneous Provisions

Sec. 7801. Identifying strategies for assessing impact of health care 
              reform.
Sec. 7802. Study of worksite wellness programs.

                   TITLE VIII--MEDICARE AND MEDICAID

Sec. 8000. References in title.

                  Subtitle A--Medicare Part C Program

Sec. 8001. Establishment of medicare part C program.

                      ``TITLE XXI--MEDICARE PART C

``Sec. 2100. Establishment of program.

                  ``Part A--Eligibility and Enrollment

``Sec. 2101. Eligibility.
``Sec. 2102. Enrollment process.
``Sec. 2103. Facilitation of enrollment.
``Sec. 2104. Coverage period; termination of enrollment.

                    ``Part B--Benefits and Payments

``Sec. 2111. Coverage of benefits under guaranteed national benefit 
              package.
``Sec. 2112. Payments for health insurance benefits.
``Sec. 2113. Adjustments to medicare rates and methodologies.
``Sec. 2114. Exclusions; coordination.

             ``Part C--Premiums; Medicare Part C Trust Fund

``Sec. 2121. Computation of applicable medicare part C premium.
``Sec. 2122. Medicare part C premium liability.
``Sec. 2123. Collection of premiums.
``Sec. 2124. Medicare part C trust fund.

                  ``Part D--Administrative Provisions

``Sec. 2131. Agreements with hospitals; participating physicians; 
              treatment of Indian Health Service facilities.
``Sec. 2132. Health maintenance organizations.
``Sec. 2133. Use of fiscal agents.
``Sec. 2134. Compliance with information standards; application of 
              medicare quality assurance and survey and certification 
              requirements.
``Sec. 2135. Program integrity.
``Sec. 2136. General administration; miscellaneous provisions.

                ``Part E--Definitions and Miscellaneous

``Sec. 2161. Definitions.
``Sec. 2162. References to medicare provisions.
Sec. 8002. Conforming amendments.
Sec. 8003. Effective date.

 Subtitle B--Benefits for Low-Income Individuals; State Maintenance of 
                                 Effort

              Part 1--Benefits for Low-income Individuals

Sec. 8101. Establishment of benefits.

          ``TITLE XXII--ASSISTANCE FOR LOW-INCOME INDIVIDUALS

``Sec. 2200. Establishment of programs.

                 ``Part A--Premium Certificate Program

  ``Subpart 1--Certificates for Low-Income Individuals Covered Under 
                         Certified Health Plans

``Sec. 2201. Eligibility.
``Sec. 2202. Value of premium certificate.
``Sec. 2203. Administration of program.

         ``Subpart 2--Premium Assistance for Qualified Retirees

``Sec. 2211. Eligibility for premium certificate for certain retirees.
``Sec. 2212. Eligibility.
``Sec. 2213. Value of premium certificate.
``Sec. 2214. Administration of premium certificates for retirees.

     ``Subpart 3--Maintenance of Effort Offset for Retiree Premium 
                             Contributions

``Sec. 2221. Offset of premium obligations for retirees.
``Sec. 2222. Amount of offset.
``Sec. 2223. Procedures for obtaining offset.

       ``Part B--Wrap-Around Benefits for Low-income Individuals

``Sec. 2231. Eligibility.
``Sec. 2232. Wrap-around benefits.
``Sec. 2233. Application for benefits.
``Sec. 2234. References to medicare provisions.

   ``Part C--Payment of Medicare Cost-Sharing for Certain Low-income 
                              Individuals

``Sec. 2241. Payment of cost-sharing for certain individuals.
``Sec. 2242. Medicare cost-sharing defined.
``Sec. 2243. Individuals defined.
``Sec. 2244. Timing.

                  ``Part D--Administrative Provisions

``Sec. 2251. Determination of eligibility; appeals.
``Sec. 2252. Verification of eligibility.
``Sec. 2253. Penalties for misrepresentation.
Sec. 8102. Effective dates.

                  Part 2--State Maintenance of Effort


           SUBPART A--PAYMENTS FOR CASH ASSISTANCE RECIPIENTS

Sec. 8111. State responsibility for payments.
Sec. 8112. Determination of AFDC per capita amounts for States.
Sec. 8113. Determination of SSI per capita amount for States.
Sec. 8114. Determination of number of AFDC and SSI recipients.


         SUBPART B--PAYMENTS FOR NON-CASH ASSISTANCE RECIPIENTS

Sec. 8121. State responsibility for payments.
Sec. 8122. Determination of baseline amounts.
Sec. 8123. Updating of baseline amount.


            SUBPART C--GENERAL AND MISCELLANEOUS PROVISIONS

Sec. 8131. Timing and manner of payments.
Sec. 8132. Special rules for Puerto Rico and other territories.
Sec. 8133. Sanctions for failure to make timely payments.
Sec. 8134. State maintenance of effort percentage.

  Part 3--Analysis of Impact of Act on Federal Expenditures and States

Sec. 8141. Impact of health care reform on Federal budget.
Sec. 8142. Impact of health care reform on States.

         Subtitle C--Cost Containment in the Medicare Programs

             Part 1--Medicare Health Expenditure Estimates

Sec. 8201. National medicare per capita health expenditure estimate.
Sec. 8202. Classes of health care services.
Sec. 8203. Allocation of per capita estimates by class of service for 
              medicare A/B.
Sec. 8204. Allocation of per capita estimates by class of service for 
              medicare C.
Sec. 8205. Combined medicare per capita allocations for classes of 
              services.
Sec. 8206. Computation of medicare annual combined rate of increase for 
              classes of services; application to medicare payment 
              rates.
Sec. 8207. National health expenditures reporting system.

               Part 2--State Health Expenditure Estimates

Sec. 8211. State medicare per capita health expenditure estimate.

               Part 3--Administrative and Judicial Review

Sec. 8221. Limitation on administrative and judicial review.

          Subtitle D--Revisions to Medicare Part A and Part B

                  Part 1--Additional Medicare Savings

Sec. 8301. Reduction in payments for indirect costs of medical 
              education.
Sec. 8302. Reductions in disproportionate share adjustments.
Sec. 8303. Reductions in payments for capital-related costs of 
              inpatient hospital services for PPS hospitals.
Sec. 8304. Limitations on payment for physicians' services furnished by 
              high-cost hospital medical staffs.
Sec. 8305. Medicare secondary payer.
Sec. 8306. Imposition of 20 percent coinsurance on home health services 
              under medicare.
Sec. 8307. Home health cost limits.

     Part 2--Provisions Relating to Payments for Medical Education

Sec. 8311. Limiting medicare medical education payments to approved 
              residency positions.
Sec. 8312. Determination of number of full-time equivalent residents.
Sec. 8313. Payments for hospitals losing specialty positions.
Sec. 8314. Medicare demonstration regarding consortia of hospitals.
Sec. 8315. Study of payments for medical education at sites other than 
              hospitals.

  Part 3--Assistance for Providers Serving Low-income and Underserved 
                              Populations

Sec. 8321. Increase in payments for federally qualified health centers.
Sec. 8322. Changes in underserved area bonus payments.
Sec. 8323. Essential access community hospitals.
Sec. 8324. Medicare telemedicine pilot projects.
Sec. 8325. Treatment of other indian facilities as indian health 
              service facilities.

  Part 4--Application of Quality Management and Administrative Reform 
             Under Guaranteed Health Insurance Act of 1994

Sec. 8331. Integration of medicare into national quality management 
              program.
Sec. 8332. Coordination of medicare cards with health security cards.
Sec. 8333. Elimination of medicare and medicaid coverage data bank.
Sec. 8334. Requirement for uniform hospital cost reporting.
Sec. 8335. Application of health information and information 
              transaction requirements to fiscal intermediaries and 
              carriers.
Sec. 8336. Application of restrictions on disclosure and use of health 
              information.

         Part 5--Amendments to Anti-fraud and Abuse Provisions

Sec. 8341. Anti-kickback statutory provisions.
Sec. 8342. Civil money penalties.
Sec. 8343. Amendments to exclusionary provisions in fraud and abuse 
              program.
Sec. 8344. Sanctions against practitioners and persons for failure to 
              comply with statutory obligations relating to quality of 
              care.
Sec. 8345. Revisions to criminal penalties.
Sec. 8346. Effective date.

      Part 6--Revisions to Limitations on Physician Self-referrals

Sec. 8351. Application of ban on self-referrals to claims submitted by 
              physicians.
Sec. 8352. Expansion of self-referral ban to additional services.
Sec. 8353. Exceptions for both ownership and compensation arrangements.
Sec. 8354. Exceptions related only to ownership or investment.
Sec. 8355. Repeal of exception for remuneration unrelated to provision 
              of designated health services.
Sec. 8356. Referring physicians.
Sec. 8357. Miscellaneous and technical provisions.
Sec. 8358. Effective date.

                   Part 7--Other Medicare Provisions

Sec. 8361. Treatment of beneficiaries residing in States with approved 
              single-payer systems.
Sec. 8362. Development and implementation of prospective payment 
              methodologies.
Sec. 8363. Medicare supplemental insurance policy amendments.
Sec. 8364. Requiring hospitals to participate in medicare part C.
Sec. 8365. Conforming amendments relating to program of cost-sharing 
              for qualified medicare beneficiaries.
Sec. 8366. Adjusting capital payments for amounts received under 
              capital financing assistance program.
Sec. 8367. Study of physician supervision of nurse anesthetist 
              services.

           Part 8--Expansion of Frail Elderly Demonstrations

Sec. 8371. Expansion of number of sites for demonstration program of 
              all-inclusive care for the elderly (PACE).

          Subtitle E--Minor and Technical Medicare Amendments

                 Part 1--Provisions Relating to Part A

Sec. 8401. Provisions relating to adjustments to standardized amounts 
              for wages and wage-related costs.
Sec. 8402. Provisions relating to rural health transition grant 
              program.
Sec. 8403. Psychology services in hospitals.
Sec. 8404. Skilled nursing facilities.
Sec. 8405. Notification of availability of hospice benefit.
Sec. 8406. Clarifying expertise of individuals to serve on the 
              prospective payment assessment commission.
Sec. 8407. Authority for budget neutral adjustments for changes in 
              payment amounts for transfer cases.
Sec. 8408. Hemophilia pass-through extension.
Sec. 8409. Sub-acute care services demonstration project.
Sec. 8410. Clarification of DRG payment window expansion; miscellaneous 
              and technical corrections.

                 Part 2--Provisions Relating to Part B


                    SUBPART A--PHYSICIANS' SERVICES

Sec. 8411. Development and implementation of resource-based methodology 
              for practice expenses.
Sec. 8412. Geographic cost of practice index refinements.
Sec. 8413. Extra-billing limits.
Sec. 8414. Relative values for pediatric services.
Sec. 8415. Administration of claims relating to physicians' services.
Sec. 8416. Miscellaneous and technical corrections.


                  SUBPART B--DURABLE MEDICAL EQUIPMENT

Sec. 8421. Certification of suppliers.
Sec. 8422. Restrictions on certain marketing and sales activities.
Sec. 8423. Beneficiary liability for noncovered services.
Sec. 8424. Adjustments for inherent reasonableness.
Sec. 8425. Miscellaneous and technical corrections.


                  SUBPART C--OTHER ITEMS AND SERVICES

Sec. 8431. Ambulatory surgical center services.
Sec. 8432. Study of medicare coverage of patient care costs associated 
              with clinical trials of new cancer therapies.
Sec. 8433. Study of annual cap on amount of medicare payment for 
              outpatient physical therapy and occupational therapy 
              services.
Sec. 8434. Payment of part B premium late enrollment penalties by 
              States.
Sec. 8435. Treatment of inpatients and provision of diagnostic X-ray 
              services by rural health clinics and federally qualified 
              health centers.
Sec. 8436. Application of mammography certification requirements.
Sec. 8437. Coverage of services of speech-language pathologists and 
              audiologists.
Sec. 8438. Miscellaneous and technical corrections.

              Part 3--Provisions Relating to Parts A and B


                  SUBPART A--MEDICARE SECONDARY PAYER

Sec. 8441. Medicare secondary payer reforms.


     SUBPART B--OTHER ITEMS AND SERVICES RELATING TO PARTS A AND B

Sec. 8451. Definition of FMGEMS examination for payment of direct 
              graduate medical education.
Sec. 8452. Qualified medicare beneficiary outreach.
Sec. 8453. Hospital agreements with organ procurement organizations.
Sec. 8454. Peer review organizations.
Sec. 8455. Health maintenance organizations.
Sec. 8456. Home health agencies.
Sec. 8457. Permanent extension of authority to contract with fiscal 
              intermediaries and carriers on other than a cost basis.
Sec. 8458. Transportation demonstration project.
Sec. 8459. Diabetes treatment demonstration project.
Sec. 8460. Expansion of number of sites for demonstration program of 
              all-inclusive care for the elderly (PACE).
Sec. 8460A. Miscellaneous and technical corrections.

Part 4--Provisions Relating to Medicare Supplemental Insurance Policies

Sec. 8461. Standards for medicare supplemental insurance policies.

        Subtitle F--Provisions Relating to the Medicaid Program

 Part 1--Conforming Medicaid to Guaranteed Health Insurance Act of 1994

Sec. 8501. Conforming medicaid amendments relating to guaranteed 
              national benefit package.
Sec. 8502. Enforcement of maintenance-of-effort requirements through 
              medicaid.
Sec. 8503. Conforming medicaid amendments relating to quality and 
              consumer protection.
Sec. 8504. Conforming amendments relating to cost-sharing for qualified 
              medicare beneficiaries.
Sec. 8505. Treatment of certain facilities as federally qualified 
              health centers.
Sec. 8506. Waivers facilitating State health security programs.
Sec. 8507. Conforming requirements for rebate agreements for covered 
              outpatient drugs.
Sec. 8508. Construction of Guaranteed Health Insurance Act of 1994 
              references.

                         Part 2--Long-Term Care

Sec. 8511. Coordination of optional home and community based services 
              under medicaid with long-term care under Guaranteed 
              Health Insurance Act of 1994.
Sec. 8512. Nursing home pass-through.
Sec. 8513. Continuation of Texas frail elderly demonstration.

                Part 3--Health Maintenance Organizations

Sec. 8521. Permitting Garden State Health Plan to participate in 
              managed care waiver.
Sec. 8522. Extension of period of applicability of enrollment mix 
              requirement to Dayton Area Health Plan.
Sec. 8523. Clarification of applicability of restrictions on Federal 
              financial participation.

                     Part 4--Vaccines for Children

Sec. 8531. State mandate for insurers to offer coverage of 
              immunizations and well-child services.
Sec. 8532. Limitation on State ability to purchase vaccines at Federal 
              price.

    Part 5--Treatment of Indians and Indian Health Service Providers

Sec. 8541. Nondiscrimination in participation providers.
Sec. 8542. Requiring individuals subject to waivers to have option to 
              enroll in Indian Health Service plans.
Sec. 8443. Treatment of outpatient facilities as federally qualified 
              health centers.

                  Part 6--Effective Date of Amendments

Sec. 8451. Amendments effective without regard to issuance of 
              regulations.

      Subtitle G--Miscellaneous and Technical Medicaid Amendments

                     Part 1--Substantive Provisions


                   SUBPART A--MANAGED CARE PROVISIONS

Sec. 8601. Medicaid managed care antifraud provisions.
Sec. 8602. Extension of medicaid waiver for Tennessee Primary Care 
              Network.
Sec. 8603. Waiver of application of medicaid enrollment mix requirement 
              to District of Columbia Chartered Health Plan, Inc.
Sec. 8604. Waiver of application of medicaid enrollment mix requirement 
              to Managed Health Services Insurance Corporation of 
              Milwaukee, Wisconsin.
Sec. 8605. Extension of Minnesota prepaid medicaid demonstration 
              project.


     SUBPART B--HOME AND COMMUNITY-BASED SERVICES WAIVER PROVISIONS

Sec. 8611. Elimination of requirement of prior institutionalization 
              with respect to habilitation services furnished under a 
              waiver for home or community-based services.
Sec. 8612. Relief from third party liability requirements when cost-
              effective.
Sec. 8613. State expenditures for medical assistance with respect to 
              home and community-based services provided under a 
              waiver.


                      SUBPART C--OTHER PROVISIONS

Sec. 8621. Presumptive eligibility for pregnant women.
Sec. 8622. Criteria for determining the amount of disallowances.
Sec. 8623. Intermediate sanctions for kickback violations.
Sec. 8624. Technical amendment related to taxes on certain health care 
              items and services.
Sec. 8625. Application of mammography certification requirements under 
              the medicaid program.
Sec. 8626. Nursing home reform.
Sec. 8627. Increase in authorization of appropriations for the maternal 
              and child health services block grant program.

 Part 2--Miscellaneous and Technical Corrections Relating to Obra-1990

Sec. 8641. Effective date.
Sec. 8642. Corrections relating to section 4401 (drug rebate program).
Sec. 8643. Corrections relating to section 4402 (enrollment under group 
              health plans).
Sec. 8644. Corrections relating to section 4501 (low-income medicare 
              beneficiaries).
Sec. 8645. Corrections relating to section 4601 (child health).
Sec. 8646. Corrections relating to section 4602 (outreach locations).
Sec. 8647. Corrections relating to section 4604 (payment for hospital 
              services for children under 6 years of age).
Sec. 8648. Corrections relating to section 4703 (payment adjustments 
              for disproportionate share hospitals).
Sec. 8649. Corrections relating to section 4704 (federally-qualified 
              health centers).
Sec. 8650. Corrections relating to section 4708 (substitute 
              physicians).
Sec. 8651. Corrections relating to section 4711 (home and community 
              care for frail elderly).
Sec. 8652. Corrections relating to section 4712 (community supported 
              living arrangements).
Sec. 8653. Correction relating to section 4713 (cobra continuation 
              coverage).
Sec. 8654. Correction relating to section 4716 (medicaid transition for 
              family assistance).
Sec. 8655. Corrections relating to section 4718 (medically needy income 
              levels for certain 1-member families).
Sec. 8656. Corrections relating to section 4723 (medicaid spend-down 
              option).
Sec. 8657. Corrections relating to section 4724 (optional State 
              disability determinations).
Sec. 8658. Correction relating to section 4732 (special rules for 
              health maintenance organizations).
Sec. 8659. Corrections relating to section 4747 (coverage of HIV-
              positive individuals).
Sec. 8660. Correction relating to section 4751 (advanced directives).
Sec. 8661. Corrections relating to section 4752 (physicians' services).
Sec. 8662. Corrections relating to section 4801 (nursing home reform).
Sec. 8663. Other technical corrections.

 Part 3--Miscellaneous and Technical Corrections Relating to Obra-1993

Sec. 8671. Effective date.
Sec. 8672. Corrections relating to section 13601 (personal care 
              services).
Sec. 8673. Corrections relating to section 13604 (emergency services 
              for aliens).
Sec. 8674. Corrections relating to section 13611 (transfers of assets; 
              treatment of certain trusts).
Sec. 8675. Corrections relating to section 13612 (medicaid estate 
              recoveries).
Sec. 8676. Corrections relating to section 13622 (liability of third 
              parties to pay for care and services).
Sec. 8677. Corrections relating to section 13623 (medical child 
              support).
Sec. 8678. Corrections relating to section 13624 (physician referrals).
Sec. 8679. Corrections relating to section 13631 (medicaid pediatric 
              immunization provisions).
Sec. 8680. Corrections relating to section 13643 (demonstration 
              projects).

             Subtitle H--Provision Relating to AFDC Program

Sec. 8701. Enforcement of maintenance-of-effort requirements through 
              AFDC.

        TITLE IX--QUALITY AND CONSUMER AND WORKFORCE PROTECTION

             Subtitle A--Quality Management and Improvement

              Part 1--National Quality Management Program

Sec. 9001. National Quality Management Program.
Sec. 9002. Consumer surveys.
Sec. 9003. National measures of quality performance.
Sec. 9004. National quality standards for approved sponsors.
Sec. 9005. Profiling patterns of practice of qualified providers.
Sec. 9006. Quality-related profiling data.
Sec. 9007. Compliance monitoring by approved States.
Sec. 9008. Guideline development and research on health care quality.
``Sec. 915. Evaluation, certification, and dissemination of guidelines.
Sec. 9009. Quality improvement organizations.
Sec. 9010. Quality management grants.
Sec. 9011. Authorization of appropriations for contracts and grants.
Sec. 9012. Health Care Quality Advisory Commission.
Sec. 9013. Definitions.
Sec. 9014. References to medicare provisions.
Sec. 9015. Effective dates.

                       Part 2--Consumer Resources

Sec. 9021. Consultation requirements regarding administration of 
              program.

   Subtitle B--Information Systems and Administrative Simplification

Sec. 9101. Requirements for health security cards and personal 
              identifiers.
Sec. 9102. National enrollment verification systems.
Sec. 9103. Standards for health information and information 
              transactions.
Sec. 9104. Requirements on sponsors and providers.
Sec. 9105. Imposition of additional requirements.
Sec. 9106. Standards and certification for health information network 
              services.
Sec. 9107. Civil money penalty.
Sec. 9108. Effect on State law.
Sec. 9109. Definitions.

             Subtitle C--Fair Health Information Practices

Sec. 9200. Definitions.

             Part 1--Duties of Health Information Trustees

Sec. 9201. Inspection of protected health information.
Sec. 9202. Amendment of protected health information.
Sec. 9203. Notice of information practices.
Sec. 9204. Accounting for disclosures.
Sec. 9205. Security.

       Part 2--Use and Disclosure of Protected Health Information

Sec. 9221. General limitations on use and disclosure.
Sec. 9222. Authorizations for disclosure of protected health 
              information.
Sec. 9223. Treatment, payment, and oversight.
Sec. 9224. Next of kin and directory information.
Sec. 9225. Public health.
Sec. 9226. Health research.
Sec. 9227. Emergency circumstances.
Sec. 9228. Judicial and administrative purposes.
Sec. 9229. Law enforcement.
Sec. 9230. Subpoenas, warrants, and search warrants.
Sec. 9231. Health information service organizations.

             Part 3--Access Procedures and Challenge Rights

Sec. 9241. Access procedures for law enforcement subpoenas, warrants, 
              and search warrants.
Sec. 9242. Challenge procedures for law enforcement subpoenas.
Sec. 9243. Access and challenge procedures for other subpoenas.
Sec. 9244. Construction of part; suspension of statute of limitations.
Sec. 9245. Responsibilities of Secretary.

                    Part 4--Miscellaneous Provisions

Sec. 9251. Payment card and electronic payment transactions.
Sec. 9252. Access to protected health information outside of the United 
              States.
Sec. 9253. Standards for electronic documents and communications.
Sec. 9254. Duties and authorities of affiliated persons.
Sec. 9255. Agents and attorneys.
Sec. 9256. Minors.
Sec. 9257. Maintenance of certain protected health information.

                          Part 5--Enforcement

Sec. 9261. Civil actions.
Sec. 9262. Civil money penalties.
Sec. 9263. Alternative dispute resolution.
Sec. 9264. Amendments to criminal law.

               ``CHAPTER 90--PROTECTED HEALTH INFORMATION

``1831. Definitions.
``1832. Obtaining protected health information under false pretenses.
``1833. Monetary gain from obtaining protected health information under 
              false pretenses.
``1834. Knowing and unlawful obtaining of protected health information.
``1835. Monetary gain from knowing and unlawful obtaining of protected 
              health information.
``1836. Knowing and unlawful use or disclosure of protected health 
              information.
``1837. Monetary gain from knowing and unlawful sale, transfer, or use 
              of protected health information.

           Part 6--Amendments to Title 5, United States Code

Sec. 9271. Amendments to Title 5, United States code.

    Part 7--Regulations, Research, and Education; Effective Dates; 
             Applicability; and Relationship to Other Laws

Sec. 9281. Regulations; research and education.
Sec. 9282. Effective dates.
Sec. 9283. Applicability.
Sec. 9284. Relationship to other laws.

                          Subtitle D--Remedies

Sec. 9300. Definitions.

                      Subtitle E--Fraud and Abuse

  Part 1--Application of Fraud and Abuse Authorities Under the Social 
                      Security Act to Other Payers

Sec. 9401. Application of civil money penalties to all payers.
Sec. 9402. Application of certain criminal penalties to all payers.
Sec. 9403. Private right of action.
Sec. 9404. Construction of Social Security Act references.

Part 2--Establishment of All-Payer Health Care Fraud and Abuse Control 
                                Program

Sec. 9411. All-payer health care fraud and abuse control program.
Sec. 9412. Establishment of all-payer health care fraud and abuse 
              control account.
Sec. 9413. Payments to States for health care fraud and abuse control 
              units.

                   Part 3--Amendments to Criminal Law

Sec. 9421. Health care fraud.
Sec. 9422. Forfeitures for violations of fraud statutes.
Sec. 9423. False statements.
Sec. 9424. Bribery and graft.
Sec. 9425. Injunctive relief relating to health care offenses.
Sec. 9426. Grand jury disclosure.
Sec. 9427. Theft or embezzlement.
Sec. 9428. Rewards for information leading to prosecution and 
              conviction.

              Part 4--Amendments to Civil False Claims Act

Sec. 9431. Amendments to Civil False Claims Act.

  Part 5--Amendments to Anti-fraud and Abuse Provisions Applicable to 
           Medicare, Medicaid, and State Health Care Programs

Sec. 9441. Reference to amendments.

          Part 6--Preemption of State Corporate Practice Laws

Sec. 9451. Preemption of State laws prohibiting corporate practice of 
              medicine.

              Subtitle F--Physician Ownership and Referral

  Part 1--Extension of Limitations on Self-Referral Under Medicare to 
                     Referrals Under Private Plans

Sec. 9501. Limitations on physician self-referral under private plans.
Sec. 9502. Construction of Social Security Act references.

Part 2--Amendments to Physician Ownership and Referral Provisions Under 
                                Medicare

Sec. 9511. Reference to amendments.

             Subtitle G--Workforce Protection and Training

Sec. 9600. Definitions.

               Part 1--General Employer Responsibilities

Sec. 9601. Prohibition of certain employer discrimination.
Sec. 9602. Whistleblower protection.
Sec. 9603. Employer neutrality.

        Part 2--Transitional Provisions for Workforce Stability

Sec. 9621. Application.
Sec. 9622. Obligations of displacing employer and affiliated 
              enterprises in event of displacement.
Sec. 9623. Employment with other health care employers.
Sec. 9624. Collective bargaining obligations during transition period.
Sec. 9625. General provisions.

              Part 3--Responsibilities of Board of Inquiry

Sec. 9631. Request for appointment of board of inquiry.
Sec. 9632. Appointment of board of inquiry.
Sec. 9633. Public fact finding.
Sec. 9634. Compensation of members of board of inquiry.
Sec. 9635. Maintenance of terms and conditions of employment.

          Part 4--Workforce Priorities Under Federal Payments

Sec. 9641. Programs of the Secretary of Labor.
Sec. 9642. National Institute for Health Care Workforce Development.

                        TITLE X--LONG-TERM CARE

                   Subtitle A--Long-Term Care Program

Sec. 10001. Establishment of long-term care program for home and 
              community-based services.
Sec. 10002. Individuals with severe disabilities.
Sec. 10003. Home and community-based services.
Sec. 10004. Administration through State plans.
Sec. 10005. Payments to States; medicaid maintenance of effort.
Sec. 10006. Federal funding.

  Subtitle B--Federal Standards for Private Long-Term Care Insurance 
                                Policies

        Part 1--General Requirement; Establishment of Standards


                     SUBPART A--GENERAL REQUIREMENT

Sec. 10101. General requirement.
Sec. 10102. Establishment of standards.
Sec. 10103. Deadline for application of standards in States.
Sec. 10104. Relation to State law.
Sec. 10105. Code of conduct with respect to endorsements.
Sec. 10106. Requirements for agent training and certification programs.


                         SUBPART B--DEFINITIONS

Sec. 10111. Long-term care insurance policy.
Sec. 10112. Other terms.

                           Part 2--Standards


                      SUBPART A--POLICY STANDARDS

Sec. 10121. Use of standard definitions and terminology and uniform 
              format.
Sec. 10122. Minimum benefits; limiting conditions on benefits.
Sec. 10123. Prohibition of discrimination.
Sec. 10124. Limitation on use of preexisting condition limits.
Sec. 10125. Use of functional assessment.
Sec. 10126. Requirements for premiums.
Sec. 10127. Inflation protection.
Sec. 10128. Nonforfeiture.
Sec. 10129. Designation of representatives.
Sec. 10130. Issuance, renewal, and cancellation.


                       SUBPART B--SALES PRACTICES

Sec. 10131. Certification of training of sales agents.
Sec. 10132. Duty of good faith and fair dealing.
Sec. 10133. Financial guidelines.
Sec. 10134. Prohibition of sale or issuance to medicaid beneficiaries.
Sec. 10135. Prohibition of sale or issuance of duplicate policies.
Sec. 10136. Provision of outline of coverage and other information.
Sec. 10137. Information on financial arrangements with groups.


                      SUBPART C--CARRIER STANDARDS

Sec. 10141. Refund of premiums (free look).
Sec. 10142. Mailing of policy.
Sec. 10143. Prompt payment.
Sec. 10144. Claims denials.
Sec. 10145. Limitation on rescission, cancellation, or nonrenewal or 
              denial of claims.
Sec. 10146. Reporting of information; access to information.
Sec. 10147. Medical documentation for the elderly.
Sec. 10148. Limits on compensation for sale of policies.

                    Part 3--Enforcement of Standards


                     SUBPART A--GENERAL PROVISIONS

Sec. 10151. Secretarial enforcement authority.
Sec. 10152. Complaints and investigations.
Sec. 10153. Hearings.
Sec. 10154. Cease and desist order with civil money penalty.


     SUBPART B--STANDARDS FOR APPROVAL OF STATE REGULATORY PROGRAMS

Sec. 10161. General requirement.
Sec. 10162. Enforcement.
Sec. 10163. Publication and public access to compliance information.
Sec. 10164. Process for approval of premiums.
Sec. 10165. Annual reports.
Sec. 10166. Increase in funding for long-term care insurance, 
              information, counseling, and assistance through State 
              regulatory programs.

                    Part 4--Miscellaneous Provisions

Sec. 10171. Reports and studies.
Sec. 10172. Waiver of paperwork requirements.

       Subtitle C--Worker Redeployment in Long-Term Care Programs

Sec. 10201. Requirement regarding redeployment of health care workers 
              under long-term care program.

                      TITLE XI--REVENUE PROVISIONS

Sec. 11001. Amendment of 1986 Code.

        Subtitle A--Increase in Excise Taxes on Tobacco Products

Sec. 11101. Increase in excise taxes on tobacco products.
Sec. 11102. Modifications of certain tobacco tax provisions.
Sec. 11103. Imposition of excise tax on manufacture or importation of 
              roll-your-own tobacco.

         Subtitle B--Treatment of Employer-Provided Health Care

Sec. 11201. Health benefits may not be provided under cafeteria plans 
              or flexible spending arrangements other than medical 
              savings accounts.
Sec. 11202. Deduction for health insurance costs of self-employed 
              individuals increased and made permanent.
Sec. 11203. Limitation on prepayment of medical insurance premiums.

Subtitle C--Extending Medicare Coverage of, and Application of Hospital 
      Insurance Tax to, All State and Local Government Employees.

Sec. 11301. Extending medicare coverage of, and application of hospital 
              insurance tax to, all State and local government 
              employees.

 Subtitle D--Treatment of Organizations Providing Health Care Services 
                       and Related Organizations

Sec. 11401. Qualification and disclosure requirements for certain 
              nonprofit health care organizations.
Sec. 11402. Excise taxes for failure by tax-exempt health care 
              organizations to meet certain qualification requirements.
Sec. 11403. Treatment of nonprofit health care organizations.
Sec. 11404. Tax treatment of taxable organizations providing health 
              insurance and other prepaid health care services.
Sec. 11405. Organizations subject to section 833.
Sec. 11406. Tax exemption for high-risk insurance pools.

    Subtitle E--Treatment of Accelerated Death Benefits Under Life 
                          Insurance Contracts

Sec. 11501. Tax treatment of accelerated death benefits under life 
              insurance contracts.
Sec. 11502. Tax treatment of companies issuing qualified accelerated 
              death benefit riders.

                Subtitle F--Employment Status Provisions

Sec. 11601. Employment status proposal required from Department of the 
              Treasury.
Sec. 11602. Increase in penalties relating to reporting of payments for 
              services.

    Subtitle G--Tax Treatment of Funding of Retiree Health Benefits

Sec. 11701. Post-retirement medical and life insurance reserves.

   Subtitle H--Excise Taxes on Insured and Self-Insured Health Plans

Sec. 11801. Excise taxes on insured and self-insured health plans.

                      Subtitle I--Other Provisions

          Part 1--Tax Incentives for Health Services Providers

Sec. 11901. Nonrefundable credit for certain primary health services 
              providers.
Sec. 11902. Expensing of medical equipment.

                Part 2--Health Care Workforce Trust Fund

Sec. 11911. Health Care Workforce Trust Fund.

  Part 3--Recapture of Certain Health Care Subsidies Received by High-
                           Income Individuals

Sec. 11921. Recapture of certain health care subsidies received by 
              high-income individuals.

 TITLE XII--AMENDMENTS TO THE EMPLOYEE RETIREMENT INCOME SECURITY ACT 
                                 OF1974

Sec. 12001. Conforming amendments to definitions.
Sec. 12002. Reporting and disclosure requirements for group health 
              plans.
Sec. 12003. Amendments to enforcement provisions of ERISA.
Sec. 12004. Exemptions from ERISA preemption.
Sec. 12005. Transitional continuation coverage requirement for group 
              health plans.
Sec. 12006. Coverage of pediatric vaccines and well-child services 
              under group health plans.
Sec. 12007. Additional amendments relating to group health plans.
Sec. 12008. Plan claims procedures.
Sec. 12009. Regulations defining collective bargaining agreement.

 TITLE XIII--COORDINATION OF MEDICAL PORTION OF WORKERS' COMPENSATION 
                        AND AUTOMOBILE INSURANCE

              Subtitle A--Workers' Compensation Insurance

Sec. 13000. Definitions.

   Part 1--Health Plan Requirements Relating to Workers' Compensation

Sec. 13001. Provision of workers' compensation services.
Sec. 13002. Payment by workers' compensation carrier.

                     Part 2--Requirements of States

Sec. 13011. State designation of centers of excellence in occupational 
              health.
Sec. 13012. Development of supplemental schedules.
Sec. 13013. Provision of workers' compensation data.
Sec. 13014. Effect on State workers' compensation laws.
Sec. 13015. Protection against fraud.

 Part 3--Application of Information Practices Requirements; Effect on 
                                Premiums

Sec. 13021. Application of information practices requirements.
Sec. 13022. Report on effect on workers' compensation premiums.
Sec. 13023. Permissible terms of certain construction industry 
              collective bargaining agreements.

                     Part 4--Demonstration Projects

Sec. 13031. Authorization.
Sec. 13032. Development of work-related protocols.
Sec. 13033. Development of capitation payment models.

  Part 5--Commission on Integration of Workers' Compensation Medical 
                                Benefits

Sec. 13041. Commission.

                    Subtitle B--Automobile Insurance

Sec. 13100. Definitions.
Sec. 13101. Provision of automobile insurance medical benefits through 
              health plans.
Sec. 13102. Payment by automobile insurance carrier.
Sec. 13103. Construction.

            Subtitle C--Federal Employees' Compensation Act

Sec. 13201. Application of policy.

          Subtitle D--Davis-Bacon Act and Service Contract Act

Sec. 13301. Coverage of benefits under Guaranteed Health Insurance Act 
              of 1994.

                      Subtitle E--Effective Dates

Sec. 13401. General effective date; application.
Sec. 13402. Federal requirements.

          TITLE XIV--FEDERAL EMPLOYEES HEALTH BENEFITS PROGRAM

Sec. 14001. Findings and purposes.
Sec. 14002. Definitions.
Sec. 14003. Amendment of title 5, United States Code.

 Subtitle A--General Changes in Health Benefits for Federal Employees 
                             and Annuitants

Sec. 14101. Types of benefits.
Sec. 14102. Contributions for guaranteed national benefits; other 
              provisions taking effect in 1997.
Sec. 14103. Annualization of open enrollment periods.
Sec. 14104. Subsidies for low-income Federal employees and annuitants.
Sec. 14105. Provisions relating to the Retired Federal Employees Health 
              Benefits Act.
Sec. 14106. Temporary employees.
Sec. 14107. Standardized claims processing.
Sec. 14108. Advance directives.
Sec. 14109. Collective bargaining authority.

           Subtitle B--Provisions Relating to Universal FEHBP

Sec. 14201. Universal FEHBP.

                      Subtitle C--Transition Rules

Sec. 14301. Treatment of comprehensive medical plans.
Sec. 14302. Eligibility for universal FEHBP.
Sec. 14303. Treatment of remaining plans.

                 Subtitle D--Post-Transition Provisions

Sec. 14401. Integration of FEHBP and universal FEHBP.

 ``CHAPTER 89A--PROVISIONS FOR THE INTEGRATION OF FEHBP AND UNIVERSAL 
                                 FEHBP

``Sec. 8931. Definitions.
``Sec. 8932. Applicability.
``Sec. 8933. Coverage under universal FEHBP.
``Sec. 8934. Provisions relating to plans offering the guaranteed 
              national benefit package.
``Sec. 8935. Eligibility for additional benefits.
``Sec. 8936. Opportunities to enroll.
``Sec. 8937. Regulations.
Sec. 14402. Final accounting and distribution of certain reserves of 
              chapter 89 plans.
Sec. 14403. Treatment of individuals residing abroad.

                  Subtitle E--Miscellaneous Provisions

Sec. 14501. Technical and conforming amendments.
Sec. 14502. Report on conforming legislative changes.
Sec. 14503. Treatment of Postal Service plans as multiemployer plans.

                TITLE XV--DEPARTMENT OF VETERANS AFFAIRS

Sec. 15001. Benefits and eligibility through Department of Veterans 
              Affairs medical system.

  ``CHAPTER 18--ELIGIBILITY AND BENEFITS UNDER ENROLLMENT-BASED SYSTEM


                        ``SUBCHAPTER I--GENERAL

``1801. Definitions.


                      ``SUBCHAPTER II--ENROLLMENT

``1811. Enrollment: veterans.
``1812. Enrollment: CHAMPVA eligibles.
``1813. Enrollment: family members.
``1814. Exclusive enrollment eligibility categories.


                       ``SUBCHAPTER III--BENEFITS

``1821. Benefits for VA enrollees.
``1822. Chapter 17 benefits.
``1823. Supplemental benefits packages and policies.
``1824. Limitation regarding veterans enrolled with health plans 
              outside Department.


                   ``SUBCHAPTER IV--FINANCIAL MATTERS

``1831. Premiums, copayments, etc..
``1832. Recovery of cost of certain care and services.
``1833. Health Plan Fund.
``1834. Guaranteed funding of Government costs.
Sec. 15002. Organization of Department of Veterans Affairs facilities 
              as health plans.


 ``SUBCHAPTER IV--PARTICIPATION AS PART OF NATIONAL HEALTH CARE REFORM

``7341. Organization of health care facilities as health plans.
``7342. Operation of health care facilities within States operating 
              single payer programs or pure managed competition 
              programs.
``7343. Health care resource agreements.
``7344. Administrative and personnel flexibility.
``7345. Veterans Health Care Transition Fund.
``7346. Funding provisions: grants and other sources of assistance.
Sec. 15003. Eligibility for chapter 17 care.
Sec. 15004. Authority to provide health care for herbicide and 
              radiation exposure.
Sec. 15005. Extension of authority to provide priority outpatient 
              health care for exposure to environmental hazards.
Sec. 15006. Confidentiality of medical records.
Sec. 15007. Report on waiving cost-sharing for certain medical care for 
              dependents of Persian Gulf veterans who may have been 
              exposed to environmental hazards.
Sec. 15008. Study of the effect of telemedicine on the delivery of VA 
              health care services.
Sec. 15009. Conforming reduction in discretionary spending limits.
Sec. 15010. Effective dates.

                    TITLE XVI--INDIAN HEALTH SERVICE

Sec. 16001. Policy.
Sec. 16002. Health security for Indians.

                ``TITLE IX--HEALTH SECURITY FOR INDIANS

``Sec. 901. Definitions.
``Sec. 902. Eligibility and health service coverage of Indians.
``Sec. 903. Provision of health services to non-enrollees and non-
              Indians.
``Sec. 904. Provision of guaranteed national benefit package.
``Sec. 905. Administrative provisions.
``Sec. 906. Long-term care for home and community-based services.
``Sec. 907. Capital investment and transitional assistance.
``Sec. 908. Treatment of Indians entitled to veterans benefits.
Sec. 16003. Treatment of payments under medicare and medicaid programs.
Sec. 16004. Annual consultation concerning health care initiatives.
Sec. 16005. Preemption of State regulatory authority.
Sec. 16006. Rules of construction.
Sec. 16007. Prohibition on reductions of full-time equivalent positions 
              in the Indian Health Service.

         TITLE XVII--MEDICAL MALPRACTICE AND ANTITRUST REFORMS

                    Subtitle A--Medical Malpractice

                        Part 1--Liability Reform

Sec. 17001. Definitions.
Sec. 17002. Federal tort reform.
Sec. 17003. Alternative dispute resolution methods.
Sec. 17004. Requirement for affidavit of merit.
Sec. 17005. Limitation on amount of attorneys' contingency fees.
Sec. 17006. Periodic payment of awards.

   Part 2--Other Provisions Relating to Medical Malpractice Liability

Sec. 17011. Pilot program applying practice guidelines to medical 
              malpractice liability actions.
Sec. 17012. Federal study on medical malpractice.

                  Subtitle B--McCarran-Ferguson Reform

Sec. 17101. Short title.
Sec. 17102. Rules of construction.
Sec. 17103. Amendments.
Sec. 17104. Publication and availability of historical underwriting 
              capacity risk pool notifications.
Sec. 17105. Business review.
Sec. 17106. Study and report.
Sec. 17107. Effective dates.

     SEC. 1000. PROTECTION OF CONSUMER CHOICE.

       Nothing in this Act shall be construed as prohibiting the 
     following:
       (1) An individual from choosing the individual's own health 
     provider.
       (2) An individual from purchasing any health care services.
       (3) An individual from purchasing supplemental insurance 
     (offered consistent with this Act) to cover health care 
     services not covered under the guaranteed national benefit 
     package.
       (4) Employers from providing coverage (consistent with this 
     Act) for benefits in addition to the guaranteed national 
     benefit package.
       (5) Employers from making contributions (consistent with 
     this Act) toward employee premiums in excess of any 
     contributions required under this Act.
     Subtitle A--Universal Coverage and Individual Responsibilities

     SEC. 1001. UNIVERSAL HEALTH COVERAGE.

       (a) Coverage.--In accordance with this Act, each eligible 
     individual is entitled to the benefits covered under the 
     guaranteed national benefit package under title III.
       (b) Requirement.--In accordance with this Act and the 
     applicable provisions of the Internal Revenue Code of 1986, 
     individuals are required to obtain health insurance coverage 
     for themselves and their family members.
       (c) Eligible Individual Defined.--In this Act, the term 
     ``eligible individual'' means an individual who is--
       (1) a citizen or national of the United States;
       (2) an alien permanently residing in the United States 
     under color of law (as defined in section 1005(b)(1)); or
       (3) a long-term nonimmigrant (as defined in section 
     1005(b)(2)).

     Such term does not include an undocumented alien or a 
     prisoner.
       (c) General Effective Date.--This section takes effect on 
     January 1, 1999.
       (d) Issuance of Health Security Cards.--Each eligible 
     individual is entitled to be issued a health security card by 
     the certified health plan (or under the medicare program or 
     medicare part C) in which the individual is enrolled.

     SEC. 1002. SATISFACTION OF RESPONSIBILITY THROUGH ENROLLMENT 
                   IN CERTIFIED HEALTH PLANS, MEDICARE PART C, AND 
                   MEDICARE.

       (a) Coverage Under Certified Health Plan.--An individual 
     meets the requirement of section 1001(b) for a month only 
     through coverage--
       (1) under a certified health plan (as defined in section 
     2), or
       (2) under medicare part C (if the individual is eligible to 
     enroll under medicare part C).
       (b) Coverage Under Medicare Program.--An individual is 
     considered to have met the requirement of section 1001(b) if 
     the individual is a part A medicare beneficiary, and the 
     provision of benefits under the medicare program is deemed to 
     constitute the entitlement described in section 1001(a).

     SEC. 1003. SPECIAL RULES FOR COVERED INDIVIDUALS WHO ARE NOT 
                   REQUIRED TO CONTRIBUTE.

       (a) In General.--In the case of an individual who is a 
     covered, noncontributing individual (as defined in subsection 
     (b)) with respect to all months in a taxable year, the 
     individual shall not be required under section 1001(b) to 
     make any contribution toward obtaining health insurance 
     coverage with respect to the taxable year.
       (b) Covered, Noncontributing Individual Defined.--In 
     subsection (a), the term ``covered, noncontributing 
     individual'', with respect to a taxable year, means either of 
     the following individuals:
       (1) Young dependents.--
       (A) In general.--An individual who is a young dependent of 
     any taxpayer for a taxable year of such taxpayer which begins 
     in the calendar year in which such taxable year begins.
       (B) Young dependent.--For purposes of this section, the 
     term ``young dependent'' means, with respect to periods in 
     any calendar year, any individual if--
       (i) an exemption is allowable under section 151(c) of the 
     Internal Revenue Code of 1986 with respect to such individual 
     to the taxpayer for a taxable year beginning in such calendar 
     year, and
       (ii) such individual--

       (I) has not attained the age of 19 as of the close of such 
     calendar year, or
       (II) is a student (as defined in section 151(c)(4) of such 
     Code) who has not attained age 24 as of the close of such 
     calendar year.

       (2) Certain cash recipients.--
       (A) In general.--An individual who for each month in the 
     taxable year is--
       (i) an AFDC recipient (as defined in section 2), or
       (ii) an SSI recipient (as defined in such section).
       (B) Limitation for ssi recipients.--Subparagraph (A)(ii) 
     shall not apply to an individual filing a joint return unless 
     both spouses are SSI recipients.
       (c) Reference to Low-Income Individuals Who Are Covered and 
     Not Required to Fully Contribute.--
       (1) Low-income individuals with below-threshold income not 
     required to contribute.--For exemption from requirement to 
     contribute toward health insurance coverage for low-income 
     individuals, see paragraph (1) of section 59B(b) of the 
     Internal Revenue Code of 1986 or section 2122(c)(1) of the 
     Social Security Act.
       (2) Reduced contribution for other low-income 
     individuals.--For reduction in contribution requirement 
     toward health insurance coverage for other low-income 
     individuals, see paragraph (2) of section 59B(b) of the 
     Internal Revenue Code of 1986 or section 2122(c)(2) of the 
     Social Security Act.

     SEC. 1004. SPECIAL RULES FOR INDIVIDUALS NEITHER COVERED NOR 
                   REQUIRED TO CONTRIBUTE.

       (a) In General.--In the case of an individual who is a 
     noncovered, noncontributing individual (as defined in 
     subsection (b)) with respect to a month in a taxable year, 
     the individual is deemed to have waived entitlement to 
     benefits under section 1001(a) and is not required to make a 
     contribution toward health insurance coverage.
       (b) Noncovered, Noncontributing Individual Defined.--In 
     subsection (a), the term ``noncovered, noncontributing 
     individual'', with respect to a month, means any of the 
     following individuals:
       (1) Religious exemption.--An individual if, as of the first 
     day of such month, there is in effect for such individual, a 
     qualified religious exemption (as defined in subsection 
     (c)(1)).
       (2) Disabled veterans.--An individual if, as of the first 
     day of such month, there is in effect for the individual, a 
     qualified disabled veteran exemption (as defined in 
     subsection (c)(2)).
       (3) Active duty military.--An individual if as of the first 
     day of such month, the individual is on active duty as a 
     member of the uniformed services (as defined in section 101 
     of title 10, United States Code).
       (4) Prisoners.--An individual if as of the first day of 
     such month, the individual is imprisoned under Federal, 
     State, or local authority after conviction.
       (c) Religious and Veterans Exemptions Described.--For 
     purposes of subsection (b)--
       (1) Qualified religious exemption.--
       (A) In general.--The term ``qualified religious exemption'' 
     means an exemption granted by the Secretary to an 
     individual--
       (i) who is a member of a recognized religious sect or 
     division thereof with respect to which such Secretary makes 
     the findings referred to in subparagraphs (C), (D), and (E) 
     of section 1402(g)(1) of the Internal Revenue Code of 1986,
       (ii) who is an adherent of established tenets or teachings 
     of such sect or division as described in such section, and
       (iii) who submits an application for such exemption which 
     contains or is accompanied by the evidence described in 
     section 1402(g)(1)(A) of such Code and a waiver described in 
     section 1402(g)(1)(B) of such Code.

     For purposes of the clause (iii), section 1402(g)(1)(B) of 
     such Code shall be treated as including a reference to 
     medicare part C.
       (B) Limitation.--An exemption granted under this paragraph 
     shall cease to apply beginning on the date such Secretary 
     determines that the individual, or the sect or division, 
     ceased to meet the requirements of subparagraph (A).
       (2) Qualified disabled veteran exemption.--
       (A) In general.--The term ``qualified disabled veteran 
     exemption'' means an exemption granted by the Secretary to an 
     eligible person (within the meaning of section 1710(a)(1) of 
     title 38, United States Code) who waives all benefits and 
     payments under all certified health plans of any employer and 
     under medicare part C with respect to the guaranteed national 
     benefit package described in title III.
       (B) Minimum period of exemption.--Such an exemption may not 
     be granted for a period of less than 1 year and shall not 
     take effect earlier than the month beginning after the month 
     in which the eligible person requests such waiver.
       (C) Termination by individual.--Such an exemption may be 
     terminated by the eligible person. Such a termination shall 
     not take effect earlier than the month beginning after the 
     month in which notice of such termination is sent to the 
     Secretary. No subsequent exemption under this paragraph may 
     be granted to such person until one year after the date such 
     termination took effect.

     SEC. 1005. MISCELLANEOUS DEFINITIONS AND RELATED PROVISIONS.

       (a) Related Definitions.--In this subtitle--
       (1) Alien permanently residing in the united states under 
     color of law.--The term ``alien permanently residing in the 
     United States under color of law'' means an alien lawfully 
     admitted for permanent residence (within the meaning of 
     section 101(a)(20) of the Immigration and Nationality Act), 
     and includes any of the following:
       (A) An alien who is admitted as a refugee under section 207 
     of the Immigration and Nationality Act.
       (B) An alien who is granted asylum under section 208 of 
     such Act.
       (C) An alien whose deportation is withheld under section 
     243(h) of such Act.
       (D) An alien whose deportation is suspended under section 
     244 of such Act.
       (E) An alien who is granted conditional entry pursuant to 
     section 203(a)(7) of such Act, as in effect before April 1, 
     1980.
       (F) An alien who is admitted for temporary residence under 
     section 210, 210A, or 245A of such Act.
       (G) An alien who has been paroled into the United States 
     under section 212(d)(5) of such Act for an indefinite period 
     or who has been granted extended voluntary departure as a 
     member of a nationality group, temporary protected status, or 
     deferred enforced departure.
       (H) An alien who is the spouse or unmarried child under 21 
     years of age of a citizen of the United States, or the parent 
     of such a citizen if the citizen is over 21 years of age, and 
     with respect to whom an application for adjustment to lawful 
     permanent residence is pending.
       (I) An alien eligible for work authorization granted by the 
     Immigration and Naturalization Service (other than as a 
     nonimmigrant).
       (J) An alien within such other classification of permanent 
     resident aliens as the Secretary may establish by regulation. 
     Such regulation shall include categories of such aliens who 
     are included in regulations as in effect on the date of the 
     enactment of this Act under title XIX of the Social Security 
     Act.
       (2) Long-term nonimmigrant.--The term ``long-term 
     nonimmigrant'' means a nonimmigrant described in subparagraph 
     (E), (H), (I), (K), (L), (N), (O), (P), (Q), or (R) of 
     section 101(a)(15) of the Immigration and Nationality Act.
       (3) Prisoner.--The term ``prisoner'' means, as specified by 
     the Secretary, an individual during a period of imprisonment 
     under Federal, State, or local authority after conviction.
       (b) Additional Recommendations and Rules Regarding Aliens; 
     Recommendations Regarding Citizens Residing Outside the 
     United States.--
       (1) Recommendations concerning aliens.--The Secretary, in 
     consultation with the Attorney General, shall make 
     recommendations to Congress with respect to classes of 
     eligibility for aliens and modifications of rules concerning 
     eligibility and coverage for aliens.
       (2) Rules.--In making the recommendations under paragraph 
     (1), the Secretary shall consider--
       (A) appropriate treatment of diplomatic personnel and 
     employees of international organizations,
       (B) appropriate rules for minors who are not dependents of 
     eligible individuals, and
       (C) appropriate rules for the treatment of spouses who are 
     dependents of ineligible individuals.
       (3) Reciprocal treatment of other nonimmigrants.--With 
     respect to those classes of individuals who are lawful 
     nonimmigrants but who are not long-term nonimmigrants (as 
     defined in section (b)(2)), the Secretary, in consultation 
     with the Attorney General, shall submit to Congress such 
     recommendations relating to reciprocal agreements between the 
     United States and foreign states with respect to coverage of 
     some or all classes of such nonimmigrants as may be 
     appropriate.
       (4) Recommendations concerning united states citizens 
     residing outside the united states.--The Secretary shall make 
     recommendations to Congress with respect to coverage of 
     United States citizens residing outside the United States.
                 Subtitle B--Employer Responsibilities

               PART 1--EMPLOYER COVERAGE RESPONSIBILITIES

     SEC. 1101. EMPLOYER RESPONSIBILITIES.

       (a) In General.--In accordance with this Act and the 
     applicable provisions of the Internal Revenue Code of 1986, 
     employers are required to provide or contribute to health 
     insurance coverage of employees and their family members.
       (b) Application of Rules.--In carrying out such 
     requirement, the provisions in the following sections of this 
     part apply.
       (c) General Exemption.--Subsection (a) shall not apply with 
     respect to a generally excludable employee (as defined in 
     section 1105(b)).
       (d) Effective Date.--This section takes effect on January 
     1, 1997, with respect to large employers and January 1, 1999, 
     with respect to other employers.

     SEC. 1102. SATISFACTION OF RESPONSIBILITY BY LARGE EMPLOYERS 
                   THROUGH ENROLLMENT IN CERTIFIED HEALTH PLANS.

       (a) Requirement.--
       (1) In general.--Subject to paragraph (2), in order for a 
     large employer to meet the requirements of section 1101(a) 
     with respect to an employee for a month, the employee must be 
     a qualified employer-covered employee (as defined in section 
     1104).
       (2) Treatment of part-time, seasonal, or temporary 
     employees.--In the case of an exempt part-time, seasonal, or 
     temporary employee (as defined in subsection (c)), in order 
     for a large employer to meet the requirements of section 
     1101(a) with respect to such an employee for a month, 
     either--
       (A) the employee must be a qualified employer-covered 
     employee (as defined in section 1104), or
       (B) the employer must contribute to medicare part C.
       (b) Exception for Voluntarily Excluded Employees Who May 
     Elect to Decline Coverage.--
       (1) In general.--Subsection (a) shall not apply with 
     respect to a voluntarily excluded employee (as defined in 
     paragraph (2)), if the employee was offered coverage in 
     accordance with section 1104(c)).
       (2) Voluntarily excluded employee.--For purposes of 
     paragraph (1), subject to paragraph (3), the term 
     ``voluntarily excluded employee'' means, with respect to a 
     month, any of the following employees:
       (A) Other health coverage.--
       (i) In general.--Any employee if there is in effect as of 
     the first day of such month a withholding exemption 
     certificate stating that such employee is covered under 
     medicare part A or a certified health plan other than a plan 
     of such employer.
       (ii) Special rule for individuals covered under indian 
     health service or veterans plan.--Clause (i) shall not apply 
     to an employee by reason of coverage under a plan described 
     in clause (iii) unless the employer makes a contribution 
     toward such coverage in the amount described in section 
     1104(d)(2).
       (iii) Plans described.--A plan described in this clause 
     is--

       (I) a health plan of the Indian Health Service, or
       (II) an HSA-certified VA health plan (as defined in section 
     1801 of title 38, United States Code) in the case of an 
     employee who is a veteran (within the meaning of section 101 
     of such title) or a family member of a veteran.

       (B) Individuals electing medicare part c.--Any employee if 
     there is in effect as of the first day of such month a 
     withholding exemption certificate stating that such 
     employee--
       (i) is an eligible individual who is an AFDC or SSI 
     recipient, and
       (ii) waives coverage under all certified health plans of 
     the employer for such month.
       (C) Waiver during transition period.--In the case of a 
     month before January 1999, any employee who waives coverage 
     under all certified health plans of the employer for such 
     month.
       (3) Special rule in case of enrollment of employees of 
     large employers in community-rated plans.--
       (A) In general.--In the case of an employee of a large 
     employer who is enrolled in a certified health plan other 
     than an exempt plan described in subparagraph (B), the 
     employee is deemed to be covered under the certified health 
     plan of the large employer and such plan shall make payment, 
     in relation to other certified health plans, in the same 
     manner as a group health plan is a primary plan (as described 
     in section 1862(b)(2)(A)) in relation to the medicare 
     program.
       (B) Exempt plan.--An exempt plan described in this 
     subparagraph with respect to an employee is--
       (i) a certified health plan offered by another employer of 
     the employee,
       (ii) a certified health plan offered by an employer of the 
     employee's spouse, or
       (iii) a certified health plan offered by an employer of 
     another person with respect to whom the employee is a young 
     dependent.
       (c) Exempt Part-time, Seasonal, or Temporary Employees.--
     For purposes of this part, the term ``exempt part-time, 
     seasonal, or temporary employee'' means, with respect to a 
     month, any of the following employees:
       (1) Certain part-time employees.--Any employee whose normal 
     work week is reasonably expected as of the first day of such 
     month to be less than 25 hours.
       (2) Seasonal or temporary employees.--Any employee who is 
     not reasonably expected as of the first day of such month to 
     be employed by the employer for a period of 120 consecutive 
     days during any 365-day period that includes such first day.
       (3) Delay for certain part-time employees.--Any employee 
     whose normal work week is reasonably expected as of the first 
     day of such month to be at least 25 hours, but less than 35 
     hours, and the normal work week of the employee during the 
     preceding 3 months was less than 25 hours.

     SEC. 1103. SATISFACTION OF RESPONSIBILITY FOR SMALL EMPLOYERS 
                   THROUGH CERTIFIED HEALTH PLANS OR MEDICARE PART 
                   C.

       (a) In General.--In order for a small employer to meet the 
     requirements of section 1101(a) with respect to an employee 
     for a month, the employee must be--
       (1) a qualified employer-covered employee (as defined in 
     section 1104) or an employee described in subsection 
     (b)(2)(B), or
       (2) covered under medicare part C.
       (b) Limitation on Employer Choice.--
       (1) In general.--Subject to paragraph (2), a small employer 
     is not considered to have met the requirements of section 
     1101(a) by reason of subsection (a)(1) of this section unless 
     all employees of such employer are qualified employer-covered 
     employees.
       (2) Exceptions.--A small employer is not required under 
     paragraph (1) to provide coverage (under a certified health 
     plan as a qualified employer-covered employee) of any 
     employee who is--
       (A) a medicare part C eligible individual described in 
     paragraph (4) or (5) of section 2101(b) of the Social 
     Security Act,
       (B) a voluntarily excluded employee (as defined in section 
     1102(b)) described in section 1102(b)(2)(A) if the employee 
     was offered such coverage in accordance with section 1104(c), 
     or
       (C) an exempt part-time, seasonal, or temporary employee 
     (as defined in section 1102(c)).

     For purposes of subparagraph (B), section 1102(b)(2)(A) shall 
     be applied by treating clause (iii) thereof as including a 
     reference to a certified health plan offered through 
     Universal FEHBP.

     SEC. 1104. QUALIFIED EMPLOYER-COVERED EMPLOYEE DEFINED.

       (a) In General.--In this part, the term ``qualified 
     employer-covered employee'' means any employee if (and only 
     if)--
       (1) such employee is covered under a certified health plan 
     of the employee's employer,
       (2) such employee's coverage under such plan is in 
     accordance with subsection (b),
       (3) such employee was offered such coverage in accordance 
     with subsection (c), and
       (4) the employer makes a contribution for such coverage in 
     accordance with subsection (d).
       (b) Coverage Requirements.--
       (1) In general.--An employee's coverage under a certified 
     health plan is in accordance with this subsection if--
       (A) such plan (which may be a high deductible plan, as 
     defined in subsection (d)(2)(E)) was selected by the employee 
     from plans offered consistent with subsection (c),
       (B) family members of the employee are covered under such 
     plan if such family coverage is elected in accordance with 
     such subsection, and
       (C) such coverage does not terminate by reason of 
     termination of employment until the end of the month in which 
     such termination occurs.
       (2) Coverage defined.--For purposes of this subsection, an 
     individual is considered to be covered with respect to a plan 
     at such time as the plan bears a legal responsibility for 
     provision of (or payment for) services for which benefits are 
     included under the plan.
       (c) Offering Required.--
       (1) In general.--Coverage is offered in accordance with 
     this subsection with respect to an employee only if the 
     employee is offered coverage under a choice of certified 
     health plans, including at least--
       (A) 1 managed care plan (as defined in section 5504(7)), if 
     available to the employer with respect to the employee, and
       (B) 1 unlimited-choice-of-provider plan (as defined in 
     section 5504(17)), which may be a point-of-service plan (as 
     defined in section 5504(10)).
       (2) Offering family coverage.--
       (A) In general.--Coverage is offered in accordance with 
     this subsection with respect to an employee only if coverage 
     also is offered for family members under the plan in which 
     the employee obtains coverage.
       (B) Family members defined.--For purposes of this section, 
     the term ``family member'' means, with respect to an 
     employee--
       (i) the employee's spouse, if the spouse is an eligible 
     individual, and
       (ii) any young dependent of the employee, if the dependent 
     is an eligible individual.
       (3) Terms of offering.--An employer shall not be treated as 
     offering coverage in accordance with this subsection unless 
     the following requirements are met:
       (A) Annual open enrollment periods.--The employer has an 
     annual open enrollment period of at least 45 days during 
     which employees may change the plan under which they are 
     provided coverage.
       (B) Changes in enrollment during 1st year of employment.--
     Once during the 1st year of employment with an employer, each 
     employee may change the plan under which the employee is 
     provided coverage. Such a change shall be effective on the 
     first day of the first month beginning at least 45 days after 
     the date the employer receives a notice of change of 
     coverage.
       (C) Changes in family status.--The offer of family coverage 
     under paragraph (2) is made (in accordance with regulations 
     prescribed by the Secretary) at such times and in such manner 
     as may be necessary to take into account changes in family 
     status and changes in employment of family members.
       (4) Treatment of cooperatives, universal fehbp, and state 
     single-payer systems.--An employer is deemed to meet the 
     requirement of the paragraph (1) with respect to an employee 
     if--
       (A) in the case of a small employer, the employer makes 
     available a choice of certified health plans through a 
     consumer purchasing cooperative or through Universal FEHBP; 
     or
       (B) the employee resides in a State which has a State 
     single-payer system approved under subtitle A of title IV and 
     the employer meets the requirements applicable to the 
     employer under such system.
       (d) Required Contribution.--
       (1) In general.--An employer makes a contribution for 
     coverage under a certified health plan in accordance with 
     this subsection with respect to an employee only if--
       (A) the employer pays the employer contribution amount 
     specified in paragraph (2) for an employee (and family 
     members) covered under a certified health plan under 
     subsection (b), and
       (B) the portion of the premium for coverage not paid by the 
     employer, net of the value of any premium certificates 
     provided under part A of title XXII of the Social Security 
     Act or other premium subsidies provided with respect to the 
     employee, is withheld from wages paid the employee.
       (2) Employer contribution amount.--
       (A) Full-time employees.--For purposes of paragraph (1)--
       (i) Covered under managed care plans.--In the case of an 
     employee who is covered under a managed care plan (as defined 
     in section 5504(7)), the employer contribution amount 
     specified in this paragraph is equal to at least 80 percent 
     of the premium for the qualified managed care plan offered 
     under subsection (c) to the employee that has the lowest 
     premium for the class of enrollment involved.
       (ii) Covered under unlimited-choice-of-provider plan.--In 
     the case of an employee who is covered under an unlimited-
     choice-of-provider plan (other than a high deductible plan) 
     the employer contribution amount specified in this paragraph 
     is equal to at least 80 percent of the premium for the 
     qualified unlimited-choice-of-provider plan offered under 
     subsection (b) to the employee that has the lowest premium 
     for the class of enrollment involved and that is not a high 
     deductible plan.
       (iii) Covered under high deductible plan.--In the case of 
     an employee who is covered by a certified health plan that is 
     a high deductible plan, the employer contribution amount 
     specified in this paragraph is the same percent of the 
     premium for such coverage as the percent that would apply 
     under clause (ii) if the employee were covered under an 
     unlimited-choice-of-provider plan that is not a high 
     deductible plan.
       (B) Reduction for part-time employees.--
       (i) In general.--In the case of a part-time employee (as 
     defined in section 1106(a)), the amount specified in this 
     paragraph is an amount that is not less than the part-time 
     fraction (as defined in such section) of the amount otherwise 
     provided under subparagraph (A).
       (ii) Employer election to increase share.--An employer may 
     elect to specify, with respect to any part-time employee for 
     any month, an part-time fraction which is greater than the 
     part-time fraction which would (but for this clause) apply to 
     such employee for such month but not greater than 1. Any 
     fraction so specified shall apply to the employee for the 
     month for which made and all succeeding months beginning 
     before the date it is revoked by the employer.
       (C) Contribution to medical savings account required if 
     coverage under high deductible medical savings account 
     plan.--
       (i) In general.--An employer shall not be treated as making 
     a contribution for coverage under a certified health plan in 
     accordance with this subsection in the case of an employee 
     covered under a high deductible plan offered by the employer, 
     unless the employer also makes a contribution in the amount 
     of the medical savings contribution amount specified in 
     clause (ii) into a medical savings account (as defined in 
     section 7705(a) of the Internal Revenue Code of 1986) on 
     behalf of the employee. Such a contribution shall be made not 
     later than the date of the premium payment to which it 
     relates.
       (ii) MSA contribution amount.--For purposes of clause (i), 
     the term ``medical savings contribution amount'' means, for 
     an employee covered under a high deductible plan, an amount 
     equal to the excess of--

       (I) the employer contribution amount that would apply under 
     this paragraph if the employee were covered under an 
     unlimited-choice-of-provider plan that was not a high 
     deductible plan, over
       (II) the employer contribution amount made for coverage 
     under the high deductible plan.

       (D) Treatment of plans offered through a cooperative or 
     universal fehbp.--With respect to certified health plans 
     offered through a consumer purchasing cooperative or 
     Universal FEHBP by an employer to an employee, the 
     contribution amount under this paragraph shall be determined 
     as if all the certified health plans offered by the 
     cooperative or Program were offered by the employer.
       (E) High deductible plan.--For purposes of this paragraph, 
     the term ``high deductible plan'' has the meaning given such 
     term by section 5504(5).
       (3) Determination of premium.--
       (A) In general.--For purposes of this subsection, the term 
     ``premium'' means, with respect to--
       (i) a certified health plan that is offered by a carrier 
     (as defined in section 5504(2)), the premium established by 
     the carrier for the plan with respect to the guaranteed 
     national benefit package described in title II ; or
       (ii) any other certified health plan, a reasonable estimate 
     of the aggregate accident and health coverage expenditures of 
     the plan (as determined under section 4376(d) of the Internal 
     Revenue Code of 1986) for the period involved with respect to 
     the guaranteed national benefit package which--

       (I) is determined on an actuarial basis for different 
     classes of enrollment (consistent with section 5108), and
       (II) takes into account such factors as the Secretary of 
     the Treasury, in consultation with the Secretary of Health 
     and Human Services, may prescribe.

       (B) Premium based on class of enrollment.--The premium with 
     respect to an employee for a month shall be based on the 
     class of enrollment with respect to which the employee is 
     provided coverage as of the first day of the month.
       (C) Additional rules.--Rules similar to the rules in 
     clauses (ii) and (iii) of subparagraph (B), and subparagraph 
     (C), of section 4980B(f)(4) of the Internal Revenue Code of 
     1986 shall apply to the determination of the premium, except 
     that the adjustment under subparagraph (B)(ii)(II) of such 
     section shall be by the sum described in section 6001(c) of 
     the Guaranteed Health Insurance Act of 1994).
       (4) Compliance with premium certificate requirements.--An 
     employer is not considered to have made a contribution for 
     coverage with respect to an employee in accordance with this 
     subsection unless--
       (A) the employer provides the employee, upon request, with 
     such documentation, in such form and in such a timely manner, 
     as the Secretary specifies, as the employee may require to 
     apply for and obtain a premium certificate under part A of 
     title XXII of the Social Security Act; and
       (B) if the employee tenders to the employer a premium 
     certificate issued under such subpart, the employer reduces 
     by the value of the certificate the amount of any premium 
     required to be paid by the employee for periods beginning 
     after the date of tender of the certificate unless otherwise 
     provided.

     SEC. 1105. EMPLOYEES NOT SUBJECT TO REQUIREMENT.

       (a) In General.--An employer is not required to provide or 
     contribute to health insurance coverage with respect to 
     employment of a generally excludable employee (as defined in 
     subsection (b)).
       (b) Generally Excludable Employee Defined.--For purposes of 
     subsection (a), the term ``generally excludable employee'' 
     means any employee for any month if--
       (1) such employee began work for the employer after the 
     first day of such month;
       (2) there is in effect as of the first day of such month a 
     withholding exemption certificate stating that such employee 
     reasonably expects to be a young dependent (as defined in 
     section 1003(b)(1)(B)) of any taxpayer for the taxable year 
     of such taxpayer which includes such month;
       (3) as of the first day of such month, there is in effect 
     for such employee--
       (A) a qualified religious exemption (as defined in section 
     1004(c)(1)), or
       (B) a qualified disabled veteran exemption (as defined in 
     section 1004(c)(2));
       (4) as of the first day of such month, such individual is 
     on active duty as a member of the uniformed services (as 
     defined in section 101 of title 10, United States Code);
       (5) the only services performed by such employee for the 
     employer during such month are services the income from which 
     is excluded from gross income for purposes of section 
     151(c)(1)(A) of the Internal Revenue Code of 1986 by reason 
     of section 151(c)(5) of such Code; or
       (6) the amount of wages paid by the employer to such 
     employee during such month does not exceed $100.
       (c) Inflation Adjustment of Wage Amount.--In the case of 
     months in any calendar year after 1997, the dollar amount 
     contained in subsection (b)(6) shall be increased by an 
     amount equal to--
       (1) such dollar amount, multiplied by
       (2) the cost-of-living adjustment determined under section 
     1(f)(3) of the Internal Revenue Code of 1986 for the calendar 
     year which includes such month, by substituting ``calendar 
     year 1994'' for ``calendar year 1992'' in subparagraph (B) 
     thereof.

     If any increase determined under the preceding sentence is 
     not a multiple of $5, such increase shall be rounded to the 
     nearest multiple of $5.

     SEC. 1106. DEFINITIONS AND SPECIAL RULES.

       (a) Full-time Employee; Part-Time Employee; Part-time 
     Fraction.--For purposes of this part--
       (1) Full-time employee.--The term ``full-time employee'' 
     means any employee of an employer whose normal work week for 
     such employer is not less than 35 hours.
       (2) Part-time employee.--The term ``part-time employee'' 
     means any employee who is not a full-time employee.
       (3) Part-time fraction.--The part-time fraction is a 
     fraction--
       (A) the numerator of which is the number of hours in the 
     employee's normal work week, and
       (B) the denominator of which is 35.
       (4) Aggregation rules.--For purposes of this subsection--
       (A) all employers treated as a single employer under 
     subsection (a) or (b) of section 52 of the Internal Revenue 
     Code of 1986 shall be treated as a single employer, and
       (B) all employees of the members of an affiliated service 
     group (as defined in section 414(m) of such Code) shall be 
     treated as employed by a single employer.
       (b) Large Employer; Small Employer Defined.--
       (1) In general.--For purposes of this part--
       (A) Large employer.--The term ``large employer'' means, 
     with respect to any calendar year, any employer if, on each 
     of 20 days during the preceding calendar year (each day being 
     in a different week), such employer (or any predecessor) 
     employed more than 100 employees for some portion of the day.
       (B) Small employer.--The term ``small employer'' means an 
     employer other than a large employer.
       (2) Aggregation rules.--For purposes of paragraph (1)--
       (A) all employers treated as a single employer under 
     subsection (a) or (b) of section 52 of the Internal Revenue 
     Code of 1986 shall be treated as a single employer, and
       (B) all employees of the members of an affiliated service 
     group (as defined in section 414(m) of such Code) shall be 
     treated as employed by a single employer.
       (c) Treatment of Employees of Educational Organizations.--
     For purposes of this part--
       (1) In general.--Notwithstanding subsection (b)(4), an 
     employee of an educational organization shall be treated as a 
     full-time employee if such employee's normal work week is the 
     customary hours that constitute full-time employment for such 
     organization (as determined by such organization).
       (2) Part-time employees.--The part-time fraction of an 
     employee of an educational organization who is not treated as 
     a full-time employee under paragraph (1) shall be the 
     fraction which such employee's normal work week bears to the 
     customary hours that constitute full-time employment for such 
     organization (as so determined).
       (3) Summer months, etc.--In the case of a period between 2 
     successive academic years or terms, if--
       (A) an employee of an educational organization performs 
     services in the first of such academic years or terms,
       (B) such employee performs substantially reduced services 
     (if any) during such period, and
       (C) there is a reasonable assurance that such employee will 
     perform such services in the second of such academic years or 
     terms,

     then the employee shall be treated as an employee of such 
     organization during such period and as having the same normal 
     work week (and compensation) as such employee had in the 
     first of such years or terms.
       (4) Employee of educational organization defined.--For 
     purposes of paragraphs (1) and (2), an individual is an 
     employee of an educational organization if such individual--
       (A) is an employee of an institution of higher education 
     (as defined in section 1201(a) of the Higher Education Act of 
     1965) or an elementary or secondary school (as defined in 
     section 1471 of the Elementary and Secondary Education Act of 
     1965), and
       (B) is employed in a capacity described in so much of 
     section 13(a)(1) of the Fair Labor Standards Act of 1936 as 
     ends with ``secondary schools)''.
       (d) Other Definitions.--
       (1) In general.--For purposes of this part, the terms 
     ``wages'', ``employer'', ``employment'', and ``employee'' 
     have the same meanings as when used in chapter 21 of the 
     Internal Revenue Code of 1986: except that, for purposes of 
     this part, the following provisions of chapter 21 of such 
     Code shall not apply:
       (A) Paragraph (1) of section 3121(a).
       (B) Paragraph (5) of section 3121(b).
       (C) Paragraph (7) of section 3121(b) (other than 
     subparagraph (C) or (F) thereof).
       (D) Paragraph (9) of section 3121(b).
       (2) Consumer purchasing cooperative.--The term ``consumer 
     purchasing cooperative'' means such a cooperative under 
     subtitle B of title IV or subtitle E of title V.
       (3) Universal fehbp.--The term ``Universal FEHBP'' means 
     the program established under subtitle D of title V.

              PART 2--ADDITIONAL EMPLOYER RESPONSIBILITIES

     SEC. 1111. MAINTENANCE-OF-EFFORT IN PROVIDING HEALTH BENEFITS 
                   TO EMPLOYEES.

       (a) Employers to Which Section Applies.--This section shall 
     apply to any employer if such employer (or any predecessor) 
     offered as of January 1, 1994, health benefits to any 
     employee.
       (b) Requirements.--An employer meets the requirements of 
     this section only if the employer offers, throughout the 5-
     year period beginning on the date of the enactment of this 
     Act, at least the level of health benefits offered as of 
     January 1, 1994, to--
       (1) the employees, spouses, and dependents to whom such 
     benefits were offered as of such date, and
       (2) similarly situated employees, spouses, and dependents.
       (c) Collective bargaining agreements.--To the extent health 
     benefits are provided pursuant to a collective bargaining 
     agreement between employee representatives and 1 or more 
     employers which was ratified before the date of the enactment 
     of this Act, the 5-year period referred to in subsection (b) 
     shall not expire before the date on which such agreement 
     terminates (determined without regard to any extension 
     thereof on or after the date of the enactment of this Act). 
     The preceding sentence shall cease to apply with respect to 
     any such agreement on the effective date of any modification 
     of such agreement on or after June 29, 1994.
       (d) Effective date.--The requirements of this section shall 
     apply to benefits offered on or after the date of the 
     enactment of this Act.

     SEC. 1112. NONDISCRIMINATION REQUIREMENTS IN PROVIDING 
                   ADDITIONAL HEALTH BENEFITS TO FULL-TIME 
                   EMPLOYEES.

       (a) Employers to Which Subsection Applies.--This section 
     shall apply to any employer who makes an additional health 
     benefit payment on behalf of any full-time employee.
       (b) Requirements.--An employer meets the requirements of 
     this section only if all full-time employees are offered the 
     same amount of additional health benefit payments. The 
     requirements of this subsection shall be applied separately 
     with respect to employees enrolled in different classes of 
     enrollment.
       (c) Safe Harbor Rules Relating to Premium Payments.--In any 
     case in which an additional health benefit payment is an 
     additional premium payment for a certified health plan, the 
     employer shall not be treated as failing to meet the 
     requirements of this section if such payment meets the 
     requirements of any (or any combination) of the following 
     paragraphs:
       (1) Level percentage contribution for plan selected.--The 
     additional payment amount is a fixed percentage of the 
     premium under each certified health plan offered. Such 
     percentage may vary based on class of enrollment.
       (2) Level percentage contribution for category of plan.--
     The additional payment amount is a fixed percentage of the 
     premium for the lowest cost plan within each category of 
     certified health plans offered. Such percentage may vary 
     based on class of enrollment.
       (3) Equalizing dollar amounts of required contributions.--
     The additional payment amount is the minimum dollar amount, 
     within such a class of enrollment, that is required to assure 
     that the total dollar contribution by the employer (including 
     both the minimum required contribution and the additional 
     payment amount) for all employees is equal to the greater 
     of--
       (A) the minimum level of employer contribution required for 
     a managed care plan, or
       (B) the minimum level of employer contribution required for 
     an unlimited-choice-of-provider plan,

     without regard to the plan selected. Such dollar amount may 
     vary based on class of enrollment.
       (4) Level dollar amounts of additional contributions.--The 
     payment is a fixed equal dollar amount per full-time 
     employee, without regard to the plan selected. Such premium 
     contribution may vary, or not vary, based on such a class of 
     enrollment.

     For purposes of applying this subsection, the term 
     ``premium'' includes, with respect to a high deductible 
     medical savings plan, a contribution to a medical savings 
     account.
       (d) Different Treatment of Unlimited-choice-of-provider 
     Plans and Managed Care Plans.--If any additional benefit 
     consists of a reduction in the cost sharing otherwise 
     required under the guaranteed national benefit package--
       (1) such reduction shall be treated as an additional health 
     benefit payment, and
       (2) the requirements of this section shall be met only if 
     any difference in such reduction between unlimited-choice-of-
     provider plans and managed care plans meets such terms and 
     conditions as may be prescribed by the Secretary by 
     regulations.
       (e) Recommendations on Inclusion of Part-Time Employees.--
     The Secretary of Labor shall analyze and submit to Congress a 
     report on how the provisions of this section may be applied 
     in the case of part-time employees.
       (f) Definitions.--For purposes of this section--
       (1) Additional health benefit payment.--The term 
     ``additional health benefit payment'' means any payment 
     designed to be used exclusively (or primarily) towards the 
     cost of health insurance coverage and does not include any 
     tax imposed by chapter 25 of the Internal Revenue Code of 
     1986.
       (2) Full-time employee.--The term ``full-time employee'' 
     means any full-time employee (as defined in section 
     1106(a)(1)) with respect to whom the employer is required to 
     make a contribution under section 1104(d).
       (3) Aggregation rules.--For purposes of this subsection--
       (A) all employers treated as a single employer under 
     subsection (a) or (b) of section 52 of the Internal Revenue 
     Code of 1986 shall be treated as a single employer, and
       (B) all employees of the members of an affiliated service 
     group (as defined in section 414(m) of such Code) shall be 
     treated as employed by a single employer.
       (g) Exception for Collective Bargaining Agreement.--This 
     section shall not apply with respect to additional health 
     benefits provided pursuant to a bona fide collective 
     bargaining agreement or to a multiemployer plan.
       (h) Effective Date.--
       (1) In general.--This section shall apply to benefits 
     provided--
       (A) by a large employer (as defined in section 1106(b)) on 
     or after January 1, 1997, or
       (B) by another employer on or after January 1, 1999.
       (2) Relationship to transitional maintenance-of-effort 
     requirements.--An employer shall not be considered to have 
     failed to comply with the requirements of this subsection 
     because of the provision of additional health benefit 
     payments that are required to be provided pursuant to section 
     1111.

     SEC. 1113. MAINTENANCE-OF-EFFORT REQUIREMENTS WITH RESPECT TO 
                   FORMER EMPLOYEES.

       (a) Employers to Which Section Applies.--This section shall 
     apply to any employer if such employer (or any predecessor), 
     as of January 1, 1994, was paying any portion of the health 
     costs for a qualified retiree or a qualified spouse or child.
       (b) Requirements.--
       (1) In general.--An employer meets the requirements of this 
     section only if--
       (A) each individual who is a qualified retiree or a 
     qualified spouse or child is offered coverage under a health 
     benefit plan of such employer which covers benefits 
     comparable to the benefits covered by the employer with 
     respect to qualified retirees as of January 1, 1994, and
       (B) with respect to such individuals who elect coverage 
     under a certified health plan of such employer, the employer 
     contribution for each month is an amount equal to 80 percent 
     of the cost of providing such coverage.
       (2) Option to provide employer contribution to medicare 
     part c.--For periods beginning on or after January 1, 1999, 
     an employer also shall meet the requirements of this section 
     if--
       (A) each individual who is a qualified retiree or a 
     qualified spouse or child is offered coverage under medicare 
     part C, and
       (B) the employer contribution for each month for each such 
     individual who elects coverage (or is covered) under medicare 
     part C is an amount equal to the employer's share of 
     applicable medicare part C premium for such month (as 
     determined under section 3455 of the Internal Revenue Code of 
     1986).
       (c) Qualified Retiree Defined.--For purposes of this 
     section, the term ``qualified retiree'' means an eligible 
     individual who--
       (1) has attained age 55 but not age 65,
       (2) is not a full-time employee, and
       (3) is not a medicare part A beneficiary.
       (d) Qualified Spouse or Child Defined.--For purposes of 
     this section, the term ``qualified spouse or child'' means, 
     in relation to a qualified retiree, an eligible individual 
     with respect to whom the requirements in one of the following 
     paragraphs is met:
       (1) The individual (A) is under 65 years of age and is (and 
     has been for a period of at least one year) married to a 
     qualified retiree or (B) is a child of the qualified retiree.
       (2) In the case of a person who was a qualified retiree at 
     the time of the person's death--
       (A) the individual was (and had for a period of at least 
     one year been) married to the retiree at the time of the 
     person's death,
       (B) the individual is under 65 years of age,
       (C) the individual is not a full-time employee,
       (D) the individual is not remarried, and
       (E) the deceased spouse would still be a qualified retiree 
     if such spouse had not died.
       (3) The individual is a child of an individual described in 
     paragraph (2).
       (e) Employer.--For purposes of this section, the term 
     ``employer'' includes, with respect to any qualified retiree 
     under a State or local retirement system (or the qualified 
     spouse or child of such a retiree), such system.
       (f) Effective Date.--This section shall apply to coverage 
     for periods beginning on or after the date of the enactment 
     of this Act.

     SEC. 1114. ENFORCEMENT BY CIVIL MONEY PENALTIES OF SECRETARY 
                   OF LABOR.

       (a) Application.--
       (1) In general.--Except as otherwise specifically provided, 
     in the case of a person that violates a requirement of this 
     part, the Secretary of Labor may impose a civil money 
     penalty, in an amount not to exceed $10,000, for each 
     violation with respect to each individual with respect to 
     whom a violation occurred.
       (b) Considerations in Imposition.--In determining the 
     amount of any penalty to be assessed under this section, the 
     Secretary of Labor shall take into account the previous 
     record of compliance of the person being assessed with the 
     applicable requirements of this Act and the gravity of the 
     violation.
       (c) Administrative Review.--
       (1) Opportunity for hearing.--The person assessed shall be 
     afforded an opportunity for hearing by the Secretary of Labor 
     upon request made within 30 days after the date of the 
     issuance of a notice of assessment. In such hearing all 
     factual determinations shall be determined on the record 
     pursuant to section 554 of title 5, United States Code. If no 
     hearing is requested, the assessment shall constitute a final 
     and unappealable order.
       (2) Hearing procedure.--If a hearing is requested, the 
     initial agency decision shall be made by an administrative 
     law judge, and such decision shall become the final order 
     unless the Secretary of Labor modifies or vacates the 
     decision. Notice of intent to modify or vacate the decision 
     of the administrative law judge shall be issued to the 
     parties within 30 days after the date of the decision of the 
     judge. A final order which takes effect under this paragraph 
     shall be subject to review only as provided under subsection 
     (d).
       (d) Judicial Review.--
       (1) Filing of action for review.--Any person against whom 
     an order imposing a civil money penalty has been entered 
     after an agency hearing under this section may obtain review 
     by the United States district court for any district in which 
     such person is located or the United States District Court 
     for the District of Columbia by filing a notice of appeal in 
     such court within 30 days from the date of such order, and 
     simultaneously sending a copy of such notice be registered 
     mail to the Secretary of Labor.
       (2) Certification of administrative record.--The Secretary 
     of Labor shall promptly certify and file in such court the 
     record upon which the penalty was imposed.
       (3) Standard for review.--The findings of the Secretary of 
     Labor shall be set aside only if found to be unsupported by 
     substantial evidence as provided by section 706(2)(E) of 
     title 5, United States Code.
       (4) Appeal.--Any final decision, order, or judgment of such 
     district court concerning such review shall be subject to 
     appeal as provided in chapter 83 of title 28 of such Code.
       (e) Failure to Pay Assessment; Maintenance of Action.--
       (1) Failure to pay assessment.--If any person fails to pay 
     an assessment after it has become a final and unappealable 
     order, or after the court has entered final judgment in favor 
     of the Secretary of Labor, the Secretary shall refer the 
     matter to the Attorney General who shall recover the amount 
     assessed by action in the appropriate United States district 
     court.
       (2) Nonreviewability.--In such action the validity and 
     appropriateness of the final order imposing the penalty shall 
     not be subject to review.
       (f) Payment of Penalties.--Penalties collected under this 
     section shall be paid to the Secretary of Labor (or other 
     officer) imposing the penalty and shall be available without 
     appropriation and until expended for the purpose of enforcing 
     the provisions of this part.
           TITLE II--INDIVIDUAL AND EMPLOYER RESPONSIBILITIES

     SEC. 2001. AMENDMENT OF 1986 CODE.

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

     SEC. 2101. INDIVIDUAL SHARE OF MEDICARE PART C PREMIUMS.

       (a) General Rule.--Subchapter A of chapter 1 (relating to 
     determination of tax liability) is amended by adding at the 
     end the following new part:

       ``PART VIII--INDIVIDUAL SHARE OF MEDICARE PART C PREMIUMS

``Sec. 59B. Individual share of medicare part C premiums.

     ``SEC. 59B. INDIVIDUAL SHARE OF MEDICARE PART C PREMIUMS.

       ``(a) Imposition of Tax.--In the case of an individual, 
     there is hereby imposed (in addition to any other tax imposed 
     by this subtitle) a tax for the taxable year in the amount 
     equal to the medicare part C premium liability (if any) of 
     such individual for such taxable year.
       ``(b) Exemption for Low-Income Individuals.--
       ``(1) In general.--No tax shall be imposed by subsection 
     (a) on any taxpayer whose modified adjusted gross income for 
     the taxable year does not exceed the threshold amount.
       ``(2) Phase-in of tax.--
       ``(A) In general.--If the modified adjusted gross income of 
     the taxpayer for the taxable year exceeds the threshold 
     amount by less than the phase-in amount, the amount of the 
     tax imposed by subsection (a) for such taxable year shall be 
     the phase-in percentage of the medicare part C premium 
     liability of such taxpayer for such taxable year.
       ``(B) Phase-in percentage.--For purposes of subparagraph 
     (A), the phase-in percentage shall be determined under tables 
     prescribed by the Secretary which--
       ``(i) shall have income brackets of not more than $50, and
       ``(ii) provide for a ratable increase in the amount of tax 
     imposed by subsection (a) for modified adjusted gross incomes 
     between the threshold amount and the sum of the threshold 
     amount and the phase-in amount.
       ``(C) Phase-in amount.--For purposes of subparagraphs (A) 
     and (B), the phase-in amount is the amount equal to the 
     applicable percentage (determined in accordance with the 
     following table) of the threshold amount.


                                                                        
                                                          The applicable
 ``In the case of taxable years ending with or within--   percentage is--
                                                                        
                                                                        
  1999, 2000, or 2001...................................   100 percent 
  2002 or 2003..........................................   120 percent 
  2004 or thereafter....................................   140 percent.
                                                                        


       ``(c) Medicare Part C Premium Liability.--For purposes of 
     this section--
       ``(1) In general.--The medicare part C premium liability of 
     any individual for any taxable year is the excess (if any) 
     of--
       ``(A) the sum of the applicable medicare part C premiums 
     for each month of medicare part C coverage during the taxable 
     year, over
       ``(B) the sum of--
       ``(i) the aggregate mandatory employer taxes with respect 
     to the employment of such individual during the calendar year 
     in which the taxable year begins, and
       ``(ii) the aggregate elective employer taxes with respect 
     to the employment of such individual during such calendar 
     year.
     For purposes of this paragraph, the term `month of medicare 
     part C coverage' means any month as of the first day of which 
     the individual, the spouse of the individual, or any young 
     dependent of the individual is a medicare part C covered 
     individual.
       ``(2) Limitation on mandatory employer taxes taken into 
     account.--The amount of mandatory employer taxes which are 
     taken into account under paragraph (1)(B)(i) with respect to 
     any individual for any taxable year shall not exceed 80 
     percent of the amount referred to in paragraph (1)(A).
       ``(3) Applicable medicare part c premium.--
       ``(A) Taxpayers with young dependents.--Except as provided 
     in subparagraph (C), if, as of the first day of a month, the 
     individual (or, in the case of a joint return, either spouse) 
     has a young dependent who is a medicare part C covered 
     individual, the applicable medicare part C premium for such 
     month is--
       ``(i) the applicable family premium for such month in the 
     case of a joint return filed by spouses both of whom are 
     medicare part C covered individuals for such month, and
       ``(ii) the applicable single parent premium for such month 
     in any other case.
       ``(B) Taxpayers without young dependents.--Except as 
     provided in subparagraph (C), if, as of the first day of a 
     month, the individual does not have (or, in the case of a 
     joint return, neither spouse has) a young dependent who is a 
     medicare part C covered individual, the applicable medicare 
     part C premium for such month is--
       ``(i) the applicable individual premium for such month, or
       ``(ii) in the case of a joint return, the sum of the 
     applicable individual premiums for each spouse who is a 
     medicare part C covered individual for such month.
       ``(C) Spouses not filing joint returns by reason of divorce 
     or otherwise.--If--
       ``(i) the individual was married as of the first day of a 
     month,
       ``(ii) the applicable medicare part C premium for such 
     month would have been the applicable family premium if the 
     individual had filed a joint return for the taxable year 
     which includes such month with the spouse of such individual 
     as of such first day, and
       ``(iii) the individual does not file a joint return for 
     such taxable year,
     the applicable medicare part C premium for such month is \1/
     2\ the applicable family premium.
       ``(D) Applicable premiums.--The applicable individual 
     premium, the applicable family premium, and the applicable 
     single parent premium of an individual for any month shall be 
     determined--
       ``(i) under tables prescribed under section 2121(a) of the 
     Social Security Act by the Secretary of Health and Human 
     Services which are effective for such month, and
       ``(ii) on the basis of the State (or place outside the 
     United States) in which such individual has his principal 
     place of abode as of the first day of such month.
       ``(d) Medicare Part C Covered Individual.--For purposes of 
     this section--
       ``(1) In general.--An individual shall be treated as a 
     medicare part C covered individual for any month unless--
       ``(A) for such month, such individual is covered under a 
     certified health plan or medicare part A, and
       ``(B) such individual furnishes to the Secretary (at such 
     time and in such manner as the Secretary may prescribe) the 
     required certification of such coverage for such month.
       ``(2) Certified health plan.--The term `certified health 
     plan' has the meaning given such term by section 2 of the 
     Guaranteed Health Insurance Act of 1994.
       ``(3) Medicare part a.--The term `medicare part A' means 
     the insurance program established by part A of title XVIII of 
     the Social Security Act.
       ``(e) Other Definitions and Special Rules.--For purposes of 
     this section--
       ``(1) Threshold amount.--
       ``(A) In general.--Except as provided in subparagraph (B), 
     the term `threshold amount' means--
       ``(i) $7,400 in the case of a return with respect to which 
     1 personal exemption is allowable under section 151,
       ``(ii) $11,500 in the case of a return with respect to 
     which 2 or 3 personal exemptions are allowable under section 
     151, and
       ``(iii) $16,000 in the case of a return with respect to 
     which 4 or more personal exemptions are allowable under 
     section 151.
       ``(B) Certain separate returns.--The threshold amount shall 
     be zero in the case of a taxpayer who--
       ``(i) is married as of the close of the taxable year but 
     does not file a joint return for such taxable year, and
       ``(ii) does not live apart from his spouse at all times 
     during the last 6 months of the taxable year.
       ``(C) Inflation adjustments.--In the case of a taxable year 
     beginning in a calendar year after 1998, each dollar amount 
     contained in subparagraph (A) shall be increased by an amount 
     equal to--
       ``(i) such dollar amount, multiplied by
       ``(ii) the cost-of-living adjustment determined under 
     section 1(f)(3) for the calendar year in which the taxable 
     year begins, by substituting `calendar year 1994' for 
     `calendar year 1992' in subparagraph (B) thereof.
       ``(2) Modified adjusted gross income.--The term `modified 
     adjusted gross income' means adjusted gross income--
       ``(A) determined without regard to sections 911, 931, and 
     933, and
       ``(B) increased by the amount of interest received or 
     accrued by the individual during the taxable year which is 
     exempt from tax.

     The determination under the preceding sentence shall be made 
     without regard to any carryover or carryback.
       ``(3) Mandatory employer taxes.--The term `mandatory 
     employer taxes' means the tax imposed by section 3455 
     determined without regard to any election under section 
     3455(b)(2).
       ``(4) Elective employer taxes.--The term `elective employer 
     taxes' means the taxes imposed by section 3455 which are not 
     mandatory employer taxes.
       ``(5) Young dependent.--The term `young dependent' has the 
     meaning given such term by section 1003(b)(1) of the 
     Guaranteed Health Insurance Act of 1994.
       ``(6) Required certification.--The term `required 
     certification' means the statement required to be provided 
     under section 6050Q(b) (or a copy thereof) or any other 
     statement approved by the Secretary for purposes of this 
     section.
       ``(7) Allocation of employer's share of premiums for 
     spouses not filing joint return.--Individuals who are married 
     to each other as of the first day of any month and who do not 
     file a joint return with each other for the taxable year 
     which includes such month may allocate mandatory and elective 
     employer taxes for such month to such extent and subject to 
     such conditions as the Secretary shall prescribe.
       ``(f) Coordination With Other Provisions.--
       ``(1) Treatment as medical expense.--For purposes of 
     section 213, the tax imposed by this section for any taxable 
     year shall be treated as an expense paid during such taxable 
     year for medical care of the taxpayer.
       ``(2) Not treated as tax for certain purposes.--The tax 
     imposed by this section shall not be treated as a tax imposed 
     by this chapter for purposes of determining--
       ``(A) the amount of any credit allowable under this 
     chapter, or
       ``(B) the amount of the minimum tax imposed by section 55.
       ``(3) Treatment under subtitle f.--For purposes of subtitle 
     F, the tax imposed by this section shall be treated as if it 
     were a tax imposed by section 1.
       ``(4) Taxes imposed by possessions.--The tax imposed by 
     this section shall not apply to a bona fide resident of a 
     possession with respect to which the requirements of section 
     2101(c)(3)(A) of the Social Security Act are met.
       ``(g) Exemptions.--
       ``(1) In general.--No tax shall be imposed by this section 
     on any individual for any taxable year if such individual 
     is--
       ``(A) a covered, noncontributing individual (as defined in 
     section 1003(b) of the Guaranteed Health Insurance Act of 
     1994) for such taxable year, or
       ``(B) a nonresident alien (as defined in section 7701(b)).
       ``(2) Certain individuals not taken into account in 
     determining amount of tax.--
       ``(A) In general.--For purposes of this section, an 
     individual shall be treated as not being a medicare part C 
     covered individual for any month if--
       ``(i) the individual is a noncovered, noncontributing 
     individual (as defined in section 1004(b) of the Guaranteed 
     Health Insurance Act of 1994) for such month, or
       ``(ii) the first day of such month is included in any 
     period for which such individual is a qualified individual 
     (as defined in section 911(d)(1)).

     Clause (ii) shall not apply to any individual for any taxable 
     year if, at any time during such taxable year, such 
     individual receives services under medicare part C.
       ``(B) Medicare part c.--For purposes of subparagraph (A), 
     the term `medicare part C' means the program of health 
     insurance benefits under title XXI of the Social Security 
     Act.
       ``(h) Regulations.--The Secretary may prescribe such 
     regulations as may be appropriate to carry out the purposes 
     of this section, including--
       ``(1) regulations determining the applicable premium for 
     spouses having different principal places of abode, and
       ``(2) regulations, prescribed after consultation with the 
     Secretary of Health and Human Services, treating health plans 
     of foreign governments or foreign employers outside the 
     United States as certified health plans.''
       (b) Adjustments to Withholding.--Subsection (a) of section 
     3402 (relating to income tax collected at source) is amended 
     by adding at the end the following new paragraph:
       ``(3) Special rule for tax imposed by section 59b.--
       ``(A) In general.--In determining the amount required to be 
     deducted and withheld from wages paid to an individual during 
     any month by such individual's employer, the tax imposed by 
     section 59B shall be taken into account.
       ``(B) Wages not reduced by exemptions.--In determining the 
     amount to be deducted and withheld by reason of subparagraph 
     (A), the amount of wages shall not be reduced as provided in 
     paragraph (2).''
       (c) Relief From Estimated Tax Penalties Where Employment 
     Terminated.--Paragraph (3) of section 6654(e) (relating to 
     failure by individual to pay estimated income tax) is amended 
     by adding at the end the following new subparagraph:
       ``(C) Underpayment of medicare part C premiums for months 
     after involuntary termination of employment.--If the 
     Secretary determines that--
       ``(i) an individual's employment was involuntarily 
     terminated during the taxable year, and
       ``(ii) the medicare part C portion of any underpayment for 
     such year was due to reasonable cause and not due to willful 
     neglect,

     no addition to tax shall be imposed under subsection (a) with 
     respect to such portion. For purposes of the preceding 
     sentence, the medicare part C portion of an underpayment is 
     the amount of the underpayment to the extent that it does not 
     exceed the amount of the tax imposed by section 59B which is 
     attributable to the portion of such taxable year after such 
     termination.''
       (d) Technical Amendments.--
       (1) Subsection (a) of section 6012 is amended by inserting 
     after paragraph (9) the following new paragraph:
       ``(10) Every individual if--
       ``(A) such individual, or the spouse or any young dependent 
     (as defined in section 1003(b)(1) of the Guaranteed Health 
     Insurance Act of 1994) of such individual, is a medicare part 
     C covered individual (as defined in section 59B(d)) for any 
     month in the taxable year, and
       ``(B) such individual is not exempt from the tax imposed by 
     section 59B by reason of subsection (b)(1) or (g) thereof.''
       (2) Section 31 is amended by adding at the end the 
     following new subsection:
       ``(d) Certain Payments of Medicare Part C Premiums.--The 
     amount paid by an individual to the Secretary of Health and 
     Human Services under section 2123(b) of the Social Security 
     Act shall be allowed to such individual as a credit against 
     the tax imposed by this subtitle for the taxable year which 
     includes the month for which such amount was required to be 
     paid. Individuals who are married to each other as of the 
     first day of any month and who do not file a joint return 
     with each other for the taxable year which includes such 
     month may allocate the amounts described in the preceding 
     sentence for such month to such extent and subject to such 
     conditions as the Secretary shall prescribe.''
       (3) Subparagraph (A) of section 1(f)(6) is amended by 
     inserting ``section 59B(e)(1)(C),'' after paragraph 
     (2)(A),''.
       (4)(A) Subsection (b) of section 6521 is amended to read as 
     follows:
       ``(b) Individual and Employer Medicare Part C Premiums.--In 
     the case of the tax imposed by section 59B (relating to 
     individual share of medicare part C premiums) and the tax 
     imposed by section 3455 (relating to employer share of 
     medicare part C premiums), if--
       ``(1) an amount is erroneously treated under section 59B as 
     the medicare part C premium liability of an individual, or an 
     amount is erroneously treated under section 3455 as the 
     employer share of the applicable medicare part C premium with 
     respect to such individual,
       ``(2) the correction of the error would require an 
     assessment of one such tax and the refund or credit of the 
     other tax, and
       ``(3) at any time the correction of the error is authorized 
     as to one such tax but is prevented as to the other tax by 
     any law or rule of law (other than section 7122, relating to 
     compromises),

     then, if the correction authorized is made, the amount of the 
     assessment, or the amount of the credit or refund, as the 
     case may be, authorized as to the one tax shall be reduced by 
     the amount of the credit or refund, or the amount of the 
     assessment, as the case may be, which would be required with 
     respect to such other tax for the correction of the error if 
     such credit or refund, or such assessment, of such other tax 
     were not prevented by any law or rule of law (other than 
     section 7122, relating to compromises).''
       (B) Subsection (a) of section 6521 is amended by adding at 
     the end the following new sentence: ``For purposes of this 
     subsection, the terms `self-employment income' and `wages' 
     shall have the same meanings as when used in section 
     1402(b).''
       (e) Clerical Amendment.--The table of parts for subchapter 
     A of chapter 1 is amended by adding at the end the following 
     new item:

``Part VIII. Individual share of medicare part C premiums.''
       (f) Effective Date.--The amendments made by this section 
     shall apply to months beginning after December 31, 1998, in 
     taxable years ending after such date.
                 Subtitle B--Employer Responsibilities

     SEC. 2201. HEALTH-RELATED EMPLOYER TAXES AND CREDITS.

       (a) General Rule.--Subtitle C (relating to employment 
     taxes) is amended by redesignating chapter 25 as chapter 26 
     and by inserting after chapter 24 the following new chapter:

        ``CHAPTER 25--HEALTH-RELATED EMPLOYER TAXES AND CREDITS

``Subchapter A. Employer Taxes.
``Subchapter B. Employer Credits.
``Subchapter C. General Provisions.

                     ``Subchapter A--Employer Taxes

``Part I. Tax on noncomplying large employers.
``Part II. Employer share of medicare part C premiums.
``Part III. Tax with respect to employees covered by certain other 
              health plans.

             ``PART I--TAX ON NONCOMPLYING LARGE EMPLOYERS

``Sec. 3451. Imposition of tax.

     ``SEC. 3451. IMPOSITION OF TAX.

       ``(a) Imposition of Tax.--In addition to other taxes, there 
     is hereby imposed on every large employer an excise tax, with 
     respect to the employment of any employee during any month 
     unless, for such month--
       ``(1) such employee is a qualified employer-covered 
     employee of such employer, or
       ``(2) such employee is a voluntarily excluded employee.
       ``(b) Amount of Tax.--The amount of the tax imposed by 
     subsection (a) with respect to any employee for any month 
     shall be an amount equal to 25 percent of the wages paid 
     during such month by such employer to such employee.
       ``(c) Tax Not To Apply To Employment of Certain 
     Employees.--
       ``(1) Employees permitted to be excluded from coverage 
     under private employer plans.--No tax shall be imposed by 
     this section on the employment for any month of any exempt 
     part-time, seasonal, or temporary employee (as defined in 
     section 1102(c) of the Guaranteed Health Insurance Act of 
     1994).
       ``(2) Generally excludable employees.--
  ``For exemption from tax for employment of generally excludable 
employees, see section 3465.
       ``(d) Definitions.--For purposes of this section--
       ``(1) Large employer.--The term `large employer' has the 
     meaning given to such term by section 1106 of the Guaranteed 
     Health Insurance Act of 1994.
       ``(2) Voluntarily excluded employee.--The term `voluntarily 
     excluded employee' has the meaning given to such term by 
     section 1102 of the Guaranteed Health Insurance Act of 1994.
       ``(3) Qualified employer-covered employee.--The term 
     `qualified employer-covered employee' has the meaning given 
     to such term by section 1104 of the Guaranteed Health 
     Insurance Act of 1994 are met.
       ``(e) Waiver of Tax in Certain Cases.--If--
       ``(1) a large employer failed--
       ``(A) to correctly determine that it is a large employer, 
     or
       ``(B) to cover any employee as a qualified employer-covered 
     employee of such employer (other than an employee referred to 
     in paragraph (1) or (2) of subsection (c)),
       ``(2) such failure is due to reasonable cause and not to 
     willful neglect, and
       ``(3) the employer takes such corrective action as the 
     Secretary may require,

     the Secretary may waive part or all of the tax imposed by 
     subsection (a) if the Secretary determines that the payment 
     of such tax would be excessive relative to the failure 
     involved.

         ``PART II--EMPLOYER SHARE OF MEDICARE PART C PREMIUMS

``Sec. 3455. Imposition of tax.

     ``SEC. 3455. IMPOSITION OF TAX.

       ``(a) Imposition of Tax.--In addition to other taxes, there 
     is hereby imposed on every employer an excise tax, with 
     respect to the employment of any medicare part C covered 
     employee during any calendar month, equal to the employer 
     share of the applicable medicare part C premium for such 
     month.
       ``(b) Employer Share of Medicare Part C Premium.--For 
     purposes of subsection (a)--
       ``(1) In general.--The employer share of the applicable 
     medicare part C premium for any calendar month is an amount 
     equal to 80 percent of the applicable medicare part C premium 
     for such month.
       ``(2) Employer election to increase share.--At the election 
     of the employer, paragraph (1) shall be applied by 
     substituting for `80 percent' any percentage specified by the 
     employer which is greater than 80 percent and not greater 
     than 100 percent. Any percentage so specified shall apply to 
     the month for which made and all succeeding months beginning 
     before the date it is revoked by the employer. Any percentage 
     so specified shall apply to all medicare part C covered 
     employees of such employer.
       ``(3) Reduction for part-time employees.--
       ``(A) In general.--In the case of any part-time employee 
     (as defined in section 1106 of the Guaranteed Health 
     Insurance Act of 1994), the employer share of the applicable 
     medicare part C premium for any month is the part-time 
     fraction (as defined in such section 1106) of the amount 
     determined under paragraphs (1) and (2).
       ``(B) Employer election to increase share.--Any employer 
     may elect to specify, with respect to any part-time employee 
     for any month, a part-time fraction which is greater than the 
     part-time fraction which would (but for this subparagraph) 
     apply to such employee for such month but not greater than 1. 
     Any fraction so specified shall apply to such employee for 
     the month for which made and all succeeding months beginning 
     before the date it is revoked by the employer.
       ``(4) Special rule for states with approved state managed 
     competition programs.--With respect to an employee who 
     resides in a State with a managed competition program 
     approved under subtitle B of title IV of the Guaranteed 
     Health Insurance Act of 1994, the employer share of the 
     applicable medicare part C premium for any calendar month is 
     amount equal to 25 percent of the wages paid during such 
     month by such employer to such employee.
       ``(c) Applicable Medicare Part C Premium.--For purposes of 
     this section--
       ``(1) In general.--Except as otherwise provided in this 
     subsection, the applicable medicare part C premium for a 
     medicare part C covered employee for any month is the 
     applicable individual premium for such month.
       ``(2) Employees with young dependents.--If, for any month, 
     an employee has a young dependent who is not covered by a 
     certified health plan or medicare part A--
       ``(A) In general.--Except as provided in subparagraph (B), 
     the applicable medicare part C premium for such employee for 
     such month is--
       ``(i) the applicable family premium for such month if such 
     employee is married and both spouses are not covered by any 
     certified health plan or medicare part A, and
       ``(ii) the applicable single parent premium for such month 
     in any other case.
       ``(B) Full family premium paid by another employer.--If, 
     for such month, another employer pays an unreduced applicable 
     family premium for such month with respect to such employee 
     or the spouse of such employee, the applicable medicare part 
     C premium for such employee for such month is zero. For 
     purposes of this subparagraph, the term `unreduced' means, 
     with respect to any premium, a premium which is not reduced 
     under subsection (b)(3).
       ``(3) Employees with spouses for whom no employer pays part 
     c premium.--If, for any month--
       ``(A) an employee is married but does not have a young 
     dependent who is not covered by a certified health plan or 
     medicare part A,
       ``(B) neither such employee nor such employee's spouse is 
     covered by a certified health plan or medicare part A, and
       ``(C) no other employer pays the employer's share of an 
     unreduced (as defined in paragraph (2)(B)) applicable 
     medicare part C premium for such spouse for such month,

     then the applicable medicare part C premium for such employee 
     for such month is twice the applicable individual premium for 
     such month.
       ``(4) Applicable premiums.--The applicable individual 
     premium, the applicable family premium, and the applicable 
     single parent premium of an employee for any month shall be 
     determined--
       ``(A) under tables prescribed under section 2121(a) of the 
     Social Security Act by the Secretary of Health and Human 
     Services which are effective for such month, and
       ``(B) on the basis of the State or place outside the United 
     States (which such employee certifies in the withholding 
     exemption certificate which is in effect as of the first day 
     of such month) in which such employee has his principal place 
     of abode.
       ``(5) Certain individuals not taken into account in 
     determining amount of tax.--An individual who is married to a 
     noncovered, noncontributing individual (as defined in section 
     1004(b) of the Guaranteed Health Insurance Act of 1994) shall 
     be treated as not married for purposes of this subsection.
       ``(6) Failure to disclose principal place of abode.--If an 
     employee does not have in effect with his employer a 
     withholding exemption certificate which certifies the 
     employee's principal place of abode, such employee's 
     principal place of abode shall be treated for purposes of 
     paragraph (4)(B) as being in the State which includes such 
     employee's principal place of employment with his employer.
       ``(7) Determinations made on basis of withholding 
     certificate.--Determinations of the applicable medicare part 
     C premium for an employee for any month shall be made on the 
     basis of such employee's withholding exemption certificate 
     (if any) which is in effect as of the first day of such month 
     unless the employer has actual knowledge that the information 
     provided on such certificate is incorrect.
       ``(d) Definitions.--For purposes of this section--
       ``(1) Medicare part c covered employee.--An employee of the 
     employer shall be treated as a medicare part C covered 
     employee for any month unless--
       ``(A)(i) such employee is a qualified employer-covered 
     employee of such employer for such month, or
       ``(ii) there is in effect as of the first day of such month 
     a withholding exemption certificate stating that such 
     employee is covered under a certified health plan (other than 
     a plan of such employer) or medicare part A, and
       ``(B)(i) each young dependent (if any) of such employee is 
     covered for such month under the certified health plan of the 
     employer under which such employee is covered, or
       ``(ii) there is in effect as of the first day of such month 
     a withholding exemption certificate stating that each young 
     dependent (if any) of such employee is covered under a plan 
     described in subparagraph (A)(ii).
       ``(2) Young dependent.--The term `young dependent' has the 
     meaning given such term by section 1003(b)(1) of the 
     Guaranteed Health Insurance Act of 1994.
       ``(3) Employee.--For purposes of this section, the term 
     `employee' includes a former employee of an employer if the 
     requirements of section 1113 of the Guaranteed Health 
     Insurance Act of 1994 apply to such employer and the employer 
     elects to satisfy such requirements as described in section 
     1113(b)(2) of such Act.
       ``(e) Treatment of Indians Employed Other Than by Indian 
     Tribes and Tribal Organizations.--
       ``(1) In general.--For purposes of this section--
       ``(A) the term `certified health plan' shall not include 
     any health program of the Service (as defined in section 901 
     of the Indian Health Care Improvement Act), and
       ``(B) any employee who (but for this subsection) would not 
     be a medicare part C covered employee solely by reason of 
     coverage under such a health program shall be treated as a 
     medicare part C covered employee.
       ``(2) Exception for employment by indian tribe, etc.--
     Paragraph (1) shall not apply if the employer is--
       ``(A) an Indian tribe (as defined in section 4 of the 
     Indian Health Care Improvement Act (25 U.S.C. 1603)), or
       ``(B) a tribal organization (as defined in such section 4).
       ``(3) Transfer of tax to health programs of the indian 
     health service.--
  ``For transfer of taxes received in the Medicare Part C Trust Fund by 
reason of this subsection for programs of the Indian Health Service, 
see section 2124(c)(2)(A) of the Social Security Act.
       ``(f) Treatment of Veterans in an GHIA-Qualified VA Health 
     Plan.--
       ``(1) In general.--For purposes of this section--
       ``(A) the term `certified health plan' shall not include 
     any GHIA-qualified VA health plan (as defined in section 1801 
     of title 38, United States Code) in the case of an employee 
     who is a veteran (within the meaning of section 101 of such 
     title) or a spouse or dependent of such an employee, and
       ``(B) any employee who (but for this subsection) would not 
     be a medicare part C covered employee solely by reason of 
     coverage under such a health plan shall be treated as a 
     medicare part C covered employee.
       ``(2) Transfer of tax to health programs of the department 
     of veterans affairs.--
  ``For transfer of taxes received in the Medicare Part C Trust Fund by 
reason of this subsection for programs of the Department of Veterans 
Affairs, see section 2124(c)(2)(B) of the Social Security Act.
       ``(g) Credit for Taxes Paid Based on Incorrect 
     Information.--If--
       ``(1) on or before January 31 of any calendar year, an 
     employer determines (in such manner as the Secretary shall 
     prescribe) that such employer overpaid the tax imposed by 
     this section with respect to an employee for any month during 
     the preceding calendar year by reason of incorrect 
     information shown on any withholding exemption certificate of 
     such employee which was in effect for such month, and
       ``(2) the statement furnished to such employee under 
     section 6051 on or before such January 31 for the preceding 
     calendar year reflects the tax which would have been paid by 
     such employer if the information shown on such certificate 
     had been correct,

     then the excess of the tax paid under this section by such 
     employer during such preceding calendar year over the amount 
     of tax referred to in paragraph (2) shall be treated as an 
     overpayment of the tax.
       ``(h) Tax Treated as Employer-Provided Health Coverage.--
       ``(1) Income tax.--For purposes of chapter 1, payment of 
     the taxes imposed by this section shall be treated as the 
     providing of coverage by the employer under an accident or 
     health plan.
       ``(2) Employment taxes.--For purposes of this subtitle, no 
     amount shall be included in the remuneration of any 
     individual by reason of the payment of the taxes imposed by 
     this section.

  ``PART III--TAX WITH RESPECT TO EMPLOYEES COVERED BY CERTAIN OTHER 
                              HEALTH PLANS

``Sec. 3458. Imposition of tax.

     ``SEC. 3458. IMPOSITION OF TAX.

       ``(a) Imposition of Tax.--In addition to other taxes, there 
     is hereby imposed on every employer an excise tax, with 
     respect to the employment of any employee described in 
     subsection (b) during any month, equal to 80 percent of the 
     applicable individual premium (as defined in section 
     3455(c)(4)) for such month with respect to each such 
     employee. In applying section 3455(c)(4) for purposes of the 
     preceding sentence, such employee's principal place of abode 
     shall be treated as being in the State which includes such 
     employee's principal place of employment with such employer.
       ``(b) Employees Described.--For purposes of subsection (a), 
     an employee is described in this subsection for any month 
     if--
       ``(1) such employee is covered for such month under a 
     certified health plan other than a plan of his employer and 
     (but for such coverage) such employer would be liable for tax 
     under section 3451 or 3455 with respect to the employment of 
     such employee for such month, or
       ``(2) such employee is a medicare part C covered individual 
     (as defined in section 59B(d)) for such month, and the 
     applicable medicare part C premium for such employee is zero 
     by reason of section 3455(c)(2)(B).

     For purposes of paragraph (1), it shall be assumed that the 
     employee would not become a qualified employer-covered 
     employee of his employer.
       ``(c) Reduction of Tax for Part-time Employees.--With 
     respect to any part-time employee, the tax imposed by this 
     section for any month shall be an amount equal to the part-
     time fraction of the amount determined under subsection (a).
       ``(d) Treatment of Indians Employed by Indian Tribes and 
     Tribal Organizations.--No tax shall be imposed by this 
     section with respect to the employment of any employee if--
       ``(1) such employee is described in subsection (b)(1) 
     solely by reason of being covered under a health program of 
     the Service (as defined in section 901 of the Indian Health 
     Care Improvement Act), and
       ``(2) the employer is an Indian tribe (as defined in 
     section 4 of the Indian Health Care Improvement Act (25 
     U.S.C. 1603)) or a tribal organization (as defined in such 
     section 4).

                    ``Subchapter B--Employer Credits

``Sec. 3461. Family premium credit.
``Sec. 3462. Small employer credit.

     ``SEC. 3461. FAMILY PREMIUM CREDIT.

       ``(a) General Rule.--Every employer shall be entitled to 
     treat an amount equal to the applicable percentage of such 
     employer's family premium amount for any calendar quarter as 
     a payment by such employer of such employer's employment tax 
     liability for such calendar quarter.
       ``(b) Family Premium Amount.--
       ``(1) In general.--For purposes of this section, the family 
     premium amount of an employer for any calendar quarter is an 
     amount equal to the sum of--
       ``(A) such employer's aggregate liability for tax under 
     section 3455 for such quarter with respect to employees for 
     whom the applicable medicare part C premium is the applicable 
     family premium, and
       ``(B) the aggregate imputed part C family premiums for such 
     quarter for qualified employer-covered employees of such 
     employer receiving family coverage under any certified health 
     plan of such employer.
       ``(2) Part c family premium liability.--The determination 
     under paragraph (1)(A) shall be made without regard to any 
     election under section 3455(b)(2).
       ``(3) Imputed part c family premium.--
       ``(A) In general.--For purposes of paragraph (1)(B), the 
     imputed part C family premium for any qualified employer-
     covered employee is an amount equal to 80 percent of the 
     applicable family premium determined under section 3455 on 
     the basis of the State which includes such employee's 
     principal place of employment with his employer.
       ``(B) Lower percentage in certain cases.--If, in 
     determining the amount of the employer contribution to any 
     certified health plan of such employer with respect to any 
     part-time employee who is a qualified employer-covered 
     employee, the part-time fraction applied by the employer is 
     less than 1, the imputed part C family premium for such 
     employee is such fraction of the amount determined under 
     subparagraph (A).
       ``(c) Applicable Percentage.--For purposes of this 
     section--
       ``(1) In general.--The applicable percentage for any 
     calendar year is the percentage which the Secretary estimates 
     (in consultation with the Secretary of Health and Human 
     Services) will result in the aggregate amount of the deemed 
     payments determined under this section for all employers for 
     such year being equal to the product of the phase-in 
     percentage and the Secretary's estimate of the taxes imposed 
     by section 3458 which will be paid for such year. Proper 
     adjustments shall be made in the applicable percentage 
     determined for succeeding calendar years to the extent that 
     the applicable percentage determined for such calendar year 
     was greater than or less than the correct percentage.
       ``(2) Phase-in percentage.--For purposes of paragraph (1), 
     the phase-in percentage is--
       ``(A) 25 percent for calendar year 1999,
       ``(B) 40 percent for calendar year 2000,
       ``(C) 60 percent for calendar year 2001, and
       ``(D) 100 percent for calendar years after 2001.
       ``(d) Coordination With Depository Requirements.--Any 
     employer who is entitled to treat any amount as a payment 
     under subsection (a) for any calendar quarter may reduce, in 
     such manner as the Secretary may by regulations prescribe, by 
     a like amount, the amount otherwise required to be deposited 
     during such quarter by reason of the employment tax liability 
     of such employer.
       ``(e) Special Rules.--
       ``(1) Payment treated as made on due date.--Notwithstanding 
     subsection (d), for purposes of determining interest, any 
     deemed payment under subsection (a) for any calendar quarter 
     shall be treated as made on the due date for the return for 
     such quarter.
       ``(2) Denial of deduction.--The amount of any deduction 
     otherwise allowable under chapter 1 for the taxes imposed by 
     this chapter or for expenditures under any certified health 
     plan of such employer shall be reduced by any payment treated 
     as made under subsection (a).
       ``(f) Employment Tax Liability.--For purposes of this 
     section, the term `employment tax liability' means liability 
     for the taxes imposed by this chapter and chapters 21 and 24.

     ``SEC. 3462. SMALL EMPLOYER CREDIT.

       ``(a) General Rule.--Every eligible small employer shall be 
     entitled to treat an amount equal to the applicable 
     percentage of such employer's total premium amount for any 
     calendar year as a payment by such employer of such 
     employer's employment tax liability (as defined in section 
     3461(f)) for such calendar year.
       ``(b) Total Premium Amount.--
       ``(1) In general.--For purposes of this section, the total 
     premium amount of an employer for a calendar year is an 
     amount equal to the excess of--
       ``(A) the sum of--
       ``(i) such employer's aggregate liability for tax under 
     sections 3455 and 3458 for such year, and
       ``(ii) the aggregate imputed part C premiums for such year 
     for qualified employer-covered employees of such employer 
     receiving coverage under any certified health plan of such 
     employer, over
       ``(B) the aggregate deemed payments by the employer for 
     such year under section 3461.
       ``(2) Imputed part C premium.--For purposes of paragraph 
     (1), the imputed part C premium for any qualified employer-
     covered employee is an amount equal to 80 percent of the 
     applicable medicare part C premium determined under section 
     3455 for such employee on the basis of the State which 
     includes such employee's principal place of employment with 
     his employer and the type of coverage provided to such 
     employee under the certified health plan. Rules similar to 
     the rules of section 3461(b)(3)(B) shall apply for purposes 
     of the preceding sentence.
       ``(3) Certain individuals not taken into account.--The 
     total premium amount of an employer shall be determined 
     without regard to--
       ``(A) in the case of an employer which is a corporation, 
     any employee who owns (directly or by application of section 
     318) more than 10 percent of--
       ``(i) the outstanding stock of such corporation, or
       ``(ii) the total combined voting power of all stock of the 
     corporation,
       ``(B) in the case of an employer which is an estate or 
     trust, any grantor, beneficiary, or fiduciary of the estate 
     or trust, and
       ``(C) any member of the family (within the meaning of 
     section 267(c)(4)) of--
       ``(i) an individual described in subparagraph (A) or (B),
       ``(ii) in the case of an employer which is a sole 
     proprietorship, the sole proprietor, or
       ``(iii) in the case of an employer which is a partnership, 
     any partner who owns more than 10 percent of the capital 
     interest or profits interest of such partnership.

     In the case of an employer who is not a corporation, the 
     total premium amount also shall be determined without regard 
     to any individual not performing services in a trade or 
     business of the employer.
       ``(c) Applicable Percentage.--For purposes of this 
     section--
       ``(1) In general.--Except as otherwise provided in this 
     subsection, the applicable percentage is--
       ``(A) 37.5 percent for calendar years after 1998 and before 
     2004,
       ``(B) 20 percent for calendar year 2004,
       ``(C) 10 percent for calendar year 2005, and
       ``(D) 0 for calendar years after 2005.
       ``(2) Smaller employers.--In the case of an employer who 
     would be an eligible small employer if `25 employees' were 
     substituted for `50 employees' in subsection (d)(1), the 
     applicable percentage is--
       ``(A) 50 percent for calendar years after 1998 and before 
     2004,
       ``(B) 30 percent for calendar year 2004,
       ``(C) 15 percent for calendar year 2005, and
       ``(D) 0 for calendar years after 2005.
       ``(3) Phaseout of credit where higher average employee 
     wage.--If the average employee wage of an eligible small 
     employer for any calendar year exceeds $12,000, the 
     applicable percentage which would (but for this paragraph) 
     apply for such calendar year shall be reduced (but not below 
     zero) by the number of percentage points which bears the same 
     ratio to such applicable percentage as such excess bears to 
     $14,000.
       ``(d) Eligible Small Employer.--For purposes of this 
     section--
       ``(1) In general.--The term `eligible small employer' 
     means, with respect to any calendar year, any employer 
     unless--
       ``(A) on each of 20 days during such year (each day being 
     in a different week), such employer (or any predecessor) 
     employed more than 50 employees for some portion of the day, 
     or
       ``(B) the average employee wage of such employer for such 
     year exceeds $26,000.
       ``(2) Average employee wage.--The average employee wage of 
     an employer for any calendar year is an amount equal to--
       ``(A) the total payroll of such employer for such calendar 
     year, divided by
       ``(B) the number of full-time equivalent employees of such 
     employer for such calendar year.
       ``(3) Total payroll.--The total payroll of an employer for 
     any calendar year is an amount equal to the sum of--
       ``(A) the total wages paid by the employer during such 
     calendar year,
       ``(B) in the case of a sole proprietorship, the net 
     earnings from self-employment of the proprietor from such 
     trade or business for the taxable year ending with or within 
     such calendar year, and
       ``(C) in the case of a partnership, the net income of the 
     partnership for the taxable year ending with or within such 
     calendar year which will be treated as net earnings from 
     self-employment by the partners.
       ``(4) Net earnings from self-employment.--The term `net 
     earnings from self-employment' has the meaning given such 
     term by section 1402; except that the amount thereof may 
     never be less than zero.
       ``(5) Full-time equivalent employees.--The number of full-
     time equivalent employees of an employer for any calendar 
     year is the sum of--
       ``(A) the number of employees who worked on a substantially 
     full-time basis for the employer throughout the calendar 
     year, and
       ``(B) a fraction for each other employee based on the 
     number of hours such employee worked during the calendar year 
     compared to a full-time, full-year employee.

     For purposes of this paragraph, the proprietor shall be 
     treated as an employee of a sole proprietorship, and each 
     partner who has net earnings from self-employment from a 
     partnership shall be treated as an employee of such 
     partnership.
       ``(6) Aggregation rules.--For purposes of this subsection--
       ``(A) all employers treated as a single employer under 
     subsection (a) or (b) of section 52 shall be treated as a 
     single employer, and
       ``(B) all employees of the members of an affiliated service 
     group (as defined in section 414(m)) shall be treated as 
     employed by a single employer.
       ``(e) Coordination With Depository Requirements.--
       ``(1) In general.--Any employer who reasonably expects to 
     be entitled to treat any amount as a payment under subsection 
     (a) for any calendar year may reduce, in such manner as the 
     Secretary may by regulations prescribe, by a like amount, the 
     amount otherwise required to be deposited during such year by 
     reason of the employment tax liability (as defined in section 
     3461(f)) of such employer.
       ``(2) Quarterly determinations.--The amount of reduction 
     permitted under paragraph (1) for any calendar quarter shall 
     be based on a separate estimate for such quarter of the 
     amount of deemed payments to which the employer reasonably 
     expects to be entitled under subsection (a) for the calendar 
     year which includes such quarter and shall be properly 
     adjusted (under regulations prescribed by the Secretary) to 
     reflect the amount by which prior reductions under subsection 
     (a) during such calendar year were in excess of, or less 
     than, the amounts which would be proper under such estimate.
       ``(3) Year-end adjustments.--
       ``(A) Excess of deemed payments allowable over depository 
     benefit claimed.--If the amount of deemed payments to which 
     an employer is entitled under subsection (a) for any calendar 
     year exceeds the amount claimed by the employer under 
     paragraph (1) during such year, such excess shall be treated 
     for purposes of this title as an overpayment made by such 
     employer. For purposes of determining interest, such 
     overpayment shall be treated as made on January 31 of the 
     following calendar year.
       ``(B) Depository benefit claimed exceeds deemed payment 
     allowable.--If the amount claimed by the employer under 
     paragraph (1) during the calendar year exceeds the amount of 
     deemed payments to which such employer is entitled under 
     subsection (a) for such year, such excess shall be treated 
     for purposes of this title as an underpayment of the tax 
     imposed by this chapter for such calendar year. For purposes 
     of determining interest, such underpayment shall be allocated 
     ratably among the calendar quarters in such year (or in such 
     other manner as the Secretary may by regulations prescribe).
       ``(f) Special Rules.--
       ``(1) Payment treated as made on due date.--Notwithstanding 
     subsection (e), for purposes of determining interest, a 
     payment shall be treated as made under subsection (a) on the 
     due date for the return for each calendar quarter in an 
     amount equal to the amount of the reduction permitted under 
     subsection (e) for such quarter.
       ``(2) Denial of deduction.--The amount of any deduction 
     otherwise allowable under chapter 1 for the taxes imposed by 
     this chapter or for expenditures under any certified health 
     plan of such employer shall be reduced by any payment treated 
     as made under subsection (a).

                   ``Subchapter C--General Provisions

``Sec. 3465. Exemption for employment of generally excludable 
              employees.
``Sec. 3466. Definitions and special rules.

     ``SEC. 3465. EXEMPTION FOR EMPLOYMENT OF GENERALLY EXCLUDABLE 
                   EMPLOYEES.

       ``No tax shall be imposed by subchapter A with respect to 
     the employment of any employee during any month if such 
     employee is a generally excludable employee (as defined in 
     section 1105(b) of the Guaranteed Health Insurance Act of 
     1994) for such month.

     ``SEC. 3466. DEFINITIONS AND SPECIAL RULES.

       ``(a) Certified Health Plan; Medicare Part A.--For purposes 
     of this chapter--
       ``(1) Certified health plan.--The term `certified health 
     plan' has the meaning given such term by section 2 of the 
     Guaranteed Health Insurance Act of 1994.
       ``(2) Medicare part a.--The term `medicare part A' means 
     the insurance program established by part A of title XVIII of 
     the Social Security Act.
       ``(b) Full-time Employee; Part-Time Employee; Part-Time 
     Fraction.--For purposes of this chapter--
       ``(1) In general.--Except as provided in paragraph (2)--
       ``(A) the terms `full-time employee', `part-time employee', 
     and `part-time fraction' have the meanings given to such 
     terms by section 1106 of the Guaranteed Health Insurance Act 
     of 1994, and
       ``(B) the rules of section 1106(c) of the Guaranteed Health 
     Insurance Act of 1994 shall apply.
       ``(2) Exception.--Subparagraphs (A) and (B) of section 
     1106(a)(4) of the Guaranteed Health Insurance Act of 1994, 
     and section 1106(c) of such Act, shall not apply for purposes 
     of section 3462.
       ``(c) No Cover Over To Possessions.--Notwithstanding any 
     other provision of law, no amount collected under this 
     chapter shall be covered over to any possession of the United 
     States.
       ``(d) Other Definitions.--For purposes of this chapter, the 
     terms `State', `wages', `employer', `employment', and 
     `employee' have the same respective meanings as when used in 
     chapter 21: except that, for purposes of this chapter, the 
     following provisions of chapter 21 shall not apply:
       ``(1) Paragraph (1) of section 3121(a).
       ``(2) Paragraph (5) of section 3121(b).
       ``(3) Paragraph (7) of section 3121(b) (other than 
     subparagraph (C) or (F) thereof).
       ``(4) Paragraph (9) of section 3121(b).
       ``(e) Regulations.--The Secretary may prescribe such 
     regulations as may be appropriate to carry out the purposes 
     of this chapter, including regulations prescribing 1 or more 
     simplified methods (including brackets of hours) for 
     determining the part-time fraction and full-time equivalent 
     employees.''
       (b) Modification of Withholding Exemption Certificate 
     Requirements.--Subsection (f) of section 3402 is amended by 
     adding at the end the following new paragraph:
       ``(8) Certificate to include information related to 
     medicare part c status.--
       ``(A) Initial certificate.--On the withholding exemption 
     certificate furnished by an employee under paragraph (2)(A), 
     the employee shall certify--
       ``(i) whether the employee--

       ``(I) is covered under medicare part A or a certified 
     health plan (as defined in section 2 of the Guaranteed Health 
     Insurance Act of 1994) other than a plan of such employer, or
       ``(II) reasonably expects to be a young dependent (as 
     defined in section 1003(b)(1) of the Guaranteed Health 
     Insurance Act of 1994) of any taxpayer,

       ``(ii) whether the employee has a young dependent (as so 
     defined),
       ``(iii) the State (or place outside the United States) in 
     which such employee has his principal place of abode, and
       ``(iv) such other information as the Secretary may require.
       ``(B) Change of status.--If, on any day, there is a change 
     in any item of information required to be certified under 
     subparagraph (A) on the withholding exemption certificate 
     then in effect with respect to an employee, such employee 
     shall within 10 days thereafter furnish the employer with a 
     new withholding exemption certificate containing the 
     information described in subparagraph (A).''
       (c) Modification of Penalty for Failure To Make Deposit of 
     Taxes.--Section 6656 (relating to failure to make deposit of 
     taxes) is amended by adding at the end the following new 
     subsection:
       ``(c) Reductions in Deposits By Reason of Health-Related 
     Credits.--No penalty shall be imposed by subsection (a) on 
     any underpayment attributable to the depositor's estimate of 
     any deemed payment under subchapter B of chapter 25 (relating 
     to health-related employer credits) unless there is no 
     reasonable basis for such estimate.''
       (d) Clerical Amendment.--The table of chapters for subtitle 
     C is amended by striking the item relating to chapter 25 and 
     inserting the following:

``Chapter 25. Health-related employer taxes and credits.
``Chapter 26. General provisions relating to employment taxes.''

       (e) Effective Date.--
       (1) In general.--Except as provided in paragraph (2), the 
     amendments made by this section shall take effect on January 
     1, 1999.
       (2) Application of section 3451 to larger employers.--
     Section 3451 of the Internal Revenue Code of 1986 (as added 
     by this section) shall take effect on January 1, 1997.

     SEC. 2202. REPORTING REQUIREMENTS.

       (a) Employer Share of Medicare Part C Premium Shown on W-
     2.--Subsection (a) of section 6051 (relating to receipts for 
     employees) is amended by striking ``and'' at the end of 
     paragraph (8), by striking the period at the end of paragraph 
     (9) and inserting a comma, and by inserting after paragraph 
     (9) the following new paragraphs:
       ``(10) the total mandatory employer taxes (as defined in 
     section 59B(e)(3)) with respect to such employee, and
       ``(11) the total elective employer taxes (as defined in 
     section 59B(e)(4)) with respect to such employee.''
       (b) Returns Relating to Certified Health Plans and Medicare 
     Part A, Direct Premium Payments to HHS, and Medicare Part C 
     Coverage of Employees.--Subpart B of part III of subchapter A 
     of chapter 61 (relating to information concerning 
     transactions with others) is amended by adding at the end the 
     following new sections:

     ``SEC. 6050Q. RETURNS RELATING TO CERTIFIED HEALTH PLANS AND 
                   MEDICARE PART A.

       ``(a) Requirement of Reporting.--The administrator of any 
     certified health plan (as defined in section 2 of the 
     Guaranteed Health Insurance Act of 1994) and the Secretary of 
     Health and Human Services with respect to medicare part A (as 
     defined in such section) shall make a return for each 
     calendar year setting forth--
       ``(1) the name and TIN of each individual covered under 
     such plan or program at any time during such taxable year as 
     a primary insured or as the spouse of a primary insured,
       ``(2) the name and TIN (to the extent available) of each 
     individual covered under such plan or program at any time 
     during such taxable year as a young dependent (as defined in 
     section 1003(b)(1) of the Guaranteed Health Insurance Act of 
     1994) of a primary insured, and
       ``(3) the months during such calendar year for which such 
     individuals were so covered.

     Such return shall be made at such time and in such form as 
     the Secretary may by regulations prescribe.
       ``(b) Statements to Primary Insured Individuals.--Every 
     administrator (and the Secretary of Health and Human 
     Services) required to make a return under subsection (a) 
     shall furnish to each individual whose name is required to be 
     set forth in such return by reason of being a primary insured 
     a written statement showing--
       ``(1) the name of the certified health plan (or medicare 
     part A) and the address of its administrator (or of the 
     Secretary), and
       ``(2) the information required to be shown on the return 
     with respect to such primary insured.

     The written statement required under the preceding sentence 
     shall be furnished to the person on or before January 31 of 
     the year following the calendar year for which the return 
     under subsection (a) was required to be made.
       ``(c) Statement to Spouse or Young Dependents of Primary 
     Insured on Request.--At the request of an individual who, at 
     any time during a calendar year, was the spouse or a young 
     dependent (as defined in section 1003(b)(1) of the Guaranteed 
     Health Insurance Act of 1994) of a primary insured who is 
     required to receive a statement under subsection (b) from an 
     administrator, such administrator shall furnish to such 
     individual a copy of such statement with respect to such 
     insured for such calendar year.

     ``SEC. 6050R. RETURNS RELATING TO MEDICARE PART C PREMIUM 
                   PAYMENTS TO DEPARTMENT OF HEALTH AND HUMAN 
                   SERVICES.

       ``(a) Requirement of Reporting.--The Secretary of Health 
     and Human Services shall make a return for each calendar year 
     setting forth--
       ``(1) the name and TIN of each individual from whom such 
     Secretary received payments during such year under section 
     2123(b) of the Social Security Act for coverage under 
     medicare part C, and
       ``(2) the amount of such payments during such year.

     Such return shall be made at such time and in such form as 
     the Secretary may by regulations prescribe.
       ``(b) Statements to Individuals.--The Secretary of Health 
     and Human Services shall furnish to each individual whose 
     name is required to be set forth in such return a written 
     statement showing the aggregate payments described in 
     subsection (a) received by such Secretary from such 
     individual. The written statement required under the 
     preceding sentence shall be furnished to the person on or 
     before January 31 of the year following the calendar year for 
     which the return under subsection (a) was required to be 
     made.
       ``(c) Medicare Part C.--For purposes of this section, the 
     term `medicare part C' means the program of health insurance 
     benefits under part title XXI of the Social Security Act.

     ``SEC. 6050S. RETURNS RELATING TO EMPLOYER MEDICARE PART C 
                   PREMIUM PAYMENTS.

       ``Every employer who pays tax under section 3455 (relating 
     to employer share of medicare part C premiums) with respect 
     to the employment of any employee during any calendar year 
     shall make a return for such year setting forth--
       ``(1) the name and TIN of each such employee,
       ``(2) the class of enrollment on which such tax was 
     determined with respect to each such employee for each month 
     of such year,
       ``(3) the name and TIN of the spouse of such employee,
       ``(4) the name and TIN (to the extent available) of each 
     young dependent (as defined in section 1003(b)(1) of the 
     Guaranteed Health Insurance Act of 1994) of such employee.

     Such return shall be made at such time and in such form as 
     the Secretary may by regulations prescribe.''
       (c) Monthly Statements to Employees To Specify Employer 
     Share of Medicare Part C Premium.--Section 6051 (relating to 
     receipts for employees) is amended by adding at the end the 
     following new subsection:
       ``(g) Employer Share of Medicare Part C Premium.--Every 
     employer required to pay a tax under section 3455 with 
     respect to any employee for any month shall furnish to each 
     such employee a written statement showing the aggregate 
     amount of such tax paid by such employer with respect to such 
     employee for such month. Such statement shall be furnished 
     with the employer's payment of wages for the payroll period 
     which includes the last day of such month or at such times as 
     may be specified by the Secretary by regulations.''
       (d) Uniform Penalty Provisions Made Applicable.--
       (1) Subparagraph (B) of section 6724(d)(1) is amended by 
     inserting after the item relating to clause (viii) the 
     following new items (and redesignating the following clauses 
     accordingly):
       ``(ix) section 6050Q(a) (relating to returns regarding 
     certified health plans and medicare part A),
       ``(x) section 6050R(a) (relating to returns relating to 
     medicare part C premium payments to Department of Health and 
     Human Services),
       ``(xi) section 6050S (relating to returns relating to 
     employer medicare part C premium payments),''.
       (2) Paragraph (2) of section 6724(d) is amended by 
     inserting after subparagraph (P) the following new 
     subparagraph (and by redesignating the following 
     subparagraphs accordingly):
       ``(Q) subsection (b) or (c) of section 6050Q (relating to 
     returns regarding certified health plans and medicare part 
     A),
       ``(R) section 6050R(b) (relating to returns relating to 
     medicare part C premium payments to Department of Health and 
     Human Services),''.
       (e) Disclosure of Information By Secretary.--
       (1) Subsection (l) of section 6103 is amended by adding at 
     the end the following new paragraphs:
       ``(15) Disclosure of return information to carry out health 
     premium certificate program.--The Secretary shall, upon 
     written request from the Secretary of Health and Human 
     Services, disclose to officers and employees of the 
     Department of Health and Human Services return information 
     for purposes of determining or verifying whether any taxpayer 
     is entitled to a premium certificate under part A of title 
     XXII of the Social Security Act and the amount thereof. Such 
     return information shall be limited to--
       ``(A) such taxpayer's marital status,
       ``(B) the adjusted gross income of such taxpayer,
       ``(C) the interest received by such taxpayer which is 
     exempt from tax, and
       ``(D) the number of personal exemptions of such taxpayer.

     Return information disclosed under this paragraph may be used 
     by such officers and employees only for the purposes of, and 
     to the extent necessary in, making such determination or 
     verification.
       ``(16) Disclosure of return information relating to 
     subsidies to states adopting state benefit management 
     programs.--The Secretary shall, upon written request from the 
     Secretary of Health and Human Services, disclose to officers 
     and employees of the Department of Health and Human Services 
     return information necessary to determine or verify the 
     proper amount payable under section 2124(c)(1)(C) of the 
     Social Security Act to a State which has a State benefit 
     management program approved under subtitle B of title IV of 
     the Guaranteed Health Insurance Act of 1994. Return 
     information disclosed under this paragraph may be used by 
     such officers and employees only for the purposes of, and to 
     the extent necessary in, making such determination or 
     verification.''
       (2) Paragraph (4) of section 6103(p) is amended by striking 
     ``or (14)'' each place it appears and inserting ``(14), (15), 
     or (16)''.
       (f) Clerical Amendment.--The table of sections for subpart 
     B of part III of subchapter A of chapter 61 is amended by 
     adding at the end the following new items:
``Sec. 6050Q. Returns relating to certified health plans and medicare 
              part A.
``Sec. 6050R. Returns relating to medicare part C premium payments to 
              Department of Health and Human Services.
``Sec. 6050S. Returns relating to employer medicare part C premium 
              payments.''

       (g) Effective Date.--The amendments made by this section 
     (other than subsection (e)) shall apply to calendar years 
     after 1998.

     SEC. 2203. TRANSITIONAL CONTINUATION COVERAGE REQUIREMENT FOR 
                   GROUP HEALTH PLANS.

       Clause (i) of section 4980B(f)(2)(B) is amended by adding 
     at the end the following new sentence: ``In the case of an 
     individual whose period of coverage under this clause would 
     (but for this sentence) end after the date of the enactment 
     of the Guaranteed Health Insurance Act of 1994 and before 
     January 1, 1999, such period shall in no event terminate by 
     reason of this clause before January 1, 1999.''
                          TITLE III--BENEFITS
            Subtitle A--Guaranteed National Benefit Package

                       PART 1--BENEFITS DESCRIBED

     SEC. 3001. ESTABLISHMENT OF PACKAGE.

       (a) Coverage of Expanded Medicare Benefits.--
       (1) In general.--Except as otherwise provided in this 
     subtitle, for purposes of this Act and the Social Security 
     Act, the guaranteed national benefit package shall consist of 
     the same items and services for which payment may be made 
     under title XVIII of the Social Security Act (as amended by 
     the Guaranteed Health Insurance Act of 1994) to individuals 
     entitled to benefits under part A, and enrolled under part B, 
     of title XVIII of such Act, subject to the same exclusions 
     from coverage as are provided under section 1862(a) of such 
     Act.
       (2) Exceptions relating to prescription drugs.--
       (A) Medicare rebates not applicable.--An outpatient 
     prescription drug shall be included in the guaranteed 
     national benefit package notwithstanding any exclusion from 
     coverage that may be made with respect to the drug under 
     section 1862(a)(17) of the Social Security Act.
       (B) Nonapplication of prior authorization and drug use 
     review by Secretary.--The provisions of section 1834(d)(6) of 
     the Social Security Act shall not apply with respect to an 
     outpatient prescription drug furnished to an individual who 
     is not enrolled under part B of title XVIII of such Act or 
     under medicare part C. A health plan may subject an 
     outpatient prescription drug furnished to any other 
     individual to prospective review, prior authorization, or 
     drug use review, but only if the plan meets the requirements 
     described in section 5007(d).
       (b) Enhanced Medicare Benefits Described.--In addition to 
     the items and services covered under title XVIII of the 
     Social Security Act as of the date of the enactment of this 
     title, the guaranteed national benefit package shall include 
     the following items and services for which coverage is 
     provided under such title XVIII as a result of the amendments 
     to such title made by subtitle B.
       (1) Outpatient prescription drugs (as added by section 
     3101).
       (2) Limitations on out-of-pocket expenditures (as added by 
     section 3111).
       (3) Unlimited days of coverage for inpatient hospital 
     services (as added by section 3112).
       (4) Newborn, well-baby, and well-child services and hearing 
     aids (as added by section 3113).
       (5) Expanded coverage of screening mammography (provided 
     under section 3114(a)) and screening pap smears (provided 
     under section 3114(b)).
       (6) Screening fecal-occult blood tests, screening flexible 
     sigmoidoscopies, and screening colonoscopy (as added by 
     section 3114(c)).
       (7) Screening for sexually-transmitted diseases (as added 
     by section 3114(d)).
       (8) Screening for tuberculosis (as added by section 
     3114(e)).
       (9) Pregnancy-related services and voluntary family 
     planning services (as added by section 3115).
       (10) Expanded coverage for mental health and substance 
     abuse services (as provided under section 3116).
       (11) Expanded coverage for certain chiropractic services 
     (as provided under section 3117).

     SEC. 3002. COVERAGE OF ITEMS AND SERVICES NOT COVERED UNDER 
                   MEDICARE.

       (a) Experimental Treatments.--
       (1) In general.--In the absence of a national coverage 
     decision under the medicare program, the guaranteed national 
     benefit package may, at the option of a certified health 
     plan, include coverage of an experimental item, service, or 
     treatment. Nothing in the previous sentence may be construed 
     to permit a certified health plan to include in the 
     guaranteed national benefit package an item or service for 
     which the Secretary does not have the authority to make such 
     a national coverage decision.
       (2) Construction.--For purposes of paragraph (1), a service 
     covered as an incident to a qualifying investigational 
     treatment under subsection (b) shall not be considered an 
     experimental item, service, or treatment.
       (b) Services Incident to Investigational Treatments.--
       (1) In general.--The guaranteed national benefit package 
     shall include coverage of any item or service provided to an 
     individual incident to a qualifying investigational treatment 
     if the item or service is otherwise included in the 
     guaranteed national benefit package.
       (2) Qualifying investigational treatment defined.--In this 
     subsection, a ``qualifying investigational treatment'' means 
     an investigational treatment provided under a clinical 
     research trial approved by the Secretary or a qualified non-
     governmental research entity (as defined in guidelines of the 
     National Institutes of Health, including guidelines for 
     designated cancer support grants of the National Cancer 
     Institute), or a peer-reviewed and approved research program 
     (as defined by the Secretary), conducted for the primary 
     purpose of determining whether or not a treatment is safe, 
     efficacious, or having any other characteristic of a 
     treatment which must be demonstrated in order for the 
     treatment to be medically necessary.
       (3) Exclusions.--Nothing in this subsection may be 
     construed to provide for coverage under the guaranteed 
     national benefit package of an item or service of a class or 
     type for which the Secretary determines that payment is 
     generally made from sources other than certified health 
     plans, including the investigational agent or device itself 
     or the investigational procedure, any non-health services 
     that might be required for a person to receive the qualifying 
     investigational treatment, or the costs of managing the 
     research.
       (c) Modification of Coverage for Preventive Services.--In 
     consultation with appropriate experts in the area of 
     preventive medicine (including the Advisory Council on 
     Immunological Practices of the Centers for Disease Control 
     and Prevention), the Secretary may modify the coverage of 
     immunizations and other preventive services otherwise 
     provided under the guaranteed national benefit package under 
     this part to provide for coverage of additional services or 
     to increase the frequency of coverage, but only if--
       (1) any such modification is determined to be clinically 
     appropriate;
       (2) in the case of preventive services related to 
     communicable diseases, such services shall be provided 
     pursuant to modification without the application of any 
     deductible or coinsurance; and
       (3) in the case of behavioral preventive services (as 
     specified by the Secretary), the coverage of such services 
     will not result in any increase in the premium imposed under 
     medicare part C.
       (d) Coverage of Certain Other Providers.--
       (1) In general.--For purposes of a certified health plan or 
     medicare part C, the guaranteed national benefit package 
     shall include--
       (1) coverage of services provided at an individual's home 
     by a Christian Science practitioner or Christian Science 
     nurse; and
       (2) coverage of services provided in a Christian Science 
     Sanitorium (as defined in section 1861(y) by a Christian 
     Science practitioner.
       (2) Qualifications of providers.--A Christian Science 
     practitioner or Christian Science nurse is qualified for 
     purposes of paragraph (1) if the practitioner or nurse is 
     listed as such a practitioner or nurse by the First Church of 
     Christ, Scientist, in Boston, Massachusetts.

     SEC. 3003. MODIFICATION OF MENTAL HEALTH AND SUBSTANCE ABUSE 
                   BENEFITS UNDER APPROVED MANAGED MENTAL HEALTH 
                   PROGRAMS.

       (a) Substitution of Mental Health Benefits Provided Under 
     Program for Benefits Provided Under Guaranteed National 
     Benefit Package.--In the case of an individual who is a 
     resident of a State operating a comprehensive managed mental 
     health program approved by the Secretary under section 1981 
     of the Public Health Service Act for a month, the individual 
     is considered to have waived the right to benefits for mental 
     health services under the guaranteed national benefit package 
     under this subtitle in consideration of receipt of benefits 
     for mental health services through such program.
       (b) Mental Health Services Described.--In this section, the 
     term ``mental health services'' means the following items and 
     services:
       (1) Inpatient psychiatric services (as described in section 
     1812(a)(5) of the Social Security Act).
       (2) Any items or services furnished under part B of title 
     XVIII of such Act for the treatment of mental, 
     psychoneurotic, and personality disorders of an individual 
     who is not an inpatient of a hospital.
       (3) Intensive community-based mental health services (as 
     described in section 1861(ff) of such Act).
       (4) Intensive residential services (as described in section 
     1861(qq) of such Act).

                          PART 2--COST-SHARING

     SEC. 3011. APPLICATION OF COST-SHARING SCHEDULES.

       (a) In General.--Benefits provided under the guaranteed 
     national benefit package shall be subject to one of the 
     following cost-sharing schedules offered by a certified 
     health plan and medicare part C:
       (1) The standard cost-sharing schedule described in section 
     3013.
       (2) The managed care cost-sharing schedule described in 
     section 3014.
       (b) Treatment of Deductibles.--
       (1) Application on an annual basis.--The deductibles for a 
     year under the schedules referred to in subsection (a) shall 
     be applied based upon expenses incurred for items and 
     services covered under the guaranteed national benefit 
     package that are furnished in the year.
       (2) Individual and family general deductibles.--
       (A) Individual.--Subject to subparagraphs (B) and (C), with 
     respect to an individual enrolled under a certified health 
     plan or medicare part C (regardless of the class of 
     enrollment), any individual general deductible in the cost 
     sharing schedule offered by the plan represents the amount of 
     countable expenses (as defined in subparagraph (D)) that the 
     individual may be required to incur in a year before the plan 
     incurs liability for expenses for items and services covered 
     under the guaranteed national benefit package that are 
     furnished to the individual.
       (B) Family.--Subject to subparagraph (C), in the case of an 
     individual enrolled under a certified health plan or medicare 
     part C other than under an individual class of enrollment (as 
     defined in section 3(b)), the individual general deductible 
     under subparagraph (A) shall not apply to countable expenses 
     incurred by any member of the individual's family in a year 
     at such time as the family members included in such 
     enrollment have incurred, in the aggregate, countable 
     expenses in the amount of the family general deductible for 
     the year.
       (C) Special rule for high deductible plans.--In the case of 
     an individual enrolled under a certified health plan that is 
     a high deductible plan (as defined in section 5504(5)) in a 
     class of enrollment other than an individual class of 
     enrollment, subparagraph (A) shall not apply and the family 
     general deductible represents the amount of countable 
     expenses (as defined in subparagraph (D)) that the members of 
     family may be required to incur in the aggregate in a year 
     before the plan incurs liability for expenses for items and 
     services covered under the guaranteed national benefit 
     package that are furnished to such members.
       (D) Countable expense.--In this paragraph, the term 
     ``countable expense'' means, with respect to an individual 
     for a year, an expense for an item or service covered under 
     the guaranteed national benefit package that is subject to 
     the general deductible and for which, but for such deductible 
     and any other cost sharing under this part, a health plan is 
     liable for payment. The amount of countable expenses for an 
     individual for a year under this paragraph shall not exceed 
     the individual general deductible for the year.
       (c) Treatment of Coinsurance and Copayments.--After a 
     general or separate deductible that applies to an item or 
     service covered under the guaranteed national benefit package 
     has been satisfied for a year, coinsurance and copayments are 
     amounts (expressed as a percentage of an amount otherwise 
     payable or as a dollar amount, respectively) that an 
     individual may be required to pay with respect to the item or 
     service.
       (d) Rounding of Amounts.--Any amount expressed in dollars 
     in this part shall be rounded to the nearest multiple of $1.

     SEC. 3012. LIMITS ON OUT-OF-POCKET EXPENDITURES.

       (a) Annual Out-of-Pocket Limit on Cost-Sharing for Services 
     Other Than Outpatient Prescription Drugs.--The total amount 
     of cost-sharing incurred in a year (beginning with 1997) with 
     respect to items and services covered under the guaranteed 
     national benefit package (other than outpatient prescription 
     drugs) may not exceed the following:
       (1) In the case of an individual enrolled under a certified 
     health plan or medicare part C under an individual class of 
     enrollment (as defined in section 3(b))--
       (A) for 1997, an amount equal to $3,000, increased by the 
     average annual percentage increase in the per capita gross 
     domestic product (in current dollars, as published by the 
     Secretary of Commerce) during each of the years 1994 through 
     1996;
       (B) for 1998, the amount determined under this paragraph 
     for 1997, increased by the average annual percentage increase 
     in the per capita gross domestic product (in current dollars, 
     as published by the Secretary of Commerce) during 1997; and
       (C) for each succeeding year, the amount determined under 
     this paragraph for the previous year, increased by the 
     national medicare growth factor established for the year 
     under section 8201(c).
       (2) In the case of an individual enrolled under a certified 
     health plan or medicare part C under any other class of 
     enrollment--
       (A) for 1997, an amount equal to $6,000, increased by the 
     average annual percentage increase in the per capita gross 
     domestic product (in current dollars, as published by the 
     Secretary of Commerce) during the period of 1994 through 
     1996;
       (B) for 1998, the amount determined under this paragraph 
     for 1997, increased by the average annual percentage increase 
     in the per capita gross domestic product (in current dollars, 
     as published by the Secretary of Commerce) during 1997; and
       (C) for each succeeding year, the amount determined under 
     this paragraph for the previous year, increased by the 
     national medicare growth factor established for the year 
     under section 8201(c).
       (b) Separate Out-of-Pocket Limit on Cost-Sharing for 
     Outpatient Prescription Drugs.--The amount of cost-sharing 
     incurred in a year with respect to outpatient prescription 
     drugs may not exceed--
       (1) for 1997, $1,000, increased by the average annual 
     percentage increase in private sector per capita outpatient 
     prescription drug expenditures (as determined by the 
     Secretary) during each of the years 1994 through 1996;
       (2) for 1998, the amount applicable under this paragraph 
     for 1997, increased by the average annual percentage increase 
     in private sector per capita outpatient prescription drug 
     expenditures (as determined by the Secretary) during 1997; 
     and
       (3) for 1999 and each succeeding year, the amount 
     applicable under this paragraph for the previous year, 
     increased by the percentage increase computed under section 
     8206(b) for the year.

     SEC. 3013. STANDARD COST-SHARING SCHEDULE DESCRIBED.

       (a) Deductible.--
       (1) In general.--Except as provided in paragraphs (3) and 
     (4), with respect to expenses incurred for items and services 
     in the comprehensive benefit package during a year (other 
     than expenses incurred for items and services described in 
     paragraph (2)), the standard cost-sharing schedule offered by 
     a certified health plan and medicare part C shall have--
       (A) for 1997--
       (i) an annual individual general deductible of $500, 
     increased by the average annual percentage increase in the 
     per capita gross domestic product (in current dollars, as 
     published by the Secretary of Commerce) during the period of 
     1994 through 1996, and
       (ii) an annual family general deductible of $750, increased 
     by such average annual percentage increase;
       (B) for 1998, the annual individual general deductible and 
     the annual family general deductible applicable for 1997, 
     increased by the average annual percentage increase in the 
     per capita gross domestic product (in current dollars, as 
     published by the Secretary of Commerce) during 1997; and
       (C) for 1999 and each succeeding year, the annual 
     individual general deductible and the annual family general 
     deductible applicable for the previous year, increased by the 
     national medicare growth factor established for the year 
     under section 8201(c).
       (2) Separate deductible for covered outpatient drugs.--With 
     respect to expenses incurred for covered outpatient drugs in 
     a year, the standard cost-sharing schedule offered by a 
     certified health plan and medicare part C shall have--
       (A) for 1997, an annual general deductible of $500, 
     increased by the average annual percentage increase in 
     private sector per capita outpatient prescription drug 
     expenditures (as determined by the Secretary) during each of 
     the years 1994 through 1996;
       (B) for 1998, the amount applicable under this paragraph 
     for 1997, increased by the average annual percentage increase 
     in private sector per capita outpatient prescription drug 
     expenditures (as determined by the Secretary) during 1997; 
     and
       (C) for 1999 and each succeeding year, the amount 
     applicable under this paragraph for the previous year, 
     increased by the percentage increase computed under section 
     8206(b) for the year.
       (3) Waiver of deductible for certain services.--No 
     deductible shall be applied under the standard cost-sharing 
     schedule offered by a certified health plan or medicare part 
     C with respect to expenses incurred--
       (A) for screening mammography (described in section 1834(c) 
     of such Act);
       (B) for screening pap smear and pelvic exams (described in 
     section 1861(s)(14);
       (C) for screening for sexually-transmitted diseases 
     (described in section 1861(s)(19) of such Act); and
       (D) for screening for tuberculosis (described in section 
     1861(s)(20)) of such Act).
       (E) for pregnancy-related services consisting of prenatal 
     services (described in section 1861(s)(21) of such Act);
       (F) for voluntary family planning services (described in 
     section 1861(s)(22) of such Act);
       (G) for newborn and well-baby services (described in 
     section 1861(oo)(1) of the Social Security Act); and
       (H) for well-child services (described in section 
     1861(pp)(1) of such Act).
       (4) Special rules for high deductible plan.--In the case of 
     a high deductible plan (as defined in section 5504(5))--
       (A) the reference in paragraph (1)(A)(i) to ``$500'' shall 
     be considered a reference to an amount established by the 
     carrier offering the plan, except that such amount may not be 
     less than $1,500 and may not exceed $2,500; and
       (B) the reference in paragraph (1)(A)(ii) to ``$750'' shall 
     be considered a reference to an amount established by the 
     carrier offering the plan, except that such amount may not be 
     less than $2,150 and may not exceed $3,750.
       (b) Application of Medicare Coinsurance Rates and 
     Copayments.--
       (1) In general.--Except as provided in paragraph (2), the 
     coinsurance rates applicable to an item or service under 
     title XVIII of the Social Security Act shall apply under the 
     standard cost-sharing schedule offered by a certified health 
     plan and medicare part C with respect to the same item or 
     service covered under the guaranteed national benefit 
     package.
       (2) Waiver of coinsurance and copayments for certain 
     inpatient services.--Under the standard cost-sharing schedule 
     offered by a certified health plan and medicare part C, 
     inpatient hospital services (as defined in section 1861(b) of 
     the Social Security Act) and intensive residential services 
     (as defined in section 1861(qq) of such Act) shall not be 
     subject to the coinsurance otherwise applicable under the 
     second sentence of section 1813(a)(1) of such Act.
       (3) Coverage of extended care services without regard to 
     spell of illness.--With respect to post-hospital extended 
     care services (as defined in section 1861(i) of such Act) 
     furnished in a skilled nursing facility (as defined in 
     section 1861(j) of such Act), such services may be furnished 
     to an individual notwithstanding that the services are not 
     furnished during a spell of illness (as described in section 
     1861(a)).

     SEC. 3014. MANAGED CARE COST-SHARING SCHEDULE.

       (a) In General.--Items and services covered under the 
     guaranteed national benefit package provided through a 
     provider network (as defined in section 5504(10)) of a 
     certified health plan or medicare part C--
       (1) are not subject to a deductible or to payment of any 
     coinsurance (except as may be provided in subsection (b)), 
     and
       (2) are subject to the applicable copayment described in 
     this section.
       (b) Copayments Imposed in 1997.--
       (1) In general.--The copayment applicable under this 
     section with respect to items and services provided during 
     1997 shall be equal to the following amounts, adjusted in 
     accordance with paragraph (2):
       (A) In the case of physician visits and other health 
     professional visits, $15.
       (B) In the case of emergency room services (or any other 
     emergency services) for non-emergency treatment, $30.
       (C) In the case of hospital outpatient and other ambulatory 
     medical and surgical services, $15.
       (D) In the case of a covered outpatient drug--
       (i) which is a generic product or which is not a generic 
     product if an equivalent generic product is not available, 
     the lesser of $10 or an amount equal to a coinsurance of 20 
     percent; or
       (ii) which is not a generic product if an equivalent 
     generic product is available, the greater of $10 or an amount 
     equal to a coinsurance of 20 percent.
       (E) In the case of pregnancy-related services and family 
     planning services (other than prenatal visits), $15.
       (F) In the case of intensive community mental illness and 
     substance abuse services, $30.
       (G) In the case of outpatient mental health and substance 
     abuse services (other than psychotherapy) $15 per visit.
       (H) In the case of outpatient mental health and substance 
     abuse services consisting of psychotherapy, $25 per visit.
       (2) Indexing of amounts provided.--The amounts described in 
     paragraph (1) shall be increased by the average annual 
     percentage increase in the per capita gross domestic product 
     (in current dollars, as published by the Secretary of 
     Commerce) during the period of 1994 through 1996.
       (c) Copayments Imposed in Subsequent Years.--The copayment 
     applicable under this section with respect to items and 
     services provided--
       (1) in 1998 is equal to the amount applicable under this 
     section for 1997, increased by the average annual percentage 
     increase in the per capita gross domestic product (in current 
     dollars, as published by the Secretary of Commerce) during 
     1997; and
       (2) in 1999 and each succeeding year is equal to the amount 
     applicable under this section for the previous year, 
     increased by the national medicare growth factor established 
     for the year under section 8201(c).

                    PART 3--MISCELLANEOUS PROVISIONS

     SEC. 3021. REFERENCES TO MEDICARE PROVISIONS.

       In this subtitle, except as otherwise specifically 
     provided, any references to provisions of title XVIII of the 
     Social Security Act are deemed to be references to such 
     provisions as in effect on the day after the date of the 
     enactment of this Act, taking into account the amendments 
     made to such title by this Act as if the effective date of 
     such amendments were January 1, 1997.

     SEC. 3022. RELATION BETWEEN PACKAGE AND CERTAIN STATE LAWS.

       (a) Permitting States to Require Benefits Under Certified 
     Health Plans to be Furnished by Certain Providers.--Nothing 
     in this subtitle may be construed to prohibit a State from 
     requiring that an item or service covered under the 
     guaranteed national benefit package be furnished to an 
     individual enrolled in a certified health plan by any 
     particular class or type of provider who is legally 
     authorized to provide such item or service under the law of 
     the State (or under a State regulatory mechanism provided by 
     State law) in which the item or service is provided.
       (b) Requiring Health Plans to Offer Benefits in Excess of 
     National Package.--No State may require a certified health 
     plan to offer any item or service not included in the 
     guaranteed national benefit package.
       (c) Coverage of Services not Furnished by Medicare 
     Providers.--
       (1) In general.--Nothing in this subtitle shall be 
     construed to prohibit coverage of an item or service 
     otherwise described in section 3001 under the guaranteed 
     national benefit package furnished to an individual under a 
     certified health plan solely on the ground that the 
     individual or entity providing the item or service is not an 
     eligible medicare provider, so long as the individual or 
     entity is legally authorized to provide such item or service 
     under the law of the State (or under a State regulatory 
     mechanism provided by State law) in which the item or service 
     is provided.
       (2) Eligible medicare provider defined.--In paragraph (1), 
     an ``eligible medicare provider'' is an individual or entity 
     providing an item or service for which payment may be made 
     under title XVIII of the Social Security Act who is 
     participating in such title or otherwise eligible to receive 
     payment for providing such an item or service under such 
     title.

     SEC. 3023. PROVISION OF ITEMS OR SERVICES CONTRARY TO 
                   RELIGIOUS BELIEF OR MORAL CONVICTION.

       A health professional or a health facility may not be 
     required to provide an item or service in the guaranteed 
     national benefit package if the professional or facility 
     objects to doing so on the basis of a religious belief or 
     moral conviction.

     SEC. 3024. ESTABLISHMENT OF COMMISSIONS.

       (a) Advisory Commission on Mental Health and Substance 
     Abuse Services.--
       (1) Establishment of commission.--
       (A) In general.--The Director of the Office of Technology 
     Assessment (hereafter in this section referred to as the 
     ``Director'' and the ``Office'', respectively) shall provide 
     for the appointment of an Advisory Commission on Mental 
     Health and Substance Abuse Services (hereafter in this 
     subsection referred to as the ``Commission'') to be composed 
     of individuals appointed by the Director without regard to 
     the provisions of title 5, United States Code, governing 
     appointments in the competitive service.
       (B) Number; timing of appointment.--The Commission shall 
     consist of 15 individuals. Members of the Commission shall 
     first be appointed not later than 1 year after the date of 
     the enactment of this subsection for a term of 3 years, 
     except that the Director may provide initially for such 
     shorter terms as will insure that (on a continuing basis) the 
     terms of no more than 4 members expire in any one year.
       (C) Composition.--The membership of the Commission shall 
     include (but need not be limited to)--
       (i) physicians,
       (ii) other health professionals,
       (iii) individuals with knowledge of and experience in the 
     delivery of mental health and substance abuse services,
       (iv) representatives of public mental health and substance 
     abuse treatment service systems, and
       (v) consumers.
     To the greatest extent feasible, the membership of the 
     Commission shall reflect the racial, ethnic, and gender 
     composition of the population of the United States.
       (2) Issues studied by commission.--The Commission shall 
     examine the following issues:
       (A) The variety of mental health and substance abuse 
     services provided in the United States, together with the 
     types of providers furnishing such services and the methods 
     under which the providers receive payment for furnishing such 
     services.
       (B) The means available to appropriately manage the 
     delivery of mental health and substance abuse services and 
     coordinate the delivery of such services with the delivery of 
     other health services, and to achieve parity in the scope of 
     mental health and substance abuse services covered under the 
     guaranteed national benefit package under this title with the 
     scope of other health services covered under the package.
       (C) The variations in the utilization of and costs 
     associated with mental health and substance abuse services 
     among different geographic regions and demographic groups.
       (D) The incidence and prevalence of severe mental illness 
     and substance abuse among incarcerated adults and juveniles 
     and the relation between the mental health and substance 
     abuse treatment provided to these individuals and the length 
     of time these individuals are incarcerated.
       (E) The standards for training and certifying providers of 
     mental health and substance abuse services.
       (F) The standards used to measure the quality of mental 
     health and substance abuse services and to review the 
     utilization of such services.
       (G) Such other issues relating to mental health and 
     substance abuse services in the United States as the 
     Commission considers appropriate.
       (3) Submission of annual report.--Not later than January 1, 
     1998 (and not later than January 1 of the first 4 years 
     thereafter), the Commission shall submit to Congress a 
     report--
       (A) describing the issues examined by the Commission under 
     paragraph (2) during the preceding year;
       (B) evaluating the effectiveness of the guaranteed national 
     benefit package under this subtitle in assuring adequate 
     coverage for mental health and substance abuse services;
       (C) analyzing the progress made in achieving parity in the 
     delivery of mental health and substance abuse services and 
     the delivery of other health services for individuals in the 
     United States;
       (D) evaluating State comprehensive managed mental health 
     programs operated during the preceding year under section 
     1981 of the Public Health Service Act and the extent of the 
     integration of public and private systems of mental health 
     and substance abuse treatment services in the State;
       (E) analyzing trends in the delivery of mental health and 
     substance abuse services and the costs associated with the 
     delivery of such services; and
       (F) analyzing whether any distinctions in limitations on 
     coverage and determinations of payment amounts between mental 
     health and substance abuse services and other services in the 
     guaranteed national benefit package under this subtitle 
     should be maintained, modified, or eliminated.
       (4) Applicability of other administrative provisions.--The 
     following provisions of section 1886(e)(6) of the Social 
     Security Act shall apply to the Commission in the same manner 
     as such provisions apply to the Prospective Payment 
     Assessment Commission:
       (A) Subparagraph (C) (relating to staffing and 
     administration generally).
       (B) Subparagraph (D) (relating to compensation of members).
       (C) Subparagraph (F) (relating to access to information).
       (D) Subparagraph (G) (relating to use of funds).
       (E) Subparagraph (H) (relating to periodic GAO audits).
       (F) Subparagraph (J) (relating to requests for 
     appropriations).
       (5) Termination.--The Commission shall terminate 30 days 
     after submitting the final report required under paragraph 
     (3).
       (b) National Health Advisory Commission.--
       (1) Establishment of commission.--
       (A) In general.--The Director of the Office of Technology 
     Assessment (hereafter in this section referred to as the 
     ``Director'' and the ``Office'', respectively) shall provide 
     for the appointment of a National Health Advisory Commission 
     (hereafter in this subsection referred to as the 
     ``Commission'').
       (B) Composition.--The Commission shall consist of the 
     following individuals:
       (i) The Chair and Vice-Chair of the Prospective Payment 
     Assessment Commission.
       (ii) The Chair and Vice-Chair of the Physician Payment 
     Review Commission.
       (iii) The Chair and Vice-Chair of the Prescription Drug 
     Payment Review Commission.
       (iv) The Chair and Vice-Chair of the Advisory Commission on 
     Mental Health and Substance Abuse Services.
       (v) 3 other individuals appointed by the Director (without 
     regard to the provisions of title 5, United States Code, 
     governing appointments in the competitive service) with 
     expertise in health economics, health insurance, benefits, 
     and provider reimbursement.
     To the greatest extent feasible, the membership of the 
     Commission shall reflect the racial, ethnic, and gender 
     composition of the population of the United States.
       (C) Timing of appointment.--Members of the Commission shall 
     first be appointed not later than 15 months after the date of 
     the enactment of this subsection for a term of 3 years, 
     except that the Director may provide initially for such 
     shorter terms as will insure that (on a continuing basis) the 
     terms of no more than 4 members expire in any one year.
       (2) Duties.--Based on detailed information provided by the 
     Commissions referred to in paragraph (1), the Commission 
     shall monitor the impact of this Act on individuals, 
     employers, and governments.
       (3) Annual reports.--Not later than January 1, 1998, and 
     each January 1 thereafter, the Commission shall submit to 
     Congress a report on the impact of this Act on individuals, 
     employers, and governments, and shall include in the report 
     recommendations for changes in this Act, including (but not 
     limited to) changes in the guaranteed national benefit 
     package described in this subtitle.
       (4) Applicability of other administrative provisions.--The 
     following provisions of section 1886(e)(6) of the Social 
     Security Act shall apply to the Commission in the same manner 
     as such provisions apply to the Prospective Payment 
     Assessment Commission:
       (A) Subparagraph (C) (relating to staffing and 
     administration generally).
       (B) Subparagraph (D) (relating to compensation of members).
       (C) Subparagraph (F) (relating to access to information).
       (D) Subparagraph (G) (relating to use of funds).
       (E) Subparagraph (H) (relating to periodic GAO audits).
       (F) Subparagraph (J) (relating to requests for 
     appropriations).

     SEC. 3025. STUDY ON COVERAGE OF EMERGENCY DENTAL SERVICES.

       (a) Study.--The Secretary of Health and Human Services 
     shall conduct a study to determine whether coverage for 
     emergency dental services should be included in the 
     guaranteed national benefit package under this subtitle.
       (b) Report.--Not later than 1 year after the date of the 
     enactment of this Act, the Secretary shall submit to Congress 
     a report on the study conducted under subsection (a), and 
     shall include in the report such recommendations as the 
     Secretary considers appropriate regarding the conditions 
     under which emergency dental services should be covered and 
     the methodology under which payment may be made for such 
     services.

     SEC. 3026. STUDY ON COVERAGE OF SCREENING FOR ADULT DIABETES.

       (a) Study.--The Secretary of Health and Human Services 
     shall conduct a study to determine the appropriateness and 
     cost-effectiveness of screening for adult diabetes for 
     purposes of determining whether coverage for such service 
     should be included in the guaranteed national benefit package 
     under this subtitle.
       (b) Report.--Not later than 1 year after the date of the 
     enactment of this Act, the Secretary shall submit to Congress 
     a report on the study conducted under subsection (a), and 
     shall include in the report such recommendations as the 
     Secretary considers appropriate regarding the conditions 
     under which screening for adult diabetes should be covered 
     and the methodology under which payment may be made for such 
     service.
Subtitle B--Coverage of Outpatient Prescription Drugs and Other Changes 
                          in Medicare Benefits

           PART 1--COVERAGE OF OUTPATIENT PRESCRIPTION DRUGS

     SEC. 3101. COVERAGE OF OUTPATIENT PRESCRIPTION DRUGS.

       (a) Covered Outpatient Drugs as Medical and Other Health 
     Services.--Section 1861(s)(2)(J) (42 U.S.C. 1395x(s)(2)(J)) 
     is amended to read as follows:
       ``(J) covered outpatient drugs;''.
       (b) Definition of Covered Outpatient Drug.--Section 1861(t) 
     (42 U.S.C. 1395x(t)) is amended--
       (1) in the heading, by adding at the end the following: ``; 
     Covered Outpatient Drugs'';
       (2) in paragraph (1)--
       (A) by striking ``paragraph (2)'' and inserting ``the 
     succeeding paragraphs of this subsection'', and
       (B) by striking the period at the end and inserting ``, but 
     only if used for a medically accepted indication (as 
     described in paragraph (4)).''; and
       (3) by striking paragraph (2) and inserting the following:
       ``(2) Except as otherwise provided in paragraph (3), the 
     term `covered outpatient drug' means any of the following 
     products used for a medically accepted indication (as 
     described in paragraph (4)):
       ``(A) A drug which may be dispensed only upon prescription 
     and--
       ``(i) which is approved for safety and effectiveness as a 
     prescription drug under section 505 or 507 of the Federal 
     Food, Drug, and Cosmetic Act or which is approved under 
     section 505(j) of such Act;
       ``(ii)(I) which was commercially used or sold in the United 
     States before the date of the enactment of the Drug 
     Amendments of 1962 or which is identical, similar, or related 
     (within the meaning of section 310.6(b)(1) of title 21 of the 
     Code of Federal Regulations) to such a drug, and (II) which 
     has not been the subject of a final determination by the 
     Secretary that it is a `new drug' (within the meaning of 
     section 201(p) of the Federal Food, Drug, and Cosmetic Act) 
     or an action brought by the Secretary under section 301, 
     302(a), or 304(a) of such Act to enforce section 502(f) or 
     505(a) of such Act; or
       ``(iii)(I) which is described in section 107(c)(3) of the 
     Drug Amendments of 1962 and for which the Secretary has 
     determined there is a compelling justification for its 
     medical need, or is identical, similar, or related (within 
     the meaning of section 310.6(b)(1) of title 21 of the Code of 
     Federal Regulations) to such a drug, and (II) for which the 
     Secretary has not issued a notice of an opportunity for a 
     hearing under section 505(e) of the Federal Food, Drug, and 
     Cosmetic Act on a proposed order of the Secretary to withdraw 
     approval of an application for such drug under such section 
     because the Secretary has determined that the drug is less 
     than effective for all conditions of use prescribed, 
     recommended, or suggested in its labeling.
       ``(B) A biological product which--
       ``(i) may only be dispensed upon prescription,
       ``(ii) is licensed under section 351 of the Public Health 
     Service Act, and
       ``(iii) is produced at an establishment licensed under such 
     section to produce such product.
       ``(C) Insulin certified under section 506 of the Federal 
     Food, Drug, and Cosmetic Act.
       ``(D) Enteral nutrients provided as a covered home infusion 
     drug.
       ``(E) Medical foods (other than enteral nutrients described 
     in subparagraph (D)) that comply with the requirements of the 
     Federal Food, Drug, and Cosmetic Act and that are prescribed 
     by a physician for persons with Phenylketonuria (PKU) and 
     other inborn errors of metabolism, in accordance with 
     guidelines established by the Secretary.
     An item described in subparagraph (D) or (E) shall not be 
     considered a covered outpatient drug for purposes of section 
     1850.
       ``(3) The term `covered outpatient drug' does not include 
     any product--
       ``(A) which is administered through infusion in a setting 
     described in paragraph (5)(A)(ii) unless the product is a 
     covered home infusion drug (as defined in paragraph (5));
       ``(B) when furnished as part of, or as incident to, a 
     diagnostic service or any other item or service for which 
     payment may be made under this title (other than physicians' 
     services or services which would be physicians' services if 
     furnished by a physician);
       ``(C) which is listed under paragraph (2) of section 
     1927(d) (other than subparagraph (B), (I), or (J) of such 
     subparagraph) as a drug which may be excluded from coverage 
     under a State plan under title XIX and which the Secretary 
     elects to exclude from coverage under part B; or
       ``(D) which is a contraceptive drug described in section 
     1861(s)(21).
       ``(4) For purposes of paragraph (2), the term `medically 
     accepted indication', with respect to the use of an 
     outpatient drug, includes--
       ``(A) any use which has been approved by the Food and Drug 
     Administration for the drug, and
       ``(B) any other use of the drug, unless the Secretary 
     determines that such use is not medically appropriate.
       ``(5)(A) For purposes of paragraph (3), the term `covered 
     home infusion drug' means a covered outpatient drug dispensed 
     to an individual that--
       ``(i) is administered intravenously, subcutaneously, or 
     epidurally, using an access device that is inserted into the 
     body and an infusion device to control the rate of flow of 
     the drug (or through other means of administration determined 
     by the Secretary);
       ``(ii) is administered--
       ``(I) in the individual's home,
       ``(II) an institution used as the individual's home, but 
     only if the drug is administered during an inpatient day for 
     which payment is not made to the institution under part A for 
     inpatient or extended care services furnished to the 
     individual, or
       ``(III) in a facility other than the individual's home if 
     the administration of the drug at the facility is determined 
     by the Secretary to be cost-effective (in accordance with 
     such criteria as the Secretary may establish); and
       ``(iii) with respect to a drug furnished in a home 
     setting--
       ``(I) is an antibiotic drug and the Secretary has not 
     determined, for the specific drug or the indication to which 
     the drug is applied, that the drug cannot generally be 
     administered safely and effectively in such a setting, or
       ``(II) is not an antibiotic drug and the Secretary has 
     determined, for the specific drug or the indication to which 
     the drug is applied, that the drug can generally be 
     administered safely and effectively in such a setting.
       ``(B) Not later than January 1, 1998 (and periodically 
     thereafter), the Secretary shall publish a list of the drugs, 
     and indications for such drugs, that are covered home 
     infusion drugs for purposes of this title.''.
       (c) Conforming Amendments Repealing Separate Coverage of 
     Certain Drugs and Products.--(1) Effective January 1, 1998, 
     section 1861(s)(2) (42 U.S.C. 1395x(s)(2)) is amended--
       (A) in subparagraph (A), by striking ``(including drugs'' 
     and all that follows through ``self-administered)'';
       (B) by striking subparagraphs (G) and (I);
       (C) by adding ``and'' at the end of subparagraph (M); and
       (D) by striking subparagraphs (O), (P), and (Q).
       (2) Effective January 1, 1998, section 1861 (42 U.S.C. 
     1395x) is amended by striking the subsection (jj) added by 
     section 4156(a)(2) of OBRA-1990.
       (3) Effective January 1, 1998, section 1881(b) (42 U.S.C. 
     1395rr(b)) is amended--
       (A) in the first sentence of paragraph (1)--
       (i) by striking ``, (B)'' and inserting ``, and (B)'', and
       (ii) by striking ``, and (C)'' and all that follows and 
     inserting a period;
       (B) in paragraph (11)--
       (i) by striking ``(11)(A)'' and inserting ``(11)'', and
       (ii) by striking subparagraphs (B) and (C).

     SEC. 3102. PAYMENT RULES AND RELATED REQUIREMENTS FOR COVERED 
                   OUTPATIENT DRUGS.

       (a) In General.--Section 1834 (42 U.S.C. 1395m) is amended 
     by inserting after subsection (c) the following new 
     subsection:
       ``(d) Payment for and Certain Requirements Concerning 
     Covered Outpatient Drugs.--
       ``(1) Deductible.--
       ``(A) In general.--Payment shall be made under paragraph 
     (2) only for expenses incurred by an individual for a covered 
     outpatient drug during a calendar year after the individual 
     has incurred expenses in the year for such drugs (during a 
     period in which the individual is entitled to benefits under 
     this part) equal to the deductible amount for that year.
       ``(B) Deductible amount.--
       ``(i) For purposes of subparagraph (A), the deductible 
     amount is--

       ``(I) for 1998, an amount equal to $500, increased by the 
     average annual percentage increase in private sector per 
     capita outpatient prescription drug expenditures (as 
     determined by the Secretary) during each of the years 1994 
     through 1997; and
       ``(II) for any succeeding year, the amount applicable under 
     this subparagraph for the previous year, increased by the 
     percentage increase computed under section 8206(b) of the 
     Guaranteed Health Insurance Act of 1994 for that succeeding 
     year.

       ``(ii) The Secretary shall promulgate the deductible amount 
     for 1998 and each succeeding year not later than October 1 of 
     the previous year.
       ``(2) Payment amount.--
       ``(A) In general.--Subject to the deductible established 
     under paragraph (1), the amount payable under this part for a 
     covered outpatient drug furnished to an individual during a 
     calendar year shall be equal to--
       ``(i) 80 percent of the payment basis described in 
     paragraph (3), in the case of an individual who has not 
     incurred expenses for covered outpatient drugs during the 
     year (including the deductible imposed under paragraph (1)) 
     in excess of the out-of-pocket limit for the year under 
     subparagraph (B); and
       ``(ii) 100 percent of the payment basis described in 
     paragraph (3), in the case of any other individual.
       ``(B) Out-of-pocket limit described.--
       ``(i) For purposes of subparagraph (A), the out-of-pocket 
     limit for a year is equal to--

       ``(I) for 1998, $1000, increased by the average annual 
     percentage increase in private sector per capita outpatient 
     prescription drug expenditures (as determined by the 
     Secretary) during each of the years 1994 through 1997; and
       ``(II) for any succeeding year, the amount applicable under 
     this subparagraph for the previous year, increased by the 
     percentage increase computed under section 8206(b) of the 
     Guaranteed Health Insurance Act of 1994 for that succeeding 
     year.

       ``(ii) The Secretary shall promulgate the out-of-pocket 
     limit for 1998 and each succeeding year not later than 
     October 1 of the previous year.
       ``(3) Payment basis.--For purposes of paragraph (2), the 
     payment basis is the lesser of--
       ``(A) the actual charge for a covered outpatient drug, or
       ``(B) the applicable payment limit established under 
     paragraph (4).
       ``(4) Payment limits.--
       ``(A) Payment limit for single source drugs and multiple 
     source drugs with restrictive prescriptions.--In the case of 
     a covered outpatient drug that is a multiple source drug 
     which has a restrictive prescription, or that is single 
     source drug, the payment limit for a payment calculation 
     period is equal to the amount of the administrative allowance 
     (established under paragraph (5)) plus the product of the 
     number of dosage units dispensed and the per unit estimated 
     acquisition cost for the drug product (determined under 
     subparagraph (C)) for the period.
       ``(B) Payment limit for multiple source drugs without 
     restrictive prescriptions.--In the case of a drug that is a 
     multiple source drug which does not have a restrictive 
     prescription, the payment limit for a payment calculation 
     period is equal to the amount of the administrative allowance 
     (established under paragraph (5)) plus the product of the 
     number of dosage units dispensed and the unweighted median of 
     the unit estimated acquisition cost (determined under 
     subparagraph (C)) for the drug products for the period.
       ``(C) Determination of unit price.--
       ``(i) Initial payment calculation period.--Subject to 
     clause (ii), the Secretary shall determine, for the 
     dispensing of a covered outpatient drug product in the 
     payment calculation period beginning January 1, 1998, the 
     estimated acquisition cost for the drug product, based upon--

       ``(I) in the case of a single source drug or multiple 
     source drug with a restrictive prescription, based upon 
     information from the period beginning in 1994 updated (in a 
     compound manner) by the percentage change in the consumer 
     price index for all urban consumers (U.S. city average) for 
     the 4 12-month periods ending with June 1997; or
       ``(II) in the case of a multiple source drug without a 
     restrictive prescription, based upon information from the 
     most recent year for which data is available.

       ``(ii) Limitation.--With respect to any covered outpatient 
     drug product, the estimated acquisition cost in the payment 
     calculation period described in clause (i) may not exceed 93 
     percent of the published average wholesale price for the 
     drug, as determined one month prior to the beginning of the 
     payment calculation period.
       ``(iii) Subsequent periods.--The estimated acquisition cost 
     for a covered outpatient drug product applicable under this 
     subparagraph for the dispensing of a drug product in a 
     payment calculation period beginning in January of each year 
     (beginning with 1999) shall be equal to the estimated 
     acquisition cost for the product determined under this 
     subparagraph for the period ending in January of the previous 
     year, increased by the uniform percentage increase determined 
     under section 8206(a) of the Guaranteed Health Insurance Act 
     of 1994 for the class of services that includes prescription 
     drugs for the year involved. Notwithstanding the previous 
     sentence, with respect to any covered outpatient drug 
     product, such cost may not exceed 93 percent of the published 
     average wholesale price for the drug, as determined one month 
     prior to the beginning of the payment calculation period.
       ``(iv) Compliance with request for information.--If a 
     wholesaler or direct seller of a covered outpatient drug 
     refuses, after being requested by the Secretary, to provide 
     price information requested to carry out clauses (i), (ii), 
     or (iii), or deliberately provides information that is false, 
     the Secretary may impose a civil money penalty of not to 
     exceed $10,000 for each such refusal or provision of false 
     information. The provisions of section 1128A (other than 
     subsections (a) and (b)) shall apply to civil money penalties 
     under the previous sentence in the same manner as they apply 
     to a penalty or proceeding under section 1128A(a). 
     Information gathered pursuant to clause (i), (ii), or (iii) 
     shall not be disclosed except as the Secretary determines to 
     be necessary to carry out the purposes of this part and to 
     permit the Comptroller General and the Director of the 
     Congressional Budget Office to review the information 
     provided.
       ``(D) Updates to payment limits.--Notwithstanding any other 
     provision of this paragraph, the payment limit determined 
     under this paragraph with respect to a payment calculation 
     period may not exceed the payment limit for the preceding 
     year, increased by the percentage increase computed under 
     section 8206(b) of the Guaranteed Health Insurance Act of 
     1994.
       ``(5) Administrative allowance for purposes of payment 
     limit.--
       ``(A) In general.--Except as provided in subparagraphs (B) 
     and (C), the administrative allowance established under this 
     paragraph is--
       ``(i) for 1998, an amount equal to $5, adjusted by the 
     percentage change in the consumer price index for all urban 
     consumers (U.S. city average) for the 2 12-month periods 
     ending with June 1997; and
       ``(ii) for each succeeding year, the amount for the 
     previous year, adjusted by the percentage change in the 
     consumer price index for all urban consumers (U.S. city 
     average) for the 12-month period ending with June of that 
     previous year.
       ``(B) Reduction for mail order pharmacies.--The Secretary 
     may, after consulting with representatives of pharmacists, 
     individuals enrolled under this part, and of private 
     insurers, reduce the administrative allowances established 
     under subparagraph (A) for any covered outpatient drug 
     dispensed by a mail order pharmacy, based on differences 
     between such pharmacies and other pharmacies with respect to 
     operating costs and other economies.
       ``(C) No dispensing fee for certain drugs and products.--No 
     administrative allowance may be provided under this paragraph 
     with respect to any of the following covered outpatient 
     drugs:
       ``(i) Erythropoietin provided to dialysis patients.
       ``(ii) Drugs and biologicals provided as an incident to a 
     physician's service or to a service which would be a 
     physician's service if furnished by a physician.
       ``(iii) Covered home infusion drugs.
       ``(6) Assuring appropriate prescribing and dispensing 
     practices.--
       ``(A) In general.--The Secretary shall develop a program 
     to--
       ``(i) provide on-line prospective review of prescriptions 
     on a 24-hour basis (in accordance with subparagraph (B)) and 
     retrospective review of claims;
       ``(ii) establish standards for counseling individuals to 
     whom covered outpatient drugs are prescribed; and
       ``(iii) identify (and to educate physicians, patients, and 
     pharmacists concerning)--

       ``(I) instances or patterns of unnecessary or inappropriate 
     prescribing or dispensing practices for covered outpatient 
     drugs,
       ``(II) instances or patterns of substandard care with 
     respect to such drugs,
       ``(III) potential adverse reactions, and
       ``(IV) appropriate use of generic products.

       ``(B) Prospective review.--
       ``(i) In general.--The program under this paragraph shall 
     provide for on-line prospective review of each covered 
     outpatient drug prescribed for a patient before the 
     prescription is filled or the drug is furnished, including 
     screening for potential drug therapy problems due to 
     therapeutic duplication, drug-to-drug interactions, and 
     incorrect drug dosage or duration of drug treatment.
       ``(ii) Discussion of appropriate use.--In conducting 
     prospective review under this subparagraph, any individual or 
     entity that dispenses a covered outpatient drug shall offer 
     to discuss with the patient to whom the drug is furnished or 
     the patient's caregiver (in person if practicable, or through 
     access to a toll-free telephone service) information 
     regarding the appropriate use of the drug, potential 
     interactions between the drug and other drugs dispensed to 
     the individual, and such other matters as the Secretary may 
     require.
       ``(iii) Additional duties.--In carrying out this 
     subparagraph, the Secretary shall--

       ``(I) develop public domain software which could be used by 
     carriers and pharmacies to provide the on-line prospective 
     review; and
       ``(II) study the feasibility and desirability of requiring 
     patient diagnosis codes on prescriptions and the feasibility 
     of expanding the prospective review program to include the 
     identification of drug-disease contraindications, 
     interactions with over-the-counter drugs, and drug-allergy 
     interactions.

       ``(C) Prior authorization.--
       ``(i) In general.--The Secretary shall establish a process 
     under which (subject to clause (ii)) the Secretary may 
     require advance approval for any covered outpatient drug.
       ``(ii) Restrictions on denial of approval.--The Secretary 
     may not deny the approval of a drug under the process 
     established under clause (i) before its dispensing unless the 
     process--

       ``(I) provides responses by telephone or other 
     telecommunication device within 24 hours of a request for 
     prior authorization; and
       ``(II) provides for the dispensing of at least a 72-hour 
     supply of a covered outpatient prescription drug in emergency 
     situations.

       ``(D) Drug use review.--As part of the program established 
     under subparagraph (A), the Secretary shall provide for a 
     drug use review program to provide for the ongoing periodic 
     examination of claims data and other records on covered 
     outpatient drugs furnished to patients under this title in 
     order to identify patterns of fraud, abuse, gross overuse, or 
     inappropriate or medically unnecessary care among physicians, 
     pharmacists, and patients.
       ``(E) Exception for managed care programs.--The Secretary 
     may waive the application of any provision of this paragraph 
     to the dispensing of covered outpatient drugs by an 
     organization described in section 1833(a)(1)(A) or an 
     eligible organization with an agreement in effect under 
     section 1876 to the extent the Secretary finds that the 
     organization has in effect a program that meets the 
     objectives of such provision.
       ``(F) Adoption of medicaid programs.--To the extent 
     considered appropriate by the Secretary, the program 
     developed under this paragraph with respect to drugs 
     furnished in a State may include elements applicable to the 
     furnishing of covered outpatient drugs under the State 
     medicaid program under section 1927.
       ``(7) Administrative and reporting requirements.--
       ``(A) Requirements relating to controlled substances and 
     illegal uses.--The Secretary shall require an entity 
     furnishing covered outpatient drugs under this part to report 
     electronically to the appropriate State agency on any covered 
     outpatient drugs dispensed to individuals enrolled under this 
     part that are controlled substances under schedules II 
     through V of the Controlled Substance Act, and on the illegal 
     use or diversion of any such drugs furnished by the entity.
       ``(B) Reports on deaths and injuries resulting from use of 
     drugs.--
       ``(i) In general.--The Secretary shall require individuals 
     and entities furnishing items and services for which payment 
     may be made under this title to report electronically to the 
     Secretary on any incidents within the knowledge of the 
     individual or entity of death or serious injury (including 
     initial or prolonged hospitalization, impairment, damage or 
     disruption in the patient's body function, congenital 
     anomaly, or life-threatening outcome) resulting from the 
     prescribing, dispensing, or administration of a covered 
     outpatient drug dispensed to an individual enrolled under 
     this part.
       ``(ii) Privacy protection.--The Secretary shall establish 
     standards to protect from public disclosure the identity of 
     individuals or institutions that report information under 
     this subparagraph and the identity of any individual (whether 
     a patient or an individual involved in the prescribing, 
     dispensing, or administration of the drug) who is the subject 
     of such information.
       ``(C) Obtaining information on federal assistance for drug 
     development.--The Secretary may request that any Federal 
     department or agency provide the Secretary with information 
     on the amount of assistance provided by the department or 
     agency for the research, development, or manufacture of any 
     drug or drug product.
       ``(D) Standard claims form.--The Secretary shall develop, 
     in consultation with representatives of pharmacies and of 
     other interested persons, a standard claims form for covered 
     outpatient drugs in accordance with title IX of the 
     Guaranteed Health Insurance Act of 1994.
       ``(8) Billing requirements.--
       ``(A) Mandatory assignment.--(i) Payment under this part 
     for a covered outpatient drug may only be made on an 
     assignment-related basis.
       ``(ii) Except for deductible, coinsurance, or copayment 
     amounts applicable under this part, no person may bill or 
     collect any amount from an individual enrolled under this 
     part or other person for a covered outpatient drug for which 
     payment may be made under this part, and no such individual 
     or person is liable for payment of any amounts billed in 
     violation of this clause. If a person knowingly and willfully 
     bills or collects an amount in violation of the previous 
     sentence, the Secretary may apply sanctions against such 
     person in accordance with section 1842(j)(2). Paragraph (4) 
     of section 1842(j) shall apply in this clause in the same 
     manner as such paragraph applies to such section.
       ``(B) Use of electronic system.--Carriers and pharmacies 
     shall submit information respecting covered outpatient drugs 
     in accordance with the applicable information system 
     established under subtitle B of title IX of the Guaranteed 
     Health Insurance Act of 1994.
       ``(9) Requiring pharmacy supplier numbers.--Payment may not 
     be made under this part with respect to a covered outpatient 
     drug dispensed by a pharmacy unless--
       ``(A) the entity has obtained a supplier number from the 
     Secretary; and
       ``(B) the entity demonstrates to the Secretary that it will 
     maintain patient records (in accordance with such standards 
     as the Secretary may impose) and meet the other applicable 
     requirements of this subsection and section 1848(g).
       ``(10) Definitions.--In this subsection:
       ``(A) Multiple and single source drugs.--The terms 
     `multiple source drug' and `single source drug' have the 
     meanings of those terms under section 1927(k)(7), except that 
     the reference in such section to a `covered outpatient drug' 
     shall be considered a reference to a covered outpatient drug 
     under this part.
       ``(B) Restrictive prescription.--A drug has a `restrictive 
     prescription' only if--
       ``(i) in the case of a written prescription, the 
     prescription for the drug indicates, in the handwriting of 
     the physician or other person prescribing the drug and with 
     an appropriate phrase (such as `brand medically necessary') 
     recognized by the Secretary, that a particular drug product 
     must be dispensed, or
       ``(ii) in the case of a prescription issued by telephone--

       ``(I) the physician or other person prescribing the drug 
     (through use of such an appropriate phrase) states that a 
     particular drug product must be dispensed, and
       ``(II) the physician or other person submits to the 
     pharmacy involved, within 30 days after the date of the 
     telephone prescription, a written confirmation which is in 
     the handwriting of the physician or other person prescribing 
     the drug and which indicates with such appropriate phrase 
     that the particular drug product was required to have been 
     dispensed.

       ``(C) Payment calculation period.--The term `payment 
     calculation period' means a caledar year.''.
       (b) Requiring Pharmacies to Submit Claims.--Section 
     1848(g)(4) (42 U.S.C. 1395w-4(g)(4)) is amended--
       (1) in the heading--
       (A) by striking ``Physician'', and
       (B) by inserting ``by physicians and suppliers'' after 
     ``claims'';
       (2) in the matter in subparagraph (A) preceding clause 
     (i)--
       (A) by striking ``For services furnished on or after 
     September 1, 1990, within 1 year'' and inserting ``Within 1 
     year (or 90 days in the case of covered outpatient drugs)'',
       (B) by striking ``a service'' and inserting ``an item or 
     service'', and
       (C) by inserting ``or of providing a covered outpatient 
     drug,'' after ``basis,''; and
       (3) in subparagraph (A)(i), by inserting ``item or'' before 
     ``service''.
       (c) Special Rules for Carriers.--
       (1) Use of regional carriers.--Section 1842(b)(2) (42 
     U.S.C. 1395u(b)(2)) is amended by adding at the end the 
     following:
       ``(D) With respect to activities related to covered 
     outpatient drugs, the Secretary may enter into contracts with 
     carriers under this section to perform the activities on a 
     regional basis.''.
       (2) Additional functions.--Section 1842(b)(3) (42 U.S.C. 
     1395u(b)(3)) is amended--
       (A) by striking ``and'' at the end of subparagraph (H);
       (B) by adding ``and'' at the end of subparagraph (L);
       (C) by redesignating subparagraph (L) as subparagraph (I); 
     and
       (D) by inserting after subparagraph (I) (as so 
     redesignated) the following new subparagraphs:
       ``(J) if it makes determinations or payments with respect 
     to covered outpatient drugs, will--
       ``(i) receive information transmitted under the electronic 
     system referred to in section 1834(d)(8)(B), and
       ``(ii) respond to requests by pharmacies (and individuals 
     entitled to benefits under this part) as to whether or not 
     such an individual has met the prescription drug deductible 
     established under section 1834(d)(1)(A) for a year; and
       ``(K) will enter into such contracts with organizations 
     described in subsection (f)(3) as the Secretary determines 
     may be necessary to implement and operate (and for related 
     functions with respect to) the electronic system referred to 
     in section 1834(d)(8)(B) for covered outpatient drugs under 
     this part;''.
       (3) Payment on other than a cost basis.--Section 
     1842(c)(1)(A) (42 U.S.C. 1395u(c)(1)(A)) is amended--
       (A) by inserting ``(i)'' after ``(c)(1)(A)'',
       (B) in the first sentence, by inserting ``, except as 
     otherwise provided in clause (ii),'' after ``under this part, 
     and'', and
       (C) by adding at the end the following:
       ``(ii) To the extent that a contract under this section 
     provides for activities related to covered outpatient drugs, 
     the Secretary may provide for payment for those activities 
     based on any method of payment determined by the Secretary to 
     be appropriate.''.
       (4) Batch prompt processing of claims.--Section 1842(c) (42 
     U.S.C. 1395u(c)) is amended--
       (A) in paragraphs (2)(A) and (3)(A), by striking ``Each'' 
     and inserting ``Except as provided in paragraph (4), each'';
       (B) by adding at the end the following new paragraph:
       ``(4)(A) Each contract under this section which provides 
     for the disbursement of funds, as described in subsection 
     (a)(1)(B), with respect to claims for payment for covered 
     outpatient drugs shall provide for a payment cycle under 
     which each carrier will, on a monthly basis, make a payment 
     with respect to all claims which were received and approved 
     for payment in the period since the most recent date on which 
     such a payment was made with respect to the participating 
     pharmacy or individual submitting the claim.
       ``(B) If payment is not issued, mailed, or otherwise 
     transmitted within 5 days of when such a payment is required 
     to be made under subparagraph (A), interest shall be paid at 
     the rate used for purposes of section 3902(a) of title 31, 
     United States Code (relating to interest penalties for 
     failure to make prompt payments) for the period beginning on 
     the day after such 5-day period and ending on the date on 
     which payment is made.''.
       (5) Use of other entities for covered outpatient drugs.--
     Section 1842(f) (42 U.S.C. 1395u(f)) is amended--
       (A) by striking ``and'' at the end of paragraph (1),
       (B) by striking the period at the end of paragraph (2) and 
     inserting ``; and'', and
       (C) by adding at the end the following:
       ``(3) with respect to activities related to covered 
     outpatient drugs, any other private entity which the 
     Secretary determines is qualified to conduct such 
     activities.''.
       (6) Designated carriers to process claims of railroad 
     retirees.--Section 1842(g) (42 U.S.C. 1395u(g)) is amended by 
     inserting ``(other than functions related to covered 
     outpatient drugs)'' after ``functions''.
       (d) Conforming Amendments.--
       (1)(A) Section 1833(a)(1) (42 U.S.C. 1395l(a)(1)) is 
     amended--
       (i) by striking ``and'' at the end of clause (O), and
       (ii) by inserting before the semicolon at the end the 
     following: ``, and (Q) with respect to covered outpatient 
     drugs, the amounts paid shall be as prescribed by section 
     1834(d)''.
       (B) Section 1833(a)(2) (42 U.S.C. 1395l(a)(2)) is amended 
     in the matter preceding subparagraph (A) by inserting ``, 
     except for covered outpatient drugs,'' after ``and (I) of 
     such section''.
       (2) Section 1833(b)(2) (42 U.S.C. 1395l(b)(2)) is amended 
     by inserting ``or with respect to covered outpatient drugs'' 
     before the comma.
       (3) Section 1834(j)(3)(F) (42 U.S.C. 1395m(j)(4)(F)), as 
     added by section 8421(a)(1) and as redesignated by section 
     8423(a), is amended--
       (A) in clause (i), by adding ``and'' at the end;
       (B) by striking clauses (ii), (iv), and (v) and 
     redesignating clause (iii) as clause (ii); and
       (C) in clause (ii) (as so redesignated), by striking the 
     comma at the end and inserting a period.
       (4) The first sentence of section 1842(h)(2) (42 U.S.C. 
     1395u(h)(2)) is amended by inserting ``(other than a carrier 
     described in subsection (f)(3))'' after ``Each carrier''.
       (5) The first sentence of section 1866(a)(2)(A) (42 U.S.C. 
     1395cc(a)(2)(A)) is amended--
       (A) in clause (i), by inserting ``section 1834(d),'' after 
     ``section 1833(b),'', and
       (B) in clause (ii), by inserting ``, other than for covered 
     outpatient drugs,'' after ``provider)''.

     SEC. 3103. MEDICARE REBATES FOR COVERED OUTPATIENT DRUGS.

       (a) In General.--Part B of title XVIII is amended by adding 
     at the end the following new section:


                     ``REBATES FOR OUTPATIENT DRUGS

       ``Sec. 1850. (a) Requirement for Rebate Agreement.--In 
     order for payment to be available under this part for drugs 
     of a manufacturer dispensed or provided on or after January 
     1, 1998, the manufacturer must have entered into and have in 
     effect a rebate agreement with the Secretary meeting the 
     requirements of subsection (b) and an agreement to give equal 
     access to discounts in accordance with subsection (e), and 
     must meet the requirements of section 1927(a)(1).
       ``(b) Terms, Implementation, and Enforcement of Rebate 
     Agreement.--
       ``(1) Periodic rebates.--
       ``(A) In general.--A rebate agreement under this section 
     shall require the manufacturer to pay to the Secretary for 
     each calendar quarter, not later than 30 days after the date 
     of receipt of the information described in paragraph (2) for 
     such quarter, a rebate in an amount determined under 
     subsection (c) for all covered outpatient drugs of the 
     manufacturer described in subparagraph (B).
       ``(B) Drugs included in quarterly rebate calculation.--
       ``(i) In general.--Except as provided in clause (ii), drugs 
     subject to a rebate with respect to a calendar quarter are 
     covered outpatient drugs which are single source and 
     innovator multiple source drugs, and contraceptive drugs 
     described in section 1861(s)(21), which are dispensed or 
     provided during such quarter to individuals (other than 
     individuals enrolled with an eligible organization with a 
     contract under section 1876) eligible for benefits under this 
     part, as reported to the Secretary.
       ``(ii) Exception for certain biological products.--A 
     covered outpatient drug consisting of a biological product is 
     not subject to a rebate under this section if payment was 
     made for the product under part B prior to the date of the 
     enactment of this section.
       ``(2) Information furnished to manufacturers.--
       ``(A) In general.--The Secretary shall report to each 
     manufacturer, not later than 60 days after the end of each 
     calendar quarter, information on the total number, for each 
     covered outpatient drug described in paragraph (1)(B), of 
     units of each dosage form, strength, and package size 
     dispensed or provided under the plan during the quarter, on 
     the basis of the data reported to the Secretary described in 
     paragraph (1)(B).
       ``(B) Audit.--The Comptroller General may audit the records 
     of the Secretary to the extent necessary to determine the 
     accuracy of reports by the Secretary pursuant to subparagraph 
     (A). Adjustments to rebates shall be made to the extent 
     determined necessary by the audit to reflect actual units of 
     drugs dispensed.
       ``(3) Provision of price information by manufacturer.--
       ``(A) Quarterly pricing information.--Each manufacturer 
     with an agreement in effect under this section shall report 
     to the Secretary, not later than 30 days after the last day 
     of each calendar quarter, on the average manufacturer retail 
     price and the average manufacturer non-retail price for each 
     dosage form and strength of each covered outpatient drug 
     described in paragraph (1)(B) for the quarter.
       ``(B) Base quarter prices.--Each manufacturer of a covered 
     outpatient drug with an agreement under this section shall 
     report to the Secretary, by not later than 30 days after the 
     effective date of such agreement (or, if later, 30 days after 
     the end of the base quarter), the average manufacturer retail 
     price, for such base quarter, for each dosage form and 
     strength of each such covered drug.
       ``(C) Verification of average manufacturer price.--The 
     Secretary may inspect the records of manufacturers, and 
     survey wholesalers, pharmacies, and institutional purchasers 
     of drugs, as necessary to verify prices reported under 
     subparagraph (A).
       ``(D) Penalties.--
       ``(i) Civil money penalties.--The Secretary may impose a 
     civil money penalty on a manufacturer with an agreement under 
     this section--

       ``(I) for failure to provide information required under 
     subparagraph (A) on a timely basis, in an amount up to 
     $10,000 per day of delay;
       ``(II) for refusal to provide information about charges or 
     prices requested by the Secretary for purposes of 
     verification pursuant to subparagraph (C), in an amount up to 
     $100,000; and
       ``(III) for provision, pursuant to subparagraph (A) or (B), 
     of information that the manufacturer knows or should know is 
     false, in an amount up to $100,000 per item of information.

     Such civil money penalties are in addition to any other 
     penalties prescribed by law. The provisions of section 1128A 
     (other than subsections (a) (with respect to amounts of 
     penalties or additional assessments) and (b)) shall apply to 
     a civil money penalty under this subparagraph in the same 
     manner as such provisions apply to a penalty or proceeding 
     under section 1128A(a).
       ``(ii) Termination of agreement.--If a manufacturer with an 
     agreement under this section has not provided information 
     required under subparagraph (A) or (B) within 90 days of the 
     deadline imposed, the Secretary may suspend the agreement 
     with respect to covered outpatient drugs dispensed after the 
     end of such 90-day period and until the date such information 
     is reported (but in no case shall a suspension be for less 
     than 30 days).
       ``(4) Length of agreement.--
       ``(A) In general.--A rebate agreement shall be effective 
     for an initial period of not less than one year and shall be 
     automatically renewed for a period of not less than one year 
     unless terminated under subparagraph (B).
       ``(B) Termination.--
       ``(i) By the secretary.--The Secretary may provide for 
     termination of a rebate agreement for violation of the 
     requirements of the agreement or other good cause shown. Such 
     termination shall not be effective earlier than 60 days after 
     the date of notice of such termination. The Secretary shall 
     afford a manufacturer an opportunity for a hearing concerning 
     such termination, but such hearing shall not delay the 
     effective date of the termination.
       ``(ii) By a manufacturer.--A manufacturer may terminate a 
     rebate agreement under this section for any reason. Any such 
     termination shall not be effective until the calendar quarter 
     beginning at least 60 days after the date the manufacturer 
     provides notice to the Secretary.
       ``(iii) Effective date of termination.--Any termination 
     under this subparagraph shall not affect rebates due under 
     the agreement before the effective date of its termination.
       ``(iv) Notice to pharmacies.--In the case of a termination 
     under this subparagraph, the Secretary shall notify 
     pharmacies and physician organizations not less than 30 days 
     before the effective date of such termination.
       ``(c) Amount of Rebate.--
       ``(1) Base rebate.--Each manufacturer shall remit a basic 
     rebate to the Secretary for each calendar quarter in an 
     amount, with respect to each dosage form and strength of a 
     covered outpatient drug equal to the product of--
       ``(A) the total number of units subject to rebate for such 
     quarter, as described in subsection (b)(1)(B); and
       ``(B)(i) in the case of a single-source drug or an 
     innovator-multiple source drug (other than insulin furnished 
     over-the-counter), 15 percent of the average manufacturer 
     retail price, or
       ``(ii) in the case of insulin furnished over-the-counter, 
     10 percent of the average manufacturer retail price.
       ``(2) Additional rebate.--Each manufacturer shall remit to 
     the Secretary, for each calendar quarter, an additional 
     rebate for each dosage form and strength of a single-source 
     drug or an innovator-multiple source drug, in an amount equal 
     to--
       ``(A) the total number of units subject to rebate for such 
     quarter, as described in subsection (b)(1)(B), multiplied by
       ``(B) the amount, if any, by which the average manufacturer 
     retail price for such drugs of the manufacturer exceeds the 
     average manufacturer retail price for the base quarter, 
     increased by the percentage increase in the Consumer Price 
     Index for all urban consumers (U.S. average) from the end of 
     such base quarter to the month before the beginning of such 
     calendar quarter.
       ``(3) Deposit of rebates.--The Secretary shall deposit 
     rebates under this section in the Federal Supplementary 
     Medical Insurance Trust Fund established under section 1841.
       ``(d) Confidentiality of Information.--Notwithstanding any 
     other provision of law, information disclosed by a 
     manufacturer under this section is confidential and shall not 
     be disclosed by the Secretary (or a carrier), except--
       ``(1) as the Secretary determines to be necessary to carry 
     out this section,
       ``(2) to permit the Comptroller General to review the 
     information provided, and
       ``(3) to permit the Director of the Congressional Budget 
     Office to review the information provided.
       ``(e) Agreement to Give Equal Access to Discounts.--An 
     agreement under this subsection by a manufacturer of covered 
     outpatient drugs shall guarantee that the manufacturer will 
     offer, to each wholesaler or retailer (or other purchaser 
     representing a group of such wholesalers or retailers) that 
     purchases such drugs on substantially the same terms 
     (including such terms as prompt payment, cash payment, volume 
     purchase, single-site delivery, the use of formularies by 
     purchasers, and any other terms effectively reducing the 
     manufacturer's costs) as any other purchaser (including any 
     institutional purchaser) the same price for such drugs as is 
     offered to such other purchaser. In determining a 
     manufacturer's compliance with the previous sentence, there 
     shall not be taken into account prices that are merely 
     nominal in amount or prices excluded under section 
     1927(c)(1)(C)(i).
       ``(f) Definitions.--For purposes of this section--
       ``(1) Average manufacturer retail price.--The term `average 
     manufacturer retail price' means, with respect to a covered 
     outpatient drug of a manufacturer for a calendar quarter, the 
     average price (inclusive of discounts for cash payment, 
     prompt payment, volume purchases, and rebates (other than 
     rebates under this section), but exclusive of nominal prices) 
     paid to the manufacturer for the drug in the United States 
     for drugs distributed to the retail pharmacy class of trade.
       ``(2) Average manufacturer non-retail price.--The term 
     `average manufacturer non-retail price' means, with respect 
     to a covered outpatient drug of a manufacturer for a calendar 
     quarter, the weighted average price (inclusive of discounts 
     for cash payment, prompt payment, volume purchases, and 
     rebates (other than rebates under this section), but 
     exclusive of nominal prices) paid to the manufacturer for the 
     drug in the United States by hospitals and other 
     institutional purchasers that purchase drugs for 
     institutional use and not for resale.
       ``(3) Base quarter.--The term `base quarter' means, with 
     respect to a covered outpatient drug of a manufacturer, the 
     calendar quarter beginning April 1, 1993, or (if later) the 
     first full calendar quarter during which the drug was 
     marketed in the United States.
       ``(4) Drug.--The terms `innovator multiple source drug', 
     `noninnovator multiple source drug', and `single source drug' 
     have the meanings of those terms under section 1927(k)(7), 
     except that the reference in such section to a `covered 
     outpatient drug' shall be considered a reference to a covered 
     outpatient drug under this part.
       ``(5) Manufacturer.--The term `manufacturer' means, with 
     respect to a covered outpatient drug--
       ``(A) the entity whose National Drug Code number (as issued 
     pursuant to section 510(e) of the Federal Food, Drug, and 
     Cosmetic Act) appears on the labeling of the drug; or
       ``(B) if the number described in subparagraph (A) does not 
     appear on the labeling of the drug, the person named as the 
     applicant in a human drug application (in the case of a new 
     drug) or the product license application (in the case of a 
     biological product) for such drug approved by the Food and 
     Drug Administration.''.
       (b) Exclusions From Coverage.--Section 1862(a) (42 U.S.C. 
     1395y(a)) is amended--
       (1) by striking ``and'' 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 new 
     paragraph:
       ``(17) consisting of a covered outpatient drug (as 
     described in section 1861(t)) furnished during a year for 
     which the drug's manufacturer does not have in effect a 
     rebate agreement with the Secretary that meets the 
     requirements of section 1850 for the year.''.

     SEC. 3104. PRESCRIPTION DRUG PAYMENT REVIEW COMMISSION.

       Part B of title XVIII is amended by adding at the end the 
     following new section:


             ``prescription drug payment review commission

       ``Sec. 1847. (a) Appointment; Membership.--(1) The Director 
     of the Congressional Office of Technology Assessment (in this 
     section referred to as the `Director' and the `Office', 
     respectively) shall provide for the appointment of a 
     Prescription Drug Payment Review Commission (in this section 
     referred to as the `Commission'), to be composed of 
     individuals with expertise in the provision and financing of 
     covered outpatient drugs appointed by the Director (without 
     regard to the provisions of title 5, United States Code, 
     governing appointments in the competitive service).
       ``(2) The Commission shall consist of 11 individuals. 
     Members of the Commission shall first be appointed by no 
     later than January 1, 1996, for a term of 3 years, except 
     that the Director may provide initially for such shorter 
     terms as will insure that (on a continuing basis) the terms 
     of no more than 4 members expire in any one year.
       ``(3) The membership of the Commission shall include 
     recognized experts in the fields of health care economics, 
     medicine, pharmacology, pharmacy, and prescription drug 
     reimbursement, as well as at least one individual who is a 
     medicare beneficiary and one individual representing a 
     research-based pharmaceutical and biotechnology company. To 
     the greatest extent feasible, the membership of the 
     Commission shall reflect the racial, ethnic, and gender 
     composition of the population of the United States.
       ``(b) Reports.--(1) The Commission shall submit to Congress 
     an annual report no later than May 1 of each year, beginning 
     with 1997, concerning methods of determining payment for 
     covered outpatient drugs under this part, including 
     recommendations on the prescription drug allocation of 
     national private and medicare health care expenditure 
     estimates for a year and the annual target rate of increase 
     for such allocation under title VI of the Guaranteed Health 
     Insurance Act of 1994.
       ``(2) The report described in paragraph (1), in 1998 and 
     thereafter, shall include, with respect to the previous year, 
     information on--
       ``(A) the relation between the costs of covered outpatient 
     drugs and the costs of other items and services provided for 
     the treatment of similar illnesses and conditions,
       ``(B) the level of utilization of covered outpatient drugs 
     by medicare beneficiaries, and
       ``(C) administrative costs relating to covered outpatient 
     drugs.
       ``(3) The first report submitted by the Commission under 
     paragraph (1) shall include an analysis of--
       ``(A) the feasibility and desirability of excluding 
     manufacturers from the requirement to provide a rebate under 
     section 1850 on the basis of the manufacturers' discounts, 
     rate of increase in prices charged, profits, and other 
     appropriate criteria;
       ``(B) the appropriateness of the payment methodology 
     provided under this part for the professional services of 
     pharmacists, including the reasonableness of the charges for 
     varying levels of services (including patient consultation); 
     and
       ``(C) the appropriateness of providing for public 
     disclosure of the information submitted to the Secretary 
     under section 1850 by manufacturers of covered outpatient 
     drugs on the prices charged and other similar information, 
     and the effect of such disclosure on the competitiveness of 
     such prices.
       ``(c) Consumer Guide.--The Commission shall publish a 
     consumer guide to prescription drugs to assist individuals in 
     reducing expenditures for covered outpatient drugs and to 
     assist providers in determining the cost-effectiveness of 
     such drugs.
       ``(d) Administration.--Section 1845(c)(1) shall apply to 
     the Commission in the same manner as it applies to the 
     Physician Payment Review Commission.
       ``(e) Authorization of Appropriations.--There are 
     authorized to be appropriated such sums as may be necessary 
     to carry out the provisions of this section. Such sums shall 
     be payable from the Federal Supplementary Medical Insurance 
     Trust Fund and the Medicare Part C Trust Fund under section 
     2124, in an allocation that reasonably reflects the 
     proportion of expenditures for outpatient prescription drugs 
     under this part and under title XXI.''.

     SEC. 3105. COVERAGE OF HOME INFUSION DRUG THERAPY SERVICES.

       (a) In General.--Section 1832(a)(2)(A) (42 U.S.C. 
     1395k(a)(2)(A)) is amended by inserting ``and home infusion 
     drug therapy services'' before the semicolon.
       (b) Home Infusion Drug Therapy Services Defined.--Section 
     1861 (42 U.S.C. 1395x) is amended--
       (1) by redesignating the subsection (jj) inserted by 
     section 4156(a)(2) of the Omnibus Budget Reconciliation Act 
     of 1990 as subsection (kk); and
       (2) by inserting after such subsection the following new 
     subsection:

                 ``Home Infusion Drug Therapy Services

       ``(ll)(1) The term `home infusion drug therapy services' 
     means the items and services described in paragraph (2) 
     furnished to an individual who is under the care of a 
     physician--
       ``(A) in a setting described in section 1861(t)(5)(A)(ii),
       ``(B) by a qualified home infusion drug therapy provider 
     (as defined in paragraph (3)) or by others under arrangements 
     with them made by that provider, and
       ``(C) under a plan established and periodically reviewed by 
     a physician.
       ``(2) The items and services described in this paragraph 
     are such nursing, pharmacy, and related services (including 
     medical supplies, intravenous fluids, delivery, and 
     equipment) as are necessary to conduct safely and effectively 
     a drug regimen through use of a covered home infusion drug 
     (as defined in subsection (t)(5)), but do not include such 
     covered home infusion drugs.
       ``(3) The term `qualified home infusion drug therapy 
     provider' means any entity that the Secretary determines 
     meets the following requirements (or, in the case of a home 
     health agency or an entity with respect to which the only 
     items and services described in paragraph (2) furnished by 
     the entity are enteral nutrition therapy services, meets any 
     of the following requirements which the Secretary considers 
     appropriate):
       ``(A) The entity is capable of providing or arranging for 
     the items and services described in paragraph (2) and covered 
     home infusion drugs.
       ``(B) The entity maintains clinical records on all 
     patients.
       ``(C) The entity adheres to written protocols and policies 
     with respect to the provision of items and services.
       ``(D) The entity makes services available (as needed) seven 
     days a week on a 24-hour basis.
       ``(E) The entity coordinates all service with the patient's 
     physician.
       ``(F) The entity conducts a quality assessment and 
     assurance program, including drug regimen review and 
     coordination of patient care.
       ``(G) The entity assures that only trained personnel 
     provide covered home infusion drugs (and any other service 
     for which training is required to provide the service 
     safely).
       ``(H) The entity assumes responsibility for the quality of 
     services provided by others under arrangements with the 
     entity.
       ``(I) In the case of an entity in any State in which State 
     or applicable local law provides for the licensing of 
     entities of this nature, the entity (i) is licensed pursuant 
     to such law, or (ii) is approved, by the agency of such State 
     or locality responsible for licensing entities of this 
     nature, as meeting the standards established for such 
     licensing.
       ``(J) The entity meets such other requirements as the 
     Secretary may determine are necessary to assure the safe and 
     effective provision of home infusion drug therapy services 
     and the efficient administration of the home infusion drug 
     therapy benefit.''.
       (c) Payment.--
       (1) In general.--Section 1833 (42 U.S.C. 1395l) is 
     amended--
       (A) in subsection (a)(2)(B), by striking ``or (E)'' and 
     inserting ``(E), or (F)'',
       (B) in subsection (a)(2)(D), by striking ``and'' at the 
     end,
       (C) in subsection (a)(2)(E), by striking the semicolon and 
     inserting ``; and'',
       (D) by inserting after subsection (a)(2)(E) the following 
     new subparagraph:
       ``(F) with respect to home infusion drug therapy services, 
     the amounts described in section 1834(j);'', and
       (E) in the first sentence of subsection (b), by striking 
     ``services, (3)'' and inserting ``services and home infusion 
     drug therapy services, (3)''.
       (2) Amount described.--Section 1834 is amended by adding at 
     the end the following new subsection:
       ``(j) Home Infusion Drug Therapy Services.--
       ``(1) In general.--With respect to home infusion drug 
     therapy services, payment under this part shall be made in an 
     amount equal to the lesser of the actual charges for such 
     services or the fee schedule established under paragraph (2).
       ``(2) Establishment of fee schedule.--
       ``(A) In general.--The Secretary shall establish by 
     regulation before the beginning of 1998 and each succeeding 
     year a fee schedule for home infusion drug therapy services 
     for which payment is made under this part. A fee schedule 
     established under this subsection shall be on a per diem 
     basis.
       ``(B) Adjustment for services furnished by institutions.--
     The fee schedule established by the Secretary under 
     subparagraph (A) shall provide for adjustments in the case of 
     home infusion drug therapy services for which payment is made 
     under this part that are furnished by a provider of services 
     to avoid duplicative payments under this title for the 
     service costs associated with such services.''.
       (d) Certification.--Section 1835(a)(2) (42 U.S.C. 
     1395n(a)(2)) is amended--
       (1) by striking ``and'' at the end of subparagraph (E),
       (2) by striking the period at the end of subparagraph (F) 
     and inserting ``; and'', and
       (3) by inserting after subparagraph (F) the following:
       ``(G) in the case of home infusion drug therapy services, 
     (i) such services are or were required because the individual 
     needed such services for the administration of a covered home 
     infusion drug, (ii) a plan for furnishing such services has 
     been established and is reviewed periodically by a physician, 
     and (iii) such services are or were furnished while the 
     individual is or was under the care of a physician.''.
       (e) Certification of Home Infusion Drug Therapy Providers; 
     Intermediate Sanctions for Noncompliance.--
       (1) Treatment as provider of services.--Section 1861(u) (42 
     U.S.C. 1395x(u)) is amended by inserting ``home infusion drug 
     therapy provider,'' after ``hospice program,''.
       (2) Consultation with state agencies and other 
     organizations.--Section 1863 (42 U.S.C. 1395z) is amended by 
     striking ``and (dd)(2)'' and inserting ``(dd)(2), and 
     (ll)(3)''.
       (3) Use of state agencies in determining compliance.--
     Section 1864(a) (42 U.S.C. 1395aa(a)) is amended--
       (A) in the first sentence, by striking ``an agency is a 
     hospice program'' and inserting ``an agency or entity is a 
     hospice program or a home infusion drug therapy provider,''; 
     and
       (B) in the second sentence--
       (i) by striking ``institution or agency'' and inserting 
     ``institution, agency, or entity'', and
       (ii) by striking ``or hospice program'' and inserting 
     ``hospice program, or home infusion drug therapy provider''.
       (4) Application of intermediate sanctions.--Section 1846 
     (42 U.S.C. 1395w@2) is amended--
       (A) in the heading, by adding ``and for qualified home 
     infusion drug therapy providers'' at the end,
       (B) in subsection (a), by inserting ``or that a qualified 
     home infusion drug therapy provider that is certified for 
     participation under this title no longer substantially meets 
     the requirements of section 1861(ll)(3)'' after ``under this 
     part'', and
       (C) in subsection (b)(2)(A)(iv), by inserting ``or home 
     infusion drug therapy services'' after ``clinical diagnostic 
     laboratory tests''.
       (f) Use of Regional Intermediaries in Administration of 
     Benefit.--Section 1816 (42 U.S.C. 1395h) is amended by adding 
     at the end the following new subsection:
       ``(k) With respect to carrying out functions relating to 
     payment for home infusion drug therapy services and covered 
     home infusion drugs, the Secretary may enter into contracts 
     with agencies or organizations under this section to perform 
     such functions on a regional basis.''.
       (g) Conforming Amendments.--(1) Section 1834(h)(4)(B) (42 
     U.S.C. 1395m(h)(4)(B)) is amended by striking ``, except 
     that'' and all that follows through ``equipment''.
       (2) Section 1861(n) (42 U.S.C. 1395x(n)) is amended by 
     adding at the end the following: ``Such term does not include 
     any home infusion drug therapy services described in section 
     1861(ll) or any covered outpatient drug used as a supply 
     related to the furnishing of an item of durable medical 
     equipment.''.
       (3) Section 1861(s)(8) (42 U.S.C. 1395x(s)(8)) is amended 
     by inserting after ``dental'' the following: ``devices or 
     enteral and parenteral nutrients, supplies, and equipment''.
       (h) Effective Date.--The amendments made by this section 
     shall apply to items and services furnished on or after 
     January 1, 1998.

PART 2--CHANGES IN MEDICARE BENEFITS TO CONFORM TO GUARANTEED NATIONAL 
                            BENEFIT PACKAGE

     SEC. 3111. IMPOSITION OF CAP ON OUT-OF-POCKET EXPENDITURES.

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


              ``limit on cost-sharing incurred during year

       ``Sec. 1894. (a) In General.--Notwithstanding any other 
     provision of this title, the total amount of cost-sharing 
     incurred by an individual in a year (beginning with 2004) 
     with respect to items and services provided to the individual 
     under this title shall be subject to a limit equal to--
       ``(1) with respect to items and services furnished in 2004, 
     an amount equal to $5,500, increased by the average annual 
     percentage increase in the per capita gross domestic product 
     (in current dollars, as published by the Secretary of 
     Commerce) during each of the years 1994 through 1998 and by 
     the national medicare growth factors established for each of 
     the years 1999 through 2004 under section 8201(c) of the 
     Guaranteed Health Insurance Act of 1994; and
       ``(2) with respect to items and services furnished in any 
     succeeding year, the amount determined under this paragraph 
     for the previous year, increased by the national medicare 
     growth factor established for the year under section 8201(c) 
     of the Guaranteed Health Insurance Act of 1994.
       ``(b) Notice for Beneficiaries Reaching Limit.--The 
     Secretary shall provide each individual, who is determined to 
     have incurred (or has had paid on the individual's behalf) 
     cost-sharing in a calendar year in the amount described in 
     subsection (a) with a notice that states that the individual 
     has reached the limit on out-of-pocket cost sharing for the 
     year.
       ``(c) Cost-Sharing Defined.--In subsection (a), the term 
     `cost-sharing' means expenses incurred by an individual that 
     are attributable to--
       ``(1) the deductibles and coinsurance described in section 
     1813;
       ``(2) the deductibles established under section 1833(b); 
     and
       ``(3) the difference between the payment amount provided 
     under part B and the payment amount that would be provided if 
     `100 percent' and `0 percent' were substituted for `80 
     percent' and `20 percent', respectively, each place either 
     appears in sections 1833(a), 1833(i)(2), 1833(i)(3), 
     1833(n)(1)(B)(i)(II), 1834(a)(1)(A), 1834(c)(1)(C), 
     1834(h)(1)(A), 1834(i)(1), 1835(b)(2), 1866(a)(2)(A), 
     1881(b)(2), and 1881(b)(3).''.
       (b) Limit on Charges When Cap Reached.--Section 
     1866(a)(2)(A) (42 U.S.C. 1395cc(a)(2)(A)) is amended by 
     adding at the end the following new sentence: ``A provider of 
     services may not impose a charge under the first sentence of 
     this subparagraph for services furnished to an individual 
     during a year after the amount of cost-sharing incurred by 
     the individual during the year reaches the limit on such 
     cost-sharing established under section 1894.''.

     SEC. 3112. REPEAL OF LIMIT ON LIFETIME RESERVE DAYS OF 
                   INPATIENT HOSPITAL SERVICES.

       (a) In General.--Section 1812(a)(1) (42 U.S.C. 1395d(a)(1)) 
     is amended by striking ``for up to'' and all that follows 
     through ``payment made)''.
       (b) Conforming Amendments.--Section 1812 (42 U.S.C. 1395d) 
     is further amended--
       (1) in subsection (b), by striking paragraph (1);
       (2) by striking subsection (c); and
       (3) in subsection (e), by striking ``subsections (b) and 
     (c)'' and all that follows through ``extended care services'' 
     and inserting ``subsection (b), services''.
       (c) Administration; Transition.--The Secretary of Health 
     and Human Services may take such actions as the Secretary 
     finds appropriate to adjust the payments made to hospitals 
     under title XVIII of the Social Security Act for hospital 
     services to take into account the amendments made by this 
     section.

     SEC. 3113. COVERAGE OF SERVICES FOR INFANTS AND CHILDREN.

       (a) Services Described.--Section 1861(s) (42 U.S.C. 
     1395x(s)(2)) is amended--
       (1) by striking ``and'' at the end of paragraph (12);
       (2) by striking the period at the end of paragraph (14) and 
     inserting ``; and''; and
       (3) by inserting after paragraph (14) the following new 
     paragraphs:
       ``(15) newborn and well-baby services (as defined in 
     subsection (oo)(1));''.
       ``(16) well-child services (as defined in subsection 
     (pp)(1)) provided to an individual who is under 19 years of 
     age; and
       ``(17) medically necessary and appropriate hearing aids 
     provided to an individual who is under 19 years of age (in 
     accordance with such periodicity schedule as the Secretary 
     may establish in consultation with the Academy of 
     Otolaryngology-Head and Neck Surgery and the American Speech-
     Language Hearing Association).''.
       (b) Services Defined.--
       (1) In general.--Section 1861 (42 U.S.C. 1395x) is amended 
     by adding at the end the following new subsection:

                    ``Newborn and Well-Baby Services

       ``(oo)(1) The term `newborn and well-baby services' means 
     well-baby care, including routine office visits, routine 
     immunizations (including the vaccine itself), routine 
     laboratory tests (including lead screening), and includes the 
     services of pediatricians during high-risk delivery (as 
     determined in accordance with criteria established by the 
     Secretary).
       ``(2) The Secretary, in consultation with the American 
     Academy of Pediatrics and other entities considered 
     appropriate by the Secretary, shall establish a schedule of 
     periodicity which reflects the appropriate frequency with 
     which the services referred to in paragraph (1) should be 
     provided.''.

                         ``Well-Child Services

       ``(pp)(1) The term `well-child services' means well-child 
     care, including routine office visits, routine immunizations 
     (including the vaccine itself), routine laboratory tests 
     (including lead screening in accordance with recommendations 
     of the Centers for Disease Control and Prevention), child 
     abuse assessment, and dental care (including preventive 
     dental services described in paragraph (2), routine fillings, 
     and oral surgery), provided in accordance with the 
     periodicity schedule established with respect to the services 
     under paragraph (3).
       ``(2) In paragraph (1), the term `preventive dental 
     services' means oral dental examinations, radiographs, dental 
     sealants, fluoride application, and dental prophylaxis.
       ``(3) The Secretary, in consultation with the American 
     Academy of Pediatrics, the Academy of Pediatric Dentistry, 
     and other entities considered appropriate by the Secretary, 
     shall establish a schedule of periodicity which reflects the 
     appropriate frequency with which the services referred to in 
     paragraph (1) should be provided to healthy children.''.
       (2) Conforming amendments.--Section 1862(a) (42 U.S.C. 
     1395y(a)) is amended--
       (A) in paragraph (1)--
       (i) in subparagraph (E), by striking ``and'' at the end,
       (ii) in subparagraph (F), by striking the semicolon at the 
     end and inserting a comma, and
       (iii) by adding at the end the following new subparagraphs:
       ``(G) in the case of newborn and well-baby services, which 
     are performed more frequently than is provided under the 
     schedule of periodicity established by the Secretary under 
     section 1861(oo)(2) for such services, and
       ``(H) in the case of well-child services, which are 
     provided more frequently than is provided under the schedule 
     of periodicity established by the Secretary under section 
     1861(pp)(2) for such services;''; and
       (B) in paragraph (7), by striking ``section 1861(s)(10) and 
     paragraph (1)(B) or under paragraph (1)(F)'' and inserting 
     ``section 1861(s)(10), section 1861(s)(17), and subparagraphs 
     (B), (F), (G), or (H) of paragraph (1)''.
       (3) Payment; waiver of cost-sharing.--
       (A) Amount of payment; waiver of coinsurance.--Section 
     1833(a)(1) (42 U.S.C. 1395l(a)(1)), as amended by section 
     3102(d)(1)(A), is amended--
       (i) by striking ``and (Q)'' and inserting ``(Q)''; and
       (ii) by striking the semicolon at the end and inserting the 
     following: ``, (R) with respect to newborn and well-baby 
     services (as described in section 1861(oo)(1)), the amounts 
     paid shall be 100 percent of the lesser of the actual charge 
     for the services or the amount determined by a fee schedule 
     established by the Secretary for the purposes of this 
     subparagraph, and (S) with respect to well-child services (as 
     described in section 1861(pp)(1)), the amounts paid shall be 
     100 percent of the lesser of the actual charge for the 
     services or the amount determined by a fee schedule 
     established by the Secretary for the purposes of this 
     subparagraph;''.
       (B) Waiver of deductible.--The first sentence of section 
     1833(b) (42 U.S.C. 1395l(b)) is amended--
       (i) by striking ``and (5)'' and inserting ``(5)''; and
       (ii) by striking the period at the end and inserting the 
     following: ``, (6) such deductible shall not apply with 
     respect to newborn and well-baby services (as described in 
     section 1861(oo)(1)), and (7) such deductible shall not apply 
     with respect to well-child services (as described in section 
     1861(pp)(1)).''.
       (4) Coverage of services under maintenance or prevention 
     program for certain children as rehabilitation services.--
     Section 1861(p) (42 U.S.C. 1395x(p)) is amended by adding at 
     the end the following: ``In the case of a child under 19 
     years of age with a congenital condition, the term 
     `outpatient physical therapy services' shall include the 
     following rehabilitation services that are used to prevent 
     deterioration of, or restore or maintain, functional 
     capacity:
       ``(A) The initial evaluation and periodic oversight of the 
     patient's needs by a qualified rehabilitation health 
     professional.
       ``(B) the designing by such professional of a maintenance 
     or prevention program that is appropriate to the capacity and 
     tolerance of the patient and the treatment objectives;
       ``(C) the instruction of the patient, family members, and 
     any personnel providing rehabilitation-related assistance to 
     the individual, in carrying out such program; and
       ``(D) reevaluations of such program.''.
       (c) General Conforming Amendments.--The Social Security Act 
     is amended--
       (1) in section 1861(s)(2)(C) (42 U.S.C. 1395x(s)(2)(C)), by 
     striking ``(C)'' and inserting ``(C) subject to section 
     1890(b),'';
       (2) in section 1861(s)(3) (42 U.S.C. 1395x(s)(3)), by 
     striking ``(3)'' and inserting ``(3) subject to section 
     1890(a)'';
       (3) by striking the second and third sentences of section 
     1861(s); and
       (4) by inserting after section 1889 the following new 
     section:


    ``special rules for laboratory and diagnostic tests and services

       ``Sec. 1890. (a) Requiring Diagnostic Laboratory and 
     Screening Tests to be Furnished in Certified Settings.--No 
     payment may be made under this title for any diagnostic and 
     screening test performed in any laboratory (including a 
     laboratory that is part of a rural health clinic or any 
     institution considered a hospital for purposes of section 
     1814(d)), including a routine laboratory test for purposes of 
     section 1861(oo)(1) or section 1861(pp)(1), unless such 
     laboratory meets the following requirements:
       ``(1) If the laboratory is situated in any State in which 
     State or applicable local law provides for licensing of 
     establishments of this nature, the laboratory--
       ``(A) is licensed pursuant to such law, or
       ``(B) is approved, by the agency of such State or locality 
     responsible for licensing establishments of this nature, as 
     meeting the standards established for such licensing.
       ``(2) The laboratory meets--
       ``(A) the certification requirements under section 353 of 
     the Public Health Service Act; and
       ``(B) such other conditions relating to the health and 
     safety of individuals with respect to whom such tests are 
     performed as the Secretary may find necessary.
       ``(b) Exclusion of Diagnostic Services Not Meeting 
     Requirements for Inpatient Hospital Services.--
       ``(1) In general.--No item or service may be included as a 
     diagnostic service specified in section 1861(s)(2)(C) if the 
     item or service would not be included as an inpatient 
     hospital service under section 1861(b) if furnished to an 
     inpatient of a hospital.
       ``(2) Exception for physicians' services.--Paragraph (1) 
     shall not apply with respect to any service consisting of a 
     physicians' service.''; and
       (5) by striking ``paragraphs (15) and (16) of section 
     1861(s)'' each place it appears in section 1864(a) and the 
     third sentence of section 1865(a) and inserting ``subsections 
     (a) and (b) of section 1890''.

     SEC. 3114. EXPANDING COVERAGE OF PREVENTIVE BENEFITS.

       (a) Screening Mammography.--
       (1) Providing annual screening mammography for women over 
     age 49.--Section 1834(c)(2)(A) (42 U.S.C. 1395m(c)(2)(A)) is 
     amended--
       (A) in clause (iv), by striking ``but under 65 years of 
     age,''; and
       (B) by striking clause (v).
       (2) Waiver of deductible.--The first sentence of section 
     1833(b) (42 U.S.C. 1395l(b)), as amended by section 
     3113(b)(3), is amended--
       (A) by striking ``and (7)'' and inserting ``(7)''; and
       (B) by striking the period at the end and inserting the 
     following: ``, and (8) such deductible shall not apply with 
     respect to screening mammography (as described in section 
     1861(jj)).''.
       (3) Conforming amendment.--Section 1834(c)(1)(C) (42 U.S.C. 
     1395m(c)(1)(C)) is amended by striking ``, subject to the 
     deductible established under section 1833(b),''.
       (b) Coverage of Screening Pap Smear and Pelvic Exams.--
       (1) Coverage of pelvic exam; increasing frequency of 
     coverage of pap smear.--Section 1861(nn) (42 U.S.C. 
     1395x(nn)) is amended--
       (A) in the heading, by striking ``Smear'' and inserting 
     ``Smear; Screening Pelvic Exam'';
       (B) by striking ``(nn)'' and inserting ``(nn)(1)'';
       (C) by striking ``3 years'' and all that follows and 
     inserting ``3 years, or during the preceding year in the case 
     of a woman described in paragraph (3).''; and
       (D) by adding at the end the following new paragraphs:
       ``(2) The term `screening pelvic exam' means an pelvic 
     examination provided to a woman if the woman involved has not 
     had such an examination during the preceding 3 years, or 
     during the preceding year in the case of a woman described in 
     paragraph (3), and includes a clinical breast examination.
       ``(3) A woman described in this paragraph is a woman who--
       ``(A) is of childbearing age and has not had a test 
     described in this subsection during each of the preceding 3 
     years that did not indicate the presence of cervical cancer; 
     or
       ``(B) is at high risk of developing cervical cancer (as 
     determined pursuant to factors identified by the 
     Secretary).''.
       (2) Waiver of deductible.--The first sentence of section 
     1833(b) (42 U.S.C. 1395l(b)), as amended by section 
     3113(b)(3) and subsection (a)(2), is amended--
       (A) by striking ``and (8)'' and inserting ``(8)''; and
       (B) by striking the period at the end and inserting the 
     following: ``, and (9) such deductible shall not apply with 
     respect to screening pap smear and screening pelvic exam (as 
     described in section 1861(nn)).''.
       (3) Conforming amendments.--(A) Section 1861(s)(14) (42 
     U.S.C. 1395x(s)(14)) is amended by inserting ``and screening 
     pelvic exam'' after ``screening pap smear''.
       (B) Section 1862(a)(1)(F) (42 U.S.C. 1395y(a)(1)(F)) is 
     amended by inserting ``and screening pelvic exam'' after 
     ``screening pap smear''.
       (c) Coverage of Colorectal Screening.--
       (1) In general.--Section 1834 (42 U.S.C. 1395m), as amended 
     by section 3102(a), is amended by inserting after subsection 
     (d) the following new subsection:
       ``(e) Frequency and Payment Limits for Screening Fecal-
     Occult Blood Tests, Screening Flexible Sigmoidoscopies, and 
     Screening Colonoscopy.--
       ``(1) Screening fecal-occult blood tests.--
       ``(A) Limiting coverage for non-elderly to high-risk 
     individuals.--No payment may be made under this part for a 
     screening fecal-occult blood test provided for the purpose of 
     early detection of colon cancer to an individual who is under 
     65 years of age unless the individual is at high risk for 
     colorectal cancer (as determined in accordance with criteria 
     established by the Secretary).
       ``(B) Frequency limits.--Subject to revision by the 
     Secretary under paragraph (4), no payment may be made under 
     this part for a screening fecal-occult blood test provided to 
     an individual for the purpose of early detection of colon 
     cancer if the test is performed--
       ``(i) in the case of an individual under 65 years of age, 
     more frequently than is provided in a periodicity schedule 
     established by the Secretary for purposes of this 
     subparagraph; or
       ``(ii) in the case of any other individual, within the 11 
     months following the month in which a previous screening 
     fecal-occult blood test was performed.
       ``(2) Screening flexible sigmoidoscopies.--
       ``(A) Payment amount.--The Secretary shall establish a 
     payment amount under section 1848 with respect to screening 
     flexible sigmoidoscopies provided for the purpose of early 
     detection of colon cancer that is consistent with payment 
     amounts under such section for similar or related services, 
     except that such payment amount shall be established without 
     regard to subsection (a)(2)(A) of such section.
       ``(B) Limiting coverage for non-elderly to high-risk 
     individuals.--No payment may be made under this part for a 
     screening flexible sigmoidoscopy provided for the purpose of 
     early detection of colon cancer to an individual who is under 
     65 years of age unless the individual is at high risk for 
     colorectal cancer (as determined in accordance with criteria 
     established by the Secretary).
       ``(C) Frequency limits.--Subject to revision by the 
     Secretary under paragraph (4), no payment may be made under 
     this part for a screening flexible sigmoidoscopy provided to 
     an individual for the purpose of early detection of colon 
     cancer if the procedure is performed--
       ``(i) in the case of an individual under 65 years of age, 
     more frequently than is provided in a periodicity schedule 
     established by the Secretary for purposes of this 
     subparagraph; or
       ``(ii) in the case of any other individual, within the 59 
     months following the month in which a previous screening 
     flexible sigmoidoscopy was performed.
       ``(3) Screening colonoscopy for individuals at high risk 
     for colorectal cancer.--
       ``(A) Payment amount.--The Secretary shall establish a 
     payment amount under section 1848 with respect to screening 
     colonoscopy for individuals at high risk for colorectal 
     cancer (as determined in accordance with criteria established 
     by the Secretary) provided for the purpose of early detection 
     of colon cancer that is consistent with payment amounts under 
     such section for similar or related services, except that 
     such payment amount shall be established without regard to 
     subsection (a)(2)(A) of such section.
       ``(B) Frequency limit.--Subject to revision by the 
     Secretary under paragraph (4), no payment may be made under 
     this part for a screening colonoscopy for individuals at high 
     risk for colorectal cancer provided to an individual for the 
     purpose of early detection of colon cancer if the procedure 
     is performed within the 47 months following the month in 
     which a previous screening colonoscopy was performed.
       ``(C) Factors considered in establishing criteria for 
     determining individuals at high risk.--In establishing 
     criteria for determining whether an individual is at high 
     risk for colorectal cancer for purposes of this paragraph, 
     the Secretary shall take into consideration family history, 
     prior experience of cancer, a history of chronic digestive 
     disease condition, and the presence of any appropriate 
     recognized gene markers for colorectal cancer.
       ``(4) Revision of frequency.--
       ``(A) Review.--The Secretary shall review periodically the 
     appropriate frequency for performing screening fecal-occult 
     blood tests, screening flexible sigmoidoscopies, and 
     screening colonoscopy based on age and such other factors as 
     the Secretary believes to be pertinent.
       ``(B) Revision of frequency.--The Secretary, taking into 
     consideration the review made under clause (i), may revise 
     from time to time the frequency with which such tests and 
     procedures may be paid for under this subsection, but no such 
     revision shall apply to tests or procedures performed before 
     January 1, 2002.
       ``(5) Limiting charges of nonparticipating physicians.--
       ``(A) In general.--In the case of a screening flexible 
     sigmoidoscopy provided to an individual for the purpose of 
     early detection of colon cancer or a screening colonoscopy 
     provided to an individual at high risk for colorectal cancer 
     for the purpose of early detection of colon cancer for which 
     payment may be made under this part, if a nonparticipating 
     physician provides the procedure to an individual enrolled 
     under this part, the physician may not charge the individual 
     more than the limiting charge (as defined in section 
     1848(g)(2)).
       ``(B) Enforcement.--If a physician or supplier knowing and 
     willfully imposes a charge in violation of subparagraph (A), 
     the Secretary may apply sanctions against such physician or 
     supplier in accordance with section 1842(j)(2).''.
       (2) Conforming amendments.--(A) Paragraphs (1)(D) and 
     (2)(D) of section 1833(a) (42 U.S.C. 1395l(a)) are each 
     amended by striking ``subsection (h)(1),'' and inserting 
     ``subsection (h)(1) or section 1834(e)(1),''.
       (B) Clauses (i) and (ii) of section 1848(a)(2)(A) (42 
     U.S.C. 1395w-4(a)(2)(A)) are each amended by striking ``a 
     service'' and inserting ``a service (other than a screening 
     flexible sigmoidoscopy provided to an individual for the 
     purpose of early detection of colon cancer or a screening 
     colonoscopy provided to an individual at high risk for 
     colorectal cancer for the purpose of early detection of colon 
     cancer)''.
       (C) Section 1861(s) (42 U.S.C. 1395x(s)) as amended by 
     section 3113(a), is amended--
       (i) by striking ``and'' at the end of paragraph (16);
       (ii) by striking the period at the end of paragraph (17) 
     and inserting ``; and''; and
       (iii) by inserting after paragraph (17) the following new 
     paragraph:
       ``(18) screening fecal-occult blood tests, screening 
     flexible sigmoidoscopies, and screening colonoscopy provided 
     for the purpose of early detection of colon cancer.''.
       (D) Section 1862(a) (42 U.S.C. 1395y(a)), as amended by 
     section 3113(b)(2), is amended--
       (i) in paragraph (1)--
       (I) in subparagraph (G), by striking ``and'' at the end;
       (II) in subparagraph (H), by striking the semicolon at the 
     end and inserting ``, and''; and
       (III) by adding at the end the following new subparagraph:
       ``(I) in the case of screening fecal-occult blood tests, 
     screening flexible sigmoidoscopies, and screening colonoscopy 
     provided for the purpose of early detection of colon cancer, 
     which are performed more frequently than is covered under 
     section 1834(e);''; and
       (ii) in paragraph (7), by striking ``or (H)'' and inserting 
     ``(H), or (I)''.
       (d) Coverage of Screening for Sexually-Transmitted 
     Diseases.--
       (1) In general.--Section 1861(s) (42 U.S.C. 1395x(s)(2)), 
     as amended by section 3113(a) and subsection (c)(2)(C), is 
     amended--
       (A) by striking ``and'' at the end of paragraph (17);
       (B) by striking the period at the end of paragraph (18) and 
     inserting ``; and''; and
       (C) by inserting after paragraph (18) the following new 
     paragraph:
       ``(19) screening for sexually-transmitted diseases for an 
     individual over 12 years of age and under 50 years of age who 
     is at risk for sexually-transmitted disease (as determined 
     pursuant to factors identified by the Secretary) and who has 
     not had such a screening during the preceding 1-year 
     period.''.
       (2) Amount of payment; waiver of coinsurance.--Section 
     1833(a)(1) (42 U.S.C. 1395l(a)(1)), as amended by section 
     3102(f), section 3113(b)(3), and subsection (b)(2), is 
     amended--
       (A) by striking ``and (S)'' and inserting ``(S)''; and
       (B) by striking the semicolon at the end and inserting the 
     following: ``, and (T) with respect to screening for 
     sexually-transmitted diseases (as described in section 
     1861(s)(19)), the amounts paid shall be 100 percent of the 
     lesser of the actual charge for the services or the amount 
     determined by a fee schedule established by the Secretary for 
     the purposes of this subparagraph;''.
       (3) Waiver of deductible.--The first sentence of section 
     1833(b), (42 U.S.C. 1395l(b)) as amended by section 
     3113(b)(3), subsection (a)(2), and subsection (b)(2), is 
     amended--
       (A) by striking ``and (9)'' and inserting ``(9)''; and
       (B) by striking the period at the end and inserting the 
     following: ``, and (10) such deductible shall not apply with 
     respect to screening for sexually-transmitted diseases (as 
     described in section 1861(s)(19)).''.
       (4) Conforming amendment.--Section 1862(a) (42 U.S.C. 
     1395y(a)), as amended by section 3113(b)(2) and subsection 
     (c)(2)(C), is amended--
       (A) in paragraph (1)--
       (i) in subparagraph (H), by striking ``and'' at the end;
       (ii) in subparagraph (I), by striking the semicolon at the 
     end and inserting ``, and''; and
       (iii) by adding at the end the following new subparagraph:
       ``(J) in the case of screening for sexually-transmitted 
     diseases, which is performed more frequently than is covered 
     under section 1861(s)(19);''; and
       (B) in paragraph (7), by striking ``or (I)'' and inserting 
     ``(I), or (J)''.
       (e) Coverage of Screening for Tuberculosis.--
       (1) In general.--Section 1861(s) (42 U.S.C. 1395x(s)(2)), 
     as amended by section 3113(a), subsection (c)(2)(C), and 
     subsection (d)(1), is amended--
       (A) by striking ``and'' at the end of paragraph (18);
       (B) by striking the period at the end of paragraph (19) and 
     inserting ``; and''; and
       (C) by inserting after paragraph (19) the following new 
     paragraph:
       ``(20) screening for tuberculosis for an individual who is 
     at risk for tuberculosis (as determined pursuant to factors 
     identified by the Secretary) and who has not had such a 
     screening during the preceding 1-year period.''.
       (2) Amount of payment; waiver of coinsurance.--Section 
     1833(a)(1) (42 U.S.C. 1395l(a)(1)), as amended by sections 
     3102(f), 3113(b)(3), and subsection (d)(2), is amended--
       (A) by striking ``and (T)'' and inserting ``(T)''; and
       (B) by striking the semicolon at the end and inserting the 
     following: ``, and (U) with respect to screening for 
     tuberculosis (as described in section 1861(s)(20)), the 
     amounts paid shall be 100 percent of the lesser of the actual 
     charge for the services or the amount determined by a fee 
     schedule established by the Secretary for the purposes of 
     this subparagraph;''.
       (3) Waiver of deductible.--The first sentence of section 
     1833(b), (42 U.S.C. 1395l(b)) as amended by section 
     3113(b)(3), subsection (a)(2), subsection (b)(3), and 
     subsection (d)(3), is amended--
       (A) by striking ``and (10)'' and inserting ``(10)''; and
       (B) by striking the period at the end and inserting the 
     following: ``, and (11) such deductible shall not apply with 
     respect to screening for tuberculosis (as described in 
     section 1861(s)(20)).''.
       (4) Conforming amendment.--Section 1862(a) (42 U.S.C. 
     1395y(a)), as amended by section 3113(b)(2), subsection 
     (c)(2)(C), and subsection (d)(4), is amended--
       (A) in paragraph (1)--
       (i) in subparagraph (I), by striking ``and'' at the end;
       (ii) in subparagraph (J), by striking the semicolon at the 
     end and inserting ``, and''; and
       (iii) by adding at the end the following new subparagraph:
       ``(K) in the case of screening for tuberculosis, which is 
     performed more frequently than is covered under section 
     1861(s)(20);''; and
       (B) in paragraph (7), by striking ``or (J)'' and inserting 
     ``(J), or (K)''.

     SEC. 3115. COVERAGE OF PREGNANCY-RELATED SERVICES AND FAMILY 
                   PLANNING.

       (a) In General.--Section 1861(s) (42 U.S.C. 1395x(s)(2)), 
     as amended by sections 3113(a), 3114(c)(2)(C), 3114(d)(1), 
     and 3114(e)(1) is amended--
       (1) by striking ``and'' at the end of paragraph (19);
       (2) by striking the period at the end of paragraph (20) and 
     inserting ``; and''; and
       (3) by inserting after paragraph (20) the following new 
     paragraphs:
       ``(21) pregnancy-related services furnished by an 
     individual or entity legally authorized to furnish such 
     services under State law (or the State regulatory mechanism 
     provided by State law); and
       ``(22) voluntary family planning services, including 
     contraceptive drugs and devices that--
       ``(A) may only be dispensed upon prescription, and
       ``(B) are subject to approval by the Secretary under the 
     Federal Food, Drug, and Cosmetic Act.''.
       (b) Waiver of Coinsurance and Deductible for Certain 
     Services.--
       (1) Waiver of coinsurance for prenatal services.--Section 
     1833(a)(1) (42 U.S.C. 1395l(a)(1)), as amended by sections 
     3102(f), 3113(b)(3), section 3114(d)(2), and section 
     3114(e)(2), is amended--
       (A) by striking ``and (U)'' and inserting ``(U)''; and
       (B) by striking the semicolon at the end and inserting the 
     following: ``, and (V) with respect to pregnancy-related 
     services (as described in section 1861(s)(20)), the amounts 
     paid shall be 80 percent (or, in the case of services 
     consisting of prenatal services, 100 percent) of the lesser 
     of the actual charge for the services or the amount 
     determined by a fee schedule established by the Secretary for 
     the purposes of this subparagraph;''.
       (2) Waiver of deductible for prenatal and family planning 
     services.--The first sentence of section 1833(b), (42 U.S.C. 
     1395l(b)) as amended by sections 3113(b)(3), 3114(a)(2), 
     3114(b)(3), and 3114(d)(3), is amended--
       (A) by striking ``and (11)'' and inserting ``(11)''; and
       (B) by striking the period at the end and inserting the 
     following: ``, and (12) such deductible shall not apply with 
     respect to pregnancy-related services consisting of prenatal 
     services (described in section 1861(s)(21)) or to voluntary 
     family planning services (described in section 
     1861(s)(22)).''.
       (c) Conforming Amendment.--Section 1862(a) (42 U.S.C. 
     1395y(a)), as amended by section 3113(b)(2), section 
     3114(c)(2)(C), section 3114(d)(4), and section 3114(e)(2), is 
     amended--
       (A) in paragraph (1)--
       (i) in subparagraph (J), by striking ``and'' at the end;
       (ii) in subparagraph (K), by striking the semicolon at the 
     end and inserting ``, and''; and
       (iii) by adding at the end the following new subparagraphs:
       ``(L) in the case of pregnancy-related services, which do 
     not meet the requirements of section 1861(s)(21);
       ``(M) in the case of voluntary family planning services, 
     which do not meet the requirements of section 1861(s)(22);''; 
     and
       (B) in paragraph (7), by striking ``or (K)'' and inserting 
     ``(K), (L), or (M)''.

     SEC. 3116. EXPANDING COVERAGE OF MENTAL HEALTH AND SUBSTANCE 
                   ABUSE SERVICES.

       (a) Inpatient Psychiatric Hospital Services.--
       (1) Services covered.--Section 1812(a) (42 U.S.C. 1395d(a)) 
     is amended--
       (A) by striking ``and'' at the end of paragraph (3);
       (B) by striking the period at the end of paragraph (4) and 
     inserting ``; and''; and
       (C) by adding at the end the following new paragraph:
       ``(5) inpatient hospital services furnished primarily for 
     the diagnosis or treatment of mental illness or substance 
     abuse for up to 60 days during a year.''.
       (2) Limitation on coverage.--Section 1812(b)(3) (42 U.S.C. 
     1395d(b)) is amended to read as follows:
       ``(3) inpatient hospital services furnished primarily for 
     the diagnosis or treatment of mental illness or substance 
     abuse that are furnished to the individual during a year 
     after such services have been furnished to the individual for 
     a total of 60 days during the year.''.
       (3) Conforming amendments.--(A) Section 1812(a)(1) (42 
     U.S.C. 1395d(a)(1)) is amended by inserting ``(other than 
     services described in paragraph (5))'' after ``inpatient 
     hospital services'' the first place it appears.
       (B) Section 1812(b)(1) (42 U.S.C. 1395d(b)(1)) is amended 
     by inserting ``(other than services described in paragraph 
     (3))'' after ``inpatient hospital services'' the first place 
     it appears.
       (C) Section 1812 (42 U.S.C. 1395d) is amended by striking 
     subsection (c).
       (D) Section 1814(a) (42 U.S.C. 1395f(a)) is amended--
       (i) in paragraph (2), by striking subparagraph (A);
       (ii) in paragraph (3), by striking ``(other than inpatient 
     psychiatric hospital services)''; and
       (iii) by striking paragraph (4).
       (E) Section 1861 (42 U.S.C. 1395x) is amended by striking 
     subsection (c).
       (4) Effective date; transition.--The amendments made by 
     this section shall take effect January 1, 1998, except that--
       (A) an individual who at any time prior to such date has 
     been furnished inpatient psychiatric hospital services (as 
     defined for purposes of title XVIII of the Social Security 
     Act as of the date of the enactment of this Act) for 190 
     consecutive days is not entitled to any services under 
     section 1812(a)(5) (as added by paragraph (1)(C)); and
       (B) in the case of an individual who is not described in 
     subparagraph (A) and is receiving inpatient psychiatric 
     hospital services (as defined for purposes of title XVIII of 
     the Social Security Act as of the date of the enactment of 
     this Act) on December 31, 1997, for which payment may be made 
     under section 1812 of such Act, the number of days of 
     services for which the individual is entitled under section 
     1812(a)(5) (and the number of days applicable under section 
     1812(b)(3)) shall be equal to the greater of 60 or the 
     difference between 190 days and the number of days of such 
     inpatient psychiatric hospital services furnished to the 
     individual prior to January 1, 1998.
       (b) Intensive Residential Services.--
       (1) Coverage under part a.--Section 1812(a) (42 U.S.C. 
     1395d(a)), as amended by subsection (a)(1), is amended--
       (A) by striking ``and'' at the end of paragraph (4);
       (B) by striking the period at the end of paragraph (5) and 
     inserting ``; and''; and
       (C) by adding at the end the following new paragraph:
       ``(6) intensive residential services (as described in 
     section 1861(qq)) furnished to an individual for up to 120 
     days during any calendar year, except that such services may 
     be furnished to the individual for additional days during the 
     year if necessary for the individual to complete a course of 
     treatment to the extent that the number of days of inpatient 
     hospital services described in paragraph (5) that may be 
     furnished to the individual during the year (as reduced under 
     such paragraph) is not less than 15.''.
       (2) Services described.--Section 1861 (42 U.S.C. 1395x), as 
     amended by section 3113(b), is further amended by adding at 
     the end the following new subsection:

                    ``Intensive Residential Services

       ``(qq)(1) Subject to paragraph (2), the term `intensive 
     residential services' means inpatient services provided in 
     any of the following facilities:
       ``(A) Residential detoxification centers.
       ``(B) Crisis residential programs or mental illness 
     residential treatment programs.
       ``(C) Therapeutic family or group treatment homes.
       ``(D) Residential centers for substance abuse treatment.
       ``(2) No service may be treated as an intensive residential 
     service under paragraph (1) unless the facility at which the 
     service is provided--
       ``(A) is legally authorized to provide such service under 
     the law of the State (or under a State regulatory mechanism 
     provided by State law) in which the facility is located or is 
     certified to provide such service by an appropriate 
     accreditation entity approved by the State in consultation 
     with the Secretary; and
       ``(B) meets such other requirements as the Secretary may 
     impose to assure the quality of the intensive residential 
     services provided.
       ``(3) No service may be treated as an intensive residential 
     service under paragraph (1) unless the service is furnished 
     in accordance with standards established by the Secretary for 
     the management of such services.''.
       (3) Reduction in days of coverage for inpatient services.--
     Section 1812(a)(5) and section 1812(b)(3), as amended by 
     subsection (a), are each amended by striking the period at 
     the end and inserting the following: ``, reduced by a number 
     of days determined by the Secretary so that the actuarial 
     value of providing such number of days of services under this 
     paragraph to the individual is equal to the actuarial value 
     of the days of inpatient residential services furnished to 
     the individual under paragraph (6) during the year after such 
     services have been furnished to the individual for 120 days 
     during the year (rounded to the nearest day).''.
       (4) Amount of payment.--Section 1814 (42 U.S.C. 1395f) is 
     amended--
       (A) in subsection (b) in the matter preceding paragraph 
     (1), by inserting ``other than intensive residential 
     services,'' after ``hospice care,''; and
       (B) by adding at the end the following new subsection:

              ``Payment for Intensive Residential Services

       ``(m) The amount of payment under this part for intensive 
     residential services under section 1812(a)(6) shall be equal 
     to--
       ``(1) the lesser of--
       ``(A) the reasonable cost of such services, as determined 
     under section 1861(v), or
       ``(B) the customary charges with respect to such services,
     less the amount a provider may charge as described in clause 
     (ii) of section 1866(a)(2)(A):
       ``(2) if such services are furnished by a public provider 
     of services or by another provider which demonstrates to the 
     satisfaction of the Secretary that a significant portion of 
     its patients are low-income (and requests that payment be 
     made under this clause), free of charge or at nominal charges 
     to the public, the amount determined in accordance with 
     subsection (b)(2); and
       ``(3) if (and for so long as) the conditions described in 
     subsection (b)(3) are met, the amounts determined under the 
     reimbursement system described in such section.''.
       (c) Lowering Coinsurance for Certain Outpatient Mental 
     Health and Substance Abuse Services.--
       (1) In general.--Section 1833(c) (42 U.S.C. 1395l(c)) is 
     amended by striking ``mental, psychoneurotic, and personality 
     disorders'' and all that follows through ``are incurred'' and 
     inserting the following: ``mental illness or substance abuse 
     of an individual who, at the time such expenses are incurred, 
     is over 18 years of age, is not an inpatient of a hospital, 
     and has received 5 or more sessions of such treatment during 
     the calendar year,''.
       (2) Requiring services to be furnished in accordance with 
     management standards.--Section 1862(a) (42 U.S.C. 1395y(a)), 
     as amended by section 3103(b), is amended--
       (A) by striking ``and'' at the end of paragraph (16);
       (B) by striking the period at the end of paragraph (17) and 
     inserting ``; or''; and
       (C) by inserting after paragraph (17) the following:
       ``(18) in the case of any items or services furnished under 
     part B for the treatment of mental illness or emotional 
     disturbance (including substance abuse), if the services are 
     not furnished in accordance with standards established by the 
     Secretary for the management of such services.''.
       (d) Intensive Community-Based Services.--
       (1) Coverage.--
       (A) In general.--Section 1832(a)(2)(J) (42 U.S.C. 
     1395k(a)(2)(J)) is amended to read as follows:
       ``(J) intensive community-based services (as described in 
     section 1861(ff))--
       ``(i) for an unlimited number of days during any calendar 
     year, in the case of services described in section 
     1861(ff)(2)(E) that are furnished to an individual who is a 
     seriously mentally ill adult, a seriously emotionally 
     disturbed child, or an adult or child with serious substance 
     abuse disorder (as determined in accordance with criteria 
     established by the Secretary),
       ``(ii) in the case of services described in section 
     1861(ff)(2)(C), for up to 180 days during any calendar year, 
     except that such services may be furnished to the individual 
     for a number of additional days during the year equal to the 
     difference between the total number of days of intensive 
     residential services which the individual may receive during 
     the year under part A (as determined under section 
     1812(a)(6)) and the number of days of such services which the 
     individual has received during the year, or
       ``(iii) in the case of any other such services, for up to 
     90 days during any calendar year, except that such services 
     may be furnished to the individual for the number of 
     additional days during the year described in clause (ii).''.
       (B) Reduction in number of days of intensive residential 
     services.--Section 1812(a)(6) (42 U.S.C. 1395d(a)(6)), as 
     added by subsection (b)(1), is amended--
       (i) by inserting ``(A)'' before ``such services''; and
       (ii) by striking the period at the end and inserting the 
     following: ``, and (B) reduced by a number of days determined 
     by the Secretary so that the actuarial value of providing 
     such number of days of services under this paragraph to the 
     individual is equal to the actuarial value of the days of 
     intensive community-based services furnished to the 
     individual under section 1832(a)(2)(J) during the year after 
     such services have been furnished to the individual for 90 
     days (or, in the case of services described in section 
     1832(a)(2)(J)(ii), for 180 days) during the year (rounded to 
     the nearest day).''.
       (2) Services described.--Section 1861(ff)(2) (42 U.S.C. 
     1395x(ff)(2)) is amended--
       (A) in the matter preceding subparagraph (A), by striking 
     ``are--'' and inserting ``are as follows:'';
       (B) in subparagraph (C)--
       (i) by inserting ``behavioral aide services,'' after 
     ``nurses'', and
       (ii) by adding at the end the following: ``(to the extent 
     authorized under State law)'';
       (C) by adding ``and'' at the end of subparagraph (G);
       (D) in subparagraph (H), by striking ``, and'' and 
     inserting a period;
       (E) by redesignating subparagraphs (A) through (H) as 
     clauses (i) through (viii) and moving such subparagraphs 2 
     ems to the right;
       (F) by inserting before clause (i) (as so redesignated) the 
     following:
       ``(A) Partial hospitalization services consisting of--'';
       (G) by inserting after clause (viii) (as so redesignated) 
     the following new subparagraphs:
       ``(B) Psychiatric rehabilitation services.
       ``(C) Day treatment services for individuals under 19 years 
     of age.
       ``(D) In-home services.
       ``(E) Case management services, including collateral 
     services designated as such case management services by the 
     Secretary.
       ``(F) Ambulatory detoxification services.''.
       (3) Permitting non-physician providers to supervise 
     individual program of treatment.--Section 1861(ff)(1) (42 
     U.S.C. 1395x(ff)(1)) is amended by inserting after 
     ``supervision of a physician'' the following: ``(or, to the 
     extent permitted under the law of the State in which the 
     services are furnished, a non-physician mental health 
     professional)''.
       (4) Requiring services to meet management standards.--
     Section 1861(ff)(1) (42 U.S.C. 1395x(ff)(1)) is amended by 
     striking the period at the end and inserting the following: 
     ``, but does not include any item or service that is not 
     furnished in accordance with standards established by the 
     Secretary for the management of such services.''.
       (5) Programs eligible to provide services.--Section 
     1861(ff)(3) (42 U.S.C. 1395x(ff)(3)) is amended to read as 
     follows:
       ``(3) A program described in this paragraph is a program 
     (whether facility-based or freestanding) which is furnished 
     by an entity--
       ``(A) legally authorized to furnish such a program under 
     State law (or the State regulatory mechanism provided by 
     State law) or certified to furnish such a program by an 
     appropriate accreditation entity approved by the State in 
     consultation with the Secretary; and
       ``(B) meeting such other requirements as the Secretary may 
     impose to assure the quality of the intensive community-based 
     services provided.''.
       (6) Waiver of copayment for case management services 
     furnished to certain individuals.--Section 1832(a)(3) (42 
     U.S.C. 1395k(a)(2)) is amended--
       (A) in subparagraph (B), by striking ``or (E)'' and 
     inserting ``(E), or (F)'';
       (B) by striking ``and'' at the end of subparagraph (D);
       (C) by adding ``and'' at the end of subparagraph (E); and
       (D) by adding at the end the following new subparagraph:
       ``(F) with respect to services described in section 
     1832(a)(2)(J)(i), the amount determined under subparagraph 
     (B), except that `100 percent' shall be substituted for any 
     reference in such subparagraph to `80 percent';''.
       (7) Conforming amendments.--(A) Section 1835(a)(2)(F) (42 
     U.S.C. 1395n(a)(2)(F)) is amended--
       (i) by striking ``partial hospitalization'' and inserting 
     ``intensive community-based''; and
       (ii) in clause (ii), by striking ``physician'' and 
     inserting ``physician (or, to the extent permitted under the 
     law of the State in which the services are furnished, a non-
     physician mental health professional)''.
       (B) Section 1861(s)(2)(B) (42 U.S.C. 1395x(s)(2)(B)) is 
     amended by striking ``partial hospitalization'' and inserting 
     ``intensive community-based''.
       (C) Section 1861(ff) (42 U.S.C. 1395x(ff)) is amended--
       (i) in the heading, by striking ``Partial Hospitalization'' 
     and inserting ``Intensive Community-Based''; and
       (ii) in paragraph (1), by striking ``partial 
     hospitalization'' and inserting ``intensive community-
     based''.
       (D) Section 1866(e)(2) (42 U.S.C. 1395cc(e)(2)) is amended 
     by striking ``partial hospitalization'' and inserting 
     ``intensive community-based''.
       (e) Requirement for Provision of Services Through Organized 
     Systems of Care for At-Risk Children.--
       (1) Requiring coordination of mental health services 
     through organized systems of care.--
       (A) Psychiatric hospital services.--Section 1812(a)(5) (42 
     U.S.C. 1395d(a)(5)), as added by subsection (a)(1), is 
     amended by striking the period at the end and inserting the 
     following: ``, but only if (with respect to services 
     furnished to an at-risk child described in section 1861(rr)) 
     such services are furnished in conformity with the plan of an 
     organized system of care for mental health and substance 
     abuse services in accordance with section 1861(rr).''.
       (B) Other part b items and services.--Section 1862(a)(18), 
     as added by subsection (c)(2), is amended by striking the 
     period at the end and inserting the following: ``, and, in 
     the case of services furnished to an at-risk child described 
     in section 1861(rr) who is not an inpatient of a hospital, if 
     the services are not furnished in conformity with the plan of 
     an organized system of care for mental health and substance 
     abuse services in accordance with section 1861(rr).''.
       (C) Intensive residential services.--Section 1861(qq) (42 
     U.S.C. 1395x(qq)) as added by subsection (b)(2), is amended--
       (i) in paragraph (1), by striking ``paragraph (2)'' and 
     inserting ``paragraphs (2) and (3)''; and
       (ii) by adding at the end the following new paragraph:
       ``(3) In the case of services furnished to an at-risk child 
     described in section 1861(rr), no service may be treated as 
     an intensive residential service under this subsection unless 
     the service is furnished in conformity with the plan of an 
     organized system of care for mental health and substance 
     abuse services in accordance with section 1861(rr).''.
       (D) Intensive community-based services.--Section 
     1861(ff)(1) (42 U.S.C. 1395x(ff)(1)) is amended by inserting 
     after ``by a physician'' the following: ``(or, in the case of 
     services furnished to an at-risk child described in section 
     1861(rr), by an organized system of care for mental health 
     and substance abuse services in accordance with such 
     section)''.
       (2) Organized systems of care described.--Section 1861 (42 
     U.S.C. 1395x) is amended by adding at the end the following 
     new subsection:

   ``Organized System of Care for Mental Health and Substance Abuse 
                                Services

       ``(rr)(1) The term `organized system of care for mental 
     health and substance abuse services' means, with respect to 
     mental health services provided to an at-risk child, a 
     community-based service delivery network consisting of public 
     or private providers that a State determines meets the 
     following requirements (in accordance with guidelines of the 
     Secretary):
       ``(A) The system has established linkages with existing 
     mental illness and substance abuse service delivery programs 
     in the area in which the child resides (or is in the process 
     of developing or operating a system with appropriate public 
     agencies in the area to coordinate the delivery of such 
     services to individuals in the area).
       ``(B) The system provides for the participation and 
     coordination of multiple agencies and providers that serve 
     the needs of children in the area, including agencies and 
     providers involved with child welfare, education, juvenile or 
     criminal justice, health care, mental health, and substance 
     abuse treatment.
       ``(C) The system provides for the involvement of the 
     families of children to whom mental illness and substance 
     abuse services are provided in the planning of treatment and 
     the delivery of services.
       ``(D) The system provides for the development and 
     implementation by multidisciplinary and multi-agency teams of 
     individualized treatment plans that are recognized and 
     followed by the requisite providers in the area.
       ``(E) The system ensures the delivery and coordination of 
     the range of mental illness and substance abuse services 
     required for at-risk children.
       ``(F) The system provides for the management of the 
     individualized treatment plans and for a flexible response to 
     treatment changes over time.
       ``(G) In the case of individuals receiving substance abuse 
     treatment services, the system places such individuals in 
     treatment programs in accordance with uniform patient 
     placement criteria established by the Secretary in 
     consultation with the States.
       ``(H) The system provides for assessment of clinical 
     outcomes of individuals receiving services through the 
     system.
       ``(2) In this subsection--
       ``(A) the term `at-risk child' means an individual under 19 
     years of age who has a serious emotional disorder or 
     substance abuse disorder (in accordance with criteria 
     established by the Secretary for purposes of this subsection) 
     and is currently involved or at imminent risk of being 
     involved with one or more public agencies providing services 
     to children, including agencies relating to child welfare, 
     special education, and juvenile or criminal justice; and
       ``(B) the term `mental health services' has the meaning 
     given such term in section 1893(c).''.
       (3) Establishment of criteria for severity of illness by 
     secretary.--Not later 1 year after the date of the enactment 
     of this Act, the Secretary shall develop criteria for 
     determining whether an individual has a serious emotional 
     disorder or substance abuse disorder for purposes of section 
     1861(rr)(2).
       (f) Special Rule for Beneficiaries in States With Managed 
     Programs.--Title XVIII is amended by inserting after section 
     1892 the following new section:


  ``coverage of mental health services for individuals in states with 
                     managed mental health programs

       ``Sec. 1893. (a) Application of State Coverage Rules.--
     Notwithstanding any other provision of this title, in the 
     case of an individual entitled to benefits under part A or 
     enrolled under part B who is a resident of a State or a 
     member of a tribe or tribal organization operating a 
     comprehensive managed mental health program under section 
     1981 of the Public Health Service Act and who is enrolled in 
     the program during a month--
       ``(1) the individual is considered to have waived the right 
     to benefits for mental health services under this title in 
     consideration of receipt of benefits for mental health 
     services through such program;
       ``(2) the Secretary shall make a per capita payment to the 
     State or the tribe or tribal organization, in the amount 
     specified in subsection (b)(1), on behalf of the individual; 
     and
       ``(3) no other payment may be made under this title with 
     respect to mental health services furnished to the individual 
     during the month.
     Payments under paragraph (2) shall be made on a monthly 
     basis.
       ``(b) Amount of Capitation Payment.--
       ``(1) In general.--In the case of a State or tribe or 
     tribal organization operating a program described in 
     subsection (a) for a month, the amount specified in this 
     subsection is the Secretary's estimate of the sum of the 
     following products:
       ``(A) The product of--
       ``(i) the part A per enrollee mental health payment 
     described in paragraph (2) for the month; and
       ``(ii) the number of individuals who are entitled to 
     benefits under part A during the month and (as estimated 
     prior to the month based on information provided by the State 
     or the tribe or tribal organization) who are enrolled in the 
     program described in subsection (a).
       ``(B) The product of--
       ``(i) the part B per enrollee mental health payment 
     described in paragraph (2) for the month; and
       ``(ii) the number of individuals who are enrolled under 
     part B during the month and (as estimated prior to the month 
     based on information provided by the State or the tribe or 
     tribal organization) who are enrolled in the program 
     described in subsection (a).
       ``(2) Per enrollee payments.--In paragraph (1)--
       ``(A) the `part A per enrollee payment' for a month is an 
     amount equal to the Secretary's estimate of the average 
     actuarial value of the mental health services for which 
     payment would be made under part A for the month on behalf of 
     individuals enrolled in the State program described in 
     subsection (a) during the month if the individuals were not 
     enrolled in the State program during the month; and
       ``(B) the `part B per enrollee payment' for a month is an 
     amount equal to the Secretary's estimate of the average 
     actuarial value of the mental health services for which 
     payment would be made under part B for the month on behalf of 
     individuals enrolled in the State program described in 
     subsection (a) during the month if the individuals were not 
     enrolled in the State program during the month.
       ``(3) Adjustments.--The Secretary shall adjust the amount 
     of payment otherwise made to a State or a tribe or tribal 
     organization under this subsection for a month--
       ``(A) to reduce such payment to take into account any 
     amounts paid to the State or tribe or tribal organization 
     under other programs towards the costs of providing mental 
     health services to individuals enrolled in the program; and
       ``(B) to take into account overpayments or underpayments 
     made under this subsection in previous months.
       ``(c) Mental Health and Substance Abuse Services 
     Described.--In this section, the term `mental health and 
     substance abuse services' means the following items and 
     services:
       ``(1) Inpatient psychiatric services (as described in 
     section 1812(a)(5).
       ``(2) Any items or services furnished under part B for the 
     treatment of mental illness or substance abuse for an 
     individual who is not an inpatient of a hospital.
       ``(3) Intensive community-based mental health services (as 
     described in section 1861(ff)).
       ``(4) Intensive residential services (as described in 
     section 1861(qq).''.

     SEC. 3117. EXPANDED COVERAGE OF CERTAIN CHIROPRACTIC 
                   SERVICES.

       Section 1861(r)(5) (42 U.S.C. 1395x(r)(5)) is amended by 
     striking ``sections 1861(s)(1) and 1861(s)(2)(A)'' and 
     inserting ``paragraphs (1), (2)(A), (3), and (4) of 
     subsection (s)''.

     SEC. 3118. MANAGED CARE OPTIONS.

       Section 1876(g) (42 U.S.C. 1395mm(g)) is amended by adding 
     at the end the following new paragraph:
       ``(7) An eligible organization with a risk-sharing contract 
     under this section may provide services under part A and B to 
     individuals enrolled with the organization through an 
     unlimited-choice-of-provider plan described in section 
     5504(15) of the Guaranteed Health Insurance Act of 1994, 
     except that in no case could the cost sharing requirements 
     imposed under such option with respect to services furnished 
     through providers who are not members of the organization's 
     provider network (as defined in section 5504(10) of such Act) 
     exceed the cost-sharing requirements that would otherwise be 
     imposed with respect to the services if the services were 
     furnished under this title other than through the eligible 
     organization.''.

     SEC. 3119. EFFECTIVE DATE.

       The amendments made by this part shall apply to items and 
     services furnished on or after January 1, 1998.
                        TITLE IV--STATE PROGRAMS
                 Subtitle A--State Single-Payer Systems

     SEC. 4001. STANDARDS FOR STATE SINGLE-PAYER SYSTEMS.

       (a) Establishment of Systems.--
       (1) In general.--As an alternative to the method otherwise 
     provided in this Act to achieving universal health insurance 
     coverage for residents of a State, a State may operate a 
     State single-payer system approved by the Secretary of Health 
     and Human Services and the Secretary of Labor (in this title 
     jointly referred to as the ``Secretaries'') under this 
     subtitle.
       (2) Requirements.--For purposes of this section, a State 
     single-payer system is a system established by a State under 
     which meets the following requirements:
       (A) Direct payment to providers.--
       (i) In general.--Under the system, the State makes payments 
     directly to providers who furnish items and services included 
     in the guaranteed national benefit package to individuals 
     covered under the system and assume (subject to clause (ii)) 
     all financial risk associated with making such payments.
       (ii) Capitated payments permitted.--Nothing in clause (i) 
     shall be construed to prohibit providers furnishing items and 
     services under the system from receiving payments from the 
     State on a capitated, at risk-basis based on prospectively 
     determined amounts.
       (B) Guaranteed national benefit package.--The system 
     guarantees coverage for at least the guaranteed national 
     benefit package, including pediatric services for children, 
     for all eligible individuals who are residents of the State, 
     subject to section 4002.
       (C) Budgetary compliance.--The system controls aggregate 
     health care expenditures in the State subject to the same 
     tests as a State operating a State provider reimbursement 
     system under subtitle C, without regard to the adjustment 
     described in section 4203(a)(2)(A).
       (b) Conditions for Approval.--The Secretaries may not 
     approve a single-payer system under this subtitle unless--
       (1) the State submits to the Secretaries an application in 
     such form and manner as the Secretaries may require [under 
     the coordinated process established under section 4301], and
       (2) the Secretaries determine to their satisfaction that 
     the State and the system meet the applicable requirements of 
     section 4002.
       (c) Termination of Approval.--Either Secretary shall 
     terminate approval of a system in accordance with section 
     4006 if that Secretary determines that the State or the 
     system no longer meet the applicable requirements of section 
     4002.

     SEC. 4002. GENERAL REQUIREMENTS FOR APPROVAL.

       (a) Universal Coverage.--
       (1) In general.--Except as provided in this subsection and 
     section 4003, the single-payer system shall cover all 
     eligible individuals who are residents of the State.
       (2) Exception for indians.--
       (A) In general.--A State may not require an individual 
     described in subparagraph (B) to be covered under the system, 
     but shall allow such an individual the option of coverage 
     under such system.
       (B) Individuals described.--An individual described in this 
     subparagraph is an individual who is--
       (i) eligible to receive services pursuant to sections 
     36.1--36.14 of title 42, Code of Federal Regulations (1986);
       (ii) an urban Indian (as defined in section ____ of the 
     Indian Health Care Improvement Act); or
       (iii) an Indian described in section 809(b) of the Indian 
     Health Care Improvement Act.
       (3) Exception for qualified religious exemption, veterans, 
     and active duty military.--A State may not require any of the 
     following individuals to be covered under the single-payer 
     system:
       (A) An individual who is described in section 1004(b)(1).
       (B) An eligible person (within the meaning of section 
     1710(a)(1) of title 38, United States Code).
       (C) An individual on active duty as a member of the 
     uniformed services (as defined in section 101 of title 10, 
     United States Code).
       (4) Inclusion of champus and fehbp.--For provisions 
     authorizing inclusion of--
       (A) certain CHAMPUS-eligible individuals in State single-
     payer systems, see section ____ of title 10, United States 
     Code; or
       (B) Federal employees and annuitants in State single-payer 
     systems, see section ____ of title 5, United States Code.
       (5) Determination of residence in state.--
       (A) In general.--For the purposes of determining 
     eligibility for coverage under a State single-payer system, 
     an individual shall be considered a ``resident'' of the State 
     if the individual lives in the State with the intention of 
     remaining there permanently or indefinitely.
       (B) Certain individuals excluded.--The State may not deny 
     coverage under the State single-payer system to an individual 
     described in subparagraph (A) because the individual has not 
     resided in the State for a specified period, or because the 
     individual is temporarily absent from the State. However, a 
     State may deny eligibility for benefits under the system to 
     an individual if the State determines that the individual is 
     residing in the State substantially for the purpose of 
     receiving medical treatment in that State.
       (b) Ensuring Access to Benefits.--
       (1) In general.--The system shall provide for coverage of 
     not less than the guaranteed national benefit package, 
     including the cost sharing provided under the package 
     (subject to paragraph (2)), to all individuals required to be 
     covered under the system.
       (2) Imposition of reduced cost sharing.--The system may 
     decrease the cost sharing otherwise provided in the package 
     with respect to any class of individuals enrolled in the 
     system or any class of items or services included in the 
     package, so long as the system does not increase the cost 
     sharing otherwise imposed with respect to any other class of 
     individuals, items, or services.
       (3) Access to services.--Services covered under the 
     guaranteed national benefit package shall be reasonably 
     accessible to individuals required to be covered under 
     subsection (a).
       [New (8/9):] (4) Access to choice of providers.--The system 
     shall provide individuals with unlimited choice of providers 
     for receiving services under the system, except that nothing 
     in this paragraph shall be construed to prohibit the State 
     from imposing cost-sharing requirements that result in 
     variations in out-of-pocket expenses based on the provider 
     chosen, so long as such variations do not impose a 
     significant financial impairment on the individual's choice.
       (c) Public Operation and Accountability.--
       (1) In general.--The system shall be established under 
     State law and State law shall provide for mechanisms to 
     enforce the requirements of the system.
       (2) Operation by state.--The State single-payer system 
     shall be operated by the State, a designated agency of the 
     State, or a non-profit entity established through State law 
     in a manner that provides for public accountability with 
     respect to the operation of the system.
       (3) Use of contracts.--During the 5-year period beginning 
     the date of the approval of the application under this 
     subtitle, nothing in this subsection shall be construed to 
     prohibit a State from contracting with private organizations 
     to assist in the administration of the system, but only if, 
     under any contract entered into with such a private 
     organization pursuant to this paragraph, such private 
     organization is required to limit administrative expenses 
     under the system to a rate of not more than 3 percent of 
     program expenses. Any arrangement under the system under 
     which items or services are provided by carriers shall meet 
     such standards under title V as the Secretaries shall 
     determine appropriate by regulation.
       (d) Nondiscriminatory Financing.--Any taxes, fees, or other 
     assessments imposed with respect to the financing of the 
     State single-payer system may not be imposed in a manner that 
     discriminates, with respect to employment or employers, on 
     the basis of the type of sponsor, or the size, self-insured 
     nature, or other characteristics of an employer.
       [New (8/9)] (e) Application of Certain Insurance Reform 
     Standards.--The State single-payer system shall meet the 
     following additional requirements:
       (1) The system shall meet such standards applicable to 
     insured health benefit plans under subtitle A of title V as 
     the Secretary determines to be appropriate for a single-payer 
     system.
       (2) The system shall provide coverage for emergency and 
     urgent care services furnished to individuals enrolled in the 
     system by out-of-State providers.
       (3) The system provides coverage and coordination of 
     payment for services provided to individuals enrolled in the 
     system by out-of-State providers.
       (4) The system has in effect procedures to coordinate the 
     delivery and payment of benefits for individuals enrolled in 
     health benefit plans outside of the State who receive 
     services from providers in the State, individuals who are 
     employees of employers in the State but are not residents of 
     the State, and other individuals for whom coordination of 
     enrollment and delivery and payment of benefits is necessary.
       (f) Ongoing Reports.--A State operating an approved State 
     single-payer system shall submit annual reports to the 
     Secretaries on the operation of the system, together with 
     such other reports as either of the Secretaries may require.

     SEC. 4003. TREATMENT OF MEDICARE BENEFICIARIES.

       (a) Permitting States to Cover Medicare Beneficiaries.--
       (1) In general.--A State single-payer system may cover an 
     individual who is a medicare part A beneficiary and who 
     resides in the State, but only if the State demonstrates to 
     the satisfaction of the Secretary [of Health and Human 
     Services], in its application under this subtitle, that--
       (A) all services for which such beneficiaries would 
     otherwise be eligible under the medicare program shall be 
     provided under the system without additional cost to such 
     beneficiaries and shall be reasonably accessible to all such 
     beneficiaries residing in the State; and
       (B) such beneficiaries shall be eligible for the same 
     benefits and provided the same opportunities with respect to 
     choice of providers as other residents of the State under the 
     system.

     For purposes of subparagraph (A), coverage determinations 
     under the system shall be made under rules that are no more 
     restrictive than are otherwise applicable under the medicare 
     program.
       (2) Timing of coverage.--The coverage of medicare part A 
     beneficiaries shall begin no earlier than the beginning of 
     the fourth year that occurs after the Secretaries have 
     approved the system pursuant to this subtitle and only if the 
     State provides evidence, satisfactory to the Secretary, that 
     all of the requirements for the system will be met, and that 
     all benefits guaranteed to such beneficiaries will be 
     provided.
       (3) Control of medicare expenditures.--If medicare part A 
     beneficiaries are included in a system under this section, 
     the State shall guarantee that total expenditures under the 
     medicare program in the State during the year will not exceed 
     the expenditures that would otherwise have been made with 
     respect to such beneficiaries residing in the State during 
     the year if the system were not approved under this section.
       [New (8/9): ] (4) Effect on financing.--Nothing in this 
     section shall be construed to prohibit a State from 
     subjecting medicare beneficiaries to any generally applicable 
     taxes used to finance the State system.
       (b) Reference to Medicare Payment Rules.--In the case of a 
     State single-payer system that covers medicare part A 
     beneficiaries, such beneficiaries shall receive benefits 
     under the State system, and the Secretary shall make payments 
     to the State, in accordance with section 1894 of the Social 
     Security Act (as added by section 8361).
       (c) Reinstatement of Medicare in Event of Failure to Meet 
     System Requirements.--In the case of a State system which 
     covers medicare part A beneficiaries or medicare part C 
     beneficiaries and fails substantially to meet requirements of 
     this section or of the medicare program or medicare part C, 
     the Secretary shall terminate coverage of such beneficiaries 
     under the State system and make payment for any services 
     covered under the medicare program or medicare part C that 
     were provided to such beneficiaries but were not reimbursed 
     under the State system.
       (d) Medicare Part C Beneficiary Defined.--In this section, 
     the term ``medicare part C beneficiary'' means an individual 
     who would be eligible for benefits under medicare part C but 
     for approval of a State single-payer system under this 
     subtitle.

     SEC. 4004. OPTIONS RELATING TO PAYMENT FOR PREMIUM SUBSIDIES 
                   AND WRAP-AROUND BENEFITS.

       (a) Premium Subsidies.--
       (1) Premium certificate eligible individuals.--
       (A) In general.--Under a State single-payer system, payment 
     shall be made directly to the State under section 
     2124(c)(1)(C)(i) of the Social Security Act in an amount 
     described in subparagraph (B).
       (B) Determination of amount of periodic payments.--The 
     amount described in this subparagraph is, subject to 
     subparagraph (C), with respect to periods occurring during a 
     year, the Secretary's estimate of the aggregate amount of the 
     payments that would have been made for premium certificates 
     under part A of title XXII of the Social Security Act to 
     individuals covered under the State single-payer system 
     during the most recent preceding year if payment had been 
     made as provided in such subpart, increased by the 
     Secretary's estimate of the rate of increase in the total 
     amount of such payments with respect to such individuals 
     during the year.
       (C) Special rule for payment to states for years before 
     2000.--In the case of periods occurring during a year before 
     2000, the State shall submit to the Secretary such 
     information as the Secretary may require to appropriately 
     estimate the amounts described in subparagraph (B) based on a 
     system established by the State to determine the eligibility 
     of State residents for the premium certificates described in 
     part A of title XXII of the Social Security Act (using the 
     same eligibility criteria applicable under such part).
       (2) Treatment of part c eligible individuals.--
       (A) In general.--The Secretary shall make payments to the 
     State under section 2124(c)(1)(C)(iii) of the Social Security 
     Act in the amount described in subparagraph (B).
       (B) Amount.--The amount described in this subparagraph is 
     the Secretary's estimate of the aggregate amount of the 
     reduction in the tax imposed under section 59B of the 
     Internal Revenue Code of 1986 that would have resulted from 
     the application of subsection (b) of such section with 
     respect to individuals enrolled in the system during the 
     applicable period if the State did not have an approved 
     system under this subtitle.
       (C) Use of data.--In computing amounts under subparagraph 
     (B), the Secretary may use information made available under 
     section 6103(l)(16) of the Internal Revenue Code of 1986.
       (3) Reconciliation for previous errors in estimation.--The 
     Secretary shall adjust the amount of payment made to the 
     State pursuant to this subsection for periods occurring in a 
     year to take into account any errors in the estimations made 
     in previous payments, based on information furnished by the 
     Secretary of the Treasury and such other information as the 
     Secretary deems necessary.
       (b) Wrap-Around Benefits.--
       (1) In general.--Under a State single-payer system, payment 
     shall be made under section 2124(c)(1)(C)(ii) of the Social 
     Security Act directly to the State in an amount described in 
     paragraph (B).
       (2) Determination of amount.--The amount described in this 
     paragraph is, subject to paragraph (3), the Secretary's 
     estimate of the aggregate amount of the payments that would 
     been made under part B of title XXII of the Social Security 
     Act if payment had been made as provided in such part.
       (3) Special rule for payment to states for years prior to 
     2000.--In the case of periods occurring during a year prior 
     to 2000, the State shall submit to the Secretary such 
     information as the Secretary may require to appropriately 
     estimate the amounts described in paragraph (2), based on a 
     system established by the State to determine the individuals 
     enrolled in the single-payer system who would be wrap-around 
     eligible individuals but for the election under the State 
     single-payer system (applying the same criteria and a similar 
     process used by the Secretary to determine whether 
     individuals are wrap-around eligible individuals under part B 
     of title XXII of the Social Security Act).
       (4) Reconciliation for previous errors in estimation.--The 
     Secretary shall adjust the amount of payment made to the 
     State under this subsection for periods occurring in a year 
     to take into account any errors in the estimations made under 
     this subsection.
       (5) Definitions.--In this subsection:
       (A) The term ``State wrap-around benefits'' means a package 
     of benefits consisting of items and services not covered 
     under the guaranteed national benefit package that the 
     Secretary finds is comparable to the wrap-around benefits 
     provided under part B of title XXII of the Social Security 
     Act.
       (B) The term ``wrap-around benefits'' means the benefits 
     described in section 2212 of the Social Security Act (as 
     added by section 8102(a)).
       (C) The term ``wrap-around eligible individual'' has the 
     meaning given such term in section 2211(b) of the Social 
     Security Act (as added by section 8102(a)).

     SEC. 4005. OFFSET TO DIRECT PAYMENTS FOR OUTSTANDING 
                   MAINTENANCE OF EFFORT PAYMENTS.

       The Secretary shall reduce the amount of any payment made 
     directly to the State under section 4003(b) or subsection (a) 
     or (b)]of section 4004 for a period by the amount of any 
     payments owed by the State under part 2 of subtitle B of 
     title VIII for such period.

     SEC. 4006. TERMINATION OF APPROVAL.

       (a) Annual Determination of Budgetary Compliance by 
     Secretaries.--The Secretaries shall annually determine 
     whether a State system has met the tests described in section 
     4001(a)(2)(C) for the most recent 3-year period, determined 
     based on all classes of services covered under the system.
       (b) Process for Termination.--If either Secretary finds 
     under subsection (a) that the single-payer system approved 
     under this subtitle fails the tests described in section 
     4001(a)(2)(C), or no longer meets any of the other applicable 
     requirements of section 4001(a)(2) or section 4002, such 
     Secretary shall terminate approval of the system, in 
     accordance with the process described in section 4204(b) 
     (relating to termination of a State provider reimbursement 
     system under subtitle C).
             Subtitle B--State Managed Competition Programs

     SEC. 4101. STANDARDS FOR STATE MANAGED COMPETITION PROGRAMS.

       (a) Establishment of State Programs.--As an alternative to 
     the method otherwise provided in this Act to achieving 
     universal health insurance coverage for residents of a State, 
     a State may operate a managed competition program approved by 
     the Secretary of Health and Human Services and the Secretary 
     of Labor (in this subtitle jointly referred to as the 
     ``Secretaries'') under this subtitle under which the State, 
     subject to subsection (b), requires eligible individuals to 
     obtain coverage through a consumer purchasing cooperative 
     established under subtitle E of title V. In this subtitle, 
     the term ``State managed competition program'' means a 
     managed competition program approved by the Secretaries under 
     this subtitle.
       (b) Conditions for Approval.--The Secretaries may not 
     approve a managed competition program under this subtitle 
     unless--
       (1) the State submits to the Secretaries an application in 
     such form and manner as the Secretaries may require, and
       (2) the Secretaries determine to their satisfaction that 
     the State and the program meets the applicable requirements 
     of sections 4102.
       (c) Termination of Approval.--Either Secretary shall 
     terminate approval of a managed competition program in 
     accordance with section 4106 if that Secretary determines 
     that the State or the program no longer meet the applicable 
     requirements of sections 4102.

     SEC. 4102. GENERAL REQUIREMENTS FOR STATE MANAGED COMPETITION 
                   PROGRAMS.

       (a) Provision of Coverage Through Qualified Insured Health 
     Benefit Plans Offered by Consumer Purchasing Cooperatives.--
       (1) Requirement.--
       (A) In general.--Except as provided in this paragraph, 
     under the managed competition program eligible individuals 
     residing in the State are required to obtain health coverage 
     through enrollment in a qualified insured health benefit plan 
     offered through a consumer purchasing cooperative.
       (B) Application of community-rating to all plans and 
     enrollees.--All such plans shall meet the requirements of 
     section 5008 (relating to community-rating of premiums) with 
     respect to all individuals and employers covered under the 
     program.
       (2) Exception for indians, qualified religious exemption, 
     veterans, active duty military, champus eligible individuals, 
     fehbp enrollees, medicare part A beneficiaries.--Paragraph 
     (1) shall not apply to--
       (A) individuals described in paragraph (2) or (3) of 
     section 4002(a);
       (B) individuals who are entitled to benefits under the 
     Civilian Health and Medical Program of the Uniformed Services 
     (as defined in section 1072(4) of title 10, United States 
     Code);
       (C) individuals who are enrolled in a health plan under 
     chapter 89 of title 5, United States Code;
       (D) medicare part A beneficiaries.
       (3) Exception for full-time employees in large firms or in 
     multiemployer plans.--
       (A) Full-time employees of large employers.--A managed 
     competition program may not require an individual who is a 
     full-time employee of an employer that has more than 1,000 
     full-time employees in the United States to participate in 
     the program.
       (B) Beneficiaries and participants in multiemployer 
     plans.--
       (i) In general.--A managed competition program may not 
     require an individual who is a participant or beneficiary (as 
     defined in clause (ii)) under a multiemployer plan described 
     in clause (iii) to participate in the program.
       (ii) Participant and beneficiary defined.--In clause (i), 
     subject to clause (iv), the terms ``participant'' and 
     ``beneficiary'' have the meaning given such terms in section 
     3 of the Employee Retirement Income Security Act of 1974.
       (iii) Plan described.--A plan described in this clause is a 
     multiemployer plan that--

       (I) covers more than 1,000 active participants in the 
     United States whose coverage under such plan is on terms at 
     least as favorable as those provided under this Act with 
     respect to a full-time employee, or
       (II) is maintained by one or more affiliates of the same 
     labor organization, or one or more affiliates of labor 
     organizations representing employees in the same industry, 
     covering more than 1,000 such active participants.

       (iv) Eligibility standards.--A multiemployer plan may 
     establish eligibility standards for those individuals who 
     will be treated as participants and beneficiaries for 
     purposes of this section. Such standards shall not 
     discriminate on the basis of race, national origin, sex, 
     religion, language, socioeconomic status, age, disability, 
     sexual orientation, health status, or anticipated need for 
     health services, but may take into account the level and rate 
     at which employer contributions are paid on behalf of 
     employees. Nothing in this clause shall be construed as 
     affecting the ability of a multiemployer plan to provide 
     health or other benefits to participants and beneficiaries 
     who are not treated as participants and beneficiaries with 
     respect to the plan.
       (C) Rural electric and telephone cooperatives.--
       (i) In general.--A managed competition program may not 
     require an individual who is a full-time employee of a member 
     of a rural cooperative described in clause (ii), or a family 
     member of such an employee, to participate in the program.
       (ii) Rural cooperative described.--A rural cooperative 
     described in this clause is a rural electric cooperative or 
     rural telephone cooperative association if the cooperative or 
     association (or members of the cooperative or association) 
     maintain a health plan under which at least 1,000 full-time 
     employees in the United States are entitled to health 
     benefits.
       (D) Option.--A managed competition program may permit 
     individuals otherwise exempt under this paragraph to 
     participate in the program.
       (b) Ensuring Access of Low-Income Individuals to Plans.--
     The managed competition program shall provide such financial 
     assistance toward the premiums of low-income individuals 
     described in section 2211(b)(1)(A)as will assure that such 
     individuals may obtain coverage under a certified health plan 
     upon the presentation of premium certificate issued under 
     part A of title XXII of the Social Security Act.
       (c) Compliance With Plan Requirements.--
       (1) In general.--The plans offered under the managed 
     competition program shall comply with the requirements of 
     subtitle A (and, if applicable, subtitle C) title V, except 
     that the Secretaries may waive such provisions of such title 
     as may be necessary to permit the operation of such a program 
     under this subtitle.
       (2) Exclusive offer through cooperatives.--The managed 
     competition program shall require carriers to offer certified 
     health plans (other than to individuals exempt from 
     participation under subsection (a)(3)) through consumer 
     purchasing cooperatives.
       (d) Budgetary Compliance.--The managed competition program 
     shall control aggregate health care expenditures in the State 
     subject to the same tests as a State operating a State 
     provider reimbursement system under subtitle C, without 
     regard to the adjustment described in section 4203(a)(2)(A).
       (e) Application of Certain Rules.--
       (1) Determination of residence and ongoing reports.--
     Subsections (a)(5) and (e) of section 4002 apply to a managed 
     competition program under this section in the same manner as 
     they apply to a single-payer system under such section.
       (2) Nondiscriminatory financing.--
       (A) In general.--Section (d) of section 4002 applies to a 
     managed competition program under this section in the same 
     manner as it applies to a single-payer system under such 
     section, except that no tax, fee, or other assessment may be 
     imposed with respect to coverage of individuals who do not 
     participate in the program pursuant to subsection (b)(3).
       (B) Construction.--Subparagraph (A) shall not be construed 
     as permitting apply with respect to only apply with respect 
     to In carrying out subparagraph (A),

     SEC. 4103. TERMINATION OF APPROVAL.

       (a) Annual Determination of Budgetary Compliance by 
     Secretary.--The Secretary shall annually determine whether a 
     managed competition program has met the tests described in 
     subsection 4101(a)(2) for the most recent 3-year period, 
     determined based on all classes of services covered under the 
     program.
       (b) Process for Termination.--If the Secretary finds under 
     subsection (a) that the managed competition program fails the 
     tests described in section 4101(a)(2), or no longer meets any 
     of the applicable requirements of section 4102, the Secretary 
     shall terminate approval of the program, in accordance with 
     the process described in section 4204(b) (relating to 
     termination of a State provider reimbursement system under 
     subtitle C).
       (c) Reinstatement of Medicare Part C in Event of Failure to 
     Meet Program Requirements.--In the case of a managed 
     competition program which covers individuals who would (but 
     for approval of the program) be medicare part C eligible 
     individuals and fails substantially to meet requirements of 
     this section with respect to such individuals, the Secretary 
     shall terminate the approval of the program with respect to 
     medicare part C eligible individuals.
            Subtitle C--State Provider Reimbursement Systems

     SEC. 4201. STANDARDS FOR STATE PROVIDER REIMBURSEMENT 
                   SYSTEMS.

       (a) In General.--During the period in which a State 
     provider reimbursement system (in this subtitle referred to 
     as a ``State payment system'') is approved under this 
     section--
       (1) the payment rates provided under such system shall 
     apply to services covered under the system and furnished in 
     the State;
       (2) maximum payment rates shall not apply to such services 
     under subtitle D of title VI, in accordance with section 
     6201(b)(2)(A); and
       (3) the requirements relating to the determination of 
     payment amounts under the medicare program, medicare part C, 
     and medicaid programs are waived insofar as such waiver is 
     necessary to implement such system.

     State preemption requirements under the Employee Retirement 
     Income Security Act of 1974 are waived under section 
     514(b)(11) of such Act (as added by section 12____) in order 
     to carry out such a system.
       (b) Application.--
       (1) In general.--Subject to subsection (e), the Secretaries 
     may not approve a state payment system under this subtitle 
     unless--
       (A) the State submits to the Secretaries an application in 
     such form and manner and containing such information and 
     assurances (consistent with this subtitle) as the Secretaries 
     may require, and
       (B) the Secretaries determine to their satisfaction that 
     the State and the system meet the applicable requirements of 
     sections 4202 and 4203 are met.
       (2) Limitation on disapproval.--The Secretaries cannot deny 
     the application of a State for a state payment system on the 
     ground that the methodology used under the system to control 
     payments for inpatient hospital services is based on a 
     payment methodology other than on the basis of a diagnosis-
     related group.
       (c) Termination of Approval.--
       (1) In general.--Either Secretary may terminate approval of 
     a state payment system in accordance with section 4204 if 
     that Secretary--
       (A) determines that the State or the system no longer meets 
     the requirements of section 4202(b)(1) (relating to all 
     payers), section 4202(b)(3)(B) (relating to limitation on 
     differentials for medicaid services), or section 4202(e) 
     (relating to certain requirements for hospitals); or
       (B) has reason to believe that the assurances described in 
     any of the following sections are not being (or will not be) 
     met:
       (i) Section 4202(b)(2) (relating to equitable treatment of 
     all payers).
       (ii) Section 4202(f) (relating to special requirements for 
     hospital admissions and exclusions).
       (iii) Section 4203 (relating to limiting aggregate 
     expenditures).
       (2) Additional authority.--Either of the Secretaries may 
     terminate such approval if such Secretary determines that the 
     system no longer continues to meet another condition for 
     approval described in section 4202 or 4203.
       (e) Deemed Approval of Certain Systems.--
       (1) In general.--In the case of a hospital reimbursement 
     control system approved under section 1886(c)(4) of the 
     Social Security Act or described in section 1814(b)(3) of 
     such Act and used for payment of hospital services in the 
     State under the medicare program, the system is deemed to be 
     a state payment system approved under this section with 
     respect to payment for hospital services.
       (2) Termination.--Insofar as paragraph (1) applies to a 
     state payment system, the continuation of the approval of the 
     system is conditioned only upon the system's compliance with 
     the requirements described in such paragraph.

     SEC. 4202. GENERAL CONDITIONS FOR STATE PROVIDER REQUIREMENTS 
                   FOR STATE SYSTEMS.

       (a) Application to Services.--
       (1) In general.--Subject to paragraph (2), the state 
     payment system applies to services described in any (or all) 
     of the following subparagraphs:
       (A) Inpatient hospital services (including services of 
     exempt hospitals (as defined in section 6311(a)(4)) 
     statewide.
       (B) Outpatient hospital services (including services of 
     exempt hospitals (as so defined)) statewide.
       (C) Physicians services statewide.

     For purposes of this part, services described in each of 
     subparagraphs (A), (B), and (C) shall be treated as a 
     separate class of services.
       (2) Additional services only by class of service.--The 
     system may apply to services in addition to services 
     described in paragraph (1) only if the system applies to all 
     services within the class (established under section 6002) in 
     which the services are classified.
       (b) Application to All Payers; Equitable Treatment.--
       (1) Application to all payers.--
       (A) In general.--The system applies to substantially all 
     payers (including the medicaid program in the State) for 
     services to which the system applies.
       (B) Exclusion of medicare program.--A State may elect not 
     to include the medicare program under the system.
       (2) Equitable treatment of payers.--Assurances satisfactory 
     to both Secretaries have been provided as to the equitable 
     and nondiscriminatory treatment of all payers (including the 
     medicare program, medicare part C, and medicaid programs and 
     other Federal and State programs) under the system.
       (3) Payment rate differentials permitted.--
       (A) In general.--Subject to subparagraph (B), a State may 
     provide for payment rates for services furnished under the 
     medicaid program that are different from the payment rates 
     for services for which payment is made by other payers.
       (B) Limitation on differentials for services under 
     medicaid.--The ratio of the average rate of payment for 
     services under the medicaid program to such average rate of 
     payment for the same services by health benefit plans (other 
     than the medicare program, medicare part C, and medicaid 
     programs) may not be less than the ratio of the average of 
     the rates of payment within the class of services for which 
     payment is provided under the medicaid program to such 
     average rate of payment under other health benefit plans 
     (other than the medicare program, medicare part C, and 
     medicaid programs) during the most recent year before the 
     implementation of the state payment system, as determined 
     jointly by the Secretaries.
       (4) Separate rate negotiations permitted for health 
     maintenance organizations.--
       (A) In general.--A State may provide that a health 
     maintenance organization (as defined in subparagraph (B)) may 
     negotiate directly with a provider of services covered under 
     the system with respect to the organization's rate of payment 
     for such services.
       (B) Definition.--In subparagraph (A), the term ``health 
     maintenance organization'' means an eligible organization 
     with a contract under section 1876 of the Social Security Act 
     or a qualified health maintenance organization (as defined in 
     section 1310(d) of the Public Health Service Act).
       (5) Minimum payment rates.--Under the state payment system, 
     the State may provide that the amount of payment for any 
     service within a class of services under the system may not 
     be less than a minimum payment rate established by the State 
     for the services.
       (6) Limiting use of addition payment amounts to bad debt 
     and charity.--Under the State payment system, amounts 
     required to be paid (for items or services) that are in 
     excess of the reasonable cost or charges or other reasonable 
     measure (as may be designated by the Secretaries) of cost for 
     such items and services shall be accounted for separately and 
     applied solely for the purpose of covering bad debts or 
     charity care (as defined by the Secretary).
       (c) Operation.--The system is operated directly by the 
     State or by a State agency or other public authority. The 
     previous sentence shall be construed to prohibit a State from 
     contracting with private organizations to carry out the 
     requirements of the state payment system.
       (d) Reports Required.--Providers of services covered under 
     the system must make such reports as the Secretaries may 
     jointly require in order to monitor assurances provided under 
     section 4203 and make determinations under section 4204.
       (e) Continued Access.--The State must demonstrate to the 
     satisfaction of the Secretaries that operation of the system 
     will not result in any change in hospital admission practices 
     or the provision of other services which result in--
       (1) a significant reduction in the proportion of patients 
     (receiving services covered under the system) who have no 
     third-party coverage and who are unable to pay for such 
     services,
       (2) a significant reduction in the proportion of 
     individuals provided services for which payment is (or is 
     likely to be) less than the anticipated charges or costs of 
     such services, or
       (3) the refusal to provide services to individuals who 
     would be expected to require unusually costly or prolonged 
     treatment for reasons other than those related to the 
     appropriateness of the care available from the provider.
       (f) Special Requirements for Hospital Admissions and 
     Exclusions.--If the system applies to payment for hospital 
     services, the system requires hospitals to which the system 
     applies to meet the requirement of section 1866(a)(1)(G) of 
     the Social Security Act with respect to the medicare program 
     and the system provides for the exclusion of certain costs in 
     accordance with section 1862(a)(14) of such Act (except for 
     such waivers thereof as the Secretaries jointly provide by 
     regulation).

     SEC. 4203. CONTROL OF AGGREGATE EXPENDITURES REQUIREMENT FOR 
                   STATE SYSTEMS.

       (a) Assurances Required.--
       (1) In general.--A state payment system may not be approved 
     until the Secretaries have been provided assurances 
     satisfactory to the Secretaries that under the system, during 
     a 3-year period (the first such period beginning with the 
     first month in which this section applies to that system in 
     the State) the following 2 tests are met:
       (A) Aggregate expenditure test.--The sum of--
       (i) aggregate private sector expenditures (as defined in 
     paragraph (4)), and
       (ii) the aggregate medicare expenditures (as defined in 
     paragraph (5)) for such class (or classes) under the system,

     will not exceed the applicable total limit specified in 
     paragraph (2).
       (B) Medicare expenditure test.--The aggregate medicare 
     expenditures for such class (or classes) under the system 
     will not exceed the applicable medicare limit specified in 
     paragraph (3).
       (2) Applicable total limit.--The applicable total limit 
     specified in this paragraph is the total of the maximum 
     amount of payments that would be payable in the State for the 
     covered class (or classes) of services if the state payment 
     system were not in effect. With respect to payments for 
     individuals who are not enrolled under the medicare program 
     or medicare part C, such amount shall be based on the State 
     private per capita expenditure estimate (established under 
     subtitle B of title VI) for the State, adjusted--
       (A) to remove the effect of the adjustment described in 
     section 6101(b)(3), and
       (B) to take into account only the proportion of such 
     estimate that is attributable to the covered class (or 
     classes).
       (3) Applicable medicare limit.--The applicable medicare 
     limit specified in this paragraph is the sum of--
       (A) the maximum amount of payments that would be payable in 
     the State for the covered class (or classes) of services 
     under the medicare program if the state payment system were 
     not in effect, and
       (B) the maximum amount of payments that would be payable in 
     the State for the covered class (or classes) of services 
     under medicare part C if the state payment system were not in 
     effect.
       (4) Aggregate private sector expenditures defined.--In this 
     subtitle, the term ``aggregate private sector expenditures'' 
     means the product of--
       (A) the State private per capita expenditure estimate 
     (referred to in paragraph (2), subject to the adjustment 
     described in such paragraph) for the class (or classes) of 
     services covered under the system, and
       (B) the average number of residents of the State enrolled 
     in certified health plans.
       (5) Aggregate medicare expenditures defined.--In this 
     subtitle, the term ``aggregate medicare expenditures'' means 
     expenditures under the medicare program and medicare part C 
     for items and services included in the class (or classes) of 
     services covered under the system.
       (6) Waiver of aggregate expenditure test for years prior to 
     1997.--The aggregate expenditure test described in paragraph 
     (1) shall not apply with respect to a state payment system 
     for any year prior to 1997.
       (b) Annual Determination by Secretaries.--The Secretaries 
     shall jointly determine annually whether a state payment 
     system has met the tests described in subsection (a)(1) for 
     the most recent 3-year period, determined based on all 
     classes of services covered under the system.
       (c) Use of Medicare Savings.--
       (1) In general.--If the Secretaries jointly determine that 
     a state payment system under this subtitle has resulted in 
     medicare savings over a period of 3 consecutive years, in the 
     4th year there shall be paid to the State an amount equal to 
     the medicare savings in the first year of such 3-year period. 
     Such payments shall be made from the Federal Hospital 
     Insurance Trust Fund, the Federal Supplementary Medical 
     Insurance Trust Fund, Medicare Part C Trust Fund in such 
     amounts as reflects the medicare savings attributable to the 
     respective Trust Fund in such first year.
       (2) Definitions.--In this subsection:
       (A) The term ``medicare spending'' means, with respect to a 
     State in a year, aggregate medicare expenditures incurred 
     under the medicare program and medicare part C in the State 
     in the year.
       (B) The term ``baseline medicare spending'' means, with 
     respect to a State in a year, the amount of aggregate 
     medicare expenditures that the Secretaries jointly estimate 
     would have been incurred under the medicare program and 
     medicare part C in the State in the year if this subtitle did 
     not apply in the State.
       (C) The term ``medicare savings'' means, with respect to a 
     State in a year, the amount by which the baseline medicare 
     spending for the State in the year exceeds the medicare 
     spending for the State in the year.

     SEC. 4204. TERMINATION OF APPROVAL OF STATE SYSTEM.

       (a) In General.--Either of the Secretaries shall terminate 
     approval of a state payment system in accordance with this 
     section if such Secretary determines under section 4203(b) 
     that the State has not met the tests referred to in such 
     section.
       (b) Process.--
       (1) Notice.--Either of the Secretaries may terminate the 
     approval of a state payment system under this subtitle only 
     after the expiration of a 90-day period beginning on the date 
     such Secretary informs the State of such Secretary's 
     intention to terminate such approval, unless, during such 90-
     day period, the State requests a hearing with such Secretary.
       (2) Hearing.--If the State requests a hearing during the 
     90-day period described in paragraph (1), such Secretary 
     shall conduct a hearing during which the State may present 
     evidence showing that such Secretary should not terminate the 
     approval of its system. If such Secretary decides to reject 
     such evidence, such Secretary shall terminate the approval of 
     the State's system beginning with the first day of the first 
     month that begins after the date of such Secretary's 
     decision.
       (3) Judicial review prohibited.--There shall be no 
     administrative or judicial review of a decision by either of 
     the Secretaries with respect to the approval (or termination 
     of approval) of a state payment system under this subsection.
       (c) Adjustments to Recapture Excess Spending.--
       (1) Adjustment of maximum payment rates.--If either of the 
     Secretaries terminates the approval of a state payment system 
     under this section due to--
       (A) a failure to meet the test described in section 
     4203(a)(1)(A) (relating to aggregate private sector and 
     medicare expenditures), the maximum payment rates otherwise 
     established for services within the class (or classes) of 
     services under subtitle D of title VI shall be adjusted in 
     accordance with paragraph (2)(A), but only for that State; or
       (B) a failure to meet the test described in section 
     4203(a)(1)(B) (relating to aggregate medicare expenditures), 
     the payment rates otherwise established for items and 
     services within the class (or classes) of services under 
     subtitle C of title VIII shall be adjusted in accordance with 
     paragraph (2)(B), but only for that State.
       (2) Adjustments.--
       (A) In maximum payment rates for private sector 
     expenditures.--The adjustment described in this subparagraph 
     is such a reduction in the maximum payment rates for the 
     class (or classes) of services covered under the system as 
     such Secretary determines necessary to decrease--
       (i) the amount of aggregate private sector expenditures 
     that would otherwise be made for services provided in the 
     State, by
       (ii) the amount by which aggregate private sector 
     expenditures for such class (or classes) of services for the 
     3-year period involved exceeded the applicable private sector 
     limit specified in section 4203(a)(4) for such period.
       (B) In medicare payment rates.--The adjustment described in 
     this subparagraph for a State is such a reduction in the 
     applicable medicare payment rate for the class (or classes) 
     of services covered under the system as the Secretary 
     determines necessary to decrease--
       (i) the amount of aggregate medicare expenditures that 
     would otherwise be made for services provided in the State, 
     by
       (ii) the amount by which aggregate medicare expenditures 
     for such class (or classes) of services for the 3-year period 
     involved exceeded the applicable medicare limit specified in 
     section 4203(a)(3) for such period.
       (C) Period of adjustment.--The adjustments under 
     subparagraphs (A) and (B) shall be made--
       (i) during the year following the termination of the 
     system, or
       (ii) during each year in the 3-year period following the 
     termination, if such Secretary determines that a reduction 
     over such 3-year period is appropriate in the case of a 
     State.
        Subtitle D--General Rules, Coordination, and Transition

     SEC. 4301. PROCEDURES.

       The Secretaries shall prescribe by regulation a process for 
     coordinating the procedures of each such Secretary governing 
     submission, consideration, and determination of applications 
     for approval, ongoing reports, and termination procedures 
     under this title. Under such process, no approval of any 
     system or program under this title may apply to the portions 
     of a metropolitan statistical area which are located in the 
     counties of Monroe, Wayne, Ontario, and Livingston.

     SEC. 4302. AVAILABILITY OF PRIVATE RIGHT OF ACTION FOR 
                   AGGRIEVED INDIVIDUALS.

       (a) In General.--Any person aggrieved by an act or omission 
     of a State under this title which constitutes a failure to 
     comply with an applicable requirement of this title may 
     obtain from the State in any court of competent jurisdiction 
     appropriate relief, including actual and compensatory damages 
     and equitable relief.
       (b) Exception for Certain Violations.--Subsection (a) does 
     not apply in the case of an act or omission upon which a 
     complaint may be filed in a complaint review office pursuant 
     to section 9304 or for which a remedy may be sought under 
     section 9331.
       (c) Attorney's Fees and Costs.--In any action under this 
     section in which the plaintiff substantially prevails, the 
     court shall award the plaintiff reasonable attorney's fees 
     (at generally prevailing hourly rates), reasonable expert 
     witness fees, and other reasonable costs, unless the court 
     finds that such award would not be appropriate.
       (d) Exhaustion of Remedies.--In an action under subsection 
     (a), the court shall exercise jurisdiction without regard to 
     whether the aggrieved person has exhausted any administrative 
     or other remedies that may be provided by law.

     SEC. 4303. REFERENCES TO WAIVERS UNDER THE MEDICARE PROGRAMS.

       For waiver of certain provisions of the medicare program, 
     see section 1894 of the Social Security Act, as added by 
     section 8361 of this Act.

     SEC. 4304. EXEMPTIONS FROM ERISA PREEMPTION.

       For exemptions from preemption of State law, under the 
     Employee Retirement Income Security Act of 1974, see 
     paragraphs (9), (10), and (11) of section 514(b) of such Act, 
     as added by section 12004 of this Act.
                 TITLE V--HEALTH PLANS AND COOPERATIVES

                       table of contents of title

  Subtitle A--Standards for Carriers and Insured Health Benefit Plans

Sec. 5001. Requirements for certification of carriers and plans.
Sec. 5002. Nondiscrimination.
Sec. 5003. Open enrollment.
Sec. 5004. Prohibition on preexisting condition exclusions.
Sec. 5005. Prohibition against waiting periods.
Sec. 5006. Continuation of coverage requirements.
Sec. 5007. Benefit requirements.
Sec. 5008. Requirements relating to community rating of premiums.
Sec. 5009. Special requirements for managed care and point-of-service 
              plans.
Sec. 5010. Standards for marketing of health benefit plans.
Sec. 5011. Collection and dissemination of plan information.
Sec. 5012. Requirements for arrangements with essential community 
              providers.
Sec. 5013. Requirements relating to plan solvency.
Sec. 5014. Utilization review.
Sec. 5015. Acceptance of premium certificates.
Sec. 5016. Additional requirements for insured health benefit plans.

  Subtitle B--Standards for Sponsors and Self-Insured Health Benefit 
                                 Plans

                      Part 1--General Requirements

Sec. 5101. Requirement for certification of sponsors and plans.
Sec. 5102. Limitation on eligible sponsors.
Sec. 5103. Non-discrimination.
Sec. 5104. Requirements relating to enrollment.
Sec. 5105. Prohibition on pre-existing condition exclusions.
Sec. 5106. Prohibition on waiting periods.
Sec. 5107. Benefit requirements.
Sec. 5108. Requirements relating to rating of premiums.
Sec. 5109. Additional standards for managed care plans and point-of-
              service plans.
Sec. 5110. Provision of plan information.
Sec. 5111. Requirements for arrangements with essential community 
              providers.
Sec. 5112. Utilization review.
Sec. 5113. Acceptance of premium certificates.
Sec. 5114. Additional requirements for self-insured health benefit 
              plans.

             Part 2--Responsibilities Relating to Financing

Sec. 5121. Reserve requirements.
Sec. 5122. Trusteeship of insolvent plans by Secretary of Labor.
Sec. 5123. Provision of amounts due providers from insolvent plans.
Sec. 5124. Imposition and collection of periodic assessments on plan 
              sponsors.
Sec. 5125. Management of funds; relations with employees.

          Subtitle C--Standards for Supplemental Health Plans

Sec. 5201. Requirement for certification of carriers and policies.
Sec. 5202. Standardized benefits.
Sec. 5203. Requirements for offering of packages.
Sec. 5204. Non-discrimination requirements.
Sec. 5205. Open enrollment.
Sec. 5206. Prohibition on pre-existing condition exclusions.
Sec. 5207. Continuation of coverage requirement.
Sec. 5208. Community rating requirements.
Sec. 5209. Standards for marketing.

                      Subtitle D--Universal FEHBP

Sec. 5301. Purpose.
Sec. 5302. Contracts with carriers.
Sec. 5303. Eligibility.
Sec. 5304. Premiums for coverage.
Sec. 5305. General administrative provisions.
Sec. 5306. Universal FEHBP Health Benefits Fund.
Sec. 5307. Establishment of Office of Universal FEHBP.
Sec. 5308. Studies; annual report.

              Subtitle E--Consumer Purchasing Cooperatives

                    Part 1--Establishment by States

Sec. 5401. Establishment of cooperatives.
Sec. 5402. Designation of cooperative boundaries and service area.

                    Part 2--Governance Requirements

Sec. 5411. Board of Directors.
Sec. 5412. Provider advisory boards.

        Part 3--Responsibilities and Authorities of Cooperatives

Sec. 5421. Contracts with carriers.
Sec. 5422. Services for participants.
Sec. 5423. Requirements relating to collection of premiums and 
              accounting.
Sec. 5424. Cooperative fee.
Sec. 5425. Antidiscrimination.

     Part 4--Grants for Establishment and Operation of Cooperatives

Sec. 5431. Establishment of grant program.
Sec. 5432. Use of grant for participation of cooperative in capital 
              review program.
Sec. 5433. Authorization of appropriations.

                     Subtitle F--General Provisions

Sec. 5501. Establishment of Federal standards.
Sec. 5502. Enforcement through approved State programs.
Sec. 5503. Federal penalties.
Sec. 5504. Definitions.
Sec. 5505. Preemption of State law.
Sec. 5506. Construction of references.

               Subtitle G--Transitional Insurance Reforms

Sec. 5601. Establishment of standards.
Sec. 5602. Continuation of coverage.
Sec. 5603. Limits on pre-existing condition exclusions.
Sec. 5604. Premium changes to reflect changes in group or individual 
              characteristics or terms of coverage.
Sec. 5605. Limitations on changes in premiums for plans in individual 
              sector and small group sector related to increases in 
              health care costs and utilization.
Sec. 5606. More stringent State laws not preempted.
Sec. 5607. Limit on changes in self-insured health benefit plans.
Sec. 5608. Definitions.
Sec. 5609. Effective date.
  Subtitle A--Standards for Carriers and Insured Health Benefit Plans

     SEC. 5001. REQUIREMENTS FOR CERTIFICATION OF CARRIERS AND 
                   PLANS.

       (a) Certification Required for Carriers Providing Insured 
     Health Benefit Plans.--
       (1) In general.--No carrier may sell, issue, or renew a 
     contract under an insured health benefit plan (as defined in 
     section 5504) in a State, or sell, issue, or renew a contract 
     under a supplemental health benefit policy (as defined in 
     section 5504(11)) in a State, unless the carrier, in relation 
     to the plan, and the plan have been certified as meeting the 
     applicable standards established under section 5501 
     consistent with this subtitle--
       (A) by a State regulatory program of the State (approved 
     under section 5502), or
       (B) in the case of a State without such an approved 
     program, by the Secretary (in accordance with such procedures 
     as the Secretary establishes).
       (2) Plan disapproved.--If the applicable regulatory 
     authority determines that a carrier with respect to an 
     insured health benefit plan or a supplemental health benefit 
     policy does not meet the applicable standards of this 
     subtitle on or after the effective date described in 
     subsection (b), the carrier may not provide coverage under 
     the plan to individuals not enrolled as of the date of the 
     determination and may not continue to provide the plan for 
     plan years beginning after the date of such determination 
     until the authority determines that such carrier and plan are 
     in compliance with such standards.
       (3) Special rule for carriers offering plans in multi-State 
     metropolitan statistical areas.--In the case of a carrier 
     offering an insured health benefit plan in a portion of a 
     State that is located in a metropolitan statistical area, the 
     carrier may not sell, issue, or renew a contract under the 
     plan with respect to an individual or employer in such 
     metropolitan statistical area unless the carrier, in relation 
     to the plan, and the plan have been certified as meeting the 
     applicable standards established under section 5501 by the 
     State regulatory program of each State in which the 
     metropolitan statistical area is located. The Secretary may 
     waive the application of this paragraph to a carrier with 
     respect to a State with an approved single-payer system under 
     subtitle A of title IV, or under unusual circumstances.
       (b) Effective Date.--
       (1) In general.--Subsection (a) shall apply to contracts 
     under insured health benefit plans sold, issued, or renewed 
     on or after January 1, 1997.
       (2) Exception for plans offered in states requiring 
     legislation.--In the case of an insured health benefit plan 
     sold, issued, or renewed in a State which the Secretary 
     identifies, in consultation with the NAIC, as--
       (A) requiring State legislation (other than legislation 
     appropriating funds) in order for carriers and plans to meet 
     the requirements of this subtitle, but
       (B) having a legislature which is not scheduled to meet in 
     1996 in a legislative session in which such legislation may 
     be considered,
     the date specified in this subsection is January 1, 1998, or, 
     if earlier, the first day of the first calendar quarter 
     beginning after the close of the first legislative session of 
     the State legislature that begins on or after January 1, 
     1997. For purposes of the previous sentence, in the case of a 
     State that has a 2-year legislative session, each year of 
     such session shall be deemed to be a separate regular session 
     of the State legislature.

     SEC. 5002. NONDISCRIMINATION.

       (a) No Discrimination Based on Health Status.--A carrier 
     may not deny, limit, or condition the coverage under (or 
     benefits of) an insured health benefit plan based on the 
     health status, claims experience, receipt of health care, 
     medical history, or lack of evidence of insurability, of an 
     individual.
       (b) Other Discrimination Prohibited.--A carrier may not 
     engage in any activity in relation to an insured health 
     benefit plan offered in a market sector that directly or 
     through contractual arrangements would have the effect of 
     discriminating against an individual on the basis of race, 
     national origin, religion, gender, sexual orientation, 
     language, socioeconomic status, age, status of an eligible 
     individual as a citizen of the United States, health status, 
     or anticipated need for health services.

     SEC. 5003. OPEN ENROLLMENT.

       (a) Enrollment Requirements.--Subject to the succeeding 
     provisions of this section, a carrier that offers an insured 
     health benefit plan in a market sector to individuals 
     residing (or to employers located) in a community-rating area 
     (described in section 5008(c)) must offer the same plan to 
     any other resident of (or employer located in) such area who 
     is eligible to seek coverage through such a sector.
       (b) Enrollment Periods.--
       (1) In general.--Except as provided under paragraph (2), 
     the requirement described in subsection (a) shall apply on a 
     continuous, year-round basis.
       (2) Enrollment for individuals in community-rated market 
     sector.--With respect to eligible individuals seeking 
     enrollment in an insured health benefit plan offered in the 
     community-rated market sector who are seeking coverage on 
     behalf of themselves (and their dependents) and not seeking 
     coverage on the basis of employment or through a consumer 
     purchasing cooperative, the following rules apply:
       (A) Annual open enrollment period.--The State shall 
     establish an annual open enrollment period of at least 45 
     days during which a carrier may not refuse to enroll such 
     individuals. Before and during each such open enrollment 
     period, the carrier shall make public information on the 
     availability of coverage in the community-rated market sector 
     (in accordance with section 5010).
       (B) Continuous open enrollment for new market entrants.--A 
     carrier may not refuse to enroll such an individual who is 
     not enrolled in an insured health benefit plan offered in the 
     community-rated market sector.
       (C) Permitting change in plan.--
       (i) Grounds for change.--An individual may change the plan 
     under which the individual is provided coverage under an 
     insured health benefit plan--

       (I) during the individual's first year of coverage; or
       (II) for good cause during any year of the individual's 
     coverage (under procedures developed by the Secretary).

       (ii) Timing of change.--A change in plan described in 
     clause (i) shall be effective on the first day of the first 
     month beginning at least 45 days after the date the 
     individual provides notice to the carrier offering the plan 
     in which the individual seeks coverage.
       (D) Permitting continuous open enrollment.--Nothing in this 
     subparagraph may be construed to prohibit a carrier from 
     permitting enrollment of any individual at any other time, so 
     long as the carrier permits enrollment of any individual 
     eligible to enroll and does not discriminate among such 
     individuals in violation of section 5002.
       (3) Exception for years before 1999.--
       (A) Individuals.--Notwithstanding any other provision of 
     this title, during any year prior to 1999, a carrier offering 
     an insured health benefit plan offered in the community-rated 
     market sector may refuse to enroll an individual who seeks 
     coverage under the plan on behalf of the individual (and the 
     individual's dependents) and not seeking coverage on the 
     basis of employment or membership in a qualifying 
     association, or through a consumer purchasing cooperative, 
     except during an annual 30-day open enrollment period 
     established by the Secretary for States during which the plan 
     would be required to provide for enrollment of any such 
     eligible individual. Before and during such open enrollment 
     period, the carrier shall make public information on the 
     availability of coverage under such plans (in accordance with 
     section 5010).
       (B) Small employers.--Notwithstanding any other provision 
     of this title, during any year prior to 1999, a carrier may 
     refuse to provide coverage with respect to a small employer 
     through the community-rated market sector if the employer 
     does not meet standards of the carrier relating to the 
     minimum participation of employees of the employer in insured 
     health benefit plans offered through such sector (in 
     accordance with standards established by the Secretary), 
     except during the annual 30-day open enrollment period 
     described in subparagraph (A) during which the plan would be 
     required to provide for coverage with respect to any small 
     employer. Prior to and during such open enrollment period, 
     the carrier shall make public information on the availability 
     of coverage under such plans (in accordance with section 
     5010).
       (4) Exception for terminated plans.--A carrier may refuse 
     to enroll an individual in an insured health benefit plan 
     offered in a market sector if the carrier is terminating 
     enrollment in the plan pursuant to section 5006(c).
       (c) Special Rules for Plans Offered Through Qualifying 
     Associations.--
       (1) Offering of plans permitted.--Subject to paragraph (2), 
     a carrier may offer an insured health benefit plan through an 
     association that is a qualifying association defined in 
     subsection (e)(4).
       (2) Special rules for association plans.--With respect to 
     an insured health benefit plan offered by a carrier through a 
     qualifying association--
       (A) the carrier shall offer the same plan to all 
     individuals and employers eligible to seek coverage through 
     the community-rated sector; and
       (B) the carrier may not offer the plan to a large employer 
     seeking coverage through the association on behalf of its 
     employees.
       (3) Carriers that are qualifying associations.--In the case 
     of a qualifying association that--
       (A) is a religious fraternal organization, and
       (B) is a carrier (and was a carrier as of December 31, 
     1993),
     the association may limit enrollment in health plans it 
     offers as a carrier to members of the association.
       (d) Capacity Limitation.--
       (1) In general.--A carrier offering an insured health 
     benefit plan may apply to the applicable regulatory authority 
     to cease enrolling new employers or individuals in part or 
     all of the service area of the plan if it can demonstrate 
     that its financial or administrative capacity (or, in the 
     case of a staff model or dedicated group model health 
     maintenance organization, its service capacity) to serve 
     previously enrolled employers and individuals (and additional 
     individuals who will be expected to enroll because of 
     affiliation with such previously enrolled employers) will be 
     impaired if it is required to enroll new employers or 
     individuals.
       (2) Priorities in case of oversubscription.--
       (A) In general.--The applicable regulatory authority in a 
     State shall establish a method for establishing enrollment 
     priorities in the case of an insured health benefit plan 
     offered by a carrier that is permitted to limit enrollment 
     under this subsection. Except as provided in subparagraph 
     (B), such priorities shall not take into account personal 
     characteristics of potential enrollees, such as health 
     status, socioeconomic status, anticipated need for health 
     care, age, occupation, sexual orientation, race, sex, 
     national origin, or affiliation with any person or entity.
       (B) Priorities.--Such method shall provide that in the case 
     of such an oversubscribed plan--
       (i) individuals already enrolled in the plan are given 
     priority in continuing enrollment in the plan, and
       (ii) to the extent that other individuals may be enrolled, 
     such enrollment shall be in accordance with a method that 
     provides equal opportunity for all individuals who seek 
     enrollment during the same enrollment period, regardless of 
     when during the period the enrollment has been sought.
       (e) Market Sectors Described.--For purposes of this title, 
     each of the following is a separate market sector:
       (1) Community-rated market sector.--The community-rated 
     market sector, consisting of (subject to subsection (f))--
       (A) individuals seeking coverage on behalf of themselves 
     (and their dependents) and not seeking coverage on the basis 
     of employment or membership in a qualifying association, or 
     through a consumer purchasing cooperative; and
       (B) small employers seeking coverage on behalf of their 
     employees (and dependents) and on behalf of other individuals 
     on the basis of their employment (or similar business 
     relationship) with the employer and not seeking coverage on 
     the basis of membership in a qualifying association or 
     through a consumer purchasing cooperative.
       (2) Large group market sector.--The large group market 
     sector, consisting of eligible large group sponsors seeking 
     coverage on behalf of individuals eligible to seek coverage 
     through such sponsors.
       (3) Eligible large group sponsor defined.--In this section, 
     the term ``eligible large group sponsor'' means an eligible 
     sponsor described in section 5102(b).
       (4) Other definitions.--
       (A) Consumer purchasing cooperative.--The term ``consumer 
     purchasing cooperative'' means a cooperative described in 
     section subtitle E, without regard to whether or not a grant 
     is made under such subtitle for the area in which the 
     cooperative is established.
       (B) Employee including self-employed.--The term 
     ``employee'' includes, with respect to an employer that is a 
     self-employed individual, the self-employed individual.
       (C) Large employer.--The term ``large employer'' has the 
     meaning given such term in section 1106(b)(1)(A).
       (D) Qualifying association.--The term ``qualifying 
     association'' means an association, religious fraternal 
     organization, or other organization (which may be a trade, 
     industry, or professional association, a chamber of commerce, 
     or a public entity association) that the Secretary finds--
       (i) has been formed for purposes other than the sale of 
     health insurance and does not restrict membership based on 
     any characteristic described in section 5002(a),
       (ii) does not exist solely or principally for the purpose 
     of selling insurance,
       (iii) has at least 1,000 individual members or 200 employer 
     members,
       (iv) offered a health benefit plan as of December 31, 1993,
       (v) any health benefit plan it offers to its members is 
     made available consistent with the requirements of section 
     5002(a), and
       (vi) any health benefit plan it offers to its members is 
     not made available to any eligible large group sponsor 
     described in paragraph (3).
     Such term includes a subsidiary or corporation that is wholly 
     owned by one or more qualifying organizations.
       (E) Small employer.--The term ``small employer'' means an 
     employer that is not a large employer and employs at least 2 
     employees.
       (f) Certain Individuals Not Included in Community-Rated 
     Market Sector.--The following individuals are not included in 
     the community-rated market sector under subsection (e)(1):
       (1) Medicare eligible individuals.--
       (A) In general.--Subject to subparagraph (B), an individual 
     who is entitled to benefits or enrolled under part A of title 
     XVIII of the Social Security Act.
       (B) Exception where medicare secondary payer.--Subparagraph 
     (A) shall not apply to an individual if the certified health 
     plan in which the individual enrolls (or will be enrolled) 
     under this subtitle is (or would be) a primary plan (as 
     defined in section 1862(b)(2)(A) of the Social Security Act) 
     with respect to the individual.
       (2) Enrolled as a dependent.--An individual who is enrolled 
     under another health plan as a dependent of an individual.
       (3) Special requirement for medicaid-eligible 
     individuals.--An individual who is entitled to benefits with 
     respect to the guaranteed national benefit package under a 
     State medicaid plan under title XIX of the Social Security 
     Act.
       (4) Full-time employee of small employers enrolled in 
     medicare part c.--An individual who is a medicare part C 
     covered employee and who is a full-time employee of an 
     employer who is not a large employer.

     SEC. 5004. PROHIBITION ON PREEXISTING CONDITION EXCLUSIONS.

       (a) In General.--A carrier may not exclude or limit 
     coverage under an insured health benefit plan with respect to 
     services covered under the plan related to treatment of a 
     preexisting condition.
       (b) Transition for Years Prior to 1999.--
       (1) In general.--Subject to the succeeding provisions of 
     this subsection, a carrier providing an insured health 
     benefit plan may exclude coverage with respect to services 
     related to treatment of a preexisting condition, but the 
     period of such exclusion may not exceed 6 months and such 
     exclusion shall not apply with respect to services furnished 
     to newborns, pregnancy-related services, or to a plan for 
     which such exclusion did not apply as of the effective date 
     of subtitle F.
       (2) Crediting of previous coverage.--
       (A) In general.--A carrier providing an insured health 
     benefit plan shall provide that if an individual covered 
     under such a plan is in a period of continuous coverage (as 
     defined in subparagraph (B)(i)) with respect to particular 
     services as of the date of initial coverage under such plan, 
     any period of exclusion of coverage with respect to a 
     preexisting condition for such services or type of services 
     shall be reduced by 1 month for each month in the period of 
     continuous coverage.
       (B) Definitions.--As used in this paragraph:
       (i) Period of continuous coverage.--The term ``period of 
     continuous coverage'' means, with respect to particular 
     services, the period beginning on the date an individual is 
     enrolled under a health benefit plan, the medicare program, a 
     State medicaid plan, or other health benefit arrangement 
     which provides benefits with respect to the same or 
     substantially similar services (as determined in accordance 
     with criteria established by the Secretary) and ends on the 
     date the individual is not so enrolled for a continuous 
     period of more than 3 months (or for a longer period with 
     respect to individuals who lose employment and meet such 
     other conditions as the Secretary may specify).
       (ii) Preexisting condition.--The term ``preexisting 
     condition'' means, with respect to coverage under a health 
     benefit plan, a condition which has been diagnosed or treated 
     during the 6-month period ending on the day before the first 
     date of such coverage (without regard to any waiting period).

     SEC. 5005. PROHIBITION AGAINST WAITING PERIODS.

       (a) In General.--Except as otherwise provided in this 
     section, a carrier shall provide coverage of an individual 
     under an insured health benefit plan as of the first day of 
     the month following the month of enrollment. A carrier may 
     not impose any waiting period on an enrollee before providing 
     coverage under an insured health benefit plan.
       (b) Coverage After Enrollment During Annual Open Enrollment 
     Period.--In the case of an individual who enrolls in an 
     insured health benefit plan during an open enrollment period 
     described in section 5003(b)(3)(A), the carrier shall provide 
     coverage of the individual under the plan effective as of 
     such date as the Secretary may establish with respect to 
     enrollments made during such period.

     SEC. 5006. CONTINUATION OF COVERAGE REQUIREMENTS.

       (a) In General.--A carrier may not refuse to enroll, refuse 
     to renew the enrollment of, or terminate the enrollment of, 
     an individual or employer in an insured health benefit plan 
     except for--
       (1) nonpayment of premiums, or
       (2) fraud or misrepresentation of material fact.
       (b) Transition for Nonconforming Policies.--Notwithstanding 
     State law or the provision of any agreement to the contrary, 
     effective January 1, 1999, a carrier may cancel or refuse to 
     renew a health insurance policy issued in a State prior to 
     the application of this part to health benefit plans sold or 
     issued in the State if the policy does not provide for 
     coverage of the guaranteed national benefit package, but only 
     if the carrier offers the policyholder affected the 
     opportunity to obtain coverage under an insured health 
     benefit plan meeting the standards established under this 
     part.
       (c) Exception for Plans Exiting Market.--
       (1) In general.--A carrier may refuse to renew the 
     enrollment of, or terminate the enrollment of, an individual 
     or employer in an insured health benefit plan offered in a 
     market sector if--
       (A) the carrier is terminating the enrollment of all 
     individuals in such plan with the approval of the applicable 
     regulatory authority, or
       (B) the carrier is terminating the plan pursuant to a joint 
     marketing agreement entered into prior to January 1, 1994.
       (2) Limitation on offering of other plans in market 
     sector.--If a carrier terminates the enrollment of 
     individuals in a plan offered in a market sector pursuant to 
     paragraph (1) in a State, the carrier may not offer a plan 
     (that is the same type as the type of plan terminated) in the 
     market sector to individuals or employers in the State until 
     the expiration of the 5-year period that begins on the date 
     that no individual is enrolled in the plan in the State.

     SEC. 5007. BENEFIT REQUIREMENTS.

       (a) Requiring Offer of Plan Consisting of Guaranteed 
     National Benefit Package.--
       (1) In general.--Each carrier that offers an insured health 
     benefit plan shall offer such a plan that only includes 
     coverage for the benefits contained in the guaranteed 
     national benefit package. A carrier may offer a plan within 
     each type of plan within each market sector.
       (2) Limitation on offering of high deductible plans.--A 
     carrier may not offer an insured health benefit plan that is 
     a high deductible plan other than to an employer who 
     demonstrates that the employer is making contributions to 
     medical savings accounts in accordance with section 
     3466(d)(2)(C)(i) of the Internal Revenue Code of 1986.
       (b) Preemption of State Laws Requiring Plans to Cover 
     Additional Benefits.--Subsection (a)(1) shall preempt any 
     State law requiring a carrier to include in an insured health 
     benefit plan coverage for any benefit not contained in the 
     guaranteed national benefit package.
       (c) Special Rule for Enrollees Covered Under Managed Mental 
     Health Programs.--
       (1) Payment to state of capitated payment.--In the case of 
     an individual enrolled in an insured health benefit plan who 
     is enrolled in a managed mental health program of a State or 
     an Indian tribe or tribal organization approved under section 
     1981 of the Public Health Service Act for a month--
       (A) the individual is considered to have waived the right 
     to benefits for mental health services through the plan in 
     consideration of receipt of benefits for mental health 
     services through such program;
       (B) the carrier providing the plan shall make a per capita 
     payment to the State or Indian tribe or tribal organization, 
     in the amount specified in paragraph (2), on behalf of the 
     individual; and
       (C) the carrier is not obligated to make any other payment 
     under the plan with respect to mental health services 
     furnished to the individual during the month.
     Payments under subparagraph (B) shall be made on a monthly 
     basis.
       (2) Capitated payment amounts.--The amount of the per 
     capita payment required under paragraph (1) shall be an 
     amount determined in accordance with a methodology 
     established by the Secretary (similar to the methodology used 
     under section 1893(b) to determine capitated payments to 
     States and Indian tribes or tribal organizations on behalf of 
     medicare beneficiaries enrolled in such programs) that 
     reflects the portion of the premium associated with the 
     coverage of mental health services under the guaranteed 
     national benefit package that would be provided to the 
     individual under the plan if the individual were not enrolled 
     in the managed mental health program.
       (3) Mental health services described.--In this subsection, 
     the term `mental health services' has the meaning given such 
     term in section 1893(c) of the Social Security Act.
       (d) Special Requirements Relating to Prescription Drugs.--
     With respect to outpatient prescription drugs covered under 
     an insured health benefit plan, the plan may subject the 
     coverage of the drug to prospective review, prior 
     authorization, or drug use review, but only if such review or 
     authorization is conducted in the same manner and under the 
     same terms as provided under section 1834(d)(6) of the Social 
     Security Act.

     SEC. 5008. REQUIREMENTS RELATING TO COMMUNITY RATING OF 
                   PREMIUMS.

       (a) Rating Requirement.--Subject to subsections (b) and 
     (e), the premium rate charged by a carrier for a type of 
     insured health benefit plan in a community-rating area (as 
     specified under subsection (c)) within the community-rated 
     market sector shall not vary except by class of enrollment in 
     accordance with subsection (d).
       (b) Transition.--
       (1) General transition.--Except in the case of a State 
     described in paragraph (2):
       (A) First year.--In the first year for which this part 
     applies to a carrier in a State, the premium rate charged by 
     the carrier for an insured health benefit plan providing the 
     guaranteed national benefit package in a community-rating 
     area may vary within a class of enrollment so long as the 
     premium range percentage (as defined in paragraph (3)) does 
     not exceed \2/3\ of the premium range percentage of premium 
     rates charged by the carrier for insured health benefit plans 
     providing similar benefits in the community-rating area in 
     the previous year.
       (B) Second year.--In the second year for which this part 
     applies to a carrier in a State, the premium rate charged by 
     the carrier for an insured health benefit plan providing the 
     guaranteed national benefit package in a community-rating 
     area may vary within a class of enrollment so long as the 
     premium range percentage does not exceed \1/2\ of the maximum 
     premium range percentage permitted under paragraph (1) for 
     the previous year.
       (2) Special transition for states subject to delayed 
     implementation.--In the case of a State described in section 
     5001(b)(2), in the first year for which this part applies to 
     a carrier in the State, the premium rate charged by the 
     carrier for an insured health benefit plan providing the 
     guaranteed national benefit package in a community-rating 
     area may vary within a class of enrollment so long as the 
     premium range percentage (as defined in paragraph (3)) does 
     not exceed \1/2\ of the premium range percentage of premium 
     rates charged by the carrier for insured health benefit plans 
     providing similar benefits in the community-rating area in 
     the previous year.
       (3) Premium range percentage defined.--In this subsection, 
     the term ``premium range percentage'' means--
       (A) the highest premium rate minus the lowest premium rate, 
     divided by
       (B) the lowest premium rate,
     expressed as a percentage.
       (4) Permissible variation.--Section 5002(a) and 5002(b) 
     (insofar as such sections relate to age, health status, or 
     anticipated need for health services) shall not apply to 
     variations in premiums permitted under this subsection.
       (5) No transition permitted after 1998.--In no event may 
     any variation in premiums be permitted pursuant to this 
     subsection after December 31, 1998.
       (c) Specification of Community-Rating Area.--
       (1) In general.--For purposes of this section, a community-
     rating area shall be determined consistent with this 
     subsection.
       (2) No splitting of msa.--The entire part of a metropolitan 
     statistical area shall be in the same community-rating area.
       (3) Treatment of non-msa.--
       (A) In general.--Except as provided in subparagraph (B), 
     all portions of a State that are outside a metropolitan 
     statistical area shall be in a single community-rating area.
       (B) State may divide.--A State may divide the portions of a 
     State that are outside a metropolitan statistical area into 
     more than one community-rating area.
       (4) No overlapping areas permitted.--No portion of a State 
     may be in more than one community-rating area.
       (5) Special rule.--Notwithstanding paragraph (2), the State 
     of New York shall define a community-rating area to be the 
     same area as an area defined (as of August 1, 1994) pursuant 
     to section 4317 of the Insurance Law of the State of New 
     York.
       (d) Charging Rates by Class of Enrollment.--
       (1) In general.--Each carrier shall establish separate 
     premium rates for each of the three classes of enrollment 
     described in section 3(b) for each market sector (including 
     the large employer market sector).
       (2) Variations only by actuarial value.--The differences 
     among such rates for an insured health benefit plan shall 
     reflect only differences in the actuarial value of the 
     guaranteed national benefit package among the classes of 
     enrollment, consistent with standards established by the 
     Secretary.
       (e) Risk Adjustment.--
       (1) Development of models by secretary.--
       (A) In general.--The Secretary shall develop one or more 
     model risk adjustment systems under which premiums applicable 
     to insured health plans offered by carriers in the community-
     rated market sector would be adjusted to take into account 
     such factors as the Secretary considers appropriate to 
     predict the future need and use of services by individuals 
     enrolled in such plans, which may include--
       (i) the age, gender, geographic residence, health status, 
     socioeconomic status, or other demographic characteristics of 
     individuals enrolled in such plans; and
       (ii) the proportion of individuals enrolled in such plans 
     who are AFDC recipients (as defined in section 2(1)) or SSI 
     recipients (as defined in section 2(11)).
       (B) Updating models.--The Secretary may periodically modify 
     the model risk adjustment systems developed under 
     subparagraph (A) as the Secretary considers appropriate.
       (C) Adjustment for pediatric risk factors.--In addition to 
     the risk adjustment methodology developed under subparagraph 
     (A), the Secretary shall develop such a model methodology for 
     pediatric risk factors, based on factors that predict solely 
     the future need and use of health services by children 
     enrolled in health benefit plans.
       (2) Application of methodology to plans.--The State shall 
     require carriers providing insured health plans in the State 
     in the community-rated market sector to meet the requirements 
     of one of the model risk adjustment systems developed by the 
     Secretary under paragraph (1)(A), or the requirements of an 
     alternative system adopted by the State and approved by the 
     Secretary.
       (f) Extension of Community Rates to Large Group Market 
     Sector.--Nothing in this section shall be construed to 
     prohibit a carrier from offering a plan in the large group 
     market sector at the rate applicable to the plan in the 
     community-rated market sector.

     SEC. 5009. SPECIAL REQUIREMENTS FOR MANAGED CARE AND POINT-
                   OF-SERVICE PLANS.

       (a) In General.--The additional requirements of this 
     section shall apply--
       (1) in the case of a managed care plan; and
       (2) with respect to the furnishing of items and services 
     through a provider network of a point-of-service plan.
       (b) Arrangements With Providers.--
       (1) In general.--The carrier shall enter into such 
     agreements with health care providers (including primary and 
     specialty providers for children) or have such other 
     arrangements as may be necessary to assure that individuals 
     enrolled with the plan have reasonably prompt access to all 
     items and services contained in the guaranteed national 
     benefit package (including access to services on a 24-hour 
     basis where medically necessary), in a manner that assures 
     the continuity of the provision of such items and services.
       (2) Provision of physicians' services.--In the case of a 
     managed care plan, the plan provides for coverage of 
     physicians' services primarily--
       (A) directly through physicians who are either employees or 
     partners of the carrier offering the plan; or
       (B) through contracts with individual physicians or one or 
     more groups of physicians (organized on a group practice or 
     individual practice basis).
       (3) Access to centers of excellence.--
       (A) In general.--The carrier shall demonstrate that 
     individuals enrolled in a plan (including individuals with 
     acute life-threatening and chronic diseases) have access 
     through the plan's provider network to specialized treatment 
     expertise of designated centers of excellence. The carrier 
     shall demonstrate such access according to standards 
     developed by the Secretary, including requirements relating 
     to plan arrangements with such centers and plan referral of 
     patients to such centers.
       (B) Designation process for centers of excellence.--The 
     Secretary shall establish a process for the designation of 
     facilities as centers of excellence for purposes of this 
     paragraph. Such process may include the use of treatment 
     outcomes data.
       (C) Requirements for designation.--A facility may not be 
     designated pursuant to subparagraph (B) unless the facility 
     is determined--
       (i) to provide specialty care,
       (ii) to deliver care for complex cases requiring 
     specialized treatment and for individuals with acute life-
     threatening or chronic diseases, and
       (iii) to meet any other requirements that shall be 
     established by the Secretary relating to specialized 
     education and training of health professionals, participation 
     in peer-reviewed research or clinical trials, or treatment of 
     patients from outside the geographic area of the facility.
       (4) No referral required for obstetrics and gynecology.--A 
     carrier may not require an individual to obtain a referral in 
     order to obtain covered items and services from a physician 
     who specializes in obstetrics and gynecology.
       (5) Protections for individuals with disabilities.--A 
     carrier take such measures as may be necessary to ensure the 
     provision of covered items and services for individuals with 
     disabilities, including such measures as may be necessary to 
     ensure access to centers of excellence and essential 
     community providers.
       (c) Provision of Emergency and Urgent Care Services.--
       (1) In general.--The plan must cover medically necessary 
     emergency and urgent care services provided to enrollees 
     (including trauma services provided by designated trauma 
     centers), without regard to whether or not the provider 
     furnishing such services has a contractual (or other) 
     arrangement with the plan to provide items or services to 
     enrollees of the plan and, in the case of services furnished 
     for the treatment of an emergency medical condition (as 
     defined in section 1867(e)(1) of the Social Security Act), 
     without regard to prior authorization.
       (2) Designated trauma centers defined.--In paragraph (1), 
     the term ``designated trauma center''--
       (A) has the meaning given such term in section 1231 of the 
     Public Health Service Act, and
       (B) includes (for years prior to 2001) a trauma center 
     that--
       (i) is located in a State that has not designated trauma 
     centers under section 1213 of such Act, and
       (ii) the Secretary finds meets the standards under such 
     section to be a designated trauma center.
       (d) Standards Relating to Provider Networks.--
       (1) Limitations on ability to exclude providers from 
     network.--
       (A) In general.--Except as provided in subparagraph (C), a 
     carrier offering an insured health plan may not exclude from 
     the provider network of the plan any provider of covered 
     items or services (including a nonphysician provider) who is 
     willing to accept the terms for participation in the network, 
     including terms relating to the schedule of fees, covered 
     expenses, and quality standards.
       (B) Construction.--Nothing in this section may be construed 
     to prohibit a carrier from carrying out any of the following 
     activities with respect to providers who are members of a 
     plan's provider network:
       (i) Instituting criteria for the credentialing of 
     providers.
       (ii) Requiring providers to accept discounts in fees.
       (iii) Matching the availability of providers with the needs 
     of individuals enrolled in the plan.
       (iv) Establishing measures to maintain quality and control 
     costs.
       (C) Exception for dedicated group and staff model health 
     maintenance organizations.--Subparagraph (A) shall not apply 
     with respect to a managed care plan that is a health 
     maintenance organization if the organization--
       (i) is treated as described in section 501(c)(3) of the 
     Internal Revenue Code of 1986 pursuant to section 501(n)(2) 
     of such Code, or
       (ii) is not so treated but substantially all of its primary 
     care health services are provided by the organization to its 
     members at its own facilities through health care 
     professionals who do not provide substantial health care 
     services other than on behalf of such organization.
       (2) Due process protections for providers.--
       (A) Standards for selection of providers for network.--
       (i) Establishment.--The carrier shall establish standards 
     to be used by the carrier for contracting with health care 
     providers with respect the plan's provider network. Such 
     standards shall be established in consultation with providers 
     who are members of the network.
       (ii) Distribution of information.--Descriptive information 
     regarding these standards shall be made available to 
     enrollees, providers who are members of the network, and 
     prospective enrollees and prospective participating 
     providers.
       (B) Notice requirement.--
       (i) In general.--The carrier may not terminate or refuse to 
     renew an agreement with a provider to participate in the 
     plan's provider network unless the carrier provides written 
     notification to the provider of the carrier's decision to 
     terminate or refuse to renew the agreement. The notification 
     shall include a statement of the reasons for the carrier's 
     decision, consistent with the standards established under 
     subparagraph (A).
       (ii) Timing of notification.--The carrier shall provide the 
     notification required under clause (i) at least 60 days prior 
     to prior to the effective date of the termination or 
     expiration of the agreement (whichever is applicable). The 
     previous sentence shall not apply if failure to terminate the 
     agreement prior to the deadline would adversely affect the 
     health or safety of an individual enrolled with the plan.
       (C) Review process.--
       (i) In general.--The carrier shall provide a process under 
     which the provider may request a review of the carrier's 
     decision to terminate or refuse to renew the provider's 
     participation agreement. Such review shall be conducted by a 
     group of individuals the majority of whom are health care 
     providers who are members of the plan's provider network or 
     employees of the carrier, and who are members of the same 
     profession as the provider who requests the review.
       (ii) Counsel.--If the provider requests in advance, the 
     carrier shall permit an attorney representing the provider to 
     be present at the provider's review.
       (iii) Review advisory.--The findings and conclusions of a 
     review under this subparagraph shall be advisory and 
     nonbinding.
       (D) Construction.--Nothing in this paragraph shall be 
     construed to affect any other provision of law that provides 
     an appeals process or other form of relief to a provider of 
     health care services.
       (3) Development of medical policies.--The carrier shall 
     consult with physicians who are members of the plan's network 
     in the development of the plan's medical policy, quality and 
     credentialing criteria, and medical management procedures.

     SEC. 5010. STANDARDS FOR MARKETING OF HEALTH BENEFIT PLANS.

       (a) Marketing Restrictions on Carriers.--
       (1) In general.--Each carrier--
       (A) shall file any marketing materials for insured health 
     benefit plans it provides for approval by the applicable 
     regulatory authority prior to distributing them within the 
     plan's service area;
       (B) may not distribute any such materials that have not 
     been previously approved by such authority, and
       (C) shall comply with such other requirements as the 
     Secretary may impose, including requirements to assure that 
     marketing materials do not include false or materially 
     misleading information and other requirements designed to 
     inappropriate marketing practices, including abusive 
     enrollment procedures.
       (2) Restriction on use of marketing materials.--All such 
     approved marketing materials--
       (A) shall be made available uniformly to all individuals 
     eligible to enroll in plans of the carrier pursuant to 
     section 5003, and
       (B) may not be used to attract or limit enrollment of 
     certain individuals or groups on the basis of personal 
     characteristics or anticipated need for health services.
       (3) Prohibition of tie-ins.--A carrier may not seek to 
     influence an individual's choice to enroll in a health 
     benefit plan in conjunction with the offering or sale of any 
     other product. The Secretary may establish rules to carry out 
     this paragraph.
       (b) Nondiscrimination in Agent Compensation.--A carrier--
       (1) may not vary or condition the compensation provided to 
     an agent or broker related to the sale or renewal of an 
     insured health benefit plan because of the health status or 
     claims experience of any individuals enrolled with the 
     carrier through the agent or broker; and
       (2) may not terminate, fail to renew, or limit its contract 
     or agreement of representation with an agent or broker for 
     any reason related to the health status or claims experience 
     of any individuals enrolled with the carrier through the 
     agent or broker.
       (c) Construction.--Nothing in this subtitle (other than 
     subsection (b)) may be construed to permit a State (including 
     the enrollment assistance program established in the State 
     under section 5011(b)) or a consumer purchasing cooperative 
     to restrict the ability of a carrier to contract with an 
     agent or broker for the sale of an insured health plan 
     offered by the carrier.

     SEC. 5011. COLLECTION AND DISSEMINATION OF PLAN INFORMATION.

       (a) Provision of Information by Carriers.--A carrier 
     providing an insured health benefit plan in a State shall 
     provide to the applicable regulatory authority information 
     requested by the State to disseminate under this section.
       (b) Enrollment Assistance Program.--Each applicable 
     regulatory mechanism in a State shall establish and operate 
     an enrollment assistance program which--
       (1) provides for enrollment assistance with respect to all 
     insured health benefit plans offered in the community-rated 
     market sector in the State;
       (1) provides for sites that are readily available to 
     individuals and employers eligible to seek coverage through 
     plans in such areas and that are not controlled by any 
     carrier (or group or association of carriers), and
       (3) must be coordinated with the preparation and provision 
     of annual information on insured health benefit plans under 
     subsection (c).
       (c) Providing Annual Information on Insured Health Benefit 
     Plans.--
       (1) In general.--Each applicable regulatory authority in a 
     State shall annually prepare and make available to consumers, 
     in a uniform format, information on insured health benefit 
     plans sold in the State.
       (2) Information described.--Such information shall include 
     summary information--
       (A) for each plan, on--
       (i) the premium for the plan and the 3-year rate of 
     increase in such premium,
       (ii) identity, location, qualifications and availability of 
     providers in any provider networks of the plan, including the 
     ratio of primary care providers to enrollees during the 
     previous year,
       (iii) the number of individuals enrolling and disenrolling 
     from the plan in the previous year,
       (iv) procedures used by the plan to control utilization of 
     services and expenditures,
       (v) procedures used by the plan to assure quality of care,
       (vi) the plan's loss ratio, and
       (vii) rights and responsibilities of enrollees, including 
     rights described in title IX;
       (B) in addition, for each managed care plan, on--
       (i) restrictions on payment for services provided outside 
     the plan's provider network,
       (ii) the process by which services may be obtained through 
     the plan's provider network,
       (iii) coverage for out-of-area services, and
       (iv) any exclusions in the types of providers participating 
     in the plan's provider network;
       (C) the means by which individuals may contact the Consumer 
     Health Advocacy Office available for consumers in the State 
     (as established under part O of title III of the Public 
     Health Service Act, as added by title VII); and
       (D) such other information as the Secretary may require.
       (3) Dissemination of information.--Carriers, agents, and 
     brokers shall provide the information described in this 
     subsection to individuals and employers seeking to purchase 
     health coverage.
       (d) Disclosure of Utilization Review and Quality 
     Standards.--Upon the request of any individual with respect 
     to an insured health plan offered in the State, the State 
     shall make available information on--
       (1) procedures used by the plan to control utilization of 
     services and expenditures, and
       (2) procedures used by the plan to assure quality of care.

     SEC. 5012. REQUIREMENTS FOR ARRANGEMENTS WITH ESSENTIAL 
                   COMMUNITY PROVIDERS.

       (a) In General.--
       (1) Agreements required.--Each carrier providing an insured 
     health benefit plan shall, with respect to each essential 
     community provider (as defined in subsection (c)) located 
     within the plan's service area (except as provided in 
     paragraph (2)), offer to enter into a written provider 
     participation agreement (described in subsection (b)) with 
     any such provider who is willing to accept the generally 
     applicable terms for participation, including terms relating 
     to the schedule of fees, covered expenses, and quality 
     standards.
       (2) Exception for agreements between certain health 
     maintenance organizations and hospitals.--Paragraph (1) shall 
     not apply with respect to any essential community provider 
     that is a hospital in the case of an insured health benefit 
     plan described as follows:
       (A) The plan is a managed care plan that is a dedicated 
     group or staff model health maintenance organization (as 
     described in section 5009(d)(1)(C)) and is treated as 
     described in section 501(c)(3) of the Internal Revenue Code 
     of 1986 pursuant to section 501(n)(2) of such Code.
       (B) The hospitals through which the plan provides services 
     to its enrollees are owned and operated by the plan, or owned 
     and operated by an organization that shares common ownership 
     and control with the plan.
       (b) Participation Agreement.--A participation agreement 
     between a carrier and an essential community provider under 
     this subsection shall provide that the plan agrees to treat 
     the provider in accordance with terms and conditions at least 
     as favorable as those that are applicable to other providers 
     with a participation agreement with the plan with respect to 
     each of the following:
       (1) The scope of items and services for which payment is 
     made by the plan to the provider.
       (2) The rate of payment for covered care and services.
       (3) The applicability of financial incentives to 
     participating providers.
       (4) Limitations on financial risk provided to other 
     participating providers.
       (5) Assignment of enrollees to participating providers.
       (c) Essential Community Providers Described.--In this 
     section, an ``essential community provider'' means any of the 
     following:
       (1) Certain medicare disproportionate share hospitals.--A 
     hospital--
       (A) described in section 1886(d)(5)(F)(i)(II) of the Social 
     Security Act;
       (B) described in section 1886(d)(5)(F)(iv)(I) of such Act 
     with a disproportionate patient percentage (as defined in 
     section 1886(d)(5)(F)(vi) of such Act) greater than 20.2; or
       (C) that would be described in subparagraph (A) or (B) if--
       (i) the hospital were a subsection (d) hospital (as defined 
     in section 1886(d)(1)(B) of such Act), or
       (ii) in the case of a hospital whose inpatients are 
     predominantly individuals under 18 years of age, if the 
     hospital were a subsection (d) hospital with more than 100 
     beds.
       (2) Designated cancer hospitals.--A hospital that the 
     Secretary has classified as a hospital involved extensively 
     in treatment for or research on cancer, as described in 
     section 1886(d)(1)(B)(v) of such Act.
       (3) Sole community hospitals.--A sole community hospital 
     (as described in section 1886(d)(5)(D)(iii) of such Act).
       (4) Medicare-dependent, small rural hospitals.--A medicare-
     dependent, small rural hospital (as described in section 
     1886(d)(5)(G)(iii) of such Act), or a hospital that would be 
     a medicare-dependent, small rural hospital if the hospital 
     were a subsection (d) hospital (as defined in section 
     1886(d)(1)(B) of such Act).
       (5) Federally qualified health centers.--A Federally 
     qualified health center (as defined in section 1905(l)(2)(B) 
     of such Act) or an entity that would be such a center but for 
     its failure to meet the requirement described in section 
     329(f)(2)(G)(i) of the Public Health Service Act or the 
     requirement described in section 330(e)(3)(G)(i) of such Act 
     (relating to the composition of the entity's governing 
     board).
       (6) Rural health clinics.--A rural health clinic (as 
     defined in section 1861(aa)(2) of the Social Security Act).
       (7) Family planning clinics.--A family planning project 
     receiving funds under title X of the Public Health Service 
     Act (or receiving funds from a State pursuant to such title) 
     or receiving funds under title V or XX of the Social Security 
     Act (or receiving funds from a State pursuant to such a 
     title).
       (8) Certain diagnostic and treatment centers.--A nonprofit 
     center or clinic that is licensed under a State law in effect 
     as of January 1, 1994, as a diagnostic and treatment center 
     which provides primary care services (including obstetric and 
     gynecology services) in an area--
       (A) designated by the Secretary as a health professional 
     shortage area under section 332(a)(1)(A) of the Public Health 
     Service Act, or
       (B) with a significant number of individuals who are 
     members of a medically underserved population designated by 
     the Secretary under section 330 of such Act.
       (9) Local health departments.--A health department of a 
     unit of State or local government which provides health 
     services directly to individuals.
       (10) Providers serving underserved areas.--
       (A) In general.--Any provider of health care services who 
     meets the requirement of subparagraph (B) (if applicable) and 
     is described as follows (in accordance with certification 
     standards of the Secretary):
       (i) The provider furnishes services not less than 20 hours 
     per week--

       (I) in an area designated by the Secretary as a health 
     professional shortage area under section 332(a)(1)(A) of the 
     Public Health Service Act, or
       (II) in an area with a significant number of individuals 
     who are members of a medically underserved population 
     designated by the Secretary under section 330 of such Act.

       (ii) The provider--

       (I) serves for at least 20 hours per week at the principal 
     site in a neighborhood or community in which persons reside 
     who are at risk of being medically underserved (in accordance 
     with criteria established by the Secretary), and
       (II) is available to patients evenings and weekends at the 
     principal site.

       (B) Requirement for physicians.--In the case of an 
     individual provider who is a physician, the provider must be 
     board certified, hold hospital staff privileges, or be 
     affiliated with one or more physicians holding hospital staff 
     privileges.
       (11) Indian health facilities.--A health program of the 
     Indian Health Service electing treatment as an essential 
     community provider under section 903(c) of the Indian Health 
     Care Improvement Act.
       (12) Certain providers of services for hiv.--Any public or 
     private nonprofit entity receiving funds from a State or unit 
     of local government pursuant to title XXVI of the Public 
     Health Service Act that the Secretary determines provides 
     primary care services, or any entity receiving a grant under 
     subpart 2 of part C of such title.
       (13) Provider of school health services.--A provider of 
     school health services that is eligible to receive funds 
     under subtitle D of title VII, without regard to whether the 
     provider receives such funds, but only with respect to 
     services for which the provider may receive funding under 
     such subtitle.
       (14) Native hawaiian health centers.--A Native Hawaiian 
     Health Center (as defined in section 8(4) of the Native 
     Hawaiian Health Care Act of 1988).
       (15) Rural primary care hospital.--A rural primary care 
     hospital (as designated by the Secretary under section 
     1820(i)(2)).
       (16) Residential treatment programs for pregnant women.--A 
     program receiving a grant under section 508 of the Public 
     Health Service Act.
       (17) Medical assistance facilities.--A facility 
     participating in a demonstration project described in section 
     4008(i) of the Omnibus Budget Reconciliation Act of 1990.
       (18) Hemophilia treatment centers.--A comprehensive 
     hemophilia diagnostic and treatment center receiving a grant 
     under section 501(a)(2) of the Social Security Act.
       (19) Certain community clinics.--A community clinic 
     organized as a nonprofit, public benefit corporation under 
     California Health and Safety Code Sec. 1204(a) that does not 
     charge patients directly for services rendered.
       (d) Special Rule for Payments to Certain Essential 
     Community Providers.--In the case of services in the 
     guaranteed national benefit package that are furnished to an 
     enrollee of an insured health benefit plan by any Federally 
     qualified health center (described in subsection (c)(5)) or 
     rural health clinic (described in subsection (c)(6)), the 
     amount of payment made to the center or clinic for such 
     services shall be determined in accordance with the payment 
     methodology used to determine the amount of payment to such a 
     center for services furnished under part B of title XVIII, 
     unless the center or clinic elects to receive payment under 
     an alternative methodology.
       (e) Requiring Essential Community Providers to Provide 
     Services to Certain Individuals.--An individual or entity may 
     not be treated as an essential community provider under this 
     section unless the individual or entity--
       (1) provides services to individuals without regard to 
     their ability to pay for such services (in accordance with 
     standards established by the Secretary); and
       (2) effective January 1, 1999, is a participating provider 
     under medicare part C.

     SEC. 5013. REQUIREMENTS RELATING TO PLAN SOLVENCY.

       (a) In General.--A carrier shall comply with the following 
     procedures and requirements in order to assure solvency of 
     insured health benefit plans provided by the carrier:
       (1) The carrier shall meet the capital requirements 
     established by the applicable regulatory authority.
       (2) The carrier shall arrange for an annual audit by an 
     independent accountant of financial statements reporting its 
     financial position and its financial activities with regard 
     to its health plan business.
       (3) The carrier shall arrange for an annual opinion by its 
     appointed actuary on the reasonableness of assets held by the 
     carrier.
       (4) The carrier shall maintain separate records of 
     finances, financial transactions, assets, and liabilities 
     related to all business undertaken with respect to its health 
     plan or plans.
       (5) The carrier shall participate in the health plan 
     guaranty fund established by the applicable regulatory 
     authority.
       (6) The carrier shall comply with such corrective actions, 
     and shall cease such practices which, if not corrected, would 
     jeopardize the financial solvency of the carrier, as the 
     applicable regulatory authority may require.
       (7) The carrier shall comply with all other solvency 
     standards and requirements established by the Secretary.
       (b) Authority of Applicable Regulatory Authorities in 
     Relation to Financial Solvency.--Each applicable regulatory 
     authority, with respect to carriers and insured health 
     benefit plans over which it exercises authority--
       (1) may examine the financial and operating records of the 
     carriers (and each plan of such carriers) and plans,
       (2) may order a carrier to take corrective actions and to 
     cease practices which, if not corrected, would jeopardize the 
     financial solvency of the carrier, and
       (3) shall take any actions necessary to assure the payment 
     of claims on behalf of individuals enrolled in insured health 
     benefit plans provided by carriers declared to be financially 
     impaired, in a financially hazardous condition, or insolvent.
       (c) Response to Carrier Financial Instability.--
       (1) Notification.--Upon determining that a carrier may be 
     financially impaired, in a financially hazardous condition, 
     or insolvent, the applicable regulatory authority of a State 
     in which a carrier is licensed to operate shall--
       (A) notify the Secretary of such determination in a timely 
     manner; and
       (B) notify the applicable regulatory authority of the State 
     in which the carrier is domiciled (if the carrier is 
     domiciled in a State other than the State providing the 
     notification).
       (2) Proceedings to rehabilitate or liquidate insolvent 
     carriers.--Upon receiving a notification under paragraph 
     (1)(B) (if applicable), the applicable regulatory authority 
     of the State in which the carrier is domiciled shall take the 
     carrier into conservatorship and begin proceedings to 
     rehabilitate or liquidate the carrier in accordance with 
     State law.
       (3) Protections for enrollees.--In the case of an insured 
     health benefit plan in a State for which the applicable 
     regulatory authority in the State has made a determination 
     that the carrier offering the plan may be financially 
     impaired, in a financially hazardous condition, or 
     insolvent--
       (A) a provider of items and services covered under the plan 
     may not charge or collect payment for such an item or service 
     furnished to an individual enrolled in the plan (other than 
     any cost-sharing otherwise applicable with respect to the 
     item or service); and
       (B) a provider of items and services covered under the plan 
     shall continue to provide such items and services to 
     individuals enrolled in the plan until such individuals are 
     no longer enrolled in the plan.
       (d) State Health Plan Guaranty Fund.--Each State shall 
     assure that there is a health plan guaranty fund in operation 
     in the State that meets requirements established by the 
     Secretary in order to provide for the payment of outstanding 
     provider claims and obligations of an insured health benefit 
     plan offered by a carrier determined to be financially 
     impaired, in a financially hazardous condition, or insolvent 
     by the applicable regulatory authority in the State.

     SEC. 5014. UTILIZATION REVIEW.

       (a) Requiring Review to Meet Standards.--A carrier offering 
     an insured health benefit plan may not deny coverage of or 
     payment for items and services on the basis of a utilization 
     review program unless the program meets the standards 
     established by the Secretary under this section.
       (b) Establishment of Standards by Secretary.--The Secretary 
     shall establish standards for utilization review programs of 
     insured health benefit plans, consistent with subsection (c), 
     and shall periodically review and update such standards to 
     reflect changes in the delivery of health care services. The 
     Secretary shall establish such standards in consultation with 
     appropriate parties.
       (c) Requirements for Standards.--Under the standards 
     established under subsection (b)--
       (1) individuals performing utilization review may not 
     receive financial compensation based upon the number of 
     denials of coverage;
       (2) negative determinations of the medical necessity or 
     appropriateness of services or the site at which services are 
     furnished may be made only by clinically qualified personnel;
       (3) the utilization review program shall provide for a 
     process under which an enrollee or provider may obtain timely 
     review of a denial of coverage;
       (4) utilization review shall be conducted in accordance 
     with uniformly applied standards that are based on the most 
     currently available medical evidence;
       (5) providers shall participate in the development of the 
     utilization review program;
       (6) the timing of the utilization review and the 
     information required to be reviewed shall be commensurate 
     with the medical need of the individual for whom the service 
     is to be furnished; and
       (7) prior authorization for the delivery of services shall 
     not be permitted in inappropriate circumstances.

     SEC. 5015. ACCEPTANCE OF PREMIUM CERTIFICATES.

       (a) In General.--If an individual covered under an insured 
     health benefit plan offered by a carrier tenders to the 
     carrier a premium certificate issued under part A of title 
     XXII of the Social Security Act, the carrier shall reduce by 
     the value of the certificate the amount of any premium 
     required to be paid by the individual for periods beginning 
     after the date of tender of the certificate unless otherwise 
     provided by the Secretary.
       (b) Tender of Certificate.--
       (1) In general.--If an individual tenders to a carrier a 
     premium certificate under subsection (a), the carrier may 
     tender such a certificate to the Secretary, in a manner 
     specified by the Secretary, and, upon such tender, is 
     entitled to receive the value of the certificate so tendered.
       (2) Tender through universal fehbp or cooperatives.--
     Paragraph (1) shall apply with respect to an individual on 
     whose behalf a premium certificate is tendered by the 
     Director of the Office of Universal FEHBP under subtitle D or 
     a consumer purchasing cooperative under subtitle E.

     SEC. 5016. ADDITIONAL REQUIREMENTS FOR INSURED HEALTH BENEFIT 
                   PLANS.

       In addition to the requirements imposed by the preceding 
     provisions of this part, each carrier providing an insured 
     health benefit plan shall meet the following additional 
     requirements:
       (1) Issuance of health security cards; coordination of 
     individual entitlement.--The carrier shall issue health 
     security cards and carry out other administrative functions 
     in accordance with regulations developed by the Secretary 
     including the issuance of an annual written statement to 
     enrollees verifying enrollment in a private health plan and 
     the provision of information on enrollees to the Secretary 
     which the Secretary may forward to the Secretary of the 
     Treasury.
       (2) Compliance with payment rules.--The carrier provides 
     for payment for items and services consistent with any State 
     system approved under title IV.
       (3) Other requirements.--The carrier shall meet the 
     applicable requirements of the following provisions of this 
     Act:
       (A) Subtitle A of title IX (relating to grievance and 
     appeals procedures, participation in the National Quality 
     Management Program, and the privacy of information on 
     enrollees).
       (B) Subtitle B of title IX (relating to data management and 
     reporting and administrative simplification).
  Subtitle B--Standards for Sponsors and Self-Insured Health Benefit 
                                 Plans

                      PART 1--GENERAL REQUIREMENTS

     SEC. 5101. REQUIREMENT FOR CERTIFICATION OF SPONSORS AND 
                   PLANS.

       (a) In General.--No sponsor may offer a self-insured health 
     benefit plan (as defined in section 5504(11)) during a year 
     on or after the effective date specified in subsection (b) 
     (or enroll any individual under such a plan beginning on or 
     after such effective date) unless the sponsor and the plan 
     have been certified for the year by the Secretary of Labor 
     (in accordance with such procedures as the Secretary of Labor 
     establishes) as meeting the applicable standards established 
     under section 5501(a)(2) consistent with this subtitle.
       (b) Effective Date.--Subsection (a) shall apply to 
     contracts under a self-insured health benefit plan sold, 
     issued, or renewed on or after January 1, 1997.

     SEC. 5102. LIMITATION ON ELIGIBLE SPONSORS.

       (a) In General.--No entity may serve as the sponsor of a 
     self-insured health benefit plan unless the entity is an 
     eligible sponsor (as defined in subsection (b)) who elects, 
     in a form and manner specified by the Secretary of Labor 
     consistent with this subtitle, to be treated as the sponsor 
     of such a plan and to be subject to the standards established 
     by the Secretary of Health and Human Services for such plans 
     under section 5501(a)(2).
       (b) Eligible Sponsors.--
       (1) In general.--In this section, each of the following is 
     an eligible sponsor:
       (A) Large employer.--An employer that is a large employer 
     as of the date of an election under subsection (a), with 
     respect to employees, former employees, and family members.
       (B) Plan sponsor of a multiemployer plan.--A plan sponsor 
     described in section 3(16)(B)(iii) of Employee Retirement 
     Income Security Act of 1974, but only with respect to 
     participants and beneficiaries (as defined in section 3 of 
     such Act) covered under a group health plan that is a 
     multiemployer plan (as defined in subsection (c)(3)) 
     maintained by the sponsor and only if (as of the date of an 
     election under subsection (a)) such plan--
       (i) covers more than 100 full-time employees in the United 
     States, or
       (ii) the plan is maintained by one or more affiliates of 
     the same labor organization, or one or more affiliates of 
     labor organizations representing employees in the same 
     industry, covering more than 100 full-time employees.
       (C) Rural electric cooperative and rural telephone 
     cooperative association.--A rural electric cooperative or a 
     rural telephone cooperative association, but only with 
     respect to employees, former employees, and family members 
     covered under a group health plan that is maintained by such 
     cooperative or association (or members of such cooperative or 
     association) and only if such plan has more than 100 
     employees in the United States entitled to benefits under the 
     plan.
       (2) Exclusion of sponsors of mewas.--The plan sponsor of a 
     multiple employer welfare arrangement may not be considered 
     an eligible sponsor under this subsection.
       (c) Definitions.--In this section, except as otherwise 
     provided:
       (1) Group health plan.--The term ``group health plan'' 
     means an employee welfare benefit plan (as defined in section 
     3(1) of the Employee Retirement Income Security Act of 1974) 
     providing medical care (as defined in section 213(d) of the 
     Internal Revenue Code of 1986) to participants or 
     beneficiaries (as defined in section 3 of the Employee 
     Retirement Income Security Act of 1974) directly or through 
     insurance, reimbursement, or otherwise.
       (2) Large employer.--The term ``large employer'' has the 
     meaning given such term in section 1106(b)(1)(A).
       (3) Multiemployer plan.--The term ``multiemployer plan'' 
     has the meaning given such term in section 3(37) of the 
     Employee Retirement Income Security Act of 1974, and includes 
     any plan that is treated as such a plan under title I of such 
     Act.
       (4) Multiple employer welfare arrangement.--The term 
     ``multiple employer welfare arrangement'' has the meaning 
     given such term in section 3(40) of the Employee Retirement 
     Income Security Act of 1974 (as in effect on the day before 
     the date of the enactment of this Act).
       (5) Rural electric cooperative.--The term ``rural electric 
     cooperative'' has the meaning given such term in section 
     3(40)(A)(iv) of the Employee Retirement Income Security Act 
     of 1974.
       (6) Rural telephone cooperative associations.--The term 
     ``rural telephone cooperative association'' has the meaning 
     given such term in section 3(40)(A)(v) of the Employee 
     Retirement Income Security Act of 1974.

     SEC. 5103. NON-DISCRIMINATION.

       (a) In General.--Section 5002 shall apply with respect to a 
     sponsor of a self-insured health benefit plan in the same 
     manner as such provisions apply with respect to a carrier 
     providing an insured health benefit plan.
       (b) Prohibiting Offering Inducement to Enroll in Insured 
     Health Benefit Plans.--A sponsor of a self-insured health 
     benefit plan may not offer any inducement to any individual 
     eligible to seek coverage through the sponsor to seek 
     coverage elsewhere.

     SEC. 5104. REQUIREMENTS RELATING TO ENROLLMENT.

       (a) Enrollment in Chosen Plan.--The sponsor of a self-
     insured health benefit plan shall enroll an individual 
     eligible to seek coverage through the sponsor in the plan 
     chosen by the individual from among the plans offered by the 
     sponsor (in accordance with the requirements of section 
     5107).
       (b) Annual Open Enrollment Period.--The sponsor of a self-
     insured health benefit plan shall provide for an annual open 
     enrollment period of at least 45 days during which 
     individuals eligible to enroll in the plan may change the 
     health benefit plan under which they are provided coverage.
       (c) Changes in Enrollment During 1st Year of Enrollment.--
     Once during the first year for which an individual is 
     enrolled in a plan offered by the sponsor of a self-insured 
     health benefit plan, the individual may change the health 
     benefit plan in which the individual is enrolled. Such a 
     change shall be effective on the first day of the first month 
     beginning at least 45 days after the date the sponsor 
     receives a notice of change of coverage.
       (d) Enrollment of Newly Eligible Individuals.--The sponsor 
     of a self-insured health benefit plan may not refuse to 
     enroll an individual who is eligible to enroll in a health 
     benefit plan offered by the sponsor and is not enrolled in 
     such a plan.

     SEC. 5105. PROHIBITION ON PRE-EXISTING CONDITION EXCLUSIONS.

       The provisions of section 5004(a) shall apply with respect 
     to the sponsor of a self-insured health benefit plan in the 
     same manner as such provisions apply with respect to a 
     carrier providing an insured health benefit plan.

     SEC. 5106. PROHIBITION ON WAITING PERIODS.

       (a) In General.--The provisions of section 5005(a) shall 
     apply with respect to the sponsor of a self-insured health 
     benefit plan in the same manner as such provisions apply with 
     respect to a carrier providing an insured health benefit 
     plan.
       (b) Coverage After Enrollment During Annual Open Enrollment 
     Period.--In the case of an individual who enrolls in a self-
     insured health benefit plan during an open enrollment period 
     described in section 5104(b), the sponsor shall provide 
     coverage of the individual under the plan effective as of 
     such date as the sponsor may establish with respect to 
     enrollments made during such period (consistent with the 
     standards established by the Secretary of Health and Human 
     Services under section 5501(c)).

     SEC. 5107. BENEFIT REQUIREMENTS.

       (a) Offer of Plan Consisting of Guaranteed National Benefit 
     Package.--Each sponsor of a self-insured health benefit 
     plan--
       (1) shall offer all enrollees a health benefit plan 
     consisting only of coverage for the benefits (including cost-
     sharing) contained in the guaranteed national benefit 
     package; and
       (2) may offer a health benefit plan consisting of coverage 
     for the benefits described in paragraph (1) and (subject to 
     subsection (d)) additional benefits.
       (b) Offer of Plan Providing Unlimited Choice of 
     Providers.--Each sponsor of a self-insured health benefit 
     plan shall assure that all enrollees are offered coverage 
     in--
       (1) at least one managed care plan (unless there is no such 
     plan available in the area); and
       (2) at least one unlimited-choice-of-provider plan, which 
     may be a point-of-service plan.
       (c) Special Rule for Enrollees Covered Under State Managed 
     Mental Health Programs.--The provisions of section 5007(c) 
     shall apply to sponsors of self-insured health benefit plans 
     in the same manner as they apply to carriers providing 
     insured health benefit plans.
       (d) Non-Discrimination in Additional Benefits for Non-
     Employer Plans.--In the case of a self-insured health benefit 
     plan with an eligible sponsor described in subparagraph (B) 
     or (C) of section 5102(b)(1), if the sponsor offers 
     additional benefits pursuant to subsection (a)(2) that 
     consist of a reduction in the cost-sharing imposed under a 
     plan, the sponsor shall provide such additional benefits to 
     all enrollees in the same manner as an employer would be 
     required under 1112.

     SEC. 5108. REQUIREMENTS RELATING TO RATING OF PREMIUMS.

       (a) Charging Rates by Class of Enrollment.--The sponsor of 
     a self-insured health benefit plan shall establish separate 
     premium rates for each of the three classes of enrollment 
     described in section 3(b) of the Guaranteed Health Insurance 
     Act of 1994.
       (b) Variations Only by Actuarial Value.--
       (1) In general.--The differences among premium rates 
     established under subsection (a) shall reflect only 
     differences in the actuarial value of the guaranteed national 
     benefit package among the classes of enrollment, consistent 
     with standards established by the Secretary of Health and 
     Human Services.
       (2) Permitting variation by geographic area of 
     enrollment.--At the option of the sponsor of a self-insured 
     health benefit plan, in applying paragraph (1) the sponsor 
     may vary premium rates based on differences in the actuarial 
     value of the package among classes of enrollment in 
     geographic areas, but only if the geographic areas applied 
     are the same as the community-rating areas established under 
     section 5008(d) with respect to insured health benefit plans 
     offered in the State.
       (c) Exception for Sponsors Paying Entire Premium.--
     Subsections (a) and (b) shall not apply in the case of a 
     self-insured health benefit plan offered by a sponsor for 
     which the sponsor does not require the enrollee to contribute 
     any portion of the applicable premium.

     SEC. 5109. ADDITIONAL STANDARDS FOR MANAGED CARE PLANS AND 
                   POINT-OF-SERVICE PLANS.

       The provisions of section 5009 shall apply with respect to 
     a managed care plan and a point-of-service plan provided by 
     the sponsor of a self-insured health benefit plan in the same 
     manner as such provisions apply with respect to a managed 
     care plan and point-of-service plan provided by the carrier 
     providing an insured health benefit plan.

     SEC. 5110. PROVISION OF PLAN INFORMATION.

       (a) In General.--The sponsor of a self-insured health 
     benefit plan shall annually prepare and make available to 
     individuals eligible to enroll in the plan, in a uniform 
     format, information on the plans offered by the sponsor.
       (b) Information Described.--The information required to be 
     provided under subsection (a) shall include summary 
     information described in section 5011(b)(2) (other than 
     information described in subparagraph (A)(vi)).
       (c) Disclosure of Utilization Review and Quality 
     Standards.--Upon the request of any individual eligible to 
     enroll in a self-insured health benefit plan offered by a 
     sponsor, the sponsor shall make available information on--
       (1) procedures used by the plan to control utilization of 
     services and expenditures, and
       (2) procedures used by the plan to assure quality of care.

     SEC. 5111. REQUIREMENTS FOR ARRANGEMENTS WITH ESSENTIAL 
                   COMMUNITY PROVIDERS.

       The provisions of section 5012 shall apply with respect to 
     the sponsor of a self-insured health benefit plan in the same 
     manner as such provisions apply with respect to a carrier 
     providing an insured health benefit plan.

     SEC. 5112. UTILIZATION REVIEW.

       The provisions of section 5014 shall apply with respect to 
     a utilization review program of a self-insured health benefit 
     plan in the same manner as such provisions apply with respect 
     to a utilization review program of an insured health benefit 
     plan.

     SEC. 5113. ACCEPTANCE OF PREMIUM CERTIFICATES.

       The provisions of section 5015 shall apply with respect to 
     the sponsor of a self-insured health benefit plan in the same 
     manner as such provisions apply with respect to a carrier 
     providing an insured health benefit plan.

     SEC. 5114. ADDITIONAL REQUIREMENTS FOR SELF-INSURED HEALTH 
                   BENEFIT PLANS.

       The additional requirements described in section 5016 shall 
     apply with respect to the sponsor of a self-insured health 
     benefit plan in the same manner as such additional 
     requirements apply with respect to a carrier providing an 
     insured health benefit plan, except that the requirements of 
     paragraph (2) of such section shall not apply in the case of 
     a sponsor who is not required to participate in a State 
     system approved under title IV.

             PART 2--RESPONSIBILITIES RELATING TO FINANCING

     SEC. 5121. RESERVE REQUIREMENTS.

       (a) In General.--The Secretary of Labor shall ensure that 
     each sponsor of a self-insured health benefit plan maintains 
     plan assets in trust as provided in section 403 of the 
     Employee Retirement Income Security Act of 1974--
       (1) without any exemption under section 403(b)(4) of such 
     Act, and
       (2) in amounts which the Secretary of Labor determines are 
     sufficient to provide at any time for payment to health care 
     providers of all outstanding balances owed by the plan at 
     such time.
     The requirements of the preceding sentence may be met through 
     letters of credit, bonds, or other appropriate security to 
     the extent provided in regulations of the Secretary of Labor.
       (b) Solvency Requirements.--The Secretary of Labor shall--
       (1) prescribe such additional financial reserve 
     requirements (which may include requirements relating to the 
     use of aggregate and specific stop-loss insurance, 
     reinsurance, or any other insurance requirement), and
       (2) establish such limits on the amount of risk such a plan 
     may retain,
     as may be appropriate to assure the solvency of a self-
     insured health benefit plan. The requirements and limits 
     shall take into account the number of lives covered and other 
     appropriate risk-related factors identified by the Secretary 
     of Labor.
       (c) Disclosure.--The sponsor of a self-insured health 
     benefit plan shall notify the Secretary of Labor at such time 
     as the financial reserve requirements of this section are not 
     being met. The Secretary of Labor may assess a civil money 
     penalty of not more than $100,000 against any sponsor for any 
     failure to provide such notification in such form and manner 
     and within such time periods as such Secretary may prescribe 
     by regulation.

     SEC. 5122. TRUSTEESHIP OF INSOLVENT PLANS BY SECRETARY OF 
                   LABOR.

       (a) Appointment of Secretary as Trustee for Insolvent 
     Plans.--Whenever the Secretary of Labor determines that self-
     insured health benefit plan will be unable to provide 
     benefits when due or is otherwise in a financially hazardous 
     condition as defined in regulations of such Secretary, the 
     Secretary of Labor shall, upon notice to the plan, apply to 
     the appropriate United States district court for appointment 
     of such Secretary as trustee to administer the plan for the 
     duration of the insolvency. The plan may appear as a party 
     and other interested persons may intervene in the proceedings 
     at the discretion of the court. The court shall appoint such 
     Secretary trustee if the court determines that the 
     trusteeship is necessary to protect the interests of the 
     enrolled individuals or health care providers or to avoid any 
     unreasonable deterioration of the financial condition of the 
     plan or any unreasonable increase in the liability of the 
     Self-Insured Plan Insolvency Fund. The trusteeship of such 
     Secretary shall continue until the conditions described in 
     the first sentence of this subsection are remedied or the 
     plan is terminated.
       (b) Powers as Trustee.--The Secretary of Labor, upon 
     appointment as trustee under subsection (a), shall have the 
     power--
       (1) to do any act authorized by the plan, this Act, or 
     other applicable provisions of law to be done by the plan 
     administrator or any trustee of the plan,
       (2) to require the transfer of all (or any part) of the 
     assets and records of the plan to the Secretary as trustee,
       (3) to invest any assets of the plan which such Secretary 
     holds in accordance with the provisions of the plan, 
     regulations of such Secretary, and applicable provisions of 
     law,
       (4) to do such other acts as such Secretary deems necessary 
     to continue operation of the plan without increasing the 
     potential liability of the Self-Insured Plan Insolvency Fund, 
     if such acts may be done under the provisions of the plan,
       (5) to require the plan sponsor, the plan administrator, 
     any contributing employer, and any employee organization 
     representing covered individuals to furnish any information 
     with respect to the plan which such Secretary as trustee may 
     reasonably need in order to administer the plan,
       (6) to collect for the plan any amounts due the plan and to 
     recover reasonable expenses of the trusteeship,
       (7) to commence, prosecute, or defend on behalf of the plan 
     any suit or proceeding involving the plan,
       (8) to issue, publish, or file such notices, statements, 
     and reports as may be required under regulations of the 
     Secretary or by any order of the court,
       (9) to terminate the plan and liquidate the plan assets in 
     accordance with applicable provisions of this Act and other 
     provisions of law, to restore the plan to the responsibility 
     of the large group sponsor, or to continue the trusteeship,
       (10) to take such steps as may be necessary to ensure the 
     continuation of the individual's enrollment in a plan 
     providing coverage of the guaranteed national benefit 
     package, and
       (11) to do such other acts as may be necessary to comply 
     with this Act or the Employee Retirement Income Security Act 
     of 1974 or any order of the court and to protect the 
     interests of enrolled individuals and health care providers.
       (c) Notice of Appointment.--As soon as practicable after 
     such Secretary's appointment as trustee, the Secretary shall 
     give notice of such appointment to--
       (1) the plan administrator,
       (2) each enrolled individual,
       (3) each employer who may be liable for contributions to 
     the plan, and
       (4) each employee organization which, for purposes of 
     collective bargaining, represents enrolled individuals.
       (d) Additional Duties.--Except to the extent inconsistent 
     with the provisions of this Act or title I of the Employee 
     Retirement Income Security Act of 1974, the Secretary of 
     Labor, upon appointment as trustee under this section, shall 
     have the same rights, powers, and duties as those of a 
     trustee under chapters 1, 3 (other than the right to 
     compensation under section 330), and 5, and subchapters I and 
     II of chapter 7, of title 11, United States Code, and shall 
     have the duties of a fiduciary for purposes of such title I.
       (e) Other Proceedings.--An application by the Secretary of 
     Labor under this subsection may be filed notwithstanding the 
     pendency in the same or any other court of any bankruptcy, 
     mortgage foreclosure, or equity receivership proceeding, or 
     any proceeding to reorganize, conserve, or liquidate such 
     plan or its property, or any proceeding to enforce a lien 
     against property of the plan.
       (f) Jurisdiction of Court.--
       (1) In general.--Upon the filing of an application for the 
     appointment as trustee or the issuance of a decree under this 
     subsection, the court to which the application is made shall 
     have exclusive jurisdiction of the plan involved and its 
     property wherever located with the powers, to the extent 
     consistent with the purposes of this subsection, of a court 
     of the United States having jurisdiction over cases under 
     title 11, United States Code. Pending an adjudication under 
     this section such court shall stay, and upon appointment by 
     it of the Secretary of Labor as trustee, such court shall 
     continue the stay of, any pending mortgage foreclosure, 
     equity receivership, or other proceeding to reorganize, 
     conserve, or liquidate the plan, the sponsor, or property of 
     such plan or sponsor, and any other suit against any 
     receiver, conservator, or trustee of the plan, the large 
     group sponsor, or property of the plan or sponsor. Pending 
     such adjudication and upon the appointment by it of such 
     Secretary as trustee, the court may stay any proceeding to 
     enforce a lien against property of the plan or the sponsor or 
     any other suit against the plan or the sponsor.
       (2) Venue.--An action under this subsection may be brought 
     in the judicial district where the plan administrator resides 
     or does business or where any asset of the plan is situated. 
     A district court in which such action is brought may issue 
     process with respect to such action in any other judicial 
     district.
       (g) Personnel.--In accordance with regulations of the 
     Secretary of Labor, such Secretary shall appoint, retain, and 
     compensate accountants, actuaries, and other professional 
     service personnel as may be necessary in connection with such 
     Secretary's service as trustee under this section.

     SEC. 5123. PROVISION OF AMOUNTS DUE PROVIDERS FROM INSOLVENT 
                   PLANS.

       (a) In General.--To the extent that amounts are available 
     in the Fund established under subsection (b), the Secretary 
     of Labor shall make payment from such Fund of outstanding 
     amounts due to providers under a self-insured health benefit 
     plan while such plan is under such Secretary's trusteeship 
     under section 5122.
       (b) Self-Insured Plan Insolvency Fund.--
       (1) Establishment.--The Secretary of Labor shall establish 
     a Self-Insured Plan Insolvency Fund (hereinafter in this part 
     referred to as the ``Fund'') from which the Secretary shall 
     authorize payment of the amounts described in subsection (a).
       (2) Borrowing authority.--At the direction of the Secretary 
     of Labor, the Fund may, to the extent necessary to carry out 
     this section, issue to the Secretary of the Treasury notes or 
     other obligations, in such forms and denominations, bearing 
     such maturities, and subject to such terms and conditions as 
     may be prescribed by the Secretary of the Treasury. The total 
     balance of the Fund obligations outstanding at any time shall 
     not exceed $500,000,000. Such notes or other obligations 
     shall bear interest at a rate determined by the Secretary of 
     the Treasury, taking into consideration the current average 
     market yield on outstanding marketable obligations of the 
     United States of comparable maturities during the month 
     preceding the issuance of such notes or other obligations by 
     the Fund. The Secretary of the Treasury shall purchase any 
     notes or other obligations issued by the Fund under this 
     paragraph, and for that purpose the Secretary of the Treasury 
     may use as a public debt transaction the proceeds from the 
     sale of any securities issued under chapter 31 of title 31, 
     United States Code and the purposes for which securities may 
     be issued under such chapter are extended to include any 
     purchase of such notes and obligations. The Secretary of the 
     Treasury may at any time sell any of the notes or other 
     obligations acquired by such Secretary under this paragraph. 
     All redemptions, purchases, and sales by the Secretary of the 
     Treasury of such notes or other obligations shall be treated 
     as public debt transactions of the United States.
       (3) Protection for enrollees.--The Secretary of Labor shall 
     take such actions as may be necessary to assure that health 
     care providers continue to care for eligible individuals 
     enrolled in such a plan while the plan is under trusteeship.

     SEC. 5124. IMPOSITION AND COLLECTION OF PERIODIC ASSESSMENTS 
                   ON PLAN SPONSORS.

       (a) Imposition of Assessments.--The Secretary of Labor may 
     impose assessments under this section to enable the Fund to 
     repay amounts borrowed by the Fund while maintaining a 
     balance sufficient to ensure the Fund's solvency.
       (b) Limitation on Amount of Assessment.--The total amount 
     assessed against a plan under this section during a year may 
     not exceed two percent of the total amount contributed to the 
     plan toward the enrollment of individuals under the plan 
     during the year.
       (c) Payment of Assessments.--
       (1) Obligation to pay.--The designated payor of each plan 
     shall pay the assessments imposed by the Secretary of Labor 
     under this section with respect to that plan when they are 
     due. Assessments under this section are payable at the time, 
     and on an estimated, advance, or other basis, as determined 
     by such Secretary. Assessments shall continue to accrue until 
     the plan's assets are distributed pursuant to a termination 
     procedure or such Secretary is appointed to serve as trustee 
     of the plan under section 5122.
       (2) Late payment charges and interest.--
       (A) Late payment charges.--If any assessment is not paid 
     when it is due, the Secretary of Labor may assess a late 
     payment charge plus interest, as prescribed by such Secretary 
     in regulations.
       (B) Waivers.--Late payment charges and interest under 
     subparagraph (A) shall not apply to any assessment payment 
     made within 60 days after the date on which payment is due, 
     if before such date, the designated payor obtains a waiver 
     from the Secretary of Labor based upon a showing of 
     substantial hardship arising from the timely payment of the 
     assessment.
       (d) Civil Action upon Nonpayment or Late Payment.--If any 
     designated payor fails to pay an assessment when due, the 
     Secretary of Labor may bring a civil action in any district 
     court of the United States within the jurisdiction of which 
     the plan assets are located, the plan is administered, or in 
     which a defendant resides or is found, for the recovery of 
     the amount of the unpaid assessment, reasonable interest, any 
     late payment charge, and interest, and process may be served 
     in any other district. The district courts of the United 
     States shall have jurisdiction over actions brought under 
     this subsection by the Secretary of Labor without regard to 
     the amount in controversy.
       (e) Designated Payor Defined.--
       (1) In general.--For purposes of this section, the term 
     ``designated payor'' means--
       (A) the employer or plan administrator in any case in which 
     the eligible sponsor of the plan is described in subparagraph 
     (A) of section 5101(b)(1); and
       (B) the contributing employers or the plan administrator in 
     any case in which the eligible sponsor of the large group 
     sponsor is described in subparagraph (B) or (C) of section 
     5101(b)(1).
       (2) Controlled groups.--If an employer is a member of a 
     controlled group, each member of such group shall be jointly 
     and severally liable for any assessments required to be paid 
     by such employer. For purposes of the preceding sentence, the 
     term ``controlled group'' means any group treated as a single 
     employer under subsection (b) or (c) of section 414 of the 
     Internal Revenue Code of 1986.

     SEC. 5125. MANAGEMENT OF FUNDS; RELATIONS WITH EMPLOYEES.

       (a) Management of Funds.--The management of funds by the 
     sponsor of a self-insured health benefit plan shall be 
     subject to the applicable fiduciary requirements of title I 
     of the Employee Retirement Income Security Act of 1974.
       (b) Management of Finances and Records; Accounting 
     System.--Each sponsor of a self-insured health benefit plan 
     shall comply with standards relating to the management of 
     finances and records and accounting systems as the Secretary 
     of Labor shall specify.
          Subtitle C--Standards for Supplemental Health Plans

     SEC. 5201. REQUIREMENT FOR CERTIFICATION OF CARRIERS AND 
                   POLICIES.

       (a) Certification Required.--
       (1) In general.--No carrier may sell, issue, or renew a 
     contract under a supplemental health benefit policy (as 
     defined in section 5504(11)) with respect to any individual 
     or group in a State, unless the carrier, in relation to the 
     plan, and the plan have been certified as meeting the 
     applicable standards established under section 5501 
     consistent with this subtitle--
       (A) by a State regulatory program of the State (approved 
     under section 5502), or
       (B) in the case of a State without such an approved 
     program, by the Secretary (in accordance with such procedures 
     as the Secretary establishes).
       (2) Policy disapproved.--If the applicable regulatory 
     authority determines that a carrier with respect to a 
     supplemental health benefit policy does not meet the 
     applicable standards of this title on or after the effective 
     date described in subsection (d), the carrier may not provide 
     coverage under the policy to individuals not enrolled as of 
     the date of the determination and may not continue to provide 
     the policy for policy years beginning after the date of such 
     determination until the authority determines that such 
     carrier and policy are in compliance with such standards.
       (3) Special rule for carriers offering policies in multi-
     State metropolitan statistical areas.--In the case of a 
     carrier offering or selling a supplemental health benefit 
     policy in a portion of a State that is located in a 
     metropolitan statistical area, the carrier may not sell, 
     issue, or renew a contract under the policy with respect to 
     an individual or employer in such metropolitan statistical 
     area unless the carrier, in relation to the policy, and the 
     policy have been certified as meeting the applicable 
     standards established under section 5501 by the State 
     regulatory program of each State in which the metropolitan 
     statistical area is located. The Secretary may waive the 
     application of this paragraph to a carrier under 
     extraordinary circumstances.
       (b) Effective Date.--
       (1) In general.--Subsection (a) shall apply to contracts 
     under supplemental health benefit policies sold, issued, or 
     renewed on or after January 1, 1997.
       (2) Exception for plans offered in states requiring 
     legislation.--In the case of a supplemental health benefit 
     policy sold, issued, or renewed in a State which the 
     Secretary identifies, in consultation with the NAIC, as--
       (A) requiring State legislation (other than legislation 
     appropriating funds) in order for carriers and plans to meet 
     the requirements of this subtitle, but
       (B) having a legislature which is not scheduled to meet in 
     1996 in a legislative session in which such legislation may 
     be considered,
     the date specified in this subsection is January 1, 1998, or, 
     if earlier, the first day of the first calendar quarter 
     beginning after the close of the first legislative session of 
     the State legislature that begins on or after January 1, 
     1998. For purposes of the previous sentence, in the case of a 
     State that has a 2-year legislative session, each year of 
     such session shall be deemed to be a separate regular session 
     of the State legislature.

     SEC. 5202. STANDARDIZED BENEFITS.

       (a) Limitation on Policies Permitted.--An carrier may not 
     offer or sell a supplemental health benefit policy unless the 
     benefits covered by the policy meet the requirements for one 
     of the standard benefit packages established by the Secretary 
     under subsection (b).
       (b) Establishment of Standardized Packages.--
       (1) In general.--Not later than July 1, 1995, the Secretary 
     shall establish not more than 10 standardized benefit 
     packages for supplemental health benefit policies under this 
     subtitle. Of such packages--
       (A) the Secretary shall designate one as a core 
     supplemental benefit package consisting of a reasonable 
     combination of benefits typical of such policies; and
       (B) at least one shall be designed to supplement a managed 
     care plan.
       (2) Criteria used in establishing packages.--In 
     establishing standardized benefit packages under paragraph 
     (1), the Secretary shall take into account State laws that 
     mandate the inclusion of particular benefits and providers of 
     services, and the benefits typically offered or sold by 
     health plans that are not included in the guaranteed national 
     benefit package.

     SEC. 5203. REQUIREMENTS FOR OFFERING OF PACKAGES.

       (a) Requiring Offer of Core Supplemental Benefit Package.--
     An carrier may not offer or sell any supplemental health 
     benefit policy unless the carrier offers or sells one such 
     policy that provides only for coverage of the core 
     supplemental benefit package described in section 
     5202(b)(1)(A).
       (b) Prohibiting Offer of Multiple Packages to an 
     Individual.--An carrier may not offer or sell a supplemental 
     health benefit policy to an individual who is covered under 
     another such policy, unless the individual's coverage under 
     the new policy begins only after the individual's coverage 
     under the original policy is terminated.

     SEC. 5204. NON-DISCRIMINATION REQUIREMENTS.

       (a) Discrimination Based on Health Status.--The provisions 
     of section 5002(a) shall apply during the annual open 
     enrollment period established under section 5205 with respect 
     to a carrier offering or selling a supplemental health 
     benefit policy in the same manner as such provisions apply 
     with respect to a carrier providing an insured health benefit 
     plan.
       (b) Discrimination Based on Other Factors.--The provisions 
     of section 5002(b) shall apply with respect to a carrier 
     offering or selling a supplemental health benefit policy in 
     the same manner as such provisions apply with respect to a 
     carrier providing an insured health benefit plan.

     SEC. 5205. OPEN ENROLLMENT.

       The State shall establish an annual open enrollment period 
     of at least 30 days during which a carrier offering or 
     selling a supplemental health benefit policy may not refuse 
     to enroll an individual who seeks coverage under the policy.

     SEC. 5206. PROHIBITION ON PRE-EXISTING CONDITION EXCLUSIONS.

       (a) During Annual Open Enrollment Period.--A carrier 
     offering or selling a supplemental health benefit policy may 
     not exclude or limit coverage under the policy during the 
     annual open enrollment period established under section 5105 
     with respect to services covered under the policy related to 
     treatment of a pre-existing condition.
       (b) During Other Periods.--
       (1) In general.--Subject to the succeeding provisions of 
     this subsection, a carrier offering or selling a supplemental 
     health benefit policy may exclude coverage during any period 
     other than the annual open enrollment period established 
     under section 5105 with respect to services related to 
     treatment of a pre-existing condition, but the period of such 
     exclusion may not exceed 6 months and shall not apply to 
     services furnished to newborns or pregnancy-related services.
       (2) Crediting of previous coverage.--
       (A) In general.--A carrier offering or selling a 
     supplemental health benefit policy shall provide that if an 
     individual covered under such a policy is in a period of 
     continuous coverage (as defined in subparagraph (B)(i)) with 
     respect to particular services as of the date of initial 
     coverage under such policy, any period of exclusion of 
     coverage with respect to a preexisting condition for such 
     services or type of services shall be reduced by 1 month for 
     each month in the period of continuous coverage.
       (B) Definitions.--As used in this paragraph:
       (i) Period of continuous coverage.--The term ``period of 
     continuous coverage'' means, with respect to particular 
     services, the period beginning on the date an individual is 
     enrolled under any plan or policy which provides benefits 
     with respect to the same or substantially similar services 
     (as determined in accordance with criteria established by the 
     Secretary) and ends on the date the individual is not so 
     enrolled for a continuous period of more than 3 months (or 
     for a longer period with respect to individuals who lose 
     employment and meet such other conditions as the Secretary 
     may specify).
       (ii) Preexisting condition.--The term ``preexisting 
     condition'' means a condition which has been diagnosed or 
     treated during the 6-month period ending on the day before 
     the first date of the individual's coverage (without regard 
     to any waiting period).

     SEC. 5207. CONTINUATION OF COVERAGE REQUIREMENT.

       The provisions of section 5006 (other than subsection (b) 
     of such section) shall apply with respect to a carrier 
     offering or selling a supplemental health benefit policy in 
     the same manner as such provisions apply with respect to a 
     carrier offering an insured health benefit plan.

     SEC. 5208. COMMUNITY RATING REQUIREMENTS.

       (a) In General.--The premium rate charged by a carrier for 
     a supplemental health benefit policy consisting of a standard 
     benefit package established by the Secretary under section 
     5202 in a community-rating area for a class of enrollment 
     shall be the same for all such enrollments.
       (b) References to Community and Enrollment.--The 
     ``community-rating area'' and ``class of enrollment'' 
     applicable under subsection (a) are the community and class 
     of enrollment applicable to the community rating of premiums 
     for insured health benefit plans required under section 5008.

     SEC. 5209. STANDARDS FOR MARKETING.

       (a) Restrictions on Tie-ins With Health Benefit Plans.--
       (1) In general.--A carrier offering or selling a 
     supplemental health benefit policy may not condition the 
     offer or sale of a health benefit plan to an individual on 
     the purchase of the supplemental health benefit policy by the 
     individual.
       (2) Restriction on authority of managed care plans to offer 
     supplemental policies.--A carrier providing a managed care 
     plan which provides for coverage of the guaranteed national 
     benefit package may not offer or sell a supplemental health 
     benefit policy to any individual unless the individual is 
     enrolled in such managed care plan.
       (b) Applicability of Other Requirements.--The provisions of 
     section 5010 shall apply with respect to a carrier offering 
     or selling a supplemental health benefit policy in the same 
     manner as such provisions apply with respect to a carrier 
     providing an insured health benefit plan.
                      Subtitle D--Universal FEHBP

     SEC. 5301. PURPOSE.

       The purpose of this subtitle is to ensure that individuals 
     seeking health insurance coverage in the community-rated 
     market sector may enroll in the same range of health plans 
     providing the same guaranteed national benefits as are 
     provided to Members of Congress and Federal employees.

     SEC. 5302. CONTRACTS WITH CARRIERS.

       (a) In General.--
       (1) Carriers serving the community-rated market sector.--
     The Office of Universal FEHBP (established under section 
     5307(a), in this subtitle referred to as the ``Office'') 
     shall enter into such contracts with carriers who, beginning 
     on January 1, 1997, shall offer insured health benefit plans 
     certified under this title in the community-rated market 
     sector and who shall meet standards prescribed under 
     subsection (c).
       (2) Assuring range of plans available.--To the maximum 
     extent practicable, the Office shall assure with respect to 
     each community-rating area the offering of such a range of 
     types of health benefit plans in the area under this subtitle 
     as is (or was) provided under the Federal Employees Health 
     Benefits Program (under chapter 89 of title 5, United States 
     Code).
       (3) Conditions.--The Office may enter into contracts with 
     carriers under this subtitle under the same conditions (in 
     relation to bidding and duration of contract) as are provided 
     for contracts under section 8902(a) of title 5, United States 
     Code. The Office is not required to enter into such a 
     contract with any particular carrier. Each such contract 
     under this subtitle shall be consistent with the provisions 
     of this subtitle and this Act.
       (b) Offering of Supplemental Policies.--To the extent 
     practicable, the Office may provide for the offering of 
     supplemental health benefit policies that meet the applicable 
     requirements of subtitle C of this title to individuals who 
     are enrolled under this subtitle in an insured health benefit 
     plan certified under this title. The Office shall take such 
     actions as may be appropriate to permit the offering of a 
     supplemental health benefit policy that has the same benefits 
     as those in a maintenance of effort policy described in 
     section 8904a of title 5, United States Code.
       (c) Standards for Carriers, Plans, and Policies.--The 
     Office may prescribe reasonable standards for carriers 
     seeking to offer insured health benefit plans under this 
     subtitle in the community-rated market sector, including 
     standards relating to quality, price, administration, and 
     other matters. Approval of a plan may be withdrawn only after 
     notice and opportunity for hearing to the carrier concerned 
     without regard to subchapter II of chapter 5 and chapter 7 of 
     title 5, United States Code.
       (d) Information to the Public.--The Office shall 
     disseminate general information to the public (especially to 
     individuals and employers of individuals eligible to enroll 
     under this subtitle) on the availability of insured health 
     benefit plans under this subtitle, enrollment and premium 
     payment procedures, and such other related information as the 
     Office considers appropriate. Such information shall meet the 
     standards specified in section 5011(c)(2).
       (e) Risk.--Neither the Office nor the United States 
     Government may bear insurance risk under this subtitle, and 
     the Office may not bear any financial, fiduciary, or other 
     responsibility for any VA health plan in which veterans may 
     enroll under title 38, United States Code, pursuant to an 
     agreement under subsection (f). The Office may not collect 
     premiums with respect to the enrollment in any such VA health 
     plan.
       (f) Agreement regarding va health plans.--The Office shall 
     enter into an agreement with the Secretary of Veterans 
     Affairs to provide for disseminating information and the 
     enrollment of veterans who are eligible to be enrolled both--
       (1) in an insured health benefit plan offered under this 
     subtitle, and
       (2) in a VA health plan under chapter 18 of title 38, 
     United States Code,

     in such a VA health plan certified pursuant to section 
     5501(c) of this title. Such a VA health plan is an 
     experienced-rated plan whose premiums are established under 
     section 1831(d)(2) of title 38, United States Code, and shall 
     not be treated as part of a community-rating area for any 
     purpose relating to risk or the establishment of premiums for 
     the purposes of this subtitle. The Secretary of Veterans 
     Affairs shall reimburse the Office for any expense incurred 
     in disseminating information on the availability of VA health 
     plans and enrolling in such a plan pursuant to such 
     agreement.

     SEC. 5303. ELIGIBILITY.

       (a) In General.--Individuals in the community-rated market 
     sector (described in section 5003(e)(1)) are eligible to be 
     enrolled in an insured health benefit plan certified under 
     this title that is offered under this subtitle. The 
     enrollment may include family members based on an appropriate 
     class of enrollment.
       (b) Certain Individuals Not Included in Community-Rated 
     Market Sector.--The following individuals are not included in 
     the community-rated market sector:
       (1) In General.--Subject to paragraphs (2) and (3) of this 
     subsection, any individual described in section 5003(f).
       (2) Chapter 89 eligibles.--
       (A) In general.--Subject to subparagraphs (B) and (C), an 
     individual who is eligible to enroll in an approved health 
     benefit plan under chapter 89 of title 5, United States Code.
       (B) Exceptions.--Subparagraph (A) shall not apply to any 
     individual--
       (i) who makes an effective election under section 8905b of 
     such title (relating to elections of coverage during the 
     FEHBP transition period (within the meaning of section 
     8903b(a)(1) of title 5, United States Code));
       (ii) who is a full-time employee and is not eligible to 
     enroll (other than as a family member) under chapter 89 of 
     such title; or
       (iii) who is a family member of an individual described in 
     clause (ii).
       (C) Termination.--The previous provisions of this paragraph 
     shall not be effective with respect to any period of coverage 
     which begins after the end of the FEHBP transition period.
       (3) Full-time employee of large employers.--
       (A) In general.--Subject to subparagraphs (B) and (C), an 
     individual who is a full-time employee of a large employer.
       (B) Exception for family members.--Subparagraph (A) shall 
     not apply to an employee who is--
       (i) a spouse of an individual who is a employee of an 
     employer that is not a large employer, or
       (ii) a dependent child.
       (C) Exception for postal workers.--Subparagraph (A) shall 
     not apply to a full-time employee of the United States Postal 
     Service.
       (c) Treatment of Federal Government.--For purposes of this 
     section, the Government of the United States (excluding the 
     United States Postal Service) shall not be treated as a large 
     employer.

     SEC. 5304. PREMIUMS FOR COVERAGE.

       (a) Amount of Premiums.--
       (1) In general.--Premiums charged individuals in a 
     community-rating area enrolled in insured health benefit 
     plans under this subtitle shall be the premiums established 
     under section 5008 for the plan for the area.
       (2) Negotiation of administrative discount.--The Office may 
     negotiate with a carrier seeking to offer an insured health 
     benefit plan under this subtitle a dollar or percentage 
     discount from the amount of the premiums otherwise 
     applicable. Such a discount--
       (A) shall be applied uniformly to all enrollees of the 
     plan;
       (B) may vary only by class of enrollment;
       (C) shall only reflect administrative savings to such a 
     carrier from marketing such a plan through the Office under 
     this subtitle instead of other means of marketing such a 
     plan; and
       (D) may not relate to differences in anticipated claims, 
     costs, or utilization.
       (b) Payment Procedures.--The Office shall develop and 
     implement procedures for the payment of premiums by enrolling 
     individuals and by employers offering health coverage through 
     insured health benefit plans under this subtitle. The 
     procedures shall provide for the acceptance and forwarding of 
     premium certificates issued under part A of title XXII of the 
     Social Security Act toward payment of the premiums owed.

     SEC. 5305. GENERAL ADMINISTRATIVE PROVISIONS.

       (a) Terms of Offering and Enrollment.--Plans and policies 
     shall be offered under this subtitle in a manner consistent 
     with the requirements of this title for the offering of such 
     plans and policies other than under this subtitle. The Office 
     shall develop and implement procedures for the enrollment, 
     directly or by contract, of individuals under this subtitle 
     during an annual open enrollment period and at such other 
     special enrollment periods as may be appropriate and 
     consistent with the requirements of this Act based on changes 
     in employment, family status, or otherwise.
       (b) Audit.--Each contract entered into with a carrier under 
     this subtitle shall contain provisions requiring the carrier 
     to--
       (1) furnish such reasonable reports as the Office 
     determines to be necessary to enable it to carry out its 
     functions under this subtitle; and
       (2) permit the Office and representatives of the General 
     Accounting Office to examine records of the carriers as may 
     be necessary to carry out the purposes of this subtitle.
       (c) Treatment of Certain Organizations As Carriers.--
       An organization which is a bargaining representative 
     recognized under section 1203 of title 39, United States 
     Code, which at any time during the 24-month period ending on 
     the date of the enactment of this Act, was under contract 
     with the Office of Personnel Management under section 8902 of 
     title 5, United States Code, for a health benefits plan that 
     was self-insured, shall be treated as a carrier for purposes 
     of this subtitle, and may provide health benefits only to 
     full members of such organization (determined in a manner 
     consistent with section 8903a(d) of such title 5), including 
     annuitants (as defined in section 8901(3) of such title 5) by 
     reason of separating from a position in such a bargaining 
     unit.

     SEC. 5306. UNIVERSAL FEHBP HEALTH BENEFITS FUND.

       (a) Establishment.--The Secretary of the Treasury shall 
     establish, at the request of the Office, in the Treasury of 
     the United States, a Universal FEHBP Health Benefits Fund. 
     The Fund shall be administered by the Office.
       (b) Deposits Into Fund.--If the Fund is established, there 
     shall be deposited into the Fund--
       (1) premiums paid to the Office under this subtitle;
       (2) administrative fees and such other payments as are 
     prescribed by the Office;
       (3) moneys and the proceeds from the sale of gifts, 
     devises, and bequests of property received under subsection 
     (f).
       (c) Availability of Amounts in Fund.--
       (1) In general.--Amounts in the Fund shall be available--
       (A) without fiscal year limitation for payments to insured 
     health benefit plans under this subtitle; and
       (B) to pay expenses for administering this subtitle within 
     the limitations that may be specified annually by Congress.
       (2) Use of letter-of-credit arrangements.--Payments from 
     the Fund to a plan participating in a letter-of-credit 
     arrangement under this subtitle shall, in connection with any 
     payment or reimbursement to be made by such plan for a health 
     service or supply, be made, to the maximum extent 
     practicable, on a checks-presented basis (as defined under 
     regulations of the Department of the Treasury).
       (d) Set-Aside for Administrative Expenses.--
       (1) Fund.--If the Fund is established, a percentage 
     (specified under paragraph (3)) of the amounts deposited into 
     the Fund as premiums shall be regularly set aside in the Fund 
     to pay administrative expenses described in subsection 
     (c)(1)(B).
       (2) Premiums not paid into fund.--In the case of premiums 
     payable to a carrier for coverage under this subtitle which 
     are not deposited into the Fund, the Office shall assess an 
     administrative fee against the carrier in an amount equal to 
     a percentage (specified under paragraph (3)) of such 
     premiums.
       (3) Percentage.--For purposes of this subsection, the 
     Office shall establish a percentage that, when applied under 
     this subsection, is reasonably adequate to pay such 
     administrative expenses. Beginning with the fourth full 
     contract year under this subtitle, such percentage may not 
     exceed 1 percent.
       (e) Investment Authority.--The Secretary of the Treasury 
     may invest and reinvest any of the money in the Fund in 
     interest-bearing obligations of the United States, and may 
     sell these obligations for the purposes of the Fund. The 
     interest on and the proceeds from the sale of these 
     obligations shall be added to and become a part of the Fund.
       (f) Gifts.--The Office may accept, hold, administer, and 
     utilize gifts, devises, and bequests of property, both real 
     and personal, made unconditionally for the purpose of 
     carrying out this subtitle. Conditional gifts may be accepted 
     and used in accordance with their provisions, except that no 
     gift may be accepted which is conditioned on any expenditure 
     not to be met therefrom or from the income thereof unless 
     such expenditure has been approved by Act of Congress.
       (g) Authorization of Appropriation of Amount for Start-up 
     Expenses.--There are authorized to be appropriated to the 
     Office such sums as may be necessary for the initial 
     implementation of this subtitle. The Office shall provide for 
     repayments to the General Fund of the Treasury, during a 
     period of not longer than 10 years beginning with the second 
     full contract year during which insured health benefit plans 
     are offered under this subtitle and from the premiums paid 
     for coverage under such plans, of the amounts appropriated 
     pursuant to this subsection.

     SEC. 5307. ESTABLISHMENT OF OFFICE OF UNIVERSAL FEHBP.

       (a) Establishment of Office.--There is established in the 
     Office of Personnel Management an office to be known as the 
     ``Office of Universal FEHBP'' to be headed by a Director 
     appointed by the President.
       (b) Functions.--The Office shall be responsible for the 
     administration of the program under this subtitle.
       (c) Transfer.--The President shall transfer to the Office 
     such functions, personnel, and other resources (and may 
     transfer such authority) of the Office of Personnel 
     Management or any other department or agency as the Office 
     may require to carry out its responsibilities under this 
     subtitle.
       (d) Detail Authority.--Agencies may detail to the Office, 
     with or without reimbursement, such personnel as the Office 
     may require to carry out such responsibilities.
       (e) Regulations.--The Office may prescribe regulations 
     necessary to carry out this subtitle.

     SEC. 5308. STUDIES; ANNUAL REPORT.

       (a) Studies.--The Office shall make a continuing study of 
     the operation and administration of this subtitle, including 
     surveys and reports on insured health benefit plans available 
     to individuals eligible to enroll under this subtitle and on 
     the experience of the plans.
       (b) Annual Report.--Not later than April 1 of each year, 
     the Office shall transmit to Congress an annual report on the 
     operation of this subtitle for the preceding contract year. 
     Such report shall include an assessment of any circumstances 
     in the universal FEHBP market that would adversely affect the 
     operation of this subtitle. The report submitted under this 
     subsection before the first full contract year under this 
     subtitle shall include a description of the procedures 
     developed and intended to be implemented for enrollment of 
     individuals in insured health benefit plans under this 
     subtitle.
              Subtitle E--Consumer Purchasing Cooperatives

                    PART 1--ESTABLISHMENT BY STATES

     SEC. 5401. ESTABLISHMENT OF COOPERATIVES.

       (a) In General.--For purposes of this title, a ``consumer 
     purchasing cooperative'' or ``cooperative'' is an entity 
     which is established by a State in accordance with this part 
     and--
       (1) which meets the governance requirements of part 2; and
       (2) which carries out functions in accordance with part 3.
       (b) Establishment of Cooperatives by Units of Local 
     Government.--A unit of local government may establish a 
     cooperative under this subtitle in the same manner as a 
     State, but only if--
       (1) the geographic area over which the unit has 
     jurisdiction is included in a metropolitan statistical area 
     with a population not less than 1,000,000; and
       (2) the cooperative established by the unit covers the 
     entire geographic area over which the unit has jurisdiction.
       (c) Administration of Cooperative by State.--A State may 
     operate a consumer purchasing cooperative through a State 
     agency or a unit of local government or may contract with a 
     nonprofit organization for the operation of the cooperative.

     SEC. 5402. DESIGNATION OF COOPERATIVE BOUNDARIES AND SERVICE 
                   AREA.

       In establishing the boundaries of a consumer purchasing 
     cooperative--
       (1) a State may not discriminate on the basis of or 
     otherwise take into account race, age, gender, sexual 
     orientation, language, religion, national origin, 
     socioeconomic status, or health status; or
       (2) if a cooperative area includes any portion of a 
     metropolitan statistical area located in the State, the State 
     shall include the entire portion of such metropolitan 
     statistical area located in the State in the cooperative 
     area; and
       (3) if the State establishes more than one cooperative 
     under this subpart--
       (A) no area of the State may be included in more than one 
     cooperative area, and
       (B) each area of the State shall be included in a 
     cooperative area.

                    PART 2--GOVERNANCE REQUIREMENTS

     SEC. 5411. BOARD OF DIRECTORS.

       (a) In General.--A consumer purchasing cooperative must be 
     governed by a Board of Directors appointed or elected 
     consistent with the provisions of this section. All powers 
     vested in a consumer purchasing cooperative under this 
     subtitle shall be vested in the Board of Directors.
       (b) Membership; Chairman.--
       (1) Membership.--Such a Board of Directors shall consist of 
     13 members as follows:
       (A) Representatives of employers.--6 members who represent 
     employers whose employees purchase health coverage through 
     the cooperative, including self-employed individuals who 
     purchase such coverage.
       (B) Representatives of consumers.--6 members who represent 
     individuals who purchase such coverage, including employees 
     who purchase such coverage.
       (C) Chief health officer.--The chief health officer of the 
     State (or such officer's designee).

     The members of the Board of Directors described in 
     subparagraphs (A) and (B) are referred to in this section as 
     ``elected'' Board members.
       (2) Chair.--The Board of Directors shall elect a member to 
     serve as the chair of the Board.
       (3) Appointment and election.--
       (A) Initial appointment.--The State shall provide, in 
     accordance with rules established by the Secretary, for the 
     appointment of initial members to the Board of Directors.
       (B) Subsequent election.--Subsequent elected members of the 
     Board of Directors of a cooperative shall be elected by 
     individuals enrolled in plans through the cooperative. Such 
     elections shall occur annually for Board members whose terms 
     expire in the following year.
       (C) Vacancies.--A vacancy of an elected Board member shall 
     be filled through election within 30 days after the date of 
     the vacancy. A vacancy in the Board of Directors shall not 
     affect the ability of the remaining Board members to govern 
     the cooperative.
       (4) Nomination process.--
       (A) In general.--Each cooperative shall provide a process 
     for nominating individuals to serve as members of the Board. 
     Under the process, the individuals nominated shall be broadly 
     representative of the interests and backgrounds (including 
     ethnic and racial backgrounds and gender) of the cooperative 
     members.
       (B) Qualifications of members nominated.--No cooperative 
     member shall be nominated unless the member--
       (i) has been a member of the cooperative for at least 6 
     months,
       (ii) has presented a petition signed by 250 cooperative 
     members, and
       (iii) has submitted a written nominating statement, 
     pursuant to the rules of the cooperative.
       (5) Terms of members.--
       (A) In general.--Elected Board members shall serve for a 
     term of 3 years, except that such members initially elected 
     shall serve for staggered terms.
       (B) Removal for cause.--Each cooperative shall establish 
     procedures for the removal of an elected Board member for 
     cause. Such procedure shall assure adequate due process.
       (6) Compensation of members.--No member of the Board of 
     Directors shall receive compensation for service as a member 
     of the Board, except that such a member may receive 
     reimbursement for expenses incurred while performing official 
     functions as member of the Board.
       (c) Requirements on Board Members.--
       (1) No conflict of interest permitted.--An individual may 
     not serve as an elected Board member (or as a member 
     appointed under subsection (b)(3)) if the individual is one 
     of the following (or an immediate family member of one of the 
     following):
       (A) A health care provider.
       (B) An individual who is an employee or member of the board 
     of directors of, has a substantial ownership in, or derives 
     substantial income from, a health care provider, health plan, 
     pharmaceutical company, or a supplier of medical equipment, 
     devices, or services.
       (C) A person who derives substantial income from the 
     provision of health care.
       (D)(i) A member or employee of an association, law firm, or 
     other institution or organization that represents the 
     interests of one or more health care providers, health plans 
     or others involved in the health care field, or (ii) an 
     individual who practices as a professional in an area 
     involving health care.
       (2) Prohibiting discrimination based on political 
     affiliation.--Members of the Board may not engage in any 
     activity that constitutes discrimination on the basis of 
     political affiliation.
       (3) Fiduciary standards.--Members of the Board of Directors 
     and other officers and employees of a consumer purchasing 
     cooperative shall comply with the requirements of part 4 of 
     title I of the Employee Retirement Income Security Act of 
     1974.
       (4) Limitation on gifts.--Members of the Board of Directors 
     of a cooperative may not receive gifts (other than of nominal 
     value, from immediate families, or under other circumstances 
     explicitly permitted by the State) from any entity that has a 
     financial interest in activities conducted by the Board.
       (d) Meetings of the Board.--
       (1) In general.--Meetings of the Board of Directors shall 
     be called by the Chairman or a majority of its members.
       (2) Open meetings.--Meetings of the Board of Directors 
     shall be open to cooperative members and the public, except 
     that, under rules established by the State, the Board may 
     meet in executive session that is not open to the public.
       (3) Quorum.--A majority of the serving members of the Board 
     of Directors shall constitute a quorum for the purposes of 
     conducting its business, but 4 members of the Board 
     constitute a quorum for purposes of holding hearings or 
     gathering information.

     SEC. 5412. PROVIDER ADVISORY BOARDS.

       Each consumer purchasing cooperative must establish a 
     provider and technical advisory board consisting of 
     representatives of health care providers and professionals 
     who provide covered items and services through plans offered 
     in the community-rated market sector served by the 
     cooperative and including other professionals. Such advisory 
     board shall provide the Board of Directors of the cooperative 
     with medical, technical, and policy advice on various issues 
     relating to the cooperative. To the greatest extent feasible, 
     the membership of such advisory board shall represent the 
     various geographic regions of the area served by the 
     cooperative and shall reflect the racial, ethnic, and gender 
     composition of the health care providers and professionals 
     who provide covered items and services through health plans 
     offered by the cooperative.

        PART 3--RESPONSIBILITIES AND AUTHORITIES OF COOPERATIVES

     SEC. 5421. CONTRACTS WITH CARRIERS.

       (a) Contracts With Carriers.--Each cooperative may enter 
     into a contract under this part with a carrier that seeks to 
     offer an insured health benefit plan certified under this 
     title in the community-rated market sector through the 
     cooperative.
       (b) Development of Standards.--The cooperative shall 
     develop standards for carriers seeking to offer plans through 
     the cooperative, including standards relating to quality, 
     price, administration, and other matters.

     SEC. 5422. SERVICES FOR PARTICIPANTS.

       (a) Offering Choice of Plans.--
       (1) No limitation on choice of plans offered.--Each 
     consumer purchasing cooperative shall permit each individual 
     eligible to seek coverage in the community-rated market 
     sector through an insured health benefit plan offered through 
     the cooperative to seek coverage through any such plan 
     offered through the cooperative.
       (2) Requirements for offering certain plans.--The 
     cooperative shall assure that each individual eligible to 
     seek coverage through a plan offered through the cooperative 
     is offered--
       (A) at least one managed care plan (unless there is no such 
     plan available in the area served by the cooperative); and
       (B) at least one unlimited-choice-of-provider plan, which 
     may be a point-of-service plan.
       (b) Information.--In conjunction with the offering of plans 
     to individuals and employers, the cooperative shall make 
     available the information described in section 5011(c)(2) and 
     such other information as it deems appropriate about such 
     plans.
       (c) Outreach.--Each cooperative shall provide for 
     appropriate outreach programs to underserved populations.
       (d) Additional Services.--Each cooperative shall carry out 
     the following additional functions:
       (1) The notification of the availability of medicare part C 
     for certain individuals
       (2) The enrollment of individuals during an annual open 
     enrollment period and at such other special enrollment 
     periods as may be appropriate and consistent with the 
     requirements of this Act based on changes in employment, 
     family status, or otherwise.
       (3) In accordance with requirements of section 5414, the 
     collection of premium contributions, the forwarding of such 
     contributions to the plans in which the individuals are 
     enrolled, and the acceptance and forwarding of premium 
     certificates issued under part A of title XXII of the Social 
     Security Act toward payment of the premiums owed.

     SEC. 5423. REQUIREMENTS RELATING TO COLLECTION OF PREMIUMS 
                   AND ACCOUNTING.

       (a) Administrative Discount Permitted for Plans Offered 
     Through Cooperatives.--A cooperative may negotiate with a 
     carrier seeking to offer a plan through the cooperative a 
     dollar or percentage discount from the amount of the premiums 
     otherwise applicable. Such a discount--
       (1) shall be applied uniformly to all enrollees of the 
     plan;
       (2) may vary only by class of enrollment;
       (3) shall only reflect administrative savings to such a 
     carrier from marketing such a plan through the cooperative 
     instead of other means of marketing such a plan; and
       (4) may not relate to differences in anticipated claims, 
     costs, or utilization.
       (b) Liability for Payments of Premiums to Plan Sponsors.--
     Under rules established by the State--
       (1) In general.--The cooperative has a duty--
       (A) to account for the receipt of payments for premiums and 
     premium certificates issued under part A of title XXII of the 
     Social Security Act, and
       (B) to coordinate such payments in a manner consistent with 
     this Act.
       (2) Liability.--The cooperative is liable to the parties 
     involved for breach of the duty described in paragraph 
     (1)(A).
       (c) Accounting System.--The cooperative shall establish an 
     accounting system that meets standards established by the 
     Secretary of Health and Human Services (in consultation with 
     the Secretary of Labor) for purposes of carrying out this 
     subtitle. Such a system shall collect such information on a 
     timely basis as may be required to ascertain the individuals 
     (including family members) covered under plans offered 
     through the cooperative, the applicable premium, and premium 
     payments (including employer contributions towards enrollment 
     and reductions in premiums owed pursuant to premium 
     certificates issued under part A of title XXII of the Social 
     Security Act) and to provide periodic reports on premiums 
     imposed, amounts collected, and remaining amount owing by 
     such individuals.
       (d) Compliance With Fiduciary Standards.--The cooperative 
     shall comply with standards and duties relating to 
     administration, management, and distribution of premium 
     payments and other funds provided under this subtitle. The 
     standards shall be specified by the Secretary of Labor, in 
     consultation with the Secretary of Health and Human Services. 
     The standards shall include at least protections of the type 
     applicable to fiduciaries under part 4 of title I and under 
     title V of the Employee Retirement Income Security Act of 
     1974.

     SEC. 5424. COOPERATIVE FEE.

       (a) In General.--A consumer purchasing cooperative may 
     require a carrier that offers a plan through the cooperative 
     to pay a fee in an amount equal to a uniform percentage (not 
     to exceed one percent) of the premiums paid by individuals 
     enrolled in the plan through the cooperative.
       (b) Use of Funds.--A cooperative shall use the funds under 
     subsection (a) only for activities described in this 
     subtitle.

     SEC. 5425. ANTIDISCRIMINATION.

       No cooperative may discriminate, or engage (directly or 
     through contractual arrangements) in any activity, including 
     marketing, that has the effect of discriminating against an 
     individual on the basis of race, national origin, sex, 
     religion, language, socioeconomic status, age, disability, 
     sexual orientation, health status, anticipated need for 
     health services, or location of residence within the service 
     area of a plan of a carrier. However, this section shall not 
     be construed as preventing a cooperative from engaging in 
     activities to encourage the enrollment of individuals 
     eligible to enroll in plans through the cooperative who 
     reside in underserved areas.

     PART 4--GRANTS FOR ESTABLISHMENT AND OPERATION OF COOPERATIVES

     SEC. 5431. ESTABLISHMENT OF GRANT PROGRAM.

       (a) In General.--The Secretary shall establish a program 
     under which the Secretary shall make grants to eligible 
     States for the planning, development, and initial operation 
     of consumer purchasing cooperatives.
       (c) Eligibility of State.--A State is eligible to receive a 
     grant under this subpart if the State submits to the 
     Secretary (at such time and in such form as the Secretary may 
     require) an application containing--
       (1) assurances that the State has established (or is in the 
     process of establishing) one or more cooperatives in 
     accordance with this subtitle);
       (2) assurances that the State and each such cooperative 
     meet the applicable requirements of this subtitle; and
       (3) such other information and assurances as the Secretary 
     may require.
       (g) Grants to Contiguous States Establishing Joint 
     Cooperatives.--In the case of contiguous States each of which 
     is eligible to receive a grant under this part, the Secretary 
     may make grants to the States for the establishment and 
     operation of a consumer purchasing cooperative operated 
     jointly by the States and serving areas in each of the 
     States.
       (f) Limit on Total Provided to State.--The total amount of 
     funds provided to a State under this part may not exceed 
     $5,000,000 for a 5-year period.

     SEC. 5432. USE OF GRANT FOR PARTICIPATION OF COOPERATIVE IN 
                   CAPITAL REVIEW PROGRAM.

       (a) In General.--A State (or unit of local government) 
     receiving a grant for the operation of a consumer purchasing 
     cooperative under this subtitle may use funds provided under 
     the grant for the participation of the cooperative in a 
     program of the State to review and approve capital 
     expenditures in the State (meeting the requirements of 
     subsection (b)).
       (b) Requirements for Program.--A capital review program 
     meets the requirements of this subsection if the program--
       (A) is designed to assure that the needs of the State's 
     residents for health care services are met;
       (B) includes and enforces occupancy targets for inpatient 
     hospital facilities;
       (C) includes and enforces utilization targets for services 
     subject to review under the plan;
       (D) identifies where appropriate which facilities (and 
     parts of facilities) would be consolidated in order to reach 
     the occupancy and utilization targets for health care 
     services; and
       (E) provides an opportunity for review and comment by 
     interested parties.

     SEC. 5433. AUTHORIZATION OF APPROPRIATIONS.

       There are authorized to be appropriated $150,000,000 for 
     the 5-year period beginning with fiscal year 1996 for grants 
     under this part.
                     Subtitle F--General Provisions

     SEC. 5501. ESTABLISHMENT OF FEDERAL STANDARDS.

       (a) Establishment of General Standards for Health Benefit 
     Plans.--
       (1) Standards for carriers providing insured health benefit 
     plans.--Not later than July 1, 1995, the Secretary shall 
     establish standards for carriers providing insured health 
     benefit plans consistent with this section and the 
     requirements described in subtitle A.
       (2) Standards for sponsors of self-insured health benefit 
     plans.--Not later than July 1, 1995, the Secretary of Health 
     and Human Services (in consultation with the Secretary of 
     Labor) shall establish and publish standards for self-insured 
     health benefit plans and the sponsors of such plans 
     consistent with this section and the requirements of subtitle 
     B. Under such standards, the Secretary of Labor would 
     annually certify (for years beginning with 1997) each self-
     insured health benefit plan found by the Secretary of Labor 
     to be in compliance with such standards, based on information 
     provided by the plans in such manner and format as the 
     Secretary of Labor considers appropriate.
       (3) Standards for plans that supplement the guaranteed 
     national benefit package.--Not later than July 1, 1995, the 
     Secretary shall establish standards for supplemental health 
     benefit policies in accordance with the requirements for such 
     policies (and the entities offering such policies) consistent 
     with this section and the requirements described in subtitle 
     C.
       (b) Special Rules for Programs of the Indian Health 
     Service.--
       (1) In general.--The standards established under subsection 
     (a) apply with respect to the certification of health 
     programs of the Indian Health Service (as used in section 901 
     of the Indian Health Care Improvement Act), except as 
     provided in paragraph (3).
       (2) Applicable regulatory authority.--The applicable 
     regulatory authority with respect to the certification of 
     health programs of the Indian Health Service under this title 
     shall be the Secretary. The Secretary may not delegate the 
     responsibility for certification.
       (3) Excepted standards.--The Secretary shall, after 
     consulting with Indian tribes, tribal organizations, and 
     urban Indian organizations, promulgate regulations describing 
     the standards or elements of standards which the Secretary 
     finds are not appropriate to health programs of the Indian 
     Health Service. In carrying out this subsection, the 
     Secretary shall apply the same standards in the same manner 
     to health programs operated directly by the Indian Health 
     Service as the Secretary applies to health programs operated 
     by tribes, tribal organizations, and urban Indian 
     organizations.
       (4) Report.--The Secretary shall submit a report to the 
     Congress describing the standards which the Secretary finds 
     are not appropriate and the reasons therefore.
       (5) Regulations.--Regulations promulgated under this 
     section shall be promulgated no later than 3 months after the 
     date that standards are established and published under 
     subsection (a).
       (c) Special Rules for Programs of the Department of 
     Veterans Affairs.--
       (1) In general.--The standards established under subsection 
     (a) apply with respect to the certification of health plans 
     of the Department of Veterans Affairs, except as provided in 
     paragraph (3).
       (2) Applicable regulatory authority.--The applicable 
     regulatory authority with respect to the certification of 
     health plans of the Department of Veterans Affairs under this 
     title shall be the Secretary. The Secretary may not delegate 
     the responsibility for certification.
       (3) Special rules.--The Secretary shall, after consulting 
     with the Secretary of Veterans Affairs, promulgate 
     regulations describing the standards or elements of standards 
     which the Secretary finds are not appropriate to health plans 
     of the Department of Veterans Affairs. Under such 
     regulations, the Secretary shall assure that premium charged 
     for enrollment in such a plan may not be less than the 
     actuarial value of the benefits provided to enrollees under 
     the plan.
       (4) Report.--The Secretary shall submit a report to the 
     Congress describing the standards which the Secretary finds 
     are not appropriate and the reasons therefore.
       (5) Regulations.--Regulations promulgated under this 
     section shall be promulgated no later than 3 months after the 
     date that standards are established and published under 
     subsection (a).
       (d) Role of NAIC in Relation to Solvency Standards.--
       (1) Request.--The Secretary shall request the NAIC (in 
     consultation with the American Society of Actuaries) within 6 
     months after the date of the enactment of this title--
       (A) to develop model regulations that specify standards 
     with respect to the solvency requirements described in 
     section 5013 (consistent with paragraph (2)), and
       (B) to submit such model regulations to the Secretary.
       (2) Specifications for standards.--The standards specified 
     by the model regulations under paragraph (1)(A) shall include 
     the following:
       (A) Capital requirements for carriers, based on financial 
     analysis, appropriate for maintaining reasonable net worth 
     for the type of carrier (and plan) involved, including a 
     requirement for additional capital in the case of factors 
     likely to adversely affect the carrier's financial stability 
     and solvency as measured by the following:
       (i) Projected plan enrollment.
       (ii) The number of participating providers.
       (iii) The extent and nature of risk-sharing with 
     participating providers.
       (iv) Prior performance of the carrier and its plans and 
     liquidity of the carrier's assets.
       (B) Procedures for financial review of carriers.
       (C) Procedures for ongoing monitoring and enforcement of 
     compliance with the standards.
       (D) Standards for the oversight and regulation of financial 
     transactions between the carrier and its parent or affiliate 
     organizations.
       (E) Criteria for determining whether a carrier is in a 
     financially impaired condition.
       (F) Standards for health plan guaranty funds described in 
     section 5013(d), including standards with respect to premium 
     assessments.
       (3) Use of model regulation.--If the NAIC develops and 
     submits model regulations on a timely basis under paragraph 
     (1) and the Secretary determines that the model regulations 
     incorporates such solvency requirements, the Secretary shall 
     incorporate such model regulations within the standards 
     established under this section.
       (e) Standards Relating to Coordination of Enrollment and 
     Coverage.--
       (1) In general.--In establishing standards for health 
     benefit plans under this section, the Secretary shall 
     establish rules concerning when changes in enrollment become 
     effective under health benefit plans in relation to changes 
     in the status of an individual enrolled in a health benefit 
     plan.
       (2) Monthly changes.--Such rules shall be designed--
       (A) to provide automatic coverage to newborns as of the 
     date of birth,
       (B) in the case of an individual provided coverage through 
     employment, to provide for coverage through the end of the 
     month in which the employment is terminated, and
       (C) to prevent eligible individuals from having any periods 
     of noncoverage when changing enrollment among health benefit 
     plans.
       (3) Special rules for coordination of coverage.--The 
     Secretary shall provide for such rules as may be necessary to 
     provide for the allocation of responsibility among certified 
     health plans (and the medicare program and medicare part C) 
     in the case of an inpatient hospital stay, or in the case in 
     which a single payment amount is made for other services 
     provided over a period of time, that begins during the period 
     of coverage under one such health benefit plan and ends 
     during a period of coverage under another such certified 
     health plan or program.

     SEC. 5502. ENFORCEMENT THROUGH APPROVED STATE PROGRAMS.

       (a) In General.--If the Secretary determines that a State 
     has in effect an effective regulatory program--
       (1) for the application of the standards established under 
     section 5501(a)(1) to carriers providing insured health 
     benefit plans (including provisions imposing penalties under 
     the same conditions and in the same amounts as provided for 
     under section 5503(a), and other provisions to monitor and 
     enforce such standards), and for providing for collecting and 
     disseminating information under section 5009, the Secretary 
     may approve such program for purposes of certification of 
     carriers and insured health benefit plans under subtitle A; 
     and
       (2) for the application of the standards established under 
     section 5501(a)(3) to carriers providing supplemental health 
     benefit policies (including provisions imposing penalties 
     under the same conditions and in the same amounts as provided 
     for under section 5503(a), and other provisions to monitor 
     and enforce such standards), and for providing for collecting 
     and disseminating information with respect to such policies 
     under section 5106(b), the Secretary may approve such program 
     for purposes of certification of carriers and supplemental 
     health benefit policies under subtitle C.
       (b) Annual Reports.--As a condition for the continued 
     approval of such a regulatory program, the State shall report 
     to the Secretary annually such information as the Secretary 
     may require with respect to the performance of the program. 
     Such information shall include a list of the carriers and 
     insured health benefit plans or supplemental health benefit 
     policies (as the case may be) certified under the program, 
     the compliance of such carriers and plans with the applicable 
     standards established under section 5501, and monitoring and 
     enforcement actions taken to ensure such compliance.
       (c) Periodic Secretarial Review of State Regulatory 
     Programs.--The Secretary annually shall review State 
     regulatory programs approved under subsection (a) to 
     determine if they adequately continue to apply, monitor, and 
     enforce the standards. If the Secretary initially determines 
     that a State regulatory program no longer is applying and 
     enforcing such standards, the Secretary shall provide the 
     State an opportunity to adopt such a plan of correction that 
     would bring such program into compliance. If the Secretary 
     makes a final determination that the State regulatory program 
     fails to apply and enforce such standards after such an 
     opportunity, the Secretary shall disapprove such program and 
     assume responsibility for certification of all carriers and 
     insured health benefit plans or supplemental health benefit 
     policies (as the case may be) in that State, for establishing 
     enrollment periods under section 5003(b), and for providing 
     for collecting and disseminating information under section 
     5011.
       (d) GAO Audits.--The Comptroller General shall conduct 
     periodic reviews on a sample of State regulatory programs 
     approved under subsection (a) to determine their compliance 
     with the requirements of such subsection. The Comptroller 
     General shall report to the Secretary and Congress on the 
     findings of such reviews.
       (e) Effect on Secretarial Responsibilities.--Nothing in 
     this section may be construed to restrict the Secretary's 
     ability to obtain such information and carry out such 
     activities as may be necessary to impose the Federal 
     penalties described in section 5503 or to otherwise carry out 
     duties and responsibilities under this title in a State with 
     an approved program under this section.

     SEC. 5503. FEDERAL PENALTIES.

       (a) Application of Federal Civil Monetary Penalties.--
       (1) In general.--Any person who sells or issues a health 
     plan--
       (A) that is not certified in accordance with this title is 
     subject to a civil money penalty not to exceed $25,000 for 
     each such violation,
       (B) in violation of the requirements of part 2 of subtitle 
     B (relating to financial requirements for self-insured health 
     benefit plans) is subject to the civil money penalty 
     applicable under such part, and
       (C) in violation of any other requirement under subtitle A, 
     B, or C is subject to a civil money penalty not to exceed 
     $25,000 for each such violation.
       (2) Procedures for imposition.--Except as provided in 
     subsection (d), the provisions of section 1128A of the Social 
     Security Act (other than subsections (a) and (b)) shall apply 
     to civil money penalties under this subsection in the same 
     manner as they apply to a penalty or proceeding under section 
     1128A of such Act.
       (3) Imposition of penalties by appropriate secretary.--The 
     civil money penalties referred to in paragraph (1) shall be 
     imposed by the Secretary of Health and Human Services (in the 
     case of penalties relating to an insured health benefit plan 
     or a supplemental health benefit policy) or the Secretary of 
     Labor (in the case of penalties relating to a self-insured 
     health benefit plan).
       (4) Availability of injunctive relief.--The Secretary of 
     Health and Human Services (in cases relating to an insured 
     health benefit plan or a supplemental health benefit policy) 
     or the Secretary of Labor (in cases relating to a self-
     insured health benefit plan) may obtain injunctive relief to 
     enjoin any act or omission which may be subject to a civil 
     money penalty under this subsection.
       (5) Application of federal penalties.--A person is subject 
     to a penalty under this section without regard to whether the 
     applicable regulatory authority with respect to the person is 
     the Secretary or the State.
       (b) Withholding Federal Financial Assistance to States not 
     Enforcing Anti-Discrimination Requirements.--If the Secretary 
     finds that a State has not adopted and is not enforcing the 
     requirements described in section 5002 (relating to anti-
     discrimination requirements for carriers providing insured 
     health benefit plans) with respect to insured health benefit 
     plans in the State, the Secretary may--
       (1) withhold Federal financial assistance payments to the 
     State; and
       (2) refer any findings to the Attorney General for further 
     action pursuant to subtitle A of title IX.
       (c) Penalty for Certain Policies Duplicating Coverage.--
       (1) In General.--Any person who sells or issues a health 
     plan described in paragraph (4) that duplicates coverage of 
     any item or service covered under the guaranteed national 
     benefit package is subject to a civil money penalty not to 
     exceed $25,000 for each such violation. Paragraph (2) of 
     subsection (a) shall apply with respect to a penalty under 
     the previous sentence in the same manner as such paragraph 
     applies to penalties under such subsection.
       (2) Exception for plans providing benefits without regard 
     to other coverage.--Paragraph (1) shall not apply with 
     respect to any health plan that provides benefits to an 
     enrollee without regard to any benefits provided to the 
     enrollee under another plan.
       (3) Exception for liability insurance coverage.--Paragraph 
     (1) shall not apply with respect to any health plan described 
     in clause (iv) or (v) of section 5504(15)(B) that provides 
     benefits to an enrollee without regard to any benefits 
     provided to the enrollee under a plan other than a plan 
     described in such clause.
       (4) Plans described.--The health plans described in this 
     paragraph are the plans described in section 5504(15)(B), but 
     do not include a maintenance of effort policy provided under 
     section 8904a of title 5, United States Code.
       (d) Procedures for Imposition of Penalties for Violation of 
     Financial Requirements for Self-Insured Plans.--
       (1) Applicability.--The procedures described in this 
     subsection shall apply with respect to the imposition of a 
     civil money penalty against the sponsor of a self-insured 
     health benefit plan for violations of any requirements 
     described in part 2 of subtitle B (relating to financial 
     requirements).
       (2) Considerations in imposition.--In determining the 
     amount of any penalty to be assessed under the procedures 
     established under this section, the Secretary of Labor shall 
     take into account the previous record of compliance of the 
     person being assessed with the applicable requirements for 
     sponsors of self-insured health benefit plans under subtitle 
     B and the gravity of the violation.
       (3) Administrative review.--
       (A) Opportunity for hearing.--The person assessed shall be 
     afforded an opportunity for hearing by the Secretary of Labor 
     upon request made within 30 days after the date of the 
     issuance of a notice of assessment. In such hearing all 
     evidence shall be determined on the record pursuant to 
     section 554 of title 5, United States Code. If no hearing is 
     requested, the assessment shall constitute a final and 
     unappealable order.
       (B) Hearing procedure.--If a hearing is requested, the 
     initial agency decision shall be made by an administrative 
     law judge, and such decision shall become the final order 
     unless the Secretary of Labor modifies or vacates the 
     decision. Notice of intent to modify or vacate the decision 
     of the administrative law judge shall be issued to the 
     parties within 30 days after the date of the decision of the 
     judge. A final order which takes effect under this paragraph 
     shall be subject to review only as provided under paragraph 
     (4).
       (4) Judicial review.--
       (A) Filing of action for review.--Any person against whom 
     an order imposing a civil money penalty has been entered 
     after an agency hearing under this subsection may obtain 
     review by the United States district court for any district 
     in which such person is located or the United States District 
     Court for the District of Columbia by filing a notice of 
     appeal in such court within 30 days from the date of such 
     order, and simultaneously sending a copy of such notice be 
     registered mail to the Secretary of Labor.
       (B) Certification of administrative record.--The Secretary 
     of Labor shall promptly certify and file in such court the 
     record upon which the penalty was imposed.
       (C) Standard for review.--The findings of the Secretary of 
     Labor shall be set aside only if found to be unsupported by 
     substantial evidence as provided by section 706(2)(E) of 
     title 5, United States Code.
       (D) Appeal.--Any final decision, order, or judgment of such 
     district court concerning such review shall be subject to 
     appeal as provided in chapter 83 of title 28 of such Code.
       (5) Failure to pay assessment; maintenance of action.--
       (A) Failure to pay assessment.--If any person fails to pay 
     an assessment after it has become a final and unappealable 
     order, or after the court has entered final judgment in favor 
     of the Secretary of Labor, the Secretary shall refer the 
     matter to the Attorney General who shall recover the amount 
     assessed by action in the appropriate United States district 
     court.
       (B) Nonreviewability.--In such action the validity and 
     appropriateness of the final order imposing the penalty shall 
     not be subject to review.
       (6) Payment of penalties.--Except as otherwise provided, 
     penalties collected under this subsection shall be paid to 
     the Secretary of Labor (or other officer) imposing the 
     penalty and shall be available without appropriation and 
     until expended for the purpose of enforcing the provisions 
     with respect to which the penalty was imposed.
       (e) Availability of Private Right of Action for Aggrieved 
     Individuals.--
       (1) In general.--Any person aggrieved by an act or omission 
     of an individual or entity which constitutes a failure to 
     comply with an applicable requirement of this title may 
     obtain from such individual or entity in any court of 
     competent jurisdiction appropriate relief, including actual, 
     compensatory, and punitive damages and equitable relief.
       (2) Exception for certain violations.--Paragraph (1) does 
     not apply in the case of an act or omission upon which a 
     complaint may be filed in a complaint review office pursuant 
     to section 9304 or for which a remedy may be sought under 
     section 9333.
       (3) Attorney's fees and costs.--In any action under 
     paragraph (1) in which the plaintiff substantially prevails, 
     the court shall award the plaintiff reasonable attorney's 
     fees (at generally prevailing hourly rates), reasonable 
     expert witness fees, and other reasonable costs, unless the 
     court finds that such award would not be appropriate.
       (4) Exhaustion of remedies.--In an action under paragraph 
     (1), the court shall exercise jurisdiction without regard to 
     whether the aggrieved person has exhausted any administrative 
     or other remedies that may be provided by law.

     SEC. 5504. DEFINITIONS.

       In this title:
       (1) Applicable regulatory authority.--The term ``applicable 
     regulatory authority'' means--
       (A) the Secretary, or
       (B) in the case of a State that has assumed responsibility 
     for enforcement of standards under subtitle A pursuant to a 
     State program approved under section 5502, the authority of 
     the State that is exercising such responsibility.
       (2) Carrier.--The term `carrier' means a licensed insurance 
     company, a hospital or medical service corporation (including 
     an existing Blue Cross or Blue Shield organization, within 
     the meaning of section 833(c)(2) of the Internal Revenue Code 
     of 1986), a health maintenance organization, or other entity 
     licensed or certified by a State to provide health insurance 
     or health benefits. The Secretary may issue regulations that 
     provide for affiliated carriers to be treated as a single 
     carrier where appropriate under this title.
       (3) Health benefit plan.--
       (A) In general.--The term ``health benefit plan'' means a 
     health plan, other than a plan described in subparagraph (B).
       (B) Exception.--The term ``health benefit plan'' does not 
     include any of the following (or any combination thereof):
       (i) Coverage only for accident, dental, vision, disability 
     income, or long-term care insurance, or any combination 
     thereof.
       (ii) Medicare supplemental health insurance.
       (iii) Coverage issued as a supplement to liability 
     insurance.
       (iv) Liability insurance, including general liability 
     insurance and automobile liability insurance.
       (v) Worker's compensation or similar insurance.
       (vi) Automobile medical-payment insurance.
       (vii) Coverage for a specified disease or illness.
       (viii) A hospital or fixed indemnity policy.
       (ix) Coverage provided exclusively to individuals who are 
     not eligible individuals under this Act.
       (4) Health plan.--The term ``health plan'' means--
       (A) any contract of health insurance, including any 
     hospital or medical service policy or certificate, hospital 
     or medical service plan contract, or health maintenance 
     organization contract, that is provided by a carrier, or
       (B) an employee welfare benefit plan or other arrangement 
     insofar as the plan or arrangement provides health benefits 
     and is funded in a manner other than through the purchase of 
     one or more policies or contracts described in subparagraph 
     (A).
       (5) High deductible plan.--The term ``high deductible 
     plan'' means an insured health benefit plan (other than a 
     plan that provides services through a provider network) that 
     provides for cost-sharing using the standard cost-sharing 
     schedule under section 3013(a) for which the carrier 
     establishes the deductible in accordance with paragraph (4) 
     of such section.
       (6) Insured.--The term ``insured'' means, with respect to a 
     plan, a plan that is provided by a carrier.
       (7) Managed care plan.--The term ``managed care plan'' 
     means a health benefit plan that provides for services 
     included in the guaranteed national benefit package under the 
     plan (other than services described in subsections (c) and 
     (d) of section 5009) primarily through providers in the 
     provider network of the plan.
       (8) Market sector.--The term ``market sector'' means a 
     market sector described in section 5003(e)(2).
       (9) NAIC.--The term ``NAIC'' means the National Association 
     of Insurance Commissioners.
       (10) Point-of-service plan.--The term ``point-of-service 
     plan'' means an unlimited-choice-of-provider plan that also 
     permits an enrollee to receive benefits through a provider 
     network.
       (11) Provider network.--The term ``provider network'' 
     means, with respect to a health plan, providers who have 
     entered into an agreement with the plan under which such 
     providers are obligated to provide items and services covered 
     under the plan to individuals enrolled in the plan subject to 
     the managed care cost-sharing schedule established under 
     section 3014.
       (12) Self-insured.--The term ``self-insured'' means, with 
     respect to a plan, a plan that is described in paragraph 
     (4)(B).
       (13) Sponsor.--The term ``sponsor'' means, in relation to a 
     health plan that--
       (A) is insured, the carrier providing the plan, or
       (B) is self-insured, the entity that sponsors the plan.
       (14) State.--The term ``State'' means the 50 States, the 
     District of Columbia, Puerto Rico, the Virgin Islands, Guam, 
     the Northern Mariana Islands, and American Samoa.
       (15) Supplemental health benefit policy.--
       (A) In general.--The term ``supplemental health benefit 
     policy'' means a health insurance policy or health benefit 
     plan which provides--
       (i) coverage for items and services not included in the 
     guaranteed national benefit package, or
       (ii) coverage for items and services included in such 
     package but not covered because of a limitation in amount, 
     duration, or scope of benefits (including coverage for cost-
     sharing),


     or both.
       (B) Exclusions.--Such term does not include the following:
       (i) Coverage only for accident, disability income, or long-
     term care insurance, or any combination thereof.
       (ii) Medicare supplemental health insurance.
       (iii) Coverage issued as a supplement to liability 
     insurance.
       (iv) Liability insurance, including general liability 
     insurance and automobile liability insurance.
       (v) Worker's compensation or similar insurance.
       (vi) Automobile medical-payment insurance.
       (vii) Coverage for a specified disease or illness.
       (viii) A hospital or fixed indemnity policy.
       (ix) Coverage provided exclusively to individuals who are 
     not eligible individuals under this Act.
       (C) Exception for services covered under certified self-
     insured plan.--Such term does not include any self-insured 
     health benefit plan certified by the Secretary under section 
     5501(a)(1)(B) as meeting the standards applicable to such a 
     plan under subtitle B, notwithstanding that the plan provides 
     coverage for any item or service described in subparagraph 
     (A).
       (16) Type of plan.--Each of the following is considered to 
     be a separate ``type'' of plan:
       (A) A managed care plan.
       (B) A point-of-service plan.
       (C) A high deductible plan.
       (D) An unlimited-choice-of-provider plan that is not a 
     point-of-service plan or a high deductible plan.
       (16) Unlimited-choice-of-provider plan.--
       (A) In general.--The term ``unlimited-choice-of-provider 
     plan'' means a health benefit plan that, regardless of 
     whether it permits enrollees to receive benefits through a 
     provider network--
       (i) provides coverage for all items and services included 
     in the guaranteed national benefit package that are furnished 
     by any lawful health care provider, subject to permissible 
     coverage limitations (described in subparagraph (B)), and
       (ii) makes payment to such a provider whether or not there 
     is a contractual arrangement between the plan and the 
     provider subject to cost sharing at the standard cost-sharing 
     schedule (described in section 3013).
       (B) Permissible coverage limitations described.--The 
     permissible coverage limitations are (as specified by the 
     Secretary) the following:
       (i) Utilization review.
       (ii) Prior approval for specified services (not including 
     routine prior approval for services), other than services 
     provided for the treatment of an emergency medical condition 
     (as defined in section 1867(e)(1) of the Social Security 
     Act).
       (iii) Exclusion of providers on the basis of poor quality 
     of care, based on evidence obtainable by the plan.

     SEC. 5505. PREEMPTION OF STATE LAW.

       No State may enforce any law or regulation that is 
     inconsistent with any standard established under this title.

     SEC. 5506. CONSTRUCTION OF REFERENCES.

       In this title, except as otherwise specifically provided, 
     any references to provisions of the Social Security Act or 
     the Employee Retirement Income Security Act of 1974 are 
     deemed to be references to such provisions as in effect on 
     the day after the date of the enactment of this Act, taking 
     into account the amendments made to such provisions by this 
     Act.
               Subtitle G--Transitional Insurance Reforms

     SEC. 5601. ESTABLISHMENT OF STANDARDS.

       (a) In General.--The Secretary of Health and Human Services 
     (in consultation with the Secretary of Labor) shall establish 
     standards to carry out the requirements of this subtitle.
       (b) Certification of Compliance.--For each 6-month period 
     in which this subtitle is effective, each health plan sponsor 
     shall file a certification with the Secretary (or with a 
     State with which the Secretary has entered into an 
     arrangement under subsection (c)(2)) that the sponsor is in 
     compliance with the requirements of this subtitle.
       (c) Enforcement.--
       (1) Issuance of regulations.--The Secretary shall issue 
     regulations to carry out this subtitle, and is authorized to 
     issue such regulations on an interim basis that become final 
     on the date of publication, subject to change based on 
     subsequent public comment. The Secretary may consult with 
     States and the National Association of Insurance 
     Commissioners in issuing regulations and guidelines under 
     this subtitle.
       (2) Arrangements with states.--The Secretary may enter into 
     arrangements with a State to enforce the requirements of this 
     subtitle with respect to insured health benefit plans issued 
     or sold, or established and maintained, in the State.
       (d) Sanctions and Remedies.--
       (1) In general.--Any health plan sponsor that violates a 
     requirement of this subtitle shall be subject to a civil 
     money penalty of not more than $25,000 for each such 
     violation. The provisions of section 1128A of the Social 
     Security Act (other than subsections (a) and (b)) shall apply 
     to civil money penalties under this subparagraph in the same 
     manner as they apply to a penalty or proceeding under section 
     1128A(a) of such Act.
       (2) Equitable remedies.--A civil action may be brought by 
     the Secretary--
       (A) to enjoin any act or practice which violates any 
     provision of this subtitle, or
       (B) to obtain other appropriate equitable relief (I) to 
     redress such violations, or (II) to enforce any provision of 
     this subtitle, including, in the case of a wrongful 
     termination of (or refusal to renew) coverage, reinstating 
     coverage effective as of the date of the violation.
       (e) Construction.--The provisions of this subtitle shall be 
     construed in a manner that assures, to the greatest extent 
     practicable, continuity of health benefits under health 
     benefit plans in effect on the effective date of this Act.
       (f) Special Rules for Acquisitions and Transfers.--The 
     Secretary may issue regulations regarding the application of 
     this subtitle in the case of insured health benefit plans (or 
     groups of such plans) which are transferred from one carrier 
     to another carrier through assumption, acquisition, or 
     otherwise, and in the case of plans terminated pursuant to a 
     joint marketing agreement entered into prior to January 1, 
     1994.

     SEC. 5602. CONTINUATION OF COVERAGE.

       (a) Prohibition of Termination.--
       (1) Group health insurance plans.--Each health plan sponsor 
     that provides a group health insurance plan for a group of 
     employees may not terminate (or fail to renew) coverage for 
     the group, or for any covered individual, if the employer of 
     the employees continues the plan, except in the case of--
       (A) nonpayment of required premiums, or
       (B) fraud or misrepresentation of a material fact relating 
     to an application for coverage or claim for benefits.
       (2) Individual health insurance plans.--Each carrier 
     providing an individual health insurance plan may not 
     terminate (or fail to renew) coverage for an individual 
     covered under the plan (or a covered dependent), except in 
     the case of--
       (A) nonpayment of required premiums,
       (B) fraud, or
       (C) misrepresentation of a material fact relating to an 
     application for coverage or claim for benefits.
       (3) Self-insured health benefit plans.--Each sponsor of a 
     self-insured health benefit plan may not terminate (or fail 
     to renew) coverage for an individual covered under the plan 
     (or a covered dependent), except in the case of--
       (A) nonpayment of required premiums,
       (B) fraud, or
       (C) misrepresentation of a material fact relating to an 
     application for coverage or claim for benefits.
       (b) Acceptance of New Members in a Group Health Insurance 
     Plan.--
       (1) In general.--In the case of a health plan sponsor that 
     provides a group health insurance plan that is in effect on 
     the effective date of this subtitle, the sponsor is 
     required--
       (A) to accept all individuals, and their eligible 
     dependents, who become full-time employees (as defined in 
     section 3467(b)(1) of the Internal Revenue Code of 1986) of 
     an employer covered after such effective date;
       (B) to establish and apply premium rates that are 
     consistent with section 5605; and
       (C) to limit the application of pre-existing condition 
     restrictions in accordance with section 5603.
       (2) Consistent application of rules relating to dependents 
     and waiting periods.--In this subsection, the term ``eligible 
     dependent'', with respect to a group health insurance plan, 
     has the meaning provided under the plan as of June 29, 1994, 
     or, in the case of a plan not established as of such date, as 
     of the date of establishment of the plan.

     SEC. 5603. LIMITS ON PRE-EXISTING CONDITION EXCLUSIONS.

       (a) In General.--Subject to the succeeding provisions of 
     this section, a carrier providing an insured health benefit 
     plan may exclude coverage with respect to services related to 
     treatment of a pre-existing condition, but the period of such 
     exclusion may not exceed 6 months and such exclusion shall 
     not apply with respect to services furnished to newborns, 
     pregnancy-related services, or to a plan for which such 
     exclusion did not apply as of the effective date of this 
     subtitle.
       (b) Crediting of Previous Coverage.--
       (1) In general.--A carrier providing an insured health 
     benefit plan shall provide that if an individual covered 
     under such a plan is in a period of continuous coverage (as 
     defined in paragraph (2)(A)) with respect to particular 
     services as of the date of initial coverage under such plan, 
     any period of exclusion of coverage with respect to a pre-
     existing condition for such services or type of services 
     shall be reduced by 1 month for each month in the period of 
     continuous coverage.
       (2) Definitions.--As used in this subsection:
       (A) Period of continuous coverage.--The term ``period of 
     continuous coverage'' means, with respect to particular 
     services, the period beginning on the date an individual is 
     enrolled under a health benefit plan, the medicare program, a 
     State medicaid plan, or other health benefit arrangement 
     which provides benefits with respect to the same or 
     substantially similar services (as determined in accordance 
     with criteria established by the Secretary) and ends on the 
     date the individual is not so enrolled for a continuous 
     period of more than 3 months (or for a longer period with 
     respect to individuals who lose employment and meet such 
     other conditions as the Secretary may specify).
       (B) Pre-existing condition.--The term ``pre-existing 
     condition'' means, with respect to coverage under a health 
     benefit plan, a condition which has been diagnosed or treated 
     during the 6-month period ending on the day before the first 
     date of such coverage (without regard to any waiting period).

     SEC. 5604. PREMIUM CHANGES TO REFLECT CHANGES IN GROUP OR 
                   INDIVIDUAL CHARACTERISTICS OR TERMS OF 
                   COVERAGE.

       (a) Application.--The provisions of this section shall 
     apply to changes in premiums under insured health benefit 
     plans that reflect--
       (1) changes in the number of individuals covered under such 
     a plan;
       (2) changes in the group or individual characteristics 
     (including age, gender, family composition or geographic area 
     but not including health status, claims experience or 
     duration of coverage under the plan) of individuals covered 
     under such a plan;
       (3) changes in the level of benefits (including changes in 
     cost-sharing) under the plan; and
       (4) changes in any material terms and conditions of the 
     health benefit plan (other than factors related to health 
     status, claims experience, and duration of coverage under the 
     plan).
       (b) Division of Health Insurance Plans by Sector.--For 
     purposes of this section, each health plan sponsor shall 
     divide its health insurance business into the following 3 
     sectors:
       (1) Health insurance for groups with at least 100 covered 
     lives (in this subsection referred to as the ``large group 
     sector'')
       (2) Health insurance for groups with fewer than 100 covered 
     lives (in this subsection referred as the ``small group 
     sector'').
       (3) Health insurance for individuals, and not for groups 
     (in this subsection referred to as the ``individual 
     sector'').
       (c) Single Set of Rate Factors.--
       (1) In general.--Each health plan sponsor shall develop a 
     single set of rate factors which will be used to calculate 
     any changes in premium within a sector described in 
     subsection (b) that relate to the reasons described in 
     paragraphs (1) through (4) of subsection (a).
       (2) Standards.--Such rate factors--
       (A) shall relate to reasonable and objective differences in 
     demographic characteristics, in the design and in levels of 
     coverage, and in other terms and conditions of a contract,
       (B) shall not relate to expected health status, claims 
     experience, or duration of coverage of the one or more groups 
     or individuals, and
       (C) shall comply with regulations established under section 
     5606.
       (d) Computation of Premium Changes.--
       (1) In general.--Changes in premium rates within a sector 
     that relate to the reasons described in subsection (a) shall 
     be calculated using the rate factors developed pursuant to 
     subsection (c).
       (2) Application of factors.--
       (A) In general.--The change in premium rates with respect 
     to each health benefit plan shall reflect the rate factors 
     specified under subsection (c) applicable to the reason as 
     applied to the current premium charged for the plan. Such 
     rate factors shall be applied in a manner so that the 
     resulting adjustment, to the extent possible, reflects the 
     premium that would have been charged under the plan if the 
     reason for the change in premium had existed at the time that 
     the current premium rate was calculated.
       (B) No reflection of change in health status.--In applying 
     the rate factors under this paragraph, the adjustment shall 
     not reflect any change in the health status, claims 
     experience or duration of coverage with respect to any 
     employer or individual covered under the plan.
       (e) Limitation on Application.--This section shall only 
     apply--
       (1) to changes in premiums occurring on or after the date 
     of the enactment of this Act to groups and individuals 
     covered as of such date, and
       (2) with respect to groups and individuals subsequently 
     covered, to changes in premiums subsequent to such coverage.
       (f) Application to Community-rated Plans.--Nothing in this 
     section shall require the application of rate factors related 
     to individual or group characteristics with respect to any 
     health benefit plan that, as of the date of the enactment of 
     this Act, does not use such factors in the determination of 
     premiums under the plan.

     SEC. 5605. LIMITATIONS ON CHANGES IN PREMIUMS FOR PLANS IN 
                   INDIVIDUAL SECTOR AND SMALL GROUP SECTOR 
                   RELATED TO INCREASES IN HEALTH CARE COSTS AND 
                   UTILIZATION.

       (a) Application.--The provisions of this section shall 
     apply to changes in premiums for insured health benefit plans 
     in the individual sector and the small group sector (as such 
     terms are defined in section 5604(b)) that reflect increases 
     in health care costs and utilization.
       (b) Equal Increase for All Plans Within Each Sector.--
       (1) In general.--To the extent that any increase in 
     premiums by a health plan sponsor for insured health benefit 
     plans reflect increases in health care costs and 
     utilization--
       (A) the annual percentage increase for plans within the 
     individual sector shall be the same for all such plans in the 
     sector; and
       (B) the annual percentage increase for plans within the 
     small group sector shall be the same for all such plans in 
     the sector.
       (2) Geographic application.--Paragraph (1)--
       (A) may be applied on a national level, or
       (B) may vary based on geographic area, but only if (i) such 
     areas are sufficiently large to provide credible data on 
     which to calculate the variation and (ii) the variation is 
     due to reasonable factors related to the objective 
     differences among such areas in costs and utilization of 
     health services.
       (3) Exceptions to accommodate state rate reform efforts.--
     Paragraph (1) shall not apply, in accordance with guidelines 
     of the Secretary, to the extent necessary to permit a State 
     to narrow the variations in premiums among insured health 
     benefit plans offered by health plan sponsors to similarly 
     situated groups or individuals within a sector.
       (4) Other reasons specified by the secretary.--The 
     Secretary may specify through regulations such other 
     exceptions to the provisions of this subsection as the 
     Secretary determines are required to enhance stability of the 
     health insurance market and continued availability of 
     coverage.
       (c) Even Application Throughout a Year.--In applying the 
     provisions of this section to an insured health benefit plan 
     that are renewed in different months of a year, the annual 
     percentage increase shall be applied in a consistent, even 
     manner so that any variations in the rate of increase applied 
     in consecutive months are even and continuous during the 
     year.
       (d) Petition for Exception.--A health plan sponsor may 
     petition the Secretary (or a State acting under a contract 
     with the Secretary under section 5601(c)(3)) for an exception 
     from the application of the provisions of this section. The 
     Secretary may approve such an exception if--
       (1) the sponsor demonstrates that the application of this 
     section would threaten the financial viability of the 
     sponsor, and
       (2) the sponsor offers an alternative method for increasing 
     premiums that is not substantially discriminatory to any 
     sector or to any group or individual covered by an insured 
     health benefit plan offered by the sponsor.

     SEC. 5606. MORE STRINGENT STATE LAWS NOT PREEMPTED.

       The requirements of this subtitle do not preempt any State 
     law unless the State law directly conflicts with such 
     requirements. The provision of additional protections under 
     State law shall not be considered to directly conflict with 
     such requirements.

     SEC. 5607. LIMIT ON CHANGES IN SELF-INSURED HEALTH BENEFIT 
                   PLANS.

       (a) In General.--A sponsor of a self-insured health benefit 
     plan may not make a modification of benefits described in 
     subsection (b).
       (b) Modification of Benefits Described.--
       (1) In general.--A modification of benefits described in 
     this subsection is any reduction or limitation in coverage, 
     effected on or after the effective date of this subtitle, 
     with respect to any medical condition or course of treatment 
     for which the anticipated cost for any individual enrollee is 
     likely to exceed $5,000 in any 12-month period.
       (2) Treatment of termination.--A modification of benefits 
     includes the termination of a plan if the sponsor, within a 
     period (specified by the Secretary) establishes a substitute 
     plan that reflects the reduction or limitation described in 
     paragraph (1).
       (c) Remedy.--Any modification made in violation of this 
     subsection shall not be effective and the sponsor of the 
     self-insured health benefit plan shall continue to provide 
     benefits as though the modification (described in subsection 
     (b)) had not occurred.

     SEC. 5608. DEFINITIONS.

       In this subtitle:
       (1) Covered employee.--The term ``covered employee'' means 
     an employee (or dependent of such an employee) covered under 
     a group health insurance plan.
       (2) Covered individual.--The ``covered individual'' means, 
     with respect to a health plan, an individual insured, 
     enrolled, eligible for benefits, or otherwise covered under 
     the plan.
       (3) Group health insurance plan.--
       (A) In general.--The term ``group health insurance plan'' 
     means a health benefit plan offered primarily to employers 
     for the purpose of providing health insurance to the 
     employees (and dependents) of the employer.
       (B) Inclusion of association plans and mewas.--Such term 
     includes--
       (i) any arrangement in which coverage for health benefits 
     is offered to employers through an association, trust, or 
     other arrangement, and
       (ii) a multiple employer welfare arrangement (as defined in 
     section 3(40) of the Employee Retirement Income Security Act 
     of 1974), whether funded through insurance or otherwise.
       (4) Individual health insurance plan.--
       (A) In general.--The term ``individual health insurance 
     plan'' means any health benefit plan directly purchased by an 
     individual or offered primarily to individuals (including 
     families) for the purpose of permitting individuals (without 
     regard to an employer contribution) to purchase health 
     insurance coverage.
       (B) Inclusion of association plans.--Such term includes any 
     arrangement in which coverage for health benefits is offered 
     to individuals through an association, trust, list-billing 
     arrangement, or other arrangement in which the individual 
     purchaser is primarily responsible for the payment of any 
     premium associated with the contract.
       (C) Treatment of certain association plans.--In the case of 
     a health benefit plan sponsored by an association, trust, or 
     other arrangement that provides health insurance coverage 
     both to employers and to individuals, the plan shall be 
     treated as--
       (i) a group health insurance plan with respect to such 
     employers, and
       (ii) an individual health insurance plan with respect to 
     such individuals.
       (5) State commissioner of insurance.--The term ``State 
     commissioner of insurance'' includes a State superintendent 
     of insurance.

     SEC. 5609. EFFECTIVE DATE.

       (a) Insured Health Benefit Plans.--The provisions of this 
     subtitle--
       (1) shall first apply to insured health benefit plans 
     provided in a State on or after January 1, 1995, except that 
     section 5602 shall apply to such plans on or after the date 
     of the enactment of this Act; and
       (2) shall not apply to an insured health benefit plan 
     provided in a State on and after the first day of the first 
     year during which the standards established by the Secretary 
     under section 5501 for insured health benefit plans sold to 
     individuals and employers are in effect in the State (in 
     accordance with such section).
       (b) Self-Insured Health Benefit Plans.--The provisions of 
     this subtitle--
       (1) shall first apply to self-insured health benefit plans 
     provided on or after January 1, 1995, except that section 
     5602 shall apply to such plans on or after the date of the 
     enactment of this Act; and
       (2) shall not apply as of the first day of the first year 
     during which the standards established by the Secretary under 
     section 5501 for self-insured health benefit plans and the 
     sponsors of such plans are in effect.
        TITLE VI--STANDBY COST CONTAINMENT IN THE PRIVATE SECTOR
           Subtitle A--National Health Expenditure Estimates

     SEC. 6001. NATIONAL PRIVATE SECTOR PER CAPITA HEALTH 
                   EXPENDITURE ESTIMATE.

       (a) Establishment.--
       (1) In general.--For each calendar year (beginning with 
     1996), there is established a national private sector per 
     capita health expenditure estimate (in this subtitle referred 
     to as the ``national private per capita estimate'') 
     determined under paragraph (2).
       (2) Amount.--Subject to subsection (e)--
       (A) 1996.--The national private per capita estimate for 
     1996 is equal to the private sector per capita budget 
     baseline for 1995 (determined under subsection (b)) 
     multiplied by the national private sector growth factor 
     (specified under subsection (c)) for 1996.
       (B) Subsequent years.--The total amount of the national 
     private per capita estimate for each year after 1996 is equal 
     to the national private per capita estimate determined under 
     this paragraph for the previous year multiplied by the 
     national private sector growth factor (specified under 
     subsection (c)) for the year involved.
       (3) Publication.--The Secretary of Health and Human 
     Services shall publish in the Federal Register and report to 
     the Congress--
       (A) by not later than April 1 before each year, an initial 
     estimate of the national private per capita estimate for the 
     year; and
       (B) by not later than October 1 before each year, a final 
     determination of the national private per capita estimate for 
     such year.
       (b) Private Sector Per Capita Budget Baseline.--The 
     Secretary shall compute a private sector per capita budget 
     baseline under this subsection for 1995 as follows:
       (1) 1993 actual expenditures.--The Secretary shall 
     determine (on the basis of the best data available) the 
     amount of the private sector per capita expenditures (as 
     determined under subsection (d)) for 1993.
       (2) Projection for 1995.--The Secretary shall increase such 
     amount by the Secretary's estimate of the percentage increase 
     in the national private per capita estimate between the 
     midpoint of 1993 and the midpoint of 1995.
       (c) National Private Sector Growth Factor.--The national 
     private sector growth factor under this subsection for each 
     year is 1 plus the sum (expressed as a fraction) of--
       (1) the average annual percentage increase in the per 
     capita gross domestic product (in current dollars, as 
     published by the Secretary of Commerce) during the 5-year 
     period ending with the second previous year; and
       (2)(A) for 1996, 2.4 percentage points,
       (B) for 1997, 0.6 percentage points, and
       (C) for each year thereafter, 0 percentage points.
       (d) Determination of National Private Per Capita 
     Expenditures for 1993.--
       (1) In general.--The Secretary shall determine for 1993 the 
     national private per capita expenditures equal to--
       (A) total covered health care expenditures (described in 
     paragraph (2)), divided by
       (B) the estimated average population in the United States 
     of individuals in 1993 who are eligible individuals (and 
     would be subject to the individual mandate in 1998) (other 
     than medicare part A beneficiaries and individuals entitled 
     to medical assistance under a State plan under title XIX of 
     the Social Security Act) for whom such expenditures were 
     determined.
       (2) Covered health care expenditures.--For purposes of 
     paragraph (1)(A), the Secretary shall determine covered 
     health care expenditures for 1993 as follows:
       (A) Determination of total expenditures.--
       (i) In general.--The Secretary shall first determine the 
     amount of total payments made for items and services included 
     in the guaranteed national benefit package (determined 
     without regard to cost sharing) or included in any standard 
     benefit package for supplemental health benefit policies 
     established under subtitle C of title V (determined without 
     regard to cost sharing) in the United States in 1993.
       (ii) Inclusion of all payers.--Except as provided in clause 
     (iii), the amount of total payments described in clause (i) 
     shall be determined without regard to the source of payment 
     and shall include (as specified by the Secretary) direct 
     patient expenditures and payments made by third party payers 
     (including Government health programs and health maintenance 
     organizations).
       (iii) Exclusions.--In computing such payment amounts, there 
     shall be excluded, as specified by the Secretary--

       (I) nonoperating revenues (such as interest);
       (II) receipts attributable to personal comfort and 
     convenience items described in section 6002(a)(5);
       (III) direct payments from the Federal Government, from 
     State government, from units of local government for research 
     to the extent unrelated (and not attributable) to the 
     provision of health care services;
       (IV) receipts attributable to the program for the provision 
     of hospital care and medical services by the Department of 
     Veterans' Affairs under chapter 17 of title 38, United States 
     Code;
       (V) payments made to health care facilities and providers 
     of the Department of Defense and of the Indian Health 
     Service; and
       (VI) such other receipts unrelated to the provision of 
     health care services as the Secretary specifies.

       (B) Removal of certain expenditures not included in private 
     sector.--The amount so determined shall be decreased by the 
     proportion of such amount that is attributable to any of the 
     following:
       (i) Medicare beneficiaries.
       (ii) Medicaid beneficiaries.
       (iii) Expenditures which are paid for through workers' 
     compensation or automobile or other liability insurance.
       (iv) Expenditures which are paid for items and services 
     excluded from classes of services under section 6002(a)(4).
       (v) Expenditures by parties (including the Federal 
     Government) that the Secretary determines will not be payable 
     by private health plans for coverage either of the guaranteed 
     national benefit package or under any supplemental health 
     benefit policy under this Act.
       (e) Adjustments.--
       (1) In General.--Except as provided in this subsection, the 
     Secretary is not authorized to adjust the national private 
     per capita estimate for a year once it is published before 
     October of the previous year.
       (2) Recommendations for changes.--Except as permitted under 
     paragraphs (3) and (4), the Secretary may submit to Congress 
     recommendations for changes in the national private per 
     capita estimate, but may not implement such recommendations 
     without the approval of Congress.
       (3) Correction permitted for estimation errors in private 
     sector per capita budget baseline.--Insofar as the Secretary 
     determines that the amounts used in estimating initially the 
     private sector per capita budget baseline described in 
     subsection (b) did not accurately reflect the actual amount 
     described in subsection (b)(1) and the actual percentage 
     increase described in subsection (b)(2), the Secretary shall 
     adjust the national private per capita estimate to correct 
     for such estimation errors.
       (4) Special rule for 1998.--The Secretary shall adjust the 
     national private per capita estimate for 1998 in order to 
     reflect the impact of universal coverage on the national 
     private per capita estimate, including--
       (A) the elimination from the private sector per capita 
     budget baseline under subsection (b) of amounts attributable 
     to uncompensated care or to a differential between payment 
     rates under title XIX of the Social Security Act and payment 
     rates in the private sector; and
       (B) increased utilization of, and expenditures for, items 
     and services covered under the guaranteed national benefit 
     package likely to occur, as a result of coverage of 
     individuals under certified health plans who, as of 1997 were 
     uninsured or underinsured with respect to such package.
       (5) Special rule for years after 2002.--The Secretary shall 
     adjust the national private per capita estimate for each year 
     after 2002 in order to reflect the impact of establishing an 
     annual out-of-pocket limit on cost-sharing under the 
     guaranteed national benefit package under section 3001.

     SEC. 6002. CLASSES OF HEALTH CARE SERVICES.

       (a) Establishment of Classes.--
       (1) In general.--
       (A) Specified services.--
       (i) In general.--Subject to subparagraph (B)(ii), in the 
     case of items and services specified in a subparagraph under 
     paragraph (2), all of the items and services described in 
     that subparagraph shall be considered to be a ``separate'' 
     class of health care services.
       (ii) Overlapping services.--Except as the Secretary may 
     provide, items and services specified in a subparagraph of 
     paragraph (2) shall be considered to be excluded from the 
     subsequent subparagraphs of that paragraph.
       (B) Other items and services.--
       (i) In general.--In the case of items and services included 
     as health care services under paragraph (3), the Secretary 
     shall group such items and services into such class or 
     classes of health care services as may be appropriate.
       (ii) Inclusion in classes of specified health care 
     services.--In carrying out clause (i), the Secretary may 
     include an item or service described in paragraph (3) within 
     a class of services established under subparagraph (A).
       (iii) Uniform definition of classes.--The Secretary shall 
     define classes under this section in a manner identical to 
     the definition of classes under section 8202.
       (2) Specified health care services.--Subject to paragraph 
     (4), the items and services specified in this paragraph are 
     as follows:
       (A) Inpatient hospital services, other than mental health 
     services.
       (B) Outpatient hospital services and ambulatory facility 
     services (including renal dialysis facility services), other 
     than mental health services.
       (C) Diagnostic testing services (including clinical 
     laboratory services and x-ray services).
       (D) Physicians' services and other professional medical 
     services, other than mental health services.
       (E) Home health services and hospice care.
       (F) Rehabilitation services, such as physical therapy, 
     occupational and speech therapy.
       (G) Durable medical equipment and supplies.
       (H) Prescription drugs and biologicals and insulin.
       (I) Nursing facility services, including skilled nursing 
     facility services and intermediate care facility services, 
     other than mental health services.
       (J) Mental health services.
       (3) Classification of additional items and services.--
     Subject to paragraph (4), with respect to items and services 
     (not described in paragraph (2)) which are included under the 
     guaranteed national benefit package or included in any 
     standard benefit package for supplemental health benefit 
     policies established under subtitle C of title V, the 
     Secretary may classify them either within a class specified 
     in paragraph (2) or within a new class established by the 
     Secretary for such an item or service.
       (4) Exclusions.--The following items and services shall not 
     be considered to be health care services and shall not be 
     included in a class of services under paragraph (1) or (3):
       (A) Over-the-counter medications and medical equipment and 
     devices.
       (B) Homemaker and home health aide services and personal 
     care services, and other services described in section 
     1915(c)(4)(B), section 1929(a), or section 1930(a) of the 
     Social Security Act.
       (C) Inpatient mental health services of a custodial nature.
       (5) Exclusion of institutional charges for personal comfort 
     and convenience items.--Payments received (and amounts 
     charged) by a facility which are attributable to items (such 
     as private rooms, telephones, and television rentals) 
     provided for the personal comfort and convenience of patients 
     shall not be counted as receipts (nor subject to limitations 
     on amounts that may be charged) for purposes of this title.
       (b) Publication.--
       (1) In general.--The Secretary shall publish--
       (A) by not later than April 1, 1995, proposed regulations 
     defining the health care services and establishing the 
     classes of services under this section, and
       (B) by not later than October 1, 1995, final regulations 
     defining the health care services and establishing such 
     classes.
       (2) Items included in regulations.--In such regulations, 
     the Secretary shall define--
       (A) the class or classes to be established under subsection 
     (a)(1),
       (B) the services to be included within each class, and
       (C) the methods and sources of data for computing, for 
     purposes of this title, the national private per capita 
     estimate within the class.
       (3) Changes.--
       (A) No changes authorized.--After the Secretary has 
     established classes of services under paragraph (1)(B), the 
     Secretary may not change such classes (or the services 
     included in such classes), except in the case of services not 
     previously classified. Any such services not previously 
     classified shall be classified within one of the classes 
     previously established.
       (B) Recommended changes.--If the Secretary determines that 
     a change in the classification established under this section 
     may be appropriate, the Secretary shall submit to the 
     Congress a report proposing such change. The Secretary shall 
     include in the report an explanation of--
       (i) the rationale for such change, and
       (ii) the impact of such change on the national private per 
     capita estimate permitted for classes of services that would 
     be affected by the change.
       (4) Commission reports.--
       (A) Initial reports.--With respect to the establishment of 
     classes of services under this section, each applicable 
     Commission (as defined in section 8202(c)), by not later than 
     June 1, 1995, shall report to the Congress its comments 
     concerning the classification proposed by the Secretary under 
     paragraph (1)(A).
       (B) Periodic reports.--Each applicable Commission shall 
     periodically report to Congress on changes in the system of 
     classification under this section that should be made to 
     promote the more efficient provision of medically appropriate 
     health care services.
       (c) Applicable Commission Defined.--In this title, the term 
     ``applicable Commission'' has the meaning given such term in 
     section 8202(c).

     SEC. 6003. ALLOCATION OF PER CAPITA ESTIMATES BY CLASS OF 
                   SERVICE.

       (a) Allocation.--
       (1) In general.--The Secretary shall allocate the national 
     private per capita estimate under section 6001 for a year 
     among classes of services specified under section 6002.
       (2) Proportional allocation based on historical projected 
     expenditures.--
       (A) In general.--The amount allocated to each class for a 
     year shall be equal to the national private per capita 
     estimate allocated for the year multiplied by the ratio 
     (expressed as a percentage) of--
       (i) the historical projected private expenditures for the 
     class for the year (as determined under subsection (b)(2)), 
     to
       (ii) the sum of such historical projected private 
     expenditures for all the classes for the year.
       (B) National annual rate of increase for a class of 
     services.--In this Act, the term ``national annual rate of 
     increase'' means, with respect to a class of services for a 
     year, the percentage by which--
       (i) the amount determined under subparagraph (A) for the 
     class for the year, exceeds
       (ii) the amount determined under such subparagraph for the 
     class for the preceding year.
       (3) Publication.--
       (A) In general.--The Secretary shall, in conjunction with 
     the publication of the initial estimate and final 
     determination of the national private per capita estimate 
     under section 6001(a)(3) for a year, publish in the Federal 
     Register and report to the Congress the allocation of the 
     national private per capita estimate among the classes of 
     services under this subsection.
       (B) Exception for 1996.--For 1996, the Secretary shall 
     publish and report the allocation of the national private per 
     capita estimate among the classes of services under this 
     subsection not later than August 1, 1995.
       (b) Historical Projected Private Expenditures.--
       (1) In general.--
       (A) Determination.--For purposes of subsection (a)--
       (i) For 1995.--The historical projected private 
     expenditures for a class of services for 1995 is equal to the 
     portion of the national private per capita estimate during 
     1993 (as determined under section 6001(b)(2)(A)) which is 
     attributable to the class of services, multiplied by the 
     private trend factor (described in subparagraph (B)) for the 
     class. In computing such portion for classes, the Secretary 
     shall take into account the allocation of expenditures by 
     health maintenance organizations among the different classes 
     of services.
       (ii) Subsequent years.--The historical projected private 
     expenditures for a class of services for a year after 1995 is 
     equal to the amount of the allocation for the class under 
     subsection (a)(2)(B) for the preceding year multiplied by the 
     trend factor (described in subparagraph (B)) for the class 
     and multiplied by the adjustment factor described in 
     subparagraph (C) for the year..
       (B) Private trend factor.--In subparagraph (A), subject to 
     subsection (c)(1)(B), the ``private trend factor'', for a 
     class of services, is 1 plus the average annual rate of 
     increase in per capita private expenditures for the class of 
     services during the 5-year period ending with 1995.
       (C) Adjustment factor.--The adjustment factor described in 
     this subparagraph for a year is equal to the ratio of--
       (i) the national private per capita estimate for the year 
     (as determined under section 6001(a)(2)), or, for 1995, the 
     private sector per capita budget baseline for 1995 (as 
     determined under section 6001(b)(2)), to
       (ii) the sum of the historical projected private 
     expenditures projected for all the classes for the year 
     (determined under subparagraph (A) without regard to this 
     subparagraph).
       (2) Publication of trend factors.--The Secretary shall 
     publish, by not later than August 1, 1995, the private trend 
     factors for the different classes of services.
       (c) Review and Changes in Allocation.--
       (1) In general.--
       (A) No administrative authority to change.--Except as 
     specifically provided in this paragraph or by law enacted 
     after the enactment of this Act, the Secretary has no 
     authority to change the allocation or private trend factors 
     from the allocation and private trend factors provided under 
     this section.
       (B) Adjustment in private trend factors.--The Secretary 
     shall make such adjustments in the private trend factors 
     under subsection (b)(1)(B) as the Secretary determines to be 
     appropriate to reflect changes in patterns of use of health 
     care services among the different classes of services. Such 
     adjustment shall be made by regulation published not later 
     than August 1, 1998, and shall be effective for determining 
     allocations for years beginning with 1999.
       (C) Recommended changes.--Subject to subparagraph (D), if 
     the Secretary determines that a change in the allocation of 
     an estimate among classes is appropriate, the Secretary shall 
     submit to the Congress a report proposing such change. The 
     Secretary shall include in the report an explanation of--
       (i) the rationale for such change, and
       (ii) the impact of such change on the national private per 
     capita estimate permitted for classes of services that would 
     be affected by the change.
       (D) Correction permitted for estimation errors.--Insofar as 
     the Secretary determines that the amounts used in estimating 
     initially the historical projected private expenditures under 
     this subsection did not accurately reflect the actual 
     portions described in subsection (b)(1)(A)(i) or the actual 
     private trend factors described in subsection (b)(1)(B), the 
     Secretary shall adjust the allocation of the national private 
     per capita estimate among classes of services to correct for 
     such estimation errors.
       (2) Commission review.--Each applicable Commission shall 
     annually review and report to Congress, in its report 
     submitted under section 6002(b)(4), on the effect of the 
     private trend factors used in the allocation of the national 
     private per capita estimate among classes of services. Such 
     report shall include such recommendations for appropriate 
     adjustments in the private trend factors as the applicable 
     Commission considers appropriate to properly take into 
     account at least--
       (A) changes in health care technology,
       (B) changes in the patterns and practices relating to 
     health care delivery found to be appropriate,
       (C) changes in the distribution of health care services, 
     and
       (D) the special health care needs of underserved rural and 
     inner city populations.

     SEC. 6004. NATIONAL HEALTH EXPENDITURES REPORTING SYSTEM.

       (a) In General.--The Secretary shall establish a national 
     health expenditures reporting system (in this section 
     referred to as the ``system'') for purposes of--
       (1) establishing the national private per capita estimate,
       (2) allocating the national private per capita estimate 
     among classes of services,
       (3) determining maximum payment rates,
       (4) monitoring of any State cost containment and benefit 
     management programs established by States pursuant to title 
     IV, and
       (5) otherwise carrying out this title.
       (b) Information Reporting.--
       (1) Annual report by providers.--
       (A) In general.--Under the system, providers of health care 
     services (including such providers within provider networks) 
     shall submit (by not later than April 15 of each year, 
     beginning with 1997) a report.
       (B) Contents.--Such a report shall include such information 
     as the Secretary specifies relating to the provision of 
     health care services in the previous year, including--
       (i) the volume and receipts for such services,
       (ii) cost and revenue data for hospitals and other 
     institutional providers and revenue data for other providers, 
     and
       (iii) information by class of service, type of payer, and 
     State of residence of individual provided the services.
     Information on revenues for activities not related to the 
     provision of direct patient care, such as teaching or 
     research or for services that are explicitly excluded from 
     the system of national health expenditures estimates, shall 
     be reported separately.
       (C) Form.--The report shall be submitted in such form and 
     manner (including the use of electronic transmission) as the 
     Secretary shall specify in regulation. Such form shall permit 
     the reporting of information by health plans on behalf of 
     providers who are in provider networks in the plan.
       (D) Use of reporting mechanisms.--To the maximum extent 
     practicable and appropriate, reporting under such system 
     shall be done through reporting mechanisms (such as uniform 
     hospital reports provided under section 9105) and using data 
     bases otherwise in use.
       (E) Use of surveys.--The Secretary may, where appropriate, 
     provide for the collection of information under the system 
     through surveys of a sample of health care providers or with 
     respect to a sample of information with respect to such 
     providers.
       (2) Confidentiality.--Information gathered pursuant to the 
     authority provided under this section shall not be disclosed 
     in a manner that identifies individual providers of services.
       (3) Transition.--Before April 15, 1997, for purposes of 
     this title, the Secretary may use such other data collection 
     and estimation techniques as may be appropriate for purposes 
     described in subsection (a).
       (c) Enforcement.--If a provider of health services is 
     required, under the system under this section, to report 
     information and refuses, after being requested by the 
     Secretary, to provide the information required, or 
     deliberately provides information that is false, the 
     Secretary may impose a civil money penalty of not to exceed 
     $10,000 for each such refusal or provision of false 
     information. The provisions of section 1128A of the Social 
     Security Act (other than subsections (a) and (b)) shall apply 
     to civil money penalties under the previous sentence in the 
     same manner as such provisions apply to a penalty or 
     proceeding under section 1128A(a) of such Act.
             Subtitle B--State Health Expenditure Estimates

     SEC. 6101. STATE PRIVATE SECTOR PER CAPITA HEALTH EXPENDITURE 
                   ESTIMATE.

       (a) Establishment.--
       (1) In general.--For each calendar year (beginning with 
     1996), the Secretary shall establish a State private sector 
     per capita health expenditure estimate (in this title 
     referred to as a ``State private per capita estimate'') for 
     each State under paragraph (2).
       (2) Amount.--Subject to subsection (e), the State private 
     per capita estimate for a State for a year is equal to the 
     national private per capita estimate for the year, 
     established under section 6001, multiplied by the applicable 
     State adjustment factor (specified under subsection (b)) for 
     the State.
       (3) Publication.--The Secretary shall publish in the 
     Federal Register and report to the Congress and to each 
     State--
       (A) by not later than April 1 before each year, an initial 
     estimate of the State private per capita estimate for each 
     State for the year; and
       (B) by not later than October 1 before each year, a final 
     determination of the State private per capita estimate for 
     each State for the year.
       (4) Periodic commission reports on state estimates.--Each 
     applicable Commission shall periodically review and report to 
     Congress on the State private per capita estimates 
     established under this section. Such a report shall include 
     such recommendations as the respective Commission deems 
     appropriate.
       (b) State Adjustment Factors.--
       (1) In general.--The Secretary shall compute a State 
     adjustment factor for each State consistent with this 
     subsection.
       (2) Utilization and price factors.--In establishing State 
     adjustment factors, the Secretary shall take into account the 
     following:
       (A) Ratio of state private sector per capita expenditures 
     to national private sector per capita expenditures.--Subject 
     to adjustments to reflect subparagraphs (B) and (C), the 
     ratio of a State private sector per capita expenditures (that 
     would be computed for the State under section 6001(d) if 
     computations under such section were made for that State 
     rather than for the United States) to the national private 
     per capita expenditures determined under such section.
       (B) Historic utilization.--With respect to utilization of 
     services, differences among the States in demographic 
     composition and historic utilization of different services in 
     the private sector in 1993.
       (C) Maximum payment rates under this title.--With respect 
     to the price of services, the price of such services that 
     would be allowed in the State in 1995 if the maximum payment 
     rates (provided under subtitle D) were to apply in the State 
     in 1995.
       (3) Adjustment to reflect health care expenditures for 
     state residents.--The Secretary shall provide for an 
     adjustment to take into account differences among States in 
     the in-State, and out-of-State, use of services by residents 
     and non-residents of the State, in order that the per capita 
     amount reflects per capita health care expenditures for 
     residents of the State for services provided anywhere in the 
     United States.
       (4) Average.--The Secretary shall establish the State 
     adjustment factors in such a manner as assures that the 
     population weighted average of such factors is 1.
       (c) Adjustment.--
       (1) In general.--Subject to paragraph (3), the provisions 
     of section 6001(e) shall apply to the State private per 
     capita estimates under this section in the same manner as 
     they apply to the national private per capita estimate.
       (2) Adjustment to correct estimation errors.--Insofar as 
     the Secretary determines that the amounts used in estimating 
     initially the State private per capita estimates did not 
     accurately reflect the correct values for the factors used in 
     computing State adjustments factors under subsection (b), the 
     Secretary shall adjust the State private per capita estimates 
     to correct for such estimation errors.
       (3) Adjustment in 1998.--In applying section 6001(e)(4) 
     under paragraph (1), the adjustment for each State private 
     per capita estimate shall be the same as the adjustment to 
     the national private per capita estimate under such section.
             Subtitle C--Stand-By Federal Cost Containment

     SEC. 6201. APPLICATION OF MAXIMUM PAYMENT RATES IN STATES 
                   THAT FAIL TO CONTROL COSTS.

       (a) Determination of State Performance.--
       (1) In general.--During each year (beginning with 1997), 
     the Secretary shall determine for each State whether the 
     actual State private per capita health care expenditures 
     (determined in a manner similar to the manner in which the 
     national private per capita expenditures is determined under 
     section 6001(d)(2)) for the previous year exceeded the State 
     private per capita estimate for the State for such year (as 
     determined under subtitle B). Such determination shall be 
     based on information submitted by providers under section 
     6005 and such other data as the Secretary finds appropriate.
       (2) Adjustment of actual per capita health expenditures.--
       (A) In general.--In accordance with procedures established 
     by the Secretary, a State may apply to the Secretary to 
     exclude from the computation of actual State per capita 
     health expenditures under paragraph (1) in the State for a 
     year expenditures attributable to health care needs of a 
     sudden and temporary nature, such as epidemics or natural 
     disasters, to the extent that health care expenditures for 
     such or similar needs were not reflected in the State private 
     per capita estimate.
       (B) Limitation.--For purposes of subparagraph (A), 
     expenditures extending over a period of longer than 6 months 
     shall not be considered temporary.
       (b) Application of Standby Cost Containment Under Subtitle 
     D.--
       (1) In general.--If the Secretary determines in a year 
     under subsection (a) beginning after 1999 that the actual 
     State per capita health expenditures in a State for the 
     previous year was greater than the State private per capita 
     estimate for the State for such year, subject to paragraph 
     (2) the provisions of subtitle D shall apply to charges 
     imposed (and payments made) for services furnished in the 
     State on or after January 1 of the following year.
       (2) Substitution of state approved alternative payment 
     system.--
       (A) Alternative payment system.--Subtitle D shall not apply 
     in a State for a year to services if the Secretary determines 
     that the State has in effect for the year an alternative 
     payment system that meets the applicable requirements of 
     subtitle A of title III for the services covered.
       (B) Benefits management program.--Subtitle D shall not 
     apply in a State for a year if the Secretary determines that 
     the State has in effect for the year a benefits management 
     program that meets the applicable requirements of subtitle B 
     of title III.
                   Subtitle D--Maximum Payment Rates

     Part 1--Establishment and Application of Maximum Payment Rates

     SEC. 6301. PROCESS.

       (a) Publication of Rates.--
       (1) In general.--The Secretary shall cause to have 
     published in the Federal Register--
       (A) not later than April 1 of each year (or not later than 
     September 1, 1995, in the case of rates for 1996), proposed 
     maximum payment rates under this subtitle for the following 
     year for public comment, and
       (B) not later than October 1 of each year (or not later 
     than December 1, 1995, in the case of rates for 1996), after 
     such consideration of public comment on the proposed rates, 
     the maximum payment rates under this subtitle for the 
     following year.
       (2) Payment rates only advisory for 1996 through 2000.--The 
     maximum payment rates for 1996 through 2000 published under 
     paragraph (1) are only advisory and shall not be applied to 
     payment for services during such years.
       (b) Items Included in Publications.--The Secretary shall 
     include in the publications referred to in subsection 
     (a)(1)--
       (1) a description of the payment methodology used in the 
     establishment of maximum payment rates; and
       (2) in the case of a publication under subsection 
     (a)(1)(B), the extent that the rates differ from the 
     applicable Commission's recommendations under subsection (c), 
     an explanation of the Secretary's grounds for not following 
     such recommendations.
       (c) Reports of Commissions.--With respect to the 
     establishment of maximum payment rates for services under 
     this subtitle, the applicable Commission, not later than June 
     1 of each year, shall report its recommendations to the 
     Secretary and Congress concerning such rates for the 
     following year. Each such report may include such other 
     recommendations relating to the operation of this subtitle as 
     the Commission considers appropriate.
       (d) Payment Rate Defined.--In this subtitle, the term 
     ``payment rate'' means, with respect to health care services 
     for which amounts are payable under a plan or program, the 
     rate of payment provided for under the plan or program and 
     including cost-sharing (including deductibles, coinsurance, 
     and extra billing amounts) applicable under the plan or 
     program with respect to the services.

     SEC. 6302. PAYMENT METHODOLOGY; RELATION TO ESTIMATE 
                   ALLOCATION.

       (a) Payment Methodology.--
       (1) In general.--Subject to sections 8002(c) and 8003, the 
     Secretary shall establish maximum payment rates under this 
     subtitle consistent with the payment rate methodology 
     specified under part 2.
       (2) Treatment of services within a class.--Nothing in this 
     title shall be construed as requiring that maximum payment 
     rates established under this subtitle for different health 
     care services within a class of services be the same or 
     determined under the same methodology.
       (b) Relation to National Private Per Capita Estimate.--
       (1) In general.--Subject to paragraph (2), the maximum 
     payment rates for a year shall be established under this 
     subtitle in a manner so that, if they were to apply in the 
     year in all the States under this title--
       (A) the national average private per capita expenditures 
     for all the services within each class subject to such rates, 
     is equal to
       (B) the percent of the national private per capita estimate 
     allocated to the class under section 6003(a)(1) for the year.
       (2) Rules for certain states.--The rates shall be 
     established under paragraph (1) not taking into account any 
     reductions in such rates effected under section 
     4004(c)(2)(A). The reductions under such section shall be 
     applied only to the rates (as so established) in that State.

     SEC. 6303. GENERAL APPLICATION AND ENFORCEMENT OF MAXIMUM 
                   PAYMENT RATES.

       (a) Limits on Charges.--
       (1) In general.--In the case of a provider that provides 
     health care services to an individual for which a maximum 
     payment rate is established and applied pursuant to this 
     subtitle and subtitle C--
       (A) the provider may not charge (i) an amount in excess of 
     such rate or (ii) on a payment basis other than the payment 
     basis established for such services under part 2;
       (B) the provider may not collect for such services an 
     amount in excess of such rate; and
       (C) the individual and other entities, including a health 
     benefit plan, are not liable collectively for payment of any 
     amount that exceeds such rate.
       (2) Relation to medicare programs.--This subsection shall 
     not apply to services furnished to an individual who is 
     entitled to benefits with respect to such services under 
     title XVIII of the Social Security Act, medicare part C, or 
     the program established under part B of title XXII of the 
     Social Security Act.
       (b) Enforcement Through Civil Money Penalties.--
       (1) Improper charges.--If a provider imposes a charge in 
     violation of subsection (a)(1)(A), the provider is subject to 
     civil money penalty in an amount not to exceed $100 for each 
     such charge.
       (2) Improper collection.--If a provider collects excess 
     amounts in violation of subsection (a)(1)(B) and does not 
     refund such excess amounts within 30 days of date on which 
     the provider is notified (in a form and manner specified by 
     the Secretary) that the provider collected excess amount, the 
     provider is subject to a civil money penalty in an amount 
     equal to three times the amount of such excess which has not 
     been so refunded or, if greater, $500.
       (3) Process.--The provisions of section 1128A of the Social 
     Security Act (other subsections (a) and (b)) shall apply to a 
     civil money penalty under this subsection in the same manner 
     as such provisions apply to a penalty or proceeding under 
     section 1128A(a) of such Act.
       (4) Deposit of penalties in all-payer health care fraud and 
     abuse control account.--Any civil money penalties collected 
     under this subsection shall be paid into the All-payer Health 
     Care Fraud and Abuse Control Account (established under 
     section 9212).

      Part 2--Methodologies for Determining Maximum Payment Rates

     SEC. 6311. BASIS FOR MAXIMUM PAYMENT RATES FOR INPATIENT 
                   HOSPITAL SERVICES.

       (a) Payment Rates.--
       (1) In general.--Subject to subsection (e), the maximum 
     payment rate established under this subtitle for a service 
     within the class of services consisting of inpatient hospital 
     services that is provided by--
       (A) a hospital that is not an exempt hospital (as defined 
     in paragraph (4)) is the payment rate specified in paragraph 
     (2), or
       (B) an exempt hospital is the payment rate specified in 
     paragraph (3).
       (2) Rate for general hospitals.--The payment rate under 
     this paragraph during a year shall be equal to the sum of the 
     following:
       (A) Standard drg-based payment rate.--The product of--
       (i) the standardized amount applicable to the hospital, as 
     established in accordance with subsection (b), adjusted under 
     subsection (d); and
       (ii) the weighting factor assigned to the service (as 
     determined in accordance with subsection (c)).
       (B) Outliers.--An amount for discharges classified as 
     outliers, in accordance with a methodology similar to the 
     methodology used under section 1886(d)(5)(A) of the Social 
     Security Act.
       (C) Direct graduate medical education.--An amount for 
     direct graduate medical education costs of the hospital, as 
     determined in accordance with section 7024(e(1)).
       (3) Rate for exempt hospitals.--The payment rate under this 
     paragraph during a year shall be determined on a per 
     admission basis, based on the allowable operating receipts of 
     the hospital (determined in the manner specified in 
     subparagraphs (A) and (B) of subsection (b)(2)).
       (4) Exempt hospital defined.--In this section, the term 
     ``exempt hospital'' means--
       (A) a psychiatric hospital (as defined in section 1861(f) 
     of the Social Security Act), including a psychiatric unit of 
     a hospital which is a distinct part of the hospital (as 
     defined by the Secretary);
       (B) a rehabilitation hospital (as defined by the 
     Secretary), including a rehabilitation unit of a hospital 
     which is a distinct part of the hospital (as defined by the 
     Secretary);
       (C) a hospital whose inpatients are predominantly 
     individuals under 18 years of age;
       (D) a hospital which has an average inpatient length of 
     stay (as determined by the Secretary) of greater than 25 
     days; or
       (E) a hospital that the Secretary has classified, at any 
     time on or before December 31, 1990, for purposes of applying 
     exceptions and adjustments to payment amounts under section 
     1886(d) of such Act, as a hospital involved extensively in 
     treatment for or research on cancer.
       (5) Exclusion of exempt hospitals in determinations.--For 
     purposes of the succeeding subsections of this section, the 
     term ``hospital'' does not include an exempt hospital.
       (b) Establishment of Standardized Amounts.--
       (1) In general.--The Secretary shall establish a 
     standardized amount under subsection (a) for hospitals 
     located in a large urban area and for other hospitals for a 
     year by standardizing the hospital's average cost per 
     discharge (based on the hospital's allowed operating 
     receipts, as determined under paragraph (2)) in accordance 
     with paragraph (3). For purposes of the preceding sentence, a 
     hospital is located in a ``large urban area'' if the hospital 
     is treated as being located in a large urban area under 
     section 1886(d) of the Social Security Act for purposes of 
     the medicare program.
       (2) Allowed operating receipts per discharge defined.--
       (A) In general.--For purposes of paragraph (1) and except 
     as provided in subparagraph (B), a hospital's ``allowed 
     operating receipts'' means the total of all receipts of the 
     hospital (without regard to the source) attributable to 
     routine operating costs, ancillary service operating costs, 
     and special care unit operating costs with respect to 
     inpatient hospital services, as determined on an average per 
     admission or per discharge basis (as determined by the 
     Secretary), during 1993, increased by the Secretary's 
     estimate of the percentage increase in such receipts between 
     the midpoint of 1993 and the midpoint of 1995.
       (B) Exclusions.--In determining a hospital's allowed 
     operating receipts per discharge under subparagraph (A), the 
     Secretary shall exclude receipts attributable to services for 
     which payment was made to the hospital under the medicare 
     program and discharges (or admissions) attributable to 
     individuals entitled to benefits under part A of the medicare 
     program.
       (C) Certain outpatient receipts included.--In determining a 
     hospital's allowed operating receipts under subparagraph (A), 
     the Secretary shall include all receipts attributable to 
     services that are provided by the hospital (or by an entity 
     wholly owned or operated by the hospital) to a patient during 
     the 3 days immediately preceding the date of the patient's 
     admission if such services are diagnostic services (including 
     clinical diagnostic laboratory tests) or are other services 
     related to the admission (as defined by the Secretary).
       (3) Process for standardizing amounts.--The Secretary shall 
     standardize the average per discharge amount for each 
     hospital for a year, in a manner similar to the 
     standardization process described in section 1886(d)(2)(C) of 
     the Social Security Act, by providing for the following 
     adjustments and exclusions:
       (A) Adjusting for variations among hospitals by area in the 
     average hospital wage level, using the area wage level 
     applied for hospitals under the medicare program under 
     section 1886(d)(3)(E) of the Social Security Act.
       (B) Adjusting for variations in case mix among hospitals.
       (C) Excluding an estimate of the additional payments to be 
     made for outliers, using the amounts paid to hospitals for 
     outliers under the medicare program under section 
     1886(d)(5)(A) of such Act (except that the Secretary may 
     apply different amounts if the Secretary finds that such 
     different amounts more accurately reflect outliers for 
     services furnished to individuals who are not medicare 
     beneficiaries).
       (D) Adjusting for variations among hospitals by area in 
     input prices other than wages and wage-related costs.;
       (E) Excluding an estimate of indirect medical education 
     costs, using the indirect medical education adjustment 
     applied for hospitals under the medicare program under 
     section 1886(d)(5)(B) of such Act.
       (F) Excluding an estimate of the additional payments made 
     for hospitals serving a disproportionate share of low-income 
     individuals, determined in the same manner as payment 
     adjustments made on behalf of such hospitals under section 
     1886(d)(5)(F) of such Act (as amended by this Act).
       (G) Excluding an estimate of direct graduate medical 
     education costs.
       (H) Excluding an estimate of capital-related costs.
       (c) Establishment of Diagnosis-Related Groups and Weighting 
     Factors.--
       (1) Diagnosis-related groups.--For purposes of this 
     section, the Secretary shall establish a classification of 
     inpatient hospital discharges by diagnosis-related groups and 
     a methodology for classifying specific hospital discharges 
     within these groups.
       (2) Weighting factors.--For each diagnosis-related group 
     established under paragraph (1), the Secretary shall assign 
     an appropriate weighting factor which reflects the relative 
     hospital resources used with respect to discharges classified 
     within that group compared to discharges classified within 
     other groups.
       (3) Use of medicare groups and factors.--In establishing 
     diagnosis-related groups and assigning weighting factors for 
     such groups under this paragraph, the Secretary shall use the 
     diagnosis-related groups and weighting factors used under the 
     medicare program under section 1886(d)(4) of the Social 
     Security Act, except to the extent that the Secretary must 
     establish diagnosis-related groups in addition to the groups 
     under such program, or adjust such weighting factors, to take 
     into account the application of payment rates under this 
     section to inpatient hospital services furnished to 
     individuals who are not medicare beneficiaries. In carrying 
     out this paragraph, the Secretary shall establish separate 
     diagnosis-related groups and weighting factors applicable to 
     services furnished to children.
       (d) Adjustments to Standardized Amounts.--The adjustments 
     under this subsection are as follows:
       (1) Wage adjustment.--Adjusting for variations among 
     hospitals by area in the average hospital wage level, using 
     the area wage level applied for hospitals under the medicare 
     program under section 1886(d)(3)(E) of the Social Security 
     Act.
       (2) Non-wage adjustment.--Adjusting for variations among 
     hospitals by area in input prices other than wages and wage-
     related costs.
       (3) Addition of indirect medical education.--Adding an 
     amount for the indirect medical education costs of the 
     hospital, in accordance with section 7024(e)(2).
       (4) Addition of capital.--Adding an amount for capital and 
     capital-related costs, determined in the same manner as 
     payment for such costs is provided under section 1886(g) of 
     the Social Security Act.
       (5) Addition of dsh.--Adding an amount in the case of 
     hospitals serving a disproportionate share of low-income 
     individuals, determined in the same manner as payment 
     adjustments are made on behalf of such hospitals under 
     section 1886(d)(5)(F) of such Act (as amended by this Act).
       (e) Other Adjustments.--
       (1) Needs of certain facilities.--The Secretary may adjust 
     the maximum payment rates otherwise determined under this 
     section for hospitals in such manner and to such extent as 
     the Secretary considers appropriate to take into account the 
     needs of--
       (A) regional and national referral centers described in 
     section 1886(d)(5)(C) of the Social Security Act;
       (B) sole community hospitals described in section 
     1886(d)(5)(D) of such Act; and
       (C) essential access hospitals designated by the Secretary 
     under section 1820(i)(1) of such Act.
       (2) Rules for transferred patients.--The Secretary shall 
     provide for rules for applying the maximum payment rates 
     under this section in the case of a hospital for inpatient 
     hospital services provided to patients transferred to (or 
     from) the hospital, in accordance with the rules used with 
     respect to such transfers under the medicare program.

     SEC. 6312. BASIS FOR MAXIMUM PAYMENT RATES FOR CLASS OF 
                   PHYSICIANS' SERVICES AND OTHER PROFESSIONAL 
                   MEDICAL SERVICES.

       (a) Use of Relative Value Fee Schedule.--
       (1) In general.--Subject to subsection (b), the maximum 
     payment rates established under this subtitle for a service 
     within the class of services consisting of physicians' 
     services and other professional medical services during a 
     year shall be equal to the product of--
       (A) the relative value for the service applied under 
     section 1848(b) of the Social Security Act;
       (B) an applicable conversion factor (determined by the 
     Secretary in an amount consistent with the requirements of 
     section 6302(b)); and
       (C) the applicable geographic adjustment factors applied 
     under section 1848(b) of the Social Security Act.
       (b) New Procedure Codes and Relative Value Units.--In 
     applying subsection (a) in the case of services for which 
     relative value units have not been established under section 
     1848 of the Social Security Act, the Secretary shall 
     establish relative value units in the same manner as if 
     payment for such services were made under the medicare 
     program.
       (c) Publication of Definitions, Relative Value Units, and 
     Payment Policies.--The Secretary shall provide for 
     publication of such definitions, relative value units 
     (established under subsection (b)), and payment policies as 
     may be necessary for payers to apply the maximum payment 
     rates established under this section.

     SEC. 6313. BASIS FOR OTHER MAXIMUM PAYMENT RATES FOR SERVICES 
                   USING CERTAIN MEDICARE PAYMENT METHODOLOGIES.

       The maximum payment rates established under this subtitle 
     for services for any of the following classes of services 
     shall be determined using the applicable payment 
     methodologies under the medicare program as follows:
       (1) In the case of facility services described in section 
     1832(a)(2)(F) of the Social Security Act furnished in 
     connection with a surgical procedure specified pursuant to 
     section 1833(i)(1)(A) of such Act and furnished to an 
     individual in an ambulatory surgical center described in such 
     section, the methodology described in section 1833(i)(2) of 
     such Act.
       (2) For services provided by Federally qualified health 
     centers, the methodology shall be the cost-based methodology 
     used in determining payment amounts under the medicare 
     programs, as amended by section 7022, and the maximum payment 
     rates shall be the amounts determined under such programs.
       (3) For the class of diagnostic testing services described 
     in section 6002(a)(2)(C)--
       (A) in the case of clinical laboratory services, the 
     methodology described in sections 1833(a)(2)(D) and 1833(h) 
     of such Act (including the requirement of direct billing for 
     such services), and
       (B) in the case of other diagnostic services, the 
     applicable methodology under part B of title XVIII of the 
     Social Security Act.
       (4) In the case of an item of durable medical equipment 
     (described in section 1834(a)(13) of the Social Security 
     Act), the methodology described in section 1834(a)(1) of such 
     Act.
       (5) In the case of prosthetic devices and orthotics and 
     prosthetics, the methodology described in section 
     1834(h)(1)(A) of the Social Security Act.
       (6) In the case of psychologists and clinical social 
     workers, the methodologies described in section 1833(a)(1)(L) 
     and 1833(a)(1)(F) of the Social Security Act, respectively.
       (7) For prescription drugs, the methodology used to 
     determine payment limits under section 1834(d)(4) of the 
     Social Security Act, as inserted by section 3102(a), except 
     that--
       (A) any reference in such section to ``1998'' or ``1999'' 
     shall be deemed to be a reference to ``1996'' or ``1997'',
       (B) any reference in such section to ``4 12-month periods 
     ending with June 1997'' shall be deemed a reference to ``2 
     12-month periods ending with June 1995'', and
       (C) any reference in such section to the uniform percentage 
     increase determined under section 8206(a) shall be deemed a 
     reference to national rate of increase for the class of 
     prescription drugs established under 6003(a)(2)(B).
       (8) For renal dialysis services, home dialysis supplies and 
     equipment (as defined in section 1881(b)(8) of the Social 
     Security Act), and self-care home dialysis support services 
     (as defined in section 1881(b)(9) of such Act), the 
     methodology described in section 1881(b) of such Act.
       (9) For any other service within a class of services for 
     which the amount of payment made under part B of the medicare 
     program is determined on the basis of reasonable or 
     prevailing charge, the methodology used for payment for such 
     service under such part.

     SEC. 6314. SERVICES PROVIDED BY MANAGED CARE ORGANIZATIONS.

       (a) In General.--The maximum payment rates established 
     under this subtitle for capitation payments made to managed 
     care organizations for the guaranteed national benefit 
     package shall be determined using the applicable payment 
     methodologies established under subsection (b).
       (b) Payment Methodology.--
       (1) In general.--The Secretary shall establish a system of 
     determining payments to managed care organizations 
     contracting to provide the guaranteed national benefit 
     package on a capitated or risk basis.
       (2) Use of medicare methodology.--Such methodology shall be 
     based on the methodology used under section 1876 of the 
     Social Security Act, and the payment rates shall reflect the 
     guaranteed national benefit package and a representative 
     population of individuals in the private sector.
       (c) Payment Rates.--The maximum payment rates under this 
     section shall be equal to 95 percent of the actuarially 
     comparable cost of providing services to individuals not 
     enrolled with managed care organizations, consistent with 
     maximum payment rates established under this part.

     SEC. 6315. OTHER SERVICES.

       In the case of services within a class of services for 
     which a methodology for establishing maximum payment rates is 
     not otherwise provided pursuant to the preceding provisions 
     of this subtitle, by January 1, 1997, the Secretary shall 
     establish an appropriate methodology for establishing such 
     rates, taking into account the payment methodology or 
     methodologies in use under the medicare program or other 
     health benefit plans, including prospective payment 
     methodologies developed and implemented under section 
     8002(a).
             Subtitle E--Administrative and Judicial Review

     SEC. 6401. LIMITATION ON ADMINISTRATIVE AND JUDICIAL REVIEW.

       There shall be no administrative or judicial review of any 
     of the following determinations:
       (1) The maximum payment rates established under subtitle D, 
     including--
       (A) relative values and relative value units and conversion 
     factors;
       (B) the establishment of diagnosis-related groups, of the 
     methodology for the classification of discharges within such 
     groups, and of the appropriate weighting factors thereof.
       (2) The national private per capita estimate and the State 
     private per capita estimate for each State.
       (3) Allocation of the national private per capita estimate 
     or a State private per capita estimate to a class of health 
     services.

     SEC. 6402. REFERENCES TO MEDICARE PROVISIONS.

       In this title, except as otherwise specifically provided, 
     any references to provisions of title XVIII of the Social 
     Security Act are deemed to be references to such provisions 
     as in effect on the day after the date of the enactment of 
     the Guaranteed Health Insurance Act of 1994, taking into 
     account the amendments made to such title by such Act.
              Subtitle F--National Health Cost Commission

     SEC. 6501. NATIONAL HEALTH COST COMMISSION.

       (a) Establishment.--By not later than January 1, 1997, the 
     President shall establish a National Health Cost Commission 
     (in this subtitle referred to as the ``Commission'').
       (b) Composition.--The Commission shall consist of 9 
     members, appointed by the President, who shall serve at the 
     pleasure of the President. The President shall appoint 
     members based on their expertise and national recognition in 
     the fields of health economics, provider reimbursement, 
     health insurance, health benefits design, and related fields. 
     The Commission shall include individuals from diverse 
     geographic areas and, to the greatest extent feasible, the 
     membership of the Commission shall reflect the racial, 
     ethnic, and gender composition of the population of the 
     United States. In appointing members to the Commission, the 
     President shall seek recommendations from the Speaker and 
     majority and minority leaders of the House of Representatives 
     and the majority and minority leaders of the Senate.
       (c) Duties.--
       (1) Analyses.--
       (A) In general.--The Commission shall conduct analyses of 
     the health care cost and revenue data reported to the 
     Secretary under section 6004.
       (B) Analysis of regional variation in per capita 
     expenditures due to practice patterns.--The Commission shall 
     conduct analyses of the variations in per capita expenditures 
     and utilization patterns among different geographic areas 
     (that are States or sub-State areas) due to variation in 
     practice patterns, not due to other factors (such as health 
     care input prices and demographic factors).
       (2) Annual reports.--Not later than April 1 of each year, 
     beginning in 1998, the Commission shall submit a report to 
     Congress on health care costs in the United States. The 
     report shall include an analysis relating to each of the 
     following:
       (A) The rate of growth in health care costs, by type of 
     provider, by type of payer, and by State.
       (B) The success or failure of the private sector in 
     maintaining health care expenditures within the national 
     health expenditure estimates established under subtitle A on 
     a State-by-State basis.
       (C) The impact of universal coverage on health care costs 
     and on payment for services by private payers.
       (D) The future rate of growth in health care costs, based 
     on projections of historical trends, using the same economic 
     assumptions used by the Congressional Budget Office.
       (E) The variations in per capita expenditures described in 
     paragraph (1)(B).
       (3) Recommendations on changes in State health expenditure 
     estimates to eliminate inappropriate regional variation.--The 
     annual report submitted under this subsection in 1999 shall 
     include recommendations relating to such phased-in changes in 
     the State private sector per capita health expenditure 
     estimates under section 6101 as the Commission determines to 
     be appropriate to eliminate the effect of inappropriate 
     variations described in paragraph (1)(B). In making such 
     recommendations, the Commission shall take into account the 
     prior success of cost containment efforts in the States and 
     may take into account regional variations in demographic or 
     health status and in health care input prices.
       (d) Special Report in 2000.--
       (1) In general.--In the report submitted under subsection 
     (c)(2) in 2000, the Commission shall include a specific 
     finding regarding whether a system of cost containment should 
     be imposed on health care services provided under private 
     health benefit plans. The finding shall be based on the most 
     recent data available at the time of the report's 
     preparation.
       (2) Recommendations.--
       (A) In general.--Such report may recommend that the system 
     of private sector cost containment provided under subtitle C 
     be allowed to go into effect, or may recommend an alternative 
     system.
       (B) Legislative proposal.--Any recommendations which 
     require legislation to implement shall include a detailed 
     legislative proposal providing for their implementation.
       (C) No changes in guaranteed national benefit package.--
     Such recommendations shall not include any change in the 
     guaranteed national benefit package.
       (e) Administration.--The President shall assure such 
     compensation, staff, and support services for the Commission 
     as may be necessary for the Commission to carry out its 
     duties.

     SEC. 6502. EXPEDITED CONSIDERATION OF RECOMMENDATIONS AND 
                   ALTERNATIVES.

       (a) Introduction and Referral.--
       (1) In general.--If--
       (A) the report under section 6501(d) contains a detailed 
     legislative proposal, and
       (B) such report is accompanied by a statement (provided by 
     the Director of the Congressional Budget Office under 
     subsection (i)) that the system provided in the proposal 
     meets the cost-containment objectives set forth in this Act,
     the majority leader (or the leader's designee) in each House 
     shall introduce (by request and not later than 7 days after 
     the date of receipt by Congress of the report) the 
     legislative proposal as a bill. The title of that bill shall 
     be ``A bill to achieve the cost containment objectives set 
     forth in the Guaranteed Health Insurance Act of 1994, and for 
     other purposes.''.
       (2) Referral.--That bill shall be referred on the date of 
     introduction to the appropriate committee (or committees) in 
     accordance with rules of the respective Houses.
       (b) Discharge Deadline.--If any committee to which the bill 
     is referred does not report the bill by the end of the 45-day 
     period beginning on the date the bill was referred to the 
     committee, the committee shall be automatically discharged 
     from further consideration of the bill as of the end of such 
     period.
       (c) Floor Consideration.--
       (1) House of Representatives.--For the purpose of 
     expediting consideration and passage of a measure reported or 
     discharged under this section, it shall be in order for the 
     Committee on Rules of the House of Representatives to report 
     a privileged resolution providing for the consideration of 
     the bill. Any such resolution, if it makes in order any 
     amendments to the bill, shall make in order an amendment 
     consisting of the text of the Commission's recommendations.
       (2) Senate.--[LANGUAGE TO BE INSERTED LATER.]
       (d) No Recommittal.--It shall not be in order to move to 
     recommit the bill.
       (e) Final Passage.--A vote on final passage of the bill 
     shall be taken in a House not later than the end of the 15-
     day period beginning on the date on which the motion to 
     proceed to its consideration in that House has been approved.
       (f) Special Rules.--If the House of Representatives 
     approves a bill and the Senate approves a bill the text of 
     which is identical to the text of the bill approved by the 
     House of Representatives, the Senate is deemed to have 
     approved the bill approved by the House of Representatives, 
     effective on the later of--
       (1) the date of approval of a bill in the Senate, or
       (2) the date the Senate receives a message from the House 
     of Representatives announcing that the House has passed the 
     bill.
       (g) Rules of House of Representatives and Senate.--This 
     section is enacted by the Congress--
       (1) as an exercise of the rulemaking power of the House of 
     Representatives and of the Senate, respectively, or of that 
     House to which they specifically apply and such rules 
     supersede other rules only to the extent that they are 
     inconsistent therewith, and
       (2) with full recognition of the constitutional right of 
     either House to change such rules (so far as relating to such 
     House) at any time, in the same manner and to the same extent 
     as in the case of any other rule of that House.
       (h) Not Including Certain Days.--Days on which a House of 
     Congress is not in session because of an adjournment of more 
     than 3 days shall be excluded in the computation of any 
     number of days in a period under this section with respect to 
     that House.
       (i) Congressional Budget Office Determinations.--The 
     Director of the Congressional Budget Office, upon request of 
     the Commission or an appropriate committee, shall--
       (1) review any bill to be proposed by the Commission or the 
     committee to determine if the system of health care cost 
     containment reflected in the bill would meet the cost-
     containment objectives set forth in this Act, and
       (2) provide a written statement of such determination.
                  TITLE VII--PUBLIC HEALTH INITIATIVES

                      table of contents for title

                Subtitle A--Health Workforce Priorities

      Part 1--National Plan Regarding Physicians and Other Health 
                             Professionals


              SUBPART A--NATIONAL PLAN; GENERAL PROVISIONS

Sec. 7001. Development of Plan.


       SUBPART B--NATIONAL PLAN; PROVISIONS REGARDING PHYSICIANS

Sec. 7011. National Advisory Council on Graduate Medical Education.
Sec. 7012. Annual designation of authorized per-specialty number of 
              specialty positions; requirements regarding primary 
              health care.
Sec. 7013. Allocation of specialty positions among approved physician 
              training programs.

                 Part 2--Payments to Teaching Hospitals

Sec. 7021. Formula payments regarding private-sector share of costs of 
              graduate of medical education.
Sec. 7022. Agreement regarding compliance with allocation system.
Sec. 7023. Application for payments.
Sec. 7024. Annual amount of payments.
Sec. 7025. Transitional provisions regarding direct-cost payments.
Sec. 7026. Rule of construction regarding medicare amendments.

            Part 3--Qualifying Physician Training Consortia

Sec. 7031. Special rules regarding allocation of specialty positions 
              and receipt of direct-cost payments.

 Part 4--Transitional Payments for Teaching Hospitals Losing Specialty 
                               Positions

Sec. 7041. Transitional payments to teaching hospitals.

               Part 5--Other Health Professions Programs


                 SUBPART A--GRADUATE NURSING EDUCATION

Sec. 7051. Federal payments for graduate nursing education.


                       SUBPART B--MEDICAL SCHOOLS

Sec. 7061. Federal payments for medical schools.

                    Part 6--Miscellaneous Provisions

Sec. 7071. Study of funding needs of health professions schools.
Sec. 7072. Additional studies.

                       Part 7--General Provisions

Sec. 7081. Definitions.

 Subtitle B--Certain Direct Spending Programs of Public Health Service

                      Part 1--Biomedical Research

Sec. 7101. Additional funding.

            Part 2--Core Functions of Public Health Programs

Sec. 7111. Table of contents regarding revised provisions of title XIX 
              of Public Health Service Act.
Sec. 7112. Direct spending regarding formula grants to States.

   Part 3--Health Centers for Populations Lacking Access to Services

Sec. 7121. Purpose of program.
Sec. 7122. Table of contents regarding new title XXVII of Public Health 
              Service Act.
Sec. 7123. Direct spending regarding federally qualified health 
              centers; development of additional centers.
Sec. 7124. Conforming amendments.

                 Part 4--National Health Service Corps

Sec. 7131. Purpose of program.
Sec. 7132. Direct spending regarding general program and scholarship 
              and loan repayment programs.

           Part 5--Consumer Resources Regarding Health Plans

Sec. 7141. Consumer resources.

 Part 6--Scholarship and Loan Repayment Programs Regarding Service in 
                        Public Health Positions

Sec. 7151. Establishment of scholarship and loan repayment programs.

    Subtitle C--Assistance for Capital Costs of Safety-Net Hospitals

Sec. 7201. Table of contents regarding new title XXVIII of Public 
              Health Service Act.
Sec. 7202. Direct spending regarding certain hospitals.

        Subtitle D--Other Programs in Public Health Service Act

Sec. 7301. School-based health clinics.
Sec. 7302. Rural and urban managed care program.
Sec. 7303. Emergency medical services in rural areas.
Sec. 7304. Allied health professions.
Sec. 7305. Community health advisors.
Sec. 7306. Training of health professionals for rural areas.
Sec. 7307. Regional poison control centers.
Sec. 7308. COBRA continuation coverage; transitional coverage 
              requirement for group health plans.

                       Subtitle E--Mental Health

Sec. 7401. State comprehensive managed mental health and substance 
              abuse programs.
Sec. 7402. Comprehensive community mental health services for children 
              with serious emotional disturbances.

       Subtitle F--United States-Mexico Border Health Commission

Sec. 7501. Agreement to establish binational commission.
Sec. 7502. Duties.
Sec. 7503. Other authorized functions.
Sec. 7504. Membership.
Sec. 7505. Regional offices.
Sec. 7506. Reports.
Sec. 7507. Definitions.

           Subtitle G--Comprehensive School Health Education

                       Part 1--General Provisions

Sec. 7601. Purposes.
Sec. 7602. Definitions.
Sec. 7603. Prohibition against Federal control of education.
Sec. 7604. Prohibition against distribution of obscene materials.

          Part 2--School Health Education; General Provisions

Sec. 7611. Authorizations of appropriations.
Sec. 7612. Waivers of statutory and regulatory requirements.

  Part 3--School Health Education; Grants to State Education Agencies

Sec. 7621. Application for grant.
Sec. 7622. Selection of grantees.
Sec. 7623. Amount of grant.
Sec. 7624. Authorized activities; limitation on administrative costs.
Sec. 7625. Subgrants to local educational agencies.

               Subtitle H--Occupational Safety and Health

Sec. 7701. Occupational injury and illness prevention.

                  Subtitle I--Miscellaneous Provisions

Sec. 7801. Identifying strategies for assessing impact of health care 
              reform.
Sec. 7802. Study of worksite wellness programs.
                Subtitle A--Health Workforce Priorities

      PART 1--NATIONAL PLAN REGARDING PHYSICIANS AND OTHER HEALTH 
                             PROFESSIONALS

              Subpart A--National Plan; General Provisions

     SEC. 7001. DEVELOPMENT OF PLAN.

       (a) In General.--
       (1) Development of plan.--The Secretary shall develop and 
     carry out in accordance with this part a plan for the 
     applicable period to be known as the National Health Care 
     Workforce Plan.
       (2) Purpose.--The purpose of the Plan shall be to establish 
     a national goal for the United States of developing a health 
     care workforce whose composition reflects the needs of the 
     United States for practitioners in the various health 
     professions, including the need for practitioners in primary 
     health care.
       (3) Definitions.--For purposes of this subtitle:
       (A) The term ``applicable period'' means the academic years 
     designated by the Secretary as the years to which a plan 
     under paragraph (1) is to apply, except that the initial 
     applicable period shall be the academic years 1998 through 
     2002.
       (B) The term ``academic year'' means the 1-year period 
     beginning on July 1. The academic year beginning July 1, 
     1998, is academic year 1998.
       (C) The term ``Plan'' means the plan under paragraph (1) 
     for the applicable period involved.
       (b) Provisions Regarding Health Professionals Other Than 
     Physicians.--With respect to health professionals other than 
     physicians, the Secretary shall in carrying out subsection 
     (b) ensure that, for the academic years of the applicable 
     period, the Plan--
       (1) establishes recommendations for national goals 
     regarding the number and variety of such professionals that 
     should be trained (including goals regarding nurse 
     practitioners and other advanced practice nurses); and
       (2) provides recommendations for encouraging the training 
     of such professionals in accordance with the goals.
       (c) Provisions Regarding Physicians.--
       (1) In general.--With respect to physicians, the Secretary 
     shall develop the Plan in accordance with subpart B.
       (2) Applicability of certain requirements.--Subsections (e) 
     through (g) apply both to provisions of the Plan that relate 
     to physicians and to provisions of the Plan that relate to 
     other health professionals.
       (d) Periodic Review and Revision of Plan.--With respect to 
     the discretion provided in this part to the Secretary for the 
     development and administration of the Plan, the Secretary 
     shall periodically review the Plan, and shall revise the Plan 
     to the extent determined by the Secretary to be appropriate.
       (e) Consideration of Projected Numbers of Professionals.--
     In developing and revising the Plan, the Secretary shall take 
     into account projections of the health care needs of the 
     United States.
       (f) Consultations.--In developing and revising the Plan, 
     the Secretary shall consult with the advisory council 
     established under section 7011, consumers, experts in health 
     workforce needs, teaching physicians, physicians in private 
     practice, nurses, representatives of health insurers 
     (including health maintenance organizations and other managed 
     care plans), other organizations representing physicians, 
     organizations involved in the accreditation of residency 
     training programs, and organizations involved in the 
     certification of practitioners.
       (g) Report to Congress.--Not later than June 30, 1996, the 
     Secretary shall submit to the Congress a final report 
     describing the contents of the initial Plan. The report shall 
     include an analysis of the impact on teaching hospitals and 
     other training sites of limiting support for training, 
     consistent with the Plan. The Secretary may submit interim 
     reports regarding any component of the Plan (regardless of 
     whether the Secretary has prepared other components).

       Subpart B--National Plan; Provisions Regarding Physicians

     SEC. 7011. NATIONAL ADVISORY COUNCIL ON GRADUATE MEDICAL 
                   EDUCATION.

       (a) In General.--There is established within the Department 
     of Health and Human Services an advisory council to be known 
     as the National Advisory Council on Graduate Medical 
     Education (in this subtitle referred to as the ``Council'').
       (b) Duties.--The Council shall provide advice to the 
     Secretary on carrying out this subpart. In providing such 
     advice, the Council shall develop and submit to the Secretary 
     a proposal for the components of the Plan under section 7001 
     that relate to physicians (including the provisions of the 
     Plan required in sections 7012 and 7013).
       (c) Composition.--
       (1) In general.--The Secretary shall appoint to the Council 
     15 individuals who are not officers or employees of the 
     United States. Such individuals shall include not less than 1 
     individual from each of the following categories of 
     individuals or entities:
       (A) Organizations representing consumers of health care 
     services.
       (B) Physicians who are faculty members of medical schools 
     (as defined in section 7012(f)), or who supervise approved 
     physician training programs (as so defined).
       (C) Physicians in private practice who are not physicians 
     described in subparagraph (B).
       (D) Practitioners in public health.
       (E) Medical schools.
       (F) Teaching hospitals.
       (G) Certified health plans (as defined in section 2).
       (H) The Accreditation Council on Graduate Medical 
     Education.
       (I) The American Board of Medical Specialities.
       (J) The Council on Postdoctoral Training of the American 
     Osteopathic Association.
       (K) The Council on Podiatric Medical Education of the 
     American Podiatric Medical Association.
       (2) Requirements regarding representative membership.--To 
     the greatest extent feasible, the membership of the Council 
     shall represent the various geographic regions of the United 
     States, shall reflect the racial, ethnic, and gender 
     composition of the population of the United States, and shall 
     be broadly representative of medical schools and teaching 
     hospitals in the United States.
       (3) Ex officio members; other federal officers or 
     employees.--The membership of the Council shall include 
     individuals designated by the Secretary to serve as members 
     of the Council from among Federal officers or employees who 
     are appointed by the President, or by the Secretary (or by 
     other Federal officers who are appointed by the President 
     with the advice and consent of the Senate). Individuals 
     designated under the preceding sentence shall include each of 
     the following officials (or a designee of the official):
       (A) The Secretary of Health and Human Services.
       (B) The Secretary of Veterans Affairs.
       (C) The Secretary of Defense.
       (d) Chair.--The Secretary shall, from among members of the 
     Council appointed under subsection (c)(1), designate an 
     individual to serve as the Chair of the Council.
       (e) Termination.--The Council terminates December 31, 1999.

     SEC. 7012. ANNUAL DESIGNATION OF AUTHORIZED PER-SPECIALTY 
                   NUMBER OF SPECIALTY POSITIONS; REQUIREMENTS 
                   REGARDING PRIMARY HEALTH CARE.

       (a) Annual Authorization of Number of Positions Per 
     Specialty.--With respect to physicians, the Secretary shall 
     in carrying out section 7001 ensure that, for each medical 
     specialty, the Plan designates, for each of the academic 
     years of the applicable period, the number of individuals 
     nationwide who are authorized to be enrolled in approved 
     physician training programs in the specialty for the academic 
     year involved, including a designation of the number of 
     individuals who are authorized to enter the programs for such 
     year. The Secretary may, under section 7001(d), change a 
     number designated under the preceding sentence for an 
     academic year to reflect changing needs for physicians in the 
     various medical specialties.
       (b) Primary Health Care.--
       (1) Requirement across specialties.--In designating the 
     per-specialty annual numbers of positions for all medical 
     specialties for academic year 2002 or any subsequent academic 
     year, the Secretary shall ensure that, of the class of 
     training participants entering approved physician training 
     programs for the year, the percentage that enters such 
     programs in primary health care is not less than 55 percent, 
     subject to the following:
       (A) The Secretary, in order to provide a period of 
     transition regarding such requirement, shall establish a 
     lesser percentage for each of the academic years 1998 through 
     2001.
       (B) The Secretary may change the percentage specified in 
     the Plan for any academic year to reflect changing needs for 
     physicians in the various medical specialties.
       (2) Rules of construction.--For purposes of the requirement 
     of paragraph (1) (relating to a percentage):
       (A) The requirement applies in the aggregate to all 
     training participants in approved physician training programs 
     for the academic year involved, and not individually to any 
     such program.
       (B) In the case of approved physician training programs in 
     a medical specialty participation in which is a prerequisite 
     to participation in approved physician training programs in 
     another medical specialty, the Secretary shall apply the 
     requirement of paragraph (1) as follows:
       (i) The Secretary shall periodically make an estimate, by 
     specialty, of the average number of training participants in 
     such prerequisite programs who subsequently enter the other 
     programs.
       (ii) In designating the per-specialty annual numbers of 
     positions for such prerequisite programs, the Secretary shall 
     consider such estimates in order to ensure that the numbers 
     designated for the programs reasonably reflect the needs of 
     the United States for practitioners in the medical 
     specialities for which the programs provide training.
       (3) Exclusion from determination.--Specialty positions in 
     approved physician training programs in podiatric medicine 
     shall be excluded from determinations under paragraph (1) 
     (both determinations regarding the number of entering 
     positions in specialties in primary health care and the 
     number of entering positions in other specialities).
       (c) Certain Considerations in Designating Annual Numbers.--
     Factors considered by the Secretary in designating a per-
     specialty annual number of positions for an academic year 
     shall include the extent to which there is a need for 
     additional practitioners in the medical specialty involved. 
     In carrying out the preceding sentence, the Secretary shall 
     consider, among other factors determined by the Secretary to 
     be relevant, the incidence and prevalence (in the general 
     population and in various other populations) of the diseases, 
     disorders, or other health conditions with which the 
     specialty is concerned.
       (d) Definitions.--
       (1) Approved program.--For purposes of this subtitle:
       (A) The term ``approved physician training program'', with 
     respect to the medical specialty involved, means (subject to 
     subparagraph (C)) a residency or other postgraduate program 
     that trains physicians and meets the conditions described in 
     clause (i), or the conditions described in clause (ii), as 
     follows:
       (i) The conditions described in this clause are that--

       (I) participation in the program may be counted toward 
     certification in the medical specialty, as determined under 
     the applicable standards of the American Board of Medical 
     Specialities or the Council on Postdoctoral Training of the 
     American Osteopathic Association; and
       (II) the program is accredited by the Accreditation Council 
     on Graduate Medical Education or approved by the Council on 
     Postdoctoral Training of the American Osteopathic 
     Association.

       (ii) The conditions described in this clause are that--

       (I) the program meets the condition described in subclause 
     (I) of clause (i), or the condition described in subclause 
     (II) of such clause, but not both; and
       (II) the Secretary designates the program as an approved 
     physician training program for purposes of this subtitle.

       (B) The term ``approved physician training program'' 
     includes any postgraduate program meeting the conditions 
     described in clause (i) or (ii) in subparagraph (A), 
     including such a program that provides health services in an 
     ambulatory setting (regardless of whether the program 
     provides inpatient hospital services).
       (C) The term ``approved physician training program'' 
     includes (notwithstanding subparagraphs (A) and (B)) each 
     program that receives payments under section 1886(h) of the 
     Social Security Act as an approved medical residency training 
     program.
       (2) Other definitions.--For purposes of this subtitle:
       (A) The term ``medical school'' means a school of medicine 
     (as defined in section 799 of the Public Health Service Act) 
     or a school of osteopathic medicine (as so defined).
       (B) The term ``medical specialty'' includes all medical, 
     surgical, and other physician specialties and subspecialties.
       (C) The term ``per-specialty annual number of positions'', 
     with respect to a medical specialty, means the number 
     designated by the Secretary under subsection (a) for approved 
     physician training programs for the academic year involved.
       (D) The term ``primary health care'' means the following 
     medical specialties: Family medicine, general internal 
     medicine, general pediatrics, geriatrics, preventive 
     medicine, osteopathic general practice, and obstetrics and 
     gynecology.
       (E) The term ``specialty position'' means a position as a 
     training participant.
       (F) The term ``training participant'' means an individual 
     who is enrolled in an approved physician training program.

     SEC. 7013. ALLOCATIONS AMONG SPECIALITIES AND PROGRAMS.

       (a) Provisions in National Plan.--
       (1) In general.--With respect to physicians, the Secretary 
     shall in carrying out section 7001 ensure that the Plan 
     specifies that the per-specialty annual number of positions 
     designated under section 7012 for a medical specialty for an 
     academic year is to be allocated among approved physician 
     training programs in the specialty.
       (2) Methodology for program by program implementation of 
     plan.--In developing the Plan, the Secretary shall develop a 
     methodology for annually allocating among the approved 
     physician training programs in a medical specialty the per-
     specialty annual number of positions that the Secretary has 
     designated for the academic year involved. The Secretary 
     shall include among the factors upon which the methodology is 
     based the following:
       (A) The geographic distribution of physicians.
       (B) The historical distribution of specialty positions 
     among the various geographic areas of the United States.
       (C) The extent to which the approved physician training 
     programs of a hospital directly provide health services to 
     patients of the hospital.
       (D) The extent to which a reduction in the allocation of 
     specialty positions for such programs of a hospital will have 
     an adverse effect on the financial capacity of the hospital 
     to maintain a level of health services equivalent to the 
     level the hospital would provide in the absence of the 
     reduction.
       (E) The quality of physician training programs.
       (F) The need to train physicians in sites other than 
     hospitals, as appropriate to the specialty involved.
       (G) The need to encourage the training of minority 
     physicians.
       (H) The need for appropriate opportunities for training in 
     osteopathic specialities.
       (I) The extent to which graduates of an approved physician 
     training program are practicing in underserved rural and 
     urban areas.
       (J) The extent to which an approved physician training 
     program provides training under the program in underserved 
     rural and urban areas, including training provided at health 
     facilities provided for under Public Law 94-437.
       (3) Definition.--For purposes of this subtitle, the term 
     ``underserved'', with respect to a rural or urban area, means 
     a health professional shortage area as defined in section 
     332(a)(1) of the Public Health Service Act.
       (b) Annual Allocations by Secretary.--
       (1) In general.--For academic year 1998 and each subsequent 
     academic year, the Secretary shall for each medical specialty 
     make allocations among approved physician training programs 
     of the per-specialty annual number of positions designated 
     for the academic year involved. The preceding sentence is 
     subject to section 7031 (relating to qualifying physician 
     training consortia).
       (2) Use of plan methodology.--In making allocations under 
     paragraph (1), the Secretary shall use the methodology 
     developed under subsection (a)(2), with such modifications in 
     the methodology as the Secretary may make under section 
     7001(d).
       (c) Advance Notice to Programs.--The Secretary shall notify 
     each approved physician training program of the allocation to 
     be made for the program under subsection (b) for an academic 
     year not later than October 1 of the preceding academic year.
       (d) Exclusions From Allocation System.--
       (1) In general.--The Secretary shall exclude from the 
     applicability of this section any specialty position filled 
     by a training participant described in paragraph (2). Such 
     positions in an approved physician training program are in 
     addition to specialty positions allocated to the program 
     under subsection (b).
       (2) Relevant training participants.--For purposes of 
     paragraph (1) and other provisions of this subtitle, a 
     training participant described in this paragraph is such a 
     participant who, through a program carried out jointly by a 
     medical school and another accredited educational entity, has 
     received both--
       (A) a doctorate of medicine; and
       (B) a doctorate of philosophy, or an equivalent degree.

                 PART 2--PAYMENTS TO TEACHING HOSPITALS

     SEC. 7021. FORMULA PAYMENTS REGARDING PRIVATE-SECTOR SHARE OF 
                   COSTS OF GRADUATE MEDICAL EDUCATION.

       (a) In General.--In the case of each teaching hospital that 
     in accordance with section 7023 submits to the Secretary an 
     application for calendar year 1996 or any subsequent calendar 
     year (referred to in this part as an ``eligible hospital'' 
     for the year involved), the Secretary shall in accordance 
     with section 7024 make payments for such year to the 
     hospital, and shall in accordance with such section make 
     adjustments in maximum payment rates for the hospital. The 
     preceding sentence is subject to section 7031 (relating to 
     qualifying physician training consortia).
       (b) Definitions.--For purposes of this subtitle, the term 
     ``teaching hospital'' means any hospital that receives 
     payments under subsection (d)(5)(B) or (h) of section 1886 of 
     the Social Security Act (relating to graduate medical 
     education).

     SEC. 7022. AGREEMENT REGARDING COMPLIANCE WITH ALLOCATION 
                   SYSTEM.

       With respect to the approved physician training programs of 
     a teaching hospital, the Secretary may make payments under 
     section 7021 for the programs only if the hospital agrees to 
     ensure that the numbers of individuals enrolled in the 
     programs is in accordance with allocations made under section 
     7013 for the programs.

     SEC. 7023. APPLICATION FOR PAYMENTS.

       (a) In General.--For purposes of section 7021(a), an 
     application for payments under such section for a calendar 
     year is in accordance with this section if--
       (1) the application is submitted not later than the date 
     specified by the Secretary;
       (2) the application contains the agreement required in 
     section 7022; and
       (3) the application is in such form, is made in such 
     manner, and contains such agreements, assurances, and 
     information as the Secretary determines to be necessary to 
     carry out this part.
       (b) Consolidation With Application Under Part 3.--The 
     Secretary may establish procedures through which teaching 
     hospitals simultaneously apply for payments under section 
     7021 and 7041.

     SEC. 7024. ANNUAL AMOUNT OF PAYMENTS.

       (a) In General.--From amounts in the Health Care Workforce 
     Trust Fund under section 9512 of the Internal Revenue Code of 
     1986, the Secretary shall, subject to section 7025, make 
     payments under section 7021 to an eligible hospital for a 
     calendar year as follows:
       (1) Payments, made on a periodic basis, whose sum is equal 
     to the amount determined under subsection (c) for the 
     hospital for the year (which amount relates to the direct 
     costs for graduate medical education attributable to certain 
     individuals).
       (2) Payments (in addition to payments under paragraph (1)), 
     made on a periodic basis, whose sum is equal to the amount 
     determined under subsection (d) for the hospital for the year 
     (which amount relates to the per discharge indirect costs of 
     the hospital for graduate medical education attributable to 
     certain individuals).

     Payments under paragraph (1) are effective for portions of 
     cost reporting periods occurring on or after January 1, 1996. 
     Payments under paragraph (2) are effective for patient 
     discharges occurring on or after such date.
       (b) Relationship of Payments to Allocation of Specialty 
     Positions.--On and after July 1, 1998, the Secretary, in 
     making determinations under subsections (c) and (d) for the 
     payments required in paragraphs (1) and (2) of subsection (a) 
     for an eligible hospital, shall count only training 
     participants who are in a specialty position that, under 
     section 7013, has been allocated to an approved physician 
     training program of the hospital. In the case of payments 
     under paragraph (1) of subsection (a), the preceding sentence 
     is effective for portions of cost reporting periods occurring 
     on or after such date; and in the case of payments under 
     paragraph (2) of such subsection, the sentence is effective 
     for patient discharges occurring on or after such date.
       (c) Amount of Payments; Direct Costs.--
       (1) In general.--For purposes of paragraph (1) of 
     subsection (a), the amount determined under this subsection 
     for an eligible hospital for a calendar year is the product 
     of--
       (A) the aggregate nonmedicare training amount for the 
     hospital, as defined in paragraph (2); and
       (B) the direct-cost Fund payout percentage, as defined in 
     paragraph (4).
       (2) Aggregate nonmedicare training amount.--For purposes of 
     this subtitle, the term ``aggregate nonmedicare training 
     amount'', with respect to the eligible hospital involved, 
     means (subject to paragraph (3)(D)) an amount equal to the 
     product of subparagraphs (A) and (B), as follows:
       (A) Subject to section 7025(b), the number of full-time-
     equivalent training participants in the approved physician 
     training programs of the hospital for the academic year in 
     which the calendar year begins (including training 
     participants described in section 7013(d)(2)).
       (B) An amount equal to the product of--
       (i) the national average FTE training amount, as defined in 
     paragraph (3); and
       (ii) a percentage equal to 1 minus the medicare patient 
     load of the hospital (determined under section 1886(h)(3)(C) 
     of the Social Security Act) for the cost reporting period 
     involved, except that the determination of the medicare 
     patient load for purposes of this clause shall include (in 
     addition to the patients included under such section) 
     patients enrolled in the program under title XXI of such Act.
       (3) National average fte training amount.--
       (A) In general.--For purposes of this subtitle, the term 
     ``national average FTE training amount'' means the national 
     average of the costs per training participant for all 
     approved physician training programs and all medical 
     specialities, which average shall be derived from the per-
     resident approved FTE resident amounts in effect for 
     hospitals under section 1886(h) of the Social Security Act 
     for academic year 1992 (as adjusted under subparagraphs (B) 
     and (C)). The weighting factor applied pursuant to paragraph 
     (4)(C) of such section shall be the weighting factor in 
     effect under such paragraph on the day before the date of the 
     enactment of this Act.
       (B) Annual adjustments per consumer price index.--The 
     national average applicable under subparagraph (A) for a 
     calendar year for such programs is, subject to subparagraph 
     (C), the amount determined under subparagraph (A) increased 
     by the amount necessary to offset the effects of inflation 
     occurring since academic year 1992, as determined through use 
     of the consumer price index.
       (C) Individual adjustments per area wage index.--The 
     national average determined under subparagraph (A) and 
     adjusted under subparagraph (B) for a calendar year shall, in 
     the case of the approved physician training programs of the 
     eligible hospital involved, be adjusted by a factor to 
     reflect regional differences in wage and wage-related costs, 
     as determined in accordance with the area wage index 
     applicable (as of the beginning of such year) to hospitals in 
     the labor-market area involved, as determined under section 
     1886(d)(3)(E) of the Social Security Act.
       (D) Alternative rule for certain hospitals.--
       (i) Election for applicability of rule.--In the case of an 
     eligible hospital for which the election under section 
     1861(b)(7) of the Social Security Act was in effect on July 
     1, 1994, and has remained in effect continuously from such 
     date, the following applies:

       (I) The hospital may, with respect to the determination 
     under paragraph (2) of the aggregate nonmedicare training 
     amount for the hospital, elect to have the alternative rule 
     described in clause (ii) applied to the hospital.
       (II) If the election under such section 1861(b)(7) ceases 
     to be in effect, any election made by the hospital under 
     subclause (I) is terminated.
       (III) If the hospital has made the election under subclause 
     (I) and subsequently requests that the election be 
     terminated, the Secretary shall approve the request. Upon the 
     approval of the request, the hospital may not subsequently 
     elect to have the alternative rule applied to the hospital.

       (ii) Description of alternative rule.--With respect to a 
     determination under paragraph (2) of the aggregate 
     nonmedicare training amount for an eligible hospital that has 
     made the election under clause (i), the alternative rule 
     described in this clause is as follows:

       (I) In lieu of the applicability of the national FTE 
     training amount (for purposes of paragraph (2)(B)(i)), the 
     Secretary shall apply an amount equal to the approved FTE 
     resident amount in effect for the hospital under section 
     1886(h)(2) of the Social Security Act.
       (II) Subject to the modification applied under subclause 
     (I), the Secretary shall determine an amount under paragraph 
     (2).
       (III) The Secretary shall determine an amount equal to the 
     product of the percentage determined under paragraph 
     (2)(B)(ii) and the amount of the physician costs of services 
     recognized under section 1861(v)(1) of the Social Security 
     Act pursuant to the election of the hospital under section 
     1861(b)(7) of such Act.
       (IV) In lieu of the applicability of the aggregate 
     nonmedicare training amount (for purposes of paragraph 
     (1)(A)), the Secretary shall apply an amount equal to the sum 
     of the amount determined under subclause (II) and the amount 
     determined under subclause (III).

       (4) Direct-cost fund payout percentage.--For purposes of 
     this subtitle, the term ``direct-cost Fund payout 
     percentage'', with respect to the calendar year involved, 
     means a percentage equal to the ratio of--
       (A) the amount available in the Health Care Workforce Trust 
     Fund for such year (as estimated by the Secretary); to
       (B) an amount equal to the sum of clauses (i) through (iv), 
     as follows:
       (i) The total amount of payments under subsection (a)(1) 
     that would be made to eligible hospitals for such year if 
     each hospital received, pursuant to paragraph (1), 100 
     percent of the aggregate nonmedicare training amount 
     determined for the hospital.
       (ii) The total of the amounts determined under subsection 
     (d) of section 7041 for such year for teaching hospitals 
     eligible for payments under such section.
       (iii) The total of the amounts determined for such year for 
     grants under section 848 of the Public Health Service Act 
     (relating to graduate nursing education).
       (iv) The total of the amounts determined for such year for 
     grants under section 741 of such Act (relating to medical 
     schools).
       (d) Amount of Payments; Indirect Costs.--
       (1) In general.--For purposes of paragraph (2) of 
     subsection (a), the amount determined under this subsection 
     for an eligible hospital for a calendar year is the product 
     of--
       (A) an amount equal to the sum of the nonmedicare per-
     discharge supplemental payments, as defined in paragraph (2); 
     and
       (B) the indirect-cost Fund payout percentage, as defined in 
     paragraph (3).
       (2) Nonmedicare per-discharge supplemental payment.--
       (A) In general.--For purposes of this subtitle, the term 
     ``nonmedicare per-discharge supplemental payment'', with 
     respect to a calendar year, means a payment made to an 
     eligible hospital for a discharge during the year of a 
     patient described in subparagraph (B), the amount of which 
     payment is determined in accordance with subparagraph (C).
       (B) Relevant patients.--For purposes of subparagraph (A), a 
     patient described in this subparagraph is a patient who is 
     not--
       (i) entitled to benefits under part A of title XVIII of the 
     Social Security Act;
       (ii) enrolled in the health insurance program under title 
     XXI of such Act; or
       (iii) eligible for medical assistance under title XIX of 
     such Act.
       (C) Amount of per-discharge payment.--For purposes of 
     subparagraph (A), the amount of the payment under such 
     subparagraph for the discharge of a patient described in 
     subparagraph (B) is the product of--
       (i) an amount equal to the maximum payment rate determined 
     for the discharge under subsection (a)(2)(A) of section 6311, 
     except that for purposes of this clause, the determination 
     under such subsection shall be made without the adjustments 
     described in paragraphs (3) through (5) of subsection (d) of 
     such section; and
       (ii) the percentage applicable to the hospital under 
     section 1886(d)(5)(B)(ii) of the Social Security Act.
       (3) Indirect-cost fund payout percentage.--For purposes of 
     this subtitle, the term ``indirect-cost Fund payout 
     percentage'', with respect the calendar year involved, means 
     a percentage equal to the ratio of--
       (A) the amount available in the Health Care Workforce Trust 
     Fund for such year remaining after payments for the year have 
     been made under subsection (a)(1), under section 7041, and 
     under sections 848 and 741 of the Public Health Service Act 
     (as such amount is estimated by the Secretary); to
       (B) the total amount of payments under subsection (a)(2) 
     that would be made to eligible hospitals for such year if 
     each hospital received, pursuant to paragraph (1), 100 
     percent of an amount equal to the sum of the nonmedicare per-
     discharge supplemental payments determined for the hospital.
       (e) Offset Regarding Shortfall in Fund Payments; Increase 
     in Maximum Payment Rates Under Title VI.--
       (1) Shortfall in direct-cost payments.--
       (A) In general.--In the case of an eligible hospital, for 
     any calendar year for which the direct-cost Fund payout 
     percentage is less than 100 percent, the Secretary shall 
     increase, by the amount determined under subparagraph (B), 
     the maximum payment rate otherwise applicable to a discharge 
     under subtitle D of title VI for inpatient services furnished 
     by the hospital. The amount so determined shall be applied 
     uniformly to each discharge from the hospital. This paragraph 
     is subject to paragraph (3).
       (B) Amount of increase.--For purposes of subparagraph (A), 
     the amount of the increase per discharge for a calendar year 
     for an eligible hospital is the product of--
       (i) a percentage equal to 1 minus the direct-cost Fund 
     payout percentage; and
       (ii) the applicable per discharge training amount for the 
     hospital, as defined in subparagraph (C).
       (C) Applicable per discharge training amount.--For purposes 
     of this subtitle, the term ``applicable per discharge 
     training amount'', with respect to the eligible hospital 
     involved and the calendar year involved, means an amount 
     equal to the quotient of--
       (i) the aggregate nonmedicare training amount for the 
     hospital, as determined under subsection (c)(1)(A); divided 
     by
       (ii) the average annual number of discharges of patients 
     described in subsection (d)(2)(B) during the most recent 3-
     year period (as determined by the Secretary on the basis of 
     the most recent data available to the Secretary).
       (2) Shortfall in indirect-cost payments.--
       (A) In general.--In the case of an eligible hospital, for 
     any calendar year for which the indirect-cost Fund payout 
     percentage is less than 100 percent, the Secretary shall 
     increase, by the amount determined under subparagraph (B), 
     the maximum payment rate per discharge otherwise established 
     under section 6311 with respect to the discharge. The 
     preceding sentence is subject to paragraph (3).
       (B) Amount of increase.--For purposes of subparagraph (A), 
     the amount of the per discharge increase for an eligible 
     hospital for a calendar year is the product of--
       (i) a percentage equal to 1 minus the indirect-cost Fund 
     payout percentage; and
       (ii) an amount equal to the amount applicable under 
     subsection (d)(2)(C)(i) to the discharge multiplied by the 
     percentage applicable to the hospital under section 
     1886(d)(5)(B)(ii) of the Social Security Act.
       (3) Relationship of rate increases to allocations of 
     specialty positions.--Effective for patient discharges 
     occurring on or after July 1, 1998, the Secretary, in making 
     determinations under paragraphs (1) and (2) of increases in 
     amounts, shall count only training participants who are in a 
     specialty position that, under section 7013, has been 
     allocated to an approved physician training program.
       (f) Publication of Fund Payout Percentages and Adjustments 
     in Maximum Payment Rates.--The Secretary shall include in the 
     publication of the final maximum payment rates for a calendar 
     year under section 6301(a)--
       (1) the direct-cost Fund payout percentage;
       (2) the indirect-cost Fund payout percentage; and
       (3) the hospital-specific adjustments in such rates 
     determined under paragraph (1) or (2) of subsection (e).
       (g) Definitions.--For purposes of this subtitle, the term 
     ``full-time-equivalent training participant'' means a full-
     time equivalent resident of the hospital as determined under 
     section 1886(h)(4) of the Social Security Act for the cost 
     reporting period involved.

     SEC. 7025. TRANSITIONAL PROVISIONS REGARDING DIRECT-COST 
                   PAYMENTS.

       (a) Payment Blend.--For each of the calendar years 1996 
     through 1998, in the case of an eligible hospital (other than 
     an eligible hospital making the election under section 
     7024(c)(3)(D)), the amount required in section 7024(a)(1) to 
     be paid to the hospital is the sum of paragraphs (1) and (2), 
     as follows (as applicable to the calendar year involved):
       (1) An amount determined in accordance with section 7024(c) 
     except that, in lieu of applying the national FTE training 
     amount (for purposes of paragraph (2)(B)(i) of such section), 
     the Secretary shall apply the following:
       (A) For calendar year 1996, an amount equal to 75 percent 
     of the approved FTE resident amount in effect for the 
     hospital under section 1886(h)(2) of the Social Security Act.
       (B) For calendar year 1997, an amount equal to 50 percent 
     of such resident amount.
       (C) For calendar year 1998, an amount equal to 25 percent 
     of such resident amount.
       (2) An amount determined in accordance with section 7024(c) 
     except that, in lieu of applying 100 percent of the national 
     FTE training amount (for purposes of paragraph (2)(B)(i) of 
     such section), the Secretary shall apply the following:
       (A) For calendar year 1996, an amount equal to 25 percent 
     of such training amount.
       (B) For calendar year 1997, an amount equal to 50 percent 
     of such training amount.
       (C) For calendar year 1998, an amount equal to 75 percent 
     of such training amount.
       (b) Transitional Limit on Number of FTEs.--In determining 
     the number of full-time-equivalent training participants 
     under section 7024(c)(2)(A) for a hospital, for the period 
     beginning on January 1, 1996 and ending on June 30, 1998, 
     such number may not exceed the number of full-time equivalent 
     residents determined with respect to the hospital under 
     section 1886(h)(4) of the Social Security Act for portions of 
     cost-reporting periods during the academic year 1994.

     SEC. 7026. RULE OF CONSTRUCTION REGARDING MEDICARE 
                   AMENDMENTS.

       Except as otherwise provided in this subtitle:
       (1) A reference in this title to title XVIII of the Social 
     Security Act shall be considered to be a reference to such 
     title as in effect on the day after the date of the enactment 
     of this Act, without regard to any amendment subsequently 
     made to such title XVIII.
       (2) For purposes of paragraph (1), an amendment to such 
     title XVIII that is made by this Act as of the day referred 
     to in such paragraph applies to this title upon the amendment 
     taking effect, without regard to whether the date on which 
     the amendment takes effect is after the day referred to in 
     such paragraph.

            PART 3--QUALIFYING PHYSICIAN TRAINING CONSORTIA

     SEC. 7031. SPECIAL RULES REGARDING ALLOCATION OF SPECIALTY 
                   POSITIONS AND RECEIPT OF DIRECT-COST PAYMENTS.

       (a) In General.--In the case of a qualifying physician 
     training consortium (as defined in subsection (b))--
       (1) the Secretary may make allocations under section 7013 
     to the consortium in the aggregate in lieu of making the 
     allocations individually to the approved physician training 
     programs of the consortium; and
       (2) if the Secretary makes allocations to the consortium 
     pursuant to paragraph (1)--
       (A) the Secretary shall make payments under sections 
     7024(a)(1) and 7041 to the consortium in the aggregate in 
     lieu of making the payments individually to the teaching 
     hospitals of the consortium; and
       (B) the payments shall be made on the basis of the amount 
     of the payments that otherwise would have been made to the 
     hospitals, adjusted through averaging the criteria that under 
     sections 7024(a)(1) and 7041 do not apply uniformly to 
     teaching hospitals and through weighting such averages 
     according to the extent to which the data that form the basis 
     of such criteria apply to the hospitals of the consortium.
       (b) Definition.--For purposes of this subtitle, the term 
     ``qualifying physician training consortium'' means a group of 
     teaching hospitals meeting the following conditions:
       (1) The hospitals of the group have entered into an 
     agreement under which a consortium is established, and the 
     purposes of the consortium include the purposes specified in 
     subsection (c).
       (2) The hospitals of the consortium include not less than 2 
     teaching hospitals, and--
       (A) with respect to allocations under section 7013, all of 
     the approved physician training programs of the hospitals 
     participate in the consortium; and
       (B) with respect to any entity (other than an entity that 
     is part of any of the hospitals of the consortium) at whose 
     facilities any of the hospitals conducts a significant amount 
     of training under such programs, each of such entities 
     participates in the consortium.
       (3) For the academic year preceding the academic year for 
     which the allocations are to be made pursuant to subsection 
     (a), or for academic year 1994, the aggregate number of 
     training participants of the consortium who were entering 
     their first approved physician training program was not less 
     than 50.
       (4) The consortium submits to the Secretary an application 
     in accordance with subsection (d) for designation as a 
     qualifying physician training consortium, and the Secretary 
     approves the application.
       (c) Purposes of Consortium.--The purposes referred to in 
     subsection (b)(1) regarding a consortium are as follows:
       (1) The approved physician training programs of the 
     consortium collaborate in the provision of training under the 
     programs.
       (2) With respect to an aggregate allocation for a medical 
     specialty that is made to the consortium pursuant to 
     subsection (a)(1), the consortium designates the number of 
     specialty positions to be received by each of the approved 
     physician training programs of the consortium in the 
     specialty.
       (3) With respect to aggregate payments that are made to the 
     consortium pursuant to subsection (a)(2), the consortium 
     allocates the payments among each of the teaching hospitals 
     of the consortium.
       (4) Such other purposes as the Secretary determines to be 
     appropriate.
       (d) Application for Consortium Status.--
       (1) In general.--For purposes of subsection (b)(4), an 
     application under this subsection for designation as a 
     qualifying physician training consortium for a calendar year 
     is in accordance with this subsection if--
       (A) the application is submitted not later than the date 
     specified by the Secretary;
       (B) the application demonstrates that the teaching 
     hospitals involved meet the conditions described in 
     paragraphs (1) through (3) of subsection (b);
       (C) the application contains an agreement described in 
     section 7022 from each of the teaching hospitals; and
       (D) the application is in such form, is made in such 
     manner, and contains such agreements, assurances, and 
     information as the Secretary determines to be necessary to 
     carry out this part.
       (2) Relation to requirement of individual applications.--If 
     a group of teaching hospitals submits to the Secretary an 
     application in accordance with paragraph (1) for a calendar 
     year, and the Secretary approves the application, each of the 
     hospitals shall be considered to have submitted an 
     application in accordance with section 7023 (and accordingly, 
     each of the hospitals is an eligible hospital for the year 
     for purposes of part 2).

 PART 4--TRANSITIONAL PAYMENTS FOR TEACHING HOSPITALS LOSING SPECIALTY 
                               POSITIONS

     SEC. 7041. TRANSITIONAL PAYMENTS TO TEACHING HOSPITALS.

       (a) Payments Regarding Effects of Allocation of Specialty 
     Positions.--In the case of each hospital that in accordance 
     with subsection (c) submits to the Secretary an application 
     for calendar year 1998 or any subsequent calendar year (in 
     this section referred to as an `eligible hospital' for the 
     year involved), the Secretary shall make payments for the 
     year to the hospital in an amount determined in accordance 
     with subsection (d). Such payments shall be made from amounts 
     in the Health Care Workforce Trust Fund under section 9512 of 
     the Internal Revenue Code of 1986.
       (b) Hospitals Losing Specialty Positions; Other 
     Conditions.--
       (1) Hospitals losing specialty positions.--
       (A) In general.--The Secretary may make payments under 
     subsection (a) to a teaching hospital for a calendar year 
     only if, as a result of allocations under 7013, the aggregate 
     number of full-time-equivalent specialty positions for the 
     hospital for the academic year in which the calendar year 
     begins (as estimated by the Secretary) is below the aggregate 
     number of such positions for the hospital for academic year 
     1993.
       (B) Aggregate number of specialty positions lost.--For 
     purposes of this section:
       (i) The term ``aggregate number of specialty positions 
     lost'', with respect to a teaching hospital and an academic 
     year, means the difference between the 2 aggregate numbers 
     determined by the Secretary under subparagraph (A) for the 
     hospital.
       (ii) The term ``lost position'', with respect to an 
     academic year, means a full-time-equivalent specialty 
     position counted in the determination under clause (i) of the 
     aggregate number of specialty positions lost for the year.
       (2) Compliance with allocation system.--With respect to the 
     approved physician training programs of a teaching hospital, 
     the Secretary may make payments under subsection (a) only if 
     the hospital agrees to ensure that the numbers of individuals 
     enrolled in the programs is in accordance with allocations 
     made under section 7013 for the programs.
       (c) Application for Payments.--For purposes of subsection 
     (a), an application for payments under such subsection for a 
     teaching hospital is in accordance with this subsection if--
       (1) the hospital submits the application not later than the 
     date specified by the Secretary;
       (2) the application demonstrates that the hospital meets 
     the condition described in subsection (b)(1)(A);
       (3) the application contains each agreement required in 
     this section; and
       (4) the application is in such form, is made in such 
     manner, and contains such agreements, assurances, and 
     information as the Secretary determines to be necessary.
       (d) Amount of Payments.--The amount of payments required in 
     subsection (a) to be made to an eligible hospital for a 
     calendar year is an amount equal to the product of paragraphs 
     (1) and (2), as follows:
       (1) An amount equal to the product of--
       (A) the aggregate lost position amount, as defined in 
     subsection (e) for the academic year; and
       (B) 1 minus the medicare patient load of the hospital 
     (determined under section 1886(h)(3)(C) of the Social 
     Security Act) for the cost reporting period involved, except 
     that the determination of the medicare patient load for 
     purposes of this subparagraph shall include (in addition to 
     the patients included under such section) patients enrolled 
     in the program under title XXI of such Act.
       (2) The direct-cost Fund payout percentage under section 
     7024(c)(4).
       (e) Aggregate Lost Position Amount.--
       (1) First year of receiving payments.--For purposes of 
     subsection (d)(1)(A), the term ``aggregate lost position 
     amount'', with respect to the first calendar year for which 
     an eligible hospital receives payments under subsection (a), 
     means an amount equal to the product of--
       (A) the aggregate number of specialty positions lost (as 
     defined in subsection (b)(1)(B)); and
       (B) an amount equal to 100 percent of the national average 
     FTE training amount in effect for the year under section 
     7024(c)(3) (or, as the case may be, 100 percent of the 
     alternative amount that applies to the hospital under section 
     7024(c)(3)(D) or section 7025).
       (2) Subsequent years of payment.--For purposes of 
     subsection (d)(1)(A), the term ``aggregate lost position 
     amount'', with respect to the second or subsequent calendar 
     year for which an eligible hospital receives payments under 
     subsection (a), means an amount equal to the sum of 
     subparagraphs (A) through (D), as follows:
       (A) An amount equal to the product of--
       (i) the aggregate number of specialty positions lost, less 
     an amount equal to the sum of--

       (I) the number of lost positions for which payments are 
     being made for the calendar year pursuant to subparagraphs 
     (B) through (D); and
       (II) the total number of lost positions for which, in 
     determinations under this subsection for the hospital for 
     prior calendar years, the percentage applicable to the 
     national average or alternative amount referred to in 
     paragraph (1)(B) was 25 percent; and

       (ii) 100 percent of such national average or alternative 
     amount applicable for the year involved.
       (B) An amount equal to the product of--
       (i) the number of lost positions for which, in the 
     determination under this subsection for the hospital for the 
     preceding calendar year, the percentage applicable to the 
     national average or alternative amount was 100 percent, 
     subject to paragraph (3) (relating to decreases in aggregate 
     numbers); and
       (ii) 75 percent of the national average or alternative 
     amount applicable for the year involved.
       (C) An amount equal to the product of--
       (i) the number of lost positions for which, in the 
     determination under this subsection for the hospital for the 
     preceding calendar year, the percentage applicable to the 
     national average or alternative amount was 75 percent, 
     subject to paragraph (3); and
       (ii) 50 percent of the national average or alternative 
     amount applicable for the year involved.
       (D) An amount equal to the product of--
       (i) the number of lost positions for which, in the 
     determination under this subsection for the hospital for the 
     preceding calendar year, the percentage applicable to the 
     national average or alternative amount was 50 percent, 
     subject to paragraph (3); and
       (ii) 25 percent of the national average or alternative 
     amount applicable for the year involved.
       (3) Rule regarding decrease in aggregate number of 
     specialty positions lost.--With respect to payments under 
     subsection (a) for an eligible hospital for a calendar year, 
     if the aggregate number of specialty positions lost for the 
     academic year involved is less than such number for the 
     preceding academic year (which difference between the 2 
     aggregate numbers is referred to in this paragraph as the 
     ``decrease in the number of lost positions''), the following 
     applies:
       (A) The Secretary shall identify the number of lost 
     positions for which, as determined under paragraph (2) 
     without regard to this paragraph, the percentage applicable 
     to payments for the calendar year is 75 percent, the number 
     of such positions for which such percentage is 50 percent, 
     and the number of such positions for which such percentage is 
     25 percent.
       (B) In the case of the lost positions so identified, the 
     Secretary shall apply the decrease in the number of lost 
     positions as follows:
       (i) First, as a reduction in the number of positions for 
     which the percentage applicable is 75 percent.
       (ii) Second (for any remaining portions of the decrease 
     after compliance with clause (i)), as a reduction in the 
     number of positions for which such percentage is 50 percent.
       (iii) Third (for any remaining portions of the decrease 
     after compliance with clause (ii)), as a reduction in the 
     number of positions for which such percentage is 25 percent.

               PART 5--OTHER HEALTH PROFESSIONS PROGRAMS

                 Subpart A--Graduate Nursing Education

     SEC. 7051. FEDERAL PAYMENTS FOR GRADUATE NURSING EDUCATION.

       (a) In General.--Part B of title VIII of the Public Health 
     Service Act (42 U.S.C. 297 et seq.) is amended by adding at 
     the end the following subpart:

      ``Subpart IV--Grants Under Health Care Workforce Trust Fund


         ``formula grants for graduate nurse education programs

       ``Sec. 848. (a) Grants under Health Care Workforce Trust 
     Fund.--
       ``(1) In general.--In the case of each graduate nurse 
     education program that in accordance with subsection (c) 
     submits to the Secretary an application for calendar year 
     1996 or any subsequent calendar year (in this section 
     referred to as an `eligible program' for the year involved), 
     the Secretary shall make a grant for the year to the program 
     for the purposes specified in subsection (b). The grant shall 
     consist of the allotment determined for the program under 
     subsection (d).
       ``(2) Trust fund.--Grants under paragraph (1) shall be made 
     from amounts in the Health Care Workforce Trust Fund under 
     section 9512 of the Internal Revenue Code of 1986. Of the 
     amounts in such Fund, the amount available for carrying out 
     this section for a calendar year is the product of--
       ``(i) $150,000,000; and
       ``(ii) the direct-cost Fund payout percentage for the year, 
     as determined under section 7024(c)(4) of the Guaranteed 
     Health Insurance Act of 1994.
       ``(3) Reservation of amounts.--Of the amount available 
     under paragraph (2) for carrying out this section for a 
     calendar year, the Secretary may reserve not more than 10 
     percent for carrying out section 849.
       ``(b) Purpose of Payments.--
       ``(1) In general.--The Secretary may make a grant under 
     subsection (a) only if the graduate nurse education program 
     involved agrees that the payments will be expended only for 
     the following purposes:
       ``(A) Increasing nursing education opportunities for 
     individuals from disadvantaged backgrounds (including members 
     of racial or ethnic minority groups) through the activities 
     authorized in section 827(a).
       ``(B) Expanding enrollment, including individuals who are 
     not described in subparagraph (A).
       ``(C) Providing scholarships to students in financial need 
     with preference given to those who agree to practice in 
     health professional shortage areas.
       ``(D) Developing and supporting programs to provide 
     students with experience in providing primary health care 
     services in noninstitutional settings.
       ``(E) Developing innovative approaches to delivering 
     services in the cultural context and language most 
     appropriate for the individuals to whom the services are 
     provided.
       ``(F) Developing programs or otherwise providing for 
     education and training in the identification, treatment, and 
     referral of cases of domestic violence.
       ``(G) Such other purposes as the Secretary determines to be 
     appropriate.
       ``(2) Allocation.--The Secretary may make a grant under 
     subsection (a) only if the graduate nurse education program 
     involved agrees that the program will expend not less than 20 
     percent of the grant to carry out the purpose described in 
     paragraph (1)(A).
       ``(c) Application for Payments.--For purposes of subsection 
     (a)(1), an application for a grant under such subsection for 
     a calendar year is in accordance with this subsection if--
       ``(1) the application is submitted not later than the date 
     specified by the Secretary;
       ``(2) the application contains the agreements required in 
     this section; and
       ``(3) the application is in such form, is made in such 
     manner, and contains such agreements, assurances, and 
     information as the Secretary determines to be necessary to 
     carry out this section.
       ``(d) Amount of Payments.--
       ``(1) In general.--For purposes of subsection (a), the 
     allotment determined under this subsection for an eligible 
     program for a calendar year is the product of--
       ``(A) the percentage determined for the program under the 
     formula established by the Secretary under paragraph (2); and
       ``(B) the amount available under subsection (a)(2) for the 
     year, less any amount the Secretary reserves under subsection 
     (a)(3).
       ``(2) Development of formula.--The Secretary shall 
     establish a formula for purposes of paragraph (1)(A). The 
     formula shall be established by the Secretary on the basis of 
     the following factors (which factors shall be given equal 
     weight):
       ``(A) The percentage constituted by the ratio of--
       ``(i) the number of individuals enrolled (or accepted for 
     enrollment) in the eligible program involved; to
       ``(ii) the sum of the respective numbers determined under 
     clause (i) for each eligible program.
       ``(B) A factor developed by the Secretary to reflect the 
     operational costs of the program relative to the operational 
     costs of other eligible programs.
       ``(C) A factor developed by the Secretary to reflect the 
     extent of the need for the nursing professionals involved in 
     medically underserved communities.
       ``(e) Definition of Graduate Nurse Education Program.--For 
     purposes of this section, the term `graduate nurse education 
     programs' means programs for advanced nurse education, 
     including programs for education as nurse practitioners, 
     programs for education as nurse midwives, programs for 
     education as nurse anesthetists, programs for advanced 
     training in occupational health nursing, other programs for 
     training in clinical nurse specialties determined by the 
     Secretary to require advanced education, and programs in 
     nursing administration.
       ``(f) Report to Congress.--
       ``(1) In general.--The Secretary shall conduct a study for 
     the purpose of determining the cost incurred in the operation 
     of graduate nurse education programs. In conducting the 
     study, the Secretary shall evaluate the program carried out 
     under subsection (a) and may develop recommendations for 
     improving the program.
       ``(2) Date certain for completion.--Not later than February 
     1, 1998, the Secretary shall complete the study required in 
     paragraph (1) and submit to the Congress the findings made in 
     the study, including any recommendations developed in the 
     study.


          ``categorical grants regarding basic nurse education

       ``Sec. 849. (a) In General.--The Secretary may make grants 
     to public and nonprofit schools of nursing for the purpose of 
     improving the capacity of such schools to provide for basic 
     nurse education and practice.
       ``(b) Funding.--Grants under subsection (a) shall be made 
     from such amounts as the Secretary may reserve under section 
     848(a)(3).''.
       (b) Other Modifications Regarding Title VIII.--
       (1) In general.--Section 851 of the Public Health Service 
     Act (42 U.S.C. 298) is amended--
       (A) by striking ``(a) There is'' and all that follows and 
     inserting the following: ``(a) In General.--There is 
     established within the Department of Health and Human 
     Services an advisory council to be known as the National 
     Advisory Council on Nurse Education (in this section referred 
     to as the ``Council'').
       ``(b) Duties.--
       ``(1) In general.--The Council shall provide advice to the 
     Secretary on carrying out this title, including advice on--
       ``(A) the need for educating additional individuals as 
     advanced practice nurses; and
       ``(B) matters relating to the program under section 848.
       ``(2) Certain activities.--The Council may collect and 
     analyze data for purposes of carrying out the duties of the 
     Council under paragraph (1), including data on the number of 
     advanced practice nurses and other health professionals in 
     the various geographic areas of the United States.
       ``(c) Composition.--
       ``(1) In general.--The membership of the Council shall 
     include individuals who are appointed to the Council from 
     among individuals who are not officers or employees of the 
     United States. Such individuals shall be appointed by the 
     Secretary, and shall include individuals from each of the 
     following categories:
       ``(A) Nurse practitioners, nurse midwives, nurse 
     anesthetists, and clinical nurse specialists.
       ``(B) Schools of nursing, teaching hospitals or other 
     entities that provide health services, and other experts in 
     health care financing, in the delivery of health services, 
     and in education in the health professions.
       ``(2) Representative membership.--To the greatest extent 
     feasible, the membership of the Council shall represent the 
     various geographic regions of the United States, and shall 
     reflect the racial, ethnic, and gender composition of the 
     population of the United States.
       ``(3) Ex officio members; other federal officers or 
     employees.--The membership of the Council shall include 
     individuals designated by the Secretary to serve as members 
     of the Council from among Federal officers or employees who 
     are appointed by the President, or by the Secretary (or by 
     other Federal officers who are appointed by the President 
     with the advice and consent of the Senate). Individuals 
     designated under the preceding sentence shall include each of 
     the following officials (or a designee of the official):
       ``(A) The Secretary of Health and Human Services.
       ``(B) The Secretary of Veterans Affairs.
       ``(C) The Secretary of Defense.
       ``(d) Chair.--The Secretary shall, from among members of 
     the National Council appointed under subsection (c)(1), 
     designate an individual to serve as the Chair of the 
     Council.''; and
       (B) in the heading for the section, by striking 
     ``practice;'' and all that follows and inserting 
     ``practice''.
       (2) Rule of construction.--With respect to the advisory 
     council in effect under section 851 of the Public Health 
     Service Act on the day before the date of the enactment of 
     this Act, individuals who were serving as members of the 
     council may serve as members of the Council established under 
     the amendment made by subsection (a), except as inconsistent 
     with the amendment.

                       Subpart B--Medical Schools

     SEC. 7061. FEDERAL PAYMENTS FOR MEDICAL SCHOOLS.

       Part B of title VII of the Public Health Service Act (42 
     U.S.C. 293 et seq.) is amended by adding at the end the 
     following section:

     ``SEC. 741. FORMULA GRANTS FOR MEDICAL SCHOOLS.

       ``(a) Grants under Health Care Workforce Trust Fund.--
       ``(1) In general.--In the case of each school of medicine 
     or osteopathic medicine that in accordance with subsection 
     (c) submits to the Secretary an application for calendar year 
     1996 or any subsequent calendar year (in this section 
     referred to as an `eligible school' for the year involved), 
     the Secretary shall make a grant for the year to the school 
     for the purposes specified in subsection (b). The grant shall 
     consist of the allotment determined for the school under 
     subsection (d).
       ``(2) Trust fund.--Grants under paragraph (1) shall be made 
     from amounts in the Health Care Workforce Trust Fund under 
     section 9512 of the Internal Revenue Code of 1986. Of the 
     amounts in such Fund, the amount available for carrying out 
     this section for a calendar year is the product of--
       ``(i) $50,000,000; and
       ``(ii) the direct-cost Fund payout percentage for the year, 
     as determined under section 7024(c)(4) of the Guaranteed 
     Health Insurance Act of 1994.
       ``(b) Expenditures of Grant.--
       ``(1) In general.--The Secretary may make a grant under 
     subsection (a) only if the school involved agrees to expend 
     the grant in accordance with the following purposes:
       ``(A) The school will carry out a program to recruit and 
     retain minority and disadvantaged individuals (including 
     members of racial or ethnic minority groups).
       ``(B) The school will carry out a program to encourage 
     students of the school to enter a field in primary health 
     care.
       ``(C) The school will provide for education and training in 
     the identification, treatment, and referral of cases of 
     domestic violence.
       ``(D) The school will establish goals for the programs 
     described in subparagraphs (A) through (C) and will monitor 
     the programs to determine the extent to which progress is 
     being made toward achieving the goals.
       ``(2) Certain authorities regarding minority and 
     disadvantaged individuals.--With respect to the program for 
     minority and disadvantaged individuals that is carried out by 
     a school of medicine or osteopathic medicine receiving a 
     grant under subsection (a), the Secretary may authorize the 
     school to expend the grant for the following purposes:
       ``(A) Identifying, recruiting, and selecting minority and 
     disadvantaged individuals for the program.
       ``(B) Facilitating the entry of such individuals into the 
     school.
       ``(C) Providing counseling or other services designed to 
     assist such individuals in successfully completing the 
     educational programs involved.
       ``(D) Providing, for a period prior to the entry of such 
     individuals into the regular course of education of the 
     school, preliminary education designed to assist the 
     individuals in successfully completing such regular course of 
     education at the school, or referring the individuals to 
     hospitals providing such preliminary education.
       ``(E) Publicizing existing sources of financial aid 
     available to the individuals for attendance at the school.
       ``(F) Paying such scholarships as the Secretary may 
     determine for such attendance.
       ``(G) Paying such stipends as the Secretary may approve for 
     such individuals for any period of education in student-
     enhancement programs (other than regular courses) at the 
     school, except that such a stipend may not be provided to an 
     individual for more than 12 months, and such a stipend shall 
     be in an amount of $40 per day (notwithstanding any other 
     provision of law regarding the amount of stipends).
       ``(3) Allocation.--The Secretary may make a grant under 
     subsection (a) only if the school involved agrees that the 
     school will expend not less than 20 percent of the grant to 
     carry out the purposes described in paragraph (2).
       ``(c) Application for Payments.--For purposes of subsection 
     (a)(1), an application for a grant under such subsection for 
     a calendar year is in accordance with this subsection if--
       ``(1) the application is submitted not later than the date 
     specified by the Secretary;
       ``(2) the application contains the agreements required in 
     this section; and
       ``(3) the application is in such form, is made in such 
     manner, and contains such agreements, assurances, and 
     information as the Secretary determines to be necessary to 
     carry out this section.
       ``(d) Amount of Payments.--
       ``(1) In general.--For purposes of subsection (a), the 
     allotment determined under this subsection for an eligible 
     school for a calendar year is the product of--
       ``(A) the percentage determined for the school under the 
     formula established by the Secretary under paragraph (2); and
       ``(B) the amount determined under subsection (a)(2) for the 
     year.
       ``(2) Development of formula.--The Secretary shall 
     establish a formula for purposes of paragraph (1)(A). Subject 
     to paragraph (3), the formula shall be established by the 
     Secretary on the basis of the following factors (which 
     factors shall be given equal weight):
       ``(A) The number of minority and disadvantaged individuals 
     enrolled (or accepted for enrollment) in the entering class 
     of the eligible school involved for the academic year in 
     which the calendar year begins, plus the number of minority 
     and disadvantaged individuals to whom the contingency 
     described in subsection (e) applies (subject to not counting 
     any individual more than once for purposes of this 
     subparagraph).
       ``(B) Of the individuals graduating from the school for the 
     academic year that is 6 years prior to the academic year 
     involved, the number of individuals who have entered a 
     postgraduate residency training program in a field of primary 
     health care.
       ``(3) Minimum formula amount for certain schools.--If for 
     the year involved an eligible school is a grantee under 
     section 740, the Secretary shall ensure that the amount 
     determined pursuant to paragraph (1)(A) for the school is not 
     less than the amount of the grant made under section 740 to 
     the school for fiscal year 1994, or fiscal year 1995, 
     whichever is greater, subject to the school agreeing to 
     expend the grant under subsection (a) to reach the goals 
     established for the school under section 740 regarding the 
     recruitment and retention of minority and disadvantaged 
     individuals. The Secretary shall waive the requirement of 
     such agreement if the Secretary determines that the goal for 
     the school has been reached.
       ``(e) Payments by Medical Schools for Off-School 
     Education.--The Secretary may make a grant under subsection 
     (a) for a calendar year only if the school involved agrees 
     that if, for the academic year beginning in such calendar 
     year, 1 or more students is enrolled (or accepted for 
     enrollment) in the school on the contingency of successfully 
     completing for the academic year a substantial number of 
     hours in medical education through an educational institution 
     that does not operate a school of medicine or osteopathic 
     medicine, and if the school provides credit toward a 
     doctorate in medicine for the hours successfully completed at 
     such other institution, then the school will pay to the other 
     institution for such calendar year an amount equal to the 
     product of--
       ``(1) the amount of the grant under subsection (a) for the 
     calendar year; and
       ``(2) the percentage constituted by the ratio of--
       ``(A) the number of such students attending the other 
     institution for the academic year; to
       ``(B) the total number of individuals enrolled (or accepted 
     for enrollment) in the eligible school involved for the 
     academic year in which the calendar year begins, plus the 
     number of individuals to whom the contingency described in 
     this subsection applies (subject to not counting any 
     individual more than once for purposes of this 
     subparagraph).''.

                    PART 6--MISCELLANEOUS PROVISIONS

     SEC. 7071. STUDY OF FUNDING NEEDS OF HEALTH PROFESSIONS 
                   SCHOOLS.

       (a) In General.--The Secretary shall conduct a study for 
     the purpose of determining the funding needs of health 
     professions schools, including schools of medicine and 
     osteopathic medicine, and schools of dentistry.
       (b) Consideration of Certain Costs.--In conducting the 
     study under subsection (a), the Secretary shall also consider 
     the following costs regarding the funding needs of health 
     professions schools:
       (1) Uncompensated costs incurred in providing health care.
       (2) Costs resulting from reduced productivity due to 
     teaching responsibilities.
       (3) Increased costs of caring for the health needs of 
     patients with severe medical complications.
       (4) Uncompensated costs incurred in conducting clinical 
     research.
       (5) The impact of competitive health plans on payments for 
     professional services delivered by faculty.
       (6) The costs associated with changes in medical education 
     from hospital inpatient to ambulatory, nonhospital sites.
       (c) Considerations Regarding Additional Funding.--In 
     conducting the study under subsection (a), the Secretary 
     shall determine the following:
       (1) Whether the health professions schools involved have a 
     significant need for an increase in the amount of funds 
     available to the schools.
       (2) If there is such a need--
       (A) recommendations regarding the sources of funds to 
     provide the increase; and
       (B) recommendations for a methodology for determining the 
     amount that should be provided to the schools involved.
       (d) Report to Congress.--Not later than 18 months after the 
     date of the enactment of this Act, the Secretary shall submit 
     to the Congress a report describing the findings and 
     recommendations made in the study.

     SEC. 7072. ADDITIONAL STUDIES.

       (a) Payment Amounts Regarding Graduate Medical Education.--
       (1) In general.--The Secretary shall conduct a study to 
     determine whether the program of payments under section 7021 
     should be modified (relating to payments to approved 
     physician training programs). Factors considered in the study 
     shall include the following factors:
       (A) The effect on educational costs of hospital size, 
     faculty salary levels, and geographic region (including 
     location in urban areas and area wage rates).
       (B) Variations in costs associated with training in 
     ambulatory settings, including community health centers, 
     managed care organizations, and hospital outpatient clinics.
       (C) Variations in costs associated with the operation of 
     approved physician training programs in different medical 
     specialties.
       (D) Whether payments to training participants should vary 
     according to which year of training the participant is in.
       (E) Whether additional factors should be included under 
     section 7024(c)(3) regarding adjustments in the amount of 
     payments.
       (F) Whether, for purposes of section 7024(c), approved 
     physician training programs in podiatric medicine should 
     receive payments on the basis of a national average FTE 
     training amount that is specific to podiatric medicine.
       (2) Index regarding cost variations.--The Secretary shall 
     conduct a study for the purpose of developing an index, for 
     use in the program under section 7021, to reflect variations 
     by geographic area in the costs incurred in operating 
     approved physician training programs.
       (b) Retraining of Physicians Regarding Practicing in 
     Primary Health Care.--With respect to physicians who do not 
     practice in primary health care, the Secretary shall conduct 
     a study to determine the feasibility of retraining the 
     physicians as practitioners in such care.
       (c) Date Certain for Completion.-- Not later than February 
     1, 1997, the Secretary shall complete the studies required in 
     subsections (a) and (b) and submit to the Congress reports 
     describing the findings made in the studies.

                       PART 7--GENERAL PROVISIONS

     SEC. 7081. DEFINITIONS.

       For purposes of this subtitle:
       (1) The term ``academic year'' has the meaning given such 
     term in section 7001(a)(3).
       (2) The term ``aggregate lost position amount'' has the 
     meaning given such term in section 7041(e).
       (3) The term ``aggregate nonmedicare training amount'' has 
     the meaning given such term in section 7024(c)(2).
       (4) The term ``aggregate number of specialty positions 
     lost'' has the meaning given such term in section 
     7041(b)(1)(B).
       (5) The term ``applicable per discharge training amount'' 
     has the meaning given such term in section 7024(e)(1)(C).
       (6) The term ``applicable period'' has the meaning given 
     such term in section 7001(a)(3).
       (7) The term ``approved physician training program'' has 
     the meaning given such term in section 7012(d).
       (8) The term ``Council'' has the meaning given such term in 
     section 7011(a).
       (9) The term ``direct-cost Fund payout percentage'' has the 
     meaning given such term in section 7024(c)(4).
       (10) The term ``full-time-equivalent training participant'' 
     has the meaning given such term in section 7024(g)(2).
       (11) The term ``indirect-cost Fund payout percentage'' has 
     the meaning given such term in section 7024(d)(3).
       (12) The term ``lost position'' has the meaning given such 
     term in section 7041(b)(1)(B).
       (13) The term ``medical school'' has the meaning given such 
     term in section 7012(d).
       (14) The term ``medical specialty'' has the meaning given 
     such term in section 7012(d).
       (15) The term ``national average FTE training amount'' has 
     the meaning given such term in section 7024(c)(3).
       (16) The term ``nonmedicare per-discharge supplemental 
     payment'' has the meaning given such term in section 
     7024(d)(2).
       (17) The term ``per-specialty annual number of positions'' 
     has the meaning given such term in section 7012(d).
       (18) The term ``Plan'' has the meaning given such term in 
     section 7001(a)(3).
       (19) The term ``primary health care'' has the meaning given 
     such term in section 7012(d).
       (20) The term ``qualifying physician training consortium'' 
     has the meaning given such term in section 7031(b).
       (21) The term ``specialty position'' has the meaning given 
     such term in section 7012(d).
       (22) The term ``teaching hospital'' has the meaning given 
     such term in section 7021(b).
       (23) The term ``training participant'' has the meaning 
     given such term in section 7012(d).
       (24) The term ``underserved'' has the meaning given such 
     term in section 7013(a)(3).
 Subtitle B--Certain Direct Spending Programs of Public Health Service

                      PART 1--BIOMEDICAL RESEARCH

     SEC. 7101. ADDITIONAL FUNDING.

       (a) Administrator of Additional Funds.--Section 402(a) of 
     the Public Health Service Act (42 U.S.C. 282(a)) is amended 
     by striking the first sentence and inserting the following: 
     ``There shall be within the Department of Health and Human 
     Services an Assistant Secretary for Scientific Affairs, who 
     shall be appointed by the President by and with the advice 
     and consent of the Senate. Such Assistant Secretary shall 
     serve as the head of the National Institutes of Health, in a 
     position to be known as the Director of the National 
     Institutes of Health (in this title referred to as the 
     `Director of NIH').''.
       (b) Expenditure of Funds.--Title II of the Public Health 
     Service Act (42 U.S.C. 202 et seq.) is amended by adding at 
     the end the following part:

``Part C--Health Research Program of Assistant Secretary for Scientific 
                                Affairs


                       ``health research program

       ``Sec. 261. (a) In General.--With respect to the amounts 
     appropriated in subsection (b), the Secretary, acting through 
     the Assistant Secretary for Scientific Affairs and in 
     consultation with the interagency advisory board established 
     under subsection (d), shall in accordance with subsection (c) 
     carry out a program for the expenditure of such amounts.
       ``(b) Direct Spending.--For carrying out the program under 
     subsection (c), there are hereby appropriated, out of any 
     money in the Treasury not otherwise appropriated, the 
     following amounts (as applicable to the fiscal year 
     involved):
       ``(1) For fiscal year 1996, $325,000,000.
       ``(2) For fiscal year 1997, $500,000,000.
       ``(3) For fiscal year 1998, $550,000,000.
       ``(4) For fiscal year 1999, $575,000,000.
       ``(5) For fiscal year 2000, $600,000,000.
       ``(6) For fiscal year 2001, $650,000,000.
       ``(7) For fiscal year 2002, $675,000,000.
       ``(8) For fiscal year 2003, $725,000,000.
       ``(9) For fiscal year 2004, $775,000,000.
       ``(10) For fiscal year 2005, the amount specified in 
     paragraph (9) multiplied by an amount equal to the product 
     of--
       ``(A) 1 plus the national medicare growth factor (as 
     defined in section 8201(c) of the Guaranteed Health Insurance 
     Act of 1994); and
       ``(B) 1 plus the annual percentage increase projected by 
     the Assistant Secretary to occur during such year in the 
     population of the States.
       ``(11) For fiscal year 2006 and each subsequent fiscal 
     year, the amount determined under this subsection for the 
     preceding fiscal year multiplied by an amount equal to the 
     product of subparagraphs (A) and (B) of paragraph (10) (as 
     such subparagraphs are applied for the fiscal year involved).
       ``(c) Program for Making Expenditures.--The Assistant 
     Secretary may expend the amounts appropriated in subsection 
     (b) for biomedical and behavioral research and demonstration 
     projects authorized in this Act, and for health services 
     research and demonstration projects authorized in this Act. 
     In conducting and supporting such projects under the 
     preceding sentence, the Assistant Secretary shall provide for 
     projects to develop and evaluate effective methods for the 
     delivery of health services in rural areas.
       ``(d) Interagency Advisory Board.--
       ``(1) In general.--There is established an advisory board 
     to be known as the Interagency Advisory Board on Scientific 
     Affairs (in this subsection referred to the `Board'), 
     consisting of the following officials.
       ``(A) The Director of the Centers for Disease Control and 
     Prevention.
       ``(B) The Commissioner of Food and Drugs.
       ``(C) The Administrator for Health Care Policy and 
     Research.
       ``(D) The Administrator of the Health Resources and 
     Services Administration.
       ``(E) The Director of the Indian Health Service.
       ``(2) Duties.--The Board shall provide advice to the 
     Assistant Secretary on carrying out the program under 
     subsection (c). Such advice shall include advice on 
     priorities in the expenditure of the amounts appropriated in 
     subsection (b), a description of which priorities shall be 
     made available to the public. Such priorities shall include 
     priorities for --
       ``(A) basic research and applied research;
       ``(B) research on significant public health problems; and
       ``(C) research on the development and application of cost-
     effective and improved medical technologies.
       ``(e) Definitions.--For purposes of this section, the term 
     `Assistant Secretary' means the Assistant Secretary for 
     Scientific Affairs (appointed under section 402(a)(1)).''.

            PART 2--CORE FUNCTIONS OF PUBLIC HEALTH PROGRAMS

     SEC. 7111. TABLE OF CONTENTS REGARDING REVISED PROVISIONS OF 
                   TITLE XIX OF PUBLIC HEALTH SERVICE ACT.

       A table describing the contents of part A of title XIX of 
     the Public Health Service Act, as added by section 7112 of 
     this Act, is as follows:

                     Part A--Public Health Programs


  SUBPART I--BLOCK GRANTS FOR CORE FUNCTIONS OF PUBLIC HEALTH PROGRAMS

Sec. 1901. Formula grants to States.
Sec. 1902. Purposes of grant.
Sec. 1903. State contributions toward purposes.
Sec. 1904. Submission of information.
Sec. 1905. Reports.
Sec. 1906. Application for grant.
Sec. 1907. Amount of allotment.


           SUBPART II--NATIONAL PUBLIC HEALTH EMERGENCY FUND

Sec. 1910. National emergency fund.

     SEC. 7112. CAPPED ENTITLEMENT REGARDING FORMULA GRANTS TO 
                   STATES.

       Title XIX of the Public Health Service Act (42 U.S.C. 300w 
     et seq.) is amended by striking part A and inserting the 
     following:

                    ``PART A--PUBLIC HEALTH PROGRAMS

 ``Subpart I--Block Grants for Core Functions of Public Health Programs

     ``SEC. 1901. FORMULA GRANTS TO STATES.

       ``(a) Formula Grants.--In the case of each State that 
     submits to the Secretary an application in accordance with 
     section 1906 for a fiscal year (in this part referred to as 
     an `eligible State' for the year), the Secretary shall make a 
     grant to the State for the year for the purposes specified in 
     section 1902. The grant shall consist of the allotment made 
     for the State under section 1907. For the purpose of carrying 
     out this part for fiscal year 1995, there are authorized to 
     be appropriated such sums as may be necessary.
       ``(b) Direct Spending.--For the purpose of carrying out 
     this part, there are hereby appropriated, out of any money in 
     the Treasury not otherwise appropriated, the following 
     amounts (as applicable to the fiscal year involved), 
     effective October 1 of the fiscal year involved:
       ``(1) For each of the fiscal years 1996 through 2004, an 
     amount equal to the amount appropriated for fiscal year 1994 
     for carrying out this part (as in effect for such year), plus 
     the following additional amount, as applicable to the fiscal 
     year involved:
       ``(A) For fiscal year 1996, $325,000,000.
       ``(B) For fiscal year 1997, $500,000,000.
       ``(C) For fiscal year 1998, $550,000,000.
       ``(D) For fiscal year 1999, $575,000,000.
       ``(E) For fiscal year 2000, $600,000,000.
       ``(F) For fiscal year 2001, $650,000,000.
       ``(G) For fiscal year 2002, $675,000,000.
       ``(H) For fiscal year 2003, $725,000,000.
       ``(I) For fiscal year 2004, $775,000,000.
       ``(2) For fiscal year 2005, the aggregate amount specified 
     in paragraph (1) for fiscal year 2004 multiplied by an amount 
     equal to the product of--
       ``(A) 1 plus the national medicare growth factor (as 
     defined in section 8201(c) of the Guaranteed Health Insurance 
     Act of 1994); and
       ``(B) 1 plus the annual percentage increase projected by 
     the Secretary to occur during such year in the populations of 
     the States.
       ``(3) For fiscal year 2006 and each subsequent fiscal year, 
     the amount determined under this subsection for the preceding 
     fiscal year multiplied by an amount equal to the product of 
     subparagraphs (A) and (B) of paragraph (2) (as such 
     subparagraphs are applied for the fiscal year involved).
       ``(c) Entitlement Status of Grants.--
       ``(1) Capped entitlement.--Effective on and after October 
     1, 1995, in the case of an eligible State, the requirement 
     established in subsection (a) for the Secretary (relating to 
     making a grant)--
       ``(A) is an entitlement in the State on behalf of the 
     population of the State (but is not an entitlement in any 
     member of the population or in any other entity); and
       ``(B) represents the obligation of the Federal Government, 
     subject to subsection (c)--
       ``(i) to make grants under subsection (a) from the amounts 
     appropriated in subsection (b); and
       ``(ii) to apply the formula under section 1907 (as in 
     effect for the fiscal year involved) to such amounts for the 
     year in order to determine the amount of the grant for the 
     State for the year.
       ``(2) Nature of entitlement.--With respect to the purposes 
     for which a grant under subsection (a) is authorized to be 
     expended, modifications in such purposes enacted after the 
     date of the enactment of the Guaranteed Health Insurance Act 
     of 1994 do not affect the amount of budget authority provided 
     in subsection (b) for any fiscal year.
       ``(c) Allocations for National Public Health Emergency 
     Fund.--Of the amounts appropriated in subsection (b) for a 
     fiscal year, 10 percent is hereby transferred to the account 
     established in section 1910, effective October 1 of the year.
       ``(d) Administrator of Programs.--The Secretary shall carry 
     out this part acting through the Director of the Centers for 
     Disease Control and Prevention.

     ``SEC. 1902. PURPOSES OF GRANT.

       ``(a) In General.--A funding agreement for a grant under 
     section 1901 is that the State involved will expend the grant 
     only for carrying out the following activities:
       ``(1) To monitor and protect the health of communities 
     against communicable diseases and exposure to toxic 
     environmental pollutants and occupational hazards.
       ``(2) To identify and control outbreaks of infectious 
     disease and patterns of chronic disease and injury.
       ``(3) To inform and educate health care consumers and 
     providers about their roles in preventing and controlling 
     disease and the appropriate use of medical services.
       ``(4) To collect, analyze, and disseminate data regarding 
     the activities carried out under paragraphs (1) through (3).
       ``(5) To develop and test new prevention and public health 
     control interventions.
       ``(6) To provide for health laboratory services.
       ``(b) Progress in Improving Public Health Status.--For 
     fiscal year 1998 and each subsequent fiscal year, if the 
     Secretary determines that, relative to October 1, 1994, a 
     State has not made reasonable progress in improving the 
     public health status of the State (as determined under the 
     Healthy People 2000 Objectives, as defined in section 
     1904(b)), the Secretary shall designate the particular 
     activities under this section to be carried out by the State 
     with the grant under section 1901. For any such fiscal year 
     for which the Secretary makes such a determination, a funding 
     agreement for a grant under section 1901 for the fiscal year 
     is that the State will expend the grant in accordance with 
     the designations made by the Secretary under the preceding 
     sentence.

     ``SEC. 1903. STATE CONTRIBUTIONS TOWARD PURPOSES.

       ``(a) Matching Funds.--
       ``(1) In general.--With respect to the costs of carrying 
     out the purposes specified in section 1902, a funding 
     agreement for a grant under section 1901 is that the State 
     involved will make available (directly or through donations 
     from public or private entities) non-Federal contributions in 
     cash toward such costs in an amount that is not less than $1 
     for each $2 of Federal funds provided in the grant.
       ``(2) Determination of amount contributed; relationship to 
     maintenance of effort.--In making a determination of the 
     amount of non-Federal contributions provided by a State under 
     paragraph (1), the Secretary may only include non-Federal 
     contributions in excess of amounts expended by the State in 
     compliance with subsection (b).
       ``(b) Maintenance of Effort.--
       ``(1) In general.--With respect to the costs of carrying 
     out the purposes specified in section 1902, a funding 
     agreement for a grant under section 1901 is that the State 
     involved will maintain expenditures of non-Federal amounts 
     for such purposes at a level that is not less than the level 
     of such expenditures maintained by the State for the 2-year 
     period preceding October 1, 1994.
       ``(2) Waiver.--The Secretary may, upon the request of a 
     State, waive the requirement established in paragraph (1) for 
     a fiscal year if the Secretary determines that extraordinary 
     economic conditions in the State justify the waiver. If the 
     Secretary provides a waiver under the preceding sentence for 
     a State for a fiscal year, the Secretary may make a grant 
     under section 1901 to the State for the following fiscal year 
     only if the Secretary reviews the circumstances involved to 
     determine whether the waiver should remain in effect.
       ``(3) Noncompliance by State.--
       ``(A) In making a grant under section 1901 to a State for a 
     fiscal year, the Secretary shall make a determination of 
     whether, for the previous fiscal year, the State maintained 
     material compliance with the agreement under paragraph (1). 
     If the Secretary determines that a State has failed to 
     maintain such compliance, the Secretary shall reduce the 
     amount of the allotment under section 1907 for the State for 
     the fiscal year for which the grant is being made by an 
     amount equal to the amount constituting such failure for the 
     previous fiscal year.
       ``(B) The Secretary may make a grant under section 1901 for 
     a fiscal year only if the State involved submits to the 
     Secretary information sufficient for the Secretary to make 
     the determination required in subparagraph (A).

     ``SEC. 1904. SUBMISSION OF INFORMATION.

       ``(a) In General.--The Secretary may make a grant under 
     section 1901 only if the State involved submits to the 
     Secretary the following information (expressed in relation to 
     standards, objectives, and goals of the Healthy People 2000 
     Objectives, as defined in subsection (b)):
       ``(1) A description of existing deficiencies in the public 
     health system of the State (at the State level and the local 
     level).
       ``(2) A description of public health status measures to be 
     improved within the State (at the State level and the local 
     level) through expanding the extent to which activities 
     authorized in section 1902 are carried out.
       ``(3) Information regarding each such activity, which--
       ``(A) identifies the amount of State and local funding 
     expended on each such activity for the fiscal year preceding 
     the fiscal year for which the grant is sought; and
       ``(B) provides a detailed description of how additional 
     Federal funding will improve each such activity by both the 
     State and local public health agencies.
       ``(4) A description of such activities to be carried out at 
     the local level, and a specification for each such activity 
     of--
       ``(A) the communities in which the activity will be carried 
     out; and
       ``(B) the amount of the grant to be expended for the 
     activity in each community so specified.
       ``(b) Healthy People 2000 Objectives.--For purposes of this 
     part, the term `Healthy People 2000 Objectives' means--
       ``(1) in the case of the fiscal years 1996 through 2000, 
     the objectives established by the Secretary toward the goals 
     of increasing the span of healthy life, reducing health 
     disparities among various populations, and providing access 
     to preventive services, which objectives apply to the health 
     status of the population of the United States for the year 
     2000; and
       ``(2) in the case of fiscal year 2001 and subsequent fiscal 
     years, any successor goals and objectives established by the 
     Secretary regarding the health status of such population for 
     a year.

     ``SEC. 1905. REPORTS.

       ``A funding agreement for a grant under section 1901 is 
     that the States involved will, not later than the date 
     specified by the Secretary, submit to the Secretary a report, 
     for the fiscal year for which the grant was provided, 
     describing--
       ``(1) the purposes for which the grant was expended; and
       ``(2) the extent of progress made by the State in achieving 
     the public health status measures identified under section 
     1904(a)(2).

     ``SEC. 1906. APPLICATION FOR GRANT.

       ``For purposes of section 1901, an application for a grant 
     under such section for a fiscal year is in accordance with 
     this section if--
       ``(1) the State involved submits the application not later 
     than the date specified by the Secretary;
       ``(2) the application contains each funding agreement that 
     is described in this subpart;
       ``(3) the application contains an agreement by the State 
     that each provision of subpart III of part B applies to the 
     grant to the same extent and in the same manner as such 
     subpart applies to grants under subpart I or II of part B;
       ``(4) the agreements are made through certification from 
     the chief executive officer of the State; and
       ``(5) the application is otherwise in such form, is made in 
     such manner, and contains such agreements as the Secretary 
     determines to be necessary to carry out this subpart.

     ``SEC. 1907. AMOUNT OF ALLOTMENT.

       ``For purposes of section 1901, the allotment for a State 
     for a fiscal year is the sum of paragraphs (1) through (3) as 
     follows:
       ``(1) An amount equal to the product of--
       ``(A) an amount equal to \1/3\ of the portion of the amount 
     appropriated in subsection (b) of section 1901 for the fiscal 
     year that remains after the transfer under subsection (c) of 
     such section for the year (except that, for fiscal year 1995, 
     the amount under this subparagraph is \1/3\ of the amounts 
     that are appropriated under subsection (a) of such section 
     and available for allotment under this section); and
       ``(B) the percentage constituted by the ratio of--
       ``(i) a number determined by the Secretary on the basis of 
     population of the State; to
       ``(ii) the sum of the respective amounts determined under 
     clause (i) for eligible States for the fiscal year.
       ``(2) An amount equal to the product of--
       ``(A) an amount equal to \1/3\ of the portion referred to 
     in paragraph (1)(A) (except that, for fiscal year 1995, the 
     amount under this subparagraph is \1/3\ of the amount 
     specified in paragraph (1)(A) with respect to such fiscal 
     year); and
       ``(B) the percentage constituted by the ratio of--
       ``(i) a number determined by the Secretary on the basis of 
     the extent of poverty in the State; to
       ``(ii) the sum of the respective amounts determined under 
     clause (i) for eligible States for the fiscal year.
       ``(3) An amount equal to the product of--
       ``(A) an amount equal to \1/3\ of the portion referred to 
     in paragraph (1)(A) (except that, for fiscal year 1995, the 
     amount under this subparagraph is \1/3\ of the amount 
     specified in paragraph (1)(A) with respect to such fiscal 
     year); and
       ``(B) the percentage constituted by the ratio of--
       ``(i) a number determined by the Secretary on the basis of 
     the years of potential life lost by individuals in the State; 
     to
       ``(ii) the sum of the respective amounts determined under 
     clause (i) for eligible States for the fiscal year.

         ``Subpart II--NATIONAL PUBLIC HEALTH EMERGENCY ACCOUNT

     ``SEC. 1910. NATIONAL EMERGENCY ACCOUNT.

       ``(a) Establishment of Account.--There is established an 
     account to be known as the National Public Health Emergency 
     Account (in this section referred to as the `Account'). The 
     Account shall consist of the amounts transferred under 
     section 1901(c).
       ``(b) Expenditures From Account.--
       ``(1) In general.--Subject to paragraph (2), upon the 
     Secretary submitting to the Congress a written declaration 
     that a public health emergency exists, amounts in the Account 
     are available to the Secretary for the purpose of responding 
     to the emergency.
       ``(2) Certain conditions.--With respect to the availability 
     to the Secretary of amounts in the Account, a declaration 
     under paragraph (1) is effective only if in the declaration 
     the Secretary provides that the Secretary has determined 
     that--
       ``(A) the emergency involved poses a significant threat to 
     the health of individuals in the community involved;
       ``(B) the resources of the State involved (including 
     Federal funds provided to the State) that are otherwise 
     available to the State for responding to the emergency are 
     insufficient; and
       ``(C) the circumstances constituting the emergency are 
     other than chronic conditions.
       ``(c) Allocation to States of Unobligated Amounts.--With 
     respect to amounts that are transferred under 1901(c) for a 
     fiscal year and that are unobligated as of September 30 of 
     the fiscal year (referred to in this subsection as the 
     `unobligated balance'), the Secretary shall pay to a State, 
     from the unobligated balance, an amount equal to the product 
     of such balance and the percentage constituted by the ratio 
     of the amount of the grant under section 1901 to the State 
     for the fiscal year to the total amount of such grants for 
     the year. The amount paid to a State under the preceding 
     sentence shall be considered by the Secretary to be part of 
     the grant made to the State under section 1901 for such 
     fiscal year.

   PART 3--HEALTH CENTERS FOR POPULATIONS LACKING ACCESS TO SERVICES

     SEC. 7121. PURPOSE OF PROGRAM.

       The purpose of the program under title XXVII of the Public 
     Health Service Act (added by section 7123 of this Act) is to 
     achieve the goal that federally qualified health centers in 
     operation as of the date of the enactment of this Act, and 
     such centers developed and placed into operation pursuant to 
     such title XXVII, will have sufficient capacity to provide 
     the required services of the centers to all rural and urban 
     medically underserved populations that, as of December 31, 
     1995, were designated by the Secretary as such a population.

     SEC. 7122. TABLE OF CONTENTS REGARDING NEW TITLE XXVII OF 
                   PUBLIC HEALTH SERVICE ACT.

       A table describing the contents of title XXVII of the 
     Public Health Service Act, as added by section 7123 of this 
     Act, is as follows:

            TITLE XXVII--FEDERALLY QUALIFIED HEALTH CENTERS

 Subtitle A--Unfunded Portion of Operational Costs of Rural and Urban 
                                Centers

     Part 1--Grants Regarding Unfunded Portion of Operational Costs

Sec. 2701. Capped entitlement regarding unfunded portion of operational 
              costs.

 Part 2--Services and Structure of Centers; Other Conditions Regarding 
                             Current Status

Sec. 2711. Required services of centers; additional services.
Sec. 2712. Activities for special populations.
Sec. 2713. Governing board.
Sec. 2714. Schedule of fees and discounts.
Sec. 2715. Additional conditions.
Sec. 2716. Application for grant.

                      Part 3--Required Agreements

Sec. 2721. Expenditure of grant; operational costs.
Sec. 2722. Additional services.
Sec. 2723. Certain public entities with modified governing boards; 
              matching funds.
Sec. 2724. Certain provisions regarding capital costs.
Sec. 2725. Development by centers of health plans and community 
              provider networks.
Sec. 2726. Additional agreements.
Sec. 2727. Reports.

                       Part 4--General Provisions

Sec. 2741. Amount of grant; unfunded portion of operational costs.
Sec. 2742. Expenditure of certain funds.
Sec. 2743. Designation of service area.
Sec. 2744. Miscellaneous provisions.

     Subtitle B--Development of Additional Rural and Urban Centers

Sec. 2751. Development of centers.
Sec. 2752. Requirement regarding presence of certain medically 
              underserved populations.
Sec. 2753. Authority regarding modified governing boards.
Sec. 2754. Certain requirements.
Sec. 2755. Application for grant.
Sec. 2756. General provisions.

                     Subtitle C--General Provisions

Sec. 2791. Miscellaneous provisions.
Sec. 2792. Definitions.

     SEC. 7123. DIRECT SPENDING REGARDING FEDERALLY QUALIFIED 
                   HEALTH CENTERS; TEMPORARY PROGRAM FOR 
                   DEVELOPMENT OF ADDITIONAL CENTERS.

       The Public Health Service Act (42 U.S.C. 201 et seq.) is 
     amended by adding at the end the following title:
           ``TITLE XXVII--FEDERALLY QUALIFIED HEALTH CENTERS
``Subtitle A--Unfunded Portion of Operational Costs of Rural and Urban 
                                Centers

    ``PART 1--GRANTS REGARDING UNFUNDED PORTION OF OPERATIONAL COSTS

     ``SEC. 2701. CAPPED ENTITLEMENT REGARDING UNFUNDED PORTION OF 
                   OPERATIONAL COSTS.

       ``(a) In General.--In the case of any public or nonprofit 
     private entity that in accordance with section 2716 submits 
     to the Secretary an application for a fiscal year 
     demonstrating that the entity is a federally qualified health 
     center, the Secretary, acting through the Administrator of 
     the Health Resources and Services Administration, shall make 
     a grant to the entity for such year for the purposes 
     determined under section 2721. The grant shall be made in an 
     amount determined under section 2741, subject to subsections 
     (b) through (e). Grants under this subsection may only be 
     made for fiscal year 1996 and subsequent fiscal years.
       ``(b) Direct Spending.--For carrying out this title, there 
     are hereby appropriated, out of any money in the Treasury not 
     otherwise appropriated, the following amounts (as applicable 
     to the fiscal year involved):
       ``(1) For fiscal year 1996, $1,325,000,000.
       ``(2) For fiscal year 1997, $1,630,000,000.
       ``(3) For fiscal year 1998, $1,750,000,000.
       ``(4) For fiscal year 1999, $1,750,000,000.
       ``(5) For fiscal year 2000, $1,800,000,000.
       ``(6) For fiscal year 2001, $1,850,000,000.
       ``(7) For fiscal year 2002, $1,950,000,000.
       ``(8) For fiscal year 2003, $1,850,000,000.
       ``(9) For fiscal year 2004, $1,950,000,000.
       ``(10) For fiscal year 2005, the amount specified in 
     paragraph (9) multiplied by an amount equal to the product 
     of--
       ``(A) 1 plus the national medicare growth factor (as 
     defined in section 8201(c) of the Guaranteed Health Insurance 
     Act of 1994); and
       ``(B) 1 plus the annual percentage increase projected by 
     the Secretary to occur during such year in the populations 
     served by federally qualified health centers.
       ``(11) For fiscal year 2006 and each subsequent fiscal 
     year, the amount determined under this subsection for the 
     preceding fiscal year multiplied by an amount equal to the 
     product of subparagraphs (A) and (B) of paragraph (10) (as 
     such subparagraphs are applied for the fiscal year involved).
       ``(c) Entitlement Status of Grants.--
       ``(1) In general.--Effective on and after October 1, 1995, 
     in the case of a federally qualified health center, the 
     requirement established in subsection (a) for the Secretary 
     (relating to making a grant)--
       ``(A) is an entitlement in the center on behalf of 
     individuals served by the center (but is not an entitlement 
     in any such individual); and
       ``(B) represents the obligation of the Federal Government, 
     subject to paragraph (2), to make a grant under subsection 
     (a) to the center in the amount determined for the center 
     under section 2741.
       ``(2) Capped entitlement.--With respect to making grants 
     under subsection (a) to federally qualified health centers in 
     the amounts determined under section 2741, the entitlement 
     established in paragraph (1) for such centers is subject to 
     the extent of the amount appropriated in subsection (b) for 
     the fiscal year and to allocations under subsections (d) and 
     (e).
       ``(3) Pro rata reductions under cap amount.--With respect 
     to making grants under subsection (a) for a fiscal year to 
     federally qualified health centers in the amounts determined 
     under section 2741, if the Secretary determines that the 
     budget authority provided in subsection (b) is insufficient 
     to both provide the amounts under section 2741 and make the 
     allocations under subsections (d) and (e), the Secretary 
     shall first make the allocation under subsection (e) and then 
     reduce each amount determined under section 2741 for such 
     year on a pro rata basis to the extent necessary for the 
     grants under subsection (a) to be provided in an aggregate 
     amount equal to the balance of the budget authority.
       ``(4) Nature of entitlement.--With respect to the purposes 
     for which a grant under subsection (a) is authorized to be 
     expended, modifications in such purposes enacted after the 
     date of the enactment of the Guaranteed Health Insurance Act 
     of 1994 do not affect the amount of budget authority provided 
     in subsection (b) for any fiscal year.
       ``(d) Allocations Regarding Development of Additional 
     Centers.--Of the budget authority provided in subsection (b) 
     for a fiscal year, the Secretary shall, for the purpose of 
     making grants under section 2751 (relating to the development 
     of federally qualified health centers), reserve the following 
     amount, as applicable to the fiscal year involved:
       ``(1) For fiscal year 1996, $75,000,000.
       ``(2) For fiscal year 1997, $80,000,000.
       ``(3) For fiscal year 1998, $100,000,000.
       ``(4) For fiscal year 1999, $100,000,000.
       ``(5) For fiscal year 2000, $100,000,000.
       ``(6) For fiscal year 2001, $100,000,000.
       ``(7) For fiscal year 2002, $150,000,000.
       ``(e) Allocations for Unanticipated Needs.--
       ``(1) In general.--Of the budget authority provided in 
     subsection (b) for a fiscal year, the Secretary shall reserve 
     2 percent for--
       ``(A) making grants to any federally qualified health 
     center that, in the determination of the Secretary, has a 
     need for such a grant to assist the center in responding to 
     unanticipated needs for required services or additional 
     services that have arisen in the service area of the center, 
     or in responding to other unanticipated circumstances that 
     have arisen in the provision by the center of required 
     services or additional services; and
       ``(B) making grants to any grantee under section 2751 that, 
     in the determination of the Secretary, has a need for a such 
     a grant to assist the grantee in responding to unanticipated 
     circumstances that have arisen in carrying out the project 
     under such section.
       ``(2) Allocation to grantees of unobligated amounts.--With 
     respect to amounts that are reserved under paragraph (1) for 
     a fiscal year and that are unobligated as of September 30 of 
     the fiscal year (referred to in this subsection as the 
     `unobligated balance'), the Secretary shall pay to each 
     federally qualified health center and to each grantee under 
     section 2751, from the unobligated balance, an amount equal 
     to the product of such balance and the percentage constituted 
     by the ratio of the amount of the grant for the fiscal year 
     for such center or grantee (made under subsection (a) or 
     section 2751, respectively) to the sum of the total amount of 
     grants under subsection (a) for the year and the total amount 
     of grants under section 2751 for the year. The amount paid to 
     such center or grantee under the preceding sentence shall be 
     considered by the Secretary to be part of the grant made for 
     such fiscal year to the center or grantee under subsection 
     (a) or section 2751, respectively.
       ``(f) Definition of Federally Qualified Health Center.--
       ``(1) In general.--For purposes of this title, the term 
     `federally qualified health center' means a public or 
     nonprofit private entity that is described in paragraph (2) 
     or (3), and that operates a health center that--
       ``(A) serves any medically underserved populations (as 
     defined in section 2752(b)) in the service area designated 
     for the center under section 2743;
       ``(B) meets each of the conditions described in part 2 
     (relating to current status);
       ``(C) meets each of the conditions described in part 3 
     (relating to agreements on future status); and
       ``(D) meets each of the conditions described in sections 
     2741 and 2742 of part 4 (relating to general provisions).
       ``(2) Relationship to status in fiscal year 1995.--For 
     purposes of paragraph (1), an entity described in this 
     paragraph is an entity that met one or more of the following 
     conditions for fiscal year 1995:
       ``(A) The entity received a grant under section 329, 330, 
     340, or 340A, as in effect for such year.
       ``(B) The entity applied for such a grant and was approved 
     by the Secretary as meeting the requirements for such a 
     grant, but the entity did not receive a grant because the 
     amount of funding available to the Secretary for such grants 
     was insufficient to make a grant to all entities so approved.
       ``(C) The entity was certified by the Secretary as a 
     Federally-qualified health center under section 1905(l)(2)(B) 
     of the Social Security Act.
       ``(3) Relationship to development grants.--For purposes of 
     paragraph (1), an entity described in this paragraph is an 
     entity that, for fiscal year 1996 or any subsequent fiscal 
     year, received a grant under section 2751 of subtitle B 
     (relating to the development of centers).

``PART 2--SERVICES AND STRUCTURE OF CENTERS; OTHER CONDITIONS REGARDING 
                             CURRENT STATUS

     ``SEC. 2711. REQUIRED SERVICES OF CENTERS; ADDITIONAL 
                   SERVICES.

       ``(a) Services Generally; Availability.--A condition under 
     section 2701(f) for status as a federally qualified health 
     center for a fiscal year is as follows:
       ``(1) The center involved (directly or through contracts or 
     cooperative agreements with public or private entities)--
       ``(A) provides the required services (as defined in 
     subsection (b)); and
       ``(B) provides any additional service (as defined in 
     section 2722) that is included for the center in the plan in 
     effect for the center under section 2721(d).
       ``(2) The center makes the required and additional services 
     available to all individuals (subject to the extent of the 
     capacity of the center), unless the Secretary provides a 
     waiver for the entity under which the center provides the 
     services principally to migratory or seasonal agricultural 
     workers and related individuals, or principally to Indians. 
     The Secretary shall provide such a waiver upon request of the 
     center regarding the individuals involved if, for fiscal year 
     1995, the center principally served such individuals. Before 
     making a grant under section 2701 for a fiscal year to a 
     center for which such a waiver was in effect for the previous 
     fiscal year, the Secretary shall review the circumstances 
     involved to determine whether the waiver should remain in 
     effect.
       ``(b) Required Services.--
       ``(1) In general.--For purposes of this title, the term 
     `required services' means the following:
       ``(A) Basic health services.
       ``(B) Referrals to providers of medical services and other 
     health-related services.
       ``(C) Patient case management services.
       ``(D) Required enabling services, subject to subsection 
     (c).
       ``(2) Basic health services.--For purposes of this title, 
     the term `basic health services' means the following:
       ``(A) Services of health professionals.
       ``(B) Diagnostic laboratory and radiologic services.
       ``(C) Preventive health services.
       ``(D) Emergency medical services.
       ``(E) Preventive dental services, subject to subsection 
     (c).
       ``(F) Pharmaceutical services, subject to subsection (c).
       ``(3) Preventive health services.--With respect to the 
     definition of the term `preventive health services' for 
     purposes of this title--
       ``(A) for each of the fiscal years 1996 through 1998, such 
     term includes prenatal and perinatal services; screening for 
     breast and cervical cancer (including mammography); well-
     child services; immunizations against vaccine-preventable 
     diseases; screenings for elevated blood lead levels, for 
     communicable diseases, and for cholesterol; pediatric eye and 
     ear examinations to determine the need for vision and hearing 
     correction; and voluntary family planning services; and
       ``(B) for fiscal year 1999 and subsequent fiscal years, 
     such term means services specified in subparagraph (A), and 
     in addition, any preventive or screening service included in 
     the guaranteed national benefit package under subtitle A of 
     title III of the Guaranteed Health Insurance Act of 1994.
       ``(4) Patient case management services.--For purposes of 
     this title, the term `patient case management services' means 
     services that will assist patients of a center in gaining 
     access to needed medical, social, educational, and other 
     services.
       ``(5) Required enabling services.--
       ``(A) For purposes of this title, the term `required 
     enabling services' means services specified in subparagraph 
     (B) that are provided for the purpose of enabling individuals 
     to utilize the services of the center involved.
       ``(B) The services referred to in subparagraph (A) are (as 
     necessary in the service area of the center involved) 
     transportation, community and patient outreach, patient 
     education, and translation services.
       ``(c) Applicability of Certain Requirements.--
       ``(1) In general.--If, for fiscal year 1995, a center did 
     not provide a service specified in paragraph (2), the 
     requirement under subsection (a) to provide the service is 
     effective for fiscal year 1999 and subsequent fiscal years, 
     except as provided in subparagraph (B). With respect to the 
     fiscal years 1996 through 1998, the following applies to the 
     center:
       ``(A) If, for such a fiscal year, the center (at the option 
     of the center) includes the service in the proposed plan 
     submitted under 2721(a)(1), the Secretary shall include the 
     service in the plan in effect for the center under 2721(d) 
     for the year.
       ``(B) Upon the service being so included in the plan, the 
     center is subject to the requirement under subsection (a) to 
     provide the service each fiscal year.
       ``(2) Relevant services.--A service referred to in 
     paragraph (1) is any required enabling service, any 
     preventive dental service, and any pharmaceutical service.
       ``(d) Other Definitions.--For purposes of this title:
       ``(1) The term `Indian' means an individual who, under 
     section 4 of the Indian Health Care Improvement Act, is an 
     Indian or an urban Indian.
       ``(2)(A) The term `migratory or seasonal agricultural 
     worker, or related individual' means each of the following:
       ``(i) A migratory agricultural worker.
       ``(ii) A seasonal agricultural worker.
       ``(iii) A member of the family of a migratory or seasonal 
     agricultural worker.
       ``(iv) An individual who previously was such a worker, but 
     who no longer meets the definition under subparagraph (B) or 
     (C) because of age or disability.
       ``(v) A member of the family of an individual described in 
     clause (iv).
       ``(B) The term `migratory agricultural worker' means an 
     individual whose principal employment is in agriculture on a 
     seasonal basis, who has been so employed within the last 
     twenty-four months, and who establishes for the purposes of 
     such employment a temporary abode.
       ``(C) The term `seasonal agricultural worker' means an 
     individual whose principal employment is in agriculture on a 
     seasonal basis and who is not a migratory agricultural 
     worker.
       ``(D) The term `agriculture' means farming in all its 
     branches, including--
       ``(i) cultivation and tillage of the soil;
       ``(ii) the production, cultivation, growing, and harvesting 
     of any commodity grown on, in, or as an adjunct to or part of 
     a commodity grown in or on, the land; and
       ``(iii) any practice (including preparation and processing 
     for market and delivery to storage or to market or to 
     carriers for transportation to market) performed by a farmer 
     or on a farm incident to or in conjunction with an activity 
     described in clause (i).

     ``SEC. 2712. ACTIVITIES FOR SPECIAL POPULATIONS.

       ``(a) Definition of Special Populations.--For purposes of 
     this title, the term `special population' means each of the 
     following populations:
       ``(1) Homeless individuals.
       ``(2) Residents of public housing.
       ``(3) Individuals with HIV disease, tuberculosis, or other 
     communicable diseases.
       ``(4) Such other populations as the Secretary may identify 
     as having significant particularized difficulties in 
     obtaining the services of federally qualified health centers.
       ``(b) Rule of Construction.--The activities carried out 
     under subsection (c) for special populations are in addition 
     to the services carried out for such populations under 
     section 340 and 340A.
       ``(c) Required Activities.--Effective for fiscal year 1996 
     and subsequent fiscal years, a condition under section 
     2701(f) for status as a federally qualified health center is 
     that the center involved carries out for each special 
     population activities to overcome the particularized 
     difficulties experienced by the population in obtaining the 
     services of the center.
       ``(d) Definitions.--For purposes of this title:
       ``(1) The term `homeless individual' means an individual 
     who lacks housing (without regard to whether the individual 
     is a member of a family), including an individual whose 
     primary residence during the night is a supervised public or 
     private facility that provides temporary living 
     accommodations and an individual who is a resident in 
     transitional housing.
       ``(2) The term `resident of public housing' means a 
     resident of housing that is public housing as defined in 
     section 3(b)(1) of the United States Housing Act of 1937.

     ``SEC. 2713. GOVERNING BOARD.

       ``(a) Requirements.--A condition under section 2701(f) for 
     status as a federally qualified health center for a fiscal 
     year is that the center involved has established a governing 
     board meeting the following requirements:
       ``(1) Except as provided in subsection (b), such board is 
     composed of individuals, a majority of whom are being served 
     by the center and who, as a group, represent the individuals 
     being served by the center.
       ``(2) The board establishes general policies for the 
     center, except as provided in subsection (c).
       ``(3) The board reviews the application to be submitted by 
     the center under section 2716, including the proposed plan 
     for the center developed under section 2721(a)(1), and 
     approves or disapproves the application.
       ``(4) The board approves the selection of a director for 
     the center.
       ``(5) The board meets at least once quarterly.
       ``(b) Indian Tribes and Organizations.--The requirement of 
     subsection (a)(1) does not apply to the governing board of a 
     center if the center is operated by an Indian tribe or tribal 
     organization under the Indian Self-Determination Act.
       ``(c) Centers of Certain Public Entities; Modified 
     Boards.--
       ``(1) In general.--In the case of a center operated by a 
     public entity, the requirement of subsection (a)(2) does not 
     apply to the personnel policies of the center, or the fiscal 
     policies of the center (subject to paragraph (2)), if--
       ``(A) the center is operated by an entity described in 
     section 2701(f)(2), and for fiscal year 1994 was not required 
     to permit the governing board of the center to establish 
     personnel or fiscal policies for the center; or
       ``(B) for fiscal year 1996 or any subsequent fiscal year, 
     the center received a grant under subtitle B (relating to the 
     development of centers) and, under section 2753, was not so 
     required.
       ``(2) Rule of construction.--The requirements of subsection 
     (a)(3), including with respect to the proposed plan under 
     section 2721, apply to a center notwithstanding the 
     provisions of paragraph (1) regarding fiscal policies.

     ``SEC. 2714. SCHEDULE OF FEES AND DISCOUNTS.

       ``A condition under section 2701(f) for status as a 
     federally qualified health center for a fiscal year is that 
     the center involved is in compliance with the following:
       ``(1) The center has maintained and is maintaining a 
     schedule of fees for the provision of the services of the 
     center, and the schedule has been and is consistent with 
     locally prevailing rates or charges.
       ``(2) In the case of any portion of a fee for which a 
     patient of the center has the responsibility of making 
     payment (including amounts owed pursuant to requirements of 
     health plans regarding copayments and deductibles), the 
     center has maintained and is maintaining a schedule of 
     discounts to be applied to the payment of such portion, and 
     the discounts have been and are being adjusted in accordance 
     with section 303(f) of part 51c of title 42, Code of Federal 
     Regulations (42 CFR 51c.303(f)), as in effect for fiscal year 
     1994.
       ``(3) With respect to the schedule of fees under paragraph 
     (1) and the schedule of discounts under paragraph (2), the 
     center has made and is making every reasonable effort to 
     secure in accordance with the schedules payments from 
     patients, subject to paragraph (4).
       ``(4) In the case of an individual seeking a service of the 
     center, the center has not conditioned and is not 
     conditioning the provision of the service on payment for the 
     service, and the center has provided and is providing the 
     service without regard to whether the individual has paid the 
     portions of fees imposed by the center for which the 
     individual has the responsibility of making payments 
     (including amounts owed pursuant to requirements of health 
     plans regarding copayments and deductibles).

     ``SEC. 2715. ADDITIONAL CONDITIONS.

       ``A condition under section 2701(f) for status as a 
     federally qualified health center for a fiscal year is that 
     the center involved is in compliance with the following:
       ``(1) The services of the center have been and are 
     available and accessible in the service area of the center 
     promptly, as appropriate, and in a manner that assures 
     continuity.
       ``(2) The center has maintained and is maintaining 
     organizational arrangements that provide for--
       ``(A) an ongoing quality assurance program regarding the 
     services of the center; and
       ``(B) procedures to maintain the confidentiality of patient 
     records.
       ``(3) The center has maintained and is maintaining an 
     ongoing referral relationship with one or more hospitals.
       ``(4) The center has maintained and is maintaining 
     compliance with applicable Federal law on accounting 
     procedures, including such requirements on accounting 
     procedures as the Secretary may establish specifically for 
     the expenditure of a grant under section 2701.
       ``(5) The center has provided and is providing the services 
     of the center in the language and cultural context that is 
     most appropriate for the patients involved.

     ``SEC. 2716. APPLICATION FOR GRANT.

       ``(a) In General.--For purposes of section 2701(a), an 
     application for a grant under such section for a fiscal year 
     for a center is in accordance with this section if the 
     application--
       ``(1) is submitted not later than the date specified by the 
     Secretary;
       ``(2) contains the proposed plan required in section 
     2721(a)(1);
       ``(3) demonstrates that the application, including such 
     plan, has been approved by the governing board of the center;
       ``(4) contains the agreements required in this subtitle, 
     and otherwise demonstrates that the center meets the 
     conditions established in this subtitle regarding status as a 
     federally qualified health center; and
       ``(5) is in such form, is made in such manner, and contains 
     such agreements, assurances, and information as the Secretary 
     determines to be necessary to carry out this subtitle.
       ``(b) Agreement Regarding Continuance of Current Status.--A 
     condition under section 2701(f) for status as a federally 
     qualified health center for a fiscal year is that the center 
     involved agree to continue serving any medically underserved 
     populations in the service area of the center, and to 
     continue meeting each of the conditions described in this 
     part.

                     ``PART 3--REQUIRED AGREEMENTS

     ``SEC. 2721. EXPENDITURE OF GRANT; OPERATIONAL COSTS.

       ``(a) In General.--A condition under section 2701(f) for 
     status as a federally qualified health center for a fiscal 
     year is as follows:
       ``(1) The center involved submits to the Secretary, in 
     accordance with subsection (d), a proposed plan for the 
     expenditure by the center of a grant under section 2701 for 
     the fiscal year.
       ``(2) The center agrees to expend the grant only for costs 
     that are specified in subsection (b) and only in accordance 
     with the plan in effect for the center for the year under 
     subsection (d).
       ``(b) Operational Costs.--
       ``(1) In general.--For purposes of subsection (a)(2), the 
     costs specified in this subsection regarding the expenditure 
     by a federally qualified health center of a grant under 
     section 2701 are the costs of providing the required 
     services; the costs of providing any additional services (as 
     defined in section 2722) that are included for the center in 
     the plan in effect under subsection (d); and the costs of 
     otherwise operating the center involved in accordance with 
     the conditions established in this subtitle.
       ``(2) Required allowance of certain costs.--The Secretary 
     shall under paragraph (1) authorize each federally qualified 
     health center to expend a grant under section 2701 for the 
     following costs:
       ``(A) The costs of providing the required services and the 
     additional services involved.
       ``(B) The costs of recruiting, training, and compensating 
     the staff of the center.
       ``(C) The costs of administering the center, including the 
     costs of participating as a provider in one or more health 
     plans.
       ``(D) The costs of carrying out offsite activities with 
     respect to the required and additional services.
       ``(3) Discretionary allowance of certain costs.--In the 
     case of the center involved, the Secretary may under 
     paragraph (1) authorize the expenditure of a grant under 
     section 2701 for any or all of the following costs (in 
     addition to expenditures authorized under paragraph (2)):
       ``(A) The developmental costs of expanding the capacity of 
     the center to provide required and additional services 
     (including the provision of additional services not 
     previously provided by the center; the provision of services 
     to an increased number of individuals; and the provision of 
     services through school-based clinics, mobile clinics, 
     satellite clinics, and other offsite locations).
       ``(B) Capital costs, subject to section 2724. Such costs 
     include the purchase of equipment; the acquisition, 
     expansion, or modernization of existing facilities; and the 
     construction of new facilities.
       ``(C) The costs of carrying out activities in areas beyond 
     the service area of the center for the purpose of improving 
     or maintaining the health of individuals within the service 
     area.
       ``(D) The costs of planning and developing a health plan in 
     accordance with section 2725(a).
       ``(E) The costs of planning and developing a network of 
     health care providers in accordance with section 2725(b) 
     (relating to community providers).
       ``(F) Such other costs as the Secretary may allow with 
     respect to the provision of required services and additional 
     services.
       ``(c) Criteria for Determining Authorized Expenditures.--
       ``(1) In general.--With respect to an expenditure by a 
     federally qualified health center, the Secretary shall 
     establish criteria for determining--
       ``(A) whether the expenditure is for a cost for which a 
     grant under section 2701 may be expended; and
       ``(B) whether any limitation applies to the expenditure 
     with respect to being considered as such a cost.
       ``(2) Certain requirements.--Criteria under paragraph (1) 
     regarding the expenditure of a grant under section 2701 shall 
     provide for the reasonable and efficient administration of 
     federally qualified health centers, and shall appropriately 
     reflect the costs of operating such centers under the 
     following circumstances (as applicable to the center 
     involved):
       ``(A) With respect to recruiting and retaining individuals 
     as professional staff for the center (including health 
     professionals), difficulties arising from substantial 
     disparities between the rate of compensation provided by a 
     center for a professional and the rate of compensation for 
     such a professional prevailing in the geographic area 
     involved.
       ``(B) With respect to a center located in a rural area, the 
     increased costs that the center incurs, relative to other 
     centers, as a result of serving fewer patients or as a result 
     of difficulties in recruiting or retaining professional 
     staff.
       ``(C) With respect to the population of patients served by 
     a center, the increased costs that the center incurs, 
     relative to other centers, as a result of the population 
     having a higher incidence or prevalence of a health 
     condition, or a greater number of severe or chronic health 
     conditions.
       ``(D) With respect to a center at which a health 
     professions training program is carried out, the increased 
     costs that the center incurs, relative to other centers, as a 
     result of the training program.
       ``(3) Relationship to former criteria.--
       ``(A) In establishing criteria under paragraph (1), the 
     Secretary shall, subject to subparagraph (B), ensure that the 
     expenditures that are authorized for grants under section 
     2701 include all expenditures that were authorized for fiscal 
     year 1994 for purposes of part 413 of title 42, Code of 
     Federal Regulations (42 CFR 413 et seq.; relating to payments 
     under title XVIII of the Social Security Act), except to the 
     extent that such part 413 relates to services that are not 
     required services or additional services for purposes of this 
     subtitle.
       ``(B) With respect to the relationship between criteria 
     under paragraph (1) and criteria under part 413 of title 42, 
     Code of Federal Regulations, subparagraph (A) does not for 
     purposes of this subsection establish any limitation 
     regarding the maximum amount of expenditures. Such 
     limitations described in the Federal Register in volume 57 at 
     any of pages 24961 through 24974 (June 12, 1992; file code 
     BPD-728-FC) (relating to a final rule under Public Law 101-
     508) do not apply to criteria under paragraph (1), and 
     otherwise shall not have any legal effect.
       ``(d) Plan Regarding Expenditure of Grant.--For purposes of 
     subsection (a), the following applies to the plan of a center 
     for a fiscal year:
       ``(1) The proposed plan submitted by the center is in 
     accordance with this subsection if the proposal describes the 
     purposes for which the center intends to expend the grant 
     under section 2701, including the following:
       ``(A) The activities to be carried out in providing the 
     required services and the amounts to be expended for the 
     activities.
       ``(B) The requests of the center regarding additional 
     services, and the activities to be carried out in providing 
     the services and the amounts to be expended for the 
     activities.
       ``(2) If the center meets the conditions established in 
     this subtitle regarding status as a federally qualified 
     health center, the Secretary shall negotiate with the center 
     to approve a plan for the fiscal year for the expenditure by 
     the center of a grant under section 2701 for the costs 
     described in subsection (b).
       ``(3) The Secretary shall ensure that the plan negotiated 
     and approved under paragraph (2) for the fiscal year includes 
     a specification of each of the following:
       ``(A) The total amount of costs that are projected to be 
     incurred by the center for the fiscal year in carrying out 
     the plan.
       ``(B) The total amount, exclusive of the grant under 
     section 2701, that is projected to be received by the center 
     for the fiscal year as payments for the provision of the 
     required services and the additional services of the center.
       ``(4) In negotiating a plan under paragraph (2), the 
     Secretary shall provide to the center written findings 
     explaining the basis of the decisions of the Secretary, 
     including decisions regarding the following:
       ``(A) Types of expenditures.
       ``(B) Limitations on expenditures.
       ``(C) Any denial by the Secretary of a request by the 
     center regarding the provision of a service. The written 
     findings regarding such a denial shall include an explanation 
     of whether the service is needed by the individuals served by 
     the center.
       ``(5) With the consent of a federally qualified health 
     center, the Secretary may modify the plan in effect under 
     this subsection for the center for the fiscal year involved. 
     If a center submits to the Secretary a written request for a 
     modification to the plan of the center, the Secretary shall 
     approve or deny the request not later than 30 days after the 
     request is received by the Secretary.

     ``SEC. 2722. ADDITIONAL SERVICES.

       ``For purposes of this title, the term `additional service' 
     means each of the following (if not a required service under 
     this title):
       ``(1) Any item or service covered in the guaranteed 
     national benefit package under subtitle A of title III of the 
     Guaranteed Health Insurance Act of 1994, except for the 
     following (as defined in such title): Hospital services; 
     extended care services; residential mental health treatment 
     services; residential substance abuse treatment services; and 
     ambulance services.
       ``(2) Any item or service available under title XVIII or 
     XIX of the Social Security Act, except for the following (as 
     defined in such titles): Nursing facility services; inpatient 
     hospital services; outpatient hospital services; services in 
     an intermediate care facility for the mentally retarded; and 
     inpatient psychiatric hospital services.
       ``(3) Ambulance services in rural areas (notwithstanding 
     paragraph (1)).
       ``(4) Environmental health services (including the 
     detection and alleviation of unhealthful conditions 
     associated with water supply, sewage treatment, solid waste 
     disposal, rodent and parasitic infestation, field sanitation, 
     housing, and other environmental factors related to health).
       ``(5) Services that are in addition to the services 
     specified in section 2711(b)(5)(B) and that are provided for 
     the purpose of enabling individuals to utilize the services 
     of the center involved.

     ``SEC. 2723. CERTAIN PUBLIC ENTITIES WITH MODIFIED GOVERNING 
                   BOARDS; MATCHING FUNDS.

       ``(a) In General.--In the case of a center to which section 
     2713(c)(1)(B) applies, a condition under section 2701(f) for 
     status as a federally qualified health center for a fiscal 
     year is that the public entity involved agrees to make 
     available (directly or through donations from public or 
     private entities) non-Federal contributions in cash toward 
     the operational costs of the center in an amount that is not 
     less than 50 percent of such costs.
       ``(b) Maintenance of Effort; Relationship to Matching 
     Funds.--In making a determination of the amount of non-
     Federal contributions provided by a public entity under 
     subsection (a), the Secretary may only include non-Federal 
     contributions in excess of the average amount of non-Federal 
     contributions made by the entity toward the operational costs 
     of the center involved for the 2-year period preceding 
     October 1, 1994.

     ``SEC. 2724. CERTAIN PROVISIONS REGARDING CAPITAL COSTS.

       ``(a) Certain Costs.--With respect to authorizing capital 
     costs as permissible expenditures under section 
     2721(b)(3)(B), the costs that the Secretary may authorize 
     include the costs of amortizing the principal of, and paying 
     interest on, loans; and the costs of repaying loan guarantees 
     and interest subsidies.
       ``(b) Wages of Laborers and Mechanics.--
       ``(1) Agreement.--A condition under section 2701(f) for 
     status as a federally qualified health center for a fiscal 
     year is that the center involved agree that, in the 
     performance of work on any expansion, modernization, or 
     construction of buildings carried out with a grant under 
     section 2701, all laborers and mechanics employed by 
     contractors or subcontractors will be paid wages at rates not 
     less than those prevailing on similar work in the locality as 
     determined by the Secretary of Labor in accordance with the 
     Act of March 3, 1931 (40 U.S.C. 276a-276a-5, known as the 
     Davis-Bacon Act).
       ``(2) Authority of secretary of labor.--The Secretary of 
     Labor shall have with respect to the labor standards referred 
     to in paragraph (1) the authority and functions set forth in 
     Reorganization Plan Numbered 14 of 1950 (15 F.R. 3176; 5 
     U.S.C. Appendix) and section 2 of the Act of June 13, 1934 
     (40 U.S.C. 276c).
       ``(c) Restrictions Regarding Construction.--The Secretary 
     may authorize as a permissible expenditure under section 
     2721(b)(3)(B) the construction of new buildings only if the 
     Secretary determines that appropriate facilities are not 
     available through acquiring, modernizing, or expanding 
     existing buildings and that the center involved has made 
     reasonable efforts to secure from other sources funds in lieu 
     of the grant under section 2701 to construct such facilities.
       ``(d) Applicability of Certain Provisions.--With respect to 
     the use and disposition of real property, and the transfer of 
     title to such property, a condition under section 2701(f) for 
     status as a federally qualified health center for a fiscal 
     year is that the center involved agree that expenditures of a 
     grant under section 2701 for capital costs regarding such 
     property are subject to the provisions of section 134 of part 
     74 of title 45, Code of Federal Regulations (45 CFR 74.134) 
     (or any successor provision).
       ``(e) Subordination; Waivers.--In the case of any Federal 
     interest that may be derived by virtue of the expenditure of 
     a grant under section 2701 for the capital costs of a center, 
     the Secretary may subordinate or waive Federal rights if the 
     Secretary determines that the subordination or waiver will 
     further the objectives of this subtitle.

     ``SEC. 2725. DEVELOPMENT BY CENTERS OF HEALTH PLANS AND 
                   COMMUNITY PROVIDER NETWORKS.

       ``(a) Health Plans.--With respect to authorizing the costs 
     of developing a health plan as permissible expenditures under 
     section 2721(b)(3)(D), a federally qualified health center 
     has developed a plan in accordance with this subsection if 
     the plan meets the following conditions:
       ``(1) The plan is an insured health benefits plan meeting 
     the requirements of subtitle A of title V of the Guaranteed 
     Health Insurance Act of 1994.
       ``(2) The plan is a public or nonprofit private entity 
     governed by the center (or by the center in collaboration 
     with other public or nonprofit private entities).
       ``(3) The center is a provider of health services through 
     the plan.
       ``(b) Community Provider Network.--With respect to 
     authorizing the costs of developing a network of health care 
     providers as permissible expenditures under section 
     2721(b)(3)(E), a federally qualified health center has 
     developed a network in accordance with this subsection if the 
     network meets the following conditions:
       ``(1) The network is a public or nonprofit private entity 
     governed by the center (or by the center in collaboration 
     with other public or nonprofit private entities).
       ``(2) The network maintains written agreements with each of 
     the health care providers participating in the network, and 
     the agreements provide as follows:
       ``(A) Each member agrees to provide appropriate emergency 
     and medical support services to other members.
       ``(B) Each member agrees to accept referrals from other 
     members.
       ``(C) Each hospital member has arrangements to provide 
     staff privileges to physicians providing care for other 
     members.
       ``(D) Each member has in effect (or is in the process of 
     establishing) agreements with other members to share in the 
     member's communication system, including (where appropriate) 
     the electronic sharing of patient data, medical records, and 
     billing services.
       ``(3) The network includes the center as a provider of 
     health services in the network.
       ``(4) The network participates as a provider of health care 
     in one or more health plans that are either insured health 
     benefits plan under subtitle A of title V of the Guaranteed 
     Health Insurance Act of 1994, or self-insured health benefit 
     plans under subtitle B of such title.
       ``(5) The network is composed principally of essential 
     community providers (as defined in subsection (d)).
       ``(6) The network provides health services within a defined 
     geographic area (in this title referred to as the `network 
     service area'), which area includes the service area of each 
     of the federally qualified health centers participating in 
     the network.
       ``(7) The network serves any medically underserved 
     populations in the network service area.
       ``(8) In the case of federally qualified health centers in 
     the network service area--
       ``(A) the network permits each such center to participate 
     in the network, subject to the center entering into the 
     agreement under paragraph (2) for such participation;
       ``(B) the terms and conditions of the agreement for the 
     participation of the center are at least as favorable as the 
     terms and conditions of the agreement for the participation 
     of other entities; and
       ``(C) the network provides a written notification to each 
     federally qualified health center in the network service area 
     informing the center of the opportunity to participate in the 
     network.
       ``(c) Antidiscrimination Regarding Networks.--Section 9333 
     of the Guaranteed Health Insurance Act of 1994 applies to 
     networks under subsection (b) to the same extent and in the 
     same manner as such section applies to health plans under 
     such section 9333.
       ``(d) Definitions.--For purposes of this title, the term 
     `essential community provider' means entities that are 
     essential community providers under section 5012(c) of the 
     Guaranteed Health Insurance Act of 1994.

     ``SEC. 2726. ADDITIONAL AGREEMENTS.

       ``(a) Third-Party Reimbursements.--A condition under 
     section 2701(f) for status as a federally qualified health 
     center for a fiscal year is that the center involved agree as 
     follows:
       ``(1) The center will participate as a provider of health 
     services in the program under title XVIII of the Social 
     Security Act; the program under title XIX of such Act; other 
     Federal or State programs that make payment for the provision 
     of health services to individuals in the State involved, and 
     in private health plans.
       ``(2) The center, in providing health services, will make 
     every reasonable effort--
       ``(A) to collect appropriate reimbursement from the 
     programs and plans referred to in paragraph (1); and
       ``(B) to collect the reimbursements on the basis of the 
     full amount of fees applicable under the schedule in effect 
     pursuant to paragraph (1) of section 2714, which 
     reimbursements shall be made on the basis of such fees 
     without regard to discounts that are applied by the center 
     pursuant to paragraph (2) of such section.
       ``(b) Maintenance of Effort Regarding Public Entities.--In 
     the case of a center operated by a public entity, a condition 
     under section 2701(f) for status as a federally qualified 
     health center for a fiscal year is that the entity will 
     maintain expenditures of non-Federal amounts for the center 
     at a level that is not less than the level of such 
     expenditures maintained by the entity for the fiscal year 
     preceding the fiscal year for which the center is applying to 
     receive a grant under section 2701. The preceding sentence is 
     subject to section 2723(b).

     ``SEC. 2727. REPORTS.

       ``(a) In General.--A condition under section 2701(f) for 
     status as a federally qualified health center for a fiscal 
     year is that the center involved agree as follows:
       ``(1) The center will prepare a report regarding the 
     activities of the center for the fiscal year, and will submit 
     the report to the Secretary during the following fiscal year 
     by not later than the date specified under subsection (b).
       ``(2) The report will include information on the following:
       ``(A) Expenditures of the center for operational costs 
     included in the plan in effect for the center under 2721(d).
       ``(B) The patterns of use of the services of the center, 
     including the patterns of use of each of the special 
     populations in the service area of the center.
       ``(C) The availability and accessibility of such services.
       ``(D) Expenditures made from any amount the center retained 
     under section 2743(b).
       ``(E) Such other matters relating to operations of the 
     center as the Secretary may require.
       ``(b) Date for Submission of Report.--With respect to 
     reports under subsection (a) for a fiscal year, the Secretary 
     shall specify a date in the following fiscal year by which 
     the reports are to be submitted to the Secretary.

                      ``PART 4--GENERAL PROVISIONS

     ``SEC. 2741. AMOUNT OF GRANT; UNFUNDED PORTION OF OPERATIONAL 
                   COSTS.

       ``(a) In General.--For purposes of section 2701(a), the 
     amount determined under this section for a grant for a 
     federally qualified health center for a fiscal year is the 
     difference between--
       ``(1) the total amount of costs that are projected to be 
     incurred by the center for the fiscal year in carrying out 
     the plan in effect for the year under section 2721(d), as 
     such total amount is specified under paragraph (3)(A) of such 
     section; and
       ``(2) the total amount, exclusive of the grant under 
     section 2701 for the fiscal year, that is projected to be 
     received by the center for the year as payments for the 
     provision under the plan of required services and additional 
     services, as such total amount is specified under paragraph 
     (3)(B) of section 2721(d).
       ``(b) Grant Payments.--Payments under a grant under section 
     2701 shall be made in advance, and in such installments as 
     the Secretary finds necessary. Adjustments in such payments 
     may be made for overpayments or underpayments, subject to 
     section 2742(b).

     ``SEC. 2742. EXPENDITURE OF CERTAIN FUNDS.

       ``(a) Expenditure of Nongrant Funds.--
       ``(1) In general.--
       ``(A) Subject to paragraph (2), the Secretary may not under 
     this subtitle restrict the purposes for which a federally 
     qualified health center expends the nongrant funds of the 
     center, including restricting expenditures pursuant to 
     criteria under section 2721(c)(1) or pursuant to other 
     Federal cost principles.
       ``(B) For purposes of this section, the term `nongrant 
     funds' means funds of a center other than the grant under 
     section 2701.
       ``(2) Compliance with center conditions.--The Secretary may 
     require, as a condition under section 2701(f) for status as a 
     federally qualified health center for a fiscal year, that the 
     center involved agree that the nongrant funds of the entity 
     will be expended for purposes that are consistent with the 
     purposes specified in this subtitle.
       ``(b) Expenditure of Excess Operating Revenues.--If, for a 
     fiscal year, the sum of the amount of the grant under section 
     2701 to a federally qualified health center and the amount of 
     the nongrant funds of the center exceeds the costs of the 
     center in carrying out the plan in effect for the center 
     under section 2721(d), the center is entitled to retain such 
     excess operating revenues (without any offsetting reduction 
     in grants under section 2701) if the center agrees, as a 
     condition under section 2701 for status as such a center, to 
     expend such revenues only for purposes authorized in this 
     subtitle. Such purposes include the following:
       ``(1) Expanding and improving services.
       ``(2) Increasing the number of individuals served.
       ``(3) Purchasing equipment; acquiring, modernizing, and 
     expanding facilities; and constructing facilities.
       ``(4) Improving the administration of the center.
       ``(5) Establishing financial reserves, including reserves 
     required for the furnishing of services on a prepaid basis or 
     as needed to cover unanticipated expenses.
       ``(6) Carrying out health professions training programs.
       ``(7) Developing health plans and community provider 
     networks in accordance with section 2725.
       ``(c) Rule of Construction.--With respect to amounts that 
     are nongrant funds under subsection (a), or excess operating 
     revenues under subsection (b), this section may not be 
     construed as limiting the authority of the Secretary to 
     require the submission of such plans, budgets, and other 
     information as may be necessary to ensure that the funds and 
     revenues are expended in accordance with subsections (a) and 
     (b), respectively.

     ``SEC. 2743. DESIGNATION OF SERVICE AREA.

       ``(a) In General.--In determining whether a center meets 
     the conditions under section 2701(f) for status as a 
     federally qualified health center for a fiscal year, the 
     Secretary shall designate the geographic area that the center 
     is to serve. In designating a service area under the 
     preceding sentence, the Secretary shall ensure that the 
     following requirements are met:
       ``(1) The size of the area is a size that ensures that the 
     services of the center (including services provided at any 
     satellite clinic or offsite location) are available and 
     accessible to individuals in the area promptly and as 
     appropriate.
       ``(2) The boundaries of the area, to the extent 
     practicable, conform to relevant boundaries of political 
     subdivisions, school districts, and Federal and State health 
     and social service programs.
       ``(3) The boundaries of the area, to the extent 
     practicable, eliminate barriers to access to the services of 
     the center, including barriers resulting from the physical 
     characteristics of the area, the residential patterns of the 
     area, the economic and social grouping of the area, and 
     available transportation.
       ``(b) Overlap in Areas.--In designating service areas under 
     subsection (a), the Secretary may provide for the operation 
     of more than one federally qualified health center in a 
     service area in any case in which the Secretary determines 
     that there is a population group in such area that otherwise 
     will have a shortage of personal health services. The 
     preceding sentence may not be construed as requiring that, in 
     such a case, the service areas of the centers involved be 
     identical.
       ``(c) Definition.--For purposes of this title, the term 
     `service area', with respect to a center, means the area 
     designated under subsection (a) for the center.

     ``SEC. 2744. MISCELLANEOUS PROVISIONS.

       ``(a) Opportunity to Correct Material Failure Regarding 
     Grant Conditions.--
       ``(1) In general.--Notwithstanding the provisions of this 
     subtitle, if a center materially fails to meet a condition of 
     this subtitle regarding status as a federally qualified 
     health center for a fiscal year, the Secretary shall provide 
     the center an opportunity to comply with the condition, 
     subject to paragraph (2).
       ``(2) Limitations.--The provision of an opportunity under 
     paragraph (1) is subject to the following:
       ``(A) The opportunity may not be provided with respect to a 
     material failure to comply with any applicable condition of 
     section 2713 or 2723 (relating to governing boards).
       ``(B) In the case of any other condition, the opportunity 
     shall be provided for a period determined by the Secretary, 
     which may not exceed one year.
       ``(C) Such period begins on the date on which the Secretary 
     provides a written notification to the center informing the 
     center of the material failure of the center, and of the 
     opportunity to comply with the condition involved.
       ``(b) Agency Review of Decisions.--
       ``(1) Procedures of departmental grants appeals board.--
     Through the applicable procedures in effect under parts 16, 
     74, and 75 of title 45, Code of Federal Regulations (or any 
     successor provisions), the Secretary, upon request of the 
     center involved, shall (subject to paragraph (3)) permit the 
     center to appeal a decision of the Secretary under this 
     subtitle and obtain from the Secretary a fair, impartial 
     review of the decision.
       ``(2) Alternative procedures regarding certain decisions.--
       ``(A) Subject to paragraph (3), if the Secretary makes a 
     decision under this subtitle that is described in 
     subparagraph (B), the Secretary, upon request of the center 
     involved, shall permit the center to appeal the decision and 
     obtain from the Secretary a review of the decision on the 
     record.
       ``(B) The decisions referred to in subparagraph (A) 
     regarding a center are as follows:
       ``(i) The Secretary, having provided to the center a period 
     of opportunity under subsection (a) to comply with a 
     condition, finds that the center continues to be in material 
     failure regarding the condition.
       ``(ii) The Secretary modifies the service area of the 
     center.
       ``(iii) The Secretary terminates the designation as a 
     medically underserved population of a population within the 
     service area of the center.
       ``(iv) The amount of the grant determined under section 
     2741 for the fiscal year involved is less than the amount so 
     determined for the center for the preceding fiscal year, and 
     the difference between such amounts results or will result in 
     a significant reduction in the availability from the center 
     of required services and additional services.
       ``(3) Exception regarding pro rata reductions.--The 
     requirements under paragraphs (1) and (2) for the Secretary 
     to review a decision do not apply if the decision is made in 
     response to pro rata reductions under section 2701(b)(3) 
     (except that review may be obtained to the extent necessary 
     to determine whether the decision was so made).
       ``(4) Election of procedures.--In the case of a decision 
     described in paragraph (2)(B), the center involved may elect 
     for appeal and review of the decision under paragraph (1) or 
     under paragraph (2), but not both.
       ``(c) Rule of Construction.--With respect to compliance 
     with the conditions of this subtitle for status as a 
     federally qualified health center for a fiscal year, the 
     circumstances constituting the material failure of a center 
     to be in such compliance include expending a grant under 
     section 2701 for a cost that the Secretary disallows. 
     Subsections (a) and (b) apply to such a material failure.
    ``Subtitle B--Development of Additional Rural and Urban Centers

     ``SEC. 2751. DEVELOPMENT OF CENTERS.

       ``(a) In General.--From amounts reserved under section 
     2701(d), the Secretary shall make grants to public and 
     nonprofit private entities for carrying out projects to plan 
     and develop centers whose services, structure, programs, 
     capabilities, and other characteristics will, once the 
     project is completed, meet the conditions for the entitlement 
     under subtitle A (relating to the operational costs of 
     federally qualified health centers). Grants under this 
     subsection may only be made for fiscal year 1996 and 
     subsequent fiscal years.
       ``(b) Allocations Regarding Rural Areas.--Of the amounts 
     reserved under section 2701(c)--
       ``(1) the Secretary shall reserve \2/3\ for projects under 
     paragraph (1) in rural areas;
       ``(2) the Secretary shall reserve \1/3\ for projects under 
     paragraph (1) in urban areas.
       ``(c) Preferences in Certain Grants.--In making grants 
     under subsection (a) from amounts reserved under subsection 
     (b)(2), the Secretary shall give preference to grantees under 
     section 340 or 340A to assist the grantees in meeting the 
     standards referred to in subsection (a) with respect to 
     becoming a federally qualified health center. The requirement 
     of preference applies only to grantees under section 340 or 
     340A who meet the requirements of this subtitle for receiving 
     a grant under section 2751.

     ``SEC. 2752. REQUIREMENTS REGARDING PRESENCE OF CERTAIN 
                   MEDICALLY UNDERSERVED POPULATIONS.

       ``(a) In General.--The Secretary may make a grant under 
     section 2751 only if the Secretary determines that, in the 
     geographic area for which the project under such section is 
     to be carried out, there is a medically underserved 
     population (as defined in subsection (b)).
       ``(b) Definition of Medically Underserved Population.--For 
     purposes of this title, the term `medically underserved 
     population' means the population of a rural or urban area 
     designated by the Secretary as an area with a shortage of 
     personal health services or a population group designated by 
     the Secretary as having a shortage of such services.
       ``(c) Criteria Regarding Definition.--
       ``(1) In general.--For purposes of subsection (b), the 
     Secretary shall establish criteria for determining the 
     specific shortages of personal health services of an area or 
     population group. Such criteria shall--
       ``(A) take into account comments received by the Secretary 
     from the chief executive officer of a State and local 
     officials in a State and from affected persons; and
       ``(B) include factors indicative of the health status of a 
     population group or individuals in an area (including the 
     rate of infant mortality), the ability of the residents of an 
     area or of a population group to pay for health services and 
     their accessibility to them, and the availability of health 
     professionals to residents of an area or to a population 
     group.
       ``(2) Modification of criteria.--The Secretary may modify 
     the criteria established under paragraph (1) only after 
     affording public notice and an opportunity for comment on any 
     such proposed modifications.
       ``(d) Notice and Comment Regarding Designations.--The 
     Secretary may not designate a medically underserved 
     population in a State or terminate the designation of such a 
     population unless, prior to such designation or termination, 
     the Secretary provides reasonable notice to and opportunity 
     for comment by--
       ``(1) the chief executive officer of such State;
       ``(2) local officials in such State;
       ``(3) members of the medically underserved population 
     involved; and
       ``(4) representatives of the health center involved.

     ``SEC. 2753. AUTHORITY REGARDING MODIFIED GOVERNING BOARDS.

       ``(a) In General.--Subject to the subsequent provisions of 
     this section, in the case of a public entity that submits an 
     application for a grant under section 2751, the Secretary may 
     provide that, in meeting the requirement under such section 
     to plan and develop a governing board (in accordance with 
     section 2713), the entity is authorized to develop and 
     operate a board that does not establish the personnel 
     policies of the center, or the fiscal policies of the center 
     (subject to section 2713(c)(2)).
       ``(b) Matching Funds.--With respect to the costs of 
     carrying out a project under section 2751, the Secretary may 
     provide an authorization under subsection (a) only if the 
     public entity involved agrees to make available (directly or 
     through donations from public or private entities) non-
     Federal contributions in cash toward such costs in an amount 
     that is not less than 50 percent of such costs.
       ``(c) Restriction Regarding Funding.--Of the budget 
     authority provided in section 2751(b) for a fiscal year, the 
     Secretary may not obligate more than 5 percent for projects 
     under such section with respect to which an authorization 
     under subsection (a) has been (or is to be) provided.

     ``SEC. 2754. CERTAIN REQUIREMENTS.

       ``(a) Submission of Information.--The Secretary may make a 
     grant under section 2751 only if the applicant for the grant 
     submits to the Secretary, in the application under section 
     2755, the following information:
       ``(1) An assessment of the need in the geographic area 
     involved for the required services.
       ``(2) The design for the federally qualified health center 
     involved, and the services of the center, based on such 
     assessment.
       ``(3) Information demonstrating that the center developed 
     with the grant will, by the date on which funding under 
     section 2751 is terminated for the center (pursuant to 
     section 2756(c)), meet the conditions for the entitlement 
     under subtitle A.
       ``(b) Community Involvement.--The Secretary may make a 
     grant under section 2751 only if the applicant for the grant 
     agrees that, in developing the federally qualified health 
     center involved, the applicant will provide for the 
     involvement of the individuals to be served by the center.

     ``SEC. 2755. APPLICATION.

       ``The Secretary may make a grant under section 2751 only if 
     an application for the grant is submitted to the Secretary, 
     the application is submitted by the date specified by the 
     Secretary, and the application is in such form, is made in 
     such manner, and contains such agreements, assurances, and 
     information as the Secretary determines to be necessary to 
     carry out this subtitle.

     ``SEC. 2756. GENERAL PROVISIONS.

       ``(a) Location of Center Within Service Area.--In making a 
     grant under section 2751 for a center, the Secretary shall 
     ensure that the center is located so that the center provides 
     services to the greatest number of individuals residing in 
     the service area that (in accordance with section 2743) is 
     designated under section 2751 for the center.
       ``(b) Expenditures.--The purposes for which a grant under 
     section 2751 may be expended include the capital costs of 
     developing the center involved (including the costs specified 
     in sections 2721(b)(3))(B) and 2724), and such other costs of 
     carrying out a project under such section as the Secretary 
     may authorize.
       ``(c) Amount and Number of Grants.--The amount of a grant 
     under section 2751 for a project shall be determined by the 
     Secretary. A center may not receive more than 2 years of 
     funding under such section.
                    ``Subtitle C--General Provisions

     ``SEC. 2791. MISCELLANEOUS PROVISIONS.

       ``(a) Technical Assistance.--The Secretary may provide 
     (either through the Department of Health and Human Services, 
     or through grant or contract) all necessary technical and 
     other nonfinancial assistance (including fiscal and program 
     management assistance and training in such management)--
       ``(1) to any public or nonprofit private entity to assist 
     the entity in operating as a federally qualified health 
     center under subtitle A or in developing such a center under 
     subtitle B;
       ``(2) to assist federally qualified health centers in 
     developing health plans and community provider networks 
     pursuant to subparagraphs (D) and (E) of section 2721(b)(3); 
     and
       ``(3) to any public or nonprofit private entity to assist 
     the entity in meeting the requirements for applications to 
     receive grants under section 2701 and section 2751.
       ``(b) Authority Regarding Joint-Purchasing Arrangements for 
     Reduced Costs.--With respect to the costs of providing the 
     supplies and services needed for the operation of federally 
     qualified health centers, the Secretary, directly or through 
     grants or contracts, may carry out projects to establish and 
     administer arrangements under which such costs are reduced 
     through collaborative efforts of the centers, through making 
     purchases that apply to multiple centers, or through such 
     other methods as the Secretary determines to be appropriate. 
     Amounts under this subsection may not be expended for the 
     purchase of supplies or services.
       ``(c) Administration of Programs.--The Secretary may 
     delegate the authority to administer the programs authorized 
     by this title to any office within the Public Health Service, 
     except that the authority to enter into, modify, or issue 
     approvals with respect to grants or contracts may be 
     delegated only within the central office of the Health 
     Resources and Services Administration.

     ``SEC. 2792. DEFINITIONS.

       ``For purposes of this title:
       ``(1) The term `additional services', with respect to 
     federally qualified health centers, has the meaning given 
     such term in section 2722.
       ``(2) The term `agriculture' has the meaning given such 
     term in section 2712(e).
       ``(3) The term `basic health services' has the meaning 
     given such term in section 2711(b).
       ``(4) The term `essential community provider' has the 
     meaning given such term in section 2725(d).
       ``(5) The term `federally qualified health center' has the 
     meaning given such term in section 2701(f).
       ``(6) The term `HIV disease' means infection with the human 
     immunodeficiency virus, and includes any condition arising 
     from acquired immune deficiency syndrome.
       ``(7) The term `homeless individual' has the meaning given 
     such term in section 2712(d).
       ``(8) The term `human immunodeficiency virus' means the 
     etiologic agent for acquired immune deficiency syndrome.
       ``(9) The term `Indian' has the meaning given such term in 
     section 2711(d).
       ``(10) The term `migratory agricultural worker' has the 
     meaning given such term in section 2711(d).
       ``(11) The term `migratory or seasonal agricultural worker, 
     or related individual' has the meaning given such term in 
     section 2711(d).
       ``(12) The term `network service area', with respect to an 
     essential community provider network, has the meaning 
     indicated for such term in section 2725(b)(6).
       ``(13) The term `preventive health services' has the 
     meaning given such term in section 2711(b).
       ``(14) The term `required enabling services' has the 
     meaning given such term in section 2711(b).
       ``(15) The term `required services' has the meaning given 
     such term in section 2711(b).
       ``(16) The term `resident of public housing' has the 
     meaning given such term in section 2712(d).
       ``(17) The term `seasonal agricultural worker' has the 
     meaning given such term in section 2711(d).
       ``(18) The term `service area' has the meaning given such 
     term in section 2743(c).
       ``(19) The term `special population' has the meaning given 
     such term in section 2712(a).''.

     SEC. 7124. CONFORMING AMENDMENTS.

       Effective October 1, 1995, the Public Health Service Act 
     (42 U.S.C. 201 et seq.) is amended by striking sections 329 
     and 330.

                 PART 4--NATIONAL HEALTH SERVICE CORPS

     SEC. 7131. PURPOSE OF PROGRAM.

       The purpose of the programs carried out pursuant to section 
     7132 is to achieve the goal that the number of members of the 
     National Health Service Corps who are practicing in health 
     professional shortage areas, together with the number of 
     students attending health professions schools under the 
     Scholarship Program of the Corps, will be sufficient (once 
     such students begin practicing in such areas) to provide 
     primary health services to all rural and urban health 
     professional shortage areas that, as of December 31, 1995, 
     were designated under section 332 of the Public Health 
     Service Act as such an area.

     SEC. 7132. DIRECT SPENDING REGARDING GENERAL PROGRAM AND 
                   SCHOLARSHIP AND LOAN REPAYMENT PROGRAMS.

       Section 331(a) of the Public Health Service Act (42 U.S.C. 
     254d(a)) is amended by adding at the end the following 
     paragraph:
       ``(4) For the purpose of carrying out this subpart and 
     sections 338A through 338H of subpart III, there are hereby 
     appropriated the following amounts, as applicable to the 
     fiscal year involved:
       ``(A) For fiscal year 1995, $200,000,000.
       ``(B) For fiscal year 1996, $200,000,000.
       ``(C) For fiscal year 1997, $250,000,000.
       ``(D) For fiscal year 1998, $250,000,000.
       ``(E) For fiscal year 1999, $300,000,000.
       ``(F) For fiscal year 2000, $300,000,000.
       ``(G) For fiscal year 2001, $350,000,000.
       ``(H) For fiscal year 2002, $350,000,000.
       ``(I) For fiscal year 2003, $400,000,000.
       ``(J) For fiscal year 2004, $400,000,000.
       ``(K) For fiscal year 2005, the amount specified in 
     subparagraph (J) multiplied by an amount equal to the product 
     of--
       ``(i) 1 plus the national medicare growth factor (as 
     defined in section 8201(c) of the Guaranteed Health Insurance 
     Act of 1994); and
       ``(ii) 1 plus the annual percentage increase projected by 
     the Secretary to occur during such year in the populations 
     served by the Corps.
       ``(L) For fiscal year 2006 and each subsequent fiscal year, 
     the amount determined under this paragraph for the preceding 
     fiscal year multiplied by an amount equal to the product of 
     clauses (i) and (ii) of subparagraph (K) (as such clauses are 
     applied for the fiscal year involved).''.

           PART 5--CONSUMER RESOURCES REGARDING HEALTH PLANS

     SEC. 7141. CONSUMER RESOURCES.

       Title III of the Public Health Service Act (42 U.S.C. 241 
     et seq.) is amended by adding at the end the following part:

          ``Part O--Consumer Resources Regarding Health Plans


                  ``funding for certain grant programs

       ``Sec. 399P. (a) Direct Spending for Grants for Consumer 
     Health Advocacy Offices.--For carrying out the program under 
     section 399Q, there are hereby appropriated, out of any money 
     in the Treasury not otherwise appropriated, the following 
     amounts (as applicable to the fiscal year involved):
       ``(1) For fiscal year 1999, $40,000,000.
       ``(2) For fiscal year 2000, the amount specified in 
     paragraph (1) multiplied by an amount equal to the product 
     of--
       ``(A) 1 plus the national medicare growth factor (as 
     defined in section 8201(c) of the Guaranteed Health Insurance 
     Act of 1994); and
       ``(B) 1 plus the annual percentage increase projected by 
     the Secretary to occur during such year in the population of 
     the States.
       ``(3) For fiscal year 2001 and each subsequent fiscal year, 
     the amount determined under this subsection for the preceding 
     fiscal year multiplied by an amount equal to the product of 
     subparagraphs (A) and (B) of paragraph (2) (as such 
     subparagraphs are applied for the fiscal year involved).
       ``(b) Direct Spending for Grants for National Consumer 
     Health Resource Center.--For carrying out the program under 
     section 399R, there are hereby appropriated, out of any money 
     in the Treasury not otherwise appropriated, the following 
     amounts (as applicable to the fiscal year involved):
       ``(1) For fiscal year 1996, $5,000,000.
       ``(2) For fiscal year 1997, $5,000,000.
       ``(3) For fiscal year 1998, $7,500,000.
       ``(4) For fiscal year 1999, $10,000,000.
       ``(5) For fiscal year 2000, $10,000,000.
       ``(6) For fiscal year 2001, the amount specified in 
     paragraph (5) multiplied by an amount equal to 1 plus the 
     consumer price index for all urban consumers (U.S. city 
     average).
       ``(7) For fiscal year 2002 and each subsequent fiscal year, 
     the amount determined under this subsection for the preceding 
     fiscal year multiplied by an amount equal to 1 plus such 
     index (as such index is applied for the fiscal year 
     involved).


             ``grants for consumer health advocacy offices

       ``Sec. 399Q. (a) In General.--The Secretary, in 
     consultation with the Secretary of Labor, shall make grants 
     under this section to private nonprofit entities for the 
     establishment and operation of offices to perform the 
     functions described in subsection (b) for consumers in a 
     State (or a multi-State area described in subsection (d)). 
     Each such office shall be known as a `Consumer Health 
     Advocacy Office' (in this part referred to as an `Office'). 
     For any grant term under subsection (c), the Secretary may 
     not make a grant under this section to more than one entity 
     with respect to any State or multi-State area.
       ``(b) Functions.--An entity that receives a grant under 
     this section shall use the grant to establish and operate an 
     Office to perform the following functions in a State or 
     multi-State area:
       ``(1) Assist, in person and by toll-free telephone access, 
     individuals eligible to seek coverage in the community-rated 
     market sector with enrollment in insured health benefit plans 
     (as described in title V of the Guaranteed Health Insurance 
     Act of 1994) by referring them to an appropriate enrollment 
     assistance program established under section 5011(b) of such 
     Act.
       ``(2) Assist, in person and by toll-free telephone access, 
     individuals in applying for enrollment in the medicare part C 
     program under title XXI of the Social Security Act, a premium 
     certificate under part A of title XXII of such Act, or wrap-
     around benefits under part B of such title, by referring them 
     to an appropriate local office used by the Social Security 
     Administration.
       ``(3) Collect and provide to the public--
       ``(A) annual information on insured health benefit plans 
     provided in the State or area that is required to be prepared 
     under section 5011(c) of the Guaranteed Health Insurance Act 
     of 1994; and
       ``(B) performance reports prepared under section 9003(g) of 
     the such Act by the State or States in the area.
       ``(4) Provide, in person and by toll-free telephone access, 
     information to individuals regarding the remedies available 
     under subtitle D of title IX of such Act.
       ``(5) Address systemic problems affecting consumers in 
     health benefit plans provided in the State or area (as 
     described in title V of such Act), but refer individual 
     complaints relating to denials of items and services and 
     requests for reimbursement under such plans to an appropriate 
     complaint review office established under part 1 of subtitle 
     D of title IX of such Act.
       ``(6) Respond, in person and by toll-free telephone access, 
     to general inquiries from consumers concerning such plans.
       ``(7) Provide outreach and education relating to consumer 
     rights and responsibilities under this Act to consumers, 
     including underserved populations.
       ``(8) Annually report to the National Consumer Health 
     Resource Center concerning the activities carried out by the 
     Office during the year.
       ``(9) Perform such other functions as the Secretary may 
     specify.
       ``(c) Term of grant and renewability.--A grant under this 
     section shall be awarded under a competitive selection 
     process for a term of 3 years.
       ``(d) Multi-State Areas.--A multi-State area under this 
     section may only be comprised of multiple contiguous States.
       ``(e) Applications.--
       ``(1) Submission.--To apply for a grant under this section, 
     an entity shall submit an application to the Secretary in 
     accordance with the procedures established by the Secretary 
     and in a form prescribed by the Secretary.
       ``(2) Criteria for approval.--The Secretary may not approve 
     an application submitted by an entity under paragraph (1) 
     unless the application includes assurances satisfactory to 
     the Secretary that--
       ``(A) funds received under this section will be used for 
     the purpose described in subsection (b);
       ``(B) the applicant has demonstrated expertise in the 
     fields of--
       ``(i) provision of consumer information; and
       ``(ii) advocacy on behalf of consumers;
       ``(C) the applicant has the ability to serve an entire 
     State or, with respect to an application submitted for a 
     multi-State area, the entire area;
       ``(D) the applicant will establish and maintain local 
     offices to the extent necessary effectively to carry out the 
     functions described in paragraphs (1) through (9) of 
     subsection (b) in the area for which the application is 
     submitted; and
       ``(E) the applicant is not subject to a conflict of 
     interest, including a conflict of interest arising from an 
     affiliation (through ownership or common control) with--
       ``(i) a certified health benefit plan sponsor (as defined 
     in section 9300(2) of the Guaranteed Health Insurance Act of 
     1994); or
       ``(ii) a health provider (as defined in section 9109(7) of 
     such Act).
       ``(3) Petitions for reconsideration and reapplications.--
       ``(A) In general.--With respect to an application submitted 
     under paragraph (1) that is disapproved under this 
     subsection, the applicant may submit to the Secretary--
       ``(i) a petition for reconsideration of the application; 
     and
       ``(ii) an application that conforms to the requirements of 
     this subsection.
       ``(B) Deadlines.--The Secretary shall establish a deadline 
     for the submission of petitions for reconsideration and 
     reapplications under this paragraph. The Secretary shall 
     approve or disapprove each such petition and reapplication 
     before the termination of the 60-day period beginning on the 
     date of such submission.


         ``grants for national consumer health resource center

       ``Sec. 399R. (a) In General.--The Secretary shall make 
     grants under this section to private nonprofit entities for 
     the establishment and operation of a national center to 
     perform the functions described in subsection (b). The center 
     shall be known as the `National Consumer Health Resource 
     Center' (in this part referred to as the `Center'). For any 
     grant term under subsection (c), the Secretary may not make a 
     grant under this section to more than one entity.
       ``(b) Functions.--An entity that receives a grant under 
     this section shall use the grant to perform the following 
     functions through the Center:
       ``(1) Coordinate and oversee the activities of the Offices 
     under section 399Q .
       ``(2) Provide technical assistance to the Offices.
       ``(3) Consolidate the annual reports prepared by the 
     Offices under section 399Q of such Act into a national annual 
     report and submit the national report to the Secretary.
       ``(4) Make recommendations to the Secretary on issues 
     affecting consumers of health care items and services.
       ``(5) Perform such other functions as the Secretary may 
     specify.
       ``(c) Term of grant and renewability.--A grant under this 
     section shall be awarded under a competitive selection 
     process for a term of 3 years.
       ``(d) Applications.--
       ``(1) Submission.--To apply for a grant under this section, 
     an entity shall submit an application to the Secretary in 
     accordance with the procedures established by the Secretary 
     and in a form prescribed by the Secretary.
       ``(2) Criteria for approval.--The Secretary may not approve 
     an application submitted by an entity under paragraph (1) 
     unless the application includes assurances satisfactory to 
     the Secretary that--
       ``(A) funds received under this section will be used for 
     the purpose described in subsection (b);
       ``(B) the applicant has demonstrated expertise in the 
     fields of--
       ``(i) provision of consumer information; and
       ``(ii) advocacy on behalf of consumers; and
       ``(C) the applicant is not subject to a conflict of 
     interest, including a conflict of interest arising from an 
     affiliation (through ownership or common control) with--
       ``(i) a certified health benefit plan sponsor (as defined 
     in section 9300(2) of the Guaranteed Health Insurance Act of 
     1994); or
       ``(ii) a health provider (as defined in section 9109(7) of 
     such Act).
       ``(3) Petitions for reconsideration and reapplications.--
       ``(A) In general.--With respect to an application submitted 
     under paragraph (1) that is disapproved under this 
     subsection, the applicant may submit to the Secretary--
       ``(i) a petition for reconsideration of the application; 
     and
       ``(ii) an application that conforms to the requirements of 
     this subsection.
       ``(B) Deadlines.--The Secretary shall establish a deadline 
     for the submission of petitions for reconsideration and 
     reapplications under this paragraph. The Secretary shall 
     approve or disapprove each such petition and reapplication 
     before the termination of the 60-day period beginning on the 
     date of such submission.


                         ``review and sanctions

       ``Sec. 399S. The Secretary shall review at least annually 
     the compliance of an entity receiving a grant under a section 
     of this part with the provisions of such section. The 
     Secretary shall establish a procedure for determining whether 
     an entity receiving a grant under a section of this part has 
     failed to comply substantially within the provisions of such 
     section and the sanctions to be imposed for any such 
     noncompliance.


                            ``annual reports

       ``Sec. 399T. The Secretary shall transmit annually to the 
     Congress a report containing a detailed statement of the 
     activities carried out under this part by the Secretary, the 
     Offices, and the Center in the year that is the subject of 
     the report.


                             ``regulations

       ``Sec. 399U. The Secretary may issue any regulations 
     necessary to carry out this part.''.

 PART 6--SCHOLARSHIP AND LOAN REPAYMENT PROGRAMS REGARDING SERVICE IN 
                        PUBLIC HEALTH POSITIONS

     SEC. 7151. ESTABLISHMENT OF SCHOLARSHIP AND LOAN REPAYMENT 
                   PROGRAMS.

       Section 761 of the Public Health Service Act (42 U.S.C. 
     294d) is amended to read as follows:

     ``SEC. 761. SCHOLARSHIP AND LOAN REPAYMENT PROGRAMS REGARDING 
                   SERVICE IN PUBLIC HEALTH POSITIONS.

       ``(a) Direct Spending for Programs.--For carrying out this 
     section, there are hereby appropriated, out of any money in 
     the Treasury not otherwise appropriated, the following 
     amounts (as applicable to the fiscal year involved):
       ``(1) For fiscal year 1999, $25,000,000.
       ``(2) For fiscal year 2000, the amount specified in 
     paragraph (1) multiplied by an amount equal to 1 plus the 
     consumer price index for all urban consumers (U.S. city 
     average).
       ``(3) For fiscal year 2001 and each subsequent fiscal year, 
     the amount determined under this subsection for the preceding 
     fiscal year multiplied by an amount equal to 1 plus such 
     index (as such index is applied for the fiscal year 
     involved).

     Amounts appropriated in this subsection are in addition to 
     amounts appropriated in section 765 that are available for 
     carrying out this section.
       ``(b) Scholarship Program.
       ``(1) In general.--The Secretary, acting through the 
     Administrator of the Health Resources and Services 
     Administration and in consultation with the Director of the 
     Centers for Disease Control and Prevention, shall carry out a 
     program under which the Secretary awards scholarships to 
     individuals described in paragraph (2) for the purpose of 
     assisting the individuals with the costs of attending public 
     and nonprofit private schools of public health (or other 
     public or nonprofit private institutions providing graduate 
     or specialized training in public health).
       ``(2) Eligible individuals.--An individual referred to in 
     paragraph (1) is any individual meeting the following 
     conditions:
       ``(A) The individual is enrolled (or accepted for 
     enrollment) at a school or other institution referred to in 
     paragraph (1) as a full-time or part-time student in a 
     program providing training in a health profession in a field 
     of public health (including the fields of epidemiology, 
     biostatistics, environmental health, health administration 
     and planning, behavioral sciences, maternal and child health, 
     occupational safety, public health nursing, nutrition, and 
     toxicology).
       ``(B) The individual enters into the contract required 
     pursuant to subsection (d) as a condition of receiving the 
     scholarship (relating to an agreement to provide services in 
     approved public health positions, as defined in subsection 
     (d).
       ``(3) Eligible schools.--For fiscal year 1997 and 
     subsequent fiscal years, the Secretary may make an award of a 
     scholarship under paragraph (1) only if the Secretary 
     determines that--
       ``(A) the school or other institution with respect to which 
     the award is to be provided has coordinated the activities of 
     the school or institution with relevant activities of the 
     Health Resources and Services Administration and the Centers 
     for Disease Control and Prevention; and
       ``(B) not fewer than 60 percent of the graduates of the 
     school or institution are in public health positions 
     determined by the Secretary to be consistent with the needs 
     of the United States regarding such professionals.
       ``(4) Applicability of certain provisions.--Except as 
     inconsistent with this subsection or subsection (d), the 
     provisions of subpart III of part D of title III (relating to 
     the Scholarship and Loan Repayment Programs of the National 
     Health Service Corps) apply to an award of a scholarship 
     under paragraph (1) to the same extent and in the same manner 
     as such provisions apply to an award of a scholarship under 
     section 338A.
       ``(c) Loan Repayment Program.--
       ``(1) In general.--The Secretary, acting through the 
     Administrator of the Health Resources and Services 
     Administration and in consultation with the Director of the 
     Centers for Disease Control and Prevention, shall carry out a 
     program under which the Federal Government enters into 
     agreements to repay all or part of the educational loans of 
     individuals meeting the following conditions:
       ``(A) The individual involved is a graduate of a school or 
     other institution described in subsection (b)(1).
       ``(B) The individual meets the applicable legal 
     requirements to provide services as a public health 
     professional (including a professional in any of the fields 
     specified in subsection (b)(2)(A)).
       ``(C) The individual enters into the contract required 
     pursuant to subsection (b) as a condition of the Federal 
     Government repaying such loans (relating to an agreement to 
     provide services in approved public health positions, as 
     defined in subsection (d)).
       ``(2) Applicability of certain provisions.--Except as 
     inconsistent with this subsection or subsection (d), the 
     provisions of subpart III of part D of title III (relating to 
     the Scholarship and Loan Repayment Programs of the National 
     Health Service Corps) apply to an agreement regarding 
     repayment under paragraph (1) to the same extent and in the 
     same manner as such provisions apply to an agreement 
     regarding repayment under section 338B.
       ``(3) Amount of repayments.--For each year for which an 
     individual contracts to serve in an approved public health 
     position pursuant to paragraph (2), the Secretary may repay 
     not more than $20,000 of the principal and interest of the 
     educational loans of the individual.
       ``(d) Approved Public Health Positions.--
       ``(1) Position regarding populations with significant need 
     for services.--
       ``(A) With respect to the programs under this section, the 
     obligated service of a program participant pursuant to 
     subsections (b)(4) and (c)(2) shall be provided through an 
     assignment, to an entity described in paragraph (2), for a 
     position in which the participant provides services as a 
     public health professional to a population determined by the 
     Secretary to have a significant unmet need for the services 
     of such a professional.
       ``(B) For purposes of subsection (b)(4) and (c)(2), the 
     period of obligated service is the following, as applicable 
     to the program participant involved:
       ``(i) In the case of scholarships under subsection (b) for 
     full-time students, the greater of--

       ``(I) 1 year for each year for which such a scholarship is 
     provided; or
       ``(II) 2 years.

       ``(ii) In the case of scholarships under subsection (b) for 
     part-time students, a period determined by the Secretary on 
     the basis of the number of hours of education or training 
     received under the scholarship, considering the percentage 
     constituted by the ratio of such number to the number of 
     hours for a full-time student in the program involved.
       ``(iii) In the case of the loan repayments under subsection 
     (c), such period as the Secretary and the participant may 
     agree, except that the period may not be less than 2 years.
       ``(2) Approval of entities for assignment of program 
     participants.--The entities referred to in paragraph (1)(A) 
     are public and nonprofit private entities approved by the 
     Secretary as meeting such requirements for the assignment of 
     a program participant as the Secretary may establish. The 
     entities that the Secretary may so approve include State and 
     local departments of health, public hospitals, community and 
     neighborhood health clinics, migrant health clinics, 
     community-based health-related organizations, certified 
     regional poison control centers, purchasing cooperatives 
     regarding health insurance, and any other public or nonprofit 
     private entity.
       ``(3) Definitions.--For purposes of this section:
       ``(1) The term `approved public health position', with 
     respect to a program participant, means a position to which 
     the participant is assigned pursuant to paragraph (1).
       ``(B) The term `program participant' means an individual 
     who enters into a contract pursuant to subsection (b)(2)(B) 
     or subsection (c)(1)(C).
       ``(e) Allocation Of Funds; Special Considerations.--
       ``(1) Allocations regarding new participants in scholarship 
     program.--Of the amounts appropriated in subsection (a) for a 
     fiscal year, the Secretary shall obligate not less than 30 
     percent for the purpose of providing awards for scholarships 
     under subsection (b) to individuals who have not previously 
     received such scholarships.
       ``(2) Special consideration for certain individuals.--In 
     making awards of scholarships under subsection (b) and making 
     repayments under subsection (c), the Secretary shall give 
     special consideration to individuals who are in the armed 
     forces of the United States or who are veterans of the armed 
     forces.
       ``(3) School health education programs.--The Secretary 
     shall ensure that the approved public health positions to 
     which the Secretary assigns program participants under this 
     part include positions in programs that provide education on 
     the promotion of health and the prevention of diseases and 
     that are carried out on the premises of public or nonprofit 
     private elementary and secondary schools.''.
    Subtitle C--Assistance for Capital Costs of Safety-Net Hospitals

     SEC. 7201. TABLE OF CONTENTS REGARDING NEW TITLE XXVIII OF 
                   PUBLIC HEALTH SERVICE ACT.

       A table describing the contents of title XXVIII of the 
     Public Health Service Act, as added by section 7202 of this 
     Act, is as follows:

     TITLE XXVIII--ASSISTANCE FOR CAPITAL COSTS OF CERTAIN ENTITIES

                    Subtitle A--Safety-Net Hospitals

                       Part 1--General Provisions

Sec. 2801. Financial assistance for qualifying hospitals.
Sec. 2802. Funding.
Sec. 2803. Certain requirements for assistance.
Sec. 2804. Application for assistance.

           Part 2--Qualifying Hospitals; Safety-Net Hospitals


                     SUBPART A--GENERAL PROVISIONS

Sec. 2811. Definition of qualifying hospitals.
Sec. 2812. Priorities in award of assistance.


              SUBPART B--REQUIREMENTS FOR LOAN GUARANTEES

Sec. 2821. Loan guarantees.
Sec. 2822. Funding.
Sec. 2823. Terms and conditions of loan guarantees.
Sec. 2824. Premiums for loan guarantees.
Sec. 2825. Procedures regarding loan default.


          SUBPART C--REQUIREMENTS FOR INTEREST RATE SUBSIDIES

Sec. 2831. Grants as interest rate subsidies.
Sec. 2832. Eligible loans.
Sec. 2833. Amount of subsidy; allocation of funds.
Sec. 2834. Terms and conditions for subsidies.
Sec. 2835. Subsidies for loan refinancing.


           SUBPART D--REQUIREMENTS FOR DIRECT MATCHING LOANS

Sec. 2841. Provision of matching loans.
Sec. 2842. Eligible projects.
Sec. 2843. Funding.
Sec. 2844. Terms and conditions of loans.
Sec. 2845. Use of loans for refinancing.
Sec. 2846. Creation of revolving fund.
Sec. 2847. Loan default.


      SUBPART E--REQUIREMENTS FOR GRANTS FOR URGENT CAPITAL NEEDS

Sec. 2851. Provision of grants.
Sec. 2852. Eligible projects.

         Part 3--Qualifying Hospitals; Academic Health Centers

Sec. 2871. Transitional assistance; provision of interest rate 
              subsidies.
Sec. 2872. Eligible financing.
Sec. 2873. Eligible projects.
Sec. 2874. Allotment of subsidies.

        Subtitle B--Emergency Medical Equipment for Rural Areas

Sec. 2881. Grants regarding emergency medical services.

            Subtitle C--Facilities of Indian Health Service

Sec. 2891. Financial assistance for facilities of Service.

     SEC. 7202. DIRECT SPENDING REGARDING CERTAIN HOSPITALS.

       The Public Health Service Act (42 U.S.C. 201 et seq.), as 
     amended by section 7123 of this Act, is amended by adding at 
     the end the following title:
    ``TITLE XXVIII--ASSISTANCE FOR CAPITAL COSTS OF CERTAIN ENTITIES
                   ``Subtitle A--Safety-Net Hospitals

                      ``PART 1--GENERAL PROVISIONS

     ``SEC. 2801. FINANCIAL ASSISTANCE FOR QUALIFYING HOSPITALS.

       ``(a) In General.--For the fiscal years 1996 through 1999, 
     the Secretary, acting through the Administrator of the Health 
     Resources and Services Administration, may in accordance with 
     this subtitle provide financial assistance for qualifying 
     hospitals for projects for--
       ``(1) the construction, acquisition, modernization, and 
     renovation of facilities for the hospitals; and
       ``(2) the purchase of equipment.
       ``(b) Qualifying Hospital.--For purposes of this subtitle, 
     the term `qualifying hospital'--
       ``(1) in the case of financial assistance authorized in 
     part 2, has the meaning given such term in section 2811(a); 
     and
       ``(2) in the case of financial assistance authorized in 
     part 3, has the meaning given such term in section 2871(b).
       ``(c) Forms of Assistance.--The forms of financial 
     assistance that may be provided under this subtitle are loan 
     guarantees, direct loans, and grants, subject to being 
     authorized in part 2 or part 3.

     ``SEC. 2802. FUNDING.

       ``(a) Direct Spending.--For carrying out this title, there 
     are hereby appropriated to the Secretary, out of any money in 
     the Treasury not otherwise appropriated, the following 
     amounts (as applicable to the calendar year involved):
       ``(1) For fiscal year 1996, $980,000,000.
       ``(2) For fiscal year 1997, $975,000,000.
       ``(3) For fiscal year 1998, $955,000,000.
       ``(4) For fiscal year 1999, $955,000,000.
       ``(b) Allocations.--Of the amounts appropriated in 
     subsection (a) for a fiscal year, the Secretary--
       ``(1) shall reserve $29,400,000 for carrying out subtitle 
     C;
       ``(2) shall reserve $75,000,000 for carrying out part 3 of 
     this subtitle; and
       ``(3) may reserve not more than $35,000,000 for carrying 
     out subtitle B.

     ``SEC. 2803. CERTAIN REQUIREMENTS FOR ASSISTANCE.

       ``(a) Community Service.--The Secretary may provide 
     financial assistance under this subtitle only if the 
     qualifying hospital involved--
       ``(1) provides services to individuals without regard to 
     their ability to pay for such services (in accordance with 
     standards established by the Secretary); and
       ``(2) effective January 1, 1999, is a participating 
     provider under medicare part C (established under title XXI 
     of the Social Security Act).
       ``(b) Protection of Federal Financial Interests.--The 
     Secretary shall establish criteria to ensure that the 
     financial interests of the United States in projects 
     described in section 2801 are protected, including ensuring 
     that qualifying hospitals have the capacity to meet any 
     financial obligations established under this subtitle for the 
     hospital. The Secretary may provide financial assistance 
     under this subtitle only if the qualifying hospital involved 
     agrees to comply with the criteria.
       ``(c) Twenty-Year Obligation; Right of Recovery.--
       ``(1) In general.--The Secretary may provide financial 
     assistance under this subtitle only if the qualifying 
     hospital involved agrees as follows:
       ``(A) The hospital is liable to the United States, for an 
     amount determined pursuant to subparagraph (B), if at any 
     time during the 20-year period beginning on the date of 
     completion of the activities for which the assistance is 
     provided, the hospital--
       ``(i) ceases to be a hospital meeting 1 or more of the 
     conditions described in section 2811(a)(3) (relating to 
     ownership status); or
       ``(ii) is sold or transferred to any entity other than an 
     entity that is--

       ``(I) a hospital described in clause (i); and
       ``(II) approved by the Secretary as a purchaser or 
     transferee of the hospital.

       ``(B) The provisions of section 1622 (relating to the 
     amount of liability, the waiver of recovery rights, and other 
     matters) apply to the hospital regarding the liability of the 
     hospital under subparagraph (A) to the same extent and the 
     same manner as such provisions apply to the liability of an 
     entity under section 1622(a).
       ``(2) Other parties.--The Secretary may recover the amount 
     of liability under paragraph (1) from the qualifying hospital 
     involved or from any transferee (or, in the case of a 
     hospital that has ceased to be public or nonprofit private 
     entity, from the owners thereof).
       ``(d) Wages of Laborers and Mechanics.--
       ``(1) Agreement.--The Secretary may provide financial 
     assistance under section 2801 only if the qualifying hospital 
     involved agrees that, in carrying out the capital activities 
     for which the assistance is provided, all laborers and 
     mechanics employed by contractors or subcontractors will be 
     paid wages at rates not less than those prevailing on similar 
     work in the locality as determined by the Secretary of Labor 
     in accordance with the Act of March 3, 1931 (40 U.S.C. 276a-
     276a-5, known as the Davis-Bacon Act).
       ``(2) Authority of secretary of labor.--The Secretary of 
     Labor shall have with respect to the labor standards referred 
     to in paragraph (1) the authority and functions set forth in 
     Reorganization Plan Numbered 14 of 1950 (15 F.R. 3176; 5 
     U.S.C. Appendix) and section 2 of the Act of June 13, 1934 
     (40 U.S.C. 276c).

     ``SEC. 2804. APPLICATION FOR ASSISTANCE.

       ``The Secretary may provide financial assistance under this 
     subtitle only if the qualifying hospital involved--
       ``(1) submits to the Secretary an application for the 
     assistance;
       ``(2) the application contains the agreements required in 
     this subtitle for the receipt of the assistance; and
       ``(3) the application is in such form, is made in such 
     manner, and contains such agreements, assurances, and 
     information as the Secretary determines to be necessary to 
     carry out this subtitle.

          ``PART 2--QUALIFYING HOSPITALS; SAFETY-NET HOSPITALS

                    ``Subpart A--General Provisions

     ``SEC. 2811. DEFINITION OF QUALIFYING HOSPITALS.

       ``(a) Definition.--
       ``(1) In general.--For purposes of this part, the term 
     `qualifying hospital' means a hospital that--
       ``(A) meets 1 or more of the conditions described in 
     paragraph (2); and
       ``(B) meets 1 or more of the conditions described in 
     paragraph (3).
       ``(2) Medicare status.--For purposes of paragraph (1), the 
     conditions described in this paragraph regarding a hospital 
     are as follows:
       ``(A) The hospital is designated as an essential access 
     community hospital by the Secretary under section 1820(i)(1) 
     of the Social Security Act.
       ``(B) The hospital is designated as a rural primary care 
     hospital by the Secretary under section 1820(i)(2) of such 
     Act.
       ``(C) The hospital has a disproportionate patient 
     percentage (as described in section 1886(d)(5)(F)(vi) of such 
     Act) equal to or greater than 40 percent.
       ``(3) Ownership status.--For purposes of paragraph (1), the 
     conditions described in this paragraph regarding a hospital 
     are as follows:
       ``(A) The hospital is owned or operated by a unit of State 
     or local government.
       ``(B) The hospital is a quasi-public corporation, defined 
     as a private, nonprofit corporation or public benefit 
     corporation which is formally granted one or more 
     governmental powers by legislative action through (or is 
     otherwise partially funded by) the State legislature, city or 
     county council.
       ``(C) The hospital is a private nonprofit hospital.
       ``(4) Certain hospitals.--For purposes of this part, the 
     term `qualifying hospital' includes each of the following: 
     George W. Hubbard Hospital of the Meharry Medical College (in 
     Nashville, in the State of Tennessee); Howard University 
     Hospital (in the District of Columbia); Newport News General 
     Hospital (in Newport News, in the State of Virginia); Norfolk 
     Community Hospital (in Norfolk, in the State of Virginia); 
     Richmond Community Hospital (in Richmond, in the State of 
     Virginia); Riverside General Hospital (in Houston, in the 
     State of Texas); Bethany Hospital (in Chicago, in the State 
     of Illinois); Jackson Park Hospital (in Chicago, in the State 
     of Illinois); North General Hospital (in New York, in the 
     State of New York); Roseland Community Hospital (in Chicago, 
     in the State of Illinois); Southwest Hospital and Medical 
     Center (in Atlanta, in the State of Georgia); and St. Bernard 
     Hospital (in Chicago, in the State of Illinois).
       ``(b) Rule of Construction Regarding Medicare Amendments.--
     Except as otherwise provided in this subtitle:
       ``(1) A reference in this subtitle to title XVIII of the 
     Social Security Act shall be considered to be a reference to 
     such title as in effect on the day after the date of the 
     enactment of the Guaranteed Health Insurance Act of 1994, 
     without regard to any amendment subsequently made to such 
     title XVIII.
       ``(2) For purposes of paragraph (1), an amendment to such 
     title XVIII that is made by the Guaranteed Health Insurance 
     Act of 1994 as of the day referred to in such paragraph 
     applies to this subtitle upon the amendment taking effect, 
     without regard to whether the date on which the amendment 
     takes effect is after the day referred to in such paragraph.

     ``SEC. 2812. PRIORITIES IN AWARD OF ASSISTANCE.

       ``In the case of qualifying hospitals that meet the 
     requirements of this part for receiving financial assistance, 
     the Secretary shall give priority to hospitals meeting the 
     conditions of each of paragraphs (1) and (2), as follows:
       ``(1) The project to be carried out with the assistance 
     meets 1 or more of the following conditions:
       ``(A) The project is necessary to bring the hospital into 
     compliance with accreditation standards or fire and life 
     safety, seismic, or other related Federal, State or local 
     regulatory standards.
       ``(B) The project will improve the provision of essential 
     services (such as emergency medical and trauma services; 
     services regarding acquired immune deficiency syndrome and 
     infectious diseases; perinatal services; services for burned 
     individuals; primary care; and such other services as the 
     Secretary may designate).
       ``(C) The project will result in the provision of access to 
     essential health services to indigent and other needy 
     individuals within the service area of the hospital, which 
     services would otherwise be unavailable.
       ``(2) The hospital provides to the Secretary (in the 
     application under section 2804) specific anticipated State or 
     local governmental or other non-Federal assurances of 
     financial support.

             ``Subpart B--Requirements for Loan Guarantees

     ``SEC. 2821. LOAN GUARANTEES.

       ``(a) Purpose.--The Secretary may provide loan guarantees 
     for loans to qualifying hospitals for projects described in 
     section 2801. The program under this subpart shall be 
     designed by the Secretary with the goal of rebuilding and 
     maintaining the essential health services of qualifying 
     hospitals eligible for such guarantees.
       ``(b) Guarantee as Essential Element in Financing.--The 
     Secretary may provide a loan guarantee under subsection (a) 
     for a qualifying hospital only if the guarantee is essential 
     for the hospital to obtain financing for the project involved 
     from a non-Federal lender at a reasonably affordable rate of 
     interest.
       ``(c) Preferences in Providing Guarantees.--In providing 
     loan guarantees under subsection (a), the Secretary shall 
     give preference to projects in which State or local 
     governmental entities participate in the form of first 
     guarantees of part or all of the total loan value.
       ``(d) Limitation Regarding Rate of Interest.--The Secretary 
     shall ensure that, with respect to a loan guarantee under 
     subsection (a), the rate of interest does not exceed such 
     annual percentage on the principal obligation outstanding as 
     the Secretary determines to be reasonable, taking into 
     account the range of interest rates prevailing in the private 
     market for similar loans and the risks assumed by the United 
     States.

     ``SEC. 2822. FUNDING.

       ``(a) In General.--Of the amounts available under section 
     2802 for a fiscal year after compliance with subsection (b) 
     of such section, the Secretary may reserve not more than 
     $150,000,000 for providing loan guarantees under section 
     2821.
       ``(b) Allocations for Rural hospitals.--Of the amounts 
     available for a fiscal year pursuant to subsection (a), the 
     Secretary shall reserve not less than 10 percent for loan 
     guarantees for qualifying hospitals in rural areas, subject 
     to a sufficient number of such hospitals meeting the 
     requirements for such guarantees.
       ``(c) Limitation Regarding Refinancing Loans.--Of the 
     amounts available for a fiscal year pursuant to subsection 
     (a), the Secretary may not obligate more than 20 percent to 
     guarantee refinancing loans.

     ``SEC. 2823. TERMS AND CONDITIONS OF LOAN GUARANTEES.

       ``(a) In General.--The principle amount of a loan 
     guaranteed under section 2821, when added to any Federal 
     grant assistance made under this subtitle, may not exceed 95 
     percent of the total value of the project, including land.
       ``(b) Maintenance of Effort.--Loan guarantees under section 
     2821 may not be used to supplant other forms of State or 
     local support.
       ``(c) Right To Recover Funds.--The United States shall be 
     entitled to recover from any applicant the amount of payments 
     made pursuant to any loan guarantee under this part, unless 
     the Secretary for good cause waives its right of recovery, 
     and, upon making any such payment, the United States shall be 
     subrogated to all of the rights of the recipients of the 
     payments with respect to which the guarantee was made.
       ``(d) Incontestability of Terms Absent Fraud or 
     Misrepresentation.--Any loan guarantee made by the Secretary 
     under section 2821 shall be incontestable in the hands of an 
     applicant on whose behalf such guarantee is made, and as to 
     any person who makes or contracts to make a loan to such 
     applicant in reliance thereon, except for fraud or 
     misrepresentation on the part of such applicant or other 
     person.

     ``SEC. 2824. PREMIUMS FOR LOAN GUARANTEES.

       ``(a) In General.--The Secretary shall determine a 
     reasonable loan insurance premium which shall be charged for 
     loan guarantees under section 2821, taking into account the 
     availability of the reserves created under section 2822. 
     Premium charges shall be payable in cash to the Secretary 
     (either in full upon issuance or annually in advance). In 
     addition to such charge, the Secretary may charge and collect 
     such amount as the Secretary considers reasonable for the 
     appraisal of a property or project offered for insurance and 
     for the inspection of such property or project.
       ``(b) Payment in Advance.--In the event that the principal 
     obligation of any loan accepted for a guarantee under section 
     2821 is paid in full prior to the maturity date, the 
     Secretary may, in the discretion of the Secretary, require 
     the payment by the borrower of an adjusted premium charge in 
     such amount as the Secretary determines to be equitable, but 
     not in excess of the aggregate amount of the premium charges 
     that the qualifying hospital involved would otherwise have 
     been required to pay if the loan had continued to be 
     guaranteed until maturity date.
       ``(c) Waiver of Premiums.--The Secretary may, in the 
     discretion of the Secretary, partially or totally waive 
     premiums charged for loan guarantees under section 2821 for 
     qualifying hospitals that are financially distressed (as 
     described by the Secretary).

     ``SEC. 2825. PROCEDURES REGARDING LOAN DEFAULT.

       ``(a) Payment of Insurance After Default.--
       ``(1) Transfer of rights and interests.--The failure of a 
     qualifying hospital to make the payment due under or provided 
     by the terms of a loan guaranteed under section 2821 shall be 
     considered in default under such loan and, if such default 
     continues for a period of 30 days, the lender shall be 
     entitled to receive the benefits of the guarantee as provided 
     in this part, upon assignment, transfer, and delivery to the 
     Secretary, within a period and in accordance with rules and 
     regulations to be prescribed by the Secretary of--
       ``(A) all rights and interests arising under the loan in 
     default;
       ``(B) all claims of the lender against the qualifying 
     hospital or others, arising out of the loan transactions;
       ``(C) all policies of title or other insurance or surety 
     bonds or other guarantees and any and all claims thereunder;
       ``(D) any balance of the loan not advanced to the borrower;
       ``(E) any cash or assets held by the lender, or to which it 
     is entitled, as deposits made for the account of the borrower 
     and which have not been applied in reduction of the principal 
     of the loan indebtedness; and
       ``(F) all records, documents, books, papers, and accounts 
     relating to the mortgage transaction.
       ``(2) Payments by secretary.--Upon an assignment, transfer, 
     and delivery described in paragraph (1), the obligation of a 
     qualifying hospital to pay the premium charges for the loan 
     guarantee shall cease, and the Secretary shall, subject to 
     the cash adjustment provided for in subsection (d), issue to 
     the lender a certificate of claim as provided in subsection 
     (b), and debentures having total face value equal to the 
     original principal face amount of the loan plus such amount 
     as the borrower may have paid for taxes, special assessments, 
     and water rates, which are liens prior to the mortgage; 
     insurance on the assets; and reasonable expenses for the 
     completion and preservation of the assets and any loan 
     insurance premiums paid after default, less the sum of--
       ``(A) that part of the amount of the principal obligation 
     that has been repaid by the borrower,
       ``(B) an amount equivalent to 1 percent of the unpaid 
     amount of such principal obligation, and
       ``(C) any net income received by the lender from the 
     assets.
       ``(3) Option to foreclose.--
       ``(A) In general.--In the event of a default under the loan 
     the lender may, at its option and in accordance with the 
     regulations of, and in a period of time to be determined by 
     the Secretary, proceed to foreclose on and obtain possession 
     of or otherwise acquire such assets from the borrower after 
     default, and receive the benefits of the insurance as herein 
     provided, upon--
       ``(i) the prompt conveyance to the Secretary of title to 
     the assets which meets the requirements of the rules and 
     regulations of the Secretary in force at the time the loan 
     was insured and which is evidenced in the manner prescribed 
     by such rules and regulations; and
       ``(ii) the assignment to the Secretary of all claims of the 
     lender against the borrower or others, arising out of the 
     loan transaction or foreclosure proceedings, except such 
     claims that may have been released with the consent of the 
     Secretary.
       ``(B) Repeal of obligation to pay premium.--Upon such 
     conveyance and assignment, the obligation of the qualifying 
     hospital to pay the premium charges for the loan guarantee 
     shall cease and the hospital shall be entitled to receive the 
     benefits of the guarantee as provided in this subsection, 
     except that in such event the 1 percent deduction set out 
     above shall not apply.
       ``(b) Certificate of Claim; Division of Excess Proceeds.--
       ``(1) Value of certificate.--The certificate of claim 
     issued under this section shall be for an amount which the 
     Secretary determines to be sufficient, when added to the face 
     value of the debentures issued and the cash adjustment paid 
     to the lender, to equal the amount which the lender would 
     have received if, on the date of the assignment, transfer and 
     delivery to the Secretary provided for in subsection (a) of 
     this section, the mortgagor had extinguished the mortgage 
     indebtedness by payment in full of all obligations under the 
     loan and a reasonable amount for necessary expenses incurred 
     by the lender in connection with the default proceedings, or 
     the acquisition of the mortgaged assets otherwise, and the 
     conveyance thereof to the Secretary. Each such certificate of 
     claim shall provide that there shall accrue to the holder of 
     such certificate with respect to the face amount of such 
     certificate, an increment at the rate of 3 percent per annum 
     which shall not be compounded.
       ``(2) Treatment of excess.--If the net amount realized from 
     the mortgage, and all claims in connection therewith, so 
     assigned, transferred, and delivered, and from the assets 
     covered by such mortgage and all claims in connection with 
     such assets, after deducting all expenses incurred by the 
     Secretary in handling, dealing with, acquiring title to, and 
     disposing of such mortgage and assets and in collecting such 
     claims, exceeds the face value of the debentures issued and 
     the case adjustment paid to the mortgagee plus all interest 
     paid on such debentures, such excess shall be divided as 
     follows:
       ``(A) If such excess is greater than the total amount 
     payable under the certificate of claim issued in connection 
     with such assets, the Secretary shall pay to the holder of 
     such certificate the full amount so payable, and any excess 
     remaining thereafter shall be retained by the Secretary and 
     credited to the loan insurance program of the Secretary.
       ``(B) If such excess is equal to or less than the total 
     amount payable under such certificate of claim, the Secretary 
     shall pay to the holder of such certificate the full amount 
     of such excess.
       ``(c) Acquisition of Assets by Conveyance or Foreclosure.--
       ``(1) In general.--The Secretary is authorized to--
       ``(A) acquire possession of and title to any assets, 
     covered by a mortgage insured under this section and assigned 
     to it, by voluntary conveyance in extinguishment of the 
     mortgage indebtedness, or
       ``(B) institute proceeding for foreclosure on the assets 
     covered by any such insured mortgage and prosecute such 
     proceedings to conclusion.
       ``(2) Bidding procedures at foreclosure.--The Secretary at 
     any sale under foreclosure may, in its discretion, for the 
     protection of the Secretary, bid any sum up to but not in 
     excess of the total unpaid indebtedness secured by the 
     mortgage plus taxes, insurance, foreclosure costs, fees, and 
     other expenses, and may become the purchaser of the assets at 
     such sale. In determining the amount to be bid, the Secretary 
     shall act consistently with its duties.
       ``(3) Payment of expenses.--The Secretary is authorized to 
     pay from the Secretary such sums as may be necessary to 
     defray such taxes, insurance, costs, fees, and other expenses 
     in connection with the acquisition or foreclosure of assets 
     under this section.
       ``(4) Exercise of rights pending acquisition.--Pending such 
     acquisition by voluntary conveyance or by foreclosure, the 
     Secretary is authorized, with respect to any mortgage 
     assigned to it under the provisions of subsection (a), to 
     exercise all the rights of a mortgagee under such mortgage, 
     including the right to sell such a mortgage, and to take such 
     action and advance such sums as may be necessary to preserve 
     or protect the lien of such mortgage.
       ``(d) Handling and Disposal of Assets; Settlement of 
     Claims.--
       ``(1) Payment for certain expenses.--Notwithstanding any 
     other provisions of law relating to the acquisition, 
     handling, or disposal of real and other property by the 
     United States, the Secretary shall also have power, for the 
     protection of the interests of the Secretary, to pay out of 
     the Secretary all expenses or charges in connection with, and 
     to deal with, complete, reconstruct, rent, renovate, 
     modernize, insure, make contracts for the management of, or 
     establish suitable agencies for the management of, or sell 
     for cash or credit or lease in its discretion, any assets 
     acquired by it under this section.
       ``(2) Settlement of claims.--Notwithstanding any other 
     provision of law, the Secretary shall also have the power to 
     pursue to final collection by way of compromise or otherwise 
     all claims assigned and transferred to it in connection with 
     the assignment, transfer, and delivery provided for in this 
     section, and at any time, upon default, to foreclose or 
     refrain from foreclosing on any assets secured by any 
     mortgage assigned and transferred to or held by it.
       ``(3) Limitations on authority.--Subsections (a) and (b) 
     shall not be construed to apply to any contract for hazard 
     insurance, or to any purchase or contract for services or 
     supplies on account of such assets if the amount thereof does 
     not exceed $1,000.

         ``Subpart C--Requirements for Interest Rate Subsidies

     ``SEC. 2831. GRANTS AS INTEREST RATE SUBSIDIES.

       ``(a) In General.--The Secretary shall make grants as 
     interest subsidies to reduce the costs of qualifying 
     hospitals in financing projects described in section 2801.
       ``(b) Purposes.--The interest subsidy program under 
     subsection (a) shall provide a partial Federal subsidy of 
     debt service payment for financing replacement (whether by 
     construction or acquisition), modernization, and renovation 
     projects or capital equipment acquisitions.
       ``(c) Interest Subsidies as Essential Element in 
     Financing.--The Secretary may make a grant under subsection 
     (a) for a qualifying hospital only if the grant is essential 
     for the hospital as financing for the project involved.

     ``SEC. 2832. ELIGIBLE LOANS.

       ``(a) In General.--Qualifying hospitals shall have issued 
     or plan to issue bonds, or shall have secured or plan to 
     secure loans, for capital projects or be responsible for 
     paying debt service on general obligation or revenue bonds 
     issued or loans made on the qualifying hospital's behalf. To 
     be eligible, bonds must have been issued after December 31, 
     1992.
       ``(b) Non-Federal Participation Requirement.--The Secretary 
     may provide interest subsidies under section 2831 for a 
     qualifying hospital only if the hospital receives assistance 
     from non-Federal sources in an amount not less than the 
     amount of such subsidies.

     ``SEC. 2833. AMOUNT OF SUBSIDY; ALLOCATION OF FUNDS.

       ``(a) In General.--Interest subsidy grants under section 
     2831 shall be made in the amount of 3 percentage points for 
     qualifying non-Federal loans.
       ``(b) Qualifying Federal Loans Under Part 2.--Interest 
     subsidy grants under section 2831 in an amount of up to 5 
     percentage points shall be made for qualifying Federal loans 
     made under this part if it is determined by the Secretary 
     that the project would not be otherwise financially feasible.
       ``(c) Reserve for Rural Hospitals and Facilities.--Of the 
     amounts available for a fiscal year pursuant to subsection 
     (e), the Secretary shall reserve not less than 10 percent for 
     grants under section 2831 to qualifying hospitals in rural 
     areas, subject to there being a sufficient number of 
     qualified applicants.
       ``(d) Limitation on Amount of Subsidies Awarded Per 
     State.--The aggregate value of interest subsidies made under 
     section 2831 to qualifying hospitals in any State for a 
     fiscal year shall not exceed 25 percent of the amounts 
     available under subsection (e) for the year.
       ``(e) Amount Allocated From Secretary.--Of the amounts 
     available under section 2802 for a fiscal year after 
     compliance with subsection (b) of such section, the Secretary 
     shall reserve $220,000,000 for interest subsidies under 
     section 2831.

     ``SEC. 2834. TERMS AND CONDITIONS FOR SUBSIDIES.

       ``(a) State or Local Participation.--State or local 
     participation in an amount equal to not less than the Federal 
     subsidy shall be required.
       ``(b) Issuance of Federal Commitments.--If the Secretary 
     approves an application for interest subsidies under section 
     2831, the qualifying hospital involved shall receive a 
     Federal commitment of a grant for the subsidies. Applicants 
     shall then have 12 months to finalize financing arrangements 
     before unobligated funds are returned to the subsidy program. 
     A commitment, when issued, shall be valid for as long as the 
     qualifying hospital continues to meet the eligibility 
     qualifications of this subtitle.

     ``SEC. 2835. SUBSIDIES FOR LOAN REFINANCING.

       ``In addition to providing interest rate subsidies for new 
     loans, the Secretary may provide subsidies to assist in 
     refinancing if the qualifying hospital involved presently 
     lacks permanent financing at an affordable current market 
     rate.

          ``Subpart D--Requirements for Direct Matching Loans

     ``SEC. 2841. PROVISION OF MATCHING LOANS.

       ``(a) In General.--The Secretary may provide direct loans 
     to qualifying hospitals for projects described in section 
     2801 if the hospitals are unable otherwise to obtain 
     essential financing for the projects.
       ``(b) Priority for Certain Projects.--In making direct 
     loans under subsection (a) to qualifying hospitals, the 
     Secretary shall give priority to smaller projects where the 
     transaction costs of securing financing from other sources 
     may be disproportionately onerous in relationship to the 
     amounts financed.

     ``SEC. 2842. ELIGIBLE PROJECTS.

       ``(a) In General.--Qualifying hospitals may seek a direct 
     loan under section 2841 for a project of up to $50,000,000. 
     Not more than 75 percent of the cost of the project may come 
     from Federal sources.
       ``(b) Exception for Financially Distressed Applicants.--The 
     Secretary shall have the discretion to waive the 25 percent 
     match requirement under subsection (a) for financially 
     distressed hospitals and facilities (as described by the 
     Secretary).

     ``SEC. 2843. FUNDING.

       ``(a) In General.--Of the amounts available under section 
     2802 for a fiscal year after compliance with subsection (b) 
     of such section, the Secretary shall reserve for direct loans 
     under section 2841 $114,500,000 for fiscal year 1996, 
     $109,500,000 for fiscal year 1997, and $89,500,000 for fiscal 
     year 1998. Funded projects shall be divided between projects 
     designed to achieve compliance with accreditation standards, 
     life safety code, and other certification standards, and 
     those related to the provision of new services.
       ``(b) Reserve for Rural Hospitals and Facilities.--Of the 
     amounts available for a fiscal year pursuant to subsection 
     (a), the Secretary shall reserve not less than 10 percent for 
     direct loans under section 2841 to qualifying hospitals in 
     rural areas, subject to there being a sufficient number of 
     qualified applicants.

     ``SEC. 2844. TERMS AND CONDITIONS OF LOANS.

       ``(a) General Term.--Direct loans under section 2841 shall 
     be made for a period equal to the construction period of the 
     project involved plus up to 39 years amortization.
       ``(b) Interest Rate.--The interest rate for a direct loan 
     under section 2841 shall be a market rate determined by the 
     Secretary to be the most recent applicable index for revenue 
     bonds, as the Secretary finds appropriate.

     ``SEC. 2845. USE OF LOANS FOR REFINANCING.

       ``In addition to making direct loans under section 2841 for 
     new projects, the Secretary may make such loans to refinance 
     existing loans if the qualifying hospital involved has been 
     unable to secure permanent financing at an affordable current 
     market rate, except that the amount of such loans made for a 
     fiscal year for refinancing existing loans may not exceed 20 
     percent of the total amount made available for such loans for 
     the year.

     ``SEC. 2846. CREATION OF REVOLVING FUND.

       ``In addition to the new amounts made available under 
     section 2843 for a fiscal year, all loan repayments under 
     section 2841 made by qualifying hospitals shall be held in a 
     revolving fund that may be used for additional loans under 
     section 2841.

     ``SEC. 2847. LOAN DEFAULT.

       ``(a) In General.--The failure of a qualifying hospital to 
     make payment due under or provided by the terms of a direct 
     loan made under section 2841 shall be considered a default 
     under such loan and, if such default continues for a period 
     of 30 days, the Secretary shall have the right to begin 
     collection proceedings against the hospital.
       ``(b) Priority of Federal Interest.--In the case of 
     default, the United States shall be paid prior to State or 
     local bonds.
       ``(c) Settlement of Claims.--Notwithstanding any other 
     provision of law, the Secretary shall have the power to 
     pursue to final collection by way of compromise or otherwise 
     all claims assigned and transferred to the Secretary in 
     connection with an assignment, transfer, and delivery and at 
     any time, upon default, to foreclose or refrain from 
     foreclosing on any assets secured by any defaulted loan held 
     by the Secretary.

     ``Subpart E--Requirements for Grants for Urgent Capital Needs

     ``SEC. 2851. PROVISION OF GRANTS.

       ``(a) In General.--The Secretary shall make grants to 
     qualifying hospitals with urgent capital needs for carrying 
     out a project under section 2801.
       ``(b) Purposes.--Grants made under subsection (a) shall be 
     available to qualifying hospitals for 3 types of projects:
       ``(1) Emergency certification and licensure grants shall be 
     available to such hospitals that are threatened with closure 
     or loss of accreditation or certification of a facility or of 
     essential services as a result of life or safety code 
     violations or similar facility or equipment failures. Such 
     grants shall provide limited funding for repair and 
     renovation or capital equipment acquisition where failure to 
     fund would disrupt the provision of essential public health 
     services such as emergency care.
       ``(2) Emergency grants shall be available for capital 
     renovation, expansion, or replacement (whether by 
     construction or acquisition) necessary to the maintenance or 
     expansion of essential safety and health services such as 
     obstetrics, perinatal, emergency and trauma, primary care and 
     preventive health services.
       ``(3) Planning grants shall be available to qualified 
     hospitals and facilities requiring pre-approval assistance 
     related to management and finance in order to apply for 
     loans, loan guarantees, and interest subsidies under this 
     part.
       ``(c) Priority to Financially Distressed Providers.--In 
     making grants pursuant to subsection (a), the Secretary shall 
     give priority to qualifying hospitals that are financially 
     distressed (as described by the Secretary).
       ``(d) Application Process.--The Secretary shall create an 
     expedited application process for grants under subsection 
     (a).
       ``(e) Amount Allocated From Secretary.--Of the amounts 
     available under section 2802 for a fiscal year after 
     compliance with subsection (b) of such section, the Secretary 
     shall reserve $356,100,000 for making grants under subsection 
     (a).

     ``SEC. 2852. ELIGIBLE PROJECTS.

       ``(a) Matching Grants.--
       ``(1) Limitation on amount.--Grants under section 2851 
     shall be limited to $25,000,000.
       ``(2) Matching requirement.--The Secretary shall require 
     that qualifying hospitals receiving grants under section 2851 
     receive at least 50 percent of their funding from State or 
     local sources.
       ``(3) Reservation for rural applicants.--Of the amounts 
     available pursuant to section 2851(e) for a fiscal year, the 
     Secretary shall reserve not less than 10 percent for grants 
     under section 2851 for qualifying hospitals in rural areas, 
     subject to there being a sufficient number of qualified 
     applicants.
       ``(b) Planning Grants.--
       ``(1) In general.--In making grants under section 2851, the 
     Secretary may make a grant to a qualifying hospital of up to 
     $200,000 to assist in implementation of key budgetary and 
     financial systems as well as management and governance 
     restructuring.
       ``(2) Limit on total amounts provided.--The total amount of 
     assistance provided pursuant to section 2851 in the form of 
     planning grants described in this subsection shall not exceed 
     $10,000,000.

        ``PART 3--QUALIFYING HOSPITALS; ACADEMIC HEALTH CENTERS

     ``SEC. 2871. TRANSITIONAL ASSISTANCE; PROVISION OF INTEREST 
                   RATE SUBSIDIES.

       ``(a) In General.--From the amounts reserved under section 
     2802(b)(2) for a fiscal year, the Secretary may make grants 
     as interest subsidies to reduce the capital costs of 
     qualifying hospitals in carrying out projects described in 
     section 2801 that meet the conditions described in section 
     2873.
       ``(b) Definition of Qualifying Hospital.--For purposes of 
     this part, the term `qualifying hospital' means a hospital 
     that--
       ``(1) is eligible to receive payment for the direct costs 
     of graduate medical education under section 1886(h) of the 
     Social Security Act;
       ``(2) on June 1, 1994, was eligible to receive a payment 
     adjustment under section 1886(d)(5)(F) of such Act in an 
     amount determined in accordance with section 
     1886(d)(5)(f)(vii)(I) of such Act; and
       ``(3) is a public or nonprofit private hospital.

     ``SEC. 2872. ELIGIBLE FINANCING.

       ``(a) In General.--An interest subsidy is available under 
     section 2871 with respect to any financing obtained by the 
     hospital involved if the financing meets the requirements of 
     subsections (b) through (d), without regard to whether such 
     financing is subject to refunding, advance refunding, or 
     refinancing.
       ``(b) Proportion of Aggregate Financing Used for Project.--
     An interest subsidy is available under section 2871 with 
     respect to any financing obtained for a project only if not 
     less than 80 percent of all financing for which a subsidy is 
     provided under such section with respect to the project is 
     used for such project.
       ``(c) Limit on Total Amount of Financing Eligible for 
     Subsidy.--The total amount of financing for which a subsidy 
     is provided under section 2871 with respect to a project may 
     not exceed the lesser of--
       ``(1) 65 percent of the total cost of the project, as 
     specified by the governing board of the hospital prior to 
     June 1, 1994;
       ``(2) the total amount of borrowing authorized by the 
     governing board of the hospital with respect to the project 
     prior to June 1, 1994; or
       ``(3) the Secretary's estimate of the reasonable cost of 
     such financing, as determined in accordance with the 
     methodology described in section 1861(v).
       ``(d) Prohibition Against Use of Subsidy for Retroactive 
     Debt Service Payments.--The Secretary may not provide any 
     interest subsidy under section 2871 with respect to any debt 
     service payment made by a hospital prior to the date on which 
     the subsidy is initially provided to the hospital under such 
     section.

     ``SEC. 2873. ELIGIBLE PROJECTS.

       ``(a) In General.--The Secretary may make a grant under 
     section 2871 to a qualifying hospital for a project under 
     section 2801 only if--
       ``(1) prior to June 1, 1994, the project has been approved 
     by a State under a capital review program or, in the case of 
     a project in a State without such a program, by the governing 
     board of the hospital;
       ``(2) the hospital demonstrates that the replacement 
     facility will be available for providing services to patients 
     not later than December 31, 2002 and was not available for 
     providing services to patients prior to January 1, 1987; and
       ``(3) the total cost of the project is not less than 
     $200,000,000.
       ``(b) Total Project Cost.--For purposes of subsection 
     (a)(3), the term `total cost of the project' means the total 
     amount of project-related costs, including the following: 
     Construction; land; air rights; equipment; construction 
     contingency; planning; legal, architectural, engineering, and 
     design services; interest during construction; borrowings for 
     the purpose of refinancing previously incurred debt in order 
     to meet requirements of a new lender; and other expenses 
     generally recognized as costs of development, financing, and 
     construction of such projects.

     ``SEC. 2874. ALLOTMENT OF SUBSIDIES.

       ``(a) In General.--Interest subsidy grants to a hospital 
     under section 2871 shall be made in an amount not exceeding 3 
     percentage points, except that the amount of such a grant may 
     not exceed the interest portion of the eligible financing 
     involved. The amount applicable under the preceding sentence 
     as the maximum amount for such a grant shall be reduced by 
     the Secretary by the amount of any financial assistance 
     provided for the project involved under part 2.
       ``(b) Amount Allocated by Secretary.--If the amount 
     reserved under section 2802(b)(2) for a fiscal year is 
     insufficient to provide interest subsidies to all qualifying 
     hospitals that apply for and are eligible for such subsidies, 
     the amount of the subsidy provided to each recipient shall be 
     reduced on a pro rata basis.
       ``Subtitle B--Emergency Medical Equipment for Rural Areas

     ``SEC. 2881. GRANTS REGARDING EMERGENCY MEDICAL SERVICES.

       ``(a) In General.--From amounts reserved under section 
     2802(b)(3), the Secretary, acting through the Director of the 
     Office of Rural Health Policy, may make grants to public and 
     nonprofit private entities for the purpose of purchasing 
     equipment and vehicles for the provision of emergency medical 
     services in rural areas.
       ``(b) Requirement Regarding Community Service.--Section 
     2803(a) applies to a grant under subsection (a) to the same 
     extent and in the same manner as such section applies to 
     financial assistance under section 2801.
       ``(c) Use of Equipment and Vehicles.--The Secretary may 
     make a grant under subsection (a) only if the applicant 
     agrees that the equipment and vehicles purchased pursuant to 
     subsection (a) will be owned, operated, and maintained by the 
     applicant.
       ``(d) Matching Funds.--
       ``(1) In general.--With respect to the costs of the program 
     to be carried out under subsection (a) by an applicant, the 
     Secretary may make a grant under such subsection only if the 
     applicant agrees to make available (directly or through 
     donations from public or private entities) non-Federal 
     contributions toward such costs in an amount that is not less 
     than 50 percent of such costs.
       ``(2) Determination of amount contributed.--Non-Federal 
     contributions required in paragraph (1) may be in cash or in 
     kind, fairly evaluated, including plant, equipment, or 
     services. Amounts provided by the Federal Government, or 
     services assisted or subsidized to any significant extent by 
     the Federal Government, may not be included in determining 
     the amount of such non-Federal contributions.
       ``(e) Application for Grant.--The Secretary may make a 
     grant under subsection (a) only if an application for the 
     grant is submitted to the Secretary and the application is in 
     such form, is made in such manner, and contains such 
     agreements, assurances, and information as the Secretary 
     determines to be necessary to carry out this section.
           ``Subtitle C--Facilities of Indian Health Service

     ``SEC. 2891. FINANCIAL ASSISTANCE FOR FACILITIES OF SERVICE.

       ``(a) In General.--From the amounts reserved under section 
     2802(b)(1), the Secretary shall provide financial assistance 
     in the form of loan guarantees, direct loans, and grants to 
     facilities of health programs of the Service (as defined in 
     section 901 of the Indian Health Care Improvement Act (25 
     U.S.C. 1601 et seq.) for the purposes specified in 
     subparagraphs (A) and (B) of section 2801(a)(1).
       ``(b) Terms and Conditions.--Section 2803 applies to 
     financial assistance under subsection (a) to the same extent 
     and in the same manner as such section applies to financial 
     assistance under section 2801. Such assistance shall be 
     subject to such other terms and conditions as the Secretary 
     determines appropriate to carry out this subtitle with 
     respect to such facilities of health programs of the Service.
       ``(c) Equal Treatment of IHS and Tribal Facilities.--In 
     carrying out this section, the Secretary shall--
       ``(1) treat facilities operated directly by the Indian 
     Health Service and facilities operated by Indian tribes, 
     tribal organizations, and urban Indian organizations through 
     a contract or compact with the Indian Health Service 
     equitably; and
       ``(2) apply the same terms and conditions in the same 
     manner with respect to facilities operated directly by the 
     Indian Health Service as the Secretary applies to facilities 
     operated by tribes, tribal organizations, and urban Indian 
     organizations through a contract or compact with the Indian 
     Health Service.''.
        Subtitle D--Other Programs in Public Health Service Act

     SEC. 7301. SCHOOL-BASED HEALTH CLINICS.

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


                     ``school-based health clinics

       ``Sec. 340E. (a) In General.--
       ``(1) In general.--The Secretary may make grants to public 
     and nonprofit private entities for the purpose of making 
     available to school children the health services described in 
     subsection (c) at sites that are on or in close proximity to 
     the premises of a school (or at such other sites as the 
     Secretary determines to be appropriate to provide school 
     children with access to the services).
       ``(2) School children.--For purposes of this section, the 
     term ``school children'' means an individual between the ages 
     of 3 and 21 (inclusive).
       ``(b) Minimum Qualifications; Status Regarding Federal 
     Health Programs.--
       ``(1) In general.--For fiscal year 1996 and subsequent 
     fiscal years, the Secretary may make a grant under subsection 
     (a) only if, subject to paragraph (2), the applicant involved 
     is in compliance with the following, as applicable to the 
     fiscal year involved:
       ``(A) For each of the fiscal years 1996 through 1998, and 
     for the first quarter of fiscal year 1999, the applicant is a 
     provider of services under the State plan approved for the 
     State involved under title XIX of the Social Security Act.
       ``(B) For the remaining quarters of fiscal year 1999 and 
     for each subsequent fiscal year, the applicant is a 
     participating provider under medicare part C (established 
     under title XXI of the Social Security Act).
       ``(2) Waiver.--The requirements established in paragraph 
     (1) do not apply to an applicant that provides health 
     services without charge and does not receive reimbursement 
     for the services from any third-party payors.
       ``(c) Required Consultations Regarding Parents and 
     Teachers.--The Secretary may make a grant under paragraph (1) 
     only if the applicant involved, in preparing the application 
     under subsection (k), has consulted with parents in the 
     community in which services under the grant are to be 
     provided, with teachers at schools in the community, and with 
     the local educational agency with jurisdiction over such 
     schools.
       ``(d) Preferences in Making Grants.--In making grants under 
     subsection (a), the Secretary shall give preference to--
       ``(1) qualified applicants that are experienced in 
     delivering health care services to medically underserved 
     populations (as defined in section 2752(b)) or in areas in 
     which a significant number of children are at risk for health 
     problems; and
       ``(2) qualified applicants that are affiliated with 
     community provider networks operated pursuant to section 
     2721(b)(3)(E).
       ``(e) Authorized Services.--
       ``(1) In general.--The Secretary may make a grant under 
     subsection (a) only if the applicant involved agrees that 
     services made available under the grant will include each of 
     the following (as medically appropriate for the child 
     involved):
       ``(A) Comprehensive health examinations.
       ``(B) Health education and prevention services, including 
     prenatal care.
       ``(C) Follow-up care for routine health problems.
       ``(D) Referrals for dental, vision, and hearing services 
     and for mental health services.
       ``(E) Screenings and follow-up treatment for sexually-
     transmitted diseases or other communicable diseases.
       ``(2) Option regarding family planning services.--A grantee 
     under subsection (a) may, at the option of the grantee, 
     expend the grant under such subsection to provide voluntary 
     family planning services. The Secretary may not require as a 
     condition of the receipt of a grant under subsection (a) that 
     an applicant for the grant agree to provide such services.
       ``(3) Other services.--In addition to services specified in 
     paragraphs (1) and (2), the Secretary may authorize a grantee 
     under subsection (a) to expend the grant for such additional 
     health or health-related services for school children as the 
     Secretary determines to be appropriate.
       ``(4) Availability throughout year.--The Secretary may make 
     a grant under subsection (a) only if the applicant involved 
     agrees that services under the grant will be available 
     throughout the year (including any portion of the year during 
     which the school does not hold classes).
       ``(f) Cultural Context of Services.--The Secretary may make 
     a grant under subsection (a) only if the applicant involved 
     agrees that services under the grant will be provided in the 
     language and cultural context most appropriate for the 
     individuals to whom the services are provided.
       ``(g) Limitation on Imposition of Fees for Services.--The 
     Secretary may make a grant under subsection (a) only if the 
     applicant involved agrees that, if a fee is imposed for the 
     provision of services under the grant, such fee--
       ``(1) will be made according to a schedule of fees that is 
     made available to the public;
       ``(2) will be adjusted to reflect the income and resources 
     of the school-children involved; and
       ``(3) will not be imposed on any school child with an 
     income of less than 100 percent of the applicable official 
     poverty line (established by the Director of the Office of 
     Management and Budget and revised by the Secretary in 
     accordance with section 673(2) of the Omnibus Budget 
     Reconciliation Act of 1981).'
       ``(h) Matching Funds.--
       ``(1) In general.--With respect to the costs of the program 
     to be carried out under subsection (a) by an applicant, the 
     Secretary, subject to paragraph (3), may make a grant under 
     such subsection only if the applicant agrees to make 
     available (directly or through donations from public or 
     private entities) non-Federal contributions toward such costs 
     in an amount that is--
       ``(A) for the first fiscal year for which the applicant 
     receives such a grant, 10 percent of such costs;
       ``(B) for any second such fiscal year, 25 percent of such 
     costs; and
       ``(C) for any subsequent such fiscal year, 50 percent of 
     such costs.
       ``(2) Determination of amount contributed.--Non-Federal 
     contributions required in paragraph (1) may be in cash or in 
     kind, fairly evaluated, including plant, equipment, or 
     services. Amounts provided by the Federal Government, or 
     services assisted or subsidized to any significant extent by 
     the Federal Government, may not be included in determining 
     the amount of such non-Federal contributions.
       ``(3) Waiver.--The Secretary may for an applicant waive the 
     requirement of paragraph (1) for a fiscal year if the 
     Secretary determines that the applicant will be unable to 
     carry out a program under subsection (a) otherwise. If the 
     Secretary provides a waiver under the preceding sentence for 
     a grantee under subsection (a) for a fiscal year, the 
     Secretary may make a grant to the applicant for the following 
     fiscal year only if the Secretary reviews the waiver to 
     determine whether the waiver should remain in effect.
       ``(i) Additional Agreements.--The Secretary may make a 
     grant under subsection (a) only if the applicant involved 
     agrees as follows:
       ``(1) The applicant will maintain the confidentiality of 
     patient records.
       ``(2) The applicant will establish an ongoing quality 
     assurance program regarding services provided under the 
     grant.
       ``(3) The applicant will not expend more than 10 percent of 
     the grant for administrative expenses regarding the grant.
       ``(j) Reports to Secretary.--The Secretary may make a grant 
     under subsection (a) only if the applicant agrees that, not 
     later than February 1 of the fiscal year following the fiscal 
     year for which the grant is to be made, the applicant will 
     submit to the Secretary a report describing the program 
     carried out by the applicant under the grant, including 
     provisions on the utilization, cost, and outcome of services 
     provided under the grant.
       ``(k) Application for Grant; Plan.--The Secretary may make 
     a grant under subsection (a) only if an application for the 
     grant is submitted to the Secretary; the application contains 
     a plan describing the proposal of the applicant for a program 
     under subsection (a); and the application is in such form, is 
     made in such manner, and contains such agreements, 
     assurances, and information as the Secretary determines to be 
     necessary to carry out this section.
       ``(l) Evaluation of Programs.--The Secretary, directly or 
     through grants or contracts, shall provide for evaluations of 
     programs carried out under subsection (a), including the 
     cost-effectiveness and health-effectiveness of the programs.
       ``(m) Reports to Congress.--Not later than May 31 of each 
     fiscal year, the Secretary shall submit to the Congress a 
     report on the programs carried out under subsection (a). The 
     report shall include a summary of the evaluations carried out 
     under subsection (l) for the preceding fiscal year.
       ``(n) Authorization of Appropriations.--For the purpose of 
     carrying out this section, there is authorized to be 
     appropriated $100,000,000 for each of the fiscal year 1996, 
     $275,000,000 for fiscal year 1997, $350,000,000 for fiscal 
     year 1998, and $400,000,000 for each of the fiscal years 1999 
     and 2000.''.
       (b) Conforming Amendment.--Part D of title III of the 
     Public Health Service Act (42 U.S.C 254b et seq.), as amended 
     by section 104 of Public Law 103-183 (107 Stat. 2230), is 
     amended in the heading for subpart VIII by striking ``Bulk'' 
     and all that follows and inserting the following: 
     ``Miscellaneous Provisions Regarding Primary Health Care''.
       (c) Rule of Construction.--For fiscal year 1995, references 
     in section 340E of the Public Health Service Act (as added by 
     subsection (a) of this section) to section 2752(b) of such 
     Act are deemed to be references to section 330(a) of such 
     Act.

     SEC. 7302. RURAL AND URBAN MANAGED CARE PROGRAM.

       (a) In General.--The Public Health Service Act, as amended 
     by section 7201 of the this Act, is amended by adding at the 
     end the following title:
       ``TITLE XXIX--ADDITIONAL PROGRAMS OF PUBLIC HEALTH SERVICE

     ``SEC. 2901. RURAL AND URBAN MANAGED CARE PROGRAM.

       ``(a) In General.--The Secretary may make grants to public 
     and nonprofit private entities for the purpose of carrying 
     out projects for the following:
       ``(1) To develop rural community-operated health plans, as 
     defined in subsection (b).
       ``(2) To develop community health networks, as defined in 
     subsection (c).
       ``(3) To promote the establishment of managed care plans in 
     underserved areas.
       ``(b) Rural Community-Operated Health Plan.--For purposes 
     of this section, the term `rural community-operated health 
     plan' means health plan meeting the following conditions:
       ``(1) The health plan is a public or nonprofit private 
     entity that provides services exclusively in a rural or 
     frontier area.
       ``(2) The plan is developed in consultation with the local 
     governments of the geographic area to be served by the plan, 
     with individuals who reside in the area, and with a 
     reasonable number and variety of health professionals who 
     provide services in the area.
       ``(3) The principal legal authority over the operation of 
     the plan is vested in individuals who reside in such 
     geographic area.
       ``(4) The plan provides a full continuum of services.
       ``(c) Community Health Network.--
       ``(1) In general.--For purposes of this section, the term 
     `community health network' means a public or nonprofit entity 
     meeting the following requirements:
       ``(A) The entity provides primary care services and acute 
     care services, including health promotion, health 
     maintenance, and disease prevention, either directly through 
     its members or through contracts with other entities (under 
     such limited circumstances as the Secretary may permit in 
     regulations) in an area--
       ``(i) designated by the Secretary as a health professional 
     shortage area under section 332(a)(1)(A); or
       ``(ii) with a significant number of individuals who are 
     members of a medically underserved population designated by 
     the Secretary under section 2752(b).
       ``(B) The entity consists of--
       ``(i) at least one hospital that

       ``(I) is a sole community hospital described in section 
     1886(d)(5)(D) of the Social Security Act;
       ``(II) is a rural referral center described in section 
     1886(d)(5)(C) of such Act; or
       ``(III) is described in section 1886(d)(5)(F) of such Act, 
     or would be described in such section if the hospital were a 
     subsection (d) hospital as defined in section 1886(d)(1)(B) 
     of such Act;

       ``(ii) at least 3 primary care centers, as described in 
     paragraph (2); and
       ``(iii) at the election of the entity's members, any other 
     entities that provide primary care or other health care 
     services.
       ``(C) The members of the entity have entered into an 
     agreement under which--
       ``(i) each member agrees to provide appropriate emergency 
     and medical support services to other members;
       ``(ii) each member agrees to accept referrals from other 
     members;
       ``(iii) each hospital member has arrangements to provide 
     staff privileges to physicians providing care for other 
     members; and
       ``(iv) each member has in effect (or is in the process of 
     establishing) agreements with other members to share in the 
     member's communication system, including (where appropriate) 
     the electronic sharing of patient data, medical records, and 
     billing services.
       ``(2) Primary care centers.--For purposes of this section, 
     the term `primary care center' means--
       ``(A) a rural health clinic, as defined in section 
     1861(aa)(2) of the Social Security Act;
       ``(B) a Federally-qualified health center certified by the 
     Secretary under section 1905(l)(2)(B) of such Act; or
       ``(C) a facility that would be a Federally-qualified health 
     center but for its failure to meet the requirement described 
     in section 2713(a)(1) (relating to the composition of the 
     facility's governing board), but only if the facility 
     provides assurances to the State or unit of local government 
     that consumers have significant input into the governance of 
     the facility.
       ``(3) Rule of construction regarding medicare amendments.--
     Except as otherwise provided in this section:
       ``(A) A reference in this section to title XVIII of the 
     Social Security Act shall be considered to be a reference to 
     such title as in effect on the day after the date of the 
     enactment of the Guaranteed Health Insurance Act of 1994, 
     without regard to any amendment subsequently made to such 
     title XVIII.
       ``(B) For purposes of subparagraph (A), an amendment to 
     such title XVIII that is made by the Guaranteed Health 
     Insurance Act of 1994 as of the day referred to in such 
     subparagraph applies to this section upon the amendment 
     taking effect, without regard to whether the date on which 
     the amendment takes effect is after the day referred to in 
     such subparagraph.
       ``(d) Authorization of Appropriations.--For the purpose of 
     carrying out this section, there is authorized to be 
     appropriated $85,000,000 for each of the fiscal years 1995 
     through 1999.''.
       (b) Rule of Construction.--For fiscal year 1995, references 
     in section 2901 of the Public Health Service Act (as added by 
     subsection (a) of this section) to section 2752(b) of such 
     Act are deemed to be references to section 330(a) of such 
     Act, and references to section 2713(a)(1) of such Act are 
     deemed to be references to section 329(e)(2)(G)(i) of such 
     Act, or section 330(e)(3)(G)(i) of such Act, as applicable to 
     the entity involved.

     SEC. 7303. EMERGENCY MEDICAL SERVICES IN RURAL AREAS.

       (a) Use of Certain Formula Grants for Training of 
     Personnel.--Part B of title XII of the Public Health Service 
     Act (42 U.S.C. 300d-11 et seq.) is amended--
       (1) in section 1211(b), by inserting before the period the 
     following: ``, and for training personnel in accordance with 
     section 1213(e)''; and
       (2) in section 1213, by adding at the end the following 
     subsection:
       ``(e) Training of Personnel.--The Secretary may not make 
     payments under section 1211(a) for a fiscal year unless the 
     State involved agrees that 25 percent of the payments will be 
     expended to train personnel in the provision of trauma 
     care.''.
       (b) Authorization of Appropriations.--Section 1232(a) of 
     the Public Health Service Act (42 U.S.C. 300d-32(a)) is 
     amended--
       (1) by striking ``and such sums'' and inserting ``, such 
     sums''; and
       (2) by inserting before the period the following: ``, and 
     $100,000,000 for each of the fiscal years 1995 through 
     1997''.

     SEC. 7304. ALLIED HEALTH PROFESSIONS.

       (a) Capital Costs.--Subpart II of part D of title VII of 
     the Public Health Service Act (42 U.S.C. 294d et seq.) is 
     amended by adding at the end the following section:

     ``SEC. 768. CAPITAL COSTS OF SCHOOLS OF ALLIED HEALTH IN 
                   INCREASING CAPACITY FOR TRAINING.

       ``(a) In General.--The Secretary may make loans to, and 
     guarantee the payment of principal and interest to Federal 
     and non-Federal lenders on behalf of, schools of allied 
     health for the capital costs of increasing the capacity of 
     the schools to train students in the allied health 
     professions.
       ``(b) Preferences Regarding Underserved Areas.--In 
     providing loans and guarantees under subsection (a), the 
     Secretary shall give preference to qualified applicants that 
     agree to make capital expenditures under subsection (a) that 
     the Secretary determines will assist underserved rural and 
     urban areas.
       ``(c) Terms and Conditions.--The Secretary shall establish 
     terms and conditions (and such other criteria as the 
     Secretary considers necessary) regarding loans and loan 
     guarantees under subsection (a), including provisions 
     regarding defaults by borrowers and including such provisions 
     as may be necessary to protect the financial interests of the 
     United States. The Secretary may provide a loan or loan 
     guarantee under subsection (a) only if the applicant involved 
     agrees to comply with such terms and conditions (and other 
     criteria).
       ``(d) Twenty-Year Obligation; Right of Recovery.--
       ``(1) In general.--With respect to a facility for which a 
     loan or loan guarantee is to be made under subsection (a), 
     the Secretary may provide the loan or loan guarantee only if 
     the applicant involved agrees that the applicant will be 
     liable to the United States for the amount of the loan or 
     loan guarantee, together with an amount representing 
     interest, if at any time during the 20-year period beginning 
     on the date of completion of the activities involved, the 
     facility--
       ``(A) ceases to be a facility utilized for the purpose 
     specified in subsection (a) (or another purpose approved by 
     the Secretary for education and training in the health 
     professions); or
       ``(B) is sold or transferred to any entity other than an 
     entity that is--
       ``(i) qualified to carry out a purpose referred to in 
     subparagraph (A); and
       ``(ii) approved by the Secretary as a purchaser or 
     transferee regarding the facility.
       ``(2) Subordination; waivers.--The Secretary may 
     subordinate or waive the right of recovery under paragraph 
     (1), and any other Federal interest that may be derived by 
     virtue of a loan or loan guarantee under subsection (a), if 
     the Secretary determines that subordination or waiver will 
     further the objectives of this section.
       ``(e) Waiver.--The Secretary may, under a waiver of the 
     requirement under subsection (a) regarding status as a school 
     of allied health, make not more than 1 grant under such 
     subsection each fiscal year to a public or nonprofit private 
     institution that does not meet each of the conditions 
     described in section 799(4) if the entity operates a program 
     that provides training in the allied health professions.
       ``(f) Funding.--
       ``(1) Credit authority.--Credit authority for making loans 
     and loan guarantees under subsection (a) for a fiscal year is 
     available only to the extent of amounts provided in 
     appropriations Acts.
       ``(2) Authorization of appropriations.--For the purpose of 
     carrying out this section, there are authorized to be 
     appropriated such sums as may be necessary for each of the 
     fiscal years 1995 through 1997.''.
       (b) Project Grants and Contracts.--Section 767(d) of the 
     Public Health Service Act (42 U.S.C. 294e(d)) is amended--
       (1) by striking ``there is'' and inserting ``there are''; 
     and
       (2) by striking ``through 1995'' and inserting the 
     following: ``and 1994, and $9,000,000 for each of the fiscal 
     years 1995 through 1997''.

     SEC. 7305. COMMUNITY HEALTH ADVISORS.

       Title XXIX of the Public Health Service Act, as added by 
     section 7302 of this Act, is amended by adding at the end the 
     following section.

     ``SEC. 2902. FORMULA GRANTS REGARDING COMMUNITY HEALTH 
                   ADVISOR PROGRAMS.

       ``(a) In general.--
       ``(1) Formula grants.--In the case of each State (or entity 
     designated by a State under paragraph (4) that submits to the 
     Secretary an application in accordance with subsection (d) 
     for a fiscal year, the Secretary, acting through the Director 
     of the Centers for Disease Control and Prevention and in 
     coordination with the heads of the agencies specified in 
     paragraph (2), shall make an award of financial assistance to 
     the State or entity for the development and operation of 
     community health advisor programs under section subsection 
     (b)(2). The award shall consist of the allotment determined 
     under subsection (e) with respect to the State, subject to 
     subsection (j).
       ``(2) Coordination with other agencies.--The agencies 
     referred to in paragraph (1) regarding coordination are the 
     Health Resources and Services Administration, the National 
     Institutes of Health, the Substance Abuse and Mental Health 
     Services Administration, the Agency for Health Care Policy 
     and Research, and the Indian Health Service.
       ``(3) Priority for medically underserved communities.--A 
     funding agreement for an award under paragraph (1) is that 
     the applicant involved will give priority to developing and 
     operating community health advisor programs for medically 
     underserved communities.
       ``(4) Designated entities.--With respect to the State 
     involved, an entity other than the State may receive an award 
     under paragraph (1) only if the entity--
       ``(A) is a public or nonprofit private entity; and
       ``(B) has been designated by the State to carry out the 
     purpose described in such paragraph in the State and to 
     receive amounts under such paragraph in lieu of the State.
       ``(5) Role of state agency for public health.--A funding 
     agreement for an award under subsection (a) is that--
       ``(A) if the applicant is a State, the award will be 
     administered by the State agency with the principal 
     responsibility for carrying out public health programs; and
       ``(B) if the applicant is an entity designated under 
     paragraph (3), the award will be administered in consultation 
     with such State agency.
       ``(5) Statewide responsibilities; limitation on 
     expenditures.--
       ``(A) A funding agreement for an award under paragraph (1) 
     is that the applicant involved will--
       ``(i) operate a clearinghouse to maintain and disseminate 
     information on community health advisor programs (and similar 
     programs) in the State, including information on developing 
     and operating such programs, on training individuals to 
     participate in the programs, and on evaluation of the 
     programs;
       ``(ii) provide to community health advisor programs in the 
     State technical assistance in training community health 
     advisors under subsection (c)(7)(A);
       ``(iii) coordinate the activities carried out in the State 
     under the award, including coordination between the various 
     community health advisor programs and coordination between 
     such programs and related activities of the State and of 
     other public or private entities.
       ``(B) A funding agreement for an award under paragraph (1) 
     is that the applicant involved will not expend more than 15 
     percent of the award in the aggregate for carrying out 
     subparagraph (A) and for the expenses of administering the 
     award with respect to the State involved, including the 
     process of receiving payments from the Secretary under the 
     award, allocating the payments among the entities that are to 
     develop and operate the community health advisor programs 
     involved, and monitoring compliance with the funding 
     agreements made under this section by the applicant.
       ``(b) Requirements Regarding Community Health Advisor 
     Programs.
       ``(1) Purpose of award; healthy people 2000 objectives.--
       ``(A) Subject to subparagraph (B), a funding agreement for 
     an award under subsection (a) for an applicant is that the 
     purpose of the award is, through community health advisor 
     programs under paragraph (2), to assist the State involved in 
     attaining the Healthy People 2000 Objectives (as defined in 
     paragraph (4)).
       ``(B) With respect to compliance with the agreement made 
     under subparagraph (A), an applicant receiving an award under 
     subsection (a) may, from among the various Healthy People 
     2000 Objectives, select one or more Objectives to be given 
     priority in the operation of a community health advisor 
     program of the applicant, subject to the applicant selecting 
     such priorities in consultation with the entity that is to 
     carry out the program.
       ``(2) Requirements for programs.--A funding agreement for 
     an award under subsection (a) for an applicant is that, in 
     expending the award, the purpose described in subsection 
     (a)(1) will be carried out in accordance with the following:
       ``(A) For each community for which the purpose is to be 
     carried out, the applicant will establish a program in 
     accordance with this subsection.
       ``(B) The program will be carried out in a community only 
     if the applicant has, under subsection (c)(1), identified the 
     community as having a significant need for the program.
       ``(C) The program will be operated by a public or nonprofit 
     private entity with experience in providing health or health-
     related social services to individuals who are underserved 
     with respect to such services.
       ``(D) The services of the program, as specified in 
     paragraph (3), will be provided principally by community 
     health advisors (as defined in paragraph (5)).
       ``(3) Authorized program services.--For purposes of 
     paragraph (2)(D), the services specified in this paragraph 
     for a program are as follows:
       ``(A) The program will collaborate with health care 
     providers and related entities in order to facilitate the 
     provision of health services and health-related social 
     services (including collaborating with local health 
     departments, community health centers, migrant health 
     centers, rural health clinics, hospitals, physicians and 
     nurses, providers of health education, and providers of 
     social services).
       ``(B) The program will provide public education on health 
     promotion and disease prevention and facilitate the use of 
     available health services and health-related social services.
       ``(C) The program will provide health-related counseling.
       ``(D) The program will provide referrals for available 
     health services and health-related social services.
       ``(E) For the purpose of increasing the capacity of 
     individuals to utilize health services and health-related 
     social services under Federal, State, and local programs, the 
     following conditions will be met:
       ``(i) The program will assist individuals in establishing 
     eligibility under the programs and in receiving the services 
     or other benefits of the programs.
       ``(ii) The program will provide such other services as the 
     Secretary determines to be appropriate, which services may 
     include (but are not limited to) transportation and 
     translation services.
       ``(F) The program will provide outreach services to inform 
     the community of the availability of the services of the 
     program.
       ``(c) Additional Agreements.--
       ``(1) Identification of community needs.--A funding 
     agreement for an award under subsection (a) is that the 
     applicant involved will--
       ``(A) identify the needs of the community involved for the 
     authorized program services;
       ``(B) in identifying such needs, consult with members of 
     the community, with individuals and programs that provide 
     health services in the community, and with individuals and 
     programs that provide health-related social services in the 
     community; and
       ``(C) consider such needs in carrying out a community 
     health advisor program for the community.
       ``(2) Matching funds.--
       ``(A) In general.--With respect to the cost of carrying out 
     a community health advisor program, a funding agreement for 
     an award under subsection (a) is that the applicant involved 
     will make available (directly or through donations from 
     public or private entities) non-Federal contributions toward 
     such cost in an amount that is not less than 25 percent of 
     such cost.
       ``(B) Determination of amount contributed.--
       ``(i) Non-Federal contributions required in subparagraph 
     (A) may be in cash or in kind, fairly evaluated, including 
     plant, equipment, or services. Amounts provided by the 
     Federal Government, or services assisted or subsidized to any 
     significant extent by the Federal Government, may not be 
     included in determining the amount of such non-Federal 
     contributions.
       ``(ii) With respect to the State in which the community 
     health advisor program involved is to be carried out, amounts 
     provided by the State in compliance with paragraph (3) shall 
     be included in determining the amount of non-Federal 
     contributions under subparagraph (A).
       ``(3) Maintenance of effort.--
       ``(A) With respect to the purposes for which an award under 
     subsection (a) is authorized in this section to be expended, 
     the Secretary may make such an award only if the State 
     involved agrees to maintain expenditures of non-Federal 
     amounts for such purposes at a level that is not less than 
     the level of such expenditures maintained by the State for 
     the fiscal year preceding the first fiscal year for which 
     such an award is made with respect to the State.
       ``(B)(i) In making an award under subsection (a) for a 
     fiscal year, the Secretary shall make a determination of 
     whether, for the previous fiscal year, the State involved 
     maintained material compliance with the agreement made under 
     subparagraph (A). If the Secretary determines that a State 
     has failed to maintain such compliance, the Secretary shall 
     reduce the amount of the grant under subsection (a) for the 
     fiscal year for which the grant is being made by an amount 
     equal to the amount constituting such failure for the 
     previous fiscal year.
       ``(ii) The Secretary may make a grant under subsection (a) 
     for a fiscal year only if the State involved submits to the 
     Secretary information sufficient for the Secretary to make 
     the determination required in clause (i).
       ``(4) Cultural context of services.--A funding agreement 
     for an award under subsection (a) for an applicant is that 
     the services of the community health advisor program involved 
     will be provided in the language and cultural context most 
     appropriate for the individuals served by the program.
       ``(5) Number of programs per award; programs for urban and 
     rural areas.--A funding agreement for an award under 
     subsection (a) for an applicant is that the number of 
     community health advisor programs operated in the State with 
     the award will be determined by the Secretary, except that 
     (subject to subsection (a)(3)) such a program will be carried 
     out in not less than one urban area of the State, and in not 
     less than one rural area of the State.
       ``(6) Ongoing supervision of advisors.--A funding agreement 
     for an award under subsection (a) is that the applicant 
     involved will ensure that each community health advisor 
     program operated with the award provides for the ongoing 
     supervision of the community health advisors of the program.
       ``(7) Certain expenditures.--
       ``(A) Funding agreements for an award under subsection (a) 
     include the following:
       ``(i) The applicant involved will ensure that, for each 
     community health advisor program operated with the award, a 
     program is carried out to train community health advisors to 
     provide the authorized program services, including practical 
     experiences in providing services for health promotion and 
     disease prevention.
       ``(ii) The program of training will provide for the 
     continuing education of the community health advisors.
       ``(iii) Not more than 15 percent of the award will be 
     expended for the program of training.
       ``(B) With respect to compliance with the agreements made 
     under this section, the purposes for which an award under 
     subsection (a) may be expended include providing compensation 
     for the services of community health advisors.
       ``(8) Reports to secretary; assessment of effectiveness.--
     Funding agreements for an award under subsection (a) for an 
     applicant include the following:
       ``(A) The applicant will ensure that, for each fiscal year 
     for which a community health advisor program receives amounts 
     from the award, the program will prepare a report describing 
     the activities of the program for such year, including--
       ``(i) a specification of the number of individuals served 
     by the program;
       ``(ii) a specification of the entities with which the 
     program has collaborated in carrying out the purpose 
     described in subsection (a)(1); and
       ``(iii) an assessment of the extent of the effectiveness of 
     the program in carrying out such purpose.
       ``(B) Such reports will include such additional information 
     regarding the applicant and the programs as the Secretary may 
     require.
       ``(C) The applicant will prepare the reports as a single 
     document and will submit the document to the Secretary not 
     later than February 1 of the fiscal year following the fiscal 
     year for which the reports were prepared.
       ``(d) Application for Assistance; State Plan.--For purposes 
     of subsection (a), an application is in accordance with this 
     section if the application is submitted not later than the 
     date specified by the Secretary; the application contains 
     each funding agreement described in this section; the 
     application contains a State plan describing the purposes for 
     which the award is to be expended in the State (including a 
     description of the manner in which the applicant will comply 
     with each such funding agreement); and the application is in 
     such form, is made in such manner, and contains such 
     agreements, assurances, and information as the Secretary 
     determines to be necessary to carry out this section.
       ``(e) Determination of Amount of Allotment.--
       ``(1) In general.--For purposes of subsection (a), the 
     allotment under this subsection with respect to a State for a 
     fiscal year is the greater of--
       ``(A) the sum of the respective amounts determined for the 
     State under paragraph (2) and paragraph (3); and
       ``(B) $500,000.
       ``(2) Amount relating to population.--For purposes of 
     subsection (a), the amount determined under this paragraph is 
     the product of--
       ``(A) an amount equal to 50 percent of the amount 
     appropriated under subsection (j) for the fiscal year and 
     available for awards under subsection (a); and
       ``(B) the percentage constituted by the ratio of--
       ``(i) the number of individuals residing in the State 
     involved; to
       ``(ii) the sum of the respective amounts determined for 
     each State under clause (i).
       ``(3) Amount relating to poverty level.--For purposes of 
     subsection (a), the amount determined under this paragraph is 
     the product of--
       ``(A) the amount determined under paragraph (2)(A); and
       ``(B) the percentage constituted by the ratio of--
       ``(i) the number of individuals residing in the State whose 
     income is at or below an amount equal to 200 percent of the 
     official poverty line; to
       ``(ii) the sum of the respective amounts determined for 
     each State under clause (i).
       ``(f) Quality Assurance; Cost-Effectiveness.--The Secretary 
     shall establish guidelines for assuring the quality of 
     community health advisor programs (including quality in the 
     training of community health advisors) and for assuring the 
     cost-effectiveness of the programs. A funding agreement for 
     an award under subsection (a) is that the applicant involved 
     will carry out such programs in accordance with the 
     guidelines.
       ``(g) Evaluations; Technical Assistance.--
       ``(1) Evaluations.--The secretary shall conduct evaluations 
     of community health advisor programs, and may disseminate 
     information developed as result of the evaluations. In 
     conducting such evaluations, the Secretary shall determine 
     whether the programs are in compliance with the guidelines 
     established under subsection (f).
       ``(2) Technical assistance.--The Secretary may provide 
     technical assistance to recipients of awards under subsection 
     (a) with respect to the planning, development, and operation 
     of community health advisor programs.
       ``(3) Grants and contracts.--The Secretary may carry out 
     this subsection directly or through grants, cooperative 
     agreements, or contracts.
       ``(4) Limitation on expenditures.--Of the amounts 
     appropriated under subsection (j) for a fiscal year, the 
     Secretary may reserve not more than 10 percent for carrying 
     out this subsection.
       ``(h) Rule of Construction Regarding Programs of Indian 
     Health Service.--This section may not be construed as 
     requiring the Secretary to modify or terminate the program 
     carried out by the Director of the Indian Health Service and 
     designated by such Director as the Community Health 
     Representative Program. The Secretary shall ensure that 
     support for such Program is not supplanted by awards under 
     subsection (a). In communities in which both such Program and 
     a community health advisor program are being carried out, the 
     Secretary shall ensure that the community health advisor 
     program works in cooperation with, and as a complement to, 
     the Community Health Representative Program.
       ``(i) Definitions.--For purposes of this section:
       ``(1) The term ``authorized program services'', with 
     respect to a community health advisor program, means the 
     services specified in subsection (b)(3).
       ``(2) The term ``community health advisor'' means an 
     individual--
       ``(A) who has demonstrated the capacity to carry out one or 
     more of the authorized program services;
       ``(B) who, for not less than 1 year, has been a resident of 
     the community in which the community health advisor program 
     involved is to be operated; and
       ``(C) is a member of a socioeconomic group to be served by 
     the program.
       ``(3) The term ``community health advisor program'' means a 
     program carried out under subsection (b)(2).
       ``(4) The term ``financial assistance'', with respect to an 
     award under subsection (a), means a grant, cooperative 
     agreement, or a contract.
       ``(5) The term ``funding agreement'' means an agreement 
     required as a condition of receiving an award under 
     subsection (a).
       ``(6) The term ``Healthy People 2000 Objectives'' means the 
     objectives established by the Secretary toward the goals of 
     increasing the span of healthy life, reducing health 
     disparities among various populations, and providing access 
     to preventive services, which objectives apply to the health 
     status of the population of the United States for the year 
     2000.
       ``(7) The term ``medically underserved community'' has the 
     meaning given such term in section 799.
       ``(8) The term ``official poverty line'' means the official 
     poverty line established by the Director of the Office of 
     Management and Budget and revised by the Secretary in 
     accordance with section 673(2) of the Omnibus Budget 
     Reconciliation Act of 1981, which poverty line is applicable 
     the size of the family involved.
       ``(9) The term ``State involved'', with respect to an 
     applicant for an award under subsection (a), means the State 
     in which the applicant is to carry out a community health 
     advisor program.
       ``(j) Funding.--
       ``(1) Authorization of appropriations.--For the purpose of 
     carrying out this section, there are authorized to be 
     appropriated such sums as may be necessary for each of the 
     fiscal years 1995 through 2000.
       ``(2) Effect of insufficient appropriations for minimum 
     allotments.--
       ``(A) If the amounts made available under paragraph (1) for 
     a fiscal year are insufficient for providing each State (or 
     entity designated by the State pursuant to subsection (a), as 
     the case may be) with an award under subsection (a) in an 
     amount equal to or greater than the amount specified in 
     subsection (e)(1)(B), the Secretary shall, from such amounts 
     as are made available under paragraph (1), make such awards 
     on a discretionary basis.
       ``(B) For purposes of subparagraph (A), awards under 
     subsection (a) are made on a discretionary basis if the 
     Secretary determines which States (or entities designated by 
     States pursuant to such subsection, as the case may be) are 
     to receive such awards, subject to meeting the requirements 
     of this section for such an award, and the Secretary 
     determines the amount of such awards.''.

     SEC. 7306. TRAINING OF HEALTH PROFESSIONALS FOR RURAL AREAS.

       Section 778(f) of the Public Health Service Act (42 U.S.C. 
     294p(f)) is amended by striking ``there is'' and all that 
     follows and inserting the following: ``there is authorized to 
     be appropriated $400,000,000 for each of the fiscal years 
     1995 through 2003.''.

     SEC. 7307. REGIONAL POISION CONTROL CENTERS.

       Title XII of the Public Health Service Act (42 U.S.C. 300d 
     et seq.) is amended by adding at the end the following part:

               ``Part G--Regional Poison Control Centers

     ``SEC. 1271. GRANTS FOR REGIONAL CENTERS.

       ``(a) In General.--The Secretary may make grants to public 
     and nonprofit private entities for centers to carry out 
     activities regarding--
       ``(1) the prevention and treatment of poisoning; and
       ``(2) such other activities regarding the control of 
     poisons as the Secretary determines to be appropriate.
       ``(b) Regional Considerations.--In making grants under 
     subsection (a), the Secretary shall determine the need in 
     each of the principal geographic regions of the United States 
     for a center under such subsection, and shall make the grants 
     according to priorities established by the Secretary on the 
     basis of the extent of such need in each of the regions. In 
     carrying out the preceding sentence, the Secretary shall 
     ensure that no two centers receive grants for the same 
     geographic service area.
       ``(c) Matching Funds.--
       ``(1) In general.--With respect to the costs of an entity 
     in providing for centers under subsection (a), the Secretary 
     may make a grant under such subsection only if the State in 
     which the center is to operate, or other public entities in 
     the State, agree to make available (directly or through 
     donations from public or private entities) non-Federal 
     contributions toward such costs in an amount determined by 
     the Secretary.
       ``(2) Determination of amount contributed.--Non-Federal 
     contributions required under paragraph (1) may be in cash or 
     in kind, fairly evaluated, including plant, equipment, or 
     services. Amounts provided by the Federal Government, or 
     services assisted or subsidized to any significant extent by 
     the Federal Government, may not be included in determining 
     the amount of such non-Federal contributions.

     ``SEC. 1272. REQUIREMENTS REGARDING CERTIFICATION.

       ``(a) In General.--Subject to subsection (b), the Secretary 
     may make a grant under section 1271 only if the center 
     involved has been certified by a professional organization in 
     the field of poison control, and the Secretary has approved 
     the organization as having in effect standards for 
     certification that reasonably provide for the protection of 
     the public health with respect to poisoning. In carrying out 
     the preceding sentence, the Secretary shall consider the 
     standards established by the American Association of Poison 
     Control Centers.
       ``(b) Temporary Waiver.--The Secretary may waive the 
     requirement of subsection (a) for a center for a period not 
     exceeding 1 year.

     ``SEC. 1273. GENERAL PROVISIONS.

       ``(a) Duration of Grant.--The period during which payments 
     are made under a grant under section 1271 may not exceed 3 
     years. The provision of such payments is subject to annual 
     approval by the Secretary of the payments and subject to the 
     availability of appropriations for the fiscal year involved 
     to make the payments. The preceding sentence may not be 
     construed as establishing a limitation on the number of such 
     grants that may be made to an entity.
       ``(b) Study Regarding Need for Centers.--
       ``(1) In general.--The Secretary shall conduct a study of 
     each of the centers for which a grant under section 1271 has 
     been provided. The purpose of the study shall be to determine 
     the effectiveness of the centers in carrying out the 
     activities described in such section and the extent to which 
     the activities have been carried out in a cost-effective 
     manner.
       ``(2) Alternatives to centers.--In carrying out the study 
     under paragraph (1), the Secretary shall determine the extent 
     to which the activities described in section 1271 can be 
     effectively carried out through means other than centers 
     under such section. The alternative means considered by the 
     Secretary under the preceding sentence shall include the 
     alternative of requiring public and private health plans to 
     carry out such activities.
       ``(3) Date certain for completion.--Not later than November 
     1, 1996, the Secretary shall submit to the Congress a report 
     describing the findings made in the study under paragraph 
     (1).
       ``(4) Notice to centers.--Not later than February 1, 1997, 
     the Secretary shall notify each grantee under section 1271 
     whether the Secretary considers the continued operation of 
     the center involved to be necessary in meeting the needs of 
     the geographic region involved for the activities described 
     in such section.

     ``SEC. 1274. AUTHORIZATIONS OF APPROPRIATIONS FROM FUND.

       ``For the purpose of carrying out this part, there is 
     authorized to be appropriated $50,000,000 for each of the 
     fiscal years 1995 through 1997.''.

     SEC. 7308. COBRA CONTINUATION COVERAGE; TRANSITIONAL COVERAGE 
                   REQUIREMENT FOR GROUP HEALTH PLANS.

       Section 2202(2) of the Public Health Service Act (42 U.S.C. 
     300bb-2) is amended by adding at the end the following new 
     sentence: ``In the case of an individual whose period of 
     coverage under this paragraph would (but for this sentence) 
     end after the date of the enactment of the Guaranteed Health 
     Insurance Act of 1994 and before January 1, 1999, such period 
     shall in no event terminate by reason of this paragraph 
     before January 1, 1999.''.
                       Subtitle E--Mental Health

     SEC. 7401. STATE COMPREHENSIVE MANAGED MENTAL HEALTH AND 
                   SUBSTANCE ABUSE PROGRAM.

       Title XIX of the Public Health Service Act (42 U.S.C. 300w 
     et seq.) is amended by adding at the end the following part:

``Part D--State Comprehensive Managed Mental Health and Substance Abuse 
                                Programs

     ``SEC. 1981. AUTHORITY FOR ESTABLISHMENT OF PROGRAMS.

       ``(a) Optional Establishment of Programs by States.--
       ``(1) In general.--A State with an application approved by 
     the Secretary under subsection (b) may establish a 
     comprehensive managed mental health and substance abuse 
     program (in this section referred to as the `Program') under 
     which, during a year the Program is in effect--
       ``(A) the State shall provide (or arrange for the provision 
     of) mental health and substance abuse services through the 
     Program for qualified individuals residing in the State who 
     choose to receive such services through the Program during 
     such year; and
       ``(B) such individuals shall receive such services through 
     the Program and not through a certified health plan, through 
     the medicare program, or through medicare part C providing 
     the guaranteed national benefit package.
       ``(2) Permitting operation of program through plans.--A 
     State may operate the Program by entering into agreements 
     with certified health plans, the medicare program, or 
     medicare part C, under which the State shall reimburse such 
     plans or programs for providing services under the Program 
     under this section to qualified individuals who are enrolled 
     in such certified health plans or programs.
       ``(3) Effect on other mental health and substance abuse 
     services.--Nothing in this section shall be construed to 
     affect the provision of services in a State that are not 
     covered under the guaranteed national benefit package.
       ``(4) Applicability to indian tribes and tribal 
     organizations.--
       ``(A) In general.--An Indian tribe or tribal organization 
     may establish a program under this section in the same manner 
     and under the same terms and conditions as a State (other 
     than the condition described in subsection (b)(8)).
       ``(B) Definition.--In subparagraph (A), the terms `Indian 
     tribe' and `tribal organization' have the meaning given such 
     terms in section 4 of the Indian Health Care Improvement Act 
     (25 U.S.C. 1603).
       ``(b) Eligibility Requirements for States.--A State is 
     eligible to establish a Program under this section if the 
     State submits an application to the Secretary (at such time 
     and in such form as the Secretary may require) containing 
     information and assurances that the State and the Program 
     meets the following requirements:
       ``(1) Coverage of services without day limits.--The Program 
     provides for coverage of the mental health and substance 
     abuse services described in the guaranteed national benefit 
     package without the imposition of any limits applicable under 
     the package on the number of days for which the services may 
     be provided and (at the option of the State) at a lower 
     coinsurance rate than the rate applicable under the package.
       ``(2) Coverage of all qualified individuals.--
       ``(A) In general.--Except as provided in subparagraph (B), 
     the Program provides for coverage for all qualified 
     individuals in the State (as described in subsection (c)) 
     during the year.
       ``(B) Initial coverage of one group of qualified 
     individuals only.--During any of the first 3 years in which 
     the Program is in operation, the Program may provide for 
     coverage for only the group of qualified individuals 
     described in paragraph (1) of subsection (c) or only the 
     group of qualified individuals described in paragraph (2) of 
     such subsection, except that the Program may not discontinue 
     coverage of any group for which coverage is provided.
       ``(3) Development of integrated delivery systems.--The 
     Program promotes the development of integrated delivery 
     systems for the management of mental health and substance 
     abuse services for individuals enrolled in the Program.
       ``(4) Access to providers.--The State assures that 
     individuals enrolled in the Program have access to the full 
     range of qualified providers necessary to furnish services 
     covered under the Program in accordance with such 
     requirements as the State may impose, except that any 
     individual or entity to whom payment may be made for the 
     provision of mental health and substance abuse services under 
     medicare part C shall be deemed to be a qualified provider 
     under the Program.
       ``(5) Mechanism for enrollment of adults not meeting income 
     eligibility requirement.--
       ``(A) Option described.--A State operating a Program may 
     elect to permit certified health plans in the State, the 
     medicare program, and medicare part C to enroll in the 
     Program any individual covered under the certified health 
     plan, the medicare program, or medicare part C who wishes to 
     enroll in the Program and who would be a qualified individual 
     described in subsection (c)(2) but for the individual's 
     failure to meet the requirement described in subparagraph (E) 
     of such subsection (relating to income).
       ``(B) Requiring enrollment and buy-in mechanism.--If a 
     State elects to permit plans or programs to enroll 
     individuals in the Program under subparagraph (A), the State 
     shall establish an effective mechanism to enroll such 
     individuals and impose an appropriate premium with respect to 
     such enrollment.
       ``(6) Standards for providers.--The State establishes and 
     enforces standards for the eligibility of individuals and 
     entities to furnish services under the Program.
       ``(7) Submission of plan.--The State shall submit to the 
     Secretary (and regularly update) a plan describing the 
     operation of the Program, including information on the 
     following:
       ``(A) The management, access and referral structure which 
     the State would use to promote and achieve integration of the 
     services the State intends to integrate under the Program.
       ``(B) The steps to be taken under the Program to ensure the 
     integration of services under the Program with services of 
     other agencies and providers that serve the needs of adults 
     with serious mental illness or substance abuse, or children 
     with serious emotional disturbance or substance abuse 
     (including agencies and providers involved with child 
     welfare, education, juvenile justice, corrections, vocational 
     rehabilitation, crime prevention, health care, mental health, 
     and substance abuse prevention and treatment).
       ``(C) The detailed specifications for the program which 
     will assure that individuals enrolled in the Program have 
     access to each service covered under the Program.
       ``(D) The criteria used by the State to determine whether 
     an individual is a qualified individual under subsection (c).
       ``(E) The involvement of the families of individuals to 
     whom services are provided under the Program (with the 
     approval of the individual where possible) in the planning of 
     treatment, the delivery of services, and the evaluation of 
     these interventions.
       ``(F) In the case of substance abuse treatment services, 
     the application of uniform patient placement criteria (as 
     established by the Secretary in consultation with the States) 
     for determining the placement of individuals enrolled in the 
     Program in treatment programs .
       ``(G) The proposed system for the development and 
     implementation of individualized treatment plans through 
     multi-disciplinary or multi-agency teams.
       ``(H) The description of how the State will provide for 
     public input in the development and ongoing assessment of the 
     Program.
       ``(I) The description of the grievance procedure that will 
     be available to eligible individuals dissatisfied with the 
     Program.
       ``(J) The method and components of Program review, 
     including assessments of clinical outcomes, residential 
     stability, vocational and academic achievement, and 
     management of costs.
       ``(K) The sources of any funds that the State proposes to 
     integrate in order to finance the Program (including funds 
     expended by or provided to the State under title IV of the 
     Social Security Act, title XIX of such Act, and the 
     Individuals With Disabilities Education Act, and State 
     general revenue), except that nothing in this section may be 
     construed to permit the State from reducing the level of 
     financial assistance it provides under any other program as a 
     result of receiving funds provided under this Act or 
     amendments made by this Act for the operation of the Program.
       ``(L)(i) Assurances that, prior to implementing the 
     Program, negotiations will be commenced with labor 
     organizations representing the employees of any hospitals or 
     other facilities that may be affected by the Program. Such 
     negotiations shall address the following:
       ``(I) The impact of the proposed Program upon the 
     workforce.
       ``(II) Methods to redeploy workers to positions in the 
     Program or other private or public settings, in the case of 
     workers affected by the proposed Program.
       ``(ii) Evidence of compliance with clause (i).
       ``(8) Consultation with indian tribes and tribal 
     organizations.--The State consults with Indian tribes and 
     tribal organizations in the State regarding the establishment 
     of the Program and the ability of individuals who receive 
     services from the tribes and tribal organizations to enroll 
     in the State Program.
       ``(c) Qualified Individuals Described.--In this section, a 
     `qualified individual' is either of the following:
       ``(1) The individual--
       ``(A) is an eligible individual (as defined in section 2);
       ``(B) is under 19 years of age;
       ``(C) has a serious mental illness or emotional disturbance 
     or substance abuse disorder (as determined in accordance with 
     standards established by the Secretary consistent with 
     subsection (d)); and
       ``(D) has such an illness, disturbance, or disorder that is 
     expected to last for not less than 1 year.
       ``(2) The individual--
       ``(A) is an eligible individual;
       ``(B) is 19 years of age or older;
       ``(C) has a serious mental illness or emotional disturbance 
     or substance abuse disorder (as determined in accordance with 
     standards established by the Secretary consistent with 
     subsection (d));
       ``(D) has such an illness, disturbance, or disorder that is 
     expected to last for not less than 1 year; and
       ``(E) has family income not greater than 200 percent of the 
     official poverty line.
       ``(d) Criteria for Standards for Qualified Individuals.--In 
     establishing standards for purposes of subsection (c), the 
     Secretary shall assure that Programs under this section focus 
     services on adults with serious mental illness, children with 
     serious emotional disturbance, and individuals with substance 
     abuse disorder, as evidenced by a need for multiple services 
     (either a past history, or prediction of future needs), and 
     who have a disorder which is expected to last at least one 
     year.
       ``(e) Definitions.--
       ``(1) Mental health and substance abuse services.--In this 
     section, the term ``mental health and substance abuse 
     services'' has the meaning given such term under section 
     1893(c) of the Social Security Act (as in effect on the date 
     of the enactment of the Guaranteed Health Insurance Act of 
     1994).
       ``(2) Other definitions.--In this section, the terms 
     `guaranteed national benefit package', `medicare part C', 
     `medicare program', and `certified health plan' have the 
     meaning given such terms in the Guaranteed Health Insurance 
     Act of 1994.

     ``SEC. 1982. GRANTS FOR DEVELOPMENT OF PROGRAMS.

       ``(a) In General.--The Secretary may make grants to States 
     for the initial operation of State programs under section 
     1981.
       ``(b) Limitation on Period of Grant.--A State may not 
     receive funding from a grant awarded under this section for a 
     period exceeding 5 years.
       ``(c) Authorization of Appropriations.--There are 
     authorized to be appropriated for grants under this section 
     $100,000,000 for each of the fiscal years 1996 through 
     1999.''.

     SEC. 7402. COMPREHENSIVE COMMUNITY MENTAL HEALTH SERVICES FOR 
                   CHILDREN WITH SERIOUS EMOTIONAL DISTURBANCES.

       Section 565(f)(1) of the Public Health Service Act (42 
     U.S.C. 290ff-4(f)(1)) is amended by striking ``for fiscal 
     year 1994'' and inserting ``for each of the fiscal years 1994 
     through 1997''.
       Subtitle F--United States-Mexico Border Health Commission

     SEC. 7501. AGREEMENT TO ESTABLISH BINATIONAL COMMISSION.

       The President is authorized and encouraged to conclude an 
     agreement with Mexico to establish a binational commission to 
     be known as the United States-Mexico Border Health 
     Commission.

     SEC. 7502. DUTIES.

       It should be the duty of the Commission--
       (1) to conduct a comprehensive needs assessment in the 
     United States-Mexico border area for the purposes of 
     identifying, evaluating, preventing, and resolving health 
     problems that affect the general population of the area;
       (2) to implement the actions recommended by the needs 
     assessment by--
       (A) assisting in the coordination of the efforts of public 
     and private entities to prevent and resolve such health 
     problems; and
       (B) assisting in the coordination of the efforts of public 
     and private entities to educate such population concerning 
     such health problems; and
       (3) to formulate recommendations to the Governments of the 
     United States and Mexico concerning a fair and reasonable 
     method by which the government of one country would reimburse 
     a public or private entity in the other country for the cost 
     of a health care service that the entity furnishes to a 
     citizen of the first country who is unable, through insurance 
     or otherwise, to pay for the service.

     SEC. 7503. OTHER AUTHORIZED FUNCTIONS.

       In addition to the duties described in section 7502, the 
     Commission should be authorized to perform the following 
     additional functions as the Commission determines to be 
     appropriate:
       (1) To conduct or sponsor investigations, research, or 
     studies designed to identify, study, and monitor health 
     problems that affect the general population in the United 
     States-Mexico border area.
       (2) To provide financial, technical, or administrative 
     assistance to public or private entities who act to prevent, 
     resolve, or educate such population concerning such health 
     problems.

     SEC. 7504. MEMBERSHIP.

       (a) Number and Appointment of United States Section.--The 
     United States section of the Commission should be composed of 
     13 members. The section should consist of the following 
     members:
       (1) The Secretary of Health and Human Services or such 
     individual's delegate.
       (2) The commissioners of health from the States of Texas, 
     New Mexico, California, and Arizona or such individuals' 
     delegates.
       (3) 2 individuals from each of the States of Texas, New 
     Mexico, California, and Arizona who are nominated by the 
     chief executive officer of one of such States, and are 
     appointed by the President from among individuals who have 
     demonstrated ties to community-based organizations and have a 
     demonstrated interest in health issues of the United States-
     Mexico border area.
       (b) Commissioner.--The Commissioner of the United States 
     section of the Commission should be the Secretary of Health 
     and Human Services or such individual's delegate to the 
     Commission. The Commissioner should be the leader of the 
     section.

     SEC. 7505. REGIONAL OFFICES.

       The Commission should establish no fewer than 2 regional 
     border offices in locations selected by the Commission.

     SEC. 7506. REPORTS.

       Not later than February 1 of each year that occurs more 
     than 1 year after the date of the establishment of the 
     Commission, the Commission should submit an annual report to 
     both the United States Government and the Government of 
     Mexico regarding all activities of the Commission during the 
     preceding calendar year.

     SEC. 7507. DEFINITIONS.

       For purposes of this subtitle:
       (1) Commission.--The term ``Commission'' means the United 
     States-Mexico Border Health Commission authorized in section 
     7501.
       (2) Health problem.--The term ``health problem'' means a 
     disease or medical ailment or an environmental condition that 
     poses the risk of disease or medical ailment. The term 
     includes diseases, ailments, or risks of disease or ailment 
     caused by or related to environmental factors, control of 
     animals and rabies, control of insect and rodent vectors, 
     disposal of solid and hazardous waste, and control and 
     monitoring of air and water quality.
       (3) United states-mexico border area.--The term ``United 
     States-Mexico border area'' means the area located in the 
     United States and Mexico within 100 kilometers of the border 
     between the United States and Mexico.
           Subtitle G--Comprehensive School Health Education

                       PART 1--GENERAL PROVISIONS

     SEC. 7601. PURPOSES.

       Subject to the subsequent provisions of this subtitle, the 
     purposes of this subtitle are as follows:
       (1) To support the provision in kindergarten through grade 
     12 of sequential, age-appropriate, comprehensive health 
     education programs that address locally-determined priorities 
     developed with the active participation of parents, families, 
     community organizations, and other appropriate entities.
       (2) To establish a national framework within which State 
     educational agencies, educational service agencies, and local 
     education agencies can create comprehensive school health 
     education programs that--
       (A) target the health risk behaviors accounting for the 
     majority of the morbidity and mortality among youth and 
     adults, including the following: Alcohol and other drug 
     abuse; sexual behaviors resulting in infection with the human 
     immunodeficiency virus, in other sexually transmitted 
     diseases or in unintended pregnancy; child abuse and neglect; 
     behaviors resulting in intentional and unintentional 
     injuries; dietary patterns resulting in disease; work hazards 
     associated with preventable diseases and injuries and 
     sedentary lifestyles; and
       (B) are integrated with plans and programs in the State, if 
     any, under title III of the Goals 2000: Educate America Act 
     or any other State education reform plan and those targeting 
     health promotion and disease prevention goals related to the 
     national health objectives set forth in Healthy People 2000.
       (3) To pay the initial costs of developing statewide 
     comprehensive school health education programs that will be 
     implemented and maintained with local, State, and other 
     Federal resources.
       (4) To support Federal activities such as research and 
     demonstrations, evaluations, and training and technical 
     assistance regarding comprehensive school health education.
       (5) To motivate youth, especially low-achieving youth, to 
     stay in school, avoid teen pregnancy, and strive for success 
     by providing intensive, high-quality comprehensive health 
     education programs that include peer-teaching, family, and 
     community involvement.
       (6) To improve the knowledge and skills of children and 
     youth by integrating academic and experiential learning in 
     comprehensive health education with other elements of a 
     comprehensive school health program.
       (7) To further the National Education Goals set forth in 
     title I of the Goals 2000: Educate America Act and the 
     national health objectives set forth in Healthy People 2000.

     SEC. 7602. DEFINITIONS.

       (a) Comprehensive School Health Education Program.--For 
     purposes of this subtitle, the term ``comprehensive school 
     health education program'' means a program that addresses 
     locally determined priorities and is developed with the 
     active involvement of parents, families, community 
     organizations, and other appropriate entities, and that meets 
     the following conditions:
       (1) The program is sequential, and age and developmentally 
     appropriate.
       (2) The program is provided, in the area served by the 
     program, every year for all students from kindergarten 
     through grade 12.
       (3) The program provides comprehensive health education, 
     which covers a full range of topics relevant to human health, 
     such as the following:
       (A) Community health.
       (B) Environmental health.
       (C) Personal health (including physical fitness).
       (D) Family life (including parenting and child 
     development).
       (E) Growth and development.
       (F) Nutritional health.
       (G) Emotional and mental health.
       (H) Prevention and control of disease and disorders and 
     such heath-risk behaviors as child abuse and neglect.
       (I) Safety and prevention of injuries.
       (J) Alcohol and drug abuse.
       (K) Consumer health, including education to ensure that 
     students understand the benefits and appropriate use of 
     medical services, including immunizations and other clinical 
     preventive services.
       (4) The program is based upon current scientific knowledge 
     of human health, fitness, and nutrition and does not provide 
     medically false information.
       (5) The program promotes personal responsibility for a 
     healthy lifestyle and provides the knowledge and skills 
     necessary to adopt a healthy lifestyle, including teaching 
     the legal, social, mental, and health consequences of 
     behaviors that pose health risks.
       (6) To the extent practicable, the program is sensitive to 
     cultural, gender, and ethnic issues in the content of 
     instructional materials and approaches and addresses the 
     needs of children with disabilities.
       (7) The program includes activities that support 
     instruction.
       (8) The program includes activities to promote involvement 
     by parents, families, community organizations, and other 
     appropriate entities.
       (9) The program is coordinated with other Federal, State, 
     and local health education and prevention programs and with 
     other Federal, State and local education programs, including 
     those carried out under the Elementary and Secondary 
     Education Act of 1965 (including the Drug-Free Schools and 
     Communities Act of 1986) and the Individuals with 
     Disabilities Education Act.
       (10) The program focuses on the particular health concerns 
     of the students, parents, and families in the State, school 
     district, or school, as the case may be.
       (11) The program utilizes existing professional resources 
     and pupil services programs to prevent duplication and waste 
     and to increase efficiency and coordination among education 
     and prevention programs.
       (b) Other Definitions.--For purposes of this subtitle:
       (1) The term ``educational service agency'' means regional 
     public multiservice agencies authorized by State statute to 
     develop, manage, and provide services and programs to local 
     educational agencies.
       (2) The term ``local educational agency'' has the meaning 
     given such term in section 1471(12) of the Elementary and 
     Secondary Education Act of 1965.
       (3) The term ``parent'' includes a legal guardian or other 
     person standing in loco parentis.
       (4) The term ``Secretary'' means the Secretary of Health 
     and Human Services, except as otherwise provided.
       (5) The term ``State educational agency'' has the meaning 
     given such term in section 1471(23) of the Elementary and 
     Secondary Education Act of 1965.

     SEC. 7603. PROHIBITION AGAINST FEDERAL CONTROL OF EDUCATION.

       Nothing in this subtitle shall be construed to authorized 
     any department, agency, officer, or employee of the United 
     States to exercise any direction, supervision, or control 
     over the curriculum, program of instruction, administration, 
     or personnel of any educational institution, school, or 
     school system, or over the selection of library resources, 
     textbooks, or other printed or published instructional 
     materials by any educational institution or school system.

     SEC. 7604. PROHIBITION AGAINST DISTRIBUTION OF OBSCENE 
                   MATERIALS.

       No entity receiving assistance under this subtitle may use 
     such assistance to support the distribution of obscene 
     materials to minors on school grounds.

          PART 2--SCHOOL HEALTH EDUCATION; GENERAL PROVISIONS

     SEC. 7611. AUTHORIZATIONS OF APPROPRIATIONS.

       (a) Funding for School Health Education.--For the purpose 
     of carrying out part 3, there are authorized to be 
     appropriated $50,000,000 for fiscal year 1995, and such sums 
     as may be necessary for each of the fiscal years 1996 through 
     2000.
       (b) Allocations.--Of the amounts appropriated under 
     subsection (a) for a fiscal year--
       (1) the Secretary may reserve not more than $5,000,000 to 
     support national leadership activities, such as research and 
     demonstration, evaluation, and training and technical 
     assistance in comprehensive school health education; and
       (2) the Secretary may reserve not more than 5 percent for 
     administrative expenses regarding part 3.
       (c) Relation to Other Funds.--The authorizations of 
     appropriations established in subsection (a) are in addition 
     to any other authorizations of appropriations that are 
     available for the purpose described in such subsection.

     SEC. 7612. WAIVERS OF STATUTORY AND REGULATORY REQUIREMENTS.

       (a) In General.--
       (1) Waivers.--Except as provided in subsection (c), upon 
     the request of an entity receiving funds under part 3 and 
     under a program specified in paragraph (2), the Secretary of 
     Education, upon the request of the Secretary of Health and 
     Human Services, may grant to the entity a waiver of any 
     requirement of such program regarding the use of funds, or of 
     the regulations issued for the program by the Secretary of 
     Education, if the following conditions are met with respect 
     to such program:
       (A) The Secretaries determine that the requirement of such 
     program impedes the ability of the State educational agency 
     or other recipient to achieve more effectively the purposes 
     of part 3.
       (B) The Secretaries determine that, with respect to the use 
     of funds under such program, the requested use of the funds 
     by the entity would be consistent with the purposes of part 
     3.
       (C) In the case of a request for a waiver submitted by a 
     State educational agency, the State educational agency--
       (i) provides all interested local educational agencies in 
     the State with notice and an opportunity to comment on the 
     proposal; and
       (ii) submits the comments to the Secretary.
       (D) In the case of a request for a waiver submitted by a 
     local educational agency or other agency, institution, or 
     organization that receives funds under part 3 from the State 
     educational agency, such request has been reviewed by the 
     State educational agency and is accompanied by the comments, 
     if any, of such agency.
       (2) Relevant programs.--For purposes of paragraph (1), the 
     programs specified in this paragraph are any program carried 
     out under part B of the Drug-Free Schools and Communities Act 
     of 1986.
       (b) Waiver Period.--
       (1) In general.--A waiver under this section shall be for a 
     period not to exceed three years.
       (2) Extensions.--The Secretaries involved under subsection 
     (a) may extend such period if the Secretaries determines 
     that--
       (A) the waiver has been effective in enabling the State or 
     affected recipients to carry out the activities for which it 
     was requested and has contributed to improved performance; 
     and
       (B) such extension is in the public interest.
       (c) Waivers Not Authorized.--The Secretaries involved under 
     subsection (a) may not waive, under this section, any 
     statutory or regulatory requirement relating to--
       (1) comparability of services;
       (2) maintenance of effort;
       (3) the equitable participation of students attending 
     private schools;
       (4) parental participation and involvement;
       (5) the distribution of funds to States or to local 
     educational agencies or other recipients of funds under the 
     programs specified in subsection (a)(2);
       (6) maintenance of records;
       (7) applicable civil rights requirements; or
       (8) the requirements of sections 444 and 445 of the General 
     Education Provisions Act.
       (d) Termination of Waiver.--The Secretaries involved under 
     subsection (a) shall terminate a waiver under this section if 
     the Secretary determines that the performance of the State or 
     other recipient affected by the waiver has been inadequate to 
     justify a continuation of the waiver or if it is no longer 
     necessary to achieve its original purposes.

  PART 3--SCHOOL HEALTH EDUCATION; GRANTS TO STATE EDUCATION AGENCIES

     SEC. 7621. APPLICATION FOR GRANT.

       (a) In General.--Any State educational agency that wishes 
     to receive a grant under this part shall submit an 
     application to the Secretary of Health and Human Services and 
     the Secretary of Education, at such time and in such manner 
     as the Secretaries may require.
       (b) Application; Development; Contents.--An application 
     under subsection (a) shall be developed by the State 
     educational agency in consultation with the State health 
     agencies of the State involved, and shall describe the 
     following:
       (1) The State's need for comprehensive school health 
     education based on an assessment, using goals that are 
     established by the Department of Health and Human Services 
     and the Department of Education and that are integrated with 
     the State's school improvement plan, if any, under title III 
     of Goals 2000: Educate America Act or other State education 
     reform plan.
       (2) The State educational agency's goals and objectives for 
     comprehensive school health education.
       (3) How the State educational agency will collaborate with 
     the State health agency in the planning and development of a 
     comprehensive school health education and pupil services 
     program in the State, including coordination of existing 
     health education and pupil services programs and resources.
       (4) A plan for evaluating the effectiveness of 
     comprehensive school health education activities.
       (5) How the State will allocate funds to local educational 
     agencies in accordance with section 7625.
       (6) How the State will coordinate programs under this part 
     with other local, State and Federal health education and 
     nutrition education programs.
       (7) How comprehensive school health education programs will 
     be coordinated and integrated with other local, State and 
     Federal education programs, such as programs under the 
     Elementary and Secondary Education Act of 1965 and the 
     Individuals with Disabilities Education Act, with the State's 
     school improvement plan, if any, under title III of the Goals 
     2000: Educate America Act, and with any similar programs.
       (8) How the State will work with local education agencies, 
     educational service agencies, and State and local health 
     agencies to reduce barriers to implementing comprehensive 
     school health education programs.
       (9) How the State will monitor the implementation of such 
     programs by local educational agencies.
       (10) How the State will build capacity for professional 
     development of school personnel.
       (11) How the State will provide staff development 
     (including curricula models and materials) and technical 
     assistance to local educational agencies, including through 
     the use of educational service agencies where such agencies 
     exist.
       (12) The respective roles of the State educational agency, 
     local educational agencies, educational service agencies, the 
     State health agency, and the local health agencies in 
     developing and implementing such comprehensive school health 
     education programs.
       (13) How such school health education programs will be 
     tailored, to the extent practicable, to be sensitive to 
     gender, cultural, and linguistic differences and responsive 
     to the various needs of the students served, including 
     individuals with disabilities, and individuals from 
     disadvantaged backgrounds (including racial and ethnic 
     minorities).
       (14) Such other information and assurances as the Secretary 
     may reasonably require.

     SEC. 7622. SELECTION OF GRANTEES.

       (a) In General.--The Secretary of Health and Human 
     Services, in consultation with the Secretary of Education, 
     shall establish criteria for the competitive selection of 
     grantees under this part.
       (b) Equitable Distribution.--The Secretary shall seek to 
     ensure that assistance under this part is equitably 
     distributed among the geographic regions of the United 
     States, including both urban and rural areas.

     SEC. 7623. AMOUNT OF GRANT.

       (a) In General.--For any fiscal year, the minimum grant to 
     any State under this part is an amount determined by the 
     Secretary to be necessary to enable the State to carry out 
     the activities under this part.
       (b) Criteria.--In determining the amount of any such grant, 
     the Secretary may consider such factors as the number of 
     children enrolled in schools in the State, the number or 
     percentage of school-aged children living in poverty in the 
     State, and the scope and quality of the State's plan.

     SEC. 7624. AUTHORIZED ACTIVITIES; LIMITATION ON 
                   ADMINISTRATIVE COSTS.

       (a) Subgrants to Local Educational Agencies.--Each State 
     that receives funds under this part for any fiscal year shall 
     retain not more than 20 percent of those funds in the first 
     year, and 10 percent of those funds in each succeeding year. 
     Those funds not retained by the State shall be used to make 
     grants to local educational agencies or educational service 
     agencies in accordance with section 7625.
       (b) State-level Activities.--Each State shall use retained 
     funds for any fiscal year for the following purposes:
       (1) To conduct statewide or sub-State regional coordination 
     and collaboration activities.
       (2) To develop and provide technical assistance for the 
     implementation of student learning objectives, instructional 
     materials, and assessment instruments.
       (3) To adapt, validate, or disseminate program models or 
     strategies for comprehensive school health education.
       (4) To build capacity to deliver staff development and 
     technical assistance services to local educational agencies, 
     and State and local health agencies.
       (5) To promote program activities involving families and 
     coordinating program activities with community groups and 
     other public and private nonprofit agencies.
       (6) To evaluate and report to the Secretary on the 
     activities carried out with assistance under this part.
       (7) To conduct such other activities to achieve the 
     objectives of this part as the Secretary may by regulation 
     authorize.
       (c) State Administration.--Of the amounts received by a 
     State for a fiscal year under this part and remaining after 
     any grants to local educational agencies made from such 
     amounts, the State may use up to 5 percent for the costs of 
     administering such amounts, including monitoring the 
     performance of local educational agencies.

     SEC. 7625. SUBGRANTS TO LOCAL EDUCATIONAL AGENCIES.

       (a) Application for Grant.--Any local educational agency or 
     educational service agency that wishes to receive a grant 
     under this part shall submit an application to the State, 
     containing such information and assurances as the State may 
     require, including a description of the following:
       (1) The local educational agency's goals and objectives for 
     comprehensive school health education programs.
       (2) How the local educational agency will concentrate funds 
     in schools with the greatest need for comprehensive health 
     education and provide sufficient funds to such schools to 
     ensure the implementation of comprehensive programs.
       (3) How the local educational agency will monitor the 
     implementation of these programs.
       (4) How the local educational agency will ensure that 
     comprehensive school health education programs are tailored, 
     to the extent practicable, to be sensitive to gender, 
     cultural, and linguistic differences and responsive to the 
     various needs of the students served, including individuals 
     with disabilities, and individuals from disadvantaged 
     backgrounds (including racial and ethnic minorities).
       (5) How the local educational agency, in consultation with 
     the local health agency, will evaluate and report on its 
     progress toward attaining the goals and objectives described 
     in paragraph (1).
       (6) How the local educational agency, in consultation with 
     the local health agency, will involve parents, teachers, 
     school health and pupil services personnel, and other 
     education and health professionals in the design, 
     instructional content, development, and implementation of the 
     program.
       (b) Selection of Subgrantees.--
       (1) In general.--Each State shall give priority to 
     applications from local educational agencies serving areas 
     with high needs, as indicated by objective, needs-based 
     criteria developed by the State, using readily available 
     public health and other data, which shall include, but need 
     not be limited to, high rates of any of the following:
       (A) Poverty among school-aged youth.
       (B) Birth to adolescents.
       (C) Sexually transmitted diseases among school-aged youth.
       (D) Drug and alcohol use among school-aged youth.
       (E) Violence among school-aged youth.
       (F) Poor daily school attendance.
       (2) Equitable distribution.--Each State shall ensure that 
     assistance under this part is equitably distributed among the 
     geographic regions of the State, including both urban and 
     rural areas.
       (c) Authorized Activities.--Each local educational agency 
     that receives a grant under this part shall use the grant 
     funds to implement comprehensive school health education 
     programs, as defined in section 7602.

     SEC. 7701. OCCUPATIONAL INJURY AND ILLNESS PREVENTION.

       (a) In General.--The Secretary of Health and Human Services 
     and the Secretary of Labor shall collaborate to develop and 
     implement a comprehensive program to expand and coordinate 
     initiatives to prevent occupational injuries and illnesses.
       (b) Secretary of Labor.--The Secretary of Labor, after 
     consultation with the Secretary of Health and Human Services, 
     shall directly or by grants or contracts--
       (1) provided for training and education programs for 
     employees and employers in the recognition and control of 
     workplace hazards and methods and measures to prevent 
     occupational injuries and illnesses;
       (2) develop model educational materials for training and 
     educating employees and employers on the recognition and 
     control of workplace hazards, including a core curriculum for 
     general safety and health training and materials related to 
     specific safety and health hazards; and
       (3) provide programs and services for technical assistance 
     to employers and employees on the recognition and control of 
     workplace safety and health hazards including programs for 
     onsite consultation.

     Nothing in this Act shall be construed to require adoption or 
     implementation by any employer of materials or curricula 
     funded by the Secretary of Labor pursuant to paragraph (2). 
     Technical assistance and consultative services under 
     paragraph (3) shall be provided in a manner that is separate 
     from the enforcement programs conducted by the Secretary of 
     Labor.
       (c) Secretary of Health and Human Services.--The Secretary 
     of Health and Human Services, acting through the Director of 
     the National Institute for Occupational Safety and Health and 
     after consultation with the Secretary of Labor, shall 
     directly or by grants or contracts--
       (1) provide education programs for training occupational 
     safety and health professionals including professionals in 
     the fields of occupational medicine, occupational health 
     nursing, industrial hygiene, safety engineering, toxicology, 
     and epidemiology;
       (2) provide education programs for other health 
     professionals and health care providers and the public to 
     improve the recognition, treatment, and prevention of 
     occupationally related injuries and illnesses;
       (3) conduct surveillance programs to identify patterns and 
     to determine the prevalence of occupational illnesses, 
     injuries and deaths related to exposure to particular safety 
     and health hazards;
       (4) conduct investigations and evaluations to determine if 
     workplace exposures to toxic chemicals, harmful physical 
     agents or potentially hazardous conditions pose a risk to 
     exposed employees; and
       (5) conduct research, demonstrations, and experiments 
     relating to occupational safety and health to identify the 
     causes of and major factors contributing to occupational 
     illnesses and injuries.

     In any case in which the Secretary of Health and Human 
     Services conducts any activity under paragraph (3), (4), or 
     (5) which includes a cohort study involving current or past 
     employees of an employer, the Secretary shall provide prior 
     notice to the employer and the employees (or employee 
     representatives of the employees) in advance of the major 
     steps of such activity, and shall provide the employer and 
     the employees (or employee representatives) an opportunity to 
     review the study and submit analysis or other comments prior 
     to making the study publicly available.
       (d) Authorization of Appropriations.--For the purposes of 
     carrying out this section, there are authorized to be 
     appropriated $150,000,000 for each of the fiscal years 1995 
     through 2000.
                  Subtitle I--Miscellaneous Provisions

     SEC. 7801. IDENTIFYING STRATEGIES FOR ASSESSING IMPACT OF 
                   HEALTH CARE REFORM.

       (a) In General.--Within 90 days after the date of the 
     enactment of this Act, the Secretary shall seek to enter into 
     an agreement with the Institute of Medicine of the National 
     Academy of Sciences (or another nonprofit, nongovernmental 
     organization or consortium of institutions) to study and 
     report on the impact of this Act at the national, regional, 
     and State levels.
       (b) Purpose.--The purpose of the study under this section 
     is to develop a detailed framework, using a prospective, 
     longitudinal study design, to assess the impact of this Act 
     on national goals, such as the goals of assuring security of 
     coverage, promoting simplicity of administration, achieving 
     health care savings, encouraging individual responsibility, 
     improving quality of care, promoting choice, and improving 
     health status.
       (c) Report.--The Secretary shall require the organization 
     conducting the study under this section to submit to the 
     Secretary and the Congress a report within 18 months after 
     the date of the enactment of this Act. The report shall 
     include recommendations regarding each of the following:
       (1) The appropriate indicators of national progress towards 
     meeting the national goals referred to in subsection (b).
       (2) The appropriate study designs that would assess the 
     impact of this Act on these indicators and that could take 
     into account different approaches to health care reform that 
     may be used in different States and regions (or by different 
     Federal agencies), as well as by foreign countries.
       (3) The data elements and public and private sources of 
     information for measuring such indicators, including--
       (A) the special requirements or authorities needed to 
     permit access to confidential data (and to assure continued 
     confidentiality of such data) needed to measure such 
     indicators;
       (B) the methods for obtaining the elements that are not 
     currently in use;
       (C) approaches to establishing a core set of primary data 
     as part of a national collection effort that could overlap 
     with the evaluation of this Act; and
       (D) the relationship between Federal, State, and local 
     agencies in the gathering, reporting, and sharing of 
     information on this Act and its assessment.
       (4) The nature, scope, and frequency of reports that would 
     best serve the Secretary and the Congress in the evaluation 
     of this Act.
       (5) The overall cost estimates associated with obtaining 
     and evaluating information on the impact of this Act.
       (6) The ways in which the findings contained in the report 
     could be used by various groups, such as patients, providers, 
     insurers, employers, taxpayers, and various government 
     agencies.

     SEC. 7802. STUDY OF WORKSITE WELLNESS PROGRAMS.

       (a) In General.--The Secretary of Health and Human 
     Services, after consultation with the Secretary of Labor, 
     shall conduct a study evaluating the effectiveness of health 
     promotion programs in the worksite and analyzing the 
     feasibility and desirability of providing incentives 
     (including health plan premium discounts) to encourage 
     employers to adopt such programs. In conducting the study, 
     the Secretary shall assess the effect of programs of various 
     size, scope, and type on health status, medical risk factors, 
     life style, disability, morbidity, mortality, and 
     productivity.
       (b) Report.--Not later than 2 years after the date of the 
     enactment of this Act, the Secretary shall submit to Congress 
     a report on the study conducted under subsection (a), and 
     shall include in the report--
       (1) information on the cost effectiveness, type, and amount 
     of financial incentives (if any) provided under the programs 
     studied; and
       (2) such recommendations as the Secretary considers 
     appropriate for providing incentives to encourage employers 
     to adopt health promotion programs in the worksite.
                   TITLE VIII--MEDICARE AND MEDICAID

                       table of contents of title

                   TITLE VIII--MEDICARE AND MEDICAID

Sec. 8000. References in title.

                  Subtitle A--Medicare Part C Program

Sec. 8001. Establishment of medicare part C program.

                      ``TITLE XXI--MEDICARE PART C

``Sec. 2100. Establishment of program.

                  ``Part A--Eligibility and Enrollment

``Sec. 2101. Eligibility.
``Sec. 2102. Enrollment process.
``Sec. 2103. Facilitation of enrollment.
``Sec. 2104. Coverage period; termination of enrollment.

                    ``Part B--Benefits and Payments

``Sec. 2111. Coverage of benefits under guaranteed national benefit 
              package.
``Sec. 2112. Payments for health insurance benefits.
``Sec. 2113. Adjustments to medicare rates and methodologies.
``Sec. 2114. Exclusions; coordination.

             ``Part C--Premiums; Medicare Part C Trust Fund

``Sec. 2121. Computation of applicable medicare part C premium.
``Sec. 2122. Medicare part C premium liability.
``Sec. 2123. Collection of premiums.
``Sec. 2124. Medicare part C trust fund.

                  ``Part D--Administrative Provisions

``Sec. 2131. Agreements with hospitals; participating physicians; 
              treatment of Indian Health Service facilities.
``Sec. 2132. Health maintenance organizations.
``Sec. 2133. Use of fiscal agents.
``Sec. 2134. Compliance with information standards; application of 
              medicare quality assurance and survey and certification 
              requirements.
``Sec. 2135. Program integrity.
``Sec. 2136. General administration; miscellaneous provisions.

                ``Part E--Definitions and Miscellaneous

``Sec. 2161. Definitions.
``Sec. 2162. References to medicare provisions.''.
Sec. 8002. Conforming amendments.
Sec. 8003. Effective date.

 Subtitle B--Benefits for Low-Income Individuals; State Maintenance of 
                                 Effort

              Part 1--Benefits for Low-income Individuals

Sec. 8101. Establishment of benefits.

          ``TITLE XXII--ASSISTANCE FOR LOW-INCOME INDIVIDUALS

``Sec. 2200. Establishment of programs.

                 ``Part A--Premium Certificate Program

  ``Subpart 1--Certificates for Low-Income Individuals Covered Under 
                         Certified Health Plans

``Sec. 2201. Eligibility.
``Sec. 2202. Value of premium certificate.
``Sec. 2203. Administration of program.

         ``Subpart 2--Premium Assistance for Qualified Retirees

``Sec. 2211. Eligibility for premium certificate for certain retirees.
``Sec. 2212. Eligibility.
``Sec. 2213. Value of premium certificate.
``Sec. 2214. Administration of premium certificates for retirees.

     ``Subpart 3--Maintenance of Effort Offset for Retiree Premium 
                             Contributions

``Sec. 2221. Offset of premium obligations for retirees.
``Sec. 2222. Amount of offset.
``Sec. 2223. Procedures for obtaining offset.

       ``Part B--Wrap-Around Benefits for Low-income Individuals

``Sec. 2231. Eligibility.
``Sec. 2232. Wrap-around benefits.
``Sec. 2233. Application for benefits.
``Sec. 2234. References to medicare provisions.

   ``Part C--Payment of Medicare Cost-Sharing for Certain Low-income 
                              Individuals

``Sec. 2241. Payment of cost-sharing for certain individuals.
``Sec. 2242. Medicare cost-sharing defined.
``Sec. 2243. Individuals defined.
``Sec. 2244. Timing.

                  ``Part D--Administrative Provisions

``Sec. 2251. Determination of eligibility; appeals.
``Sec. 2252. Verification of eligibility.
``Sec. 2253. Penalties for misrepresentation.''.
Sec. 8102. Effective dates.

                  Part 2--State Maintenance of Effort


           SUBPART A--PAYMENTS FOR CASH ASSISTANCE RECIPIENTS

Sec. 8111. State responsibility for payments.
Sec. 8112. Determination of AFDC per capita amounts for States.
Sec. 8113. Determination of SSI per capita amount for States.
Sec. 8114. Determination of number of AFDC and SSI recipients.


         SUBPART B--PAYMENTS FOR NON-CASH ASSISTANCE RECIPIENTS

Sec. 8121. State responsibility for payments.
Sec. 8122. Determination of baseline amounts.
Sec. 8123. Updating of baseline amount.


            SUBPART C--GENERAL AND MISCELLANEOUS PROVISIONS

Sec. 8131. Timing and manner of payments.
Sec. 8132. Special rules for Puerto Rico and other territories.
Sec. 8133. Sanctions for failure to make timely payments.
Sec. 8134. State maintenance of effort percentage.

  Part 3--Analysis of Impact of Act on Federal Expenditures and States

Sec. 8141. Impact of health care reform on Federal budget.
Sec. 8142. Impact of health care reform on States.

                     table of contents of subtitle

         Subtitle C--Cost Containment in the Medicare Programs

             Part 1--Medicare Health Expenditure Estimates

Sec. 8201. National medicare per capita health expenditure estimate.
Sec. 8202. Classes of health care services.
Sec. 8203. Allocation of per capita estimates by class of service for 
              medicare A/B.
Sec. 8204. Allocation of per capita estimates by class of service for 
              medicare C.
Sec. 8205. Combined medicare per capita allocations for classes of 
              services.
Sec. 8206. Computation of medicare annual combined rate of increase for 
              classes of services; application to medicare payment 
              rates.
Sec. 8207. National health expenditures reporting system.

               Part 2--State Health Expenditure Estimates

Sec. 8211. State medicare per capita health expenditure estimate.

               Part 3--Administrative and Judicial Review

Sec. 8221. Limitation on administrative and judicial review.

          Subtitle D--Revisions to Medicare Part A and Part B

                  Part 1--Additional Medicare Savings

Sec. 8301. Reduction in payments for indirect costs of medical 
              education.
Sec. 8302. Reductions in disproportionate share adjustments.
Sec. 8303. Reductions in payments for capital-related costs of 
              inpatient hospital services for PPS hospitals.
Sec. 8304. Limitations on payment for physicians' services furnished by 
              high-cost hospital medical staffs.
Sec. 8305. Medicare secondary payer.
Sec. 8306. Imposition of 20 percent coinsurance on home health services 
              under medicare.
Sec. 8307. Home health cost limits.

     Part 2--Provisions Relating to Payments for Medical Education

Sec. 8311. Limiting medicare medical education payments to approved 
              residency positions.
Sec. 8312. Determination of number of full-time equivalent residents.
Sec. 8313. Payments for hospitals losing specialty positions.
Sec. 8314. Medicare demonstration regarding consortia of hospitals.
Sec. 8315. Study of payments for medical education at sites other than 
              hospitals.

  Part 3--Assistance for Providers Serving Low-income and Underserved 
                              Populations

Sec. 8321. Increase in payments for federally qualified health centers.
Sec. 8322. Changes in underserved area bonus payments.
Sec. 8323. Essential access community hospitals.
Sec. 8324. Medicare telemedicine pilot projects.
Sec. 8325. Treatment of other indian facilities as indian health 
              service facilities.

  Part 4--Application of Quality Management and Administrative Reform 
             Under Guaranteed Health Insurance Act of 1994

Sec. 8331. Integration of medicare into national quality management 
              program.
Sec. 8332. Coordination of medicare cards with health security cards.
Sec. 8333. Elimination of medicare and medicaid coverage data bank.
Sec. 8334. Requirement for uniform hospital cost reporting.
Sec. 8335. Application of health information and information 
              transaction requirements to fiscal intermediaries and 
              carriers.
Sec. 8336. Application of restrictions on disclosure and use of health 
              information.

         Part 5--Amendments to Anti-fraud and Abuse Provisions

Sec. 8341. Anti-kickback statutory provisions.
Sec. 8342. Civil money penalties.
Sec. 8343. Amendments to exclusionary provisions in fraud and abuse 
              program.
Sec. 8344. Sanctions against practitioners and persons for failure to 
              comply with statutory obligations relating to quality of 
              care.
Sec. 8345. Revisions to criminal penalties.
Sec. 8346. Effective date.

      Part 6--Revisions to Limitations on Physician Self-referrals

Sec. 8351. Application of ban on self-referrals to claims submitted by 
              physicians.
Sec. 8352. Expansion of self-referral ban to additional services.
Sec. 8353. Exceptions for both ownership and compensation arrangements.
Sec. 8354. Exceptions related only to ownership or investment.
Sec. 8355. Repeal of exception for remuneration unrelated to provision 
              of designated health services.
Sec. 8356. Referring physicians.
Sec. 8357. Miscellaneous and technical provisions.
Sec. 8358. Effective date.

                   Part 7--Other Medicare Provisions

Sec. 8361. Treatment of beneficiaries residing in States with approved 
              single-payer systems.
Sec. 8362. Development and implementation of prospective payment 
              methodologies.
Sec. 8363. Medicare supplemental insurance policy amendments.
Sec. 8364. Requiring hospitals to participate in medicare part C.
Sec. 8365. Conforming amendments relating to program of cost-sharing 
              for qualified medicare beneficiaries.
Sec. 8366. Adjusting capital payments for amounts received under 
              capital financing assistance program.
Sec. 8367. Study of physician supervision of nurse anesthetist 
              services.

           Part 8--Expansion of Frail Elderly Demonstrations

Sec. 8371. Expansion of number of sites for demonstration program of 
              all-inclusive care for the elderly (PACE).

          Subtitle E--Minor and Technical Medicare Amendments

                 Part 1--Provisions Relating to Part A

Sec. 8401. Provisions relating to adjustments to standardized amounts 
              for wages and wage-related costs.
Sec. 8402. Provisions relating to rural health transition grant 
              program.
Sec. 8403. Psychology services in hospitals.
Sec. 8404. Skilled nursing facilities.
Sec. 8405. Notification of availability of hospice benefit.
Sec. 8406. Clarifying expertise of individuals to serve on the 
              prospective payment assessment commission.
Sec. 8407. Authority for budget neutral adjustments for changes in 
              payment amounts for transfer cases.
Sec. 8408. Hemophilia pass-through extension.
Sec. 8409. Sub-acute care services demonstration project.
Sec. 8410. Clarification of DRG payment window expansion; miscellaneous 
              and technical corrections.

                 Part 2--Provisions Relating to Part B


                    SUBPART A--PHYSICIANS' SERVICES

Sec. 8411. Development and implementation of resource-based methodology 
              for practice expenses.
Sec. 8412. Geographic cost of practice index refinements.
Sec. 8413. Extra-billing limits.
Sec. 8414. Relative values for pediatric services.
Sec. 8415. Administration of claims relating to physicians' services.
Sec. 8416. Miscellaneous and technical corrections.


                  SUBPART B--DURABLE MEDICAL EQUIPMENT

Sec. 8421. Certification of suppliers.
Sec. 8422. Restrictions on certain marketing and sales activities.
Sec. 8423. Beneficiary liability for noncovered services.
Sec. 8424. Adjustments for inherent reasonableness.
Sec. 8425. Miscellaneous and technical corrections.


                  SUBPART C--OTHER ITEMS AND SERVICES

Sec. 8431. Ambulatory surgical center services.
Sec. 8432. Study of medicare coverage of patient care costs associated 
              with clinical trials of new cancer therapies.
Sec. 8433. Study of annual cap on amount of medicare payment for 
              outpatient physical therapy and occupational therapy 
              services.
Sec. 8434. Payment of part B premium late enrollment penalties by 
              States.
Sec. 8435. Treatment of inpatients and provision of diagnostic X-ray 
              services by rural health clinics and federally qualified 
              health centers.
Sec. 8436. Application of mammography certification requirements.
Sec. 8437. Coverage of services of speech-language pathologists and 
              audiologists.
Sec. 8438. Miscellaneous and technical corrections.

              Part 3--Provisions Relating to Parts A and B


                  SUBPART A--MEDICARE SECONDARY PAYER

Sec. 8441. Medicare secondary payer reforms.


     SUBPART B--OTHER ITEMS AND SERVICES RELATING TO PARTS A AND B

Sec. 8451. Definition of FMGEMS examination for payment of direct 
              graduate medical education.
Sec. 8452. Qualified medicare beneficiary outreach.
Sec. 8453. Hospital agreements with organ procurement organizations.
Sec. 8454. Peer review organizations.
Sec. 8455. Health maintenance organizations.
Sec. 8456. Home health agencies.
Sec. 8457. Permanent extension of authority to contract with fiscal 
              intermediaries and carriers on other than a cost basis.
Sec. 8458. Transportation demonstration project.
Sec. 8459. Diabetes treatment demonstration project.
Sec. 8460. Expansion of number of sites for demonstration program of 
              all-inclusive care for the elderly (PACE).
Sec. 8460A. Miscellaneous and technical corrections.

Part 4--Provisions Relating to Medicare Supplemental Insurance Policies

Sec. 8461. Standards for medicare supplemental insurance policies.

        Subtitle F--Provisions Relating to the Medicaid Program

 Part 1--Conforming Medicaid to Guaranteed Health Insurance Act of 1994

Sec. 8501. Conforming medicaid amendments relating to guaranteed 
              national benefit package.
Sec. 8502. Enforcement of maintenance-of-effort requirements through 
              medicaid.
Sec. 8503. Conforming medicaid amendments relating to quality and 
              consumer protection.
Sec. 8504. Conforming amendments relating to cost-sharing for qualified 
              medicare beneficiaries.
Sec. 8505. Treatment of certain facilities as federally qualified 
              health centers.
Sec. 8506. Waivers facilitating State health security programs.
Sec. 8507. Conforming requirements for rebate agreements for covered 
              outpatient drugs.
Sec. 8508. Construction of Guaranteed Health Insurance Act of 1994 
              references.

                         Part 2--Long-Term Care

Sec. 8511. Coordination of optional home and community based services 
              under medicaid with long-term care under Guaranteed 
              Health Insurance Act of 1994.
Sec. 8512. Nursing home pass-through.
Sec. 8513. Continuation of Texas frail elderly demonstration.

                Part 3--Health Maintenance Organizations

Sec. 8521. Permitting Garden State Health Plan to participate in 
              managed care waiver.
Sec. 8522. Extension of period of applicability of enrollment mix 
              requirement to Dayton Area Health Plan.
Sec. 8523. Clarification of applicability of restrictions on Federal 
              financial participation.

                     Part 4--Vaccines for Children

Sec. 8531. State mandate for insurers to offer coverage of 
              immunizations and well-child services.
Sec. 8532. Limitation on State ability to purchase vaccines at Federal 
              price.

    Part 5--Treatment of Indians and Indian Health Service Providers

Sec. 8541. Nondiscrimination in participation providers.
Sec. 8542. Requiring individuals subject to waivers to have option to 
              enroll in Indian Health Service plans.
Sec. 8543. Treatment of outpatient facilities as federally qualified 
              health centers.

                  Part 6--Effective Date of Amendments

Sec. 8551. Amendments effective without regard to issuance of 
              regulations.

      Subtitle G--Miscellaneous and Technical Medicaid Amendments

                     Part 1--Substantive Provisions


                   SUBPART A--MANAGED CARE PROVISIONS

Sec. 8601. Medicaid managed care antifraud provisions.
Sec. 8602. Extension of medicaid waiver for Tennessee Primary Care 
              Network.
Sec. 8603. Waiver of application of medicaid enrollment mix requirement 
              to District of Columbia Chartered Health Plan, Inc.
Sec. 8604. Waiver of application of medicaid enrollment mix requirement 
              to Managed Health Services Insurance Corporation of 
              Milwaukee, Wisconsin.
Sec. 8605. Extension of Minnesota prepaid medicaid demonstration 
              project.


     SUBPART B--HOME AND COMMUNITY-BASED SERVICES WAIVER PROVISIONS

Sec. 8611. Elimination of requirement of prior institutionalization 
              with respect to habilitation services furnished under a 
              waiver for home or community-based services.
Sec. 8612. Relief from third party liability requirements when cost-
              effective.
Sec. 8613. State expenditures for medical assistance with respect to 
              home and community-based services provided under a 
              waiver.


                      SUBPART C--OTHER PROVISIONS

Sec. 8621. Presumptive eligibility for pregnant women.
Sec. 8622. Criteria for determining the amount of disallowances.
Sec. 8623. Intermediate sanctions for kickback violations.
Sec. 8624. Technical amendment related to taxes on certain health care 
              items and services.
Sec. 8625. Application of mammography certification requirements under 
              the medicaid program.
Sec. 8626. Nursing home reform.
Sec. 8627. Increase in authorization of appropriations for the maternal 
              and child health services block grant program.

 Part 2--Miscellaneous and Technical Corrections Relating to Obra-1990

Sec. 8641. Effective date.
Sec. 8642. Corrections relating to section 4401 (drug rebate program).
Sec. 8643. Corrections relating to section 4402 (enrollment under group 
              health plans).
Sec. 8644. Corrections relating to section 4501 (low-income medicare 
              beneficiaries).
Sec. 8645. Corrections relating to section 4601 (child health).
Sec. 8646. Corrections relating to section 4602 (outreach locations).
Sec. 8647. Corrections relating to section 4604 (payment for hospital 
              services for children under 6 years of age).
Sec. 8648. Corrections relating to section 4703 (payment adjustments 
              for disproportionate share hospitals).
Sec. 8649. Corrections relating to section 4704 (federally-qualified 
              health centers).
Sec. 8650. Corrections relating to section 4708 (substitute 
              physicians).
Sec. 8651. Corrections relating to section 4711 (home and community 
              care for frail elderly).
Sec. 8652. Corrections relating to section 4712 (community supported 
              living arrangements).
Sec. 8653. Correction relating to section 4713 (cobra continuation 
              coverage).
Sec. 8654. Correction relating to section 4716 (medicaid transition for 
              family assistance).
Sec. 8655. Corrections relating to section 4718 (medically needy income 
              levels for certain 1-member families).
Sec. 8656. Corrections relating to section 4723 (medicaid spend-down 
              option).
Sec. 8657. Corrections relating to section 4724 (optional State 
              disability determinations).
Sec. 8658. Correction relating to section 4732 (special rules for 
              health maintenance organizations).
Sec. 8659. Corrections relating to section 4747 (coverage of HIV-
              positive individuals).
Sec. 8660. Correction relating to section 4751 (advanced directives).
Sec. 8661. Corrections relating to section 4752 (physicians' services).
Sec. 8662. Corrections relating to section 4801 (nursing home reform).
Sec. 8663. Other technical corrections.

 Part 3--Miscellaneous and Technical Corrections Relating to Obra-1993

Sec. 8671. Effective date.
Sec. 8672. Corrections relating to section 13601 (personal care 
              services).
Sec. 8673. Corrections relating to section 13604 (emergency services 
              for aliens).
Sec. 8674. Corrections relating to section 13611 (transfers of assets; 
              treatment of certain trusts).
Sec. 8675. Corrections relating to section 13612 (medicaid estate 
              recoveries).
Sec. 8676. Corrections relating to section 13622 (liability of third 
              parties to pay for care and services).
Sec. 8677. Corrections relating to section 13623 (medical child 
              support).
Sec. 8678. Corrections relating to section 13624 (physician referrals).
Sec. 8679. Corrections relating to section 13631 (medicaid pediatric 
              immunization provisions).
Sec. 8680. Corrections relating to section 13643 (demonstration 
              projects).

             Subtitle H--Provision Relating to AFDC Program

Sec. 8701. Enforcement of maintenance-of-effort requirements through 
              AFDC.

     SEC. 8000. REFERENCES IN TITLE.

       (a) Amendments to Social Security Act.--Except as otherwise 
     specifically provided, whenever in this title 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.
       (b) References to OBRA.--In this title, the terms ``OBRA-
     1986'', ``OBRA-1987'', ``OBRA-1989'', ``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.
                  Subtitle A--Medicare Part C Program

     SEC. 8001. ESTABLISHMENT OF MEDICARE PART C PROGRAM.

       The Social Security Act is amended by adding after title XX 
     the following new title:

                      ``TITLE XXI--MEDICARE PART C

     ``SEC. 2100. ESTABLISHMENT OF PROGRAM.

       ``Not later than January 1, 1999, the Secretary shall 
     establish and operate a Medicare Part C Program under this 
     title to provide coverage for the guaranteed national benefit 
     package for eligible individuals.

                  ``Part A--Eligibility and Enrollment

     ``SEC. 2101. ELIGIBILITY.

       ``(a) Eligibility to Enroll for Health Insurance 
     Benefits.--Each medicare part C eligible individual (as 
     defined in subsection (b)) is eligible to enroll in the 
     program under this title.
       ``(b) Medicare Part C Eligible Individual Defined.--In this 
     title, subject to subsection (c), the term `medicare part C 
     eligible individual' means any eligible individual (as 
     defined in section 1001(c) of the Guaranteed Health Insurance 
     Act of 1994) who meets any of the following requirements:
       ``(1) Certain part-time, temporary, and seasonal 
     employees.--The individual is an employee described in 
     section 1102(c) of the Guaranteed Health Insurance Act of 
     1994 or a member of the family of such an individual (as 
     defined in section 3 of such Act).
       ``(2) Full-time employees of small employers.--The 
     individual is a full-time employee (as defined in section 
     1106(a) of the Guaranteed Health Insurance Act of 1994) of an 
     employer that is not a large employer (as defined in section 
     1106(b) of such Act) and the employee is not a qualified 
     employer-covered employee of the employer (as defined in 
     section 1104 of such Act), or a member of the family of such 
     an individual (as defined in section 3 of such Act).
       ``(3) Non-workers.--The individual is not an employee, or 
     is a member of the family of an individual who is not an 
     employee.
       ``(4) AFDC and ssi recipients.--The individual is an AFDC 
     or SSI recipient.
       ``(5) Employed individuals with income below specified 
     percentage of income threshold.--
       ``(A) In general.--The individual--
       ``(i) is an employee of a small employer (as defined in 
     section 1106(b) of the Guaranteed Health Insurance Act of 
     1994), and
       ``(ii) is determined, under part D of title XXII in the 
     manner described in section 2251, to have projected modified 
     adjusted gross income that is less than the applicable 
     percentage (specified in subparagraph (B)) of the threshold 
     amount (as defined in section 2122(c)(3)) applicable to the 
     taxpayer involved.
       ``(B) Applicable percentage.--For purposes of subparagraph 
     (A), the `applicable percentage', for taxable years ending 
     with or within--
       ``(i) 1999, 2000, or 2001, is 200 percent,
       ``(ii) 2002 or 2003, is 220 percent, and
       ``(iii) a year thereafter, is 240 percent.
       ``(c) Ineligible Individual.--
       ``(1) In general.--
       ``(A) In general.--The term `medicare part C eligible 
     individual' does not include an eligible individual (as 
     defined in section 1001 of the Guaranteed Health Insurance 
     Act of 1994)--
       ``(i) who is covered under a certified health plan,
       ``(ii) subject to paragraph (2), who is entitled to 
     benefits under part A of title XVIII,
       ``(iii) whose principal place of abode is in Puerto Rico, 
     the Virgin Islands, Guam, American Samoa, or the Northern 
     Mariana Islands, unless (and only so long as) such possession 
     meets the requirements of paragraph (3)(A), or
       ``(iv) who is covered under a State single-payer system or 
     a State managed competition program under subtitle A or B of 
     title IV of the Guaranteed Health Insurance Act of 1994.
       ``(B) Construction.--Nothing in subparagraph (A)(i) shall 
     prevent an individual described in such subparagraph from 
     disenrolling from a plan in order to become a medicare part C 
     eligible individual.
       ``(2) Exception for medicare secondary payer situations.--
     Paragraph (1)(A)(ii) shall not apply to an individual to whom 
     section 1862(b)(2) applies, if the program under this title 
     would otherwise constitute the primary plan (as defined in 
     section 1862(b)(2)(A)).
       ``(3) Rules relating to possessions.--
       ``(A) Requirements.--The requirements of this subparagraph 
     with respect to a possession are that an agreement is in 
     effect between the United States and such possession pursuant 
     to which--
       ``(i) the laws of such possession impose a qualified 
     medicare part C premium individual share tax (as defined in 
     subparagraph (B));
       ``(ii) nothing in any provision of law, including the law 
     of such possession, permits such possession to reduce or 
     remit in any way, directly or indirectly, any liability to 
     such possession by reason of such individual share tax;
       ``(iii) any amount received in the Treasury of such 
     possession by reason of such individual share tax shall be 
     paid (at such time and in such manner as the Secretary of the 
     Treasury shall prescribe) to the Treasury of the United 
     States for credit to the Medicare Part C Trust Fund;
       ``(iv) such individual share tax is coordinated with the 
     tax imposed by section 59B of the Internal Revenue Code of 
     1986 such that, for any period, an individual would be 
     required to pay (in the aggregate under both such taxes) not 
     more than the appropriate applicable medicare part C premium 
     for such period; and
       ``(v) the possession complies with such other requirements 
     as may be prescribed by the Secretary and the Secretary of 
     the Treasury to carry out the purposes of this paragraph, 
     including requirements prescribing the information 
     individuals to whom such individual share tax may apply shall 
     furnish to the Secretary and the Secretary of the Treasury.
       ``(B) Qualified medicare part c premium individual share 
     tax.--In subparagraph (A), the term `qualified medicare part 
     C premium individual share tax' means a tax imposed and 
     collected by such a possession that is--
       ``(i) equivalent to the tax imposed under section 59B of 
     the Internal Revenue Code of 1986 (and any tax subsequently 
     enacted for the purpose of collecting the individual share of 
     premiums for benefits under this title); and
       ``(ii) imposed on all individuals who are medicare part C 
     eligible individuals (as determined without regard to 
     paragraph (1)(A)(iii)) and who are bona fide residents of the 
     possession, to the extent such individuals have not paid the 
     tax imposed under such section 59B to the United States by 
     reason of subsection (f)(4) of such section or otherwise paid 
     the qualified medicare part C premium individual share tax 
     imposed by another possession under this paragraph.

     ``SEC. 2102. ENROLLMENT PROCESS.

       ``(a) In General.--The Secretary, through the Health Care 
     Financing Administration, the Social Security Administration, 
     and other appropriate agencies, shall establish a process in 
     coordination with section 2184 for--
       ``(1) determining whether individuals are medicare part C 
     eligible individuals,
       ``(2) enrolling medicare part C eligible individuals under 
     this title if they seek such enrollment or are otherwise 
     required to be enrolled or covered under this title, and
       ``(3) enrolling medicare part C eligible individuals 
     described in section 2101(b)(2) whose employers do not enroll 
     such individuals in a certified health plan.
       ``(b)  Period of Continuous Open Enrollment.--Any medicare 
     part C eligible individual may enroll under this title at any 
     time beginning July 1, 1998.
       ``(c) Application Process.--
       ``(1) In general.--The filing of an application for 
     enrollment under this title shall (except as the Secretary 
     may provide) constitute enrollment under this title. Such an 
     application may be filed with the Secretary by mail or at 
     such locations as the Secretary may specify.
       ``(2) Availability of applications.--The Secretary shall 
     make applications for enrollment under this title available--
       ``(A) at local offices of the Social Security 
     Administration,
       ``(B) at out-reach sites (such as provider and practitioner 
     locations described in section 2103(c)), and
       ``(C) at other locations (including post offices) 
     accessible to a broad cross-section of medicare part C 
     eligible individuals.
       ``(3) Coordination with application for premium subsidies 
     and wrap-around benefits.--An application for enrollment 
     under this title may (but need not) be accompanied by an 
     application for wrap-around benefits under part B of title 
     XXII.
       ``(c) Certain Individuals Deemed Enrolled.--Consistent with 
     standards established under section 5501 of the Guaranteed 
     Health Insurance Act of 1994--
       ``(1) Termination of enrollment under certified health 
     plan.--The Secretary shall provide a process under which an 
     eligible individual whose coverage under a certified health 
     plan is terminated and who fails to establish continuous 
     coverage under another certified health plan or the medicare 
     program shall be deemed to be enrolled under this title as of 
     the date of termination of such coverage.
       ``(2) Coverage at birth.--The Secretary shall provide that 
     in the case of an individual born in the United States and 
     who is not enrolled or otherwise covered under a certified 
     health plan at the time of birth, the individual shall be 
     deemed to have been enrolled under this title at the time of 
     birth.
       ``(d) Issuance of Health Security Card.--At the time an 
     individual enrolls in the program under this title, the 
     Secretary shall issue a health security card to the 
     individual in accordance with the standards applicable to the 
     issuance of such cards under subtitle B of title IX of the 
     Guaranteed Health Insurance Act of 1994.

     ``SEC. 2103. FACILITATION OF ENROLLMENT.

       ``(a) In General.--The Secretary shall establish procedures 
     that facilitate enrollment under this title.
       ``(b) Coordination.--The Secretary shall coordinate with 
     existing programs and agencies to streamline the enrollment 
     process.
       ``(c) Use of Certain Providers.--
       ``(1) In general.--In accordance with regulations 
     promulgated by the Secretary, hospitals, rural primary care 
     hospitals, federally qualified health centers, rural health 
     clinics, and any essential community provider (as described 
     in section 5012(c) of the Guaranteed Health Insurance Act of 
     1994) receiving Federal funds, shall--
       ``(A) assist in enrolling under this title individuals who 
     (i) appear to be medicare part C eligible individuals, (ii) 
     are provided services covered under the guaranteed national 
     benefit package, and (iii) do not present a valid health 
     security card, and
       ``(B) report to the Secretary such information as the 
     Secretary may require to assist in the enrollment of such 
     individuals.
       ``(2) Access to information.--Such hospitals, centers, 
     clinics, and providers shall have access to information, 
     pertaining to the certified health plans (or the medicare 
     program or medicare part C) in which individuals are 
     enrolled, through the national enrollment verification system 
     established under subtitle B of title IX of the Guaranteed 
     Health Insurance Act of 1994.
       ``(d) Outreach.--The Secretary shall develop and implement 
     outreach programs to ensure enrollment of all medicare part C 
     eligible individuals (who are not enrolled in a certified 
     health plan or the medicare program) under this title.

     ``SEC. 2104. COVERAGE PERIOD; TERMINATION OF ENROLLMENT.

       ``(a) Beginning of Coverage.--In the case of an individual 
     enrolled under this title, the benefits under this title 
     shall first become available for services furnished 
     beginning--
       ``(1) in the case of an individual who enrolls on or before 
     January 1, 1999, on January 1, 1999; or
       ``(2) in the case of an individual who enrolls after such 
     date, on the date of enrollment or such other date as the 
     Secretary may specify, consistent with preventing eligible 
     individuals from having any periods of noncoverage and 
     consistent with rules established under section 5501 of the 
     Guaranteed Health Insurance Act of 1994.
       ``(b) Limiting Termination of Enrollment.--An individual 
     enrolled under this title may not terminate such enrollment 
     unless--
       ``(A) the individual is no longer a medicare part C 
     eligible individual because of a change of family, 
     employment, or other relevant status; or
       ``(B) the individual demonstrates to the satisfaction of 
     the Secretary that if the individual is an eligible 
     individual the individual is enrolled under a certified 
     health plan, is entitled to benefits under part A of title 
     XVIII, is a noncovered, noncontributing individual (as 
     defined in section 1004(b) of the Guaranteed Health Insurance 
     Act of 1994), or is described in section 59B(g)(2)(A)(ii) of 
     the Internal Revenue Code of 1986.

                    ``Part B--Benefits and Payments

     ``SEC. 2111. COVERAGE OF BENEFITS UNDER GUARANTEED NATIONAL 
                   BENEFIT PACKAGE.

       ``(a) In General.--Subject to subsection (b), the health 
     insurance benefits provided to an individual covered under 
     this title shall consist of entitlement to the benefits 
     (including cost-sharing) contained in the guaranteed national 
     benefit package described in subtitle A of title III of the 
     Guaranteed Health Insurance Act of 1994. Except in the case 
     of enrollment with an organization under section 2132, the 
     cost-sharing schedule shall be the standard cost-sharing 
     schedule described in section 3013 of the Guaranteed Health 
     Insurance Act of 1994 (determined without regard to 
     subsection (a)(4) thereof).
       ``(b) Requiring Covered Services To Be Furnished by 
     Medicare-Eligible Providers.--No benefits are payable under 
     this title with respect to an individual or entity that 
     provides items and services (other than services described in 
     section 3002(d) of the Guaranteed Health Insurance Act of 
     1994) unless the individual or entity qualifies for payment 
     with respect to such items or services under title XVIII (for 
     individuals entitled to benefits under such title).

     ``SEC. 2112. PAYMENTS FOR HEALTH INSURANCE BENEFITS.

       ``(a) Use of Medicare Payment Rules.--
       ``(1) In general.--Except as otherwise provided in this 
     title, consistent with sections 5501(c)(3) and 8002(c) of the 
     Guaranteed Health Insurance Act of 1994 and consistent with 
     the cost-sharing described in section 2111(a)--
       ``(A) payment of health insurance benefits under this title 
     with respect to services shall be made, subject to adjustment 
     in payment rates under section 2113, in the same amounts and 
     on the same basis as payment may be made with respect to such 
     services under title XVIII (including pursuant to waiver 
     authority), and
       ``(B) the provisions of sections 1814, 1815, 1833, 1834, 
     1835, 1842, 1848, 1850, 1886, 1887, and 1893 shall apply to 
     payment of benefits (and provision of services and charges 
     thereon) under this title in the same manner as they apply to 
     benefits, services, and charges under title XVIII.
       ``(2) Establishment of comparable payment methods for new 
     services.--In the case of any service for which there is not 
     a payment basis established under title XVIII, the Secretary 
     shall establish payment rules that are similar to the payment 
     rules for similar services under such title, in consultation 
     with the Prospective Payment Assessment Commission, Physician 
     Payment Review Commission, and the Prescription Drug Payment 
     Review Commission.
       ``(3) Limitations on administrative or judicial review.--
     Administrative or judicial review of the payment rates or 
     rules under this section (including adjustments made under 
     section 2113) shall be available only to the extent such a 
     review would be available with respect to such rates or rules 
     (or similar rates or rules) under title XVIII.
       ``(4) Use of trust fund.--In applying the provisions 
     described in paragraph (a)(1)(B) in carrying out this 
     section, any reference in title XVIII to a trust fund shall 
     be treated as a reference to the Medicare Part C Trust Fund 
     established under section 2124.
       ``(b) Payments to Providers for Certain Emergency Care 
     Services for Ineligible Aliens.--
       ``(1) In general.--In addition to amounts otherwise payable 
     under this title, the Secretary shall make payments for care 
     and services that are necessary for the treatment of an 
     emergency medical condition (as defined in section 
     1903(v)(3)) of an alien who is not an eligible individual.
       ``(2) Payment amount.--Notwithstanding any other provisions 
     of this title, the amount of such payments--
       ``(A) shall not take into account any cost-sharing that may 
     otherwise be imposed under this title, but
       ``(B) shall be reduced by the amount of any payment 
     otherwise made (or that through the exercise of reasonable 
     collection policies, would have been paid) with respect to 
     such care and services.
       ``(3) Effective date.--This subsection shall not apply to 
     care and services furnished before January 1, 2002.

     ``SEC. 2113. ADJUSTMENTS TO MEDICARE RATES AND METHODOLOGIES.

       ``(a) Adjustment of Medicare Payment Rates for Inpatient 
     Hospital Services.--
       ``(1) For pps hospitals.--For purposes of payment for 
     inpatient hospital services for hospitals receiving payment 
     under section 1886(d), the Secretary, by regulation and in 
     accordance with this section--
       ``(A) shall adjust the standardized amounts otherwise 
     established under title XVIII to reflect differences in the 
     average cost of providing inpatient hospital services 
     (included in the guaranteed national benefit package) between 
     the program under part A of title XVIII and under this title, 
     and
       ``(B) may develop separate diagnosis-related groups and 
     weighting factors for such groups to reflect resource needs 
     of individuals enrolled under this title and shall develop 
     separate groups and factors for children.
       ``(2) Report by prospective payment assessment 
     commission.--The Prospective Payment Assessment Commission, 
     in its report to Congress under section 1886(e)(3)(A) in 
     1998, shall include its recommendations on the adjustments 
     that should be made under paragraph (1) in the payment 
     methodology for inpatient hospital services and data that 
     should be collected in order to establish appropriate 
     weighting factors for diagnosis-related groups used under 
     this section. The Commission shall include, in its subsequent 
     reports under such section, such recommendations with respect 
     to payment for inpatient hospital services under this title 
     as it deems appropriate.
       ``(3) Secretarial publications.--The Secretary shall 
     provide for the publication, in the manner and time specified 
     under section 1886(e)(5), of adjustments proposed to be made 
     (and to be made) under this subsection for each fiscal year.
       ``(b) New Procedure Codes and Relative Value Units for 
     Physicians' Services.--
       ``(1) New procedure codes and relative value units.--In 
     applying section 2112 in the case of services for which 
     relative value units have not been established under section 
     1848, the Secretary shall establish relative value units in 
     the same manner as if payment for such services were made 
     under part B of title XVIII.
       ``(2) Report by physician payment review commission.--The 
     Physician Payment Review Commission, in its recommendations 
     to Congress under section 1845(b) in the year before the 
     first year in which this title is effective, shall include 
     recommendations on adjustments to the relative value units 
     that should be applied (under paragraph (1)) with respect to 
     physicians' services furnished under this title. The 
     Commission shall include, in its subsequent recommendations 
     under such section, such recommendations with respect to the 
     payment for physicians' services under this title as it deems 
     appropriate.
       ``(3) Secretarial publication.--The Secretary shall cause 
     to be published in the Federal Register--
       ``(A) before June 1 of the year before the first year in 
     which this title is effective, the relative value units 
     proposed to be applied during such first year under this 
     title, and
       ``(B) after consideration of public comments submitted 
     pursuant to such proposal and before October 1 before such 
     first year, the relative value units to be applied during 
     such first year under this title.
       ``(4) Secretarial review and revision.--The Secretary shall 
     provide for the periodic review and adjustment of the 
     relative value units to be applied under this title in the 
     same manner and frequency as provided under section 
     1848(c)(2)(B), except that such review shall first be 
     conducted each year during the first 3 years in which this 
     title is in effect and not less often than every 5 years 
     thereafter.
       ``(c) Adjustment to Average Per Capita Rates for Health 
     Maintenance Organizations.--For purposes of establishing per 
     capita rates of payment for classes of individuals enrolled 
     with an eligible organization under a risk-sharing contract 
     under section 2132, the Secretary, by regulation and in 
     accordance with this subsection, shall adjust the adjusted 
     average per capita cost otherwise established under section 
     1876(a)(4) to take into account differences between the 
     population served under title XVIII and the population 
     receiving health insurance benefits under this title.

     ``SEC. 2114. EXCLUSIONS; COORDINATION.

       ``(a) Exclusions.--
       ``(1) In general.--Section 1862 shall apply to expenses 
     incurred for items and services provided under this title in 
     the same manner as such section applies to items and services 
     provided under title XVIII.
       ``(2) Use of same national coverage decision review 
     process.--The provisions of section 1869(b)(3) shall apply 
     under this title in the same manner as they apply under title 
     XVIII. Any determination under such title that, under 
     paragraph (1), applies under this title shall not be subject 
     to review under this paragraph.
       ``(b) Treatment as Large Group Health Plan for Purposes of 
     Medicare Secondary Payer.--For purposes of section 1862(b), 
     this title shall be treated as a large group health plan 
     (described in such section).

             ``Part C--Premiums; Medicare Part C Trust Fund

     ``SEC. 2121. COMPUTATION OF APPLICABLE MEDICARE PART C 
                   PREMIUM.

       ``(a) In General.--The applicable medicare part C premium 
     under this title, for health insurance benefits for any 
     individual in a class of enrollment (as defined in section 
     3(b) of the Guaranteed Health Insurance Act of 1994) in a 
     State (or outside the United States) for a month in a year, 
     is equal to the product of--
       ``(1) the monthly national actuarial rate established under 
     subsection (b) with respect to such class for months in the 
     year, and
       ``(2) a State actuarial adjustment factor established under 
     subsection (c) with respect to the State (or outside the 
     United States).
     The Secretary shall publish, for purposes of this title, 
     sections 59B(c)(3)(D) and 3455(c)(4)(A) of the Internal 
     Revenue Code of 1986, and part A of title XXII, tables of the 
     monthly applicable medicare part C premium computed under 
     this subsection.
       ``(b) Monthly National Actuarial Rates.--
       ``(1) Initial rate.--Subject to the succeeding provisions 
     of this subsection, the national monthly actuarial rates 
     under this subsection for months in 1999 are as follows 
     (expressed in 1994 dollars):
       ``(A) Individual enrollment.--$178.25 for the individual 
     class of enrollment.
       ``(B) Single parent enrollment.--$347.50 for the single 
     parent class of enrollment.
       ``(C) Family enrollment.--$472.60 for the family class of 
     enrollment.
       ``(2) Determination of rates.--
       ``(A) Annual determination.--In September of each year 
     (beginning with 1998) the Secretary shall determine and 
     publish a national monthly actuarial rate for each class of 
     enrollment for health insurance benefits under this title in 
     the following year. Such rates for--
       ``(i) 1999 shall be the rates specified under paragraph 
     (1), subject to adjustment under subparagraph (C), or
       ``(ii) a subsequent year, shall be the monthly actuarial 
     rates estimated under paragraph (3).
       ``(B) Public statement.--Whenever the Secretary publishes 
     monthly actuarial rates under this section, the Secretary 
     shall, at the time of such publication, include a public 
     statement setting forth the actuarial assumptions and bases 
     employed in arriving at the amount of the actuarial rates.
       ``(C) Relation to specified rates.--If the Secretary finds 
     that the rates specified under paragraph (1) are greater or 
     less than the respective monthly actuarial rates estimated 
     under paragraph (3), the Secretary shall adjust the specified 
     rates to reflect such estimated actuarial rates and the 
     national monthly actuarial rates under this subsection shall 
     be treated for all purposes as the rates as so adjusted.
       ``(3) Basis for monthly actuarial rates.--
       ``(A) In general.--Subject to subparagraph (C), each such 
     monthly actuarial rate established for a class of enrollment 
     shall be an amount the Secretary estimates to be necessary so 
     that, if payments were made on the basis of such rates for 
     all individuals enrolled under this title in such class, the 
     aggregate amount for the calendar year would equal the total 
     of the benefits and administrative costs which the Secretary 
     estimates will be payable from the Medicare Part C Trust Fund 
     for services performed and related administrative costs 
     incurred in such calendar year with respect to such 
     enrollees. In calculating the monthly actuarial rates, the 
     Secretary shall include an appropriate amount for a 
     contingency margin.
       ``(B) Assumptions for premium calculation.--In determining 
     actuarial rates under subparagraph (A)--
       ``(i) the Secretary shall not take into account any 
     expenditures (including related administrative expenses) 
     attributable to--

       ``(I) individuals enrolled for health insurance benefits 
     under this title who are SSI recipients who have been 
     determined to be disabled for purposes of the supplemental 
     security income program (under title XVI); or
       ``(II) the operation of part B of this title; or
       ``(III) payments made pursuant to section 2112(b); and

       ``(ii) for months in 1999, 2000, 2001, and 2002, the 
     Secretary shall assume that \3/4\ of individuals who are 
     medicare part C eligible individuals are enrolled under this 
     title.
       ``(c) State Actuarial Adjustment Factors.--
       ``(1) In general.--The Secretary shall establish for each 
     State a State actuarial adjustment factor. Such factor shall 
     vary among the States based on the variation in the average 
     level of costs for covered benefits and administration, 
     described in subsection (b)(3)(B) and determined on a per 
     capita basis, among such States.
       ``(2) Conditions.--State actuarial adjustment factors shall 
     be computed for each year in a manner so that the application 
     of such adjustment factors shall not change the weighted 
     average of the national monthly payment rates computed under 
     this subsection.
       ``(3) Special rule for individuals residing outside the 
     united states.--In the case of an eligible individual who has 
     a principal place of abode outside the United States, the 
     State actuarial adjustment factor under this subsection is 1.
       ``(d) Application to Families.--In the case of individuals 
     enrolled under this title in a class of enrollment other than 
     the individual class of enrollment, the premium rate 
     established under this section applies collectively to all 
     family members included within the class of enrollment.

     ``SEC. 2122. MEDICARE PART C PREMIUM LIABILITY.

       ``(a) In General.--An individual's share of the medicare 
     part C premium is the amount determined under section 59B of 
     the Internal Revenue Code of 1986.
       ``(b) Description of Factors Taken Into Account.--The 
     amount of such individual share under such section--
       ``(1) is based on the sum of monthly premiums based on 
     class of enrollment;
       ``(2) is fully or partially reduced for low-income 
     individuals, as described in subsection (c); and
       ``(3) may be reduced by any employer payments.
       ``(c) Reduction for Low-Income Individuals.--
       ``(1) In general.--An individual whose modified adjusted 
     gross income (as defined in paragraph (4)) does not exceed 
     the threshold amount (as defined in paragraph (3)) is not 
     liable for payment of the individual share of the medicare 
     part C premium.
       ``(2) Phase-in of premium liability.--
       ``(A) In general.--If the modified adjusted gross income of 
     an individual for a taxable year exceeds the threshold amount 
     by less than the phase-in amount (described in subparagraph 
     (C)), the amount of the premium liability under subsection 
     (a) for the year shall be the phase-in percentage (specified 
     in subparagraph (B)) of the medicare part C premium liability 
     of such individual for the taxable year.
       ``(B) Phase-in percentage.--For purposes of subparagraph 
     (A), the phase-in percentage shall be determined under tables 
     prescribed by the Secretary of the Treasury under section 
     59B(b)(2)(B) of the Internal Revenue Code of 1986, which 
     tables--
       ``(i) have income brackets of not more than $50, and
       ``(ii) provide for a ratable increase in the amount of 
     premium imposed by subsection (a) for modified adjusted gross 
     incomes between the threshold amount and the sum of the 
     threshold amount and the phase-in amount.
       ``(C) Phase-in amount.--For purposes of subparagraphs (A) 
     and (B), the phase-in amount is the amount equal to the 
     applicable percentage (determined in accordance with the 
     following table) of the threshold amount.


                                                                        
                                                          The applicable
 ``In the case of taxable years ending with or within--   percentage is--
                                                                        
                                                                        
  1999, 2000, or 2001...................................   100 percent 
  2002 or 2003..........................................   120 percent 
  2004 or thereafter....................................   140 percent.
                                                                        

       ``(3) Threshold amount defined.--For purposes of this 
     subsection--
       ``(A) In general.--Except as provided in subparagraph (B), 
     the term `threshold amount' means--
       ``(i) $7,400 in the case of a return with respect to which 
     1 personal exemption is allowable under section 151 of the 
     Internal Revenue Code of 1986,
       ``(ii) $11,500 in the case of a return with respect to 
     which 2 or 3 personal exemptions are allowable under such 
     section, and
       ``(iii) $16,000 in the case of a return with respect to 
     which 4 or more personal exemptions are allowable under such 
     section.
       ``(B) Certain separate returns.--The threshold amount shall 
     be zero in the case of a taxpayer who--
       ``(i) is married as of the close of the taxable year but 
     does not file a joint return for such taxable year, and
       ``(ii) does not live apart from his spouse at all times 
     during the last 6 months of the taxable year.
       ``(C) Inflation adjustments.--In the case of a taxable year 
     beginning in a calendar year after 1998, each dollar amount 
     contained in subparagraph (A) shall be increased by an amount 
     equal to--
       ``(i) such dollar amount, multiplied by
       ``(ii) the cost-of-living adjustment determined under 
     section 1(f)(3) of the Internal Revenue Code of 1986 for the 
     calendar year in which the taxable year begins, by 
     substituting `calendar year 1994' for `calendar year 1992' in 
     subparagraph (B) thereof.
       ``(4) Modified adjusted gross income.--For purposes of this 
     subsection, and pursuant to section 59B(e)(1) of the Internal 
     Revenue Code of 1986, the term `modified adjusted gross 
     income' means adjusted gross income--
       ``(A) determined without regard to sections 911, 931, and 
     933 of the Internal Revenue Code of 1986, and
       ``(B) increased by the amount of interest received or 
     accrued by the individual during the taxable year which is 
     exempt from tax.
     The determination under the preceding sentence shall be made 
     without regard to any carryover or carryback.

     ``SEC. 2123. COLLECTION OF PREMIUMS.

       ``(a) In General.--Except as provided in subsection (b), 
     the amounts under section 2122 are payable pursuant to 
     section 59B of the Internal Revenue Code of 1986.
       ``(b) Direct Payment Process.--
       ``(1) In general.--The Secretary shall establish a process 
     whereby individuals who are liable for payments under section 
     2122 (or section 59B of the Internal Revenue Code of 1986) 
     may make such payments directly to the Secretary (or the 
     Secretary's designee) in a manner specified by the Secretary.
       ``(2) Information.--Under the process, the Secretary shall 
     provide such information return or other documentation that 
     may be used to establish, for purposes of the Internal 
     Revenue Code of 1986 or otherwise, the amounts paid on behalf 
     of each individual under this subsection and the period in 
     which the individual was enrolled under this title.
       ``(3) Deposit.--Amounts received under this subsection 
     shall be deposited to the credit of the Medicare Part C Trust 
     Fund (established under section 2124).

     ``SEC. 2124. MEDICARE PART C TRUST FUND.

       ``(a) Establishment.--
       ``(1) In general.--There is hereby created on the books of 
     the Treasury of the United States a trust fund to be known as 
     the `Medicare Part C Trust Fund' (in this section referred to 
     as the `Trust Fund'). The Trust Fund shall consist of such 
     gifts and bequests as may be made as provided pursuant to 
     section 201(h) and such amounts as may be deposited in, or 
     appropriated to, such Trust Fund as provided in this part.
       ``(2) Deposit of premium amounts and contributions.--There 
     are hereby appropriated to the Trust Fund amounts equivalent 
     to 100 percent of--
       ``(A) the amounts received in the Treasury under section 
     59B and chapter 25 of the Internal Revenue Code of 1986 and 
     section 2132,
       ``(B) the amount of payments made by States to the 
     Secretary under sections 8111, 8121, and 8131 of the 
     Guaranteed Health Insurance Act of 1994, and
       ``(C) amounts paid to the Treasury pursuant to agreements 
     under section 2101(c)(3)(A).

     The amounts appropriated by clauses (A) and (C) of the 
     preceding sentence shall be transferred from time to time 
     from the general fund in the Treasury to the Trust Fund, such 
     amounts to be determined on the basis of estimates by the 
     Secretary of the Treasury of the amounts paid to or deposited 
     into the Treasury; and proper adjustments shall be made in 
     amounts subsequently transferred to the extent prior 
     estimates were in excess of or were less than the amounts 
     specified in such clauses.
       ``(3) Appropriations to cover balance of expenditures.--
     There are authorized to be appropriated from time to time, 
     out of any moneys in the Treasury not otherwise appropriated, 
     to the Medicare Part C Trust Fund a Government contribution 
     equal to the amount by which the expenditures from the Trust 
     Fund (including the payment of administrative expenses in 
     accordance with section 201(g)(1)) exceed the other receipts 
     of the Trust Fund.
       ``(b) Incorporation of Provisions.--
       ``(1) In general.--Subject to paragraph (2), the provisions 
     of subsections (b) through (e), (h), and (i) of section 1817 
     shall apply to the Trust Fund and this title in the same 
     manner as they apply to the Federal Hospital Insurance Trust 
     Fund and part A of title XVIII.
       ``(2) Exceptions.--In applying paragraph (1)--
       ``(A) the Board of Trustees and Managing Trustee of the 
     Trust Fund shall be composed of the members of the Board of 
     Trustees and the Managing Trustee, respectively, of the 
     Federal Hospital Insurance Trust Fund; and
       ``(B) any reference in section 1817 to the Federal Hospital 
     Insurance Trust Fund or to title XVIII (or part A thereof) is 
     deemed a reference to the Trust Fund under this section and 
     this title, respectively.
       ``(c) Payments From Trust Fund.--
       ``(1) Payments for part C program.--Pursuant to authority 
     described in section 1817(h) (as incorporated under 
     subsection (b)(1)), the Managing Trustee of the Trust Fund 
     shall pay from time to time from the Trust Fund such amounts 
     as the Secretary certifies are necessary to carry out the 
     medicare part C program under this title.
       ``(2) Certain transfers.--The Managing Trustee of the Trust 
     Fund shall also pay from time to time from the Trust Fund--
       ``(A) such amounts to the General Treasury as the Secretary 
     certifies to be necessary to carry out parts A, B, and C of 
     title XXII (including amounts for payments to States under 
     subsections (a)(1)(B), (a)(2)(B), and (b)(2) of section 4004 
     of the Guaranteed Health Insurance Act of 1994).
       ``(B) such amounts to the General Treasury as the Secretary 
     of the Treasury certifies to be payments for credits under 
     section 3461 and 3462 of the Internal Revenue Code of 1986 
     that are not an offset to a liability in amounts otherwise 
     payable under chapter 25 of such Code;
       ``(C) such amounts to the Secretary of Health and Human 
     Services as are appropriated to the Trust Fund under 
     subsection (a)(2)(B);
       ``(D) amounts equivalent to the amounts received in the 
     Trust Fund by reason of section 3455(e) of the Internal 
     Revenue Code of 1986 to the Indian Health Service to augment 
     the appropriation for health programs of such Service; and
       ``(E) amounts equivalent to the amounts received in the 
     Trust Fund by reason of section 3455(f) of the Internal 
     Revenue Code of 1986 to the Secretary of Veterans Affairs to 
     augment the appropriation for health programs of the 
     Department of Veterans Affairs.

     Amounts paid by a small employer (as defined in section 
     1106(b) of the Guaranteed Health Insurance Act of 1994) shall 
     be taken into account under subparagraph (E) only if such 
     employer offers coverage under a certified health plan.

                  ``Part D--Administrative Provisions

     ``SEC. 2131. AGREEMENTS WITH HOSPITALS; PARTICIPATING 
                   PHYSICIANS; TREATMENT OF INDIAN HEALTH SERVICE 
                   FACILITIES.

       ``(a) Requirement.--Any hospital shall be qualified to 
     participate under this title and shall be eligible for 
     payments under this title if--
       ``(1) it has in effect a participation agreement under 
     section 1866(a)(1), and
       ``(2) it files with the Secretary a participation agreement 
     meeting the requirements of subsection (b).
       ``(b) Elements of Agreement.--
       ``(1) In general.--Except as provided in this subsection, a 
     participation agreement under this subsection shall provide 
     terms, specified by the Secretary, that are the same terms as 
     those required of hospital participation agreements under 
     section 1866(a)(1).
       ``(2) Modified copayments.--Instead of the limitation on 
     charges specified under paragraphs (1)(A) and (2) of section 
     1866(a), the agreement shall not permit the hospital to 
     charge more than the applicable deductible and coinsurance 
     permitted under this title.
       ``(c) Physician Participation Agreements.--The Secretary 
     shall provide for participating physician agreements under 
     this title in the same manner as such agreements are provided 
     for under part B of title XVIII pursuant to section 1842(h).
       ``(d) Indian Health Service Facilities.--The provisions of 
     section 1880 (relating to Indian health service facilities) 
     shall apply to this title in the same manner as they apply 
     under title XVIII.

     ``SEC. 2132. HEALTH MAINTENANCE ORGANIZATIONS.

       ``(a) In General.--Except as provided in this section, 
     section 1876 shall apply to individuals enrolled under this 
     title in the same manner as such section applies to 
     individuals entitled to benefits under part A, and enrolled 
     under part B, of title XVIII.
       ``(b) Application.--In applying section 1876 under 
     subsection (a)--
       ``(1) individuals who are enrolled in a class of enrollment 
     under this title may enroll with an eligible organization 
     only based on the same class of enrollment;
       ``(2) if an eligible organization imposes an additional 
     premium for additional benefits, such a premium shall be 
     adjusted to reflect the class of enrollment with the eligible 
     organization;
       ``(3) the appropriate classes of members described in 
     section 1876(a)(1)(B) applied under this section may be 
     different from the classes applied for purposes of title 
     XVIII;
       ``(4) the provisions of such section relating only to 
     individuals enrolled under part B of title XVIII shall not 
     apply;
       ``(5) any reference to a Trust Fund established under title 
     XVIII and to benefits with respect to any services under such 
     title is deemed a reference to the Medicare Part C Trust Fund 
     and to the guaranteed national benefit package with respect 
     to required health services under this title;
       ``(6) the adjusted average per capita cost shall be 
     determined on the basis of benefits under this title;
       ``(7) subsection (h) shall not apply; and
       ``(8) in the case of a risk-sharing contract, the eligible 
     organization may not require an enrollee to obtain a referral 
     from a physician in order to obtain covered items and 
     services from a physician who specializes in obstetrics and 
     gynecology.

     ``SEC. 2133. USE OF FISCAL AGENTS.

       ``(a) Use of Fiscal Agents.--
       ``(1) In general.--Except as provided in this section, the 
     Secretary shall provide for the administration of this title 
     through the use of fiscal agents in the same manner as title 
     XVIII is carried out through the use of fiscal intermediaries 
     and carriers.
       ``(2) Separate contracts.--Contracts with fiscal agents 
     entered into pursuant to this subsection for an area need not 
     be with the same fiscal intermediary or carrier with an 
     agreement under section 1816 or a contract under section 1842 
     for the area. However, nothing in this section shall be 
     construed as preventing such an organization with such an 
     agreement or contract under such respective section from 
     entering into a contract under this section.

     ``SEC. 2134. COMPLIANCE WITH INFORMATION STANDARDS; 
                   APPLICATION OF MEDICARE QUALITY ASSURANCE AND 
                   SURVEY AND CERTIFICATION REQUIREMENTS.

       ``(a) In General.--The Secretary, with respect to the 
     program under this title, shall comply with the applicable 
     provisions of subtitle B of title IX of the Guaranteed Health 
     Insurance Act of 1994 (relating to information systems and 
     administrative simplification).
       ``(b) Survey and Certification; Quality Assurance.--In 
     accordance with rules of the Secretary, the survey and 
     certification requirements of title XVIII, and the quality 
     assurance provisions of such title and part B of title XI 
     (relating to professional review organizations), insofar as 
     they relate to providers of services and other health care 
     providers under title XVIII, shall apply to such providers 
     under this title in the same manner as they apply to 
     providers under title XVIII.

     ``SEC. 2135. PROGRAM INTEGRITY.

       Sections 1124, 1124A, 1126, 1128 through 1128B (relating to 
     fraud and abuse), 1145 (relating to restrictions on the 
     disclosure of health information), and section 1877 (relating 
     to limitation on certain physician referrals) shall apply to 
     this title in the same manner as they apply to title XVIII.

     ``SEC. 2136. GENERAL ADMINISTRATION; MISCELLANEOUS 
                   PROVISIONS.

       ``(a) Health Security Administration.--
       ``(1) In general.--Except as otherwise provided in this 
     title, this title shall be administered by the Health 
     Security Administration.
       ``(2) Renaming health care financing administration as 
     health security administration.--Any reference in law to the 
     `Health Care Financing Administration' is hereby deemed a 
     reference to the `Health Security Administration'.
       ``(b) Regulations; Title II Provisions; Administration.--
     The provisions of sections 1871, 1872, and 1874 (relating to 
     regulations, application of certain provisions of title II, 
     and administration) shall apply to this title in the same 
     manner as they apply to title XVIII.
       ``(c) Determinations; Appeals; Provider Reimbursement 
     Review Board.--
       ``(1) In general.--The determination of whether an 
     individual is entitled to benefits under this title, the 
     determination of the amount of benefits under this title, and 
     appeals from such determinations shall be made in accordance 
     with the same procedures applicable to determinations under 
     title XVIII.
       ``(2) Provider reimbursement review board.--The provisions 
     of section 1878 (relating to the Provider Reimbursement 
     Review Board) shall apply under this title in the same manner 
     as they apply under title XVIII.
       ``(d) Reporting of Information to Secretary of Treasury.--
     The Secretary shall submit to the Secretary of the Treasury 
     such information on individuals enrolled under this title as 
     the Secretary of the Treasury may require for purposes of 
     carrying out section 59B and chapter 25, and related 
     provisions, of the Internal Revenue Code of 1986.

                ``Part E--Definitions and Miscellaneous

     ``SEC. 2161. DEFINITIONS.

       ``In this title--
       ``(1) the definitions contained in section 1861 apply for 
     purposes of this title in the same manner as they apply for 
     purposes of title XVIII;
       ``(2) the definitions contained in sections 2 and 3 
     (relating to general definitions and definitions relating to 
     families) of the Guaranteed Health Insurance Act of 1994 
     apply for purposes of this title in the same manner as they 
     apply for purposes of such Act.

     ``SEC. 2162. REFERENCES TO MEDICARE PROVISIONS.

       ``In this title, except as otherwise specifically provided, 
     any references to provisions of title XVIII of the Social 
     Security Act are deemed to be references to such provisions 
     as in effect on the day after the date of the enactment of 
     the Guaranteed Health Insurance Act of 1994, taking into 
     account the amendments made to such title by such Act.''.

     SEC. 8002. CONFORMING AMENDMENTS.

       (a) In General.--Effective January 1, 1999, section 1876(f) 
     (42 U.S.C. 1395mm(f)) is amended by striking ``under a State 
     plan approved under title XIX'' and inserting ``under title 
     XXI'' each place it appears.
       (b) Renaming of Health Care Financing Administration.--
     Section 1117 (42 U.S.C. 1317) is amended--
       (1) in the heading, by striking ``health care financing 
     administration'' and inserting ``health security 
     administration'', and
       (2) by striking ``Health Care Financing Administration'' 
     and inserting ``Health Security Administration''.
       (c) Administrative Expenses.--Section 201 (42 U.S.C. 401) 
     is amended--
       (1) in subsection (g)(1)(A), by inserting ``and the 
     Medicare Part C Trust Fund established by title XXI'' after 
     ``title XVIII'' in the matter before clause (i);
       (2) in subsection (g)(1), by striking ``and XVIII'' and 
     ``and title XVIII'' each place either appears and inserting 
     ``XVIII, and XXI'' and ``title XVIII, and title XXI'', 
     respectively; and
       (3) in subsection (h), by striking ``and the Federal 
     Supplementary Medical Insurance Trust Fund'' and inserting 
     ``the Federal Supplementary Medical Insurance Trust Fund, and 
     the Medicare Part C Trust Fund''.
       (d) Definition of State.--Section 1101(a)(1) (42 U.S.C. 
     1301(a)(1)) is amended by inserting ``or title XXI'' after 
     ``Such term when used in title XX''.

     SEC. 8003. EFFECTIVE DATE.

       Title XXI of the Social Security Act, as added by section 
     8001, shall take effect on the date of the enactment of this 
     Act, except that no benefits shall be provided under such 
     title for services furnished before January 1, 1999.
 Subtitle B--Benefits for Low-Income Individuals; State Maintenance of 
                                 Effort

         Subtitle C--Cost Containment in the Medicare Programs

             Part 1--Medicare Health Expenditure Estimates

       Sec. 8201. National medicare per capita health expenditure 
           estimate.
       Sec. 8202. Classes of health care services.
       Sec. 8203. Allocation of per capita estimates by class of 
           service for medicare A/B.
       Sec. 8204. Allocation of per capita estimates by class of 
           service for medicare C.
       Sec. 8205. Combined medicare per capita allocations for 
           classes of services.
       Sec. 8206. Computation of medicare annual combined rate of 
           increase for classes of services; application to 
           medicare payment rates.
       Sec. 8207. National health expenditures reporting system.

               Part 2--State Health Expenditure Estimates

       Sec. 8211. State medicare per capita health expenditure 
           estimate.

               Part 3--Administrative and Judicial Review

       Sec. 8221. Limitation on administrative and judicial 
           review.

              PART 1--BENEFITS FOR LOW-INCOME INDIVIDUALS

     SEC. 8101. ESTABLISHMENT OF BENEFITS.

       The Social Security Act, as amended by section 8001, is 
     amended by adding after title XXI the following new title:

          ``TITLE XXII--ASSISTANCE FOR LOW-INCOME INDIVIDUALS

     ``SEC. 2200. ESTABLISHMENT OF PROGRAMS.

       ``(a) In General.--Not later than January 1, 1999, the 
     Secretary shall establish and operate the following programs 
     under this title:
       ``(1) A program of premium subsidies under part A for 
     certain low-income individuals covered under a certified 
     health plan (as defined in section 2 of the Guaranteed Health 
     Insurance Act of 1994).
       ``(2) A program of wrap-around benefits under part B for 
     certain low-income individuals.
       ``(3) A program of payment of medicare cost-sharing under 
     part C for qualified medicare beneficiaries.
       ``(b) Direct Spending for Programs.--
       ``(1) In general.--There are hereby appropriated to the 
     Secretary such amount as the Secretary determines is 
     necessary enable the Secretary to make all required 
     expenditures under this title.
       ``(2) Direct spending.--Amounts appropriated pursuant to 
     this subsection are available each fiscal year to the 
     Secretary for carrying out this title.

                 ``Part A--Premium Certificate Program

  ``Subpart 1--Certificates for Low-Income Individuals Covered Under 
                         Certified Health Plans

     ``SEC. 2201. ELIGIBILITY.

       ``(a) In General.--Each premium certificate eligible 
     individual is entitled to be issued a premium certificate in 
     accordance with this part.
       ``(b) Premium Certificate Eligible Individual.--
       ``(1) In general.--In this part, the term `premium 
     certificate eligible individual' means an eligible individual 
     who--
       ``(A) with respect to premiums for a taxable year ending in 
     a year, is determined, in the manner described in section 
     2251, to have projected modified adjusted gross income that 
     is less than the applicable percentage (specified in section 
     2101(b)(5)(B)) of the threshold amount (as defined in section 
     2122(c)(3)) applicable to the taxpayer involved; or
       ``(B) with respect to a premium for a month, is an AFDC or 
     SSI recipient (as defined in section 2 of the Guaranteed 
     Health Insurance Act of 1994) in the month.
       ``(2) Exception.--
       ``(A) In general.--Such term does not include an 
     individual--
       ``(i) who is enrolled under the medicare part C program 
     under title XXI;
       ``(ii) who is entitled to benefits under part A of title 
     XVIII;
       ``(iii) subject to subparagraph (B), who is covered under a 
     State single-payer system approved under subtitle A of title 
     IV of the Guaranteed Health Insurance Act of 1994 or a State 
     managed competition system approved under subtitle B of title 
     IV of such Act; or
       ``(iv) whose only enrollment in a certified health plan is 
     in a plan that is a high deductible plan (as defined in 
     section 5504(5)).
       ``(B) Continued application in case of certain election.--
     Subparagraph (A)(iii) shall not apply in the case of a State 
     which has made the election described in section 
     4104(a)(1)(A)(ii) of the Guaranteed Health Insurance Act of 
     1994.

     ``SEC. 2202. VALUE OF PREMIUM CERTIFICATE.

       ``The value of the premium certificate issued under this 
     part to an individual is equal to--
       ``(1) the amount of the reduction that would occur in the 
     medicare part C premium liability under section 2122(c) for 
     the individual if the individual were a medicare part C 
     covered individual; or
       ``(2) if less in the case of an individual who is an 
     employee and who is covered under a certified health plan of 
     the employer, the employee's premium obligation under such 
     certified health plan.

     ``SEC. 2203. ADMINISTRATION OF PROGRAM.

       ``(a) In General.--The Secretary shall establish a program 
     to provide for the issuance of premium certificates, in the 
     amount described in section 2202, to premium certificate 
     eligible individuals. Under the program the Secretary shall--
       ``(1) determine if individuals are premium certificate 
     eligible individuals, and
       ``(2) provide for issuance of premium certificates to 
     individuals determined to be premium certificate eligible 
     individuals.
       ``(b) Application for Certificate.--
       ``(1) In general.--Any eligible individual may apply for a 
     premium certificate under this part by filing an application 
     with the Secretary (either in person or by mail) through a 
     local office of the Social Security Administration. An 
     eligible Indian under section 902(a) of the Indian Health 
     Care Improvement Act may apply for a certificate through the 
     Indian Health Service in the same manner as an individual 
     applying through a local office of the Social Security 
     Administration.
       ``(2) Attachments.--The Secretary shall require attachments 
     to the application of such documentation (such as prior year 
     tax forms and pay stubs) as may be needed to determine the 
     individual's eligibility and the value of any premium 
     certificate.
       ``(c) Determinations.--
       ``(1) In general.--The Secretary shall provide for--
       ``(A) prompt determination, on each application made under 
     subsection (b), of eligibility of an applicant and the value 
     of any premium certificate for the applicant, and
       ``(B) prompt notification of the applicant of such 
     determinations (including an explanation of the reasons for 
     the determination)
       ``(2) Condition of certificate.--Each certificate issued to 
     an individual under this section is conditioned upon the 
     individual reporting to the Secretary (in a form and manner 
     specified by the Secretary) any change in status that would 
     affect the individual's eligibility for such a certificate or 
     the amount of the certificate.
       ``(3) Hearings; appeals.--The provisions of section 2136(c) 
     shall apply with respect to determinations of eligibility for 
     and the value of a premium certificate under this part in the 
     same manner as such provisions apply to determinations of 
     entitlement to and the amount of benefits under title XXI.
       ``(d) Issuance and Use of Certificates.--
       ``(1) Issuance.--The Secretary shall issue a premium 
     certificate to each individual determined to be a premium 
     certificate eligible individual under this section.
       ``(2) Treatment of employees.--
       ``(A) In general.--If an individual who is entitled to a 
     premium certificate under this part is an employee and 
     eligible to be enrolled under a certified health plan offered 
     by an employer of the individual, the premium certificate may 
     only be applied against the premiums for a certified health 
     plan offered by the employer.
       ``(B) Submission to secretary and remission of value to 
     employer.--The Secretary shall make payments (in a manner 
     specified by the Secretary) to each employer who tenders such 
     a certificate to the Secretary in the value of the 
     certificate so tendered.
       ``(3) Treatment of other individuals.--
       ``(A) In general.--If an individual who is entitled to a 
     premium certificate under this part is not described in 
     paragraph (2)(A)--
       ``(i) the premium certificate may be applied against the 
     premiums for the certified health plan in which the 
     individual is enrolled, and
       ``(ii) upon the tender of such certificate by the 
     individual to the applicable carrier, the carrier is required 
     to reduce the amount of premiums required to be paid by the 
     individual.
       ``(B) Applicable carrier described.--In subparagraph (A), 
     the term `applicable carrier' means, with respect to an 
     individual enrolled in a certified health plan,--
       ``(i) the Office of Universal FEHBP, in the case of an 
     individual who pays premiums through such office;
       ``(ii) the consumer purchasing cooperative under subtitle E 
     of title V of the Guaranteed Health Insurance Act of 1994, in 
     the case of an individual who pays premiums through the 
     cooperative);
       ``(iii) the program of the Indian Health Service (as used 
     in section 901 of the Indian Health Care Improvement Act), in 
     the case of an individual enrolled in a health program of the 
     Indian Health Service; orSec. 
       ``(iv) the Secretary of Veterans Affairs, in the case of an 
     individual enrolled in a health program of the Department of 
     Veterans Affairs.
       ``(4) Direct payment of certain assistance.--The Secretary 
     shall provide for a payment directly to an individual whose 
     application is approved of an amount equal to the amount of 
     the reduction in premium that would have been provided with 
     respect to the individual for the month in which the 
     application was filed if the certificate had been issued (and 
     tendered to the individual's employer or plan, as the case 
     may be) on the first day of such month.
       ``(e) Verification.--
       ``(1) In general.--The Secretary shall periodically verify 
     information reported on applications under this section, 
     using any or all of the following:
       ``(A) The national enrollment verification system 
     established under subtitle B of title IX of the Guaranteed 
     Health Insurance Act of 1994.
       ``(B) Information reported pursuant to section 1137.
       ``(C) Other information deemed to be necessary.
       ``(2) Reconciliation.--
       ``(A) Excess payments.--If the Secretary determines, based 
     upon information described in paragraph (1), that the value 
     of a certificate issued exceeded the correct value of the 
     certificate or that an individual who was issued a 
     certificate was not a premium certificate eligible 
     individual, the Secretary shall--
       ``(i) adjust the value of the certificate to recoup, over a 
     reasonable period of time, the amount of the overpayment, or
       ``(ii) if the individual is no longer a premium certificate 
     eligible individual, bill the individual for the amount of 
     the excess value and for interest on any amount so billed 
     that is not repaid on a timely basis.
       ``(B) Deficit payments.--If the Secretary determines, based 
     upon the information described in paragraph (1), that the 
     value of a certificate issued was less than the correct value 
     of the certificate, the Secretary shall--
       ``(i) pay directly to the individual the amount of the 
     underpayment, or
       ``(ii) if the individual continues to be a premium 
     certificate eligible individual, adjust the value of the 
     certificate, as appropriate.
       ``(f) Penalties for Misrepresentation.--Any individual who 
     knowingly makes a material misrepresentation of information 
     in an application for a premium certificate under this 
     section would be liable for excess payments made based upon 
     such misrepresentation and interest on such excess payments, 
     at a rate specified by the Secretary. In addition, such 
     individuals would be subject to a civil monetary penalty of 
     $1,000, or, if greater, three times the amount of excess 
     payments made based on such misrepresentations. The 
     provisions of section 1128A (other than subsections (a) and 
     (b)) shall apply to civil money penalties under this 
     subsection in the same manner as they apply to a penalty or 
     proceeding under section 1128A(a).

         ``Subpart 2--Premium Assistance for Qualified Retirees

     ``SEC. 2211. ELIGIBILITY FOR PREMIUM CERTIFICATE FOR CERTAIN 
                   RETIREES.

       ``(a) In General.--A qualified retiree (or qualified spouse 
     or child of such a retiree) is eligible for a premium 
     certificate in accordance with this subpart if--
       ``(1) the total amount paid by the individual for premiums 
     for enrollment in a health benefit plan during months in a 
     year, exceeds
       ``(2) the product of (A) the individual's projected 
     modified adjusted gross income for the year, and (B) the 
     applicable percentage established under section 2212(c).
       ``(b) Health Benefit Plan Defined.--In subsection (a), the 
     term `health benefit plan' has the meaning given such term in 
     section 5504(3) of the Guaranteed Health Insurance Act of 
     1994.

     ``SEC. 2212. ELIGIBILITY.

       ``(a) Qualified Retiree and Qualified Spouse or Child 
     Defined.--For purposes of this subpart--
       ``(1) Qualified retiree defined.--The term `qualified 
     retiree' means, with respect to a month in a calendar year, 
     an eligible individual who meets the income requirements 
     specified in subsection (b) for the year and who as of the 
     first day of the month--
       ``(A) has attained age 55 but not age 65 (as of January 1, 
     1994),
       ``(B) is not a full-time employee, and
       ``(C) is not entitled to benefits under part A of title 
     XVIII.
       ``(2) Qualified spouse or child defined.--The term 
     `qualified spouse or child' means, in relation to a qualified 
     retiree, an eligible individual who meets the income 
     requirements specified in subsection (b) for the year and 
     with respect to whom the requirements in one of the following 
     clauses is met (with respect to the first day of a month):
       ``(A) The individual (i) is under 65 years of age, is not a 
     full-time employee, and is (and has been for a period of at 
     least one year) married to a qualified retiree or (ii) is a 
     young dependent (as described in section 1003(b)(1)(B) of the 
     Guaranteed Health Insurance Act of 1994) of the qualified 
     retiree.
       ``(B) In the case of a person who was a qualified retiree 
     at the time of the person's death--
       ``(i) the individual was (and had for a period of at least 
     one year been) married to the retiree at the time of the 
     person's death,
       ``(ii) the individual is under 65 years of age,
       ``(iii) the individual is not a full-time employee,
       ``(iv) the individual is not remarried, and
       ``(v) the deceased spouse would still be a qualified 
     retiree if such spouse had not died.
       ``(C) The individual is a young dependent (as described in 
     section 1003(b)(1)(B) of the Guaranteed Health Insurance Act 
     of 1994) of an individual described in subparagraph (B).
       ``(b) Maximum Amount of Income.--
       ``(1) In general.--An individual meets the income 
     requirements of this subsection if (for a calendar year 
     ending in 1994)--
       ``(A) in the case of a married individual whose spouse is a 
     qualified retiree or qualified spouse or child under 
     subsection (a), the combined income of the individual and the 
     individual's spouse for the year does not exceed $40,000, or
       ``(B) in the case of any other individual, the individual's 
     income for the year does not exceed $30,000.
       ``(2) Inflation adjustments.--In the case of a year after 
     1997, each dollar amount contained in paragraph (1) shall be 
     increased by an amount equal to--
       ``(A) such dollar amount, multiplied by
       ``(B) the percentage increase in the consumer price index 
     for all urban consumers (U.S. city average) for the previous 
     calendar year.
       ``(c) Applicable Percentage.--For purposes of subsection 
     (a), the applicable percentage specified in this paragraph 
     for a year is determined in accordance with the following 
     table:


                                                                        
                                                          The applicable
 ``In the case of calendar years ending with or within--  percentage is--
                                                                        
                                                                        
  1997..................................................    7 percent  
  1998..................................................    7 percent  
  1999..................................................    6 percent  
  2000..................................................    5 percent  
  2001 or thereafter....................................    4 percent  
                                                                        

       ``(d) Proration.--In the case of an individual described in 
     subsection (a) who is not a qualified retiree or qualified 
     spouse or child for all months in the calendar year, the 
     amount of any premium certificate under subsection (a) shall 
     be prorated to reflect the ratio of the number of months in 
     the year in which the individual is a qualified retiree or 
     qualified spouse or child to 12 months.

     ``SEC. 2213. VALUE OF PREMIUM CERTIFICATE.

       ``(a) In general.--The amount of the premium certificate 
     provided to an individual under this subpart for a year is 
     equal to the amount by which--
       ``(1) the total amount paid by the individual for premiums 
     for enrollment in a health benefit plan during months in the 
     year; exceeds
       ``(2) the product of (A) the individual's projected 
     modified adjusted gross income for the year, and (B) the 
     applicable percentage established under section 2212(c).
       ``(b) Limitation for Years After 1998.--With respect to 
     years beginning with 1999, the amount of the premium 
     certificate provided to an individual under this subpart for 
     the year is equal to the lesser of--
       ``(1) the amount determined in accordance with subsection 
     (a); or
       ``(2) an amount equal to the amount by which--
       ``(A) the total amount that would have been paid by the 
     individual for premiums during the year if the individual had 
     been enrolled in medicare part C during the year, exceeds
       ``(B) the amount described in subsection (a)(2).

     ``SEC. 2214. ADMINISTRATION OF PREMIUM CERTIFICATES FOR 
                   RETIREES.

       ``The provisions of section 2203 shall apply to this 
     subpart in the same manner as they apply to subpart 1.

     ``Subpart 3--Maintenance of Effort Offset for Retiree Premium 
                             Contributions

     ``SEC. 2221. OFFSET OF PREMIUM OBLIGATIONS FOR RETIREES.

       ``The Secretary shall make a per capita payment to each 
     employer who meets the requirements of section 1113 of the 
     Guaranteed Health Insurance Act of 1994 (relating to 
     maintenance of effort for premiums for certain retirees, 
     spouses, and dependents) during a year in the amount 
     determined under section 2222 with respect to each eligible 
     individual for whom the employer meets such requirement.

     ``SEC. 2222. AMOUNT OF OFFSET.

       ``The amount of the payment made to an employer with 
     respect to an individual for a year is equal to 50 percent of 
     the employer's share of the premium that would be applicable 
     to the individual based on the individual's class of 
     enrollment during the year if the individual were enrolled in 
     medicare part C during the year.

     ``SEC. 2223. PROCEDURES FOR OBTAINING OFFSET.

       ``The Secretary shall establish procedures under which 
     employers may submit information necessary for the Secretary 
     to make payment to the employer under this subpart.

       ``Part B--Wrap-Around Benefits for Low-Income Individuals

     ``SEC. 2231. ELIGIBILITY.

       ``(a) In General.--Subject to subsection (c), each 
     individual who applies for benefits under this part and is 
     determined under this part to be a wrap around eligible 
     individual described in subsection (b) is entitled to wrap-
     around benefits in accordance with this part, without regard 
     to whether the individual is enrolled under medicare part C 
     under title XXI.
       ``(b) Wrap Around Eligible Individual.--
       ``(1) In general.--In this part, the term `wrap around 
     eligible individual' means any of the following individuals:
       ``(A) Individuals with income below poverty level.--An 
     individual who is determined under this part to have 
     projected modified adjusted gross income that is less than 
     the threshold amount (as defined in section 2122(c)(3)) 
     applicable to the individual involved.
       ``(B) AFDC and ssi recipients.--An AFDC recipient or SSI 
     recipient.
       ``(C) Children and pregnant women with income below 200 
     percent of poverty level.--Any of the following individuals 
     if the individual is determined under this part to have 
     projected modified adjusted gross income that is less than 
     twice the threshold amount (as defined in section 2122(c)(3)) 
     applicable to the individual involved:
       ``(i) A child under 19 years of age.
       ``(ii) A pregnant woman.
     For purposes of clause (ii), a woman shall be deemed to be a 
     pregnant woman during the period ending on the first day of 
     the first month that begins more than 60 days after the date 
     of the termination of the pregnancy.
       ``(2) Exceptions.--
       ``(A) In general.--Such term does not include an 
     individual--
       ``(i) who is entitled to benefits under part A of title 
     XVIII,
       ``(ii) subject to subparagraph (B), who is covered under a 
     State single-payer system approved under subtitle A of title 
     IV of the Guaranteed Health Insurance Act of 1994 or a State 
     managed competition system approved under subtitle B of title 
     IV of such Act, or
       ``(iii) whose only enrollment in a certified health plan is 
     in a plan that is a high deductible plan (as defined in 
     section 5504(5)).
       ``(B) Special rule.--Subparagraph (A)(ii) shall not apply 
     in the case of a State which has made the election described 
     in section 4104(b)(1)(B) of the Guaranteed Health Insurance 
     Act of 1994.
       ``(c) Special Rules for Cash Assistance Recipients.--
       ``(1) In general.--An individual who is an AFDC recipient 
     or SSI recipient is deemed to be entitled to benefits under 
     this part, without the need to file an application under this 
     part, for items and services furnished during the period in 
     which the individual is receiving assistance.
       ``(2) Coordination.--The Secretary shall provide for a 
     method under which individuals who are determined to be AFDC 
     recipients or SSI recipients are notified of the benefits to 
     which they are entitled under this part and any applicable 
     procedures for obtaining evidence of their entitlement.
       ``(d) Period of Entitlement.--
       ``(1) Beginning of benefits.--Benefits under this part 
     shall be available with respect to expenses incurred for 
     items and services furnished after the date the individual is 
     determined to be a wrap around eligible individual.
       ``(2) Termination of period.--
       ``(A) In general.--Subject to subparagraph (C) and section 
     2251(c), an individual who is determined to be entitled to 
     benefits under this part shall remain so entitled for a 
     period of 12 months beginning on the date on which the 
     determination takes effect. Such period may be extended upon 
     the filing of an application under this part before the end 
     of the 12-month period.
       ``(B) Notice of requirement.--The Secretary shall provide 
     for appropriate written notice of the requirement of 
     subparagraph (A) (relating to reapplying annually in order to 
     continue to be entitled to benefits under this part) to each 
     family a member of which is entitled to benefits under this 
     part at least 60 days before the expiration of the 12-month 
     period described in such subparagraph.
       ``(C) Exception.--Subparagraphs (A) and (B) shall not apply 
     with respect to an individual whose entitlement to benefits 
     under this part is based solely on the grounds that the 
     individual is an AFDC recipient or an SSI recipient.
       ``(e) AFDC Recipient and SSI Recipient Defined.--In this 
     part, the terms `AFDC recipient' and `SSI recipient' have the 
     meanings given such terms in section 2 of the Guaranteed 
     Health Insurance Act of 1994.

     ``SEC. 2232. WRAP-AROUND BENEFITS.

       ``(a) Benefits.--The benefits provided to a wrap around 
     eligible individual under this part consist of the following 
     (subject to subsection (e)):
       ``(1) Waiver of cost-sharing.--The payment for any cost 
     sharing (described in part B of title XXI) otherwise 
     applicable to items and services covered under the guaranteed 
     national benefit package (described in subtitle A of title 
     III of the Guaranteed Health Insurance Act of 1994).
       ``(2) Early and periodic screening, diagnostic, and 
     treatment services.--For individuals under 19 years of age, 
     payment for those early and periodic screening, diagnostic, 
     and treatment services (as defined in section 1905(r)) that 
     are not covered under the guaranteed national benefit 
     package.
       ``(3) Vision and hearing care.--For individuals 19 years of 
     age or older, payment for vision and hearing care of the same 
     scope as provided under paragraph (2), including eyeglasses 
     and hearing aids, that are not covered under the guaranteed 
     national benefit package.
       ``(b) Payment Amounts.--
       ``(1) Cost-sharing.--Payments for cost-sharing under 
     subsection (a)(1) for an item or service shall be based upon 
     the cost-sharing amounts that would apply to the item or 
     service if the individual were enrolled under medicare part C 
     under title XXI, without regard to whether the individual is 
     enrolled under such part.
       ``(2) Additional services.--Payments for items and services 
     described in paragraph (2) or (3) of subsection (a)--
       ``(A) for which there are payment amounts established under 
     title XXI shall be based on the payment amounts established 
     under such title; or
       ``(B) for which there are not such payment amounts 
     established, shall be based on payment amounts established by 
     the Secretary, in consultation with the Prospective Payment 
     Assessment Commission and the Physician Payment Review 
     Commission, taking into account the payment rules established 
     for similar items and services under part A of title XVIII.
       ``(c) Secondary Payer to Certified Health Plans.--Section 
     1862(b) shall apply to expenses incurred for items and 
     services provided under this part in the same manner as such 
     section applies to items and services provided under title 
     XVIII.
       ``(d) Use of Medicare Part C Claims Process.--
       ``(1) Cost-sharing for individuals enrolled under medicare 
     part c.--In the case of individuals entitled to benefits 
     under this part and enrolled under title XXI, the benefits 
     for cost-sharing under subsection (a)(1) with respect to an 
     item or service shall be provided simultaneous with the 
     payment of benefits with respect to such item or service 
     under such part.
       ``(2) Other benefits.--Except as provided in paragraph (1), 
     claims for payment for benefits under this part shall be made 
     and processed in the same manner as claims for payment for 
     benefits under title XXI.
       ``(3) Extension of agreements with fiscal agents.--The 
     Secretary may provide for the administration of this part 
     through agreements with fiscal agents meeting the 
     requirements applicable to such agents under title XXI.
       ``(e) Special Rules for Individuals Enrolled in Managed 
     Mental Health and Substance Abuse Programs.--
       ``(1) Coverage of services through the program.--In the 
     case of a wrap around eligible individual who is enrolled in 
     a managed mental health and substance abuse program of a 
     State or an Indian tribe or tribal organization approved 
     under section 1981 of the Public Health Service Act for a 
     month--
       ``(A) the individual is considered to have waived the right 
     to benefits described in paragraph (3) under this part in 
     consideration of receipt of benefits for mental health and 
     substance abuse services through such program;
       ``(B) the Secretary shall make a per capita payment to the 
     State or Indian tribe or tribal organization, in the amount 
     specified in paragraph (2), on behalf of the individual; and
       ``(C) no other payment may be made under this part with 
     respect to such services furnished to the individual during 
     the month.
     Payments under subparagraph (B) shall be made not less 
     frequently than monthly.
       ``(2) Capitated payments amounts.--The amount of the per 
     capita payment provided under paragraph (1)(B) shall be an 
     amount determined in accordance with a methodology 
     established by the Secretary (similar to the methodology used 
     under section 1893(b) to determine capitated payments to 
     States or Indian tribes or tribal organizations on behalf of 
     medicare beneficiaries enrolled in such programs) that 
     reflects the costs associated with the benefits described in 
     paragraph (3) that would be provided to the individual under 
     this part if the individual were not enrolled in the managed 
     mental health and substance abuse program.
       ``(3) Mental health and substance abuse benefits 
     described.--The benefits described in this paragraph are as 
     follows:
       ``(A) Mental health and substance abuse cost sharing.--
     Payment of cost sharing described in subsection (a)(1) with 
     respect to mental health and substance abuse services (as 
     defined in section 1893(c)) covered under the guaranteed 
     national benefit package.
       ``(B) Mental health and substance abuse services included 
     in epsdt.--Benefits under subsection (a)(2) with respect to 
     such mental health and substance abuse services.

     ``SEC. 2233. APPLICATION FOR BENEFITS.

       ``(a) Form.--
       ``(1) In general.--An application for benefits under this 
     part shall be made in such form and manner as the Secretary 
     shall specify consistent with this section.
       ``(2) Information.--The application shall require--
       ``(A) the provision of information necessary to determine 
     eligibility for benefits under this part, and
       ``(B) the provision of information respecting whether the 
     individual is enrolled under medicare part C and the 
     certified health plan (if any) in which the individual is 
     enrolled.
       ``(b) Availability of Applications.--The Secretary shall 
     make applications for benefits under this part available in 
     the same manner as the Secretary makes available applications 
     for enrollment under title XXI.
       ``(c) Coordination With Part C and Premium Certificate 
     Enrollment Application.--An application for benefits under 
     this part may (but need not) be accompanied by an application 
     for enrollment under medicare part C or for a premium 
     certificate under part A on the basis of being a low-income 
     individual.
       ``(d) Facilitation of Applications for Benefits.--The 
     provisions of section 2103 shall apply to wrap around 
     eligible individuals and applications for benefits under this 
     part in the same manner as such provisions apply to medicare 
     part C eligible individuals and applications for enrollment 
     under title XXI.
       ``(e) Timing of Application.--An application for benefits 
     under this part may be filed at any time during the year.

     ``SEC. 2234. REFERENCES TO MEDICARE PROVISIONS.

       ``In this part, except as otherwise specifically provided, 
     any references to provisions of title XVIII of the Social 
     Security Act are deemed to be references to such provisions 
     as in effect on the day after the date of the enactment of 
     the Guaranteed Health Insurance Act of 1994, taking into 
     account the amendments made to such title by such Act.

   ``Part C--Payment of Medicare Cost-Sharing for Certain Low-Income 
                              Individuals

     ``SEC. 2241. PAYMENT OF COST-SHARING FOR CERTAIN INDIVIDUALS.

       ``Subject to section 2242, the Secretary shall make 
     payments as follows:
       ``(1) Qualified medicare beneficiaries with income below 
     100 percent of poverty level.--In the case of an individual 
     who is determined by the Secretary to be a qualified medicare 
     beneficiary (as defined in section 2243(a)), the Secretary 
     shall make payment for all medicare cost-sharing described in 
     section 2242(a).
       ``(2) Qualified medicare beneficiaries with income below 
     120 percent of poverty level.--In the case of an individual 
     who would be such a qualified medicare beneficiary but for 
     the fact the individual's family income exceeds 100 percent, 
     but is less than 120 percent, of the official poverty line 
     (as described in section 2243(d)), the Secretary shall make 
     payment for the medicare cost-sharing described in section 
     2242(a)(1)(B).
       ``(3) Qualified disabled and working individuals.--In the 
     case of an individual who is determined by the Secretary to 
     be a qualified disabled and working individual (as defined in 
     section 2243(d)(2)), the Secretary shall make payment for the 
     medicare cost-sharing described in section 2242(a)(1)(A).

     ``SEC. 2242. MEDICARE COST-SHARING DEFINED.

       ``(a) In General.--In this section, the term `medicare 
     cost-sharing' means the following costs incurred with respect 
     to a qualified medicare beneficiary or a qualified disabled 
     and working individual:
       ``(1)(A) Premiums under section 1818 or 1818A, and
       ``(B) premiums under section 1839.
       ``(2) Coinsurance under title XVIII (including coinsurance 
     described in section 1813).
       ``(3) Deductibles established under title XVIII (including 
     those described in section 1813, 1833(b), and 1834(b)).
       ``(4) The difference between the amount that is paid under 
     section 1833(a) and the amount that would be paid under such 
     section if any reference to `80 percent' therein were deemed 
     a reference to `100 percent'.
       ``(b) Enrollment With Eligible Organizations.--Under rules 
     established by the Secretary for an individual described in 
     section 2241(1), `medicare cost-sharing' under this section 
     may include premiums for the enrollment of the individual 
     with an eligible organization under section 1876.

     ``SEC. 2243. INDIVIDUALS DEFINED.

       ``(a) Qualified Medicare Beneficiary.--In this part, the 
     term `qualified medicare beneficiary' means an individual--
       ``(1) who is entitled to benefits under part A of title 
     XVIII (other than an individual entitled to such benefits 
     only pursuant to an enrollment under section 1818A);
       ``(2) whose income (as determined under section 1612 for 
     purposes of the supplemental security income program, except 
     as provided in subsection (c)) does not exceed 100 percent of 
     the official poverty line applicable to a family of the size 
     involved; and
       ``(3) whose resources (as determined under section 1613 for 
     purposes of the supplemental security income program) do not 
     exceed twice the maximum amount of resources that an 
     individual may have and obtain benefits under that program.
       ``(b) Qualified Disabled and Working Individual.--The term 
     `qualified disabled and working individual' means an 
     individual--
       ``(1) who is entitled to enroll for hospital insurance 
     benefits under part A of title XVIII under section 1818A;
       ``(2) whose income (as determined under section 1612 for 
     purposes of the supplemental security income program, except 
     as provided in subsection (c)) does not exceed 200 percent of 
     the official poverty line applicable to a family of the size 
     involved;
       ``(3) whose resources (as determined under section 1613 for 
     purposes of the supplemental security income program) do not 
     exceed twice the maximum amount of resources that an 
     individual or a couple (in the case of an individual with a 
     spouse) may have and obtain benefits under that program; and
       ``(4) who is not eligible for medical assistance under the 
     State plan for medical assistance under title XIX for the 
     State in which the individual resides.
       ``(c) Exclusion of Certain Transition Income.--In 
     determining under this section the income of an individual 
     who is entitled to monthly insurance benefits under title II 
     for a transition month in a year, such income shall not 
     include any amounts attributable to an increase in the level 
     of monthly insurance benefits payable under such title which 
     have occurred pursuant to section 215(i) for benefits payable 
     for months beginning with December of the previous year. In 
     the previous sentence, the term `transition month' means each 
     month in a year through the month following the month in 
     which the annual revision of the official poverty line (as 
     described in subsection (d)) is published.
       ``(d) Official Poverty Line Described.--In this section, 
     the `official poverty line' is the line defined by the Office 
     of Management and Budget, and revised annually in accordance 
     with section 673(2) of the Omnibus Budget Reconciliation Act 
     of 1981.
       ``(e) Use of Alternative Methodologies.--
       ``(1) In general.--The methodology to be employed in 
     determining income and resource eligibility under this 
     section may be less restrictive, and shall be no more 
     restrictive, than the methodology--
       ``(A) in the case of groups consisting of aged, blind, or 
     disabled individuals, under the supplemental security income 
     program under title XVI, or
       ``(B) in the case of other groups, under the State plan 
     most closely categorically related.
       ``(2) More restrictive methodology described.--For purposes 
     of this subsection, a methodology is considered to be `no 
     more restrictive' if, using the methodology, additional 
     individuals may be eligible for treatment as qualified 
     medicare beneficiaries or qualified disabled and working 
     individuals and no individuals who are otherwise eligible to 
     be so treated are made ineligible for such treatment.

     ``SEC. 2244. TIMING.

       ``If an individual is determined to be a qualified medicare 
     beneficiary or a qualified disabled and working individual 
     under this part, such determination shall apply to items and 
     services furnished after the end of the month in which the 
     determination first occurs.

                  ``Part D--Administrative Provisions

     ``SEC. 2251. DETERMINATION OF ELIGIBILITY; APPEALS.

       ``(a) Process.--The Secretary, through the Social Security 
     Administration and other appropriate agencies, shall 
     establish a process for determining whether individuals are 
     eligible for benefits under this title. Such process shall be 
     coordinated with the enrollment process described in section 
     2102.
       ``(b) Determination of Projected Income for Purposes of 
     Medicare Part C and Wrap-Around.--
       ``(1) In general.--In determining the amount of an 
     individual's projected modified adjusted gross income for 
     purposes of part A or part B, the income for a year shall be 
     projected on an annual basis based on evidence of the current 
     (and projected) modified adjusted gross income over a period 
     of at least 3 months, as determined under a uniform, national 
     methodology established by the Secretary.
       ``(2) Modified adjusted gross income defined.--In this 
     title, the term `modified adjusted gross income' has the 
     meaning given such term in section 59B(e)(2) of the Internal 
     Revenue Code of 1986 (as in effect on the date of the 
     enactment of the Guaranteed Health Insurance Act of 1994). 
     The parenthetical in the preceding sentence shall not apply 
     to the determination of adjusted gross income.
       ``(c) Requirement to Provide Notice of Material Change 
     Affecting Eligibility for Benefits.--
       ``(1) In general.--Each individual who has been determined 
     to be entitled to benefits under this title (including under 
     section 2231(c)) shall notify the Secretary (in a form and 
     manner specified by the Secretary) of any material change in 
     status that would affect the individual's eligibility for 
     benefits under this title.
       ``(2) Construction.--Nothing in this section shall be 
     construed as authorizing reconciliation of benefits provided 
     with respect to deductibles and coinsurance.
       ``(d) Notice and Appeals.--
       ``(1) Notice.--If the Secretary determines that an 
     individual is not entitled to benefits under this title, the 
     Secretary shall notify the individual of the determination 
     (and an explanation of the reasons for the determination).
       ``(2) Appeals.--The provisions of section 2136(c) shall 
     apply with respect to determinations of entitlement to and 
     the amount of benefits under this title in the same manner as 
     such provisions apply to determinations of entitlement to and 
     the amount of benefits under title XXI.

     ``SEC. 2252. VERIFICATION OF ELIGIBILITY.

       ``(a) In General.--The Secretary, in consultation with the 
     Secretary of the Treasury, shall provide for such 
     verification of eligibility, including verification of 
     income, as the Secretary deems appropriate. Such verification 
     may be based upon information provided under the national 
     enrollment verification system established under subtitle B 
     of title IX of the Guaranteed Health Insurance Act of 1994 
     and information provided under section 1137, and may be made 
     on a sample or other basis.
       ``(b) Monitoring Changes in Status.--
       ``(1) In general.--The Secretary periodically shall verify, 
     using the national enrollment verification system established 
     under subtitle B of title IX of the Guaranteed Health 
     Insurance Act of 1994 and other means, the status of 
     individuals who are receiving benefits under this title in 
     order to identify changes of employment or other status that 
     may affect their eligibility for such benefits.
       ``(2) Information on cash assistance recipients.--In order 
     to carry out paragraph (1), the Secretary shall require 
     States administering plans under parts A or E of title IV and 
     the entity responsible for administering the supplemental 
     security income program under title XVI to report to the 
     Secretary, on a semiannual basis, such information as may be 
     necessary to verify an individual's status as an AFDC or SSI 
     recipient.

     ``SEC. 2253. PENALTIES FOR MISREPRESENTATION.

       ``Any individual that knowingly misrepresents income or 
     family status for the purpose of obtaining benefits under 
     this title to which the individual is not entitled is subject 
     to a civil money penalty not to exceed $1,000 for each such 
     misrepresentation, or, if greater, three times the amount of 
     the benefits obtained as a result of the misrepresentation. 
     The provisions of section 1128A (other than subsections (a) 
     and (b)) shall apply to civil money penalties under this 
     section in the same manner as they apply to a penalty or 
     proceeding under section 1128A(a).''.

     SEC. 8102. EFFECTIVE DATES.

       (a) Premium Certificates.--No premium certificate or other 
     assistance under title XXII of the Social Security Act (as 
     added by subsection (a)) shall be made available--
       (1) under subpart 1 or subpart 3 of part A of such title 
     for premiums or assistance for months before January 1999; or
       (2) under subpart 2 of part A of such title for premiums 
     for months before January 1997.
       (b) Wrap-Around Benefits.--No wrap-around benefits are 
     available under part B of title XXII of the Social Security 
     Act, added by subsection (a), with respect to any items or 
     services furnished before January 1, 1999.
       (c) Medicare Cost-Sharing.--No medicare cost-sharing is 
     available under part C of title XXII of the Social Security 
     Act (as added by section 8001) with respect to items or 
     services furnished in a State before January 1999.

                  PART 2--STATE MAINTENANCE OF EFFORT

           Subpart A--Payments for Cash Assistance Recipients

     SEC. 8111. STATE RESPONSIBILITY FOR PAYMENTS.

       (a) In General.--Subject to section 8133, each State shall 
     provide in each year (beginning with 1999) for payment to the 
     Secretary, to the credit of the Medicare Part C Trust Fund, 
     of an amount equal to the State medical assistance percentage 
     (as defined in subsection (b)) of the State maintenance of 
     effort percentage (as defined in section 8134) for the year 
     of the sum of the following products:
       (1) AFDC portion.--The product of--
       (A) the sum of--
       (i) the AFDC, non-DSH per capita amount for the State for 
     the year (determined under section 8112(a)(1)), and
       (ii) the AFDC, DSH per capita amount for the State for the 
     year (determined under section 8112(a)(2)); and
       (B) the number of AFDC recipients residing in the State in 
     the year (as determined under section 8114).
       (2) SSI portion.--The product of--
       (A) the sum of--
       (i) the SSI, non-DSH per capita amount for the State for 
     the year (determined under section 8113), and
       (ii) the SSI, DSH per capita amount for the State for the 
     year (determined under section 8113); and
       (B) the number of SSI recipients residing in the State in 
     the year (as determined under section 8114).
       (b) State Medical Assistance Percentage Defined.--In 
     subsection (a), the term ``State medical assistance 
     percentage'' means, for a State for a quarter in a fiscal 
     year, 100 percent minus the Federal medical assistance 
     percentage (as defined in section 1905(b) of the Social 
     Security Act) for the State for the fiscal year.
       (c) Benefit Package for Low-Income Individuals.--In this 
     subtitle, the term ``benefit package for low-income 
     individuals'' means the benefits, including the guaranteed 
     national benefit package and the wrap-around benefits made 
     available for low-income individuals under part A and subpart 
     2 of part B of title XXI of the Social Security Act, as added 
     by the previous provisions of this title.

     SEC. 8112. DETERMINATION OF AFDC PER CAPITA AMOUNTS FOR 
                   STATES.

       (a) Determinations.--
       (1) In general.--For each State for each year, the 
     Secretary shall determine an AFDC, non-DSH per capita amount 
     in accordance with paragraph (2) and an AFDC, DSH per capita 
     amount in accordance with paragraph (3).
       (2) AFDC, non-dsh per capita amount.--The AFDC, non-DSH per 
     capita amount is equal to the per capita, non-DSH State 
     medicaid expenditures (under subsection (b)(1)) for the 
     benefit package for low-income individuals (as defined in 
     section 8111(c)) for AFDC recipients for the State for the 
     year (as determined under subsection (b)(1)).
       (3) AFDC, dsh per capita amount.--The AFDC, DSH per capita 
     amount is equal to the per capita DSH State medicaid 
     expenditures (under subsection (b)(2)) for the benefit 
     package for low-income individuals (as defined in section 
     8111(c)) for AFDC recipients for the State for the year (as 
     determined under subsection (b)(2)).
       (b) Per Capita State Medicaid Expenditures Defined.--For 
     purposes of subsection (a)--
       (1) Per capita non-dsh state medicaid expenditures.--The 
     ``per capita non-DSH State medicaid expenditures'' for the 
     benefit package for low-income individuals for a State for a 
     year is equal to the base per capita non-DSH expenditures 
     (described in subsection (c)(1)), updated to the year 
     involved under subsection (d)).
       (2) Per capita dsh state medicaid expenditures.--The ``per 
     capita DSH State medicaid expenditures'' for the benefit 
     package for low-income individuals for a State for a year is 
     equal to the base per capita DSH expenditures (described in 
     subsection (c)(2)), updated to the year involved under 
     subsection (d)).
       (c) Medicaid Expenditures.--
       (1) Base per capita non-dsh expenditures.--The ``base per 
     capita non-DSH expenditures'' described in this paragraph, 
     for a State for a year, is--
       (A) the baseline non-DSH medicaid expenditures (as defined 
     in subsection (e)(1)(A)) for the State, divided by
       (B) the number of AFDC recipients enrolled in the State 
     medicaid plan in fiscal year 1993, as determined under 
     section 8114(a).
       (2) Base per capita dsh expenditures.--The ``base per 
     capita DSH expenditures'' described in this paragraph, for a 
     State for a year, is--
       (A) the baseline DSH medicaid expenditures (as defined in 
     subsection (e)(1)(B)) for the State; divided by
       (B) the number of AFDC recipients enrolled in the State 
     medicaid plan in fiscal year 1993, as determined under 
     section 8114(a).
       (d) Updating.--
       (1) Initial update through 1998.--
       (A) In general.--
       (i) Base per capita non-dsh expenditures.--The Secretary 
     shall update the base per capita non-DSH expenditures 
     described in subsection (c)(1) for each State from fiscal 
     year 1993 through 1998, by 57.6 percent.
       (ii) Base per capita dsh expenditures.--The Secretary shall 
     update the base per capita DSH expenditures described in 
     subsection (c)(2) for each State from fiscal year 1993 
     through 1998, by 39.7 percent.
       (B) Adjustment authorized to take into account cash flow 
     variations.--In determining the update under paragraph (1), 
     the Secretary may provide for an adjustment in a manner 
     similar to the adjustment permitted under section 8122(b)(3).
       (2) Update for subsequent years.--For each State for 1999 
     and for each subsequent year the Secretary shall update the 
     base per capita non-DSH expenditures described in subsection 
     (c)(1) (as previously updated under this subsection) and the 
     base per capita DSH expenditures described in subsection 
     (c)(2) (as previously updated under this subsection) by a 
     factor equal to the national medicare growth factor (under 
     section 8201(c) for the year.
       (e) Determination of Baseline Medicaid Expenditures.--
       (1) In general.--
       (A) Baseline non-dsh medicaid expenditures.--For purposes 
     of subsection (c)(1)(A), the ``baseline non-DSH medicaid 
     expenditures'' for a State is the gross amount of payments 
     under the State medicaid plan with respect to medical 
     assistance furnished, for items and services included in the 
     benefit package for low-income individuals, for AFDC 
     recipients for calendar quarters in fiscal year 1993, but 
     does not include such expenditures for which no Federal 
     financial participation is provided under such plan and does 
     not include any payments made under section 1923 of the 
     Social Security Act (relating to DSH payments).
       (B) Baseline dsh medicaid expenditures.--For purposes of 
     subsection (c)(2)(A), the term ``baseline DSH medicaid 
     expenditures'' for a State is payments made under section 
     1923 of the Social Security Act in fiscal year 1993 
     multiplied by the proportion of payments for medical 
     assistance for hospital services (including psychiatric 
     hospital services) under the State medicaid plan in fiscal 
     year 1993 that is attributable to AFDC recipients.
       (2) Treatment of disallowances.--The amount determined 
     under this subsection shall take into account amounts (or an 
     estimate of amounts) disallowed.
       (f) Application to Particular Items and Services in Benefit 
     Package for Low-income Individuals.--For purposes of this 
     section, in determining the per capita State non-DSH medicaid 
     expenditures and the per capita State DSH medicaid 
     expenditures for a category of items and services (within the 
     benefit package for low-income individuals) furnished in a 
     State, there shall be counted only that proportion of such 
     expenditures (determined only with respect to medical 
     assistance furnished to AFDC recipients) that were 
     attributable to items and services included in the benefit 
     package for low-income individuals (taking into account any 
     limitation on amount, duration, or scope of items and 
     services included in such package).

     SEC. 8113. DETERMINATION OF SSI PER CAPITA AMOUNT FOR STATES.

       For State for each year, the Secretary shall determine an 
     SSI per capita amount in accordance with this section. Such 
     amount shall be determined in the same manner as the AFDC per 
     capita amount for the State is determined under section 8112 
     except that, for purposes of this section--
       (1) any reference in such section (or in sections referred 
     to in such section) to an ``AFDC recipient'' is deemed a 
     reference to an ``SSI recipient''; and
       (2)(A) 25.8 percent shall be substituted for 57.6 percent 
     in section 8112(d)(1)(A)(i), and
       (B) 11.5 percent shall be substituted for 39.7 percent in 
     section 8112(d)(1)(A)(ii).

     SEC. 8114. DETERMINATION OF NUMBER OF AFDC AND SSI 
                   RECIPIENTS.

       (a) Baseline.--For purposes of section 8112 and section 
     8113, the number of AFDC recipients and SSI recipients for a 
     State for fiscal year 1993 shall be determined based on 
     actual reports submitted by the State to the Secretary. In 
     the case of individuals who were not recipients for the 
     entire fiscal year, the number shall take into account only 
     the portion of the year in which they were such recipients. 
     The Secretary may audit such reports.
       (b) Subsequent Years.--For purposes of section 8111(a), the 
     number of AFDC and SSI recipients residing in a State shall 
     be determined on a monthly basis based on the actual number 
     of such recipients.

         Subpart B--Payments for Non-Cash Assistance Recipients

     SEC. 8121. STATE RESPONSIBILITY FOR PAYMENTS.

       (a) Payment.--Each State shall provide for each year 
     (beginning with 1999) for payment to the Secretary, to the 
     credit of the Medicare Part C Trust Fund, of the amounts 
     specified in subsection (b).
       (b) Amount.--Subject to section 8133, the total amount of 
     such payment for a year shall be equal to the State 
     maintenance of effort percentage (as defined in section 8134) 
     for the year of the sum of--
       (1) the State non-cash, non-DSH baseline amount for the 
     State, determined under section 8122(a)(1) and updated to the 
     year involved under section 8123, and
       (2) the State non-cash, DSH baseline amount for the State, 
     determined under section 8122(a)(2) and updated to the year 
     involved under section 8123.

     SEC. 8122. DETERMINATION OF BASELINE AMOUNTS.

       (a) Baseline Amounts.--
       (1) Non-dsh amount.--The Secretary shall determine for each 
     State a non-cash, non-DSH baseline amount which is equal to 
     the aggregate State medicaid expenditures in fiscal year 1993 
     (as defined in subsection (c)(1)) for the benefit package for 
     low-income individuals for non-cash assistance recipients (as 
     defined in subsection (b)).
       (2) DSH amount.--The Secretary shall determine for each 
     State a non-cash, DSH baseline amount which is equal to the 
     DSH expenditures in fiscal year 1993 (as defined in 
     subsection (c)(2)) multiplied by proportion of payments for 
     medical assistance for hospital services (including 
     psychiatric hospital services) under the State medicaid plan 
     in fiscal year 1993 that is attributable to non-cash 
     assistance recipients.
       (b) Non-Cash Assistance Recipient.--In this part, the term 
     ``non-cash assistance recipient'' means an eligible 
     individual who is not an AFDC or SSI recipient or a medicare 
     part A beneficiary.
       (c) State Medicaid Expenditures and DSH Expenditures 
     Defined.--
       (1) Aggregate state medicaid expenditures.--
       (A) In general.--In this section, the term ``aggregate 
     State medicaid expenditures'' means, with respect to a State 
     in fiscal year 1993, the amount of payments under the State 
     medicaid plan with respect to medical assistance furnished 
     for non-cash assistance recipients for calendar quarters in 
     fiscal year 1993, less the amount of Federal financial 
     participation paid to the State with respect to such 
     assistance, and not including any DSH expenditures (as 
     defined in paragraph (2)).
       (B) Limited to payments for services.--In applying 
     subparagraph (A), payments under the State medicaid plan 
     shall not be included unless Federal financial participation 
     is provided with respect to such payments under section 
     1903(a)(1) of the Social Security Act and such payments shall 
     not include payments for medicare cost-sharing (as defined in 
     section 1905(p)(3) of the Social Security Act).
       (2) DSH expenditures.--In this section, the term ``DSH 
     expenditures'' means payments made under section 1923 of the 
     Social Security Act in fiscal year 1993.
       (3) Adjustment authorized to take into account cash flow 
     variations.--If the Secretary finds that a State took an 
     action that had the effect of shifting the timing of medical 
     assistance payments under the State medicaid plan between 
     quarters or fiscal years in a manner so that the payments 
     made in fiscal year 1993 do not accurately reflect the value 
     of the medical assistance provided with respect to items and 
     services furnished in that fiscal year, the Secretary may 
     provide for such adjustment in the amounts computed under 
     this subsection as may be necessary so that the non-cash, 
     non-DSH baseline amount and the non-cash, DSH baseline amount 
     determined under this section accurately reflect such value.
       (4) Treatment of disallowances.--The amounts determined 
     under this subsection shall take into account amounts (or an 
     estimate of amounts) disallowed.
       (d) Application to Particular Items and Services in the 
     Benefit Package for Low-income Individuals.--For purposes of 
     subsection (a), in determining the aggregate State medicaid 
     expenditures for a category of items and services (within the 
     benefit package for low-income individuals) furnished in a 
     State, there shall be counted only that proportion of such 
     expenditures that were attributable to items and services 
     included in such package (taking into account any limitation 
     on amount, duration, or scope of items and services included 
     in such package).

     SEC. 8123. UPDATING OF BASELINE AMOUNT.

       (a) Update for Years Through 1998.--
       (1) Non-cash, non-dsh baseline amount.--The Secretary shall 
     update the non-cash, non-DSH baseline amount determined under 
     section 8122(a)(1) for each State for years from fiscal year 
     1993 through 1998 by 66.2 percent.
       (2) Non-cash, dsh baseline amount.--The Secretary shall 
     update the non-cash, DSH baseline amount determined under 
     section 8122(a)(2) for each State for years from fiscal year 
     1993 through 1998 by 47.3 percent.
       (3) Adjustment authorized to take into account cash flow 
     variations.--In determining the updates under paragraph (1), 
     the Secretary may provide for an adjustment in a manner 
     similar to the adjustment permitted under section 8122(b)(3).
       (b) Update For Subsequent Years.--For each State for each 
     year after 1998, the Secretary shall update the non-cash, 
     non-DSH baseline amount (as previously updated under this 
     section) and the non-cash, DSH baseline amount (as previously 
     updated under this section) by the product of--
       (1) 1 plus the national medicare growth factor (under 
     section 8201(c)) for the year, and
       (2) 1 plus the annual percentage increase in the population 
     of the United States of individuals who are under 65 years of 
     age (as estimated by the Secretary based on projections made 
     by the Bureau of Labor Statistics of the Department of Labor) 
     for the year.

            Subpart C--General and Miscellaneous Provisions

     SEC. 8131. TIMING AND MANNER OF PAYMENTS.

       (a) In General.--Amounts required to be paid under this 
     part shall be paid on a periodic basis specified by the 
     Secretary, taking into account the benefits provided under 
     part B of title XXI of the Social Security Act and taking 
     into account the manner in which States provide for payments 
     under agreements under section 1843 of such Act.
       (b) Periodic Provision of Information.--Each State shall 
     periodically transmit to the Secretary such information as 
     the Secretary may require to verify the amounts payable.
       (c) Reconciliation.--
       (1) Preliminary.--At such time after the end of each year 
     as the Secretary shall specify, the State shall submit to the 
     Secretary such information as the Secretary may require to do 
     a preliminary reconciliation of the amounts paid under this 
     part and the amounts due.
       (2) Final.--No later than June 30 of each year, the 
     Secretary shall provide for a final reconciliation for such 
     payments for quarters in the previous year. Amounts 
     subsequently payable are subject to adjustment to reflect the 
     results of such reconciliation.
       (3) Audit.--Payments under this part are subject to audits 
     by the Secretary in accordance with rules established by the 
     Secretary.

     SEC. 8132. SPECIAL RULES FOR PUERTO RICO AND OTHER 
                   TERRITORIES.

       (a) Computation of Baselines As If Commonwealths and 
     Territories Were States.--
       (1) In general.--For purposes of determining payment 
     amounts by the Commonwealths and territories under subpart A 
     and subpart B of this part, subject to paragraph (2), the 
     Secretary, in consultation with such Commonwealths and 
     territories and using data on expenditures reported to the 
     Secretary by the Commonwealths and territories, shall 
     compute--
       (A) the base per capita non-DSH expenditures and base per 
     capita DSH expenditures, under section 8112(c), and
       (B) the non-cash, non-DSH baseline amount and the non-cash, 
     DSH baseline amount, under section 8122(a),

     in the same manner as if the Commonwealths and territories 
     had been one of the 50 States of the United States.
       (2) Reduction of maintenance of effort payments by amount 
     of tobacco taxes in puerto rico.--The payment amounts 
     otherwise payable under subparts A and B of this part by each 
     of the Commonwealths and territories for a year shall be 
     ratably reduced by ratio of--
       (A) the amount of additional revenues in the year which the 
     Secretary of the Treasury estimates to be attributable to 
     section 5701(h) of the Internal Revenue Code of 1986 (as 
     added by section 11101(h) of this Act), to
       (B) the total payment amounts otherwise payable under such 
     subparts by all of the Commonwealths and territories for the 
     year.
       (b) Treatment of Certain SSI Recipients.--With respect to 
     the Commonwealths and territories insofar as they are not 
     covered under the supplementary security income program, in 
     this part, the term ``SSI recipient'' includes an individual 
     receiving aid under a territorial program for the aged, 
     blind, or disabled under the Social Security Act.
       (c) Commonwealths and Territories.--In this section, the 
     term ``Commonwealths and territories'' means Puerto Rico, the 
     Virgin Islands, Guam, American Samoa, and the Northern 
     Mariana Islands.

     SEC. 8133. SANCTIONS FOR FAILURE TO MAKE TIMELY PAYMENTS.

       (a) Reduction of Federal Matching Payments.--To the extent 
     that a State that fails to make the payments required under 
     this part in a timely manner, the Secretary shall, in 
     addition to withholding payments pursuant to section 1903(x) 
     of the Social Security Act (as added by section 8502(b)), 
     withhold the required amounts from Federal matching payments 
     that would otherwise be paid to the State for the following 
     programs:
       (1) The program under part A of title IV of the Social 
     Security Act.
       (2) The program under title XVI of such Act.
       (3) The program under title XX of such Act.
       (b) Construction.--Nothing in this section shall be 
     construed as affecting payments made directly to individuals, 
     whether or not such payments are administered by a State 
     agency.

     SEC. 8134. STATE MAINTENANCE OF EFFORT PERCENTAGE.

       For purposes of sections 8111(a) and 8121(b), the term 
     ``State maintenance of effort percentage'' means--
       (1) 100 percent for 1999, 2000, and 2001
       (2) 96 percent for 2002 and 2003, and
       (3) 86 percent for each year thereafter.

  PART 3--ANALYSIS OF IMPACT OF ACT ON FEDERAL EXPENDITURES AND STATES

     SEC. 8141. IMPACT OF HEALTH CARE REFORM ON FEDERAL BUDGET.

       (a) Study.--The Director of the Congressional Budget Office 
     shall conduct a study of the impact of this Act on the budget 
     of the Federal Government (including the impact on receipts, 
     spending, and other obligations) with respect to each fiscal 
     year (beginning with fiscal year 1996).
       (b) Report.--Not later than March 1 of each year (beginning 
     with 1997), the Director shall submit a report to Congress on 
     the study conducted under subsection (a) for the previous 
     fiscal year, and shall include in the report--
       (1) a comparison of the actual impact of this Act on the 
     Federal budget with the projected impact of this Act on 
     Federal receipts, spending, and obligations, as first 
     estimated by the Director after the date of the enactment of 
     this Act; and
       (2) to the extent that the actual impact of this Act on the 
     Federal budget is not in accordance with the Director's 
     estimate, an explanation for the differences.

     SEC. 8142. IMPACT OF HEALTH CARE REFORM ON STATES.

       (a) Study.--The Director of the Congressional Budget Office 
     shall conduct a State-by-State study for each fiscal year 
     (beginning with fiscal year 1996) of the impact of this Act 
     on State spending for health care services and the overall 
     economy of the State during the fiscal year. Such study shall 
     include an analysis of the impact of this Act on the 
     following:
       (1) The number of individuals in the State with health 
     insurance coverage.
       (2) Health-related expenditures by the State, including--
       (A) maintenance of effort paid under part 2;
       (B) payments under the State plan under title XIX of the 
     Social Security Act;
       (C) support for uninsured and low-income individuals 
     (including undocumented aliens);
       (D) payments for medical education and other public health 
     programs;
       (E) payments for health insurance coverage for State and 
     local government employees.
       (3) Health-related payments by the Federal government to 
     individuals and providers in the State, including--
       (A) premium certificates under part A of title XXII of the 
     Social Security Act and other premium assistance for low-
     income individuals;
       (B) credits for small employers and retirees;
       (C) payments to providers under the medicare program and 
     medicare part C; and
       (D) other Federal assistance to providers and programs 
     (including capital assistance, payments under the Public 
     Health Service Act, and payments for graduate medical 
     education) under this Act and other Federal laws.
       (b) Report.--Not later than March 1 of each year (beginning 
     with 1997), the Director shall submit a report to Congress on 
     the study conducted under subsection (a) for the previous 
     fiscal year.
       (c) Recommendations to Assist Adversely Affected States.--
     If, with respect to a State for a fiscal year, the Director 
     finds that this Act resulted in an adverse impact on State 
     revenues and the overall State economy during the year, the 
     Director shall report such information to the Secretary. The 
     Secretary shall submit recommendations to Congress for a 
     legislative proposal to assure that the State is held 
     harmless as a result of this Act (including recommendations 
     relating to adjustments in the State maintenance of effort 
     payments required under part 2, other revenues contained in 
     this Act, and other provisions).
         Subtitle C--Cost Containment in the Medicare Programs

             PART 1--MEDICARE HEALTH EXPENDITURE ESTIMATES

     SEC. 8201. NATIONAL MEDICARE PER CAPITA HEALTH EXPENDITURE 
                   ESTIMATE.

       (a) Establishment.--
       (1) In general.--For each calendar year (beginning with 
     1996), there is established a national medicare per capita 
     health expenditure estimate (in this subtitle referred to as 
     the ``national medicare per capita estimate'') determined 
     under paragraph (2).
       (2) Amount.--Subject to subsection (e)--
       (A) National medicare per capita estimate.--
       (i) 1996, 1997, and 1998.--The national medicare per capita 
     estimate for 1996, 1997, and 1998 is equal to the national 
     medicare A/B per capita estimate for the respective year.
       (ii) Subsequent years.--The national medicare per capita 
     estimate for a year after 1998 is equal to the average, 
     weighted by the estimated number of enrollees in the 
     respective programs, of the national medicare A/B per capita 
     estimate and the national medicare C per capita estimate for 
     the year.
       (B) National medicare a/b per capita amount.--
       (i) 1996.--Subject to the special rule provided under 
     subsection (e)(4), the national medicare A/B per capita 
     estimate for 1996 is equal to the medicare per capita budget 
     baseline for 1995 (as determined under subsection (b)) 
     multiplied by the sum of 1 plus the national medicare growth 
     factor (specified under subsection (c)) for 1996.
       (ii) Subsequent years.--Subject to the special rule 
     provided under subsection (e)(4), the total amount of the 
     national medicare A/B per capita estimate for each year after 
     1996 is equal to the national medicare A/B per capita 
     estimate determined under this subparagraph for the previous 
     year multiplied by the national medicare growth factor 
     (specified under subsection (c)) for the year involved.
       (C) National medicare c per capita amount.--
       (i) 1999.--The Secretary shall estimate the national 
     medicare C per capita estimate for 1999 by using the payment 
     rates under the medicare part C program in 1999 and taking 
     into account the average characteristics of the population 
     expected to be enrolled in such program and their projected 
     use of covered services (including wrap around services 
     covered under subpart 2 of part B of title XXIII of the 
     Social Security Act).
       (ii) Subsequent years.--The total amount of the national 
     medicare C per capita estimate for each year after 1999 is 
     equal to the national medicare C per capita estimate 
     determined under this subparagraph for the previous year 
     multiplied by the sum of 1 plus the national medicare growth 
     factor (specified under subsection (c)) for the year 
     involved.
       (3) Publication.--The Secretary of Health and Human 
     Services shall publish in the Federal Register and report to 
     the Congress--
       (A) by not later than April 1 before each year, an initial 
     estimate of the per capita estimates under this subsection 
     for the year; and
       (B) by not later than October 1 before each year, a final 
     determination of such per capita estimates for such year.
       (b) Medicare Per Capita Budget Baseline.--The Secretary 
     shall compute a medicare per capita budget baseline under 
     this subsection for 1995 as follows:
       (1) 1993 actual expenditures.--The Secretary shall 
     determine (on the basis of the best data available) the 
     amount of the medicare per capita expenditures (as determined 
     under subsection (d)) for 1993.
       (2) Projection for 1995.--The Secretary shall increase such 
     amount by the Secretary's estimate of the percentage increase 
     in the national medicare per capita estimate between the 
     midpoint of 1993 and the midpoint of 1995.
       (c) National Medicare Growth Factor.--The national medicare 
     growth factor under this subsection for each year is the sum 
     (expressed as a fraction) of--
       (1) the average annual percentage increase in the per 
     capita gross domestic product (in current dollars, as 
     published by the Secretary of Commerce) during the 5-year 
     period ending with the second previous year; and
       (2)(A) for 1996, 1.8 percentage points,
       (B) for 1997, 1.4 percentage points,
       (C) for 1998, 0.5 percentage points,
       (D) for 1999, 0.1 percentage points, and
       (E) for each year thereafter, 0 percentage points.
       (d) Determination of National Medicare Per Capita 
     Expenditures for 1993.--
       (1) In general.--The Secretary shall determine for 1993 the 
     national medicare per capita expenditures equal to--
       (A) total covered health care expenditures (described in 
     paragraph (2)), divided by
       (B) the estimated average number of medicare beneficiaries 
     in 1993 for whom such expenditures were determined.
       (2) Covered health care expenditures.--For purposes of 
     paragraph (1)(A), the Secretary shall determine covered 
     health care expenditures for 1993 as follows:
       (A) Determination of total expenditures.--The Secretary 
     shall first determine the amount of total payments made for 
     items and services under title XVIII of the Social Security 
     Act (determined without regard to cost sharing) in 1993.
       (B) Removal of certain expenditures not included in 
     medicare.--The amount so determined shall be decreased by the 
     proportion of such amount that is attributable to 
     expenditures which are paid for items and services excluded 
     from classes of services under section 8202(a)(4).
       (e) Adjustments.--
       (1) In General.--Except as provided in this subsection, the 
     Secretary is not authorized to adjust the medicare A/B per 
     capita estimate or the medicare C per capita estimate under 
     this section for a year once they are published before 
     October of the previous year.
       (2) Recommendations for changes.--Except as permitted under 
     paragraphs (3) and (4), the Secretary may submit to Congress 
     recommendations for changes in the medicare A/B per capita 
     estimate or the medicare C per capita estimate, but may not 
     implement such recommendations without the approval of 
     Congress.
       (3) Correction permitted for estimation errors in medicare 
     per capita budget baseline.--Insofar as the Secretary 
     determines that the amounts used in estimating initially the 
     medicare per capita budget baseline described in subsection 
     (b) did not accurately reflect the actual amount described in 
     subsection (b)(1) and the actual percentage increase 
     described in subsection (b)(2), the Secretary shall adjust 
     the national medicare per capita estimate to correct for such 
     estimation errors.
       (4) Special rules.--
       (A) Medicare a/b per capita estimate.--The Secretary shall 
     adjust the national medicare A/B per capita estimate for each 
     year (beginning with 1996) in order to reflect the changes in 
     expenditures under parts A and B of the medicare program 
     attributable to amendments made by subtitle B of title III or 
     subtitle D of this title, including the addition of an 
     outpatient prescription drug benefit.
       (B) Medicare c per capita estimate.--The Secretary shall 
     adjust the national medicare C per capita estimate for each 
     year (beginning with 1999) in order to reflect the changes in 
     expenditures under medicare part C attributable to the 
     addition of benefits not included in the previous year.

     SEC. 8202. CLASSES OF HEALTH CARE SERVICES.

       (a) Establishment of Classes.--
       (1) In general.--
       (A) Specified services.--
       (i) In general.--Subject to subparagraph (B)(ii), in the 
     case of items and services specified in a subparagraph under 
     paragraph (2), all of the items and services described in 
     that subparagraph shall be considered to be a ``separate'' 
     class of health care services.
       (ii) Overlapping services.--Except as the Secretary may 
     provide, items and services specified in a subparagraph of 
     paragraph (2) shall be considered to be excluded from the 
     subsequent subparagraphs of that paragraph.
       (B) Other items and services.--
       (i) In general.--In the case of items and services included 
     as health care services under paragraph (3), the Secretary 
     shall group such items and services into such class or 
     classes of health care services as may be appropriate.
       (ii) Inclusion in classes of specified health care 
     services.--In carrying out clause (i), the Secretary may 
     include an item or service described in paragraph (3) within 
     a class of services established under subparagraph (A).
       (2) Specified health care services.--Subject to paragraph 
     (4), the items and services specified in this paragraph are 
     as follows:
       (A) Inpatient hospital services, other than mental health 
     services.
       (B) Outpatient hospital services and ambulatory facility 
     services (including renal dialysis facility services), other 
     than mental health services.
       (C) Diagnostic testing services (including clinical 
     laboratory services and x-ray services).
       (D) Physicians' services and other professional medical 
     services, other than mental health services.
       (E) Home health services and hospice care.
       (F) Rehabilitation services, such as physical therapy, 
     occupational and speech therapy.
       (G) Durable medical equipment and supplies.
       (H) Prescription drugs and biologicals and insulin.
       (I) Nursing facility services, including skilled nursing 
     facility services and intermediate care facility services, 
     other than mental health services.
       (J) Mental health services.
       (3) Classification of additional items and services.--
     Subject to paragraph (4), with respect to items and services 
     (not described in paragraph (2)) which are included under the 
     medicare program (including wrap around benefits under 
     subpart 2 of part B of title XXIII of the Social Security 
     Act), the Secretary may classify them either within a class 
     specified in paragraph (2) or within a new class established 
     by the Secretary for such an item or service.
       (4) Exclusions.--The following items and services shall not 
     be considered to be health care services and shall not be 
     included in a class of services under paragraph (1) or (3), 
     except as provided in paragraph (5):
       (A) Over-the-counter medications and medical equipment and 
     devices.
       (B) Homemaker and home health aide services and personal 
     care services, and other services described in section 
     1915(c)(4)(B), section 1929(a), or section 1930(a) of the 
     Social Security Act.
       (C) Inpatient mental health services of a custodial nature.
       (5) Inclusion of medicare services.--Paragraph (4) shall 
     not apply to items and services covered under the medicare 
     program.
       (b) Publication.--
       (1) In general.--The Secretary shall publish--
       (A) by not later than April 1, 1995, proposed regulations 
     defining the health care services and establishing the 
     classes of services under this section, and
       (B) by not later than October 1, 1995, final regulations 
     defining the health care services and establishing such 
     classes.
       (2) Items included in regulations.--In such regulations, 
     the Secretary shall define--
       (A) the class or classes to be established under subsection 
     (a)(1),
       (B) the services to be included within each class, and
       (C) the methods and sources of data for computing, for 
     purposes of this subtitle, the national medicare per capita 
     estimate within the class.
       (3) Changes.--
       (A) No changes authorized.--After the Secretary has 
     established classes of services under paragraph (1)(B), the 
     Secretary may not change such classes (or the services 
     included in such classes), except in the case of services not 
     previously classified. Any such services not previously 
     classified shall be classified within one of the classes 
     previously established.
       (B) Recommended changes.--If the Secretary determines that 
     a change in the classification established under this section 
     may be appropriate, the Secretary shall submit to the 
     Congress a report proposing such change. The Secretary shall 
     include in the report an explanation of--
       (i) the rationale for such change, and
       (ii) the impact of such change on the per capita estimates 
     under this part and on medicare expenditures permitted for 
     classes of services that would be affected by the change.
       (4) Commission reports.--
       (A) Initial reports.--With respect to the establishment of 
     classes of services under this section, each applicable 
     Commission (as defined in subsection (c)), by not later than 
     June 1, 1995, shall report to the Congress its comments 
     concerning the classification proposed by the Secretary under 
     paragraph (1)(A).
       (B) Periodic reports.--Each applicable Commission shall 
     periodically report to Congress on changes in the system of 
     classification under this section that should be made to 
     promote the more efficient provision of medically appropriate 
     health care services.
       (c) Applicable Commission Defined.--In this subtitle, the 
     term ``applicable Commission'' means--
       (1) with respect to services included in a class of 
     services furnished by a hospital, other institutional 
     provider, or home health provider, the Prospective Payment 
     Assessment Commission (established under section 1886(e)(2) 
     of the Social Security Act);
       (2) with respect to prescription drugs, biologicals, and 
     insulin, the Prescription Drug Payment Review Commission 
     (provided for under section 1847 of the Social Security Act, 
     as added by section 3104 of this Act),
       (3) with respect to physicians' services, the Physician 
     Payment Review Commission (provided for under section 1845 of 
     the Social Security Act), and
       (4) with respect to mental health and substance abuse 
     services, the Advisory Commission on Mental Health and 
     Substance Abuse Services (provided for under section 
     3025(a)).

     SEC. 8203. ALLOCATION OF PER CAPITA ESTIMATES BY CLASS OF 
                   SERVICE FOR MEDICARE A/B.

       (a) Allocation.--
       (1) In general.--The Secretary shall allocate the medicare 
     A/B per capita estimate under section 8201 for a year among 
     classes of services specified under section 8202.
       (2) Proportional allocation based on projected 
     expenditures.--The amount allocated to each class for a year 
     shall be equal to the medicare A/B per capita estimate for 
     the year multiplied by the ratio (expressed as a percentage) 
     of--
       (A) the projected medicare A/B expenditures for the class 
     for the year (as determined under subsection (b)(2)), to
       (B) the sum of such projected medicare A/B expenditures for 
     all the classes for the year.
       (3) Publication.--
       (A) In general.--The Secretary shall, in conjunction with 
     the publication of the initial estimate and final 
     determination of the per capita estimates under section 
     8201(a)(3) for a year, publish in the Federal Register and 
     report to the Congress the allocation of the per capita 
     estimates among the classes of services under this 
     subsection.
       (B) Exception for 1996.--For 1996, the Secretary shall 
     publish and report the allocation of the medicare A/B per 
     capita estimate among the classes of services under this 
     subsection not later than August 1, 1995.
       (b) Projected Medicare A/B Expenditures.--
       (1) In general.--
       (A) Determination.--For purposes of subsection (a)--
       (i) For 1995.--The projected medicare A/B expenditures for 
     a class of services for 1995 is equal to the portion of the 
     national medicare per capita expenditures during 1993 (as 
     determined under section 8201(d)) which is attributable to 
     the class of services, multiplied twice by the medicare A/B 
     trend factor (described in subparagraph (B)) for the class 
     and multiplied by the adjustment factor described in 
     subparagraph (C) for 1995. In computing such portion for 
     classes, the Secretary shall take into account the allocation 
     of expenditures by health maintenance organizations among the 
     different classes of services.
       (ii) Subsequent years.--The projected medicare A/B 
     expenditures for a class of services for a year after 1995 is 
     equal to the amount of the allocation for the class under 
     clause (i) for the preceding year multiplied by the medicare 
     A/B trend factor (described in subparagraph (B)) for the 
     class and multiplied by the adjustment factor described in 
     subparagraph (C) for the year.
       (B) Medicare a/b trend factor.--In subparagraph (A), 
     subject to subparagraph (D), the ``medicare A/B trend 
     factor'', is 1 plus the following amount for the class of 
     services involved:
       (i) Inpatient hospital services.--For the class described 
     in section 8202(a)(2)(A), 8.6 percent.
       (ii) Outpatient hospital services.--For the class described 
     in section 8202(a)(2)(B), 15.7 percent.
       (iii) Diagnostic testing services.--For the class described 
     in section 8202(a)(2)(C), 12.2 percent.
       (iv) Physicians' services.--For the class described in 
     section 8202(a)(2)(D), 9.1 percent.
       (v) Home health and hospice.--For the class described in 
     section 8202(a)(2)(E), 13.9 percent.
       (vi) Rehabilitation services.--For the class described in 
     section 8202(a)(2)(F), 12.3 percent.
       (vii) Durable medical equipment.--For the class described 
     in section 8202(a)(2)(G), 10.2 percent.
       (viii) Prescription drugs.--For the class described in 
     section 8202(a)(2)(H), 8.2 percent.
       (ix) Nursing facility services.--For the class described in 
     section 8202(a)(2)(I), 11.5 percent.
       (x) Mental health services.--For the class described in 
     section 8202(a)(2)(J), 15.7 percent.
       (C) Adjustment factor (normalization).--The adjustment 
     factor described in this subparagraph for a year is equal to 
     the ratio of--
       (i) the national medicare A/B per capita estimate for the 
     year (as determined under section 8201(a)(2)(B)) or, for 
     1995, the medicare per capita budget baseline for 1995 (as 
     determined under section 8201(b)(2)), to
       (ii) the sum of the projected medicare A/B expenditures 
     projected for all the classes for the year (determined under 
     subparagraph (A) without regard to this subparagraph).
       (D) Special rule.--The Secretary shall adjust the projected 
     medicare A/B expenditures for each year (beginning with 1996) 
     in order to reflect the changes in expenditures under parts A 
     and B of the medicare program attributable to amendments made 
     by subtitle B of title III or subtitle D of this title, 
     including the addition of an outpatient prescription drug 
     benefit. Such adjustment shall be consistent with the 
     adjustment described in section 8201(e)(4)(A).
       (2) Publication of trend factors.--The Secretary shall 
     publish, by not later than August 1, 1995, the medicare A/B 
     trend factors for the different classes of services.
       (c) Review and Changes in Allocation.--
       (1) In general.--
       (A) No administrative authority to change.--Except as 
     specifically provided in this paragraph, the Secretary has no 
     authority to change the allocation or medicare A/B trend 
     factors from the allocation and medicare A/B trend factors 
     provided under this section.
       (B) Recommended changes.--Subject to subparagraph (C), if 
     the Secretary determines that a change in the allocation of 
     an estimate among classes is appropriate, the Secretary shall 
     submit to the Congress a report proposing such change. The 
     Secretary shall include in the report an explanation of--
       (i) the rationale for such change, and
       (ii) the impact of such change on the per capita estimates 
     permitted for classes of services that would be affected by 
     the change.
       (C) Correction permitted for estimation errors.--Insofar as 
     the Secretary determines that the amounts used in estimating 
     initially the projected medicare A/B expenditures under this 
     subsection did not accurately reflect the actual portions 
     described in subsection (b)(1)(A)(i), the Secretary shall 
     adjust the allocation of the medicare A/B per capita estimate 
     among classes of services to correct for such estimation 
     errors.
       (2) Commission review.--Each applicable Commission shall 
     annually review and report to Congress, in its report 
     submitted under section 8202(b)(4), on the effect of the 
     medicare trend factors used in the allocation of the medicare 
     A/B per capita estimate among classes of services. Such 
     report shall include such recommendations for appropriate 
     adjustments in the medicare trend factors as the applicable 
     Commission considers appropriate to properly take into 
     account at least--
       (A) changes in health care technology,
       (B) changes in the patterns and practices relating to 
     health care delivery found to be appropriate,
       (C) changes in the distribution of health care services, 
     and
       (D) the special health care needs of underserved rural and 
     inner city populations.

     SEC. 8204. ALLOCATION OF PER CAPITA ESTIMATES BY CLASS OF 
                   SERVICE FOR MEDICARE C.

       (a) Allocation.--
       (1) In general.--The Secretary shall allocate the medicare 
     C per capita estimate under section 8201 for a year among 
     classes of services specified under section 8202.
       (2) Proportional allocation based on projected 
     expenditures.--The amount allocated to each class for a year 
     shall be equal to the medicare C per capita estimate 
     allocated for the year multiplied by the ratio (expressed as 
     a percentage) of--
       (A) the projected medicare C expenditures for the class for 
     the year (as determined under subsection (b)(2)), to
       (B) the sum of such projected medicare C expenditures for 
     all the classes for the year.
       (3) Publication.--The Secretary shall, in conjunction with 
     the publication of the initial estimate and final 
     determination of the per capita estimates under section 
     8201(a)(3) for a year, publish in the Federal Register and 
     report to the Congress the allocation of the per capita 
     estimates among the classes of services under this 
     subsection.
       (b) Projected Medicare Part C Expenditures.--
       (1) In general.--
       (A) Determination.--For purposes of subsection (a)--
       (i) For 1999.--The projected medicare part C expenditures 
     for a class of services for 1999 is equal to the portion of 
     the national medicare C per capita estimate during 1999 (as 
     determined under section 8201(a)(2)(C)) which is attributable 
     to each class of services, as estimated by the Secretary 
     based upon the best data available, consistent with data used 
     in determining the applicable medicare part C premiums under 
     section 2121 of the Social Security Act.
       (ii) Subsequent years.--The projected medicare C 
     expenditures for a class of services for a year after 1999 is 
     equal to the amount of the allocation for the class under 
     clause (i) for the preceding year multiplied by the medicare 
     C trend factor (described in subparagraph (B)) for the class 
     for the year involved and multiplied by the adjustment factor 
     described in subparagraph (C) for the year.
       (B) Medicare c trend factor.--
       (i) In general.--In subparagraph (A), subject to clause 
     (ii), the ``medicare C trend factor'', for a class of 
     services, the private trend factor for the class of services, 
     as determined under section 6003(b)(1)(B).
       (ii) Modification.--Based upon data from the medicaid 
     program and such other data as the Secretary determines to be 
     appropriate, the Secretary may modify the trend factors 
     described in clause (i) to reflect the rate of growth in 
     services for the classes under medicare part C.
       (C) Adjustment factor (normalization).--The adjustment 
     factor described in this subparagraph for a year is equal to 
     the ratio of--
       (i) the national medicare C per capita estimate for the 
     year (as determined under section 8201(a)(2)(C)), to
       (ii) the sum of the projected medicare C expenditures 
     projected for all the classes for the year (determined under 
     subparagraph (A) without regard to this subparagraph).
       (D) Special rule.--The Secretary shall adjust the projected 
     medicare C expenditures for each year (beginning with 2000) 
     in order to reflect the changes in expenditures under 
     medicare part C to reflect the changes in expenditures under 
     medicare part C attributable to the addition of benefits not 
     included in the previous year. Such adjustment shall be 
     consistent with the adjustment described in section 
     8201(e)(4)(B).
       (2) Publication of trend factors.--The Secretary shall 
     publish, by not later than April 1, 1998, the medicare C 
     trend factors for the different classes of services.
       (c) Review and Changes in Allocation.--
       (1) In general.--
       (A) No administrative authority to change.--Except as 
     specifically provided in this paragraph, subsection 
     (b)(1)(B)(ii), and sections 8201(e)(4)(B) and 8203(b)(1)(D), 
     the Secretary has no authority to change the allocation or 
     medicare C trend factors from the allocation and medicare C 
     trend factors provided under this section.
       (B) Recommended changes.--If the Secretary determines that 
     a change in the allocation of an estimate among classes is 
     appropriate, the Secretary shall submit to the Congress a 
     report proposing such change. The Secretary shall include in 
     the report an explanation of--
       (i) the rationale for such change, and
       (ii) the impact of such change on the per capita estimates 
     permitted for classes of services that would be affected by 
     the change.
       (2) Commission review.--Each applicable Commission shall 
     annually review and report to Congress, in its report 
     submitted under section 8202(b)(4), on the effect of the 
     medicare trend factors used in the allocation of the medicare 
     C per capita estimate among classes of services. Such report 
     shall include such recommendations for appropriate 
     adjustments in the medicare trend factors as the applicable 
     Commission considers appropriate to properly take into 
     account at least--
       (A) changes in health care technology,
       (B) changes in the patterns and practices relating to 
     health care delivery found to be appropriate,
       (C) changes in the distribution of health care services, 
     and
       (D) the special health care needs of underserved rural and 
     inner city populations.

     SEC. 8205. COMBINED MEDICARE PER CAPITA ALLOCATIONS FOR 
                   CLASSES OF SERVICES.

       (a) For 1996, 1997, and 1998.--For 1996, 1997, and 1998, 
     the Secretary shall compute a combined medicare per capita 
     allocation for each class of services equal to the per capita 
     amount allocated to the class for medicare A/B for the year 
     under section 8203.
       (b) Subsequent Years.--For each year after 1998, the 
     Secretary shall compute a combined medicare per capita 
     allocation for each class of services equal to the average 
     of--
       (1) the per capita amount allocated to the class for 
     medicare A/B for the year under section 8203, and
       (2) the per capita amount allocated to the class for 
     medicare C for the year under section 8204,

     weighted to reflect the relative average number of enrollees 
     in the medicare program and in medicare part C, respectively, 
     for the year.

     SEC. 8206. COMPUTATION OF MEDICARE ANNUAL COMBINED RATE OF 
                   INCREASE FOR CLASSES OF SERVICES; APPLICATION 
                   TO MEDICARE PAYMENT RATES.

       (a) Combined Rates.--
       (1) Determination.--For each year (beginning with 1996) for 
     services within each class of services, the Secretary shall 
     determine a uniform percentage increase. The uniform 
     percentage increase shall be such an increase as the 
     Secretary determines will result in aggregate expenditures 
     under the medicare program and medicare part C consistent 
     with the combined medicare per capita allocation for such 
     class for such year, as determined under section 8205.
       (2) Application to medicare payment rates.--Notwithstanding 
     any provision of title XVIII or title XXIII of the Social 
     Security Act, subject to section 4004(c)(1)(B), the amount of 
     payment under such titles for items and services included in 
     a class of services for a year (after 1995) shall be based on 
     the amount of payment for such items and services under such 
     titles in the previous year increased by the uniform 
     percentage increase determined under paragraph (1) for such 
     class of services for the year.
       (b) Percentage Increase in Combined Allocation for Class of 
     Prescription Drugs.--For each year beginning after 1997, for 
     purposes of sections 1834(d) of the Social Security Act and 
     sections 3012(d) and 3013(a), the Secretary shall compute the 
     percentage by which--
       (1) the combined medicare per capita allocation for the 
     class of services that includes prescription drugs for the 
     year, exceeds
       (2) the combined medicare per capita allocation for such 
     class of services for the preceding year.

     SEC. 8207. NATIONAL HEALTH EXPENDITURES REPORTING SYSTEM.

       (a) In General.--The Secretary shall establish a national 
     health expenditures reporting system (in this section 
     referred to as the ``system'') for purposes of--
       (1) establishing per capita estimates,
       (2) allocating the medicare per capita estimates among 
     classes of services,
       (3) determining medicare payment rates,
       (4) monitoring of any State cost containment and benefit 
     management programs established by States pursuant to title 
     IV, and
       (5) otherwise carrying out this subtitle.
       (b) Information Reporting.--
       (1) Annual report by providers.--
       (A) In general.--Under the system, providers of health care 
     services (including such providers within provider networks) 
     shall submit (by not later than April 15 of each year, 
     beginning with 1997) a report.
       (B) Contents.--Such a report shall include such information 
     as the Secretary specifies relating to the provision of 
     health care services in the previous year, including--
       (i) the volume and receipts for such services,
       (ii) cost and revenue data for hospitals and other 
     institutional providers and revenue data for other providers, 
     and
       (iii) information by class of service, type of payer, and 
     State of residence of individual provided the services.

     Information on revenues for activities not related to the 
     provision of direct patient care, such as teaching or 
     research or for services that are explicitly excluded from 
     the system of national health expenditures estimates, shall 
     be reported separately.
       (C) Form.--The report shall be submitted in such form and 
     manner (including the use of electronic transmission) as the 
     Secretary shall specify in regulation. Such form shall permit 
     the reporting of information by health plans on behalf of 
     providers who are in provider networks in the plan.
       (D) Use of reporting mechanisms.--To the maximum extent 
     practicable and appropriate, reporting under such system 
     shall be done through reporting mechanisms (such as uniform 
     hospital reports provided under section 9105) and using data 
     bases otherwise in use.
       (E) Use of surveys.--The Secretary may, where appropriate, 
     provide for the collection of information under the system 
     through surveys of a sample of health care providers or with 
     respect to a sample of information with respect to such 
     providers.
       (2) Confidentiality.--Information gathered pursuant to the 
     authority provided under this section shall not be disclosed 
     in a manner that identifies individual providers of services.
       (3) Transition.--Before April 15, 1997, for purposes of 
     this subtitle, the Secretary may use such other data 
     collection and estimation techniques as may be appropriate 
     for purposes described in subsection (a).
       (c) Enforcement.--If a provider of health services is 
     required, under the system under this section, to report 
     information and refuses, after being requested by the 
     Secretary, to provide the information required, or 
     deliberately provides information that is false, the 
     Secretary may impose a civil money penalty of not to exceed 
     $10,000 for each such refusal or provision of false 
     information. The provisions of section 1128A of the Social 
     Security Act (other than subsections (a) and (b)) shall apply 
     to civil money penalties under the previous sentence in the 
     same manner as such provisions apply to a penalty or 
     proceeding under section 1128A(a) of such Act.

               PART 2--STATE HEALTH EXPENDITURE ESTIMATES

     SEC. 8211. STATE MEDICARE PER CAPITA HEALTH EXPENDITURE 
                   ESTIMATE.

       (a) Establishment.--
       (1) In general.--For each calendar year (beginning with 
     1996), the Secretary shall establish a State medicare per 
     capita health expenditure estimate (in this subtitle referred 
     to as a ``State medicare per capita estimate'') for each 
     State under paragraph (2).
       (2) Amount.--Subject to subsection (e), the State medicare 
     per capita estimate for a State for a year is equal to the 
     national medicare per capita estimate for the year, 
     established under section 8201, multiplied by the applicable 
     State adjustment factor (specified under subsection (b)) for 
     the State.
       (3) Publication.--The Secretary shall publish in the 
     Federal Register and report to the Congress and to each 
     State--
       (A) by not later than April 1 before each year, an initial 
     estimate of the State medicare per capita estimate for each 
     State for the year; and
       (B) by not later than October 1 before each year, a final 
     determination of the State medicare per capita estimate for 
     each State for the year.
       (4) Periodic commission reports on state estimates.--Each 
     applicable Commission shall periodically review and report to 
     Congress on the State medicare per capita estimates 
     established under this section. Such a report shall include 
     such recommendations as the respective Commission deems 
     appropriate.
       (b) State Adjustment Factors.--
       (1) In general.--The Secretary shall compute a State 
     adjustment factor for each State consistent with this 
     subsection.
       (2) Basis for computation.--Subject to adjustment under 
     paragraphs (3) and (4), the State adjustment factor for a 
     State shall be equal to the ratio of the State's medicare per 
     capita expenditures (that would be computed for the State 
     under section 8201(d) if computations under such section were 
     made for that State rather than for the United States) to the 
     national medicare per capita expenditures determined under 
     such section.
       (3) Adjustment to reflect health care expenditures for 
     state residents.--The Secretary shall provide for an 
     adjustment to take into account differences among States in 
     the in-State, and out-of-State, use of services by residents 
     and non-residents of the State, in order that the per capita 
     amount reflects the medicare per capita health care 
     expenditures for residents of the State for services provided 
     anywhere in the United States.
       (4) Average.--The Secretary shall establish the State 
     adjustment factors in such a manner as assures that the 
     population weighted average of such factors is 1.
       (c) Adjustment.--
       (1) In general.--Subject to paragraph (3), the provisions 
     of section 8201(e) shall apply to the State medicare per 
     capita estimates under this section in the same manner as 
     they apply to the national medicare per capita estimate.
       (2) Adjustment to correct estimation errors.--Insofar as 
     the Secretary determines that the amounts used in estimating 
     initially the State medicare per capita estimates did not 
     accurately reflect the correct values for the factors used in 
     computing State adjustments factors under subsection (b), the 
     Secretary shall adjust the State medicare per capita 
     estimates to correct for such estimation errors.
       (3) Adjustments in 1996 and subsequent years.--
       (A) Adjustment for changes in benefits in 1996.--In 
     applying section 8201(e)(4) under paragraph (1), the 
     adjustment for each State medicare per capita estimate shall 
     be the same as the adjustment to the national medicare per 
     capita estimate under such section.
       (B) Adjustment for implementation of medicare part c.--The 
     Secretary shall adjust the State medicare per capita 
     estimates for each State for each year (beginning with 1999) 
     to reflect variations among States in the estimated number of 
     residents of the State who are enrolled in medicare part C 
     for the year.

               PART 3--ADMINISTRATIVE AND JUDICIAL REVIEW

     SEC. 8221. LIMITATION ON ADMINISTRATIVE AND JUDICIAL REVIEW.

       There shall be no administrative or judicial review of any 
     of the following determinations:
       (1) The national medicare per capita estimate and the State 
     medicare per capita estimate for each State.
       (2) Allocation of the national medicare per capita estimate 
     or a State medicare per capita estimate to a class of health 
     services.
          Subtitle D--Revisions to Medicare Part A and Part B

                  PART 1--ADDITIONAL MEDICARE SAVINGS

     SEC. 8301. REDUCTION IN PAYMENTS FOR INDIRECT COSTS OF 
                   MEDICAL EDUCATION.

       (a) In General.--Section 1886(d)(5)(B)(ii) (42 U.S.C. 
     1395ww(d)(5)(B)(ii)) is amended to read as follows:
       ``(ii) For purposes of clause (i)(II), the indirect 
     teaching adjustment factor is equal to c * (((1+r) to the nth 
     power) - 1), where `r' is the ratio of the hospital's full-
     time equivalent interns and residents to beds and `n' equals 
     .405. For discharges occurring on or after--
       ``(I) May 1, 1986, and before January 1, 1999, `c' is equal 
     to 1.89;
       ``(II) January 1, 1999, and before October 1, 1999, `c' is 
     equal to 1.68;
       ``(III) October 1, 1999, and before October 1, 2000, `c' is 
     equal to 1.48; and
       ``(IV) October 1, 2000, `c' is equal to 1.28.''.
       (b) No Restandardization of Payment Amounts Required.--
     Section 1886(d)(2)(C)(i) (42 U.S.C. 1395ww(d)(2)(C)(i)) is 
     amended by striking ``of 1985'' and inserting ``of 1985, but 
     not taking into account the amendments made by section 
     8301(a) of the Guaranteed Health Insurance Act of 1994''.

     SEC. 8302. REDUCTIONS IN DISPROPORTIONATE SHARE ADJUSTMENTS.

       (a) In General.--Section 1886(d)(5)(F) (42 U.S.C. 
     1395ww(d)(5)(F)) is amended--
       (1) in clause (ii), by striking ``The amount'' and 
     inserting ``Subject to clause (ix), the amount''; and
       (2) by adding at the end the following new clause:
       ``(ix) Notwithstanding any other provision of this 
     subparagraph, the Secretary shall reduce the amount of any 
     additional payment made to a hospital under this 
     subparagraph--
       ``(I) for discharges occurring on or after January 1, 1999, 
     and before October 1, 2000, by 25 percent (or, in the case of 
     an urban hospital that has more than 100 beds and a 
     disproportionate patient percentage equal to or greater than 
     30 percent or a hospital described in the second sentence of 
     clause (v), by 10 percent); and
       ``(II) for discharges occurring on or after October 1, 2000 
     by 50 percent (or, in the case of an urban hospital that has 
     more than 100 beds and a disproportionate patient percentage 
     equal to or greater than 30 percent or a hospital described 
     in the second sentence of clause (v), by 25 percent).''.
       (b) Recommendations on Adjustments to Formula.--
       (1) Recommendations of secretary.--Not later than October 
     1, 1995, the Secretary shall submit recommendation to 
     Congress on methods to adjust the definition of 
     disproportionate patient percentage used to determine the 
     amount of payment adjustments made under section 
     1886(d)(5)(F) of the Social Security Act to hospitals serving 
     a significantly disproportionate number of low-income 
     patients to take into account the provisions of this Act, 
     including the establishment of the health insurance benefit 
     program under part A of title XXIII of the Social Security 
     Act and the repeal of coverage of inpatient hospital services 
     under State plans for medical assistance under title XIX of 
     such Act.
       (2) Report by propac.--The Prospective Payment Assessment 
     Commission shall review the Secretary's report under 
     paragraph (2) and include recommendations relating to the 
     report in the report submitted pursuant to section 1886(e)(3) 
     of the Social Security Act on March 1, 1996.

     SEC. 8303. REDUCTIONS IN PAYMENTS FOR CAPITAL-RELATED COSTS 
                   OF INPATIENT HOSPITAL SERVICES FOR PPS 
                   HOSPITALS.

       Section 1886(g)(1)(A) (42 U.S.C. 1395ww(g)(1)(A)) is 
     amended by adding at the end the following new sentence: ``In 
     addition to the reduction described in the preceding 
     sentence, for discharges occurring after September 30, 1995, 
     the Secretary shall reduce by 7.31 percent the unadjusted 
     standard Federal capital payment rate (as described in 42 CFR 
     412.308(c), as in effect on the date of the enactment of the 
     Guaranteed Health Insurance Act of 1994) and shall reduce by 
     10.41 percent the unadjusted hospital-specific rate (as 
     described in 42 CFR 412.328(e)(1), as in effect on the date 
     of the enactment of the Guaranteed Health Insurance Act of 
     1994).''.

     SEC. 8304. LIMITATIONS ON PAYMENT FOR PHYSICIANS' SERVICES 
                   FURNISHED BY HIGH-COST HOSPITAL MEDICAL STAFFS.

       (a) In General.--
       (1) Limitations described.--Part B of title XVIII, as 
     amended by [Review: section 3103(a)], is amended by inserting 
     after section 1848 the following new section:


  ``limitations on payment for physicians' services furnished by high-
                      cost hospital medical staffs

       ``Sec. 1849. (a) Services Subject to Reduction.--
       ``(1) Determination of hospital-specific per admission 
     relative value.--Not later than October 1 of each year 
     (beginning with 1997), the Secretary shall determine for each 
     hospital--
       ``(A) the hospital-specific per admission relative value 
     under subsection (b)(2) for the following year; and
       ``(B) whether such hospital-specific relative value is 
     projected to exceed the allowable average per admission 
     relative value applicable to the hospital for the following 
     year under subsection (b)(1).
       ``(2) Reduction for services at hospitals exceeding 
     allowable average per admission relative value.--If the 
     Secretary determines (under paragraph (1)) that a medical 
     staff's hospital-specific per admission relative value for a 
     year (beginning with 1998) is projected to exceed the 
     allowable average per admission relative value applicable to 
     the medical staff for the year, the Secretary shall reduce 
     (in accordance with subsection (c)) the amount of payment 
     otherwise determined under this part for each physician's 
     service furnished during the year to an inpatient of the 
     hospital by an individual who is a member of the hospital's 
     medical staff.
       ``(3) Timing of determination; notice to hospitals and 
     carriers.--Not later than October 1 of each year (beginning 
     with 1997), the Secretary shall notify the medical executive 
     committee of each hospital (as set forth in the Standards of 
     the Joint Commission on the Accreditation of Health 
     Organizations) of the determinations made with respect to the 
     medical staff under paragraph (1).
       ``(b) Determination of Allowable Average Per Admission 
     Relative Value and Hospital-Specific Per Admission Relative 
     Values.--
       ``(1) Allowable average per admission relative value.--
       ``(A) Urban hospitals.--In the case of a hospital located 
     in an urban area, the allowable average per admission 
     relative value established under this subsection for a year 
     is equal to 125 percent (or 120 percent for years after 1999) 
     of the median of 1996 hospital-specific per admission 
     relative values determined under paragraph (2) for all 
     hospital medical staffs.
       ``(B) Rural hospitals.--In the case of a hospital located 
     in a rural area, the allowable average per admission relative 
     value established under this subsection for 1998 and each 
     succeeding year, is equal to 140 percent of the median of the 
     1996 hospital-specific per admission relative values 
     determined under paragraph (2) for all hospital medical 
     staffs.
       ``(2) Hospital-specific per admission relative value.--
       ``(A) In general.--The hospital-specific per admission 
     relative value projected for a hospital (other than a 
     teaching hospital) for a calendar year, shall be equal to the 
     average per admission relative value (as determined under 
     section 1848(c)(2)) for physicians' services furnished to 
     inpatients of the hospital by the hospital's medical staff 
     (excluding interns and residents) during the second year 
     preceding such calendar year, adjusted for variations in 
     case-mix and disproportionate share status among hospitals 
     (as determined by the Secretary under subparagraph (C)).
       ``(B) Special rule for teaching hospitals.--The hospital-
     specific relative value projected for a teaching hospital in 
     a calendar year shall be equal to the sum of--
       ``(i) the average per admission relative value (as 
     determined under section 1848(c)(2)) for physicians' services 
     furnished to inpatients of the hospital by the hospital's 
     medical staff (excluding interns and residents) during the 
     second year preceding such calendar year; and
       ``(ii) the equivalent per admission relative value (as 
     determined under section 1848(c)(2)) for physicians' services 
     furnished to inpatients of the hospital by interns and 
     residents of the hospital during the second year preceding 
     such calendar year, adjusted for variations in case-mix, 
     disproportionate share status, and teaching status among 
     hospitals (as determined by the Secretary under subparagraph 
     (C)). The Secretary shall determine such equivalent relative 
     value unit per admission for interns and residents based on 
     the best available data for teaching hospitals and may make 
     such adjustment in the aggregate.
       ``(C) Adjustment for teaching and disproportionate share 
     hospitals.--The Secretary shall adjust the allowable per 
     admission relative values otherwise determined under this 
     paragraph to take into account the needs of teaching 
     hospitals and hospitals receiving additional payments under 
     subparagraphs (F) and (G) of section 1886(d)(5). The 
     adjustment for teaching status or disproportionate share 
     shall not be less than zero.
       ``(c) Amount of Reduction.--The amount of payment otherwise 
     made under this part for a physician's service that is 
     subject to a reduction under subsection (a) during a year 
     shall be reduced 15 percent, in the case of a service 
     furnished by a member of the medical staff of the hospital 
     for which the Secretary determines under subsection (a)(1) 
     that the hospital medical staff's projected relative value 
     per admission exceeds the allowable average per admission 
     relative value.
       ``(d) Reconciliation of Reductions Based on Hospital-
     Specific Relative Value Per Admission With Actual Relative 
     Values.--
       ``(1) Determination of actual average per admission 
     relative value.--Not later than October 1 of each year 
     (beginning with 1999), the Secretary shall determine the 
     actual average per admission relative value (as determined 
     pursuant to section 1848(c)(2)) for the physicians' services 
     furnished by members of a hospital's medical staff to 
     inpatients of the hospital during the previous year, on the 
     basis of claims for payment for such services that are 
     submitted to the Secretary not later than 90 days after the 
     last day of such previous year. The actual average per 
     admission shall be adjusted by the appropriate case-mix, 
     disproportionate share factor, and teaching factor for the 
     hospital medical staff (as determined by the Secretary under 
     subsection (b)(2)(C)). Notwithstanding any other provision of 
     this title, no payment may be made under this part for any 
     physician's service furnished by a member of a hospital's 
     medical staff to an inpatient of the hospital during a year 
     unless the hospital submits a claim to the Secretary for 
     payment for such service not later than 90 days after the 
     last day of the year.
       ``(2) Reconciliation with reductions taken.--In the case of 
     a hospital for which the payment amounts for physicians' 
     services furnished by members of the hospital's medical staff 
     to inpatients of the hospital were reduced under this section 
     for a year--
       ``(A) if the actual average per admission relative value 
     for such hospital's medical staff during the year (as 
     determined by the Secretary under paragraph (1)) did not 
     exceed the allowable average per admission relative value 
     applicable to the hospital's medical staff under subsection 
     (b)(1) for the year, the Secretary shall reimburse the 
     fiduciary agent for the medical staff by the amount by which 
     payments for such services were reduced for the year under 
     subsection (c), including interest at an appropriate rate 
     determined by the Secretary;
       ``(B) if the actual average per admission relative value 
     for such hospital's medical staff during the year is less 
     than 15 percentage points above the allowable average per 
     admission relative value applicable to the hospital's medical 
     staff under subsection (b)(1) for the year, the Secretary 
     shall reimburse the fiduciary agent for the medical staff, as 
     a percent of the total allowed charges for physicians' 
     services performed in such hospital (prior to the withhold), 
     the difference between 15 percentage points and the actual 
     number of percentage points that the staff exceeds the limit 
     allowable average per admission relative value, including 
     interest at an appropriate rate determined by the Secretary; 
     and
       ``(C) if the actual average per admission relative value 
     for such hospital's medical staff during the year exceeded 
     the allowable average per admission relative value applicable 
     to the hospital's medical staff by 15 percentage points or 
     more, none of the withhold is paid to the fiduciary agent for 
     the medical staff.
       ``(3) Medical executive committee of a hospital.--Each 
     medical executive committee of a hospital whose medical staff 
     is projected to exceed the allowable relative value per 
     admission for a year, shall have one year from the date of 
     notification that such medical staff is projected to exceed 
     the allowable relative value per admission to designate a 
     fiduciary agent for the medical staff to receive and disburse 
     any appropriate withhold amount made by the carrier.
       ``(4) Alternative reimbursement to members of staff.--At 
     the request of a fiduciary agent for the medical staff, if 
     the fiduciary agent for the medical staff is owed the 
     reimbursement described in paragraph (2)(B) for excess 
     reductions in payments during a year, the Secretary shall 
     make such reimbursement to the members of the hospital's 
     medical staff, on a pro-rata basis according to the 
     proportion of physicians' services furnished to inpatients of 
     the hospital during the year that were furnished by each 
     member of the medical staff.
       ``(e) Definitions.--In this section, the following 
     definitions apply:
       ``(1) Medical staff.--An individual furnishing a 
     physician's service is considered to be on the medical staff 
     of a hospital--
       ``(A) if (in accordance with requirements for hospitals 
     established by the Joint Commission on Accreditation of 
     Health Organizations)--
       ``(i) the individual is subject to bylaws, rules, and 
     regulations established by the hospital to provide a 
     framework for the self-governance of medical staff 
     activities;
       ``(ii) subject to such bylaws, rules, and regulations, the 
     individual has clinical privileges granted by the hospital's 
     governing body; and
       ``(iii) under such clinical privileges, the individual may 
     provide physicians' services independently within the scope 
     of the individual's clinical privileges, or
       ``(B) if such physician provides at least one service to a 
     medicare beneficiary in such hospital.
       ``(2) Rural area; urban area.--The terms `rural area' and 
     `urban area' have the meaning given such terms under section 
     1886(d)(2)(D).
       ``(3) Teaching hospital.--The term `teaching hospital' 
     means a hospital which has a teaching program approved as 
     specified in section 1861(b)(6).''.
       (2) Conforming amendments.--(A) Section 1833(a)(1)(N) (42 
     U.S.C. 1395l(a)(1)(N)) is amended by inserting ``(subject to 
     reduction under section 1849)'' after ``1848(a)(1)''.
       (B) Section 1848(a)(1)(B) (42 U.S.C. 1395w-4(a)(1)(B)) is 
     amended by striking ``this subsection,'' and inserting ``this 
     subsection and section 1849,''.
       (b) Requiring Physicians to Identify Hospital at Which 
     Service Furnished.--Section 1848(g)(4)(A)(i) (42 U.S.C. 
     1395w-4(g)(4)(A)(i)) is amended by striking ``beneficiary,'' 
     and inserting ``beneficiary (and, in the case of a service 
     furnished to an inpatient of a hospital, report the hospital 
     identification number on such claim form),''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to services furnished on or after January 1, 
     1998.

     SEC. 8305. MEDICARE SECONDARY PAYER.

       (a) Extension of Data Match.--
       (1) Section 1862(b)(5)(C) (42 U.S.C. 1395y(b)(5)(C)) is 
     amended by striking clause (iii).
       (2) Section 6103(l)(12) of the Internal Revenue Code of 
     1986 is amended by striking subparagraph (F).
       (b) Repeal of Sunset on Application to Disabled Employees 
     of Employers with More than 100 Employees.--Section 
     1862(b)(1)(B)(iii) (42 U.S.C. 1395y(b)(1)(B)(iii)) is 
     amended--
       (1) in the heading, by striking ``Sunset'' and inserting 
     ``Effective date''; and
       (2) by striking ``, and before October 1, 1998''.
       (c) Provisions Relating to End Stage Renal Disease 
     Beneficiaries.--
       (1) Extension of period.--Section 1862(b)(1)(C) (42 U.S.C. 
     1395y(b)(1)(C)) is amended in the second sentence by striking 
     ``and on or before October 1, 1998,''.
       (2) Clarification of secondary payer for beneficiaries 
     covered under group health plans.--Effective as if included 
     in the enactment of OBRA-1993, section 1862(b)(1)(C)(i) (42 
     U.S.C. 1395y(b)(1)(C)(i)) is amended--
       (A) by inserting ``(or a member of the individual's family) 
     who is covered under the plan by virtue of the individual's 
     current employment status with an employer'' after ``an 
     individual''; and
       (B) by inserting ``solely'' after ``this title''.
       (d) Penalty for Late Payment.--Section 1862(b)(2)(B)(i) (42 
     U.S.C. 1395y(b)(2)(B)(i)) is amended by adding at the end the 
     following: ``If a primary plan fails to make such 
     reimbursement during the 60-day period that begins on the 
     date such notice or other information is received, the amount 
     required to be reimbursed shall be increased by 1 percent for 
     each month occurring after the expiration of such period and 
     prior to the month in which the primary plans makes the 
     reimbursement.''.

     SEC. 8306. IMPOSITION OF 20 PERCENT COINSURANCE ON HOME 
                   HEALTH SERVICES UNDER MEDICARE.

       (a) Part A.--Section 1813(a) (42 U.S.C. 1395e(a)) is 
     amended by adding at the end the following new paragraph:
       ``(5) The amount payable for a home health service 
     furnished to an individual under this part shall be reduced 
     by a copayment amount equal to 20 percent of the average of 
     all the per visit costs for such service furnished under this 
     title determined under section 1861(v)(1)(L) (as determined 
     by the Secretary on a prospective basis for services 
     furnished during a calendar year).''.
       (b) Part B.--Section 1833(a)(2) (42 U.S.C. 1395l(a)(2)), as 
     amended by section 2106(c)(1), is amended--
       (1) in subparagraph (A), by striking ``to home health 
     services,'' and by striking the comma after ``opinion)'';
       (2) in subparagraph (E), by striking ``and'' at the end;
       (3) in subparagraph (F), by striking the semicolon at the 
     end and inserting ``; and''; and
       (4) by adding at the end the following new subparagraph:
       ``(G) with respect to any home health service--
       ``(i) the lesser of --

       ``(I) the reasonable cost of such service, as determined 
     under section 1861(v), or
       ``(II) the customary charges with respect to such service,

     less the amount a provider may charge as described in clause 
     (ii) of section 1866(a)(2)(A), or
       ``(ii) if such service is furnished by a public provider of 
     services, or by another provider which demonstrates to the 
     satisfaction of the Secretary that a significant portion of 
     its patients are low-income (and requests that payment be 
     made under this clause), free of charge or at nominal charges 
     to the public, the amount determined in accordance with 
     section 1814(b)(2),

     less a copayment amount equal to 20 percent of the average of 
     all per visit costs for such service furnished under this 
     title determined under section 1861(v)(1)(L) (as determined 
     by the Secretary on a prospective basis for services 
     furnished during a calendar year);''.
       (c) Provider Charges.--Section 1866(a)(2)(A)(i) (42 U.S.C. 
     1395cc(a)(2)(A)(i)) is amended--
       (1) by striking ``deduction or coinsurance'' and inserting 
     ``deduction, coinsurance, or copayment''; and
       (2) by striking ``or (a)(4)'' and inserting ``(a)(4), or 
     (a)(5)''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to services furnished on or after January 1, 
     1998.

     SEC. 8307. HOME HEALTH COST LIMITS.

       (a) Reduction in Update to Routine Cost Limits.--Section 
     1861(v)(1)(L)(i) (42 U.S.C. 1395x(v)(1)(L)(i)) is amended--
       (1) in subclause (II), by striking ``or'' at the end;
       (2) in subclause (III), by striking ``112 percent,'' and 
     inserting ``and before July 1, 1996, 112 percent, or''; and
       (3) by inserting after subclause (III) the following new 
     subclause:
       ``(IV) July 1, 1996, 100 percent (adjusted by such amount 
     as the Secretary determines to be necessary to preserve the 
     savings resulting from the enactment of section 13564(a)(1) 
     of the Omnibus Budget Reconciliation Act of 1993),''.
       (b) Effective Date.--The amendments made by subsection (a) 
     shall apply to cost reporting periods beginning on or after 
     July 1, 1996.

     PART 2--PROVISIONS RELATING TO PAYMENTS FOR MEDICAL EDUCATION

     SEC. 8311. LIMITING MEDICARE MEDICAL EDUCATION PAYMENTS TO 
                   APPROVED RESIDENCY POSITIONS.

       (a) Payment for Direct Graduate Medical Education.--Section 
     1886(h)(4) (42 U.S.C. 1395ww(h)(4)) is amended by adding at 
     the end the following new subparagraph:
       ``(F) Requiring residents to meet approval under workforce 
     program.--Such rules shall provide that, with respect to a 
     resident whose initial residency period begins on or after 
     July 1, 1998--
       ``(i) an individual shall be counted only if the individual 
     is in a residency position that, under section 7013 of the 
     Guaranteed Health Insurance Act of 1994, has been allocated 
     to an approved medical residency training program; and
       ``(ii) the Secretary may not make any payments under this 
     subsection to a hospital unless the number of residents in 
     each of the approved medical residency training programs of 
     the hospital is in accordance with allocations under such 
     section 7013.''.
       (b) Payment for Indirect Graduate Medical Education.--
     Section 1886(d)(5)(B) (42 U.S.C. 1395ww(d)(5)(B)) is amended 
     by adding at the end the following new clause:
       ``(v) On and after July 1, 1998--
       ``(I) the Secretary, in determining such adjustment, may 
     count a resident in the calculation of a hospital's ratio of 
     full-time equivalent interns and residents to beds only if 
     the resident is in a residency position that, under section 
     7013 of the Guaranteed Health Insurance Act of 1994, has been 
     allocated to an approved medical residency training program; 
     and
       ``(II) the Secretary may not make any payments under this 
     subparagraph to the hospital unless the number of residents 
     in each of the approved medical residency training programs 
     of the hospital is in accordance with allocations under such 
     section 7013.''.

     SEC. 8312. DETERMINATION OF NUMBER OF FULL-TIME EQUIVALENT 
                   RESIDENTS.

       (a) Determination of Full-Time-Equivalent Residents During 
     Initial Residency Period.--
       (1) Emphasis on primary care.--Paragraph (4)(C)(ii) of 
     section 1886(h) (42 U.S.C. 1395ww(h)) is amended by striking 
     ``is 1.00,'' and inserting the following: ``is--

       ``(I) 1.1, in the case of a resident who is a primary care 
     resident (as defined in paragraph (5)(H)),
       ``(II) .8, in the case of a resident not described in 
     subclause (I),''.

       (2) Treating obstetrics and gynecology residents as primary 
     care residents.--Paragraph (5) of such section is amended--
       (A) by striking ``or''; and
       (B) by striking the period and inserting ``, or obstetrics 
     and gynecology.''.
       (b) Effective Date.--The amendments made by subsection (a) 
     shall apply to portions of cost reporting periods beginning 
     on or after January 1, 1996.

     SEC. 8313. PAYMENTS FOR HOSPITALS LOSING SPECIALTY POSITIONS.

       Section 1886 (42 U.S.C. 1395ww) is amended by adding at the 
     end the following subsection:
       ``(j) Payments for Hospitals Losing Specialty Positions 
     Under Allocation System.--
       ``(1) In general.--
       ``(A) Payments.--In the case of each hospital that in 
     accordance with paragraph (3) submits to the Secretary an 
     application for calendar year 1998 or any subsequent calendar 
     year (in this subsection referred to as an `eligible 
     hospital' for the year involved), the Secretary shall make 
     payments for the year to the hospital in an amount determined 
     in accordance with paragraph (4).
       ``(B) Source of funds for payments.--Payments under 
     paragraph (1) shall be made from amounts in the Federal 
     Hospital Insurance Trust Fund and the Federal Supplementary 
     Medical Insurance Trust Fund, and from amounts in the 
     Medicare Part C Trust Fund under title XXI (in the 
     proportions described in subsection (h)(1), taking into 
     account the proportions of direct medical education costs 
     associated with the provision of services under title XXI).
       ``(2) Hospitals losing specialty positions; other 
     conditions.--
       ``(A) Loss of positions.--
       ``(i) In general.--The Secretary may make payments under 
     paragraph (1) to a hospital for a calendar year only if, as a 
     result of allocations under 7013 of the Guaranteed Health 
     Insurance Act of 1994, the aggregate number of full-time-
     equivalent specialty positions for the hospital for the 
     academic year in which the calendar year begins (as estimated 
     by the Secretary) is below the aggregate number of such 
     positions for the hospital for academic year 1993.
       ``(ii) Aggregate number of specialty positions lost.--For 
     purposes of this subsection:

       ``(I) The term `aggregate number of specialty positions 
     lost', with respect to a hospital and an academic year, means 
     the difference between the 2 aggregate numbers determined by 
     the Secretary under clause (i) for the hospital.
       ``(II) The term `lost position', with respect to an 
     academic year, means a full-time-equivalent specialty 
     position counted in the determination under subclause (I) of 
     the aggregate number of specialty positions lost for the 
     year.

       ``(B) Compliance with allocation system.--With respect to 
     the approved physician training programs of a hospital, the 
     Secretary may make payments under paragraph (1) only if the 
     hospital agrees to ensure that the numbers of individuals 
     enrolled in the programs is in accordance with allocations 
     made under section 7013 of the Guaranteed Health Insurance 
     Act of 1994 for the programs.
       ``(3) Application for payments.--For purposes of paragraph 
     (1), an application for payments under such paragraph for a 
     hospital is in accordance with this paragraph if--
       ``(A) the hospital submits the application not later than 
     the date specified by the Secretary;
       ``(B) the application demonstrates that the hospital meets 
     the condition described in paragraph (2)(A)(i);
       ``(C) the application contains each agreement required in 
     this subsection; and
       ``(D) the application is in such form, is made in such 
     manner, and contains such agreements, assurances, and 
     information as the Secretary determines to be necessary.
       ``(4) Amount of payments.--The amount of payments required 
     in paragraph (1) to be made to an eligible hospital for a 
     calendar year is an amount equal to the product of--
       ``(A) the aggregate lost position amount, as defined in 
     paragraph (5) or (6) for the year, as applicable; and
       ``(B) the medicare patient load of the hospital under 
     subsection (h)(3)(C) for the cost reporting period involved, 
     except that the determination of the medicare patient load 
     for purposes of this subparagraph shall include (in addition 
     to the patients included under such subsection) patients 
     enrolled in the medicare part C program under part A of title 
     XXI.
       ``(5) Aggregate lost position amount; first year of 
     payments.--For purposes of paragraph (4)(A), the term 
     `aggregate lost position amount', with respect to the first 
     calendar year for which an eligible hospital receives 
     payments under paragraph (1), means an amount equal to the 
     product of--
       ``(A) the aggregate number of specialty positions lost (as 
     defined in paragraph (2)(A)(ii)(I)); and
       ``(B) an amount equal to 100 percent of the national 
     average FTE training amount in effect for the year under 
     section 7024(c)(3) of the Guaranteed Health Insurance Act of 
     1994 (or, as the case may be, 100 percent of the alternative 
     amount that applies to the hospital under section 
     7024(c)(3)(D) or section 7025 of such Act).
       ``(6) Aggregate lost position amount; subsequent years of 
     payments.--For purposes of paragraph (4)(A), the term 
     `aggregate lost position amount', with respect to the second 
     or subsequent calendar year for which an eligible hospital 
     receives payments under paragraph (1), means an amount equal 
     to the sum of subparagraphs (A) through (D), as follows:
       ``(A) An amount equal to the product of--
       ``(i) the aggregate number of specialty positions lost, 
     less an amount equal to the sum of--

       ``(I) the number of lost positions for which payments are 
     being made for the calendar year pursuant to subparagraphs 
     (B) through (D); and
       ``(II) the total number of lost positions for which, in 
     determinations under this paragraph for the hospital for 
     prior calendar years, the percentage applicable to the 
     national average or alternative amount referred to in 
     paragraph (5)(B) was 25 percent; and

       ``(ii) 100 percent of such national average or alternative 
     amount applicable for the year involved.
       ``(B) An amount equal to the product of--
       ``(i) the number of lost positions for which, in the 
     determination under this paragraph for the hospital for the 
     preceding calendar year, the percentage applicable to the 
     national average or alternative amount was 100 percent, 
     subject to paragraph (7) (relating to decreases in aggregate 
     numbers); and
       ``(ii) 75 percent of the national average or alternative 
     amount applicable for the year involved.
       ``(C) An amount equal to the product of--
       ``(i) the number of lost positions for which, in the 
     determination under this paragraph for the hospital for the 
     preceding calendar year, the percentage applicable to the 
     national average or alternative amount was 75 percent, 
     subject to paragraph (7); and
       ``(ii) 50 percent of the national average or alternative 
     amount applicable for the year involved.
       ``(D) An amount equal to the product of--
       ``(i) the number of lost positions for which, in the 
     determination under this paragraph for the hospital for the 
     preceding calendar year, the percentage applicable to the 
     national average or alternative amount was 50 percent, 
     subject to paragraph (7); and
       ``(ii) 25 percent of the national average or alternative 
     amount applicable for the year involved.
       ``(7) Rule regarding decrease in aggregate number of 
     specialty positions lost.--With respect to payments under 
     paragraph (1) for an eligible hospital for a calendar year, 
     if the aggregate number of specialty positions lost for the 
     academic year involved is less than such number for the 
     preceding academic year (which difference between the 2 
     aggregate numbers is referred to in this paragraph as the 
     ``decrease in the number of lost positions''), the following 
     applies:
       ``(A) The Secretary shall identify the number of lost 
     positions for which, as determined under paragraph (6) 
     without regard to this paragraph, the percentage applicable 
     to payments for the calendar year is 75 percent, the number 
     of such positions for which such percentage is 50 percent, 
     and the number of such positions for which such percentage is 
     25 percent.
       ``(B) In the case of the lost positions so identified, the 
     Secretary shall apply the decrease in the number of lost 
     positions as follows:
       ``(i) First, as a reduction in the number of positions for 
     which the percentage applicable is 75 percent.
       ``(ii) Second (for any remaining portions of the decrease 
     after compliance with clause (i)), as a reduction in the 
     number of positions for which such percentage is 50 percent.
       ``(iii) Third (for any remaining portions of the decrease 
     after compliance with clause (ii)), as a reduction in the 
     number of positions for which such percentage is 25 percent.
       ``(8) Definitions.--For purposes of this subsection, the 
     terms `academic year', `approved physician training program', 
     `full-time-equivalent specialty position', and `specialty 
     position', each has the meaning given the term under section 
     7081 of the Guaranteed Health Insurance Act of 1994.''.

     SEC. 8314. MEDICARE DEMONSTRATION REGARDING CONSORTIA OF 
                   HOSPITALS.

       (a) In General.--The Secretary shall establish and conduct 
     not more than 10 demonstration projects to increase the 
     number and percentage of medical students entering primary 
     care practice relative to those entering nonprimary care 
     practice under which the Secretary shall make payments in 
     accordance with subsection (c) to participating health care 
     training consortia.
       (b) Applications.--Each consortium desiring to participate 
     in a demonstration project under this section shall prepare 
     and submit to the Secretary an application at such time and 
     in such manner as the Secretary may require, and containing--
       (1) assurances that not less than 55 percent of all 
     residents participating in approved residency training 
     programs conducted by members of the consortium are primary 
     care residents (as defined in section 1886(h)(5)(H) of the 
     Social Security Act); and
       (2) such other information and assurances as the Secretary 
     may require.
       (c) Payments to Participants.--
       (1) In general.--Notwithstanding any provision of title 
     XVIII of the Social Security Act--
       (A) in the case of a consortium participating in a 
     demonstration project under this subtitle, the Secretary 
     shall make payments under such title for the direct and 
     indirect costs of graduate medical education of members of 
     the consortium to the consortium (or through any entity 
     identified by such a consortium as appropriate for receiving 
     payments on behalf of the consortium), except that the amount 
     paid to the consortium shall be based on the designations 
     described in paragraph (2); and
       (B) the Secretary may not make any payment under such title 
     to a member of a consortium for the direct and indirect costs 
     of graduate medical education during the period of the 
     consortium's participation in the demonstration project.
       (2) Designation of residents by consortium.--Each 
     consortium participating in a demonstration project shall 
     designate for each resident assigned to the consortium a 
     hospital operating an approved medical residency training 
     program for purposes of enabling the Secretary to calculate 
     the amount paid to the consortium under paragraph (1)(A). 
     Such hospital shall be the hospital where the resident 
     receives the majority of the resident's hospital-based, 
     nonambulatory training experience.
       (3) Limit on payment.--The amount paid to a consortium 
     under paragraph (1)(A) during a year may not exceed the 
     Secretary's estimate of the sum of the payments that would 
     have been made under title XVIII to each member of the 
     consortium during the year but for the application of this 
     section, determined as if such payments were based on--
       (A) the number of full-time-equivalent residents in 
     approved medical residency training programs of the member 
     calculated under section 1886(h)(4) of the Social Security 
     Act during the academic year beginning July 1, 1993; and
       (B) the ratio of the member's full-time equivalent interns 
     and residents to beds applicable under section 
     1886(d)(5)(B)(ii) of such Act for discharges occurring during 
     the 12-month cost reporting period beginning or after July 1, 
     1993.
       (d) Duration.--A demonstration project under this section 
     shall be conducted for a period not to exceed 10 years. The 
     Secretary may terminate a project if the Secretary determines 
     that the consortium participating in the project is not in 
     substantial compliance with the terms of the application 
     approved by the Secretary.
       (e) Evaluations and Reports.--
       (1) Evaluations.--Each consortium participating in a 
     demonstration project shall submit to the Secretary a final 
     evaluation within 360 days of the termination of the 
     consortium's participation and such interim evaluations as 
     the Secretary may require.
       (2) Reports to congress.--Not later than 360 days after the 
     first demonstration project under this section begins, and 
     annually thereafter for each year in which such a project is 
     conducted, the Secretary shall submit a report to Congress 
     which evaluates the effectiveness of the consortium 
     activities conducted under such projects and includes any 
     legislative recommendations determined appropriate by the 
     Secretary.
       (f) Definitions.--In this section:
       (1) Approved medical residency training program.--The term 
     ``approved medical residency training program'' has the 
     meaning given such term in section 1886(h)(5)(A) of the 
     Social Security Act.
       (2) Health care training consortium.--The term ``health 
     care training consortium'' means a State, regional, or local 
     entity consisting of at least 2 hospitals operating approved 
     medical residency training programs.
       (3) Resident.--The term ``resident'' has the meaning given 
     such term in section 1886(h)(5)(H) of the Social Security 
     Act.

     SEC. 8315. STUDY OF PAYMENTS FOR MEDICAL EDUCATION AT SITES 
                   OTHER THAN HOSPITALS.

       (a) Study.--The Secretary of Health and Human Services 
     shall conduct a study of the feasibility and desirability of 
     making payments to facilities, from sources including the 
     Health Care Workforce Trust Fund under title VII and the 
     Trust Funds established under title XVIII of the Social 
     Security Act, that are not hospitals for the direct and 
     indirect costs of graduate medical education attributable to 
     residents trained at such facilities. In conducting the 
     study, the Secretary shall evaluate new payment 
     methodologies--
       (1) under which each entity which incurs costs of graduate 
     medical education shall receive reimbursement for such costs; 
     and
       (2) which would encourage the training of primary care 
     physicians.
       (b) Report.--Not later than 2 years after the date of the 
     enactment of this Act, the Secretary shall submit a report to 
     Congress a report on the study conducted under subsection 
     (a), and shall include in the report such recommendations as 
     the Secretary considers appropriate.

  PART 3--ASSISTANCE FOR PROVIDERS SERVING LOW-INCOME AND UNDERSERVED 
                              POPULATIONS

     SEC. 8321. INCREASE IN PAYMENTS FOR FEDERALLY QUALIFIED 
                   HEALTH CENTERS.

       (a) In General.--Section 1833(a)(3) (42 U.S.C. 1395l(a)(3)) 
     is amended by inserting after ``1861(v)(1)(A),'' the 
     following: ``and, in the case of services described in 
     subparagraph (D)(ii) of such section, which include any costs 
     associated with participation in an approved medical 
     residency training program (as defined in section 
     1886(h)(5)(A)) as determined based on the portion of time 
     spent by a resident or intern at the center and adjusted by a 
     factor reflecting the relative indirect and direct costs of 
     such participation,''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply with respect to costs incurred on or after 
     January 1, 1996.

     SEC. 8322. CHANGES IN UNDERSERVED AREA BONUS PAYMENTS.

       (a) Increase in Amount of Payment for Primary Care 
     Services.--Section 1833(m) (42 U.S.C. 1395l(m)) is amended--
       (A) by striking ``10 percent'' and inserting ``a percent'',
       (B) by striking ``service'' the last place it appears and 
     inserting ``services'', and
       (C) by adding the following new sentence: ``The percent 
     referred to in the previous sentence is 20 percent in the 
     case of primary care services, as defined in section 
     1842(i)(4), and 10 percent for services other than primary 
     care services furnished in health professional shortage areas 
     located in rural areas as defined in section 
     1886(d)(2)(D).''.
       (b) Extension to Services Furnished in Areas Losing 
     Designation.--Section 1833(m) of such Act (42 U.S.C. 
     1395l(m)) is amended by striking ``area,'' and inserting 
     ``area (or was designated as such an area at any time during 
     the 36-month period ending on the date the services are 
     furnished),''.
       (c) Effective Date.--The amendments made by subsection (a) 
     shall apply with respect to services furnished on or after 
     January 1, 1998.

     SEC. 8323. ESSENTIAL ACCESS COMMUNITY HOSPITALS.

       (a) Increasing Number of Participating States.--Section 
     1820(a)(1) of the Social Security Act (42 U.S.C. 1395i-
     4(a)(1)) is amended by striking ``not more than 7''.
       (b) Treatment of Inpatient Hospital Services Provided in 
     Rural Primary Care Hospitals.--
       (1) In general.--Section 1820(f)(1)(F) of such Act (42 
     U.S.C. 1395i-4(f)(1)(F)) is amended to read as follows:
       ``(F) subject to paragraph (4), provides not more than 6 
     inpatient beds (meeting such conditions as the Secretary may 
     establish) for providing inpatient care to patients requiring 
     stabilization before discharge or transfer to a hospital, 
     except that the facility may not provide any inpatient 
     hospital services--
       ``(i) to any patient whose attending physician does not 
     certify that the patient may reasonably be expected to be 
     discharged or transferred to a hospital within 72 hours of 
     admission to the facility; or
       ``(ii) consisting of surgery or any other service requiring 
     the use of general anesthesia (other than surgical procedures 
     specified by the Secretary under section 1833(i)(1)(A)), 
     unless the attending physician certifies that the risk 
     associated with transferring the patient to a hospital for 
     such services outweighs the benefits of transferring the 
     patient to a hospital for such services.''.
       (2) Limitation on average length of stay.--Section 1820(f) 
     of such Act (42 U.S.C. 1395i-4(f)) is amended by adding at 
     the end the following new paragraph:
       ``(4) Limitation on average length of inpatient stays.--The 
     Secretary may terminate a designation of a rural primary care 
     hospital under paragraph (1) if the Secretary finds that the 
     average length of stay for inpatients at the facility during 
     the previous year in which the designation was in effect 
     exceeded 72 hours. In determining the compliance of a 
     facility with the requirement of the previous sentence, there 
     shall not be taken into account periods of stay of inpatients 
     in excess of 72 hours to the extent such periods exceed 72 
     hours because transfer to a hospital is precluded because of 
     inclement weather or other emergency conditions.''.
       (3) Conforming amendment.--Section 1814(a)(8) of such Act 
     (42 U.S.C. 1395f(a)(8)) is amended by striking ``such 
     services'' and all that follows and inserting ``the 
     individual may reasonably be expected to be discharged or 
     transferred to a hospital within 72 hours after admission to 
     the rural primary care hospital.''.
       (4) GAO reports.--Not later than 2 years after the date of 
     the enactment of this Act, the Comptroller General shall 
     submit reports to Congress on--
       (A) the application of the requirements under section 
     1820(f) of the Social Security Act (as amended by this 
     subsection) that rural primary care hospitals provide 
     inpatient care only to those individuals whose attending 
     physicians certify may reasonably be expected to be 
     discharged within 72 hours after admission and maintain an 
     average length of inpatient stay during a year that does not 
     exceed 72 hours; and
       (B) the extent to which such requirements have resulted in 
     such hospitals providing inpatient care beyond their 
     capabilities or have limited the ability of such hospitals to 
     provide needed services.
       (c) Designation of Hospitals.--
       (1) Permitting designation of hospitals located in urban 
     areas.--
       (A) In general.--Section 1820 of such Act (42 U.S.C. 1395i-
     4) is amended--
       (i) by amending paragraph (1) of subsection (e) to read as 
     follows:
       ``(1) is participating in a rural health network that 
     includes at least one rural primary care hospital designated 
     by the State under subsection (f);'';
       (ii) in subsection (e)(2)(A)--

       (I) by striking ``is located'' and inserting ``except in 
     the case of a hospital located in an urban area, is 
     located'',
       (II) by striking ``, (ii)'' and inserting ``or (ii)'', and
       (III) by striking ``or (iii)'' and all that follows through 
     ``section,''; and

       (iii) in subsection (i)(1)(B), by striking ``paragraph 
     (3)'' and inserting ``paragraph (2)''.
       (B) No change in medicare prospective payment.--Section 
     1886(d)(5)(D) of such Act (42 U.S.C. 1395ww(d)(5)(D)) is 
     amended--
       (i) in clause (iii)(III), by inserting ``located in a rural 
     area and'' after ``that is'', and
       (ii) in clause (v), by inserting ``located in a rural area 
     and'' after ``in the case of a hospital''.
       (2) Permitting hospitals located in adjoining states to 
     participate in state program.--
       (A) In general.--Section 1820 of such Act (42 U.S.C. 1395i-
     4) is amended--
       (i) by redesignating subsection (k) as subsection (l); and
       (ii) by inserting after subsection (j) the following new 
     subsection:
       ``(k) Eligibility of Hospitals Not Located in Participating 
     States.--Notwithstanding any other provision of this 
     section--
       ``(1) for purposes of including a hospital or facility as a 
     member institution of a rural health network, a State may 
     designate a hospital or facility that is not located in the 
     State as an essential access community hospital or a rural 
     primary care hospital if the hospital or facility is located 
     in an adjoining State and is otherwise eligible for 
     designation as such a hospital;
       ``(2) the Secretary may designate a hospital or facility 
     that is not located in a State receiving a grant under 
     subsection (a)(1) as an essential access community hospital 
     or a rural primary care hospital if the hospital or facility 
     is a member institution of a rural health network of a State 
     receiving a grant under such subsection; and
       ``(3) a hospital or facility designated pursuant to this 
     subsection shall be eligible to receive a grant under 
     subsection (a)(2).''.
       (B) Conforming amendments.--(i) Section 1820(c)(1) of such 
     Act (42 U.S.C. 1395i-4(c)(1)) is amended by striking 
     ``paragraph (3)'' and inserting ``paragraph (3) or subsection 
     (k)''.
       (ii) Paragraphs (1)(A) and (2)(A) of section 1820(i) of 
     such Act (42 U.S.C. 1395i-4(i)) are each amended--
       (I) in clause (i), by striking ``(a)(1)'' and inserting 
     ``(a)(1) (except as provided in subsection (k))'', and
       (II) in clause (ii), by striking ``subparagraph (B)'' and 
     inserting ``subparagraph (B) or subsection (k)''.
       [New] (3) Eligibility of indian health service facilities 
     for designation as rural primary care hospitals.--Section 
     1820(i)(2) (42 U.S.C. 1395i@4(i)(2)) is amended by adding at 
     the end the following new subparagraph:
       ``(D) The Secretary may designate a [facility of the Indian 
     Health Service] as a rural primary care hospital under this 
     section if the facility meets the requirements applicable to 
     a hospital described in subparagraph (C) and elects to be 
     treated as such a hospital under this title. No facility 
     designated by the Secretary under this subparagraph shall be 
     taken into account under subparagraph (C) in determining the 
     number of hospitals designated by the Secretary under this 
     paragraph.''.
       (d) Skilled Nursing Services in Rural Primary Care 
     Hospitals.--Section 1820(f)(3) (42 U.S.C. 1395i-4(f)(3)) is 
     amended by striking ``because the facility'' and all that 
     follows and inserting the following: ``because, at the time 
     the facility applies to the State for designation as a rural 
     primary care hospital, there is in effect an agreement 
     between the facility and the Secretary under section 1883 
     under which the facility's inpatient hospital facilities are 
     used for the furnishing of extended care services, except 
     that the number of beds used for the furnishing of such 
     services may not exceed the total number of licensed 
     inpatient beds at the time the facility applies to the State 
     for such designation (minus the number of inpatient beds used 
     for providing inpatient care pursuant to paragraph (1)(F)). 
     For purposes of the previous sentence, the number of beds of 
     the facility used for the furnishing of extended care 
     services shall not include any beds of a unit of the facility 
     that is licensed as a distinct-part skilled nursing facility 
     at the time the facility applies to the State for designation 
     as a rural primary care hospital.''.
       (e) Deadline for Development of Prospective Payment System 
     for Inpatient Rural Primary Care Hospital Services.--Section 
     1814(l)(2) of such Act (42 U.S.C. 1395f(l)(2)) is amended by 
     striking ``January 1, 1993'' and inserting ``January 1, 
     1996''.
       (f) Payment for Outpatient Rural Primary Care Hospital 
     Services.--
       (1) Implementation of prospective payment system.--Section 
     1834(g) of such Act (42 U.S.C. 1395m(g)) is amended--
       (A) in paragraph (1), by striking ``during a year before 
     1993'' and inserting ``during a year before the prospective 
     payment system described in paragraph (2) is in effect''; and
       (B) in paragraph (2), by striking ``January 1, 1993,'' and 
     inserting ``January 1, 1996,''.
       (2) No use of customary charge in determining payment.--
     Section 1834(g)(1) of such Act (42 U.S.C. 1395m(g)(1)) is 
     amended by adding at the end the following new flush 
     sentence:
     ``The amount of payment shall be determined under either 
     method without regard to the amount of the customary or other 
     charge.''.
       (g) Requirements Relating to Rural Health Care Plan.--
       (1) In general.--Section 1820(b)(1)(A) of such Act (42 
     U.S.C. 1395i-4(b)(1)(A)) is amended--
       (A) by striking ``and'' at the end of clause (iii);
       (B) by striking the semicolon at the end of clause (iv) and 
     inserting ``, and''; and
       (C) by adding at the end the following new clause:
       ``(v) meets such other requirements as the Secretary may 
     establish regarding the quality and effectiveness of such 
     plans;''.
       (2) Technical assistance.--At the request of a State 
     submitting an application for a grant under section 1820 of 
     the Social Security Act, the Secretary of Health and Human 
     Services shall provide technical assistance to the State for 
     the development of the State's rural health care plan 
     described in section 1820(b)(1) of such Act.
       (h) Service Area of Facilities Included in Rural Health 
     Networks.--Section 1820(g) of such Act (42 U.S.C. 1395i-4(g)) 
     is amended--
       (1) by striking ``and'' at the end of paragraph (1);
       (2) by striking the period at the end of paragraph (2) and 
     inserting ``, and''; and
       (3) by adding at the end the following new paragraph:
       ``(3) the members of which provide services in the same 
     general geographic area (in accordance with criteria 
     established by the Secretary).''.
       (i) Payment for Services of Essential Access Community 
     Hospitals.--
       (1) Repeal of categorical treatment as sole community 
     hospital.--Section 1886(d)(5)(D)(iii) of such Act (42 U.S.C. 
     1395ww(d)(5)(D)(iii)) is amended--
       (A) by adding ``or'' at the end of subclause (I);
       (B) by striking ``or'' at the end of subclause (II); and
       (C) by striking subclause (III).
       (2) Effective date.--The amendment made by paragraph (1) 
     shall apply to discharges occurring on or after October 1, 
     1996.
       (3) Report on appropriate payment methodology.--Not later 
     than September 1, 1995, the Prospective Payment Assessment 
     Commission shall submit a report to Congress recommending 
     appropriate adjustments in the methodology used to determine 
     the amounts paid to essential access community hospitals for 
     the operating costs of inpatient hospital services under part 
     A of the medicare program to take into account the special 
     needs of such hospitals.
       (j) Clarification of Physician Staffing Requirement for 
     Rural Primary Care Hospitals.--Section 1820(f)(1)(H) of such 
     Act (42 U.S.C. 1395i-4(f)(1)(H)) is amended by striking the 
     period and inserting the following: ``, except that in 
     determining whether a facility meets the requirements of this 
     subparagraph, subparagraphs (E) and (F) of that paragraph 
     shall be applied as if any reference to a `physician' is a 
     reference to a physician as defined in section 1861(r)(1).''.
       (k) Technical Amendments Relating to Part A Deductible, 
     Coinsurance, and Spell of Illness.--(1) Section 1812(a)(1) of 
     such Act (42 U.S.C. 1395d(a)(1)) is amended--
       (A) by striking ``inpatient hospital services'' the first 
     place it appears and inserting ``inpatient hospital services 
     or inpatient rural primary care hospital services'';
       (B) by striking ``inpatient hospital services'' the second 
     place it appears and inserting ``such services''; and
       (C) by striking ``and inpatient rural primary care hospital 
     services''.
       (2) Sections 1813(a) and 1813(b)(3)(A) of such Act (42 
     U.S.C. 1395e(a), 1395e(b)(3)(A)) are each amended by striking 
     ``inpatient hospital services'' each place it appears and 
     inserting ``inpatient hospital services or inpatient rural 
     primary care hospital services''.
       (3) Section 1813(b)(3)(B) of such Act (42 U.S.C. 
     1395e(b)(3)(B)) is amended by striking ``inpatient hospital 
     services'' and inserting ``inpatient hospital services, 
     inpatient rural primary care hospital services''.
       (4) Section 1861(a) of such Act (42 U.S.C. 1395x(a)) is 
     amended--
       (A) in paragraph (1), by striking ``inpatient hospital 
     services'' and inserting ``inpatient hospital services, 
     inpatient rural primary care hospital services''; and
       (B) in paragraph (2), by striking ``hospital'' and 
     inserting ``hospital or rural primary care hospital''.
       (l) Authorization of Appropriations.--Section 1820(l) of 
     such Act (42 U.S.C. 1395i-4(l)), as redesignated by 
     subsection (c)(2)(A), is amended by striking ``Trust Fund'' 
     and all that follows and inserting the following: ``Trust 
     Fund--
       ``(1) for each of the fiscal years 1990 through 1994--
       ``(A) $10,000,000 for grants to States under subsection 
     (a)(1), and
       ``(B) $15,000,000 for grants to hospitals, facilities, and 
     consortia under subsection (a)(2); and
       ``(2) for each of the fiscal years 1995 through 1999--
       ``(A) $50,000,000 for grants to States under subsection 
     (a)(1), and
       ``(B) $40,000,000 for grants to hospitals, facilities, and 
     consortia under subsection (a)(2).''.
       (m) Effective Date.--Except as otherwise provided, the 
     amendments made by this section shall take effect on the date 
     of the enactment of this Act.

     SEC. 8324. MEDICARE TELEMEDICINE PILOT PROJECTS.

       (a) Establishment of Project.--
       (1) In general.--The Secretary of Health and Human Services 
     shall establish not more than 10 pilot projects to 
     investigate over a 3-year period the effectiveness of the use 
     of rural health care provider telemedicine networks to 
     provide coverage of physician consultative services provided 
     with respect to the provision of other services under part B 
     of the medicare program in rural areas.
       (2) Networks defined.--In this section, the term ``rural 
     health care provider telemedicine network'' (hereafter 
     referred to as a ``network'') means a network of providers 
     that meets the following requirements:
       (A) The network serves physicians, clinics (including rural 
     health clinics described in section 1861(aa)(2) of the Social 
     Security Act), and other non-tertiary care providers in a 
     rural area who have entered into agreements with a multi-
     specialty tertiary care provider who has agreed to provide 
     physician consultative services (without regard to whether or 
     not such tertiary care provider is in the rural area) 
     regarding patient referral and transfer, the use of joint 
     communications systems, and the provision of emergency and 
     non-emergency transportation among the network members.
       (B) The area in which the network operates is a rural area 
     designated as a health professional shortage area (under 
     section 332(a) of the Public Health Service Act) or is an 
     underserved rural area in accordance with such other criteria 
     as the Secretary may specify.
       (b) Medicare Payment for Participants.--
       (1) In general.--Under the projects established under this 
     section, the Secretary shall make payments from the Federal 
     Supplementary Medical Insurance Trust Fund under part B of 
     title XVIII of the Social Security Act in accordance with the 
     methodology described in paragraph (2) for physicians' 
     consultation services provided by the tertiary care services 
     consisting of a professional consultation to an individual or 
     entity in the network furnishing a service for which payment 
     may be made under such part to a medicare beneficiary in a 
     rural area, notwithstanding that the individual providing the 
     professional consultation is not at the same location as the 
     individual furnishing the service to the medicare 
     beneficiary.
       (2) Methodology for determining amount of payments.--Taking 
     into account the amount of funds available for payments under 
     the project, the Secretary shall establish a methodology for 
     determining the amount of payments made under paragraph (1), 
     and shall include in the methodology a method for making 
     payment for reasonable costs incurred in the usage of signal 
     transmission facilities suitable for the conduct of physician 
     consultative services.
       (c) Eligibility of Networks.--
       (1) In general.--A network is eligible to participate in a 
     pilot project under this section if--
       (A) the network submits to the Secretary (at such time and 
     in such form as the Secretary may require) an application 
     containing--
       (i) information and assurances that the members of the 
     network have entered into such agreements as are necessary to 
     operate the network,
       (ii) information and assurances that the network has 
     available the appropriate technology for providing remote 
     consultations, and
       (iii) such other information and assurances as the 
     Secretary may require; and
       (B) the network agrees to submit to the Secretary such 
     information as the Secretary may require to determine the 
     amount of payments described in subsection (b)(2), to prepare 
     reports under subsection (e), and to otherwise carry out the 
     project.
       (2) Rural area defined.--In this section, the term ``rural 
     area'' has the meaning given such term in section 
     1886(d)(2)(D) of the Social Security Act.
       (d) Criteria for Selecting Participants.--
       (1) Technology applied.--In selecting among eligible 
     networks for participation in pilot projects under this 
     section, the Secretary shall give priority to networks that 
     provide for consultations between patients and medical 
     specialists involving transmission of detailed data on the 
     patient in a manner that serves as a reasonable substitute 
     for in-person interaction between the patients and the 
     specialists.
       (2) Permitting existing networks to participate.--Nothing 
     in this section may be construed to prohibit the Secretary 
     from selecting a network operating at the time of the 
     establishment of the pilot projects for participation in the 
     project.
       (e) Reports.--
       (1) Interim report on participating sites.--Not later than 
     24 months after the Secretary first makes payment under 
     subsection (b) for services under a pilot project, the 
     Secretary shall submit a report to Congress describing the 
     projects and the networks participating in the projects under 
     this section, including a description of the amounts expended 
     and the number of patients served under the projects;
       (2) Final.--Not later than 1 year after the termination of 
     the projects, the Secretary shall submit a final report to 
     Congress describing the operation of the projects and 
     containing--
       (A) the Secretary's analysis of the projects' cost-
     effectiveness and success in promoting the access of 
     providers of health care services in rural areas to 
     consultation services of specialist physicians;
       (B) the Secretary's analysis of the impact of the projects 
     on the ability of patients to obtain a higher quality and 
     greater range of care; and
       (C) such recommendations as the Secretary considers 
     appropriate for changes in the medicare program relating to 
     telemedicine, including estimates of the costs associated 
     with any such changes.
       (f) Limitation on Amount Expended Under Projects.--The 
     total amount expended from the Federal Supplementary Medical 
     Insurance Trust Fund under section 1841 of the Social 
     Security Act for services under the demonstration project 
     under this section may not exceed $25,000,000.

     SEC. 8325. TREATMENT OF OTHER INDIAN FACILITIES AS INDIAN 
                   HEALTH SERVICE FACILITIES.

       (a) In General.--Section 1880(a) (42 U.S.C. 1395qq(a)) is 
     amended by striking ``facility of the Indian Health Service, 
     whether operated by such service'' and inserting ``facility 
     operated by the Indian Health Service''.
       (b) Clarification of Coverage of Hospital Outpatient 
     Services.--Section 1880(a) (42 U.S.C. 1395qq(a)) is amended 
     by inserting ``(including payments for services described in 
     section 1832(a)(2)(B))'' after ``under this title''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to portions of cost reporting periods beginning 
     on or after January 1, 1999.

  PART 4--APPLICATION OF QUALITY MANAGEMENT AND ADMINISTRATIVE REFORM 
             UNDER GUARANTEED HEALTH INSURANCE ACT OF 1994

     SEC. 8331. INTEGRATION OF MEDICARE INTO NATIONAL QUALITY 
                   MANAGEMENT PROGRAM.

       Not later than 1 year after the date of the enactment of 
     this Act, the Secretary shall submit to Congress a detailed 
     proposal for legislation to provide for the integration of 
     the medicare program into the National Quality Management 
     Program through--
       (1) the incorporation of information provided by medicare 
     beneficiaries into the consumer surveys described in section 
     9002;
       (2) the incorporation of information on the quality of 
     services provided under the medicare program, as measured by 
     the national measures of quality performance established 
     under section 9003, into the performance reports described in 
     section 9003(g);
       (3) the transfer to approved quality improvement 
     organizations, on a State-by-State basis over a 5-year 
     period, of functions being performed by both approved quality 
     improvement organizations and utilization and quality control 
     peer review organizations entering into contracts with the 
     Secretary under part B of title XI of the Social Security Act 
     (without regard to whether the organizations with contracts 
     under such part perform such functions on a multi-State 
     basis); and
       (4) the retention by such peer review organizations of 
     functions the organizations are required to perform under 
     such Act that do not overlap with functions that are required 
     to be performed by approved quality improvement organizations 
     under this part.

     SEC. 8332. COORDINATION OF MEDICARE CARDS WITH HEALTH 
                   SECURITY CARDS.

       (a) In General.--Title XVIII is amended by inserting after 
     section 1804 the following new section:


                        ``coordination of cards

       ``Sec. 1805. In issuing identification cards for 
     individuals entitled to benefits under this title, the 
     Secretary shall assure that such cards conform to the 
     standards established for health security cards under section 
     9101(c) of the Guaranteed Health Insurance Act of 1994.''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall take effect January 1, 1997.

     SEC. 8333. ELIMINATION OF MEDICARE AND MEDICAID COVERAGE DATA 
                   BANK.

       Effective upon full implementation of the national 
     enrollment verification system under section 9102--
       (1) no employer is required to make any reports under 
     section 1144(c) of the Social Security Act; and
       (2) information and functions previously in or performed by 
     the Medicare and Medicaid Coverage Data Bank under section 
     1144 of such Act shall be subsumed by the enrollment 
     verification system.

     SEC. 8334. REQUIREMENT FOR UNIFORM HOSPITAL COST REPORTING.

       (a) In General.--Section 1866(a)(1) (42 U.S.C. 
     1395cc(a)(1)) is amended--
       (1) in subparagraph (P), by striking ``and'' at the end;
       (2) by striking the period at the end of subparagraph (Q) 
     and inserting ``, and''; and
       (3) by inserting after subparagraph (Q) the following:
       ``(R) in the case of a hospital or a rural primary care 
     hospital, to report information in a uniform manner 
     consistent with standards established by the Secretary to 
     carry out section 4007(c) of the Omnibus Budget 
     Reconciliation Act of 1987 and in an electronic form, 
     consistent with standards established by the Secretary.''.
       (b) Effective Date.--The amendments made by subsection (a) 
     shall apply to cost reporting periods beginning on or after 
     October 1, 1994.

     SEC. 8335. APPLICATION OF HEALTH INFORMATION AND INFORMATION 
                   TRANSACTION REQUIREMENTS TO FISCAL 
                   INTERMEDIARIES AND CARRIERS.

       (a) Fiscal Intermediaries Under Part A.--Section 1816(f) 
     (42 U.S.C. 1395h(f)) is amended by adding at the end the 
     following new paragraph:
       ``(3) The standards and criteria under paragraph (1) shall 
     include requirements that the agency or organization meet the 
     following requirements applicable under subtitle B of title 
     IX of the Guaranteed Health Insurance Act of 1994 to a 
     sponsor of an administered health plan:
       ``(A) Health information standards under section 9103 of 
     such Act.
       ``(B) Standards relating to transactions and information 
     under section 9104 of such Act.
       ``(C) Standards relating to the acceptance of claims and 
     attachments and limitations on other transactions under 
     section 9105 of such Act.''.
       (b) Carriers Under Part B.--Section 1842(c) (42 U.S.C. 
     1395u(c)) is amended by adding at the end the following new 
     paragraph:
       ``(4) Each contract under this section shall include 
     requirements that the carrier meet the following requirements 
     applicable under subtitle B of title IX of the Guaranteed 
     Health Insurance Act of 1994 to a sponsor of an administered 
     health plan:
       ``(A) Health information standards under section 9103 of 
     such Act.
       ``(B) Standards relating to transactions and information 
     under section 9104 of such Act.
       ``(C) Standards relating to the acceptance of claims and 
     attachments and limitations on other transactions under 
     section 9105 of such Act.''.

     SEC. 8336. APPLICATION OF RESTRICTIONS ON DISCLOSURE AND USE 
                   OF HEALTH INFORMATION.

       Part A of title XI (42 U.S.C. 1301 et seq.) is amended by 
     adding at the end the following new section:


           ``restrictions on disclosure of health information

       ``Sec. 1145. The provisions of subtitle C of title IX of 
     the Guaranteed Health Insurance Act of 1994 shall apply with 
     respect to health information relating to individuals 
     entitled to benefits under part A of title XVIII in the same 
     manner as such provisions apply with respect to health 
     information relating to other individuals under such 
     subtitle.''.

         PART 5--AMENDMENTS TO ANTI-FRAUD AND ABUSE PROVISIONS

     SEC. 8341. ANTI-KICKBACK STATUTORY PROVISIONS.

       (a) Revision to Penalties.--
       (1) Permitting secretary to impose civil monetary 
     penalty.--Section 1128A(a) (42 U.S.C. 1320a-7a(a)) is 
     amended--
       (A) by striking ``or'' at the end of paragraphs (1) and 
     (2);
       (B) by striking the semicolon at the end of paragraph (3) 
     and inserting ``; or''; and
       (C) by inserting after paragraph (3) the following new 
     paragraph:
       ``(4) carries out any activity in violation of paragraph 
     (1) or (2) of section 1128B(b);''.
       (2) Description of civil monetary penalty applicable.--
     Section 1128A(a) (42 U.S.C. 1320a-7a(a)) is amended--
       (A) by striking ``given).'' at the end of the first 
     sentence and inserting the following: ``given or, in cases 
     under paragraph (4), $50,000 for each such violation).''; and
       (B) by striking ``claim.'' at the end of the second 
     sentence and inserting the following: ``claim (or, in cases 
     under paragraph (4), damages of not more than three times the 
     total amount of remuneration offered, paid, solicited, or 
     received.''.
       (3) Increase in criminal penalty.--Paragraphs (1) and (2) 
     of section 1128B(b) (42 U.S.C. 1320a-7b(b)) are each 
     amended--
       (A) by striking ``$25,000'' and inserting ``$50,000''; and
       (B) by striking the period at the end and inserting the 
     following: ``, and shall be subject to damages of not more 
     than three times the total remuneration offered, paid, 
     solicited, or received.''.
       (b) Revisions to Exceptions.--
       (1) Exception for discounts.--Section 1128B(b)(3)(A) (42 
     U.S.C. 1320a-7b(b)(3)(A)) is amended by striking ``program;'' 
     and inserting ``program and is not in the form of a cash 
     payment;''.
       (2) Exception for payments to employees.--Section 
     1128B(b)(3)(B) (42 U.S.C. 1320a-7b(b)(3)(B)) is amended by 
     inserting at the end ``if the amount of remuneration under 
     the arrangement is consistent with the fair market value of 
     the services and is not determined in a manner that takes 
     into account (directly or indirectly) the volume or value of 
     any referrals, except that such employee can be paid 
     remuneration in the form of a productivity bonus based on 
     services personally performed by the employee.''.
       (3) Exception for waiver of coinsurance by certain 
     providers.--Section 1128B(b)(3)(D) (42 U.S.C. 1320a-
     7b(b)(3)(D)) is amended to read as follows:
       ``(D) a waiver or reduction of any coinsurance or other 
     copayment if--
       ``(i) the waiver or reduction is made pursuant to a public 
     schedule of discounts which the person is obligated as a 
     matter of law to apply to certain individuals,
       ``(ii) the waiver or reduction is made pursuant to an 
     established program and applies to a defined group of 
     individuals whose incomes do not exceed 150 percent (or such 
     higher percentage as the Secretary may permit) of the 
     official poverty line (as defined by the Office of Management 
     and Budget, and revised annually in accordance with section 
     673(2) of the Omnibus Budget Reconciliation Act of 1981) 
     applicable to a family of the size involved,
       ``(iii) the waiver or reduction of coinsurance is not 
     offered as part of any advertisement or solicitation and the 
     person offering the waiver or reduction determines in good 
     faith that the individual is in financial need,
       ``(iv) the person offering the waiver or reduction fails to 
     collect the coinsurance or other payment after making 
     reasonable collection efforts, or
       ``(v) the waiver or reduction of coinsurance is in 
     accordance with a cost sharing schedule or a supplemental 
     benefit package which may be offered by a managed care plan 
     under title XXII; and''.
       (4) New exception for capitated payments.--Section 
     1128B(b)(3) (42 U.S.C. 1320a-7b(b)(3)) is amended--
       (A) by striking ``and'' at the end of subparagraph (D);
       (B) by striking the period at the end of subparagraph (E) 
     and inserting ``; and''; and
       (C) by adding at the end the following new subparagraphs:
       ``(F) any reduction in cost sharing or increased benefits 
     given to an individual, any amounts paid to a provider for an 
     item or service furnished to an individual, or any discount 
     or reduction in price given by the provider for such an item 
     or service, if the individual is enrolled with and such item 
     or service is covered under any of the following:
       ``(i) A health plan which is furnishing items or services 
     under a risk-sharing contract under section 1876 or section 
     1903(m).
       ``(ii) A health plan receiving payments on a prepaid basis, 
     under a demonstration project under section 402(a) of the 
     Social Security Amendments of 1967 or under section 222(a) of 
     the Social Security Amendments of 1972; and
       ``(G) any amounts paid to a provider for an item or service 
     furnished to an individual or any discount or reduction in 
     price given by the provider for such an item or service, if 
     the individual is enrolled with and such item or service is 
     covered under a health plan under which the provider 
     furnishing the item or service is paid by the health plan for 
     furnishing the item or service only on a capitated basis 
     pursuant to a written arrangement between the plan and the 
     provider in which the provider assumes financial risk for 
     furnishing the item or service.''.
       (c) Authorization for the Secretary To Issue Regulations.--
     Section 1128B(b) (42 U.S.C. 1320a-7b(b)) is amended by adding 
     at the end the following new paragraph:
       ``(4) The Secretary is authorized to impose by regulation 
     such other requirements as needed to protect against program 
     or patient abuse with respect to any of the exceptions 
     described in paragraph (3).''.
       (d) Clarification of Other Elements of Offense.--Section 
     1128B(b) (42 U.S.C. 1320a-7b(b)) is amended--
       (1) in paragraph (1)(A), by striking ``in return for 
     referring'' and inserting ``to refer'';
       (2) in paragraph (1)(B), by striking ``in return for 
     purchasing, leasing, ordering, or arranging for or 
     recommending'' and inserting ``to purchase, lease, order, or 
     arrange for or recommend''; and
       (3) by adding at the end of paragraphs (1) and (2) the 
     following sentence: ``A violation exists under this paragraph 
     if one or more purposes of the remuneration is unlawful under 
     this paragraph.''.

     SEC. 8342. CIVIL MONEY PENALTIES.

       (a) Prohibition Against Offering Inducements to Individuals 
     Enrolled Under Plans.--
       (1) Offer of remuneration.--Section 1128A(a) (42 U.S.C. 
     1320a-7a(a)), as amended by section 8341(a)(1), is amended--
       (A) by striking ``; or'' at the end of paragraph (3) and 
     inserting a semicolon;
       (B) by striking the semicolon at the end of paragraph (4) 
     and inserting ``; or''; and
       (C) by inserting after paragraph (4) the following new 
     paragraph:
       ``(5) offers, pays, or transfers remuneration to any 
     individual eligible for benefits under title XVIII of this 
     Act, or under a State health care program (as defined in 
     section 1128(h)) that such person knows or should know is 
     likely to influence such individual to order or receive from 
     a particular provider, practitioner, or supplier any item or 
     service for which payment may be made, in whole or in part, 
     under title XVIII, or a State health care program, other than 
     to influence an individual enrolled in a managed care plan or 
     a point-of-service plan (as defined in section 2204) to 
     receive benefits under the plan in accordance with 
     established practice patterns for the delivery of medically 
     necessary services;''.
       (2) Remuneration defined.--Section 1128A(i) of such Act (42 
     U.S.C. 1320a-7a(i)) is amended by adding at the end the 
     following new paragraph:
       ``(6) The term `remuneration' includes the waiver or 
     reduction of coinsurance amounts, and transfers of items or 
     services for free or for other than fair market value, except 
     that such term does not include the waiver or reduction of 
     coinsurance amounts by a person or entity, if--
       ``(A) the waiver or reduction is made pursuant to a public 
     schedule of discounts which the person is obligated as a 
     matter of law to apply to certain individuals,
       ``(B) the waiver or reduction is made pursuant to an 
     established program and applies to a defined group of 
     individuals whose incomes do not exceed 150 percent (or such 
     higher percentage as the Secretary may permit) of the 
     official poverty line (as defined by the Office of Management 
     and Budget, and revised annually in accordance with section 
     673(2) of the Omnibus Budget Reconciliation Act of 1981) 
     applicable to a family of the size involved,
       ``(C) the waiver or reduction of coinsurance is not offered 
     as part of any advertisement or solicitation and the person 
     offering the waiver or reduction determines in good faith 
     that the individual is in financial need,
       ``(D) the person offering the waiver or reduction fails to 
     collect the coinsurance or other payment after making 
     reasonable collection efforts, or
       ``(E) the waiver or reduction of coinsurance is in 
     accordance with a cost sharing schedule or a supplemental 
     benefit package which may be offered by a managed care plan 
     under title XXII.''.
       (b) Additional Offenses.--Section 1128A(a) of such Act, as 
     amended by section 8341(a)(1) and subsection (a)(1), is 
     further amended--
       (1) by striking ``or'' at the end of paragraph (4);
       (2) by striking the semicolon at the end of paragraph (5) 
     and inserting ``; or''; and
       (3) by inserting after paragraph (5) the following new 
     paragraphs:
       ``(6) engages in a practice which has the effect of 
     limiting or discouraging (as compared to other plan 
     enrollees) the utilization of medically necessary health care 
     services covered by law or under the service contract by 
     title XIX or other publicly subsidized patients, including 
     but not limited to differential standards for the location 
     and hours of service offered by providers participating in 
     the plan;
       ``(7) substantially fails to cooperate with a quality 
     assurance program or a utilization review activity;
       ``(8) engaging in a pattern of failing substantially to 
     provide or authorize medically necessary items and services 
     that are required to be provided to an individual covered 
     under a health plan under the Guaranteed Health Insurance Act 
     of 1994 or public program for the delivery of or payment for 
     health care items or services, if the failure has adversely 
     affected (or had a substantial likelihood of adversely 
     affecting) the individual; or
       ``(9) submits false or fraudulent statements, data or 
     information on claims to the Secretary, a State health care 
     agency, or any other Federal, State or local agency charged 
     with implementation or oversight of a health plan or a public 
     program that the person knows or should know is 
     fraudulent;''.
       (c) Modifications of Amounts of Penalties and 
     Assessments.--Section 1128A(a) (42 U.S.C. 1320a-7a(a)), as 
     amended by section 8341(a), subsection (a)(1), and subsection 
     (b), is amended in the matter following paragraph (9)--
       (1) by striking ``$2,000'' and inserting ``$10,000'';
       (2) by inserting after ``under paragraph (4), $50,000 for 
     each such violation'' the following: ``; in cases under 
     paragraph (5), $10,000 for each such offer, payment, or 
     transfer; in cases under paragraphs (6) through (9), an 
     amount not to exceed $10,000 for each such determination by 
     the Secretary''; and
       (3) by striking ``twice the amount'' and inserting ``three 
     times the amount''.
       (d) Interest on Penalties.--Section 1128A(f) (42 U.S.C. 
     1320a-7a(f)) is amended by adding after the first sentence 
     the following: ``Interest shall accrue on the penalties and 
     assessments imposed by a final determination of the Secretary 
     in accordance with an annual rate established by the 
     Secretary under the Federal Claims Collection Act. The rate 
     of interest charged shall be the rate in effect on the date 
     the determination becomes final and shall remain fixed at 
     that rate until the entire amount due is paid. In addition, 
     the Secretary is authorized to recover the costs of 
     collection in any case where the penalties and assessments 
     are not paid within 30 days after the determination becomes 
     final, or in the case of a compromised amount, where payments 
     are more than 90 days past due. In lieu of actual costs, the 
     Secretary is authorized to impose a charge of up to 10 
     percent of the amount of penalties and assessments owed to 
     cover the costs of collection.''.
       (e) Authorization To Act.--
       (1) In general.--The first sentence of section 1128A(c)(1) 
     (42 U.S.C. 1320a-7a(c)(1)) is amended by striking all that 
     follows ``(b)'' and inserting the following: ``unless, within 
     one year after the date the Secretary presents a case to the 
     Attorney General for consideration, the Attorney General 
     brings an action in a district court of the United States.''.
       (2) Effective date.--The amendment made by this paragraph 
     (1) shall apply to cases presented by the Secretary of Health 
     and Human Services for consideration on or after the date of 
     the enactment of this Act.
       (f) Deposit of Penalties Collected into All-Payer 
     Account.--Section 1128A(f)(3) (42 U.S.C. 1320a-7a(f)(3)) is 
     amended by striking ``as miscellaneous receipts of the 
     Treasury of the United States'' and inserting ``in the All-
     Payer Health Care Fraud and Abuse Control Account established 
     under section [9212] of Guaranteed Health Insurance Act of 
     1994''.
       (g) Clarification of Penalty Imposed on Excluded Provider 
     Furnishing Services.--Section 1128A(a)(1)(D) (42 U.S.C. 
     1320a-7a(a)(1)(D)) is amended by inserting ``who furnished 
     the service'' after ``in which the person''.

     SEC. 8343. AMENDMENTS TO EXCLUSIONARY PROVISIONS IN FRAUD AND 
                   ABUSE PROGRAM.

       (a) Mandatory Exclusion of Individual Convicted of Criminal 
     Offense Related to Health Care Fraud.--
       (1) In general.--Section 1128(a) (42 U.S.C. 1320a-7(a)) is 
     amended by adding at the end the following new paragraph:
       ``(3) Felony conviction relating to fraud.--Any individual 
     or entity that has been convicted under Federal or State law, 
     in connection with the delivery of a health care item or 
     service on or after January 1, 1996, or with respect to any 
     act or omission on or after such date in a program operated 
     by or financed in whole or in part by any Federal, State, or 
     local government agency, of a criminal offense consisting of 
     a felony relating to fraud, theft, embezzlement, breach of 
     fiduciary responsibility, or other financial misconduct.''.
       (2) Conforming amendment.--Section 1128(b)(1) (42 U.S.C. 
     1320a-7(b)(1)) is amended--
       (A) in the heading, by striking ``Conviction'' and 
     inserting ``Misdemeanor conviction''; and
       (B) by striking ``criminal offense'' and inserting 
     ``criminal offense consisting of a misdemeanor''.
       (b) Establishment of Minimum Period of Exclusion for 
     Certain Individuals and Entities Subject to Permissive 
     Exclusion From Medicare and State Health Care Programs.--
       (1) In general.--Section 1128(c)(3) (42 U.S.C. 1320a-
     7(c)(3)) is amended by adding at the end the following new 
     subparagraphs:
       ``(D) In the case of an exclusion of an individual or 
     entity under paragraphs (1), (2), or (3) of subsection (b), 
     the period of exclusion shall be a minimum of 3 years, unless 
     the Secretary determines that an alternative period is 
     appropriate because of aggravating or mitigating 
     circumstances.
       ``(E) In the case of an exclusion of an individual or 
     entity under paragraph (4) or (5) of subsection (b), the 
     period of the exclusion shall not be less than the period 
     during which the individual's or entity's license to provide 
     health care is revoked, suspended, or surrendered, or the 
     individual or the entity is excluded or suspended from a 
     Federal or State health care program.
       ``(F) In the case of an exclusion of an individual or 
     entity under subsection (b)(6)(B), the period of the 
     exclusion shall be not less than 1 year.''.
       (2) Conforming amendment.--Section 1128(c)(3)(A) (42 U.S.C. 
     1320a-7(c)(3)(A)) is amended by striking ``subsection 
     (b)(12)'' and inserting ``paragraph (1), (2), (3), (4), 
     (6)(B), or (12) of subsection (b)''.
       (c) Failure to Provide Information as Grounds for 
     Permissive Exclusion Under Medicare and Medicaid.--Section 
     1128(b)(9) (42 U.S.C. 1320a-7(b)(9)) is amended by striking 
     the period at the end and inserting ``, or provide any 
     information requested by the Attorney General or the 
     Inspector General of the Department of Health and Human 
     Services to carry out the All-Payer Health Care Fraud and 
     Abuse Control Program established under section [9211] of the 
     Guaranteed Health Insurance Act of 1994.'';

     SEC. 8344. SANCTIONS AGAINST PRACTITIONERS AND PERSONS FOR 
                   FAILURE TO COMPLY WITH STATUTORY OBLIGATIONS 
                   RELATING TO QUALITY OF CARE.

       (a) Minimum Period of Exclusion for Practitioners and 
     Persons Failing To Meet Statutory Obligations.--
       (1) In general.--The second sentence of section 1156(b)(1) 
     (42 U.S.C. 1320c-5(b)(1)) is amended by striking ``may 
     prescribe)'' and inserting ``may prescribe, except that such 
     period may not be less than one year)''.
       (2) Conforming amendment.--Section 1156(b)(2) (42 U.S.C. 
     1320c-5(b)(2)) is amended by striking ``shall remain'' and 
     inserting ``shall (subject to the minimum period specified in 
     the second sentence of paragraph (1)) remain''.
       (b) Amount of Civil Money Penalty.--Section 1156(b)(3) (42 
     U.S.C. 1320c-5(b)(3)) is amended by striking ``the actual or 
     estimated cost'' and inserting the following: ``$10,000 for 
     each instance''.
       (c) Repeal of ``Unwilling or Unable'' Condition for 
     Imposition of Sanction.--Section 1156(b)(1) (42 U.S.C. 1320c-
     5(b)(1)) is amended--
       (1) in the second sentence, by striking ``and determines'' 
     and all that follows through ``such obligations,'' and
       (2) by striking the third sentence.

     SEC. 8345. REVISIONS TO CRIMINAL PENALTIES.

       (a) Treble Damages for Criminal Sanctions.--Section 1128B 
     (42 U.S.C. 1320a-7b) is amended by adding at the end the 
     following new subsection:
       ``(f) In addition to the fines that may be imposed under 
     subsection (a) or (c) any individual found to have violated 
     the provisions of any of such subsections may be subject to 
     treble damages.''.
       (b) Identification of Community Service Opportunities.--
     Section 1128B (42 U.S.C. 1320a-7b), as amended by subsection 
     (a), is further amended by adding at the end the following 
     new subsection:
       ``(g) The Secretary shall--
       ``(1) in consultation with State and local health care 
     officials, identify opportunities for the satisfaction of 
     community service obligations that a court may impose upon 
     the conviction of an offense under this section, and
       ``(2) make information concerning such opportunities 
     available to Federal and State law enforcement officers and 
     State and local health care officials.''.

     SEC. 8346. EFFECTIVE DATE.

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

      PART 6--REVISIONS TO LIMITATIONS ON PHYSICIAN SELF-REFERRALS

     SEC. 8351. APPLICATION OF BAN ON SELF-REFERRALS TO CLAIMS 
                   SUBMITTED BY PHYSICIANS.

       Section 1877(a)(1)(B) (42 U.S.C. 1395nn(a)(1)(B)) is 
     amended to read as follows:
       ``(B) no physician or entity may present or cause to be 
     presented a claim under this title or bill to any individual, 
     third party payor, or other entity for designated health 
     services furnished pursuant to a referral prohibited under 
     subparagraph (A).''.

     SEC. 8352. EXPANSION OF SELF-REFERRAL BAN TO ADDITIONAL 
                   SERVICES.

       Section 1877(h)(6) (42 U.S.C. 1395nn(h)(6)) is amended--
       (1) in subparagraph (D), by striking ``or other 
     diagnostic''; and
       (2) by adding at the end the following new subparagraphs:
       ``(L) Home infusion drug therapy services (other than 
     services consisting of the furnishing of infusion pumps).
       ``(M) Any other item or service not rendered by the 
     physician personally or by a person under the physician's 
     direct supervision.''.

     SEC. 8353. EXCEPTIONS FOR BOTH OWNERSHIP AND COMPENSATION 
                   ARRANGEMENTS.

       (a) Repeal of Exception for Physicians' Services.--Section 
     1877(b) (42 U.S.C. 1395nn(b)) is amended by striking 
     paragraph (1).
       (b) Revision to In-Office Ancillary Services Exception.--
       (1) In general.--Section 1877(b) (42 U.S.C. 1395nn(b)(1)), 
     as amended by subsection (a), is amended by striking 
     ``Subsection (a)(1) shall not apply in the following cases'' 
     and all that follows through paragraph (2) and inserting the 
     following:
       ``(1) In-office ancillary services of sole practitioners.--
     Subsection (a)(1) shall not apply in the case of designated 
     health services--
       ``(A) that are furnished--
       ``(i) personally by the referring physician or personally 
     by individuals who are directly supervised by the physician,
       ``(ii) in an office location in which the referring 
     physician furnishes physicians' services unrelated to the 
     furnishing of designated health services, and
       ``(iii) using equipment that is wholly owned or leased 
     exclusively by the referring physician; and
       ``(B) that are billed by the physician performing or 
     supervising the services or by an entity that is wholly owned 
     by such physician,
     if the ownership or investment interest in such services 
     meets such other requirements as the Secretary may impose by 
     regulation as needed to protect against program or patient 
     abuse.
       ``(2) In-office ancillary services of physicians in group 
     practice.--Subject to subsection (h)(4)(C), subsection (a)(1) 
     shall not apply in the case of designated health services--
       ``(A) that are furnished personally by the referring 
     physician, personally by a physician who is a member of the 
     same group practice as the referring physician, or personally 
     by individuals who are directly supervised by any physician 
     who is a member of such group practice;
       ``(B) that are furnished in a building in which a physician 
     who is a member of the group practice furnishes physicians' 
     services unrelated to the furnishing of designated health 
     services;
       ``(C) that are furnished using equipment that is owned or 
     leased exclusively by the physician group; and
       ``(D) that are billed by the group practice of which the 
     physician is a member under a billing number assigned to the 
     group practice, or by an entity that is wholly owned by such 
     group practice,
     unless the Secretary determines other terms and conditions 
     under which the provision of such services does not present a 
     risk of program or patient abuse.''.
       (2) Requirements for group practice.--Section 1877(h)(4) 
     (42 U.S.C. 1395nn(h)(4)) is amended by adding at the end the 
     following new subparagraph:
       ``(C) Requirements for group practice.--For purposes of 
     subsection (b)(2), a group practice meets the requirements of 
     this subparagraph only if--
       ``(i) no member of the group is permitted to personally 
     employ any individual to participate in the furnishing of 
     services to patients of the group;
       ``(ii) no member of the group is permitted to enter 
     separately on the member's own behalf into arrangements with 
     any type of managed care entity (including health maintenance 
     organizations and preferred provider organizations), third 
     party payer, or other health benefit plan for the provision 
     of services to patients of the group, except that nothing in 
     this clause may be construed to prohibit the group from 
     entering into an arrangement with a managed care entity that 
     does not apply to services furnished by all the members of 
     the group; and
       ``(iii) the group has a governing body or persons with 
     responsibility for the conduct of the group practice, 
     including making decisions relating to retention of all 
     physician and nonphysician personnel, promulgating and 
     enforcing personnel policies which apply to all employees of 
     the group, developing salary, bonus, and benefits applicable 
     to physicians and nonphysician personnel, and establishing 
     fees for all services furnished by the group, except that 
     nothing in this clause may be construed to prohibit the 
     delegation of authority within a group practice or to require 
     the personnel policies to be documented in writing.''.
       (c) New Exception for Capitated Payments.--Section 1877(b) 
     (42 U.S.C. 1395nn(b)), as amended by subsection (a), is 
     amended--
       (1) by redesignating paragraph (3) as paragraph (4); and
       (2) by inserting after paragraph (2) the following new 
     paragraph:
       ``(3) Other capitated payments.--Subsection (a)(1) shall 
     not apply in the case of a designated health service, if the 
     designated health service is included in the services for 
     which a physician or physician group is paid only on a 
     capitated basis by a health plan or insurer pursuant to a 
     written arrangement between the plan or insurer and the 
     physician or physician group in which the physician or 
     physician group assumes financial risk for the furnishing of 
     the service.''.
       (d) New Exception for Shared Facility Services.--
       (1) In general.--Section 1877(b) (42 U.S.C. 1395nn(b)), as 
     amended by subsections (a) and (c), is amended--
       (A) by redesignating paragraph (4) as paragraph (3); and
       (B) by inserting after paragraph (3) the following new 
     paragraph:
       ``(4) Shared facility services.--
       ``(A) In general.--Subsection (a)(1) shall not apply in the 
     case of a designated health service consisting of a shared 
     facility service of a shared facility--
       ``(i) that is furnished--

       ``(I) personally by the referring physician who is a shared 
     facility physician or personally by an individual directly 
     employed by such a physician,
       ``(II) by a shared facility in a building in which the 
     referring physician furnishes substantially all of the 
     services of the physician that are unrelated to the 
     furnishing of shared facility services, and
       ``(III) to a patient of a shared facility physician; and

       ``(ii) that is billed by the referring physician.
       ``(B) Shared facility related definitions.--
       ``(i) Shared facility service.--The term `shared facility 
     service' means, with respect to a shared facility, a 
     designated health service furnished by the facility to 
     patients of shared facility physicians.
       ``(ii) Shared facility.--The term `shared facility' means 
     an entity that furnishes shared facility services under a 
     shared facility arrangement.
       ``(iii) Shared facility physician.--The term `shared 
     facility physician' means, with respect to a shared facility, 
     a physician who has a financial relationship under a shared 
     facility arrangement with the facility.
       ``(iv) Shared facility arrangement.--The term `shared 
     facility arrangement' means, with respect to the provision of 
     shared facility services in a building, a financial 
     arrangement--

       ``(I) which is only between physicians who are providing 
     services (unrelated to shared facility services) in the same 
     building,
       ``(II) in which the overhead expenses of the facility are 
     shared, in accordance with methods previously determined by 
     the physicians in the arrangement, among the physicians in 
     the arrangement, and
       ``(III) which, in the case of a corporation, is wholly 
     owned and controlled by shared facility physicians.''.

     SEC. 8354. EXCEPTIONS RELATED ONLY TO OWNERSHIP OR 
                   INVESTMENT.

       (a) Revision to Publicly Traded Securities Exception.--
     Section 1877(c)(1) (42 U.S.C. 1395nn(c)(1)) is amended by 
     inserting ``at the time acquired by the physician'' after 
     ``which may be purchased on terms generally available to the 
     public''.
       (b) Revision to Rural Provider Exception.--Section 
     1877(d)(2) of such Act (42 U.S.C. 1395nn(d)(2)) is amended by 
     striking ``substantially all'' and inserting ``not less than 
     75 percent (as determined in accordance with regulations of 
     the Secretary)''.

     SEC. 8355. REPEAL OF EXCEPTION FOR REMUNERATION UNRELATED TO 
                   PROVISION OF DESIGNATED HEALTH SERVICES.

       Section 1877(e) (42 U.S.C. 1395nn(e)) is amended--
       (1) by striking paragraph (4); and
       (2) by redesignating paragraphs (5), (6), (7), and (8) as 
     paragraphs (4), (5), (6), and (7).

     SEC. 8356. REFERRING PHYSICIANS.

       Section 1877(h)(5)(C) (42 U.S.C. 1395nn(H)(5)(C)) is 
     amended--
       (1) by striking ``and a request'' and inserting ``a 
     request'';
       (2) by inserting after ``radiation therapy,'' the 
     following: ``and a request by a nephrologist for items or 
     services related to renal dialysis,''; and
       (3) by striking ``or radiation oncologist'' and inserting 
     ``radiation oncologist, or nephrologist''.

     SEC. 8357. MISCELLANEOUS AND TECHNICAL PROVISIONS.

       (a) Clarification of Coverage of Indirectly Held Financial 
     Interests.--The last sentence of section 1877(a)(2) (42 
     U.S.C. 1395nn(a)(2)) is amended by striking ``an interest in 
     an entity that holds an ownership or investment interest in 
     any entity providing the designated health service'' and 
     inserting the following: ``an interest held indirectly 
     through means such as (but not limited to) holding a legal or 
     beneficial interest in another entity (such as a trust) that 
     holds such investment interest''.
       (b) Clarification of Exception for Payments by a 
     Physician.--Section 1877(e)(7) (42 U.S.C. 1395nn(e)(7)), as 
     redesignated by section 9305, is amended to read as follows:
       ``(7) Payments by a physician for items and services.--
     Payments made by a physician to an individual or entity as 
     compensation for items or services if the items or services 
     are furnished at a price that is consistent with fair market 
     value.''.
       (c) Reporting Requirements.--Section 1877(f) (42 U.S.C. 
     1395nn) is amended--
       (1) in the matter before paragraph (1), by inserting ``, 
     investment, and compensation'' after ``ownership'';
       (2) in paragraph (2), by inserting ``, or with a 
     compensation arrangement (as described in subsection 
     (a)(2)(B)),'' after ``investment interest (as described in 
     subsection (a)(2)(A))'';
       (3) in paragraph (2), by inserting ``interest or who have 
     such a compensation relationship with the entity'' before the 
     period at the end;
       (4) in the fourth sentence, by striking ``covered items 
     and'' and inserting ``designated health''; and
       (5) by striking the third and fifth sentences.
       (d) Revision of Effective Date Exception Provision.--
     Section 13562(b)(2) of the Omnibus Budget Reconciliation Act 
     of 1993 is amended by striking subparagraphs (A) and (B) and 
     inserting the following:
       ``(A) the second sentence of subsection (a)(2), and 
     subsections (b)(2)(B) and (d)(2), of section 1877 of the 
     Social Security Act (as in effect on the day before the date 
     of the enactment of this Act) shall apply instead of the 
     corresponding provisions in section 1877 (as amended by this 
     Act);
       ``(B) section 1877(b)(4) of the Social Security Act (as in 
     effect on the day before the date of the enactment of this 
     Act) shall apply;
       ``(C) the requirements of section 1877(c)(2) of the Social 
     Security Act (as amended by this Act) shall not apply to any 
     securities of a corporation that meets the requirements of 
     section 1877(c)(2) of the Social Security Act (as in effect 
     on the day before the date of the enactment of this Act);
       ``(D) section 1877(e)(3) of the Social Security Act (as 
     amended by this Act) shall apply, except that it shall not 
     apply to any arrangement that meets the requirements of 
     subsection (e)(2) or subsection (e)(3) of section 1877 of the 
     Social Security Act (as in effect on the day before the date 
     of the enactment of this Act);
       ``(E) the requirements of clauses (iv) and (v) of section 
     1877(h)(4)(A), and of clause (i) of section 1877(h)(4)(B), of 
     the Social Security Act (as amended by this Act) shall not 
     apply; and
       ``(F) section 1877(h)(4)(B) of the Social Security Act (as 
     in effect on the day before the date of the enactment of this 
     Act) shall apply instead of section 1877(h)(4)(A)(ii) of such 
     Act (as amended by this Act).''.
       (e) Clarification of Sanction Authority.--Section 
     1877(g)(4) (42 U.S.C. 1395nn(g)(4)) is amended by striking 
     ``Any physician'' and all that follows through ``to such 
     entity,'' and inserting the following: ``Any physician or 
     other entity that enters into an arrangement or scheme (such 
     as a cross-referral arrangement or an arrangement with 
     multiple leases overlapping in time for the same or similar 
     rental space or equipment) which the physician or entity 
     knows or should know has a principal purpose of inducing 
     referrals to another entity, which referrals, if made 
     directly by the physician or entity to such other entity,''.
       (f) Authorization for Secretary to Issue Regulations.--
     Section 1877 (42 U.S.C. 1395nn) is amended by adding at the 
     end the following new subsection:
       ``(i) Additional Requirements.--The Secretary is authorized 
     to impose by regulation such other requirements as needed to 
     protect against program or patient abuse with respect to any 
     of the exceptions under this section.''.

     SEC. 8358. EFFECTIVE DATE.

       The amendments made by this part shall apply to referrals 
     made on or after January 1, 1996, except that the amendments 
     made by section 8356(2) and section 8357(d) shall apply as if 
     included in the enactment of OBRA-1993.

                   PART 7--OTHER MEDICARE PROVISIONS

     SEC. 8361. TREATMENT OF BENEFICIARIES RESIDING IN STATES WITH 
                   APPROVED SINGLE-PAYER SYSTEMS.

       Title XVIII, as amended by section 3116(f), is further 
     amended by adding at the end the following new section:


     ``treatment of beneficiaries under state single-payer systems

       ``Sec. 1894. (a) In General.--In the case of individual 
     entitled to benefits under this title who is covered under a 
     State single-payer system approved under subtitle A of title 
     IV of the Guaranteed Health Insurance Act of 1994--
       ``(1) the benefits covered under such system shall be 
     instead of the payments which would otherwise be made to the 
     individual or on the individual's behalf under this title; 
     and
       ``(2) the Secretary shall make a payment to the State in 
     the amount specified under subsection (b), on such periodic 
     basis that will permit the State to make timely payment for 
     items and services furnished under the State single-payer 
     system to such individuals.
       ``(b) Amount of Payments to States.--
       ``(1) In general.--The amount specified in this subsection 
     with respect to a State is the Secretary's estimate of the 
     sum of the following products:
       ``(A) The product of--
       ``(i) the part A per enrollee payment described in 
     paragraph (2) for the month; and
       ``(ii) the number of individuals who are entitled to 
     benefits under part A during the month and (as estimated 
     prior to the month based on information provided by the 
     State) who are covered under the State system described in 
     subsection (a).
       ``(B) The product of--
       ``(i) the part B per enrollee payment described in 
     paragraph (2) for the month; and
       ``(ii) the number of individuals who are enrolled under 
     part B during the month and (as estimated prior to the month 
     based on information provided by the State) who are covered 
     under the State system described in subsection (a).
       ``(2) Per enrollee payments.--In paragraph (1)--
       ``(A) the `part A per enrollee payment' for a month is an 
     amount equal to the Secretary's estimate of the amount of 
     payment which would be made under part A for the month on 
     behalf of individuals covered under the State system 
     described in subsection (a) during the month if the 
     individuals were not covered under the State system during 
     the month; and
       ``(B) the `part B per enrollee payment' for a month is an 
     amount equal to the Secretary's estimate of the amount of 
     payment which would be made under part B for the month on 
     behalf of individuals covered under the State system 
     described in subsection (a) during the month if the 
     individuals were not covered under the State system during 
     the month.
       ``(3) Adjustments.--The Secretary shall adjust the amount 
     of payment otherwise made to a State under this subsection 
     for a month to take into account overpayments or 
     underpayments made under this subsection in previous months.
       ``(c) Payments From Trust Funds.--Of the total amount of 
     payment made to a State under subsection (b)--
       ``(1) the portion attributable to the amount described in 
     subsection (b)(1)(A) shall be paid from the Federal Hospital 
     Insurance Trust Fund; and
       ``(2) the portion attributable to the amount described in 
     subsection (b)(1)(B) shall be paid from the Federal 
     Supplementary Medical Insurance Trust Fund.''.

     SEC. 8362. DEVELOPMENT AND IMPLEMENTATION OF PROSPECTIVE 
                   PAYMENT METHODOLOGIES.

       (a) In General.--Subject to subsection (b), the Secretary 
     shall, not later than January 1, 1997, develop and implement 
     prospective payment methodologies for setting payment rates 
     for services for which a prospective payment methodology is 
     not used under the medicare program. In developing such 
     methodologies, the Secretary shall ensure that the amount of 
     payments under such methodologies under the medicare program 
     would not exceed the amount of payments that would be paid 
     under the methodologies otherwise applicable.
       (b) Payment Methodologies for PPS-Exempt Hospitals.--The 
     Secretary shall develop and implement such a payment 
     methodology for services of classes of hospitals (including 
     children's hospitals) that are not subsection (d) hospitals 
     (within the meaning of section 1886(d)(1)(B) of the Social 
     Security Act) where appropriate. Any such payment methodology 
     shall provide for hospital-specific payment rates based on 
     resource requirements of such hospitals, determined using 
     data specific to the different classes of such hospitals.
       (c) Application of Methodologies.--In the case of any 
     service within a class of services for which a prospective 
     payment methodology is implemented under subsection (a), 
     notwithstanding any other provision of law, such methodology 
     shall be applied under the medicare program and medicare part 
     C and under subtitle D of title VI instead of the methodology 
     otherwise provided.
       (d) Development of Methodology for Establishing Limits on 
     Payments for Services Provided in Hospital Outpatient 
     Departments.--The Secretary shall revise the payment 
     methodology established under the medicare program for 
     payment for services provided in hospital outpatient 
     departments in order to provide for a hospital-specific limit 
     on the rate of growth in payments for such services. Such 
     revision shall first be applied to payments to hospitals for 
     portions of cost reporting periods occurring on or after 
     January 1, 1997.

     SEC. 8363. MEDICARE SUPPLEMENTAL INSURANCE POLICY AMENDMENTS.

       (a) Conforming Changes in Medicare Benefits.--Not later 
     than July 1, 1995, the Secretary shall, in accordance with 
     section 1882(p)(1) of the Social Security Act, promulgate 
     standards for medicare supplemental policies to reflect the 
     changes in benefits provided under parts A and B of title 
     XVIII of such Act for purposes of the NAIC or Federal 
     Standards applicable under such section. The provisions of 
     section 1882(p)(1) of the Social Security Act shall apply to 
     such standards in the same manner as such provisions apply to 
     ``Federal standards'' described in subparagraph (B) of such 
     section, except that any reference in such section to ``the 
     date specified in subparagraph'' shall be deemed to be a 
     reference to ``January 1, 1998''.
       (b) Requiring Open Enrollment.--
       (1) In general.--Section 1882(s) (42 U.S.C. 1395ss(s)) is 
     amended--
       (A) in paragraph (3), by striking ``paragraphs (1) and 
     (2)'' and inserting ``paragraphs (1), (2), and (3)'';
       (B) by redesignating paragraph (3) as paragraph (4); and
       (C) by inserting after paragraph (2) the following new 
     paragraph:
       ``(3) Notwithstanding paragraph (2), the issuer of a 
     medicare supplemental policy may not deny the issuance of a 
     medicare supplemental policy during an annual open enrollment 
     period of at least 30 days established by the Secretary for 
     medicare supplemental policies.''.
       (2) Issuance of regulations.--Not later than July 1, 1995, 
     the Secretary shall issue regulations to carry out the 
     amendments made by paragraph (1).
       (c) Effective Date.--
       (1) Conforming changes.--The changes in the NAIC or Federal 
     standards made pursuant to subsection (a) shall apply to 
     medicare supplemental policies issued on or after January 1, 
     1998.
       (2) Open enrollment.--(A) Except as provided in 
     subparagraph (B), the amendments made by subsection (b) shall 
     apply to medicare supplemental policies issued on or after 
     January 1, 1997.
       (B) In the case of a State which the Secretary identifies 
     as--
       (i) requiring State legislation (other than legislation 
     appropriating funds) to conform its regulatory program to the 
     amendments made by subsection (b), but
       (ii) having a legislature which is not scheduled to meet in 
     1996 in a legislative session in which such legislation may 
     be considered,
     the amendment made by subsection (b) shall apply to medicare 
     supplemental policies issued in the State on or after the 
     earlier of January 1, 1998, or the first day of the first 
     calendar quarter beginning after the close of the first 
     legislative session of the State legislature that begins on 
     or after January 1, 1996. For purposes of the previous 
     sentence, in the case of a State that has a 2-year 
     legislative session, each year of such session shall be 
     deemed to be a separate regular session of the State 
     legislature.

     SEC. 8364. REQUIRING HOSPITALS TO PARTICIPATE IN MEDICARE 
                   PART C.

       (a) In General.--Section 1866(a)(1) (42 U.S.C. 
     1395cc(a)(1)), as amended by section 8334(a), is amended--
       (1) in subparagraph (Q), by striking ``and'' at the end;
       (2) by striking the period at the end of subparagraph (R) 
     and inserting ``, and''; and
       (3) by inserting after subparagraph (R) the following:
       ``(S) in the case of a hospital or a rural primary care 
     hospital, to file a participation agreement with respect to 
     the medicare part C program (in accordance with [section 
     2131]).''.
       (b) Effective Date.--The amendments made by subsection (a) 
     shall apply to cost reporting periods beginning on or after 
     January 1, 1999.

     SEC. 8365. CONFORMING AMENDMENTS RELATING TO PROGRAM OF COST-
                   SHARING FOR QUALIFIED MEDICARE BENEFICIARIES.

       (a) In General.--(1) Section 1818(g)(1) (42 U.S.C. 
     1395i@2(g)(1)) is amended by striking ``1905(p)(1)'' and 
     inserting ``2223(a)''.
       (2) Section 1843(h) (42 U.S.C. 1395v(h)) is amended by 
     striking ``1905(p)(1)'' each place it appears in paragraph 
     (1)(B) and paragraph (2) and inserting ``2223(a)''
       (3) Section 1848(g)(3)(A) (42 U.S.C. 1395w-4(g)(3)) is 
     amended--
       (A) by striking ``(including as a qualified medicare 
     beneficiary, as described in section 1905(p)(1))'', and
       (B) by inserting ``or who is eligible for benefits under 
     part C of title XXII'' after ``title XIX''.
       (b) Effective Date.--The amendments made by this section 
     shall apply with respect to items or services furnished in a 
     State on or after January 1, 1999.

     SEC. 8366. ADJUSTING CAPITAL PAYMENTS FOR AMOUNTS RECEIVED 
                   UNDER CAPITAL FINANCING ASSISTANCE PROGRAM.

       Section 1886(g)(1)(B) (42 U.S.C. 1395ww(g)(1)(B)) is 
     amended--
       (1) by striking ``and'' at the end of clause (iii);
       (2) by striking the period at the end of clause (iv) and 
     inserting ``, and''; and
       (3) by adding at the end the following new clause:
       ``(v) shall provide for adjustments to assure that payment 
     is not made to a hospital for capital-related costs to the 
     extent that such costs were reduced or eliminated as a result 
     of the receipt of financial assistance under title XXVIII of 
     the Public Health Service Act.''.

     SEC. 8367. STUDY OF PHYSICIAN SUPERVISION OF NURSE 
                   ANESTHETIST SERVICES.

       (a) Study.--The Secretary of Health and Human Services, 
     acting through the Administrator of the Health Care Financing 
     Administration, shall conduct a study to determine the 
     appropriate requirements for and amount of--
       (1) payments under part B of the medicare program for 
     services of a certified registered nurse anesthetist who does 
     not provide such services under the medical supervision or 
     medical direction of a physician, and
       (2) payments under such part for the medical direction of 
     such certified registered nurse anesthetist by a physician.
       (b) Report.--Not later than 1 year after the date of the 
     enactment of this Act, the Secretary shall submit a report to 
     Congress on the study conducted under subsection (a), and 
     shall include in the report such recommendations as the 
     Secretary considers appropriate.

           PART 8--EXPANSION OF FRAIL ELDERLY DEMONSTRATIONS

     SEC. 8371. EXPANSION OF NUMBER OF SITES FOR DEMONSTRATION 
                   PROGRAM OF ALL-INCLUSIVE CARE FOR THE ELDERLY 
                   (PACE).

       Section 9412(b)(1) of OBRA-1986 is amended by striking 
     ``not more than 15'' and inserting ``not more than 50''.
          Subtitle E--Minor and Technical Medicare Amendments

                     table of contents of subtitle

          Subtitle E--Minor and Technical Medicare Amendments

                 Part 1--Provisions Relating to Part A

Sec. 8401. Provisions relating to adjustments to standardized amounts 
              for wages and wage-related costs.
Sec. 8402. Provisions relating to rural health transition grant 
              program.
Sec. 8403. Psychology services in hospitals.
Sec. 8404. Skilled nursing facilities.
Sec. 8405. Notification of availability of hospice benefit.
Sec. 8406. Clarifying expertise of individuals to serve on the 
              prospective payment assessment commission.
Sec. 8407. Authority for budget neutral adjustments for changes in 
              payment amounts for transfer cases.
Sec. 8408. Hemophilia pass-through extension.
Sec. 8409. Sub-acute care services demonstration project.
Sec. 8410. Clarification of DRG payment window expansion; miscellaneous 
              and technical corrections.

                 Part 2--Provisions Relating to Part B


                    SUBPART A--PHYSICIANS' SERVICES

Sec. 8411. Development and implementation of resource-based methodology 
              for practice expenses.
Sec. 8412. Geographic cost of practice index refinements.
Sec. 8413. Extra-billing limits.
Sec. 8414. Relative values for pediatric services.
Sec. 8415. Administration of claims relating to physicians' services.
Sec. 8416. Miscellaneous and technical corrections.


                  SUBPART B--DURABLE MEDICAL EQUIPMENT

Sec. 8421. Certification of suppliers.
Sec. 8422. Restrictions on certain marketing and sales activities.
Sec. 8423. Beneficiary liability for noncovered services.
Sec. 8424. Adjustments for inherent reasonableness.
Sec. 8425. Miscellaneous and technical corrections.


                  SUBPART C--OTHER ITEMS AND SERVICES

Sec. 8431. Ambulatory surgical center services.
Sec. 8432. Study of medicare coverage of patient care costs associated 
              with clinical trials of new cancer therapies.
Sec. 8433. Study of annual cap on amount of medicare payment for 
              outpatient physical therapy and occupational therapy 
              services.
Sec. 8434. Payment of part B premium late enrollment penalties by 
              States.
Sec. 8435. Treatment of inpatients and provision of diagnostic X-ray 
              services by rural health clinics and federally qualified 
              health centers.
Sec. 8436. Application of mammography certification requirements.
Sec. 8437. Coverage of services of speech-language pathologists and 
              audiologists.
Sec. 8438. Miscellaneous and technical corrections.

              Part 3--Provisions Relating to Parts A and B


                  SUBPART A--MEDICARE SECONDARY PAYER

Sec. 8441. Medicare secondary payer reforms.


     SUBPART B--OTHER ITEMS AND SERVICES RELATING TO PARTS A AND B

Sec. 8451. Definition of FMGEMS examination for payment of direct 
              graduate medical education.
Sec. 8452. Qualified medicare beneficiary outreach.
Sec. 8453. Hospital agreements with organ procurement organizations.
Sec. 8454. Peer review organizations.
Sec. 8455. Health maintenance organizations.
Sec. 8456. Home health agencies.
Sec. 8457. Permanent extension of authority to contract with fiscal 
              intermediaries and carriers on other than a cost basis.
Sec. 8458. Transportation demonstration project.
Sec. 8459. Diabetes treatment demonstration project.
Sec. 8460. Expansion of number of sites for demonstration program of 
              all-inclusive care for the elderly (PACE).
Sec. 8460A. Miscellaneous and technical corrections.

Part 4--Provisions Relating to Medicare Supplemental Insurance Policies

Sec. 8461. Standards for medicare supplemental insurance policies.

                 PART 1--PROVISIONS RELATING TO PART A

     SEC. 8401. PROVISIONS RELATING TO ADJUSTMENTS TO STANDARDIZED 
                   AMOUNTS FOR WAGES AND WAGE-RELATED COSTS.

       (a) Use of Occupational Mix in Guidelines for Determination 
     of Area Wage Index.--
       (1) In general.--Section 1886(d)(10)(D)(i)(I) (42 U.S.C. 
     1395ww(d)(10)(D)(i)(I)) is amended by inserting ``(to the 
     extent the Secretary determines appropriate)'' after ``taking 
     into account''.
       (2) Effective date.--The amendment made by paragraph (1) 
     shall take effect as if included in the enactment of OBRA-
     1989.
       (b) Conforming Amendments Relating to Geographic Area Used 
     to Determine Wage Index Applicable to Hospital.--(1) Section 
     1886(d)(8)(C) (42 U.S.C. 1395ww(d)(8)(C)), as amended by 
     section 13501(b)(1) of OBRA-1993, is amended--
       (A) in clause (iv), by striking ``paragraph (1)'' and 
     inserting ``paragraph (10)''; and
       (B) by adding at the end the following new clause:
       ``(v) This subparagraph shall apply with respect to 
     discharges occurring in a fiscal year only if the Secretary 
     uses a method for making adjustments to the DRG prospective 
     payment rate for area differences in hospital wage levels 
     under paragraph (3)(E) for the fiscal year that is based on 
     the use of Metropolitan Statistical Area classifications.''.
       (2) Section 1886(d)(10) (42 U.S.C. 1395ww(d)(10)) is 
     amended--
       (A) in subparagraph (C)(i)(II), by striking ``the area wage 
     index applicable'' and inserting ``the factor used to adjust 
     the DRG prospective payment rate for area differences in 
     hospital wage levels that applies''; and
       (B) in subparagraph (D)--
       (i) by redesignating clause (ii) as clause (iii), and
       (ii) by inserting after clause (i) the following new 
     clause:
       ``(ii) Notwithstanding clause (i), if the Secretary uses a 
     method for making adjustments to the DRG prospective payment 
     rate for area differences in hospital wage levels under 
     paragraph (3)(E) that is not based on the use of Metropolitan 
     Statistical Area classifications, the Secretary may revise 
     the guidelines published under clause (i) to the extent such 
     guidelines are used to determine the appropriateness of the 
     geographic area in which the hospital is determined to be 
     located for purposes of making such adjustments.''.
       (c) Adjustment of Labor and Non-Labor Portions of 
     Standardized Amounts.--Section 1886(d)(3)(A)(iii) (42 U.S.C. 
     1395ww(d)(3)(A)(iii)) is amended by adding at the end the 
     following: ``For discharges occurring on or after October 1, 
     1994, the Secretary shall adjust the ratio of the labor 
     portion to non-labor portion of each average standardized 
     amount to equal such ratio for the national average of all 
     standardized amounts.''.

     SEC. 8402. PROVISIONS RELATING TO RURAL HEALTH TRANSITION 
                   GRANT PROGRAM.

       (a) Eligibility of Rural Primary Care Hospitals for 
     Grants.--
       (1) In general.--Section 4005(e)(2) of OBRA-1987 is amended 
     in the matter preceding subparagraph (A) by inserting ``any 
     rural primary care hospital designated by the Secretary under 
     section 1820(i)(2) of the Social Security Act, or'' after 
     ``means''.
       (2) Effective date.--The amendment made by paragraph (1) 
     shall apply to grants made on or after October 1, 1993.
       (b) Extension of Authorization of Appropriations.--Section 
     4005(e)(9) of OBRA-1987 is amended--
       (1) by striking ``1989 and'' and inserting ``1989,''; and
       (2) by striking ``1992'' and inserting ``1992 and 
     $30,000,000 for each of fiscal years 1993 through 1997''.
       (c) Frequency of Required Reports.--Section 4008(e)(8)(B) 
     of OBRA-1987 is amended by striking ``every 6 months'' and 
     inserting ``every 12 months''.
       (d) Use of Grants for Telecommunications Projects.--
       (1) In general.--Section 4005(e)(7) of OBRA-1987 is amended 
     by adding at the end the following new subparagraph:
       ``(E) A hospital may use a grant received under this 
     subsection to participate in a project established by the 
     Secretary to establish telecommunications linkages between 
     the hospital and other medical facilities in order to permit 
     the hospital to use the medical expertise or equipment of the 
     other facility through telecommunications techniques. In 
     awarding grants to hospitals for this purpose, the Secretary 
     shall take into account the need to demonstrate alternative 
     telecommunications techniques for rural hospitals, including 
     interactive video telecommunications, static video imaging 
     transmitted through the telephone system, and facsimile 
     reproductions transmitted through the telephone system.''.
       (2) Set-aside of authorization.--Section 4005(e)(9) of 
     OBRA-1987 is amended by adding at the end the following: ``Of 
     the amounts authorized to be appropriated during each of the 
     fiscal years 1996 and 1997, $2,000,000 shall be available 
     solely for projects described in paragraph (7)(E).''.

     SEC. 8403. PSYCHOLOGY SERVICES IN HOSPITALS.

       Section 1861(e)(4) (42 U.S.C. 1395x(e)(4)) is amended by 
     striking ``physician;'' and inserting ``physician, except 
     that a patient receiving qualified psychologist services (as 
     defined in subsection (ii)) may be under the care of a 
     clinical psychologist with respect to such services to the 
     extent permitted under State law;''.

     SEC. 8404. SKILLED NURSING FACILITIES.

       (a) Construction of Wage Index.--Not later than 1 year 
     after the date of the enactment of this Act, the Secretary of 
     Health and Human Services shall begin to collect data on 
     employee compensation and paid hours of employment in skilled 
     nursing facilities for the purpose of constructing a skilled 
     nursing facility wage index adjustment to the routine service 
     cost limits required under section 1888(a)(4) of the Social 
     Security Act.
       (b) Clarification of Repeal of Utilization Review 
     Requirements.--
       (1) In general.--(A) Section 1814(a)(5) (42 U.S.C. 
     1395f(a)(5)) is amended--
       (i) by striking ``and with respect'' and all that follows 
     through ``regulations'';
       (ii) by striking ``or skilled nursing facility, as the case 
     may be''; and
       (iii) by striking ``or facility''.
       (B) Section 1866(d) (42 U.S.C. 1395cc(d)) is amended--
       (i) by striking ``or skilled nursing facility'';
       (ii) by striking ``or facility'' each place it appears;
       (iii) by striking ``or for post-hospital'' and all that 
     follows through ``the case may be''; and
       (iv) by striking ``, or (in the case of'' and all that 
     follows through ``transfer agreement,''.
        (2) Effective date.--The amendments made by paragraph (1) 
     shall take effect as if included in the enactment of OBRA-
     1987.
       (c) Reimbursement for Atypical Services.--Section 1888(c) 
     (42 U.S.C. 1395yy(c)) is amended--
       (1) by striking ``(c)'' and inserting ``(c)(1)''; and
       (2) by adding at the end the following new paragraph:
       ``(2) The Secretary shall establish an expedited review 
     process under which the Secretary shall respond to the 
     request of a skilled nursing facility received on or after 
     October 1, 1994, for an adjustment under this subsection 
     based on the furnishing of atypical services by the facility 
     during any cost reporting period (including the furnishing of 
     atypical services based on the facility's case mix) not later 
     than 30 days after receiving the facility's request. If the 
     Secretary approves a facility's request under the process, 
     the Secretary shall adjust the amount of the payments made 
     under this title (on a timely basis) with respect to routine 
     service costs of extended care services furnished by the 
     facility for each cost reporting period for which the 
     facility demonstrates that it furnishes (or will furnish) 
     such atypical services.''.
       (d) Payment for Services of Independent Laboratories 
     Furnished to Residents.--
       (1) Inclusion as routine service costs of extended care 
     services.--Section 1861(h)(6) (42 U.S.C. 1395x(h)(6)) is 
     amended by inserting ``or an independent clinical 
     laboratory'' after ``by a hospital''.
       (2) Requiring facilities to furnish laboratory services.--
     Section 1819(b)(4)(A) (42 U.S.C. 1395i-3(b)(4)(A)) is 
     amended--
       (A) by striking ``and'' at the end of clause (vi);
       (B) by striking the period at the end of clause (vii) and 
     inserting ``; and''; and
       (C) by inserting after clause (vii) the following new 
     clause:
       ``(viii) clinical laboratory services necessary to meet the 
     needs of each resident.''.
       (e) Conforming Amendments to Nursing Home Reform.--
       (1) Suspension of decertification of nurses aide training 
     and competency evaluation programs based on extended 
     surveys.--
       (A) In general.--Section 1819(f)(2)(B)(iii)(I)(b) (42 
     U.S.C. 1395i-3(f)(2)(B)(iii)(I)(b)) is amended by striking 
     the semicolon and inserting the following: ``, unless the 
     survey shows that the facility is in compliance with the 
     requirements of subsections (b), (c), and (d) of this 
     section;''.
       (B) Effective date.--The amendment made by subparagraph (A) 
     shall take effect as if included in the enactment of OBRA-
     1990.
       (2) Requirements for consultants conducting reviews on use 
     of drugs.--
       (A) In general.--Section 1819(c)(1)(D) (42 U.S.C. 1395i-
     3(c)(1)(D)) is amended by adding at the end the following 
     sentence: ``In determining whether such a consultant is 
     qualified to conduct reviews under the preceding sentence, 
     the Secretary shall take into account the needs of nursing 
     facilities under this title to have access to the services of 
     such a consultant on a timely basis.''.
       (B) Effective date.--The amendment made by subparagraph (A) 
     shall take effect as if included in the enactment of OBRA-
     1987.
       (3) Increase in minimum amount required for separate 
     deposit of personal funds.--
       (A) In general.--Section 1819(c)(6)(B)(i) (42 U.S.C. 1395i-
     3(c)(6)(B)(i)) is amended by striking ``$50'' and inserting 
     ``$100''.
       (B) Effective date.--The amendment made by subparagraph (A) 
     shall take effect January 1, 1995.
       (4) Due process protections for nurse aides.--
       (A) Prohibiting state from including undocumented 
     allegations in nurses aide registry.--Section 1819(e)(2)(B) 
     (42 U.S.C. 1395i-3(e)(2)(B)) is amended by striking the 
     period at the end of the first sentence and inserting the 
     following: ``, but shall not include any allegations of 
     resident abuse or neglect or misappropriation of resident 
     property that are not specifically documented by the State 
     under such subsection.''.
       (B) Due process requirements for rebutting allegations.--
     Section 1819(g)(1)(C) (42 U.S.C. 1395i-3(g)(1)(C)) is amended 
     by striking the second sentence and inserting the following: 
     ``The State shall, after providing the individual involved 
     with a written notice of the allegations (including a 
     statement of the availability of a hearing for the individual 
     to rebut the allegations) and the opportunity for a hearing 
     on the record, make a written finding as to the accuracy of 
     the allegations.''.
       (C) Effective date.--The amendments made by this paragraph 
     shall take effect January 1, 1995.
       (f) Corrections Relating to Section 4008.--
       (1) Section 1819(b)(5)(D) (42 U.S.C. 1395i-3(b)(5)(D)), as 
     amended by section 4008(h)(1)(D) of OBRA-1990, is amended by 
     striking the comma before ``or a new competency evaluation 
     program.''.
       (2) Section 1819(b)(5)(G) (42 U.S.C. 1395i-3(b)(5)(G)) is 
     amended by striking ``or licensed or certified social 
     worker'' and inserting ``licensed or certified social worker, 
     registered respiratory therapist, or certified respiratory 
     therapy technician''.
       (3) Section 1819(f)(2)(B)(i) (42 U.S.C. 1395i-
     3(f)(2)(B)(i)) is amended by striking ``facilities,'' and 
     inserting ``facilities (subject to clause (iii)),''.
       (4) Section 1819(f)(2)(B)(iii)(I)(c) (42 U.S.C. 1395i-
     3(f)(2)(B)(iii)(I)(c)) is amended by striking ``clauses'' 
     each place it appears and inserting ``clause''.
       (5) Section 1819(g)(5)(B) (42 U.S.C. 1395i-3(g)(5)(B)) is 
     amended by striking ``paragraphs'' and inserting 
     ``paragraph''.
       (6) Section 4008(h)(1)(F)(ii) of OBRA-1990 is amended--
       (A) by striking ``The amendments'' and inserting ``(I) The 
     amendments'';
       (B) by striking ``nursing facility'' each place it appears 
     and inserting ``skilled nursing facility'';
       (C) by redesignating subclauses (I) through (V) as items 
     (aa) through (ee); and
       (D) by adding at the end the following new subclause:
       ``(II) Notwithstanding subclause (I) and subject to section 
     1819(f)(2)(B)(iii)(I) of the Social Security Act (as amended 
     by clause (i)), a State may approve a training and competency 
     evaluation program or a competency evaluation program offered 
     by or in a skilled nursing facility described in subclause 
     (I) if, during the previous 2 years, item (aa), (bb), (cc), 
     (dd), or (ee) of subclause (I) did not apply to the 
     facility.''.
       (7) Effective date.--The amendments made by this subsection 
     shall take effect as if included in the enactment of OBRA-
     1990.

     SEC. 8405. NOTIFICATION OF AVAILABILITY OF HOSPICE BENEFIT.

       (a) In General.--Section 1861(ee)(2)(D) (42 U.S.C. 
     1395x(ee)(2)(D)) is amended by inserting ``, including 
     hospice services,'' after ``post-hospital services''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to services furnished on or after the first day 
     of the first month beginning more than one year after the 
     date of the enactment of this Act.

     SEC. 8406. CLARIFYING EXPERTISE OF INDIVIDUALS TO SERVE ON 
                   THE PROSPECTIVE PAYMENT ASSESSMENT COMMISSION.

       Section 1886(e)(6)(B) (42 U.S.C. 1395ww(e)(6)(B)) is 
     amended by striking ``hospital reimbursement, hospital 
     financial management'' and inserting ``health facility 
     management, reimbursement of health facilities or other 
     providers of services which reflect the scope of the 
     Commission's responsibilities''.

     SEC. 8407. AUTHORITY FOR BUDGET NEUTRAL ADJUSTMENTS FOR 
                   CHANGES IN PAYMENT AMOUNTS FOR TRANSFER CASES.

       Section 1886(d)(5)(I) (42 U.S.C. 1395ww(d)(5)) is amended--
       (1) by inserting ``(i)'' after ``(I)''; and
       (2) by adding at the end the following new clause:
       ``(ii) In making adjustments under clause (i) for transfer 
     cases (as defined by the Secretary) in a fiscal year, the 
     Secretary may make adjustments to each of the average 
     standardized amounts determined under paragraph (3) to assure 
     that the aggregate payments made under this subsection for 
     such fiscal year are not greater or lesser than those that 
     would have otherwise been made in such fiscal year.''.

     SEC. 8408. HEMOPHILIA PASS-THROUGH EXTENSION.

       Effective as if included in the enactment of OBRA-1993, 
     section 6011(d) of OBRA-1989 (as amended by section 13505 of 
     OBRA-1993) is amended by striking ``September 30, 1994'' and 
     inserting ``September 30, 1999''.

     SEC. 8409. SUB-ACUTE CARE SERVICES DEMONSTRATION PROJECT.

       (a) Demonstration Project.--
       (1) In general.--The Secretary of Health and Human Services 
     shall conduct a demonstration project during fiscal years 
     1996 and 1997 on the provision of sub-acute care services 
     under part A of the medicare program in freestanding skilled 
     nursing facilities and hospitals.
       (2) Authorization of appropriations.--There are authorized 
     to be appropriated $10,000,000 for each of the fiscal years 
     1996 and 1997 to conduct the demonstration project under 
     paragraph (1).
       (b) Report.--Not later than 6 months after the conclusion 
     of the demonstration project conducted under subsection (a), 
     the Secretary shall submit a report to Congress on the 
     demonstration project, and shall include in the report an 
     evaluation of the demonstration project together with any 
     recommendations considered appropriate by the Secretary for 
     changes to title XVIII of the Social Security Act relating to 
     the provision of sub-acute care services under part A of the 
     medicare program.

     SEC. 8410. CLARIFICATION OF DRG PAYMENT WINDOW EXPANSION; 
                   MISCELLANEOUS AND TECHNICAL CORRECTIONS.

       (a) Clarification of DRG Payment Window Expansion.--The 
     first sentence of section 1886(a)(4) (42 U.S.C. 1395ww(a)(4)) 
     is amended by inserting ``(or, in the case of a hospital that 
     is not a subsection (d) hospital, during the 1 day)'' after 
     ``3 days''.
       (b) Technical Correction Relating to Resident Assessment in 
     Nursing Homes.--Section 1819(b)(3)(C)(i)(I) (42 U.S.C. 1395i-
     3(b)(3)(C)(i)(I)) is amended by striking ``not later than'' 
     before ``14 days''.
       (c) Technical Correction Relating to Applicable Adjustment 
     Factor for Indirect Medical Education Adjustment.--Section 
     1886(d)(5)(B)(ii) (42 U.S.C. 1395ww(d)(5)(B)(ii)) is amended 
     by striking ``May 1, 1986,'' and inserting ``October 1, 
     1988,''.
       (d) Medicare-dependent, Small Rural Hospitals and Sole 
     Community Hospitals.--
       (1) Medicare dependent, small rural hospitals.--
       (A) Clarification of additional payment.--Section 
     1886(d)(5)(G)(ii)(I) (42 U.S.C. 1395ww(d)(5)(G)(ii)(I)), as 
     amended by section 13501(e)(1) of OBRA-1993, is amended by 
     striking ``the first 3 12-month cost reporting periods that 
     begin'' and inserting ``the 36-month period beginning with 
     the first day of the cost reporting period that begins''.
       (B) Conforming target amounts to extension of additional 
     payments.--Section 1886(b)(3)(D) (42 U.S.C. 1395ww(b)(3)(D)) 
     is amended in the matter preceding clause (i) by striking 
     ``March 31, 1993'' and inserting ``September 30, 1994''.
       (2) Clarification of updates.--Section 
     1886(b)(3)(B)(iv)(II) (42 U.S.C. 1395ww(b)(3)(B)(iv)(II)), as 
     added by section 13501(a)(2) of OBRA-1993, is amended by 
     striking ``(taking into account'' and all that follows 
     through ``1994)'' and inserting ``(adjusted to exclude any 
     portion of a cost reporting period beginning during fiscal 
     year 1993 for which the applicable percentage increase is 
     determined under subparagraph (I))''.
       (e) Clerical Corrections.--(1) Section 1814(i)(1)(C)(i) (42 
     U.S.C. 1395f(i)(1)(C)(i)) is amended by striking ``1990'' and 
     inserting ``1990,''.
       (2) Section 1816(f)(2)(A)(ii) (42 U.S.C. 
     1396h(f)(2)(A)(ii)) is amended by striking ``such agency'' 
     and inserting ``such agency's''.

                 PART 2--PROVISIONS RELATING TO PART B

                    Subpart A--Physicians' Services

     SEC. 8411. DEVELOPMENT AND IMPLEMENTATION OF RESOURCE-BASED 
                   METHODOLOGY FOR PRACTICE EXPENSES.

       (a) Development.--
       (1) In general.--The Secretary of Health and Human Services 
     shall develop a methodology for implementing in 1997 a 
     resource-based system for determining practice expense 
     relative value units for each physicians' service. The 
     methodology utilized shall recognize the staff, equipment, 
     and supplies used in the provision of various medical and 
     surgical services in various settings.
       (2) Report.--The Secretary shall transmit a report by July 
     1, 1995, on the methodology developed under paragraph (1) to 
     the Committees on Ways and Means and Energy and Commerce of 
     the House of Representatives and the Committee on Finance of 
     the Senate. The report shall include a presentation of data 
     utilized in developing the methodology and an explanation of 
     the methodology.
       (b) Implementation.--
       (1) In general.--Section 1848(c)(2)(C)(ii) (42 U.S.C. 
     1395w-4(c)(2)(C)(ii)) is amended--
       (A) by inserting ``for the service for years before 1997'' 
     before ``equal to'',
       (B) by striking the period at the end of subclause (II) and 
     inserting a comma, and
       (C) by adding after and below subclause (II) the following:
     ``and for years beginning with 1997 based on the relative 
     practice expense resources involved in furnishing the service 
     (in accordance with the transition provided in subparagraph 
     (G)).''.
       (2) Transition.--Section 1848(c)(2) (42 U.S.C. 
     1395w@4(c)(2)) is amended by adding at the end the following 
     new subparagraph:
       ``(G) Transition to resource-based practice expense 
     relative value units.--With respect to physicians' services 
     furnished in years beginning with 1997, the number of 
     practice expense relative value units applicable under 
     subparagraph (C)(ii) shall be equal to the following:
       ``(i) For services furnished in 1997, the sum of--

       ``(I) 75 percent of the units determined under the 
     methodology applicable under such subparagraph for years 
     prior to 1997; and
       ``(II) 25 percent of the units determined under the 
     methodology developed by the Secretary under section 
     8411(a)(1) of the Guaranteed Health Insurance Act of 1994.

       ``(ii) For services furnished in 1998, the sum of--

       ``(I) 50 percent of the units determined under the 
     methodology applicable under such subparagraph for years 
     prior to 1997; and
       ``(II) 50 percent of the units determined under the 
     methodology developed by the Secretary under section 
     8411(a)(1) of the Guaranteed Health Insurance Act of 1994.

       ``(iii) For services furnished in 1999, the sum of--

       ``(I) 25 percent of the units determined under the 
     methodology applicable under such subparagraph for years 
     prior to 1997; and
       ``(II) 75 percent of the units determined under the 
     methodology developed by the Secretary under section 
     8411(a)(1) of the Guaranteed Health Insurance Act of 1994.

       ``(iv) For services furnished in years beginning with 2000, 
     100 percent of the units determined under the methodology 
     developed by the Secretary under section 8411(a)(1) of the 
     Guaranteed Health Insurance Act of 1994.''.
       (3) Conforming amendment.--Section 1848(c)(3)(C)(ii) (42 
     U.S.C. 1395w-4(c)(3)(C)(ii)) is amended by striking ``The 
     practice'' and inserting ``For years before 2000, the 
     practice''.
       (4) Application of certain provisions.--In implementing the 
     amendment made by paragraph (1)(C), the provisions of clauses 
     (ii)(II) and (iii) of section 1848(c)(2)(B) of the Social 
     Security Act shall apply in the same manner as they apply to 
     adjustments under clause (ii)(I) of such section.

     SEC. 8412. GEOGRAPHIC COST OF PRACTICE INDEX REFINEMENTS.

       (a) Requiring Consultation with Representatives of 
     Physicians in Reviewing Geographic Adjustment Factors.--
     Section 1848(e)(1)(C) (42 U.S.C. 1395w-4(e)(1)(C)) is amended 
     by striking ``shall review'' and inserting ``shall, in 
     consultation with appropriate representatives of physicians, 
     review''.
       (b) Use of Most Recent Data In Geographic Adjustment.--
     Section 1848(e)(1) (42 U.S.C. 1395w-4(e)(1)) is amended by 
     adding at the end the following new subparagraph:
       ``(D) Use of recent data.--In establishing indices and 
     index values under this paragraph, the Secretary shall use 
     the most recent data available relating to practice expenses, 
     malpractice expenses, and physician work effort in different 
     fee schedule areas.''.
       (c) Report on Review Process.--Not later than 1 year after 
     the date of the enactment of this Act, the Secretary of 
     Health and Human Services shall study and report to the 
     Committee on Finance of the Senate and the Committee on Ways 
     and Means and the Committee on Energy and Commerce of the 
     House of Representatives on--
       (1) the data necessary to review and revise the indices 
     established under section 1848(e)(1)(A) of the Social 
     Security Act, including--
       (A) the shares allocated to physicians' work effort, 
     practice expenses (other than malpractice expenses), and 
     malpractice expenses;
       (B) the weights assigned to the input components of such 
     shares; and
       (C) the index values assigned to such components;
       (2) any limitations on the availability of data necessary 
     to review and revise such indices at least every three years;
       (3) ways of addressing such limitations, with particular 
     attention to the development of alternative data sources for 
     input components for which current index values are based on 
     data collected less frequently than every three years; and
       (4) the costs of developing more accurate and timely data.

     SEC. 8413. EXTRA-BILLING LIMITS.

       (a) Enforcement of Limits.--Section 1848(g) (42 U.S.C. 
     1395w-4(g)), as amended by section 13517(a) of OBRA-1993, is 
     amended--
       (1) by amending paragraph (1) to read as follows:
       ``(1) Limitation on actual charges.--
       ``(A) In general.--In the case of a nonparticipating 
     physician or nonparticipating supplier or other person (as 
     defined in section 1842(i)(2)) who does not accept payment on 
     an assignment-related basis for a physician's service 
     furnished with respect to an individual enrolled under this 
     part, the following rules apply:
       ``(i) Application of limiting charge.--No person may bill 
     or collect an actual charge for the service in excess of the 
     limiting charge described in paragraph (2) for such service.
       ``(ii) No liability for excess charges.--No person is 
     liable for payment of any amounts billed for the service in 
     excess of such limiting charge.
       ``(iii) Correction of excess charges.--If such a physician, 
     supplier, or other person bills, but does not collect, an 
     actual charge for a service in violation of clause (i), the 
     physician, supplier, or other person shall reduce on a timely 
     basis the actual charge billed for the service to an amount 
     not to exceed the limiting charge for the service.
       ``(iv) Refund of excess collections.--If such a physician, 
     supplier, or other person collects an actual charge for a 
     service in violation of clause (i), the physician, supplier, 
     or other person shall provide on a timely basis a refund to 
     the individual charged in the amount by which the amount 
     collected exceeded the limiting charge for the service. The 
     amount of such a refund shall be reduced to the extent the 
     individual has an outstanding balance owed by the individual 
     to the physician.
       ``(B) Sanctions.--If a physician, supplier, or other 
     person--
       ``(i) knowingly and willfully bills or collects for 
     services in violation of subparagraph (A)(i) on a repeated 
     basis, or
       ``(ii) fails to comply with clause (iii) or (iv) of 
     subparagraph (A) on a timely basis,
     the Secretary may apply sanctions against the physician, 
     supplier, or other person in accordance with paragraph (2) of 
     section 1842(j). In applying this subparagraph, paragraph (4) 
     of such section applies in the same manner as such paragraph 
     applies to such section and any reference in such section to 
     a physician is deemed also to include a reference to a 
     supplier or other person under this subparagraph.
       ``(C) Timely basis.--For purposes of this paragraph, a 
     correction of a bill for an excess charge or refund of an 
     amount with respect to a violation of subparagraph (A)(i) in 
     the case of a service is considered to be provided `on a 
     timely basis', if the reduction or refund is made not later 
     than 30 days after the date the physician, supplier, or other 
     person is notified by the carrier under this part of such 
     violation and of the requirements of subparagraph (A).''; and
       (2) in paragraph (3)(B)--
       (A) by inserting after the first sentence the following: 
     ``No person is liable for payment of any amounts billed for 
     such a service in violation of the previous sentence.'', and
       (B) in the last sentence, by striking ``previous sentence'' 
     and inserting ``first sentence''.
       (b) Clarification of Mandatory Assignment Rules for Certain 
     Practitioners.--
       (1) In general.--Section 1842(b) (42 U.S.C. 1395u(b)), as 
     amended by section 8416(e), is amended by adding at the end 
     the following new paragraph:
       ``(18)(A) Payment for any service furnished by a 
     practitioner described in subparagraph (C) and for which 
     payment may be made under this part on a reasonable charge or 
     fee schedule basis may only be made under this part on an 
     assignment-related basis.
       ``(B) A practitioner described in subparagraph (C) or other 
     person may not bill (or collect any amount from) the 
     individual or another person for any service described in 
     subparagraph (A), except for deductible and coinsurance 
     amounts applicable under this part. No person is liable for 
     payment of any amounts billed for such a service in violation 
     of the previous sentence. If a practitioner or other person 
     knowingly and willfully bills (or collects an amount) for 
     such a service in violation of such sentence, the Secretary 
     may apply sanctions against the practitioner or other person 
     in the same manner as the Secretary may apply sanctions 
     against a physician in accordance with subsection (j)(2) in 
     the same manner as such section applies with respect to a 
     physician. Paragraph (4) of subsection (j) shall apply in 
     this subparagraph in the same manner as such paragraph 
     applies to such section.
       ``(C) A practitioner described in this subparagraph is any 
     of the following:
       ``(i) A physician assistant, nurse practitioner, or 
     clinical nurse specialist (as defined in section 
     1861(aa)(5)).
       ``(ii) A certified registered nurse anesthetist (as defined 
     in section 1861(bb)(2)).
       ``(iii) A certified nurse-midwife (as defined in section 
     1861(gg)(2)).
       ``(iv) A clinical social worker (as defined in section 
     1861(hh)(1)).
       ``(v) A clinical psychologist (as defined by the Secretary 
     for purposes of section 1861(ii)).
       ``(D) For purposes of this paragraph, a service furnished 
     by a practitioner described in subparagraph (C) includes any 
     services and supplies furnished as incident to the service as 
     would otherwise be covered under this part if furnished by a 
     physician or as incident to a physician's service.''.
       (2) Conforming amendments.--
       (A) Section 1833 (42 U.S.C. 1395l) is amended--
       (i) in subsection (l)(5), by striking subparagraph (B) and 
     redesignating subparagraph (C) as subparagraph (B);
       (ii) by striking subsection (p); and
       (iii) in subsection (r), by striking paragraph (3) and 
     redesignating paragraph (4) as paragraph (3).
       (B) Section 1842(b)(12) (42 U.S.C. 1395u(b)(12)) is amended 
     by striking subparagraph (C).
       (c) Information on Extra-Billing Limits.--
       (1) Part of explanation of medicare benefits.--Section 
     1842(h)(7) (42 U.S.C. 1395u(h)(7)) is amended--
       (A) by striking ``and'' at the end of subparagraph (B),
       (B) in subparagraph (C), by striking ``shall include'',
       (C) in subparagraph (C), by striking the period at the end 
     and inserting ``, and'', and
       (D) by adding at the end the following new subparagraph:
       ``(D) in the case of services for which the billed amount 
     exceeds the limiting charge imposed under section 1848(g), 
     information regarding such applicable limiting charge 
     (including information concerning the right to a refund under 
     section 1848(g)(1)(A)(iv)).''.
       (2) Determinations by carriers.--Subparagraph (G) of 
     section 1842(b)(3) (42 U.S.C. 1395u(b)(3)) is amended to read 
     as follows:
       ``(G) will, for a service that is furnished with respect to 
     an individual enrolled under this part, that is not paid on 
     an assignment-related basis, and that is subject to a 
     limiting charge under section 1848(g)--
       ``(i) determine, prior to making payment, whether the 
     amount billed for such service exceeds the limiting charge 
     applicable under section 1848(g)(2);
       ``(ii) notify the physician, supplier, or other person 
     periodically (but not less often than once every 30 days) of 
     determinations that amounts billed exceeded such applicable 
     limiting charges; and
       ``(iii) provide for prompt response to inquiries of 
     physicians, suppliers, and other persons concerning the 
     accuracy of such limiting charges for their services;''.
       (d) Report on Charges in Excess of Limiting Charge.--
     Section 1848(g)(6)(B) (42 U.S.C. 1395w-4(g)(6)(B)) is amended 
     by inserting ``information on the extent to which actual 
     charges exceed limiting charges, the number and types of 
     services involved, and the average amount of excess charges 
     and information'' after ``report to the Congress''.
       (e) Miscellaneous and Technical Amendments.--Section 
     1833(h)(5)(D) (42 U.S.C. 1395l(h)(5)(D)) is amended--
       (1) by striking ``paragraphs (2) and (3)'' and by inserting 
     ``paragraph (2)''; and
       (2) by adding at the end the following: ``Paragraph (4) of 
     such section shall apply in this subparagraph in the same 
     manner as such paragraph applies to such section.''.
       (f) Effective Dates.--
       (1) Enforcement; miscellaneous and technical amendments.--
     The amendments made by subsections (a) and (e) shall apply to 
     services furnished on or after the date of the enactment of 
     this Act; except that the amendments made by subsection (a) 
     shall not apply to services of a nonparticipating supplier or 
     other person furnished before January 1, 1995.
       (2) Practitioners.--The amendments made by subsection (b) 
     shall apply to services furnished on or after January 1, 
     1995.
       (3) EOMBs.--The amendments made by subsection (c)(1) shall 
     apply to explanations of benefits provided on or after 
     January 1, 1995.
       (4) Carrier determinations.--The amendments made by 
     subsection (c)(2) shall apply to contracts as of January 1, 
     1995.
       (5) Report.--The amendment made by subsection (d) shall 
     apply to reports for years beginning with 1995.

     SEC. 8414. RELATIVE VALUES FOR PEDIATRIC SERVICES.

       (a) In General.--The Secretary of Health and Human Services 
     shall fully develop, by not later than January 1, 1995, 
     relative values for the full range of pediatric physicians' 
     services which are consistent with the relative values 
     developed for other physicians' services under section 
     1848(c) of the Social Security Act. In developing such 
     values, the Secretary shall conduct such refinements as may 
     be necessary to produce appropriate estimates for such 
     relative values.
       (b) Study.--
       (1) In general.--The Secretary shall conduct a study of the 
     relative values for pediatric and other services to determine 
     whether there are significant variations in the resources 
     used in providing similar services to different populations. 
     In conducting such study, the Secretary shall consult with 
     appropriate organizations representing pediatricians and 
     other physicians and physical and occupational therapists.
       (2) Report.--Not later than July 1, 1995, the Secretary 
     shall submit to Congress a report on the study conducted 
     under paragraph (1). Such report shall include any 
     appropriate recommendations regarding needed changes in 
     coding or other payment policies to ensure that payments for 
     pediatric services appropriately reflect the resources 
     required to provide these services.

     SEC. 8415. ADMINISTRATION OF CLAIMS RELATING TO PHYSICIANS' 
                   SERVICES.

       (a) Limitation on Carrier User Fees.--Section 1842(c) (42 
     U.S.C. 1395u(c)) is amended by adding at the end the 
     following new paragraph:
       ``(4) Neither a carrier nor the Secretary may impose a fee 
     under this title--
       ``(A) for the filing of claims related to physicians' 
     services,
       ``(B) for an error in filing a claim relating to 
     physicians' services or for such a claim which is denied,
       ``(C) for any appeal under this title with respect to 
     physicians' services,
       ``(D) for applying for (or obtaining) a unique identifier 
     under subsection (r), or
       ``(E) for responding to inquiries respecting physicians' 
     services or for providing information with respect to medical 
     review of such services.''.
       (b) Clarification of Permissible Substitute Billing 
     Arrangements.--
       (1) In general.--Clause (D) of section 1842(b)(6) (42 
     U.S.C. 1395u(b)(6)) is amended to read as follows: ``(D) 
     payment may be made to a physician for physicians' services 
     (and services furnished incident to such services) furnished 
     by a second physician to patients of the first physician if 
     (i) the first physician is unavailable to provide the 
     services; (ii) the services are furnished pursuant to an 
     arrangement between the two physicians that (I) is informal 
     and reciprocal, or (II) involves per diem or other fee-for-
     time compensation for such services; (iii) the services are 
     not provided by the second physician over a continuous period 
     of more than 60 days; and (iv) the claim form submitted to 
     the carrier for such services includes the second physician's 
     unique identifier (provided under the system established 
     under subsection (r)) and indicates that the claim meets the 
     requirements of this subparagraph for payment to the first 
     physician''.
       (2) Effective date.--The amendment made by paragraph (1) 
     shall apply to services furnished on or after the first day 
     of the first month beginning more than 60 days after the date 
     of the enactment of this Act.

     SEC. 8416. MISCELLANEOUS AND TECHNICAL CORRECTIONS.

       (a) Overvalued Procedures.--(1) Section 1842(b)(16)(B)(iii) 
     (42 U.S.C. 1395u(b)(16)(B)(iii)) is amended--
       (A) by striking ``, simple and subcutaneous'',
       (B) by striking ``; small'' and inserting ``and small'',
       (C) by striking ``treatments;'' the first place it appears 
     and inserting ``and'',
       (D) by striking ``lobectomy;'',
       (E) by striking ``enterectomy; colectomy; 
     cholecystectomy;'',
       (F) by striking ``; transurerethral resection'' and 
     inserting ``and resection'', and
       (G) by striking ``sacral laminectomy;''.
       (2) Section 4101(b)(2) of OBRA-1990 is amended--
       (A) in the matter before subparagraph (A), by striking 
     ``1842(b)(16)'' and inserting ``1842(b)(16)(B)'', and
       (B) in subparagraph (B)--
       (i) by striking ``, simple and subcutaneous'',
       (ii) by striking ``(HCPCS codes 19160 and 19162)'' and 
     inserting ``(HCPCS code 19160)'', and
       (iii) by striking all that follows ``(HCPCS codes 92250'' 
     and inserting ``and 92260).''.
       (b) Radiology Services.--(1) Section 1834(b)(4) (42 U.S.C. 
     1395m(b)(4)) is amended by redesignating the subparagraphs 
     (E) and (F) redesignated by section 4102(a)(1) of OBRA-1990 
     as subparagraphs (F) and (G), respectively.
       (2) Section 1834(b)(4)(D) (42 U.S.C. 1395m(b)(4)(D)) is 
     amended--
       (A) in the matter before clause (i), by striking ``shall be 
     determined as follows:'' and inserting ``shall, subject to 
     clause (vii), be reduced to the adjusted conversion factor 
     for the locality determined as follows:'',
       (B) in clause (iv), by striking ``Local adjustment.--
     Subject to clause (vii), the conversion factor to be applied 
     to'' and inserting ``Adjusted conversion factor.--The 
     adjusted conversion factor for'',
       (C) in clause (vii), by striking ``under this 
     subparagraph'', and
       (D) in clause (vii), by inserting ``reduced under this 
     subparagraph by'' after ``shall not be''.
       (3) Section 4102(c)(2) of OBRA-1990 is amended by striking 
     ``radiology services'' and all that follows and inserting 
     ``nuclear medicine services.''.
       (4) Section 4102(d) of OBRA-1990 is amended by striking 
     ``new paragraph'' and inserting ``new subparagraph''.
       (5) Section 1834(b)(4)(E) (42 U.S.C. 1395m(b)(4)(E)) is 
     amended by inserting ``Rule for certain scanning services.--
     '' after ``(E)''.
       (6) Section 1848(a)(2)(D)(iii) (42 U.S.C. 1395w-
     4(a)(2)(D)(iii)) is amended by striking ``that are subject to 
     section 6105(b) of the Omnibus Budget Reconciliation Act of 
     1989'' and by striking ``provided under such section'' and 
     inserting ``provided under section 6105(b) of the Omnibus 
     Budget Reconciliation Act of 1989''.
       (c) Anesthesia Services.--(1) Section 4103(a) of OBRA-1990 
     is amended by striking ``Reduction in Fee Schedule'' and 
     inserting ``Reduction in Prevailing Charges''.
       (2) Section 1842(q)(1)(B) (42 U.S.C. 1395u(q)(1)(B)) is 
     amended--
       (A) in the matter before clause (i), by striking ``shall be 
     determined as follows:'' and inserting ``shall, subject to 
     clause (iv), be reduced to the adjusted prevailing charge 
     conversion factor for the locality determined as follows:'', 
     and
       (B) in clause (iii), by striking ``Subject to clause (iv), 
     the prevailing charge conversion factor to be applied in'' 
     and inserting ``The adjusted prevailing charge conversion 
     factor for''.
       (d) Assistants at Surgery.--(1) Section 4107(c) of OBRA-
     1990 is amended by inserting ``(a)(1)'' after ``subsection''.
       (2) Section 4107(a)(2) of OBRA-1990 is amended by adding at 
     the end the following: ``In applying section 1848(g)(2)(D) of 
     the Social Security Act for services of an assistant-at-
     surgery furnished during 1991, the recognized payment amount 
     shall not exceed the maximum amount specified under section 
     1848(i)(2)(A) of such Act (as applied under this paragraph in 
     such year).''.
       (e) Technical Components of Diagnostic Services.--Section 
     1842(b) (42 U.S.C. 1395u(b)) is amended by redesignating 
     paragraph (18), as added by section 4108(a) of OBRA-1990, as 
     paragraph (17) and, in such paragraph, by inserting ``, tests 
     specified in paragraph (14)(C)(i),'' after ``diagnostic 
     laboratory tests''.
       (f) Statewide Fee Schedules.--Section 4117 of OBRA-1990 is 
     amended--
       (1) in subsection (a)--
       (A) by striking ``(a) In General.--'', and
       (B) by striking ``, if the'' and all that follows through 
     ``1991,''; and
       (2) by striking subsections (b), (c), and (d).
       (g) Study of Aggregation Rule for Claims of Similar 
     Physician Services.--Section 4113 of OBRA-1990 is amended--
       (1) by inserting ``of the Social Security Act'' after 
     ``1869(b)(2)''; and
       (2) by striking ``December 31, 1992'' and inserting 
     ``December 31, 1993''.
       (h) Other Miscellaneous and Technical Amendments.--(1) The 
     heading of section 1834(f) (42 U.S.C. 1395m(f)) is amended by 
     striking ``Fiscal Year''.
       (2)(A) Section 4105(b) of OBRA-1990 is amended--
       (i) in paragraph (2), by striking ``amendments'' and 
     inserting ``amendment'', and
       (ii) in paragraph (3), by striking ``amendments made by 
     paragraphs (1) and (2)'' and inserting ``amendment made by 
     paragraph (1)''.
       (B) Section 1848(f)(2)(C) (42 U.S.C. 1395w-4(f)(2)(C)) is 
     amended by inserting ``Performance standard rates of increase 
     for fiscal year 1991.--'' after ``(C)''.
       (C) Section 4105(d) of OBRA-1990 is amended by inserting 
     ``Publication of Performance Standard Rates.--'' after 
     ``(d)''.
       (3) Section 4106(c) of OBRA-1990 is amended by inserting 
     ``of the Social Security Act'' after ``1848(d)(1)(B)''.
       (4) Section 4114 of OBRA-1990 is amended by striking 
     ``patients'' the second place it appears.
       (5) Section 1848(e)(1)(C) (42 U.S.C. 1395w-4(e)(1)(C)) is 
     amended by inserting ``date of the'' after ``since the''.
       (6) Section 4118(f)(1)(D) of OBRA-1990 is amended by 
     striking ``is amended''.
       (7) Section 4118(f)(1)(N)(ii) of OBRA-1990 is amended by 
     striking ``subsection (f)(5)(A)'' and inserting ``subsection 
     (f)(5)(A))''.
       (8) Section 1845(e) (42 U.S.C. 1395w-1(e)) is amended--
       (A) by striking paragraph (2); and
       (B) by redesignating paragraphs (3), (4), and (5) as 
     paragraphs (2), (3), and (4).
       (9) Section 4118(j)(2) of OBRA-1990 is amended by striking 
     ``In section'' and inserting ``Section''.
       (10)(A) Section 1848(i)(3) (42 U.S.C. 1395w-4(i)(3)) is 
     amended by striking the space before the period at the end.
       (B) Section 1834(a)(10)(B) (42 U.S.C. 1395m(a)(10)(B)) is 
     amended--
       (i) by striking ``apply to'' and inserting ``would 
     otherwise apply to'', and
       (ii) by inserting before the period at the end ``but for 
     the application of section 1848(i)(3)''.
       (i) Other Corrections.--(1) Effective on the date of the 
     enactment of this Act, section 6102(d)(4) of OBRA-1989 is 
     amended by striking all that follows the first sentence.
       (2) Effective for payments for fiscal years beginning with 
     fiscal year 1994, section 1842(c)(1) (42 U.S.C. 1395u(c)(1)) 
     is amended--
       (A) in subparagraph (A), by striking ``(A) Any contract'' 
     and inserting ``Any contract''; and
       (B) by striking subparagraph (B).
       (j) Effective Date.--Except as provided in subsection (i), 
     the amendments made by this section and the provisions of 
     this section shall take effect as if included in the 
     enactment of OBRA-1990.

                  Subpart B--Durable Medical Equipment

     SEC. 8421. CERTIFICATION OF SUPPLIERS.

       (a) Requirements.--
       (1) In general.--Section 1834 (42 U.S.C. 1395m), as amended 
     by section 13544(b)(1) of OBRA-1993, is amended by adding at 
     the end the following new subsection:
       ``(j) Requirements for Suppliers of Medical Equipment and 
     Supplies.--
       ``(1) Issuance and renewal of supplier number.--
       ``(A) Payment.--Except as provided in subparagraph (C), no 
     payment may be made under this part after the expiration of 
     the 60-day period that begins on the date of the enactment of 
     the Guaranteed Health Insurance Act of 1994, for items 
     furnished by a supplier of medical equipment and supplies 
     unless such supplier obtains (and renews at such intervals as 
     the Secretary may require) a supplier number.
       ``(B) Standards for possessing a supplier number.--A 
     supplier may not obtain a supplier number unless--
       ``(i) for medical equipment and supplies furnished on or 
     after the expiration of the 60-day period that begins on the 
     date of the enactment of the Guaranteed Health Insurance Act 
     of 1994, and before January 1, 1996, the supplier meets 
     standards prescribed by the Secretary in regulations issued 
     on June 18, 1992; and
       ``(ii) for medical equipment and supplies furnished on or 
     after January 1, 1996, the supplier meets revised standards 
     prescribed by the Secretary (in consultation with 
     representatives of suppliers of medical equipment and 
     supplies, carriers, and consumers) that shall include 
     requirements that the supplier--

       ``(I) comply with all applicable State and Federal 
     licensure and regulatory requirements;
       ``(II) maintain a physical facility on an appropriate site;
       ``(III) have proof of appropriate liability insurance; and
       ``(IV) meet such other requirements as the Secretary may 
     specify.

       ``(C) Exception for items furnished as incident to a 
     physician's service.--Subparagraph (A) shall not apply with 
     respect to medical equipment and supplies furnished incident 
     to a physician's service.
       ``(D) Prohibition against multiple supplier numbers.--The 
     Secretary may not issue more than one supplier number to any 
     supplier of medical equipment and supplies unless the 
     issuance of more than one number is appropriate to identify 
     subsidiary or regional entities under the supplier's 
     ownership or control.
       ``(E) Prohibition against delegation of supplier 
     determinations.--The Secretary may not delegate (other than 
     by contract under section 1842) the responsibility to 
     determine whether suppliers meet the standards necessary to 
     obtain a supplier number.
       ``(2) Certificates of medical necessity.--
       ``(A) Limitation on information provided by suppliers on 
     certificates of medical necessity.--
       ``(i) In general.--Effective upon the expiration of the 60-
     day period that begins on the date of the enactment of the 
     Guaranteed Health Insurance Act of 1994, a supplier of 
     medical equipment and supplies may distribute to physicians, 
     or to individuals entitled to benefits under this part, a 
     certificate of medical necessity for commercial purposes 
     which contains no more than the following information 
     completed by the supplier:

       ``(I) An identification of the supplier and the beneficiary 
     to whom such medical equipment and supplies are furnished.
       ``(II) A description of such medical equipment and 
     supplies.
       ``(III) Any product code identifying such medical equipment 
     and supplies.
       ``(IV) Any other administrative information (other than 
     information relating to the beneficiary's medical condition) 
     identified by the Secretary.

       ``(ii) Information on payment amount and charges.--If a 
     supplier distributes a certificate of medical necessity 
     containing any of the information permitted to be supplied 
     under clause (i), the supplier shall also list on the 
     certificate of medical necessity the fee schedule amount and 
     the supplier's charge for the medical equipment or supplies 
     being furnished prior to distribution of such certificate to 
     the physician.
       ``(iii) Penalty.--Any supplier of medical equipment and 
     supplies who knowingly and willfully distributes a 
     certificate of medical necessity in violation of clause (i) 
     or fails to provide the information required under clause 
     (ii) is subject to a civil money penalty in an amount not to 
     exceed $1,000 for each such certificate of medical necessity 
     so distributed. The provisions of section 1128A (other than 
     subsections (a) and (b)) shall apply to civil money penalties 
     under this subparagraph in the same manner as they apply to a 
     penalty or proceeding under section 1128A(a).
       ``(B) Definition.--For purposes of this paragraph, the term 
     `certificate of medical necessity' means a form or other 
     document containing information required by the carrier to be 
     submitted to show that an item is reasonable and necessary 
     for the diagnosis or treatment of illness or injury or to 
     improve the functioning of a malformed body member.
       ``(3) Definition.--The term `medical equipment and 
     supplies' means--
       ``(A) durable medical equipment (as defined in section 
     1861(n));
       ``(B) prosthetic devices (as described in section 
     1861(s)(8));
       ``(C) orthotics and prosthetics (as described in section 
     1861(s)(9));
       ``(D) surgical dressings (as described in section 
     1861(s)(5));
       ``(E) such other items as the Secretary may determine; and
       ``(F) for purposes of paragraph (1)--
       ``(i) home dialysis supplies and equipment (as described in 
     section 1861(s)(2)(F)),
       ``(ii) immunosuppressive drugs (as described in section 
     1861(s)(2)(J)),
       ``(iii) therapeutic shoes for diabetics (as described in 
     section 1861(s)(12)),
       ``(iv) oral drugs prescribed for use as an anticancer 
     therapeutic agent (as described in section 1861(s)(2)(Q)), 
     and
       ``(v) self-administered erythropoetin (as described in 
     section 1861(s)(2)(P)).''.
       (2) Conforming amendment.--Section 1834(a) (42 U.S.C. 
     1395m(a)) is amended by striking paragraph (16).
       (b) Use of Covered Items by Disabled Beneficiaries.--
       (1) In general.--The Secretary of Health and Human 
     Services, in consultation with representatives of suppliers 
     of durable medical equipment under part B of the medicare 
     program and individuals entitled to benefits under such 
     program on the basis of disability, shall conduct a study of 
     the effects of the methodology for determining payments for 
     items of such equipment under such part on the ability of 
     such individuals to obtain items of such equipment, including 
     customized items.
       (2) Report.--Not later than one year after the date of the 
     enactment of this Act, the Secretary shall submit a report to 
     Congress on the study conducted under paragraph (1), and 
     shall include in the report such recommendations as the 
     Secretary considers appropriate to assure that disabled 
     medicare beneficiaries have access to items of durable 
     medical equipment.
       (c) Criteria for Treatment of Items as Prosthetic Devices 
     or Orthotics and Prosthetics.--Not later than one year after 
     the date of the enactment of this Act, the Secretary of 
     Health and Human Services shall submit a report to the 
     Committees on Ways and Means and Energy and Commerce of the 
     House of Representatives and the Committee on Finance of the 
     Senate describing prosthetic devices or orthotics and 
     prosthetics covered under part B of the medicare program that 
     do not require individualized or custom fitting and 
     adjustment to be used by a patient. Such report shall include 
     recommendations for an appropriate methodology for 
     determining the amount of payment for such items under such 
     program.

     SEC. 8422. RESTRICTIONS ON CERTAIN MARKETING AND SALES 
                   ACTIVITIES.

       (a) Prohibiting Unsolicited Telephone Contacts From 
     Suppliers of Durable Medical Equipment to Medicare 
     Beneficiaries.--
       (1) In general.--Section 1834(a) (42 U.S.C. 1395m(a)) is 
     amended by adding at the end the following new paragraph:
       ``(17) Prohibition against unsolicited telephone contacts 
     by suppliers.--
       ``(A) In general.--A supplier of a covered item under this 
     subsection may not contact an individual enrolled under this 
     part by telephone regarding the furnishing of a covered item 
     to the individual unless 1 of the following applies:
       ``(i) The individual has given written permission to the 
     supplier to make contact by telephone regarding the 
     furnishing of a covered item.
       ``(ii) The supplier has furnished a covered item to the 
     individual and the supplier is contacting the individual only 
     regarding the furnishing of such covered item.
       ``(iii) If the contact is regarding the furnishing of a 
     covered item other than a covered item already furnished to 
     the individual, the supplier has furnished at least 1 covered 
     item to the individual during the 15-month period preceding 
     the date on which the supplier makes such contact.
       ``(B) Prohibiting payment for items furnished subsequent to 
     unsolicited contacts.--If a supplier knowingly contacts an 
     individual in violation of subparagraph (A), no payment may 
     be made under this part for any item subsequently furnished 
     to the individual by the supplier.
       ``(C) Exclusion from program for suppliers engaging in 
     pattern of unsolicited contacts.--If a supplier knowingly 
     contacts individuals in violation of subparagraph (A) to such 
     an extent that the supplier's conduct establishes a pattern 
     of contacts in violation of such subparagraph, the Secretary 
     shall exclude the supplier from participation in the programs 
     under this Act, in accordance with the procedures set forth 
     in subsections (c), (f), and (g) of section 1128.''.
       (2) Requiring refund of amounts collected for disallowed 
     items.--Section 1834(a) (42 U.S.C. 1395m(a)), as amended by 
     paragraph (1), is amended by adding at the end the following 
     new paragraph:
       ``(18) Refund of amounts collected for certain disallowed 
     items.--
       ``(A) In general.--If a nonparticipating supplier furnishes 
     to an individual enrolled under this part a covered item for 
     which no payment may be made under this part by reason of 
     paragraph (17)(B), the supplier shall refund on a timely 
     basis to the patient (and shall be liable to the patient for) 
     any amounts collected from the patient for the item, unless--
       ``(i) the supplier establishes that the supplier did not 
     know and could not reasonably have been expected to know that 
     payment may not be made for the item by reason of paragraph 
     (17)(B), or
       ``(ii) before the item was furnished, the patient was 
     informed that payment under this part may not be made for 
     that item and the patient has agreed to pay for that item.
       ``(B) Sanctions.--If a supplier knowingly and willfully 
     fails to make refunds in violation of subparagraph (A), the 
     Secretary may apply sanctions against the supplier in 
     accordance with section 1842(j)(2).
       ``(C) Notice.--Each carrier with a contract in effect under 
     this part with respect to suppliers of covered items shall 
     send any notice of denial of payment for covered items by 
     reason of paragraph (17)(B) and for which payment is not 
     requested on an assignment-related basis to the supplier and 
     the patient involved.
       ``(D) Timely basis defined.--A refund under subparagraph 
     (A) is considered to be on a timely basis only if--
       ``(i) in the case of a supplier who does not request 
     reconsideration or seek appeal on a timely basis, the refund 
     is made within 30 days after the date the supplier receives a 
     denial notice under subparagraph (C), or
       ``(ii) in the case in which such a reconsideration or 
     appeal is taken, the refund is made within 15 days after the 
     date the supplier receives notice of an adverse determination 
     on reconsideration or appeal.''.
       (b) Conforming Amendment.--Section 1834(h)(3) (42 U.S.C. 
     1395m(h)(3)) is amended by striking ``Paragraph (12)'' and 
     inserting ``Paragraphs (12) and (17)''.
       (c) Effective Date.--The amendments made by subsections (a) 
     and (b) shall apply to items furnished after the expiration 
     of the 60-day period that begins on the date of the enactment 
     of this Act.

     SEC. 8423. BENEFICIARY LIABILITY FOR NONCOVERED SERVICES.

       (a) Unassigned Claims.--Section 1834(j) (42 U.S.C. 
     1395m(i)), as added by section 8421(a)(1), is amended--
       (A) by redesignating paragraph (3) as paragraph (4), and
       (B) by inserting after paragraph (2) the following new 
     paragraph:
       ``(3) Limitation on patient liability.--If a supplier of 
     medical equipment and supplies (as defined in paragraph 
     (4))--
       ``(A) furnishes an item or service to a beneficiary for 
     which no payment may be made by reason of paragraph (1);
       ``(B) furnishes an item or service to a beneficiary for 
     which payment is denied in advance under subsection (a)(15); 
     or
       ``(C) furnishes an item or service to a beneficiary for 
     which payment is denied under section 1862(a)(1);
     any expenses incurred for items and services furnished to an 
     individual by such a supplier not on an assigned basis shall 
     be the responsibility of such supplier. The individual shall 
     have no financial responsibility for such expenses and the 
     supplier shall refund on a timely basis to the individual 
     (and shall be liable to the individual for) any amounts 
     collected from the individual for such items or services. The 
     provisions of subsection (a)(18) shall apply to refunds 
     required under the previous sentence in the same manner as 
     such provisions apply to refunds under such subsection.''.
       (b) Assigned Claims.--Section 1879 (42 U.S.C. 1395pp) is 
     amended by adding at the end the following new subsection:
       ``(h) If a supplier of medical equipment and supplies (as 
     defined in section 1834(j)(4))--
       ``(1) furnishes an item or service to a beneficiary for 
     which no payment may be made by reason of section 1834(j)(1);
       ``(2) furnishes an item or service to a beneficiary for 
     which payment is denied in advance under section 1834(a)(15); 
     or
       ``(3) furnishes an item or service to a beneficiary for 
     which no payment may be made by reason of section 
     1834(a)(17)(B),
     any expenses incurred for items and services furnished to an 
     individual by such a supplier on an assignment-related basis 
     shall be the responsibility of such supplier. The individual 
     shall have no financial responsibility for such expenses and 
     the supplier shall refund on a timely basis to the individual 
     (and shall be liable to the individual for) any amounts 
     collected from the individual for such items or services. The 
     provisions of section 1834(a)(18) shall apply to refunds 
     required under the previous sentence in the same manner as 
     such provisions apply to refunds under such section.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to items or services furnished on or after the 
     expiration of the 60-day period that begins on the date of 
     the enactment of this Act.

     SEC. 8424. ADJUSTMENTS FOR INHERENT REASONABLENESS.

       (a) Adjustments Made to Final Payment Amounts.--
       (1) In general.--Section 1834(a)(10)(B) (42 U.S.C. 
     1395m(a)(10)(B)) is amended by adding at the end the 
     following: ``In applying such provisions to payments for an 
     item under this subsection, the Secretary shall make 
     adjustments to the payment basis for the item described in 
     paragraph (1)(B) if the Secretary determines (in accordance 
     with such provisions and on the basis of prices and costs 
     applicable at the time the item is furnished) that such 
     payment basis is not inherently reasonable.''.
       (2) Effective date.--The amendment made by paragraph (1) 
     shall take effect on the date of the enactment of this Act.
       (b) Adjustment Required for Certain Items.--
       (1) In general.--In accordance with section 1834(a)(10)(B) 
     of the Social Security Act (as amended by subsection (a)), 
     the Secretary of Health and Human Services shall determine 
     whether the payment amounts for the items described in 
     paragraph (2) are not inherently reasonable, and shall adjust 
     such amounts in accordance with such section if the amounts 
     are not inherently reasonable.
       (2) Items described.--The items referred to in paragraph 
     (1) are decubitus care equipment, transcutaneous electrical 
     nerve stimulators, and any other items considered appropriate 
     by the Secretary.

     SEC. 8425. MISCELLANEOUS AND TECHNICAL CORRECTIONS.

       (a) Updates to Payment Amounts.--(1) Subparagraph (A) of 
     section 1834(a)(14) (42 U.S.C. 1395m(a)(14)) is amended to 
     read as follows:
       ``(A) for 1991 and 1992, the percentage increase in the 
     consumer price index for all urban consumers (U.S. city 
     average) for the 12-month period ending with June of the 
     previous year reduced by 1 percentage point; and''.
       (2) The amendment made by paragraph (1) shall be effective 
     on the date of the enactment of this Act.
       (b) Advance Determinations of Coverage.--(1) Effective on 
     the expiration of the 60-day period that begins on date of 
     the enactment of this Act, section 1834(a)(15) (42 U.S.C. 
     1395m(a)(15)) is amended to read as follows:
       ``(15) Advance determinations of coverage for certain 
     items.--
       ``(A) Development of lists of items by Secretary.--The 
     Secretary may develop and periodically update a list of items 
     for which payment may be made under this subsection that the 
     Secretary determines, on the basis of prior payment 
     experience, are frequently subject to unnecessary utilization 
     throughout a carrier's entire service area or a portion of 
     such area.
       ``(B) Development of lists of suppliers by Secretary.--The 
     Secretary may develop and periodically update a list of 
     suppliers of items for which payment may be made under this 
     subsection with respect to whom--
       ``(i) the Secretary has found that a substantial number of 
     claims for payment under this part for items furnished by the 
     supplier have been denied on the basis of the application of 
     section 1862(a)(1); or
       ``(ii) the Secretary has identified a pattern of 
     overutilization resulting from the business practice of the 
     supplier.
       ``(C) Determinations of coverage in advance.--A carrier 
     shall determine in advance of delivery of an item whether 
     payment for the item may not be made because the item is not 
     covered or because of the application of section 1862(a)(1) 
     if--
       ``(i) the item is included on the list developed by the 
     Secretary under subparagraph (A);
       ``(ii) the item is furnished by a supplier included on the 
     list developed by the Secretary under subparagraph (B); or
       ``(iii) the item is a customized item (other than 
     inexpensive items specified by the Secretary) and the patient 
     to whom the item is to be furnished or the supplier requests 
     that such advance determination be made.''.
       (2) Effective for standards applied for contract years 
     beginning after the date of the enactment of this Act, 
     section 1842(c) (42 U.S.C. 1395u(c)), as amended by section 
     8415(a), is amended by adding at the end the following new 
     paragraph:
       ``(5) Each contract under this section which provides for 
     the disbursement of funds, as described in subsection 
     (a)(1)(B), shall require the carrier to meet criteria 
     developed by the Secretary to measure the timeliness of 
     carrier responses to requests for payment of items described 
     in section 1834(a)(15)(C).''.
       (3) Effective on the date of the enactment of this Act, 
     section 1834(h)(3) (42 U.S.C. 1395m(h)(3)), as amended by 
     section 8423(b), is amended by striking ``(12) and (17)'' and 
     inserting ``(12), (15), and (17)''.
       (c) Study of Variations in Durable Medical Equipment 
     Supplier Costs.--
       (1) Collection and analysis of supplier cost data.--The 
     Administrator of the Health Care Financing Administration 
     shall, in consultation with appropriate organizations, 
     collect data on supplier costs of durable medical equipment 
     for which payment may be made under part B of the medicare 
     program, and shall analyze such data to determine the 
     proportions of such costs attributable to the service and 
     product components of furnishing such equipment and the 
     extent to which such proportions vary by type of equipment 
     and by the geographic region in which the supplier is 
     located.
       (2) Development of geographic adjustment index; reports.--
     Not later than 6 months after collecting and analyzing the 
     data described in paragraph (1)--
       (A) the Administrator shall submit a report to the 
     Committees on Energy and Commerce and Ways and Means of the 
     House of Representatives and the Committee on Finance of the 
     Senate on the data collected and the analysis conducted under 
     paragraph (1), and shall include in such report the 
     Administrator's recommendations for a geographic cost 
     adjustment index for suppliers of durable medical equipment 
     under the medicare program and an analysis of the impact of 
     such proposed index on payments under the medicare program; 
     and
       (B) the Comptroller General shall submit a report to the 
     Committees on Energy and Commerce and Ways and Means of the 
     House of Representatives and the Committee on Finance of the 
     Senate analyzing on a geographic basis the supplier costs of 
     durable medical equipment under the medicare program.
       (d) Oxygen Retesting.--(1) Section 1834(a)(5)(E) (42 U.S.C. 
     1395m(a)(5)(E)) is amended by striking ``55'' and inserting 
     ``56''.
       (2) The amendment made by paragraph (1) shall be effective 
     on the date of the enactment of this Act.
       (e) Other Miscellaneous and Technical Amendments.--(1) 
     Section 4152(a)(3) of OBRA-1990 is amended by striking 
     ``amendment made by subsection (a)'' and inserting 
     ``amendments made by this subsection''.
       (2) Section 4152(c)(2) of OBRA-1990 is amended by striking 
     ``1395m(a)(7)(A)'' and inserting ``1395m(a)(7)''.
       (3) Section 1834(a)(7)(A)(iii)(II) (42 U.S.C. 
     1395m(a)(7)(A)(iii)(II)) is amended by striking ``clause 
     (v)'' and inserting ``clause (vi)''.
       (4) Section 1834(a)(7)(C)(i) (42 U.S.C. 1395m(a)(7)(C)(i)) 
     is amended by striking ``or paragraph (3)''.
       (5) Section 1834(a)(3) (42 U.S.C. 1395m(a)(3)) is amended 
     by striking subparagraph (D).
       (6) Section 4153(c)(1) of OBRA-1990 is amended by striking 
     ``1834(a)'' and inserting ``1834(h)''.
       (7) Section 4153(d)(2) of OBRA-1990 is amended by striking 
     ``Reconiliation'' and inserting ``Reconciliation''.
       (8) The amendments made by this subsection shall take 
     effect as if included in the enactment of OBRA-1990.

                  Subpart C--Other Items and Services

     SEC. 8431. AMBULATORY SURGICAL CENTER SERVICES.

       (a) Payment Amounts for Services Furnished in Ambulatory 
     Surgical Centers.--
       (1) Use of survey to determine incurred costs.--Section 
     1833(i)(2)(A)(i) (42 U.S.C. 1395l(i)(2)(A)(i)) is amended by 
     striking the comma at the end and inserting the following: 
     ``, as determined in accordance with a survey (based upon a 
     representative sample of procedures and facilities) taken not 
     later than January 1, 1995, and every 5 years thereafter, of 
     the actual audited costs incurred by such centers in 
     providing such services,''.
       (2) Automatic application of inflation adjustment.--Section 
     1833(i)(2) (42 U.S.C. 1395l(i)(2)) is amended--
       (A) in the second sentence of subparagraph (A) and the 
     second sentence of subparagraph (B), by striking ``and may be 
     adjusted by the Secretary, when appropriate,''; and
       (B) by adding at the end the following new subparagraph:
       ``(C) Notwithstanding the second sentence of subparagraph 
     (A) or the second sentence of subparagraph (B), if the 
     Secretary has not updated amounts established under such 
     subparagraphs with respect to facility services furnished 
     during a fiscal year (beginning with fiscal year 1996), such 
     amounts shall be increased by the percentage increase in the 
     consumer price index for all urban consumers (U.S. city 
     average) as estimated by the Secretary for the 12-month 
     period ending with the midpoint of the year involved.''.
       (3) Consultation requirement.--The second sentence of 
     section 1833(i)(1) (42 U.S.C. 1395l(i)(1)) is amended by 
     striking the period and inserting the following: ``, in 
     consultation with appropriate trade and professional 
     organizations.''.
       (b) Adjustments to Payment Amounts for New Technology 
     Intraocular Lenses.--
       (1) Establishment of process for review of amounts.--Not 
     later than 1 year after the date of the enactment of this 
     Act, the Secretary of Health and Human Services (in this 
     subsection referred to as the ``Secretary'') shall develop 
     and implement a process under which interested parties may 
     request review by the Secretary of the appropriateness of the 
     reimbursement amount provided under section 
     1833(i)(2)(A)(iii) of the Social Security Act with respect to 
     a class of new technology intraocular lenses. For purposes of 
     the preceding sentence, an intraocular lens may not be 
     treated as a new technology lens unless it has been approved 
     by the Food and Drug Administration.
       (2) Factors considered.--In determining whether to provide 
     an adjustment of payment with respect to a particular lens 
     under paragraph (1), the Secretary shall take into account 
     whether use of the lens is likely to result in reduced risk 
     of intraoperative or postoperative complication or trauma, 
     accelerated postoperative recovery, reduced induced 
     astigmatism, improved postoperative visual acuity, more 
     stable postoperative vision, or other comparable clinical 
     advantages.
       (3) Notice and comment.--The Secretary shall publish notice 
     in the Federal Register from time to time (but no less often 
     than once each year) of a list of the requests that the 
     Secretary has received for review under this subsection, and 
     shall provide for a 30-day comment period on the lenses that 
     are the subjects of the requests contained in such notice. 
     The Secretary shall publish a notice of the Secretary's 
     determinations with respect to intraocular lenses listed in 
     the notice within 90 days after the close of the comment 
     period.
       (4) Effective date of adjustment.--Any adjustment of a 
     payment amount (or payment limit) made under this subsection 
     shall become effective not later than 30 days after the date 
     on which the notice with respect to the adjustment is 
     published under paragraph (3).
       (c) Technical Correction Relating to Blend Amounts for 
     Ambulatory Surgical Center Payments.--
       (1) In general.--Subclauses (I) and (II) of section 
     1833(i)(3)(B)(ii) (42 U.S.C. 1395l(i)(3)(B)(ii)) are each 
     amended--
       (A) by striking ``for reporting'' and inserting ``for 
     portions of cost reporting''; and
       (B) by striking ``and on or before'' and inserting ``and 
     ending on or before''.
       (2) Effective date.--The amendments made by paragraph (1) 
     shall take effect as if included in the enactment of OBRA-
     1990.
       (d) Technical Correction Related to Cataract Surgery.--
     Effective as if included in the enactment of OBRA-1990, 
     section 4151(c)(3) of such Act is amended by striking ``for 
     the insertion of an intraocular lens'' and inserting ``for an 
     intraocular lens inserted''.

     SEC. 8432. STUDY OF MEDICARE COVERAGE OF PATIENT CARE COSTS 
                   ASSOCIATED WITH CLINICAL TRIALS OF NEW CANCER 
                   THERAPIES.

       (a) Study.--The Secretary of Health and Human Services 
     shall conduct a study of the effects of expressly covering 
     under the medicare program the patient care costs for 
     beneficiaries enrolled in clinical trials of new cancer 
     therapies, where the protocol for the trial has been approved 
     by the National Cancer Institute or meets similar scientific 
     and ethical standards, including approval by an institutional 
     review board. The study shall include--
       (1) an estimate of the cost of such coverage, taking into 
     account the extent to which medicare currently pays for such 
     patient care costs in practice;
       (2) an assessment of the extent to which such clinical 
     trials represent the best available treatment for the 
     patients involved and of the effects of participation in the 
     trials on the health of such patients;
       (3) an assessment of whether progress in developing new 
     anticancer therapies would be assisted by medicare coverage 
     of such patient care costs; and
       (4) an evaluation of whether there should be special 
     criteria for the admission of medicare beneficiaries (on 
     account of their age or physical condition) to clinical 
     trials for which medicare would pay the patient care costs.
       (b) Report.--Not later than 2 years after the date of the 
     enactment of this Act, the Secretary of Health and Human 
     Services shall submit a report on the study conducted under 
     subsection (a) to the Committee on Ways and Means and the 
     Committee on Energy and Commerce of the House of 
     Representatives and the Committee on Finance of the Senate. 
     Such report shall include recommendations as to the coverage 
     under the medicare program of patient care costs of 
     beneficiaries enrolled in clinical trials of new cancer 
     therapies.

     SEC. 8433. STUDY OF ANNUAL CAP ON AMOUNT OF MEDICARE PAYMENT 
                   FOR OUTPATIENT PHYSICAL THERAPY AND 
                   OCCUPATIONAL THERAPY SERVICES.

       (a) Study.--The Secretary of Health and Human Services 
     shall conduct a study of the appropriateness of continuing an 
     annual limitation on the amount of payment for outpatient 
     services of independently practicing physical and 
     occupational therapists under the medicare program.
       (b) Report.--By not later than January 1, 1996, the 
     Secretary shall submit to the Committees on Energy and 
     Commerce and Ways and Means of the House of Representatives 
     and the Committee on Finance of the Senate a report on the 
     study conducted under subsection (a). Such report shall 
     include such recommendations for changes in such annual 
     limitation as the Secretary finds appropriate.

     SEC. 8434. PAYMENT OF PART B PREMIUM LATE ENROLLMENT 
                   PENALTIES BY STATES.

       Section 1839 (42 U.S.C. 1395r) is amended by adding at the 
     end the following new subsection:
       ``(g)(1) Upon the request of a State, the Secretary may 
     enter into an agreement with the State under which the State 
     agrees to pay on a quarterly or other periodic basis to the 
     Secretary (to be deposited in the Treasury to the credit of 
     the Federal Supplementary Medical Insurance Trust Fund) an 
     amount equal to the amount of the part B late enrollment 
     premium increases with respect to the premiums for eligible 
     individuals (as defined in paragraph (3)(A)).
       ``(2) No part B late enrollment premium increase shall 
     apply to an eligible individual for premiums for months for 
     which the amount of such an increase is payable under an 
     agreement under paragraph (1).
       ``(3) In this subsection:
       ``(A) The term `eligible individual' means an individual 
     who is enrolled under this part B and who is within a class 
     of individuals specified in the agreement under paragraph 
     (1).
       ``(B) The term `part B late enrollment premium increase' 
     means any increase in a premium as a result of the 
     application of subsection (b).''.

     SEC. 8435. TREATMENT OF INPATIENTS AND PROVISION OF 
                   DIAGNOSTIC X-RAY SERVICES BY RURAL HEALTH 
                   CLINICS AND FEDERALLY QUALIFIED HEALTH CENTERS.

       (a) Treatment of Inpatients.--Section 1861(aa) (42 U.S.C. 
     1395x(aa)) is amended--
       (1) in paragraph (1), in the matter following subparagraph 
     (C), by striking ``as an outpatient'' and inserting ``as a 
     patient'';
       (2) in paragraph (2)(A), by striking ``furnishing to 
     outpatients'' and inserting ``furnishing to patients''; and
       (3) in paragraph (3), in the matter following subparagraph 
     (B), by striking ``as an outpatient'' and inserting ``as a 
     patient''.
       (b) Treatment of Diagnostic X-Ray Services.--Section 
     1861(aa) (42 U.S.C. 1395x(aa)) is further amended--
       (1) in paragraph (1)(A), by inserting ``(i)'' after ``(A)'' 
     and by adding at the end the following: ``and (ii) diagnostic 
     x-ray services,'', and
       (2) in paragraph (2)(A), by striking ``(A)'' and inserting 
     ``(A)(i)''.
       (c) Conforming Amendment.--Section 1862(a)(14) (42 U.S.C. 
     1395y(a)(14)) is amended by striking ``and services of a 
     certified registered nurse anesthetist'' and inserting 
     ``services of a certified registered nurse anesthetist, rural 
     health clinic services, and Federally-qualified health center 
     services''.
       (d) Effective Date.--The amendments made by this section 
     shall take effect on January 1, 1995, and shall apply to 
     services furnished on or after such date.

     SEC. 8436. APPLICATION OF MAMMOGRAPHY CERTIFICATION 
                   REQUIREMENTS.

       (a) Screening Mammography.--Section 1834(c) (42 U.S.C. 
     1395m(c)) is amended--
       (1) in paragraph (1)(B), by striking ``meets the quality 
     standards established under paragraph (3)'' and inserting 
     ``is conducted by a facility that has a certificate (or 
     provisional certificate) issued under section 354 of the 
     Public Health Service Act'';
       (2) in paragraph (1)(C)(iii), by striking ``paragraph (4)'' 
     and inserting ``paragraph (3)'';
       (3) by striking paragraph (3); and
       (4) by redesignating paragraphs (4) and (5) as paragraphs 
     (3) and (4).
       (b) Diagnostic Mammography.--Section 1861(s)(3) (42 U.S.C. 
     1395x(s)(3)) is amended by inserting ``and including 
     diagnostic mammography if conducted by a facility that has a 
     certificate (or provisional certificate) issued under section 
     354 of the Public Health Service Act'' after ``necessary''.
       (c) Conforming Amendments.--(1) Section 1862(a)(1)(F) (42 
     U.S.C. 1395y(a)(1)(F)) is amended by striking ``or which does 
     not meet the standards established under section 1834(c)(3)'' 
     and inserting ``or which is not conducted by a facility 
     described in section 1834(c)(1)(B)''.
       (2) Section 1863 (42 U.S.C. 1395z) is amended by striking 
     ``or whether screening mammography meets the standards 
     established under section 1834(c)(3),''.
       (3) The first sentence of section 1864(a) (42 U.S.C. 
     1395aa(a)) is amended by striking ``, or whether screening 
     mammography meets the standards established under section 
     1834(c)(3)''.
       (4) The third sentence of section 1865(a) (42 U.S.C. 
     1395bb(a)) is amended by striking ``1834(c)(3),''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to mammography furnished by a facility on and 
     after the first date that the certificate requirements of 
     section 354(b) of the Public Health Service Act apply to such 
     mammography conducted by such facility.

     SEC. 8437. COVERAGE OF SERVICES OF SPEECH-LANGUAGE 
                   PATHOLOGISTS AND AUDIOLOGISTS.

       (a) Services Defined.--Section 1861 (42 U.S.C. 1395x), as 
     amended by section 8438(f)(6)(E), is amended by inserting 
     after subsection (kk) the following new subsection:

        ``Speech-Language Pathology Services; Audiology Services

       ``(ll)(1) The term `speech-language pathology services' 
     means such speech, language, and related function assessment 
     and rehabilitation services furnished by a qualified speech-
     language pathologist as the speech-language pathologist is 
     legally authorized to perform under State law (or the State 
     regulatory mechanism provided by State law) as would 
     otherwise be covered if furnished by a physician.
       ``(2) The term `audiology services' means such hearing and 
     balance assessment services furnished by a qualified 
     audiologist as the audiologist is legally authorized to 
     perform under State law (or the State regulatory mechanism 
     provided by State law), as would otherwise be covered if 
     furnished by a physician.
       ``(3) In this subsection:
       ``(A) The term `qualified speech-language pathologist' 
     means an individual with a master's or doctoral degree in 
     speech-language pathology who--
       ``(i) is licensed as a speech-language pathologist by the 
     State in which the individual furnishes such services, or
       ``(ii) in the case of an individual who furnishes services 
     in a State which does not license speech-language 
     pathologists, has successfully completed 350 clock hours of 
     supervised clinical practicum (or is in the process of 
     accumulating such supervised clinical experience), performed 
     not less than 1 month of supervised full-time speech-language 
     pathology services after obtaining a master's or doctoral 
     degree in speech-language pathology or a related field, and 
     successfully completed a national examination in speech-
     language pathology approved by the Secretary.
       ``(B) The term `qualified audiologist' means an individual 
     with a master's or doctoral degree in audiology who--
       ``(i) is licensed as a speech-language pathologist by the 
     State in which the individual furnishes such services, or
       ``(ii) in the case of an individual who furnishes services 
     in a State which does not license speech-language 
     pathologists, has successfully completed 350 clock hours of 
     supervised clinical practicum (or is in the process of 
     accumulating such supervised clinical experience), performed 
     not less than 1 month of supervised full-time speech-language 
     pathology services after obtaining a master's or doctoral 
     degree in speech-language pathology or a related field, and 
     successfully completed a national examination in speech-
     language pathology approved by the Secretary.''.
       (b) Conforming Amendments Relating to Medicare Treatment of 
     Speech and Language Services.--
       (1) Extended care services.--Section 1861(h)(3) (42 U.S.C. 
     1395x(h)(3)) is amended by striking ``, occupational, or 
     speech therapy'' and inserting ``or occupational therapy or 
     speech-language pathology services''.
       (2) Home health services.--Section 1861(m)(2) (42 U.S.C. 
     1395x(m)(2)) is amended by striking ``, occupational, or 
     speech therapy'' and inserting ``or occupational therapy or 
     speech-language pathology services''.
       (3) Outpatient physical therapy services.--The fourth 
     sentence of section 1861(p) (42 U.S.C. 1395x(p)) is amended 
     by striking ``speech pathology services'' and inserting 
     ``speech-language pathology services''.
       (4) Comprehensive outpatient rehabilitation facility 
     services.--Section 1861(cc)(1)(B) (42 U.S.C. 1395x(cc)(1)(B)) 
     is amended by striking ``speech pathology services'' and 
     inserting ``speech-language pathology services''.
       (5) Hospice care.--Section 1861(dd)(1)(B) (42 U.S.C. 
     1395x(dd)(1)(B)) is amended by striking ``therapy or speech-
     language pathology'' and inserting ``therapy, or speech-
     language pathology services''.
       (c) Effective Date.--The amendments made by this section 
     shall take effect on the date of the enactment of this Act.

     SEC. 8438. MISCELLANEOUS AND TECHNICAL CORRECTIONS.

       (a) Revision of Information on Part B Claims Forms.--
     Section 1833(q)(1) (42 U.S.C. 1395l(q)(1)) is amended--
       (1) by striking ``provider number'' and inserting ``unique 
     physician identification number''; and
       (2) by striking ``and indicate whether or not the referring 
     physician is an interested investor (within the meaning of 
     section 1877(h)(5))''.
       (b) Consultation for Social Workers.--Effective with 
     respect to services furnished on or after January 1, 1991, 
     section 6113(c) of OBRA-1989 is amended--
       (1) by inserting ``and clinical social worker services'' 
     after ``psychologist services''; and
       (2) by striking ``psychologist'' the second and third place 
     it appears and inserting ``psychologist or clinical social 
     worker''.
       (c) Reports on Hospital Outpatient Payment.--(1) OBRA-1989 
     is amended by striking section 6137.
       (2) Section 1135(d) (42 U.S.C. 1320b-5(d)) is amended--
       (A) by striking paragraph (6); and
       (B) in paragraph (7)--
       (i) by striking ``systems'' each place it appears and 
     inserting ``system''; and
       (ii) by striking ``paragraphs (1) and (6)'' and inserting 
     ``paragraph (1)''.
       (d) Radiology and Diagnostic Services Provided in Hospital 
     Outpatient Departments.--(1) Effective as if included in the 
     enactment of OBRA-1989, section 1833(n)(1)(B)(i)(II) (42 
     U.S.C. 1395l(n)(1)(B)(i)(II)) is amended--
       (A) by inserting ``and for services described in subsection 
     (a)(2)(E)(ii) furnished on or after January 1, 1992'' after 
     ``1989''; and
       (B) by striking ``1842(b)'' and inserting ``1842(b) (or, in 
     the case of services furnished on or after January 1, 1992, 
     under section 1848)''.
       (2) Effective as if included in the enactment of OBRA-1989, 
     section 1833(n)(1)(B)(i)(II) (42 U.S.C. 
     1395l(n)(1)(B)(i)(II)) is amended by striking ``January 1, 
     1989'' and inserting ``April 1, 1989''.
       (e) Payments to Nurse Practitioners in Rural Areas (Section 
     4155 of OBRA-1990).--(1) Section 1861(s)(2)(K)(iii) (42 
     U.S.C. 1395x(s)(2)(K)(iii)) is amended--
       (A) by striking ``subsection (aa)(3)'' and inserting 
     ``subsection (aa)(5)''; and
       (B) by striking ``subsection (aa)(4)'' and inserting 
     ``subsection (aa)(6)''.
       (2) Section 1833(r)(1) (42 U.S.C. 1395l(r)(1)) is amended--
       (A) by striking ``ambulatory'' each place it appears and 
     inserting ``or ambulatory''; and
       (B) by striking ``center,'' and inserting ``center''.
       (3) Section 1833(r)(2)(A) (42 U.S.C. 1395l(r)(2)(A)) is 
     amended by striking ``subsection (a)(1)(M)'' and inserting 
     ``subsection (a)(1)(O)''.
       (4) Section 1861(b)(4) (42 U.S.C. 1395x(b)(4)) is amended 
     by striking ``subsection (s)(2)(K)(i)'' and inserting 
     ``clauses (i) or (iii) of subsection (s)(2)(K)''.
       (5) Section 1861(aa)(5) (42 U.S.C. 1395x(aa)(5)) is amended 
     by striking ``this Act'' and inserting ``this title''.
       (6) Section 1862(a)(14) (42 U.S.C. 1395y(a)(14)) is amended 
     by striking ``1861(s)(2)(K)(i)'' and inserting 
     ``1861(s)(2)(K)(i) or 1861(s)(2)(K)(iii)''.
       (7) Section 1866(a)(1)(H) (42 U.S.C. 1395cc(a)(1)(H)) is 
     amended by striking ``1861(s)(2)(K)(i)'' and inserting 
     ``1861(s)(2)(K)(i) or 1861(s)(2)(K)(iii)''.
       (f) Other Miscellaneous and Technical Amendments.--
       (1) Immediate enrollment in part b by individuals covered 
     by an employment-based plan.--(A) Subparagraphs (A) and (B) 
     of section 1837(i)(3) (42 U.S.C. 1395p(i)(3)) are each 
     amended--
       (i) by striking ``beginning with the first day of the first 
     month in which the individual is no longer enrolled'' and 
     inserting ``including each month during any part of which the 
     individual is enrolled''; and
       (ii) by striking ``and ending seven months later'' and 
     inserting ``ending with the last day of the eighth 
     consecutive month in which the individual is at no time so 
     enrolled''.
       (B) Paragraphs (1) and (2) of section 1838(e) (42 U.S.C. 
     1395q(e)) are amended to read as follows:
       ``(1) in any month of the special enrollment period in 
     which the individual is at any time enrolled in a plan 
     (specified in subparagraph (A) or (B), as applicable, of 
     section 1837(i)(3)) or in the first month following such a 
     month, the coverage period shall begin on the first day of 
     the month in which the individual so enrolls (or, at the 
     option of the individual, on the first day of any of the 
     following three months), or
       ``(2) in any other month of the special enrollment period, 
     the coverage period shall begin on the first day of the month 
     following the month in which the individual so enrolls.''.
       (C) The amendments made by subparagraphs (A) and (B) shall 
     take effect on the first day of the first month that begins 
     after the expiration of the 120-day period that begins on the 
     date of the enactment of this Act.
       (2) Clinical diagnostic laboratory tests.--Section 
     4154(e)(5) of OBRA-1990 is amended by striking ``(1)(A)'' and 
     inserting ``(1)(A),''.
       (3) Separate payment under part b for certain services.--
     Section 4157(a) of OBRA-1990 is amended by striking ``(a) 
     Services of'' and all that follows through ``Section'' and 
     inserting ``(a) Treatment of Services of Certain Health 
     Practitioners.--Section''.
       (4) Community health centers and rural health clinics.--(A) 
     The fourth sentence of section 1861(aa)(2) (42 U.S.C. 
     1395x(aa)(2)) is amended--
       (i) by striking ``certification'' the first place it 
     appears and inserting ``approval''; and
       (ii) by striking ``the Secretary's approval or disapproval 
     of the certification'' and inserting ``Secretary's approval 
     or disapproval''.
       (B) Section 4161(a)(7)(B) of OBRA-1990 is amended by 
     inserting ``and to the Committee on Finance of the Senate'' 
     after ``Representatives''.
       (5) Screening mammography.--Section 4163 of OBRA-1990 is 
     amended--
       (A) by adding at the end of subsection (d) the following 
     new paragraph:
       ``(3) The amendment made by paragraph (2)(A)(iv) shall 
     apply to screening pap smears performed on or after July 1, 
     1990.''; and
       (B) in subsection (e), by striking ``The amendments'' and 
     inserting ``Except as provided in subsection (d)(3), the 
     amendments''.
       (6) Injectable drugs for treatment of osteoporosis.--
       (A) Clarification of drugs covered.--The section 1861(jj) 
     (42 U.S.C. 1395x(jj)) inserted by section 4156(a)(2) of OBRA-
     1990 is amended--
       (i) in the matter preceding paragraph (1), by striking ``a 
     bone fracture related to''; and
       (ii) in paragraph (1), by striking ``patient'' and 
     inserting ``individual has suffered a bone fracture related 
     to post-menopausal osteoporosis and that the individual''.
       (B) Limiting coverage to drugs provided by home health 
     agencies.--(i) The section 1861(jj) (42 U.S.C. 1395x(jj)) 
     inserted by section 4156(a)(2) of OBRA-1990 is amended by 
     striking ``if'' and inserting ``by a home health agency if''.
       (ii) Section 1861(m)(5) (42 U.S.C. 1395x(m)(5)) is amended 
     by striking ``but excluding'' and inserting ``and a covered 
     osteoporosis drug (as defined in subsection (kk), but 
     excluding other''.
       (iii) Section 1861(s)(2) (42 U.S.C. 1395x(s)(2)) is 
     amended--
       (I) by adding ``and'' at the end of subparagraph (N), and
       (II) by striking subparagraph (O) and redesignating 
     subparagraph (P) as subparagraph (O).
       (C) Payment based on reasonable cost.--Section 1833(a)(2) 
     (42 U.S.C. 1395l(a)(2)) is amended--
       (i) in subparagraph (A), by striking ``health services'' 
     and inserting ``health services (other than a covered 
     osteoporosis drug (as defined in section 1861(kk)))'';
       (ii) by striking ``and'' at the end of subparagraph (D);
       (iii) by striking the semicolon at the end of subparagraph 
     (E) and inserting ``; and''; and
       (iv) by adding at the end the following new subparagraph:
       ``(F) with respect to a covered osteoporosis drug (as 
     defined in section 1861(kk)) furnished by a home health 
     agency, 80 percent of the reasonable cost of such service, as 
     determined under section 1861(v);''.
       (D) Application of part b deductible.--Section 1833(b)(2) 
     (42 U.S.C. 1395l(b)(2)) is amended by striking ``services'' 
     and inserting ``services (other than a covered osteoporosis 
     drug (as defined in section 1861(kk)))''.
       (E) Covered osteoporosis drug (section 4156 of obra-
     1990).--Section 1861 (42 U.S.C. 1395x) is amended, in the 
     subsection (jj) inserted by section 4156(a)(2) of OBRA-1990, 
     by striking ``(jj) The term'' and inserting ``(kk) The 
     term''.
       (7) Other miscellaneous and technical corrections.--
       (A) Ownership disclosure requirements.--(i) Section 
     1124A(a)(2)(A) (42 U.S.C. 1320a-3a(a)(2)(A)) is amended by 
     striking ``of the Social Security Act''.
       (ii) Section 4164(b)(4) of OBRA-1990 is amended by striking 
     ``paragraph'' and inserting ``paragraphs''.
       (B) Directory of unique physician identifier numbers.--
     Section 4164(c) of OBRA-1990 is amended by striking 
     ``publish'' and inserting ``publish, and shall periodically 
     update,''.
       (g) Effective Date.--Except as otherwise provided in this 
     section, the amendments made by this section shall take 
     effect as if included in the enactment of OBRA-1990.

              PART 3--PROVISIONS RELATING TO PARTS A AND B

                  Subpart A--Medicare Secondary Payer

     SEC. 8441. MEDICARE SECONDARY PAYER REFORMS.

       (a) Improving Identification of Medicare Secondary Payer 
     Situations.--
       (1) Survey of beneficiaries.--
       (A) In general.--Section 1862(b)(5) (42 U.S.C. 1395y(b)(5)) 
     is amended by adding at the end the following new 
     subparagraph:
       ``(D) Obtaining information from beneficiaries.--Before an 
     individual applies for benefits under part A or enrolls under 
     part B, the Administrator shall mail the individual a 
     questionnaire to obtain information on whether the individual 
     is covered under a primary plan and the nature of the 
     coverage provided under the plan, including the name, 
     address, and identifying number of the plan.''.
       (B) Distribution of questionnaire by contractor.--The 
     Secretary of Health and Human Services shall enter into an 
     agreement with an entity not later than the expiration of the 
     60-day period that begins on the date of the enactment of 
     this Act, to distribute the questionnaire described in 
     section 1862(b)(5)(D) of the Social Security Act (as added by 
     subparagraph (A)).
       (C) No medicare secondary payer denial based on failure to 
     complete questionnaire.--Section 1862(b)(2) (42 U.S.C. 
     1395y(b)(2)) is amended by adding at the end the following 
     new subparagraph:
       ``(C) Treatment of questionnaires.--The Secretary may not 
     fail to make payment under subparagraph (A) solely on the 
     ground that an individual failed to complete a questionnaire 
     concerning the existence of a primary plan.''.
       (2) Mandatory screening by providers and suppliers under 
     part b.--
       (A) In general.--Section 1862(b) (42 U.S.C. 1395y(b)) is 
     amended by adding at the end the following new paragraph:
       ``(6) Screening requirements for providers and suppliers.--
       ``(A) In general.--Notwithstanding any other provision of 
     this title, no payment may be made for any item or service 
     furnished under part B unless the entity furnishing such item 
     or service completes (to the best of its knowledge and on the 
     basis of information obtained from the individual to whom the 
     item or service is furnished) the portion of the claim form 
     relating to the availability of other health benefit plans.
       ``(B) Penalties.--An entity that knowingly, willfully, and 
     repeatedly fails to complete a claim form in accordance with 
     subparagraph (A) or provides inaccurate information relating 
     to the availability of other health benefit plans on a claim 
     form under such subparagraph shall be subject to a civil 
     money penalty of not to exceed $2,000 for each such incident. 
     The provisions of section 1128A (other than subsections (a) 
     and (b)) shall apply to a civil money penalty under the 
     previous sentence in the same manner as such provisions apply 
     to a penalty or proceeding under section 1128A(a).''.
       (B)  Effective date.--The amendment made by subparagraph 
     (A) shall apply with respect to items and services furnished 
     on or after the expiration of the 120-day period that begins 
     on the date of the enactment of this Act.
       (b) Improvements in Recovery of Payments From Primary 
     Payers.--
       (1) Submission of reports on efforts to recover erroneous 
     payments.--
       (A) Fiscal intermediaries under part a.--Section 1816 (42 
     U.S.C. 1396h) is amended by adding at the end the following 
     new subsection:
       ``(k) An agreement with an agency or organization under 
     this section shall require that such agency or organization 
     submit an annual report to the Secretary describing the steps 
     taken to recover payments made for items or services for 
     which payment has been or could be made under a primary plan 
     (as defined in section 1862(b)(2)(A)).''.
       (B) Carriers under part b.--Section 1842(b)(3) (42 U.S.C. 
     1395u(b)(3)) is amended--
       (i) by striking ``and'' at the end of subparagraph (G);
       (ii) by striking ``and'' at the end of subparagraph (H); 
     and
       (iii) by inserting after subparagraph (H) the following new 
     subparagraph:
       ``(I) will submit annual reports to the Secretary 
     describing the steps taken to recover payments made under 
     this part for items or services for which payment has been or 
     could be made under a primary plan (as defined in section 
     1862(b)(2)(A)); and''.
       (2) Requirements under carrier performance evaluation 
     program.--
       (A) Fiscal intermediaries under part a.--Section 
     1816(f)(1)(A) (42 U.S.C. 1396h(f)(1)(A)) is amended by 
     striking ``processing'' and inserting ``processing (including 
     the agency's or organization's success in recovering payments 
     made under this title for services for which payment has been 
     or could be made under a primary plan (as defined in section 
     1862(b)(2)(A)))''.
       (B) Carriers under part b.--Section 1842(b)(2) (42 U.S.C. 
     1395u(b)(2)) is amended by adding at the end the following 
     new subparagraph:
       ``(D) In addition to any other standards and criteria 
     established by the Secretary for evaluating carrier 
     performance under this paragraph relating to avoiding 
     erroneous payments, the carrier shall be subject to standards 
     and criteria relating to the carrier's success in recovering 
     payments made under this part for items or services for which 
     payment has been or could be made under a primary plan (as 
     defined in section 1862(b)(2)(A)).''.
       (3) Deadline for reimbursement by primary plans.--
       (A) In general.--Section 1862(b)(2)(B)(i) (42 U.S.C. 
     1395y(b)(2)(B)(i)) is amended by adding at the end the 
     following sentence: ``If reimbursement is not made to the 
     appropriate Trust Fund before the expiration of the 60-day 
     period that begins on the date such notice or other 
     information is received, the Secretary may charge interest 
     (beginning with the date on which the notice or other 
     information is received) on the amount of the reimbursement 
     until reimbursement is made (at a rate determined by the 
     Secretary in accordance with regulations of the Secretary of 
     the Treasury applicable to charges for late payments).''.
       (B) Conforming amendment.--The heading of clause (i) of 
     section 1862(b)(2)(B) is amended to read as follows: 
     ``Repayment required.--''.
       (C) Effective date.--The amendments made by this paragraph 
     shall apply to payments for items and services furnished on 
     or after the date of the enactment of this Act.
       (4) Effective date.--The amendments made by paragraphs (1) 
     and (2) shall apply to contracts with fiscal intermediaries 
     and carriers under title XVIII of the Social Security Act for 
     contract years beginning on or after the date of the 
     enactment of this Act.
       (c) Miscellaneous and Technical Corrections.--
       (1) Effective as if included in the enactment of OBRA-1993, 
     section 1862(b)(1)(A) (42 U.S.C. 1395y(b)(1)(A)), as amended 
     by section 13561(e)(1) of OBRA-1993, is amended--
       (A) in clause (i)(II), by striking ``over (and the 
     individual's spouse age 65 or older) who is covered under the 
     plan by virtue of the individual's current employment status 
     with an employer'' and inserting ``older (and the spouse age 
     65 or older of any individual) who has current employment 
     status with an employer''; and
       (B) in clause (ii), by striking ``or employee organization 
     that has 20 or more individuals in current employment 
     status'' and inserting ``that has 20 or more employees''.
       (2) Effective as if included in the enactment of OBRA-1993, 
     section 1837(i) (42 U.S.C. 1395p(i)) is amended--
       (A) by striking ``as an active individual (as those terms 
     are defined in section 1862(b)(1)(B)(iv))'' each place it 
     appears in the second sentence of paragraph (1), and the 
     second sentence of paragraph (2) and inserting ``(as that 
     term is defined in section 1862(b)(1)(B)(iv)) by reason of 
     the individual's current employment status (or the current 
     employment status of a family member of the individual)'';
       (B) in paragraph (3)(B), by striking ``as an active 
     individual in a large group health plan (as such terms are 
     defined in section 1862(b)(1)(B)(iv))'' and inserting ``in a 
     large group health plan (as that term is defined in section 
     1862(b)(1)(B)(iv)) by reason of the individual's current 
     employment status (or the current employment status of a 
     family member of the individual)'';
       (C) in the second sentence of paragraph (2) (as amended by 
     subparagraph (A)), by striking ``as an active individual'' 
     and inserting ``by reason of the individual's current 
     employment status (or the current employment status of a 
     family member of the individual)''; and
       (D) by inserting ``status'' after ``current employment'' 
     each place it appears in paragraphs (1)(A), (2)(B), (2)(C), 
     and (3)(A).
       (3) Effective as if included in the enactment of OBRA-1993, 
     the second sentence of section 1839(b) (42 U.S.C. 1395r(b)) 
     is amended--
       (A) by inserting ``status'' after ``current employment'', 
     and
       (B) by striking ``as an active individual (as those terms 
     are defined in section 1862(b)(1)(B)(iv))'' and inserting 
     ``(as that term is defined in section 1862(b)(1)(B)(iv)) by 
     reason of the individual's current employment status (or the 
     current employment status of a family member of the 
     individual)''.
       (4) Effective as if included in the enactment of OBRA-1990, 
     the sentence in section 1862(b)(1)(C) added by section 
     4203(c)(1)(B) of OBRA-1990 is amended by striking ``clauses 
     (i) and (ii)'' and inserting ``this subparagraph''.
       (5) Effective as if included in the enactment of OBRA-1989, 
     section 1862(b)(1)(C) is amended in the matter after clause 
     (ii), by striking ``taking into account that'' and inserting 
     ``paying benefits secondary to this title when''.
       (6) Effective as if included in the enactment of OBRA-1989, 
     section 1862(b)(5)(C)(i) (42 U.S.C. 1395y(b)(5)(C)(i)) is 
     amended by striking ``6103(l)(12)(D)(iii)'' and inserting 
     ``6103(l)(12)(E)(iii)''.
       (7) Effective as if included in the enactment of OBRA-1990, 
     section 4203(c)(2) of such Act is amended--
       (A) by striking ``the application of clause (iii)'' and 
     inserting ``the second sentence'';
       (B) by striking ``on individuals'' and all that follows 
     through ``section 226A of such Act'';
       (C) in clause (ii), by striking ``clause'' and inserting 
     ``sentence'';
       (D) in clause (v), by adding ``and'' at the end; and
       (E) in clause (vi)--
       (i) by inserting ``of such Act'' after ``1862(b)(1)(C)'', 
     and
       (ii) by striking the period at the end and inserting the 
     following: ``, without regard to the number of employees 
     covered by such plans.''.
       (8) Effective as if included in the enactment of OBRA-1990, 
     section 4203(d) of OBRA-1990 is amended by striking ``this 
     subsection'' and inserting ``this section''.
       (9) Effective as if included in the enactment of OBRA-1993, 
     section 13561(e)(1)(D) of OBRA-1993 is amended--
       (A) by inserting ``effective as if included in the 
     enactment of OBRA-1989,'' after ``(D)'', and
       (B) by striking ``of each subparagraph''.
       (10) The amendment made by section 13561(e)(1)(G) of OBRA-
     1993, to the extent it relates to the definition of large 
     group health plan, shall be effective as if included in the 
     enactment of OBRA-1989.

     Subpart B--Other Items and Services Relating to Parts A and B

     SEC. 8451. DEFINITION OF FMGEMS EXAMINATION FOR PAYMENT OF 
                   DIRECT GRADUATE MEDICAL EDUCATION.

       (a) In General.--Section 1886(h)(5)(E) (42 U.S.C. 
     1395ww(h)(5)(E)) is amended by inserting ``or any successor 
     examination'' after ``Medical Sciences''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply as if included in the enactment of the 
     Consolidated Omnibus Budget Reconciliation Act of 1985 
     (Public Law 99-272).

     SEC. 8452. QUALIFIED MEDICARE BENEFICIARY OUTREACH.

       Not later than 1 year after the date of the enactment of 
     this Act, the Secretary of Health and Human Services shall 
     establish and implement a method for obtaining information 
     from newly eligible medicare beneficiaries that may be used 
     to determine whether such beneficiaries may be eligible for 
     medical assistance for medicare cost-sharing under State 
     medicaid plans as qualified medicare beneficiaries, and for 
     transmitting such information to the State in which such a 
     beneficiary resides.

     SEC. 8453. HOSPITAL AGREEMENTS WITH ORGAN PROCUREMENT 
                   ORGANIZATIONS.

       (a) Hospital Agreements.--
       (1) In general.--
       (A) Identification of organ donors.--Section 
     1138(a)(1)(A)(iii) (42 U.S.C. 1320b-8(a)(1)(A)(iii)) is 
     amended to read as follows:
       ``(iii) require that such hospital's designated organ 
     procurement agency (as defined in paragraph (3)(B)) is 
     notified of potential organ donors;''.
       (B) Agreements with designated organ procurement 
     agencies.--Section 1138(a)(1) (42 U.S.C. 1320b-8(a)(1)) is 
     amended--
       (i) by striking the period at the end of subparagraph (B) 
     and inserting ``; and''; and
       (ii) by adding at the end the following new subparagraph:
       ``(C) the hospital or rural primary care hospital has an 
     agreement (as defined in paragraph (3)(A)) only with such 
     hospital's designated organ procurement agency.''.
       (C) Waiver of requirements related to agreements.--Section 
     1138(a) (42 U.S.C. 1320b-8(a)) is amended--
       (i) by redesignating paragraph (2) as paragraph (3); and
       (ii) by inserting after paragraph (1) the following new 
     paragraph:
       ``(2)(A) The Secretary shall grant a waiver of the 
     requirements under subparagraphs (A)(iii) and (C) of 
     paragraph (1) to a hospital or rural primary care hospital 
     desiring to enter into an agreement with an organ procurement 
     agency other than such hospital's designated organ 
     procurement agency if the Secretary determines that--
       ``(i) the waiver is expected to increase organ donation; 
     and
       ``(ii) the waiver will assure equitable treatment of 
     patients referred for transplants within the service area 
     served by such hospital's designated organ procurement agency 
     and within the service area served by the organ procurement 
     agency with which the hospital seeks to enter into an 
     agreement under the waiver.
       ``(B) In making a determination under subparagraph (A), the 
     Secretary may consider factors that would include, but not be 
     limited to--
       ``(i) cost effectiveness;
       ``(ii) improvements in quality;
       ``(iii) whether there has been any change in a hospital's 
     designated organ procurement agency due to a change made on 
     or after December 28, 1992, in the definitions for 
     metropolitan statistical areas (as established by the Office 
     of Management and Budget); and
       ``(iv) the length and continuity of a hospital's 
     relationship with an organ procurement agency other than the 
     hospital's designated organ procurement agency;

     except that nothing in this subparagraph shall be construed 
     to permit the Secretary to grant a waiver that does not meet 
     the requirements of subparagraph (A).
       ``(C) Any hospital or rural primary care hospital seeking a 
     waiver under subparagraph (A) shall submit an application to 
     the Secretary containing such information as the Secretary 
     determines appropriate.
       ``(D) The Secretary shall--
       ``(i) publish a public notice of any waiver application 
     received from a hospital or rural primary care hospital under 
     this paragraph within 30 days of receiving such application; 
     and
       ``(ii) prior to making a final determination on such 
     application under subparagraph (A), offer interested parties 
     the opportunity to submit written comments to the Secretary 
     during the 60-day period beginning on the date such notice is 
     published.''.
       (D) Definitions.--Section 1138(a)(3) (42 U.S.C. 1320b-
     8(a)(3)), as redesignated by subparagraph (C), is amended to 
     read as follows:
       ``(3) For purposes of this subsection--
       ``(A) the term `agreement' means an agreement described in 
     section 371(b)(3)(A) of the Public Health Service Act;
       ``(B) the term `designated organ procurement agency' means, 
     with respect to a hospital or rural primary care hospital, 
     the organ procurement agency designated pursuant to 
     subsection (b) for the service area in which such hospital is 
     located; and
       ``(C) the term `organ' means a human kidney, liver, heart, 
     lung, pancreas, and any other human organ or tissue specified 
     by the Secretary for purposes of this subsection.''.
       (2) Existing agreements.--Any hospital or rural primary 
     care hospital which has an agreement (as defined in section 
     1138(a)(3)(A) of the Social Security Act) with an organ 
     procurement agency other than such hospital's designated 
     organ procurement agency (as defined in section 1138(a)(3)(B) 
     of such Act) on the date of the enactment of this section 
     shall, if such hospital desires to continue such agreement on 
     and after the effective date of the amendments made by 
     paragraph (1), submit an application to the Secretary for a 
     waiver under section 1138(a)(2) of such Act not later than 
     January 1, 1995, and such agreement may continue in effect 
     pending the Secretary's determination with respect to such 
     application.
       (3) Effective date.--The amendments made by paragraph (1) 
     shall apply to hospitals and rural primary care hospitals 
     participating in the programs under titles XVIII and XIX of 
     the Social Security Act beginning January 1, 1995.
       (b) Study on Hospital Agreements with Organ Procurement 
     Agencies.--
       (1) In general.--The Office of Technology Assessment 
     (referred to in this section as the ``OTA'') shall, pursuant 
     to the approval of the Technology Assessment Board of the 
     OTA, conduct a study to determine the efficacy and fairness 
     of requiring a hospital to enter into an agreement under 
     section 371(b)(3)(A) of the Public Health Service Act with 
     the organ procurement agency designated pursuant to section 
     1138(b) of the Social Security Act for the service area in 
     which such hospital is located and the impact of such 
     requirement on the efficacy and fairness of organ procurement 
     and distribution.
       (2) Report.--Not later than 2 years after the date of the 
     enactment of this Act, the OTA shall complete the study 
     required under paragraph (1) and prepare and submit to the 
     Committee on Finance and the Committee on Labor and Human 
     Resources of the Senate and the Committee on Ways and Means 
     and the Committee on Energy and Commerce of the House of 
     Representatives a report containing the findings of such 
     study and the implications of such findings with respect to 
     policies affecting organ procurement and distribution.

     SEC. 8454. PEER REVIEW ORGANIZATIONS.

       (a) Repeal of PRO Precertification Requirement for Certain 
     Surgical Procedures.--
       (1) In general.--Section 1164 (42 U.S.C. 1320c-13) is 
     repealed.
       (2) Conforming amendments.--
       (A) Section 1154 (42 U.S.C. 1320c-3) is amended--
       (i) in subsection (a), by striking paragraph (12), and
       (ii) in subsection (d), by striking ``(and except as 
     provided in section 1164)''.
       (B) Section 1833 (42 U.S.C. 1395l) is amended--
       (i) in subsection (a)(1)(D)(i), by striking ``, or for 
     tests furnished in connection with obtaining a second opinion 
     required under section 1164(c)(2) (or a third opinion, if the 
     second opinion was in disagreement with the first opinion)'';
       (ii) in subsection (a)(1), by striking subparagraph (G);
       (iii) in subsection (a)(2)(A), by striking ``, to items and 
     services (other than clinical diagnostic laboratory tests) 
     furnished in connection with obtaining a second opinion 
     required under section 1164(c)(2) (or a third opinion, if the 
     second opinion was in disagreement with the first 
     opinion),'';
       (iv) in subsection (a)(2)(D)(i)--

       (I) by striking ``basis,'' and inserting ``basis or'', and
       (II) by striking ``, or for tests furnished in connection 
     with obtaining a second opinion required under section 
     1164(c)(2) (or a third opinion, if the second opinion was in 
     disagreement with the first opinion)'';

       (v) in subsection (a)(3), by striking ``and for items and 
     services furnished in connection with obtaining a second 
     opinion required under section 1164(c)(2), or a third 
     opinion, if the second opinion was in disagreement with the 
     first opinion''; and
       (vi) in the first sentence of subsection (b), by striking 
     ``(4)'' and all that follows through ``and (5)'' and 
     inserting ``and (4)''.
       (C) Section 1834(g)(1)(B) (42 U.S.C. 1395m(g)(1)(B)) is 
     amended by striking ``and for items and services furnished in 
     connection with obtaining a second opinion required under 
     section 1164(c)(2), or a third opinion, if the second opinion 
     was in disagreement with the first opinion''.
       (D) Section 1862(a) (42 U.S.C. 1395y(a)) is amended--
       (i) by adding ``or'' at the end of paragraph (14),
       (ii) by striking ``; or'' at the end of paragraph (15) and 
     inserting a period, and
       (iii) by striking paragraph (16).
       (E) The third sentence of section 1866(a)(2)(A) (42 U.S.C. 
     1395w(a)(2)(A)) is amended by striking ``, with respect to 
     items and services furnished in connection with obtaining a 
     second opinion required under section 1164(c)(2) (or a third 
     opinion, if the second opinion was in disagreement with the 
     first opinion),''.
       (3) Effective date.--The amendments made by this subsection 
     shall apply to services provided on or after the date of the 
     enactment of this Act.
       (b) Miscellaneous and Technical Corrections.--(1) The third 
     sentence of section 1156(b)(1) (42 U.S.C. 1320c-5(b)(1)) is 
     amended by striking ``whehter'' and inserting ``whether''.
       (2)(A) Section 1154(a)(9)(B) (42 U.S.C. 1320c-3(a)(9)(B)) 
     is amended to read as follows:
       ``(B) If the organization finds, after reasonable notice to 
     and opportunity for discussion with the physician or 
     practitioner concerned, that the physician or practitioner 
     has furnished services in violation of section 1156(a) and 
     the organization determines that the physician or 
     practitioner should enter into a corrective action plan under 
     section 1156(b)(1), the organization shall notify the State 
     board or boards responsible for the licensing or disciplining 
     of the physician or practitioner of its finding and of any 
     action taken as a result of the finding.''.
       (B) Subparagraph (D) of section 1160(b)(1) (42 U.S.C. 
     1320c-9(b)(1)) is amended to read as follows:
       ``(D) to provide notice in accordance with section 
     1154(a)(9)(B);''.
       (3) Section 4205(d)(2)(B) of OBRA-1990 is amended by 
     striking ``amendments'' and inserting ``amendment''.
       (4) Section 1160(d) (42 U.S.C. 1320c-9(d)) is amended by 
     striking ``subpena'' and inserting ``subpoena''.
       (5) Section 4205(e)(2) of OBRA-1990 is amended by striking 
     ``amendments'' and inserting ``amendment'' and by striking 
     ``all''.
       (6)(A) Except as provided in subparagraph (B), the 
     amendments made by this subsection shall take effect as if 
     included in the enactment of OBRA-1990.
       (B) The amendments made by paragraph (2) (relating to the 
     requirement on reporting of information to State boards) 
     shall take effect on the date of the enactment of this Act.

     SEC. 8455. HEALTH MAINTENANCE ORGANIZATIONS.

       (a) Adjustment in Medicare Capitation Payments to Take Into 
     Account Secondary Payer Status.--
       (1) In general.--In defining the classes to be used in 
     determining the annual per capita rate of payment under 
     section 1876(a)(1)(B) of the Social Security Act to an 
     eligible organization with a risk-sharing contract under such 
     section (for contract years beginning on or after October 1, 
     1994), the Secretary of Health and Human Services shall treat 
     as a separate class individuals entitled to benefits under 
     title XVIII of such Act with respect to whom there is a group 
     health plan that is a primary plan (within the meaning of 
     section 1862(b)(2)(A) of such Act).
       (2) Deadline for announcement of rates.--Not later than 
     September 1, 1994, the Secretary shall announce annual per 
     capita rates of payment for eligible organizations described 
     in paragraph (1) that take into account the separate 
     treatment of individuals with respect to whom there is a 
     group health plan that is a primary plan.
       (b) Revisions in the Payment Methodology for Risk 
     Contractors.--Section 4204(b) of OBRA-1990 is amended to read 
     as follows:
       ``(b) Revisions in the Payment Methodology for Risk 
     Contractors.--(1)(A) Not later than October 1, 1995, the 
     Secretary of Health and Human Services (in this subsection 
     referred to as the `Secretary') shall submit a proposal to 
     the Congress that provides for revisions to the payment 
     method to be applied in years beginning with 1996 for 
     organizations with a risk-sharing contract under section 
     1876(g) of the Social Security Act.
       ``(B) In proposing the revisions required under 
     subparagraph (A), the Secretary shall consider--
       ``(i) the difference in costs associated with medicare 
     beneficiaries with differing health status and demographic 
     characteristics; and
       ``(ii) the effects of using alternative geographic 
     classifications on the determinations of costs associated 
     with beneficiaries residing in different areas.
       ``(2) Not later than 3 months after the date of submittal 
     of the proposal under paragraph (1), the Comptroller General 
     shall review the proposal and shall report to Congress on the 
     appropriateness of the proposed modifications.''.
       (c) Miscellaneous and Technical Corrections.--(1) Section 
     1876(a)(3) (42 U.S.C. 1395mm(a)(3)) is amended by striking 
     ``subsection (c)(7)'' and inserting ``subsections 
     (c)(2)(B)(ii) and (c)(7)''.
       (2) Section 4204(c)(3) of OBRA-1990 is amended by striking 
     ``for 1991'' and inserting ``for years beginning with 1991''.
       (3) Section 4204(d)(2) of OBRA-1990 is amended by striking 
     ``amendment'' and inserting ``amendments''.
       (4) Section 1876(a)(1)(E)(ii)(I) (42 U.S.C. 
     1395mm(a)(1)(E)(ii)(I)) is amended by striking the comma 
     after ``contributed to''.
       (5) Section 4204(e)(2) of OBRA-1990 is amended by striking 
     ``(which has a risk-sharing contract under section 1876 of 
     the Social Security Act)''.
       (6) Section 4204(f)(4) of OBRA-1990 is amended by striking 
     ``final''.
       (7) Section 1862(b)(3)(C) (42 U.S.C. 1395y(b)(3)(C)) is 
     amended--
       (A) in the heading, by striking ``plan'' and inserting 
     ``plan or a large group health plan'';
       (B) by striking ``group health plan'' and inserting ``group 
     health plan or a large group health plan'';
       (C) by striking ``, unless such incentive is also offered 
     to all individuals who are eligible for coverage under the 
     plan''; and
       (D) by striking ``the first sentence of subsection (a) and 
     other than subsection (b)'' and inserting ``subsections (a) 
     and (b)''.
       (8) The amendments made by this subsection shall take 
     effect as if included in the enactment of OBRA-1990.

     SEC. 8456. HOME HEALTH AGENCIES.

       (a) Use of Most Current Data in Determining Wage Index.--
       (1) In general.--Section 1861(v)(1)(L)(iii) (42 U.S.C. 
     1395x(v)(1)(L)(iii)) is amended by striking ``as of such date 
     to'' and inserting ``and determined using the survey of the 
     most recent available wages and wage-related costs of''.
       (2) Effective date.--The amendment made by paragraph (1) 
     shall apply with respect to cost reporting periods beginning 
     on or after July 1, 1996.
       (b) Clarification of Extension of Waiver of Liability.--
       (1) In general.--The second sentence of section 9205 of the 
     Consolidated Omnibus Budget Reconciliation Act of 1985 is 
     amended by striking ``November 1, 1990'' and inserting 
     ``December 31, 1995''.
       (2) Effective date.--The amendment made by paragraph (1) 
     shall take effect as if included in the enactment of OBRA-
     1990.

     SEC. 8457. PERMANENT EXTENSION OF AUTHORITY TO CONTRACT WITH 
                   FISCAL INTERMEDIARIES AND CARRIERS ON OTHER 
                   THAN A COST BASIS.

       (a) In General.--Section 2326(a) of the Deficit Reduction 
     Act of 1984, as amended by section 6215 of OBRA-1989, is 
     amended in the third sentence by striking ``during such 
     period'' and inserting ``beginning with fiscal year 1990 and 
     any subsequent fiscal year''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall take effect on the date of the enactment of this Act.

     SEC. 8458. TRANSPORTATION DEMONSTRATION PROJECT.

       (a) In General.--The Secretary of Health and Human Services 
     shall conduct a demonstration project at 2 sites to--
       (1) examine methods to reduce the cost of non-emergency 
     medical transportation and regularly scheduled medical 
     transportation by coordinating the timing of the provision of 
     non-emergency medical services with the availability of 
     public transportation; and
       (2) examine methods to reduce the cost of emergency medical 
     transportation and emergency room treatment through the 
     supervised use of ambulance emergency medical technicians.
       (b) Selection of Sites.--Of the 2 sites selected for the 
     demonstration project under subsection (a), one shall be in 
     an urban area and one shall be in a rural area.

     SEC. 8459. DIABETES TREATMENT DEMONSTRATION PROJECT.

       The Secretary of Health and Human Services shall conduct a 
     demonstration project at sites in urban and rural areas under 
     which the Secretary shall provide for coverage under the 
     medicare program of comprehensive diabetes treatment, 
     management, and education services (including services 
     necessary to provide intensive metabolic management found 
     effective by the Diabetes Control and Complications Trial of 
     the National Institutes of Health) to determine whether the 
     manner in which payment is made for the treatment of diabetes 
     under the medicare program should be modified.

     SEC. 8460. EXPANSION OF NUMBER OF SITES FOR DEMONSTRATION 
                   PROGRAM OF ALL-INCLUSIVE CARE FOR THE ELDERLY 
                   (PACE).

       Section 9412(b)(1) of the Omnibus Budget Reconciliation Act 
     of 1986 is amended by striking ``not more than 15'' and 
     inserting ``not more than 30''.

     SEC. 8460A. MISCELLANEOUS AND TECHNICAL CORRECTIONS.

       (a) Survey and Certification Requirements.--(1) Section 
     1864 (42 U.S.C. 1395aa) is amended--
       (A) in subsection (e), by striking ``title'' and inserting 
     ``title (other than any fee relating to section 353 of the 
     Public Health Service Act)''; and
       (B) in the first sentence of subsection (a), by striking 
     ``1861(s) or'' and all that follows through ``Service Act,'' 
     and inserting ``1861(s),''.
       (2) An agreement made by the Secretary of Health and Human 
     Services with a State under section 1864(a) of the Social 
     Security Act may include an agreement that the services of 
     the State health agency or other appropriate State agency (or 
     the appropriate local agencies) will be utilized by the 
     Secretary for the purpose of determining whether a laboratory 
     meets the requirements of section 353 of the Public Health 
     Service Act.
       (b) Home Dialysis Demonstration Technical Corrections.--
     Section 4202 of OBRA-1990 is amended--
       (1) in subsection (b)(1)(A), by striking ``home 
     hemodialysis staff assistant'' and inserting ``qualified home 
     hemodialysis staff assistant (as described in subsection 
     (d))'';
       (2) in subsection (b)(2)(B)(ii)(I), by striking ``(as 
     adjusted to reflect differences in area wage levels)'';
       (3) in subsection (c)(1)(A), by striking ``skilled''; and
       (4) in subsection (c)(1)(E), by striking ``(b)(4)'' and 
     inserting ``(b)(2)''.
       (c) Technical Correction to Revisions of Coverage for 
     Immunosuppressive Drug Therapy.--The Secretary of Health and 
     Human Services may administer section 1861(s)(2)(J) of the 
     Social Security Act in a manner such that the months of 
     coverage of drugs described in such section are provided 
     consecutively, so long as the total number of months of 
     coverage provided is the same as the number described in such 
     section.
       (d) Other Miscellaneous and Technical Provisions.--(1) 
     Section 1833 (42 U.S.C. 1395l) is amended by redesignating 
     the subsection (r) added by section 4206(b)(2) of OBRA-1990 
     as subsection (s).
       (2) Section 1866(f)(1) (42 U.S.C. 1395cc(f)(1)) is amended 
     by striking ``1833(r)'' and inserting ``1833(s)''.
       (3) Section 4201(d)(2) of OBRA-1990 is amended by striking 
     ``(B) by striking'', ``(C) by striking'', and ``(3) by 
     adding'' and inserting ``(i) by striking'', ``(ii) by 
     striking'', and ``(B) by adding'', respectively.
       (4) The section following section 4206 of OBRA-1990 is 
     amended by striking ``Sec. 4027.'' and inserting ``Sec. 
     4207.'', and in this subtitle is referred to as section 4207 
     of OBRA-1990.
       (5)(A) Section 4207(a)(1) of OBRA-1990 is amended by adding 
     closing quotation marks and a period after ``such review.''.
       (B) Section 4207(a)(4) of OBRA-1990 is amended by striking 
     ``this subsection'' and inserting ``paragraphs (2) and (3)''.
       (C) Section 4207(b)(1) of OBRA-1990 is amended by striking 
     ``section 3(7)'' and inserting ``section 601(a)(1)''.
       (6) Section 2355(b)(1)(B) of the Deficit Reduction Act of 
     1984, as amended by section 4207(b)(4)(B)(ii) of OBRA-1990, 
     is amended--
       (A) by striking ``12907(c)(4)(A)'' and inserting 
     ``4207(b)(4)(B)(i)'', and
       (B) by striking ``feasibilitly'' and inserting 
     ``feasibility''.
       (7) Section 4207(b)(4)(B)(iii)(III) of OBRA-1990 is amended 
     by striking the period at the end and inserting a semicolon.
       (8) Subsections (c)(3) and (e) of section 2355 of the 
     Deficit Reduction Act of 1984, as amended by section 
     4207(b)(4)(B) of OBRA-1990, are each amended by striking 
     ``12907(c)(4)(A)'' each place it appears and inserting 
     ``4207(b)(4)(B)''.
       (9) Section 4207(c)(2) of OBRA-1990 is amended by striking 
     ``the Committee on Ways and Means'' each place it appears and 
     inserting ``the Committees on Ways and Means and Energy and 
     Commerce''.
       (10) Section 4207(d) of OBRA-1990 is amended by 
     redesignating the second paragraph (3) (relating to effective 
     date) as paragraph (4).
       (11) Section 4207(i)(2) of OBRA-1990 is amended--
       (A) by striking the period at the end of clause (iii) and 
     inserting a semicolon, and
       (B) in clause (v), by striking ``residents'' and inserting 
     ``patients''.
       (12) Section 4207(j) of OBRA-1990 is amended by striking 
     ``title'' each place it appears and inserting ``subtitle''.

PART 4--PROVISIONS RELATING TO MEDICARE SUPPLEMENTAL INSURANCE POLICIES

     SEC. 8461. STANDARDS FOR MEDICARE SUPPLEMENTAL INSURANCE 
                   POLICIES.

       (a) Simplification of Medicare Supplemental Policies.--
       (1) Section 4351 of OBRA-1990 is amended by striking ``(a) 
     In General.--''.
       (2) Section 1882(p) (42 U.S.C. 1395ss(p)) is amended--
       (A) in paragraph (1)(A)--
       (i) by striking ``promulgates'' and inserting ``changes the 
     revised NAIC Model Regulation (described in subsection (m)) 
     to incorporate'',
       (ii) by striking ``(such limitations, language, 
     definitions, format, and standards referred to collectively 
     in this subsection as `NAIC standards'),'', and
       (iii) by striking ``included a reference to the NAIC 
     standards'' and inserting ``were a reference to the revised 
     NAIC Model Regulation as changed under this subparagraph 
     (such changed regulation referred to in this section as the 
     `1991 NAIC Model Regulation')'';
       (B) in paragraph (1)(B)--
       (i) by striking ``promulgate NAIC standards'' and inserting 
     ``make the changes in the revised NAIC Model Regulation'',
       (ii) by striking ``limitations, language, definitions, 
     format, and standards described in clauses (i) through (iv) 
     of such subparagraph (in this subsection referred to 
     collectively as `Federal standards')'' and inserting ``a 
     regulation'', and
       (iii) by striking ``included a reference to the Federal 
     standards'' and inserting ``were a reference to the revised 
     NAIC Model Regulation as changed by the Secretary under this 
     subparagraph (such changed regulation referred to in this 
     section as the `1991 Federal Regulation')'';
       (C) in paragraph (1)(C)(i), by striking ``NAIC standards or 
     the Federal standards'' and inserting ``1991 NAIC Model 
     Regulation or 1991 Federal Regulation'';
       (D) in paragraphs (1)(C)(ii)(I), (1)(E), (2), and (9)(B), 
     by striking ``NAIC or Federal standards'' and inserting 
     ``1991 NAIC Model Regulation or 1991 Federal Regulation'';
       (E) in paragraph (2)(C), by striking ``(5)(B)'' and 
     inserting ``(4)(B)'';
       (F) in paragraph (4)(A)(i), by inserting ``or paragraph 
     (6)'' after ``(B)'';
       (G) in paragraph (4), by striking ``applicable standards'' 
     each place it appears and inserting ``applicable 1991 NAIC 
     Model Regulation or 1991 Federal Regulation'';
       (H) in paragraph (6), by striking ``in regard to the 
     limitation of benefits described in paragraph (4)'' and 
     inserting ``described in clauses (i) through (iii) of 
     paragraph (1)(A)'';
       (I) in paragraph (7), by striking ``policyholder'' and 
     inserting ``policyholders'';
       (J) in paragraph (8), by striking ``after the effective 
     date of the NAIC or Federal standards with respect to the 
     policy, in violation of the previous requirements of this 
     subsection'' and inserting ``on and after the effective date 
     specified in paragraph (1)(C) (but subject to paragraph 
     (10)), in violation of the applicable 1991 NAIC Model 
     Regulation or 1991 Federal Regulation insofar as such 
     regulation relates to the requirements of subsection (o) or 
     (q) or clause (i), (ii), or (iii) of paragraph (1)(A)'';
       (K) in paragraph (9), by adding at the end the following 
     new subparagraph:
       ``(D) Subject to paragraph (10), this paragraph shall apply 
     to sales of policies occurring on or after the effective date 
     specified in paragraph (1)(C).''; and
       (L) in paragraph (10), by striking ``this subsection'' and 
     inserting ``paragraph (1)(A)(i)''.
       (b) Guaranteed Renewability.--Section 1882(q) (42 U.S.C. 
     1395ss(q)) is amended--
       (1) in paragraph (2), by striking ``paragraph (2)'' and 
     inserting ``paragraph (4)'', and
       (2) in paragraph (4), by striking ``the succeeding issuer'' 
     and inserting ``issuer of the replacement policy''.
       (c) Enforcement of Standards.--
       (1) Section 1882(a)(2) (42 U.S.C. 1395ss(a)(2)) is 
     amended--
       (A) in subparagraph (A), by striking ``NAIC standards or 
     the Federal standards'' and inserting ``1991 NAIC Model 
     Regulation or 1991 Federal Regulation'', and
       (B) by striking ``after the effective date of the NAIC or 
     Federal standards with respect to the policy'' and inserting 
     ``on and after the effective date specified in subsection 
     (p)(1)(C)''.
       (2) The sentence in section 1882(b)(1) added by section 
     4353(c)(5) of OBRA-1990 is amended--
       (A) by striking ``The report'' and inserting ``Each 
     report'',
       (B) by inserting ``and requirements'' after ``standards'',
       (C) by striking ``and'' after ``compliance,'', and
       (D) by striking the comma after ``Commissioners''.
       (3) Section 1882(g)(2)(B) (42 U.S.C. 1395ss(g)(2)(B)) is 
     amended by striking ``Panel'' and inserting ``Secretary''.
       (4) Section 1882(b)(1) (42 U.S.C. 1395ss(b)(1)) is amended 
     by striking ``the the Secretary'' and inserting ``the 
     Secretary''.
       (d) Preventing Duplication.--
       (1) Section 1882(d)(3)(A) (42 U.S.C. 1395ss(d)(3)(A)) is 
     amended--
       (A) by amending the first sentence to read as follows:
       ``(i) It is unlawful for a person to sell or issue to an 
     individual entitled to benefits under part A or enrolled 
     under part B of this title--
       ``(I) a health insurance policy with knowledge that the 
     policy duplicates health benefits to which the individual is 
     otherwise entitled under this title or title XIX,
       ``(II) a medicare supplemental policy with knowledge that 
     the individual is entitled to benefits under another medicare 
     supplemental policy, or
       ``(III) a health insurance policy (other than a medicare 
     supplemental policy) with knowledge that the policy 
     duplicates health benefits to which the individual is 
     otherwise entitled, other than benefits to which the 
     individual is entitled under a requirement of State or 
     Federal law.'';
       (B) by designating the second sentence as clause (ii) and, 
     in such clause, by striking ``the previous sentence'' and 
     inserting ``clause (i)'';
       (C) by designating the third sentence as clause (iii) and, 
     in such clause--
       (i) by striking ``the previous sentence'' and inserting 
     ``clause (i) with respect to the sale of a medicare 
     supplemental policy'', and
       (ii) by striking ``and the statement'' and all that follows 
     up to the period at the end; and
       (D) by striking the last sentence.
       (2) Section 1882(d)(3)(B) (42 U.S.C. 1395ss(d)(3)(B)) is 
     amended--
       (A) in clause (ii)(II), by striking ``65 years of age or 
     older'',
       (B) in clause (iii)(I), by striking ``another medicare'' 
     and inserting ``a medicare'',
       (C) in clause (iii)(I), by striking ``such a policy'' and 
     inserting ``a medicare supplemental policy'',
       (D) in clause (iii)(II), by striking ``another policy'' and 
     inserting ``a medicare supplemental policy'', and
       (E) by amending subclause (III) of clause (iii) to read as 
     follows:
       ``(III) If the statement required by clause (i) is obtained 
     and indicates that the individual is entitled to any medical 
     assistance under title XIX, the sale of the policy is not in 
     violation of clause (i) (insofar as such clause relates to 
     such medical assistance), if (aa) a State medicaid plan under 
     such title pays the premiums for the policy, (bb) in the case 
     of a qualified medicare beneficiary described in section 
     1905(p)(1), the policy provides for coverage of outpatient 
     prescription drugs, or (cc) the only medical assistance to 
     which the individual is entitled under the State plan is 
     medicare cost sharing described in section 
     1905(p)(3)(A)(ii).''.
       (3)(A) Section 1882(d)(3)(C) (42 U.S.C. 1395ss(d)(3)(C)) is 
     amended--
       (i) by striking ``the selling'' and inserting ``(i) the 
     sale or issuance'', and
       (ii) by inserting before the period at the end the 
     following: ``, (ii) the sale or issuance of a policy or plan 
     described in subparagraph (A)(i)(I) (other than a medicare 
     supplemental policy to an individual entitled to any medical 
     assistance under title XIX) under which all the benefits are 
     fully payable directly to or on behalf of the individual 
     without regard to other health benefit coverage of the 
     individual but only if (for policies sold or issued more than 
     60 days after the date the statements are published or 
     promulgated under subparagraph (D)) there is disclosed in a 
     prominent manner as part of (or together with) the 
     application the applicable statement (specified under 
     subparagraph (D)) of the extent to which benefits payable 
     under the policy or plan duplicate benefits under this title 
     and (in the case of a policy that is not a health plan 
     described in section 2203(c)(2) and does not provide coverage 
     for benefits regardless of other coverage), to the extent 
     considered appropriate by the Secretary, benefits under the 
     guaranteed national benefit package under title XXI or under 
     a standardized benefit package for supplemental health 
     benefit policies established under part D of title XXII, or 
     (iii) the sale or issuance of a policy or plan described in 
     subparagraph (A)(i)(III) under which all the benefits are 
     fully payable directly to or on behalf of the individual 
     without regard to other health benefit coverage of the 
     individual''.
       (B) Section 1882(d)(3) (42 U.S.C. 1395ss(d)(3)) is amended 
     by adding at the end the following:
       ``(D)(i) If--
       ``(I) within the 90-day period beginning on the date of the 
     enactment of this subparagraph, the National Association of 
     Insurance Commissioners develops (after consultation with 
     consumer and insurance industry representatives) and submits 
     to the Secretary a statement for each of the types of health 
     insurance policies (other than medicare supplemental policies 
     and including, but not limited to, as separate types of 
     policies, policies paying directly to the beneficiary fixed, 
     cash benefits, and policies that limit benefit payments to 
     specific diseases) which are sold or issued to persons 
     entitled to health benefits under this title, of the extent 
     to which benefits payable under the policy or plan duplicate 
     benefits under this title, and
       ``(II) the Secretary approves all the statements submitted 
     as meeting the requirements of subclause (I),

     each such statement shall be (for purposes of subparagraph 
     (C)) the statement specified under this subparagraph for the 
     type of policy involved. The Secretary shall review and 
     approve (or disapprove) all the statements submitted under 
     subclause (I) within 30 days after the date of their 
     submittal. Upon approval of such statements, the Secretary 
     shall publish such statements.
       ``(ii) If the Secretary does not approve the statements 
     under clause (i) or the statements are not submitted within 
     the 90-day period specified in such clause, the Secretary 
     shall promulgate (after consultation with consumer and 
     insurance industry representatives and not later than 90 days 
     after the date of disapproval or the end of such 90-day 
     period (as the case may be)) a statement for each of the 
     types of health insurance policies (other than medicare 
     supplemental policies and including, but not limited to, as 
     separate types of policies, policies paying directly to the 
     beneficiary fixed, cash benefits, and policies that limit 
     benefit payments to specific diseases) which are sold or 
     issued to persons entitled to health benefits under this 
     title, of the extent to which benefits payable under the 
     policy or plan duplicate benefits under this title, and each 
     such statement shall be (for purposes of subparagraph (C)) 
     the statement specified under this subparagraph for the type 
     of policy involved.''.
       (C) The requirement of a disclosure under section 
     1882(d)(3)(C)(ii) of the Social Security Act shall not apply 
     to an application made for a policy or plan before 60 days 
     after the date the Secretary of Health and Human Services 
     publishes or promulgates all the statements under section 
     1882(d)(3)(D) of such Act.
       (4) Subparagraphs (A) and (B) of section 1882(q)(5) are 
     amended by striking ``of the Social Security Act''.
       (e) Loss Ratios and Refunds of Premiums.--
       (1) Section 1882(r) (42 U.S.C. 1395ss(r)) is amended--
       (A) in paragraph (1), by striking ``or sold'' and inserting 
     ``or renewed (or otherwise provide coverage after the date 
     described in subsection (p)(1)(C))'';
       (B) in paragraph (1)(A), by inserting ``for periods after 
     the effective date of these provisions'' after ``the policy 
     can be expected'';
       (C) in paragraph (1)(A), by striking ``Commissioners,'' and 
     inserting ``Commissioners)'';
       (D) in paragraph (1)(B), by inserting before the period at 
     the end the following: ``, treating policies of the same type 
     as a single policy for each standard package'';
       (E) by adding at the end of paragraph (1) the following: 
     ``For the purpose of calculating the refund or credit 
     required under paragraph (1)(B) for a policy issued before 
     the date specified in subsection (p)(1)(C), the refund or 
     credit calculation shall be based on the aggregate benefits 
     provided and premiums collected under all such policies 
     issued by an insurer in a State (separated as to individual 
     and group policies) and shall be based only on aggregate 
     benefits provided and premiums collected under such policies 
     after the date specified in section 8461(m)(4) of the 
     Guaranteed Health Insurance Act of 1994.'';
       (F) in the first sentence of paragraph (2)(A), by striking 
     ``by policy number'' and inserting ``by standard package'';
       (G) by striking the second sentence of paragraph (2)(A) and 
     inserting the following: ``Paragraph (1)(B) shall not apply 
     to a policy until 12 months following issue.'';
       (H) in the last sentence of paragraph (2)(A), by striking 
     ``in order'' and all that follows through ``are effective'';
       (I) by adding at the end of paragraph (2)(A), the following 
     new sentence: ``In the case of a policy issued before the 
     date specified in subsection (p)(1)(C), paragraph (1)(B) 
     shall not apply until 1 year after the date specified in 
     section 8461(m)(4) of the Guaranteed Health Insurance Act of 
     1994.'';
       (J) in paragraph (2), by striking ``policy year'' each 
     place it appears and inserting ``calendar year'';
       (K) in paragraph (4), by striking ``February'', 
     ``disllowance'', ``loss-ratios'' each place it appears, and 
     ``loss-ratio'' and inserting ``October'', ``disallowance'', 
     ``loss ratios'', and ``loss ratio'', respectively;
       (L) in paragraph (6)(A), by striking ``issues a policy in 
     violation of the loss ratio requirements of this subsection'' 
     and ``such violation'' and inserting ``fails to provide 
     refunds or credits as required in paragraph (1)(B)'' and 
     ``policy issued for which such failure occurred'', 
     respectively; and
       (M) in paragraph (6)(B), by striking ``to policyholders'' 
     and inserting ``to the policyholder or, in the case of a 
     group policy, to the certificate holder''.
       (2) Section 1882(b)(1) (42 U.S.C. 1395ss(b)(1)) is amended, 
     in the matter after subparagraph (H), by striking 
     ``subsection (F)'' and inserting ``subparagraph (F)''.
       (3) Section 4355(d) of OBRA-1990 is amended by striking 
     ``sold or issued'' and all that follows and inserting 
     ``issued or renewed (or otherwise providing coverage after 
     the date described in section 1882(p)(1)(C) of the Social 
     Security Act) on or after the date specified in section 
     1882(p)(1)(C) of the Social Security Act.''.
       (f) Treatment of HMO's.--
       (1) Section 1882(g)(1) (42 U.S.C. 1395ss(g)(1)) is amended 
     by striking ``a health maintenance organization or other 
     direct service organization'' and all that follows through 
     ``1833'' and inserting ``an eligible organization (as defined 
     in section 1876(b)) if the policy or plan provides benefits 
     pursuant to a contract under section 1876 or an approved 
     demonstration project described in section 603(c) of the 
     Social Security Amendments of 1983, section 2355 of the 
     Deficit Reduction Act of 1984, or section 9412(b) of the 
     Omnibus Budget Reconciliation Act of 1986, or, during the 
     period beginning on the date specified in subsection 
     (p)(1)(C) and ending on December 31, 1995, a policy or plan 
     of an organization if the policy or plan provides benefits 
     pursuant to an agreement under section 1833(a)(1)(A)''.
       (2) Section 4356(b) of OBRA-1990 is amended by striking 
     ``on the date of the enactment of this Act'' and inserting 
     ``on the date specified in section 1882(p)(1)(C) of the 
     Social Security Act''.
       (g) Pre-existing Condition Limitations.--Section 1882(s) 
     (42 U.S.C. 1395ss(s)) is amended--
       (1) in paragraph (2)(A), by striking ``for which an 
     application is submitted'' and inserting ``in the case of an 
     individual for whom an application is submitted prior to 
     or'',
       (2) in paragraph (2)(A), by striking ``in which the 
     individual (who is 65 years of age or older) first is 
     enrolled for benefits under part B'' and inserting ``as of 
     the first day on which the individual is 65 years of age or 
     older and is enrolled for benefits under part B'', and
       (3) in paragraph (2)(B), by striking ``before it'' and 
     inserting ``before the policy''.
       (h) Medicare Select Policies.--
       (1) Section 1882(t) (42 U.S.C. 1395ss(t)) is amended--
       (A) in paragraph (1), by inserting ``medicare 
     supplemental'' after ``If a'',
       (B) in paragraph (1), by striking ``NAIC Model Standards'' 
     and inserting ``1991 NAIC Model Regulation or 1991 Federal 
     Regulation'',
       (C) in paragraph (1)(A), by inserting ``or agreements'' 
     after ``contracts'',
       (D) in subparagraphs (E)(i) and (F) of paragraph (1), by 
     striking ``NAIC standards'' and inserting ``standards in the 
     1991 NAIC Model Regulation or 1991 Federal Regulation'', and
       (E) in paragraph (2), by inserting ``the issuer'' before 
     ``is subject to a civil money penalty''.
       (2) Section 1154(a)(4)(B) (42 U.S.C. 1320c-3(a)(4)(B)) is 
     amended--
       (A) by inserting ``that is'' after ``(or'', and
       (B) by striking ``1882(t)'' and inserting ``1882(t)(3)''.
       (i) Health Insurance Counseling.--Section 4360 of OBRA-1990 
     is amended--
       (1) in subsection (b)(2)(A)(ii), by striking ``Act'' and 
     inserting ``Act)'';
       (2) in subsection (b)(2)(D), by striking ``services'' and 
     inserting ``counseling'';
       (3) in subsection (b)(2)(I), by striking ``assistance'' and 
     inserting ``referrals'';
       (4) in subsection (c)(1), by striking ``and that such 
     activities will continue to be maintained at such level'';
       (5) in subsection (d)(3), by striking ``to the rural 
     areas'' and inserting ``eligible individuals residing in 
     rural areas'';
       (6) in subsection (e)--
       (A) by striking ``subsection (c) or (d)'' and inserting 
     ``this section'',
       (B) by striking ``and annually thereafter, issue an annual 
     report'' and inserting ``and annually thereafter during the 
     period of the grant, issue a report'', and
       (C) in paragraph (1), by striking ``State-wide'';
       (7) in subsection (f), by striking paragraph (2) and by 
     redesignating paragraphs (3) through (5) as paragraphs (2) 
     through (4), respectively; and
       (8) in the second subsection (f) (relating to authorization 
     of appropriations for grants)--
       (A) by striking ``and 1993'' and inserting ``1993, 1994, 
     1995, and 1996''; and
       (B) by redesignating such subsection as subsection (g).
       (j) Telephone Information System.--
       (1) Section 1804 (42 U.S.C. 1395b-2) is amended--
       (A) by adding at the end of the heading the following: ``; 
     medicare and medigap information'',
       (B) by inserting ``(a)'' after ``1804.'', and
       (C) by adding at the end the following new subsection:
       ``(b) The Secretary shall provide information via a toll-
     free telephone number on the programs under this title.''.
       (2) Section 1882(f) (42 U.S.C. 1395ss(f)) is amended by 
     adding at the end the following new paragraph:
       ``(3) The Secretary shall provide information via a toll-
     free telephone number on medicare supplemental policies 
     (including the relationship of State programs under title XIX 
     to such policies).''.
       (3) Section 1889 is repealed.
       (k) Mailing of Policies.--Section 1882(d)(4) (42 U.S.C. 
     1395ss(d)(4)) is amended--
       (1) in subparagraph (D), by striking ``, if such policy'' 
     and all that follows up to the period at the end, and
       (2) by adding at the end the following new subparagraph:
       ``(E) Subparagraph (A) shall not apply in the case of an 
     issuer who mails or causes to be mailed a policy, 
     certificate, or other matter solely to comply with the 
     requirements of subsection (q).''.
       (l) Effective Date.--The amendments made by this section 
     shall be effective as if included in the enactment of OBRA-
     1990; except that--
       (1) the amendments made by subsection (d)(1) shall take 
     effect on the date of the enactment of this Act, but no 
     penalty shall be imposed under section 1882(d)(3)(A) of the 
     Social Security Act (for an action occurring after the 
     effective date of the amendments made by section 4354 of 
     OBRA-1990 and before the date of the enactment of this Act) 
     with respect to the sale or issuance of a policy which is not 
     unlawful under section 1882(d)(3)(A)(i)(II) of the Social 
     Security Act (as amended by this section);
       (2) the amendments made by subsection (d)(2)(A) and by 
     subparagraphs (A), (B), and (E) of subsection (e)(1) shall be 
     effective on the date specified in subsection (m)(4); and
       (3) the amendment made by subsection (g)(2) shall take 
     effect on January 1, 1995, and shall apply to individuals who 
     attain 65 years of age or older on or after the effective 
     date of section 1882(s)(2) of the Social Security Act (and, 
     in the case of individuals who attained 65 years of age after 
     such effective date and before January 1, 1995, and who were 
     not covered under such section before January 1, 1995, the 6-
     month period specified in that section shall begin January 1, 
     1995).
       (m) Transition Provisions.--
       (1) In general.--If the Secretary of Health and Human 
     Services identifies a State as requiring a change to its 
     statutes or regulations to conform its regulatory program to 
     the changes made by this section, the State regulatory 
     program shall not be considered to be out of compliance with 
     the requirements of section 1882 of the Social Security Act 
     due solely to failure to make such change until the date 
     specified in paragraph (4).
       (2) NAIC standards.--If, within 6 months after the date of 
     the enactment of this Act, the National Association of 
     Insurance Commissioners (in this subsection referred to as 
     the ``NAIC'') modifies its 1991 NAIC Model Regulation 
     (adopted in July 1991) to conform to the amendments made by 
     this section and to delete from section 15C the exception 
     which begins with ``unless'', such revised regulation 
     incorporating the modifications shall be considered to be the 
     1991 Regulation for the purposes of section 1882 of the 
     Social Security Act.
       (3) Secretary standards.--If the NAIC does not make the 
     modifications described in paragraph (2) within the period 
     specified in such paragraph, the Secretary of Health and 
     Human Services shall make the modifications described in such 
     paragraph and such revised regulation incorporating the 
     modifications shall be considered to be the 1991 Regulation 
     for the purposes of section 1882 of the Social Security Act.
       (4) Date specified.--
       (A) In general.--Subject to subparagraph (B), the date 
     specified in this paragraph for a State is the earlier of--
       (i) the date the State changes its statutes or regulations 
     to conform its regulatory program to the changes made by this 
     section, or
       (ii) 1 year after the date the NAIC or the Secretary first 
     makes the modifications under paragraph (2) or (3), 
     respectively.
       (B) Additional legislative action required.--In the case of 
     a State which the Secretary identifies as--
       (i) requiring State legislation (other than legislation 
     appropriating funds) to conform its regulatory program to the 
     changes made in this section, but
       (ii) having a legislature which is not scheduled to meet in 
     1996 in a legislative session in which such legislation may 
     be considered,

     the date specified in this paragraph is the first day of the 
     first calendar quarter beginning after the close of the first 
     legislative session of the State legislature that begins on 
     or after January 1, 1996. For purposes of the previous 
     sentence, in the case of a State that has a 2-year 
     legislative session, each year of such session shall be 
     deemed to be a separate regular session of the State 
     legislature.
        Subtitle F--Provisions Relating to the Medicaid Program

                     table of contents of subtitle

        Subtitle F--Provisions Relating to the Medicaid Program

 Part 1--Conforming Medicaid to Guaranteed Health Insurance Act of 1994

Sec. 8501. Conforming medicaid amendments relating to guaranteed 
              national benefit package.
Sec. 8502. Enforcement of maintenance-of-effort requirements through 
              medicaid.
Sec. 8503. Conforming medicaid amendments relating to quality and 
              consumer protection.
Sec. 8504. Conforming amendments relating to cost-sharing for qualified 
              medicare beneficiaries.
Sec. 8505. Treatment of certain facilities as federally qualified 
              health centers.
Sec. 8506. Waivers facilitating State health security programs.
Sec. 8507. Conforming requirements for rebate agreements for covered 
              outpatient drugs.
Sec. 8508. Construction of Guaranteed Health Insurance Act of 1994 
              references.

                         Part 2--Long-Term Care

Sec. 8511. Coordination of optional home and community based services 
              under medicaid with long-term care under Guaranteed 
              Health Insurance Act of 1994.
Sec. 8512. Nursing home pass-through.
Sec. 8513. Continuation of Texas frail elderly demonstration.

                Part 3--Health Maintenance Organizations

Sec. 8521. Permitting Garden State Health Plan to participate in 
              managed care waiver.
Sec. 8522. Extension of period of applicability of enrollment mix 
              requirement to Dayton Area Health Plan.
Sec. 8523. Clarification of applicability of restrictions on Federal 
              financial participation.

                     Part 4--Vaccines for Children

Sec. 8531. State mandate for insurers to offer coverage of 
              immunizations and well-child services.
Sec. 8532. Limitation on State ability to purchase vaccines at Federal 
              price.

    Part 5--Treatment of Indians and Indian Health Service Providers

Sec. 8541. Nondiscrimination in participation providers.
Sec. 8542. Requiring individuals subject to waivers to have option to 
              enroll in Indian Health Service plans.
Sec. 8543. Treatment of outpatient facilities as federally qualified 
              health centers.

                  Part 6--Effective Date of Amendments

Sec. 8551. Amendments effective without regard to issuance of 
              regulations.

 PART 1--CONFORMING MEDICAID TO GUARANTEED HEALTH INSURANCE ACT OF 1994

     SEC. 8501. CONFORMING MEDICAID AMENDMENTS RELATING TO 
                   GUARANTEED NATIONAL BENEFIT PACKAGE.

       (a) Limiting Coverage Under Medicaid.--
       (1) In general.--Title XIX is amended by redesignating 
     section 1931 as section 1932 and by inserting after section 
     1930 the following new section:


``limitation on coverage of services under guaranteed national benefit 
                                package

       ``Sec. 1931. (a) In General.--Subject to subsection (b), a 
     State plan under this title is not required to provide 
     medical assistance on or after January 1, 1999, consisting of 
     payment for any item or service which is included in the 
     guaranteed national benefit package under title III of the 
     Guaranteed Health Insurance Act of 1994.
       ``(b) Exceptions.--Subsection (a) shall not apply to--
       ``(1) emergency care and services described in section 
     1903(v)(2) furnished before January 1, 2002, or
       ``(2) inpatient mental health services provided to 
     individuals who are entitled to benefits under part A of 
     title XVIII.
       ``(c) No FFP for State Maintenance-of-Effort.--Payment of 
     amounts under part 2 of subtitle B of title VIII of the 
     Guaranteed Health Insurance Act of 1994 shall not be 
     construed to constitute medical assistance for purposes of 
     section 1903(a).''.
       (2) Conforming amendment to state plan requirement.--
     Section 1902(a) (42 U.S.C. 1396a(a)) is amended in the matter 
     preceding paragraph (1) by striking ``A State'' and inserting 
     ``Subject to section 1931, a State''.
       (3) No federal financial participation.--Section 1903(i) 
     (42 U.S.C. 1396b(i)) is amended--
       (A) by striking ``or'' at the end of paragraph (14),
       (B) by striking the period at the end of paragraph (15) and 
     inserting ``; or'', and
       (C) by inserting after paragraph (15) the following new 
     paragraphs:
       ``(16) with respect to medical assistance consisting of 
     payment for items or services furnished to an individual on 
     or after January 1, 1999, to the extent that payment may be 
     made for the item or service under the guaranteed national 
     benefit package under title III of the Guaranteed Health 
     Insurance Act of 1994; or
       ``(17) with respect to any medical assistance furnished on 
     or after January 1, 1999, to an individual entitled to 
     benefits under part A of title XVIII other than long-term 
     care services described in section 1905(t).''.
       (4) Long-term care services defined.--Section 1905 (42 
     U.S.C. 1396d) is amended by adding at the end the following 
     new subsection:
       ``(t) The term `long-term care services' means the 
     following items and services:
       ``(1) Nursing facility services and intermediate care 
     facility services for the mentally retarded (including items 
     and services that may be included in such services pursuant 
     to regulations in effect as of October 26, 1993).
       ``(2) Personal care services.
       ``(3) Home or community-based services provided under a 
     waiver granted under subsection (c), (d), or (e) of section 
     1915.
       ``(4) Home and community care provided to functionally 
     disabled elderly individuals under section 1929.
       ``(5) Community supported living arrangements services 
     provided under section 1930.
       ``(6) Home health care services, case-management services, 
     clinic services, and rehabilitation services that are 
     furnished to an individual who has a condition or disability 
     that qualifies the individual to receive any of the services 
     described in paragraphs (1) through (5).''.
       (5) Conforming amendments relating to secondary payer.--(A) 
     Section 1902(a)(25)(A) (42 U.S.C. 1396a(a)(25)(A)) is amended 
     by inserting ``certified health plans (as defined in section 
     2 of the Guaranteed Health Insurance Act of 1994 and 
     including medicare part C),'' after ``of 1974),''.
       (B) Section 1903(o) (42 U.S.C. 1396b(o)) is amended by 
     inserting ``and a certified health plan (as defined in 
     section 2 of the Guaranteed Health Insurance Act of 1994 and 
     including medicare part C)'' after ``of 1974)''.
       (c) Other Medicaid Conforming Amendments.--Section 
     1902(a)(9)(C) (42 U.S.C. 1396a(a)(9)(C)) and section 
     1915(a)(1)(B)(ii)(I) (42 U.S.C. 1396n(a)(1)(B)(ii)(I)) are 
     each amended by striking ``paragraphs (15) and (16) of 
     section 1861(s)'' and inserting ``subsections (a) and (b) of 
     section 1890''.

     SEC. 8502. ENFORCEMENT OF MAINTENANCE-OF-EFFORT REQUIREMENTS 
                   THROUGH MEDICAID.

       (a) State Plan Requirement.--Section 1902(a) (42 U.S.C. 
     1396a(a)) is amended--
       (1) by striking ``and'' at the end of paragraph (61);
       (2) by striking the period at the end of paragraph (62) and 
     inserting ``; and''; and
       (3) by inserting after paragraph (62) the following new 
     paragraphs:
       ``(63) provide assurances that the State is making payments 
     required under part 2 of subtitle B of title VIII of the 
     Guaranteed Health Insurance Act of 1994.''.
       (b) Withholding Amounts Unpaid.--Section 1903 (42 U.S.C. 
     1396b) is amended by adding at the end the following new 
     subsection:
       ``(x) Notwithstanding any other provision of this section, 
     the Secretary shall reduce the amount of payment made to a 
     State under this section for quarters in any fiscal year to 
     the extent that the State fails to make the payments required 
     for the fiscal year under part 2 of subtitle B of title VIII 
     of the Guaranteed Health Insurance Act of 1994 in a timely 
     manner.''.

     SEC. 8503. CONFORMING MEDICAID AMENDMENTS RELATING TO QUALITY 
                   AND CONSUMER PROTECTION.

       (a) State Plan Requirements.--Section 1902(a) (42 U.S.C. 
     1396a(a)), as amended by section 8502(a), is amended--
       (1) by striking ``and'' at the end of paragraph (61);
       (2) by striking the period at the end of paragraph (62) and 
     inserting ``; and''; and
       (3) by inserting after paragraph (62) the following new 
     paragraphs:
       ``(63) provide that the identification cards issued under 
     the State plan conform with the requirements of section 
     9101(c) of the Guaranteed Health Insurance Act of 1994;
       ``(64) provide that the claims process applicable under the 
     State plan conforms with the requirements of section 9103(c) 
     of the Guaranteed Health Insurance Act of 1994; and
       ``(65) provide that the State plan meets the requirements 
     of section 9104(c)(4) of the Guaranteed Health Insurance Act 
     of 1994.''.
       (b) Denial of Federal Financial Participation for 
     Improperly Submitted Claims.--Section 1903(i) (42 U.S.C. 
     1396b(i)), as amended by section 8501(a)(3), is amended--
       (A) by striking ``or'' at the end of paragraph (16),
       (B) by striking the period at the end of paragraph (17) and 
     inserting ``; or'', and
       (C) by inserting after paragraph (17) the following new 
     paragraph:
       ``(18) with respect to medical assistance consisting of 
     payment for items and services for which the claim was not 
     submitted in a form and manner consistent with the standards 
     established under section 9103(c) of the Guaranteed Health 
     Insurance Act of 1994.''.

     SEC. 8504. CONFORMING AMENDMENTS RELATING TO COST-SHARING FOR 
                   QUALIFIED MEDICARE BENEFICIARIES.

       (a) In General.--Title XIX is amended as follows:
       (1) Section 1902(a)(10) (42 U.S.C. 1396a(a)(10)) is 
     amended--
       (A) in subparagraph (C) in the matter preceding clause (i), 
     by striking ``or (E)'',
       (B) by adding ``and'' at the end of subparagraph (D);
       (C) by striking subparagraph (E) and redesignating 
     subparagraph (F) as subparagraph (E); and
       (D) in the matter following subparagraph (E) (as so 
     redesignated), by striking clause (VIII).
       (2) Section 1902(e) (42 U.S.C. 1396a(e)) is amended by 
     striking paragraph (8).
       (3) The first sentence of section 1902(f) (42 U.S.C. 
     1396a(f)) is amended by striking ``qualified disabled'' and 
     all that follows through ``medicare beneficiaries''.
       (3) Section 1902(m)(4) (42 U.S.C. 1396a(m)(4)) is amended--
       (A) in the matter preceding subparagraph (A), by striking 
     ``1905(p)(1)'' and inserting ``1894(e)(1)''; and
       (B) in subparagraph (A), by striking ``1905(p)(1)(B)'' and 
     inserting ``1894(e)(1)(B)''.
       (4) Section 1902(u)(2) (42 U.S.C. 1396a(u)(2)) is amended 
     by striking ``(a)(10)(F)'' and inserting ``(a)(10)(E)''.
       (5) Section 1903(f)(4) (42 U.S.C. 1396b(f)(4)) is amended 
     in the matter preceding subparagraph (A) by striking 
     ``1902(a)(10)(A)(ii)(X), or 1905(p)(1)'' and inserting ``or 
     1902(a)(10)(A)(ii)(X)''.
       (6) Section 1905(a) (42 U.S.C. 1396d(a)) is amended in the 
     matter preceding paragraph (1) by striking ``or, in the case 
     of medicare cost-sharing'' and all that follows through 
     ``such a beneficiary''.
       (7) Section 1905 (42 U.S.C. 1396d) is amended by striking 
     subsections (p) and (s).
       (8) Section 1916 (42 U.S.C. 1396o) is amended--
       (A) in subsection (a) in the matter preceding paragraph 
     (1), by striking ``or (E)(i)'';
       (B) in subsection (b) in the matter preceding paragraph 
     (1), by striking ``or (E)''; and
       (C) by striking subsection (d).
       (b) Effective Date.--The amendments made by this section 
     shall apply with respect to items or services furnished in a 
     State on or after January 1, 1999.

     SEC. 8505. TREATMENT OF CERTAIN FACILITIES AS FEDERALLY 
                   QUALIFIED HEALTH CENTERS.

       (a) In General.--Section 1905(l)(2)(B) (42 U.S.C. 
     1396d(l)(2)(B)) is amended--
       (1) by striking ``or 340A'' each place it appears in clause 
     (i) and clause (ii)(I) and inserting ``340A, or 508'';
       (2) by striking ``or'' at the end of clause (iii);
       (3) by striking the semicolon at the end of clause (iv) and 
     inserting a comma; and
       (4) by inserting after clause (iv) the following new 
     clauses:
       ``(v) is a Native Hawaiian Health Center (as defined in 
     section 8(4) of the Native Hawaiian Health Care Act of 1988), 
     or
       ``(vi) is a community clinic organized as a nonprofit, 
     public benefit corporation under California Health and Safety 
     Code Sec. 1204(a) that does not charge patients directly for 
     services rendered;''.
       (b) Effective Date.--The amendments made by subsection (a) 
     shall apply to quarters beginning on or after July 1, 1995.

     SEC. 8506. WAIVERS FACILITATING STATE HEALTH SECURITY 
                   PROGRAMS.

       (a) In General.--Section 1115(a) (42 U.S.C. 1315(a)) is 
     amended by adding at the end the following: ``The Secretary 
     may not waive compliance with any of the requirements of 
     section 1902 under this subsection with respect to a State 
     for a year except to the extent necessary to enable the State 
     to operate an approved State single-payer system under 
     subtitle A of title IV of the Guaranteed Health Insurance Act 
     of 1994 or an approved State managed competition system under 
     subtitle B of title IV.''.
       (b) Effective Date.--The amendment made by subsection shall 
     take effect--
       (1) on January 1, 1999, in the case of a State with a 
     waiver approved under section 1115(a) of the Social Security 
     Act for which a formal, written, and completed application 
     was received by the Secretary of Health and Human Services 
     under such section on or before August 1, 1994; or
       (2) on August 1, 1994, in the case of any other State.

     SEC. 8507. CONFORMING REQUIREMENTS FOR REBATE AGREEMENTS FOR 
                   COVERED OUTPATIENT DRUGS.

       (a) In General.--Section 1927(a)(1) (42 U.S.C. 1396r-
     8(a)(1)) is amended by striking ``manufacturer),'' and 
     inserting ``manufacturer) and a rebate agreement with the 
     Secretary under section 1850,''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to covered outpatient drugs furnished during 
     quarters beginning on or after January 1, 1999.

     SEC. 8508. CONSTRUCTION OF GUARANTEED HEALTH INSURANCE ACT OF 
                   1994 REFERENCES.

       Section 1932 (42 U.S.C. 1396s), as redesignated by section 
     8501(a), is amended by adding at the end the following new 
     subsection:
       ``(c) References Guaranteed Health Insurance Act of 1994.--
     In this title, except as otherwise specifically provided, any 
     references to provisions of the Guaranteed Health Insurance 
     Act of 1994 are deemed to be references to such provisions as 
     in effect on the day after the date of the enactment of such 
     Act.''.

                         PART 2--LONG-TERM CARE

     SEC. 8511. COORDINATION OF OPTIONAL HOME AND COMMUNITY BASED 
                   SERVICES UNDER MEDICAID WITH LONG-TERM CARE 
                   UNDER GUARANTEED HEALTH INSURANCE ACT OF 1994.

       (a) Personal Care Services.--Section 1905(a)(24) (42 U.S.C. 
     1396d(a)(24)) is amended--
       (1) by striking ``and (C)'' and inserting ``(C)''; and
       (2) by striking ``location;'' and inserting ``location, and 
     (D) for quarters beginning on or after October 1, 1999, in 
     compliance with the standards applicable to personal 
     assistance services under the long-term care program for home 
     and community-based services under subtitle A of title X of 
     the Guaranteed Health Insurance Act of 1994;''.
       (b) Services Under Home and Community-Based Waivers.--(1) 
     Section 1915(c)(2) (42 U.S.C. 1396n(c)(2)) is amended--
       (1) by striking ``and'' at the end of subparagraph (D);
       (2) by striking the period at the end of subparagraph (E) 
     and inserting ``; and''; and
       (3) by adding at the end the following new subparagraph:
       ``(F) effective October 1, 1997, the services furnished 
     under the waiver meet the applicable standards for home and 
     community-based services furnished under the long-term care 
     program for home and community-based services under subtitle 
     A of title X of the Guaranteed Health Insurance Act of 
     1994.''.
       (2) Section 1915(d)(2) (42 U.S.C. 1396n(d)(2)) is amended--
       (1) by striking ``and'' at the end of subparagraph (B);
       (2) by striking the period at the end of subparagraph (C) 
     and inserting ``; and''; and
       (3) by inserting after subparagraph (C) the following new 
     subparagraph:
       ``(D) effective October 1, 1997, the services furnished 
     under the waiver meet the applicable standards for home and 
     community-based services furnished under the long-term care 
     program for home and community-based services under subtitle 
     A of title X of the Guaranteed Health Insurance Act of 
     1994.''.

     SEC. 8512. NURSING HOME PASS-THROUGH.

       Section 1902(a)(13)(A) (42 U.S.C. 1396a(a)(13)(A)) is 
     amended by--
       (1) inserting ``incurred by facilities in making required 
     contributions towards enrolling employees in health plans 
     under the Guaranteed Health Insurance Act of 1994 and'' 
     before ``the costs of services''; and
       (2) by striking ``nursing care, and which'' and inserting 
     ``nursing care, and which, in the case of intermediate care 
     facilities for the mentally retarded, take into account the 
     costs incurred by facilities in making required contributions 
     towards enrolling employees in health plans under the 
     Guaranteed Health Insurance Act of 1994, and which''.

     SEC. 8513. CONTINUATION OF TEXAS FRAIL ELDERLY DEMONSTRATION.

       A State that is described in section 1929(b)(2)(B) of the 
     Social Security Act and is receiving Federal financial 
     participation under section 1903(a) of such Act as of the 
     date of the enactment of this Act with respect to medical 
     assistance consisting of home and community care for 
     functionally disabled elderly individuals that meets the 
     requirements for such care described in section 1929 of the 
     Social Security Act may continue to receive participation 
     with respect to such medical assistance under the same terms 
     and conditions during quarters ending on or before September 
     30, 1997.

                PART 3--HEALTH MAINTENANCE ORGANIZATIONS

     SEC. 8521. PERMITTING GARDEN STATE HEALTH PLAN TO PARTICIPATE 
                   IN MANAGED CARE WAIVER.

       Section 1903(m)(6)(D) (42 U.S.C. 1396b(m)(6)(D)) is amended 
     to read as follows:
       ``(D) The undertaking described in subparagraph (A) shall 
     be eligible to participate in a waiver under section 1915(b) 
     if the State provides individuals subject to the waiver with 
     the option to enroll in at least 3 plans in addition to the 
     plan offered through the undertaking.''.

     SEC. 8522. EXTENSION OF PERIOD OF APPLICABILITY OF ENROLLMENT 
                   MIX REQUIREMENT TO DAYTON AREA HEALTH PLAN.

       Section 2 of Public Law 102-276 is amended by striking 
     ``December 31, 1995'' and inserting ``December 31, 1999''.

     SEC. 8523. CLARIFICATION OF APPLICABILITY OF RESTRICTIONS ON 
                   FEDERAL FINANCIAL PARTICIPATION.

       Section 1903(i) (42 U.S.C. 1396b(i)) is amended in the 
     matter preceding paragraph (1) by striking ``the preceding 
     provisions of this section'' and inserting ``this section 
     (including subsection (m))''.

                     PART 4--VACCINES FOR CHILDREN

     SEC. 8531. STATE MANDATE FOR INSURERS TO OFFER COVERAGE OF 
                   IMMUNIZATIONS AND WELL-CHILD SERVICES.

       (a) Requirement for Pediatric Immunization Program.--
     Section 1928(f) (42 U.S.C. 1396s(f)) is amended to read as 
     follows:
       ``(f) State Insurance Requirements.--
       ``(1) Maintenance of immunization laws for certain 
     states.--In the case of a State that had in effect as of May 
     1, 1993, a law that requires some or all health insurance 
     policies or plans to provide some coverage with respect to a 
     pediatric vaccine, a State program under this section does 
     not comply with the requirements of this section unless the 
     State certifies to the Secretary that the State has not 
     modified or repealed such law in a manner that reduces the 
     amount of coverage so required.
       ``(2) Requirement for coverage of immunizations and well-
     child services.--A State program under this section does not 
     comply with the requirements of this section unless the State 
     certifies to the Secretary that State has in effect a law 
     that requires (and allows enforcement through private rights 
     of action) health insurance policies or plans issued or 
     renewed on or after January 1, 1995, to provide coverage for 
     the following services without deductible, coinsurance, or 
     any other form of cost-sharing:
       ``(A) All vaccines on the list described in subsection (e).
       ``(B) Well-child services (including the administration of 
     vaccines referred to in subparagraph (A)) for children 6 
     years of age or younger, as determined by the Secretary after 
     consultation with recognized medical organizations involved 
     in child health care.''.
       (b) Effective Date.--(1) Except as provided in paragraph 
     (2), the amendment made by subsection (a) shall apply to 
     calendar quarters beginning on or after January 1, 1995.
       (2) In the case of a State plan for medical assistance 
     under title XIX of the Social Security Act which the 
     Secretary of Health and Human Services determines requires 
     State legislation (other than legislation appropriating 
     funds) in order for the plan to meet the additional 
     requirements imposed by the amendments made by subsection 
     (a), the State plan shall not be regarded as failing to 
     comply with the requirements of such title solely on the 
     basis of its failure to meet these additional requirements 
     before the first day of the first calendar quarter beginning 
     after the close of the first regular session of the State 
     legislature that begins after the date of the enactment of 
     this Act. For purposes of the previous sentence, in the case 
     of a State that has a 2-year legislative session, each year 
     of such session shall be deemed to be a separate regular 
     session of the State legislature.

     SEC. 8532. LIMITATION ON STATE ABILITY TO PURCHASE VACCINES 
                   AT FEDERAL PRICE.

       (a) In General.--Section 1928(d)(4)(B) (42 U.S.C. 
     1396s(d)(4)(B)) is amended by striking ``each State'' and 
     inserting ``each eligible State (as described in paragraph 
     (8))''.
       (b) States Eligible to Purchase at Federal Price 
     Described.--Section 1928(d) (42 U.S.C. 1396s(d)) is amended 
     by adding at the end the following new paragraph:
       ``(8) States eligible to purchase at federal price 
     described.--
       ``(A) In general.--A State is eligible for purposes of 
     paragraph (4)(B) if the State--
       ``(i)(I) is a universal purchase State (as defined in 
     subparagraph (B)), or
       ``(II) the State agrees that the vaccines obtained under 
     such paragraph will be used to provide immunizations only for 
     children who do not have private insurance coverage for all 
     the vaccines on the list described in subsection (e) without 
     deductible, coinsurance, or any other form of cost-sharing; 
     and
       ``(ii) does not have in operation a trust fund or similar 
     mechanism consisting of contributions from private entities 
     that provide health care or offer or sell health plans from 
     which amounts are used to purchase vaccines pursuant to 
     contracts of the Centers for Disease Control and Prevention 
     with vaccine manufacturers (unless such trust fund was in 
     operation as of July 1, 1994).
       ``(B) Universal purchase state defined.--
       ``(i) In general.--In paragraph (4)(B), the term `universal 
     purchase state' means any of the following:

       ``(I) A State which has in effect as of July 1, 1994, a 
     vaccine purchase program designed to assure immunization of 
     all children in the State with the vaccines specified in 
     subparagraph (C) without charge.
       ``(II) A State which advises the Centers for Disease 
     Control and Prevention as of July 20, 1994, of its intent to 
     provide the vaccines specified in subparagraph (C), and, by 
     October 1, 1994, provides the vaccines in volumes necessary 
     to assure immunization of all children in the State, pursuant 
     to contracts of the Centers for Disease Control and 
     Prevention with vaccine manufacturers with effective dates on 
     or before October 1, 1994.
       ``(III) A State which manufacturers any of the vaccines 
     specified in clause (ii).

       ``(C) Vaccines specified.--The vaccines specified in this 
     subparagraph are as follows: diphtheria, pertussis, tetanus, 
     oral polio, measles, mumps, and rubella.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to quarters beginning on or after January 1, 
     1995.

    PART 5--TREATMENT OF INDIANS AND INDIAN HEALTH SERVICE PROVIDERS

     SEC. 8541. NONDISCRIMINATION IN PARTICIPATION PROVIDERS.

       Section 1911(a) (42 U.S.C. 1396j(a)) is amended by striking 
     the period at the end and inserting the following: ``, 
     without regard to whether or not the facility furnishes all 
     medical assistance covered under the State plan.''.

     SEC. 8542. REQUIRING INDIVIDUALS SUBJECT TO WAIVERS TO HAVE 
                   OPTION TO ENROLL IN INDIAN HEALTH SERVICE 
                   PLANS.

       (a) 1115 Waivers.--Section 1115 (42 U.S.C. 1315) is amended 
     by adding at the end the following new subsection:
       ``(e)(1) A State with a waiver granted under subsection (a) 
     with respect to title XIX may not prohibit any individual 
     eligible under the State plan under such title from receiving 
     services pursuant to the waiver at a facility described in 
     paragraph (2), and may not refuse to make payment under the 
     State plan for medical assistance provided to such an 
     individual at such a facility.
       ``(2) A facility described in this paragraph is a facility 
     described in section 1911(a), or an urban Indian organization 
     receiving funds under title V of the Indian Health Care 
     Improvement Act.''.
       (b) 1915 Waivers.--Section 1915(c) (42 U.S.C. 1396n(c)) is 
     amended by adding at the end the following: ``No waiver under 
     this subsection may prohibit any individual from receiving 
     services pursuant to the waiver at a facility described in 
     section 1911(a), or an urban Indian organization receiving 
     funds under title V of the Indian Health Care Improvement 
     Act.''.

     SEC. 8543. TREATMENT OF OUTPATIENT FACILITIES AS FEDERALLY 
                   QUALIFIED HEALTH CENTERS.

       (a) In General.--Section 1905(l)(2)(B) (42 U.S.C. 
     1396d(l)(2)(B)) is amended in the matter following clause 
     (iv) by inserting ``the Indian Health Service or'' after 
     ``operated by''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to quarters beginning on or after July 1, 1995.

                  PART 6--EFFECTIVE DATE OF AMENDMENTS

     SEC. 8551. AMENDMENTS EFFECTIVE WITHOUT REGARD TO ISSUANCE OF 
                   REGULATIONS.

       (a) In General.--Except as otherwise provided, the 
     amendments made by this subtitle shall take effect on the 
     date of the enactment of this Act.
       (b) Issuance of Regulations Not Required.--Each amendment 
     made by this subtitle shall take effect on the effective date 
     provided for such amendment, without regard to whether or not 
     final regulations to carry out the amendment have been issued 
     by such effective date.
      Subtitle G--Miscellaneous and Technical Medicaid Amendments

                     table of contents of subtitle

      Subtitle G--Miscellaneous and Technical Medicaid Amendments

                     Part 1--Substantive Provisions


                   SUBPART A--MANAGED CARE PROVISIONS

Sec. 8601. Medicaid managed care antifraud provisions.
Sec. 8602. Extension of medicaid waiver for Tennessee Primary Care 
              Network.
Sec. 8603. Waiver of application of medicaid enrollment mix requirement 
              to District of Columbia Chartered Health Plan, Inc.
Sec. 8604. Waiver of application of medicaid enrollment mix requirement 
              to Managed Health Services Insurance Corporation of 
              Milwaukee, Wisconsin.
Sec. 8605. Extension of Minnesota prepaid medicaid demonstration 
              project.


     SUBPART B--HOME AND COMMUNITY-BASED SERVICES WAIVER PROVISIONS

Sec. 8611. Elimination of requirement of prior institutionalization 
              with respect to habilitation services furnished under a 
              waiver for home or community-based services.
Sec. 8612. Relief from third party liability requirements when cost-
              effective.
Sec. 8613. State expenditures for medical assistance with respect to 
              home and community-based services provided under a 
              waiver.


                      SUBPART C--OTHER PROVISIONS

Sec. 8621. Presumptive eligibility for pregnant women.
Sec. 8622. Criteria for determining the amount of disallowances.
Sec. 8623. Intermediate sanctions for kickback violations.
Sec. 8624. Technical amendment related to taxes on certain health care 
              items and services.
Sec. 8625. Application of mammography certification requirements under 
              the medicaid program.
Sec. 8626. Nursing home reform.
Sec. 8627. Increase in authorization of appropriations for the maternal 
              and child health services block grant program.

 Part 2--Miscellaneous and Technical Corrections Relating to Obra-1990

Sec. 8641. Effective date.
Sec. 8642. Corrections relating to section 4401 (drug rebate program).
Sec. 8643. Corrections relating to section 4402 (enrollment under group 
              health plans).
Sec. 8644. Corrections relating to section 4501 (low-income medicare 
              beneficiaries).
Sec. 8645. Corrections relating to section 4601 (child health).
Sec. 8646. Corrections relating to section 4602 (outreach locations).
Sec. 8647. Corrections relating to section 4604 (payment for hospital 
              services for children under 6 years of age).
Sec. 8648. Corrections relating to section 4703 (payment adjustments 
              for disproportionate share hospitals).
Sec. 8649. Corrections relating to section 4704 (federally-qualified 
              health centers).
Sec. 8650. Corrections relating to section 4708 (substitute 
              physicians).
Sec. 8651. Corrections relating to section 4711 (home and community 
              care for frail elderly).
Sec. 8652. Corrections relating to section 4712 (community supported 
              living arrangements).
Sec. 8653. Correction relating to section 4713 (cobra continuation 
              coverage).
Sec. 8654. Correction relating to section 4716 (medicaid transition for 
              family assistance).
Sec. 8655. Corrections relating to section 4718 (medically needy income 
              levels for certain 1-member families).
Sec. 8656. Corrections relating to section 4723 (medicaid spend-down 
              option).
Sec. 8657. Corrections relating to section 4724 (optional State 
              disability determinations).
Sec. 8658. Correction relating to section 4732 (special rules for 
              health maintenance organizations).
Sec. 8659. Corrections relating to section 4747 (coverage of HIV-
              positive individuals).
Sec. 8660. Correction relating to section 4751 (advanced directives).
Sec. 8661. Corrections relating to section 4752 (physicians' services).
Sec. 8662. Corrections relating to section 4801 (nursing home reform).
Sec. 8663. Other technical corrections.

 Part 3--Miscellaneous and Technical Corrections Relating to Obra-1993

Sec. 8671. Effective date.
Sec. 8672. Corrections relating to section 13601 (personal care 
              services).
Sec. 8673. Corrections relating to section 13604 (emergency services 
              for aliens).
Sec. 8674. Corrections relating to section 13611 (transfers of assets; 
              treatment of certain trusts).
Sec. 8675. Corrections relating to section 13612 (medicaid estate 
              recoveries).
Sec. 8676. Corrections relating to section 13622 (liability of third 
              parties to pay for care and services).
Sec. 8677. Corrections relating to section 13623 (medical child 
              support).
Sec. 8678. Corrections relating to section 13624 (physician referrals).
Sec. 8679. Corrections relating to section 13631 (medicaid pediatric 
              immunization provisions).
Sec. 8680. Corrections relating to section 13643 (demonstration 
              projects).

                     PART 1--SUBSTANTIVE PROVISIONS

                   Subpart A--Managed Care Provisions

     SEC. 8601. MEDICAID MANAGED CARE ANTIFRAUD PROVISIONS.

       (a) Prohibiting Affiliations With Individuals Debarred by 
     Federal Agencies.--
       (1) In general.--Section 1903(m) (42 U.S.C. 1396b(m)) is 
     amended--
       (A) in paragraph (2)(A)--
       (i) by striking ``and'' at the end of clause (x),
       (ii) by striking the period at the end of clause (xi) and 
     inserting ``; and'', and
       (iii) by adding at the end the following new clause:
       ``(xii) the entity complies with the requirements of 
     paragraph (3) (relating to certain protections against fraud 
     and abuse).'';
       (B) in paragraph (2)(B), as amended by section 8649, by 
     striking ``clause (ix)'' and inserting ``clauses (ix) and 
     (xii)''; and
       (C) by inserting after paragraph (2) the following new 
     paragraph:
       ``(3)(A)(i) An entity with a contract under this subsection 
     may not have a person described in clause (iv) as a director, 
     officer, partner, or person with beneficial ownership of more 
     than 5 percent of the entity's equity.
       ``(ii) An entity with a contract under this subsection may 
     not have an employment, consulting, or other agreement with a 
     person described in clause (iv) for the provision of goods 
     and services that are significant and material to the 
     entity's obligations under its contract with the State 
     described in paragraph (2)(A)(iii).
       ``(iii) If an entity with a contract under this subsection 
     is not in compliance with clause (i) or (ii)--
       ``(I) a State may continue an existing agreement with the 
     entity unless the Secretary (in consultation with the 
     Inspector General of the Department of Health and Human 
     Services) directs otherwise; and
       ``(II) a State may not renew or otherwise extend the 
     duration of an existing agreement with the entity unless the 
     State provides a written statement to the Secretary 
     describing compelling reasons that exist for renewing or 
     extending the agreement and the Secretary (in consultation 
     with the Inspector General of the Department of Health and 
     Human Services) approves such statement.
       ``(iv) A person described in this clause is a person that--
       ``(I) is debarred or suspended by the Federal Government, 
     pursuant to the Federal acquisition regulation, from 
     Government contracting and subcontracting, or
       ``(II) is an affiliate (within the meaning of the Federal 
     acquisition regulation) of a person described in subclause 
     (I).''.
       (2) Effective date.--The amendments made by paragraph (1) 
     shall apply to agreements between a State and an entity under 
     section 1903(m) of the Social Security Act entered into or 
     renewed on or after January 1, 1994, without regard to 
     whether regulations to carry out such amendments are 
     promulgated by such date.
       (b) Requirement for State Conflict-Of-Interest Safeguards 
     in Medicaid Risk Contracting.--
       (1) In general.--Section 1903(m)(2)(A) (42 U.S.C. 
     1396b(m)(2)(A)), as amended by subsection (a)(1)(A), is 
     amended--
       (A) by striking ``and'' at the end of clause (xi),
       (B) by striking the period at the end of clause (xii) and 
     inserting ``; and'', and
       (C) by adding at the end the following new clause:
       ``(xiii) the State certifies to the Secretary and the 
     Secretary finds that the State has in effect conflict-of-
     interest safeguards with respect to officers and employees of 
     the State who have responsibilities with respect to contracts 
     with organizations under this subsection that are at least as 
     effective as the Federal conflicts-of-interest safeguards 
     provided under section 27 of the Office of Federal 
     Procurement Policy Act that apply with respect to Federal 
     procurement officials who have comparable responsibilities 
     with respect to such contracts.''.
       (2) Effective date.--The amendments made by paragraph (1) 
     shall apply as of July 1, 1994, without regard to whether 
     regulations to carry out such amendments are promulgated by 
     such date.
       (c) Requiring Disclosure of Financial Information.--
       (1) In general.--Section 1903(m)(3), as inserted by 
     subsection (a)(1)(C), is amended by adding at the end the 
     following new subparagraph:
       ``(B) The contract between the State and an entity referred 
     to in paragraph (2)(A)(iii) shall provide that--
       ``(i) the entity agrees to report to the State such 
     financial information as the Secretary or the State may 
     require to demonstrate that the entity has a fiscally sound 
     operation; and
       ``(ii) the entity agrees to make available to its enrollees 
     upon reasonable request--
       ``(I) the information reported under clause (i),
       ``(II) the information required to be disclosed under 
     sections 1124 and 1126, and
       ``(III) a description of each transaction, described in 
     subparagraphs (A) through (C) of section 1318(a)(3) of the 
     Public Health Service Act, between the entity and a party in 
     interest (as defined in section 1318(b) of such Act).''.
       (2) Effective date.--The amendment made by paragraph (1) 
     shall apply to contract years beginning on or after April 1, 
     1994, without regard to whether regulations to carry out such 
     amendments are promulgated by such date, with respect to 
     information reported or required to be disclosed, or 
     transactions occurring, before, on, or after such date.
       (d) Prohibiting Marketing Fraud.--
       (1) In general.--Section 1903(m)(3), as inserted by 
     subsection (a)(1) and as amended by subsection (c)(1), is 
     amended by adding at the end the following new subparagraph:
       ``(C) The contract between the State and an entity referred 
     to in paragraph (2)(A)(iii) shall provide that the entity 
     agrees to comply with such procedures and conditions as the 
     Secretary prescribes in order to ensure that, before an 
     individual is enrolled or reenrolled with the entity, the 
     individual is provided accurate and sufficient information to 
     make an informed decision whether or not to enroll or 
     reenroll.''.
       (2) Effective date.--The amendment made by paragraph (1) 
     shall apply to contract years that begin on or after April 1, 
     1994.
       (e) Requiring Adequate Provision Against Risk of 
     Insolvency.--
       (1) In general.--Section 1903(m)(1)(A)(ii) (42 U.S.C. 
     1396b(m)(1)(A)(ii)) is amended by inserting ``, which meets 
     such standards as the Secretary shall prescribe,'' after 
     ``satisfactory to the State''.
       (2) Effective date.--The amendment made by paragraph (1) 
     shall apply to contract years beginning on or after January 
     1, 1995.
       (f) Requiring Report on Net Earnings and Additional 
     Benefits.--
       (1) In general.--Section 1903(m)(3), as inserted by 
     subsection (a)(1) and as amended by subsections (c)(1) and 
     (d)(1) is amended by adding at the end the following new 
     subparagraph:
       ``(D) The contract between the State and an entity referred 
     to in paragraph (2)(A)(iii) shall provide that the entity 
     shall submit a report to the State and the Secretary not 
     later than 12 months after the close of a contract year 
     containing--
       ``(i) a financial statement of the entity's net earnings 
     under the contract during the contract year, which statement 
     has been audited using generally accepted auditing standards;
       ``(ii) a description of any benefits that are in addition 
     to the benefits required to be provided under the contract 
     that were provided during the contract year to members 
     enrolled with the entity and entitled to medical assistance 
     under the plan; and
       ``(iii) such other information as the Secretary may 
     prescribe.''.
       (2) Effective date.--The amendment made by paragraph (1) 
     shall apply to contract years beginning on or after January 
     1, 1994.

     SEC. 8602. EXTENSION OF MEDICAID WAIVER FOR TENNESSEE PRIMARY 
                   CARE NETWORK.

       Section 6411(f) of OBRA-1989, as amended by section 1 of 
     Public Law 102-317, is amended by striking ``January 31, 
     1994'' and inserting ``December 31, 1995''.

     SEC. 8603. WAIVER OF APPLICATION OF MEDICAID ENROLLMENT MIX 
                   REQUIREMENT TO DISTRICT OF COLUMBIA CHARTERED 
                   HEALTH PLAN, INC.

       (a) In General.--The Secretary of Health and Human Services 
     shall waive the application of the requirement described in 
     section 1903(m)(2)(A)(ii) of the Social Security Act (42 
     U.S.C. 1396b(m)(2)(A)(ii)) to the entity known as the 
     District of Columbia Chartered Health Plan, Inc., for the 
     period described in subsection (b), if the Secretary 
     determines that the entity is making continuous efforts and 
     progress toward achieving compliance with such requirement.
       (b) Period of Applicability.--The period referred to in 
     subsection (a) is the period that begins on October 1, 1992, 
     and ends on December 31, 1995.

     SEC. 8604. WAIVER OF APPLICATION OF MEDICAID ENROLLMENT MIX 
                   REQUIREMENT TO MANAGED HEALTH SERVICES 
                   INSURANCE CORPORATION OF MILWAUKEE, WISCONSIN.

       The Secretary of Health and Human Services shall waive the 
     application of the requirement described in section 
     1903(m)(2)(A)(ii) of the Social Security Act (42 U.S.C. 
     1396b(m)(2)(A)(ii)) to the entity known as the Managed Health 
     Services Insurance Corporation of Milwaukee, Wisconsin until 
     December 31, 1995, if the Secretary determines that the 
     entity is making continuous efforts and progress toward 
     achieving compliance with such requirement.

     SEC. 8605. EXTENSION OF MINNESOTA PREPAID MEDICAID 
                   DEMONSTRATION PROJECT.

       (a) In General.--Section 507 of the Family Support Act of 
     1988 (Public Law 100-485), as amended by section 6411(j) of 
     OBRA-1989 and by section 4733 of OBRA-1990, is amended by 
     striking ``1996'' and inserting ``1998''.
       (b) Authority To Impose Premium.--
       (1) In general.--Notwithstanding section 1916 of the Social 
     Security Act and subject to paragraph (2), the State of 
     Minnesota may impose a premium on individuals receiving 
     medical assistance under the Minnesota Prepaid Demonstration 
     Project operated under a waiver granted by the Secretary of 
     Health and Human Services under section 1115(a) of the Social 
     Security Act and other individuals eligible under the State's 
     plan for medical assistance under title XIX of such Act.
       (2) Limitation on amount of premium.--In no case may the 
     amount of any premium imposed on an individual receiving 
     medical assistance under the State plan or under the 
     Demonstration Project described in paragraph (1) exceed 10 
     percent of the amount by which the family income (less 
     expenses for the care of a dependent child) of the individual 
     exceeds 110 percent of the income official poverty line (as 
     defined by the Office of Management and Budget, and revised 
     annually in accordance with section 673(2) of the Omnibus 
     Budget Reconciliation Act of 1981) applicable to a family of 
     the size involved.

     Subpart B--Home and Community-Based Services Waiver Provisions

     SEC. 8611. ELIMINATION OF REQUIREMENT OF PRIOR 
                   INSTITUTIONALIZATION WITH RESPECT TO 
                   HABILITATION SERVICES FURNISHED UNDER A WAIVER 
                   FOR HOME OR COMMUNITY-BASED SERVICES.

       (a) In General.--Section 1915(c)(5) (42 U.S.C. 1396n(c)(5)) 
     is amended in the matter preceding subparagraph (A) by 
     striking ``, with respect to individuals who receive such 
     services after discharge from a nursing facility or 
     intermediate care facility for the mentally retarded''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to services furnished on or after January 1, 
     1994.

     SEC. 8612. RELIEF FROM THIRD PARTY LIABILITY REQUIREMENTS 
                   WHEN COST-EFFECTIVE.

       (a) In General.--Section 1902(a)(25)(B) (42 U.S.C. 
     1396a(a)(25)(B)) is amended to read as follows--
       ``(B) that in any case where such a legal liability is 
     found to exist after medical assistance has been made 
     available, the State or local agency will seek reimbursement 
     for such assistance to the extent of such legal liability, 
     unless--
       ``(i) the amount of reimbursement the State can reasonably 
     expect to recover for medical assistance furnished to an 
     individual does not exceed the costs of such recovery, or
       ``(ii) with respect to case management services (as defined 
     in section 1915(g)(2)), the State demonstrates to the 
     satisfaction of the Secretary that it is not cost-effective 
     in the aggregate to seek such recovery with respect to such 
     services furnished to individuals covered under the State 
     plan, using methods specified by the Secretary which may 
     include a demonstration that such services are not generally 
     covered by health insurers in the State;''.
       (b) Effective Date.--The amendments made by this section 
     shall become effective on January 1, 1994.

     SEC. 8613. STATE EXPENDITURES FOR MEDICAL ASSISTANCE WITH 
                   RESPECT TO HOME AND COMMUNITY-BASED SERVICES 
                   PROVIDED UNDER A WAIVER.

       (a) In General.--Section 1915(d)(5)(B) (42 U.S.C. 
     1396n(d)(5)(B)) is amended--
       (1) in clause (i), by striking ``times the number of 
     years'' and inserting ``compounded annually for years'';
       (2) in clause (ii), by striking ``times the number of 
     years'' and inserting ``compounded annually for years''; and
       (3) in clause (iv), by striking ``December 22, 1987'' and 
     inserting ``the date of the enactment of the Omnibus Budget 
     Reconciliation Act of 1986''.
       (b) Effective Date.--The amendments made by subsection (a) 
     shall be effective as if included in the enactment of OBRA-
     1987.

                      Subpart C--Other Provisions

     SEC. 8621. PRESUMPTIVE ELIGIBILITY FOR PREGNANT WOMEN.

       (a) Qualified Provider.--Section 1920(b)(2) (42 U.S.C. 
     1396r-1(b)(2)) is amended to read as follows:
       ``(2) the term `qualified provider' means--
       ``(A) any provider that--
       ``(i) is eligible for payments under a State plan approved 
     under this title;
       ``(ii) provides services of the type described in 
     subparagraph (A) or (B) of section 1905(a)(2) or in section 
     1905(a)(9);
       ``(iii) is determined by the State agency to be capable of 
     making determinations of the type described in paragraph 
     (1)(A); and
       ``(iv)(I) receives funds under section 329, 330, 340, or 
     340A of the Public Health Service Act, title V of this Act, 
     or title V of the Indian Health Care Improvement Act;
       ``(II) participates in a program established under section 
     17 of the Child Nutrition Act of 1966 or section 4(a) of the 
     Agriculture and Consumer Protection Act of 1973;
       ``(III) participates in a State perinatal program; or
       ``(IV) is the Indian Health Service or is a health program 
     or facility operated by a tribe or tribal organization under 
     the Indian Self-Determination Act (Public Law 93-638); and
       ``(B) at the option of the State, any individual who is 
     employed by the State and who is determined by the State 
     agency to be capable of making determinations of the type 
     described in paragraph (1)(A).''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to payments under title XIX of the Social 
     Security Act for calendar quarters beginning on or after 
     January 1, 1994.

     SEC. 8622. CRITERIA FOR DETERMINING THE AMOUNT OF 
                   DISALLOWANCES.

       (a) In General.--
       (1) Criteria for initial determinations.--Section 1903 (42 
     U.S.C. 1396b) is amended by adding at the end the following 
     new subsection:
       ``(x) If the Secretary determines that a disallowance of 
     Federal financial participation should be made under this 
     title with respect to any item or class of items, the 
     Secretary shall, in making a determination with respect to 
     the amount of such disallowance, take into account (to the 
     extent the State makes a showing) factors which shall 
     include--
       ``(1) whether the amount of the disallowance is reasonably 
     related to the act or omission by the State which is the 
     basis for the disallowance; and
       ``(2) whether the act or omission by the State which is the 
     basis for the disallowance was based on a reasonable 
     interpretation of Federal statutes, Federal regulations, or 
     any written guidance provided by the Secretary.''.
       (2) Criteria for redeterminations.--Section 1116(d) (42 
     U.S.C. 1316(d)) is amended--
       (A) by striking ``(d)'' and inserting ``(d)(1)''; and
       (B) by adding at the end the following new paragraph:
       ``(2) In conducting any reconsideration of a disallowance 
     of Federal financial participation by the Secretary under 
     title XIX, the Departmental Appeals Board of the Department 
     of Health and Human Services (or another entity designated by 
     the Secretary), shall, if such Board or entity upholds the 
     basis for the disallowance, determine whether the amount of 
     the disallowance properly takes into account the factors 
     listed in section 1903(x). If the amount of the disallowance 
     does not properly take into account such factors, the Board 
     shall adjust such amount in accordance with such factors.''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to disallowances made after the date of the 
     enactment of this Act and shall take effect without regard to 
     the promulgation of implementing regulations.

     SEC. 8623. INTERMEDIATE SANCTIONS FOR KICKBACK VIOLATIONS.

       (a) Penalty for Kickback Violations.--Section 1128A(a) (42 
     U.S.C. 1320a-7a(a)) is amended--
       (1) by striking ``or'' at the end of paragraphs (1) and 
     (2);
       (2) by adding ``or'' at the end of paragraph (3);
       (3) by inserting after paragraph (3) the following new 
     paragraph:
       ``(4) carries out any activity in violation of paragraph 
     (1) or (2) of section 1128B(b) with respect to remuneration 
     relating to a State health care program;'';
       (4) by striking ``given).'' at the end of the first 
     sentence and inserting ``given or, in cases under paragraph 
     (4), $10,000 for each such violation).'';
       (5) in the second sentence, by inserting ``in cases under 
     paragraphs (1), (2), and (3),'' after ``In addition,''; and
       (6) by inserting after the second sentence the following 
     new sentence: ``In cases under paragraph (4), such a person 
     shall be subject to an assessment of not more than twice the 
     total amount of the remuneration offered, paid, solicited, or 
     received in violation of section 1128B(b), determined without 
     regard to whether a portion of such remuneration was offered, 
     paid, solicited, or received for a lawful purpose.''.
       (b) Authorization to Act.--The first sentence of section 
     1128A(c)(1) (42 U.S.C. 1320a-7a(c)(1)) is amended by striking 
     the period at the end and inserting ``, except that with 
     respect to a proceeding relating to a State health program, 
     the Secretary may initiate such a proceeding at such time and 
     under such procedures as the Secretary determines appropriate 
     unless, within 1 year after the date the Secretary presents a 
     case to the Attorney General for consideration, the Attorney 
     General brings an action in a district court of the United 
     States.''.
       (c) Effective Dates.--
       (1) The amendments made by subsection (a) shall apply to 
     remuneration offered, paid, solicited, or received before, 
     on, or after the date of the enactment of this Act.
       (2) The amendment made by subsection (b) shall apply to 
     cases presented by the Secretary of Health and Human Services 
     for consideration on or after the date of the enactment of 
     this Act.

     SEC. 8624. TECHNICAL AMENDMENT RELATED TO TAXES ON CERTAIN 
                   HEALTH CARE ITEMS AND SERVICES.

       (a) In General.--Section 1903(w)(7)(A)(viii) (42 U.S.C. 
     1396b(w)(7)(A)(viii)) is amended by striking the period at 
     the end and inserting ``not otherwise subject to a tax 
     described in this subsection.''.
       (b) Effective Date.--(1) Except as provided in paragraph 
     (2), the amendment made by subsection (a) shall be effective 
     January 1, 1994.
       (2) In the case of a State which the Secretary of Health 
     and Human Services determines requires State legislation in 
     order to avoid a reduction in Federal financial participation 
     under section 1903(a) of the Social Security Act as a result 
     of the amendment made by subsection (a), the State shall not 
     be subject to such a reduction before the first day of the 
     first calendar quarter beginning after the close of the first 
     regular session of the State legislature that begins after 
     the date of the enactment of this Act. For purposes of the 
     preceding sentence, in the case of a State that has a 2-year 
     legislative session, each year of such session shall be 
     deemed to be a separate regular session of the State 
     legislature.

     SEC. 8625. APPLICATION OF MAMMOGRAPHY CERTIFICATION 
                   REQUIREMENTS UNDER THE MEDICAID PROGRAM.

       (a) In General.--Section 1902(a)(9) (42 U.S.C. 1396a(a)(9)) 
     is amended--
       (1) by striking ``and'' at the end of subparagraph (B),
       (2) by striking the semicolon at the end of subparagraph 
     (C) and inserting ``, and'', and
       (3) by adding at the end the following new subparagraph:
       ``(D) that any mammography paid for under such plan must be 
     conducted by a facility that has a certificate (or 
     provisional certificate) issued under section 354 of the 
     Public Health Service Act;''.
       (b) Effective Date.--(1) Except as provided in paragraph 
     (2), the amendments made by subsection (a) shall apply to 
     mammography furnished by a facility during calendar quarters 
     beginning on or after the first date that the certificate 
     requirements of section 354(b) of the Public Health Service 
     Act apply to such mammography conducted by such facility, 
     without regard to whether or not final regulations to carry 
     out such amendments have been promulgated by such date.
       (2) In the case of a State plan for medical assistance 
     under title XIX of the Social Security Act which the 
     Secretary of Health and Human Services determines requires 
     State legislation (other than legislation appropriating 
     funds) in order for the plan to meet the additional 
     requirement imposed by the amendment made by subsection 
     (a)(3), the State plan shall not be regarded as failing to 
     comply with the requirements of such title solely on the 
     basis of its failure to meet this additional requirement 
     before the first day of the first calendar quarter beginning 
     after the close of the first regular session of the State 
     legislature that begins after the date of the enactment of 
     this Act. For purposes of the preceding sentence, in the case 
     of a State that has a 2-year legislative session, each year 
     of such session shall be deemed to be a separate regular 
     session of the State legislature.

     SEC. 8626. NURSING HOME REFORM.

       (a) Suspension of Decertification of Nurse Aide Training 
     and Competency Evaluation Programs Based on Extended 
     Surveys.--
       (1) In general.--Section 1919(f)(2)(B)(iii)(I)(b) (42 
     U.S.C. 1396r(f)(2)(B)(iii)(I)(b)) is amended by striking the 
     semicolon and inserting the following: ``, unless the survey 
     shows that the facility is in compliance with the 
     requirements of subsections (b), (c), and (d) of this 
     section;''.
       (2) Effective date.--The amendment made by paragraph (1) 
     shall take effect as if included in the enactment of OBRA-
     1990.
       (b) Requirements for Consultants Conducting Reviews on Use 
     of Drugs.--
       (1) In general.--Section 1919(c)(1)(D) (42 U.S.C. 
     1396r(c)(1)(D)) is amended by adding at the end the following 
     sentence: ``In determining whether such a consultant is 
     qualified to conduct reviews under the preceding sentence, 
     the Secretary shall take into account the needs of nursing 
     facilities under this title to have access to the services of 
     such a consultant on a timely basis.''.
       (2) Effective date.--The amendment made by paragraph (1) 
     shall take effect as if included in the enactment of OBRA-
     1987.
       (c) Increase in Minimum Amount Required for Separate 
     Deposit of Personal Funds.--
       (1) In general.--Section 1919(c)(6)(B)(i) (42 U.S.C. 
     1396r(c)(6)(B)(i)) is amended by striking ``$50'' and 
     inserting ``$100''.
       (2) Effective date.--The amendment made by paragraph (1) 
     shall take effect January 1, 1994.
       (d) Due Process Protections for Nurse Aides.--
       (1) Prohibiting state from including undocumented 
     allegations in nurse aide registry.--Section 1919(e)(2)(B) 
     (42 U.S.C. 1396r(e)(2)(B)) is amended by striking the period 
     at the end of the first sentence and inserting the following: 
     ``, but shall not include any allegations of resident abuse 
     or neglect or misappropriation of resident property that are 
     not specifically documented by the State under such 
     subsection.''.
       (2) Due process requirements for rebutting allegations.--
     Section 1919(g)(1)(C) (42 U.S.C. 1396r(g)(1)(C)) is amended 
     by striking the second sentence and inserting the following: 
     ``The State shall, after providing the individual involved 
     with a written notice of the allegations (including a 
     statement of the availability of a hearing for the individual 
     to rebut the allegations) and the opportunity for a hearing 
     on the record, make a written finding as to the accuracy of 
     the allegations.''.
       (3) Effective date.--The amendments made by this subsection 
     shall take effect January 1, 1994.

     SEC. 8627. INCREASE IN AUTHORIZATION OF APPROPRIATIONS FOR 
                   THE MATERNAL AND CHILD HEALTH SERVICES BLOCK 
                   GRANT PROGRAM.

       Section 501(a) (42 U.S.C. 701(a)) is amended by striking 
     ``$686,000,000 for fiscal year 1990'' and inserting 
     ``$705,000,000 for fiscal year 1994''.

 PART 2--MISCELLANEOUS AND TECHNICAL CORRECTIONS RELATING TO OBRA-1990

     SEC. 8641. EFFECTIVE DATE.

       Except as otherwise provided, the amendments made by this 
     part shall take effect as if included in the enactment of 
     OBRA-1990.

     SEC. 8642. CORRECTIONS RELATING TO SECTION 4401 (DRUG REBATE 
                   PROGRAM).

       (a) Section 1927.--(1) Section 1927(a) (42 U.S.C. 1396r-
     8(a)), as inserted by section 4401(a)(3) of OBRA-1990, is 
     amended--
       (A) in paragraph (1)--
       (i) by amending the second sentence to read as follows: 
     ``Any such agreement entered into prior to May 1, 1991, shall 
     be deemed to have been entered into on January 1, 1991, and 
     the amount of the rebate to be paid by the manufacturer under 
     such agreement shall be calculated as if the agreement had 
     been entered into on January 1, 1991.'', and
       (ii) in the third sentence, by striking ``March'' and 
     inserting ``May'';
       (B) in paragraph (2)--
       (i) by striking ``first'', and
       (ii) by striking the period at the end and inserting the 
     following: ``, except that such paragraph (and section 
     1903(i)(10)(A)) shall not apply to drugs dispensed before May 
     1, 1991, if the Secretary determines that there were 
     extenuating circumstances with respect to the first calendar 
     quarter of 1991.'';
       (C) by amending paragraph (3) to read as follows:
       ``(3) Authorizing payment for drugs not covered under 
     rebate agreements.--Paragraph (1) and section 1903(i)(10) 
     shall not apply to the dispensing of a covered outpatient 
     drug if--
       ``(A) the State has made a determination that the 
     availability of such drug is essential to the health of 
     beneficiaries under the State plan;
       ``(B) the drug has been given a rating of 1-A or 1-P by the 
     Food and Drug Administration; and
       ``(C)(i) the physician has obtained approval for the use of 
     the drug in advance of dispensing such drug in accordance 
     with a prior authorization program described in subsection 
     (d)(5), or
       ``(ii) the Secretary has reviewed and approved the State's 
     determination under subparagraph (A).''; and
       (D) in paragraph (4)--
       (i) by striking ``In the case'' and inserting ``(A) In the 
     case'',
       (ii) by striking ``in compliance with'' and inserting ``in 
     effect under'',
       (iii) by striking ``such agreement provides for a minimum 
     aggregate rebate of 10 percent of the State's total 
     expenditures under the State plan for coverage of the 
     manufacturer's drugs under this title'' and inserting ``such 
     agreement provides for a minimum aggregate rebate of 10 
     percent of the sum of the amounts determined under 
     subparagraph (B) for all of the manufacturer's drugs paid for 
     by the State under the agreement'', and
       (iv) by adding at the end the following new subparagraph:
       ``(B) The amount determined under this subparagraph with 
     respect to a manufacturer's drug paid for by a State under an 
     agreement described in the first sentence of subparagraph (A) 
     is an amount equal to the product of--
       ``(i) the average manufacturer's price for such drug; and
       ``(ii) the number of dosage units of such drug paid for by 
     the State under such agreement.''.
       (2) Section 1927(b) (42 U.S.C. 1396r-8(b)), as inserted by 
     section 4401(a)(3) of OBRA-1990, is amended--
       (A) in paragraph (2)(A), by striking ``during'' and 
     inserting ``for'';
       (B) in paragraph (3)(A)--
       (i) in clause (i), by striking the open parenthesis before 
     ``for'' and the close parenthesis after ``drugs'',
       (ii) in clause (i), by striking ``subsection (c)(2)(B)) for 
     covered outpatient drugs'' and inserting ``subsection 
     (c)(1)(C)) for each covered outpatient drug'', and
       (iii) in clause (ii), by inserting a comma after ``this 
     section'' and after ``1990'';
       (C) in paragraph (3)(B)--
       (i) by striking ``$100,000'' and inserting ``$10,000'',
       (ii) by striking ``about charges or prices'', and
       (iii) by striking ``or knowingly provides false 
     information'';
       (D) in paragraph (3)(C)--
       (i) in clause (i)--
       (I) by striking ``increased by'', and
       (II) by striking ``, and, if'' and inserting ``. If'',
       (ii) in clause (ii), by striking ``under this section'' and 
     inserting ``under this section, or a wholesaler or direct 
     seller,'',
       (iii) in clause (ii), by inserting ``under subparagraph (A) 
     or (B)'' after ``provides false information'', and
       (iv) in clause (ii), by striking ``Such civil money 
     penalties are'' and inserting ``Any such civil money penalty 
     shall be'';
       (E) in paragraph (3)(D), by striking ``wholesaler,'' the 
     first time it appears and inserting ``wholesaler or the''; 
     and
       (F) in paragraph (4)(B)(i), by adding at the end the 
     following new sentence: ``Failure of a State to provide any 
     advance notice of such a termination as required by 
     regulation shall not affect the State's right to terminate 
     coverage of the drugs affected by such termination as of the 
     effective date of such termination.''.
       (3) Section 1927(d)(3) (42 U.S.C. 1396r-8(d)(3)), as 
     inserted by section 4401(a)(3) of OBRA-1990 and as amended by 
     section 13602 of OBRA-1993, is amended to read as follows:
       ``(3) Additions to drug listings.--The Secretary shall, by 
     regulation, periodically update the list of drugs or classes 
     of drugs described in paragraph (2), or their medical uses, 
     which the Secretary has determined to be subject to clinical 
     abuse or inappropriate use.''.
       (4) Section 1927(g) (42 U.S.C. 1396r-8(g)) is amended--
       (A) by amending paragraph (1) to read as follows:
       ``(1) Requirement for drug use review program.--Each State 
     shall provide, by not later than January 1, 1993, for a drug 
     use review program for covered outpatient drugs (other than 
     drugs dispensed to residents of nursing facilities) 
     consistent with standards established by the Secretary that--
       ``(i) meets the requirements of paragraph (2), and
       ``(ii) is intended to assure that prescriptions for such 
     drugs are appropriate, medically necessary, and not likely to 
     lead to adverse medical results.'';
       (B) in paragraph (2)--
       (i) by amending the matter before subparagraph (A) to read 
     as follows:
       ``(2) Requirements.--'',
       (ii) by amending subparagraph (A) to read as follows:
       ``(A) Prospective drug use review.--Each drug use review 
     program shall provide for a review of drug therapy before 
     each prescription is filled or delivered to an individual 
     receiving benefits under this title (including counseling by 
     pharmacists under standards established under applicable 
     State law). Nothing in this paragraph shall be construed as 
     requiring a pharmacist to provide consultation when an 
     individual receiving benefits under this title or caregiver 
     of such individual refuses such consultation.'',
       (iii) in subparagraph (C)--
       (I) by striking ``Application of standards.--'' and 
     inserting ``Standards.--(i)'',
       (II) by striking ``and literature referred to in subsection 
     (1)(B)'' and inserting ``described in clause (ii)'',
       (III) by striking ``including but not limited to'' and 
     inserting ``. Such assessment shall include'',
       (IV) by striking ``abuse/misuse and, as necessary, 
     introduce remedial strategies,'' and inserting ``abuse or 
     misuse and introduce remedial strategies'', and
       (V) by adding at the end the following new clause:
       ``(ii) The compendia described in this clause are the 
     American Hospital Formulary Service Drug Information, the 
     United States Pharmacopeia-Drug Information, and the American 
     Medical Association Drug Evaluations.'', and
       (iv) by amending subparagraph (D) to read as follows:
       ``(D) Educational program.--The program shall educate 
     (directly or by contract) pharmacists, physicians, and other 
     individuals prescribing or dispensing covered outpatient 
     drugs under the State plan on common drug therapy problems in 
     order to improve prescribing or dispensing practices.'';
       (C) in paragraph (3)--
       (i) in subparagraph (A), by striking ``(hereinafter'' and 
     all that follows and inserting ``(in this paragraph referred 
     to as the `DUR Board').'',
       (ii) in subparagraph (B), by striking ``51 percent'' and 
     all that follows and inserting ``50 percent licensed and 
     actively practicing physicians and at least 1/3 but not more 
     than 50 percent licensed and actively practicing 
     pharmacists.'',
       (iii) by amending subparagraph (C) to read as follows:
       ``(C) Responsibilities.--The responsibilities of the DUR 
     Board shall include the following:
       ``(i) Carrying out retrospective drug use review pursuant 
     to paragraph (2)(B).
       ``(ii) Establishing and applying standards for drug use 
     review described in paragraph (2)(C).
       ``(iii) Implementing educational programs described in 
     paragraph (2)(D).
       ``(iv) Conducting ongoing evaluations of the effectiveness 
     of its programs and activities in improving the quality and 
     safety of drug therapy for individuals receiving benefits 
     under the State plan.''; and
       (D) by amending subparagraph (D) to read as follows:
       ``(4) Annual report.--Each State shall submit a report each 
     year to the Secretary on the nature and scope of the drug use 
     review program under this subsection. Such report shall 
     include an estimate of cost savings resulting from operation 
     of such program.''.
       (5) Section 1927(h) (42 U.S.C. 1396r-8(h)) is amended to 
     read as follows:
       ``(h) Encouraging Electronic Claims Management.--The 
     Secretary shall encourage each single State agency under this 
     title to establish, as its principal means of processing 
     claims for covered outpatient drugs, a point-of-sale 
     electronic claims management system for the purpose of 
     verifying eligibility, transmitting data on claims, and 
     assisting pharmacists and other authorized persons in 
     applying for and receiving payment under the State plan.''.
       (6) Section 1927(i) (42 U.S.C. 1396r-8(i)) is amended to 
     read as follows:
       ``(i) Annual Report on Rebate Program.--Not later than May 
     1 of each year, the Secretary shall submit to the Committee 
     on Finance of the Senate, the Committee on Energy and 
     Commerce of the House of Representatives, and the Committee 
     on Aging of the Senate a report on the operation of the 
     rebate agreements required for covered outpatient drugs under 
     this section in the preceding fiscal year, and shall include 
     in the report such information in addition to the information 
     required to be reported under section 601(d) of the Veterans 
     Health Care Act of 1992 as the Secretary considers 
     appropriate.''.
       (7) Section 1927(j) (42 U.S.C. 1396r-8(j)), as inserted by 
     section 4401(a)(3) of OBRA-1990, is amended to read as 
     follows:
       ``(j) Exemption for Certain Health Maintenance 
     Organizations and Hospitals.--
       ``(1) In general.--Except as provided in paragraph (2), the 
     requirements of this section shall not apply with respect to 
     covered outpatient drugs dispensed by--
       ``(A) a health maintenance organization; or
       ``(B) a hospital that dispenses covered outpatient drugs 
     using a drug formulary system and bills the State no more 
     than the hospital's purchasing costs for covered outpatient 
     drugs.
       ``(2) Construction in determining best price.--Nothing in 
     paragraph (1) shall be construed as excluding amounts paid by 
     the entities described in such paragraph for covered 
     outpatient drugs from the determination of the best price (as 
     defined in subsection (c)(1)(C)) for such drugs.''.
       (8) Section 1927(k) (42 U.S.C. 1396r-8(k)), as inserted by 
     section 4401(a)(3) of OBRA-1990, is amended--
       (A) in paragraph (2)--
       (i) in the matter preceding clause (i) of subparagraph (A), 
     by striking ``paragraph (5)'' and inserting ``subparagraph 
     (D)'';
       (ii) in subparagraph (A)--
       (I) in clause (i), by striking ``for safety and 
     effectiveness'' and by striking ``or which is approved under 
     section 505(j) of such Act''; and
       (II) by striking ``and'' at the end;
       (iii) in subparagraph (B)--
       (I) in clause (i), by striking ``prescription,'' and 
     inserting ``prescription;'';
       (II) in clause (ii), by striking ``, and'' and inserting 
     ``; and''; and
       (III) by striking ``and'' at the end;
       (iv) by striking the period at the end of subparagraph (C) 
     and inserting ``; and''; and
       (v) by adding at the end the following new subparagraph:
       ``(D) a drug which may be sold without a prescription 
     (commonly referred to as an `over-the-counter drug'), if the 
     drug is prescribed by a physician (or other person authorized 
     to prescribe under State law).'';
       (B) in subparagraph (H) of paragraph (3), by inserting 
     ``services'' after ``dialysis'';
       (C) by striking paragraph (4) and redesignating paragraphs 
     (5), (6), (7), (8), and (9) as paragraphs (4), (5), (6), (7), 
     and (8), respectively;
       (D) by amending paragraph (4), as so redesignated, to read 
     as follows:
       ``(4) Manufacturer.--The term `manufacturer' means, with 
     respect to a covered outpatient drug, the entity holding 
     legal title to or possession of the National Drug Code number 
     for such drug.''; and
       (E) in paragraph (6), as so redesignated--
       (i) in subparagraph (A)(i), by striking ``paragraph (5)'' 
     and inserting ``paragraph (2)(D)'',
       (ii) in subparagraph (A)(ii), by inserting ``or product 
     licensing application'' after ``application'',
       (iii) in subparagraph (A)(iv), by inserting ``or product 
     licensing application'' after ``application'',
       (iv) in subparagraph (A)(iv), by striking ``distributers'' 
     and inserting ``distributors'',
       (v) in subparagraph (C)(i), by striking 
     ``pharmaceuutically'' and inserting ``pharmaceutically'', and
       (vi) in subparagraph (C)(iii), by striking ``, provided 
     that'' and inserting ``if''.
       (b) Section 1903.--
       (1) Enhanced match.--Section 1903(a) (42 U.S.C. 1396b(a)) 
     is amended--
       (A) by striking the period at the end of paragraph (7) and 
     inserting ``; plus''; and
       (B) by adding at the end the following new paragraph:
       ``(8) 75 per centum of so much of the sums expended under 
     the State plan during calendar years 1991 through 1993 as the 
     Secretary determines attributable to the statewide adoption 
     of a drug use review program which conforms to the 
     requirements of section 1927(g).''.
       (2) Conforming amendments.--Section 1903(a)(3) (42 U.S.C. 
     1396b(a)(3)) is amended--
       (A) by striking ``and'' at the end of subparagraph (C) and 
     inserting ``plus''; and
       (B) by striking subparagraph (D).
       (c) Funding.--Section 4401(b)(2) of OBRA-1990 is amended by 
     striking the semicolon and all that follows and inserting a 
     period.
       (d) Demonstration Projects.--Section 4401(c)(1) of OBRA-
     1990 is amended--
       (1) in subparagraph (A), by striking ``1992'' and inserting 
     ``1993'';
       (2) in subparagraph (A), by striking ``10'' and inserting 
     ``5'';
       (3) in subparagraph (C), by striking ``regiment'' and 
     inserting ``regimen''; and
       (4) in subparagraph (D), by striking ``1994'' and inserting 
     ``1995''.
       (e) Studies.--Section 4401(d) of OBRA-1990 is amended--
       (1) in paragraph (1)(A), by striking ``other institutional 
     facilities,'' and inserting ``nursing facilities, 
     intermediate care facilities for the mentally retarded,'';
       (2) in paragraph (1)(B), by striking ``under this 
     subsection'' and inserting ``under this paragraph'';
       (3) in paragraph (1)(B)(i), by striking ``under this 
     section'' and inserting ``under section 1927 of the Social 
     Security Act'';
       (4) in paragraph (1)(B)(ii)--
       (A) by striking ``drug use review'' the second time it 
     appears and inserting ``the type of drug use review that 
     is''; and
       (B) by striking ``under this section'' and inserting 
     ``under such section'';
       (5) in paragraph (1)(B)(iii), by striking ``under this 
     title'' and inserting ``under title XIX of the Social 
     Security Act'';
       (6) in paragraph (1)(C)--
       (A) by striking ``May 1, 1991'' and inserting ``May 1, 
     1992'', and
       (B) by striking ``Committees on Aging of the Senate and the 
     House of Representatives'' and inserting ``Committee on Aging 
     of the Senate'';
       (7) in paragraph (2)--
       (A) by striking ``By not later than May 1 of each year, the 
     Comptroller'' and inserting ``The Comptroller'';
       (B) by striking ``Committees on Aging of the Senate and 
     House of Representatives'' and inserting ``Committee on Aging 
     of the Senate'';
       (C) by striking ``an annual report'' and inserting ``a 
     report''; and
       (D) by striking ``retail and'';
       (8) in paragraph (3)--
       (A) in subparagraph (A), by striking ``, acting in 
     consultation with the Comptroller General,'',
       (B) by indenting subparagraph (B) an additional 2 ems;
       (C) in subparagraph (B), by striking ``December 31, 1991, 
     the Secretary and the Comptroller General'' and inserting 
     ``June 1, 1993, the Secretary''; and
       (D) by striking ``Committees on Aging of the Senate and the 
     House of Representatives'' and inserting ``Committee on Aging 
     of the Senate'';
       (9) in paragraph (4)--
       (A) in subparagraph (A), by striking ``each'' and by 
     striking the semicolon and inserting a comma;
       (B) in subparagraph (B), by striking ``December 31, 1991'' 
     and inserting ``January 1, 1993''; and
       (C) in subparagraph (B), by striking ``Committees on Aging 
     of the Senate and the House of Representatives'' and 
     inserting ``Committee on Aging of the Senate'';
       (10) in paragraph (5)--
       (A) by striking ``Secretary of Health and Human Services'' 
     and inserting ``Comptroller General'',
       (B) by striking ``under this title'' and inserting ``under 
     State medicaid programs'', and
       (C) by striking the second sentence and inserting the 
     following new sentence: ``The Comptroller General shall 
     report to the Congress on the study not later than January 1, 
     1993.''; and
       (11) by striking paragraph (6).

     SEC. 8643. CORRECTIONS RELATING TO SECTION 4402 (ENROLLMENT 
                   UNDER GROUP HEALTH PLANS).

       Section 4402(b) of OBRA-1990 is amended by striking 
     ``1903(u)(1)(C)(iv) (42 U.S.C. 1396b(u)(1)(C)(iv))'' and 
     inserting ``1903(u)(1)(D)(iv) (42 U.S.C. 
     1396b(u)(1)(D)(iv))''.

     SEC. 8644. CORRECTIONS RELATING TO SECTION 4501 (LOW-INCOME 
                   MEDICARE BENEFICIARIES).

       (a) Section 1902(a)(10)(E)(iii) (42 U.S.C. 
     1396a(a)(10)(E)(iii)), as added by section 4501(b)(3) of 
     OBRA-1990, is amended by striking ``cost sharing'' and 
     inserting ``cost-sharing''.
       (b) Section 1905(p)(4)(B) (42 U.S.C. 1396d(p)(4)(B)), as 
     amended by section 4501(c)(1) of OBRA-1990, is amended by 
     striking ``1902(a)(10)(E)(iii)'' and inserting ``section 
     1902(a)(10)(E)(iii)''.

     SEC. 8645. CORRECTIONS RELATING TO SECTION 4601 (CHILD 
                   HEALTH).

       (a) Section 1902(a)(10)(A)(i)(VII) (42 U.S.C. 
     1396a(a)(10)(A)(i)(VII)), as added by section 
     4601(a)(10)(A)(iii) of OBRA-1990, is amended by striking 
     ``family;'' and inserting ``family; and''.
       (b) Section 1902(l) (42 U.S.C. 1396a(l)), as amended by 
     section 4601(a)(1)(C) of OBRA-1990, is amended--
       (1) in paragraph (1)(C), by striking ``children'' after 
     ``(C)'';
       (2) in paragraph (3), by striking ``(a)(10)(A)(i)(VII),,'' 
     and inserting ``(a)(10)(A)(i)(VII),''; and
       (3) in paragraph (4)(B), by inserting a comma before 
     ``(a)(10)(A)(i)(VI),''.
       (c) Section 1925 (42 U.S.C. 1396r-6), as amended by section 
     4601(a) of OBRA-1990, is amended--
       (1) in subsection (a)(3)(C), by striking ``(i)(VI)'' and 
     inserting ``(i)(VI),'', and
       (2) in subsection (b)(3)(C)(i), by striking ``(i)(IV) 
     (i)(VI) (i)(VII), ,'' and inserting ``(i)(IV), (i)(VI), 
     (i)(VII),''.

     SEC. 8646. CORRECTIONS RELATING TO SECTION 4602 (OUTREACH 
                   LOCATIONS).

       (a) Section 1902(a)(55) (42 U.S.C. 1396a(a)(55)), as added 
     by section 4602(a)(3) of OBRA-1990, is amended--
       (1) in the matter preceding subparagraph (A)--
       (A) by striking ``subsection'' and inserting ``paragraph'', 
     and
       (B) by striking ``(a)'' each place it appears; and
       (2) in subparagraph (A), by striking ``1905(1)(2)(B)'' and 
     inserting ``1905(l)(2)(B)''.
       (b) Section 1902(l)(1) (42 U.S.C. 1396a(l)(1)) is amended 
     by striking ``who are not described in any of subclauses (I) 
     through (III) of subsection (a)(10)(A)(i) and''.

     SEC. 8647. CORRECTIONS RELATING TO SECTION 4604 (PAYMENT FOR 
                   HOSPITAL SERVICES FOR CHILDREN UNDER 6 YEARS OF 
                   AGE).

       (a) Section 1902(a)(10) (42 U.S.C. 1396a(a)(10)) is amended 
     in clause (X) in the matter following subparagraph (F) by 
     striking ``under one year of age'' and inserting ``under 6 
     years of age''.
       (b) Section 1902(s) (42 U.S.C. 1396a(s)), as added by 
     section 4604(a) of OBRA-1990, is amended to read as follows:
       ``(s) In order to meet the requirements of subsection 
     (a)(56), the State plan must provide that payments to 
     hospitals under the plan for inpatient services furnished to 
     infants who have not attained the age of 1 year (or, in the 
     case of such an individual who is an inpatient on his first 
     birthday, until such individual is discharged) shall--
       ``(1) if made on a prospective basis (whether per diem, per 
     case, or otherwise), provide for an outlier adjustment in 
     payment amounts for medically necessary inpatient hospital 
     services involving exceptionally high costs or exceptionally 
     long lengths of stay;
       ``(2) not be limited by the imposition of day limits; and
       ``(3) not be limited by the imposition of dollar limits 
     (other than dollar limits resulting from prospective payments 
     as adjusted pursuant to paragraph (1)).''.
       (c) Section 1923(a)(2)(C) (42 U.S.C. 1396r-4(a)(2)(C)) is 
     amended by striking ``provided on or after July 1, 1989,'' 
     and all that follows and inserting the following: ``involving 
     exceptionally high costs or exceptionally long lengths of 
     stay--
       ``(i) for individuals under 1 year of age, in the case of 
     services provided on or after July 1, 1989, and on or before 
     June 30, 1991; and
       ``(ii) for individuals under 6 years of age, in the case of 
     services provided on or after July 1, 1991.''.

     SEC. 8648. CORRECTIONS RELATING TO SECTION 4703 (PAYMENT 
                   ADJUSTMENTS FOR DISPROPORTIONATE SHARE 
                   HOSPITALS).

       (a) Section 1923(c) (42 U.S.C. 1396r-4(c)) is amended--
       (1) in paragraph (2), by striking ``paragraph (b)(3)'' and 
     inserting ``subsection (b)(3)'';
       (2) by striking the period at the end of paragraph (3)(B) 
     and inserting a comma; and
       (3) in the third sentence, by striking ``the payment 
     adjustment described in paragraph (2)'' and inserting ``a 
     payment adjustment described in paragraph (2) or (3)''.
       (b) Effective December 22, 1987, section 1923(d)(2)(A)(ii) 
     (42 U.S.C. 1396r-4(d)(2)(A)(ii)) is amended by striking ``the 
     date of the enactment of this Act'' and inserting ``December 
     22, 1987''.
       (c) Section 4703(d) of OBRA-1990 is amended by striking 
     ``412(a)(2)'' and inserting ``4112(a)(2)''.

     SEC. 8649. CORRECTIONS RELATING TO SECTION 4704 (FEDERALLY-
                   QUALIFIED HEALTH CENTERS).

       (a) Clause (ix) of section 1903(m)(2)(A) (42 U.S.C. 
     1396b(m)(2)(A)), as added by section 4704(b)(1)(C) of OBRA-
     1990, is amended--
       (1) by striking ``of such center'' the first place it 
     appears;
       (2) by striking ``federally qualified'' and inserting 
     ``Federally-qualified'';
       (3) by inserting ``section'' before ``1905(a)(2)(C)''; and
       (4) by moving such clause 2 ems to the left.
       (b) Section 1903(m)(2)(B) (42 U.S.C. 1396b(m)(2)(B)), as 
     amended by section 4704(b)(2) of OBRA-1990, is amended in the 
     matter preceding clause (i) by striking ``except with respect 
     to clause (ix) of subparagraph (A),'' and inserting ``(except 
     with respect to clause (ix) of such subparagraph)''.
       (c) Section 1905(l)(2) (42 U.S.C. 1396d(l)(2)), as amended 
     by section 4704(c) of OBRA-1990 and sections 13606(a) and 
     13631(f)(2)(B) of OBRA-1993, is amended--
       (1) in subparagraph (A)--
       (A) by striking ``Federally-qualififed'' and inserting 
     ``Federally-qualified'', and
       (B) by striking ``an patient'' and inserting ``a patient'', 
     and
       (2) in subparagraph (B)--
       (A) in the matter preceding clause (i), by striking ``a 
     entity'' and inserting ``an entity'',
       (B) by striking ``or'' at the end of clause (iii),
       (C) by striking the semicolon at the end of clause (iv) and 
     inserting ``, or'', and
       (D) by striking ``and includes an outpatient health 
     program'' and all that follows through ``for good cause 
     shown.'' and inserting the following:
       ``(v) is an outpatient health program or facility operated 
     by a tribe or tribal organization under the Indian Self-
     Determination Act (Public Law 93-638) or by an urban Indian 
     organization receiving funds under title V of the Indian 
     Health Care Improvement Act for the provision of primary 
     health services.

     In applying clause (ii), the Secretary may waive any 
     requirement referred to in such clause for up to 2 years for 
     good cause shown.''.

     SEC. 8650. CORRECTIONS RELATING TO SECTION 4708 (SUBSTITUTE 
                   PHYSICIANS).

       (a) Section 1902(a)(32) (42 U.S.C. 1396a(a)(32)), as added 
     by section 4708(a)(3) of OBRA-1990 and as amended by section 
     13631(e)(1) of OBRA-1993, is amended--
       (1) in the matter preceding subparagraph (A), by striking 
     ``except that'' and inserting ``except that (subject to 
     section 1903(i)(12))''; and
       (2) by amending subparagraph (C) to read as follows:
       ``(C) payment may be made to a physician for physicians' 
     services (and services furnished incident to such services) 
     furnished by a second physician to patients of the first 
     physician if (i) the first physician is unavailable to 
     provide the services; (ii) the services are furnished 
     pursuant to an arrangement between the two physicians that 
     (I) is informal and reciprocal, or (II) involves per diem or 
     other fee-for-time compensation for such services; (iii) the 
     services are not provided by the second physician over a 
     continuous period of more than 60 days; and (iv) the claim 
     form submitted to the State for such services includes the 
     second physician's unique identifier (provided under the 
     system established under subsection (x)) and indicates that 
     the claim meets the requirements of this subparagraph for 
     payment to the first physician; and''.
       (b) The amendments made by subsection (a) shall apply to 
     services furnished on or after the first day of the first 
     month beginning more than 60 days after the date of the 
     enactment of this Act.

     SEC. 8651. CORRECTIONS RELATING TO SECTION 4711 (HOME AND 
                   COMMUNITY CARE FOR FRAIL ELDERLY).

       (a) Section 1929 (42 U.S.C. 1396t), as added by section 
     4711(b) of OBRA-1990, is amended--
       (1) in subsection (c)(2)(F), by moving the second sentence 
     2 ems to the right;
       (2) in subsection (d)(2)(F)(ii), by striking ``they 
     manage'' and inserting ``it manages'';
       (3) in subsection (d)(2)(F)(iii), by inserting ``the agency 
     or organization'' after ``(iii)'';
       (4) in subsection (e)(2)(B), by striking ``fiscal year 
     1989'' and inserting ``fiscal year 1990'';
       (5) in subsection (f)(1), by striking ``Community care'' 
     and inserting ``community care'';
       (6) in subsection (g)(1)--
       (A) by striking ``settings'' and inserting ``setting''; and
       (B) in subparagraph (B), by striking ``setting.'' and 
     inserting ``setting in which home and community care under 
     this section is provided.'';
       (7) in subsection (g)(2), by striking ``community care'' 
     the second, third, and fourth place it appears and inserting 
     ``home and community care'';
       (8) in subsection (h)(1)--
       (A) by amending subparagraph (A) to read as follows:
       ``(A) a nonresidential setting that serves 8 or more 
     individuals; or''; and
       (B) in subparagraph (B)--
       (i) by striking ``more than 8'' and inserting ``8 or 
     more''; and
       (ii) by inserting ``(other than merely board)'' after 
     ``personal services'';
       (9) in subsection (h)(2), by striking ``community care'' 
     the second and third place it appears and inserting ``home 
     and community care'';
       (10) in the first sentence of subsection (j)(1)(A), by 
     striking ``the State may terminate the provider's 
     participation under the State plan and may provide in 
     addition for a civil money penalty'' and inserting ``the 
     State may provide for a civil money penalty and, in addition, 
     may terminate the provider's participation under the State 
     plan'';
       (11) in the first sentence of subsection (j)(2)(B), by 
     striking ``the Secretary may terminate the provider's 
     participation under the State plan and may provide, in 
     addition, for a civil money penalty under subparagraph (C)'' 
     and inserting ``the Secretary may provide for a civil money 
     penalty under subparagraph (C) and, in addition, terminate 
     the provider's participation under the State plan'';
       (12) in subsection (k)(1)(A)(i)--
       (A) by striking ``(d)(2)(E)'' and inserting ``(d)(2)'', and
       (B) by striking ``settings,'' and inserting ``settings),'';
       (13) in subsection (l), by striking ``State wideness'' and 
     inserting ``Statewideness'';
       (14) in paragraph (2) of subsection (m) by striking 
     ``Individual Community Care Plan'' and inserting ``individual 
     community care plan''; and
       (15) by adding at the end the following new subsection:
       ``(n) Community Care Setting Defined.--In this section, the 
     term `community care setting' means a small community care 
     setting (as defined in subsection (g)(1)) or a large 
     community care setting (as defined in subsection (h)(1)).''.
       (b) Section 1905(r)(5) (42 U.S.C. 1396d(r)(5)) is amended 
     by striking ``section 1905(a)'' and inserting ``subsection 
     (a) (other than services described in paragraph (22) or (23) 
     of such subsection)''.
       (c) Section 4711(f) of OBRA-1990 is amended by striking 
     ``Act'' each place it appears and inserting ``section''.

     SEC. 8652. CORRECTIONS RELATING TO SECTION 4712 (COMMUNITY 
                   SUPPORTED LIVING ARRANGEMENTS).

       (a) Section 1930 (42 U.S.C. 1396u), as added by section 
     4712(b)(2) of OBRA-1990, is amended--
       (1) in subsection (b)--
       (A) by striking ``title the term,'' and inserting ``title, 
     the term'',
       (B) by striking ``guardian'' and inserting ``guardian or'', 
     and
       (C) by striking ``3 other'' and inserting ``3'';
       (2) in subsection (d)--
       (A) in the matter preceding paragraph (1), by striking 
     ``program,'' and inserting ``program'', and
       (B) in the second sentence, by striking ``plan'' each place 
     it appears and inserting ``program''; and
       (3) in subsection (i), by striking ``funds'' and inserting 
     ``Funds''.
       (b) Section 4712(c) of OBRA-1990 is amended--
       (1) in paragraph (1), by inserting ``of section 1930 of the 
     Social Security Act'' after ``subsection (h)''; and
       (2) in paragraph (2), by striking ``this section'' and 
     inserting ``such section''.

     SEC. 8653. CORRECTION RELATING TO SECTION 4713 (COBRA 
                   CONTINUATION COVERAGE).

       (a) Section 1902(a)(10) (42 U.S.C. 1396a(a)(10)) is amended 
     in the matter following subparagraph (F) by striking ``COBRA 
     continuation premiums'' and inserting ``COBRA premiums''.
       (b) Section 1902(u)(3) (42 U.S.C. 1396a(u)(3)), as added by 
     section 4713(a)(2) of OBRA-1990, is amended by striking 
     ``title VI'' and inserting ``part 6 of subtitle B of title 
     I''.

     SEC. 8654. CORRECTION RELATING TO SECTION 4716 (MEDICAID 
                   TRANSITION FOR FAMILY ASSISTANCE).

       Section 4716(a) of OBRA-1990 is amended by striking 
     ``Amendments.--Subsection (f) of section'' and inserting ``In 
     General.--Section''.

     SEC. 8655. CORRECTIONS RELATING TO SECTION 4718 (MEDICALLY 
                   NEEDY INCOME LEVELS FOR CERTAIN 1-MEMBER 
                   FAMILIES).

       Section 4718(b) of OBRA-1990 is amended by striking ``June 
     1, 1989'' and inserting ``July 1, 1989''.

     SEC. 8656. CORRECTIONS RELATING TO SECTION 4723 (MEDICAID 
                   SPEND-DOWN OPTION).

       Section 1903(f)(2) (42 U.S.C. 1396b(f)(2)), as amended by 
     section 4723(a) of OBRA-1990, is amended by striking ``to the 
     State, provided that'' and inserting ``to the State if''.

     SEC. 8657. CORRECTIONS RELATING TO SECTION 4724 (OPTIONAL 
                   STATE DISABILITY DETERMINATIONS).

       Section 1902(v) (42 U.S.C. 1396a(v)), as added by section 
     4724 of OBRA-1990, is amended--
       (1) by striking ``(v)(1)'' and inserting ``(v)''; and
       (2) by striking ``of the Social Security Act''.

     SEC. 8658. CORRECTION RELATING TO SECTION 4732 (SPECIAL RULES 
                   FOR HEALTH MAINTENANCE ORGANIZATIONS).

       Section 1903(m)(2)(F)(i) (42 U.S.C. 1396b(m)(2)(F)(i)), as 
     amended by section 4732(b)(2)(B) of OBRA-1990, is amended by 
     striking ``or'' before ``with an eligible organization''.

     SEC. 8659. CORRECTIONS RELATING TO SECTION 4747 (COVERAGE OF 
                   HIV-POSITIVE INDIVIDUALS).

       Section 4747 of OBRA-1990 is amended--
       (1) in subsection (a)--
       (A) by striking ``services described in subsection (c)'' 
     and inserting ``services described in subsection (b)(1) (and 
     may provide coverage for services described in subsection 
     (b)(2))'', and
       (B) by striking ``to individuals'' and inserting ``to 
     individuals who are not otherwise eligible for medical 
     assistance under such title,'';
       (2) by amending subsection (b) to read as follows:
       ``(b) Services Available Under a Demonstration Project.--
       ``(1) Required services.--
       ``(A) In general.--Services described in this paragraph are 
     the following:
       ``(i) General and preventive medical care services, 
     including outpatient care, physician visits, and clinic 
     visits.
       ``(ii) Other laboratory and X-ray services.
       ``(iii) Prescription drugs (including costs associated with 
     the intravenous administration of prescription drugs).
       ``(iv) Case management services.
       ``(B) Scope of services.--The services described in 
     subparagraph (A) may be limited under a demonstration project 
     only on the basis of medical necessity or the appropriateness 
     of such services.
       ``(2) Optional services.--
       ``(A) In general.--Services described in this paragraph are 
     the following:
       ``(i) Counseling and social services.
       ``(ii) Substance abuse treatment.
       ``(iii) Health education services.
       ``(iv) Dental services.
       ``(B) Scope of services.--A demonstration project may limit 
     the amount, duration, or scope of services described in 
     subparagraph (A).'';
       (3) in subsection (c)--
       (A) in paragraph (1)--
       (i) by striking ``with a hospital'' and all that follows 
     through ``other entity have'' and inserting ``with an entity 
     which has'', and
       (ii) by striking ``and have access'' and all that follows 
     through the end and inserting ``and has access to data on 
     comparable patients who have so tested and who are not 
     participating in the demonstration project.'', and
       (B) by striking paragraphs (2) and (3) and redesignating 
     paragraph (4) as paragraph (2);
       (4) in subsection (d), by striking ``paragraph (3)'' and 
     ``paragraph (1)'' and inserting ``subsection (b)'' and 
     ``subsection (a)'', respectively; and
       (5) in subsection (f), by adding at the end the following 
     new sentence: ``Such sums as may be available under the 
     limitation set forth in this paragraph for fiscal year 1993 
     shall be available until expended.''.

     SEC. 8660. CORRECTION RELATING TO SECTION 4751 (ADVANCED 
                   DIRECTIVES).

       Section 1903(m)(1)(A) (42 U.S.C. 1396b(m)(1)(A)), as 
     amended by section 4751(b)(1) of OBRA-1990, is amended--
       (1) by striking ``1902(w)'' and inserting ``1902(w) and''; 
     and
       (2) by striking ``1902(a)'' and inserting ``1902(w)''.

     SEC. 8661. CORRECTIONS RELATING TO SECTION 4752 (PHYSICIANS' 
                   SERVICES).

       (a) Paragraph (59) of section 1902(a) (42 U.S.C. 1396a(a)), 
     as added by section 4752(c)(1)(C) of OBRA-1990 and as 
     redesignated by section 13623(a)(6) of OBRA-1993, is amended 
     by striking ``subsection (v)'' and inserting ``subsection 
     (x)''.
       (b) Section 1903(i)(12) (42 U.S.C. 1396b(i)(12)), as 
     inserted by section 4752(e) of OBRA-1990 and as redesignated 
     by section 13631(c)(3) of OBRA-1993, is amended--
       (1) by amending clause (i) of subparagraph (A) to read as 
     follows:
       ``(i) is certified in family practice or pediatrics by the 
     medical specialty board recognized by the American Board of 
     Medical Specialties for family practice or pediatrics or is 
     certified in family practice or pediatrics by the medical 
     specialty boards recognized by the American Osteopathic 
     Association,'';
       (2) by amending clause (i) of subparagraph (B) to read as 
     follows:
       ``(i) is certified in family practice or obstetrics by the 
     medical specialty board recognized by the American Board of 
     Medical Specialties for family practice or obstetrics or is 
     certified in family practice or obstetrics by the medical 
     specialty boards recognized by the American Osteopathic 
     Association,''; and
       (3) in subparagraphs (A) and (B)--
       (A) by striking ``or'' at the end of clause (v);
       (B) by redesignating clause (vi) as clause (vii); and
       (C) by inserting after clause (v) the following new clause:
       ``(vi) delivers such services in the emergency department 
     of a hospital participating in the State plan approved under 
     this title, or''.

     SEC. 8662. CORRECTIONS RELATING TO SECTION 4801 (NURSING HOME 
                   REFORM).

       (a) Section 1919(b)(3)(C)(i)(I) (42 U.S.C. 
     1396r(b)(3)(C)(i)(I)), as amended by section 4801(e)(3) of 
     OBRA-1990, is amended by striking ``not to exceed'' before 
     ``14 days''.
       (b) Section 1919(b)(5)(D) (42 U.S.C. 1396r(b)(5)(D)), as 
     amended by section 4801(a)(4) of OBRA-1990, is amended by 
     striking the comma before ``or a new competency evaluation 
     program.''.
       (c) Section 1919(b)(5)(G) (42 U.S.C. 1396r(b)(5)(G)) is 
     amended by striking ``or licensed or certified social 
     worker'' and inserting ``licensed or certified social worker, 
     registered respiratory therapist, or certified respiratory 
     therapy technician''.
       (d) Section 1919(f)(2)(B)(i) (42 U.S.C. 1396r(f)(2)(B)(i)) 
     is amended by striking ``facilities,'' and inserting 
     ``facilities (subject to clause (iii)),''.
       (e) Section 1919(f)(2)(B)(iii)(I)(c) (42 U.S.C. 
     1396r(f)(2)(B)(iii)(I)(c)) is amended by striking ``clauses'' 
     each place it appears and inserting ``clause''.
       (f) Section 1919(g)(5)(B) (42 U.S.C. 1396r(g)(5)(B)) is 
     amended by striking ``paragraphs'' and inserting 
     ``paragraph''.
       (g) Section 4801(a)(6)(B) of OBRA-1990 is amended--
       (1) by striking ``The amendments'' and inserting ``(i) The 
     amendments'';
       (2) by redesignating clauses (i) through (v) as subclauses 
     (I) through (V); and
       (3) by adding at the end the following new clause:
       ``(ii) Notwithstanding clause (i) and subject to section 
     1919(f)(2)(B)(iii)(I) of the Social Security Act (as amended 
     by subparagraph (A)), a State may approve a training and 
     competency evaluation program or a competency evaluation 
     program offered by or in a nursing facility described in 
     clause (i) if, during the previous 2 years, none of the 
     subclauses of clause (i) applied to the facility.''.

     SEC. 8663. OTHER TECHNICAL CORRECTIONS.

       (a) Section 1905(o)(1)(A) (42 U.S.C. 1396d(o)(1)(A)) is 
     amended--
       (1) in the first sentence, by striking ``intermediate care 
     facility services'' and inserting ``for nursing facility 
     services or intermediate care facility services for the 
     mentally retarded''; and
       (2) in the second sentence, by striking ``or intermediate 
     care facility'' and inserting ``(for purposes of title 
     XVIII), a nursing facility, or an intermediate care facility 
     for the mentally retarded''.
       (b) Section 1915(d) (42 U.S.C. 1396n(d)) is amended--
       (1) by striking ``skilled nursing facility or intermediate 
     care facility'' each place it appears in paragraphs (1), 
     (2)(B), and (2)(C) and inserting ``nursing facility'';
       (2) in paragraph (2)(B)(i), by striking ``skilled nursing 
     or intermediate care facility'' and inserting ``nursing 
     facility'';
       (3) in paragraph (5)(A), by striking ``under'' the second 
     place it appears and inserting ``(or, in the case of waiver 
     years beginning on or after October 1, 1990, with respect to 
     nursing facility services and home and community-based 
     services) under''; and
       (4) in paragraph (5)(B)--
       (A) in clause (i), by striking ``furnished'' and inserting 
     ``(or, with respect to waiver years beginning on or after 
     October 1, 1990, for nursing facility services) furnished''; 
     and
       (B) in clause (iii)(I), by striking ``(regardless'' and 
     inserting ``(or, with respect to waiver years beginning on or 
     after October 1, 1990, which comprise nursing facility 
     services) (regardless''.
       (c)(1) Section 1924(h)(1)(A) (42 U.S.C. 1396r-5(h)(1)(A)) 
     is amended to read as follows:
       ``(A)(i) is in a medical institution or nursing facility; 
     or
       ``(ii) is described in section 1902(a)(10)(A)(ii)(VI) 
     (except that for purposes of subsection (d), such term shall 
     include such individual only if the State elects to apply 
     such subsection to the individual); and''.
       (2) The amendments made by this subsection shall apply to 
     home or community-based services furnished on or after 
     January 1, 1994.

 PART 3--MISCELLANEOUS AND TECHNICAL CORRECTIONS RELATING TO OBRA-1993

     SEC. 8671. EFFECTIVE DATE.

       Except as otherwise provided, the amendments made by this 
     part shall take effect as if included in the enactment of 
     OBRA-1993.

     SEC. 8672. CORRECTIONS RELATING TO SECTION 13601 (PERSONAL 
                   CARE SERVICES).

       Section 13601(a)(3) of OBRA-1993 is amended by striking 
     ``comma'' and inserting ``period''.

     SEC. 8673. CORRECTIONS RELATING TO SECTION 13604 (EMERGENCY 
                   SERVICES FOR ALIENS).

       Section 13604(b)(2) of OBRA-1993 is amended to read as 
     follows:
       ``(2) The Secretary of Health and Human Services shall not 
     disallow expenditures made under section 1903(v)(2) of the 
     Social Security Act for care and services relating to organ 
     transplant procedures furnished before the date of the 
     enactment of this Act.''.

     SEC. 8674. CORRECTIONS RELATING TO SECTION 13611 (TRANSFERS 
                   OF ASSETS; TREATMENT OF CERTAIN TRUSTS).

       (a) Exemption From Asset Transfer Restrictions.--Section 
     1917(c)(2)(B) (42 U.S.C. 1396p(c)(2)(B)), as amended by 
     section 13611(a)(2) of OBRA-1993, is amended--
       (1) by striking ``or'' at the end of clause (iii);
       (2) by striking the semicolon at the end of clause (iv) and 
     inserting ``, or''; and
       (3) by adding at the end the following new clause:
       ``(iv) were transferred to a trust described in subsection 
     (d)(4)(B) or subsection (d)(4)(C).''.
       (b) Restriction on Ability of Trustee to Distribute 
     Corpus.--Section 1917(d)(4)(B) (42 U.S.C. 1396p(d)(4)(B)), as 
     added by section 13611(b) of OBRA-1993, is amended--
       (1) by striking ``and'' at the end of clause (ii);
       (2) by striking the period at the end of clause (iii) and 
     inserting ``, and''; and
       (3) by adding at the end the following new clause:
       ``(iv) no payment may be made from any portion of the 
     corpus of the trust to any person other than the 
     individual.''.
       (c) Income Placed Into Trust Not Counted for Purposes of 
     Eligibility.--Section 1917(d) (42 U.S.C. 1396p(d)), as added 
     by section 13611(b) of OBRA-1993, is amended--
       (1) by striking the closing quotation mark and the second 
     period at the end of paragraph (5);
       (2) by redesignating paragraph (6) as paragraph (7); and
       (3) by inserting after paragraph (5) the following new 
     paragraph:
       ``(6) For purposes of determining an individual's 
     eligibility for, or amount of, benefits under a State plan 
     under this title, any income placed into a trust described in 
     paragraph (4)(B) that is established for the benefit of the 
     individual shall not be considered income of the 
     individual.''.
       (d) Other Technical Amendments.--(1) Section 
     1917(c)(2)(C)(iii) (42 U.S.C. 1396p(c)(2)(C)(iii)), as added 
     by section 13611(a)(2)(C)(iv) of OBRA-1993, is amended by 
     striking ``all''.
       (2) Section 1917(c)(4) (42 U.S.C. 1396p(c)(4)), as amended 
     by section 13611(a)(2)(F), is amended by striking 
     ``resources'' and inserting ``assets''.
       (3) Section 13611(e)(3) of OBRA-1993 is amended--
       (A) by striking ``amendment made by subsection (b)'' and 
     inserting ``amendments made by subsections (a) and (b)''; and
       (B) by striking ``such amendment'' and inserting ``such 
     amendments''.

     SEC. 8675. CORRECTIONS RELATING TO SECTION 13612 (MEDICAID 
                   ESTATE RECOVERIES).

       (a) Clarification of Disregard of Asset Rules.--Section 
     1902(r)(2) (42 U.S.C. 1396a(r)(2)) is amended by adding at 
     the end the following:
       ``(C)(i) Notwithstanding subparagraph (A), except as 
     provided in clause (ii), a State plan may not provide 
     pursuant to this paragraph for disregarding any assets--
       ``(I) to the extent that payments are made under a long-
     term care insurance policy; or
       ``(II) because an individual has received (or is entitled 
     to receive) benefits for a specified period of time under a 
     long-term care insurance policy.
       ``(ii) Clause (i) shall not apply to State plan provisions 
     that are approved as of August 1, 1994.''.
       (b) Estate Recoveries.--Section 1917(b)(1) (42 U.S.C 
     1396p(b)(1)), as amended by section 13612(a) of OBRA-1993, is 
     amended--
       (1) by amending the matter preceding subparagraph (A) to 
     read as follows:
       ``(b)(1) No adjustment or recovery of any medical 
     assistance correctly paid on behalf of an individual under 
     the State plan may be made, except that the State shall 
     comply with the following:'';
       (2) by amending subparagraph (A) to read as follows:
       ``(A) In the case of an individual described in subsection 
     (a)(1)(B), the State--
       ``(i) shall seek adjustment or recovery upon the sale of 
     property subject to a lien imposed on account of medical 
     assistance paid on behalf of the individual, and
       ``(ii) may seek adjustment or recovery from the 
     individual's estate.'';
       (3) in subparagraph (B)--
       (A) in clause (i), by striking ``or'' at the end and 
     inserting ``and''; and
       (B) in clause (ii), by inserting ``additional'' after 
     ``any''; and
       (4) in subparagraph (C), by striking the period at the end 
     and inserting the following: ``, and shall notify any 
     individual who seeks to purchase such a policy (or who has 
     purchased such a policy as of the date of the enactment of 
     the Guaranteed Health Insurance Act of 1994) of the State's 
     obligation to seek adjustment or recovery under this 
     clause.''.

     SEC. 8676. CORRECTIONS RELATING TO SECTION 13622 (LIABILITY 
                   OF THIRD PARTIES TO PAY FOR CARE AND SERVICES).

       (a) Section 1902(a)(25)(A) (42 U.S.C. 1396a(a)(25)(A)), as 
     amended by section 13622(a) of OBRA-1993, is amended by 
     striking ``(as defined in section 607(1)'' and inserting 
     ``(including any such plan meeting the definition of section 
     607(1)''.
       (b) Section 1902(a)(25)(I) (42 U.S.C. 1396a(a)(25)(I)), as 
     added by section 13622(c) of OBRA-1993, is amended to read as 
     follows:
       ``(I) assurances satisfactory to the Secretary that the 
     State has in effect laws providing that, to the extent that 
     payment has been made under the State plan of that or any 
     other State for medical assistance for health care items or 
     services furnished to an individual, the State paying such 
     medical assistance is considered to have acquired the rights 
     of such individual to payment by any third party legally 
     liable to pay for such items or services;''.

     SEC. 8677. CORRECTIONS RELATING TO SECTION 13623 (MEDICAL 
                   CHILD SUPPORT).

       (a)(1) Title XIX (42 U.S.C. 1396 et seq.) is amended by 
     redesignating section 1908, as added by section 13623(b) of 
     OBRA-1993, as section 1909.
       (2) Paragraph (60) of section 1902(a) (42 U.S.C. 1396a(a)), 
     as added by section 13623(a) of OBRA-1993, is amended by 
     striking ``section 1908'' and inserting ``section 1909''.
       (b) Subsection (b) of section 1909, as redesignated by 
     subsection (a), is amended by striking ``as defined in 
     section 607(1)'' and inserting ``including any such plan 
     meeting the definition of section 607(1)''.

     SEC. 8678. CORRECTIONS RELATING TO SECTION 13624 (PHYSICIAN 
                   REFERRALS).

       Section 13624(b) of OBRA-1993 is amended by striking ``on 
     or''.

     SEC. 8679. CORRECTIONS RELATING TO SECTION 13631 (MEDICAID 
                   PEDIATRIC IMMUNIZATION PROVISIONS).

       (a) Section 1902(a)(32)(D) (42 U.S.C. 1396(a)(32)(D)), as 
     added by section 13631(e)(1) of OBRA-1993, is amended by 
     striking ``(which price includes a reasonable amount to cover 
     shipping and the handling of returns)'' and inserting ``plus 
     a reasonable amount to cover shipping and the handling of 
     returns''.
       (b) Section 1928(d)(3)(B) (42 U.S.C. 1396s(d)(3)(B)), as 
     added by section 13631(b)(2) of OBRA-1993, is amended by 
     striking ``and any applicable excise tax established under 
     section 4131 of the Internal Revenue Code of 1986''.

     SEC. 8680. CORRECTIONS RELATING TO SECTION 13643 
                   (DEMONSTRATION PROJECTS).

       Effective as if included in the enactment of OBRA-1990, 
     section 4745 of such Act is amended in subsection (d) by 
     striking ``shall commence not later than July 1, 1991 and''.
             Subtitle H--Provision Relating to AFDC Program

     SEC. 8701. ENFORCEMENT OF MAINTENANCE-OF-EFFORT REQUIREMENTS 
                   THROUGH AFDC.

       (a) State Plan Requirement.--Section 402(a) (42 U.S.C. 
     602(a)) is amended--
       (1) by striking ``and'' at the end of paragraph (44);
       (2) by striking the period at the end of paragraph (45) and 
     inserting ``; and''; and
       (3) by inserting after paragraph (45) the following new 
     paragraph:
       ``(46) provide assurances that the State is making payments 
     required under part 2 of subtitle B of title VIII of the 
     Guaranteed Health Insurance Act of 1994.''.
       (b) Withholding Amounts Unpaid.--Section 403 (42 U.S.C. 
     603) is amended by adding at the end the following new 
     subsection:
       ``(o) Notwithstanding any other provision of this section, 
     the Secretary shall reduce the amount of payment made to a 
     State under this section for quarters in any fiscal year to 
     the extent that the State fails to make the payments required 
     for the fiscal year under part 2 of subtitle B of title VIII 
     of the Guaranteed Health Insurance Act of 1994 in a timely 
     manner.''.
        TITLE IX--QUALITY AND CONSUMER AND WORKFORCE PROTECTION
             Subtitle A--Quality Management and Improvement

              PART 1--NATIONAL QUALITY MANAGEMENT PROGRAM

     SEC. 9001. NATIONAL QUALITY MANAGEMENT PROGRAM.

       (a) Establishment.--The Secretary shall establish and 
     oversee a performance-based program of quality management and 
     improvement designed to enhance the quality, appropriateness, 
     and effectiveness of health care services rendered in the 
     United States. The program shall be known as the National 
     Quality Management Program.
       (b) Elements.--Subject to the specific provisions of this 
     part, the National Quality Management Program shall consist 
     of the following:
       (1) The consumer surveys described in section 9002.
       (2) The national measures of quality performance described 
     in section 9003.
       (3) The national quality standards for approved sponsors 
     described in section 9004.
       (4) The models for profiling patterns of clinical practice 
     and improving quality of care described in section 9005.
       (5) The quality-related profiling data described in section 
     9006.
       (6) The compliance monitoring described in section 9007.
       (7) The guideline development and certification and the 
     research on health care quality described in section 9008.
       (8) The contracts with approved quality improvement 
     organizations entered into by the Secretary under section 
     9009.
       (9) The quality management grants made to approved States 
     by the Secretary under section 9010.

     SEC. 9002. CONSUMER SURVEYS.

       (a) In General.--The Secretary shall conduct annual surveys 
     of health care consumers to gather information, with respect 
     to a year to which a survey pertains, concerning access to 
     care, use of health services, health outcomes, and patient 
     satisfaction. The surveys shall be conducted using the 
     standard design and the sampling strategies developed under 
     subsection (d).
       (b) Authority to Contract.--The Secretary may carry out 
     subsection (a) by entering into contracts with private 
     individuals or entities or States pursuant to which the 
     individuals, entities, or States undertake the duties 
     applicable to the Secretary under the subsection.
       (c) Transmission of Survey Results.--
       (1) Approved sponsors.--The Secretary shall forward the 
     results of any survey conducted under this section that 
     pertains to an approved health plan provided or sponsored by 
     an approved sponsor in a State to--
       (A) the State (if the State is an approved State); and
       (B) the approved quality improvement organization 
     responsible for the geographic area that includes the State.
       (2) Qualified providers.--The Secretary shall forward the 
     results of any survey conducted under this section that 
     pertains to health care services rendered in a State by a 
     qualified provider to--
       (A) the State (if the State is an approved State); and
       (B) the approved quality improvement organization 
     responsible for the geographic area that includes the State.
       (d) Design and Sampling Strategies.--
       (1) Standard design.--The Secretary shall develop and 
     approve a standard design for the surveys conducted under 
     this section. The design shall ensure the collection of 
     valid, reliable, and comparable survey responses.
       (2) Sampling strategies.--The Secretary shall develop 
     sampling strategies that ensure that survey samples 
     adequately measure populations that are considered to be at 
     risk of receiving inadequate health care, including 
     individuals with disabilities.
       (3) Deadline.--The Secretary shall develop and approve the 
     design under paragraph (1) and the sampling strategies under 
     paragraph (2) not later than 12 months after the date of the 
     enactment of this Act.
       (e) Timeliness.--The Secretary shall carry out subsections 
     (a) and (c) in a manner that permits a State to include the 
     results of consumer surveys that pertain to a year in the 
     performance report published by the State under section 
     9003(g) that pertains to the year.

     SEC. 9003. NATIONAL MEASURES OF QUALITY PERFORMANCE.

       (a) Development and Updating.--
       (1) In general.--The Secretary shall develop and update a 
     uniform set of national measures of quality performance to be 
     used to assess--
       (A) the performance of approved sponsors, network 
     providers, and health institutions;
       (B) the satisfaction of individuals enrolled under an 
     approved health plan with the access to, and quality of, 
     items and services provided by the approved sponsor providing 
     or sponsoring the plan and network providers with respect to 
     the plan;
       (C) the satisfaction of individuals receiving health care 
     items and services from a health institution; and
       (D) the degree to which approved sponsors, network 
     providers, and health institutions are meeting the needs of 
     special patient populations, including individuals with 
     disabilities.
       (2) Minimum information required to be provided.--The 
     measures shall be developed and selected in a manner that 
     ensures that approved plan sponsors and health institutions 
     are required to provide the minimum amount of information 
     that is necessary to perform the assessments referred to in 
     paragraph (1).
       (3) Bases for measures.--In developing and selecting the 
     national measures of quality performance, the Secretary shall 
     consider the recommendations of the Health Care Quality 
     Advisory Commission established under section 9012 (in this 
     part referred to as the ``Commission''). The measures also 
     may be based on guidelines developed or certified under title 
     IX of the Public Health Service Act, research sponsored under 
     such title, or other guidelines or research, if the 
     guidelines or research are determined to be appropriate for 
     such purpose by the Secretary.
       (4) Sequential sets.--The set of national measures of 
     quality performance shall be established through the 
     development and use of a series of interim sets of quality 
     measures. The Secretary, in consultation with the Commission, 
     shall establish a sequence for such sets. The initial set of 
     national measures of quality performance shall provide 
     information on access to care and, with respect to an 
     approved sponsor, information on the number, types, and 
     locations of qualified providers who are authorized to 
     provide services or receive payments under each approved 
     health plan provided or sponsored by the sponsor. Subsequent 
     sets of measures shall provide additional information as such 
     information becomes valid and available (as determined by the 
     Secretary).
       (b) Subject of Measures.--The national measures of quality 
     performance shall be selected in a manner that provides 
     accurate, comparable information on the following subjects:
       (1) Access to health care services and procedures by 
     individuals enrolled in approved health plans.
       (2) Outcomes (including patient functional status), 
     effectiveness, and appropriateness of such health care 
     services and procedures.
       (3) Risk management and reduction, through health promotion 
     and disease prevention.
       (4) Consumer experience and satisfaction.
       (c) Criteria.--The following criteria shall be used in 
     developing and selecting national measures of quality 
     performance:
       (1) Significance.--When a measure relates to a specific 
     disease, disorder, or other health condition, the disease, 
     disorder, or condition shall be of significance in terms of 
     prevalence, morbidity, mortality, or the costs associated 
     with the prevention, diagnosis, treatment, or clinical 
     management of the disease, disorder, or condition.
       (2) Range of services.--The set of measures, taken as a 
     whole, shall be representative of the range of services 
     provided to consumers of health care.
       (3) Reliability and validity.--To the extent practicable, 
     the measures shall be reliable and valid.
       (4) Undue burden.--The data needed to calculate the 
     measures shall be obtained without undue burden on the entity 
     or individual providing the data.
       (5) Rural practice.--The measures shall take into account 
     criteria appropriate to rural clinical practice.
       (6) Variation.--Performance with respect to a measure shall 
     be expected to vary widely among the individuals and entities 
     whose performance is assessed using the measure.
       (7) Linkage to health outcome.--When a measure is 
     established relating to a process of care, the process shall 
     be linked to a health outcome based upon the best available 
     scientific evidence.
       (8) Provider control and risk adjustment.--When a measure 
     is an outcome of the provision of care, the outcome shall be 
     within the control of the provider and one with respect to 
     which an adequate risk adjustment can be made.
       (9) Public health.--The measures shall reflect goals 
     identified by the Secretary for meeting public health 
     objectives.
       (d) Data Transmission.--
       (1) Approved sponsors.--An approved sponsor shall transmit 
     the data determined by the Secretary (consistent with 
     subtitle C) to be necessary to assess under this section the 
     performance of the sponsor with respect to an approved health 
     plan provided or sponsored by the sponsor in a State, and the 
     performance of network providers with respect to the plan, to 
     the State (if the State is an approved State).
       (2) Health institutions.--A health institution shall 
     transmit the data determined by the Secretary (consistent 
     with subtitle C) to be necessary to assess the performance of 
     the institution under this section with respect to health 
     care services rendered in a State by the institution to the 
     State (if the State is an approved State).
       (3) Application of subtitle B.--Subsections (b), (c), and 
     (d) of section 9104 and section 9107 shall apply to the 
     transmission of data under this subsection, to the extent 
     that such data are health information described in paragraph 
     (1) or (2) of section 9104(b).
       (e) Data Validation.--An approved State shall conduct such 
     audits of the data submitted to the State under subsection 
     (d) as are necessary to ensure that the data are valid, 
     reliable, and complete. An approved sponsor and a health 
     institution shall maintain such records, make such reports, 
     and cooperate with the audits to the extent necessary to 
     permit a State to satisfy the preceding sentence.
       (f) Assessment of Performance.--
       (1) States.--Each approved State annually shall assess, 
     using the national measures of quality performance, the 
     performance of each--
       (A) approved sponsor providing or sponsoring an approved 
     health plan in the State;
       (B) network provider with respect to such a plan; and
       (C) health institution licensed by the State.
       (2) Plan sponsors.--An approved sponsor shall use the 
     national measures of quality performance to assess--
       (A) the satisfaction of individuals enrolled under an 
     approved health plan provided or sponsored by the sponsor 
     with the services of the sponsor and network providers with 
     respect to the plan; and
       (B) the quality of such services, as measured by access to 
     health care and appropriateness and outcomes of health care.
       (g) Performance Reports.--
       (1) Preparation.--Using a standard format prescribed by the 
     Secretary, and not later than January 1 of each year, an 
     approved State shall compile in the form of a performance 
     report the results of assessments conducted by the State 
     under subsection (f), the results of the consumer surveys 
     conducted by the Secretary under section 9002, and any other 
     relevant information with respect to the national quality 
     standards under section 9004 concerning approved sponsors 
     providing or sponsoring an approved health plan in the State. 
     The report shall be written in language calculated to be 
     understood by the typical individual enrolled under such a 
     plan and in a form which will assist consumers in selecting 
     among such plans.
       (2) Publication.--An approved State--
       (A) shall publish any performance report prepared under 
     paragraph (1);
       (B) shall transmit any such published report to--
       (i) the Consumer Health Advocacy Office for the State or a 
     geographic region that includes the State established through 
     a grant made under part O of title III of the Public Health 
     Service Act (relating to consumer resources regarding health 
     plans);
       (ii) the enrollment assistance program for the State 
     established under section 5011(b);
       (iii) any consumer purchasing cooperatives in the State; 
     and
       (iv) the Secretary; and
       (C) shall otherwise make available to the public any such 
     published report.
       (3) Compilation for Congress.--The Secretary annually shall 
     compile a national performance report from the reports 
     transmitted to the Secretary under paragraph (2). The 
     Secretary annually shall transmit such national report to the 
     Congress.
       (h) Authority to Contract.--An approved State may carry out 
     subsections (f) and (g) by entering into contracts with 
     individuals or entities pursuant to which the individuals or 
     entities undertake the duties applicable to the State under 
     the subsection.
       (i) Other Quality Improvement Activities.--Consistent with 
     subtitle C, an approved State shall make any data transmitted 
     to the State under subsection (d) available to an quality 
     improvement organization responsible for the geographic area 
     that includes the State, upon request by the organization. An 
     approved quality improvement organization may use such data, 
     consistent with subtitle C, to carry out any function of the 
     organization under this part.
       (j) Deadline.--The Secretary shall develop an initial set 
     of national measures of quality performance and the standard 
     format for the performance reports under subsection (g) not 
     later than 12 months after the date of the enactment of this 
     Act.

     SEC. 9004. NATIONAL QUALITY STANDARDS FOR APPROVED SPONSORS.

       (a) In General.--Not later than 18 months after the date of 
     the enactment of this Act, the Secretary shall establish 
     national quality standards for approved sponsors. The 
     standards established by the Secretary shall include the 
     standards described in subsections (b) and (c).
       (b) Requirements for plan sponsors.--The quality standards 
     for approved sponsors shall require each such sponsor--
       (1) to establish an internal quality improvement program to 
     measure, assess, and improve--
       (A) the satisfaction of individuals enrolled under an 
     approved health plan provided or sponsored by the sponsor 
     with the services provided by the sponsor and by network 
     providers with respect to the plan;
       (B) the health status of such individuals; and
       (C) the quality and outcomes of such services;
       (2) through such program, to cooperate with--
       (A) the performance monitoring activities undertaken by 
     approved States under section 9007; and
       (B) the activities undertaken by approved quality 
     improvement organizations under sections 9004 and 9009;
       (3) to make available to individuals enrolled in an 
     approved health plan provided or sponsored by the sponsor 
     information about the rights and responsibilities of 
     enrollees;
       (4) to provide an appeals procedure for review of benefit 
     determinations that satisfies the requirements of part 1 of 
     subtitle D;
       (5) to provide a grievance procedure that provides for 
     effective and timely response to complaints for enrollees to 
     use in pursuing complaints with respect to the sponsor that 
     are not based on a benefit determination reviewable under 
     part 1 of subtitle D;
       (6) to establish procedures for taking appropriate remedial 
     action whenever inappropriate or substandard services are 
     provided by an officer or employee of the sponsor or a 
     qualified provider who is a network provider with respect to 
     an approved health plan provided or sponsored by the sponsor;
       (7) to verify the credentials of qualified providers who 
     are network providers with respect to an approved health plan 
     provided or sponsored by the sponsor;
       (8) to establish a policy to identify and investigate 
     sources of dissatisfaction with a provider who is a network 
     provider with respect to an approved health plan provided or 
     sponsored by the sponsor, outline actions to follow up on the 
     findings, and inform the provider of the findings;
       (9) to give reasonable consideration, in selecting among 
     qualified providers for participation in a plan network 
     serving a geographic area, to all providers who are legally 
     authorized to provide health care services in the area; and
       (10) to establish written policies and procedures to ensure 
     that the confidentiality of protected health information (as 
     defined in section 9200(a)) is protected in a manner 
     consistent with subtitle C.
       (c) Other Requirements.--The quality standards for approved 
     sponsors--
       (1) shall ensure that any physician incentive plan (as 
     defined in subsection (d)) operated by an approved sponsor is 
     required to satisfy the requirements of clauses (i) and (ii) 
     of section 1876(i)(8)(A) of the Social Security Act in the 
     same manner as a physician incentive plan operated by an 
     eligible organization (as defined in section 1876(b) of such 
     Act) is required to satisfy the requirements of such clauses;
       (2) shall require each approved sponsor to provide each 
     State in which the sponsor provides or sponsors an approved 
     health plan with descriptive information sufficient to permit 
     the State to determine whether the sponsor is in compliance 
     with any requirement established with respect to such 
     incentive plans under this section;
       (3) shall require that if a physician incentive plan 
     operated by an approved sponsor places a physician or 
     physician group at substantial financial risk (as determined 
     by the Secretary) for services not provided by the physician 
     or physician group, the sponsor shall make available, upon 
     request by enrollees, qualified providers, or potential 
     enrollees or providers, descriptive information regarding any 
     financial arrangements in the plan relating to controlling 
     utilization or costs; and
       (4) shall prohibit approved sponsors from engaging in any 
     formal or informal practice that in any way restricts a 
     qualified provider from communicating with a patient of the 
     provider concerning the compensation of the provider, a term 
     of any contract between the sponsor and the provider, or 
     practices, protocols, or patterns of applying utilization 
     review procedures of the sponsor, where such compensation, 
     contract term, practice, protocol, or pattern may affect the 
     patient's access to care.
       (d) Physician Incentive Plan Defined.--In this section, the 
     term ``physician incentive plan'' means any compensation 
     arrangement between an approved sponsor and a physician or 
     physician group that may directly or indirectly have the 
     effect of reducing or limiting services provided with respect 
     to individuals enrolled in an approved health plan provided 
     or sponsored by the sponsor.

     SEC. 9005. PROFILING PATTERNS OF PRACTICE OF QUALIFIED 
                   PROVIDERS.

       (a) Profiling of Patterns of Practice; Opportunities for 
     Quality Improvement.--
       (1) Model adoption.--The Secretary shall develop models for 
     profiling the patterns of clinical practice of qualified 
     providers and approved sponsors (to the extent that such 
     sponsors provide health benefits in the form of items and 
     services to enrollees).
       (2) Dissemination.--The Secretary shall disseminate to 
     approved quality improvement organizations, approved 
     sponsors, and approved States the models adopted under 
     paragraph (1).
       (3) Opportunities for quality improvement.--The Secretary 
     shall develop and disseminate to approved quality improvement 
     organizations models for improving quality of care where 
     opportunities are identified through profiling and other 
     means so as to assure the quality of health care services 
     provided in the United States.
       (4) Deadline.--The Secretary shall develop the models under 
     this subsection not later than 18 months after the date of 
     the enactment of this Act.
       (b) Implementation by Quality Improvement Organizations.--
       (1) In general.--An approved quality improvement 
     organization shall implement, on an ongoing basis, the models 
     developed under subsection (a) with respect to--
       (A) qualified providers who are licensed by a State that is 
     in a geographic area for which the organization is 
     responsible; and
       (B) approved sponsors providing health benefits in the form 
     of items and services to enrollees in a State--
       (i) in which the sponsor provides or sponsors an approved 
     health plan; and
       (ii) that is in a geographic area for which the 
     organization is responsible.
       (2) Population-based monitoring.--The duties of an approved 
     quality improvement organization under the preceding sentence 
     shall include population-based monitoring of the patterns of 
     clinical practice described in subsection (a)(1) for the 
     purpose of promoting community-based quality improvement.
       (3) Quality-related profiling data.--In implementing a 
     model for profiling patterns of clinical practice, an 
     approved quality improvement organization shall use the 
     quality-related profiling data transmitted to the 
     organization under section 9006.
       (c) Limitation on Liability.--Notwithstanding any other 
     provision of law, a person providing information to any 
     approved quality improvement organization may not be held, by 
     reason of having provided such information, to have violated 
     any criminal law, or to be civilly liable under any law of 
     the United States or of any State (or political subdivision 
     thereof) unless--
       (1) such information is unrelated to the performance of the 
     contract of such organization with the Secretary under 
     section 9009;
       (2) such information is transmitted in violation of section 
     9006; or
       (3) such information is false and the person providing it 
     knew, or had reason to believe, that such information was 
     false.

     SEC. 9006. QUALITY-RELATED PROFILING DATA.

       (a) Transmission.--
       (1) Approved sponsors.--An approved sponsor that provides 
     health benefits in the form of items and services to 
     enrollees shall transmit to each approved quality improvement 
     organization for a geographic area that includes a State in 
     which the sponsor provides or sponsors an approved health 
     plan the set of quality-related profiling data established by 
     the Secretary under subsection (b).
       (2) Providers.--A qualified provider shall transmit to each 
     approved quality improvement organization for a geographic 
     area that includes a State in which the provider is licensed 
     the set of quality-related profiling data established by the 
     Secretary under subsection (b).
       (3) Application of subtitle B.--Subsections (b), (c), and 
     (d) of section 9104 and section 9107 shall apply to the 
     transmission of data under this subsection.
       (b) Establishment of Data Sets.--
       (1) In general.--The Secretary shall establish a set of 
     quality-related profiling data to be transmitted by approved 
     sponsors and qualified providers to approved quality 
     improvement organizations in order to permit such 
     organizations to carry out section 9005(b). The set of 
     quality-related profiling data may only include data that are 
     part of a set of health information established by the 
     Secretary under paragraph (1) or (2) of section 9103(b). The 
     set may only include data that an approved quality 
     improvement organization is authorized to receive under 
     subtitle C. The Secretary shall also specify the frequency 
     with which approved sponsors and qualified providers are 
     required to transmit the quality-related profiling data set.
       (2) No undue burden.--With respect to data developed or 
     collected by an approved sponsor or a qualified provider 
     under this section, the Secretary shall, in order to assure 
     the utility, accuracy, and sufficiency of such data, 
     establish guidelines for uniform methods of developing and 
     collecting such data. Such guidelines shall include 
     specifications ensuring that any set of quality-related 
     profiling data to be transmitted under this section may be 
     developed or collected using the least burdensome method 
     consistent with the efficient and effective administration of 
     this part.
       (c) Freedom of Information Act.--An approved quality 
     improvement organization, in carrying out its functions under 
     a contract entered into under section 9009, shall not be 
     considered a Federal agency for purposes of section 552 of 
     title 5, United States Code.
       (d) Use and Disclosure of Data.--The Secretary shall 
     establish standards concerning the purposes for which, and 
     the procedures by which, data that is transmitted to, and 
     collected by, an approved quality improvement organization 
     under this section or section 9009 may be used and disclosed 
     by the organization. The standards established under this 
     subsection shall be consistent with subtitle C and section 
     1160(b) of the Social Security Act. Such standards shall 
     include standards regarding the aggregation of data in a 
     manner that does not reveal data that identifies or can 
     readily be associated with the identity of an individual.
       (e) Requirement on Organizations.--An approved quality 
     improvement organization shall comply with the standards 
     established by the Secretary under subsection (c).
       (f) Deadline.--Not later than 18 months after the date of 
     the enactment of this Act, the Secretary--
       (1) shall establish the set of quality-related profiling 
     data under subsection (b); and
       (2) shall establish the standards under subsection (c).

     SEC. 9007. COMPLIANCE MONITORING BY APPROVED STATES.

       (a) Monitoring.--An approved State shall monitor 
     periodically, but not less than annually, compliance with 
     requirements applicable to approved sponsors and qualified 
     providers under this part by--
       (1) approved sponsors providing or sponsoring an approved 
     health plan in the State; and
       (2) qualified providers licensed by the State.
       (b) Enforcement.--
       (1) Approved sponsors.--
       (A) In general.--If an approved State finds that an 
     approved sponsor providing or sponsoring an approved health 
     plan in the State engages in a pattern or practice of failing 
     to fulfill a requirement applicable to the sponsor under this 
     part, the State shall enforce the requirement by--
       (i) prohibiting the sponsor from providing coverage under 
     the plan in the State under section 5502; or
       (ii) imposing a civil money penalty not to exceed $10,000 
     on the sponsor in accordance with the procedures described in 
     section 5503(a)(2).
       (B) Public information.--An approved State shall make 
     available to the public the following information with 
     respect to an enforcement action under subparagraph (A), if 
     such information is applicable with respect to the action:
       (i) Information disclosing that the action has resulted in 
     a penalty being imposed on an approved sponsor under clause 
     (i) or (ii) of subparagraph (A).
       (ii) Information disclosing that a national quality 
     standard under section 9004 was found to have been violated 
     by an approved sponsor through the action.
       (iii) Any other information relating to the action that is 
     required to be made available to the public under State law.
       (2) Qualified providers.--If an approved State finds that a 
     qualified provider that is licensed by the State engages in a 
     pattern or practice of failing to fulfill a requirement 
     applicable to the provider under this part, or failing to 
     cooperate with an approved quality improvement organization 
     to the extent the organization is carrying out a function 
     under section 9009(c)(2), the State shall ensure that the 
     appropriate State board or boards responsible for licensing, 
     accrediting, and disciplining the provider are notified.

     SEC. 9008. GUIDELINE DEVELOPMENT AND RESEARCH ON HEALTH CARE 
                   QUALITY.

       (a) Research Support.--Section 902(a) of the Public Health 
     Service Act is amended--
       (1) in paragraph (7), by striking ``; and'' and inserting a 
     semicolon;
       (2) in paragraph (8), by striking the period and inserting 
     ``; and''; and
       (3) by inserting after paragraph (8) the following:
       ``(9) effective and efficient dissemination of information, 
     standards, and guidelines.''.
       (b) Development of Pediatric Practice Guidelines.--Section 
     912(b) of the Public Health Service Act is amended--
       (1) in paragraph (3), by striking ``; and'' and inserting a 
     semicolon;
       (2) in paragraph (4), by striking ``; and'' and inserting a 
     semicolon;
       (3) in paragraph (5), by striking the period and inserting 
     ``; and''; and
       (4) by inserting after paragraph (5) the following:
       ``(6) include pediatric practice guidelines for the medical 
     treatment of individuals under the age of 18.''.
       (c) Limitation of Liability.--Section 913 of the Public 
     Health Service Act is amended by inserting after subsection 
     (c) the following:
       ``(d) Limitation of Liability.--A member of a panel 
     convened under this section, or an entity having a contract 
     under this section, may not be held, by reason of the 
     performance of any duty, function, or activity required or 
     authorized pursuant to this part or a valid contract entered 
     into under this section, to have violated any criminal law or 
     to be civilly liable under any law of the United States or of 
     any State (or political subdivision thereof), if the member 
     or entity exercised good faith in the performance of such 
     duty, function, or activity.''.
       (d) Dissemination of Guidelines.--Section 914(c) of the 
     Public Health Service Act is amended by--
       (1) striking ``912(a).'' and inserting ``912(a) or 
     certified under section 915.''; and
       (2) striking ``bodies,'' and inserting ``bodies, States, 
     approved quality improvement organizations (as defined in 
     section 9013(2) of the Guaranteed Health Insurance Act of 
     1994),''.
       (d) Evaluation, Certification, and Dissemination of 
     Guidelines.--Part B of title IX of the Public Health Service 
     Act is amended by adding at the end the following:

     ``SEC. 915. EVALUATION, CERTIFICATION, AND DISSEMINATION OF 
                   GUIDELINES.

       ``(a) Evaluation and Certification.--Not later than 18 
     months after the date of the enactment of the Guaranteed 
     Health Insurance Act of 1994, the Administrator shall 
     establish a procedure by which individuals and entities may 
     submit practice guidelines of the type described in section 
     912(a)(1) to the Administrator for evaluation and 
     certification by the Administrator.
       ``(b) Guideline Clearinghouse.--The Administrator shall 
     establish and oversee a clearinghouse and dissemination 
     program for practice guidelines that are certified under this 
     section.''.
       (e) Authorization of Appropriations.--Section 1142(i) of 
     the Social Security Act is amended--
       (1) in paragraph (1)--
       (A) in subparagraph (D), by striking ``and'';
       (B) in subparagraph (E), by striking the period and 
     inserting ``; and''; and
       (C) by inserting after subparagraph (E) the following:
       ``(F) $6,000,000 for each of the fiscal years 1995 through 
     2000.''; and
       (2) in paragraph (2), by striking ``and 1994'' and 
     inserting ``through 2000''.

     SEC. 9009. QUALITY IMPROVEMENT ORGANIZATIONS.

       (a) In General.--
       (1) Contracts.--Subject to subsection (e), and using 
     competitive contracting procedures, the Secretary shall enter 
     into contracts with quality improvement organizations to 
     perform the functions specified in subsection (c) for the 
     geographic areas established under subsection (d)(1).
       (2) Commencement.--The Secretary may not enter into a 
     contract under this section before the date that is 18 months 
     after the date of the enactment of this Act or October 1, 
     1997, whichever occurs later.
       (b) Definition.--For purposes of this part, the term 
     ``quality improvement organization'' means a private 
     nonprofit entity that--
       (1) has a governing body that is broadly representative of 
     consumers of health care, purchasers of health care, 
     qualified providers, and representatives of academia, 
     including experts in quality improvement;
       (2) has a governing body that, to the greatest extent 
     feasible, reflects the racial, ethnic, and gender composition 
     of the population of the United States;
       (3) has a staff that includes individuals with expertise in 
     the fields of quality improvement, public health, patient 
     outcome assessment, risk adjustment, clinical practice 
     guidelines, health services data analysis, and provider and 
     consumer education; and
       (4) is able, in the judgment of the Secretary, to satisfy 
     the requirements in paragraphs (1) and (2) of subsection (c).
       (c) Functions.--
       (1) In General.--A quality improvement organization 
     entering into a contract with the Secretary under this 
     section--
       (A) shall fulfill each requirement that is set forth in 
     sections 9002 through 9008 and that is applicable to quality 
     improvement organizations;
       (B) shall assist in the development of innovative programs 
     to improve the quality of health care services, including 
     provider education programs;
       (C) shall collaborate with, and provide technical 
     assistance to, approved sponsors and qualified providers in 
     ongoing efforts to improve the quality of care;
       (D) shall develop programs in lifetime learning;
       (E) shall disseminate information about quality improvement 
     programs;
       (F) shall disseminate and encourage the appropriate 
     application of guidelines developed, updated, or certified 
     pursuant to title IX of the Public Health Service Act or 
     other guidelines;
       (G) shall maintain such records, make such reports 
     (including expenditure reports), and cooperate with such 
     audits, as the Secretary finds necessary to determine the 
     compliance of the organization with the requirements of this 
     part; and
       (H) shall perform such duties and functions, assume such 
     responsibilities, and comply with such other requirements as 
     the Secretary may require under regulations promulgated to 
     carry out this part.
       (2) Referral.--
       (A) Evaluation of practices.--If a quality improvement 
     organization entering into a contract with the Secretary 
     under this section finds that the pattern of practice of a 
     qualified provider or an approved sponsor that provides 
     health benefits in the form of items and services to 
     enrollees suggests deficiencies in the quality of care being 
     provided by the provider or sponsor that could impair patient 
     health or safety, the organization shall evaluate the 
     practices that may have lead to the suggestion of 
     deficiencies.
       (B) Assistance in eliminating deficiencies.--If a quality 
     improvement organization finds, after conducting an 
     evaluation under subparagraph (A), that the quality of the 
     practices of a qualified provider or an approved sponsor 
     referred to in such subparagraph is deficient, the 
     organization shall work with the provider to assist the 
     provider to eliminate the deficiencies.
       (C) No substantial improvement.--If a quality improvement 
     organization finds, after affording reasonable opportunities 
     for improvement, that substantial improvement in the quality 
     of the practices of a qualified provider or an approved plan 
     sponsor referred to in subparagraph (B) has not occurred, the 
     organization shall determine whether the deficiencies in the 
     quality of such practices pose a danger to patient health or 
     safety. If the organization finds that such practices do pose 
     such a danger, the organization shall notify the appropriate 
     State board or boards responsible for licensing, accrediting, 
     and disciplining the provider or sponsor.
       (d) Contract Specifications.--
       (1) Establishment of geographic areas.--The Secretary shall 
     establish throughout the United States geographic areas with 
     respect to which contracts under this section will be made. 
     In establishing such areas, the Secretary shall take into 
     account the following criteria:
       (A) State areas.--Each State shall generally be designated 
     as a geographic area for purposes of this paragraph.
       (B) Multi-state areas.--The Secretary may establish 
     geographic areas comprised of multiple contiguous States 
     rather than State areas only where the volume of activity or 
     other relevant factors (as determined by the Secretary) 
     warrant such an establishment.
       (2) Organizations entitled to contract with Secretary.--
       (A) In general.--The Secretary shall enter into a contract 
     with a quality improvement organization for each area 
     established under paragraph (1) if a qualified organization 
     is available in such area and such organization and the 
     Secretary have negotiated a proposed contract which the 
     Secretary determines will be carried out by such organization 
     in a manner consistent with the efficient and effective 
     administration of this part.
       (B) Limitation on affiliations with payers.--The Secretary 
     may not enter into a contract under this section with any 
     entity which is, or is affiliated with (through management, 
     ownership, or common control), an entity (other than a self-
     insured employer) which directly or indirectly makes payments 
     to any qualified provider whose health care services are 
     reviewed by such entity or would be reviewed by such entity 
     if it entered into a contract with the Secretary under this 
     section.
       (C) Limitation on affiliations with providers.--The 
     Secretary may not enter into a contract under this section 
     with any entity which is, or is affiliated with (through 
     management, ownership, or common control), a qualified 
     provider, or association of such providers, within the area 
     served by such entity or which would be served by such entity 
     if it entered into a contract with the Secretary under this 
     part. For purposes of this subparagraph, an entity shall not 
     be considered to be affiliated with a qualified provider or 
     association of providers by reason of management, ownership, 
     or common control if the management, ownership, or common 
     control consists only of not more than 20 percent of the 
     members of the governing board of the entity being affiliated 
     (through management, ownership, or common control) with one 
     or more of such providers or associations.
       (3) Terms of contract.--Each contract with an organization 
     under this section shall provide that--
       (A) the organization shall perform the functions set forth 
     in subsection (c) or may subcontract for the performance of 
     all or some of such functions (and for purposes of 
     subparagraphs (B) and (C) paragraph (2), a subcontract under 
     this subparagraph shall not constitute an affiliation with a 
     subcontractor);
       (B) the Secretary shall have the right to evaluate the 
     quality and effectiveness of the organization in carrying out 
     the functions specified in the contract;
       (C) the contract shall be for an initial term of 3 years 
     and shall be renewable for an additional term of 2 years 
     thereafter without a competitive selection process based upon 
     evidence of successful quality improvement activities;
       (D) if the Secretary intends not to renew a contract, the 
     Secretary shall notify the organization of the decision at 
     least 90 days prior to the expiration of the contract term, 
     and shall provide the organization an opportunity to present 
     data, interpretations of data, and other information 
     pertinent to its performance under the contract, which shall 
     be reviewed in a timely manner by the Secretary;
       (E) the organization may terminate the contract upon 90 
     days notice to the Secretary;
       (F) the Secretary may terminate the contract prior to the 
     expiration of the contract term upon 90 days notice to the 
     organization if the Secretary determines that--
       (i) the organization does not substantially meet the 
     requirements of this section; or
       (ii) the organization has failed substantially to carry out 
     the contract or is carrying out the contract in a manner 
     inconsistent with the efficient and effective administration 
     of this part, but only after such organization has had an 
     opportunity to submit data and have such data reviewed by the 
     panel established under paragraph (4).
       (4) Evaluation of performance.--In evaluating the 
     performance of quality improvement organizations under 
     contracts under this section, the Secretary shall place 
     emphasis on the performance of such organizations in 
     improving the quality of health care services and educating 
     qualified providers and approved sponsors concerning the 
     process being used by the organization and the criteria being 
     applied by the organization.
       (5) Contracting authority of Secretary.--The contracting 
     authority of the Secretary under this section may be carried 
     out without regard to any provision of law relating to the 
     making, performance, amendment, or modification of contracts 
     of the United States as the Secretary may determine to be 
     inconsistent with the purposes of this part. The Secretary 
     may use different contracting methods with respect to 
     different geographical areas.
       (6) Termination not subject to judicial review.--Any 
     determination by the Secretary to terminate or not to renew a 
     contract under this section shall not be subject to judicial 
     review.
       (e) Assumption of Responsibilities by Secretary.--If the 
     Secretary determines that there is no qualified entity 
     available for an area with which the Secretary can enter into 
     a contract under this section, the Secretary shall take such 
     steps as are necessary to perform in the area the duties 
     applicable to approved quality improvement organizations 
     under this part. Any information required under this part to 
     be transmitted by any person to an approved quality 
     improvement organization for an area shall be transmitted to 
     the Secretary in the case where there is no qualified entity 
     available for an area with which the Secretary can enter into 
     a contract under this section.
       (f) Limitation of Liability.--A quality improvement 
     organization having a contract with the Secretary under this 
     section, a person who is employed by, or who has a fiduciary 
     relationship with, any such organization, and a person who 
     furnishes professional services to such organization, may not 
     be held, by reason of the performance of any duty, function, 
     or activity required or authorized pursuant to this part or 
     to a valid contract entered into under this section, to have 
     violated any criminal law or to be civilly liable under any 
     law of the United States or of any State (or political 
     subdivision thereof), if the organization or person exercised 
     good faith in the performance of such duty, function, or 
     activity.

     SEC. 9010. QUALITY MANAGEMENT GRANTS.

       (a) In General.--
       (1) Grants.--The Secretary shall make a grant to each State 
     that satisfies the requirements of this section.
       (2) Commencement.--The Secretary may not make a grant under 
     this section before the date that is 18 months after the date 
     of the enactment of this Act or October 1, 1997, whichever 
     occurs later.
       (b) Applications.--
       (1) Submission.--To apply for a grant under this section 
     for any fiscal year, a State shall submit an application to 
     the Secretary in accordance with the procedures established 
     by the Secretary. The Secretary shall establish a deadline 
     for the submission of applications under this paragraph for 
     each fiscal year.
       (2) Criteria for approval.--The Secretary may not approve 
     an application submitted under paragraph (1) unless the 
     application includes assurances satisfactory to the Secretary 
     that--
       (A) the State has a State regulatory program approved under 
     section 5502(b) of the Social Security Act;
       (B) the State is willing and able to fulfill each 
     requirement that is set forth in sections 9002 through 9008 
     that is applicable to an approved State;
       (C) the State will enforce the requirements set forth in 
     sections 9002 through 9008 that are applicable to an approved 
     sponsor or a qualified provider with respect to each approved 
     sponsor that provides or sponsors an approved health plan in 
     the State and each qualified provider licensed by the State, 
     except in the case where another individual or entity is 
     charged with such enforcement under this part;
       (D) the State will maintain such records, make such reports 
     (including expenditure reports), and cooperate with such 
     audits, as the Secretary finds necessary to determine the 
     compliance of the State (and persons regulated by the State) 
     with the requirements of this part;
       (E) the State will carry out a plan, that has been 
     submitted to the Secretary in a form and manner specified by 
     the Secretary, to make specific improvements, in accordance 
     with standards established by the Secretary for this purpose, 
     in the health status of populations in the State that--
       (i) experience a disproportionately high rate of morbidity 
     and mortality; or
       (ii) are historically underserved; and
       (F) funds received under this section will be used for 
     consumer protection and quality oversight activities.
       (3) Petitions for reconsideration and reapplications.--
       (A) In general.--With respect to an application submitted 
     under paragraph (1) that is disapproved under this 
     subsection, the applicant may submit to the Secretary--
       (i) a petition for reconsideration of the application; and
       (ii) an application that conforms to the requirements of 
     this subsection.
       (B) Deadlines.--The Secretary shall establish a deadline 
     for the submission of petitions for reconsideration and 
     reapplications under this paragraph for each fiscal year. The 
     Secretary shall approve or disapprove each such petition and 
     reapplication before the termination of the 60-day period 
     beginning on the date of such submission.
       (c) Ability to Satisfy Requirements Through Arrangements.--
     A State may satisfy a requirement that is set forth in any of 
     sections 9002 through 9008 directly or through arrangements 
     with individuals or entities approved by the State that 
     demonstrate to the satisfaction of the State that the 
     individual or entity--
       (1) has the ability to fulfill any duty delegated to the 
     individual or entity by the State; and
       (2) does not have a relationship with an approved sponsor 
     or a qualified provider that would interfere with the ability 
     of the individual or entity to fulfill any duty of a 
     participating State under this part.
       (d) Periodic Review.--The Secretary shall periodically 
     review the compliance by States that receive a grant under 
     this section with the terms of the award of the grant.
       (e) Federal Assumption of State Responsibilities.--
       (1) In general.--In the case of a State that does not 
     receive a grant under this section on or before January 1, 
     1999, or that substantially fails to satisfy a term of an 
     award of such a grant, the Secretary shall take such steps as 
     are necessary--
       (A) to perform in the State the duties specified in 
     sections 9002 through 9008 as duties of approved States;
       (B) to enforce in the State the requirements set forth in 
     sections 9002 through 9008 that are applicable to an approved 
     sponsor or a qualified provider in the same manner as an 
     approved State would be required to enforce such requirements 
     under subsection (b)(2)(C).
       (2) Data transmission.--Any information required under this 
     part to be transmitted by any person to an approved State 
     shall be transmitted to the Secretary in the case of a State 
     described in paragraph (1).

     SEC. 9011. AUTHORIZATION OF APPROPRIATIONS FOR CONTRACTS AND 
                   GRANTS.

       There are authorized to be appropriated $300,000,000 for 
     each of the fiscal years 1998 through 2002 for contracts 
     under section 9009 and for grants under section 9010.

     SEC. 9012. HEALTH CARE QUALITY ADVISORY COMMISSION.

       (a) Establishment.--The Secretary shall provide for the 
     appointment of a Health Care Quality Advisory Commission, to 
     be composed of individuals from the public and private 
     sectors with expertise in the fields of public health, 
     financing and delivery of health care, health services 
     research, health care quality, and privacy of health 
     information and representatives of consumers appointed by the 
     Secretary. To the greatest extent feasible, the membership of 
     the Commission shall reflect the racial, ethnic, and gender 
     composition of the population of the United States.
       (b) Duties.--The Commission shall provide recommendations 
     to the Secretary with respect to the--
       (1) development and selection of the national measures of 
     quality performance under section 9003, after consulting with 
     appropriate interested parties, including the Administrator 
     for Health Care Policy and Research, States, the National 
     Association of Insurance Commissioners, approved sponsors, 
     qualified providers, experts in quality measurement, 
     nationally recognized accrediting bodies, other Federal 
     advisory bodies, and consumers of health care services;
       (2) establishment of an appropriate sequence for the 
     interim sets of national measures of quality performance 
     under section 9003(a)(4);
       (3) development of national goals of quality performance;
       (4) design and execution of consumer surveys under section 
     9002;
       (5) standard format for performance reports under section 
     9003(g);
       (6) establishment and functioning approved quality 
     improvement organizations under section 9009; and
       (7) impact of the implementation of the National Quality 
     Management Program.
       (c) Membership.--The Commission shall be composed of 15 
     members. Members of the Commission shall first be appointed 
     not later than 6 months after the date of the enactment of 
     this Act for a term of 3 years, except that the Secretary may 
     provide initially for such shorter terms as will ensure that 
     (on a continuing basis) the terms of not more than 4 member 
     expire in any one year.
       (d) Duration.--Notwithstanding section 14(a) of the Federal 
     Advisory Committee Act, the Commission shall continue in 
     existence until otherwise provided by law.
       (e) Report.--The Commission shall submit to the Congress an 
     annual report not later than May 1 of each year concerning 
     the activities of the Commission under this part during the 
     preceding year.

     SEC. 9013. DEFINITIONS.

       For purposes of this part:
       (1) Approved health plan.--The term ``approved health 
     plan'' means an insured health benefit plan or a self-insured 
     health benefit plan, as described in title V.
       (2) Approved quality improvement organization.--The term 
     ``approved quality improvement organization'' means a quality 
     improvement organization that has a contract with the 
     Secretary under section 9009. When used with respect to a 
     geographic area, such term means a quality improvement 
     organization that is responsible under such a contract for 
     carrying out the responsibilities of approved quality 
     improvement organizations under this part in a geographic 
     area established under section 9009(d)(1).
       (3) Approved sponsor.--The term ``approved sponsor'' 
     means--
       (A) a carrier providing an insured health benefit plan, as 
     described in title V; or
       (B) a sponsor of a self-insured health benefit plan, as 
     described in such title.
       (4) Approved state.--The term ``approved State'' means a 
     State that receives a grant under section 9010.
       (5) Health institution.--The term ``health institution'' 
     means a qualified provider that is not a network provider 
     with respect to any approved health plan and is--
       (A) a hospital (as defined in section 1861(e) of the Social 
     Security Act);
       (B) a psychiatric hospital (as defined in section 1861(f) 
     of such Act);
       (C) an institution (or a distinct part of an institution) 
     which is primarily engaged in providing skilled nursing care 
     and related services to residents who require medical or 
     nursing care or rehabilitation services to residents for 
     rehabilitation with respect to an illness, injury, disorder, 
     or other health condition (regardless of whether the 
     institution meets the requirements of section 1819 of such 
     Act for receiving payment for items and services furnished 
     under title 18 of such Act);
       (D) an ambulatory surgical center (regardless of whether 
     the center meets the health, safety, and other standards 
     promulgated by the Secretary under section 1832(a)(2)(F)(i) 
     of such Act);
       (E) a provider of intensive residential services (as 
     defined in section 1861(qq) of such Act); and
       (F) a provider of intensive community-based services (as 
     defined in section 1861(ff) of such Act).
       (6) Network provider.--The term ``network provider'', when 
     used with respect to an approved health plan, means a 
     qualified provider who is member of a plan network of the 
     plan.
       (7) Plan network.--The term ``plan network'' means, with 
     respect to an approved health plan, qualified providers who 
     have entered into an agreement with the plan under which such 
     providers are obligated to provide items and services covered 
     under the plan to individuals enrolled in the plan, or have 
     an agreement to provide services on a fee-for-service basis.
       (8) Qualified provider.--The term ``qualified provider'' 
     means a health professional who, or a health facility that, 
     is authorized to provide an item or service in the guaranteed 
     national benefit package.

     SEC. 9014. REFERENCES TO MEDICARE PROVISIONS.

       In this part, any references to provisions of title XVIII 
     of the Social Security Act are deemed to be references to 
     such provisions as in effect on the day after the date of the 
     enactment of this Act, taking into account the amendments 
     made to such title by this Act as if the effective date of 
     such amendments were January 1, 1997.

     SEC. 9015. EFFECTIVE DATES.

       (a) In General.--Except as provided in subsection (b), the 
     provisions of this part shall take effect on January 1, 1998.
       (b) Provisions Effective Immediately.--
       (1) Secretarial responsibilities.--The following provisions 
     imposing a duty on the Secretary shall take effect on the 
     date of the enactment of this Act:
       (A) Section 9001.
       (B) Section 9002.
       (C) Subsections (a), (b), (c), and (j) of section 9003.
       (D) Section 9004.
       (E) Section 9005(a).
       (F) Subsections (b), (c), and (e) of section 9006.
       (G) Sections 9008, 9009, 9010, 9012, 9013, and 9014.
       (2) Authorization of appropriations.--Section 9011 shall 
     take effect on the date of the enactment of this Act.

                       PART 2--CONSUMER RESOURCES

     SEC. 9021. CONSULTATION REQUIREMENTS REGARDING ADMINISTRATION 
                   OF PROGRAM.

       The Secretary of Health and Human Services shall consult 
     with the Secretary of Labor in carrying out part O of title 
     III of the Public Health Service Act (relating to consumer 
     resources regarding health plans).
   Subtitle B--Information Systems and Administrative Simplification

     SEC. 9101. REQUIREMENTS FOR HEALTH SECURITY CARDS AND 
                   PERSONAL IDENTIFIERS.

       (a) Health Security Cards.--
       (1) Requirement.--Each administered health plan sponsor 
     shall issue a health security card that meets the 
     requirements of subsection (c) for each individual who is 
     entitled to benefits under an administered health plan 
     provided or sponsored by the sponsor, if the plan provides 
     for coverage of the guaranteed national benefit package. Such 
     card shall be issued to the individual involved or, in the 
     case of an individual enrolled as a dependent of another 
     individual, to that other individual.
       (2) Deadline for application of requirement.--The deadline 
     specified under this paragraph for the requirement under 
     paragraph (1) is January 1, 1997.
       (b) Enforcement Through Civil Money Penalties.--
       (1) In general.--In the case of an administered health plan 
     sponsor that fails to issue a health security card in 
     accordance with subsection (a)(1), the sponsor is subject to 
     a civil money penalty of not to exceed $100 for each such 
     violation. The provisions of section 1128A of the Social 
     Security Act (other than subsections (a) and (b)) shall apply 
     to a civil money penalty under this subsection in the same 
     manner as such provisions apply to a penalty or proceeding 
     under section 1128A(a) of such Act.
       (2) Effective date.--No penalty may be imposed under 
     paragraph (1) for any failure occurring before the deadline 
     specified in subsection (a)(2).
       (c) Standards for Cards.--
       (1) In general.--The Secretary shall establish standards 
     consistent with this subsection respecting the form and 
     information to be contained on health security cards (for 
     purposes of subsection (a)).
       (2) Permissible uses of card.--A health security card that 
     is issued to an individual who is entitled to benefits under 
     an administered health plan may be used by an individual or 
     entity, in accordance with regulations promulgated by the 
     Secretary consistent with subtitle C, only for the purpose of 
     providing to the individual entitled to benefits, or 
     assisting the individual in obtaining, an item or service 
     that is covered under such plan.
       (3) Electronic.--
       (A) In general.--Subject to subparagraph (B), the card 
     shall be in a form similar to that of a credit card and shall 
     have, encoded in electronic or magnetic form--
       (i) the identity of the individual entitled to health 
     benefits;
       (ii) the administered health plan providing for coverage of 
     the guaranteed national benefit package in which the 
     individual is enrolled;
       (iii) the identity of each principal insured (as defined by 
     the Secretary) for the family that includes the individual, 
     in the case of an individual who is enrolled under a family 
     class of enrollment;
       (iv) the telephone number or numbers (or other electronic 
     equivalent) to be used for the submission electronically of 
     claims under the plan; and
       (v) information relating to organ donation.
       (B) Use of electronic read-and-write cards.--The Secretary 
     may provide for cards in an electronic form that permits 
     information on the card to be readily changed. Such 
     information may include information relating to the health 
     coverage status of the individual and the medical history of 
     the individual.
       (C) Personal identifier.--For purposes of subparagraph (A), 
     and for purposes of the transactions described in section 
     9104(a), the Social Security account number assigned to the 
     individual by the Secretary under section 205(c)(2) of the 
     Social Security Act or, in the case of an infant or other 
     individual to whom such a number has not been issued, such a 
     Social Security account number of a parent or guardian or 
     other number as the Secretary shall specify, shall be used as 
     the personal identifier for the individual.
       (4) Additional information.--The card shall include such 
     additional information, in electronic or other form, as the 
     Secretary may require to carry out the purposes of this Act. 
     In addition, the administered health plan sponsor issuing the 
     card may include such additional information on the card as 
     the sponsor desires, subject to such limitations as the 
     Secretary may provide.
       (5) Deadline.--The Secretary shall first establish the 
     standards for health security cards under this subsection by 
     not later than 18 months after the date of the enactment of 
     this Act.
       (d) Misuse of Cards.--
       (1) In general.--An individual or entity may not collect, 
     disseminate, request or require presentation of, or otherwise 
     use (by electronic or other means) a health security card 
     except as authorized under this section.
       (2) Private right of action.--A person who is aggrieved by 
     a violation of paragraph (1) may, in a civil action, obtain 
     appropriate relief, including actual, compensatory, and 
     punitive damages and equitable relief, against any 
     appropriate party.
       (3) Attorney's fees and costs.--In any action under 
     paragraph (2) in which the plaintiff substantially prevails, 
     the court shall award the plaintiff reasonable attorney's 
     fees (at generally prevailing hourly rates), reasonable 
     expert witness fees, and other reasonable costs, unless the 
     court finds that such award would not be appropriate.
       (4) Penalties.--
       (A) Misuse of information.--The provisions of section 
     208(a) of the Social Security Act in relation to violations 
     described in paragraphs (7) and (8) thereof shall apply with 
     respect to the health security card and any information 
     contained or encoded on such card in the same manner and to 
     the same extent as such provisions apply with respect to the 
     social security card and to the social security account 
     number or other information contained or encoded on the 
     social security card, except that, in applying such 
     provisions, any reference therein to the Commissioner of 
     Social Security shall be deemed a reference to the Secretary.
       (B) Misuse of symbols, emblems, or names.--Section 1140 of 
     the Social Security Act shall apply with respect to the 
     health security card in the same manner and to the same 
     extent as such section applies with respect to the social 
     security card.
       (5) Civil money penalty.--Any person who the Secretary 
     determines has failed to comply with paragraph (1) shall be 
     subject, in addition to any other penalties that may be 
     prescribed by law, to a civil money penalty of not more than 
     $1,000 for each such failure. The provisions of section 1128A 
     of the Social Security Act (other than subsections (a) and 
     (b)) shall apply to a civil money penalty under this 
     paragraph in the same manner as such provisions apply to a 
     penalty or proceeding under section 1128A(a) of such Act.
       (7) Protection against delay or denial of services.--An 
     individual may not have health services delayed or denied for 
     inability or failure to produce a health security card.

     SEC. 9102. NATIONAL ENROLLMENT VERIFICATION SYSTEMS.

       (a) Establishment.--The Secretary shall establish national 
     enrollment verification systems for the verification of an 
     individual's enrollment in an administered health plan and 
     entitlement to benefits under such plan. The systems shall 
     assist in the identification of, and collection from, parties 
     responsible for the payment for health care items and 
     services furnished to individuals enrolled under an 
     administered health plan.
       (b) Information in Systems.--The enrollment verification 
     systems shall contain such information submitted by 
     administered health plan sponsors, the Civilian Health and 
     Medical Program of the Uniformed Services under chapter 55 of 
     title 10, United States Code, employers, and other 
     individuals and entities specified by the Secretary as the 
     Secretary shall determine in standards established under this 
     section. The information shall be submitted in a form and 
     manner specified by the Secretary. The information shall 
     include the following with respect to each individual 
     enrolled in an administered health plan (regardless of 
     whether the individual is enrolled under an individual or a 
     family class of enrollment):
       (1) The name, address, and personal identifier of the 
     individual and the identity of each principal insured (as 
     defined by the Secretary under section 9101(c)(3)(A)(iii)) 
     for the family that includes the individual, in the case of 
     an individual who is enrolled under a family class of 
     enrollment.
       (2) The name, address, and telephone number (or other 
     electronic equivalent) of each administered health plan in 
     which the individual is enrolled.
       (3) The type of coverage elected.
       (4) Race and ethnicity data.
       (5) The period for which such coverage is elected.
       (6) The status of individuals with respect to deductibles, 
     copayments, coinsurance, or out-of-pocket limits on cost 
     sharing.
       (7) Coordination of benefit information appropriate in 
     determining liability in cases in which benefits may be 
     payable under 2 or more administered health plans.
       (c) Periodicity of Submissions.--The standards established 
     by the Secretary under this subsection shall require the 
     submission of information to the national enrollment 
     verification systems on a periodic basis (as determined by 
     the Secretary) in order to report applicable changes with 
     respect to the information described in subsection (b).
       (d) Form of Inquiry.--The verification systems shall be 
     capable of accepting inquiries from health care providers, 
     administered health plan sponsors, the Civilian Health and 
     Medical Program of the Uniformed Services under chapter 55 of 
     title 10, United States Code, (and any other individual or 
     entity determined appropriate by the Secretary) in a variety 
     of electronic and other forms.
       (e) Form of Response.--The systems shall be capable of 
     responding to inquiries under subsection (d) in a variety of 
     electronic and other forms.
       (f) Limits on Disclosure of Information Reported.--The 
     disclosure of information reported to the national enrollment 
     verification systems shall be restricted by the Secretary 
     under standards established by the Secretary that are 
     consistent with subtitle C.
       (g) Fees.--The Secretary shall establish a schedule of fees 
     for the acceptance of, and response to, inquiries to the 
     verification systems. The Secretary may impose appropriate 
     fees, according to the schedule, for such inquiries and 
     responses.
       (h) Public Domain Software to Providers.--The Secretary 
     shall provide for the development, and shall make available 
     without charge to health care providers, a variety of forms 
     of computer software to enable such providers to make 
     inquiries to, and receive responses from, the national 
     enrollment verification systems in electronic form.
       (i) Deadline.--The Secretary shall establish the system and 
     standards under this section (and shall develop and make 
     available the software under subsection (h)) by not later 
     than January 1, 1996.
       (j) Civil Money Penalty.--In the case of a failure of an 
     individual or entity to report information to the enrollment 
     verification system under a standard established by the 
     Secretary under this section, the individual or entity shall 
     be subject, in addition to any other penalties that may be 
     prescribed by law, to a civil money penalty of not more than 
     $1000 for each day in which such failure persists. The 
     provisions of section 1128A of the Social Security Act (other 
     than subsections (a) and (b)) shall apply to a civil money 
     penalty under this subsection in the same manner as such 
     provisions apply to a penalty or proceeding under section 
     1128A(a) of such Act.

     SEC. 9103. STANDARDS FOR HEALTH INFORMATION AND INFORMATION 
                   TRANSACTIONS.

       (a) Standards to Ensure Comparability of Information.--
       (1) In general.--The Secretary shall establish standards 
     necessary to make a set of health information described in 
     subsection (b) that is created by an administered health plan 
     sponsor or a health provider comparable with the same set of 
     information created by another such sponsor or provider.
       (2) Data elements.--The standards shall specifically define 
     the data elements that comprise each set of health 
     information described in subsection (b).
       (3) Format.--The standards shall include uniform 
     presentation and format requirements for the arrangement of 
     data elements.
       (4) Electronic.--The standards under paragraph (1) shall 
     require that health information described in such paragraph 
     be in electronic or magnetic form.
       (5) Unique identifiers.--The Secretary shall establish a 
     system to provide for a unique identifier for each employer, 
     administered health plan, administered health plan sponsor, 
     group practice, and health provider. In the case of a health 
     provider that has a unique identifier issued for purposes of 
     the medicare program, the 2 unique identifiers shall be 
     identical.
       (6) Code sets.--The Secretary, in consultation with experts 
     from the private sector and Federal agencies--
       (A) shall select code sets for appropriate data elements 
     from among the code sets that have been developed by private 
     and public entities; or
       (B) shall establish code sets for appropriate data elements 
     if no code set for the data elements has been developed by 
     such entities.
       (b) Sets of Health Information.--
       (1) Plan and provider transactions.--The Secretary shall 
     establish a separate set of health information that is 
     appropriate for transmission in connection with each 
     transaction described in section 9104(a).
       (2) Encounter information.--The Secretary shall establish a 
     set of encounter information derived from inpatient and 
     outpatient clinical encounters that the Secretary 
     determines--
       (A) is appropriate for creation by--
       (i) an administered health plan sponsor to the extent the 
     sponsor provides health benefits in the form of items and 
     services to enrollees; or
       (ii) a network provider with respect to an administered 
     health plan sponsored or provided by an administered health 
     plan sponsor, but only if the sponsor does not--

       (I) provide health benefits in the form of payments based 
     on claims; or
       (II) create the set of encounter information; and

       (B) is necessary to provide information regarding the 
     operation of an administered health plan sponsor described in 
     subparagraph (A)(i), or a network provider described in 
     subparagraph (A)(ii), that is equivalent to information 
     derived from claims.
       (3) Patient medical record information.--The Secretary 
     shall establish a set of patient medical record information.
       (4) Additions to sets.--The Secretary may make additions to 
     a set of health information established under paragraph (1), 
     (2), or (3) as the Secretary determines appropriate in a 
     manner that minimizes the disruption to, and costs of 
     compliance incurred by, an administered health plan sponsor 
     or a health provider that is required to comply with section 
     9104.
       (c) Standards for Information Transactions.--
       (1) In general.--The Secretary shall establish standards 
     relating to technical aspects of the procedure and method by 
     which an administered health plan sponsor or a health 
     provider that is required to comply with section 9104 may 
     transmit electronically health information that is included 
     in a set of health information described in subsection (b). 
     The standards shall include standards with respect to the 
     format in which such information shall be transmitted under 
     such section.
       (2) Chain of custody.--The standards under paragraph (1) 
     shall ensure the suitability of health information that is 
     included in a set of health information described in 
     subsection (b) in a court of law.
       (3) Record keeping.--The standards shall include 
     instructions on record keeping in support of claims for 
     benefits under an administered health plan.
       (4) Standards for claims for clinical laboratory tests.--
     The standards shall provide that claims for clinical 
     laboratory tests for which benefits are provided under an 
     administered health plan shall be submitted directly by the 
     person or entity that performed (or supervised the 
     performance of) the tests to the plan in a manner consistent 
     with (and subject to such exceptions as are provided under) 
     the requirement for direct submission of such claims under 
     the medicare program.
       (5) Ensuring accountability for claims submitted 
     electronically.--In establishing the standards, the 
     Secretary, in consultation with appropriate agencies, shall 
     include such methods of ensuring health provider 
     responsibility and accountability for claims submitted 
     electronically that are designed to control fraud and abuse 
     in the submission of such claims.
       (6) Special rule for coordination of benefits.--Any 
     standards adopted by the Secretary under paragraph (1) that 
     relate to coordination of benefits shall provide, to the 
     maximum extent practicable, that a claim for reimbursement 
     for health services furnished is tested by an algorithm 
     specified by the Secretary against appropriate records of 
     enrollment and eligibility for the individual who received 
     such services to determine any primary and secondary obligors 
     for payment.
       (d) General Requirements.--In establishing standards under 
     this section, the Secretary shall, to the maximum extent 
     practicable--
       (1) establish standards that are consistent with the 
     objective of reducing the costs of providing and paying for 
     health care;
       (2) incorporate standards that are in use and generally 
     accepted, or developed, by standard setting or standard 
     development organizations; and
       (3) consult with experts and professional organizations in 
     the field of information management.
       (e) Timetables for Standards.--
       (1) Initial Standards.--
       (A) In general.--Except as provided in subparagraph (B), 
     not later than January 1, 1996, the Secretary shall establish 
     standards under subsections (a) and (c) with respect to each 
     set of health information described in subsection (b).
       (B) Exceptions.--
       (i) In general.--Not later than January 1, 1997, the 
     Secretary shall establish standards under subsections (a) and 
     (c) with respect to--

       (I) health information that is appropriate for transmission 
     in connection with the submission of a claim attachment; and
       (II) the set of patient medical record information 
     established under subsection (b)(3).

       (ii) Additions.--The Secretary shall establish standards 
     under subsection (a) and (c) with respect to health 
     information that is added to a set of health information 
     under subsection (b)(4) in conjunction with making such 
     addition.
       (2) Modifications to standards.--
       (A) In general.--Except as provided in subparagraph (B), 
     the Secretary shall review the standards established under 
     this section and shall modify such standards as determined 
     appropriate, but not more frequently than once every 6 
     months. Any modification under this subparagraph shall be 
     made in a manner that minimizes the disruption to, and costs 
     of compliance incurred by, a health information plan sponsor 
     or a health provider that is required to comply with section 
     9104.
       (B) Special rules.--
       (i) Modifications during first 12-month period.--The 
     Secretary may not modify a standard established under this 
     section during the 12-month period beginning on the date the 
     standard is established unless the Secretary determines that 
     a modification is necessary in order to permit a health 
     information plan sponsor or a health provider to comply with 
     section 9104.
       (ii) Additions and modifications to code sets.--

       (I) In general.--The Secretary shall ensure that procedures 
     exist for the enhancement of code sets to accommodate changes 
     in public health, biomedical science, and health care 
     delivery.
       (II) Additional rules.--If a code set is modified under 
     this clause, the modified code set shall include instructions 
     on how data elements that were encoded prior to the 
     modification are to be converted or translated so as to 
     preserve the value of the data elements. Any modification to 
     a code set under this subsection shall be implemented in a 
     manner that minimizes the disruption to, and costs of 
     compliance incurred by, a health information plan sponsor or 
     a health provider that is required to comply with section 
     9104.

       (f) Evaluation of Standards.--The Secretary may establish a 
     process to measure or verify the consistency of standards 
     established or modified under this section. The process may 
     include demonstration projects and analyses of the cost of 
     implementing such standards and modifications.
       (g) Distribution of Code Sets.--The Secretary shall 
     establish efficient and low-cost procedures for the 
     distribution of code sets that are selected, established, or 
     modified under this section.

     SEC. 9104. REQUIREMENTS ON SPONSORS AND PROVIDERS.

       (a) Transactions by sponsors.--
       (1) Transactions with providers.--If an administered health 
     plan sponsor conducts any of the transactions described in 
     paragraph (3) with a health provider--
       (A) the transaction shall be a standard transaction; and
       (B) the health information transmitted by the sponsor to 
     the provider or by the provider to the sponsor in connection 
     with the transaction shall be standard health information.
       (2) Transactions with sponsors.--If an administered health 
     plan sponsor or a workers' compensation carrier conducts any 
     of the transactions described in paragraph (3) with an 
     administered health plan sponsor or a workers' compensation 
     carrier--
       (A) the transaction shall be a standard transaction; and
       (B) the health information transmitted by any such sponsor 
     or any such carrier in connection with the transaction shall 
     be standard health information.
       (3) Transactions.--The transactions referred to in 
     paragraphs (1) and (2) are the following:
       (A) Verification of eligibility for benefits.
       (B) First report of injury.
       (C) Coordination of benefits.
       (D) Claim submission.
       (E) Claim attachment submission.
       (F) Claim status notification.
       (G) Claim status verification.
       (H) Claim adjudication.
       (I) Payment and remittance advice.
       (b) Disclosure of Information.--
       (1) Transaction information.--If an administered health 
     plan sponsor or a health provider discloses health 
     information that was transmitted or received by the sponsor 
     or provider in connection with a transaction described in 
     subsection (a) to a State, a Federal or State agency, a 
     grantee of a State or the Federal Government, or a party to a 
     contract entered into by a State or the Federal Government, 
     and the disclosure is made in order to fulfill a requirement 
     under this Act--
       (A) the health information disclosed shall be standard 
     health information; and
       (B) the disclosure shall be made through an electronic 
     transmission consistent with--
       (i) the standards under section 9103(c); and
       (ii) subtitle C.
       (2) Encounter information.--If an administered health plan 
     sponsor or a health provider discloses health information 
     that is included in the set of encounter information 
     established by the Secretary under section 9103(b)(2) to a 
     State, a Federal or State agency, a grantee of a State or the 
     Federal Government, or a party to a contract entered into by 
     a State or the Federal Government, and the disclosure is made 
     in order to fulfill a requirement under this Act--
       (A) the health information disclosed shall be standard 
     health information; and
       (B) the disclosure shall be made through an electronic 
     transmission consistent with--
       (i) the standards under section 9103(c); and
       (ii) subtitle C.
       (3) Requirement on government agents.--A State, a Federal 
     or State agency, a grantee of a State or the Federal 
     Government, or a party to a contract entered into by a State 
     or the Federal Government may not impose a requirement on an 
     administered health plan sponsor or a health provider that is 
     inconsistent with paragraph (1) or (2).
       (c) Use of Health Information Network Services.--A health 
     information plan sponsor or a health provider may comply with 
     any provision of this section by entering into an agreement 
     or other arrangement with a health information network 
     service certified under section 9106 pursuant to which the 
     service undertakes the duties applicable to the sponsor or 
     provider under the provision.
       (d) Timetables for Compliance.--
       (1) Initial compliance.--
       (A) In general.--A health information plan sponsor or 
     health provider shall comply with the requirements of this 
     section not later than January 1, 1997.
       (B) Additional health information.--Not later than 6 months 
     after the date on which the Secretary makes an addition to a 
     set of health information under section 9103(b)(4), a health 
     information plan sponsor or health provider shall comply with 
     the requirements of this section with respect to the 
     additional information.
       (2) Compliance with modified standards.--
       (A) In general.--If the Secretary modifies a standard 
     established under section 9103, a health information plan 
     sponsor or health provider shall comply with the modified 
     standard at such time as the Secretary determines 
     appropriate, taking into account the nature and intent of the 
     modification.
       (B) Special rule.--In the case of a modification to a 
     standard under subparagraph (A) that does not occur within 
     the 12-month period beginning on the date the standard is 
     established, the time determined appropriate by the Secretary 
     under subparagraph (A) may not be--
       (i) earlier than the last day of the 90-day period 
     beginning on the date the modified standard is established; 
     or
       (ii) later than the last day of the 12-month period 
     beginning on the date the standard is established.

     SEC. 9105. IMPOSITION OF ADDITIONAL REQUIREMENTS.

       (a) Acceptance of Claims.--An administered health plan 
     sponsor may not reject a claim for payment submitted by any 
     individual or entity under an administered health plan 
     provided or sponsored by the sponsor on the basis of the form 
     or manner in which the claim is submitted if the claim--
       (1) contains the standard health information in the set of 
     health information with respect to claims submission 
     established by the Secretary under section 9103(b)(1); and
       (2) is submitted in accordance with the standards 
     established under section 9103(c).
       (b) Acceptance of Attachments.--An administered health plan 
     sponsor may not reject a claim attachment submitted by any 
     individual or entity in connection with a claim for payment 
     under an administered health plan provided or sponsored by 
     the sponsor on the basis of the form or manner in which the 
     attachment is submitted if the attachment--
       (1) contains the standard health information in the set of 
     health information with respect to claims attachment 
     submission established by the Secretary under section 
     9103(b)(1); and
       (2) is submitted in accordance with the standards 
     established under section 9103(c).
       (c) Limitation on Other Transactions.--An administered 
     health plan sponsor or a health provider may not require, as 
     a condition of conducting a transaction described in section 
     9104(a), that any individual or entity--
       (A) provide any health information that is not in the set 
     of health information established by the Secretary under 
     section 9103(b)(1) with respect to the transaction; or
       (B) transmit any such health information in a manner 
     inconsistent with the standards established under section 
     9103(c).
       (d) Exceptions.--Subsections (a), (b), and (c) do not apply 
     if--
       (1) the individual or entity on whom the administered 
     health plan sponsor or the health provider is imposing a 
     requirement otherwise prohibited under the subsections 
     voluntarily agrees to the imposition of the requirement; or
       (2) a waiver is granted under subsection (e) to impose a 
     requirement otherwise prohibited under such subsections.
       (e) Conditions for Waivers.--
       (1) In general.--An administered health plan sponsor or 
     health provider may request a waiver from the Secretary in 
     order to impose on an individual or entity a requirement 
     otherwise prohibited under subsection (a), (b), or (c).
       (2) Consideration of waiver requests.--A waiver may not be 
     granted under this subsection to impose an otherwise 
     prohibited requirement unless the Secretary determines that 
     the value of any additional information to be provided under 
     the requirement for research or other purposes significantly 
     outweighs the administrative cost of the imposition of the 
     requirement, taking into account the burden of the timing of 
     the imposition of the requirement.
       (3) Anonymous reporting.--If an administered health plan 
     sponsor or a health provider attempts to impose on an 
     individual or entity a requirement prohibited under 
     subsection (a), (b), or (c), the individual or entity may 
     contact the Secretary. The Secretary shall develop a 
     procedure under which an individual or entity that contacts 
     the Secretary under the preceding sentence shall remain 
     anonymous. The Secretary shall notify the sponsor or provider 
     imposing the requirement that the requirement may not be 
     imposed unless the other sponsor or provider voluntarily 
     agrees to such requirement or a waiver is obtained under this 
     subsection.
       (f) Timetables for Compliance.--An administered health plan 
     sponsor or a health provider shall comply with the 
     requirements of this section not later than January 1, 1997.

     SEC. 9106. STANDARDS AND CERTIFICATION FOR HEALTH INFORMATION 
                   NETWORK SERVICES.

       (a) Standards for Operations.--The Secretary shall 
     establish standards with respect to the operation of health 
     information network services, including standards ensuring 
     that such services--
       (1) develop, operate, and cooperate with one another to 
     form a health information network;
       (2) meet all of the requirements under subtitle C that are 
     applicable to such services;
       (3) make public information concerning their performance, 
     as measured by uniform indicators such as accessibility, 
     transaction responsiveness, administrative efficiency, 
     reliability, dependability, and any other indicator 
     determined appropriate by the Secretary; and
       (4) have the highest security procedures that are 
     practicable with respect to the processing and handling of 
     health information.
       (b) Certification by Secretary.--
       (1) Establishment of procedure.--Not later than 12 months 
     after the date of the enactment of this Act, the Secretary 
     shall establish a certification procedure for health 
     information network services which ensures that services 
     certified under this section are qualified--
       (A) to meet the requirements of this part and the standards 
     established by the Secretary under this section; and
       (B) to ensure the confidentiality of protected health 
     information (as defined in section 9200(a)) as required under 
     subtitle C.
       (2) Deemed Certification.--The Secretary may designate 
     private individuals or entities to conduct the certification 
     procedure established by the Secretary under this subsection. 
     A health information network service certified by such an 
     individual or entity in accordance with such designation 
     shall be considered to be certified by the Secretary under 
     this subsection.
       (3) Application for certification.--Each entity desiring to 
     be certified as a health information network service shall 
     apply to the Secretary for certification in a form and manner 
     determined appropriate by the Secretary.
       (4) Audits and Reports.--The procedure established under 
     paragraph (1) shall provide for audits by the Secretary and 
     reports by an entity certified under this section as the 
     Secretary determines appropriate in order to monitor the 
     compliance by the entity with the requirements of this part 
     and the standards established by the Secretary under this 
     section.
       (5) Recertification.--A health information network service 
     shall be recertified under this subsection not less than 
     every 3 years.
       (c) Loss of Certification.--
       (1) Mandatory termination.--If a health information network 
     service violates a provision of subtitle C, the certification 
     of the service under this section shall be terminated unless 
     the Secretary determines that appropriate corrective action 
     has been taken.
       (2) Discretionary termination.--If a health information 
     service violates a requirement or standard under this part 
     and a penalty has been imposed under section 9107, the 
     Secretary shall review the certification of the service and 
     may terminate the certification.
       (d) Health Information Continuity.--If a health information 
     network service is decertified or ceases to function, in a 
     manner that would threaten the continued availability of the 
     standard health information held by the service, the service 
     shall transfer the standard health information to a health 
     information network service that is certified under this 
     section and designated by the Secretary to receive the 
     information.

     SEC. 9107. CIVIL MONEY PENALTY.

       (a) In General.--Any person who the Secretary determines is 
     required, but has failed, to comply with a requirement or 
     standard imposed under this part shall be subject, in 
     addition to any other penalties that may be prescribed by 
     law, to a civil money penalty of not more than $1,000 for 
     each such failure.
       (b) Process.--The provisions of section 1128A of the Social 
     Security Act (other than subsections (a) and (b)) shall apply 
     to a civil money penalty under subsection (a) in the same 
     manner as such provisions apply to a penalty or proceeding 
     under section 1128A(a) of such Act.

     SEC. 9108. EFFECT ON STATE LAW.

       (a) Preemption of State Quill Pen Laws.--
       (1) In general.--Any provision of State law that requires 
     medical or health insurance records (including billing 
     information) to be maintained in written, rather than 
     electronic, form is deemed to be satisfied if the records are 
     maintained in an electronic form that meets standards 
     established by the Secretary under paragraph (2).
       (2) Secretarial authority.--Not later than 1 year after the 
     date of the enactment of this Act, the Secretary shall issue 
     regulations to carry out paragraph (1). The regulations shall 
     provide for an electronic substitute that is in the form of a 
     unique identifier (assigned to each authorized individual) 
     that serves the functional equivalent of a signature. The 
     regulations may provide for such exceptions to paragraph (1) 
     as the Secretary determines to be necessary to prevent fraud 
     and abuse, to prevent the illegal distribution of controlled 
     substances, and in such other cases as the Secretary deems 
     appropriate.
       (b) Public Health Reporting.--Nothing in this part shall be 
     construed to invalidate or limit the authority, power, or 
     procedures established under any law providing for the 
     reporting of disease or injury, child abuse, birth, or death, 
     public health surveillance, or public health investigation or 
     intervention.

     SEC. 9109. DEFINITIONS.

       For purposes of this subtitle:
       (1) Administered health plan.--The term ``administered 
     health plan'' has the meaning given the term ``health benefit 
     plan'' in section 5504(3), but includes--
       (A) the medicare program, medicare supplemental health 
     insurance, medicare part C, the medicaid program, the wrap-
     around benefit program under part B of title XXII of the 
     Social Security Act; and
       (B) except as the Secretary may provide, other Federal or 
     State programs or arrangements that provide health benefits 
     (other than coverage or insurance described in clause (i) or 
     clauses (iii) through (ix) of section 5504(3)(B)).
       (2) Administered health plan sponsor.--The term 
     ``administered health plan sponsor'' has the meaning given 
     the term ``sponsor'' in section 5504(13) in relation to an 
     administered health plan (as defined in paragraph (1)).
       (3) Code set.--The term ``code set'' means any set of codes 
     used for encoding data elements, such as tables of terms, 
     medical concepts, medical diagnostic codes, or medical 
     procedure codes.
       (4) Coordination of benefits.--The term ``coordination of 
     benefits'' means determining and coordinating the financial 
     obligations of administered health plan sponsors and workers' 
     compensation carriers when health care benefits are payable 
     by more than one such sponsor or carrier.
       (5) Health information.--The term ``health information'' 
     means any information that relates to the past, present, or 
     future physical or mental health or condition or functional 
     status of an individual, the provision of health care to an 
     individual, or payment for the provision of health care to an 
     individual.
       (6) Health information network service.--The term ``health 
     information network service'' means a private entity or an 
     entity operated by a State that enters into contracts--
       (A) to process or facilitate the processing of nonstandard 
     health information into standard health information;
       (B) to provide the means by which individuals and entities 
     transmit and receive standard health information to satisfy 
     the requirements of this part; or
       (C) to provide other information processing services, such 
     as automated coordination of benefits or claim routing.
       (7) Health provider.--The term ``health provider'' includes 
     a provider of services (as defined in section 1861(u) of the 
     Social Security Act), a provider of medical or other health 
     services (as defined in section 1861(s) of such Act), and any 
     other person (other than an administered health plan sponsor) 
     furnishing health care items or services.
       (8) Network provider.--The term ``network provider'', when 
     used with respect to an administered health plan, means a 
     health provider who is member of a plan network of the plan.
       (9) Plan network.--The term ``plan network'' means, with 
     respect to an administered health plan, health providers who 
     have entered into an agreement with the plan under which such 
     providers are obligated to provide items and services covered 
     under the plan to individuals enrolled in the plan, or have 
     an agreement to provide services on a fee-for-service basis.
       (10) Standard.--The term ``standard'', when used with 
     reference to health information or a transaction involving 
     such information, means that the information or transaction 
     meets any standard established by the Secretary under section 
     9103 that applies to the information or transaction.
       (11) Workers' compensation carrier.--The term ``workers' 
     compensation carrier'' has the meaning given such term in 
     section 13000(4).
             Subtitle C--Fair Health Information Practices

     SEC. 9200. DEFINITIONS.

       (a) Definitions Relating to Protected Health Information.--
     For purposes of this subtitle:
       (1) Disclose.--The term ``disclose'', when used with 
     respect to protected health information that is held by a 
     health information trustee, means to provide access to the 
     information, but only if such access is provided by the 
     trustee to a person other than--
       (A) the trustee or an officer or employee of the trustee;
       (B) an affiliated person of the trustee; or
       (C) a protected individual who is a subject of the 
     information.
       (2) Disclosure.--The term ``disclosure'' means the act or 
     an instance of disclosing.
       (3) Protected health information.--The term ``protected 
     health information'' means any information, whether oral or 
     recorded in any form or medium--
       (A) that is created or received in a State by--
       (i) a health care provider;
       (ii) a health plan sponsor;
       (iii) a health oversight agency;
       (iv) a health information service organization; or
       (v) a public health authority;
       (B) that--
       (i) relates in any way to--

       (I) the past, present, or future physical or mental health 
     or condition or functional status of a protected individual;
       (II) the provision of health care to a protected 
     individual;
       (III) any cause or circumstance underlying the provision of 
     such care; or
       (IV) payment for the provision of such care; or

       (ii) is received by a health care provider in the course of 
     the provision of health care; and
       (C) that--
       (i) identifies the individual; or
       (ii) with respect to which there is a reasonable basis to 
     believe that the information can be used to identify the 
     individual.
       (4) Protected individual.--The term ``protected 
     individual'' means an individual who, with respect to a 
     date--
       (A) is living on the date; or
       (B) has died within the 2-year period ending on the date.
       (5) Use.--The term ``use'', when used with respect to 
     protected health information that is held by a health 
     information trustee, means--
       (A) to use, or provide access to, the information in any 
     manner that does not constitute a disclosure; or
       (B) any act or instance of using, or providing access, 
     described in subparagraph (A).
       (b) Definitions Relating to Health Information Trustees.--
     For purposes of this subtitle:
       (1) Carrier.--The term ``carrier'' has the meaning given 
     such term in section 5504(2).
       (2) Health plan.--The term ``health plan'' has the meaning 
     given such term in section 5504(4).
       (3) Health plan sponsor.--The term ``health plan sponsor'' 
     means a person who, with respect to a specific item of 
     protected health information, receives, creates, uses, 
     maintains, or discloses the information while acting in whole 
     or in part in the capacity of--
       (A) a carrier providing an insured health plan;
       (B) a public or private entity sponsoring any other health 
     plan; or
       (C) an officer or employee of a person described in 
     subparagraph (A) or (B).
       (4) Health care provider.--The term ``health care 
     provider'' means a person who, with respect to a specific 
     item of protected health information, receives, creates, 
     uses, maintains, or discloses the information while acting in 
     whole or in part in the capacity of--
       (A) a person who is licensed, certified, registered, or 
     otherwise authorized by law to provide an item or service 
     that constitutes health care in the ordinary course of 
     business or practice of a profession;
       (B) a Federal or State program that directly provides items 
     or services that constitute health care to beneficiaries; or
       (C) an officer or employee of a person described in 
     subparagraph (A) or (B).
       (5) Health information service organization.--The term 
     ``health information service organization'' means a person 
     who, with respect to a specific item of protected health 
     information, receives, creates, uses, maintains, or discloses 
     the information while acting in whole or in part in the 
     capacity of--
       (A) a person, other than an affiliated person, who performs 
     specific functions for which the Secretary has authorized (by 
     means of a designation or certification) the person to 
     receive access to health care information in electronic or 
     magnetic form that is regulated by this Act; or
       (B) an officer or employee of a person described in 
     subparagraph (A).
       (6) Health information trustee.--The term ``health 
     information trustee'' means--
       (A) a health care provider;
       (B) a health information service organization;
       (C) a health oversight agency;
       (D) a health plan sponsor;
       (E) a public health authority;
       (F) a health researcher;
       (G) a person who, with respect to a specific item of 
     protected health information, is not described in 
     subparagraphs (A) through (F) but receives the information--
       (i) pursuant to--

       (I) section 9227 (relating to emergency circumstances);
       (II) section 9228 (relating to judicial and administrative 
     purposes);
       (III) section 9229 (relating to law enforcement); or
       (IV) section 9230 (relating to subpoenas, warrants, and 
     search warrants); or

       (ii) while acting in whole or in part in the capacity of an 
     officer or employee of a person described in clause (i).
       (7) Health oversight agency.--The term ``health oversight 
     agency'' means a person who, with respect to a specific item 
     of protected health information, receives, creates, uses, 
     maintains, or discloses the information while acting in whole 
     or in part in the capacity of--
       (A) a person who performs or oversees the performance of an 
     assessment, evaluation, determination, or investigation 
     relating to the licensing, accreditation, or certification of 
     health care providers;
       (B) a person who--
       (i) performs or oversees the performance of an audit, 
     assessment, evaluation, determination, or investigation 
     relating to the effectiveness of, compliance with, or 
     applicability of, legal, fiscal, medical, quality, or 
     scientific standards or aspects of performance related to the 
     delivery of, or payment for, health care; and
       (ii) is a public agency, acting on behalf of a public 
     agency, acting pursuant to a requirement of a public agency, 
     or carrying out activities under a State or Federal statute 
     regulating the assessment, evaluation, determination, or 
     investigation; or
       (C) an officer or employee of a person described in 
     subparagraph (A) or (B).
       (8) Health researcher.--The term ``health researcher'' 
     means a person who, with respect to a specific item of 
     protected health information, receives the information--
       (A) pursuant to section 9226 (relating to health research); 
     or
       (B) while acting in whole or in part in the capacity of an 
     officer or employee of a person described in subparagraph 
     (A).
       (9) Public health authority.--The term ``public health 
     authority'' means a person who, with respect to a specific 
     item of protected health information, receives, creates, 
     uses, maintains, or discloses the information while acting in 
     whole or in part in the capacity of--
       (A) an authority of the United States, a State, or a 
     political subdivision of a State that is responsible for 
     public health matters;
       (B) a person acting under the direction of such an 
     authority; or
       (C) an officer or employee of a person described in 
     subparagraph (A) or (B).
       (c) Other Definitions.--For purposes of this subtitle:
       (1) Affiliated person.--The term ``affiliated person'' 
     means a person who--
       (A) is not a health information trustee;
       (B) is a contractor, subcontractor, associate, or 
     subsidiary of a person who is a health information trustee; 
     and
       (C) pursuant to an agreement or other relationship with 
     such trustee, receives, creates, uses, maintains, or 
     discloses protected health information.
       (2) Approved health research project.--The term ``approved 
     health research project'' means a biomedical, 
     epidemiological, or health services research or statistics 
     project, or a research project on behavioral and social 
     factors affecting health, that has been approved by a 
     certified institutional review board.
       (3) Certified institutional review board.--The term 
     ``certified institutional review board'' means a board--
       (A) established by an entity to review research involving 
     protected health information and the rights of protected 
     individuals conducted at or supported by the entity;
       (B) established in accordance with regulations of the 
     Secretary under section 9226(e)(1); and
       (C) certified by the Secretary under section 9226(e)(2).
       (4) Health care.--The term ``health care''--
       (A) means--
       (i) any preventive, diagnostic, therapeutic, 
     rehabilitative, maintenance, or palliative care, counseling, 
     service, or procedure--

       (I) with respect to the physical or mental condition, or 
     functional status, of an individual; or
       (II) affecting the structure or function of the human body 
     or any part of the human body, including banking of blood, 
     sperm, organs, or any other tissue; or

       (ii) any sale or dispensing of a drug, device, equipment, 
     or other item to an individual, or for the use of an 
     individual, pursuant to a prescription; but
       (B) does not include any item or service that is not 
     furnished for the purpose of maintaining or improving the 
     health of an individual.
       (5) Law enforcement inquiry.--The term ``law enforcement 
     inquiry'' means a lawful investigation or official proceeding 
     inquiring into a violation of, or failure to comply with, any 
     criminal or civil statute or any regulation, rule, or order 
     issued pursuant to such a statute.
       (6) Person.--The term ``person'' includes an authority of 
     the United States, a State, or a political subdivision of a 
     State.

             PART 1--DUTIES OF HEALTH INFORMATION TRUSTEES

     SEC. 9201. INSPECTION OF PROTECTED HEALTH INFORMATION.

       (a) In General.--Except as provided in subsection (b), a 
     health information trustee described in subsection (g)--
       (1) shall permit a protected individual to inspect any 
     protected health information about the individual that the 
     trustee maintains, any accounting with respect to such 
     information required under section 9204, and any copy of an 
     authorization required under section 9222 that pertains to 
     such information;
       (2) shall provide the protected individual with a copy of 
     the information upon request by the individual and subject to 
     any conditions imposed by the trustee under subsection (d);
       (3) shall permit a person who has been designated in 
     writing by the protected individual to inspect the 
     information on behalf of the individual or to accompany the 
     individual during the inspection; and
       (4) may offer to explain or interpret information that is 
     inspected or copied under this subsection.
       (b) Exceptions.--A health information trustee is not 
     required by this section to permit inspection or copying of 
     protected health information by a protected individual if any 
     of the following conditions apply:
       (1) Mental health treatment notes.--The information 
     consists of psychiatric, psychological, or mental health 
     treatment notes about the individual, the trustee determines 
     in the exercise of reasonable professional judgment that 
     inspection or copying of the notes would cause sufficient 
     harm to the protected individual so as to outweigh the 
     desirability of permitting access, and the trustee does not 
     disclose the notes to any person not directly engaged in 
     treating the individual, except with the authorization of the 
     individual or under compulsion of law.
       (2) Information about others.--The information relates to 
     an individual, other than the protected individual or a 
     health care provider, and the trustee determines in the 
     exercise of reasonable professional judgment that inspection 
     or copying of the information would cause sufficient harm to 
     one or both of the individuals so as to outweigh the 
     desirability of permitting access.
       (3) Endangerment to life or safety.--Inspection or copying 
     of the information could reasonably be expected to endanger 
     the life or physical safety of an individual.
       (4) Confidential source.--The information identifies or 
     could reasonably lead to the identification of an individual 
     (other than a health care provider) who provided information 
     under a promise of confidentiality to a health care provider 
     concerning a protected individual who is a subject of the 
     information.
       (5) Administrative purposes.--The information--
       (A) is used by the trustee solely for administrative 
     purposes and not in the provision of health care to a 
     protected individual who is a subject of the information; and
       (B) is not disclosed by the trustee to any person.
       (6) Duplicative information.--The information duplicates 
     information available for inspection under subsection (a).
       (7) Information compiled in anticipation of litigation.--
     The information is compiled principally--
       (A) in anticipation of a civil, criminal, or administrative 
     action or proceeding; or
       (B) for use in such an action or proceeding.
       (c) Inspection and Copying of Segregable Portion.--A health 
     information trustee shall permit inspection and copying under 
     subsection (a) of any reasonably segregable portion of a 
     record after deletion of any portion that is exempt under 
     subsection (b).
       (d) Conditions.--A health information trustee may--
       (1) require a written request for the inspection and 
     copying of protected health information under this section; 
     and
       (2) charge a reasonable cost-based fee for--
       (A) permitting inspection of information under this 
     section; and
       (B) providing a copy of protected health information under 
     this section.
       (e) Statement of Reasons for Denial.--If a health 
     information trustee denies in whole or in part a request for 
     inspection or copying under this section, the trustee shall 
     provide the protected individual who made the request with a 
     written statement of the reasons for the denial.
       (f) Deadline.--A health information trustee shall comply 
     with or deny a request for inspection or copying of protected 
     health information under this section within the 30-day 
     period beginning on the date the trustee receives the 
     request.
       (g) Applicability.--This section applies to a health 
     information trustee who is--
       (1) a health plan sponsor;
       (2) a health care provider;
       (3) a health information service organization;
       (4) a health oversight agency; or
       (5) a public health authority.

     SEC. 9202. AMENDMENT OF PROTECTED HEALTH INFORMATION.

       (a) In General.--A health information trustee described in 
     subsection (f) shall, within the 45-day period beginning on 
     the date the trustee receives from a protected individual 
     about whom the trustee maintains protected health information 
     a written request that the trustee correct or amend the 
     information, complete the duties described in one of the 
     following paragraphs:
       (1) Correction or amendment and notification.--The trustee 
     shall--
       (A) make the correction or amendment requested;
       (B) inform the protected individual of the amendment or 
     correction that has been made;
       (C) make reasonable efforts to inform any person who is 
     identified by the protected individual, who is not an 
     employee of the trustee, and to whom the uncorrected or 
     unamended portion of the information was previously disclosed 
     of the correction or amendment that has been made; and
       (D) at the request of the individual, make reasonable 
     efforts to inform any known source of the uncorrected or 
     unamended portion of the information about the correction or 
     amendment that has been made.
       (2) Reasons for refusal and review procedures.--The trustee 
     shall inform the protected individual of--
       (A) the reasons for the refusal of the trustee to make the 
     correction or amendment;
       (B) any procedures for further review of the refusal; and
       (C) the individual's right to file with the trustee a 
     concise statement setting forth the requested correction or 
     amendment and the individual's reasons for disagreeing with 
     the refusal of the trustee.
       (b) Standards for Correction or Amendment.--A trustee shall 
     correct or amend protected health information in accordance 
     with a request made under subsection (a) if the trustee 
     determines that the information is not accurate, relevant, 
     timely, or complete for the purposes for which the 
     information may be used or disclosed by the trustee.
       (c) Statement of Disagreement.--After a protected 
     individual has filed a statement of disagreement under 
     subsection (a)(2)(C), the trustee, in any subsequent 
     disclosure of the disputed portion of the information, shall 
     include a copy of the individual's statement and may include 
     a concise statement of the trustee's reasons for not making 
     the requested correction or amendment.
       (d) Construction.--This section may not be construed to 
     require a health information trustee to conduct a hearing or 
     proceeding concerning a request for a correction or amendment 
     to protected health information the trustee maintains.
       (e) Correction.--For purposes of subsection (a), a 
     correction is deemed to have been made to protected health 
     information when--
       (1) information that is not timely, accurate, relevant, or 
     complete is clearly marked as incorrect; or
       (2) supplementary correct information is made part of the 
     information and adequately cross-referenced.
       (f) Applicability.--This section applies to a health 
     information trustee who is--
       (1) a health plan sponsor;
       (2) a health care provider;
       (3) a health information service organization;
       (4) a health oversight agency; or
       (5) a public health authority.

     SEC. 9203. NOTICE OF INFORMATION PRACTICES.

       (a) Preparation of Notice.--A health information trustee 
     described in subsection (d) shall prepare a written notice of 
     information practices describing the following:
       (1) The rights under this subtitle of a protected 
     individual who is the subject of protected health 
     information, including the right to inspect and copy such 
     information and the right to seek amendments to such 
     information, and the procedures for authorizing disclosures 
     of protected health information and for revoking such 
     authorizations.
       (2) The procedures established by the trustee for the 
     exercise of such rights.
       (3) The uses and disclosures of protected health 
     information that are authorized under this subtitle.
       (b) Dissemination of Notice.--A health information 
     trustee--
       (1) shall, upon request, provide any person with a copy of 
     the trustee's notice of information practices (described in 
     subsection (a)); and
       (2) shall make reasonable efforts to inform persons in a 
     clear and conspicuous manner of the existence and 
     availability of such notice.
       (c) Model Notices.--Not later than July 1, 1996, the 
     Secretary, after notice and opportunity for public comment, 
     shall develop and disseminate model notices of information 
     practices for use by health information trustees under this 
     section.
       (d) Applicability.--This section applies to a health 
     information trustee who is--
       (1) a health plan sponsor;
       (2) a health care provider;
       (3) a health information service organization; or
       (4) a health oversight agency.

     SEC. 9204. ACCOUNTING FOR DISCLOSURES.

       (a) In General.--Except as provided in subsection (b) and 
     section 9224, each health information trustee shall create 
     and maintain, with respect to any protected health 
     information the trustee discloses, a record of--
       (1) the date and purpose of the disclosure;
       (2) the name of the person to whom the disclosure was made;
       (3) the address of the person to whom the disclosure was 
     made or the location to which the disclosure was made; and
       (4) where practicable, a description of the information 
     disclosed.
       (b) Regulations.--Not later than July 1, 1996, the 
     Secretary shall promulgate regulations that exempt a health 
     information trustee from maintaining a record under 
     subsection (a) with respect to protected health information 
     disclosed by the trustee for purposes of peer review, 
     licensing, certification, accreditation, and similar 
     activities.

     SEC. 9205. SECURITY.

       (a) In General.--Each health information trustee who 
     receives or creates protected health information that is 
     subject to this subtitle shall maintain reasonable and 
     appropriate administrative, technical, and physical 
     safeguards--
       (1) to ensure the integrity and confidentiality of the 
     information;
       (2) to protect against any reasonably anticipated--
       (A) threats or hazards to the security or integrity of the 
     information; and
       (B) unauthorized uses or disclosures of the information; 
     and
       (3) otherwise ensure compliance with this subtitle by the 
     trustee and the officers and employees of the trustee.
       (b) Guidelines.--Not later than July 1, 1996, the 
     Secretary, after notice and opportunity for public comment, 
     shall develop and disseminate guidelines for the 
     implementation of this section. The guidelines shall take 
     into account--
       (1) the technical capabilities of record systems used to 
     maintain protected health information;
       (2) the costs of security measures;
       (3) the need for training persons who have access to 
     protected health information; and
       (4) the value of audit trails in computerized record 
     systems.

       PART 2--USE AND DISCLOSURE OF PROTECTED HEALTH INFORMATION

     SEC. 9221. GENERAL LIMITATIONS ON USE AND DISCLOSURE.

       (a) Use.--Except as otherwise provided under this subtitle, 
     a health information trustee may use protected health 
     information only for a purpose--
       (1) that is compatible with and directly related to the 
     purpose for which the information--
       (A) was collected; or
       (B) was received by the trustee; or
       (2) for which the trustee is authorized to disclose the 
     information under this subtitle.
       (b) Disclosure.--A health information trustee may disclose 
     protected health information only as authorized under this 
     subtitle.
       (c) Scope of Uses and Disclosures.--
       (1) In general.--A use or disclosure of protected health 
     information by a health information trustee shall be limited, 
     when practicable, to the minimum amount of information 
     necessary to accomplish the purpose for which the information 
     is used or disclosed.
       (2) Guidelines.--Not later than July 1, 1996, the 
     Secretary, after notice and opportunity for public comment, 
     shall issue guidelines to implement paragraph (1), which 
     shall take into account the technical capabilities of the 
     record systems used to maintain protected health information 
     and the costs of limiting use and disclosure.
       (d) Identification of Disclosed Information as Protected 
     Information.--Except with respect to protected health 
     information that is disclosed under section 9224 (relating to 
     next of kin and directory information), a health information 
     trustee may disclose protected health information only if the 
     recipient has been notified that the information is protected 
     health information that is subject to this subtitle.
       (e) Agreement to Limit Use or Disclosure.--A health 
     information trustee who receives protected health information 
     from any person pursuant to a written agreement to restrict 
     use or disclosure of the information to a greater extent than 
     otherwise would be required under this subtitle shall comply 
     with the terms of the agreement, except where use or 
     disclosure of the information in violation of the agreement 
     is required by law. A trustee who fails to comply with the 
     preceding sentence shall be subject to section 9261 (relating 
     to civil actions) with respect to such failure.
       (f) No General Requirement to Disclose.--Nothing in this 
     subtitle shall be construed to require a health information 
     trustee to disclose protected health information not 
     otherwise required to be disclosed by law.

     SEC. 9222. AUTHORIZATIONS FOR DISCLOSURE OF PROTECTED HEALTH 
                   INFORMATION.

       (a) Written Authorizations.--A health information trustee, 
     other than a health information service organization, may 
     disclose protected health information pursuant to an 
     authorization executed by the protected individual who is the 
     subject of the information, if each of the following 
     requirements is satisfied:
       (1) Writing.--The authorization is in writing, signed by 
     the individual, and dated on the date of such signature.
       (2) Separate form.--The authorization is not on a form used 
     to authorize or facilitate the provision of, or payment for, 
     health care.
       (3) Trustee described.--The trustee is specifically named 
     or generically described in the authorization as authorized 
     to disclose such information.
       (4) Recipient described.--The person to whom the 
     information is to be disclosed is specifically named or 
     generically described in the authorization as a person to 
     whom such information may be disclosed.
       (5) Statement of intended uses and disclosures received.--
     The authorization contains an acknowledgment that the 
     individual has received a statement described in subsection 
     (b) from such person.
       (6) Information described.--The information to be disclosed 
     is described in the authorization.
       (7) Authorization timely received.--The authorization is 
     received by the trustee during a period described in 
     subsection (c)(1).
       (8) Disclosure timely made.--The disclosure occurs during a 
     period described in subsection (c)(2).
       (b) Statement of Intended Uses and Disclosures.--
       (1) In general.--A person who wishes to receive from a 
     health information trustee protected health information about 
     a protected individual pursuant to an authorization executed 
     by the individual shall supply the individual, in writing and 
     on a form that is distinct from the authorization, with a 
     statement of the uses for which the person intends the 
     information and the disclosures the person intends to make of 
     the information. Such statement shall be supplied before the 
     authorization is executed.
       (2) Enforcement.--If the person uses or discloses the 
     information in a manner that is inconsistent with such 
     statement, the person shall be subject to section 9261 
     (relating to civil actions) with respect to such failure, 
     except where such use or disclosure is required by law.
       (3) Model statements.--Not later than July 1, 1996, the 
     Secretary, after notice and opportunity for public comment, 
     shall develop and disseminate model statements of intended 
     uses and disclosures of the type described in paragraph (1).
       (c) Time Limitations on Authorizations.--
       (1) Receipt by trustee.--For purposes of subsection (a)(7), 
     an authorization is timely received if it is received by the 
     trustee during--
       (A) the 1-year period beginning on the date that the 
     authorization is signed under subsection (a)(1), if the 
     authorization permits the disclosure of protected health 
     information to--
       (i) a health plan sponsor;
       (ii) a health care provider;
       (iii) a health oversight agency;
       (iv) a public health authority;
       (v) a health researcher; or
       (vi) a person who provides counseling or social services to 
     individuals; or
       (B) the 30-day period beginning on the date that the 
     authorization is signed under subsection (a)(1), if the 
     authorization permits the disclosure of protected health 
     information to a person other than a person described in 
     subparagraph (A).
       (2) Disclosure by trustee.--For purposes of subsection 
     (a)(8), a disclosure is timely made if it occurs before--
       (A) the date or event (if any) specified in the 
     authorization upon which the authorization expires; and
       (B) the expiration of the 6-month period beginning on the 
     date the trustee receives the authorization.
       (d) Revocation or Amendment of Authorization.--
       (1) In general.--A protected individual in writing may 
     revoke or amend an authorization described in subsection (a), 
     in whole or in part, at any time, except insofar as--
       (A) disclosure of protected health information has been 
     authorized to permit validation of expenditures based on 
     health condition by a government authority; or
       (B) action has been taken in reliance on the authorization.
       (2) Notice of revocation.--A health information trustee who 
     discloses protected health information in reliance on an 
     authorization that has been revoked shall not be subject to 
     any liability or penalty under this subtitle if--
       (A) the reliance was in good faith;
       (B) the trustee had no notice of the revocation; and
       (C) the disclosure was otherwise in accordance with the 
     requirements of this section.
       (e) Additional Requirements of Trustee.--A health 
     information trustee may impose requirements for an 
     authorization that are in addition to the requirements in 
     this section.
       (f) Copy.--A health information trustee who discloses 
     protected health information pursuant to an authorization 
     under this section shall maintain a copy of the 
     authorization.
       (g) Construction.--This section may not be construed--
       (1) to require a health information trustee to disclose 
     protected health information; or
       (2) to limit the right of a health information trustee to 
     charge a fee for the disclosure or reproduction of protected 
     health information.
       (h) Subpoenas, Warrants, and Search Warrants.--If a health 
     information trustee discloses protected health information 
     pursuant to an authorization in order to comply with an 
     administrative subpoena or warrant or a judicial subpoena or 
     search warrant, the authorization--
       (1) shall specifically authorize the disclosure for the 
     purpose of permitting the trustee to comply with the 
     subpoena, warrant, or search warrant; and
       (2) shall otherwise meet the requirements in this section.

     SEC. 9223. TREATMENT, PAYMENT, AND OVERSIGHT.

       (a) Disclosures by Plans, Providers, and Oversight 
     Agencies.--A health information trustee described in 
     subsection (d) may disclose protected health information to a 
     health plan sponsor, health care provider, or health 
     oversight agency if the disclosure is--
       (1) for the purpose of providing health care and a 
     protected individual who is a subject of the information has 
     not previously objected to the disclosure in writing;
       (2) for the purpose of providing for the payment for health 
     care furnished to an individual; or
       (3) for use by a health oversight agency for a purpose that 
     is described in subparagraph (A) or (B)(i) of section 
     9200(b)(7).
       (b) Sensitive Claims Information.--Not later than July 1, 
     1996, the Secretary shall establish standards consistent with 
     this subtitle with respect to the disclosure, to any person 
     other than a health plan sponsor, of protected health 
     information created or received by a health care provider or 
     a health plan sponsor in connection with a claim for benefits 
     under a health plan, where such information--
       (1) pertains to a diagnosis, item, or service; and
       (2) is disclosed--
       (A) concurrent with the filing of the claim; or
       (B) after the claim is filed.
       (c) Use in Action Against Individual.--A person who 
     receives protected health information about a protected 
     individual through a disclosure under this section may not 
     use or disclose the information in any administrative, civil, 
     or criminal action or investigation directed against the 
     individual, except an action or investigation arising out of 
     and related to receipt of health care or payment for health 
     care.
       (d) Applicability.--A health information trustee referred 
     to in subsection (a) is any of the following:
       (1) A health plan sponsor.
       (2) A health care provider.
       (3) A health oversight agency.
       (4) A health information service organization.

     SEC. 9224. NEXT OF KIN AND DIRECTORY INFORMATION.

       (a) Next of Kin.--A health information trustee who is a 
     health care provider, who received protected health 
     information pursuant to section 9227 (relating to emergency 
     circumstances), or who is an officer or employee of such a 
     recipient may orally disclose protected health information 
     about a protected individual to the next of kin of the 
     individual (as defined under State law), or to a person with 
     whom the individual has a close personal relationship, if--
       (1) the trustee has no reason to believe that the 
     individual would consider the information especially 
     sensitive;
       (2) the individual has not previously objected to the 
     disclosure;
       (3) the disclosure is consistent with good medical or other 
     professional practice; and
       (4) the information disclosed is limited to information 
     about health care that is being provided to the individual at 
     or about the time of the disclosure.
       (b) Directory Information.--
       (1) In General.--A health information trustee who is a 
     health care provider, who received protected health 
     information pursuant to section 9227 (relating to emergency 
     circumstances), or who is an officer or employee of a such a 
     recipient may disclose to any person the information 
     described in paragraph (2) if--
       (A) a protected individual who is a subject of the 
     information has not objected in writing to the disclosure;
       (B) the disclosure is otherwise consistent with good 
     medical and other professional practice; and
       (C) the information does not reveal specific information 
     about the physical or mental condition or functional status 
     of a protected individual or about the health care provided 
     to a protected individual.
       (2) Information described.--The information referred to in 
     paragraph (1) is the following:
       (A) The name of an individual receiving health care from a 
     health care provider on a premises controlled by the 
     provider.
       (B) The location of the individual on such premises.
       (C) The general health status of the individual, described 
     in terms of critical, poor, fair, stable, satisfactory, or 
     terms denoting similar conditions.
       (c) No Accounting Required.--A health information trustee 
     who discloses protected health information under this section 
     is not required to maintain an accounting of the disclosure 
     under section 9204.
       (d) Recipients.--A person to whom protected health 
     information is disclosed under this section shall not, by 
     reason of such disclosure, be subject to any requirement 
     under this subtitle.

     SEC. 9225. PUBLIC HEALTH.

       (a) In General.--A health information trustee who is a 
     health care provider or a public health authority may 
     disclose protected health information to--
       (1) a public health authority for use in legally 
     authorized--
       (A) disease or injury reporting;
       (B) public health surveillance; or
       (C) public health investigation or intervention; or
       (2) an individual who is authorized by law to receive the 
     information in a public health intervention.
       (b) Use in Action Against Individual.--A public health 
     authority who receives protected health information about a 
     protected individual through a disclosure under this section 
     may not use or disclose the information in any 
     administrative, civil, or criminal action or investigation 
     directed against the individual, except where the use or 
     disclosure is authorized by law for protection of the public 
     health.
       (c) Individual Recipients.--An individual to whom protected 
     health information is disclosed under subsection (a)(2) shall 
     not, by reason of such disclosure, be subject to any 
     requirement under this subtitle.

     SEC. 9226. HEALTH RESEARCH.

       (a) In General.--A health information trustee described in 
     subsection (d) may disclose protected health information to a 
     person if--
       (1) the person is conducting an approved health research 
     project;
       (2) the information is to be used in the project; and
       (3) the project has been determined by a certified 
     institutional review board to be--
       (A) of sufficient importance so as to outweigh the 
     intrusion into the privacy of the protected individual who is 
     the subject of the information that would result from the 
     disclosure; and
       (B) impracticable to conduct without the information.
       (b) Disclosures by Health Information Service 
     Organizations.--A health information service organization may 
     disclose protected health information under subsection (a) 
     only if the certified institutional review board referred to 
     in subsection (a)(3) has been certified as being qualified to 
     make determinations under such subsection with respect to 
     disclosures by such organizations.
       (c) Limitations on Use and Disclosure; Obligations of 
     Recipient.--A health researcher who receives protected health 
     information about a protected individual pursuant to 
     subsection (a)--
       (1) may use the information solely for purposes of an 
     approved health research project;
       (2) may not use or disclose the information in any 
     administrative, civil, or criminal action or investigation 
     directed against the individual; and
       (3) shall remove or destroy, at the earliest opportunity 
     consistent with the purposes of the approved health research 
     project in connection with which the disclosure was made, 
     information that would enable an individual to be identified, 
     unless a certified institutional review board has determined 
     that there is a health or research justification for 
     retention of such identifiers and there is an adequate plan 
     to protect the identifiers from use and disclosure that is 
     inconsistent with this subtitle.
       (d) Applicability.--A health information trustee referred 
     to in subsection (a) is any health information trustee other 
     than a person who, with respect to the specific protected 
     health information to be disclosed under such subsection, 
     received the information--
       (1) pursuant to--
       (A) section 9228 (relating to judicial and administrative 
     purposes);
       (B) paragraph (1), (2), or (3) of section 9229(a) (relating 
     to law enforcement); or
       (C) section 9230 (relating to subpoenas, warrants, and 
     search warrants); or
       (2) while acting in whole or in part in the capacity of an 
     officer or employee of a person described in paragraph (1).
       (e) Requirements for Institutional Review Boards.--
       (1) Regulations.--Not later than July 1, 1996, the 
     Secretary, after opportunity for notice and comment, shall 
     promulgate regulations establishing requirements for 
     certified institutional review boards under this subtitle. 
     The regulations shall be based on regulations promulgated 
     under section 491(a) of the Public Health Service Act and 
     shall ensure that certified institutional review boards are 
     qualified to assess and protect the confidentiality of 
     research subjects. The regulations shall include specific 
     requirements for certified institutional review boards that 
     make determinations under subsection (a)(3) with respect to 
     disclosures by health information service organizations. To 
     the greatest extent feasible, the membership of a certified 
     institutional review board shall reflect the racial, ethnic, 
     and gender composition of the population of the United 
     States.
       (2) Certification.--The Secretary shall certify that an 
     institutional review board satisfies the requirements of the 
     regulations promulgated under paragraph (1).

     SEC. 9227. EMERGENCY CIRCUMSTANCES.

       (a) In General.--A health information trustee may disclose 
     protected health information if the trustee believes, on 
     reasonable grounds, that the disclosure is necessary to 
     prevent or lessen a serious and imminent threat to the health 
     or safety of an individual.
       (b) Use in Action Against Individual.--A person who 
     receives protected health information about a protected 
     individual through a disclosure under this section may not 
     use or disclose the information in any administrative, civil, 
     or criminal action or investigation directed against the 
     individual, except an action or investigation arising out of 
     and related to receipt of health care or payment for health 
     care.

     SEC. 9228. JUDICIAL AND ADMINISTRATIVE PURPOSES.

       (a) In General.--A health information trustee described in 
     subsection (d) may disclose protected health information--
       (1) pursuant to the Federal Rules of Civil Procedure, the 
     Federal Rules of Criminal Procedure, or comparable rules of 
     other courts or administrative agencies in connection with 
     litigation or proceedings to which a protected individual who 
     is a subject of the information is a party and in which the 
     individual has placed the individual's physical or mental 
     condition or functional status in issue;
       (2) if directed by a court in connection with a court-
     ordered examination of an individual; or
       (3) to assist in the identification of a dead individual.
       (b) Written Statement.--A person seeking protected health 
     information about a protected individual held by health 
     information trustee under--
       (1) subsection (a)(1)--
       (A) shall notify the protected individual or the attorney 
     of the protected individual of the request for the 
     information;
       (B) shall provide the trustee with a signed document 
     attesting--
       (i) that the protected individual is a party to the 
     litigation or proceedings for which the information is 
     sought;
       (ii) that the individual has placed the individual's 
     physical or mental condition or functional status in issue; 
     and
       (iii) the date on which the protected individual or the 
     attorney of the protected individual was notified under 
     subparagraph (A); and
       (C) shall not accept any requested protected health 
     information from the trustee until the termination of the 10-
     day period beginning on the date notice was given under 
     subparagraph (A); or
       (2) subsection (a)(3) shall provide the trustee with a 
     written statement that the information is sought to assist in 
     the identification of a dead individual.
       (c) Use and Disclosure.--A person to whom protected health 
     information is disclosed under this section may use and 
     disclose the information only to accomplish the purpose for 
     which the disclosure was made.
       (d) Applicability.--A health information trustee referred 
     to in subsection (a) is any of the following:
       (1) A health plan sponsor.
       (2) A health care provider.
       (3) A health oversight agency.
       (4) A person who, with respect to the specific protected 
     health information to be disclosed under such subsection, 
     received the information--
       (A) pursuant to--
       (i) section 9227 (relating to emergency circumstances); or
       (ii) section 9230 (relating to subpoenas, warrants, and 
     search warrants); or
       (B) while acting in whole or in part in the capacity of an 
     officer or employee of a person described in subparagraph 
     (A).

     SEC. 9229. LAW ENFORCEMENT.

       (a) In General.--A health information trustee, other than a 
     health information service organization, may disclose 
     protected health information to a law enforcement agency, 
     other than a health oversight agency--
       (1) if the information is disclosed for use in an 
     investigation or prosecution of a health information trustee;
       (2) in connection with criminal activity committed against 
     the trustee or an affiliated person of the trustee or on 
     premises controlled by the trustee; or
       (3) if the information is needed to determine whether a 
     crime has been committed and the nature of any crime that may 
     have been committed (other than a crime that may have been 
     committed by the protected individual who is the subject of 
     the information).
       (b) Additional Authority of Certain Trustees.--A health 
     information trustee who is not a health information service 
     organization, a public health authority, or a health 
     researcher may disclose protected health information to a law 
     enforcement agency (other than a health oversight agency)--
       (1) to assist in the identification or location of a victim 
     or witness in a law enforcement inquiry;
       (2) pursuant to a law requiring the reporting of specific 
     health care information to law enforcement authorities; or
       (3) if the information is specific health information 
     described in paragraph (2) and the trustee is operated by a 
     Federal agency;
       (c) Certification.--Where a law enforcement agency requests 
     a health information trustee to disclose protected health 
     information under subsection (a) or (b)(1), the agency shall 
     provide the trustee with a written certification that--
       (1) is signed by a supervisory official of a rank 
     designated by the head of the agency;
       (2) specifies the information requested; and
       (3) states that the information is needed for a lawful 
     purpose under this section.
       (d) Restrictions on Disclosure and Use.--A person who 
     receives protected health information about a protected 
     individual through a disclosure under this section may not 
     use or disclose the information--
       (1) in any administrative, civil, or criminal action or 
     investigation directed against the individual, except an 
     action or investigation arising out of and directly related 
     to the action or investigation for which the information was 
     obtained; and
       (2) otherwise unless the use or disclosure is necessary to 
     fulfill the purpose for which the information was obtained 
     and is not prohibited by any other provision of law.

     SEC. 9230. SUBPOENAS, WARRANTS, AND SEARCH WARRANTS.

       (a) In General.--A health information trustee described in 
     subsection (g) may disclose protected health information if 
     the disclosure is pursuant to any of the following:
       (1) A subpoena issued under the authority of a grand jury 
     and the trustee is provided a written certification by the 
     grand jury that the grand jury has complied with the 
     applicable access provisions of section 9241.
       (2) An administrative subpoena or warrant or a judicial 
     subpoena or search warrant and the trustee is provided a 
     written certification by the person seeking the information 
     that the person has complied with the applicable access 
     provisions of section 9241 or 9243(a).
       (3) An administrative subpoena or warrant or a judicial 
     subpoena or search warrant and the disclosure otherwise meets 
     the conditions of one of sections 9223 through 9229.
       (b) Authority of All Trustees.--Any health information 
     trustee may disclose protected health information if the 
     disclosure is pursuant to subsection (a)(3).
       (c) Restrictions on Use and Disclosure.--Protected health 
     information about a protected individual that is disclosed by 
     a health information trustee pursuant to--
       (1) subsection (a)(2) may not be otherwise used or 
     disclosed by the recipient unless the use or disclosure is 
     necessary to fulfill the purpose for which the information 
     was obtained; and
       (2) subsection (a)(3) may not be used or disclosed by the 
     recipient unless the recipient complies with the conditions 
     and restrictions on use and disclosure with which the 
     recipient would have been required to comply if the 
     disclosure by the trustee had been made under the section 
     referred to in subsection (a)(3) the conditions of which were 
     met by the disclosure.
       (d) Restrictions on Grand Juries.--Protected health 
     information that is disclosed by a health information trustee 
     under subsection (a)(1)--
       (1) shall be returnable on a date when the grand jury is in 
     session and actually presented to the grand jury;
       (2) shall be used only for the purpose of considering 
     whether to issue an indictment or report by that grand jury, 
     or for the purpose of prosecuting a crime for which that 
     indictment or report is issued, or for a purpose authorized 
     by rule 6(e) of the Federal Rules of Criminal Procedure or a 
     comparable State rule;
       (3) shall be destroyed or returned to the trustee if not 
     used for one of the purposes specified in paragraph (2); and
       (4) shall not be maintained, or a description of the 
     contents of such information shall not be maintained, by any 
     government authority other than in the sealed records of the 
     grand jury, unless such information has been used in the 
     prosecution of a crime for which the grand jury issued an 
     indictment or presentment or for a purpose authorized by rule 
     6(e) of the Federal Rules of Criminal Procedure or a 
     comparable State rule.
       (e) Use in Action Against Individual.--A person who 
     receives protected health information about a protected 
     individual through a disclosure under this section may not 
     use or disclose the information in any administrative, civil, 
     or criminal action or investigation directed against the 
     individual, except an action or investigation arising out of 
     and directly related to the inquiry for which the information 
     was obtained;
       (f) Construction.--Nothing in this section shall be 
     construed as authority for a health information trustee to 
     refuse to comply with a valid administrative subpoena or 
     warrant or a valid judicial subpoena or search warrant that 
     meets the requirements of this subtitle.
       (g) Applicability.--A health information trustee referred 
     to in subsection (a) is any trustee other than the following:
       (1) A health information service organization.
       (2) A public health authority.
       (3) A health researcher.

     SEC. 9231. HEALTH INFORMATION SERVICE ORGANIZATIONS.

       A health information trustee may disclose protected health 
     information to a health information service organization for 
     the purpose of permitting the organization to perform a 
     function for which the Secretary has authorized (by means of 
     a designation or certification) the organization to receive 
     access to health care information in electronic or magnetic 
     form that is regulated by this Act.

             PART 3--ACCESS PROCEDURES AND CHALLENGE RIGHTS

     SEC. 9241. ACCESS PROCEDURES FOR LAW ENFORCEMENT SUBPOENAS, 
                   WARRANTS, AND SEARCH WARRANTS.

       (a) Probable Cause Requirement.--A government authority may 
     not obtain protected health information about a protected 
     individual from a health information trustee under paragraph 
     (1) or (2) of section 9230(a) for use in a law enforcement 
     inquiry unless there is probable cause to believe that the 
     information is relevant to a legitimate law enforcement 
     inquiry being conducted by the government authority.
       (b) Warrants and Search Warrants.--A government authority 
     that obtains protected health information about a protected 
     individual from a health information trustee under 
     circumstances described in subsection (a) and pursuant to a 
     warrant or search warrant shall, not later than 30 days after 
     the date the warrant was served on the trustee, serve the 
     individual with, or mail to the last known address of the 
     individual, a copy of the warrant.
       (c) Subpoenas.--Except as provided in subsection (d), a 
     government authority may not obtain protected health 
     information about a protected individual from a health 
     information trustee under circumstances described in 
     subsection (a) and pursuant to a subpoena unless a copy of 
     the subpoena has been served by hand delivery upon the 
     individual, or mailed to the last known address of the 
     individual, on or before the date on which the subpoena was 
     served on the trustee, together with a notice (published by 
     the Secretary under section 9245(1)) of the individual's 
     right to challenge the subpoena in accordance with section 
     9242, and--
       (1) 30 days have passed from the date of service, or 30 
     days have passed from the date of mailing, and within such 
     time period the individual has not initiated a challenge in 
     accordance with section 9242; or
       (2) disclosure is ordered by a court under section 9242.
       (d) Application for Delay.--
       (1) In general.--A government authority may apply to an 
     appropriate court to delay (for an initial period of not 
     longer than 90 days) serving a copy of a subpoena and a 
     notice otherwise required under subsection (c) with respect 
     to a law enforcement inquiry. The government authority may 
     apply to the court for extensions of the delay.
       (2) Reasons for delay.--An application for a delay, or 
     extension of a delay, under this subsection shall state, with 
     reasonable specificity, the reasons why the delay or 
     extension is being sought.
       (3) Ex parte order.--The court shall enter an ex parte 
     order delaying, or extending the delay of, the notice and an 
     order prohibiting the trustee from revealing the request for, 
     or the disclosure of, the protected health information being 
     sought if the court finds that--
       (A) the inquiry being conducted is within the lawful 
     jurisdiction of the government authority seeking the 
     protected health information;
       (B) there is probable cause to believe that the protected 
     health information being sought is relevant to a legitimate 
     law enforcement inquiry being conducted by the government 
     authority;
       (C) the government authority's need for the information 
     outweighs the privacy interest of the protected individual 
     who is the subject of the information; and
       (D) there are reasonable grounds to believe that receipt of 
     a notice by the individual will result in--
       (i) endangering the life or physical safety of any 
     individual;
       (ii) flight from prosecution;
       (iii) destruction of or tampering with evidence or the 
     information being sought; or
       (iv) intimidation of potential witnesses.
       (4) Service of application on individual.--Upon the 
     expiration of a period of delay of notice under this 
     subsection, the government authority shall serve upon the 
     individual, with the service of the subpoena and the notice, 
     a copy of any applications filed and approved under this 
     subsection.

     SEC. 9242. CHALLENGE PROCEDURES FOR LAW ENFORCEMENT 
                   SUBPOENAS.

       (a) Motion to Quash Subpoena.--Within 30 days of the date 
     of service, or 30 days of the date of mailing, of a subpoena 
     of a government authority seeking protected health 
     information about a protected individual from a health 
     information trustee under paragraph (1) or (2) of section 
     9230(a) (except a subpoena to which section 9243 applies), 
     the individual may file (without filing fee) a motion to 
     quash the subpoena--
       (1) in the case of a State judicial subpoena, in the court 
     which issued the subpoena;
       (2) in the case of a subpoena issued under the authority of 
     a State that is not a State judicial subpoena, in a court of 
     competent jurisdiction;
       (3) in the case of a subpoena issued under the authority of 
     a Federal court, in any court of the United States of 
     competent jurisdiction; or
       (4) in the case of any other subpoena issued under the 
     authority of the United States, in--
       (A) the United States district court for the district in 
     which the individual resides or in which the subpoena was 
     issued; or
       (B) another United States district court of competent 
     jurisdiction.
       (b) Copy.--A copy of the motion shall be served by the 
     individual upon the government authority by delivery of 
     registered or certified mail.
       (c) Affidavits and Sworn Documents.--The government 
     authority may file with the court such affidavits and other 
     sworn documents as sustain the validity of the subpoena. The 
     individual may file with the court, within 5 days of the date 
     of the authority's filing, affidavits and sworn documents in 
     response to the authority's filing. The court, upon the 
     request of the individual, the government authority, or both, 
     may proceed in camera.
       (d) Proceedings and Decision on Motion.--The court may 
     conduct such proceedings as it deems appropriate to rule on 
     the motion. All such proceedings shall be completed, and the 
     motion ruled on, within 10 calendar days of the date of the 
     government authority's filing.
       (e) Extension of Time Limits for Good Cause.--The court, 
     for good cause shown, may at any time in its discretion 
     enlarge the time limits established by subsections (c) and 
     (d).
       (f) Standard for Decision.--A court may deny a motion under 
     subsection (a) if it finds that there is probable cause to 
     believe that the protected health information being sought is 
     relevant to a legitimate law enforcement inquiry being 
     conducted by the government authority, unless the court finds 
     that the individual's privacy interest outweighs the 
     government authority's need for the information. The 
     individual shall have the burden of demonstrating that the 
     individual's privacy interest outweighs the need established 
     by the government authority for the information.
       (g) Specific Considerations With Respect to Privacy 
     Interest.--In determining under subsection (f) whether an 
     individual's privacy interest outweighs the government 
     authority's need for the information, the court shall 
     consider--
       (1) the particular purpose for which the information was 
     collected by the trustee;
       (2) the degree to which disclosure of the information will 
     embarrass, injure, or invade the privacy of the individual;
       (3) the effect of the disclosure on the individual's future 
     health care;
       (4) the importance of the inquiry being conducted by the 
     government authority, and the importance of the information 
     to that inquiry; and
       (5) any other factor deemed relevant by the court.
       (h) Attorney's Fees.--In the case of any motion brought 
     under subsection (a) in which the individual has 
     substantially prevailed, the court, in its discretion, may 
     assess against a government authority a reasonable attorney's 
     fee and other litigation costs (including expert fees) 
     reasonably incurred.
       (i) No Interlocutory Appeal.--A court ruling denying a 
     motion to quash under this section shall not be deemed a 
     final order and no interlocutory appeal may be taken 
     therefrom by the individual. An appeal of such a ruling may 
     be taken by the individual within such period of time as is 
     provided by law as part of any appeal from a final order in 
     any legal proceeding initiated against the individual arising 
     out of or based upon the protect health information 
     disclosed.

     SEC. 9243. ACCESS AND CHALLENGE PROCEDURES FOR OTHER 
                   SUBPOENAS.

       (a) In General.--A person (other than a government 
     authority seeking protected health information under 
     circumstances described in section 9241(a)) may not obtain 
     protected health information about a protected individual 
     from a health information trustee pursuant to a subpoena 
     under section 9230(a)(2) unless--
       (1) a copy of the subpoena has been served upon the 
     individual or mailed to the last known address of the 
     individual on or before the date on which the subpoena was 
     served on the trustee, together with a notice (published by 
     the Secretary under section 9245(2)) of the individual's 
     right to challenge the subpoena, in accordance with 
     subsection (b); and
       (2) either--
       (A) 30 days have passed from the date of service or 30 days 
     have passed from the date of the mailing and within such time 
     period the individual has not initiated a challenge in 
     accordance with subsection (b); or
       (B) disclosure is ordered by a court under such subsection.
       (b) Motion to Quash.--Within 30 days of the date of service 
     or 30 days of the date of mailing of a subpoena seeking 
     protected health information about a protected individual 
     from a health information trustee under subsection (a), the 
     individual may file (without filing fee) in any court of 
     competent jurisdiction, a motion to quash the subpoena, with 
     a copy served on the person seeking the information. The 
     individual may oppose, or seek to limit, the subpoena on any 
     grounds that would otherwise be available if the individual 
     were in possession of the information.
       (c) Standard for Decision.--The court shall grant an 
     individual's motion under subsection (b) if the person 
     seeking the information has not sustained the burden of 
     demonstrating that--
       (1) there are reasonable grounds to believe that the 
     information will be relevant to a lawsuit or other judicial 
     or administrative proceeding; and
       (2) the need of the person for the information outweighs 
     the privacy interest of the individual.
       (d) Specific Considerations With Respect to Privacy 
     Interest.--In determining under subsection (c) whether the 
     need of the person for the information outweighs the privacy 
     interest of the individual, the court shall consider--
       (1) the particular purpose for which the information was 
     collected by the trustee;
       (2) the degree to which disclosure of the information will 
     embarrass, injure, or invade the privacy of the individual;
       (3) the effect of the disclosure on the individual's future 
     health care;
       (4) the importance of the information to the lawsuit or 
     proceeding; and
       (5) any other factor deemed relevant by the court.
       (e) Attorney's Fees.--In the case of any motion brought 
     under subsection (b) by an individual against a person in 
     which the individual has substantially prevailed, the court, 
     in its discretion, may assess against the person a reasonable 
     attorney's fee and other litigation costs (including expert 
     fees) reasonably incurred.

     SEC. 9244. CONSTRUCTION OF PART; SUSPENSION OF STATUTE OF 
                   LIMITATIONS.

       (a) In General.--Nothing in this part shall affect the 
     right of a health information trustee to challenge a request 
     for protected health information. Nothing in this part shall 
     entitle a protected individual to assert the rights of a 
     health information trustee.
       (b) Effect of Motion on Statute of Limitations.--If an 
     individual who is the subject of protected health information 
     files a motion under this part which has the effect of 
     delaying the access of a government authority to such 
     information, the period beginning on the date such motion was 
     filed and ending on the date on which the motion is decided 
     shall be excluded in computing any period of limitations 
     within which the government authority may commence any civil 
     or criminal action in connection with which the access is 
     sought.

     SEC. 9245. RESPONSIBILITIES OF SECRETARY.

       Not later than July 1, 1996, the Secretary, after notice 
     and opportunity for public comment, shall develop and 
     disseminate brief, clear, and easily understood model 
     notices--
       (1) for use under subsection (c) of section 9241, detailing 
     the rights of a protected individual who wishes to challenge, 
     under section 9242, the disclosure of protected health 
     information about the individual under such subsection; and
       (2) for use under subsection (a) of section 9243, detailing 
     the rights of a protected individual who wishes to challenge, 
     under subsection (b) of such section, the disclosure of 
     protected health information about the individual under such 
     section.

                    PART 4--MISCELLANEOUS PROVISIONS

     SEC. 9251. PAYMENT CARD AND ELECTRONIC PAYMENT TRANSACTIONS.

       (a) Payment for Health Care Through Card or Electronic 
     Means.--If a protected individual pays a health information 
     trustee for health care by presenting a debit, credit, or 
     other payment card or account number, or by any other 
     electronic payment means, the trustee may disclose to a 
     person described in subsection (b) only such protected health 
     information about the individual as is necessary for the 
     processing of the payment transaction or the billing or 
     collection of amounts charged to, debited from, or otherwise 
     paid by, the individual using the card, number, or other 
     electronic payment means.
       (b) Transaction Processing.--A person who is a debit, 
     credit, or other payment card issuer, is otherwise directly 
     involved in the processing of payment transactions involving 
     such cards or other electronic payment transactions, or is 
     otherwise directly involved in the billing or collection of 
     amounts paid through such means, may only use or disclose 
     protected health information about a protected individual 
     that has been disclosed in accordance with subsection (a) 
     when necessary for--
       (1) the authorization, settlement, billing or collection of 
     amounts charged to, debited from, or otherwise paid by, the 
     individual using a debit, credit, or other payment card or 
     account number, or by other electronic payment means;
       (2) the transfer of receivables, accounts, or interest 
     therein;
       (3) the audit of the credit, debit, or other payment card 
     account information;
       (4) compliance with Federal, State, or local law; or
       (5) a properly authorized civil, criminal, or regulatory 
     investigation by Federal, State, or local authorities.

     SEC. 9252. ACCESS TO PROTECTED HEALTH INFORMATION OUTSIDE OF 
                   THE UNITED STATES.

       (a) In General.--Notwithstanding the provisions of part 2, 
     and except as provided in subsection (b), a health 
     information trustee may not permit any person who is not in a 
     State to have access to protected health information about a 
     protected individual unless one or more of the following 
     conditions exist:
       (1) Specific authorization.--The individual has 
     specifically consented to the provision of such access 
     outside of the United States in an authorization that meets 
     the requirements of section 9222.
       (2) Equivalent protection.--The provision of such access is 
     authorized under this subtitle and the Secretary has 
     determined that there are fair information practices for 
     protected health information in the jurisdiction where the 
     access will be provided that provide protections for 
     individuals and protected health information that are 
     equivalent to the protections provided for by this subtitle.
       (3) Access required by law.--The provision of such access 
     is required under--
       (A) a Federal statute; or
       (B) a treaty or other international agreement applicable to 
     the United States.
       (b) Exceptions.--Subsection (a) does not apply where the 
     provision of access to protected health information--
       (1) is to a foreign public health authority;
       (2) is authorized under section 9224 (relating to next of 
     kin and directory information), 9226 (relating to health 
     research), or 9227 (relating to emergency circumstances); or
       (3) is necessary for the purpose of providing for payment 
     for health care that has been provided to an individual.

     SEC. 9253. STANDARDS FOR ELECTRONIC DOCUMENTS AND 
                   COMMUNICATIONS.

       (a) Standards.--Not later than July 1, 1996, the Secretary, 
     after notice and opportunity for public comment and in 
     consultation with appropriate private standard-setting 
     organizations and other interested parties, shall establish 
     standards with respect to the creation, transmission, 
     receipt, and maintenance, in electronic and magnetic form, of 
     each type of written document specifically required or 
     authorized under this subtitle. Where a signature is required 
     under any other provision of this subtitle, such standards 
     shall provide for an electronic or magnetic substitute that 
     serves the functional equivalent of a signature.
       (b) Treatment of Complying Documents and Communications.--
     An electronic or magnetic document or communication that 
     satisfies the standards established under subsection (a) with 
     respect to such document or communication shall be treated as 
     satisfying the requirements of this subtitle that apply to an 
     equivalent written document.

     SEC. 9254. DUTIES AND AUTHORITIES OF AFFILIATED PERSONS.

       (a) Requirements on Trustees.--
       (1) Provision of information.--A health information trustee 
     may provide protected health information to a person who, 
     with respect to the trustee, is an affiliated person and may 
     permit the affiliated person to use such information, only 
     for the purpose of conducting, supporting, or facilitating an 
     activity that the trustee is authorized to undertake.
       (2) Notice to affiliated person.--A health information 
     trustee shall notify a person who, with respect to the 
     trustee, is an affiliated person of any duties under this 
     subtitle that the affiliated person is required to fulfill 
     and of any authorities under this subtitle that the 
     affiliated person is authorized to exercise.
       (b) Duties of Affiliated Persons.--
       (1) In general.--An affiliated person shall fulfill any 
     duty under this subtitle that--
       (A) the health information trustee with whom the person has 
     an agreement or relationship described in section 
     9200(c)(1)(C) is required to fulfill; and
       (B) the person has undertaken to fulfill pursuant to such 
     agreement or relationship.
       (2) Construction of other parts.--With respect to a duty 
     described in paragraph (1) that an affiliated person is 
     required to fulfill, the person shall be considered a health 
     information trustee for purposes of this subtitle. The person 
     shall be subject to part 5 (relating to enforcement) with 
     respect to any such duty that the person fails to fulfill.
       (3) Effect on trustee.--An agreement or relationship with 
     an affiliated person does not relieve a health information 
     trustee of any duty or liability under this subtitle.
       (b) Authorities of Affiliated Persons.--
       (1) In general.--An affiliated person may only exercise an 
     authority under this subtitle that the health information 
     trustee with whom the person is affiliated may exercise and 
     that the person has been given by the trustee pursuant to an 
     agreement or relationship described in section 9200(c)(1)(C). 
     With respect to any such authority, the person shall be 
     considered a health information trustee for purposes of this 
     subtitle. The person shall be subject to part 5 (relating to 
     enforcement) with respect to any act that exceeds such 
     authority.
       (2) Effect on trustee.--An agreement or relationship with 
     an affiliated person does not affect the authority of a 
     health information trustee under this subtitle.

     SEC. 9255. AGENTS AND ATTORNEYS.

       (a) In General.--Except as provided in subsections (b) and 
     (c), a person who is authorized by law (on grounds other than 
     an individual's minority), or by an instrument recognized 
     under law, to act as an agent, attorney, proxy, or other 
     legal representative for a protected individual or the estate 
     of a protected individual, or otherwise to exercise the 
     rights of the individual or estate, may, to the extent 
     authorized, exercise and discharge the rights of the 
     individual or estate under this subtitle.
       (b) Health Care Power of Attorney.--A person who is 
     authorized by law (on grounds other than an individual's 
     minority), or by an instrument recognized under law, to make 
     decisions about the provision of health care to an individual 
     who is incapacitated may exercise and discharge the rights of 
     the individual under this subtitle to the extent necessary to 
     effectuate the terms or purposes of the grant of authority.
       (c) No Court Declaration.--If a health care provider 
     determines that an individual, who has not been declared to 
     be legally incompetent, suffers from a medical condition that 
     prevents the individual from acting knowingly or effectively 
     on the individual's own behalf, the right of the individual 
     to authorize disclosure under section 9222 may be exercised 
     and discharged in the best interest of the individual by--
       (1) a person described in subsection (b) with respect to 
     the individual;
       (2) a person described in subsection (a) with respect to 
     the individual, but only if a person described in paragraph 
     (1) cannot be contacted after a reasonable effort;
       (3) the next of kin of the individual, but only if a person 
     described in paragraph (1) or (2) cannot be contacted after a 
     reasonable effort; or
       (4) the health care provider, but only if a person 
     described in paragraph (1), (2), or (3) cannot be contacted 
     after a reasonable effort.

     SEC. 9256. MINORS.

       (a) Individuals Who Are 18 or Legally Capable.--In the case 
     of an individual--
       (1) who is 18 years of age or older, all rights of the 
     individual shall be exercised by the individual, except as 
     provided in section 9255; or
       (2) who, acting alone, has the legal capacity under State 
     law to apply for and obtain health care and has sought such 
     care, the individual shall exercise all rights of an 
     individual under this subtitle with respect to protected 
     health information relating to such care.
       (b) Individuals Under 18.--Except as provided in subsection 
     (a)(2), in the case of an individual who is--
       (1) under 14 years of age, all the individual's rights 
     under this subtitle shall be exercised through the parent or 
     legal guardian of the individual; or
       (2) 14, 15, 16, or 17 years of age, the right of inspection 
     (under section 9201), the right of amendment (under section 
     9202), and the right to authorize disclosure of protected 
     health information (under section 9222) of the individual may 
     be exercised either by the individual or by the parent or 
     legal guardian of the individual.

     SEC. 9257. MAINTENANCE OF CERTAIN PROTECTED HEALTH 
                   INFORMATION.

       (a) In General.--The Secretary shall establish a process 
     under which the protected health information described in 
     subsection (b) that is maintained by a person described in 
     subsection (c) is delivered to, and maintained by, an 
     individual or entity designated by the Secretary (which may 
     include a State).
       (b) Information Described.--The protected health 
     information referred to in subsection (a) is protected health 
     information that--
       (1) is recorded in any form or medium;
       (2) is created by--
       (A) a health care provider; or
       (B) a health plan sponsor that provides health benefits in 
     the form of items and services to enrollees and not in the 
     form of reimbursement for items and services; and
       (3) relates in any way to the past, present, or future 
     physical or mental health or condition or functional status 
     of a protected individual or the provision of health care to 
     a protected individual.
       (c) Persons Described.--A person referred to in subsection 
     (a) is any of the following:
       (A) A health care facility that has closed.
       (B) A professional practice operated by a health care 
     provider that has closed.
       (C) A health plan sponsor that--
       (i) previously provided health benefits in the form of 
     items and services to enrollees; and
       (ii) has ceased to do business.

                          PART 5--ENFORCEMENT

     SEC. 9261. CIVIL ACTIONS.

       (a) In General.--Any individual whose right under this 
     subtitle has been knowingly or negligently violated--
       (1) by a health information trustee, or any other person, 
     who is not described in paragraph (2), (3), (4), or (5) may 
     maintain a civil action for actual damages and for equitable 
     relief against the health information trustee or other 
     person;
       (2) by an officer or employee of the United States while 
     the officer or employee was acting within the scope of the 
     office or employment may maintain a civil action for actual 
     damages and for equitable relief against the United States;
       (3) by an officer or employee of any government authority 
     of a State that has waived its sovereign immunity to a claim 
     for damages resulting from a violation of this subtitle while 
     the officer or employee was acting within the scope of the 
     office or employment may maintain a civil action for actual 
     damages and for equitable relief against the State 
     government;
       (4) by an officer or employee of a government of a State 
     that is not described in paragraph (3) may maintain a civil 
     action for actual damages and for equitable relief against 
     the officer or employee; or
       (5) by an officer or employee of a government authority 
     while the officer or employee was not acting within the scope 
     of the office or employment may maintain a civil action for 
     actual damages and for equitable relief against the officer 
     or employee.
       (b) Knowing Violations.--Any individual entitled to recover 
     actual damages under this section because of a knowing 
     violation of a provision of this subtitle (other than 
     subsection (c) or (d) of section 9221) shall be entitled to 
     recover the amount of the actual damages demonstrated or 
     $5000, whichever is greater.
       (c) Actual Damages.--For purposes of this section, the term 
     ``actual damages'' includes damages paid to compensate an 
     individual for nonpecuniary losses such as physical and 
     mental injury as well as damages paid to compensate for 
     pecuniary losses.
       (d) Punitive Damages; Attorney's Fees.--In any action 
     brought under this section in which the complainant has 
     prevailed because of a knowing violation of a provision of 
     this subtitle (other than subsection (c) or (d) of section 
     9221), the court may, in addition to any relief awarded under 
     subsections (a) and (b), award such punitive damages as may 
     be warranted. In such an action, the court, in its 
     discretion, may allow the prevailing party a reasonable 
     attorney's fee (including expert fees) as part of the costs, 
     and the United States shall be liable for costs the same as a 
     private person.
       (e) Limitation.--A civil action under this section may not 
     be commenced more than 2 years after the date on which the 
     aggrieved individual discovered the violation or the date on 
     which the aggrieved individual had a reasonable opportunity 
     to discover the violation, whichever occurs first.
       (f) Inspection and Amendment.--If a health information 
     trustee has established a formal internal procedure that 
     allows an individual who has been denied inspection or 
     amendment of protected health information to appeal the 
     denial, the individual may not maintain a civil action in 
     connection with the denial until the earlier of--
       (1) the date the appeal procedure has been exhausted; or
       (2) the date that is 4 months after the date on which the 
     appeal procedure was initiated.
       (g) No Liability for Permissible Disclosures.--A health 
     information trustee who makes a disclosure of protected 
     health information about a protected individual that is 
     permitted by this subtitle and not otherwise prohibited by 
     State or Federal statute shall not be liable to the 
     individual for the disclosure under common law.
       (h) No Liability for Institutional Review Board 
     Determinations.--If the members of a certified institutional 
     review board have in good faith determined that an approved 
     health research project is of sufficient importance so as to 
     outweigh the intrusion into the privacy of an individual 
     pursuant to section 9226(a)(1), the members, the board, and 
     the parent institution of the board shall not be liable to 
     the individual as a result of such determination.
       (i) Good Faith Reliance on Certification.--A health 
     information trustee who relies in good faith on a 
     certification by a government authority or other person and 
     discloses protected health information about an individual in 
     accordance with this subtitle shall not be liable to the 
     individual for such disclosure.

     SEC. 9262. CIVIL MONEY PENALTIES.

       (a) Violation.--Any health information trustee who the 
     Secretary determines has demonstrated a pattern or practice 
     of failure to comply with the provisions of this subtitle 
     shall be subject, in addition to any other penalties that may 
     be prescribed by law, to a civil money penalty of not more 
     than $10,000 for each such failure. In determining the amount 
     of any penalty to be assessed under the procedures 
     established under subsection (b), the Secretary shall take 
     into account the previous record of compliance of the person 
     being assessed with the applicable requirements of this 
     subtitle and the gravity of the violation.
       (b) Procedures for Imposition of Penalties.--The provisions 
     of section 1128A of the Social Security Act (other than 
     subsections (a) and (b)) shall apply to the imposition of a 
     civil monetary penalty under this section in the same manner 
     as such provisions apply with respect to the imposition of a 
     penalty under section 1128A of such Act.

     SEC. 9263. ALTERNATIVE DISPUTE RESOLUTION.

       (a) In General.--Not later than July 1, 1996, the Secretary 
     shall, by regulation, develop alternative dispute resolution 
     methods for use by individuals, health information trustees, 
     and other persons in resolving claims under section 9261. 
     Such regulations may not require an individual to pursue an 
     alternative dispute resolution method.
       (b) Suspension of Statute of Limitations.--The regulations 
     established by the Secretary under subsection (a) may provide 
     that a period in which an individual who alleges that a right 
     of the individual under this subtitle has been violated 
     pursues (as defined by the Secretary) an alternative dispute 
     resolution method under this section shall be excluded in 
     computing the period of limitations under section 9261(e).
       (c) Methods.--The methods under subsection (a) shall 
     include at least the following:
       (1) Arbitration.--The use of arbitration.
       (2) Mediation.--The use of mediation.
       (3) Early offers of settlement.--The use of a process under 
     which parties make early offers of settlement.
       (d) Standards for Establishing Methods.--In developing 
     alternative dispute resolution methods under subsection (a), 
     the Secretary shall ensure that the methods promote the 
     resolution of claims in a manner that--
       (1) is affordable for the parties involved;
       (2) provides for timely and fair resolution of claims; and
       (3) provides for reasonably convenient access to dispute 
     resolution for individuals.

     SEC. 9264. AMENDMENTS TO CRIMINAL LAW.

       (a) In General.--Title 18, United States Code, is amended 
     by inserting after chapter 89 the following:

               ``CHAPTER 90--PROTECTED HEALTH INFORMATION

``Sec.
``1831. Definitions.
``1832. Obtaining protected health information under false pretenses.
``1833. Monetary gain from obtaining protected health information under 
              false pretenses.
``1834. Knowing and unlawful obtaining of protected health information.
``1835. Monetary gain from knowing and unlawful obtaining of protected 
              health information.
``1836. Knowing and unlawful use or disclosure of protected health 
              information.
``1837. Monetary gain from knowing and unlawful sale, transfer, or use 
              of protected health information.

     ``Sec. 1831. Definitions

       ``As used in this chapter--
       ``(1) the term `health information trustee' has the meaning 
     given such term in section 9200(b)(6) of the Guaranteed 
     Health Insurance Act of 1994;
       ``(2) the term `protected health information' has the 
     meaning given such term in section 9200(a)(3) of such Act; 
     and
       ``(3) the term `protected individual' has the meaning given 
     such term in section 9200(a)(4) of such Act.

     ``Sec. 1832. Obtaining protected health information under 
       false pretenses

       ``Whoever under false pretenses--
       ``(1) requests or obtains protected health information from 
     a health information trustee; or
       ``(2) obtains from a protected individual an authorization 
     for the disclosure of protected health information about the 
     individual maintained by a health information trustee;
     shall be fined under this title or imprisoned not more than 5 
     years, or both.

     ``Sec. 1833. Monetary gain from obtaining protected health 
       information under false pretenses

       ``Whoever under false pretenses--
       ``(1) requests or obtains protected health information from 
     a health information trustee with the intent to sell, 
     transfer, or use such information for profit or monetary 
     gain; or
       ``(2) obtains from a protected individual an authorization 
     for the disclosure of protected health information about the 
     individual maintained by a health information trustee with 
     the intent to sell, transfer, or use such authorization for 
     profit or monetary gain;
     and knowingly sells, transfers, or uses such information or 
     authorization for profit or monetary gain shall be fined 
     under this title or imprisoned not more than 10 years, or 
     both.

     ``Sec. 1834. Knowing and unlawful obtaining of protected 
       health information

       ``Whoever knowingly obtains protected health information 
     from a health information trustee in violation of subtitle C 
     of title IX of the Guaranteed Health Insurance Act of 1994, 
     knowing that such obtaining is unlawful, shall be fined under 
     this title or imprisoned not more than 5 years, or both.

     ``Sec. 1835. Monetary gain from knowing and unlawful 
       obtaining of protected health information

       ``Whoever knowingly--
       ``(1) obtains protected health information from a health 
     information trustee in violation of subtitle C of title IX of 
     the Guaranteed Health Insurance Act of 1994, knowing that 
     such obtaining is unlawful and with the intent to sell, 
     transfer, or use such information for profit or monetary 
     gain; and
       ``(2) knowingly sells, transfers, or uses such information 
     for profit or monetary gain;

     shall be fined under this title or imprisoned not more than 
     10 years, or both.

     ``Sec. 1836. Knowing and unlawful use or disclosure of 
       protected health information

       ``Whoever knowingly uses or discloses protected health 
     information in violation of subtitle C of title IX of the 
     Guaranteed Health Insurance Act of 1994, knowing that such 
     use or disclosure is unlawful, shall be fined under this 
     title or imprisoned not more than 5 years, or both.

     ``Sec. 1837. Monetary gain from knowing and unlawful sale, 
       transfer, or use of protected health information

       ``Whoever knowingly sells, transfers, or uses protected 
     health information in violation of subtitle C of title IX of 
     the Guaranteed Health Insurance Act of 1994, knowing that 
     such sale, transfer, or use is unlawful, shall be fined under 
     this title or imprisoned not more than 10 years, or both.''.
       (b) Clerical Amendment.--The table of chapters for part I 
     of title 18, United States Code, is amended by inserting 
     after the item relating to chapter 89 the following:

``90. Protected health information..........................1831''.....

           PART 6--AMENDMENTS TO TITLE 5, UNITED STATES CODE

     SEC. 9271. AMENDMENTS TO TITLE 5, UNITED STATES CODE.

       (a) New Subsection.--Section 552a of title 5, United States 
     Code, is amended by adding at the end the following:
       ``(w) Medical Exemptions.--The head of an agency that is a 
     health information trustee (as defined in section 9200(b)(6) 
     of the Guaranteed Health Insurance Act of 1994) shall 
     promulgate rules, in accordance with the requirements 
     (including general notice) of subsections (b)(1), (b)(2), 
     (b)(3), (c), and (e) of section 553 of this title, to exempt 
     a system of records within the agency, to the extent that the 
     system of records contains protected health information (as 
     defined in section 9200(a)(3) of such Act), from all 
     provisions of this section except subsections (e)(1), (e)(2), 
     subparagraphs (A) through (C) and (E) through (I) of 
     subsection (e)(4), and subsections (e)(5), (e)(6), (e)(9), 
     (e)(12), (l), (n), (o), (p), (q), (r), and (u).''.
       (b) Repeal.--Section 552a(f)(3) of title 5, United States 
     Code, is amended by striking ``pertaining to him,'' and all 
     that follows through the semicolon and inserting ``pertaining 
     to the individual;''.

    PART 7--REGULATIONS, RESEARCH, AND EDUCATION; EFFECTIVE DATES; 
             APPLICABILITY; AND RELATIONSHIP TO OTHER LAWS

     SEC. 9281. REGULATIONS; RESEARCH AND EDUCATION.

       (a) Regulations.--Not later than July 1, 1996, the 
     Secretary shall prescribe regulations to carry out this 
     subtitle.
       (b) Research and Technical Support.--The Secretary may 
     sponsor--
       (1) research relating to the privacy and security of 
     protected health information;
       (2) the development of consent forms governing disclosure 
     of such information; and
       (3) the development of technology to implement standards 
     regarding such information.
       (c) Education.--The Secretary shall establish education and 
     awareness programs--
       (1) to foster adequate security practices by health 
     information trustees;
       (2) to train personnel of health information trustees 
     respecting the duties of such personnel with respect to 
     protected health information; and
       (3) to inform individuals and employers who purchase health 
     care respecting their rights with respect to such 
     information.

     SEC. 9282. EFFECTIVE DATES.

       (a) In General.--Except as provided in subsection (b), this 
     subtitle, and the amendments made by this subtitle, shall 
     take effect on January 1, 1997.
       (b) Provisions Effective Immediately.--A provision of this 
     subtitle shall take effect on the date of the enactment of 
     this Act if the provision--
       (1) imposes a duty on the Secretary to develop, establish, 
     or promulgate regulations, guidelines, notices, statements, 
     or education and awareness programs;
       (2) authorizes the Secretary to sponsor research or the 
     development of forms or technology; or
       (3) defines a term.

     SEC. 9283. APPLICABILITY.

       (a) Protected Health Information.--Except as provided in 
     subsections (b) and (c), the provisions of this subtitle 
     shall apply to any protected health information that is 
     received, created, used, maintained, or disclosed by a health 
     information trustee in a State on or after January 1, 1997, 
     regardless of whether the information existed or was 
     disclosed prior to such date.
       (b) Exception.--
       (1) In general.--The provisions of this subtitle shall not 
     apply to a trustee described in paragraph (2), except with 
     respect to protected health information that is received by 
     the trustee on or after January 1, 1997. With respect to 
     protected health information that is received by such a 
     trustee before such date, other applicable law shall continue 
     to apply.
       (2) Applicability.--A trustee referred to in paragraph (1) 
     is--
       (A) a health researcher; or
       (B) a person who, with respect to specific protected health 
     information, received the information--
       (i) pursuant to--

       (I) section 9227 (relating to emergency circumstances);
       (II) section 9228 (relating to judicial and administrative 
     purposes);
       (III) section 9229 (relating to law enforcement); or
       (IV) section 9230 (relating to subpoenas, warrants, and 
     search warrants); or

       (ii) while acting in whole or in part in the capacity of an 
     officer or employee of a person described in clause (i).
       (c) Authorizations for Disclosures.--An authorization for 
     the disclosure of protected health information about a 
     protected individual that is executed by the individual 
     before January 1, 1997, and is recognized and valid under 
     State law on December 31, 1996, shall remain valid and shall 
     not be subject to the requirements of section 9222 until 
     January 1, 1998, or the occurrence of the date or event (if 
     any) specified in the authorization upon which the 
     authorization expires, whichever occurs earlier.

     SEC. 9284. RELATIONSHIP TO OTHER LAWS.

       (a) State Law.--Except as otherwise provided in subsections 
     (b), (c), (d), and (f), a State may not establish, continue 
     in effect, or enforce any State law to the extent that the 
     law is inconsistent with, or imposes additional requirements 
     with respect to, any of the following:
       (1) A duty of a health information trustee under this 
     subtitle.
       (2) A provision of part 3 (relating to access procedures 
     and challenge rights) or part 4 (miscellaneous provisions).
       (b) Laws Relating to Authorized Disclosures.--This part 
     does not preempt, supersede, or modify the operation of any 
     State law to the extent that the law prohibits or regulates a 
     disclosure of protected health information that is authorized 
     under this part.
       (c) Criminal Penalties.--A State may establish and enforce 
     criminal penalties with respect to a failure to comply with a 
     provision of this part.
       (d) Privileges.--A privilege that a person has under law in 
     a court of a State or the United States or under the rules of 
     any agency of a State or the United States may not be 
     diminished, waived, or otherwise affected by--
       (1) the execution by a protected individual of an 
     authorization for disclosure of protected health information 
     under this part, if the authorization is executed for the 
     purpose of receiving health care or providing for the payment 
     for health care; or
       (2) any provision of this part that authorizes the 
     disclosure of protected health information for the purpose of 
     receiving health care or providing for the payment for health 
     care.
       (e) Department of Veterans Affairs.--The limitations on use 
     and disclosure of protected health information under this 
     part shall not be construed to prevent any exchange of such 
     information within and among components of the Department of 
     Veterans Affairs that determine eligibility for or 
     entitlement to, or that provide, benefits under laws 
     administered by the Secretary of Veterans Affairs.
       (f) Certain Duties Under State or Federal Law.--This part 
     shall not be construed to preempt, supersede, or modify the 
     operation of any of the following:
       (1) Any law that provides for the reporting of vital 
     statistics such as birth or death information.
       (2) Any law requiring the reporting of abuse or neglect 
     information about any individual.
       (3) Subpart II of part E of title XXVI of the Public Health 
     Service Act (relating to notifications of emergency response 
     employees of possible exposure to infectious diseases).
       (4) The Americans with Disabilities Act of 1990.
       (5) Any Federal or State statute that establishes a 
     privilege for records used in health professional peer review 
     activities.
       (g) Secretarial Authority.--
       (1) Secretary of Health and Human Services.--A provision of 
     this part does not preempt, supersede, or modify the 
     operation of section 543 of the Public Health Service Act, 
     except to the extent that the Secretary of Health and Human 
     Services determines through regulations promulgated by such 
     Secretary that the provision provides greater protection for 
     protected health information, and the rights of protected 
     individuals, than is provided under such section 543.
       (2) Secretary of Veterans Affairs.--A provision of this 
     part does not preempt, supersede, or modify the operation of 
     section 7332 of title 38, United States Code, except to the 
     extent that the Secretary of Veterans Affairs determines 
     through regulations promulgated by such Secretary that the 
     provision provides greater protection for protected health 
     information, and the rights of protected individuals, than is 
     provided under such section 7332.
                          Subtitle D--Remedies


                     table of contents of subtitle

                          Subtitle D--Remedies

Sec. 9300. Definitions.

                 Part 1--Grievance and Appeals Process


  SUBPART A--REVIEW OF REFUSALS OF ITEMS AND SERVICES AND DENIALS OF 
                  PAYMENT TO PROVIDERS AND INDIVIDUALS

Sec. 9301. Determinations by certified health benefit plan sponsors 
              providing items and services.
Sec. 9302. Determinations by certified health benefit plan sponsors 
              providing benefits in the form of payments to health 
              providers or individuals for items and services.
Sec. 9303. Notices; waiver of rights prohibited.
Sec. 9304. Review of grievances based on acts or practices by certified 
              health benefit plan sponsors.
Sec. 9305. Initial proceedings in complaint review offices.
Sec. 9306. Hearings before hearing officers in complaint review 
              offices.
Sec. 9307. Coordination with other provisions of law.


                  SUBPART B--EARLY RESOLUTION PROGRAMS

Sec. 9311. Establishment of early resolution programs in complaint 
              review offices.
Sec. 9312. Eligibility of cases for submission to early resolution 
              program.
Sec. 9313. Facilitators.
Sec. 9314. Initiation of proceedings.
Sec. 9315. The mediation proceedings.
Sec. 9316. Applicable time limits.
Sec. 9317. Legal effect of participation in proceedings.
Sec. 9318. Confidentiality.
Sec. 9319. Enforcement of settlement agreements.

                     Part 2--General Civil Remedies

Sec. 9321.  Right of action against certified health benefit plan 
              sponsors and third party contractors.
Sec. 9322. General private right of action against States.

                      Part 3--Anti-Discrimination

Sec. 9331. Requirements relating to States.
Sec. 9332. Requirements relating to consumer purchasing cooperatives.
Sec. 9333. Requirements relating to plan sponsors.
Sec. 9334. Nondiscrimination in federally assisted programs.
Sec. 9335. Collection and reporting of data by Secretary.
Sec. 9336. Regulations.

     SEC. 9300. DEFINITIONS.

       For purposes of this subtitle--
       (1) Certified health benefit plan.--The term ``certified 
     health benefit plan'' means--
       (A) a health benefit plan (as defined in section 5504(3)) 
     provided or sponsored by a private person (regardless of 
     whether enrollment in such plan is facilitated by a 
     purchasing cooperative or governmental program);
       (B) a health benefit plan established or maintained by the 
     government of a State or political subdivision thereof, or by 
     any agency or instrumentality of such a government, for its 
     employees; and
       (C) a long-term care insurance policy (as defined in 
     section 10111).
       (2) Certified health benefit plan sponsor.--The term 
     ``certified health benefit plan sponsor'' has the meaning 
     given the term ``sponsor'' in section 5504(13) in relation to 
     a certified health benefit plan.
       (3) Disability.--The term ``disability'' has the meaning 
     given such term in section 3(2) of the Americans with 
     Disabilities Act of 1990.
       (4) Health provider.--The term ``health provider'' has the 
     meaning given such term in section 9109(7).
       (5) Network provider.--The term ``network provider'' has 
     the meaning given such term in section 9109(8).
       (6) Plan network.--The term ``plan network'' has the 
     meaning given such term in section 9109(9).
       (7) Third party contractor.--The term ``third party 
     contractor'' means, in connection with a certified health 
     benefit plan, any person (other than a certified health 
     benefit plan sponsor with respect to the plan) who--
       (A) administers or processes payments made under the plan 
     pursuant to requests for payment for items and services but 
     is not the provider of the items and services, or
       (B) carries out any other duty of the certified health 
     benefit plan sponsor under a direct or indirect contractual 
     arrangement with the certified health benefit plan sponsor, 
     other than providing the items and services.

                 PART 1--GRIEVANCE AND APPEALS PROCESS

  Subpart A--Review of Refusals of Items and Services and Denials of 
                  Payment To Providers and Individuals

     SEC. 9301. DETERMINATIONS BY CERTIFIED HEALTH BENEFIT PLAN 
                   SPONSORS PROVIDING ITEMS AND SERVICES.

       (a) Applicability.--This section applies in the case of a 
     certified health benefit plan to the extent it provides 
     benefits in the form of items and services.
       (b) Explanation of Reasons for Certain Refusals of Items or 
     Services.--
       (1) In general.--A certified health benefit plan sponsor 
     shall provide any individual who is refused an item or 
     service under the certified health benefit plan a written 
     explanation for such refusal within three business days after 
     a request for such explanation is made by or on behalf of the 
     individual. Such explanation shall set forth the specific 
     reasons for the refusal and shall meet the requirements of 
     section 9303(a). For purposes of this section, a refusal to 
     provide an item or service at the time requested shall be 
     treated as a refusal of a request for the item or service. 
     For treatment in the complaint review office of refusals 
     involving urgent requests for items and services, see section 
     9306(b)(4).
       (2) Explanation with respect to certain refusals.--
       (A) Not covered under comprehensive benefit package.--If 
     the refusal by a certified health benefit plan sponsor of an 
     item or service is based in whole or in part on a 
     determination that the item or service is not covered by the 
     comprehensive benefit package, the explanation required under 
     paragraph (1) shall include the specific factual basis for 
     the individual determination.
       (B) Experimental treatments or investigative procedures.--
     If the refusal by a certified health benefit plan sponsor of 
     an item or service is based in whole or in part on exclusion 
     of coverage with respect to a service because the service is 
     determined to comprise an experimental treatment or 
     investigatory procedure, the explanation required under 
     paragraph (1) shall include the medical basis for the 
     determination and a description of the process used in making 
     the determination.
       (C) Inconsistency with practice guidelines.--If the refusal 
     by a certified health benefit plan sponsor of an item or 
     service is based in whole or in part on a determination that 
     a particular treatment is not medically necessary or 
     appropriate or is inconsistent with the plan's practice 
     guidelines, the explanation required under paragraph (1) 
     shall include the medical basis for the determination, the 
     guidelines used in making the determination, the basis for 
     such guidelines, and a description of the process used in 
     making the determination.
       (c) Requirements Relating to Terminated or Reduced Items or 
     Services.--
       (1) Written explanation.--A certified health benefit plan 
     sponsor shall provide to any individual a written explanation 
     for any intended action that would result in termination or 
     reduction of any item or service which has been provided in a 
     course of treatment for such individual. Such explanation 
     shall be provided not less than one business day before the 
     action is to be taken by the certified health benefit plan 
     sponsor. The written explanation shall set forth the specific 
     reasons for such action and shall meet the requirements of 
     section 9303(a). Subsection (b)(2) shall apply with respect 
     to such written explanation.
       (2) Interim relief in urgent cases in complaint review 
     office.--
       (A) In general.--Upon the filing of a complaint with the 
     appropriate complaint review office under section 9304 with 
     respect to any proposed action described in a written 
     explanation received pursuant to paragraph (1), together with 
     an attestation described in subparagraph (B), the item or 
     service proposed to be terminated or reduced shall be 
     continued until an initial decision on the complaint is made 
     by the complaint review office.
       (B) Attestation.--An attestation described in this 
     paragraph is an attestation, with respect to the individual 
     on whose behalf the complaint is made--
       (i) that failure to immediately provide the item or service 
     could reasonably be expected to result in--

       (I) placing the health of such individual (or, with respect 
     to such an individual who is a pregnant woman, the health of 
     the woman or her unborn child) in serious jeopardy,
       (II) serious impairment to bodily functions, or
       (III) serious dysfunction of any bodily organ or part,

     or
       (ii) that immediate provision of the item or service is 
     necessary because such individual has made or is at serious 
     risk of making an attempt to harm himself or herself or 
     another individual.
       (d) Failure to meet requirements establishing right to file 
     complaint.--A refusal described in subsection (b)(1), a 
     reduction or termination described in subsection (c), or a 
     failure by a certified health benefit plan sponsor to comply 
     with any requirement of this section with respect to any 
     individual shall establish a right for the aggrieved 
     individual to file a complaint with the complaint review 
     office under section 9304.

     SEC. 9302. DETERMINATIONS BY CERTIFIED HEALTH BENEFIT PLAN 
                   SPONSORS PROVIDING BENEFITS IN THE FORM OF 
                   PAYMENTS TO HEALTH PROVIDERS OR INDIVIDUALS FOR 
                   ITEMS AND SERVICES.

       (a) Applicability.--This section applies in the case of a 
     certified health benefit plan to the extent it provides 
     benefits in the form of payments to health providers or 
     individuals for items and services.
       (b) Treatment of Requests for Payments for Items and 
     Services.--
       (1) Notice requirements and time limits.--
       (A) In general.--In the case of a request presented to a 
     certified health benefit plan sponsor by a health provider or 
     individual for payment for any item or service provided to an 
     individual, the certified health benefit plan sponsor shall 
     provide to the health provider or individual a written notice 
     of any denial, in whole or in part, of the payment within 20 
     business days after the date on which the request is 
     presented in writing to the certified health benefit plan 
     sponsor. Failure by any certified health benefit plan sponsor 
     to respond to any such request within such period of 20 
     business days shall be treated as a final determination by 
     the certified health benefit plan sponsor to deny the 
     request.
       (B) Matters to be included in notice.--Such notice shall 
     include a written explanation for such denial which sets 
     forth the specific reasons therefor and which meets the 
     requirements of section 9303(a).
       (2) Explanation with respect to certain denials.--
       (A) Not covered under comprehensive benefit package.--If 
     the denial by a certified health benefit plan sponsor of 
     payment to a health provider or individual for an item or 
     service is based in whole or in part on a determination that 
     the item or service is not covered by the comprehensive 
     benefit package, exceeds the maximum payment rate, if any, 
     applicable to the class of service under title VI, or exceeds 
     payment rates under any applicable fee schedule, the 
     explanation required under paragraph (1) shall include the 
     specific factual basis for the individual determination.
       (B) Experimental treatments or investigative procedures.--
     If the denial by a certified health benefit plan sponsor of 
     payment to a health provider or individual for an item or 
     service is based in whole or in part on exclusion of coverage 
     with respect to a service because the service is determined 
     to comprise an experimental treatment or investigatory 
     procedure, the explanation required under paragraph (1) shall 
     include the medical basis for the determination and a 
     description of the process used in making the determination.
       (C) Inconsistency with practice guidelines.--If the denial 
     by a certified health benefit plan sponsor of payment to a 
     health provider or individual for an item or service is based 
     in whole or in part on a determination that a particular 
     treatment is not medically necessary or appropriate or is 
     inconsistent with the plan's practice guidelines, the 
     explanation required under paragraph (1) shall include the 
     medical basis for the determination, the guidelines used in 
     making the determination, the basis for such guidelines, and 
     a description of the process used in making the 
     determination.
       (c) Treatment of Requests by health providers or 
     Individuals for Preauthorization of Payment for Items and 
     Services.--
       (1) In general.--Except as otherwise provided in this 
     subsection, subsection (e)(1), and section 9306(b)(4), any 
     request by a health provider or an individual for 
     preauthorization of payment for any item or service under a 
     certified health benefit plan shall be treated in the same 
     manner as a request for payment for an item or service under 
     subsection (b). In applying subsection (b)(1)(A) to such a 
     request, each reference therein to ``20 business days'' shall 
     be deemed a reference to ``10 business days''.
       (2) Treatment of urgent requests for preauthorization.--
       (A) Applicability.--This paragraph applies to any request 
     for preauthorization of an item or service (other than an 
     emergency service which may not be subject to 
     preauthorization) which is accompanied by an attestation, 
     with respect to the individual on whose behalf the request is 
     made--
       (i) that failure to immediately provide the item or service 
     could reasonably be expected to result in--

       (I) placing the health of such individual (or, with respect 
     to such an individual who is a pregnant woman, the health of 
     the woman or her unborn child) in serious jeopardy,
       (II) serious impairment to bodily functions, or
       (III) serious dysfunction of any bodily organ or part,

     or
       (ii) that immediate provision of the item or service is 
     necessary because such individual has made or is at serious 
     risk of making an attempt to harm himself or herself or 
     another individual.
       (B) Shortened time limit for consideration of urgent 
     requests for preauthorization.--A certified health benefit 
     plan sponsor shall approve or deny any request described in 
     subparagraph (A) within 24 hours after the request is 
     presented to the certified health benefit plan sponsor. 
     Failure to comply with the requirements of this paragraph 
     shall be treated as a final determination by the certified 
     health benefit plan sponsor to deny the request.
       (3) Denial of previously authorized claims not permitted.--
     In any case in which a certified health benefit plan sponsor 
     approves a request for preauthorization of payment for any 
     item or service submitted by a health provider or individual 
     pursuant to this section, the certified health benefit plan 
     sponsor may not subsequently deny payment for such item or 
     service, unless the certified health benefit plan sponsor 
     makes a showing of an intentional misrepresentation of a 
     material fact by the person making the request.
       (d) Treatment of Requests to Certified Health Benefit Plan 
     Sponsors for Continuation or Restoration of Terminated or 
     Reduced Payment for Items or Services.--
       (1) In general.--A certified health benefit plan sponsor 
     shall provide to a health provider or individual a written 
     explanation for any intended action that would result in 
     termination or reduction of payment to such health provider 
     or individual for any item or service which has been provided 
     in the course of treatment. Such explanation shall be 
     provided not less than one business day before the certified 
     health benefit plan sponsor intends to take such action, 
     shall set forth the specific reasons for such action, and 
     shall meet the requirements of section 9303(a). Subsection 
     (b)(2) shall apply with respect to such explanation.
       (2) Interim relief in complaint review office of urgent 
     requests for continuation of payment for items and 
     services.--Upon the filing of a complaint with the 
     appropriate complaint review office under section 9304 with 
     respect to any proposed action described in a written 
     explanation received pursuant to paragraph (1), accompanied 
     by an attestation meeting the requirements of subsection 
     (c)(2), the payment for the items and services which is 
     proposed to be terminated or reduced shall be continued until 
     an initial decision on the complaint is made by the complaint 
     review office under section 9306(b)(4).
       (e) Time Limit for Determination of Incompleteness of 
     Requests for Payment.--For purposes of this section--
       (1) Any urgent request referred to in subsection (c)(2) 
     shall be treated as submitted in complete form.
       (2) Any other request referred to in subsection (b), (c), 
     or (d) and any other written request by a health provider or 
     individual to the certified health benefit plan sponsor 
     regarding payment for an item or service provided thereunder 
     shall be treated as filed in complete form as of 10 business 
     days after the date of the submission thereof, unless the 
     certified health benefit plan sponsor provides to the health 
     provider or individual, within such period, a written 
     explanation of any required matter remaining to be filed in 
     order to complete the presentation of the request. Such 
     explanation shall meet the requirements of section 9303(a).
       (f) Failure to meet requirements establishing right to file 
     complaint.--A denial in whole or in part by a plan of a 
     request for payment described in subsection (b), (c), or (d) 
     or a failure by a certified health benefit plan sponsor to 
     comply with any requirement of this section with respect to 
     any individual shall establish a right for such individual to 
     file a complaint with the complaint review office under 
     section 9304.

     SEC. 9303. NOTICES; WAIVER OF RIGHTS PROHIBITED.

       (a) Notice Requirements.--Each written notice or 
     explanation required under section 9301 or 9302 shall 
     include--
       (1) the address and telephone number of the Consumer Health 
     Advocacy Office (established pursuant to part O of title III 
     of the Public Health Service Act, as added by title VII) 
     serving the community-rating area in which the recipient of 
     the notice or explanation resides or (in the case of a health 
     provider) provides health care and the services available 
     from such Office, and
       (2) an explanation of the right of aggrieved individuals 
     and health providers to obtain review of grievances against 
     the certified health benefit plan sponsor in the complaint 
     review office for the applicable community-rating area under 
     section 9304.

     Any such notice or explanation shall be written in language 
     calculated to be understood by the average individual 
     enrolled under the plan and shall be provided in a form which 
     takes into account accessibility to the information by 
     individuals whose primary language is not English and shall 
     be provided in a manner consistent with the applicable 
     requirements of the Americans with Disabilities Act of 1990.
       (b) Waiver of Rights Prohibited.--A certified health 
     benefit plan sponsor may not require any party to waive any 
     right under the plan or Federal or State law, except to the 
     extent otherwise specified in a settlement agreement under 
     section 9319 or in a settlement agreement obtained with 
     representation of such party by an attorney.

     SEC. 9304. REVIEW OF GRIEVANCES BASED ON ACTS OR PRACTICES BY 
                   CERTIFIED HEALTH BENEFIT PLAN SPONSORS.

       (a) Filings of Complaints by Aggrieved Persons.--Each State 
     shall establish a complaint review office for each community-
     rating area, unless such area is adequately served by another 
     complaint review office established by the State. Any person 
     may, pursuant to section 9301(d) or section 9302(f), file 
     with the complaint review office a complaint against the 
     certified health benefit plan sponsor (or a third party 
     contractor with respect to a certified health benefit plan) 
     not later than three years after the alleged violation 
     occurs.
       (b) Notice of Filing.--The complaint review office shall 
     serve by certified mail a copy of the complaint (including 
     the date, place, and circumstances of the alleged violation) 
     to the person or persons against whom the complaint is made 
     within 10 days after the filing of the complaint.

     SEC. 9305. INITIAL PROCEEDINGS IN COMPLAINT REVIEW OFFICES.

       (a) Elections.--Whenever a complaint is brought to a 
     complaint review office under section 9304, the complaint 
     review office shall provide the complainant with an 
     opportunity, in such form and manner as shall be prescribed 
     in regulations of the Secretary, to elect one of the 
     following:
       (1) to submit the complaint as a dispute under the Early 
     Resolution Program, if established pursuant to part 2,
       (2) to proceed with the complaint to a hearing in the 
     complaint review office under section 9306, or
       (3) to forego further proceedings in the complaint review 
     office and rely on remedies available in a court of competent 
     jurisdiction, including remedies under section 9321.
       (b) Effect of Participation in Early Resolution Program.--
     If the complainant makes an election to submit the complaint 
     as a dispute under the Early Resolution Program under 
     subsection (a)(1) and the proceedings under the Program with 
     respect to the dispute are terminated without settlement or 
     resolution of the dispute with respect to such matter, the 
     complainant may proceed to an election under subsection 
     (a)(2) or (a)(3).

     SEC. 9306. HEARINGS BEFORE HEARING OFFICERS IN COMPLAINT 
                   REVIEW OFFICES.

       (a) Assignment of Complaints To Hearing Officers and Notice 
     To Parties.--
       (1) In general.--In the case of an election under section 
     9305(a)(2) the complaint review office shall assign the 
     complaint to a hearing officer employed by the State in the 
     office who shall conduct a hearing on the compliant under 
     this section.
       (2) Qualifications for hearing officers.--The hearing 
     officer shall be qualified and shall not have any official, 
     financial, or personal conflict of interest.
       (b) Hearings.--
       (1) De novo hearing.--Hearings under this section shall be 
     de novo. In any such hearing, the hearing officer shall 
     provide for--
       (A) full review of the applicable law and facts,
       (B) no deference to factual findings, legal findings, or 
     plan interpretations of the decisionmaker below, and
       (C) admission of any new evidence and new witnesses 
     provided by all parties to the extent relevant to any issue 
     being considered.
       (2) Recorded testimony.--The testimony taken by the hearing 
     officer shall be recorded.
       (3) Authority of hearing officers.--The hearing officer may 
     compel, by subpoena, the attendance of witnesses and the 
     production of evidence at any designated place or hearing. In 
     case of contumacy or refusal to obey a subpoena lawfully 
     issued under this paragraph and upon application of the 
     hearing officer, the hearing officer may seek enforcement of 
     the subpoena in an appropriate district court of the United 
     States or in a State court of competent jurisdiction.
       (4) Expedited hearings.--Notwithstanding section 9025 and 
     the preceding provisions of this section, upon receipt of a 
     complaint relating to a refusal or denial referred to in 
     section 9301 or 9302 which is accompanied by an attestation 
     equivalent to the attestation described in section 
     9301(c)(2)(B) or 9302(c)(2)(A), the complaint review office 
     shall promptly provide the complainant with the opportunity 
     to make an election under section 9305(a)(2) and assignment 
     to a hearing on the complaint before a hearing officer. The 
     complaint review office shall ensure that such a hearing 
     commences not later than 24 hours after receipt of the 
     complaint by the complaint hearing office and that the 
     hearing is completed and the decision is rendered within 
     three business days after the date on which the complaint is 
     received.
       (c) Decision of Hearing Officer.--
       (1) In general.--Within 60 days after the close of the 
     hearing, the hearing officer shall make a decision with 
     respect to each allegation in the complaint. The hearing 
     officer shall decide the extent to which any party against 
     whom the complaint is brought has acted or failed to act in 
     violation of the terms of the certified health benefit plan 
     or Federal or State law. Each such decision--
       (A) shall be supported by substantial evidence on the 
     record considered as a whole,
       (B) shall include the hearing officer's findings of fact, 
     and
       (C) shall constitute the hearing officer's final 
     disposition of the proceedings.
     The burden of proof shall be on the party against whom the 
     complaint is filed.
       (2) Decisions finding in favor of complainant.--If the 
     hearing officer rules in favor of the complainant--
       (A) the hearing officer may order the party against whom 
     the complaint is brought, as a remedy for such violation--
       (i) to cease and desist from such violation,
       (ii) to provide items and services under the plan, or 
     payment requested, and to otherwise comply with the terms of 
     the plan and the applicable requirements of Federal and State 
     law,
       (iii) to pay to the complainant actual and compensatory 
     damages, except punitive damages, and
       (iv) to pay to the complainant prejudgment interest on the 
     actual costs incurred in obtaining the items and services, or 
     payment therefor, at issue in the complaint, and
       (B) if the complainant substantially prevails, the hearing 
     officer shall award the complainant reasonable attorney's 
     fees (at generally prevailing hourly rates), reasonable 
     expert witness fees, and other reasonable costs, unless the 
     court finds that such award would not be appropriate.
       (3) Finality of decision.--The decision of the hearing 
     officer shall be final, unless review is sought under 
     subsection (d).
       (d) Review.--
       (1) In general.--Any party to the complaint may, within 60 
     days after service of the decision by the complaint review 
     office, seek review of the decision in a court of competent 
     jurisdiction. In any such proceeding in which the plaintiff 
     substantially prevails, the court shall award the plaintiff 
     reasonable attorney's fees (at generally prevailing hourly 
     rates), reasonable expert witness fees, and other reasonable 
     costs, unless the court finds that such award would not be 
     appropriate.
       (2) Scope of review.--The court shall set aside or modify 
     the decision of the hearing officer if--
       (A) the decision is not supported by substantial evidence 
     on the record considered as a whole,
       (B) in the case of any interpretation by the hearing 
     officer of contractual terms (irrespective of the extent to 
     which extrinsic evidence was considered), the determination 
     is not supported by a preponderance of the evidence, or
       (C) the decision is in excess of jurisdiction, without 
     observance any procedure required by law, in violation of a 
     statutory or constitutional right, or otherwise contrary to 
     law.
       (e) Court Enforcement of Orders.--If the complainant 
     prevails and the order is not appealed, the complainant may 
     petition any court of competent jurisdiction for enforcement 
     of the order.

     SEC. 9307. COORDINATION WITH OTHER PROVISIONS OF LAW.

       Nothing under any provision of the Employee Retirement 
     Income Security Act of 1974 or any other Federal law (other 
     than this Act) shall be construed as limiting any right or 
     remedy provided under this Act.

                  Subpart B--Early Resolution Programs

     SEC. 9311. ESTABLISHMENT OF EARLY RESOLUTION PROGRAMS IN 
                   COMPLAINT REVIEW OFFICES.

       (a) Establishment of Programs.--Each State may establish 
     and maintain an Early Resolution Program in each complaint 
     review office in such State in accordance with this subpart. 
     Any such Program shall include the establishment and 
     maintenance of forums for mediation of disputes in accordance 
     with this subpart.
       (b) Duties of Complaint Review Offices.--Each State 
     establishing an Early Resolution Program shall--
       (1) administer the Early Resolution Program in each claims 
     review office in accordance with regulations of the 
     Secretary,
       (2) develop Program policy and procedures,
       (3) maintain a roster of facilitators for each claims 
     review office to act under the Program in mediation 
     proceedings between parties conducted under this subpart, and 
     coordinate the recruitment, selection, and training of such 
     facilitators,
       (4) provide meeting sites, maintain records, and provide 
     facilitators with administrative support staff,
       (5) establish and maintain attorney referral panels, and
       (6) monitor and evaluate the Program on an ongoing basis.

     SEC. 9312. ELIGIBILITY OF CASES FOR SUBMISSION TO EARLY 
                   RESOLUTION PROGRAM.

       (a) Case Criteria.--A dispute may be submitted to the Early 
     Resolution Program only if the dispute consists of an 
     assertion by an individual (hereinafter in this subpart 
     referred to as the `claimant') of--
       (1) a denial or refusal by the certified health benefit 
     plan sponsor (or a third party contractor with respect to the 
     certified health benefit plan), contrary to the provisions of 
     the certified health benefit plan, this Act, or State law, of 
     one or more items or services under the plan or payment 
     therefor, or
       (2) failure or refusal by the certified health benefit plan 
     sponsor (or a third party contractor with respect to the 
     certified health benefit plan) to comply with the claimant's 
     request for information or documents the disclosure of which 
     is required under the plan, this Act, or State law (including 
     failure or refusal to comply with any claim of entitlement to 
     disclosure based on colorable claims to rights to benefits 
     under the plan).
       (b) Representation.--Any claimant may be secure 
     representation by any person.
       (c) Notice of Program Availability.--Each certified health 
     benefit plan sponsor shall ensure that, as part of review 
     procedures established pursuant to this subpart, claimants 
     taking part in such procedure will be informed during such 
     procedure of the availability of the Early Resolution 
     Program.

     SEC. 9313. FACILITATORS.

       (a) Recruitment.--The State shall recruit individuals to 
     serve as facilitators under the Early Resolution Program from 
     individuals who have the requisite expertise for such 
     service.
       (b) Criteria.--In selecting individuals to serve as 
     facilitators, the State shall consider the following:
       (1) the individual's experience in dispute resolution;
       (2) the individual's ability to act impartially;
       (3) the individual's ability to perform evaluations quickly 
     and to present them in nontechnical terms; and
       (4) the individual's experience in employee benefit law and 
     the individual's expertise pertaining to medical or 
     disability issues;
       (c) Training of Facilitators.--The State shall provide a 
     training program for all new facilitators. The curriculum 
     shall include the procedures of the Program, relevant ethical 
     obligations, and skills in arbitration, mediation, and 
     conciliation necessary for effective alternative dispute 
     resolution in the applicable proceedings. A facilitator may 
     serve only upon completion of such training program.
       (d) Assignment of Facilitators to Cases.--Upon submission 
     of a dispute to mediation proceedings under this subpart, the 
     State shall appoint a facilitator (as appropriate) through a 
     random selection procedure which shall be prescribed in 
     regulations.
       (e) Compensation.--Facilitators serving in the Early 
     Resolution Program may, at their election, serve on a pro 
     bono basis or be compensated at a fixed fee to be established 
     by the State. Each facilitator shall receive travel expenses, 
     including per diem in lieu of subsistence.

     SEC. 9314. INITIATION OF PROCEEDINGS.

       (a) Filing of Election.--A claimant with a dispute which is 
     eligible under section 9312 for submission to the Early 
     Resolution Program may elect to participate in proceedings 
     under the Program by means of filing with the appropriate 
     complaint review office an election for mediation under the 
     Program. An election to commence mediation proceedings under 
     the Program shall be in such form and manner as the Secretary 
     may prescribe.
       (b) Agreement to Participate.--
       (1) Election by claimants.--A claimant may elect 
     participation in mediation proceedings under the Program only 
     by entering into a written agreement (including an agreement 
     to comply with the rules of the Program and consent for the 
     State to contact the certified health benefit plan sponsor 
     (and any third party contractor with respect to the plan) 
     involved regarding the agreement) and by releasing plan 
     records to the Program for the exclusive use of the 
     facilitator assigned to the mediation. The State may charge 
     the claimant a filing fee of not more than $100. The State 
     shall provide for waiver of the fee in cases of hardship, 
     under standards which shall be prescribed by the Secretary by 
     regulation.
       (2) Participation by certified health benefit plan sponsors 
     and third party contractors.--Each party whose participation 
     in the mediation proceedings has been elected by a claimant 
     shall participate in, and cooperate fully, in the 
     proceedings. The complaint review office shall provide each 
     party with a copy of the participation agreement described in 
     paragraph (1), together with a written description of 
     mediation under the Early Resolution Program. Each party 
     shall submit a copy of the agreement, with the party's 
     signature, to the complaint review office, and shall include 
     a copy of the written record of any claims procedure 
     completed by the plan pursuant to section 9301 or 9302 with 
     respect to the dispute and all relevant plan documents. The 
     State may charge each such party a filing fee of not more 
     than $100. The relevant documents shall include all relevant 
     medical records of the claimant and all documents under which 
     the plan is or was administered or operated, including copies 
     of any insurance contracts under which benefits are or were 
     provided and any fee or reimbursement schedules for health 
     providers requested by the facilitator.

     SEC. 9315. THE MEDIATION PROCEEDINGS.

       (a) In General.--A mediation proceeding under the Early 
     Resolution Program shall be conducted by facilitators 
     recruited, trained, and assigned by the State under section 
     9313 and in accordance with fair and equitable procedures to 
     be prescribed by the Secretary which shall be subject to the 
     requirements of this subpart.
       (b) Procedural Rules.--
       (1) Inapplicability of formal rules of evidence.--Formal 
     rules of evidence shall not apply to mediation proceedings 
     under the Program. All statements made and evidence presented 
     in the proceedings shall be admissible in such proceedings. 
     The facilitator shall be the sole judge of the proper weight 
     to be afforded to each submission.
       (2) Inapplicability of oath requirements.--The parties to 
     the mediation proceedings shall not be required to make 
     statements or present evidence under oath.
       (c) Analysis Stage.--In the commencement of the mediation 
     proceedings with respect to any dispute, the facilitator 
     assigned to the dispute shall--
       (1) identify the necessary parties,
       (2) confirm that the case is eligible for mediation under 
     the Program,
       (3) ensure that each party is informed of available legal 
     representation, including such services as may be available 
     free of charge under legal assistance programs,
       (4) set a conference date,
       (5) at the option of the facilitator, request position 
     papers from the parties, if the facilitator determines that 
     such papers are needed to clarify the parties' positions and 
     issues in dispute, and
       (6) analyze the record of any plan procedure conducted 
     pursuant to subpart A and any position papers submitted by 
     the parties, with appropriate legal assistance provided by 
     the State, to determine if further case development is needed 
     to clarify the legal and factual issues in dispute, and 
     whether there is any need for additional information and 
     documents, and request the parties to present any such needed 
     information and documents.
       (d) Evaluation Stage.--Upon completion of the procedures 
     described in subsection (c), the mediation proceedings shall 
     proceed as follows:
       (1) Commencement of conference.--The facilitator shall 
     convene a conference between the parties. Each party shall be 
     given the opportunity to make a statement summarizing the 
     facts, issues, and arguments in support of such party's 
     position, and present, or inform the facilitator of, any 
     additional evidence such party considers to be relevant to 
     the evaluation.
       (2) Neutrality of facilitator.--The facilitator shall 
     maintain a neutral stance between the parties.
       (3) Preparation of settlement agreement.--If settlement is 
     reached, the facilitator shall assist in the preparation of a 
     written settlement agreement (which shall remain confidential 
     at the option of the parties) and shall ensure that the 
     parties understand the terms of the settlement.
       (4) Evaluation upon initial failure to reach settlement.--
     If no settlement is reached, the facilitator may evaluate for 
     the parties the likely outcome of further administrative 
     action or litigation, based on the facilitator's assessment 
     of the relative strength of each party's position. Any such 
     evaluation by the facilitator shall be treated as a 
     proceeding communication to which section 9318 applies.
       (5) Further proceedings.--The facilitator shall then 
     encourage extension of the proceedings if it is likely to 
     lead to settlement or a substantial narrowing of the issues.

     SEC. 9316. APPLICABLE TIME LIMITS.

       The mediation proceedings under the Early Resolution 
     Program with respect to any dispute shall be completed within 
     60 days after the date of the election to participate. The 
     parties may agree to one extension of the proceedings of not 
     more than 30 days.

     SEC. 9317. LEGAL EFFECT OF PARTICIPATION IN PROCEEDINGS.

       (a) Process Nonbinding.--Findings and conclusions made in 
     the mediation proceedings under the Early Resolution Program 
     shall be treated as advisory in nature and nonbinding. Except 
     as provided in subsection (b), the rights of the parties 
     under subpart A shall not be affected by participation in the 
     mediation proceedings under the Program.
       (b) Resolution Through Settlement Agreement.--If a case is 
     settled through participation in the mediation proceedings 
     under the Program, the facilitator shall assist the parties 
     in drawing up an agreement which shall constitute, upon 
     signature of the parties, a binding contract between the 
     parties, which shall be enforceable under section 9319, and 
     which shall be enforceable under this subpart and State law 
     as if the terms of such agreement were terms of the plan.
       (c) Preservation of Rights of Non-Parties.--The settlement 
     agreement shall not have the effect of waiving or otherwise 
     affecting any rights to review under this part, State law, or 
     any other right under this Act, State law, or the plan with 
     respect to any person who is not a party to the settlement 
     agreement.

     SEC. 9318. CONFIDENTIALITY.

       (a) Facilitators.--Except as provided in subsections (d) 
     and (e), a facilitator in a mediation proceeding under the 
     Early Resolution Program shall not voluntarily disclose or 
     through discovery or compulsory process be required to 
     disclose any information concerning any proceeding 
     communication or any communication provided in confidence to 
     the facilitator, unless--
       (1) all parties to the proceeding and the facilitator 
     consent in writing, and, if the proceeding communication was 
     provided by a participating nonparty, that the participating 
     nonparty also consents in writing,
       (2) the proceeding communication has already been made 
     public,
       (3) the proceeding communication is required by statute to 
     be made public, but a facilitator may make such communication 
     public only if no other person is reasonably available to 
     disclose the communication, or
       (4) a court determines that such testimony or disclosure is 
     necessary to--
       (A) prevent a manifest injustice,
       (B) help establish a violation of law, or
       (C) prevent harm to the public health or safety,

     of sufficient magnitude in the particular case to outweigh 
     the integrity of the proceedings in general by reducing the 
     confidence of parties in future cases that their 
     communications will remain confidential.
       (b) Parties.--A party to a mediation proceeding under the 
     Early Resolution Program shall not voluntarily disclose or 
     through discovery or compulsory process be required to 
     disclose any information concerning any proceeding 
     communication, unless--
       (1) the communication was prepared by the party seeking 
     disclosure,
       (2) all parties to the proceeding consent in writing,
       (3) the proceeding communication has already been made 
     public,
       (4) the proceeding communication is required by statute to 
     be made public,
       (5) a court determines that such testimony or disclosure is 
     necessary to--
       (A) prevent a manifest injustice,
       (B) help establish a violation of law, or
       (C) prevent harm to the public health or safety,

     of sufficient magnitude in the particular case to outweigh 
     the integrity of the proceedings in general by reducing the 
     confidence of parties in future cases that their 
     communications will remain confidential,
       (6) the proceeding communication is relevant to determining 
     the existence or meaning of an agreement or award that 
     resulted from the proceeding or to the enforcement of such an 
     agreement or award, or
       (7) the proceeding communication was provided to or was 
     available to all parties to the proceeding.
       (c) Inadmissibility of Disclosed Information.--Any 
     proceeding communication that is disclosed in violation of 
     subsection (a) or (b) shall not be admissible in any 
     proceeding relating to the issues in controversy with respect 
     to which the communication was made.
       (d) Alternative Procedures.--The parties may agree to 
     alternative confidential procedures for disclosures by a 
     facilitator. Upon such agreement the parties shall inform the 
     facilitator before the commencement of the proceeding of any 
     modifications to the provisions of subsection (a) that will 
     govern the confidentiality of the proceeding. If the parties 
     do not so inform the facilitator, subsection (a) shall apply.
       (e) Notice of Demands for Disclosure.--If a demand for 
     disclosure, by way of discovery request or other legal 
     process, is made upon a facilitator regarding a proceeding 
     communication, the facilitator shall make reasonable efforts 
     to notify the parties and any affected participating 
     nonparties of the demand. In any case in which such 
     disclosure would otherwise be in violation of this section, 
     the facilitator may perform such disclosure in accordance 
     with such demand only if each party and affected nonparty 
     participant who receives such notice consents to such 
     disclosure within 15 calendar days after the date of the 
     issuance of such notification.
       (f) Exceptions.--
       (1) Information otherwise disclosable.--Nothing in this 
     section shall prevent the discovery or admissibility of any 
     evidence that is otherwise discoverable, merely because the 
     evidence was presented in the course of a mediation 
     proceeding under the Early Resolution Program.
       (2) Documentation of agreements or orders.--Subsections (a) 
     and (b) shall have no effect on the information and data that 
     are necessary to document an agreement reached or order 
     issued pursuant to a mediation proceeding under the Early 
     Resolution Program.
       (3) Research or educational purposes.--Subsections (a) and 
     (b) shall not prevent the gathering of information for 
     research or educational purposes so long as the parties and 
     the specific issues in controversy are not identifiable.
       (4) Disputes between facilitator and a party.--Subsections 
     (a) and (b) shall not prevent use of a proceeding 
     communication to resolve a dispute between the facilitator in 
     a mediation proceeding under the Early Resolution Program and 
     a party to or participant in such proceeding, so long as such 
     proceeding communication is disclosed only to the extent 
     necessary to resolve such dispute.
       (g) Civil Remedies.--
       (1) Civil penalty.--The Secretary shall assess a civil 
     penalty against any person who discloses information in 
     violation of subsection (a) or (b) in the amount of three 
     times the amount of the claim involved. The procedures 
     described in section 1128A of the Social Security Act (other 
     than subsections (a) and (b)) apply to civil money penalties 
     under this paragraph under this section in the same manner as 
     such provisions apply with respect to the imposition of a 
     penalty under section 1128A of such Act.
       (2) Disqualification from service.--Any facilitator who 
     discloses information in violation of subsection (a) shall be 
     disqualified from further service as a facilitator under this 
     subpart.
       (h) Definitions.--For purposes of this section--
       (1) Proceeding communication.--The term `proceeding 
     communication' means any oral or written communication 
     prepared for the purposes of a mediation proceeding under the 
     Early Resolution Program, including any memoranda, notes, or 
     work product of the facilitator, parties, or participating 
     nonparties, except that such term does not include a written 
     agreement to enter into the proceeding or a final written 
     agreement reached as a result of the proceeding.
       (2) In confidence.--The term `in confidence' means, with 
     respect to information, that the information is provided--
       (A) with the expressed intent of the source that it not be 
     disclosed, or
       (B) under circumstances that would create the reasonable 
     expectation on behalf of the source that the information will 
     not be disclosed.

     SEC. 9319. ENFORCEMENT OF SETTLEMENT AGREEMENTS.

       (a) Confirmation; Jurisdiction; Procedure.--At any time 
     within one year after the date of a settlement agreement 
     entered into in mediation proceeding under the Early 
     Resolution Program, any party to the agreement may apply to 
     the United States district court in and for the district 
     within which such agreement was made for an order confirming 
     the agreement. Upon such application, the court shall grant 
     such an order unless the agreement is vacated, modified, or 
     corrected as prescribed in subsection (b) or (c). Notice of 
     the application shall be served upon the adverse party. Upon 
     such notice, the court shall have jurisdiction of such 
     adverse party as though such adverse party had appeared 
     generally in the proceeding. If the adverse party is a 
     resident of the district within which the award was made, 
     such service shall be made upon the adverse party or such 
     party's attorney as prescribed by law for service of notice 
     of motion in any action in the same court. If the adverse 
     party is a nonresident, the notice of the application shall 
     be served by the marshal of any district within which the 
     adverse party may be found in like manner as other process of 
     the court.
       (b) Vacation; Grounds; Rehearing.--The court may make an 
     order vacating the settlement agreement upon the application 
     of any party to the agreement if--
       (1) the agreement was procured under duress or by 
     corruption, fraud, or undue means, or
       (2) there was evident partiality or corruption in the 
     facilitator who assisted in the making of the agreement.
       (c) Modification or Correction; Grounds; Order.--The court 
     may make an order modifying or correcting the settlement 
     agreement upon the application of any party to the agreement 
     if--
       (1) there was a material miscalculation of figures or a 
     material mistake in the description of any person, thing, or 
     property referred to in the agreement,
       (2) the agreement relates to a matter not submitted in the 
     conference proceedings, unless it is a matter not affecting 
     the merits of the agreement upon the matter submitted, or
       (3) the agreement is imperfect in matter of form not 
     affecting the merits of the controversy.

     The order may modify and correct the agreement, so as to 
     effect the intent thereof and promote justice between the 
     parties.
       (d) Notice of Motions to Vacate or Modify; Service; Stay of 
     Proceedings.--Notice of a motion to vacate, modify, or 
     correct a settlement agreement made in mediation proceedings 
     under the Early Resolution Program must be served upon the 
     adverse party or the party's attorney within 90 days after 
     the settlement agreement is made. If the adverse party is a 
     resident of the district within which the agreement is made, 
     such service shall be made upon the adverse party or the 
     party's attorney as prescribed by law for service of notice 
     of motion in an action in the same court. If the adverse 
     party is a nonresident, the notice of the application shall 
     be served by the marshal of any district within which the 
     adverse party may be found in like manner as other process of 
     the court. For the purposes of the motion any judge who may 
     make an order to stay the proceedings in an action brought in 
     the same court may make an order, to be served with the 
     notice of motion, staying the proceedings of the adverse 
     party to enforce the agreement.
       (e) Papers Filed With Order on Motions; Judgment; 
     Docketing; Force and Effect; Enforcement.--
       (1) Filing of papers.--The party moving for an order 
     confirming, modifying, or correcting a settlement agreement 
     made in mediation proceedings under the Early Resolution 
     Program shall, at the time such order is filed with the clerk 
     for the entry of judgment thereon, also file the following 
     papers with the clerk:
       (A) the agreement, and
       (B) each notice, affidavit, or other paper used upon an 
     application to confirm, modify, or correct the agreement, and 
     a copy of each order of the court upon such an application.
       (2) Docketing of judgment.--The judgment shall be docketed 
     as if it were rendered in an action.
       (3) Force and effect; enforcement.--The judgment so entered 
     shall have the same force and effect, in all respects, as a 
     judgment in an action, and shall be subject to all the 
     provisions of law relating to such a judgment. Such judgment, 
     including the terms of the agreement (as confirmed, modified, 
     or corrected), may be enforced as if it had been rendered in 
     an action in the court in which it is entered.
       (f) Appeals.--An appeal may be taken from an order 
     confirming or denying confirmation of a settlement agreement 
     made in mediation proceedings under the Early Resolution 
     Program or modifying, correcting, or vacating such an 
     agreement.
       (g) Attorney's Fees and Costs.--In any action for court 
     enforcement of a settlement agreement under this section in 
     which the plaintiff substantially prevails, the court shall 
     award the plaintiff reasonable attorney's fees (at generally 
     prevailing hourly rates), reasonable expert witness fees, and 
     other reasonable costs, unless the court finds that such 
     award would not be appropriate.
       (h) Enforcement in State Court.--Any party to a settlement 
     agreement made in mediation proceedings under the Early 
     Resolution Program may also apply to a State court of 
     competent jurisdiction for an order confirming the agreement.

                     PART 2--GENERAL CIVIL REMEDIES

     SEC. 9321. RIGHT OF ACTION AGAINST CERTIFIED HEALTH BENEFIT 
                   PLAN SPONSORS AND THIRD PARTY CONTRACTORS.

       (a) In General.--An individual or health provider who is 
     aggrieved by an act or failure to act by a certified health 
     benefit plan sponsor or a third party contractor in violation 
     of the terms of a certified health benefit plan or Federal or 
     State law may bring a civil action in a court of competent 
     jurisdiction for the relief described in subsection (b).
       (b) Relief.--In the case of any violation described in 
     subsection (a), the certified health benefit plan sponsor, 
     together with each third party contractor (if any) whose act 
     or failure to act constitutes or contributes to the 
     violation, shall be jointly and severally liable to the 
     aggrieved individual or health provider for appropriate 
     relief, including actual, compensatory, and punitive damages 
     and equitable relief.
       (c) Attorney's Fees and Costs.--In any action under this 
     section in which the plaintiff substantially prevails, the 
     court shall award the plaintiff reasonable attorney's fees 
     (at generally prevailing hourly rates), reasonable expert 
     witness fees, and other reasonable costs, unless the court 
     finds that such award would not be appropriate.

     SEC. 9322. GENERAL PRIVATE RIGHT OF ACTION AGAINST STATES.

       (a) In General.--Any person aggrieved by an act or omission 
     of a State which constitutes a failure to comply with an 
     applicable requirement of this Act may obtain appropriate 
     relief from the State, including actual, compensatory, and 
     punitive damages and equitable relief, in any court of 
     competent jurisdiction.
       (b) Exhaustion of Remedies.--In an action under subsection 
     (a), the court shall exercise jurisdiction without regard to 
     whether the aggrieved person has exhausted any administrative 
     or other remedies that may be provided by law.
       (c) Attorney's Fees and Costs.--In any action under this 
     section in which the plaintiff substantially prevails, the 
     court shall award the plaintiff reasonable attorney's fees 
     (at generally prevailing hourly rates), reasonable expert 
     witness fees, and other reasonable costs, unless the court 
     finds that such award would not be appropriate.

                      PART 3--ANTI-DISCRIMINATION

     SEC. 9331. REQUIREMENTS RELATING TO STATES.

       (a) In General.--A State, or a person acting under the 
     authority of a State, may not discriminate, or engage 
     (directly or through contractual arrangements) in any 
     activity that has the effect of discriminating, in carrying 
     out any responsibility or in exercising any authority under 
     this Act, against an individual or entity on the basis of 
     race, age, gender, sexual orientation, language, religion, 
     national origin, status of an eligible individual as a 
     citizen of the United States, income, disability, perceived 
     health status, or anticipated need for health services.
       (b) Boundaries.--In establishing boundaries for community 
     rating areas or consumer purchasing cooperative areas, a 
     State may not discriminate, engage (directly or through 
     contractual arrangements) in any activity that has the effect 
     of discriminating, or otherwise take into account, race, age, 
     gender, sexual orientation, language, religion, national 
     origin, status of an eligible individual as a citizen of the 
     United States, income, disability, perceived health status, 
     or anticipated need for health services.
       (c) Remedy.--A person who is aggrieved by a violation of 
     subsection (a) or (b) may, in a civil action, obtain 
     appropriate relief, including actual, compensatory, and 
     punitive damages and equitable relief, against any 
     appropriate party, including a State.
       (d) Attorney's Fees and Costs.--In any action under 
     subsection (c) in which the plaintiff substantially prevails, 
     the court shall award the plaintiff reasonable attorney's 
     fees (at generally prevailing hourly rates), reasonable 
     expert witness fees, and other reasonable costs, unless the 
     court finds that such award would not be appropriate.

     SEC. 9332. REQUIREMENTS RELATING TO CONSUMER PURCHASING 
                   COOPERATIVES.

       (a) Activities Relating to Plans.--A consumer purchasing 
     cooperative may not discriminate, or engage (directly or 
     through contractual arrangements) in any activity that has 
     the effect of discriminating, against a certified health 
     benefit plan sponsor providing or sponsoring a certified 
     health benefit plan on the basis of--
       (1) mix of health providers associated with the plan;
       (2) organizational arrangement of the plan (except as 
     specifically provided in this Act);
       (3) personal characteristics of an individual enrolled in 
     the plan or considering enrolling in the plan that are 
     unrelated to whether the individual is eligible to enroll in 
     the plan, such as race, age, gender, sexual orientation, 
     language, religion, national origin, status of an eligible 
     individual as a citizen of the United States, income, 
     disability, perceived health status, or anticipated need for 
     health services; or
       (4) personal characteristics of a health provider who is a 
     network provider with respect to the plan, such as race, age, 
     gender, sexual orientation, language, religion, national 
     origin, status of an eligible individual as a citizen of the 
     United States, income, disability, perceived health status, 
     or anticipated need for health services.
       (b) Other Activities.--A consumer purchasing cooperative 
     may not discriminate, or engage (directly or through 
     contractual arrangements) in any other activity that has the 
     effect of discriminating, against an individual or entity on 
     the basis of race, age, gender, sexual orientation, language, 
     religion, national origin, income, disability, status of an 
     eligible individual as a citizen of the United States, 
     perceived health status, or anticipated need for health 
     services.
       (c) Remedy.--A person who is aggrieved by a violation of 
     subsection (a) or (b) may, in a civil action, obtain 
     appropriate relief, including actual, compensatory, and 
     punitive damages and equitable relief, against any 
     appropriate party.
       (d) Attorney's Fees and Costs.--In any action under 
     subsection (c) in which the plaintiff substantially prevails, 
     the court shall award the plaintiff reasonable attorney's 
     fees (at generally prevailing hourly rates), reasonable 
     expert witness fees, and other reasonable costs, unless the 
     court finds that such award would not be appropriate.
       (e) Exhaustion of Remedies.--In an action under subsection 
     (c), the court shall exercise jurisdiction without regard to 
     whether the aggrieved person has exhausted any administrative 
     or other remedies that may be provided by law.

     SEC. 9333. REQUIREMENTS RELATING TO PLAN SPONSORS.

       (a) Underwriting.--A certified health benefit plan sponsor 
     providing or sponsoring a certified health benefit plan may 
     not engage in any practice that has the effect of attracting 
     or limiting enrollees on the basis of personal 
     characteristics that are unrelated to the eligibility of an 
     individual to enroll in the plan, such as race, age, gender, 
     sexual orientation, language, religion, national origin, 
     status of an eligible individual as a citizen of the United 
     States, income, disability, perceived health status, or 
     anticipated need for health services.
       (b) Selection of Network Providers.--In selecting among 
     health providers for membership in a plan network, or in 
     establishing the terms and conditions of such membership, a 
     certified health benefit plan sponsor described in subsection 
     (a) may not discriminate, or engage (directly or through 
     contractual arrangements) in any activity that has the effect 
     of discriminating, against a health provider--
       (1) based on personal characteristics of the provider, such 
     as race, age, gender, sexual orientation, language, religion, 
     national origin, status of an eligible individual as a 
     citizen of the United States, income, disability, perceived 
     health status, or anticipated need for health services; or
       (2) based on personal characteristics of a patient of the 
     provider, such as race, age, gender, sexual orientation, 
     language, religion, national origin, status of an eligible 
     individual as a citizen of the United States, income, 
     disability, perceived health status, or anticipated need for 
     health services.
       (c) Other Sponsor Activities.--A certified health benefit 
     plan sponsor described in subsection (a) may not 
     discriminate, or engage (directly or through contractual 
     arrangements) in any other activity that has the effect of 
     discriminating, against an individual or entity on the basis 
     of race, age, gender, sexual orientation, language, religion, 
     national origin, status of an eligible individual as a 
     citizen of the United States, income, disability, perceived 
     health status, or anticipated need for health services.
       (d) Business Necessity.--Except in the case of intentional 
     discrimination, a certified health benefit plan sponsor may 
     not be considered to be in violation of this section, or of 
     any regulations issued under this section, if the sponsor 
     demonstrates, in a civil action under subsection (e), that 
     each action of the sponsor that is otherwise prohibited under 
     this section is required by a compelling business necessity 
     and cannot be accomplished by less discriminatory means. 
     Nothing in this subsection shall be construed to preclude the 
     person alleging the violation from having an opportunity to 
     present evidence to rebut the evidence presented in support 
     of such demonstration.
       (e) Remedy.--A person who is aggrieved by a violation of 
     this section may, in a civil action, obtain appropriate 
     relief, including actual, compensatory, and punitive damages 
     and equitable relief, against any appropriate party.
       (f) Attorney's Fees and Costs.--In any action under 
     subsection (e) in which the plaintiff substantially prevails, 
     the court shall award the plaintiff reasonable attorney's 
     fees (at generally prevailing hourly rates), reasonable 
     expert witness fees, and other reasonable costs, unless the 
     court finds that such award would not be appropriate.
       (g) Exhaustion of Remedies.--In an action under subsection 
     (e), the court shall exercise jurisdiction without regard to 
     whether the aggrieved individual has exhausted any 
     administrative or other remedies that may be available to the 
     individual under part 1 or that are otherwise provided by 
     law.
       (h) Construction.--Nothing in this section may be construed 
     to permit a right of action with respect to any practice or 
     activity that is explicitly authorized under section 
     5003(b)(3) or 5008(b)(4).

     SEC. 9334. NONDISCRIMINATION IN FEDERALLY ASSISTED PROGRAMS.

       (a) In General.--No person in the United States shall, on 
     the basis of race, age, gender, sexual orientation, language, 
     religion, national origin, status of an eligible individual 
     as a citizen of the United States, income, disability, 
     perceived health status, or anticipated need for health 
     services, be excluded from participation in, be denied the 
     benefits of, or be subjected to discrimination under, any 
     health program or activity receiving Federal financial 
     assistance.
       (b) Private Remedy.--
       (1) In general.--A person who is aggrieved by a violation 
     of this section may, in a civil action, obtain appropriate 
     relief, including actual, compensatory, and punitive damages 
     and equitable relief, against any appropriate party.
       (2) Attorney's fees and costs.--In any action under this 
     subsection in which the plaintiff substantially prevails, the 
     court shall award the plaintiff reasonable attorney's fees 
     (at generally prevailing hourly rates), reasonable expert 
     witness fees, and other reasonable costs, unless the court 
     finds that such award would not be appropriate.
       (c) Administrative Powers.--
       (1) In general.--Each Federal department and agency which 
     is empowered to extend Federal financial assistance to any 
     health program or activity shall effectuate the provisions of 
     this section with respect to such program or activity in 
     accordance with the remedies, procedures and rights set forth 
     in title VI of the Civil Rights Act of 1964.
       (2) Construction.--Paragraph (1) shall not be construed to 
     supersede, limit, or otherwise affect any provision of the 
     Social Security Act or any duty or authority of the Secretary 
     under such Act.
       (d) Definitions.--For purposes of this section, the terms 
     ``program or activity'', and ``program'' have the meaning 
     given such terms in section 606 of the Civil Rights Act of 
     1964.

     SEC. 9335. COLLECTION AND REPORTING OF DATA BY SECRETARY.

       (a) In General.--The Secretary shall promulgate regulations 
     that provide for the routine collection, analysis, and 
     reporting, by race, national origin, status of an eligible 
     individual as a citizen of the United States, sex, language, 
     income, age, and residence, of data collected from States, 
     consumer purchasing cooperatives, certified health benefit 
     plan sponsors, and any other person or entity determined 
     appropriate by the Secretary that the Secretary determines 
     are necessary or appropriate to determine whether such 
     individuals and entities are complying with this part. The 
     Secretary shall compile, analyze, and make public the data 
     collected under this section.
       (b) No Undue Burden.--The regulations under subsection (a) 
     shall include specifications ensuring that any data required 
     to be collected under this section may be collected using the 
     least burdensome method consistent with the efficient and 
     effective administration of this part.

     SEC. 9336. REGULATIONS.

       Not later than 1 year after the date of the enactment of 
     this Act, the Secretary shall issue regulations to carry out 
     this part.
                      Subtitle E--Fraud and Abuse

  PART 1--APPLICATION OF FRAUD AND ABUSE AUTHORITIES UNDER THE SOCIAL 
                      SECURITY ACT TO OTHER PAYERS

     SEC. 9401. APPLICATION OF CIVIL MONEY PENALTIES TO ALL 
                   PAYERS.

       (a) Actions Subject to Penalty.--Any person who is 
     determined by the Secretary to have committed any of the 
     following actions with respect to a certified health plan 
     shall be subject to a penalty in accordance with subsection 
     (b):
       (1) Actions subject to penalty under medicare, medicaid, 
     and other social security health programs.--Any action that 
     would subject the person to a penalty under paragraphs (1) 
     through (9) of section 1128A(a) of the Social Security Act if 
     the action was taken with respect to title V, XVIII, XIX, or 
     XX of such Act.
       (2) Termination of enrollment.--The termination of an 
     individual's enrollment (including the refusal to re-enroll 
     an individual) in violation of the applicable standards 
     established under title V.
       (3) Discriminating on basis of medical condition.--The 
     engagement in any practice that would reasonably be expected 
     to have the effect of denying or discouraging the initial or 
     continued enrollment in a certified health plan or medicare 
     part C by individuals whose medical condition or history 
     indicates a need for substantial future medical services.
       (4) Inducing enrollment on false pretenses.--The engagement 
     in any practice to induce enrollment in a certified health 
     plan or medicare part C through representations to 
     individuals which the person knows or should know are false 
     or fraudulent.
       (b) Penalties Described.--
       (1) General rule.--Any person who the Secretary determines 
     has committed an action described in paragraphs (2) through 
     (4) of subsection (a) shall be subject to a civil monetary 
     penalty in an amount not to exceed $10,000 for each such 
     determination.
       (2) Actions subject to penalties under social security 
     act.--In the case of a person who the Secretary determines 
     has committed an action described in paragraph (1) of 
     subsection (a), the person shall be subject to the civil 
     monetary penalty (together with any additional assessment) to 
     which the person would be subject under section 1128A of the 
     Social Security Act if the action on which the determination 
     is based had been committed with respect to title V, XVIII, 
     XIX, or XX of such Act.
       (c) Applicability of Procedures Under Social Security 
     Act.--The provisions of section 1128A of the Social Security 
     Act (other than subsections (a) and (b) and the second 
     sentence of subsection (f)) shall apply to the imposition of 
     a civil monetary penalty or assessment under this section in 
     the same manner as such provisions apply with respect to the 
     imposition of a penalty or assessment under section 1128A of 
     such Act.
       (d) Treatment of Amounts Recovered.--Any amounts recovered 
     under this section shall be paid to the Secretary and 
     disposed of as follows:
       (1) Such portions of the amounts recovered as is determined 
     to have been improperly paid from a certified health plan for 
     the delivery of or payment for health care items or services 
     shall be repaid to such plan.
       (2) The remainder of the amounts recovered shall be 
     deposited in the All-Payer Health Care Fraud and Abuse 
     Control Account established under section 9412.
       (e) Notification of Licensing Authorities.--Whenever the 
     Secretary's determination to impose a penalty or assessment 
     under this section becomes final, the Secretary shall notify 
     the appropriate State or local licensing agency or 
     organization (including the agency specified in section 
     1864(a) and 1902(a)(33) of the Social Security Act) that such 
     a penalty or assessment has become final and the reasons 
     therefore.

     SEC. 9402. APPLICATION OF CERTAIN CRIMINAL PENALTIES TO ALL 
                   PAYERS.

       Any person who is determined by the Attorney General (in 
     consultation with the Secretary) to have committed any action 
     with respect to a certified health plan that would subject 
     the person to a penalty under subsection (a) or (b) of 
     section 1128B of the Social Security Act if the action was 
     taken with respect to title V, XVIII, XIX, or XX of such Act 
     shall be subject to the penalty (together with any 
     assessment) that would apply if the action was taken with 
     respect to any such title.

     SEC. 9403. PRIVATE RIGHT OF ACTION.

       (a) Availability of Right of Action to Insurers.--Subject 
     to paragraphs (2) and (3), a carrier offering an insured 
     health benefit plan and the sponsor of a self-insured health 
     benefit plan that suffers financial harm as a direct result 
     of the submission of claims by an individual or entity for 
     payment for items and services furnished under the plan which 
     makes the individual or entity subject to a civil monetary 
     penalty under this part may, in a civil action against the 
     individual or entity in the United States District Court, 
     obtain damages against the individual or entity and such 
     equitable relief as is appropriate.
       (b) Right Contingent Upon Refusal to Bring Action by 
     Secretary and Attorney General.--A carrier or sponsor may 
     bring a civil action under this section only if the carrier 
     or sponsor provides the Secretary and the Attorney General 
     with written notice of the intent to bring an action under 
     this subsection, the identities of the individuals or 
     entities the carrier or sponsor intends to name as defendants 
     to the action, and all information the carrier or sponsor 
     possesses regarding the activity that is the subject of the 
     action that may materially affect the Secretary's decision to 
     initiate a proceeding to impose a civil monetary penalty 
     under this part against the defendants.
       (c) Conditions.--A carrier or sponsor may bring a civil 
     action under this section only if any of the following 
     conditions are met:
       (1) During the 60-day period that begins on the date the 
     Secretary receives the written notice described in paragraph 
     (2), the Secretary does not notify the carrier or sponsor 
     that the Secretary intends to initiate a proceeding to impose 
     a civil monetary penalty under this section against the 
     defendants.
       (2) If the Secretary notifies the carrier or sponsor during 
     the 60-day period described in subparagraph (A) that the 
     Secretary intends to initiate a proceeding to impose a civil 
     monetary penalty under this part against the defendants, the 
     Secretary subsequently notifies the carrier or sponsor that 
     the Secretary no longer intends to initiate such a proceeding 
     against the defendants.
       (3) After the expiration of the 2-year period that begins 
     on the date the Secretary notifies the carrier or sponsor 
     that the Secretary intends to initiate a proceeding to impose 
     a civil monetary penalty under this part against the 
     defendants, the Secretary has not made a good faith effort to 
     initiate such a proceeding against the defendants.
       (d) Set-Aside of Amounts to Account.--If a carrier or 
     sponsor is awarded any amounts in an action brought under 
     this section that are in excess of the damages suffered by 
     the carrier or sponsor as a result of the defendant's 
     activities, 10 percent of such amounts shall be withheld from 
     the carrier or sponsor for payment into the Health Care Fraud 
     and Abuse Control Account established under section 9412.
       (e) Statute of Limitations.--No action may be brought under 
     this section more than 6 years after the date of the activity 
     with respect to which the action is brought.

     SEC. 9404. CONSTRUCTION OF SOCIAL SECURITY ACT REFERENCES.

       (a) Incorporation of Other Amendments.--Any reference in 
     this part to a provision of the Social Security Act shall be 
     considered a reference to the provision as amended under part 
     5 of subtitle D of title VIII.
       (b) Effect of Subsequent Amendments.--Except as provided in 
     subsection (a), any reference to a provision of the Social 
     Security Act in this part shall be deemed to be a reference 
     to such provision as in effect on the date of the enactment 
     of this Act, and (except as Congress may otherwise provide) 
     any amendments made to such provisions after such date shall 
     not be taken into account in determining the applicability of 
     such provisions to individuals and entities under this Act.

PART 2--ESTABLISHMENT OF ALL-PAYER HEALTH CARE FRAUD AND ABUSE CONTROL 
                                PROGRAM

     SEC. 9411. ALL-PAYER HEALTH CARE FRAUD AND ABUSE CONTROL 
                   PROGRAM.

       (a) In General.--Not later than January 1, 1996, the 
     Secretary (acting through the Inspector General of the 
     Department of Health and Human Services) and the Attorney 
     General shall establish a program--
       (1) to coordinate the functions of the Attorney General, 
     the Secretary, and other organizations with respect to the 
     prevention, detection, and control of health care fraud and 
     abuse,
       (2)(A) to conduct investigations, audits, evaluations, and 
     inspections relating to health care fraud and abuse under the 
     Public Health Service Act, titles V, XI, XVIII, XIX, and XX 
     of the Social Security Act, medicare part C, and part 1 of 
     this subtitle, and (B) to facilitate the conducting of such 
     investigations, audits, evaluations, and inspections relating 
     to the delivery of and payment for other health care services 
     in the United States, and
       (3) to facilitate the enforcement of this subtitle and 
     other statutes applicable to health care fraud and abuse.
       (b) Coordination With Other Inspectors General.--
       (1) Scope of authority of hhs inspector general.--The 
     Inspector General of the Department of Health and Human 
     Services may not exercise any authority under subsection 
     (a)(2)(A) with respect to any matter which is subject to 
     investigation, audit, evaluation, and inspection by the 
     Inspector General of another executive department.
       (2) Scope of authority of other inspectors general.--The 
     Inspector General of each of the Department of Defense, the 
     Office of Personnel Management, and the Department of 
     Veterans Affairs, and the Attorney General shall conduct 
     audits, civil and criminal investigations, inspections, and 
     evaluations relating to the prevention, detection, and 
     control of health care fraud and abuse in violation of any 
     Federal law, except that such an Inspector General may not 
     conduct any investigation, audit, evaluation, or inspection 
     with respect to the authorities described in subsection 
     (a)(2)(A).
       (c) Coordination With Law Enforcement Agencies.--In 
     carrying out the program under subsection (a), the Secretary 
     and Attorney General may consult with, and arrange for the 
     sharing of data and resources with Federal, State and local 
     law enforcement agencies, State Medicaid Fraud Control Units, 
     and State agencies responsible for the licensing and 
     certification of health care providers (consistent with the 
     requirements of subtitle C).
       (d) Coordination With Health Plans.--In carrying out the 
     program under subsection (a), the Secretary and Attorney 
     General may consult with, and arrange for the sharing of data 
     with representatives of certified health plans (consistent 
     with the requirements of subtitle C).
       (e) Authorities of Attorney General and Inspector 
     General.--In carrying out duties under subsection (a), the 
     Attorney General and the Inspector General are authorized--
       (1) to conduct, supervise, and coordinate audits, civil and 
     criminal investigations, inspections, and evaluations 
     relating to the program established under such subsection; 
     and
       (2) to have access (including on-line access as requested 
     and available) to all records available to certified health 
     plans relating to the activities described in paragraph (1) 
     (subject to restrictions based on the confidentiality of 
     certain information under subtitle C).
       (f) Qualified Immunity for Providing Information.--The 
     provisions of section 1157(a) of the Social Security Act 
     (relating to limitation on liability) shall apply to a person 
     providing information or communications to the Secretary or 
     Attorney General in conjunction with their performance of 
     duties under this section, in the same manner as such section 
     applies to information provided to organizations with a 
     contract under part B of title XI of such Act.
       (g) Authorizations of Appropriations for Investigators and 
     Other Personnel.--In addition to any other amounts authorized 
     to be appropriated to the Secretary and the Attorney General 
     for health care anti-fraud and abuse activities for a fiscal 
     year, there are authorized to be appropriated such additional 
     amounts as may be necessary to enable the Secretary and the 
     Attorney General to conduct investigations, audits, 
     evaluations, and inspections of allegations of health care 
     fraud and abuse and otherwise carry out the program 
     established under subsection (a) in a fiscal year.
       (h) Use of Powers Under Inspector General Act of 1978.--For 
     purposes of carrying out duties and responsibilities under 
     this section, each Inspector General referred to in 
     subsection (b) may exercise powers that are available to that 
     Inspector General for purposes of audits, investigations, and 
     other activities under the Inspector General Act of 1978 (5 
     U.S.C. App.).
       (i) Construction of Federal Authority.--Nothing in this 
     section may be construed to affect the authority of States to 
     conduct investigations, audits, evaluations, and inspections 
     relating to violations of State law.
       (j) Definition.--In this subtitle, the term ``Inspector 
     General'' means the Inspector General of the Department of 
     Health and Human Services.

     SEC. 9412. ESTABLISHMENT OF ALL-PAYER HEALTH CARE FRAUD AND 
                   ABUSE CONTROL ACCOUNT.

       (a) Establishment.--
       (1) In general.--There is hereby created on the books of 
     the Treasury of the United States an account to be known as 
     the ``All-Payer Health Care Fraud and Abuse Control Account'' 
     (in this section referred to as the ``Anti-Fraud Account''), 
     to be administered by the Inspector General of the Department 
     of Health and Human Services. The Anti-Fraud Account shall 
     consist of such gifts and bequests as may be made as provided 
     in paragraph (2) and such amounts as may be deposited in such 
     Anti-Fraud Account as provided in section 9401(d)(2) and 
     title XI of the Social Security Act. It shall also include 
     the following (but only with respect to activities of the 
     Inspector General and the Attorney General under section 
     9411(a)(2)(A)):
       (A) All criminal fines imposed in cases involving a Federal 
     health care offense (as defined in subsection (d)).
       (B) Penalties and damages imposed under the False Claims 
     Act (31 U.S.C. 3729 et seq.), in cases involving claims 
     related to the provision of health care items and services 
     (other than funds awarded to a relator or for restitution).
       (C) Administrative penalties and assessments imposed under 
     titles XI, XVIII, and XIX of the Social Security Act and 
     section 9401 (except as otherwise provided by law).
       (D) Amounts paid under section 9403(d) (relating to a set-
     aside of amounts recovered under private right of action).
       (D) Amounts resulting from the forfeiture of property by 
     reason of a Federal health care offense.

     Any such funds received on or after the date of the enactment 
     of this Act shall be deposited in the Anti-Fraud Account.
       (2) Authorization to accept gifts.--The Anti-Fraud Account 
     is authorized to accept on behalf of the United States money 
     gifts and bequests made unconditionally to the Anti-Fraud 
     Account, for the benefit of the Anti-Fraud Account or any 
     activity financed through the Anti-Fraud Account.
       (b) Use of Funds.--
       (1) In general.--Amounts in the Anti-Fraud Account shall be 
     available without appropriation and until expended as 
     determined jointly by the Secretary and Attorney General in 
     carrying out the All-Payer Health Care Fraud and Abuse 
     Control Program established under section 9411 (including the 
     administration of the Program), and may be used to cover 
     costs incurred in operating the Program, including--
       (A) costs of prosecuting health care matters (through 
     criminal, civil and administrative proceedings);
       (B) costs of investigations (including equipment, salaries, 
     administratively uncontrollable work, travel, and training of 
     law enforcement personnel);
       (C) costs of financial and performance audits of health 
     care programs and operations;
       (D) costs of inspections and other evaluations; and
       (E) the costs of providing awards under section 3059(c)(2) 
     of title 18, United States Code (as added by section 9428).
       (2) Funds used to supplement agency appropriations.--It is 
     intended that disbursements made from the Anti-Fraud Account 
     to any Federal agency be used to increase and not supplant 
     the recipient agency's appropriated operating budget.
       (c) Annual Report.--The Inspector General shall submit an 
     annual report to Congress on the amount of revenue which is 
     generated and disbursed by the Anti-Fraud Account in each 
     fiscal year.
       (d) Use of Subaccounts.--
       (1) Subaccounts described.--The Account shall consist of--
       (A) the Health Care Fraud and Abuse Expenses Subaccount; 
     and
       (B) the Health Care Fraud and Abuse Reserve Subaccount.
       (2) Expenses subaccount.--
       (A) Contents.--The Expenses Subaccount consists of--
       (i) amounts deposited pursuant to subsection (a)(1); and
       (ii) amounts transferred from the Reserve Subaccount under 
     paragraph (3)(B).
       (B) Use.--Amounts in the Expenses Subaccount shall be 
     available to the Inspector General for the uses described in 
     subsection (b).
       (3) Reserve subaccount.--
       (A) Deposits.--An amount otherwise required under paragraph 
     (2)(A) to be deposited in the Expenses Subaccount in a fiscal 
     year shall be deposited in the Reserve Subaccount, if--
       (i) the amount in the Expenses Subaccount is greater than 
     $500,000,000; and
       (ii) the deposit of that amount in the Expenses Subaccount 
     would result in the amount in the Expenses Subaccount 
     exceeding 110 percent of the total amount deposited in the 
     Expenses Subaccount in the preceding fiscal year.
       (B) Transfers to expenses subaccount.--
       (i) Estimation of shortfall.--Not later than the first day 
     of the last quarter of each fiscal year, the Inspector 
     General shall estimate whether sufficient amounts will be 
     available during such quarter in the Expenses Subaccount for 
     the uses described in paragraph (2)(B).
       (ii) Transfer to cover shortfall.--If the Inspector General 
     estimates under paragraph (1) that there will not be 
     available sufficient amounts in the Expenses Subaccount 
     during the last quarter of a fiscal year, there shall be 
     transferred from the Reserve Subaccount to the Expenses 
     Subaccount such amount as the Inspector General estimates is 
     required to ensure that sufficient amounts are available in 
     the Expenses Subaccount during such quarter.
       (C) Limitation on amount carried over to succeeding fiscal 
     year.--There shall be transferred to the general fund of the 
     Treasury any amount remaining in the Reserve Subaccount at 
     the end of a fiscal year (after any transfer made under 
     subparagraph (B)) in excess of 10 percent of the total amount 
     authorized to be deposited in the Expenses Subaccount 
     (consistent with subparagraph (A)) during the fiscal year.
       (d) Federal Health Care Offense Defined.--The term 
     ``Federal health care offense'' means a violation of, or a 
     criminal conspiracy to violate--
       (1) sections 226, 668, 1033, or 1347 of title 18, United 
     States Code;
       (2) section 1128B of the Social Security Act;
       (3) sections 287, 371, 664, 666, 1001, 1027, 1341, 1343, or 
     1954 of title 18, United States Code, if the violation or 
     conspiracy relates to health care fraud;
       (4) sections 501 or 511 of the Employee Retirement Income 
     Security Act of 1974, if the violation or conspiracy relates 
     to health care fraud; or
       (5) sections 301, 303(a)(2), or 303(b) or (e) of the 
     Federal Food Drug and Cosmetic Act, if the violation or 
     conspiracy relates to health care fraud.
       (e) Account Payments Advisory Board.--
       (1) Establishment.--There is established the Account 
     Payments Advisory Board, which shall make recommendations to 
     the Inspector General regarding the equitable allocation of 
     payments from the Anti-Fraud Account.
       (2) Membership.--The Board shall consist of 10 members 
     appointed by the Inspector General of the Department of 
     Health and Human Services to represent Health Care Fraud and 
     Abuse Control Units, of whom one shall be appointed--
       (A) for each of the 10 regions established by the Director 
     of the Office of Management and Budget under Office of 
     Management and Budget Circular A-105, to represent Units in 
     that region; and
       (B) from among individuals recommended by the heads of 
     those agencies in that region.

     To the greatest extent feasible, the membership of the Board 
     shall reflect the racial, ethnic, and gender composition of 
     the population of the United States.
       (3) Terms.--The term of a member of the Board appointed 
     under paragraph (2)(B) shall be 3 years, except that of such 
     members first appointed 3 members shall serve an initial term 
     of one year and 3 members shall serve an initial term of 2 
     years, as specified by the Inspector General at the time of 
     appointment.
       (4) Vacancies.--A vacancy on the Board shall be filled in 
     the same manner in which the original appointment was made, 
     except that an individual appointed to fill a vacancy 
     occurring before the expiration of the term for which the 
     individual is appointed shall be appointed only for the 
     remainder of that term.
       (5) Chairperson and bylaws.--The Board shall elect one of 
     its members as chairperson and shall adopt bylaws.
       (6) Compensation and expenses.--Members of the Board shall 
     serve without compensation, except that the Inspector General 
     may pay the expenses reasonably incurred by the Board in 
     carrying out its functions under this section.
       (7) No termination.--Section 14(a)(2) of the Federal 
     Advisory Committee Act (5 U.S.C. App.) does not apply to the 
     Board.

     SEC. 9413. PAYMENTS TO STATES FOR HEALTH CARE FRAUD AND ABUSE 
                   CONTROL UNITS.

       (a) Payments to States.--
       (1) In general.--For each year for which a State has an 
     annual plan approved under subsection (b)(3), and subject to 
     the availability of appropriations authorized under 
     subsection (e), the Inspector General of the Department of 
     Health and Human Services shall pay to the State for each 
     quarter an amount equal to 75 percent of the sums expended 
     during the quarter by the Health Care Fraud and Abuse Control 
     Unit described in subsection (b)(1) in conducting activities 
     described in that subsection.
       (2) Time of payment.--The Inspector General shall make a 
     payment under paragraph (1) for a quarter by not later than 
     30 days after the end of the quarter.
       (b) State Requirements for Receiving Payments.--A State is 
     eligible to receive payments under subsection (a) if the 
     State carries out the following activities:
       (1) Health care fraud and abuse control unit 
     requirements.--There is a Health Care Fraud and Abuse Control 
     Unit established by the State which is a single identifiable 
     entity of State government which is separate and distinct 
     from any State agency with principal responsibility for the 
     administration of health care programs, and meets the 
     following requirements:
       (A) The entity--
       (i) is a unit of the office of the State Attorney General 
     or of another department of State government that possesses 
     statewide authority to prosecute individuals for criminal 
     violations;
       (ii) is in a State the constitution of which does not 
     provide for the criminal prosecution of individuals by a 
     statewide authority, and has formal procedures, approved by 
     the Secretary, that assure it will refer suspected criminal 
     violations relating to health care fraud or abuse in 
     violation of Federal law to the appropriate authority or 
     authorities of the State for prosecution and assure it will 
     assist such authority or authorities in such prosecutions; or
       (iii) has a formal working relationship with the office of 
     the State Attorney General or the appropriate authority or 
     authorities for prosecution and has formal procedures 
     (including procedures under which it will refer suspected 
     criminal violations to such office), that provide effective 
     coordination of activities between the Health Care Fraud and 
     Abuse Control Unit and such office with respect to the 
     detection, investigation, and prosecution of suspected health 
     care fraud or abuse in violation of Federal law.
       (B) The entity conducts a statewide program for the 
     investigation and prosecution of violations of all applicable 
     State laws regarding any and all aspects of health care fraud 
     and abuse in violation of Federal law.
       (C) The entity has procedures for--
       (i) reviewing complaints of the abuse or neglect of 
     patients of health care facilities in the State, and
       (ii) where appropriate, investigating and prosecuting such 
     complaints under the criminal laws of the State or for 
     referring the complaints to other State or Federal agencies 
     for action.
       (D) The entity provides for the collection, or referral for 
     collection to the appropriate agency, of overpayments that--
       (i) are made under any federally funded or mandated health 
     care program required by this Act, and
       (ii) it discovers in carrying out its activities.
       (E) The entity employs attorneys, auditors, investigators, 
     and other necessary personnel, is organized in such a manner, 
     and provides sufficient resources, as is necessary to promote 
     the effective and efficient conduct of its activities.
       (2) Submission of annual plan.--The Health Care Fraud and 
     Abuse Control Unit of a State has a plan preventing, 
     detecting, and controlling health care fraud and abuse in 
     violation of State law which is approved by the Inspector 
     General of the Department of Health and Human Services. The 
     Inspector General shall approve a plan submitted under 
     paragraph (3) by the Health Care Fraud and Abuse Control Unit 
     of a State, unless the Inspector General establishes that the 
     plan will not enable the Unit to prevent, detect, and control 
     health care fraud and abuse in violation of Federal law.
       (3) Reports.--The Health Care Fraud and Abuse Control Unit 
     submits to the Inspector General an annual report containing 
     such information as the Inspector General determines to be 
     necessary.
       (c) Semiannual Reports of Inspector General of Health and 
     Human Services.--The Inspector General shall include in its 
     semiannual reports to the Congress under section 5(a) of the 
     Inspector General Act of 1978 (5 U.S.C. App.) an assessment 
     of the Inspector General of how well States are preventing, 
     detecting, and controlling health care fraud and abuse.
       (d) Limitation on Federal Laws Affected.--In this 
     subsection, any reference to ``Federal law'' shall not 
     include any law described in section 9411(a)(2)(A).
       (e) Authorization of Appropriations.--There are authorized 
     to be appropriated for fiscal years beginning with fiscal 
     year 1996 for payments under this section such sums as may be 
     necessary for making such payments.

                   PART 3--AMENDMENTS TO CRIMINAL LAW

     SEC. 9421. HEALTH CARE FRAUD.

       (a) In General.--Chapter 63 of title 18, United States 
     Code, is amended by adding at the end the following:

     ``Sec. 1347. Health care fraud

       ``(a) Whoever knowingly executes, or attempts to execute, a 
     scheme or artifice--
       ``(1) to defraud any health plan or other person, in 
     connection with the delivery of or payment for health care 
     benefits, items, or services;
       ``(2) to obtain, by means of false or fraudulent pretenses, 
     representations, or promises, any of the money or property 
     owned by, or under the custody or control of, any health plan 
     or person in connection with the delivery of or payment for 
     health care benefits, items, or services;

     shall be fined under this title or imprisoned not more than 
     10 years, or both. If the violation results in serious bodily 
     injury (as defined in section 1365 of this title) such person 
     shall be imprisoned for life or any term of years.
       ``(b) As used in this section, the term `health plan' has 
     the meaning given such term in title V of the Guaranteed 
     Health Insurance Act of 1994.''.
       (b) Clerical Amendment.--The table of sections at the 
     beginning of chapter 63 of title 18, United States Code, is 
     amended by adding at the end the following:

``1347. Health care fraud.''.

     SEC. 9422. FORFEITURES FOR VIOLATIONS OF FRAUD STATUTES.

       (a) In General.--Section 982(a) of title 18, United States 
     Code, is amended by inserting after paragraph (5) the 
     following:
       ``(6) The court, in imposing sentence on a person convicted 
     of a Federal health care offense (as defined in section 
     9412(d) of the Guaranteed Health Insurance Act of 1994) shall 
     order the person to forfeit any real or personal property 
     that--
       ``(A) is used in the commission of the offense, if the 
     offense results in a financial loss or gain of $50,000 or 
     more; or
       ``(B) constitutes or is derived from proceeds traceable to 
     the commission of the offense.''.
       (b) Proceeds of Health Care Fraud Forfeitures.--Section 
     524(c)(4)(A) of title 28, United States Code, is amended by 
     inserting ``all proceeds of forfeitures relating to Federal 
     health care offenses (as defined in section 9412(d) of the 
     Guaranteed Health Insurance Act of 1994), and'' after 
     ``except''.

     SEC. 9423. FALSE STATEMENTS.

       (a) In General.--Chapter 47 of title 18, United States 
     Code, is amended by adding at the end the following:

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

       ``(a) Whoever, in any matter involving a health plan, 
     knowingly and willfully falsifies, conceals, or covers up by 
     any trick, scheme, or device a material fact, or makes any 
     false, fictitious, or fraudulent statements or 
     representations, or makes or uses any false writing or 
     document knowing the same to contain any false, fictitious, 
     or fraudulent statement or entry, shall be fined under this 
     title or imprisoned not more than 5 years, or both.
       ``(b) As used in this section the term `health plan' has 
     the meaning given such term in title V of the Guaranteed 
     Health Insurance Act of 1994.''.
       (b) Clerical Amendment.--The table of sections at the 
     beginning of chapter 47 of title 18, United States Code, is 
     amended by adding at the end the following:

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

     SEC. 9424. BRIBERY AND GRAFT.

       (a) In General.--Chapter 11 of title 18, United States 
     Code, is amended by adding at the end the following:

     ``Sec. 226. Bribery and graft in connection with health care

       ``(a) Whoever--
       ``(1) directly or indirectly, corruptly gives, offers, or 
     promises anything of value to a health care official, or 
     offers or promises a health care official to give anything of 
     value to any other person, with intent--
       ``(A) to influence any of the health care official's 
     actions, decisions, or duties relating to a health plan;
       ``(B) to influence such an official to commit or aid in the 
     committing, or collude in or allow, any fraud, or make 
     opportunity for the commission of any fraud, on a health 
     plan; or
       ``(C) to induce such an official to engage in any conduct 
     in violation of the lawful duty of such official; or
       ``(2) being a health care official, directly or indirectly, 
     corruptly demands, seeks, receives, accepts, or agrees to 
     accept anything of value personally or for any other person 
     or entity, the giving of which violates paragraph (1) of this 
     subsection;

     shall be fined under this title or imprisoned not more than 
     15 years, or both.
       ``(b) Whoever, otherwise than as provided by law for the 
     proper discharge of any duty, directly or indirectly gives, 
     offers, or promises anything of value to a health care 
     official, for or because of any of the health care official's 
     actions, decisions, or duties relating to a health plan, 
     shall be fined under this title or imprisoned not more than 
     two years, or both.
       ``(c) As used in this section--
       ``(1) the term `health care official' means--
       ``(A) an administrator, officer, trustee, fiduciary, 
     custodian, counsel, agent, or employee of any health plan;
       ``(B) an officer, counsel, agent, or employee, of an 
     organization that provides services under contract to any 
     health plan;
       ``(C) an official or employee of a State agency having 
     regulatory authority over any health plan;
       ``(D) an officer, counsel, agent, or employee of a health 
     care sponsor; and
       ``(2) the term `health care sponsor' means any individual 
     or entity serving as the sponsor of a health plan for 
     purposes of the Guaranteed Health Insurance Act of 1994, and 
     includes the joint board of trustees or other similar body 
     used by two or more employers to administer a health plan for 
     purposes of such Act.''.
       (b) Clerical Amendment.--The table of chapters at the 
     beginning of chapter 11 of title 18, United States Code, is 
     amended by adding at the end the following:

``226. Bribery and graft in connection with health care.''.

     SEC. 9425. INJUNCTIVE RELIEF RELATING TO HEALTH CARE 
                   OFFENSES.

       Section 1345(a)(1) of title 18, United States Code, is 
     amended--
       (1) by striking ``or'' at the end of subparagraph (A);
       (2) by inserting ``or'' at the end of subparagraph (B); and
       (3) by adding at the end the following:
       ``(C) committing or about to commit a Federal health care 
     offense (as defined in section 9412(d) of the Guaranteed 
     Health Insurance Act of 1994);''.

     SEC. 9426. GRAND JURY DISCLOSURE.

       Section 3322 of title 18, United States Code, is amended--
       (1) by redesignating subsections (c) and (d) as subsections 
     (d) and (e), respectively; and
       (2) by inserting after subsection (b) the following:
       ``(c) A person who is privy to grand jury information 
     concerning a health law violation--
       ``(1) received in the course of duty as an attorney for the 
     Government; or
       ``(2) disclosed under rule 6(e)(3)(A)(ii) of the Federal 
     Rules of Criminal Procedure;
     may disclose that information to an attorney for the 
     Government to use in any civil proceeding related to a 
     Federal health care offense (as defined in section 9412(d) of 
     the Guaranteed Health Insurance Act of 1994).''.

     SEC. 9427. THEFT OR EMBEZZLEMENT.

       (a) In General.--Chapter 31 of title 18, United States 
     Code, is amended by adding at the end the following:

     ``Sec. 668. Theft or embezzlement in connection with health 
       care

       ``(a) Whoever embezzles, steals, willfully and unlawfully 
     converts to the use of any person other than the rightful 
     owner, or intentionally misapplies any of the moneys, 
     securities, premiums, credits, property, or other assets of a 
     health plan or of any fund connected with such a plan, shall 
     be fined under this title or imprisoned not more than 10 
     years, or both.
       ``(b) As used in this section, the term `health plan' has 
     the meaning given such term under title V of the Guaranteed 
     Health Insurance Act of 1994.''.
       (b) Clerical Amendment.--The table of sections at the 
     beginning of chapter 31 of title 18, United States Code, is 
     amended by adding at the end the following:

``668. Theft or embezzlement in connection with health care.''.

     SEC. 9428. REWARDS FOR INFORMATION LEADING TO PROSECUTION AND 
                   CONVICTION.

       Section 3059 of title 18, United States Code, is amended by 
     adding at the end the following:
       ``(c)(1) The Attorney General may pay a reward not more 
     than $50,000 to any person who furnishes information or 
     services that lead to a conviction of a Federal health care 
     offense as defined by section 9412 of the Guaranteed Health 
     Insurance Act of 1994.
       ``(2) Rewards under this subsection are authorized to be 
     paid out of the All-Payer Health Care Fraud and Abuse Control 
     Account established under section 9412 of the Guaranteed 
     Health Insurance Act of 1994.
       ``(3) An officer or employee of the United States 
     (including a fiscal intermediary or carrier carrying out a 
     program on behalf of the United States) or of a State or 
     local government who furnishes information or renders 
     services in the performance of official duty is ineligible 
     for a payment under this subsection with respect to such 
     information or services.
       ``(4) The granting or decision not to grant a reward under 
     this subsection is not reviewable in any court.''.

              PART 4--AMENDMENTS TO CIVIL FALSE CLAIMS ACT

     SEC. 9431. AMENDMENTS TO CIVIL FALSE CLAIMS ACT.

       Section 3729 of title 31, United States Code, is amended--
       (1) in subsection (a)(7), by inserting ``or to a health 
     plan'' after ``property to the Government'';
       (2) in the matter following subsection (a)(7), by inserting 
     ``or health plan'' before ``sustains because of the act of 
     that person,'' ;
       (3) at the end of the first sentence of subsection (a), by 
     inserting ``or health plan'' before ``sustains because of the 
     act of the person.'' ;
       (4) in subsection (c)--
       (A) by inserting ``the term'' after ``section,''; and
       (B) by adding at the end the following: ``The term also 
     includes any request or demand, whether under contract of 
     otherwise, for money or property which is made or presented 
     to a health plan.'' ; and
       (5) by adding at the end the following:
       ``(f) Health Plan Defined.--For purposes of this section, 
     the term `health plan' has the meaning given such term under 
     title V of the Guaranteed Health Insurance Act of 1994.''.

  PART 5--AMENDMENTS TO ANTI-FRAUD AND ABUSE PROVISIONS APPLICABLE TO 
           MEDICARE, MEDICAID, AND STATE HEALTH CARE PROGRAMS

     SEC. 9441. REFERENCE TO AMENDMENTS.

       For provisions amending the anti-fraud and abuse provisions 
     existing under the Social Security Act, see part 5 of 
     subtitle D of title VIII.

          PART 6--PREEMPTION OF STATE CORPORATE PRACTICE LAWS

     SEC. 9451. PREEMPTION OF STATE LAWS PROHIBITING CORPORATE 
                   PRACTICE OF MEDICINE.

       No provision of State or local law shall apply that 
     prohibits a corporation from practicing medicine.
              Subtitle F--Physician Ownership and Referral

  PART 1--EXTENSION OF LIMITATIONS ON SELF-REFERRAL UNDER MEDICARE TO 
                     REFERRALS UNDER PRIVATE PLANS

     SEC. 9501. LIMITATIONS ON PHYSICIAN SELF-REFERRAL UNDER 
                   PRIVATE PLANS.

       The provisions of section 1877 of the Social Security Act 
     shall apply to items and services (and payments and claims 
     for payment for such items and services) furnished under any 
     certified health plan in the same manner as such provisions 
     apply to designated health services (and payments and claims 
     for payment for such services) under title XVIII of the 
     Social Security Act.

     SEC. 9502. CONSTRUCTION OF SOCIAL SECURITY ACT REFERENCES.

       (a) Incorporation of Other Amendments.--Any reference in 
     this part to a provision of the Social Security Act shall be 
     considered a reference to the provision as amended under part 
     6 of subtitle D of title VIII.
       (b) Effect of Subsequent Amendments.--Except as provided in 
     subsection (a), any reference to a provision of the Social 
     Security Act in this part shall be deemed to be a reference 
     to such provision as in effect on the date of the enactment 
     of this Act, and (except as Congress may otherwise provide) 
     any amendments made to such provisions after such date shall 
     not be taken into account in determining the applicability of 
     such provisions to individuals and entities under this Act.

PART 2--AMENDMENTS TO PHYSICIAN OWNERSHIP AND REFERRAL PROVISIONS UNDER 
                                MEDICARE

     SEC. 9511. REFERENCE TO AMENDMENTS.

       For provisions amending section 1877 of the Social Security 
     Act, see part 6 of subtitle D of title VIII.
             Subtitle G--Workforce Protection and Training

     SEC. 9600. DEFINITIONS.

       For purposes of this subtitle:
       (1) Employ.--The term ``employ'' includes to suffer or 
     permit to work.
       (2) Employee.--
       (A) In general.--The term ``employee'' means--
       (i) any individual employed by an employer or otherwise 
     having the status of an employee, taking into account the 
     factors described in subparagraph (B);
       (ii) any officer of a corporation;
       (iii) any individual (not described in clauses (i) through 
     (ii)) who performs for remuneration services described in 
     section 210(j) of the Social Security Act; and
       (iv) an individual described in subparagraph (C).
       (B) Application of factors reflecting economic 
     dependence.--An individual shall be deemed to be employed 
     taking into account (and to the extent that) the following 
     factors apply:
       (i) The individual has a low degree of control over the 
     circumstances under which the services are performed.
       (ii) The individual lacks opportunities for profit or loss 
     in performing the services.
       (iii) The individual does not have an investment in 
     facilities or equipment used in performing the services.
       (iv) The individual's relation with the person (for whom 
     the services are provided) is not temporary.
       (v) The services performed for the person represent a high 
     percentage of all services performed by the individual.
       (vi) The individual's performance of the services does not 
     require a high degree of skill.
       (C) Inclusion of certain contract relationships.--The term 
     ``employee'' includes, with respect to any employer which 
     during the preceding year had gross receipts in excess of an 
     amount specified by the Secretary of Labor (which amount 
     shall not be less than $10,000,000), an individual who 
     performs services for the employer if--
       (i) the services are not performed by the individual as an 
     employee of another employer or as a leased employee (as 
     defined in paragraph (8)(C));
       (ii) the contract or other arrangement for services 
     contemplates that substantially all of such services are to 
     be performed personally by such individual; and
       (iii) the individual performs the services--

       (I) on the premises owned or leased by the employer,
       (II) using facilities or equipment in which the employer 
     has a substantial investment, or
       (III) using facilities and equipment in which the 
     individual does not have a substantial investment.

       (D) Exclusion of volunteers.--The term ``employee'' does 
     not include any individual who volunteers to perform services 
     for a public agency which is a State, a political subdivision 
     of a State or an interstate governmental agency, if--
       (i) the individual receives no compensation other than 
     reasonable expenses or a nominal fee to perform the services 
     for which the individual volunteered, and
       (ii) such services are not the same type of services which 
     the individual is employed to perform for such public agency.

     An employee of a public agency which is a State, political 
     subdivision of a State, or an interstate governmental agency 
     may volunteer to perform services for any other State, 
     political subdivision, or interstate governmental agency, 
     including a State, political subdivision, or agency with 
     which the employing State, political subdivision, or agency 
     has a mutual aid agreement.
       (E) Exception for certain immediate family.--Except as 
     provided by the Secretary of Labor in regulations, a child 
     under the age of 18 shall not be considered to be an employee 
     by virtue of service performed for the child's parent or 
     guardian.
       (F) Exclusion of employees outside the united states.--The 
     term ``employee'' does not include an individual who does not 
     reside in the United States.
       (G) Exclusion of foreign employment.--The term ``employee'' 
     does not include an individual--
       (i) with respect to service, if the individual is not a 
     citizen or resident of the United States and the service is 
     performed outside the United States, or
       (ii) with respect to service, if the individual is a 
     citizen or resident of the United States and the service is 
     performed outside the United States for an employer other 
     than an American employer (as defined in section 210(e) of 
     the Social Security Act).
       (H) Exclusion of inmates as employees.--An individual shall 
     not be treated as an employee by virtue of services performed 
     in a penal institution by an inmate thereof or in a hospital 
     or other health care institution by a patient thereof.
       (I) Application of control group rules for employers.--For 
     purposes of this subtitle:
       (i) Two or more trades or businesses, whether or not 
     incorporated, shall be deemed a single employer if such 
     trades or businesses are within the same control group.
       (ii) The term ``control group'' means a group of trades or 
     businesses under common control.
       (iii) The determination of whether a trade or business is 
     under common control with another trade or business shall be 
     determined under regulations of the Secretary of Labor 
     applying principles similar to the principles applied under 
     section 4001(a)(14)(B) of the Employee Retirement Income 
     Security Act of 1974.
       (iv) Under regulations of the Secretary of Labor, all 
     employees of organizations which are under common control 
     with one or more organizations which are exempt from income 
     tax under subtitle A of the Internal Revenue Code of 1986 
     shall be treated as employed by a single employer.

     The regulations prescribed under clause (iv) shall be based 
     on principles similar to the principles which apply to 
     taxable organizations under clause (iii).
       (J) Anti-evasion rules.--An individual shall be treated as 
     an employee of a person if the individual would otherwise be 
     treated as such an employee but for an action which was 
     undertaken by the person or another on the person's behalf to 
     evade responsibilities imposed under this subtitle with 
     respect to the individual as an employee.
       (K) Exemption of employees who are members of certain 
     religious faiths.--A member of certain religious faiths (as 
     defined in section 1402(g) of the Internal Revenue Code of 
     1986) who elects to waive all benefits and payments provided 
     under this Act (or the Social Security Act) with respect to 
     the guaranteed national benefit package shall not be 
     considered an employee for purposes of this subtitle. The 
     election under the previous sentence shall be consistent with 
     the waiver of benefits under section 202(v) of the Social 
     Security Act.
       (3) Employer.--
       (A) In general.--The term ``employer''--
       (i) means any person engaged in any activity, business or 
     industry in commerce or affecting commerce that employs an 
     individual;
       (ii) includes any person who acts, directly or indirectly, 
     in the interest of an employer in relation to any of the 
     employees of such employer; and
       (iii) includes any public agency (as defined in section 
     3(x) of the Fair Labor Standards Act, 29 U.S.C. 203(x)).
       (B) Commerce.--The term ``commerce'' means trade, traffic, 
     commerce, transportation, or communication among the several 
     States, or between the District of Columbia or any Territory 
     of the United States and any State or other Territory, or 
     between any foreign country and any State, Territory, or the 
     District of Columbia, or within the district of Columbia or 
     any Territory, or between points in the same State but 
     through any other State or any Territory or the District of 
     Columbia or any foreign country.
       (C) Affecting commerce.--The term ``affecting commerce'' 
     means in commerce, or burdening or obstructing commerce or 
     the free flow of commerce.
       (D) Successor employer.--An employer is a ``successor 
     employer'' if, based on the facts and circumstances, on 
     balance after applying at least the following criteria, and 
     consistent with any regulations promulgated by the Secretary 
     of Labor, the employer has substantially assumed the 
     employment-related responsibilities of another employer:
       (i) Substantial continuity of the same business operations.
       (ii) Use of the same plant, common facility, or work site.
       (iii) Continuity of the work force.
       (iv) Similarity of jobs and working conditions.
       (v) Similarity of supervisory personnel.
       (vi) Similarity in machinery, equipment, and productions 
     methods.
       (vii) Similarity of products or services.
       (E) Treatment of common employment.--The Secretary of Labor 
     may promulgate regulations regarding responsibilities of 
     employers in the case of common employment of an employee by 
     such employers.
       (4) Full-time equivalent employees; part-time employees.--
       (A) In general.--For purposes of this subtitle, subject to 
     subparagraphs (D) and (E) a qualifying employee who is 
     employed by an employer--
       (i) for at least 120 hours in a month, is counted as one 
     full-time equivalent employee for the month and shall be 
     deemed to be employed on a full-time basis; or
       (ii) for at least 40 hours, but less than 120 hours, in a 
     month, is counted as a fraction of a full-time equivalent 
     employee in the month equal to the full-time employment ratio 
     (as defined in subparagraph (B)) for the employee and shall 
     be deemed to be employed on a part-time basis.
       (B) Full-time employment ratio defined.--For purposes of 
     this subtitle, the term ``full-time employment ratio'' means, 
     with respect to a qualifying employee of an employer in a 
     month, subject to subparagraph (E), the lesser of 1 or the 
     ratio of--
       (i) the number of hours of employment such employee is 
     employed by such employer for the month (as determined under 
     paragraph (6)), to
       (ii) 120 hours.
       (C) Full-time employee; part-time employee.--For purposes 
     of this subtitle, subject to subparagraphs (D) and (E), the 
     terms ``full-time employee'' and ``part-time employee'' mean, 
     with respect to an employer, an employee who is employed on a 
     full-time basis or part-time basis (as specified in 
     subparagraph (A)), respectively, by the employer.
       (D) Consideration of industry practice.--As provided under 
     rules established by the Secretary of Labor, an employee who 
     is not described in subparagraph (C) shall be considered to 
     be employed on a full-time or part-time basis by an employer 
     (and to be a full-time or part-time employee of an employer) 
     for a month (or for all months in a 12-month period) if the 
     employee is employed by that employer on a continuing basis 
     that, taking into account the structure or nature of the 
     employment in the industry, represents full time or part time 
     employment, respectively.
       (E) Employment at educational institutions.--With respect 
     to employees of an institution of higher education (as 
     defined in section 1201(a) of the Higher Education Act of 
     1965) or of an elementary or secondary school (as defined in 
     section 1471 of the Elementary and Secondary Education Act of 
     1965) who are exempt under section 13 of the Fair Labor 
     Standards Act of 1938--
       (i) the employees shall be considered to be employed on a 
     full-time basis (and to be a full-time employee) if they work 
     the customary hours that constitute full-time employment as 
     defined at such institution;
       (ii) the number of hours and, with respect to less-than-
     full-time employees at such an institution, the number of 
     such customary hours shall be substituted for 120 in 
     subparagraphs (A) and (B)(ii); and
       (iii) such employees who are regular seasonal employees who 
     are not paid during summer months or other regular periods of 
     the year, but are assured employment at the end of such 
     periods, shall be considered to be employed year round.
       (5) Health care employer.--The term ``health care 
     employer'' means an employer that--
       (A) provides health care items or services (including such 
     items and services not included in the guaranteed national 
     benefit package); or
       (B) provides necessary related services, including 
     administrative, food service, janitorial or maintenance 
     services, to an entity that provides health care items or 
     services (as described in subparagraph (A));

     except that an employer that solely manufactures or provides 
     goods or equipment to a health care employer shall not be 
     considered a health care employer.
       (6) Hours of employment.--
       (A) In general.--For purposes of this subtitle, the 
     Secretary shall specify the method for computing hours of 
     employment for employees of an employer consistent with this 
     paragraph. The Secretary shall take into account rules used 
     for purposes of applying the Fair Labor Standards Act of 
     1938.
       (B) Hourly wage earners.--In the case of an individual who 
     receives compensation (in the form of hourly wages or 
     compensation) for the performance of services, the individual 
     is considered to be ``employed'' by an employer for an hour 
     if compensation is payable with respect to that hour of 
     employment, without regard to whether or not the employee is 
     actually performing services during such hour.
       (7) Qualifying employee.--
       (A) In general.--The term ``qualifying employee'' means, 
     with respect to an employer for a month, an employee (other 
     than a young dependent, as defined in subparagraph (B)) who 
     is employed by the employer for at least 40 hours (as 
     determined under paragraph (6)) in the month.
       (B) Young dependent defined.--In subparagraph (A), the term 
     ``young dependent'' means an eligible individual who is a 
     young dependent (as defined in section 1003(b)(1)(B)) and is 
     enrolled under a health plan as a family member (as defined 
     in section 1104(c)(2)(B)).
       (8) Treatment of employee leasing arrangements.--
       (A) Treatment as employee of leasing organization.--Except 
     as provided in subparagraph (B), with respect to any person 
     (in this paragraph referred to as the ``recipient'') for whom 
     a leased employee (as defined in subparagraph (C)) performs 
     services the leased employee shall not be treated as an 
     employee of the recipient.
       (B) Application in relation to workforce stability.--For 
     purposes of applying sections 9621(b) and 9624(b) (relating 
     to transitional provisions for workforce stability), leased 
     employees shall be treated as employees of the recipient and 
     of the leasing organization.
       (C) Leased employee.--For purposes of this paragraph, the 
     term ``leased employee'' means any person who is not an 
     employee of the recipient and who provides services to the 
     recipient if--
       (i) such services are provided pursuant to an agreement 
     between the recipient and any other person (in this paragraph 
     referred to as the ``leasing organization''); and
       (ii)(I) such services are of a type historically performed, 
     in the business field of the recipient, by employees;
       (II) the person provides services to the recipient for at 
     least such number of hours per week (or such percentage of 
     the person's time) as the Secretary of Labor specifies; or
       (III) the tasks performed by the person are functionally 
     integrated with the operations of the recipient and performed 
     on the premises of (or using the facilities and equipment of) 
     the recipient.
       (9) Treatment of employees in the entertainment industry.--
     In the case of employees in the entertainment industry, the 
     Secretary shall establish special rules to determine what 
     constitutes full-time and part-time work in the industry. 
     Such rules shall take into account the historic employment 
     patterns in the industry.
       (10) Treatment of franchise networks.--
       (A) In general.--The Secretary of Labor shall prescribe 
     regulations regarding the circumstances under which 
     individuals performing services for a franchisee are treated 
     as employees of a franchise network.
       (B) Definitions.--For purposes of this paragraph, the terms 
     ``franchisee'' and ``franchise network'' have the meanings 
     given such terms in regulations of the Federal Trade 
     Commission published in part 436 of title 16, Code of Federal 
     Regulations.
       (11) Treatment of salaried employees and employees paid on 
     contingent or bonus arrangements.--In the case of an employee 
     who receives compensation on a salaried basis or on the basis 
     of a commission (or other contingent or bonus basis), rather 
     than an hourly wage, the Secretary of Labor shall establish 
     rules for the conversion of the compensation to hours of 
     employment, taking into account the minimum monthly 
     compensation levels for workers employed on a full-time basis 
     under the Fair Labor Standards Act of 1938 and other factors 
     the Secretary considers relevant.
       (12) Wages.--
       (A) In general.--The term ``wages'' has the meaning given 
     such term in section 209(a) of the Social Security Act, 
     except that paragraph (1) shall not apply.
       (B) Tips not included.--The term ``wages'' does not include 
     cash tips.

               PART 1--GENERAL EMPLOYER RESPONSIBILITIES

     SEC. 9601. PROHIBITION OF CERTAIN EMPLOYER DISCRIMINATION.

       (a) Prohibition of Family Discrimination.--No employer may 
     discriminate with respect to an employee on the basis of the 
     family status of the employee or on the basis of the class of 
     family enrollment selected with respect to the employee.
       (b) Evasion of Obligations.--It shall be unlawful for any 
     employer or other person to discharge, fine, suspend, expel, 
     discipline, discriminate or otherwise take adverse action 
     against any employee if a purpose of such action is to 
     interfere with the employee's attainment of status as a 
     qualifying employee, as a full-time employee, or as a part-
     time employee, or if a purpose of such action is to evade or 
     avoid any obligation under this Act.
       (c) Enforcement.--In the case of a person that violates a 
     requirement of this section, the Secretary of Labor may 
     impose a civil money penalty, in an amount not to exceed 
     $10,000, for each violation with respect to each individual 
     with respect to whom a violation occurred. The provisions of 
     section 503 of the Migrant and Seasonal Agricultural Worker 
     Protection Act (other than subsection (a)) shall apply to 
     civil money penalties under this subsection in the same 
     manner as such provisions apply to a penalty under such Act.

     SEC. 9602. WHISTLEBLOWER PROTECTION.

       (a) Employee Protections.--No entity under this Act may 
     discharge, discriminate, or otherwise take adverse action 
     against any employee with respect to compensation, terms, 
     conditions, or privileges of employment because the employee 
     (or any other person acting pursuant to a request of the 
     employee) provided information to any Federal, State, or 
     public or private supervisory agency or entity regarding a 
     possible violation of any provision of this Act or any 
     regulation issued pursuant to this Act.
       (b) Court Action.--
       (1) In general.--An employee or former employee who 
     believes that such employee was discharged, discriminated, or 
     otherwise subject to adverse action in violation of 
     subsection (a), may file a civil action in the appropriate 
     district court of the United States not later than two years 
     after the date of such discharge, discrimination, or adverse 
     action.
       (2) Damages.--If the court determines that a violation of 
     subsection (a) has occurred, the plaintiff may obtain 
     appropriate relief, including actual, compensatory, and 
     punitive damages and equitable relief (including 
     reinstatement).
       (3) Attorney's fees and costs.--In any action under 
     paragraph (1) in which the plaintiff substantially prevails, 
     the court shall award the plaintiff reasonable attorney's 
     fees (at generally prevailing hourly rates), reasonable 
     expert witness fees, and other reasonable costs, unless the 
     court finds that such award would not be appropriate.

     SEC. 9603. EMPLOYER NEUTRALITY.

       Federal funds appropriated to carry out this Act, other 
     than funds appropriated pursuant to title XVIII, XIX, XXI, or 
     XXII of the Social Security Act, may not be used to assist, 
     promote, or deter union organizing.

        PART 2--TRANSITIONAL PROVISIONS FOR WORKFORCE STABILITY

     SEC. 9621. APPLICATION.

       (a) Limitation to Transition Period.--The provisions of 
     this part are intended to minimize, to the extent possible, 
     disruptions in established employment relationships during 
     the period of transition to a restructured health care 
     delivery system, and shall terminate on January 1, 2004.
       (b) Health Care Employers Covered by Part.--The provisions 
     of this part, including references to displacing employers, 
     hiring employers, successors and contractors, apply only to 
     health care employers (including successor employers) that 
     employ more than 15 covered employees on a typical business 
     day.
       (c) Covered Employees Defined.--In this part, the term 
     ``covered employee'' means an employee of a health care 
     employer.
       (d) Inclusion of Successor Employers.--In this part, the 
     term ``employer'' includes a successor employer of the 
     employer.

     SEC. 9622. OBLIGATIONS OF DISPLACING EMPLOYER AND AFFILIATED 
                   ENTERPRISES IN EVENT OF DISPLACEMENT.

       (a) Notice.--A health care employer which displaces a 
     preference eligible employee (as defined in subsection (e)) 
     shall provide such employee with--
       (1) written notice, no later than the date of displacement, 
     of employment rights under this part; and
       (2) notice of any existing or subsequent vacancies with the 
     displacing employer, which notice may be given by posting of 
     such vacancies wherever notices to applicants for employment 
     are customarily posted, by listing such vacancies with the 
     local employment services agency, or in such other manner as 
     the Secretary of Labor, by regulation, may specify.

     Any such vacancy shall remain open for applications by 
     preference eligible employees for not less than 14 calendar 
     days from the date on which the initial notice is provided.
       (b) Hiring Preference.--
       (1) In general.--A preference eligible employee who--
       (A) meets any qualifications described in paragraph (3); 
     and
       (B) applies during the notice period described in 
     subsection (a)(2) for a vacant position with the displacing 
     employer which is in the employee's occupational specialty 
     and located in the same State or Metropolitan Statistical 
     Area in which the employee was employed prior to the 
     displacement,

     shall be given the right to accept or decline the position 
     before the employer may offer the position to an employee who 
     is not a preference eligible employee.
       (2) Multiple applications.--When considering applications 
     from more than one preference eligible employee described in 
     paragraph (1), the hiring health care employer shall have 
     discretion as to which of such employees will be offered the 
     position.
       (3) Employment qualification requirements.--A hiring health 
     care employer may establish reasonable employment 
     qualifications for a vacancy to which this part applies, 
     except that an employee who performed essentially the same 
     work prior to the employee's displacement shall be deemed 
     presumptively qualified for a comparable position.
       (c) Termination of Preference Eligibility.--Subject to 
     section 9621(a), a displaced employee's preference 
     eligibility shall terminate at such time as the displaced 
     employee obtains substantially equivalent employment with the 
     displacing employer.
       (d) Notice of Job Openings.--A health care employer, to the 
     extent practicable, shall list all job openings for covered 
     employees with the job bank established by the Employment 
     Service.
       (e) Definitions.--In this part:
       (1) Preference eligible employee.--The term ``preference 
     eligible employee'' means an employee who--
       (A) has been employed as a covered employee for in excess 
     of one year by a health care employer; and
       (B) has been displaced by or has received notice of an 
     impending displacement by such employer.
       (2) Displacement.--The term ``displacement'' includes a lay 
     off, termination, significant cutback in paid work hours, or 
     other loss of employment, except that a discharge for just 
     cause shall not constitute a displacement within the meaning 
     of this paragraph.

     SEC. 9623. EMPLOYMENT WITH OTHER HEALTH CARE EMPLOYERS.

       A health care employer that replaces another health care 
     employer in whole or in part through merger, consolidation, 
     acquisition, contract, or other similar manner shall--
       (1) provide employees who would otherwise be displaced the 
     right to continued employment in the job positions previously 
     held by such employees, unless the employer can establish 
     that such positions no longer exist; and
       (2) for six months from the date of their displacement by 
     the predecessor, provide employees who are not rehired under 
     paragraph (1) notice and the right to employment in any 
     vacancies that become available in such job positions.

     SEC. 9624. COLLECTIVE BARGAINING OBLIGATIONS DURING 
                   TRANSITION PERIOD.

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

     SEC. 9625. GENERAL PROVISIONS.

       (a) Regulations.--Not later than 120 days after the date of 
     enactment of this Act, the Secretary of Labor shall 
     promulgate regulations to implement the requirements of this 
     part.
       (b) Other Laws.--The standards and requirements of this 
     part shall not preempt or excuse noncompliance with any other 
     applicable Federal or State law, regulation, or municipal 
     ordinance that establishes additional notice and preference 
     standards or requirements concerning employee dislocation, 
     employee representation, or collective bargaining.
       (c) Rules of Construction.--Nothing in this part shall be 
     construed to excuse or otherwise limit the obligation of an 
     employer to comply with the terms of any collective 
     bargaining agreement or of any employee benefit plan that 
     provides employees with rights in addition to those provided 
     under this part.
       (d) Discrimination.--In making decisions that would result 
     in the displacement, retention, hiring or transfer of 
     employees, a health care employer may not discriminate 
     between or among employees on the basis of their protected 
     status under this part or under any other Federal or State 
     laws.
       (e) Enforcement.--Unless otherwise specifically provided in 
     this part, the enforcement provisions of section 107 of the 
     Family and Medical Leave Act of 1993 shall apply (except that 
     the limitation of paragraph (1) of subsection (a) shall not 
     apply) with respect to the enforcement of the individual 
     rights, including notice requirements, provided under section 
     9622 and 9623. The collective bargaining and contractual 
     rights provided under section 9624 shall be enforced through 
     administrative and judicial procedures otherwise provided 
     under Federal or State law with respect to such rights.

              PART 3--RESPONSIBILITIES OF BOARD OF INQUIRY

     SEC. 9631. REQUEST FOR APPOINTMENT OF BOARD OF INQUIRY.

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

     SEC. 9632. APPOINTMENT OF BOARD OF INQUIRY.

       (a) In General.--Except as provided in subsection (b), the 
     Director shall appoint a Health Care Board of Inquiry not 
     later than 10 days after receipt of a request under section 
     9631. Each such Board shall be composed of such number of 
     individuals as the Director may deem desirable. No member 
     appointed under this section shall have any interest or 
     involvement in a health care employer, or a labor 
     organization, involved in the collective bargaining dispute. 
     To the greatest extent feasible, the membership of a Board 
     shall reflect the racial, ethnic, and gender composition of 
     the population of the community served by the health care 
     employer involved.
       (b) Limitation.--With respect to the appointment of a 
     Health Care Board of Inquiry under paragraph (1), if the 
     Director determines that--
       (1) the health care employer is--
       (A) otherwise exempt from coverage under the Labor 
     Management Relations Act, as amended; and
       (B) subject to State laws containing procedures for the 
     resolution of impasses in collective bargaining that are 
     comparable to those that would be followed by a Board of 
     Inquiry under this section; or
       (2) the parties involved have agreed to procedures for the 
     resolution of the impasse in collective bargaining that are 
     comparable to those that would be followed by a Board of 
     Inquiry;

     the Director may refuse the request for the appointment of 
     such a Board.

     SEC. 9633. PUBLIC FACT FINDING.

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

     SEC. 9634. COMPENSATION OF MEMBERS OF BOARD OF INQUIRY.

       (a) Employees of Federal Government.--Members of any Board 
     established under this part who are otherwise employed by the 
     Federal Government shall serve without compensation but shall 
     be reimbursed for travel, subsistence, and other necessary 
     expenses incurred by them in carrying out its duties under 
     this section.
       (b) Other Members.--Members of any Board established under 
     this section who are not subject to paragraph (1) shall 
     receive compensation at a rate prescribed by the Director but 
     not to exceed the daily rate prescribed for GS-18 of the 
     General Schedule under section 5332 of title 5, including 
     travel for each day they are engaged in the performance of 
     their duties under this section and shall be entitled to 
     reimbursement for travel, subsistence, and other necessary 
     expenses incurred by them in carrying out their duties under 
     this part.

     SEC. 9635. MAINTENANCE OF TERMS AND CONDITIONS OF EMPLOYMENT.

       Beginning on the date on which a Board is requested under 
     section 9631 and ending 15 days after the date any such Board 
     has issued its report, no change in the terms and conditions 
     of employment in effect prior to the expiration of the 
     contract in the case of negotiations for a contract renewal, 
     or in effect prior to the time the parties begin their 
     bargaining in the case of an initial beginning negotiations, 
     except by agreement, shall made by the parties to the 
     collective bargaining dispute.

          PART 4--WORKFORCE PRIORITIES UNDER FEDERAL PAYMENTS

     SEC. 9641. PROGRAMS OF THE SECRETARY OF LABOR.

       (a) In General.--
       (1) Funding.--(A) For purposes of carrying out the programs 
     described in this section, and for carrying out section 9642, 
     there is authorized to be appropriated $200,000,000 for 
     fiscal year 1995 and each subsequent fiscal year.
       (B) Of the total amount authorized for each fiscal year 
     under subparagraph (A)--
       (i) not more than $10,000,000 may be used to carry out the 
     program under subparagraph (B) of subsection (b)(1);
       (ii) not more than $25,000,000 may be used to carry out the 
     program under subparagraph (C) of subsection (b)(1);
       (iii) not more than $10,000,000 may be used to carry out 
     the program under subparagraph (D) of subsection (b)(1);
       (iv) not more than $3,000,000 may be used to carry out the 
     provisions of section 9642; and
       (v) the remainder of funds shall be used to carry out the 
     program under subparagraph (A) of subsection (b)(1).
       (2) Administration.--The programs described in this section 
     and carried out with amounts made available under subsection 
     (a) shall be carried out by the Secretary of Labor.
       (b) Retraining Programs; Advanced Career Positions; 
     Workforce Adjustment Programs.--
       (1) In general.--For purposes of subsection (a), the 
     programs described in this section are the following:
       (A) A program for skills upgrading and occupational 
     retraining (including retraining health care workers for more 
     advanced positions as technicians, nurses, and physician 
     assistants), and for quality and workforce improvement.
       (B) A demonstration program to assist workers in health 
     care institutions in obtaining advanced career positions.
       (C) A program to ensure the expansion of the national job 
     bank (established by the Employment Service of the Department 
     of Labor) within local employment services agencies designed 
     to address the needs of health care workers, subject to the 
     following:
       (i) Such job bank shall be available to all health care 
     employers and health care workers in the community involved.
       (ii)(I) With respect to each affected community, the local 
     employment service agency or one-stop career center serving 
     such community shall be allocated not less than one counselor 
     whose responsibility shall include addressing the needs of 
     health care workers.
       (II) Such counselor shall ensure the solicitation of job 
     openings from local health care employers and, not less 
     frequently than once each month, ensure that such employers 
     and other employers are contacted, and ensure that all job 
     listings appropriate for health care workers adversely 
     affected under this Act are monitored and updated regularly.
       (III) Such counselor shall provide directly, or facilitate 
     the provision of, labor exchange services by local employment 
     service staff to eligible health care workers, including 
     assessment, counseling, testing, job-search assistance, job 
     referral and placement, and referral to training and 
     educational programs.
       (IV) If the impact of health care industry restructuring is 
     such that the functions required under this clause cannot be 
     satisfactorily provided by one counselor, additional 
     counselors shall be allocated.
       (iii) The job bank serving the community involved shall be 
     subject to performance goals that measure the number of 
     health care job openings and the proportion of health care 
     employers in the community that list job openings. Such goals 
     shall be adjusted based on specific economic, geographic, and 
     other characteristics, including demonstrated difficulties 
     with employer compliance.
       (D) A program to provide for joint labor-management 
     decision-making in the health care sector on workplace 
     matters related to the restructuring of the health care 
     delivery system provided for in this Act.
       (2) Use of funds.--Amounts made available under subsection 
     (a) for carrying out this section may be expended for program 
     support, faculty development, trainee support, workforce 
     analysis, and dissemination of information, as necessary to 
     produce required performance outcomes.
       (c) Administrative Requirements.--In carrying out the 
     programs described in subsection (b), the Secretary of Labor 
     shall, with respect to the organizations and employment 
     positions involved, provide for the following:
       (1) Joint labor-management implementation and 
     administration.
       (2) Discussion with employees as to training needs for 
     career advancement.
       (3) Commitment to a policy of internal hirings and 
     promotion.
       (4) Provision of support services.
       (5) Consultations with employers and with organized labor.

     SEC. 9642. NATIONAL INSTITUTE FOR HEALTH CARE WORKFORCE 
                   DEVELOPMENT.

       (a) Establishment of Institute.--The Secretary of Labor, in 
     consultation with the Secretary of Health and Human Services, 
     shall establish an office to be known as the National 
     Institute for Health Care Workforce Development.
       (b) Director.--The Institute shall be headed by a Director, 
     who shall be appointed by the Secretary of Labor.
       (c) Duties.--
       (1) Recommendations by director.--The Director of the 
     Institute shall make recommendations to the Secretary of 
     Labor regarding--
       (A) the supply of health care workers needed for proper 
     staffing of the health care institutions serving the insured 
     health benefit plans, and the self-insured health benefit 
     plans, described in title V;
       (B) the impact of this Act, and of related changes 
     regarding health care, on health care workers and the needs 
     of such workers with respect to education, training, and 
     career development; and
       (C) the development and implementation of high performance, 
     high quality health care delivery systems, including employee 
     participation committee systems, that will improve the health 
     care delivery system by increasing the role, the 
     responsibilities, and the area of independent decision-making 
     authority of health care workers.
       (2) Response to recommendations.--The Secretary of Labor, 
     in acting upon the recommendations made under paragraph (1), 
     may--
       (A) issue timely and useful reports on health care worker 
     supply and needs and on proper staffing of health care 
     institutions;
       (B) take actions to encourage the use of employee 
     participation committees and other activities intended to 
     promote the development of high performance, high quality 
     health care delivery systems; and
       (C) take such other actions as are authorized under this 
     Act.
       (d) Advisory Board.--
       (1) In general.--The Secretary of Labor shall establish an 
     advisory board to assist in the development and 
     implementation of recommendations under subsection (c)(1).
       (2) Composition.--The advisory board established under 
     paragraph (1) shall be composed of the following members with 
     expertise in health care workforce issues:
       (A) The Secretary of Labor.
       (B) The Secretary of Health and Human Services.
       (C) Five representatives of health care workers in 
     organized labor to be appointed by Secretary of Labor.
       (D) Five representatives of health institutions to be 
     appointed by the Secretary of Health and Human Services.
       (E) Two representatives from organizations that train and 
     educate health care workers, to be appointed by the Secretary 
     of Labor.
       (F) Two representatives from consumer organizations to be 
     appointed by the Secretary of Labor.

     To the greatest extent feasible, the membership of the 
     advisory board shall reflect the racial, ethnic, and gender 
     composition of the population of the United States.
       (e) Staff, Quarters, and Other Assistance.--The Secretary 
     of Labor shall provide the Institute and the Advisory Board 
     with such staff, quarters, and other administrative 
     assistance as may be necessary for the Institute and the 
     Advisory Board to carry out this section.
       (f) Coordination.--The Secretary of Labor, in consultation 
     with the Secretary of Health and Human Services, shall, to 
     the extent practicable, ensure that the efforts under this 
     section and section 792 of the Public Health Service Act are 
     coordinated to ensure that joint planning occurs to maximize 
     the utilization of resources, to avoid duplication of effort, 
     and to provide for the equitable division of responsibility.
       (g) Definitions.--For purposes of this section:
       (1) Advisory board.--The term ``Advisory Board'' means the 
     advisory board established under subsection (d).
       (2) Employee participation committee.--The term ``employee 
     participation committee'' means a committee of non-managerial 
     workers at a health care facility which--
       (A) is selected without employer interference by one or 
     more labor organizations representing such workers or, if 
     there is no such organization, by such workers;
       (B) operates without employer interference; and
       (C) consults with management on issues of efficiency, 
     productivity, and quality of care.
       (3) The term ``Institute'' means the Institute established 
     under subsection (a).
       (h) Sunset.--Unless otherwise extended by law, the 
     Institute is terminated on January 1, 2004.
                        TITLE X--LONG-TERM CARE
                   Subtitle A--Long-Term Care Program

     SEC. 10001. ESTABLISHMENT OF LONG-TERM CARE PROGRAM FOR HOME 
                   AND COMMUNITY-BASED SERVICES.

       The Secretary shall establish a long-term care program for 
     grants to States under this subtitle to provide home and 
     community-based services for individuals with severe 
     disabilities without regard to age or income through approved 
     State plans. Nothing in this subtitle may be construed to 
     authorize the Secretary to delegate to the States the primary 
     responsibility for interpreting the governing provisions of 
     this subtitle.

     SEC. 10002. INDIVIDUALS WITH SEVERE DISABILITIES.

       (a) In General.--In this subtitle, the term ``individual 
     with severe disabilities'' means any individual within one or 
     more of the following 4 categories of individuals:
       (1) Individuals requiring help with activities of daily 
     living.--An individual of any age who--
       (A) requires hands-on or standby assistance, supervision, 
     or cueing (as defined by the Secretary) to perform three or 
     more activities of daily living (as defined in subsection 
     (c)), and
       (B) is expected to require such assistance, supervision, or 
     cueing over a period of at least 100 days.
       (2) Individuals with severe cognitive or mental 
     impairment.--An individual of any age--
       (A) whose score, on a standard mental status protocol (or 
     protocols) specified by the Secretary as appropriate for 
     measuring the individual's particular condition, indicates 
     either severe cognitive impairment or severe mental 
     impairment, or both;
       (B) who--
       (i) requires hands-on or standby assistance, supervision, 
     or cueing with one or more activities of daily living,
       (ii) requires hands-on or standby assistance, supervision, 
     or cueing with at least such instrumental activity (or 
     activities) of daily living related to cognitive or mental 
     impairment as the Secretary specifies, or
       (iii) displays symptoms of one or more serious behavioral 
     problems (that is on a list of such problems specified by the 
     Secretary) which create a need for supervision to prevent 
     harm to self or others; and
       (C) whose is expected to meet the requirements of 
     subparagraphs (A) and (B) over a period of at least 100 days.
       (3) Individuals with severe or profound mental 
     retardation.--An individual of any age who has severe or 
     profound mental retardation (as determined according to a 
     protocol specified by the Secretary).
       (4) Severely disabled children.--An individual under 6 
     years of age who--
       (A) has a severe disability or chronic medical condition,
       (B) but for receiving home and community-based services 
     would require institutionalization in a hospital, nursing 
     facility, or intermediate care facility for the mentally 
     retarded, and
       (C) is expected to have such disability or condition and 
     require such services over a period of at least 100 days.
       (b) Determination of Eligibility.--
       (1) In general.--The determination of whether an individual 
     is an individual with severe disabilities shall be made, by 
     persons or entities (which may be local care coordination 
     agencies) specified under the State plan (under section 
     10004), using a uniform protocol consisting of an initial 
     screening and assessment specified by the Secretary. A State 
     may collect additional information, at the time of obtaining 
     information to be used by such persons or entities to make 
     such determination, in order to provide for the assessment 
     and plan described in section 10004(b) or for other purposes. 
     The determination of such persons or entities shall be made 
     without regard to the individual's income or (except in the 
     case described in subsection (a)(4)) the individual's age.
       (2) Initial screening process.--The plan shall provide a 
     process for the initial screening of individuals who appear 
     to have some reasonable likelihood of being an individual 
     with severe disabilities.
       (3) Periodic reassessment.--The determination that an 
     individual is an individual with severe disabilities shall be 
     considered to be in effect under the State plan for a period 
     of not more than 12 months (or for such longer period in such 
     cases as a significant change in an individual's condition 
     that may affect such determination is unlikely). A 
     reassessment shall be made if there is a significant change 
     in an individual's condition that may affect such 
     determination.
       (4) Fair hearing process.--The State shall establish a fair 
     hearing process for appeals of such determinations.
       (c) Activity of Daily Living Defined.--In this subtitle, 
     the term ``activity of daily living'' means any of the 
     following: eating, toileting, dressing, bathing, and 
     transferring.

     SEC. 10003. HOME AND COMMUNITY-BASED SERVICES.

       (a) Scope of Services.--
       (1) In general.--In this subtitle, the term ``home and 
     community-based services'' includes, subject to paragraph 
     (2), the following:
       (A) Agency-administered and consumer-directed personal 
     assistance services (as defined in paragraph (3)).
       (B) Case management.
       (C) Homemaker and chore assistance.
       (D) Home modifications.
       (E) Respite services.
       (F) Assistive devices.
       (G) Adult day services.
       (H) Habilitation and rehabilitation.
       (I) Supported employment.
       (J) Home health services.
       (L) Any other care or assistive services (approved by the 
     Secretary) that a State determines will help individuals with 
     severe disabilities to remain in their homes and communities.
       (2) Exclusions.--Such term does not include coverage of the 
     following:
       (A) Room and board.
       (B) Services furnished in a hospital, nursing facility, 
     intermediate care facility for the mentally retarded, or 
     other institutional setting specified by the Secretary.
       (C) Items and services to the extent coverage is provided 
     for the individual under a certified health plan or under 
     title XVIII of the Social Security Act or medicare part C.
       (3) Personal assistance services defined.--
       (A) In general.--In this subsection, the term ``personal 
     assistance services'' includes hands-on and standby 
     assistance, supervision, and cueing with activities of daily 
     living, whether agency-administered or consumer-directed (as 
     defined in subparagraph (B)).
       (B) Consumer-directed; agency-administered.--In this 
     subtitle:
       (i) The term ``consumer-directed'' means, with reference to 
     personal assistance services or the provider of such 
     services, services that are provided by an individual who is 
     selected and managed (and, at the individual's option, 
     trained) by the individual receiving the services.
       (ii) The term ``agency-administered'' means, with respect 
     to such services, services that are not consumer-directed.
       (C) Limitation on licensure or certification.--A State may 
     not subject consumer-directed providers of personal 
     assistance services to licensure, certification, or other 
     requirements which the Secretary finds not to be necessary 
     for the health and safety of individuals with severe 
     disabilities.
       (b) Cost Sharing.--
       (1) No or nominal cost sharing for poorest.--No cost 
     sharing (other than nominal cost sharing) may be imposed for 
     individuals with income (as determined under paragraph (3)) 
     less than 150 percent of the Federal poverty level (as 
     defined in paragraph (4)) applicable to a family of the size 
     involved.
       (2) Sliding scale for remainder.--Cost sharing in the form 
     of coinsurance (based on the amount paid under this subtitle 
     for a service) shall be imposed--
       (A) at a rate of 10 percent for individuals with severe 
     disabilities with income not less than 150 percent, and less 
     than 200 percent, of the applicable Federal poverty level;
       (B) at a rate of 20 percent for such individuals with 
     income not less than 200 percent, and less than 250 percent, 
     of the applicable Federal poverty level; and
       (C) at a rate of 25 percent for such individuals with 
     income equal to at least 250 percent of such Federal poverty 
     level.
       (3) Determination of income for purposes of cost sharing.--
     Each State, or an agency designated by the State, shall 
     determine the income of an individual with severe 
     disabilities for purposes of this subsection, in a manner 
     specified by the Secretary.
       (4) Federal poverty level defined.--In this subsection, the 
     term ``Federal poverty level'' means, for a family for a 
     year, the official poverty line (as defined by the Office of 
     Management and Budget, and revised annually in accordance 
     with section 673(2) of the Omnibus Budget Reconciliation Act 
     of 1981) applicable to a family of the size involved for the 
     year.
       (c) Specification of Services to be Covered.--
       (1) In general.--Each State shall specify, in its plan 
     under section 10004--
       (A) the methods and standards used to select the types, and 
     the amount, duration, and scope, of home and community-based 
     services to be covered under the plan and to be available to 
     each category of individuals with severe disabilities;
       (B) how the types, and the amount, duration, and scope of 
     the services specified meet the needs of individuals within 
     each of such categories;
       (C) the extent and manner in which such services would be 
     allocated among individuals with severe disabilities and 
     categories of such individuals;
       (D) the manner in which such services are coordinated with 
     each other and with health and long-term care services 
     available outside the plan for individuals with severe 
     disabilities; and
       (E) the manner in which individuals with severe 
     disabilities will be assisted in obtaining services from 
     other programs for which they may qualify (including home 
     health services under title XVIII or medicare part C and home 
     and community-based services under a State plan approved 
     under title XIX).
       (2) Flexibility in meeting individual needs.--The 
     services--
       (A) shall be specified in a manner that permits sufficient 
     flexibility for providers to meet the needs of individuals 
     with severe disabilities in a cost effective manner;
       (B) may be specified in a manner that takes into account 
     the availability of informal care; and
       (C) subject to subsection (a)(2)(B), may be delivered in an 
     individual's home, a range of community residential 
     arrangements, or outside the home (but not in an 
     institutional setting).

     SEC. 10004. ADMINISTRATION THROUGH STATE PLANS.

       (a) In General.--As a condition for the payment of funds to 
     a State under section 10005, the State must have a plan for 
     home and community-based services for individuals with severe 
     disabilities approved by the Secretary. The Secretary may not 
     approve such a plan unless the Secretary determines that the 
     plan meets the requirements of subsection (b).
       (b) Plan Requirements.--The requirements for a State plan 
     are as follows:
       (1) Eligibility process.--The plan shall provide for a 
     process to determine if individuals are individuals with 
     severe disabilities in accordance with section 10002(b).
       (2) Specification of services, cost sharing, types of 
     providers, and requirements for participation.--The plan 
     shall--
       (A) specify, in accordance with section 10003(c), the home 
     and community-based services to be provided under this 
     subtitle to individuals with severe disabilities;
       (B) impose cost sharing with respect to covered services in 
     accordance with section 10003(b); and
       (C) specify--
       (i) the types of service providers eligible to participate 
     in the program under the plan, and
       (ii) any requirements for participation applicable to each 
     type of service provider.
       (3) Provision of services.--
       (A) According to plan of care.--
       (i) In general.--The State plan shall provide for home and 
     community-based services to an individual with disabilities 
     only if such services are provided consistent with an 
     individualized plan of care.
       (ii) Plan of care.--Such plan of care shall--

       (I) be based on an assessment of the individual's need for 
     such services under section 10002(b)(1),
       (II) be developed in consultation with the individual and 
     the individual's family, and
       (III) be periodically reviewed and updated, as appropriate 
     (in accordance with section 10002(b)(3).

       (iii) Construction.--Nothing in this subparagraph shall be 
     construed as requiring a State (under the State plan or 
     otherwise) to provide all the services specified in such a 
     plan.
       (B) Consumer choice.--To the extent possible, preference is 
     to be given to the choice of an individual with severe 
     disabilities (and that individual's family) regarding which 
     covered services to receive and the providers who will 
     provide such services.
       (4) Payments for services.--The plan provides for payment 
     for services in accordance with the schedules and payment 
     methodology specified in subsection (e).
       (5) Budgeting and fiscal management.--
       (A) Limitation on administrative expenditures.--The plan 
     shall contain assurances that not more than an amount or 
     level (specified by the Secretary) of expenditures under the 
     plan for all quarters in any fiscal year shall be for 
     administrative costs.
       (B) Use of state funds for matching.--The plan shall 
     provide assurances that Federal funds will not be used to 
     provide for the State share of expenditures under this 
     subtitle.
       (C) Budget priority for continuing current services for 
     current recipients.--The State plan shall give priority to 
     the provision of such services to individuals who are already 
     being provided services under the plan in a fiscal year 
     during which insufficient funds are available to provide 
     services to each individual eligible to receive such services 
     under 10002(a).
       (6) Quality assurance and safeguards.--The State plan shall 
     provide for quality assurance and safeguards for applicants 
     and beneficiaries in accordance with subsection (f).
       (7) General administration.--
       (A) State agency.--The plan shall designate a State agency 
     or agencies to manage and coordinate benefits under the plan, 
     in accordance with specifications included in the plan.
       (B) Use of local care coordination agencies.--A State may 
     contract with or establish local care coordination agencies 
     throughout the State to assure the availability of home and 
     community-based services to individuals with severe 
     disabilities residing throughout the State.
       (C) Coordination.--The plan shall specify how the plan--
       (i) will be integrated with the State plan for medical 
     assistance under title XIX of the Social Security Act, State 
     plans under titles V and XX of such Act, programs under the 
     Older Americans Act of 1965, programs under the Developmental 
     Disabilities Assistance and Bill of Rights Act, the 
     Individuals with Disabilities Education Act, and any other 
     Federal or State programs that provide services or assistance 
     targeted to individuals with severe disabilities, and
       (ii) will be coordinated with certified health plans.
       (8) Reports and information to secretary; audits.--The plan 
     shall provide that the State will furnish to the Secretary--
       (A) such reports, and will cooperate with such audits, as 
     the Secretary determines are needed concerning the State's 
     administration of its plan under this subtitle, including the 
     processing of claims under the plan, and
       (B) such data and information as the Secretary may require 
     in order to carry out the purpose of the program.
       (9) Compliance with worker redeployment negotiation 
     requirements.--The plan shall meet the requirements of 
     subtitle C (relating to negotiations regarding worker 
     redeployment).
       (c) Standards for Plan Approval.--
       (1) In general.--The Secretary shall establish standards 
     for the approval of State plans under this section.
       (2) Effectiveness.--The approval of such a plan shall take 
     effect as of the first day of the first fiscal year beginning 
     after the date of such approval (except that any approval 
     made before October 1, 1998, shall be effective as of such 
     date). In order to budget funds allotted under this subtitle, 
     the Secretary may establish a deadline for the submission of 
     such a plan before the beginning of a fiscal year as a 
     condition of its approval effective with that fiscal year.
       (d) Monitoring State Performance.--
       (1) In general.--The Secretary shall monitor the 
     performance of States in carrying out plans under this 
     section and shall, not less often than every two years, 
     evaluate the performance of State agencies in carrying out 
     their programmatic and fiscal responsibilities under this 
     subtitle.
       (2) Performance measures.--In evaluating such performance, 
     the Secretary shall take into account at least the following:
       (A) The State's ability to maintain plan expenditures 
     within amounts for which Federal payments are available under 
     section 10005.
       (B) The plan's ability to maximize the provision of 
     services within the State's allocation.
       (C) The State's success at finding alternative sources of 
     funding to pay for services authorized under a care plan.
       (D) The plan's ability to maintain individuals with severe 
     disabilities outside institutional settings.
       (E) The State's ability to implement the requirement that 
     the plan is a secondary payor to the State plan for medical 
     assistance under title XIX of the Social Security Act under 
     section 10005(f)(1).
       (e) Requirements Relating to Payment for Services.--
       (1) In general.--Subject to paragraph (2), payments for 
     services under the State plan shall be made based on--
       (A) the prospective payment system developed under 
     paragraph (3)(B), or
       (B) in the absence of such a system, the fee schedules 
     developed under paragraph (3)(A), or
       (C) in the absence of such a system or schedules, payment 
     rates or methodologies developed by the providers for payment 
     rates that are reasonable and ensure adequate provider 
     participation and access to covered services of adequate 
     quality.
       (2) Use of cash payments and vouchers.--
       (A) In general.--Under standards established by the 
     Secretary under this section, a State plan may provide for 
     the use of vouchers and cash payments directly to individuals 
     with severe disabilities to pay for covered services.
       (B) Determination of payment rates.--The plan shall specify 
     the methods and criteria to be used to set rates for such 
     cash payments and vouchers.
       (C) Use of intermediate entities for consumer-directed 
     services.--With respect to consumer-directed services 
     furnished to an individual with severe disabilities by a 
     provider, the plan may provide that an entity, other than the 
     individual or provider--
       (i) would inform the individual and the provider of rights 
     and responsibilities under all Federal and other applicable 
     labor and tax laws, and
       (ii) would act as the employer of the provider for purposes 
     of assuming responsibility for effective billing and for 
     payments for service tax withholding, unemployment 
     compensation, and workers'' compensation under such laws.

     In such a case individuals with severe disabilities retain 
     the right to select, hire, terminate, and direct the work of 
     such a provider.
       (3) Development of fee schedules and prospective payment 
     system.--
       (A) In general.--The Secretary shall develop fee schedules 
     for payment for home and community-based services. Such 
     schedules shall be--
       (i) based on the estimated cost of visits by discipline or 
     service,
       (ii) adjusted to take into account variations in area wage 
     levels and such other factors as the Secretary deems 
     appropriate, and
       (iii) adequate to ensure provider participation and access 
     to covered services of adequate quality.
       (B) Development of prospective schedule.--To the extent 
     practicable, the Secretary shall develop a prospective 
     payment system for payment for home and community-based 
     services under this subtitle. Such a system shall adjust 
     payment rates to take into account--
       (i) variations in area wage levels, and
       (ii) predictable differences in the cost and utilization of 
     such services, based on degree of dependency in relation to 
     activities of daily living and other case-mix severity 
     indicators of resource needs.

     To the extent possible, the unit of payment shall be 
     established on a per-episode basis rather than per-visit 
     basis. The payment rates under such a system shall be 
     adequate to ensure provider participation and access to 
     covered services of adequate quality.
       (4) Extra billing not permitted.--The plan shall restrict 
     payment under the plan for covered services to those 
     providers that agree to accept the payment under the plan (at 
     the rates established under this subsection) and any cost 
     sharing permitted or provided for under the plan as payment 
     in full for services furnished under the plan.
       (f) Quality Assurance and Safeguards.--
       (1) Quality assurance requirements.--In order to assure the 
     health and safety of individuals with severe disabilities, 
     the Secretary shall establish, by not later than July 1, 
     1999, quality assurance and certification requirements--
       (A) for providers to receive payments under a State plan 
     for furnishing home and community-based services, and
       (B) for enforcement of such requirements under the plan.
       (2) Safeguards.--
       (A) Confidentiality.--The State plan shall provide 
     safeguards which restrict the use or disclosure of 
     information concerning applicants and beneficiaries to 
     purposes directly connected with the administration of the 
     plan.
       (B) Safeguards against abuse.--The State plans shall 
     provide, through methods other than reliance on State 
     licensure processes, that individuals receiving home and 
     community care under this subtitle are protected from 
     neglect, physical and sexual abuse, financial exploitation, 
     inappropriate involuntary restraint, and the provision of 
     health care services by unqualified personnel in community 
     care settings.
       (C) Safeguards in cases of cash payments and vouchers.--The 
     State plans shall provide appropriate safeguards in cases 
     where payment for program benefits is made by cash payments 
     or vouchers given directly to individuals with severe 
     disabilities.
       (D) Incorporation of provisions.--In carrying out this 
     subsection, the provisions of subsections (f) through (h) of 
     section 1929 of the Social Security Act (relating to minimum 
     requirements for care and settings) shall apply under this 
     subtitle in the same manner as they apply under such section.
       (g) Regulations.--The Secretary shall issue such 
     regulations as may be appropriate to carry out this subtitle.

     SEC. 10005. PAYMENTS TO STATES; MEDICAID MAINTENANCE OF 
                   EFFORT.

       (a) In General.--The Secretary shall authorize payment to 
     each State with a plan approved under this subtitle, for each 
     fiscal year (beginning with fiscal year 2000), of an amount 
     equal to six dollars for each seven dollars expended under 
     the plan, but not to exceed the State allocation under 
     subsection (b)(1) for the fiscal year plus the State's share 
     of the reallotment pool under subsection (b)(3).
       (b) Allocation to States.--
       (1) Allocation of federal funds.--The Secretary shall 
     allocate all the national long-term care allocation amount 
     (described in paragraph (2)) for each fiscal year among the 
     States in accordance with a formula based on--
       (A) the number of individuals with severe disabilities in 
     the State within each of the categories of such individuals, 
     and
       (B) the average per capita spending amounts within each 
     State within each of such categories for home and community-
     based services.
       (2) National long-term care allocation amount.--For any 
     fiscal year, the national long-term care allocation amount is 
     125 percent of the Federal funds available under section 
     10006 for the fiscal year.
       (3) State share of reallotment pool.--
       (A) In general.--For purposes of subsection (a), the 
     State's share of the reallotment pool for the fiscal year 
     under this paragraph is equal to the State's share (as 
     determined under subparagraph (B)) of the redistribution pool 
     (as determined under subparagraph (C)) for the fiscal year.
       (B) State share.--For purposes of subparagraph (A), a 
     State's share is equal to the ratio of--
       (i) the State allocation under paragraph (1) for the fiscal 
     year, to
       (ii) the sum of such allocations for all fully 
     participating States for the fiscal year.
       (C) Redistribution pool.--For purposes of subparagraph (A), 
     the redistribution pool for a fiscal year is equal to the 
     amount by which the available Federal funds under section 
     10006 for the fiscal year exceeds the total payments made to 
     States under paragraphs (1) and (2) of subsection (a) for the 
     fiscal year.
       (c) State Entitlement.--This subtitle constitutes budget 
     authority in advance of appropriations Acts, and represents 
     the obligation of the Federal Government to provide for the 
     payment to States of amounts described in subsection (a).
       (d) Disallowance of Certain Excessive Administrative 
     Costs.--For purposes of subsection (a), administrative 
     expenditures that are in excess of the amounts permitted 
     under section 10004(b)(5)(A) shall not be treated as 
     expenditures under the State plan.
       (e) Application of Rules Regarding Limitations on Provider-
     Related Donations and Health Care Related Taxes.--The 
     provisions of section 1903(w) of the Social Security Act 
     shall apply to payments to States under this section in the 
     same manner as they apply to payments to States under section 
     1903(a) of such Act .
       (f) Payments on Estimates with Retrospective Adjustments.--
     The method of computing and making payments under this 
     section shall be as follows:
       (1) The Secretary shall, prior to the beginning of each 
     quarter in a fiscal year, estimate the amount to be paid to 
     the State under subsection (a) for such quarter, based on a 
     report filed by the State containing its estimate of one-
     quarter of the total sum to be expended in such fiscal year, 
     and such other information as the Secretary may find 
     necessary.
       (2) The Secretary shall provide for payment of the amount 
     so estimated, reduced or increased, as the case may be, by 
     any sum (not previously adjusted under this section) by which 
     the Secretary finds that the estimate of the amount to be 
     paid the State for any prior period under this section was 
     greater or less than the amount which should have been paid.
       (g) Reduction of Payments Authorized for Failure to 
     Maintain Medicaid Effort.--
       (1) Payer of last resort.--The Secretary shall reduce the 
     amount of payments otherwise made to a State under this 
     section by the amount of any expenditures under this subtitle 
     for services to individuals otherwise entitled to benefits 
     under the title XVIII, medicare part C, a State plan approved 
     under title XIX, or any certified health plan.
       (2) Medicaid maintenance of effort.--
       (A) In general.--The Secretary also may reduce the amount 
     of payments otherwise made to a State in a fiscal year under 
     this section by the amount by which--
       (i) the State medicaid expenditures for home and community-
     based services in the fiscal year (as determined under 
     subparagraph (B)), is less than
       (ii) the maintenance of effort level for the State for the 
     fiscal year (as determined under subparagraph (C)).
       (B) State medicaid expenditures.--For purposes of this 
     paragraph, a State's ``medicaid expenditures for home and 
     community-based services'' in a fiscal year is--
       (i) the gross amount expended on medical assistance under 
     the State medicaid plan in the fiscal year for home and 
     community-based services, including a reasonable allocation 
     (determined by the Secretary) of administrative expenses 
     attributable to the provision of such services, reduced by
       (ii) the amount of the Federal financial participation 
     attributable to such assistance and expenses under the 
     medicaid program.
       (C) Maintenance-of-effort level.--For purposes of 
     subparagraph (A)(ii), the ``maintenance-of-effort level'' for 
     a State for a fiscal year (beginning with fiscal year 1998) 
     is equal to--
       (i) the State's medicaid expenditures for home and 
     community-based services (as determined under subparagraph 
     (B)) for fiscal year 1994,
       (ii) increased by the total nominal growth in the gross 
     domestic product between 1994 and 1997, and
       (iii) increased for each year after 1998 and before the 
     year in which the fiscal year involved ends by national 
     medicare growth factor established under section 8201(c) for 
     the year.
       (3) Construction.--Nothing in this subsection shall be 
     construed as requiring States to determine eligibility for 
     medical assistance under the State medicaid plan on behalf of 
     individuals receiving benefits under this subtitle.

     SEC. 10006. FEDERAL FUNDING.

       (a) Fiscal Years 1998 Through 2004.--For purposes of this 
     subtitle, subject to subsection (c), the available Federal 
     funds for all State plans under this subtitle--
       (1) for fiscal year 1998 is $1.7 billion;
       (2) for fiscal year 1999 is $1.5 billion;
       (3) for fiscal year 2000 is $5.0 billion;
       (4) for fiscal year 2001 is $6.6 billion;
       (5) for fiscal year 2002 is $9.4 billion;
       (6) for fiscal year 2003 is $19.3 billion; and
       (7) for fiscal year 2004 is $22.6 billion.
       (b) Subsequent Fiscal Years.--For purposes of this 
     subtitle, subject to subsection (c), the available Federal 
     funds for State plans under this subtitle for each fiscal 
     year after fiscal year 2004 is the total available Federal 
     funds under this section for the preceding fiscal year 
     increased by the national medicare growth factor established 
     under section 8201(c) for the year in which such preceding 
     fiscal year ends.
       (c) Set Aside for Services under the Indian Health Care 
     Improvement Act.--The Secretary shall set aside and pay to 
     the Indian Health Service for each fiscal year (beginning 
     with fiscal year 2000), for payments under section 906 of the 
     Indian Health Care Improvement Act, 0.8 percent of the 
     available Federal funds otherwise provided under subsection 
     (a) or (b). Such amounts shall be treated as a reduction of 
     amounts available under this title for purposes of computing 
     the amount of allocations to States under section 10005(b).
  Subtitle B--Federal Standards for Private Long-Term Care Insurance 
                                Policies

        PART 1--GENERAL REQUIREMENT; ESTABLISHMENT OF STANDARDS

                     Subpart A--General Requirement

     SEC. 10101. GENERAL REQUIREMENT.

       (a) Approved Regulatory States.--No long-term care 
     insurance policy (as defined in section 10111) may be issued, 
     sold, or offered for sale in an approved regulatory State (as 
     defined in section 10112(3)) on or after the date specified 
     in section 10103 unless the policy has been certified by the 
     State commissioner of insurance under such program as meeting 
     the standards established by the approved regulatory program 
     in the State.
       (b) Other States.--No long-term care insurance policy may 
     be issued, sold, or offered for sale in a State that is not 
     an approved regulatory State on or after the date specified 
     in section 10103 unless the policy has been certified by the 
     Secretary (in accordance with such procedures as the 
     Secretary may establish) as meeting the standards established 
     under section 10102.
       (c) Treatment of Advertising and Soliciting.--For purposes 
     of this section, the advertising or soliciting with respect 
     to a policy, directly or indirectly, shall be deemed the 
     offering for sale of the policy.

     SEC. 10102. ESTABLISHMENT OF STANDARDS.

       (a) In General.--The Secretary shall promulgate a 
     regulation that provides standards that incorporate the 
     requirements of part 2 and such standards shall apply under 
     section 10101. Such regulations shall first be published by 
     not later than July 1, 1995.
       (b) Consultation.--In promulgating regulations under this 
     section, the Secretary shall consult with the National 
     Association of Insurance Commissioners (in this subtitle 
     referred to as the ``NAIC'') and with representatives of 
     consumer groups.

     SEC. 10103. DEADLINE FOR APPLICATION OF STANDARDS IN STATES.

       (a) Initial Standards.--With respect to the initial 
     Standards established under section 10102, subject to 
     subsection (b), for purposes of this part, the date specified 
     in this section for a State is--
       (1) the date the State establishes an approved regulatory 
     program, or
       (2) January 1, 1997,

     whichever is earlier.
       (b) State Requiring Legislation.--In the case of a State 
     which the Secretary identifies as--
       (1) requiring State legislation (other than legislation 
     appropriating funds) in order for the State regulatory 
     program under section 10161 to be implemented; but
       (2) having a legislature which is not scheduled to meet in 
     a legislative session in which such legislation may be 
     considered in the year following the year in which the 
     standards (or subsequent standards) are established;

     the date specified in this section is the first day of the 
     first calendar quarter beginning after the close of the first 
     legislative session of the State legislature that begins on 
     or after January 1 of the year following the year in which 
     such standards (or subsequent standards) are established. For 
     purposes of the previous sentence, in the case of a State 
     that has a 2-year legislative session, each year of such 
     session shall be deemed to be a separate regular session of 
     the State legislature.

     SEC. 10104. RELATION TO STATE LAW.

       (a) Preemption..--Except as provided in subsection (b), the 
     Standards established under section 10102 preempt provisions 
     of State law which conflict with such Standards.
       (b) Stricter Standards Permitted.--A State may apply 
     standards that provide greater protection to policyholders of 
     long-term care insurance policies than the Standards.
       (c) Grandparenting of Current Policies.--Except as a State 
     may provide, the Standards shall not apply to policies issued 
     before the date specified in section 10103, unless and until 
     such policies are upgraded under section 10130(c)(2).
       (d) Exemption for Certain Policies Subject to State Plan 
     Amendments Under Medicaid.--The Standards shall not apply to 
     a policy in connection with which assets or resources are 
     disregarded in the manner described in section 
     1917(b)(1)(C)(ii) of the Social Security Act, but only if the 
     policy is certified by the State pursuant to an amendment to 
     the State medicaid plan under section 1902(r)(2) of such Act 
     approved on or before August 1, 1994.

     SEC. 10105. CODE OF CONDUCT WITH RESPECT TO ENDORSEMENTS.

       Not later than July 1, 1995, the Secretary shall issue 
     guidelines that shall apply to organizations and associations 
     and their subsidiaries that provide endorsements of long-term 
     care insurance policies, or that permit such policies to be 
     offered for sale through the organization or association or 
     subsidiary. Such guidelines shall include, at a minimum, the 
     following:
       (1) In endorsing or selling long-term care insurance 
     policies, the primary responsibility of an organization or 
     association or its subsidiary shall be to educate their 
     members concerning such policies and assist such members in 
     making informed decisions. Such organizations and 
     associations and their subsidiaries may not function 
     primarily as sales agents for insurance companies.
       (2) Organizations and associations and their subsidiaries 
     shall provide objective information regarding long-term care 
     insurance policies sold or endorsed by such organizations, 
     associations, and subsidiaries to ensure that members of such 
     organizations, associations, and subsidiaries have a balanced 
     and complete understanding of both the strengths and 
     weaknesses of the policies that are being endorsed or sold.
       (3) Organizations and associations and their subsidiaries 
     selling or endorsing long-term care insurance policies shall 
     disclose, in marketing literature concerning such policies 
     that is provided to their members, the manner in which such 
     policies and the insurance company issuing such policies were 
     selected. If the organization, association, or subsidiary and 
     the insurance company have interlocking directorates, the 
     organization, association, or subsidiary shall disclose such 
     fact to their members.
       (4) Organizations and associations and their subsidiaries 
     selling or endorsing long-term care insurance policies shall 
     disclose, in marketing literature concerning such policies 
     that is provided to their members, the precise nature and 
     amount of the compensation arrangements (including all fees, 
     commissions, administrative fees and other forms of financial 
     support) that the organization, association, or subsidiary 
     receives from the endorsement or sale of the policies to its 
     members. The Boards of Directors of organizations and 
     associations and their subsidiaries selling or endorsing 
     long-term care insurance policies shall review and approve 
     the compensation arrangements relating to such policies.
       (5) Organizations and associations and their subsidiaries 
     selling or endorsing long-term care insurance policies to 
     their members shall--
       (A) disclose, in summary form, the most recent information 
     available pertaining to the financial status (including 
     solvency) of the carrier;
       (B) make periodic actuarial or independent examinations of 
     the policies, including their benefits, features, and rates;
       (C) actively monitor the marking efforts, with respect to 
     its members, of the carrier and its agents;
       (D) review and approve all marketing materials or other 
     insurance communications used to promote sales among, or sent 
     to, members regarding such policies; and
       (E) file with the State insurance commissioner of the State 
     in which they are based--
       (i) a copy of the policies,
       (ii) a copy of the outline of coverage which accompanies 
     such policies, and
       (iii) a copy of each advertising and other marketing 
     materials utilized in connection with the sale or endorsement 
     of such policies.

     SEC. 10106. REQUIREMENTS FOR AGENT TRAINING AND CERTIFICATION 
                   PROGRAMS.

       (a) Establishment.--The Secretary shall establish 
     requirements for a long-term care insurance agent training 
     and certification program for insurance agents who desire to 
     sell or offer for sale long-term care insurance policies. 
     Under such program--
       (1) the agent must pass either--
       (A) a comprehensive examination on long-term care insurance 
     coverage and appropriate sales techniques, or
       (B) an equally comprehensive long-term care insurance 
     portion of another examination required by a State in order 
     for the agent to sell another insurance product in the State; 
     and
       (2) agents who have completed such program shall be 
     certified as qualified to sell or offer for sale long-term 
     care insurance policies.
       (b) Administration.--The program established under 
     subsection (a) shall be administered under an approved State 
     regulatory program.

                         Subpart B--Definitions

     SEC. 10111. LONG-TERM CARE INSURANCE POLICY.

       (a) In General.--In this subtitle, except as otherwise 
     provided in this section, the term ``long-term care insurance 
     policy'' means any insurance policy, certificate, or rider 
     advertised, marketed, offered, or designed to provide 
     coverage for each covered individual on an expense incurred, 
     indemnity, prepaid, or other basis, for one or more necessary 
     or medically necessary diagnostic, preventive, therapeutic, 
     rehabilitative, maintenance or personal care services, 
     provided in a setting other than an acute care unit of a 
     hospital. Such term includes a group or individual annuity or 
     life insurance policy or rider which provides directly (or 
     which supplements) long-term care insurance described in the 
     previous sentence. Such term also includes an insurance 
     policy or rider which provides for payment of benefits based 
     upon cognitive impairment or the loss of functional capacity.
       (b) Policies Excluded.--Except as provided in subsections 
     (c) and (d), in this subtitle the term ``long-term care 
     insurance policy'' does not include any medicare supplemental 
     policy (as defined in section 1882(g) of the Social Security 
     Act) and any insurance which is offered primarily to 
     provide--
       (1) basic hospital expense coverage, basic medical-surgical 
     expense coverage, hospital confinement indemnity coverage, or 
     major medical expense coverage,
       (2) disability income or related asset-protection coverage,
       (3) accident only coverage,
       (4) specified disease or specified accident coverage, or
       (5) limited benefit health coverage.
       (c) Inclusion of Policies Marketed as Long-term Care 
     Insurance.--In this subtitle, the term ``long-term care 
     insurance policy'' also includes any product which is 
     advertised, marketed, or offered as long-term care insurance.
       (d) Disclosure Requirements for Certain Disability Income 
     Policies and Life Insurance Policies.--
       (1) In general.--In this subtitle, the term ``long-term 
     care insurance policy'' includes--
       (A) a policy described in subsection (b)(2) under which the 
     eligibility or amount of benefits are based on an assessment 
     of functional ability (based on activities of daily living or 
     otherwise), or
       (B) a life insurance policy described in paragraph (3),

     if the disclosure requirements of paragraph (2) are not met.
       (2) Disclosure requirements.--The disclosure requirements 
     of this paragraph for a policy are that--
       (A) the policy discloses (in a form and manner specified in 
     the Standards) the fact that the policy is not a long-term 
     care insurance policy;
       (B) the policy outlines how the benefits in the policy 
     differ from the benefits required to be provided under the 
     Standards of a long-term care insurance policy; and
       (C) in the case of a life-insurance policy described in 
     subsection (c), at the time of policy delivery there is 
     provided to the purchaser and the beneficiary a policy 
     summary that includes--
       (i) an explanation of how the long-term care benefits 
     interact with other components of the policy (including 
     deductions from death benefits);
       (ii) a description of the amount and length of benefits and 
     the guaranteed lifetime benefits (if any) for each covered 
     individual; and
       (iii) any exclusions, reductions, and limitations on 
     benefits of long-term care.
       (3) Certain life insurance policies.--A life insurance 
     policy described in this paragraph is one--
       (A) which accelerates the death benefit specifically for--
       (i) one or more of the qualifying events of terminal 
     illness,
       (ii) medical conditions requiring extraordinary medical 
     intervention, or
       (iii) permanent institutional confinement;
       (B) which provides the option of a lump-sum payment for 
     those benefits; or
       (C) which provides benefits based on the use of nursing 
     facility care.

     SEC. 10112. OTHER TERMS.

       In this subtitle:
       (1) Agent.--The term ``agent'' means--
       (A) prior to 1 year after the date of the establishment of 
     the agent training and certification requirements of section 
     10106, an individual who sells or offers for sale a long-term 
     care insurance policy subject to the requirements of section 
     10101; and
       (B) after the date referred to in subparagraph (A), an 
     individual certified under a training and certification 
     program established under section 10106.
       (2) Approved regulatory program; approved regulatory 
     state.--(A) The term ``approved regulatory program'' means a 
     regulatory program in a State that the Secretary determines--
       (i) provides for the application and enforcement of the 
     standards established under section 10103, and
       (ii) complies with the requirements of subpart B of part 3.
       (B) Approved regulatory state.--The term ``approved 
     regulatory State'' means a State with an approved regulatory 
     program (as defined in subparagraph (A)).
       (3) Carrier.--The term ``carrier'' has the meaning given 
     such term in section 5504.
       (4) Standards.--The term ``Standards'' means all standards 
     established under section 10102 that apply in a State under 
     section 10101.
       (5) State commissioner of insurance.--The term ``State 
     commissioner of insurance'' includes the State superintendent 
     of insurance.

                           PART 2--STANDARDS

                      Subpart A--Policy Standards

     SEC. 10121. USE OF STANDARD DEFINITIONS AND TERMINOLOGY AND 
                   UNIFORM FORMAT.

       Each long-term care insurance policy shall, pursuant to the 
     Standards--
       (1) use uniform language and definitions for description of 
     benefits, coverage, providers of covered services, facilities 
     at which covered services are rendered, and eligibility for 
     benefits, including definitions of ``home and community care 
     services'', of ``nursing facility services'', and of 
     ``respite care'', and
       (2) use a uniform format and simple, easily understood 
     English for presenting the marketing material and outline of 
     coverage under such a policy.

     SEC. 10122. MINIMUM BENEFITS; LIMITING CONDITIONS ON 
                   BENEFITS.

       (a) Minimum Benefits.--
       (1) In general.--A long-term care insurance policy shall 
     provide benefits either--
       (A) for nursing facility services, but not for home and 
     community care services, and be labeled prominently as a 
     ``nursing home care'' policy;
       (B) for home and community care services, but not for 
     nursing facility services, and be labeled prominently as a 
     ``home and community care'' policy; or
       (C) for both nursing facility services and home and 
     community care services, and be labeled prominently as a 
     ``comprehensive long-term care'' policy.
       (2) Must offer all options or disclose lack of options.--A 
     carrier may not offer for sale to an individual a long-term 
     care insurance policy described in one of the subparagraphs 
     of paragraph (1) unless the carrier either (A) also offers 
     for sale to the individual a policy described in each of the 
     other 2 subparagraphs of that paragraph, or (B) discloses the 
     fact that the carrier does not offer policies described in 
     each of such subparagraphs.
       (b) Restrictions on Conditions.--A long-term care insurance 
     policy may not condition or limit eligibility--
       (1) for benefits for a type of services to the need for or 
     receipt of any other services, including prior 
     hospitalization;
       (2) for any benefit (where the need for such benefit has 
     been established by an independent assessment of impairment) 
     on any particular medical diagnosis (including any acute 
     condition) or on one of a group of diagnoses;
       (3) for benefits furnished by licensed or certified 
     providers on compliance with conditions which are in addition 
     to those required for licensure or certification under State 
     law;
       (4) for nursing facility services (if covered under the 
     policy) only--
       (A) to care provided in facilities which provide a 
     specified level of care; or
       (B) to care provided in facilities which provide for 24-
     hour or other nursing care not required in order to be 
     licensed by the State; or
       (5) for benefits on the continued payment of premiums 
     during periods when long-term care is being received and for 
     which claims under the policy are being filed.
       (c) Home and Community Care Services.--
       (1) Services included.--Home and community care services 
     under a long-term care insurance policy shall include--
       (A) home-based services (described in paragraph (2)) which 
     are provided in a place of residence used as the individual's 
     home (or, in the case of services described in subparagraphs 
     (C), (F), and (G) of that paragraph, which may be provided 
     outside the individual's residence), and
       (B) community-based services (described in paragraph (3)).
       (2) Home-based services.--The home-based services described 
     in this paragraph are as follows:
       (A) Nursing care provided by or under the supervision of a 
     registered professional nurse.
       (B) Services of a homemaker/home health aide who has 
     successfully completed a training and competency evaluation 
     program that meets minimum standards established by the 
     Secretary under section 1891(a)(3)(D) of the Social Security 
     Act.
       (C) Personal assistance services furnished by an individual 
     who has successfully completed a training and competency 
     evaluation program that meets minimum standards established 
     by the Secretary.
       (D) Medical social services.
       (E) Physical, occupational, or respiratory therapy or 
     speech-language pathology.
       (F) Medical supplies (other than drugs and biologicals), 
     assistive technologies, and equipment that assist in the 
     performance of activities of daily living.
       (G) Patient and caregiver (including family caregiver) 
     education and training to develop skills necessary to permit 
     the individual to remain in the home setting.
       (H) Such other home-based items and services as the 
     Secretary may approve.
       (3) Community-based services.--The community-based services 
     described in this paragraph are as follows:
       (A) Adult day care services provided by an adult day care 
     program that meets minimum standards (including the provision 
     of at least 1 meal a day and the provision of necessary 
     transportation) established by the Secretary.
       (B) In the case of individuals with chronic mental illness, 
     day treatment or other partial hospitalization services, 
     psychosocial rehabilitation services, and clinic services 
     (whether or not furnished in a facility), but only insofar as 
     such services are equivalent to services described in 
     subparagraph (A) and do not include individual therapy.
       (C) Such other community-based items and services as the 
     Secretary may approve.
       (4) Limitations on conditions.--If a long-term care 
     insurance policy provides benefits for home and community 
     care services, the policy--
       (A) may not limit such benefits to services provided by 
     registered nurses, licensed practical nurses, occupational, 
     physical, or speech therapists, or social workers;
       (B) may not require benefits for such services to be 
     provided by a nurse or therapist that can be provided by a 
     home health aide or licensed or certified home care worker 
     acting within the scope of the worker's licensure or 
     certification;
       (C) may not limit such benefits to services provided by 
     agencies or providers certified under title XVIII or XIX of 
     the Social Security Act;
       (D) may not limit or exclude benefits for such services (i) 
     by requiring that the policyholder would need nursing care in 
     a facility if home and community care services were not 
     provided, or (ii) by requiring that the policyholder have an 
     acute condition before home and community care services are 
     covered; and
       (E) must provide not less than 365 days of home-based 
     services and community-based services.
       (d) Nursing Facility Services.--
       (1) Types of services.--Nursing facility services under a 
     long-term care insurance policy shall include the following:
       (A) Nursing care provided by or under the supervision of a 
     registered professional nurse.
       (B) Bed and board in connection with the furnishing of such 
     nursing care.
       (C) Physical, occupational, or respiratory therapy, or 
     speech-language pathology, furnished by the facility or by 
     others under arrangements with them made by the facility.
       (D) Medical social services.
       (E) Such drugs, biologicals, supplies, appliances, and 
     equipment, furnished for use in the facility as are 
     ordinarily furnished by such facility for the care and 
     treatment of residents.
       (F) Medical services provided by an intern or resident-in-
     training of a hospital with which the facility has in effect 
     a transfer agreement (meeting the requirements of section 
     1861(l) of the Social Security Act), under a teaching program 
     of such hospital approved as provided in the last sentence of 
     section 1861(b) of such Act, and other diagnostic or 
     therapeutic services provided by a hospital with which the 
     facility has such an agreement in effect.
       (G) Such other services necessary to the health of the 
     residents as are generally provided by nursing facilities.
       (2) Minimum duration.--If a long-term care insurance policy 
     provides benefits for nursing facility services, the policy 
     shall provide--
       (A) such benefits with respect to all nursing facilities 
     (as defined in section 1919(a) of the Social Security Act, 
     and
       (B) not less than 365 days of such benefits with respect to 
     all such nursing facilities.

     SEC. 10123. PROHIBITION OF DISCRIMINATION.

       A long-term care insurance policy may not treat benefits 
     under the policy for an individual with Alzheimer's disease, 
     with any related progressive degenerative dementia of an 
     organic origin, with any mental disorder of a demonstrable 
     organic origin, or with HIV disease, differently from 
     benefits for an individual having another medical condition 
     for which benefits may be made available. For purposes of the 
     previous sentence, the term ``HIV disease'' means infection 
     with the human immunodeficiency virus, and includes any 
     condition arising from acquired immune deficiency syndrome.

     SEC. 10124. LIMITATION ON USE OF PREEXISTING CONDITION 
                   LIMITS.

       (a) Initial Issuance.--
       (1) In general.--Subject to paragraph (2), a long-term care 
     insurance policy may not exclude or condition benefits based 
     on a medical condition for which the policyholder received 
     treatment or was otherwise diagnosed before the date of 
     issuance of the policy.
       (2) 6-month limit.--A long-term care insurance policy may 
     exclude benefits under a policy, during its first 6 months, 
     based on a condition for which the policyholder received 
     treatment or was otherwise diagnosed during the 6 months 
     before the policy became effective.
       (3) Reference to medical documentation requirement.--For 
     provision requiring medical documentation for individuals 75 
     years or age or older at the time of policy issuance, see 
     section 10147.
       (b) Replacement Policies.--If a long-term care insurance 
     policy replaces another long-term care insurance policy, the 
     replacing policy shall waive any time periods (including 
     waiting periods, elimination periods, and probationary 
     periods) applicable to preexisting conditions in the new 
     policy for similar benefits to the extent such time was spent 
     under the original policy.

     SEC. 10125. USE OF FUNCTIONAL ASSESSMENT.

       (a) In General.--If a long-term care insurance policy 
     limits the eligibility for, or level of, benefits, the 
     policy--
       (1) shall specify that eligibility for, and the level of, 
     benefits available under the policy based on a functional 
     assessment (described in subsection (c)); and
       (2) shall specify the level (or levels) of physical, 
     cognitive, or mental impairment required under such an 
     assessment to obtain benefits under the policy.
       (b) Conduct of Assessment.--Such assessment may not be 
     conducted by an individual--
       (1) who has a direct or indirect ownership or control 
     interest in the carrier issuing the policy or an entity that 
     provides services for which benefits are available under the 
     long-term care insurance policy, or
       (2) who has a direct or indirect affiliation or 
     relationship with such a carrier or entity if there is a 
     financial incentive that is related to the results of the 
     assessment determination.
       (c) Uniform Assessment Instrument and Uniform Formulas.--
     Not later than July 1, 1995--
       (1) the functional assessment referred to in subsection (a) 
     must--
       (A) be based on a professional assessment of the 
     policyholder's physical, cognitive, and mental abilities, and
       (B) be conducted in accordance with a standard, 
     reproducible, uniform assessment instrument and methodology 
     designated by the Secretary; and
       (2) benefits shall be determined in accordance with an 
     eligibility formula specified in the Standards and based on 
     the assessment described in paragraph (1).
       (d) Appeals Process.--Each long-term care insurance policy 
     shall provide for an appeals process, meeting the Standards, 
     for individuals who dispute the results of an assessment 
     conducted under this section, including any determination of 
     eligibility, level of functional impairment, or level of 
     benefits.

     SEC. 10126. REQUIREMENTS FOR PREMIUMS.

       (a) Initial Issuance.--The premiums charged for the initial 
     issuance of a long-term care insurance policy shall be 
     established in accordance with a system that ensures that 
     premiums--
       (1) accurately reflect the true lifetime cost of the 
     policies (in order to minimize premium rate increases);
       (2) are fully supported by an actuarial memorandum; and
       (3) utilize lapse rates (in accordance with a table 
     specified in the standards).
       (b) Renewals.--Except as provided in subsection (c)--
       (1) In general.--The Standards shall provide limits on the 
     increases in premiums that are allowable at the time of 
     renewal. Such Standards shall be at least as stringent as the 
     limitations contained in the succeeding paragraphs of this 
     subsection.
       (2) Prohibition on increases in first 4 years.--No increase 
     in premiums shall be granted during the first 4 years of a 
     policy's duration.
       (3) Requirements for certain premium increases for 
     individuals under age 70.--In the case of a policyholder or 
     certificateholder of a long-term care insurance policy who is 
     under the age of 70, a proposed premium increase for renewal 
     of the policy that would result either--
       (A) in the premium exceeding twice the original premium 
     amount, or
       (B) in a premium increase, over any 4-year period, 
     exceeding 25 percent of the premium in effect at the 
     beginning of such period,

     shall not be granted.
       (4) Requirements for premium increases for individuals 
     between 70 and 80 years of age.--In the case of a 
     policyholder or certificateholder of a long-term care 
     insurance policy who is at least 70 years of age but under 
     the age of 80, no proposed premium increase for renewal of 
     the policy shall be granted if the proposed premium increase 
     would result in a premium increase, over any 5-year period, 
     exceeding 15 percent of the premium in effect at the 
     beginning of the period.
       (5) Prohibition on premium increases for individuals 80 
     years of age or older.--In the case of a policyholder or 
     certificate holder of a long-term care insurance policy who 
     is 80 years of age or older, the premiums for such policy may 
     not be increased.
       (c) Special Rules in Case of Inflation Protection.--In the 
     case of a policy that includes inflation protection benefits, 
     the requirements of subsection (b) shall not apply to any 
     proposed or expected premium increases if the increases are 
     consistent with the increases attributable to such inflation 
     protection as scheduled within the policy and were contained 
     in the outline of coverage required under section 
     10136(b)(9).

     SEC. 10127. INFLATION PROTECTION.

       (a) Requirement to Offer.--An insurer offering for sale any 
     long-term care insurance policy shall afford the purchaser 
     the option to obtain coverage under such policy of annual 
     increases in benefits (upon payment of increased premiums) at 
     rates in accordance with subsection (b).
       (b) Rate Increase in Benefits.--For purposes of subsection 
     (a), the benefits under a policy for each year shall be 
     increased by a percentage of the full value of benefits under 
     the policy for the previous year, which shall be not less 
     than 5 percent of such value (or such other rate of increase 
     as may be determined by the Secretary to be adequate to 
     offset increases in the costs of long-term care services for 
     which coverage is provided under the policy).
       (c) Requirement of Written Rejection.--Inflation protection 
     in accordance with subsection (b) may be excluded from the 
     coverage under a policy only if the insured individual (or, 
     if different, the person responsible for payment of premiums) 
     has rejected in writing the option to obtain such coverage.

     SEC. 10128. NONFORFEITURE.

       (a) In General.--Each long-term care insurance policy shall 
     provide that if the policy lapses after the policy has been 
     in effect for at least 3 years, the policy will provide 
     without payment of any additional premiums benefits equal to 
     a percentage (specified under the Standards) of the benefits 
     otherwise available at term.
       (b) Standards.--The Standards may provide that the 
     percentage under subsection (a) must increase based upon the 
     period of time in which the policy was in effect.

     SEC. 10129. DESIGNATION OF REPRESENTATIVES.

       (a) In General.--The carrier issuing a long-term care 
     insurance policy--
       (1) at the time of issuance of the policy shall require the 
     applicant or policyholder either--
       (A) to designate not more than 3 representatives whom the 
     carrier shall notify in the event that the policyholder fails 
     to pay premiums, or
       (B) to provide a written waiver (signed and dated by the 
     applicant or policyholder) of the right to make such 
     designation; and
       (2) shall permit the policyholder to make or alter such a 
     designation not less frequently than annually at the time of 
     renewal.
       (b) No Legal Obligation To Pay Premiums.--An individual 
     designated as a representative under subsection (a) is not 
     under any legal obligation to pay for premiums or to 
     otherwise act in the event of a notification under this 
     section.

     SEC. 10130. ISSUANCE, RENEWAL, AND CANCELLATION.

       (a) In General.--No long-term care insurance policy may be 
     canceled or nonrenewed for any reason other than nonpayment 
     of premium (subject to subsection (d) and any nonforfeiture 
     rights under section 10128) or fraud or material 
     misrepresentation (subject to section 10145(c)).
       (b) Continuation and Conversion Rights for Group 
     Policies.--
       (1) In general.--Each group long-term care insurance policy 
     shall provide covered individuals with a basis for 
     continuation or conversion in accordance with this 
     subsection.
       (2) Basis for continuation.--For purposes of paragraph (1), 
     a policy provides a basis for continuation of coverage if the 
     policy maintains coverage under the existing group policy 
     when such coverage would otherwise terminate and which is 
     subject only to the continued timely payment of premium when 
     due. A group policy which restricts provision of benefits and 
     services to or contains incentives to use certain providers 
     or facilities, may provide continuation benefits which are 
     substantially equivalent to the benefits of the existing 
     group policy.
       (3) Basis for conversion.--For purposes of paragraph (1), a 
     policy provides a basis for conversion of coverage if the 
     policy entitles each individual--
       (A) whose coverage under the group policy would otherwise 
     be terminated for any reason; and
       (B) who has been continuously insured under the policy (or 
     group policy which was replaced) for at least 6 months before 
     the date of the termination;
     to issuance of a policy providing benefits identical to, 
     substantially equivalent to, or in excess of, those of the 
     policy being terminated, without evidence of insurability.
       (4) Guidelines for determination of substantial 
     equivalence.--For the purpose of determining whether benefits 
     under such policies are substantially equivalent under 
     paragraphs (2) or (3), the Secretary shall establish 
     guidelines for comparing long-term care insurance policies.
       (5) Group replacement of policies.--If a group long-term 
     care insurance policy is replaced by another long-term care 
     insurance policy purchased by the same policyholder, the 
     succeeding carrier shall offer coverage to all persons 
     covered under the old group policy on its date of 
     termination. Coverage under the new group policy shall not 
     result in any exclusion for preexisting conditions that would 
     have been covered under the group policy being replaced.
       (6) Premiums for replacement or conversion.--In the case of 
     a converted policy or a replacement policy issued by the same 
     carrier that had issued a previous policy and issued to the 
     same group or its successor, or issued to any individual 
     covered by the previous group policy, the premium shall be 
     calculated on the basis of the insured's age at the inception 
     of coverage under the earliest previous policy which became 
     the basis for the converted or replaced policy in the case of 
     benefits which are the same as benefits that were provided 
     under any earlier policy.
       (c) Guaranteed Issuance.--
       (1) In general.--A carrier that sells or issues long-term 
     care insurance policies shall guarantee that such policies 
     shall be sold or issued to an individual if such individual 
     meets the minimum medical underwriting requirements of such 
     policy as established in compliance with an age rating 
     formula established by the Secretary.
       (2) Policy upgrades.--
       (A) Current policies.--Each long-term care insurance policy 
     in effect as of the effective date of the Standards 
     established under section 10102 shall permit the policyholder 
     to purchase a policy that meets all such standards and the 
     carrier shall directly inform each such policyholder of the 
     right to purchase an upgraded policy under this paragraph.
       (B) Future upgrades.--
       (i) In general.--If a carrier of a long-term care insurance 
     policy provides for the issuance of policies with benefits 
     that are greater than the benefits previously provided under 
     such policies, the policyholder of a long-term care insurance 
     policy previously issued by that carrier and still in force 
     has the right to purchase a policy that provides for such 
     upgraded benefits and the carrier shall directly inform each 
     such policyholder of the existence of such an upgraded policy 
     and the right to purchase an upgraded policy under this 
     paragraph.
       (ii) Limitation.--Clause (i) shall not apply to a 
     policyholder who is eligible (or was eligible at any time 
     within the previous 3 months) for benefits under the long-
     term care insurance policy.
       (C) Limitation on medical underwriting of upgraded policies 
     required under federal or state law.--With respect to a 
     policy that offers upgraded benefits in accordance with a new 
     Federal or State requirement, the carrier issuing the policy 
     may not impose additional medical underwriting criteria, 
     except that--
       (i) the carrier may utilize an age rate for such policy 
     based on the formula established by the Secretary under 
     subsection (c)(1), and
       (ii) the carrier may impose additional medical underwriting 
     criteria in relation to benefits to the extent they were not 
     included in the previously issued policy.
       (D) Limitation on medical underwriting on other upgraded 
     policies.--With respect to an upgraded long-term care 
     insurance policy that offers benefits that are greater than 
     the benefits required under Federal or State requirements, 
     the carrier issuing the policy--
       (i) except as provided in clause (ii), may not impose 
     additional medical underwriting criteria in relation to 
     benefits that are the same as the benefits under the 
     previously issued policy and the premiums charged with 
     respect to such benefits may not be greater than the premiums 
     charged with respect to such benefits under the previously 
     issued policy, but
       (ii) may impose additional medical underwriting criteria in 
     cases where the State insurance commissioner determines that 
     the absence of such underwriting would result in adverse 
     selection of insured risks.
       (E) Approval of higher premiums required.--In the case of a 
     carrier that intends to offer upgraded policies at premiums 
     that are higher than the premiums charged for their existing 
     policies, such carrier must have such higher premiums 
     approved through the process specified in section 10164.
       (F) Credit toward nonforfeiture benefit.--In the case that 
     a policy is replaced with an upgraded policy, the upgraded 
     policy shall provide for credit designed to assure retention 
     of a policyholder's equity, according to a formula 
     established by the Secretary, toward the nonforfeiture 
     benefit for periods of coverage under the previous long-term 
     care insurance policy issued by the same carrier.
       (d) Effect of Incapacitation.--
       (1) In general.--Except as provided in paragraph (2), a 
     long-term care insurance policy may not be canceled for 
     nonpayment if the policy holder is determined by a long-term 
     care provider, physician or other health care provider, 
     independent of the carrier issuing the policy, to be 
     cognitively, mentally, or physically incapacitated.
       (2) Permitted cancellation.--A long-term care insurance 
     policy may be canceled under paragraph (1) for nonpayment 
     if--
       (A) the period of such nonpayment is in excess of 30 days; 
     and
       (B) notice of intent to cancel (and right of reinstatement 
     under paragraph (3)) is received by all designated 
     representatives of the policyholder after the expiration of 
     the period specified in subparagraph (A) and not less than 30 
     days prior to such cancellation.
       (3) Reinstatement.--If a long-term care insurance policy is 
     canceled for nonpayment under this subsection, the policy may 
     be reinstated without any loss in the policyholder's equity 
     for purposes of a nonforfeiture benefit if the policyholder 
     pays all premiums owing within a period (specified in the 
     standards and of not less than 6 months) after the date of 
     the cancellation.

                       Subpart B--Sales Practices

     SEC. 10131. CERTIFICATION OF TRAINING OF SALES AGENTS.

       A person may not sell or offer for sale a long-term care 
     insurance policy unless the person has been certified under 
     the State regulatory program or by the Secretary as having 
     received training (in accordance with section 10106) with 
     respect to such policies in accordance with the Standards.

     SEC. 10132. DUTY OF GOOD FAITH AND FAIR DEALING.

       (a) In General.--Each person who is selling or offering for 
     sale a long-term care insurance policy has the duty of good 
     faith and fair dealing to the purchaser or potential 
     purchaser of such a policy.
       (b) Prohibited Practices.--A person is considered to have 
     violated subsection (a) if the person engages in any of the 
     following practices:
       (1) Twisting.--Knowingly making any misleading 
     representation or incomplete or fraudulent comparison of any 
     long-term care insurance policy or carrier for the purpose of 
     inducing, or tending to induce, any person to retain or 
     effect a change with respect to a long-term care insurance 
     policy.
       (2) High pressure tactics.--Employing any method of 
     marketing having the effect of, or intending to, induce the 
     purchase of long-term care insurance policy through undue 
     pressure.
       (3) Cold lead advertising.--Making use directly or 
     indirectly of any method of marketing which fails to disclose 
     in a conspicuous manner that a purpose of the method of 
     marketing is solicitation of insurance and that contact will 
     be made by an insurance agent or insurance company.
       (4) Others.--Engaging in such other practices determined 
     inappropriate under standards established by the Secretary.
       (c) Prohibition of Completion of Medical Histories.--A 
     person who is selling or offering for sale a long-term care 
     insurance policy may not complete the medical history portion 
     of an application for any other individual (other than a 
     relative of the person).

     SEC. 10133. FINANCIAL GUIDELINES.

       (a) Development.--The Secretary, by July 1, 1995, shall 
     develop recommended minimum financial guidelines (including 
     both income and asset criteria) that an individual should 
     meet before purchasing a long-term care insurance policy.
       (b) Construction.--Nothing in such guidelines shall permit 
     a person who is selling or offering for sale a long-term care 
     insurance policy to compel a potential purchaser of such a 
     policy (directly or indirectly) to provide financial 
     information as a condition of purchasing such a policy.

     SEC. 10134. PROHIBITION OF SALE OR ISSUANCE TO MEDICAID 
                   BENEFICIARIES.

       A person may not knowingly sell or issue a long-term care 
     insurance policy to an individual who is eligible for medical 
     assistance (other than only as a qualified medicare 
     beneficiary) under title XIX of the Social Security Act.

     SEC. 10135. PROHIBITION OF SALE OR ISSUANCE OF DUPLICATE 
                   POLICIES.

       A person may not sell or issue a long-term care insurance 
     policy--
       (1) knowing that the policy provides for coverage that 
     duplicates coverage already provided in another long-term 
     care insurance policy (unless the policy is intended to 
     replace such other policy), or
       (2) for the benefit of an individual unless the individual 
     (or a representative of the individual) provides a written 
     statement to the effect that the coverage under the new 
     policy--
       (A) does not duplicate other coverage in effect under a 
     long-term care insurance policy,
       (B) will replace another long-term care insurance policy, 
     or
       (C) is fully payable without regard to other long-term care 
     services which may be provided to the individual.

     SEC. 10136. PROVISION OF OUTLINE OF COVERAGE AND OTHER 
                   INFORMATION.

       (a) Outline of Coverage.--A person may not sell or offer 
     for a sale a long-term care insurance policy for the benefit 
     of an individual without providing to the purchaser or 
     potential purchaser (or representative), before such 
     purchase, with--
       (1) a copy of the guidelines developed under section 10133 
     and an explanation of such guidelines;
       (2) an outline of coverage that includes the information 
     required under subsection (b); and
       (3) information (specified under the Standards) 
     describing--
       (A) the right of individuals to turn down the policy in 30 
     days, and
       (B) the right of individuals to cancel a policy, and 
     receive a refund on premiums paid, within 30 days after the 
     date the policy is issued.
     In applying this subsection in the case of a group long-term 
     care insurance policy, the carrier issuing the policy is 
     responsible for the provision of the outline and information 
     to each certificate holder before the policy takes effect 
     with respect to that certificate holder.
       (b) Contents of Outline of Coverage.--The outline of 
     coverage for each long-term care insurance policy shall be in 
     a uniform format, utilizing simple, easily understood 
     English, as prescribed in guidelines issued by the Secretary. 
     Each outline shall include (in accordance with the Standards) 
     at least the following:
       (1) A description of the principal benefits and coverage 
     under the policy, how such benefits and coverage compare to 
     the range of potential benefits and coverage available under 
     such policies, and the eligibility criteria (if any) for such 
     benefits.
       (2) A statement of the principal exclusions, reductions, 
     and limitations contained in the policy.
       (3) A statement of the terms under which the policy (or 
     certificate in the case of a group policy) may be continued 
     in force or discontinued, the terms for continuation or 
     conversion, and any reservation in the policy of a right to 
     change premiums.
       (4) A statement that the outline of coverage is a summary 
     only, not a contract of insurance, and that the policy (or 
     master policy) contains the contractual provisions that 
     govern.
       (5) A description of the terms, specified in section 10140, 
     under which a policy may be returned and the premium 
     refunded.
       (6) Information developed by the Secretary on national 
     average nursing home lengths of stay and percentage of the 
     population that requires nursing facility or home care 
     services, broken down by age groups.
       (7) Information on average costs (and variation in such 
     costs) for nursing facility care (and such other care as the 
     Secretary may specify) in the United States, information on 
     the value of benefits relative to such costs, and a statement 
     that this national average varies by geographic region.
       (8) A comparison of benefits, over a period of at least 20 
     years, for policies with and without inflation protection.
       (9) A declaration as to whether the amount of benefits will 
     increase over time, and, if so, a statement of the type and 
     amount of, any limitations on, and any premium increases for, 
     such benefit increases.
     For purposes of carrying out paragraph (7), the Secretary 
     shall publish annually the national average costs of nursing 
     facility care, home health care services, and other long-term 
     care services as may be deemed appropriate by the Secretary.
       (c) Certificates.--A certificate issued pursuant to a group 
     long-term care insurance policy shall include--
       (1) a description of the principal benefits and coverage 
     provided in the policy;
       (2) a statement of the principal exclusions, reductions, 
     and limitations contained in the policy; and
       (3) a statement that the group master policy determines 
     governing contractual provisions.
       (d) Long-term Care as Part of Life Insurance.--In the case 
     of a long-term care insurance policy issued as a part of or a 
     rider on a life insurance policy, at the time of policy 
     delivery there shall be provided a policy summary that 
     includes--
       (1) an explanation of how the long-term care benefits 
     interact with other components of the policy (including 
     deductions from death benefits);
       (2) an illustration of the amount of benefits, the length 
     of benefit, and the guaranteed lifetime benefits (if any) for 
     each covered person;
       (3) principal exclusions, reductions, and limitations on 
     benefits of long-term care; and
       (4) a description of the tax consequences of redeeming the 
     life insurance policy to pay for long-term care.

     SEC. 10137. INFORMATION ON FINANCIAL ARRANGEMENTS WITH 
                   GROUPS.

       A person may not sell or offer for sale a long-term care 
     insurance policy with respect to a member of an organization 
     with which the person (or the carrier issuing the policy) has 
     a financial arrangement of any type unless the person 
     discloses (in accordance with the Standards) the nature of 
     the financial arrangement.

                      Subpart C--Carrier Standards

     SEC. 10141. REFUND OF PREMIUMS (FREE LOOK).

       If an application for a long-term care insurance policy (or 
     for a certificate under a group long-term care insurance 
     policy) is denied or an applicant returns a policy or 
     certificate within 30 days of the date of its issuance, the 
     carrier shall refund directly to the applicant, not later 
     than 30 days after the date of the denial or return, any 
     premiums paid with respect to such a policy.

     SEC. 10142. MAILING OF POLICY.

       If an application for a long-term care insurance policy (or 
     for a certificate under a group long-term care insurance 
     policy) is approved, the carrier shall transmit to the 
     applicant the policy of insurance not later than 30 days 
     after the date of the approval.

     SEC. 10143. PROMPT PAYMENT.

       A carrier issuing a long-term care insurance policy shall 
     make payment promptly to satisfy claims filed under such 
     policy.

     SEC. 10144. CLAIMS DENIALS.

       (a) Information on Denials of Claims.--If a claim under a 
     long-term care insurance policy is denied or results in less 
     than full payment, the carrier shall, within 30 days of the 
     date of the denial or partial payment--
       (1) provide to the person submitting the claim, and to the 
     persons (if any) designated under section 10129, a written 
     explanation of the reasons for the denial or partial payment;
       (2) make available to such person all information directly 
     relating to such denial or partial payment; and
       (3) inform the individual of the process established under 
     paragraph (3) for the appeal of the claim denial.
       (b) Limitation on Basis for Denial.--
       (1) Failure to disclose information.--No claim under such a 
     policy may be denied on the basis of a failure to disclose 
     information at the time of delivery (and issuance for 
     delivery) of the policy if the application for the policy 
     failed to request such information.
       (2) Timely resolution of insurability questions.--Before 
     issuing a long-term care insurance policy or certificate with 
     respect to coverage of an individual, the carrier shall 
     resolve all reasonable questions relating to the insurability 
     of the individual (including, if the carrier underwrites such 
     coverage, the completion of such underwriting).
       (3) Treatment of individuals 75 years of age or older.--In 
     the case of a policyholder who was 75 years of age or older 
     at the time of delivery (and issuance for delivery) of a 
     long-term care insurance policy, no claim under such a policy 
     may be denied on the basis of a failure to disclose 
     information at the time of delivery (and issuance for 
     delivery) of the policy if the policyholder truthfully 
     disclosed documentation obtained under section 10147.
       (c) Appeals Process.--A policyholder whose policy has been 
     rescinded, canceled, or nonrenewed, or whose claim has been 
     fully or partly denied, or whose claim has not been acted 
     upon with reasonable promptness shall have the right to a 
     review of such rescission, cancellation, nonrenewal, or 
     denial under a process specified in the Standards and shall 
     be granted an opportunity for a fair hearing by the carrier 
     in any case where the amount in controversy is at least $500. 
     The Standards may provide for an appeal to the State 
     commissioner of insurance in an appropriate State.

     SEC. 10145. LIMITATION ON RESCISSION, CANCELLATION, OR 
                   NONRENEWAL OR DENIAL OF CLAIMS.

       (a) In General.--A carrier may rescind, cancel, or nonrenew 
     a long-term care insurance policy or certificate, or deny an 
     otherwise valid claim under such policy, only in accordance 
     with this section.
       (b) Nonpayment of Premiums.--A carrier may rescind, cancel, 
     or nonrenew a long-term care insurance policy or certificate 
     for nonpayment of premiums, except as provided in section 
     10130(d).
       (c) Fraud or Misrepresentation Relating to Insurability.--A 
     carrier may rescind, cancel, or nonrenew a long-term care 
     insurance policy or certificate, or deny an otherwise valid 
     claim under such policy based upon fraud or misrepresentation 
     of facts relating to the insurability of the individual, 
     only--
       (1) based upon clear and convincing evidence--
       (A) of fraud or misrepresentation of information material 
     to the acceptance for coverage, and
       (B) involve a chronic condition or dates of treatment 
     before the date of the policy application; and
       (2) if the carrier notifies the policyholder of the 
     carrier's intention to rescind, terminate, or nonrenew the 
     policy or deny the claim not later than--
       (A) 60 days after the date the carrier discovers the fraud 
     or misrepresentation, or
       (B) 6 months (or 2 years in the case of clear and 
     convincing evidence that the fraud or misrepresentation 
     pertains to the condition for which benefits are sought) 
     after the date of issuance of the policy,
     whichever is earlier.
       (d) Fraud or Misrepresentation Relating to a Group 
     Policy.--In the case of a policyholder or certificate holder 
     who is insured as part of a group, within 2 years after the 
     date of issuance of the policy or certificate, a carrier may 
     rescind, cancel, or nonrenew the policy or certificate, or 
     deny an otherwise valid claim under such policy, based upon 
     fraud or misrepresentation of facts relating to that 
     individual's status as a member of the group or other 
     relationship to that group at the time of initial coverage of 
     that individual under the policy or certificate.

     SEC. 10146. REPORTING OF INFORMATION; ACCESS TO INFORMATION.

       (a) Reporting of Information.--Each carrier issuing a long-
     term care insurance policy shall periodically (not less often 
     than annually) report to the State commissioner of insurance 
     of each State in which the policy is sold, and shall make 
     available to the Secretary, upon request, information 
     respecting the following:
       (1) The long-term care insurance policies of the carrier 
     that are in force.
       (2) Utilization of benefits and payment of claims under the 
     policy.
       (3) The ages of individuals purchasing the policy.
       (4) Advertising and other marketing material utilized in 
     connection with the sale of such policies, including a copy 
     of each such item.
       (5) Total premiums written and premiums earned in the 
     previous year.
       (6) The most recent premiums for such policies and the 
     premiums imposed for such policies during the previous 5-year 
     period.
       (7) The lapse rates, replacement rates, and rescission 
     rates for policies (by agent). For purposes of this 
     paragraph, there shall not be included as a lapse of policy 
     such a lapse due to the death of the policyholder.
       (8) The claims denied (as a percentage of claims submitted) 
     for such policies. For purposes of this paragraph, there 
     shall not be included as a denied claim such a claim that is 
     denied solely because of the failure to meet a deductible, 
     waiting period, or exclusionary period.
       (9) Complaints received with respect to such policies, and 
     the resolution of such complaints.
       (10) The rate of appeal of denied claims (as a percentage 
     of claims denied) for such policies.
       (11) The rate of reversal of denied claims on appeal (as a 
     percentage of claim denials appealed) for such policies.
       (12) Such other information as is specified in the 
     Standards.
     Information under this subsection shall be reported in a 
     format specified in the Standards.
       (b) Access to Information.--Each such carrier shall make 
     available to the Secretary and the State commissioner of 
     insurance of each State in which the policy is sold such 
     additional information as the Secretary or Commissioner, may 
     request.
       (c) Availability of Information.--The State commissioner of 
     insurance of each State shall make information under this 
     section available, upon request, to the NAIC and, to the 
     extent consistent with other laws, to other interested 
     parties.

     SEC. 10147. MEDICAL DOCUMENTATION FOR THE ELDERLY.

       Each carrier issuing a long-term care insurance policy 
     shall, with respect to an applicant who is 75 years of age or 
     older, obtain one of the following before issuing the policy:
       (1) A report of a contemporaneous physical examination.
       (2) A contemporaneous assessment of functional capacity.
       (3) Copies of contemporaneous medical records.
     The carrier shall maintain the information obtained in its 
     files.

     SEC. 10148. LIMITS ON COMPENSATION FOR SALE OF POLICIES.

       (a) In General.--A carrier issuing a long-term care 
     insurance policy may not provide a commission or other 
     compensation to an agent or other representative for the sale 
     of such a policy in an amount that exceeds a percentage of 
     the commission or other compensation paid for selling or 
     servicing such a policy in the second or subsequent year 
     specified in the Standards.
       (b) Compensation Defined.--In subsection (a), the term 
     ``compensation'' includes pecuniary or nonpecuniary 
     remuneration of any kind relating to the sale or renewal of 
     the policy or certification, including deferred compensation, 
     bonuses, gifts, prizes, awards, and finders fees.

                    PART 3--ENFORCEMENT OF STANDARDS

                     Subpart A--General Provisions

     SEC. 10151. SECRETARIAL ENFORCEMENT AUTHORITY.

       (a) In General.--The Secretary shall exercise authority 
     under this section--
       (1) in the case of a State which does not an approved 
     regulatory program;
       (2) in the case of a State which has an approved regulatory 
     State, to the extent specified by the Secretary (under a 
     look-behind program), to determine whether or not individual 
     long-term health care policies in the State have failed to 
     comply with the applicable Standards required under part 2 
     and whether persons or entities are otherwise in compliance 
     with the requirements of such part;
       (3) in imposing sanctions under this subpart against any 
     person who sells, offers for sale, or issues a long-term care 
     insurance policy in violation of the Standards required under 
     subpart B of part 2; and
       (4) in imposing sanctions under this subpart against a 
     carrier that violates the Standards required under subpart C 
     of part 2.
       (b) Plan Disapproved under Look-behind Authority.--If the 
     Secretary determines under this subpart that a long-term care 
     insurance policy does not meet the applicable requirements of 
     part 2 on or after the date specified in section 10103, 
     regardless of whether or not the State has taken any action 
     with respect to such noncompliance, no new policies may be 
     offered under the plan on or after the date of the 
     determination.
       (c) Loss of Status as a Long-term Care Plan.--If an 
     association or its subsidiary or a carrier is determined 
     under this section not to be in compliance with applicable 
     Standards under part 2 and is not determined to have come 
     into compliance with such applicable Standards at the end of 
     the 6-month period beginning on the date of the initial 
     determination of such noncompliance, any long-term care 
     insurance policy issued, sold, or offered for sale by such 
     association or its subsidiary or carrier shall be considered 
     to be issued, sold, or offered for sale in violation of 
     section 10101(a).

     SEC. 10152. COMPLAINTS AND INVESTIGATIONS.

       (a) In General.--The Secretary shall establish procedures--
       (1) for individuals and entities to file written, signed 
     complaints respecting alleged violations of the Standards 
     required under part 2,
       (2) for responding on a timely basis to such complaints, 
     and
       (3) for the investigation of--
       (A) those complaints which, on their face, have a 
     substantial probability of validity, and
       (B) such other alleged violations of the requirements of 
     part 2 as the Secretary determines to be appropriate.
       (b) Conduct of Investigations.--In conducting 
     investigations under this section, agents of the Secretary 
     shall have reasonable access to examine evidence of any 
     person or entity being investigated.
       (c) Treatment of Carrier Violations.--For purposes of this 
     subpart, a carrier whose policy was sold, offered for sale, 
     or issued by an agent in violation of the Standards under 
     subpart B of part 2 and who had any reason to know of such 
     violation but did not act immediately to correct such 
     violation in good faith, shall be deemed to have violated the 
     Standards of such subpart.

     SEC. 10153. HEARINGS.

       (a) In General.--Before imposing an order described in 
     section 10154 against a person or entity under this section 
     for a violation of the Standards under part 2, the Secretary 
     shall provide the person or entity with notice and, upon 
     request made within a reasonable time (of not less than 30 
     days, as established by the Secretary) of the date of the 
     notice, a hearing respecting the violation. If no hearing is 
     so requested, the Secretary shall impose a final and 
     unappealable order.
       (b) Conduct of Hearing.--Any hearing so requested shall be 
     conducted before an administrative law judge under section 
     201 of the Social Security Act. If no hearing is so 
     requested, the Secretary's imposition of the order shall 
     constitute a final and unappealable order.
       (c) Authority in Hearings.--
       (1) In general.--In conducting hearings under this 
     section--
       (A) agents of the Secretary and administrative law judges 
     shall have reasonable access to examine evidence of any 
     person or entity being investigated, and
       (B) administrative law judges, may, if necessary, compel by 
     subpoena the attendance of witnesses and the production of 
     evidence at any designated place or hearing.
       (2) Enforcement of subpoenas.--In case of contumacy or 
     refusal to obey a subpoena lawfully issued under this 
     subsection and upon application of the Secretary, an 
     appropriate district court of the United States may issue an 
     order requiring compliance with such subpoena and any failure 
     to obey such order may be punished by such court as a 
     contempt thereof.
       (d) Issuance of orders.--If the administrative law judge 
     determines, upon the preponderance of the evidence received, 
     that a person or entity named in the complaint has violated 
     the Standards required under part 2, the administrative law 
     judge shall state the findings of fact and issue and cause to 
     be served on such person or entity an order described in 
     section 10154. Any order issued under such section shall be 
     provided to the agent, association or its subsidiary, or 
     carrier and include the findings and the basis of the order.

     SEC. 10154. CEASE AND DESIST ORDER WITH CIVIL MONEY PENALTY.

       (a) Cease and Desist Order.--
       (1) In general.--Subject to the succeeding provisions of 
     this section, the order under this section--
       (A) shall require the person or entity--
       (i) to cease and desist from such violations, and
       (ii) to pay a civil penalty in an amount not to exceed 
     $25,000 (or $15,000 in the case of a violation by an agent) 
     for each such violation; and
       (B) may require the person or entity to take such other 
     remedial action as is appropriate.
       (2) Amount of civil penalty.--The amount of a civil penalty 
     under paragraph (1)(A)(ii) may take into account the 
     penalties imposed by a State with respect to the same such 
     violation.
       (3) Procedures for civil penalty.--The provisions of 
     section 1128A (other than the first sentence of subsection 
     (a) and other than subsection (b)) shall apply to a civil 
     money penalty under this subsection in the same manner as 
     such provisions apply to a penalty or proceeding under 
     section 1128A(a).
       (b) Criminal Penalty for Multiple Agent Violations.-- In 
     the case of an agent who has committed multiple violations of 
     the Standards required under subpart B of part 2, such agent 
     also may be imprisoned not more than 5 years, or fined in 
     accordance with title 18, United States Code, or both.
       (c) Corrections within 30 Days.--No order shall be imposed 
     under this section by reason of any violation if the person 
     or entity establishes to the satisfaction of the Secretary by 
     clear and convincing evidence that--
       (1) such violation was due to reasonable cause and was not 
     intentional and was not due to willful neglect, and
       (2) such violation is corrected within the 30-day period 
     beginning on the earliest date the person or entity knew, or 
     exercising reasonable diligence could have known, that such a 
     violation was occurring.
       (d) Waiver by Secretary.--In the case of a violation which 
     is due to reasonable cause and not to willful neglect, the 
     Secretary may waive part or all of the civil money penalty 
     imposed by subsection (a)(1)(A)(ii) to the extent that 
     payment of such penalty would be grossly excessive relative 
     to the violation involved and to the need for deterrence of 
     violations.
       (e) Review by the Secretary.--The decision and order of an 
     administrative law judge under this section shall become the 
     final agency decision and order of the Secretary unless, 
     within 30 days, the Secretary modifies or vacates the 
     decision and order, in which case the decision and order of 
     the Secretary shall become a final order under this section.
       (f) Judicial Review.--A person or entity adversely affected 
     by a final order issued under this section may, within 45 
     days after the date the final order is issued, file a 
     petition in the Court of Appeals for the appropriate circuit 
     for review of the order.
       (g) Enforcement of Orders.--If a person or entity fails to 
     comply with a final order issued under this section against 
     the person or entity after opportunity for judicial review 
     under subsection (f), the Secretary shall file a suit to seek 
     compliance with the order in any appropriate district court 
     of the United States. In any such suit, the validity and 
     appropriateness of the final order shall not be subject to 
     review.

     Subpart B--Standards for Approval of State Regulatory Programs

     SEC. 10161. GENERAL REQUIREMENT.

       (a) In General.--The Secretary may not approve a State 
     regulatory program for purposes of this subtitle, unless the 
     Secretary determines that the program--
       (1) provides for the application and enforcement of the 
     Standards; and
       (2) complies with the requirements of--
       (A) section 10162 (relating to enforcement),
       (B) section 10163 (relating to publication and public 
     access to compliance information),
       (C) section 10164 (relating to a process for the approval 
     of premiums), and
       (D) section 10165 (relating to annual reports).
       (b) Periodic Review of State Regulatory Programs.--The 
     Secretary periodically shall review State regulatory programs 
     to determine if they continue to meet the requirements for 
     approval under subsection (a). If the Secretary determines 
     that a State regulatory program no longer meets such 
     standards and requirements or is no longer in compliance, 
     before making a final determination that a State regulatory 
     program no longer meets such requirements, the Secretary 
     shall provide the State a hearing and an opportunity of 6 
     months (or, in the case in which State legislation is 
     required in order for the State to be in compliance with such 
     standards and requirements, such longer period as is 
     necessary to enact such legislation) to adopt such a plan of 
     correction as would permit the program to continue to meet 
     such standards and requirements. If the Secretary makes a 
     final determination that the State regulatory program, after 
     such a hearing and opportunity, fails to meet such 
     requirements, the Secretary shall assume responsibility under 
     section 10101(b) with respect to certifying long-term care 
     insurance policies in the State and shall exercise full 
     authority under subpart A for persons and entities in the 
     State.

     SEC. 10162. ENFORCEMENT.

       (a) In General.--The enforcement process under each State 
     regulatory program--
       (1) shall be designed in a manner so as to secure 
     compliance with the Standards within 30 days after the date 
     of a finding of noncompliance with such Standards, and
       (2) shall provide for notice to the Secretary in cases 
     where such compliance is not secured within such 30-day 
     period.
       (b) Process.--The enforcement process under each State 
     regulatory program shall provide for--
       (1) procedures for individuals and entities to file 
     written, signed complaints respecting alleged violations of 
     the Standards;
       (2) responding on a timely basis to such complaints;
       (3) the investigation of--
       (A) those complaints which, on their face, have a 
     substantial probability of validity, and
       (B) such other alleged violations of the Standards as the 
     program finds appropriate;
       (4) notice and opportunity for a hearing before executing 
     sanctions;
       (5) the imposition of appropriate sanctions (which include, 
     in appropriate cases, the imposition of a civil money 
     penalty) in the case of a person or entity determined to have 
     violated the Standards; and
       (6) an annual report to the Secretary on details concerning 
     complaints filed under the process, including the disposition 
     of, and actions resulting from, such complaints.

     SEC. 10163. PUBLICATION AND PUBLIC ACCESS TO COMPLIANCE 
                   INFORMATION.

       (a) Publication of Information.--Each State regulatory 
     program shall publish annually a summary--
       (1) by carrier, of (A) the types of long-term health care 
     policies issued and (B) the types of complaints filed 
     concerning such policies, and
       (2) of the information reported by policy under section 
     10146.
       (b) Access to Information on Complaints.--
       (1) In general.--Each State regulatory program shall 
     provide for consumer access to complaints filed with the 
     State commissioner of insurance with respect to long-term 
     care insurance policies. Any such disclosure of complaint 
     information shall be accompanied by a general disclaimer 
     stating that no representations are being made as to the 
     merits of such a complaint.
       (2) Confidentiality.--The access provided under paragraph 
     (1) shall be limited to the extent required to protect the 
     confidentiality of the identity of individual policyholders.

     SEC. 10164. PROCESS FOR APPROVAL OF PREMIUMS.

       (a) In General.--Each State regulatory program shall--
       (1) provide for a process for approving or disapproving 
     proposed premium increases with respect to long-term care 
     insurance policies, and
       (2) establish a policy for receipt and consideration of 
     public comments before approving such a premium increase.
       (b) Conditions for Approval.--No such premium increase 
     shall be approved (or deemed approved) unless the proposed 
     increase is accompanied by an actuarial memorandum which--
       (1) includes a description of the assumptions which justify 
     the increase,
       (2) fully supports the increase,
       (3) contains such information as may be required under the 
     Standards, and
       (4) is made available to the public.
       (c) Secretarial Authority.--In the case of a State without 
     an approved regulatory program, the Secretary shall provide 
     for the activities described in subsections (a) and (b).

     SEC. 10165. ANNUAL REPORTS.

       Each State regulatory program shall provide for annual 
     reports to the Secretary on the implementation and 
     enforcement of the Standards in the State.

     SEC. 10166. INCREASE IN FUNDING FOR LONG-TERM CARE INSURANCE, 
                   INFORMATION, COUNSELING, AND ASSISTANCE THROUGH 
                   STATE REGULATORY PROGRAMS.

       In addition to amounts otherwise authorized to be 
     appropriated, there are authorized to be appropriated, under 
     section 4360(f) of the Omnibus Budget Reconciliation Act of 
     1990, $10,000,000 for fiscal year 1997 and each subsequent 
     fiscal year, to fund grant programs under such section for 
     the purpose of providing information, counseling, and 
     assistance relating to long-term care benefits under this 
     subtitle and the procurement of adequate and appropriate 
     long-term care insurance.

                    PART 4--MISCELLANEOUS PROVISIONS

     SEC. 10171. REPORTS AND STUDIES.

       (a) Report on Solvency Protection.--Not later than 2 years 
     after the date of the enactment of this title, the Secretary 
     shall prepare and submit to the appropriate committees of 
     Congress a report on standards that may be applied under this 
     subtitle to assure the solvency of carriers with respect to 
     long-term care insurance policies.
       (b) Study of Standard Measure of Value for Long-Term Care 
     Insurance Policies.--The Secretary shall provide for the 
     conduct of a study to develop a standard measure of value for 
     long-term care insurance policies. Not later than 2 years 
     after the date of the enactment of this Act, the Secretary 
     shall prepare and submit to the appropriate committees of 
     Congress a report concerning such study.
       (c) Study of Long-Term Care Insurance Riders.--The 
     Secretary shall review the applicability of the Standards to 
     long-term care insurance riders. Not later than 2 years after 
     the date of the enactment of this Act, the Secretary shall 
     prepare and submit to the appropriate committees of Congress 
     a report concerning such study.
       (d) Study of Coordination with Public Programs.--The 
     Secretary shall review the coordination of coverage under 
     long-term care insurance policies with benefits for long-term 
     care services under the medicare program, medicare part C, 
     the medicaid program, the long-term care program for home and 
     community-based services under subtitle A, and other public 
     programs. Not later than 2 years after the date of the 
     enactment of this Act, the Secretary shall prepare and submit 
     to the appropriate committees of Congress a report concerning 
     such study. The Secretary shall include in the report such 
     recommendations concerning rules for such coordination as the 
     Secretary deems appropriate.

     SEC. 10172. WAIVER OF PAPERWORK REQUIREMENTS.

       Chapter 35 of title 44, United States Code, and Executive 
     Order 12291 shall not apply to information and regulations 
     required for purposes of carrying out this subtitle.
       Subtitle C--Worker Redeployment in Long-Term Care Programs

     SEC. 10201. REQUIREMENT REGARDING REDEPLOYMENT OF HEALTH CARE 
                   WORKERS UNDER LONG-TERM CARE PROGRAM.

       With respect to the plan required in section 10004(c) (for 
     the long-term care program for home and community-based 
     services under subtitle A), the plan shall, in addition to 
     requirements under such subtitle, provide for the following:
       (1) Prior to implementing the program under such plan, 
     negotiations will be commenced with labor organizations 
     representing the employees of the affected hospitals or other 
     facilities providing such services.
       (2) Negotiations under paragraph (1) will address the 
     following:
       (A) The impact of the implementation of the program upon 
     the workforce.
       (B) Methods to redeploy workers to positions in the 
     proposed program or other public or private settings, in the 
     case of workers affected by the program.
       (3) The plan will provide evidence that there has been 
     compliance with paragraphs (1) and (2).
                      TITLE XI--REVENUE PROVISIONS

                       table of contents of title

Sec. 11001. Amendment of 1986 Code.

        Subtitle A--Increase in Excise Taxes on Tobacco Products

Sec. 11101. Increase in excise taxes on tobacco products.
Sec. 11102. Modifications of certain tobacco tax provisions.
Sec. 11103. Imposition of excise tax on manufacture or importation of 
              roll-your-own tobacco.

         Subtitle B--Treatment of Employer-Provided Health Care

Sec. 11201. Health benefits may not be provided under cafeteria plans 
              or flexible spending arrangements other than medical 
              savings accounts.
Sec. 11202. Deduction for health insurance costs of self-employed 
              individuals increased and made permanent.
Sec. 11203. Limitation on prepayment of medical insurance premiums.

Subtitle C--Extending Medicare Coverage of, and Application of Hospital 
      Insurance Tax to, All State and Local Government Employees.

Sec. 11301. Extending medicare coverage of, and application of hospital 
              insurance tax to, all State and local government 
              employees.

 Subtitle D--Treatment of Organizations Providing Health Care Services 
                       and Related Organizations

Sec. 11401. Qualification and disclosure requirements for certain 
              nonprofit health care organizations.
Sec. 11402. Excise taxes for failure by tax-exempt health care 
              organizations to meet certain qualification requirements.
Sec. 11403. Treatment of nonprofit health care organizations.
Sec. 11404. Tax treatment of taxable organizations providing health 
              insurance and other prepaid health care services.
Sec. 11405. Organizations subject to section 833.
Sec. 11406. Tax exemption for high-risk insurance pools.

    Subtitle E--Treatment of Accelerated Death Benefits Under Life 
                          Insurance Contracts

Sec. 11501. Tax treatment of accelerated death benefits under life 
              insurance contracts.
Sec. 11502. Tax treatment of companies issuing qualified accelerated 
              death benefit riders.

                Subtitle F--Employment Status Provisions

Sec. 11601. Employment status proposal required from Department of the 
              Treasury.
Sec. 11602. Increase in penalties relating to reporting of payments for 
              services.

    Subtitle G--Tax Treatment of Funding of Retiree Health Benefits

Sec. 11701. Post-retirement medical and life insurance reserves.

   Subtitle H--Excise Taxes on Insured and Self-Insured Health Plans

Sec. 11801. Excise taxes on insured and self-insured health plans.

                      Subtitle I--Other Provisions

          Part 1--Tax Incentives for Health Services Providers

Sec. 11901. Nonrefundable credit for certain primary health services 
              providers.
Sec. 11902. Expensing of medical equipment.

                Part 2--Health Care Workforce Trust Fund

Sec. 11911. Health Care Workforce Trust Fund.

  Part 3--Recapture of Certain Health Care Subsidies Received by High-
                           Income Individuals

Sec. 11921. Recapture of certain health care subsidies received by 
              high-income individuals.

     SEC. 11001. AMENDMENT OF 1986 CODE.

       Except as otherwise expressly provided, whenever in this 
     title an amendment or repeal is expressed in terms of an 
     amendment to, or repeal of, a section or other provision, the 
     reference shall be considered to be made to a section or 
     other provision of the Internal Revenue Code of 1986.
        Subtitle A--Increase In Excise Taxes On Tobacco Products

     SEC. 11101. INCREASE IN EXCISE TAXES ON TOBACCO PRODUCTS.

       (a) Cigarettes.--Subsection (b) of section 5701 is amended 
     by striking paragraph (1) and all that follows and inserting 
     the following:
       ``(1) Small cigarettes.--On cigarettes, weighing not more 
     than 3 pounds per thousand, the amount per thousand 
     determined under the following table:


                                                                        
                                                            The tax per 
          ``In the case of cigarettes removed--            thousand is--
                                                                        
  After July 31, 1995, and before January 1, 1997.......      $19.50   
  During 1997...........................................      $24.50   
  During 1998...........................................      $29.50   
  After December 31, 1998...............................      $34.50.   
                                                                        

       ``(2) Large cigarettes.--On cigarettes, weighing more than 
     3 pounds per thousand, removed at any time, an amount per 
     thousand equal to 2.1 times the tax per thousand imposed by 
     paragraph (1) on cigarettes removed at such time; except 
     that, if more than 6\1/2\ inches in length, they shall be 
     taxable at the rate prescribed for cigarettes weighing not 
     more than 3 pounds per thousand, counting each 2\3/4\ inches, 
     or fraction thereof, of the length of each as one 
     cigarette.''
       (b) Cigars.--Paragraphs (1) and (2) of section 5701(a) are 
     amended to read as follows:
       ``(1) Small cigars.--On cigars, weighing not more than 3 
     pounds per thousand, the amount per thousand determined under 
     the following table:


                                                                        
                                                            The tax per 
            ``In the case of cigars removed--              thousand is--
                                                                        
  After July 31, 1995, and before January 1, 1997.......       $1.83    
  During 1997...........................................       $2.30    
  During 1998...........................................       $2.77    
  After December 31, 1998...............................      $3.23.    
                                                                        

       ``(2) Large cigars.--On cigars, weighing more than 3 pounds 
     per thousand, the applicable percentage (determined under the 
     following table) of the price for which sold but not more 
     than the applicable limitation (determined under such table) 
     per thousand:


                                                                        
                                          The applicable                
     In the case of cigars removed--      percentage is-- The limitation
                                                               is--     
                                                                        
After July 31, 1995 and before January                                  
 1, 1997................................    21 percent       $48.75   
During 1997.............................    26 percent       $61.26   
During 1998.............................    31 percent       $73.74   
After December 31, 1998.................    37 percent       $86.25.''  
                                                                        

       (c) Cigarette Papers.--Subsection (c) of section 5701 is 
     amended--
       (1) by striking ``0.75 cent (0.625 cent on cigarette papers 
     removed during 1991 or 1992)'' and inserting ``the amount 
     determined in accordance with the following table'', and
       (2) by adding at the end the following:


                                                                        
                                                            The tax for 
       ``In the case of cigarette papers removed--        each 50 papers
                                                               is--     
                                                                        
  After July 31, 1995 and before January 1, 1997........   1.22 cents 
  During 1997...........................................   1.53 cents 
  During 1998...........................................   1.84 cents 
  After December 31, 1998...............................   2.16 cents.''
                                                                        

       (d) Cigarette Tubes.--Subsection (d) of section 5701 is 
     amended--
       (1) by striking ``1.5 cents (1.25 cents on cigarette tubes 
     removed during 1991 or 1992)'' and inserting ``the amount 
     determined in accordance with the following table'', and
       (2) by adding at the end the following:


                                                                        
                                                            The tax for 
       ``In the case of cigarette tubes removed--          each 50 tubes
                                                               is--     
                                                                        
  After July 31, 1995 and before January 1, 1997........   2.44 cents 
  During 1997...........................................   3.06 cents 
  During 1998...........................................   3.69 cents 
  After December 31, 1998...............................   4.31 cents.''
                                                                        

       (e) Snuff.--Paragraph (1) of section 5701(e) is amended--
       (1) by striking ``36 cents (30 cents on snuff removed 
     during 1991 or 1992)'' and inserting ``the amount determined 
     in accordance with the following table'', and
       (2) by adding at the end the following:


                                                                        
                                                            The tax per 
            ``In the case of snuff removed--                pound is--  
                                                                        
  After July 31, 1995 and before January 1, 1997........    58.5 cents  
  During 1997...........................................    73.5 cents  
  During 1998...........................................    88.5 cents  
  After December 31, 1998...............................   $1.03\1/2\.''
                                                                        

       (f) Chewing Tobacco.--Paragraph (2) of section 5701(e) is 
     amended--
       (1) by striking ``12 cents (10 cents on chewing tobacco 
     removed during 1991 or 1992)'' and inserting ``the amount 
     determined in accordance with the following table'', and
       (2) by adding at the end the following:


                                                                        
                                                            The tax per 
       ``In the case of chewing tobacco removed--           pound is--  
                                                                        
  After July 31, 1995 and before January 1, 1997........    19.5 cents
  During 1997...........................................    24.5 cents
  During 1998...........................................    29.5 cents
  After December 31, 1998...............................   34.5 cents.''
                                                                        

       (g) Pipe Tobacco.--Subsection (f) of section 5701 is 
     amended--
       (1) by striking ``67.5 cents (56.25 cents on pipe tobacco 
     removed during 1991 or 1992)'' and inserting ``the amount 
     determined in accordance with the following table'', and
       (2) by adding at the end the following:


                                                                        
                                                            The tax per 
         ``In the case of pipe tobacco removed--            pound is--  
                                                                        
  After July 31, 1995 and before January 1, 1997........      $1.10   
  During 1997...........................................      $1.38   
  During 1998...........................................      $1.66   
  After December 31, 1998...............................     $1.94.''   
                                                                        

       (h) Application of Tax Increase to Puerto Rico.--Section 
     5701 is amended by adding at the end the following new 
     subsection:
       ``(h) Application of Taxes to Puerto Rico.--Notwithstanding 
     subsections (b) and (c) of section 7653 and any other 
     provision of law--
       ``(1) In general.--On tobacco products and cigarette papers 
     and tubes, manufactured in or imported into the Commonwealth 
     of Puerto Rico, there is hereby imposed a tax at the rate 
     equal to the excess of--
       ``(A) the rate of tax applicable under this section to like 
     articles manufactured in the United States, over
       ``(B) the rate referred to in subparagraph (A) as in effect 
     on the day before the date of the enactment of the Guaranteed 
     Health Insurance Act of 1994.
       ``(2) Shipments to puerto rico from the united states.--
     Only the rates of tax in effect on the day before the date of 
     the enactment of the Guaranteed Health Insurance Act of 1994 
     shall be taken into account in determining the amount of any 
     exemption from, or credit or drawback of, any tax imposed by 
     this section on any article shipped to the Commonwealth of 
     Puerto Rico from the United States.
       ``(3) Shipments from puerto rico to the united states.--The 
     rates of tax taken into account under section 7652(a) with 
     respect to tobacco products and cigarette papers and tubes 
     coming into the United States from the Commonwealth of Puerto 
     Rico shall be the rates of tax in effect on the day before 
     the date of the enactment of the Guaranteed Health Insurance 
     Act of 1994.
       ``(4) Regulations.--To the extent provided in regulations 
     prescribed by the Secretary, references in this chapter 
     (other than this section) to the United States shall be 
     treating as including references to the Commonwealth of 
     Puerto Rico to the extent appropriate to carry out the 
     purposes of this subsection.
       ``(5) Disposition of revenues.--The provisions of section 
     7652(a)(3) shall not apply to any tax imposed by reason of 
     this subsection.''
       (i) Effective Date.--The amendments made by this section 
     shall apply to articles removed (as defined in section 
     5702(k) of the Internal Revenue Code of 1986, as amended by 
     this Act) after July 31, 1995.
       (j) Floor Stocks Taxes.--
       (1) Imposition of tax.--On tobacco products and cigarette 
     papers and tubes manufactured in or imported into the United 
     States or the Commonwealth of Puerto Rico which are removed 
     before any tax-increase date and held on such date for sale 
     by any person, there is hereby imposed a tax in an amount 
     equal to the excess of--
       (A) the tax which would be imposed under section 5701 of 
     the Internal Revenue Code of 1986 on the article if the 
     article had been removed on such date, over
       (B) the prior tax (if any) imposed under section 5701 or 
     7652 of such Code on such article.
       (2) Authority to exempt cigarettes held in vending 
     machines.--To the extent provided in regulations prescribed 
     by the Secretary, no tax shall be imposed by paragraph (1) on 
     cigarettes held for retail sale on any tax-increase date, by 
     any person in any vending machine. If the Secretary provides 
     such a benefit with respect to any person, the Secretary may 
     reduce the $500 amount in paragraph (3) with respect to such 
     person.
       (3) Credit against tax.--Each person shall be allowed as a 
     credit against the taxes imposed by paragraph (1) on each 
     tax-increase date an amount equal to $500. Such credit shall 
     not exceed the amount of taxes imposed by paragraph (1) on 
     such date for which such person is liable.
       (4) Liability for tax and method of payment.--
       (A) Liability for tax.--A person holding any article on any 
     tax-increase date to which any tax imposed by paragraph (1) 
     applies shall be liable for such tax.
       (B) Method of payment.--The tax imposed by paragraph (1) 
     shall be paid in such manner as the Secretary shall prescribe 
     by regulations.
       (C) Time for payment.--The tax imposed by paragraph (1) on 
     any tax-increase date shall be paid on or before the date 
     which is 3 months after such tax-increase date.
       (5) Articles in foreign trade zones.--Notwithstanding the 
     Act of June 18, 1934 (48 Stat. 998, 19 U.S.C. 81a) and any 
     other provision of law, any article which is located in a 
     foreign trade zone on any tax-increase date shall be subject 
     to the taxes imposed by paragraph (1) if--
       (A) internal revenue taxes have been determined, or customs 
     duties liquidated, with respect to such article before such 
     date pursuant to a request made under the 1st proviso of 
     section 3(a) of such Act, or
       (B) such article is held on such date under the supervision 
     of a customs officer pursuant to the 2d proviso of such 
     section 3(a).
       (6) Definitions.--For purposes of this subsection--
       (A) Tax-increase date.--The term ``tax-increase date'' 
     means August 1, 1995, January 1, 1997, January 1, 1998, and 
     January 1, 1999.
       (B) Other definitions.--Terms used in this subsection which 
     are also used in section 5702 of the Internal Revenue Code of 
     1986 shall have the respective meanings such terms have in 
     such section, as amended by this Act.
       (C) Secretary.--The term ``Secretary'' means the Secretary 
     of the Treasury or his delegate.
       (7) Controlled groups.--Rules similar to the rules of 
     section 5061(e)(3) of such Code shall apply for purposes of 
     this subsection.
       (8) Other laws applicable.--All provisions of law, 
     including penalties, applicable with respect to the taxes 
     imposed by section 5701 of such Code shall, insofar as 
     applicable and not inconsistent with the provisions of this 
     subsection, apply to the floor stocks taxes imposed by 
     paragraph (1), to the same extent as if such taxes were 
     imposed by such section 5701. The Secretary may treat any 
     person who bore the ultimate burden of the tax imposed by 
     paragraph (1) as the person to whom a credit or refund under 
     such provisions may be allowed or made.

     SEC. 11102. MODIFICATIONS OF CERTAIN TOBACCO TAX PROVISIONS.

       (a) Exemption for Exported Tobacco Products and Cigarette 
     Papers and Tubes To Apply Only to Articles Marked for 
     Shipment From the United States.--
       (1) Subsection (b) of section 5704 is amended by adding at 
     the end the following new sentence: ``Tobacco products and 
     cigarette papers and tubes may not be transferred or removed 
     under this subsection unless such products or papers and 
     tubes bear such marks, labels, or notices as the Secretary 
     shall by regulations prescribe.''
       (2) Section 5761 is amended by redesignating subsections 
     (c) and (d) as subsections (d) and (e), respectively, and by 
     inserting after subsection (b) the following new subsection:
       ``(c) Sale of Tobacco Products and Cigarette Papers and 
     Tubes for Export.--Except as provided in subsections (b) and 
     (d) of section 5704--
       ``(1) every person who sells, relands, or receives within 
     the jurisdiction of the United States any tobacco products or 
     cigarette papers or tubes which have been labeled or shipped 
     for exportation under this chapter,
       ``(2) every person who sells or receives such relanded 
     tobacco products or cigarette papers or tubes, and
       ``(3) every person who aids or abets in such selling, 
     relanding, or receiving,
     shall, in addition to the tax and any other penalty provided 
     in this title, be liable for a penalty equal to the greater 
     of $1,000 or 5 times the amount of the tax imposed by this 
     chapter. All tobacco products and cigarette papers and tubes 
     relanded within the jurisdiction of the United States, and 
     all vessels, vehicles, and aircraft used in such relanding or 
     in removing such products, papers, and tubes from the place 
     where relanded, shall be forfeited to the United States.''
       (3) Subsection (a) of section 5761 is amended by striking 
     ``subsection (b)'' and inserting ``subsection (b) or (c)''.
       (4) Subsection (d) of section 5761, as redesignated by 
     paragraph (2), is amended by striking ``The penalty imposed 
     by subsection (b)'' and inserting ``The penalties imposed by 
     subsections (b) and (c)''.
       (5)(A) Subchapter F of chapter 52 is amended by adding at 
     the end the following new section:

     ``SEC. 5754. RESTRICTION ON IMPORTATION OF PREVIOUSLY 
                   EXPORTED TOBACCO PRODUCTS.

       ``(a) In General.--Tobacco products and cigarette papers 
     and tubes previously exported from the United States may be 
     imported or brought into the United States only as provided 
     in section 5704(d). For purposes of this section, section 
     5704(d), section 5761, and such other provisions as the 
     Secretary may specify by regulations, references to 
     exportation shall be treated as including a reference to 
     shipment to the Commonwealth of Puerto Rico.
       ``(b) Cross Reference.--

  ``For penalty for the sale of tobacco products and cigarette papers 
and tubes in the United States which are labeled for export, see 
section 5761(c).''

       (B) The table of sections for subchapter F of chapter 52 is 
     amended by adding at the end thereof the following new item:

``Sec. 5754. Restriction on importation of previously exported tobacco 
              products.''

       (b) Importers Required To Be Qualified.--
       (1) Sections 5712, 5713(a), 5721, 5722, 5762(a)(1), and 
     5763(b) and (c) are each amended by inserting ``or importer'' 
     after ``manufacturer''.
       (2) The heading of subsection (b) of section 5763 is 
     amended by inserting ``Qualified Importers,'' after 
     ``Manufacturers,''.
       (3) The heading for subchapter B of chapter 52 is amended 
     by inserting ``and Importers'' after ``Manufacturers''.
       (4) The item relating to subchapter B in the table of 
     subchapters for chapter 52 is amended by inserting ``and 
     importers'' after ``manufacturers''.
       (c) Repeal of Tax-Exempt Sales to Employees of Cigarette 
     Manufacturers.--
       (1) Subsection (a) of section 5704 is amended--
       (A) by striking ``Employee Use or'' in the heading, and
       (B) by striking ``for use or consumption by employees or'' 
     in the text.
       (2) Subsection (e) of section 5723 is amended by striking 
     ``for use or consumption by their employees, or for 
     experimental purposes'' and inserting ``for experimental 
     purposes''.
       (d) Repeal of Tax-Exempt Sales to United States.--
     Subsection (b) of section 5704 is amended by striking ``and 
     manufacturers may similarly remove such articles for use of 
     the United States;''.
       (e) Books of 25 or Fewer Cigarette Papers Subject to Tax.--
     Subsection (c) of section 5701 is amended by striking ``On 
     each book or set of cigarette papers containing more than 25 
     papers,'' and inserting ``On cigarette papers,''.
       (f) Storage of Tobacco Products.--Subsection (k) of section 
     5702 is amended by inserting ``under section 5704'' after 
     ``internal revenue bond''.
       (g) Authority To Prescribe Minimum Manufacturing Activity 
     Requirements.--Section 5712 is amended by striking ``or'' at 
     the end of paragraph (1), by redesignating paragraph (2) as 
     paragraph (3), and by inserting after paragraph (1) the 
     following new paragraph:
       ``(2) the activity proposed to be carried out at such 
     premises does not meet such minimum capacity or activity 
     requirements as the Secretary may prescribe; or''.
       (h) Limitation on Cover Over of Tax on Tobacco Products.--
     Section 7652 is amended by adding at the end thereof the 
     following new subsection:
       ``(h) Limitation on Cover Over of Tax on Tobacco 
     Products.--For purposes of this section, with respect to 
     taxes imposed under section 5701 or this section on any 
     tobacco product or cigarette paper or tube, the amount 
     covered into the treasuries of Puerto Rico and the Virgin 
     Islands shall not exceed the rate of tax under section 5701 
     in effect on the article on the day before the date of the 
     enactment of the Guaranteed Health Insurance Act of 1994.''
       (i) Effective Date.--The amendments made by this section 
     shall apply to articles removed (as defined in section 
     5702(k) of the Internal Revenue Code of 1986, as amended by 
     this Act) after July 31, 1995.

     SEC. 11103. IMPOSITION OF EXCISE TAX ON MANUFACTURE OR 
                   IMPORTATION OF ROLL-YOUR-OWN TOBACCO.

       (a) In General.--Section 5701 (relating to rate of tax), as 
     amended by section 11101, is amended by redesignating 
     subsections (g) and (h) as subsections (h) and (i), 
     respectively, and by inserting after subsection (f) the 
     following new subsection:
       ``(g) Roll-Your-Own Tobacco.--On roll-your-own tobacco, 
     manufactured in or imported into the United States, there 
     shall be imposed a tax of the amount determined in accordance 
     with the following table per pound (and a proportionate tax 
     at the like rate on all fractional parts of a pound).


                                                                        
                                                            The tax per 
    ``In the case of roll-your-own tobacco removed--        pound is--  
                                                                        
  After July 31, 1995 and before January 1, 1997........      $1.10   
  During 1997...........................................      $1.38   
  During 1998...........................................      $1.66   
  After December 31, 1998...............................     $1.94.''   
                                                                        
                                                                        

       (b) Roll-Your-Own Tobacco.--Section 5702 (relating to 
     definitions) is amended by adding at the end the following 
     new subsection:
       ``(p) Roll-Your-Own Tobacco.--The term `roll-your-own 
     tobacco' means any tobacco which, because of its appearance, 
     type, packaging, or labeling, is suitable for use and likely 
     to be offered to, or purchased by, consumers as tobacco for 
     making cigarettes.''
       (c) Technical Amendments.--
       (1) Subsection (c) of section 5702 is amended by striking 
     ``and pipe tobacco'' and inserting ``pipe tobacco, and roll-
     your-own tobacco''.
       (2) Subsection (d) of section 5702 is amended--
       (A) in the material preceding paragraph (1), by striking 
     ``or pipe tobacco'' and inserting ``pipe tobacco, or roll-
     your-own tobacco'', and
       (B) by striking paragraph (1) and inserting the following 
     new paragraph:
       ``(1) a person who produces cigars, cigarettes, smokeless 
     tobacco, pipe tobacco, or roll-your-own tobacco solely for 
     his own personal consumption or use, and''.
       (3) The chapter heading for chapter 52 is amended to read 
     as follows:

    ``CHAPTER 52--TOBACCO PRODUCTS AND CIGARETTE PAPERS AND TUBES''.

       (4) The table of chapters for subtitle E is amended by 
     striking the item relating to chapter 52 and inserting the 
     following new item:

``Chapter 52. Tobacco products and cigarette papers and tubes.''

       (d) Effective Date.--
       (1) In general.--The amendments made by this section shall 
     apply to roll-your-own tobacco removed (as defined in section 
     5702(k) of the Internal Revenue Code of 1986, as amended by 
     this Act) after July 31, 1995.
       (2) Transitional rule.--Any person who--
       (A) on the date of the enactment of this Act is engaged in 
     business as a manufacturer of roll-your-own tobacco or as an 
     importer of tobacco products or cigarette papers and tubes, 
     and
       (B) before August 1, 1995, submits an application under 
     subchapter B of chapter 52 of such Code to engage in such 
     business,

     may, notwithstanding such subchapter B, continue to engage in 
     such business pending final action on such application. 
     Pending such final action, all provisions of such chapter 52 
     shall apply to such applicant in the same manner and to the 
     same extent as if such applicant were a holder of a permit 
     under such chapter 52 to engage in such business.
         Subtitle B--Treatment of Employer-Provided Health Care

     SEC. 11201. HEALTH BENEFITS MAY NOT BE PROVIDED UNDER 
                   CAFETERIA PLANS OR FLEXIBLE SPENDING 
                   ARRANGEMENTS OTHER THAN MEDICAL SAVINGS 
                   ACCOUNTS.

       (a) Cafeteria Plans.--
       (1) In general.--Subsection (f) of section 125 (defining 
     qualified benefits) is amended by adding at the end the 
     following new sentence: ``Such term shall not include any 
     benefits or coverage under an accident or health plan.''
       (2) Conforming amendment.--Subsection (g) of section 125 is 
     amended by striking paragraph (2) and redesignating 
     paragraphs (3) and (4) as paragraphs (2) and (3), 
     respectively.
       (b) Flexible Spending Arrangements.--The text of section 
     106 (relating to contributions by employer to accident and 
     health plans) is amended to read as follows:
       ``(a) General Rule.--Except as provided in subsection (b), 
     gross income of an employee does not include employer-
     provided coverage under an accident or health plan.
       ``(b) No Exclusion for Coverage Provided Under Flexible 
     Spending Arrangements.--
       ``(1) In general.--Subsection (a) shall not apply to 
     coverage provided through a flexible spending or similar 
     arrangement.
       ``(2) Flexible spending arrangement.--For purposes of this 
     subsection, a flexible spending arrangement is a benefit 
     program which provides employees with coverage under which--
       ``(A) specified incurred expenses may be reimbursed 
     (subject to reimbursement maximums and other reasonable 
     conditions), and
       ``(B) the maximum amount of reimbursement which is 
     reasonably available to a participant for such coverage is 
     less than 500 percent of the cost of such coverage.

     In the case of an insured plan, the maximum amount reasonably 
     available shall be determined on the basis of the underlying 
     coverage.
       ``(c) Contributions to Medical Savings Accounts.--
       ``(1) In general.--Notwithstanding subsection (b), gross 
     income of an eligible employee does not include amounts 
     contributed by an employer to any medical savings account of 
     such employee to the extent such contributions are required 
     to be made to such account by such employer under section 
     1104(d)(2)(C) of the Guaranteed Health Insurance Act of 1994. 
     For purposes of the preceding sentence, the terms `eligible 
     employee' and `medical savings account' have the respective 
     meanings given such terms by section 7705.
       ``(2) No constructive receipt.--No amount shall be included 
     in the gross income of any employee solely because the 
     employee may choose between the contributions referred to in 
     paragraph (1) and employer contributions to another health 
     plan of the employer.''
       (c) Medical Savings Accounts.--
       (1) In general.--Chapter 79 is amended by adding at the end 
     the following new section:

     ``SEC. 7705. MEDICAL SAVINGS ACCOUNTS.

       ``(a) General Rule.--For purposes of this title, the term 
     `medical savings account' means a trust created or organized 
     in the United States for the exclusive benefit of an 
     individual or his beneficiaries, but only if the written 
     instrument creating the trust meets the following 
     requirements:
       ``(1) Except in the case of a rollover contribution 
     described in subsection (d)(3), no contribution will be 
     accepted unless--
       ``(A) it is in cash, and
       ``(B) such individual is an eligible employee for the 
     period for which such contribution is made.
       ``(2) The trustee is a bank (as defined in section 408(n)), 
     insurance company (as defined in section 816), or such other 
     person who demonstrates to the satisfaction of the Secretary 
     that the manner in which such other person will administer 
     the trust will be consistent with the requirements of this 
     section.
       ``(3) No part of the trust funds will be invested in life 
     insurance contracts.
       ``(4) The interest of an individual in the balance of the 
     account is nonforfeitable.
       ``(5) The assets of the trust will not be commingled with 
     other property except in a common trust fund or common 
     investment fund.
       ``(b) Eligible Employee.--For purposes of this section--
       ``(1) In general.--The term `eligible employee' means any 
     employee who is covered under a high deductible plan (as 
     defined in section 5504(5) of the Guaranteed Health Insurance 
     Act of 1994) of his employer.
       ``(2) Exception.--An employee shall be treated as not being 
     an eligible employee for any calendar year if--
       ``(A) for any month during such year, it is reasonably 
     expected that such employee will be eligible for subsidies 
     under part A of title XXII of the Social Security Act, or
       ``(B) it is reasonably expected that, if the employee were 
     a medicare part C covered individual for any month during 
     such year, the amount of tax imposed by section 59B (if any) 
     on such employee would be determined under section 59B(b).
       ``(c) Tax Treatment of Accounts.--
       ``(1) Account taxed as grantor trust.--
       ``(A) In general.--Except as provided in subparagraph (B), 
     the account beneficiary of a medical savings account shall be 
     treated for purposes of this title as the owner of such 
     account and shall be subject to tax thereon in accordance 
     with subpart E of part I of subchapter J of this chapter 
     (relating to grantors and others treated as substantial 
     owners).
       ``(B) Treatment of capital losses.--With respect to assets 
     held in a medical savings account, any capital loss for a 
     taxable year from the sale or exchange of such an asset shall 
     be allowed only to the extent of capital gains from such 
     assets for such taxable year. Any capital loss which is 
     disallowed under the preceding sentence shall be treated as a 
     capital loss from the sale or exchange of such an asset in 
     the next taxable year. For purposes of this subparagraph, all 
     medical savings accounts of the account beneficiary shall be 
     treated as 1 account.
       ``(2) Account terminates if individual engages in 
     prohibited transaction.--
       ``(A) In general.--If, during any taxable year of the 
     account beneficiary, such beneficiary engages in any 
     transaction prohibited by section 4975 with respect to the 
     account, the account shall cease to be a medical savings 
     account as of the first day of such taxable year.
       ``(B) Account treated as distributing all its assets.--In 
     any case in which any account ceases to be a medical savings 
     account by reason of subparagraph (A) on the first day of any 
     taxable year, subsection (d) shall be applied as if--
       ``(i) there were a distribution on such first day in an 
     amount equal to the fair market value (on such first day) of 
     all assets in the account (on such first day), and
       ``(ii) no portion of such distribution were used to pay 
     qualified medical expenses.
       ``(3) Effect of pledging account as security.--If, during 
     any taxable year, the account beneficiary uses the account or 
     any portion thereof as security for a loan, the portion so 
     used is treated as distributed and not used to pay qualified 
     medical expenses.
       ``(d) Tax Treatment of Distributions.--
       ``(1) Inclusion of amounts not used for qualified medical 
     expenses.--
       ``(A) In general.--Any amount paid or distributed out of a 
     medical savings account which is not used exclusively to pay 
     the qualified medical expenses of the account beneficiary or 
     of the spouse or young dependents (as defined in section 
     1003(b)(1) of the Guaranteed Health Insurance Act of 1994) of 
     such beneficiary shall be included in the gross income of 
     such beneficiary to the extent such amount does not exceed 
     the excess of--
       ``(i) the aggregate contributions to such account which 
     were not includible in gross income by reason of section 
     106(c), over
       ``(ii) the aggregate prior payments or distributions from 
     such account which were includible in gross income under this 
     paragraph.
       ``(B) Special rules.--For purposes of subparagraph (A)--
       ``(i) all medical savings accounts of the account 
     beneficiary shall be treated as 1 account,
       ``(ii) all payments and distributions during any taxable 
     year shall be treated as 1 distribution, and
       ``(iii) any distribution of property shall be taken into 
     account at its fair market value on the date of the 
     distribution.
       ``(2) Penalty for distributions not used for qualified 
     medical expenses.--
       ``(A) In general.--The tax imposed by chapter 1 on the 
     account beneficiary for any taxable year in which there is a 
     payment or distribution from a medical savings account of 
     such beneficiary which is includible in gross income under 
     paragraph (1) shall be increased by 100 percent of the amount 
     which is so includible.
       ``(B) Exception for distributions after age 65.--
     Subparagraph (A) shall not apply to any payment or 
     distribution after the date on which the account beneficiary 
     attains age 65.
       ``(C) Exception for disability or death.--Subparagraph (A) 
     shall not apply if the payment or distribution is made after 
     the account beneficiary becomes disabled within the meaning 
     of section 72(m)(7) or dies.
       ``(3) Rollover contribution.--An amount is described in 
     this paragraph as a rollover contribution if it meets the 
     requirements of subparagraphs (A) and (B).
       ``(A) In general.--Paragraph (1) shall not apply to any 
     amount paid or distributed from a medical savings account to 
     the account beneficiary to the extent the amount received is 
     paid into a medical savings account for the benefit of such 
     beneficiary not later than the 60th day after the day on 
     which he receives the payment or distribution.
       ``(B) Limitation.--This paragraph shall not apply to any 
     amount described in subparagraph (A) received by an 
     individual from a medical savings account if, at any time 
     during the 1-year period ending on the day of such receipt, 
     such individual received any other amount described in 
     subparagraph (A) from a medical savings account which was not 
     includible in his gross income because of the application of 
     this paragraph.
       ``(4) Coordination with medical expense deduction.--For 
     purposes of section 213, any payment or distribution out of a 
     medical savings account for qualified medical expenses shall 
     not be treated as an expense paid for medical care to the 
     extent of the amount of such payment or distribution which is 
     excludable from gross income solely by reason of paragraph 
     (1)(A).
       ``(e) Definitions.--For purposes of this section--
       ``(1) Qualified medical expenses.--The term `qualified 
     medical expenses' means any expense for medical care (as 
     defined in section 213(d)); except that such term shall not 
     include any expense for insurance.
       ``(2) Account beneficiary.--The term `account beneficiary' 
     means the individual for whose benefit the medical savings 
     account is maintained.
       ``(f) Custodial Accounts.--For purposes of this section, a 
     custodial account shall be treated as a trust if--
       ``(1) the assets of such account are held by a bank (as 
     defined in section 408(n)), insurance company (as defined in 
     section 816), or another person who demonstrates to the 
     satisfaction of the Secretary that the manner in which he 
     will administer the account will be consistent with the 
     requirements of this section, and
       ``(2) the custodial account would, except for the fact that 
     it is not a trust, constitute a medical savings account 
     described in subsection (a).

     For purposes of this title, in the case of a custodial 
     account treated as a trust by reason of the preceding 
     sentence, the custodian of such account shall be treated as 
     the trustee thereof.
       ``(g) Reports.--The trustee of a medical savings account 
     shall keep such records and make such reports regarding such 
     account to the Secretary and to the account beneficiary with 
     respect to contributions, distributions, and such other 
     matters as the Secretary may require under regulations. The 
     reports required by this subsection shall be filed at such 
     time and in such manner and furnished to such individuals at 
     such time and in such manner as may be required by such 
     regulations.''
       (2) Employer payments excluded from employment tax base.--
       (A) Social security taxes.--
       (i) Subsection (a) of section 3121 is amended by striking 
     ``or'' at the end of paragraph (20), by striking the period 
     at the end of paragraph (21) and inserting ``; or'', and by 
     inserting after paragraph (21) the following new paragraph:
       ``(22) any payment made to or for the benefit of an 
     employee if at the time of such payment it is reasonable to 
     believe that the employee will be able to exclude such 
     payment from income under section 106(c).''
       (ii) Subsection (a) of section 209 of the Social Security 
     Act is amended by striking ``or'' at the end of paragraph 
     (18), by striking the period at the end of paragraph (19) and 
     inserting ``; or'', and by inserting after paragraph (19) the 
     following new paragraph:
       ``(20) any payment made to or for the benefit of an 
     employee if at the time of such payment it is reasonable to 
     believe that the employee will be able to exclude such 
     payment from income under section 106(c) of the Internal 
     Revenue Code of 1986.''
       (B) Railroad retirement tax.--Subsection (e) of section 
     3231 is amended by adding at the end the following new 
     paragraph:
       ``(10) medical savings account contributions.--The term 
     `compensation' shall not include any payment made to or for 
     the benefit of an employee if at the time of such payment it 
     is reasonable to believe that the employee will be able to 
     exclude such payment from income under section 106(c).''
       (C) Unemployment tax.--Subsection (b) of section 3306 is 
     amended by striking ``or'' at the end of paragraph (15), by 
     striking the period at the end of paragraph (16) and 
     inserting ``; or'', and by inserting after paragraph (16) the 
     following new paragraph:
       ``(17) any payment made to or for the benefit of an 
     employee if at the time of such payment it is reasonable to 
     believe that the employee will be able to exclude such 
     payment from income under section 106(c).''
       (D) Withholding tax.--Subsection (a) of section 3401 is 
     amended by striking ``or'' at the end of paragraph (19), by 
     striking the period at the end of paragraph (20) and 
     inserting ``; or'', and by inserting after paragraph (20) the 
     following new paragraph:
       ``(21) any payment made to or for the benefit of an 
     employee if at the time of such payment it is reasonable to 
     believe that the employee will be able to exclude such 
     payment from income under section 106(c).''
       (3) Tax on prohibited transactions.--Section 4975 (relating 
     to prohibited transactions) is amended--
       (A) by adding at the end of subsection (c) the following 
     new paragraph:
       ``(4) Special rule for medical savings accounts.--An 
     individual for whose benefit a medical savings account 
     (within the meaning of section 7705) is established shall be 
     exempt from the tax imposed by this section with respect to 
     any transaction concerning such account (which would 
     otherwise be taxable under this section) if, with respect to 
     such transaction, the account ceases to be a medical savings 
     account by reason of the application of section 7705(c)(2)(A) 
     to such account.'', and
       (B) by inserting ``or a medical savings account described 
     in section 7705'' in subsection (e)(1) after ``described in 
     section 408(a)''.
       (4) Failure to provide reports on medical savings 
     accounts.--Section 6693 (relating to failure to provide 
     reports on individual retirement account or annuities) is 
     amended--
       (A) by inserting ``or on medical savings accounts'' after 
     ``annuities'' in the heading of such section, and
       (B) by adding at the end of subsection (a) the following: 
     ``The person required by section 7705(g) to file a report 
     regarding a medical savings account at the time and in the 
     manner required by such section shall pay a penalty of $50 
     for each failure unless it is shown that such failure is due 
     to reasonable cause.''
       (5) Clerical Amendments.--
       (A) The table of sections for chapter 79 is amended by 
     adding at the end the following:

``Sec. 7705. Medical savings accounts.''

       (B) The table of sections for subchapter B of chapter 68 is 
     amended by inserting ``or on medical savings accounts'' after 
     ``annuities'' in the item relating to section 6693.
       (d) Employment Tax Treatment of Amount Not Excluded Under 
     Section 106.--
       (1) Social security tax.--
       (A) Subsection (a) of section 3121 is amended by inserting 
     after paragraph (22) the following new sentence:

     ``Nothing in paragraph (2) shall exclude from the term 
     `wages' any amount which is required to be included in gross 
     income under section 106(b).''
       (B) Subsection (a) of section 209 of the Social Security 
     Act is amended by inserting after paragraph (20) the 
     following new sentence:

     ``Nothing in paragraph (2) shall exclude from the term 
     `wages' any amount which is required to be included in gross 
     income under section 106(b) of the Internal Revenue Code of 
     1986.''
       (2) Railroad retirement tax.--Paragraph (1) of section 
     3231(e) is amended by adding at the end thereof the following 
     new sentence:

     ``Nothing in clause (i) of the second sentence of this 
     paragraph shall exclude from the term `compensation' any 
     amount which is required to be included in gross income under 
     section 106(b).''
       (3) Unemployment tax.--Subsection (b) of section 3306 is 
     amended by inserting after paragraph (17) the following new 
     sentence:

     ``Nothing in paragraph (2) shall exclude from the term 
     `wages' any amount which is required to be included in gross 
     income under section 106(b).''
       (4) Wage withholding.--Subsection (a) of section 3401 is 
     amended by adding at the end thereof the following new 
     sentence:

     ``Nothing in the preceding provisions of this subsection 
     (other than paragraph (21)) shall exclude from the term 
     `wages' any amount which is required to be included in gross 
     income under section 106(b).''
       (e) Effective Date.--
       (1) Provisions other than medical savings accounts.--
       (A) In general.--Except as provided in subparagraphs (B) 
     and (C), the amendments made by subsections (a) and (d), and 
     so much of the amendment made by subsection (b) as relates to 
     section 106(b) of the Internal Revenue Code of 1986, shall 
     take effect on January 1, 1995.
       (B) Benefits provided pursuant to collective bargaining 
     agreements.--In the case of a cafeteria plan or flexible 
     spending arrangement maintained pursuant to 1 or more 
     collective bargaining agreements between employee 
     representatives and 1 or more employers which was ratified 
     before June 30, 1994, the amendments referred to in 
     subparagraph (A) shall not apply to benefits pursuant to any 
     such agreement provided before the date on which the last of 
     such agreements terminate (determined without regard to any 
     extension thereof on or after June 30, 1994). The preceding 
     sentence shall cease to apply with respect to any such 
     agreement on the effective date of any modification of such 
     agreement on or after June 30, 1994.
       (C) State and local employees covered by collective 
     bargaining agreements.--In the case of employees of a State 
     or political subdivision thereof--
       (i) who are not entitled to the benefits of subparagraph 
     (B),
       (ii) who are covered by 1 or more collective bargaining 
     agreements with such State or political subdivision which was 
     ratified before June 30, 1994, and
       (iii) who are eligible to participate in a cafeteria plan 
     or flexible spending arrangement which was established by 
     State or local law and which is in effect on such date,

     the amendments referred to in subparagraph (A) shall not 
     apply to benefits provided under such plan or arrangement (as 
     in effect on such date) before January 1, 1999.
       (2) Medical savings accounts.--The amendments made by this 
     section (other than the amendments referred to in paragraph 
     (1)(A)) shall take effect on January 1, 1999.

     SEC. 11202. DEDUCTION FOR HEALTH INSURANCE COSTS OF SELF-
                   EMPLOYED INDIVIDUALS INCREASED AND MADE 
                   PERMANENT.

       (a) Provision Made Permanent.--
       (1) In general.--Subsection (l) of section 162 (relating to 
     special rules for health insurance costs of self-employed 
     individuals) is amended by striking paragraph (6).
       (2) Effective date.--The amendment made by paragraph (1) 
     shall apply to taxable years beginning after December 31, 
     1993.
       (b) Deduction Increased to 80 Percent.--
       (1) In general.--Paragraph (1) of section 162(l) is amended 
     by striking ``25 percent'' and inserting ``80 percent''.
       (2) Other coverage.--Subparagraph (B) of section 162(l)(2) 
     is amended to read as follows:
       ``(B) Other coverage.--Paragraph (1) shall not apply to any 
     taxpayer for any calendar month for which the taxpayer or the 
     taxpayer's spouse--
       ``(i) is normally employed by an employer for at least 25 
     hours per week, or
       ``(ii) is eligible to participate in a subsidized health 
     plan maintained by any employer of such taxpayer or spouse.''
       (3) Effective date.--The amendments made by this subsection 
     shall apply to taxable years beginning after December 31, 
     1998.

     SEC. 11203. LIMITATION ON PREPAYMENT OF MEDICAL INSURANCE 
                   PREMIUMS.

       (a) General Rule.--Subsection (d) of section 213 is amended 
     by adding at the end the following new paragraph:
       ``(10) Limitation on prepayments.--If the taxpayer pays a 
     premium or other amount which constitutes medical care under 
     paragraph (1), to the extent such premium or other amount is 
     properly allocable to insurance coverage or care to be 
     provided during periods more than 12 months after the month 
     in which such payment is made, such premium shall be treated 
     as paid ratably over the period during which such insurance 
     coverage or care is to be provided. The preceding sentence 
     shall not apply to any premium to which paragraph (7) 
     applies.''
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to amounts paid after December 31, 1994.
Subtitle C--Extending Medicare Coverage of, and Application of Hospital 
      Insurance Tax to, All State And Local Government Employees.

     SEC. 11301. EXTENDING MEDICARE COVERAGE OF, AND APPLICATION 
                   OF HOSPITAL INSURANCE TAX TO, ALL STATE AND 
                   LOCAL GOVERNMENT EMPLOYEES.

       (a) In General.--
       (1) Application of hospital insurance tax.--Section 
     3121(u)(2) is amended by striking subparagraphs (C) and (D).
       (2) Coverage under medicare.--Section 210(p) of the Social 
     Security Act (42 U.S.C. 410(p)) is amended by striking 
     paragraphs (3) and (4).
       (3) Effective date.--The amendments made by this subsection 
     shall apply to services performed after December 31, 1996.
       (b) Phasein of Amount of Tax With Respect to Employees 
     Newly Subject to Tax.--Subsection (u) of section 3121 is 
     amended by adding at the end the following new paragraph:
       ``(4) Phasein of amount of tax with respect to certain 
     employees.--If the wages paid to any individual during any 
     period before January 1, 2000, would not be subject to tax 
     under sections 3101(b) and 3111(b) but for the repeal of 
     subparagraphs (C) and (D) of paragraph (2), the rates of the 
     taxes imposed by such sections with respect to such wages 
     paid during such period shall be--
       ``(A) 0.3625 percent in the case of wages paid during 1997,
       ``(B) 0.725 percent in the case of wages paid during 1998, 
     and
       ``(C) 1.0875 percent in the case of wages paid during 
     1999.''
       (c) Transition in Benefits for State and Local Government 
     Employees and Former Employees.--
       (1) In general.--
       (A) Employees newly subject to tax.--For purposes of 
     sections 226, 226A, and 1811 of the Social Security Act, in 
     the case of any individual who performs services during the 
     calendar quarter beginning January 1, 1997, the wages for 
     which are subject to the tax imposed by section 3101(b) of 
     the Internal Revenue Code of 1986 only because of the 
     amendments made by subsection (a), the individual's medicare 
     qualified State or local government employment (as defined in 
     subparagraph (B)) performed before January 1, 1997, shall be 
     considered to be ``employment'' (as defined for purposes of 
     title II of such Act), but only for purposes of providing the 
     individual (or another person) with entitlement to hospital 
     insurance benefits under part A of title XVIII of such Act 
     for months beginning with January 1997.
       (B) Medicare qualified state or local government employment 
     defined.--In this paragraph, the term ``medicare qualified 
     State or local government employment'' means medicare 
     qualified government employment described in section 
     210(p)(1)(B) of the Social Security Act (determined without 
     regard to section 210(p)(3) of such Act, as in effect before 
     its repeal under subsection (a)(2)).
       (2) Authorization of appropriations.--There are authorized 
     to be appropriated to the Federal Hospital Insurance Trust 
     Fund from time to time such sums as the Secretary of Health 
     and Human Services deems necessary for any fiscal year on 
     account of--
       (A) payments made or to be made during such fiscal year 
     from such Trust Fund with respect to individuals who are 
     entitled to benefits under title XVIII of the Social Security 
     Act solely by reason of paragraph (1),
       (B) the additional administrative expenses resulting or 
     expected to result therefrom, and
       (C) any loss in interest to such Trust Fund resulting from 
     the payment of those amounts, in order to place such Trust 
     Fund in the same position at the end of such fiscal year as 
     it would have been in if this subsection had not been 
     enacted.
       (3) Information to individuals who are prospective medicare 
     beneficiaries based on state and local government 
     employment.--Section 226(g) of the Social Security Act (42 
     U.S.C. 426(g)) is amended--
       (A) by redesignating paragraphs (1) through (3) as 
     subparagraphs (A) through (C), respectively,
       (B) by inserting ``(1)'' after ``(g)'', and
       (C) by adding at the end the following new paragraph:
       ``(2) The Secretary, in consultation with State and local 
     governments, shall provide procedures designed to assure that 
     individuals who perform medicare qualified government 
     employment by virtue of service described in section 
     210(a)(7) are informed with respect to (A) their eligibility 
     or potential eligibility for hospital insurance benefits 
     (based on such employment) under part A of title XVIII, (B) 
     the requirements for, and conditions of, such eligibility, 
     and (C) the necessity of timely application as a condition of 
     becoming entitled under subsection (b)(2)(C), giving 
     particular attention to individuals who apply for an annuity 
     or retirement benefit and whose eligibility for such annuity 
     or retirement benefit is based on a disability.''
       (c) Technical Amendments.--
       (1) Subparagraph (A) of section 3121(u)(2) is amended by 
     striking ``subparagraphs (B) and (C),'' and inserting 
     ``subparagraph (B),''.
       (2) Subparagraph (B) of section 210(p)(1) of the Social 
     Security Act (42 U.S.C. 410(p)(1)) is amended by striking 
     ``paragraphs (2) and (3).'' and inserting ``paragraph (2).''
       (3) Section 218 of the Social Security Act (42 U.S.C. 418) 
     is amended by striking subsection (n).
       (4) The amendments made by this subsection shall apply 
     after December 31, 1996.
 Subtitle D--Treatment of Organizations Providing Health Care Services 
                       and Related Organizations

     SEC. 11401. QUALIFICATION AND DISCLOSURE REQUIREMENTS FOR 
                   CERTAIN NONPROFIT HEALTH CARE ORGANIZATIONS.

       (a) Treatment of Hospitals and Other Entities Providing 
     Health Care Services.--Section 501 (relating to exemption 
     from tax on corporations, certain trusts, etc.) is amended by 
     redesignating subsection (n) as subsection (o) and by 
     inserting after subsection (m) the following new subsection:
       ``(n) Qualification of Health Care Organizations as Exempt 
     Organizations.--
       ``(1) In general.--An organization which is described in 
     paragraph (3) or (4) of subsection (c) and the predominant 
     activity of which is the provision of health care services 
     shall be exempt from tax under subsection (a) only if--
       ``(A) such organization, with the participation of 
     community representatives, annually--
       ``(i) assesses its community's needs for health care 
     services and qualified outreach services, and
       ``(ii) prepares a written plan to meet those needs,
       ``(B) pursuant to such plan, such organization provides 
     (directly or indirectly) significant qualified outreach 
     services,
       ``(C) at least 80 percent of the members of the board of 
     directors of such organization are independent members,
       ``(D) such organization does not discriminate against 
     individuals in the provision of health care services on the 
     basis of participation in a government-sponsored health plan,
       ``(E) such organization does not discriminate against 
     individuals in the provision of emergency health care 
     services on the basis of ability to pay, and
       ``(F) to the extent of such organization's financial 
     ability, such organization does not discriminate against 
     individuals in the provision of medically necessary health 
     care services (other than emergency services) on the basis of 
     ability to pay.
       ``(2) Special rule for health maintenance organizations.--A 
     health maintenance organization shall not be treated as 
     described in subsection (c)(3) unless substantially all of 
     its primary care health services is provided as described in 
     subsection (m)(6)(A).
       ``(3) Definitions.--For purposes of this subsection--
       ``(A) Qualified outreach services.--The term `qualified 
     outreach services' means health care services (or preventive 
     care, educational, or social services programs related 
     thereto) which are provided--
       ``(i) in 1 or more medically underserved areas, or
       ``(ii) at below cost to individuals who are otherwise 
     unable to afford such services.
     Such term shall not include insurance described in 
     subparagraph (B)(iii) unless such insurance is provided on a 
     subsidized basis.
       ``(B) Health care services.--The term `health care 
     services' means--
       ``(i) any activity of providing medical care (as defined in 
     section 213(d)(1)(A)) to individuals,
       ``(ii) in the case of an organization described in 
     subsection (c)(3), any activity which is treated as 
     accomplishing an exempt purpose of the organization solely 
     because it is carried on as part of an activity described in 
     clause (i), and
       ``(iii) insurance (other than commercial-type insurance, as 
     defined in subsection (m)) for the activities described in 
     clauses (i) and (ii).
       ``(C) Medically underserved area.--The term `medically 
     underserved area' means, with respect to a health care 
     service, any area reasonably determined by the organization 
     (in a manner not inconsistent with regulations prescribed by 
     the Secretary) to have--
       ``(i) a shortage (relative to the number of individuals 
     needing such service) of health professionals performing such 
     service, or
       ``(ii) a population group experiencing such a shortage.
     Such term includes a health professional shortage area (as 
     defined in section 332 of the Public Health Service Act).
       ``(D) Independent member.--The term `independent member' 
     means a member of the board of directors of an organization 
     who receives no compensation (directly or indirectly)--
       ``(i) for medical services performed in connection with 
     such organization, or
       ``(ii) for services as an officer of such organization 
     (other than as a member of such board).

     For purposes of clause (ii), the term `officer' includes any 
     individual having powers or responsibilities similar to those 
     of officers.
       ``(4) Exception.--This subsection shall not apply to any 
     organization which provides health care services exclusively 
     on an uncompensated basis, regardless of ability to pay.
       ``(5) Safe harbor for nursing homes.--
       ``(A) In general.--A nursing home shall be treated as 
     meeting the requirement of paragraph (1)(D) if it accepts a 
     proportion of Medicaid patients which meets a safe harbor 
     prescribed by the Secretary for purposes of this paragraph.
       ``(B) Definitions.-- For purposes of subparagraph (A)--
       ``(i) Nursing home.--The term `nursing home' means any 
     facility which is of a type which is traditionally considered 
     a nursing home.
       ``(ii) Medicaid patient.--The term `Medicaid patient' means 
     any individual eligible to receive medical assistance under a 
     State plan approved under title XIX of the Social Security 
     Act.
       ``(6) Disallowance of charitable deductions.--No gift or 
     bequest to an organization which is not exempt from tax by 
     reason of this subsection shall be allowed as a deduction 
     under section 170, 545(b)(2), 556(b)(2), 642(c), 2055, 
     2106(a)(2), or 2522.
       ``(7) Requirements supplement other requirements.--The 
     requirements of this subsection are in addition to, and not 
     in lieu of, the requirements otherwise applicable to an 
     organization described in paragraph (3) or (4) of subsection 
     (c).''
       (b) Reporting and Disclosure of Needs Assessment and 
     Plan.--
       (1) Reporting.--
       (A) Organizations described in section 501(c)(3).--
     Subsection (b) of section 6033 (relating to certain 
     organizations described in section 501(c)(3)) is amended by 
     striking ``and'' at the end of paragraph (9), by 
     redesignating paragraph (10) as paragraph (14), and by 
     inserting after paragraph (9) the following new paragraphs:
       ``(10) in the case of an organization which prepares a plan 
     described in section 501(n)(1)(A) (relating to community 
     needs)--
       ``(A) a copy of such plan for the year, and
       ``(B) information on the implementation of such plan for 
     the year (including unrecovered costs and revenues foregone 
     in furtherance of such plan),
       ``(11)(A) the amount (if any) of tax paid by the 
     organization during the year under section 4958 (relating to 
     tax on failure to satisfy section 501(n)), and
       ``(B) the amount (if any) of tax imposed by section 4958 on 
     the organization which was not assessed, or the assessment of 
     which was abated, pursuant to section 4958(d),
       ``(12) such information as the Secretary may require with 
     respect to any excess benefit transaction (as defined in 
     section 4959(c)),
       ``(13) in the case of an applicable tax-exempt health care 
     organization (as defined in section 4960), the respective 
     amounts (if any) of the taxes paid by the organization during 
     the year (and such other information as the Secretary may 
     require with respect to the activities resulting in such 
     taxes) under--
       ``(A) section 4911 (relating to tax on excess expenditures 
     to influence legislation),
       ``(B) section 4912 (relating to tax on disqualifying 
     lobbying expenditures of certain organizations), and
       ``(C) section 4955 (relating to taxes on political 
     expenditures of section 501(c)(3) organizations), and''.
       (B) Organizations described in section 501(c)(4).--Section 
     6033 is amended by redesignating subsection (f) as subsection 
     (g) and by inserting after subsection (e) the following new 
     subsection:
       ``(f) Certain Organizations Described in Section 
     501(c)(4).--Every organization described in section 501(c)(4) 
     which is subject to the requirements of subsection (a) and 
     which prepares a plan described in section 501(n)(1)(A) 
     (relating to community needs) for the year--
       ``(1) shall include a copy of such plan with the return 
     required under subsection (a) for the year, and
       ``(2) shall include on such return the information referred 
     to in paragraphs (10)(B), (11), and (12) of subsection (b) 
     with respect to such organization.''
       (2) Disclosure.--
       (A) In general.--Subsection (e) of section 6104 (relating 
     to public inspection of certain annual returns and 
     applications for exemption) is amended by adding at the end 
     the following new paragraph:
       ``(3) Community health care needs assessment and plan and 
     application for exemption.--
       ``(A) In general.--Every organization which is required to 
     prepare a plan described in section 501(n)(1)(A) (relating to 
     community needs)--
       ``(i) shall make a copy of such plan (and the assessment on 
     which such plan is based) available for inspection during 
     regular business hours by any individual at the principal 
     office of such organization and, if such organization 
     regularly maintains 1 or more regional or district offices 
     having 3 or more employees, at each such regional or district 
     office, and
       ``(ii) upon request of an individual made at such principal 
     office or such a regional or district office, shall provide--

       ``(I) a copy of such plan (and assessment),
       ``(II) a copy of the annual return filed under section 
     6033, and
       ``(III) a copy of the application, papers, letters, and 
     other documents referred to in paragraph (2)(A)(ii),

     to such individual without charge other than a reasonable fee 
     for any reproduction and mailing costs.

     If the request under clause (ii) is made in person, such 
     copies shall be provided immediately and, if made other than 
     in person, shall be provided within 30 days.
       ``(B) Period of availability.--Subparagraph (A) shall 
     apply--
       ``(i) with respect to any plan (and assessment) during the 
     3-year period after the close of the year for which such plan 
     is prepared,
       ``(ii) with respect to any return, during the 3-year period 
     beginning on the filing date (as defined in paragraph 
     (1)(D)), and
       ``(iii) with respect to the material referred to in 
     subparagraph (A)(ii)(III), at any time.
       ``(C) Limitation.--Subparagraph (A)(ii) shall not apply to 
     any request if the Secretary determines, upon application by 
     an organization, that such request is part of a harassment 
     campaign and that compliance with such request is not in the 
     public interest.''
       (B) Technical amendment.--The heading for subsection (e) of 
     section 6104 is amended by striking ``and Applications for 
     Exemption'' and inserting ``, Applications for Exemption, and 
     Community Needs Assessment and Plan for Health and Outreach 
     Services''.
       (c) Fundraising Solicitations Required to Disclose 
     Availability of Annual Return.--
       (1) Paragraph (1) of section 6104(e) is amended by adding 
     at the end the following new subparagraph:
       ``(E) Fundraising solicitations of certain health care 
     organizations required to disclose availability of annual 
     return.--In the case of an applicable tax-exempt health care 
     organization (as defined in section 4960), each fundraising 
     solicitation (as defined in section 6113(c)) by (or on behalf 
     of) such organization shall contain an express statement (in 
     a conspicuous and easily recognizable format) that such 
     return shall be provided to individuals upon request.''
       (2) Penalty.--
       (A) Section 6710 is amended by striking ``section 6113'' 
     each place it appears and inserting ``section 6113 or 
     6104(e)(1)(E)''.
       (B) Subsection (a) of section 6710 is amended by inserting 
     ``($100 in the case of a failure to meet the requirements of 
     section 6104(e)(1)(E))'' after ``$1,000''.
       (C) The section heading of section 6710 is amended by 
     inserting before the period ``; failure by certain health 
     care organizations to disclose availability of annual 
     return''.
       (D) The table of sections for part I of subchapter B of 
     chapter 68 is amended by inserting before the period at the 
     end of the item relating to section 6710 the following: ``; 
     failure by certain health care organizations to disclose 
     availability of annual return''.
       (E) Subparagraph (C) of section 6652(c)(1) is amended by 
     striking ``(e)(1)'' and inserting ``(e)(1) (other than 
     subparagraph (E))''.
       (d) Effective Date.--
       (1) In general.--Except as provided in paragraphs (2) and 
     (3), the amendments made by this section shall take effect on 
     January 1, 1995.
       (2) Requirement of independent board of directors.--
     Subparagraph (C) of section 501(n)(1) of the Internal Revenue 
     Code of 1986, as added by this section, shall take effect on 
     January 1, 1997.
       (3) HMO service requirement.--So much of the amendments 
     made by this section as relate to section 501(n)(2) of such 
     Code, as added by this section, shall take effect on the date 
     of the enactment of this Act.

     SEC. 11402. EXCISE TAXES FOR FAILURE BY TAX-EXEMPT HEALTH 
                   CARE ORGANIZATIONS TO MEET CERTAIN 
                   QUALIFICATION REQUIREMENTS.

       (a) In General.--Chapter 42 (relating to private 
     foundations and certain other tax-exempt organizations) is 
     amended by redesignating subchapter D as subchapter E and by 
     inserting after subchapter C the following new subchapter:
``Subchapter D--Failure By Tax-Exempt Health Care Organizations To Meet 
                   Certain Qualification Requirements

``Sec. 4958. Tax on failure to satisfy section 501(n).
``Sec. 4959. Taxes on excess benefit transactions.
``Sec. 4960. Other definitions.

     ``SEC. 4958. TAX ON FAILURE TO SATISFY SECTION 501(n).

       ``(a) Imposition of Tax.--There is hereby imposed on any 
     applicable tax-exempt health care organization which fails to 
     meet 1 or more of the requirements of section 501(n)(1) 
     during any taxable year a tax equal to the greater of--
       ``(1) $25,000, or
       ``(2) 5 percent of the organization's net investment income 
     for such taxable year.
       ``(b) Payment of Tax.--The tax imposed by this section 
     shall be paid by the organization.
       ``(c) Determination of Net Investment Income.--For purposes 
     of this section--
       ``(1) In general.--The net investment income of an 
     applicable tax-exempt health care organization shall include 
     the net investment income of--
       ``(A) each organization which would be described in 
     subparagraph (A) or (B) of section 509(a)(3) or in section 
     509(a)(4) with respect to such health care organization if 
     such health care organization were described in section 
     509(a)(2), and
       ``(B) each organization which is organized and operated for 
     the benefit of, and which directly or indirectly is 
     controlled by, such health care organization.
       ``(2) Net investment income.--The term `net investment 
     income' has the meaning given such term by section 4940.
       ``(d) Waiver.--If it is established to the satisfaction of 
     the Secretary that--
       ``(1) a failure was due to reasonable cause and not to 
     willful neglect, and
       ``(2) the organization has established safeguards to 
     prevent future such failures (and has taken such additional 
     corrective action as is prescribed by the Secretary by 
     regulations),

     then the tax imposed by subsection (a) (including interest) 
     by reason of such failure shall not be assessed and, if 
     assessed, the assessment shall be abated and, if collected, 
     shall be credited or refunded as an overpayment.

     ``SEC. 4959. TAXES ON EXCESS BENEFIT TRANSACTIONS.

       ``(a) Initial Taxes.--
       ``(1) On the disqualified person.--There is hereby imposed 
     on each excess benefit transaction a tax equal to 25 percent 
     of the excess benefit. The tax imposed by this paragraph 
     shall be paid by any disqualified person referred to in 
     subsection (e)(1) with respect to such transaction.
       ``(2) On the management.--In any case in which a tax is 
     imposed by paragraph (1), there is hereby imposed on the 
     participation of any organization manager in the excess 
     benefit transaction, knowing that it is such a transaction, a 
     tax equal to 10 percent of the excess benefit, unless such 
     participation is not willful and is due to reasonable cause. 
     The tax imposed by this paragraph shall be paid by any 
     organization manager who participated in the excess benefit 
     transaction.
       ``(b) Additional Tax On the Disqualified Person.--In any 
     case in which an initial tax is imposed by subsection (a)(1) 
     on an excess benefit transaction and the excess benefit 
     involved in such transaction is not corrected within the 
     taxable period, there is hereby imposed a tax equal to 200 
     percent of the excess benefit involved. The tax imposed by 
     this subsection shall be paid by any disqualified person 
     referred to in subsection (e)(1) with respect to such 
     transaction.
       ``(c) Excess Benefit Transaction; Excess Benefit.--For 
     purposes of this section--
       ``(1) Excess benefit transaction.--
       ``(A) In general.--The term `excess benefit transaction' 
     means any transaction in which an economic benefit is 
     provided by an applicable tax-exempt health care organization 
     to or for the use of any disqualified person if the value of 
     the economic benefit provided exceeds the value of the 
     consideration (including the performance of services) 
     received for providing such benefit.
       ``(B) Loans and certain private inurement included.--The 
     term `excess benefit transaction' includes--
       ``(i) any loan of money or other extension of credit by an 
     applicable tax-exempt health care organization to or for the 
     use of a disqualified person described in subsection 
     (e)(1)(A)(i), and
       ``(ii) any transaction in which the amount of any economic 
     benefit provided to or for the use of a disqualified person 
     is determined in whole or in part by the gross or net 
     revenues of 1 or more activities of the organization but only 
     if such transaction results in inurement not permitted under 
     paragraph (3) or (4) of section 501(c), as the case may be.
       ``(2) Excess benefit.--
       ``(A) In general.--Except as provided in subparagraph (B), 
     the term `excess benefit' means the excess referred to in 
     paragraph (1)(A).
       ``(B) Loans and private inurement included.--The term 
     `excess benefit' means--
       ``(i) in the case of a loan or extension of credit 
     described in paragraph (1)(B)(i), the amount of the loan or 
     the credit extended, and
       ``(ii) in the case of a transaction described in paragraph 
     (1)(B)(ii), the amount of the inurement.
       ``(3) Exception for organizations subject to private 
     foundation rules.--For purposes of this section, the term 
     `applicable tax-exempt health care organization' shall not 
     include a private foundation (as defined in section 509(a)).
       ``(d) Special Rules.--For purposes of this section--
       ``(1) Joint and several liability.--If more than 1 person 
     is liable for any tax imposed by subsection (a) or subsection 
     (b), all such persons shall be jointly and severally liable 
     for such tax.
       ``(2) Limit for management.--With respect to any 1 excess 
     benefit transaction, the maximum amount of the tax imposed by 
     subsection (a)(2) shall not exceed $10,000.
       ``(e) Other Definitions.--For purposes of this section--
       ``(1) Disqualified person.--The term `disqualified person' 
     means, with respect to any transaction--
       ``(A) any person who was, at any time during the 5-year 
     period ending on the date of such transaction--
       ``(i) an organization manager, or
       ``(ii) an individual (other than an organization manager) 
     in a position to exercise substantial influence over the 
     affairs of the organization,
       ``(B) a member of the family of an individual described in 
     subparagraph (A), and
       ``(C) a 35-percent controlled entity.
       ``(2) Organization manager.--The term `organization 
     manager' means, with respect to any applicable tax-exempt 
     health care organization, any officer, director, or trustee 
     of such organization (or any individual having powers or 
     responsibilities similar to those of officers, directors, or 
     trustees of the organization).
       ``(3) 35-percent controlled entity.--
       ``(A) In general.--The term `35-percent controlled entity' 
     means--
       ``(i) a corporation in which persons described in 
     subparagraph (A) or (B) of paragraph (1) own more than 35 
     percent of the total combined voting power,
       ``(ii) a partnership in which such persons own more than 35 
     percent of the profits interest, and
       ``(iii) a trust or estate in which such persons own more 
     than 35 percent of the beneficial interest.
       ``(B) Constructive ownership rules.--Rules similar to the 
     rules of paragraphs (3) and (4) of section 4946(a) shall 
     apply for purposes of this paragraph.
       ``(4) Family members.--The members of an individual's 
     family shall be determined under section 4946(d); except that 
     such members also shall include the brothers and sisters 
     (whether by the whole or half blood) of the individual and 
     their spouses.
       ``(f) Treatment of Previously Exempt Organizations.--
       ``(1) In general.--For purposes of this section, the status 
     of any organization as an applicable tax-exempt health care 
     organization shall be terminated only if--
       ``(A)(i) such organization notifies the Secretary (at such 
     time and in such manner as the Secretary may by regulations 
     prescribe) of its intent to accomplish such termination, or
       ``(ii) there is a final determination by the Secretary that 
     such status has terminated, and
       ``(B)(i) such organization pays the tax imposed by 
     paragraph (2) (or any portion not abated pursuant to 
     paragraph (3)), or
       ``(ii) the entire amount of such tax is abated pursuant to 
     paragraph (3).
       ``(2) Imposition of tax.--There is hereby imposed on each 
     organization referred to in paragraph (1) a tax equal to the 
     lesser of--
       ``(A) the amount which the organization substantiates by 
     adequate records or other corroborating evidence as the 
     aggregate tax benefit resulting from its exemption from tax 
     under section 501(a), or
       ``(B) the value of the net assets of such organization.
       ``(3) Abatement of tax.--The Secretary may abate the unpaid 
     portion of the assessment of any tax imposed by paragraph 
     (2), or any liability in respect thereof, if the applicable 
     tax-exempt health care organization distributes all of its 
     net assets to 1 or more organizations each of which has been 
     in existence, and described in section 501(c)(3), for a 
     continuous period of at least 60 calendar months. If the 
     distributing organization is described in section 501(c)(4), 
     the preceding sentence shall be applied by treating the 
     reference to section 501(c)(3) as including a reference to 
     section 501(c)(4).
       ``(4) Certain rules made applicable.--Rules similar to the 
     rules of subsections (d), (e), and (f) of section 507 shall 
     apply for purposes of this subsection.

     ``SEC. 4960. OTHER DEFINITIONS.

       ``(a) Applicable Tax-Exempt Health Care Organization.--For 
     purposes of this subchapter, the term `applicable tax-exempt 
     health care organization' means any organization--
       ``(1) the predominant activity of which is the provision of 
     health care services (as defined in section 501(n)(3)), and
       ``(2) which (without regard to any failure to meet any 
     requirement of section 501(n) or any excess benefit) would be 
     described in paragraph (3) or (4) of section 501(c) and 
     exempt from tax under section 501(a).
       ``(b) Taxable Period; Correction.--For purposes of this 
     subchapter--
       ``(1) Taxable period.--The term `taxable period' means, 
     with respect to any excess benefit transaction, the period 
     beginning with the date on which the transaction occurs and 
     ending on the earliest of--
       ``(A) the date of mailing a notice of deficiency under 
     section 6212 with respect to the tax imposed by subsection 
     (a)(1) of section 4959, or
       ``(B) the date on which the tax imposed by such subsection 
     (a)(1) is assessed.
       ``(2) Correction.--The terms `correction' and `correct' 
     mean, with respect to any excess benefit transaction, undoing 
     the excess benefit to the extent possible, establishing 
     safeguards to prevent future such excess benefit, and where 
     fully undoing the excess benefit is not possible, such 
     additional corrective action as is prescribed by the 
     Secretary by regulations.''
       (b) Application of Private Inurement Rule to Tax-Exempt 
     Health Care Organizations Described in Section 501(c)(4).--
     Paragraph (4) of section 501(c) is amended by inserting 
     ``(A)'' after ``(4)'' and by adding at the end the following:
       ``(B) Subparagraph (A) shall not apply to an entity the 
     predominant activity of which is the provision of health care 
     services (as defined in subsection (n)(3)) unless no part of 
     the net earnings of such entity inures to the benefit of any 
     private shareholder or individual.''
       (c) Technical and Conforming Amendments.--
       (1) Subsection (e) of section 4955 is amended--
       (A) by striking ``Section 4945'' in the heading and 
     inserting ``Sections 4945 and 4959'', and
       (B) by inserting before the period ``or an excess benefit 
     for purposes of section 4959''.
       (2) Subsections (a), (b), and (c) of section 4963 are each 
     amended by inserting ``4959,'' after ``4955,''.
       (3) Subsection (e) of section 6213 is amended by inserting 
     ``4959 (relating to private excess benefit),'' before 
     ``4971''.
       (4) Paragraphs (2) and (3) of section 7422(g) are each 
     amended by inserting ``4959,'' after ``4955,''.
       (5) Subsection (b) of section 7454 is amended by inserting 
     ``or whether an organization manager (as defined in section 
     4959(e)(2)) has `knowingly' participated in an excess benefit 
     transaction (as defined in section 4959(c)),'' after 
     ``section 4912(b),''.
       (6) The table of subchapters for chapter 42 is amended by 
     striking the last item and inserting the following:

``Subchapter D. Failure by tax-exempt health care organizations to meet 
              certain qualification requirements.
``Subchapter E. Abatement of first and second tier taxes in certain 
              cases.''

       (d) Effective Dates.--
       (1) Section 501(n) requirements.--The amendments made by 
     this section, to the extent related to section 4958 of the 
     Internal Revenue Code of 1986 (as added by this section), 
     shall take effect on January 1, 1995.
       (2) Excess benefit transaction rules.--
       (A) In general.--Except as provided in subparagraph (B), 
     the amendments made by this section, to the extent related to 
     section 4959 of such Code (as added by this section), shall 
     apply to excess benefit transactions occurring on or after 
     June 30, 1994.
       (B) Binding contracts for personal services.--The 
     amendments referred to in subparagraph (A) shall not apply to 
     any transaction pursuant to any written contract for the 
     performance of personal services which was binding on June 
     29, 1994, and at all times thereafter before such transaction 
     occurred.
       (3) Application of private inurement rule to tax-exempt 
     health care organizations described in section 501(c)(4).--
       (A) In general.--The amendment made by subsection (b) shall 
     apply to inurement occurring on or after June 30, 1994.
       (B) Binding contracts.--The amendment made by subsection 
     (b) shall not apply to any inurement occurring before July 1, 
     1996, pursuant to a written contract which was binding on 
     June 29, 1994, and at all times thereafter before such 
     inurement occurred.

     SEC. 11403. TREATMENT OF NONPROFIT HEALTH CARE ORGANIZATIONS.

       (a) Insurance Provided By Health Maintenance 
     Organizations.--Section 501(m) (relating to certain 
     organizations providing commercial-type insurance not exempt 
     from tax) is amended by adding at the end the following new 
     paragraph:
       ``(6) Certain activities provided by health maintenance 
     organizations not treated as commercial-type insurance.--For 
     purposes of this subsection, the provision of (or the 
     arranging for the provision of) medical care on a prepaid 
     basis by a health maintenance organization shall not be 
     treated as commercial-type insurance if (and only if) such 
     care is--
       ``(A) care provided by such organization to its members at 
     its own facilities through health care professionals who do 
     not provide substantial health care services other than on 
     behalf of such organization,
       ``(B) care provided by a health care professional to a 
     member of such organization on a basis under which 
     substantially all of the risks of the rates of utilization is 
     assumed by the provider of such care, or
       ``(C) care (other than primary care) provided to a member 
     of such organization pursuant to a referral by such 
     organization, or
       ``(D) emergency care provided to a member of such 
     organization at a location outside such member's area of 
     residence.''
       (2) Technical amendments.--
       (A) Paragraph (3) of section 501(m) is amended by striking 
     subparagraph (B) and by redesignating subparagraphs (C), (D), 
     and (E) as subparagraphs (B), (C), and (D), respectively.
       (B) Paragraph (5) of section 501(m) is amended by striking 
     ``paragraph (3)(E)'' and inserting ``paragraph (3)(D)''.
       (b) Treatment of Parent Organizations of Health Care 
     Providers.--Section 509(a) (defining private foundation) is 
     amended by striking ``and'' at the end of paragraph (3), by 
     redesignating paragraph (4) as paragraph (5), and by 
     inserting after paragraph (3) the following new paragraph:
       ``(4) an organization which is organized and operated for 
     the benefit of, and which directly or indirectly controls, an 
     organization described in section 170(b)(1)(A)(iii); and''.
       (c) Consumer Purchasing Cooperatives Exempt From Tax.--
       (1) In general.--Subsection (c) of section 501 (relating to 
     exemption from tax on corporations, certain trusts, etc.) is 
     amended by adding at the end the following new paragraph:
       ``(26)(A) Any consumer purchasing cooperative described in 
     subtitle E of title V of the Guaranteed Health Insurance Act 
     of 1994.
       ``(B) Such a cooperative shall not be exempt from tax 
     pursuant to any provision other than this paragraph.
       ``(C) Such a cooperative shall not be exempt from tax 
     unless--
       ``(i) no part of the net earnings of such cooperative 
     inures to the benefit of any private shareholder or 
     individual,
       ``(ii) no substantial part of the activities of such 
     cooperative is carrying on propaganda, or otherwise 
     attempting, to influence legislation (except as otherwise 
     provided in subsection (h)), and
       ``(iii) such cooperative does not participate in, or 
     intervene in (including the publishing or distributing of 
     statements), any political campaign on behalf of (or in 
     opposition to) any candidate for public office.''
       (2) Certain provisions applicable to organizations 
     described in section 501(c)(3) made applicable to consumer 
     purchasing cooperatives.--Section 501 is amended by 
     redesignating subsection (o) as subsection (p) and by 
     inserting after subsection (n) the following new subsection:
       ``(o) Certain Provisions Made Applicable To Consumer 
     Purchasing Cooperatives.--A consumer purchasing cooperative 
     described in subsection (c)(26) shall be treated--
       ``(1) as described in subsection (c)(3) for purposes of 
     applying subsection (h) (relating to expenditures by public 
     charities to influence legislation), section 4955 (relating 
     to taxes on political expenditures of section 501(c)(3) 
     organizations), and section 4959 (relating to private 
     inurement), and
       ``(2) as described in subsection (h)(4).''
       (d) Effective Date.--The amendments made by this section 
     shall take effect on the date of the enactment of this Act.

     SEC. 11404. TAX TREATMENT OF TAXABLE ORGANIZATIONS PROVIDING 
                   HEALTH INSURANCE AND OTHER PREPAID HEALTH CARE 
                   SERVICES.

       (a) General Rule.--Section 831 is amended by redesignating 
     subsection (c) as subsection (d) and by inserting after 
     subsection (b) the following new subsection:
       ``(c) Treatment of Organizations Providing Health Insurance 
     and Other Prepaid Health Care Services.--
       ``(1) General rule.--Any organization to which this 
     subsection applies shall be taxable under this part in the 
     same manner as if it were an insurance company other than a 
     life insurance company.
       ``(2) Organizations to which subsection applies.--This 
     subsection shall apply to any organization--
       ``(A) which is not exempt from taxation under this 
     subtitle,
       ``(B) which is not taxable as a life insurance company 
     under part I of this subchapter,
       ``(C) which is not an organization to which section 833 
     applies, and
       ``(D) the primary and predominant business activity of 
     which during the taxable year consists of 1 or more of the 
     following:
       ``(i) Issuing accident and health insurance contracts or 
     the reinsuring of risks undertaken by other insurance 
     companies under such contracts.
       ``(ii) Operating as a health maintenance organization.
       ``(iii) Entering into arrangements under which--

       ``(I) fixed payments or premiums are received as 
     consideration for the organization's agreement to provide or 
     arrange for the provision of health care services, regardless 
     of how the health care services are provided or arranged to 
     be provided, and
       ``(II) substantially all of the risks of the rates of 
     utilization of such services is assumed by the provider of 
     such services.

     In the case of an organization which has as a material 
     business activity the issuing of accident and health 
     insurance contracts or the reinsuring of risks undertaken by 
     other insurance companies under such contracts, the 
     administering of accident and health insurance contracts by 
     such organization shall be treated as part of such business 
     activity for purposes of subparagraph (D)(i).''
       (b) Effective Date.--
       (1) In general.--The amendment made by this section shall 
     apply to taxable years beginning after December 31, 1994.
       (2) Transitional rules.--
       (A) Organizations to which paragraph applies.--This 
     paragraph shall apply to any organization to which section 
     831(c) of the Internal Revenue Code of 1986 (as added by 
     subsection (a)) applies for such organization's first taxable 
     year beginning after December 31, 1994; except that this 
     paragraph shall not apply if--
       (i) such organization treated itself as an insurance 
     company taxable under part II of subchapter L of chapter 1 of 
     such Code on its original Federal income tax return for its 
     taxable year beginning in 1992 and for all of its taxable 
     years thereafter beginning before January 1, 1995, or
       (ii) such organization was exempt from tax under chapter 1 
     of such Code for such organization's last taxable year 
     beginning before January 1, 1995.
       (B) Treatment of currently taxable companies.--In the case 
     of any organization to which this paragraph applies--
       (i) the amendments made by this section shall be treated as 
     a change in the method of accounting, and
       (ii) all adjustments required to be taken into account 
     under section 481 of the Internal Revenue Code of 1986 shall 
     be taken into account for such company's first taxable year 
     beginning after December 31, 1994.

     SEC. 11405. ORGANIZATIONS SUBJECT TO SECTION 833.

       (a) In General.--Section 833(c) (relating to organization 
     to which section applies) is amended by adding at the end the 
     following new paragraph:
       ``(4) Treatment as existing blue cross or blue shield 
     organization.--
       ``(A) In general.--Paragraph (2) shall be applied to an 
     organization described in subparagraph (B) as if it were a 
     Blue Cross or Blue Shield organization.
       ``(B) Applicable organization.--An organization is 
     described in this subparagraph if it--
       ``(i) is organized under, and governed by, State laws which 
     are specifically and exclusively applicable to not-for-profit 
     health insurance or health-service type organizations, and
       ``(ii) is not a Blue Cross or Blue Shield organization or 
     health maintenance organization.''
       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years beginning after December 31, 
     1986.

     SEC. 11406. TAX EXEMPTION FOR HIGH-RISK INSURANCE POOLS.

       (a) In General.--Subsection (c) of section 501 (relating to 
     list of exempt organizations) is amended by adding at the end 
     the following new paragraph:
       ``(27) In the case of taxable years beginning before 
     January 1, 1998, any corporation, association, or similar 
     legal entity which is created by any State or political 
     subdivision thereof to establish a risk pool to provide 
     health insurance coverage to any person unable to obtain 
     health insurance coverage in the private insurance market 
     because of health conditions and no part of the net earnings 
     of which inures to the benefit of any private shareholder, 
     member, or individual.''
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to taxable years beginning after December 31, 
     1989.
    Subtitle E--Treatment of Accelerated Death Benefits Under Life 
                          Insurance Contracts

     SEC. 11501. TAX TREATMENT OF ACCELERATED DEATH BENEFITS UNDER 
                   LIFE INSURANCE CONTRACTS.

       (a) General Rule.--Section 101 (relating to certain death 
     benefits) is amended by adding at the end the following new 
     subsection:
       ``(g) Treatment of Certain Accelerated Death Benefits.--
       ``(1) In general.--For purposes of this section, any amount 
     received under a life insurance contract on the life of an 
     insured who is a terminally ill individual shall be treated 
     as an amount paid by reason of the death of such insured.
       ``(2) Necessary conditions.--
       ``(A) In general.--Paragraph (1) shall not apply to any 
     amount received unless--
       ``(i) the total amount received is not less than the 
     present value (determined under subparagraph (B)) of the 
     reduction in the death benefit otherwise payable in the event 
     of the death of the insured, and
       ``(ii) the percentage reduction by reason of the 
     distribution in the cash surrender value of the contract does 
     not exceed the percentage reduction by reason of such 
     distribution in the death benefit payable under the contract.

     For purposes of this subparagraph, any amount referred to in 
     paragraph (1) that is received as a loan or lien shall be 
     treated as a reduction, at the time of receipt, in the death 
     benefit or the cash surrender value to the extent that the 
     death benefit or cash surrender value, respectively, are 
     encumbered (or can become encumbered) by the amount of such 
     loan or lien (or amounts related thereto).
       ``(B) Determination of present value.--The present value of 
     a reduction in the death benefit shall be determined by--
       ``(i) using a discount rate not to exceed the highest rate 
     set forth in subparagraph (C), and
       ``(ii) assuming that the death benefit (or the portion 
     thereof) would have been paid on the date which is 12 months 
     after the date of the certification referred to in paragraph 
     (3).
       ``(C) Rates.--The rates set forth in this subparagraph are 
     the following:
       ``(i) the 90-day Treasury bill yield,
       ``(ii) the rate described as Moody's Corporate Bond Yield 
     Average-Monthly Average Corporates, as published by Moody's 
     Investors Service, Inc., or any successor thereto, for the 
     calendar month ending 2 months before the date on which the 
     rate is determined, and
       ``(iii) the rate used to compute the cash surrender values 
     under the contract during the applicable period plus 1 
     percent per annum.
       ``(D) Liens.--To the extent a lien is imposed against the 
     death benefit in connection with the distribution, the rate 
     of any interest charged may not exceed the highest rate set 
     forth in subparagraph (C), and such lien may not encumber the 
     cash surrender value such that the percentage amount of the 
     cash surrender value that is encumbered exceeds the 
     percentage amount of the death benefit that is encumbered.
       ``(3) Terminally ill individual.--For purposes of this 
     subsection, the term `terminally ill individual' means an 
     individual who the insurer has determined, after receipt of 
     an acceptable certification by a licensed physician, has an 
     illness or physical condition which is reasonably expected to 
     result in death within 12 months after the date of 
     certification.
       ``(4) Exception for business-related policies.--This 
     subsection shall not apply in the case of any amount paid to 
     any taxpayer other than the insured if such taxpayer has an 
     insurable interest with respect to the life of the insured by 
     reason of the insured being a director, officer, or employee 
     of the taxpayer or by reason of the insured being financially 
     interested in any trade or business carried on by the 
     taxpayer.''
       (b) Effective Date.--
       (1) In general.--Except as provided in paragraph (2), the 
     amendment made by subsection (a) shall apply to amounts 
     received after the date of the enactment of this Act.
       (2) Delay in application of discounting rules.--Clause (i) 
     of section 101(g)(2)(A) of the Internal Revenue Code of 1986 
     (as added by this section) shall not apply to any amount 
     received before January 1, 1995.
       (3) Issuance of rider not treated as material change.--For 
     purposes of applying sections 101(f), 7702, and 7702A of the 
     Internal Revenue Code of 1986 to any contract, the issuance 
     of a qualified accelerated death benefit rider (as defined in 
     section 818(g) of such Code (as added by this Act)) shall not 
     be treated as a modification or material change of such 
     contract.

     SEC. 11502. TAX TREATMENT OF COMPANIES ISSUING QUALIFIED 
                   ACCELERATED DEATH BENEFIT RIDERS.

       (a) Qualified Accelerated Death Benefit Riders Treated as 
     Life Insurance.--Section 818 (relating to other definitions 
     and special rules) is amended by adding at the end the 
     following new subsection:
       ``(g) Qualified Accelerated Death Benefit Riders Treated as 
     Life Insurance.--For purposes of this part--
       ``(1) In general.--Any reference to a life insurance 
     contract shall be treated as including a reference to a 
     qualified accelerated death benefit rider on such contract.
       ``(2) Qualified accelerated death benefit riders.--For 
     purposes of this subsection, the term `qualified accelerated 
     death benefit rider' means any rider on a life insurance 
     contract if the only payments under the rider are payments 
     meeting the requirements of section 101(g).''
       (c) Effective Date.--The amendments made by this section 
     shall take effect on January 1, 1995.
                Subtitle F--Employment Status Provisions

     SEC. 11601. EMPLOYMENT STATUS PROPOSAL REQUIRED FROM 
                   DEPARTMENT OF THE TREASURY.

       Not later than January 1, 1996, the Secretary of the 
     Treasury shall submit to the Committee on Ways and Means of 
     the House of Representatives and the Committee on Finance of 
     the Senate a legislative proposal relating to the 
     classification of workers as employees or independent 
     contractors.

     SEC. 11602. INCREASE IN PENALTIES RELATING TO REPORTING OF 
                   PAYMENTS FOR SERVICES.

       (a) Increase in Penalty.--Section 6721(a) (relating to 
     imposition of penalty) is amended by adding at the end the 
     following new paragraph:
       ``(3) Increased penalty for returns involving payments for 
     services.--
       ``(A) In general.--Subject to the overall limitation of 
     paragraph (1), the amount of the penalty under paragraph (1) 
     for any failure with respect to any applicable return shall 
     be equal to the greater of $50 or 5 percent of the amount 
     required to be reported correctly but not so reported.
       ``(B) Exception where substantial compliance.--Subparagraph 
     (A) shall not apply to failures with respect to applicable 
     returns required to be filed by a person during any calendar 
     year if the aggregate amount which is timely and correctly 
     reported on applicable returns filed by the person for the 
     calendar year is at least 97 percent of the aggregate amount 
     which is required to be reported on applicable returns by the 
     person for the calendar year.
       ``(C) Applicable return.--For purposes of this paragraph, 
     the term `applicable return' means any information return 
     required to be filed under--
       ``(i) section 6041(a) but only if such return relates to 
     payments to any person for services performed by such person 
     (other than as an employee), or
       ``(ii) section 6041A(a).''
       (b) Conforming Amendment.--Section 6721(a)(1) is amended by 
     striking ``In'' and inserting ``Except as provided in 
     paragraph (3), in''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to returns the due date for which (without regard 
     to extensions) is more than 30 days after the date of the 
     enactment of this Act.
    Subtitle G--Tax Treatment of Funding of Retiree Health Benefits

     SEC. 11701. POST-RETIREMENT MEDICAL AND LIFE INSURANCE 
                   RESERVES.

       (a) Minimum Period for Working Lives.--Section 419A(c)(2) 
     (relating to additional reserve for post-retirement medical 
     and life insurance benefits) is amended by inserting ``(but 
     not less than 10 years)'' after ``working lives of the 
     covered employees''.
       (b) Separate Accounting.--
       (1) Requirement.--Section 419A(c)(2) is amended by adding 
     at the end the following new flush sentence:

     ``Such reserve shall be maintained as a separate account.''
       (2) Use of reserve for other purposes.--Paragraph (1) of 
     section 4976(b) (defining disqualified benefit) is amended by 
     striking ``and'' at the end of subparagraph (B), by striking 
     the period at the end of subparagraph (C) and inserting ``, 
     and'', and by adding after subparagraph (C) the following new 
     subparagraph:
       ``(D) any payment to which subparagraph (C) does not apply 
     which is out of an account described in section 419A(c)(2) 
     and which is not used to provide a post-retirement medical 
     benefit or life insurance benefit.''
       (c) Effective Dates.--
       (1) In general.--Except as provided in paragraph (2), the 
     amendments made by this section shall apply to contributions 
     paid or accrued after December 31, 1994, in taxable years 
     ending after such date.
       (2) Separate accounting.--The amendments made by subsection 
     (b) shall apply to contributions paid or accrued after the 
     date of the enactment of this Act, in taxable years ending 
     after such date.
   Subtitle H--Excise Taxes on Insured and Self-Insured Health Plans

     SEC. 11801. EXCISE TAXES ON INSURED AND SELF-INSURED HEALTH 
                   PLANS.

       (a) General Rule.--Chapter 34 is amended by adding at the 
     end the following new subchapter:

         ``Subchapter B--Insured and Self-Insured Health Plans


``Sec. 4375. Health insurance and health-related administrative 
              services.
``Sec. 4376. Self-insured health plans.
``Sec. 4377. Definitions and special rules.

     ``SEC. 4375. HEALTH INSURANCE AND HEALTH-RELATED 
                   ADMINISTRATIVE SERVICES.

       ``(a) Imposition of Tax.--There is hereby imposed--
       ``(1) on each taxable health insurance policy, a tax equal 
     to 2 percent of the premiums received under such policy, and
       ``(2) on each amount received for health-related 
     administrative services, a tax equal to 2 percent of the 
     amount so received.
       ``(b) Liability for Tax.--
       ``(1) Health insurance.--The tax imposed by subsection 
     (a)(1) shall be paid by the issuer of the policy.
       ``(2) Health-related administrative services.--The tax 
     imposed by subsection (a)(2) shall be paid by the person 
     providing the health-related administrative services.
       ``(c) Taxable Health Insurance Policy.--For purposes of 
     this section--
       ``(1) In general.--Except as otherwise provided in this 
     section, the term `taxable health insurance policy' means any 
     accident or health insurance policy issued with respect to 
     individuals residing in the United States.
       ``(2) Exemption of certain policies.--The term `taxable 
     health insurance policy' does not include any insurance 
     policy if substantially all of the coverage provided under 
     such policy relates to--
       ``(A) liabilities incurred under workers' compensation 
     laws,
       ``(B) tort liabilities,
       ``(C) liabilities relating to ownership or use of property,
       ``(D) credit insurance, or
       ``(E) such other similar liabilities as the Secretary may 
     specify by regulations.
       ``(3) Special rule where policy provides other coverage.--
     In the case of any taxable health insurance policy under 
     which amounts are payable other than for accident and health 
     coverage, in determining the amount of the tax imposed by 
     subsection (a)(1) on any premium received under such policy, 
     there shall be excluded the amount of the charge for the non-
     accident and health coverage if--
       ``(A) the charge for such non-accident and health coverage 
     is either separately stated in the policy, or furnished to 
     the policyholder in a separate statement, and
       ``(B) such charge is reasonable in relation to the total 
     charges under the policy.

     In any other case, the entire amount of the premium received 
     under such a policy shall be subject to tax under subsection 
     (a)(1).
       ``(4) Treatment of prepaid health coverage arrangements.--
       ``(A) In general.--In the case of any arrangement described 
     in subparagraph (B)--
       ``(i) such arrangement shall be treated as a taxable health 
     insurance policy,
       ``(ii) the payments or premiums referred to in subparagraph 
     (B)(i) shall be treated as premiums received for a taxable 
     health insurance policy, and
       ``(iii) the person referred to in subparagraph (B)(i) shall 
     be treated as the issuer.
       ``(B) Description of arrangements.--An arrangement is 
     described in this subparagraph if under such arrangement--
       ``(i) fixed payments or premiums are received as 
     consideration for any person's agreement to provide or 
     arrange for the provision of accident or health coverage to 
     residents of the United States, regardless of how such 
     coverage is provided or arranged to be provided, and
       ``(ii) substantially all of the risks of the rates of 
     utilization of services is assumed by such person or the 
     provider of such services.
       ``(d) Health-Related Administrative Services.--For purposes 
     of this section, the term `health-related administrative 
     services' means--
       ``(1) the processing of claims or performance of other 
     administrative services in connection with accident or health 
     coverage under a taxable health insurance policy if the 
     charge for such services is not included in the premiums 
     under such policy, and
       ``(2) processing claims, arranging for provision of 
     accident or health coverage, or performing other 
     administrative services in connection with an applicable 
     self-insured health plan (as defined in section 4376(c)) 
     established or maintained by another person.

     ``SEC. 4376. SELF-INSURED HEALTH PLANS.

       ``(a) Imposition of Tax.--In the case of any applicable 
     self-insured health plan, there is hereby imposed a tax for 
     each month equal to 2 percent of the sum of--
       ``(1) the accident and health coverage expenditures for 
     such month under such plan, and
       ``(2) the direct administrative expenditures for such month 
     under such plan.
       ``(b) Liability for Tax.--
       ``(1) In general.--The tax imposed by subsection (a) shall 
     be paid by the plan sponsor.
       ``(2) Plan sponsor.--For purposes of paragraph (1) the term 
     `plan sponsor' means--
       ``(A) the employer in the case of a plan established or 
     maintained by a single employer,
       ``(B) the employee organization in the case of a plan 
     established or maintained by an employee organization,
       ``(C) in the case of--
       ``(i) a plan established or maintained by 2 or more 
     employers or jointly by 1 or more employers and 1 or more 
     employee organizations,
       ``(ii) a multiple employer welfare arrangement, or
       ``(iii) a voluntary employees' beneficiary association 
     described in section 501(c)(9),
     the association, committee, joint board of trustees, or other 
     similar group of representatives of the parties who establish 
     or maintain the plan, or
       ``(D) the cooperative or association described in 
     subsection (c)(2)(F) in the case of a plan established or 
     maintained by such a cooperative or association.
       ``(c) Applicable Self-Insured Health Plan.--For purposes of 
     this section, the term `applicable self-insured health plan' 
     means any plan for providing accident or health coverage if--
       ``(1) any portion of such coverage is provided other than 
     through an insurance policy, and
       ``(2) such plan is established or maintained--
       ``(A) by one or more employers for the benefit of their 
     employees or former employees,
       ``(B) by one or more employee organizations for the benefit 
     of their members or former members,
       ``(C) jointly by 1 or more employers and 1 or more employee 
     organizations for the benefit of employees or former 
     employees,
       ``(D) by a voluntary employees' beneficiary association 
     described in section 501(c)(9),
       ``(E) by any organization described in section 501(c)(6), 
     or
       ``(F) in the case of a plan not described in the preceding 
     subparagraphs, by a multiple employer welfare arrangement (as 
     defined in section 3(40) of Employee Retirement Income 
     Security Act of 1974), a rural electric cooperative (as 
     defined in section 3(40)(B)(iv) of such Act), or a rural 
     telephone cooperative association (as defined in section 
     3(40)(B)(v) of such Act).
       ``(d) Accident and Health Coverage Expenditures.--For 
     purposes of this section--
       ``(1) In general.--The accident and health coverage 
     expenditures of any applicable self-insured health plan for 
     any month is the aggregate expenditures for such month for 
     accident and health coverage provided under such plan to the 
     extent such expenditures are not subject to tax under section 
     4375.
       ``(2) Treatment of reimbursements.--In determining accident 
     and health coverage expenditures during any month of any 
     applicable self-insured health plan, reimbursements (by 
     insurance or otherwise) received during such month for 
     accident and health coverage expenditures shall be taken into 
     account as a reduction in accident and health coverage 
     expenditures.
       ``(3) Certain expenditures disregarded.--Paragraph (1) 
     shall not apply to any expenditure for the acquisition or 
     improvement of land or for the acquisition or improvement of 
     any property to be used in connection with the provision of 
     accident and health coverage which is subject to the 
     allowance under section 167, except that, for purposes of 
     paragraph (1), allowances under section 167 shall be 
     considered as expenditures.
       ``(e) Direct Administrative Expenditures.--For purposes of 
     this section, the term `direct administrative expenditures' 
     means the administrative expenditures under the plan to the 
     extent such expenditures are not subject to tax under section 
     4375. In determining the amount of such expenditures, rules 
     similar to the rules of subsection (d)(3) shall apply.

     ``SEC. 4377. DEFINITIONS AND SPECIAL RULES.

       ``(a) Definitions.--For purposes of this subchapter--
       ``(1) Accident and health coverage.--The term `accident and 
     health coverage' means any coverage which, if provided by an 
     insurance policy, would cause such policy to be a taxable 
     health insurance policy (as defined in section 4375(c).
       ``(2) Insurance policy.--The term `insurance policy' means 
     any policy or other instrument whereby a contract of 
     insurance is issued, renewed, or extended.
       ``(3) Premium.--The term `premium' means the gross amount 
     of premiums and other consideration (including advance 
     premiums, deposits, fees, and assessments) arising from 
     policies issued by a person acting as the primary insurer, 
     adjusted for any return or additional premiums paid as a 
     result of endorsements, cancellations, audits, or 
     retrospective rating.
       ``(4) United States.--The term `United States' includes any 
     possession of the United States.
       ``(b) Treatment of Governmental Entities.--
       ``(1) In general.--For purposes of this subchapter--
       ``(A) the term `person' includes any governmental entity, 
     and
       ``(B) notwithstanding any other law or rule of law, 
     governmental entities shall not be exempt from the taxes 
     imposed by this subchapter except as provided in paragraph 
     (2).
       ``(2) Treatment of exempt governmental programs.--In the 
     case of an exempt governmental program--
       ``(A) no tax shall be imposed under section 4375 on any 
     premium received pursuant to such program or on any amount 
     received for health-related administrative services pursuant 
     to such program, and
       ``(B) no tax shall be imposed under section 4376 on any 
     expenditures pursuant to such program.
       ``(3) Exempt governmental program defined.--For purposes of 
     this subchapter, the term `exempt governmental program' 
     means--
       ``(A) the insurance programs established by parts A and B 
     of title XVIII of the Social Security Act,
       ``(B) medicare part C (as defined in section 59B(g)(2)),
       ``(C) the medical assistance program established by title 
     XIX of the Social Security Act,
       ``(D) any program established by Federal law for providing 
     medical care (other than through insurance policies) to 
     individuals (or the spouses and dependents thereof) by reason 
     of such individuals being--
       ``(i) members of the Armed Forces of the United States, or
       ``(ii) veterans, and
       ``(E) any program established by Federal law for providing 
     medical care (other than through insurance policies) to 
     members of Indian tribes (as defined in section 4(d) of the 
     Indian Health Care Improvement Act).
       ``(c) No Cover Over To Possessions.--Notwithstanding any 
     other provision of law, no amount collected under this 
     subchapter shall be covered over to any possession of the 
     United States.''
       (b) Clerical Amendment.--Chapter 34 is amended by striking 
     the chapter heading and inserting the following:

           ``CHAPTER 34--TAXES ON CERTAIN INSURANCE POLICIES

``Subchapter A. Policies issued by foreign insurers.
``Subchapter B. Insured and self-insured health plans.

         ``Subchapter A--Policies Issued By Foreign Insurers''.

       (c) Effective Date.--The amendments made by this section 
     shall apply with respect to premiums received and expenses 
     incurred after December 31, 1995.
                      Subtitle I--Other Provisions

          PART 1--TAX INCENTIVES FOR HEALTH SERVICES PROVIDERS

     SEC. 11901. NONREFUNDABLE CREDIT FOR CERTAIN PRIMARY HEALTH 
                   SERVICES PROVIDERS.

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

     ``SEC. 23. PRIMARY HEALTH SERVICES PROVIDERS.

       ``(a) Allowance of Credit.--There shall be allowed as a 
     credit against the tax imposed by this chapter for the 
     taxable year an amount equal to the product of--
       ``(1) the number of months during such taxable year--
       ``(A) during which the taxpayer is a qualified primary 
     health services provider, and
       ``(B) which are within the taxpayer's mandatory service 
     period, and
       ``(2) $1,000 ($500 in the case of a qualified practitioner 
     who is not a physician).
       ``(b) Qualified Primary Health Services Provider.--For 
     purposes of this section, the term `qualified primary health 
     services provider' means, with respect to any month, any 
     qualified practitioner who--
       ``(1) has in effect a certification by the Bureau as a 
     provider of primary health services and such certification 
     is, when issued, for a health professional shortage area in 
     which the qualified practitioner is commencing the providing 
     of primary health services,
       ``(2) is providing primary health services full time in the 
     health professional shortage area identified in such 
     certification, and
       ``(3) has not received a scholarship under the National 
     Health Service Corps Scholarship Program or any loan 
     repayments under the National Health Service Corps Loan 
     Repayment Program.

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

``If the recapture                                                     
  event occurs                                    The applicable recap-
  during:                                           ture percentage is:
        Months 1-24...............................................100  
        Months 25-36...............................................75  
        Months 37-48...............................................50  
        Months 49-60...............................................25  
        Month 61 or thereafter.....................................0.  

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

``Sec. 23. Primary health services providers.''

       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     1994.

     SEC. 11902. EXPENSING OF MEDICAL EQUIPMENT.

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

                PART 2--HEALTH CARE WORKFORCE TRUST FUND

     SEC. 11911. HEALTH CARE WORKFORCE TRUST FUND.

       (a) In General.--Subchapter A of chapter 98 (relating to 
     trust fund code) is amended by adding at the end the 
     following new section:

     ``SEC. 9512. HEALTH CARE WORKFORCE TRUST FUND.

       ``(a) Creation of Trust Fund.--There is established in the 
     Treasury of the United States a trust fund to be known as the 
     `Health Care Workforce Trust Fund', consisting of such 
     amounts as may be appropriated or credited to such Trust Fund 
     as provided in this section and section 9602(b).
       ``(b) Transfers to Fund.--There are hereby appropriated to 
     the Health Care Workforce Trust Fund amounts equivalent to 50 
     percent of the net revenues received in the Treasury from the 
     taxes imposed under subchapter B of chapter 34 (relating to 
     taxes on health insurance and health-related administrative 
     services).
       ``(c) Expenditures From Fund.--Amounts in the Health Care 
     Workforce Trust Fund are available to the Secretary of Health 
     and Human Services for making payments under sections 7021 
     and 7041 of the Guaranteed Health Insurance Act of 1994 and 
     for making grants under sections 741 and 848 of the Public 
     Health Service Act.
       ``(d) Net Revenues.--For purposes of this section, the term 
     `net revenues' means the amount estimated by the Secretary 
     based on the excess of--
       ``(1) the taxes received in the Treasury under subchapter B 
     of chapter 34, over
       ``(2) the decrease in the tax imposed by chapter 1 
     resulting from the taxes imposed by such subchapter.''.
       (b) Clerical Amendment.--The table of sections for such 
     subchapter A is amended by adding at the end thereof the 
     following new item:

``Sec. 9512. Health Care Workforce Trust Fund.''.

  PART 3--RECAPTURE OF CERTAIN HEALTH CARE SUBSIDIES RECEIVED BY HIGH-
                           INCOME INDIVIDUALS

     SEC. 11921. RECAPTURE OF CERTAIN HEALTH CARE SUBSIDIES 
                   RECEIVED BY HIGH-INCOME INDIVIDUALS.

       (a) In General.--Subchapter A of chapter 1 is amended by 
     adding at the end thereof the following new part:

   ``PART IX--CERTAIN HEALTH CARE SUBSIDIES RECEIVED BY HIGH-INCOME 
                              INDIVIDUALS

``Sec. 59C. Recapture of certain health care subsidies.

     ``SEC. 59C. RECAPTURE OF CERTAIN HEALTH CARE SUBSIDIES.

       ``(a) Imposition of Recapture Amount.--In the case of an 
     individual, if the modified adjusted gross income of the 
     taxpayer for the taxable year exceeds the threshold amount, 
     such taxpayer shall pay (in addition to any other amount 
     imposed by this subtitle) a recapture amount for such taxable 
     year equal to the aggregate of the Medicare part B recapture 
     amounts (if any) for months during such year that a premium 
     is paid under part B of title XVIII of the Social Security 
     Act for the coverage of the individual under such part.
       ``(b) Medicare Part B Premium Recapture Amount for Month.--
     For purposes of this section, the Medicare part B premium 
     recapture amount for any month is the amount equal to the 
     excess of--
       ``(1) 150 percent of the monthly actuarial rate for 
     enrollees age 65 and over determined for that calendar year 
     under section 1839(b) of the Social Security Act, over
       ``(2) the total monthly premium under section 1839 of the 
     Social Security Act (determined without regard to subsections 
     (b) and (f) of section 1839 of such Act).
       ``(c) Phasein of Recapture Amount.--
       ``(1) In general.--If the modified adjusted gross income of 
     the taxpayer for any taxable year exceeds the threshold 
     amount by less than $15,000, the recapture amount imposed by 
     this section for such taxable year shall be an amount which 
     bears the same ratio to the recapture amount which would (but 
     for this subsection) be imposed by this section for such 
     taxable year as such excess bears to $15,000.
       ``(2) Joint returns.--If a recapture amount is determined 
     separately for each spouse filing a joint return, paragraph 
     (1) shall be applied by substituting `$30,000' for `$15,000' 
     each place it appears.
       ``(d) Other Definitions and Special Rules.--For purposes of 
     this section--
       ``(1) Threshold amount.--The term `threshold amount' 
     means--
       ``(A) except as otherwise provided in this paragraph, 
     $90,000,
       ``(B) $115,000 in the case of a joint return, and
       ``(C) zero in the case of a taxpayer who--
       ``(i) is married (as determined under section 7703) but 
     does not file a joint return for such year, and
       ``(ii) does not live apart from his spouse at all times 
     during the taxable year.
       ``(2) Modified adjusted gross income.--The term `modified 
     adjusted gross income' means adjusted gross income--
       ``(A) determined without regard to sections 135, 911, 931, 
     and 933, and
       ``(B) increased by the amount of interest received or 
     accrued by the taxpayer during the taxable year which is 
     exempt from tax.
       ``(3) Joint returns.--In the case of a joint return--
       ``(A) the recapture amount under subsection (a) shall be 
     the sum of the recapture amounts determined separately for 
     each spouse, and
       ``(B) subsections (a) and (c) shall be applied by taking 
     into account the combined modified adjusted gross income of 
     the spouses.
       ``(4) Coordination with other provisions.--
       ``(A) Treated as tax for subtitle f.--For purposes of 
     subtitle F, the recapture amount imposed by this section 
     shall be treated as if it were a tax imposed by section 1.
       ``(B) Not treated as tax for certain purposes.--The 
     recapture amount imposed by this section shall not be treated 
     as a tax imposed by this chapter for purposes of 
     determining--
       ``(i) the amount of any credit allowable under this 
     chapter, or
       ``(ii) the amount of the minimum tax under section 55.
       ``(C) Treated as payment for medical insurance.--The 
     recapture amount imposed by this section shall be treated as 
     an amount paid for insurance covering medical care, within 
     the meaning of section 213(d).''
       (b) Reporting Requirement.--
       (1) Paragraph (1) of section 6050F(a) (relating to returns 
     relating to social security benefits) is amended by striking 
     ``and'' at the end of subparagraph (B) and by inserting after 
     subparagraph (C) the following new subparagraph:
       ``(D) the number of months during the calendar year for 
     which a premium was paid under part B of title XVIII of the 
     Social Security Act for the coverage of such individual under 
     such part, and''.
       (2) Paragraph (2) of section 6050F(b) is amended to read as 
     follows:
       ``(2) the information required to be shown on such return 
     with respect to such individual.''
       (3) Subparagraph (A) of section 6050F(c)(1) is amended by 
     inserting before the comma ``and in the case of the 
     information specified in subsection (a)(1)(D)''.
       (4) The heading for section 6050F is amended by inserting 
     ``AND MEDICARE PART B COVERAGE'' before the period.
       (5) The item relating to section 6050F in the table of 
     sections for subpart B of part III of subchapter A of chapter 
     61 is amended by inserting ``and Medicare part B coverage'' 
     before the period.
       (c) Waiver of Certain Estimated Tax Penalties.--No addition 
     to tax shall be imposed under section 6654 of the Internal 
     Revenue Code of 1986 (relating to failure to pay estimated 
     income tax) for any period before April 16, 1998, with 
     respect to any underpayment to the extent that such 
     underpayment resulted from section 59C(a) of the Internal 
     Revenue Code of 1986, as added by this section.
       (d) Clerical Amendment.--The table of parts for subchapter 
     A of chapter 1 is amended by adding at the end thereof the 
     following new item:

``Part IX. Certain health care subsidies received by high-income 
              individuals.''

       (e) Effective Date.--The amendments made by this section 
     shall apply to periods after December 31, 1996, in taxable 
     years ending after such date.
TITLE XII--AMENDMENTS TO THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 
                                  1974

     SEC. 12001. CONFORMING AMENDMENTS TO DEFINITIONS.

       (a) Moving Definition of Group Health Plan.--Subtitle B of 
     title I of such Employee Retirement Income Security Act of 
     1974 is amended--
       (1) in section 607 (29 U.S.C. 1167), by striking paragraph 
     (1);
       (2) by striking section 3(41) commencing with ``(41) 
     Single-employer plan.--''; and
       (3) in section 3 (29 U.S.C. 1002) (as amended by paragraph 
     (2)), by adding at the end the following new paragraph:
       ``(42) The term ``group health plan'' means an employee 
     welfare benefit plan providing medical care (as defined in 
     section 213(d) of the Internal Revenue Code of 1986) to 
     participants or beneficiaries, directly or through insurance, 
     reimbursement, or otherwise.''.
       (b) Clarification of Interrelationship of ERISA Guaranteed 
     Health Insurance Act of 1994.--Section 3(42) of such Act (as 
     amended by subsection (a)) is amended by adding at the end 
     the following new sentence: ``Such term includes a health 
     plan (within the meaning of section 5504(4) of the Guaranteed 
     Health Insurance Act of 1994 (as of the date of the enactment 
     of such Act) but only to the extent such plan is an employee 
     welfare benefit plan.''.
       (c) Other Definitions.--Section 3 of the Employee 
     Retirement Income Security Act of 1974 (29 U.S.C. 1002) is 
     amended--
       (1) by adding at the end the following new paragraphs:
       ``(43) The term `insured' means, with respect to a group 
     health plan, a group health plan insofar as the plan is 
     funded through the purchase of one or more contracts of 
     health insurance, including any hospital or medical service 
     policy or certificate, hospital or medical service plan 
     contract, or health maintenance organization contract.
       ``(44) The term `self-insured' means, with respect to a 
     group health plan, a group health plan insofar as the plan is 
     funded in a manner other than through the purchase of one or 
     more policies or contracts described in paragraph (42).
       ``(45) The term `carrier' has the meaning provided in 
     section 5504(2) of the Guaranteed Health Insurance Act of 
     1994 (as of the date of the enactment of such Act).
       ``(46) The term `third party contractor' means, in 
     connection with a group health plan, any person (other than a 
     health plan sponsor with respect to the plan) who--
       ``(A) administers or processes payments made under the plan 
     pursuant to requests for payment for items and services but 
     is not the provider of the items and services, or
       ``(B) carries out any other duty of the health plan sponsor 
     under a direct or indirect contractual arrangement with the 
     health plan sponsor, other than providing the items and 
     services.''.

     SEC. 12002. REPORTING AND DISCLOSURE REQUIREMENTS FOR GROUP 
                   HEALTH PLANS.

       (a) In General.--Part 1 of subtitle B of title I of the 
     Employee Retirement Income Security Act of 1974 (29 U.S.C. 
     1021 et seq.) is amended--
       (1) by redesignating section 111 as section 112; and
       (2) by inserting after section 110 the following new 
     section:


                 ``special rules for group health plans

       ``Sec. 111. (a) In General.--Rules issued by the Secretary 
     under this part with respect to group health plans shall be 
     consistent with the purposes of this title and the Guaranteed 
     Health Insurance Act of 1994.
       ``(b) Expeditious Reporting and Disclosure.--The special 
     rules provided under subsection (a) may include rules 
     providing for--
       ``(1) reductions in the periods of time referred to in this 
     part,
       ``(2) increases in the frequency of reports and disclosures 
     required under this part, and
       ``(3) such other changes in the provisions of this part as 
     may result in more expeditious reporting and disclosure of 
     group health plan terms and changes in such terms to the 
     Secretary and to plan participants and beneficiaries,
     to the extent that the Secretary determines that the rules 
     described in this subsection are necessary to ensure timely 
     reporting and disclosure of information consistent with the 
     purposes of this title and the Guaranteed Health Insurance 
     Act of 1994 as they relate to group health plans.
       ``(c) Additional Requirements.--The special rules provided 
     under subsection (a) may include rules providing for 
     reporting and disclosure of additional information and for 
     reporting and disclosure at more frequent intervals--
       ``(1) to the Secretary, and
       ``(2) to participants and beneficiaries,
     to the extent necessary to effectively carry out this title 
     with respect to group health plans and in a manner that is 
     consistent with the Guaranteed Health Insurance Act of 
     1994.''.
       (b) Clerical Amendment.--The table of contents in section 1 
     of such Act is amended by striking the item relating to 
     section 111 and inserting the following new items:

``Sec. 111. Special rules for group health plans.
``Sec. 112. Effective date.''

     SEC. 12003. AMENDMENTS TO ENFORCEMENT PROVISIONS OF ERISA.

       (a) Improvements in Enforcement.--
       (1) Recovery of damages for failure to provide benefits as 
     required under a health plan.--
       (A) In general.--Section 502(c) of the Employee Retirement 
     Income Security Act of 1974 (29 U.S.C. 1132(c)) is amended by 
     adding at the end the following new paragraph:
       ``(5)(A) In the case of any act or failure to act by a 
     group health plan or the plan sponsor in violation of the 
     terms of the plan or this title, the plan, the plan sponsor, 
     and the carrier (in the case of an insured plan), together 
     with each third party contractor (if any) whose act or 
     failure to act constitutes or contributes to the violation, 
     shall be jointly and severally liable to any plaintiff 
     described in subsection (a)(9) aggrieved by such violation 
     for appropriate relief, including actual, compensatory, and 
     punitive damages and equitable relief.
       ``(B) Nothing in the Guaranteed Health Insurance Act of 
     1994 shall be construed as limiting any right or remedy 
     provided under this title in connection with a group health 
     plan.''.
       (B) Standing of sponsors and plans in actions for failure 
     to meet requirements.--
       (i) In general.--Section 502(a) of such Act (29 U.S.C. 
     1132(a)) is amended--

       (I) in paragraph (7), by striking ``or'' at the end;
       (II) in paragraph (8), by striking the period and inserting 
     ``; or''; and
       (III) by inserting after paragraph (8) the following new 
     paragraph:

       ``(9) in the case of a group health plan--
       ``(A) by a participant or beneficiary, or by the plan 
     sponsor (or, in the case of a self-insured plan, by any 
     entity with a right to bring action on behalf of the plan), 
     for the relief provided under subsection (c)(5), or
       ``(B) by the Secretary, on behalf of a participant or 
     beneficiary, for the relief provided under subsection 
     (c)(5).''.
       (ii) Conforming amendment.--Section 502(e)(1) of such Act 
     (29 U.S.C. 1132(e)(1)) is amended--

       (I) in the first sentence, by striking ``subsection 
     (a)(1)(B) of this section'' and inserting ``paragraph (1)(A) 
     (with respect to relief under subsection (c)(5)), paragraph 
     (1)(B), paragraph (7), or paragraph (9) of subsection (a)''; 
     and
       (II) in the second sentence, by striking ``paragraphs 
     (1)(B) and (7)'' and insert ``paragraphs (1)(A) (with respect 
     to relief under subsection (c)(5)), paragraph (1)(B), 
     paragraph (7), and paragraph (9)''.

       (2) Actions for violations of statutory requirements.--
     Section 502(a)(1)(B) of such Act (29 U.S.C. 1132(a)(1)(B)) is 
     amended by inserting ``or the provisions of this title'' 
     after ``plan'' each place it appears.
       (3) Actions by plans against fiduciaries.--Section 
     502(a)(2) of such Act (29 U.S.C. 1132(a)(2)) is amended by 
     striking ``beneficiary or fiduciary'' and inserting ``a 
     beneficiary, a fiduciary, a plan sponsor of a group health 
     plan, or, in the case of a self-insured group health plan, 
     any entity with a right to bring action on behalf of the 
     plan''.
       (b) Attorney's Fees and Costs of Action.--Section 502(g) of 
     such Act (29 U.S.C. 1132(g)) is amended--
       (1) in paragraph (1), by inserting ``or (3)'' after 
     ``paragraph (2)''; and
       (2) by adding at the end the following new paragraph:
       ``(3) In any action or settlement proceeding under this 
     title with respect to a group health plan by a participant or 
     beneficiary under such plan, the court shall award the 
     plaintiff reasonable attorney's fees (at generally prevailing 
     hourly rates), reasonable expert witness fees, and other 
     reasonable costs.''.
       (c) Civil Money Penalties for Denial or Delay in Providing 
     Group Health Plan Benefits.--
       (1) In general.--Section 502(c) of such Act (as amended by 
     the preceding provisions of this section) is further amended 
     by adding at the end the following new paragraph:
       ``(6) Civil money penalties for denial or delay in 
     providing health plan benefits.--The Secretary may assess a 
     civil penalty against any group health plan, the plan sponsor 
     of such plan, or the carrier (in the case of an insured plan) 
     for unreasonable denial or delay in the provision of items or 
     services, or payment therefor, and against any third-party 
     contractor whose act or failure to act constitutes or 
     contributes to the denial or delay, in an amount not to 
     exceed--
       ``(A) $25,000 per violation, or $75,000 per violation in 
     the case of a finding of bad faith on the part of the liable 
     party, and
       ``(B) in the case of a finding of a pattern or practice of 
     such violations engaged in by the liable party, $1,000,000 in 
     addition to the total amount of penalties assessed under 
     subparagraph (A) with respect to such violations.

     For purposes of subparagraph (A), each violation with respect 
     to any single individual shall be treated as a separate 
     violation.''.
       (2) Conforming amendment.--Section 502(a)(6) of such Act 
     (29 U.S.C. 1132(a)(6)) is amended by striking ``subsection 
     (c)(2) or (i) or (l)'' and inserting ``subsection (c)(2), 
     (c)(6), (i), or (l)''.
       (3) Effective date.--The amendments made by this subsection 
     shall apply with respect to violations occurring on or after 
     the date of the enactment of this Act.

     SEC. 12004. EXEMPTIONS FROM ERISA PREEMPTION.

       (a) In General.--Section 514(b) of the Employee Retirement 
     Income Security Act of 1974 (29 U.S.C. 1144) is amended--
       (1) by amending paragraph (5) to read as follows:
       ``(5) Subsection (a) shall not apply to the Hawaii Prepaid 
     Health Care Act.''; and
       (2) by adding at the end the following new paragraphs:
       ``(9) Subsection (a) shall not apply to any provision of 
     State law to the extent such provision implements a State 
     single-payer system pursuant to subtitle A of title IV of the 
     Guaranteed Health Insurance Act of 1994 (including the 
     imposition of nondiscriminatory taxes in connection with such 
     a system consistent with the requirements of such subtitle).
       ``(10) Subsection (a) shall not apply to any provision of 
     State law to the extent such provision provides for a managed 
     competition program under subtitle B of title IV of the 
     Guaranteed Health Insurance Act of 1994 (including the 
     imposition of nondiscriminatory taxes in connection with such 
     a program consistent with the requirements of such subtitle).
       ``(11) Subsection (a) shall not apply to any provision of 
     State law implementing a State provider payment system under 
     subtitle C of title IV of the Guaranteed Health Insurance Act 
     of 1994.''.
       (b) Temporary Transitional Rules.--
       (1) In general.--Section 514(b) of such Act (29 U.S.C. 
     1144(b)) (as amended by subsection (a)) is further amended by 
     adding at the end the following new paragraphs:
       ``(12)(A) Except as provided in subparagraphs (C) and (D), 
     subsection (a) shall not apply to any provision of State law 
     described in subparagraph (B) if there is in effect an 
     exemption under this paragraph granted to the State by the 
     Secretary under section 12004(b)(2) of the Guaranteed Health 
     Insurance Act of 1994 with respect to such provision.
       ``(B) A provision of State law is described in this 
     subparagraph if such provision is a part of a program of 
     comprehensive health care reform adopted by the State before 
     the date of the enactment of the Guaranteed Health Insurance 
     Act of 1994 under which employers are obligated to make 
     contributions on behalf of employees and their families to 
     group health plans providing comprehensive health benefit 
     coverage for such employees and their families.
       ``(C) In any case in which the program referred to in 
     subparagraph (A) includes a tax, subparagraph (A) shall not 
     apply with respect to the provision of State law referred to 
     in subparagraph (A) unless such tax is nondiscriminatory.
       ``(D) Subparagraph (A) shall not at any time apply in the 
     case of any plan sponsor of a group health plan if such plan 
     and plan sponsor would at such time be in compliance with the 
     applicable requirements of the Guaranteed Health Insurance 
     Act of 1994 if the provisions of such Act were in effect and 
     fully implemented at such time.
       ``(E) This paragraph shall cease to be effective January 1, 
     1999.
       ``(13)(A) Subsection (a) shall not apply to any provision 
     of State law described in subparagraph (B) if there is in 
     effect an exemption under this paragraph granted to the State 
     by the Secretary under section 12004(b)(2) of the Guaranteed 
     Health Insurance Act of 1994 with respect to such provision.
       ``(B) A provision of State law is described in this 
     subparagraph if such provision is part of a program 
     consisting of a comprehensive legislative effort enacted by 
     the State to achieve full implementation of the requirements 
     of the Guaranteed Health Insurance Act of 1994, and--
       ``(i) such program has the effect of imposing requirements 
     in relation to employees, employers, and group health plans 
     that the Secretary finds would have the effect of imposing 
     (under the State law) requirements which would be imposed 
     under the Guaranteed Health Insurance Act of 1994, in 
     relation to such employees, employers, and plans, if such Act 
     were in effect and fully implemented,
       ``(ii) any tax included in such program is 
     nondiscriminatory, and
       ``(iii) such program does not, directly or indirectly, 
     discriminate against an individual on the basis of race, 
     national origin, religion, gender, sexual orientation, 
     language, socio-economic status, age, status of an eligible 
     individual as a citizen of the United States, health status, 
     or anticipated need for health services.
       ``(C) This paragraph shall cease to be effective January 1, 
     1999.
       ``(14)(A) Subsection (a) shall not apply to any provision 
     of State law described in subparagraph (B) if there is in 
     effect an exemption under this paragraph granted to the State 
     by the Secretary under section 12004(b)(2) of the Guaranteed 
     Health Insurance Act of 1994 with respect to such provision.
       ``(B) A provision of State law is described in this 
     subparagraph to the extent such provision provides for 
     transfer of financial responsibility for workers' 
     compensation medical benefits to certified health plans (as 
     defined in section 2(2) of the Guaranteed Health Insurance 
     Act of 1994 (as of the date of the enactment of such Act)) if 
     there is in effect an exemption granted to the State by the 
     Secretary of Labor under this section with respect to such 
     provision.
       ``(C) This paragraph shall cease to be effective 2 years 
     after the date on which the Commission on Integration of 
     Workers' Compensation Medical Benefits submits its report to 
     the President and to the Congress under section 13041 of the 
     Guaranteed Health Insurance Act of 1994.''.
       (2) Exemption Procedure.--
       (A) Requirements.--The Secretary of Labor shall grant to a 
     State an exemption under paragraph (12), (13), or (14) of 
     section 514(b) of the Employee Retirement Income Security Act 
     of 1974 with respect to a provision described in such 
     paragraph if--
       (i) an application for such exemption with respect to such 
     provision has been duly filed with the Secretary of Labor by 
     the State in complete form in accordance with such procedures 
     as such Secretary may prescribe, and
       (ii) the Secretary of Labor finds that such exemption is--

       (I) administratively feasible,
       (II) not adverse to the interests of the individuals 
     covered under certified health plans affected by the 
     exemption, and
       (III) protective of the rights and benefits of the 
     individuals covered under such certified health plans.

     An exemption granted under this subparagraph with respect to 
     any provision of State law shall terminate at such time as 
     any requirement of this Act which is effectively implemented 
     by such provision takes effect.
       (B) Initial review.--Within 40 days after receipt of each 
     application for exemption, the Secretary of Labor shall--
       (i) complete an initial review of the application,
       (ii) determine whether additional information is needed 
     from the State and notify the State in writing of such 
     determination, and
       (iii) issue a preliminary opinion concerning the likelihood 
     that the application will be approved.
       (3) Decision.--The Secretary of Labor shall issue his or 
     her decision on each application for an exemption under this 
     paragraph within 60 days after the later of--
       (A) the date of the his or her receipt of the application, 
     or
       (B) the date on which such Secretary receives the State's 
     response to any notification of need for additional 
     information made by such Secretary pursuant to paragraph 
     (2)(B)(ii).

     The decision of the Secretary of Labor shall be final, 
     subject to reconsideration and review under paragraph (3).
       (4) Reconsideration and Review.--
       (A) Petitions for reconsideration.--
       (i) In general.--Any State dissatisfied with the decision 
     of the Secretary of Labor decision under paragraph (2) may, 
     within 60 days after it has been notified of such decision, 
     file a petition with such Secretary for reconsideration of 
     the State's application under this paragraph (2). Within 30 
     days after receipt of such a petition, such Secretary shall 
     notify the State of the time and place at which a hearing 
     will be held for the purpose of reconsidering such 
     application. Such hearing shall be held not less than 20 days 
     nor more than 60 days after the date notice of such hearing 
     is furnished to such State, unless such Secretary and such 
     State agree in writing to holding the hearing at another 
     time. Such Secretary shall affirm or reverse the original 
     decision within 60 days of the conclusion of the hearing.
       (ii) No stays pending reconsideration.--Action pursuant to 
     a decision of the Secretary of Labor under paragraph (2) 
     shall not be stayed pending reconsideration under clause (i).
       (B) Court review.--
       (i) In general.--Any State which is dissatisfied with the 
     final decision of the Secretary of Labor on such State's 
     application under this subsection, as affirmed after 
     reconsideration under subparagraph (A), may, within 60 days 
     after it has been notified of the action of such Secretary 
     under subparagraph (A), file with the United States court of 
     appeals for the circuit in which such State is located a 
     petition for review of such decision. A copy of the petition 
     shall be forthwith transmitted by the clerk of the court to 
     such Secretary. Such Secretary thereupon shall file in the 
     court the record of the proceedings on which such Secretary 
     based the decision, as affirmed under subparagraph (A).
       (ii) Procedure.--The findings of fact by the Secretary of 
     Labor, if supported by substantial evidence, shall be 
     conclusive; but the court, for good cause shown, may remand 
     the case to such Secretary to take further evidence, and such 
     Secretary may thereupon make new or modified findings of fact 
     and may modify such Secretary's previous action, and shall 
     certify to the court the transcript and record of the further 
     proceedings. Such new or modified findings of fact shall 
     likewise be conclusive if supported by substantial evidence.
       (iii) Jurisdiction and review.--The court shall have 
     jurisdiction to affirm the action of the Secretary of Labor 
     or to set it aside. The judgment of the court shall be 
     subject to review by the Supreme Court of the United States 
     upon certiorari or certification as provided in section 1254 
     of title 28, United States Code.
       (c) Temporary Rules Governing Preemption of Certain Laws of 
     the State of New York.--
       (1) In general.--Section 514(b) of such Act (29 U.S.C. 
     1144(b)) (as amended by subsections (a) and (b)) is further 
     amended by adding at the end the following new paragraph:
       ``(15)(A) Except as provided in subparagraphs (B), (D), 
     (E), and (G), subsection (a) shall not apply to the following 
     provisions of the law of the State of New York:
       ``(i) subdivisions 1(b) and 4(e) of section 2807-c of the 
     Public Health Law (relating to 13 percent surcharge);
       ``(ii) subdivision 1(c) of section 2807-c of the Public 
     Health Law (relating to uniform hospital charges);
       ``(iii) subdivision 2-a of section 2807-c of the Public 
     Health Law (relating to the variable surcharge for HMOs);
       ``(iv) subdivision 14 of section 2807-c of the Public 
     Health Law (relating to basic percentage allowances for bad 
     debt and charity care);
       ``(v) subdivision 14-b of section 2807-c of the Public 
     Health Law (relating to health care services allowances);
       ``(vi) subdivision 14-c of section 2807-c of the Public 
     Health Law (relating to further allowances for financially 
     distressed hospitals); and
       ``(vii) section 18 of chapter 266 of the laws of 1986, as 
     amended (relating to excess malpractice insurance 
     adjustments.
       ``(B) Except as provided in subparagraph (C), nothing in 
     subparagraph (A) shall be construed to exempt from subsection 
     (a)--
       ``(i) any State tax law relating to employee benefit plans, 
     or
       ``(ii) any provision referred to in subparagraph (A) to the 
     extent that any law of the State of New York appropriates 
     amounts based on amounts collected by the State under such 
     provision for any purpose other than carrying out the 
     programs with respect to which the provisions described in 
     subparagraph (A) apply.
       ``(C) Notwithstanding subparagraph (B), subsection (a) 
     shall not apply to any provision of the law of the State of 
     New York to the extent that such provision constitutes--
       ``(i) an HMO surcharge of the type provided for under 
     subdivision 2-a of such section 2807-c (as in effect on 
     February 2, 1993), or
       ``(ii) an allowance, of the type provided for under the 
     provisions referred to in subparagraph (A) (as so in effect), 
     for bad debts, charity care, health care services, or excess 
     malpractice insurance,

     but only if the law of such State appropriates or allocates 
     amounts based on and equivalent to amounts collected by the 
     State under such provision solely for the purpose of carrying 
     out one or more programs with respect to which the provisions 
     described in subparagraph (A) apply.
       ``(D) Subsection (a) shall apply to any provision of the 
     law of the State of New York to the extent that such 
     provision constitutes a surcharge of the type provided for 
     under subdivisions 1(b) and 4(e) of section 2807-c of the 
     Public Health Law of the State of New York (as in effect on 
     February 2, 1993) unless such provision provides for use of 
     amounts collected under such provision solely for the purpose 
     of carrying out one or more programs with respect to which 
     the provisions described in subparagraph (A) apply.
       ``(E) Nothing in subparagraph (A) shall be construed to 
     exempt from subsection (a) any amendment of any provision 
     referred to in subparagraph (A) enacted on or after February 
     2, 1993, to the extent it provides for more than the 
     effective administration of such provisions as in effect on 
     such date, unless such amendment constitutes only a change in 
     the methodology of determining payments to hospitals and 
     would result in--
       ``(i) a surcharge described in subparagraph (C)(i) of not 
     more than 9 percent with respect to which the requirements of 
     subparagraph (C) are met,
       ``(ii) an allowance described in subparagraph (C)(ii) which 
     does not exceed in the aggregate a Statewide average of not 
     more than 10 percent and with respect to which the 
     requirements of subparagraph (C) are met, or
       ``(iii) a surcharge described in subparagraph (D) of not 
     more than 13 percent with respect to which the requirements 
     of subparagraph (D) are met.
       ``(F) Subsection (a) shall not apply to any amendment to 
     chapter 2 of the laws of 1988 of the State of New York, as 
     amended, to the extent that such amendment extends the period 
     for which the provisions referred to in subparagraph (A) are 
     in effect.
       ``(G) Notwithstanding subparagraph (A), parts 1 and 4 of 
     this subtitle, and the preceding sections of this part to the 
     extent they govern matters which are governed by the 
     provisions of such parts 1 and 4, shall supersede the 
     provisions described in subparagraph (A) (as in effect on or 
     after February 2, 1993), but the Secretary may enter into 
     cooperative arrangements under this subparagraph and section 
     506 with officials of the State of New York to assist them in 
     effectuating the policies of such provisions which are 
     superseded by such parts 1 and 4 and the preceding sections 
     of this part.
       ``(H) Subsection (a) shall apply to any provision of the 
     law of the State of New York to the extent that such 
     provision requires an entity which may be deemed to be 
     engaged in the business of insurance under paragraph (2) 
     (including a health maintenance organization) to provide open 
     enrollment and community rating (including premium 
     adjustments for the purpose of risk adjustment).
       ``(I) References in this paragraph to provisions of the law 
     of the State of New York shall be deemed references to such 
     provisions as in effect August 1, 1993.
       ``(J) This paragraph shall not apply to any provision of 
     the law of the State of New York to the extent such provision 
     applies with respect to residents of the area described in 
     the second sentence of section 4301 of the Guaranteed Health 
     Insurance Act of 1994.''.
       (d) Treatment of Consumer Purchasing Cooperatives.--Section 
     514(b)(6) of such Act (29 U.S.C. 1144(b)(6)) is amended to 
     read as follows:
       ``(6) Subsection (a) shall not apply with respect to any 
     provision of State law to the extent that such provision 
     implements a consumer purchasing cooperative pursuant to 
     title V of the Guaranteed Health Insurance Act of 1994.''.
       (e) Effective Dates.--
       (1) In general.--Except as provided in this subsection, the 
     amendments made by subsection (a) shall take effect on the 
     date of the enactment of this Act.
       (2) Effective date and sunset of new york rule.--Section 
     514(b)(13) of the Employee Retirement Income Security Act of 
     1974 (added by subsection (b)) shall cease to be effective 2 
     years after the date of the enactment of this Act. 
     Subparagraph (H) of such section 514(b)(13) shall apply with 
     respect to provisions of State law in effect as of April 1, 
     1993.
       (3) Effective date of consumer purchasing cooperative 
     rule.--The amendment made by subsection (c) shall take effect 
     January 1, 1997.

     SEC. 12005. TRANSITIONAL CONTINUATION COVERAGE REQUIREMENT 
                   FOR GROUP HEALTH PLANS.

       Paragraph (2) of section 602 of the Employee Retirement 
     Income Security Act of 1974 (29 U.S.C. 1162(2)) is amended by 
     adding at the end the following new sentence: ``In the case 
     of an individual whose period of coverage under this 
     paragraph would (but for this sentence) end after the date of 
     the enactment of the Guaranteed Health Insurance Act of 1994 
     and before January 1, 1999, such period shall in no event 
     terminate by reason of this paragraph before January 1, 
     1999.''.

     SEC. 12006. COVERAGE OF PEDIATRIC VACCINES AND WELL-CHILD 
                   SERVICES UNDER GROUP HEALTH PLANS.

       (a) In General.--Section 609(d) of the Employee Retirement 
     Income Security Act of 1974 (29 U.S.C. 1167(d)) is amended to 
     read as follows:
       ``(f) Coverage of Costs of Pediatric Vaccine and Well-Child 
     Services for Group Health Plans.--
       ``(1) Maintenance of vaccine coverage.--A group health plan 
     may not reduce its coverage of the costs of pediatric 
     vaccines (as defined under section 1928(h)(6) of the Social 
     Security Act) below the coverage it provided as of May 1, 
     1993.
       ``(2) Requirement for coverage of immunizations and well-
     child services.--Each group health plan shall provide 
     coverage of the following services without deductible, 
     coinsurance, or any other form of cost-sharing:
       ``(A) All vaccines on the list described in section 1928(e) 
     of the Social Security Act.
       ``(B) Well-child services described in section 
     1928(f)(2)(B) of such Act.''.
       (b) Effective Date.--
       (1) In general.--The amendment made by this section shall 
     take effect on the date of the enactment of this Act.
       (2) Plan amendments not required until January 1, 1995.--
     Any amendment to a plan required to be made by the amendment 
     made by this section shall not be required to be made before 
     the first plan year beginning on or after January 1, 1995.

     SEC. 12007. ADDITIONAL AMENDMENTS RELATING TO GROUP HEALTH 
                   PLANS.

       (a) Technical Corrections.--Effective as if included in the 
     enactment of the Omnibus Budget Reconciliation Act of 1993--
       (1) Subsection (a)(2)(B)(ii) of section 609 of the Employee 
     Retirement Income Security Act of 1974 is amended by striking 
     ``section 13822'' and inserting ``section 13623''.
       (2) Subsection (a)(4) of such section 609 is amended by 
     striking ``section 13822'' and inserting ``section 13623''.
       (3) Subsection (d) of such section 609 is amended by 
     striking ``section 13830'' and inserting ``section 13631''.
       (4) Section 514(b)(7) of such Act (29 U.S.C. 1144(b)(7)) is 
     amended by inserting ``, qualified medical child support 
     orders (within the meaning of section 609(a)(2)(A)), and the 
     provisions of law referred to in section 609(a)(2)(B)(ii) to 
     the extent enforced by qualified medical child support 
     orders'' before the period.

     SEC. 12008. PLAN CLAIMS PROCEDURES.

       Section 503 of the Employee Retirement Income Security Act 
     of 1974 (29 U.S.C. 1133) is amended--
       (1) by inserting ``(a) In General.--'' after ``Sec. 503.''; 
     and
       (2) by adding at the end the following new subsection:
       ``(b) Group Health Plans.--A group health plan shall be 
     treated as failing to meet the requirements of subsection (a) 
     to the extent that the requirements of sections 9301, 9302, 
     and 9303 of the Guaranteed Health Insurance Act of 1994 are 
     not met with respect to such plan.''.

     SEC. 12009. REGULATIONS DEFINING COLLECTIVE BARGAINING 
                   AGREEMENT.

       Not later than 180 days after the date of the enactment of 
     this Act, the Secretary of Labor shall prescribe regulations 
     defining the term ``collective bargaining agreement'' for 
     purposes of this Act and title I of the Employee Retirement 
     Income Security Act of 1974.
 TITLE XIII--COORDINATION OF MEDICAL PORTION OF WORKERS' COMPENSATION 
                        AND AUTOMOBILE INSURANCE
              Subtitle A--Workers' Compensation Insurance

     SEC. 13000. DEFINITIONS.

       In this subtitle:
       (1) Injured worker.--The term ``injured worker'' means, 
     with respect to a certified health plan, an individual 
     enrolled under the plan who has a work-related injury or 
     illness for which workers' compensation medical benefits are 
     available under State law.
       (2) Specialized workers' compensation provider.--The term 
     ``specialized workers' compensation provider''--
       (A) means a health provider that specializes in the 
     provision of preventive services, diagnostic services, 
     medical treatment and medical rehabilitative services 
     relating to work-related injuries or illness, and includes a 
     physician specializing in occupational medicine and a non-
     physician specialist in occupational health or a related 
     field; and
       (B) includes a center of excellence in occupational health.
       (3) Workers' compensation medical benefits.--The term 
     ``workers' compensation medical benefits'' means, with 
     respect to an enrollee who is an employee subject to the 
     workers' compensation laws of a State, the comprehensive 
     medical benefits for work-related injuries and illnesses 
     provided for under such laws with respect to such an 
     employee.
       (4) Workers' compensation carrier.--The term ``workers' 
     compensation carrier'' means an insurance company that 
     underwrites workers' compensation medical benefits with 
     respect to one or more employers and includes an employer or 
     fund that is financially at risk for the provision of 
     workers' compensation medical benefits.
       (5) Workers' compensation services.--The term ``workers' 
     compensation services''--
       (A) means items and services included in workers' 
     compensation medical benefits, including rehabilitation 
     services and long-term care services; and
       (B) includes services of a case manager under section 
     13001(c) and the preparation of reports relating to workers' 
     compensation medical benefits.

   PART 1--HEALTH PLAN REQUIREMENTS RELATING TO WORKERS' COMPENSATION

     SEC. 13001. PROVISION OF WORKERS' COMPENSATION SERVICES.

       (a) Provision of Benefits.--Subject to subsection (b)--
       (1) Requirement for certified health plans.--
       (A) In general.--Each certified health plan shall enter 
     into such contracts and arrangements as are necessary (in 
     accordance with subparagraph (B)) to provide or arrange for 
     the provision of workers' compensation services to an 
     enrollee who is an injured worker, in return for payment from 
     the workers' compensation carrier under section 13002. The 
     health plan shall contract with, or arrange for the provision 
     of service from, a range of specialized workers' compensation 
     providers (as defined in 13000(2)) sufficient to deliver the 
     medical and rehabilitative services compensable under the 
     State's workers' compensation laws.
       (B) Provision of services.--For purposes of this paragraph, 
     a certified health plan provides (or arranges for the 
     provision of) workers' compensation services with respect to 
     an enrollee if the services are provided by--
       (i) a participating provider in the plan,
       (ii) any other specialized workers' compensation provider 
     with whom the plan has entered into an agreement for the 
     provision of such services, or
       (iii) a center of excellence in occupational health 
     designated by the State under section 13011(a), whether or 
     not the center is a provider described in clause (i) or (ii).
       (C) List of specialized workers' compensation providers.--
     Upon the request of an enrollee, a certified health plan 
     shall provide a list of the plan's specialized workers' 
     compensation providers and shall include, for each such 
     provider, the provider's phone number, address, subspecialty, 
     and a summary of the provider's training and relevant 
     experience.
       (2) Individual requirement.--An individual entitled to 
     workers' compensation medical benefits and enrolled in a 
     certified health plan shall receive workers' compensation 
     services through the provision (or arrangement for the 
     provision) of such services by the health plan, regardless of 
     whether the services are included in the guaranteed national 
     benefit package.
       (3) Exceptions for certain health plans for veterans, 
     military personnel, and indians.--Paragraphs (1) and (2) 
     shall not apply with respect to a health plan of the 
     Department of Veterans' Affairs, of the Indian Health 
     Service, or of the Department of Defense and individuals 
     enrolled in such a plan.
       (4) Use of state-designated centers of excellence.--Either 
     a certified health plan or the injured worker may elect to 
     provide or receive benefits under this subsection through a 
     center of excellence in occupational health designated under 
     section 13011(a).
       (5) Access to emergency services.--An injured worker shall 
     have the same access to emergency workers' compensation 
     services as the worker has with respect to other emergency 
     services.
       (b) Alternative Permitted.--Subsection (a) shall not be 
     construed as preventing an injured worker and a workers' 
     compensation carrier from agreeing that workers' compensation 
     services shall be provided other than by or through the 
     certified health plan in which the worker is enrolled.
       (c) Coordination.--
       (1) Designation of case manager.--Each certified health 
     plan shall employ or contract with one or more individuals, 
     such as occupational nurses, with experience in the 
     management of occupational illness and injury to provide case 
     management services with respect to workers' compensation 
     services provided through the plan under this section.
       (2) Functions of case manager.--The certified health plan 
     (through the case manager described in paragraph (1)) is 
     responsible for ensuring that--
       (A) there is a plan of treatment (when appropriate) for 
     each enrollee who is an injured worker designed to assure 
     appropriate treatment and facilitate return to work;
       (B) the plan of treatment is developed with the 
     participation of the worker and communicated on a timely 
     basis to the worker and to the workers' compensation carrier, 
     the employer, or both for purposes of return to work 
     planning;
       (C) medical information to the extent needed to assure the 
     enrollee's safe, healthful, and timely return to work is 
     provided to the worker and to the workers' compensation 
     carrier, the employer or both, as appropriate, that shall 
     include the types of work activities an injured worker can 
     safely perform and any specific work restrictions that may be 
     appropriate to prevent the recurrence of the injury or 
     illness and to permit the worker's complete recovery; and
       (D) the health plan (and its providers) comply with legal 
     duties and requirements under State workers' compensation law 
     (including treatment protocols approved in accordance with 
     such laws) and other Federal and State laws including those 
     regarding the reporting of occupational injuries and 
     diseases.
       (d) Administration.--The Secretary of Labor shall 
     administer this subtitle and, for such purposes, the 
     Secretary is authorized to prescribe such rules and 
     regulations as may be necessary and appropriate.
       (e) Waiver for Certain States.--The Secretary shall waive 
     the application of the provisions of this part and part 2 
     (other than sections 13011 and 13013) if the State 
     demonstrates the following:
       (1) The State has a comprehensive, mandatory workers' 
     compensation system that covers an overwhelming majority of 
     the workers in the State.
       (2)(A) Injured workers in the State are assured a broad 
     choice of health providers when seeking treatment for work-
     related illnesses and injuries.
       (B) Injured workers are assured the right to seek workers' 
     compensation services, when appropriate, from centers of 
     excellence designated by the State under section 13011.
       (C) If the State allows or requires injured workers to 
     obtain workers' compensation medical benefits only from one 
     or more organizations that restrict the workers' choice of 
     providers from whom the benefits may be obtained--
       (i) workers are provided an opportunity to select from 
     among a reasonable choice of at least 3 such organizations;
       (ii) such organizations are--
       (I) certified by the State; and
       (II) required by the State to meet minimum requirements 
     related to quality, accessibility, and continuity of 
     services; and
       (iii) workers are provided the option to choose such an 
     organization that is not owned or controlled by the workers' 
     compensation carrier that underwrites the workers' 
     compensation medical benefits with respect to the employer of 
     the worker.
       (3) The State has a system in place--
       (A) to control increases in the costs of workers' 
     compensation medical benefits; and
       (B) to monitor and improve the quality of workers' 
     compensation services provided to injured workers.

     SEC. 13002. PAYMENT BY WORKERS' COMPENSATION CARRIER.

       (a) Payment.--
       (1) In general.--Each workers' compensation carrier that is 
     liable for payment for workers' compensation services 
     furnished by or through a certified health plan, regardless 
     of whether the services are included in the guaranteed 
     national benefit package, shall make payment for such 
     services. If a certified health plan has provided or paid for 
     services for which such a workers' compensation carrier is 
     liable, such carrier shall reimburse the health plan for such 
     services. If an individual has paid for services for which 
     such a carrier is liable, the carrier shall reimburse the 
     individual for such services (including cost sharing incurred 
     for such services).
       (2) Use of fee schedule.--Except as provided in subsection 
     (b), such payment shall be made in accordance with the 
     applicable fee schedule established by the certified health 
     plan for services provided under the guaranteed national 
     benefit package or section 13012.
       (b) Alternative Payment Methodologies.--Subsection (a)(2) 
     shall not apply--
       (1) in the case of a State that establishes an alternative 
     payment methodology (such as payment on a negotiated fee for 
     each case) for payment for workers' compensation services; or
       (2) in the case in which a workers' compensation carrier 
     and the certified health plan negotiate alternative payment 
     arrangements.
       (c) Limitation of Liability of Injured Worker.--Nothing in 
     this part shall be construed as requiring an injured worker 
     to make any payment (including payment of any cost sharing or 
     any amount in excess of the applicable fee schedule) to any 
     certified health plan or health provider for the receipt of 
     workers' compensation services.

                     PART 2--REQUIREMENTS OF STATES

     SEC. 13011. STATE DESIGNATION OF CENTERS OF EXCELLENCE IN 
                   OCCUPATIONAL HEALTH.

       (a) In General.--A State shall, in consultation with a 
     panel consisting of representatives of organized labor and 
     representatives of employers in equal numbers, designate at 
     least one center of excellence in occupational health for 
     each community-rating area in the State. A State may 
     designate such a center of excellence for a community-rating 
     area that is not located in the area or the State. Injured 
     workers and certified health plans may elect to receive 
     workers' compensation services through such centers under 
     section 13001(a)(4).
       (b) Qualifications.--A State shall not designate a center 
     of excellence under subsection (a) unless the State finds 
     that the center meets the following requirements:
       (1) The center includes, as staff members or contractors, 
     physicians and other health providers with significant 
     experience and training in the diagnosis, management, and 
     treatment of occupational injuries and illnesses, including 
     the diagnosis of chronic diseases of occupational origin.
       (2) The center has the ability to serve as a technical 
     resource to providers serving certified health plans on 
     issues relating to occupational injury and illness.
       (3) The center provides an interdisciplinary range of 
     specialized services, including independent evaluation of 
     occupational injuries and illnesses, assessment and control 
     of the causes of such injuries and illnesses, methods to 
     educate workers in the prevention of such injuries and 
     illnesses, and rehabilitative care and other treatment to 
     facilitate the return to work of an injured worker.
       (c) Publication.--Each State shall publish a list of 
     centers of excellence designated under subsection (a).
       (d) Travel Paid by Carrier.--Injured workers shall be 
     reimbursed by workers' compensation carriers for reasonable 
     expenses related to travel to centers of excellence 
     designated under subsection (a).

     SEC. 13012. DEVELOPMENT OF SUPPLEMENTAL SCHEDULES.

       Each State shall develop a fee schedule applicable to 
     payment for workers' compensation services not included in 
     the guaranteed national benefit package, including a separate 
     schedule for services of a case manager under section 
     13001(c) and the preparation of reports relating to workers' 
     compensation medical benefits.

     SEC. 13013. PROVISION OF WORKERS' COMPENSATION DATA.

       Each State shall make available to the Secretary of Labor, 
     in such form as the Secretary shall require, injury and 
     illness data collected as part of the State's workers' 
     compensation program. Such a State is not required to make 
     available personally identifiable information with respect to 
     a worker. The Secretary is authorized to reimburse the States 
     for the cost of preparing and transmitting the data in the 
     requested form.

     SEC. 13014. EFFECT ON STATE WORKERS' COMPENSATION LAWS.

       (a) In General.--Except as provided in this subtitle, no 
     State law shall have any effect that restricts the choice, or 
     payment, of providers that may provide workers' compensation 
     services for individuals enrolled in a certified health plan.
       (b) Dispute Resolution.--A State law may provide for a 
     method for resolving disputes related to--
       (1) an individual's entitlement to workers' compensation 
     medical benefits under State law,
       (2) the necessity and appropriateness of workers' 
     compensation services provided to an injured worker, and
       (3) subject to section 13002, the reasonableness of fees 
     charged for workers' compensation services.
       (c) Construction.--Nothing in this subtitle shall be 
     construed as altering--
       (1) the effect of a State workers' compensation law as the 
     exclusive remedy for work-related injuries or illnesses,
       (2) the determination of whether or not a person is an 
     injured worker and entitled to workers' compensation medical 
     benefits under State law,
       (3) the scope of items and services available to injured 
     workers entitled to workers' compensation medical benefits 
     under State law, including protocols approved under such a 
     law relating to provision of workers' compensation services, 
     or
       (4) the eligibility of any individual or class of 
     individuals for workers' compensation medical benefits under 
     State law.
       (d) Integration.--Nothing in this subtitle shall prevent a 
     State from integrating or otherwise coordinating the payment 
     for workers' compensation medical benefits with payment for 
     benefits under health insurance or health benefit plans.

     SEC. 13015. PROTECTION AGAINST FRAUD.

       A State workers' compensation law may disqualify or suspend 
     a health provider from providing workers' compensation 
     services if the provider is determined to have violated 
     protocols or standards of care, to have provided unnecessary 
     or inappropriate services, to have billed in violation of 
     law, or to have engaged in another prohibited practice with 
     respect to workers' compensation services.

 PART 3--APPLICATION OF INFORMATION PRACTICES REQUIREMENTS; EFFECT ON 
                                PREMIUMS

     SEC. 13021. APPLICATION OF INFORMATION PRACTICES 
                   REQUIREMENTS.

       (a) In General.--The provisions of subtitle C of title IX 
     apply to the provision of workers' compensation services.
       (b) Rules.--The Secretary of Health and Human Services, in 
     consultation with the Secretary of Labor, shall promulgate 
     rules to clarify the responsibilities of certified health 
     plans and workers' compensation carriers in carrying out the 
     provisions referred to in subsection (a).

     SEC. 13022. REPORT ON EFFECT ON WORKERS' COMPENSATION 
                   PREMIUMS.

       (a) Study and Report.--
       (1) Study.--The Secretary of Labor shall provide for a 
     study of the impact of the provisions of this subtitle on the 
     premium rates charged to employers for workers' compensation 
     insurance. Such study shall use information supplied by 
     States relating to workers' compensation premiums and such 
     other information as the Secretary of Labor finds 
     appropriate.
       (2) Report.--The Secretary of Labor shall submit to the 
     Congress, by not later than two years after the date that 
     this subtitle applies to a substantial number of employers in 
     all States, a report on the findings of the study.
       (b) Workers' Compensation Carrier Filings.--
       (1) In general.--Each workers' compensation carrier (other 
     than a employer that is self-funded for the purpose of 
     providing workers' compensation services) providing workers' 
     compensation insurance in a State shall make a filing with an 
     agency designated by the State at a time specified by the 
     Secretary of Labor (but not earlier than one year after the 
     date this subtitle applies to a substantial number of 
     employers in the State). Such filing shall describe the 
     manner in which such carrier has modified (or intends to 
     modify) its premium rates for workers' compensation insurance 
     provided in the State to reflect the changes brought about by 
     the provisions in this subtitle. The filing shall include 
     such actuarial projections and assumptions as necessary to 
     support the modifications of such rates.
       (2) Report to secretary.--Each State shall provide to the 
     Secretary of Labor such information on filings made under 
     paragraph (1) as the Secretary of Labor may specify.

     SEC. 13023. PERMISSIBLE TERMS OF CERTAIN CONSTRUCTION 
                   INDUSTRY COLLECTIVE BARGAINING AGREEMENTS.

       (a) In General.--A construction industry collective 
     bargaining agreement described in subsection (b) may include 
     provisions relating to any of the following:
       (1) A mechanism to resolve disputes relating to employee 
     entitlement to workers' compensation benefits under 
     applicable State workers' compensation law, including 
     mediation or arbitration, so long as the rights and remedies 
     of employees under such laws are not diminished.
       (2) Providing benefits for injured workers or their 
     survivors that are in addition to those provided under State 
     workers' compensation law.
       (3) Providing for a light duty, modified job, or return to 
     work program.
       (4) Providing for a vocational rehabilitation or training 
     program.
       (5) Providing for worker injury and illness prevention 
     programs.
       (b) Construction Industry Collective Bargaining Agreement 
     Described.--A construction industry collective bargaining 
     agreement described in this subsection is a collective 
     bargaining agreement--
       (1) between--
       (A) an employer engaged primarily in the building and 
     construction industry, and
       (B) a labor organization--
       (i) of which building and construction employee are 
     members, and
       (ii) which is not established, maintained, or assisted by 
     conduct that constitutes an unfair labor practice under 
     section 8(a) of the National Labor Relations Act;
       (2) covering employees engaged (or who upon their 
     employment will be engaged) in the building and construction 
     industry; and
       (3) that meets the prevailing standards for such an 
     agreement in the applicable area.
       (c) Construction.--Nothing in this section shall be 
     construed to authorize an agreement described in subsection 
     (b)--
       (1) to reduce the benefits payable under applicable State 
     workers' compensation laws, or
       (2) to limit the rights or remedies provided to injured 
     workers under such laws.

                     PART 4--DEMONSTRATION PROJECTS

     SEC. 13031. AUTHORIZATION.

       The Secretary of Health and Human Services and the 
     Secretary of Labor are authorized to conduct demonstration 
     projects under this part in one or more States with respect 
     to--
       (1) treatment of work-related injuries and illnesses;
       (2) ways in which occupational health providers can promote 
     safety and health in the workplace; and
       (3) ways in which health providers can promote effective 
     return to work of injured workers.

     SEC. 13032. DEVELOPMENT OF WORK-RELATED PROTOCOLS.

       (a) In General.--Under this part, the Secretaries, in 
     consultation with States and such experts on work-related 
     injuries and illnesses as the Secretaries find appropriate, 
     shall develop protocols (which may include protocols for 
     utilization review) for the appropriate treatment of work-
     related conditions.
       (b) Testing of Protocols.--The Secretaries shall enter into 
     contracts with one or more certified health plans to test the 
     validity of the protocols developed under subsection (a).

     SEC. 13033. DEVELOPMENT OF CAPITATION PAYMENT MODELS.

       The Secretaries shall develop, using protocols developed 
     under section 13032 if possible, methods of providing for 
     payment by workers' compensation carriers to certified health 
     plans on a per case, capitated basis for the treatment of 
     specified work-related injuries and illnesses.

  PART 5--COMMISSION ON INTEGRATION OF WORKERS' COMPENSATION MEDICAL 
                                BENEFITS

     SEC. 13041. COMMISSION.

       (a) Establishment.--There is hereby created a Commission on 
     Integration of Workers' Compensation Medical Benefits (in 
     this part referred to as the ``Commission'').
       (b) Composition.--
       (1) In general.--The Commission shall consist of the 
     Director of the National Institute for Occupational Safety 
     and Health (or the Director's designee) and 14 members 
     appointed jointly by the Secretary of Health and Human 
     Services and the Secretary of Labor. Appointed members of the 
     Commission shall include the following:
       (A) One or more individuals representing State insurance 
     commissioners.
       (B) One or more individuals representing State workers' 
     compensation funds.
       (C) One or more individuals representing organized labor.
       (D) One or more members representing employers (other than 
     workers' compensation insurance carriers).
       (E) One or more members representing workers' compensation 
     insurance carriers.
       (F) One or more members of the medical profession having 
     expertise in occupational health.
       (G) One or more educators or researchers having expertise 
     in the field of occupational health.
       (H) One or more members of the legal profession who 
     regularly represent workers' compensation claimants.
       (I) One or more actuaries having expertise in the field of 
     workers' compensation.

     To the greatest extent feasible, the membership of the 
     Commission shall reflect the racial, ethnic, and gender 
     composition of the population of the United States.
       (2) No compensation except travel expenses.--Members of the 
     Commission shall serve without compensation, but the 
     Secretaries shall provide that each member shall receive 
     travel expenses, including per diem in lieu of subsistence, 
     in accordance with sections 5702 and 5703 of title 5, United 
     States Code.
       (3) Quorum.--Eight members of the Commission shall 
     constitute a quorum.
       (c) Duties.--
       (1) In general.--The Commission shall study the feasibility 
     of transferring financial responsibility for workers' 
     compensation medical benefits to certified health plans. The 
     Commission shall consider both the potential benefits and 
     potential disadvantages of integration, including the likely 
     impact on--
       (A) the quality of medical care delivered to workers 
     injured or made ill on the job;
       (B) the incentives for employers to maintain safe 
     workplaces; and
       (C) workers' compensation indemnity benefit costs, medical 
     costs and the overall cost of the workers' compensation 
     system.
       (2) Issues to be addressed.--The Commission shall consider 
     the following issues:
       (A) Whether and how to maintain financial incentives for 
     employers to prevent work-related illness and injury and to 
     reduce workers' compensation costs.
       (B) Modifications of requirements for workers' compensation 
     carrier and certified health plan reserves, including any 
     associated transition issues relating to the modification of 
     such requirements.
       (C) The ability of certified health plans to set capitated 
     payment rates for workers' compensation costs, including the 
     lack of availability of data for use by plans in setting such 
     rates.
       (D) Coverage for benefits not included in the guaranteed 
     national benefits package, including both services and cost-
     sharing, that are covered under State workers' compensation 
     laws.
       (E) Variation among States in eligibility for medical and 
     rehabilitation benefits, and the scope of such benefits, 
     compensable under State workers' compensation laws.
       (F) The ability to move the financial responsibility for 
     workers' compensation medical benefits from an experience-
     rated system to a community-rated system.
       (G) The need to provide appropriate incentives to encourage 
     certified health plans, providers of health care services, 
     and employers to return injured employees to work as soon as 
     possible.
       (H) The effect of an integrated system on the ability to 
     preserve adequate case management of workers' compensation 
     cases.
       (I) The impact of an injured worker's choice of provider on 
     the costs of medical care, losses in wages and benefits, and 
     quality of care.
       (J) Whether and under what circumstances a State may 
     demonstrate that the comprehensive workers' compensation law 
     providing for medical benefits to injured workers in effect 
     in that State obviates the need for transferring financial 
     responsibility for workers' compensation medical benefits to 
     certified health plans, taking into account the impact on 
     injured workers.
       (3) Development of plan.--The Commission shall, based on 
     its study of the issues under paragraphs (1) and (2), develop 
     a detailed plan for implementing the transfer of financial 
     responsibility for workers' compensation medical benefits to 
     certified health plans and make a recommendation as to 
     whether such a transfer should be effected.
       (d) Staff Support.--The Secretaries shall provide staff 
     support for the Commission.
       (e) Report.--The Commission shall submit a report on its 
     work to the President and to the Congress by not later than 
     two years after the date of the enactment of this Act. The 
     report shall include the plan developed and its 
     recommendation under subsection (c)(3).
       (f) Termination.--The Commission shall terminate 90 days 
     after the date of submission of its report under subsection 
     (e).
       (g) Authorization of Appropriations.--There are authorized 
     to be appropriated such sums as may be necessary to carry out 
     this section.
                    Subtitle B--Automobile Insurance

     SEC. 13100. DEFINITIONS.

       In this subtitle:
       (1) Injured individual.--The term ``injured individual'' 
     means, with respect to a certified health plan, an individual 
     enrolled under the plan who has an injury or illness 
     sustained in an automobile accident for which automobile 
     insurance medical benefits are available.
       (2) Automobile insurance medical benefits.--The term 
     ``automobile insurance medical benefits'' means, with respect 
     to an enrollee, the comprehensive medical benefits for 
     injuries or illnesses sustained in automobile accidents.
       (3) Automobile insurance carrier.--The term ``automobile 
     insurance carrier'' means an insurance company that 
     underwrites automobile insurance medical benefits and 
     includes an employer or fund that is financially at risk for 
     the provision of automobile insurance medical benefits.
       (4) Automobile insurance medical services.--The term 
     ``automobile insurance medical services'' means items and 
     services included in automobile insurance medical benefits 
     and includes items and services (such as rehabilitation 
     services and long-term care services) commonly used for 
     treatment of injuries and illnesses sustained in automobile 
     accidents.

     SEC. 13101. PROVISION OF AUTOMOBILE INSURANCE MEDICAL 
                   BENEFITS THROUGH HEALTH PLANS.

       (a) In General.--An individual entitled to automobile 
     insurance medical benefits and enrolled in a certified health 
     plan shall receive automobile insurance medical services 
     through the provision (or arrangement for the provision) of 
     such services by the health plan.
       (b) Referral for Specialized Services.--Each certified 
     health plan shall provide for such referral for automobile 
     insurance medical services as may be necessary to assure 
     appropriate treatment of injured individuals.
       (c) Exceptions.--Subsections (a) and (b) shall not apply 
     shall not apply with respect to a health plan of the 
     Department of Veterans' Affairs, of the Indian Health 
     Service, or of the Department of Defense and individuals 
     enrolled in such a plan.
       (d) Alternative Permitted.--Subsection (a) shall not be 
     construed as preventing an injured individual and an 
     automobile insurance carrier from agreeing that automobile 
     insurance medical services shall be provided other than by or 
     through the certified health plan in which the individual is 
     enrolled.

     SEC. 13102. PAYMENT BY AUTOMOBILE INSURANCE CARRIER.

       (a) Payment.--
       (1) In general.--Except as provided in subsection (b), each 
     automobile insurance carrier that is liable for payment for 
     automobile insurance medical services furnished by or through 
     a certified health plan, regardless of whether or not the 
     services are included in the guaranteed national benefit 
     package, shall make payment for such services directly to the 
     health plan.
       (2) Price discrimination prohibited.--Fees charged an 
     automobile insurance carrier by a certified health plan or 
     health provider for automobile insurance medical services 
     shall not exceed fees charged by such certified health plan 
     or health provider for similar services provided to an 
     injured individual for an injury or illness not sustained in 
     an automobile accident.
       (3) Exception for medicare part c enrollees.--Each health 
     provider or certified health plan providing automobile 
     insurance medical services to an injured individual enrolled 
     in medicare part C shall bill the automobile insurance 
     carrier directly for such services, and each carrier liable 
     for payment for such services shall make payment for such 
     services directly to such health provider or certified health 
     plan.
       (b) Alternative Payment Methodologies.--Subsection (a) 
     shall not apply--
       (1) in the case of a State that establishes an alternative 
     payment methodology (such as payment on a negotiated fee for 
     each case) for payment for automobile insurance medical 
     services; or
       (2) in the case in which an automobile insurance carrier 
     and the certified health plan negotiate alternative payment 
     arrangements.
       (c) Limitation of Liability of Injured Individual.--Nothing 
     in this subtitle shall be construed as requiring an injured 
     individual to make any payment (including payment of any cost 
     sharing) to any certified health plan or health provider for 
     the receipt of automobile insurance medical services for 
     which an automobile insurance carrier is liable.
       (d) Prevention of Duplicate Payment.--Except in accordance 
     with other subsections of this section, nothing in this Act 
     shall require any automobile insurance carrier or 
     policyholder to make any duplicate payment to any certified 
     health plan or health provider for automobile insurance 
     medical services.
       (e) Reimbursement for Payments Made.--Nothing in this 
     section shall impair the right of a certified health plan or 
     automobile insurance carrier to seek reimbursement from any 
     person legally responsible for a bodily injury or illness 
     resulting from an automobile accident for payments made for 
     automobile insurance medical services to treat such injury or 
     illness.

     SEC. 13103. CONSTRUCTION.

       Nothing in this subtitle shall be construed as altering--
       (1) the determination of whether or not a person is an 
     injured individual and entitled to automobile insurance 
     medical benefits under State law, or
       (2) the scope of items and services available to injured 
     individuals entitled to automobile insurance medical benefits 
     under State law.
            Subtitle C--Federal Employees' Compensation Act

     SEC. 13201. APPLICATION OF POLICY.

       (a) In General.--Chapter 81 of title 5, United States Code, 
     known as the Federal Employees' Compensation Act shall be 
     interpreted and administered consistent with the provisions 
     of subtitle A.
       (b) Construction.--In applying subsection (a), subtitle A 
     shall be applied as if the following modifications had been 
     made in subtitle A:
       (1) Any reference in section 13000, section 13001(c)(2)(D), 
     or section 13014 to a State law is deemed to include a 
     reference to chapter 81 of title 5, United States Code.
       (2) The term ``workers' compensation carrier'' includes the 
     Employees Compensation Fund (established under section 8147 
     of title 5, United States Code).
       (c) Application to Certain Other Laws.--
       (1) In general.--The provisions of section 13002(a)(2), 
     relating to payment for workers' compensation services, shall 
     apply to payment for medical services in the United States 
     under the following laws, in the same manner as such 
     provisions apply to the Federal Employees' Compensation Act 
     under this section:
       (A) The Longshore and Harbor Workers' Compensation Act (33 
     U.S.C. 901 et seq.).
       (B) Cure for a seaman under general maritime law.
       (C) The Federal Employers' Liability Act (45 U.S.C. 51 et 
     seq.).
       (2) Construction.--Nothing in this subsection shall be 
     construed as altering--
       (A) the remedies available under the laws described in 
     subparagraphs (A) through (C) of paragraph (1);
       (B) the determination of whether or not a person is 
     entitled to benefits under such laws;
       (C) the scope of items and services available under such 
     laws; or
       (D) the eligibility of any individual or class of 
     individuals for benefits under such laws.
          Subtitle D--Davis-Bacon Act and Service Contract Act

     SEC. 13301. COVERAGE OF BENEFITS UNDER GUARANTEED HEALTH 
                   INSURANCE ACT OF 1994.

       (a) Davis-Bacon Act.--Subsection (b)(2) of the first 
     section of the Davis Bacon Act (40 U.S.C. 276a(b)(2)) is 
     amended in the matter following subparagraph (B) by inserting 
     after ``local law'' the following: ``(other than benefits 
     provided pursuant to the Guaranteed Health Insurance Act of 
     1994)''.
       (b) Service Contract Act of 1965.--The second sentence of 
     section 2(a)(2) of the Service Contract Act of 1965 (41 
     U.S.C. 351(a)(2)) is amended by inserting after ``local law'' 
     the following: ``(other than benefits provided pursuant to 
     the Guaranteed Health Insurance Act of 1994)''.
                      Subtitle E--Effective Dates

     SEC. 13401. GENERAL EFFECTIVE DATE; APPLICATION.

       The provisions of subtitles A and B of this title shall 
     take effect on January 1, 1997, and shall apply with respect 
     to any individual covered under a certified health plan under 
     this Act.

     SEC. 13402. FEDERAL REQUIREMENTS.

       The provisions of subtitle C of this title shall take 
     effect on January 1, 1998.
          TITLE XIV--FEDERAL EMPLOYEES HEALTH BENEFITS PROGRAM

     SEC. 14001. FINDINGS AND PURPOSES.

       (a) Findings.--The Congress finds the following:
       (1) The Federal Employees Health Benefits Program (in this 
     section referred to as ``FEHBP'') has been providing tens of 
     millions of Federal employees, retirees, and dependents with 
     affordable, comprehensive health insurance for over 30 years.
       (2) The FEHBP, as the only model of managed competition 
     operating on a national basis, could make a significant 
     contribution toward making affordable, comprehensive health 
     insurance available to the Nation's underinsured and 
     uninsured by enrolling members of the general public.
       (3) The FEHBP has a better record than most private and 
     public health programs in constraining the average rate of 
     increases in annual health care costs, and offers the Nation 
     a working model for constraining health care costs.
       (4) The long-term viability of the FEHBP is critical to its 
     contributing to increasing the availability of affordable, 
     comprehensive health insurance to the general public.
       (5) The long-term viability of the FEHBP is critical to the 
     continued fulfillment of the Federal Government's obligation 
     as the Nation's largest employer to provide affordable, 
     comprehensive health benefits to its employees and retirees.
       (6) To maintain the long-term viability of the FEHBP, the 
     expansion of the program to serve the general public should 
     be accomplished in a sound, prudent, and incremental manner.
       (7) The enactment of certain insurance and health policy 
     reforms as a part of national health care reform will 
     eliminate features of the current system that would otherwise 
     threaten the solvency of FEHBP health benefit plans and the 
     long-term viability of the expanded program.
       (8) Opening the FEHBP to the general public should be 
     viewed as a complement to other broad-based health care 
     reform initiatives, such as the creation of a nationwide 
     system of affordable, comprehensive health care benefits 
     available to all, to ensure the long-term viability of the 
     FEHBP, to prevent the FEHBP from being overwhelmed 
     administratively, and to protect the interests of existing 
     FEHBP enrollees.
       (9) The general public should have available the level of 
     benefits, quality of service, and choice of plans and 
     providers currently received by FEHBP enrollees and their 
     dependents.
       (10) The ultimate integration of existing FEHBP enrollees 
     into community-rated pools should await the enactment of key 
     insurance market reforms and an employer mandate, both to 
     ensure the creation of stable insurance markets and to 
     protect the interests of existing FEHBP enrollees.
       (b) Purposes.--The purposes of this title are as follows:
       (1) To provide tens of millions of Americans, many of whom 
     have no or inadequate health insurance, with access to the 
     same affordable, comprehensive health care benefits as are 
     available to Federal employees and retirees.
       (2) To permit the future integration of Federal employees 
     and retirees into a FEHBP expanded to serve the general 
     public.
       (3) To make necessary changes in the FEHBP.

     SEC. 14002. DEFINITIONS.

       For the purpose of this title--
       (1) the terms ``FEHBP transition period'' and ``universal 
     FEHBP'' have the meanings given such terms by section 8903b 
     of title 5, United States Code (as added by section 14301); 
     and
       (2) the term ``contract year'' is used in the same way as 
     under chapter 89 of title 5, United States Code.

     SEC. 14003. AMENDMENT OF TITLE 5, UNITED STATES CODE.

       Except as otherwise expressly provided, whenever in this 
     title an amendment or repeal is expressed in terms of an 
     amendment to, or repeal of, a section or other provision, the 
     reference shall be considered to be made to a section or 
     other provision of title 5, United States Code.
 Subtitle A--General Changes in Health Benefits for Federal Employees 
                             and Annuitants

     SEC. 14101. TYPES OF BENEFITS.

       (a) Guaranteed National Benefits.--
       (1) In general.--
       (A) Benefits to be offered.--Subsection (a) of section 8904 
     is amended to read as follows:
       ``(a) The benefits provided under each plan described in 
     section 8903 shall be the same as the guaranteed national 
     benefit package under subtitle A of title III of the 
     Guaranteed Health Insurance Act of 1994.''.
       (B) Conforming amendments.--Chapter 89 is amended--
       (i) in section 8903(1) by striking ``8904(1)'' and 
     inserting ``8904(a)'';
       (ii) in section 8903(2) by striking ``8904(2)'' and 
     inserting ``8904(a)'';
       (iii) in section 8903(3) by striking ``8904(3)'' and 
     inserting ``8904(a)'';
       (iv) in section 8903(4)(A) by striking ``8904(4)'' and 
     inserting ``8904(a)''; and
       (v) in section 8903a(b)(2) by striking ``paragraph (1) or 
     (2) of section 8904 of this title or both'' and inserting 
     ``section 8904(a)''.
       (2) Levels of benefits.--
       (A) Paragraphs (1) and (2) of section 8903 are amended by 
     striking ``, offering two levels of benefits,''.
       (B) Section 8905a(d)(1)(A)(i) is amended by striking ``and 
     level of benefits''.
       (C) Section 8906(d) is amended by striking ``plan and level 
     of benefits.'' and inserting ``plan.''.
       (3) Classes of enrollment.--
       (A) Section 8905(a) is amended by striking ``either as an 
     individual or for self and family.'' and inserting ``based on 
     an appropriate class of enrollment.''.
       (B) Section 8905(c)(1) is amended in the first sentence by 
     striking ``as an individual or for self and family as 
     provided in paragraph (2) of this subsection''.
       (C) Section 8905 is amended by adding a period at the end 
     of subsection (b) and by striking the matter before 
     subparagraph (A) of subsection (c)(2) and inserting the 
     following:
       ``(2) Coverage under this subsection shall not be available 
     except with respect to--''.
       (D) Section 8905(d) is amended to read as follows:
       ``(d) If an employee, annuitant, or other individual 
     eligible to enroll in a health benefits plan under this 
     chapter has a spouse who is also eligible to enroll, such 
     individual may not be enrolled both as an employee, 
     annuitant, or other individual eligible to enroll and as a 
     family member of the spouse.''.
       (E) Section 8905a(d)(3)(A) is amended by striking 
     ``coverage either as an individual or, if appropriate, for 
     self and family.'' and inserting ``any appropriate class of 
     enrollment.''.
       (F) Section 8905a(f)(3)(A) is amended by striking ``for 
     self and family'' and inserting ``under a class of enrollment 
     that covered such individual''.
       (b) Maintenance of Effort.--
       (1) In general.--Chapter 89 is amended by inserting after 
     section 8904 the following:

     ``Sec. 8904a. Maintenance of effort

       ``(a) For the purpose of this section, the term `guaranteed 
     national benefit package' means the guaranteed national 
     benefit package referred to in section 8904(a).
       ``(b)(1) The Office of Personnel Management shall provide 
     or contract for maintenance of effort policies which shall 
     provide--
       ``(A) in the case of an individual covered by a 
     comprehensive medical plan, coverage which, when considered 
     together with the guaranteed national benefit package, is 
     comparable to that which, during the year described in 
     paragraph (3), was provided by the comprehensive medical plan 
     with the largest number of enrollments in such year (as 
     identified by the Office); and
       ``(B) in the case of an individual covered by any other 
     plan under this chapter--
       ``(i) coverage for services and items which were available 
     under the lower level of benefits offered by the service 
     benefit plan during the year described in paragraph (3), but 
     which are not included in the guaranteed national benefit 
     package;
       ``(ii) coverage for services and items included in the 
     guaranteed national benefit package, but not covered to the 
     same extent as was the case under the lower level of benefits 
     offered by the service benefit plan during the year described 
     in paragraph (3), because of any limitation in amount, 
     duration, or scope under the guaranteed national benefit 
     package;
       ``(iii) coverage for deductibles, coinsurance, and 
     copayments imposed under the guaranteed national benefit 
     package, but not by the lower level of benefits offered by 
     the service benefit plan during the year described in 
     paragraph (3); or
       ``(iv) any combination thereof.
       ``(2) In developing maintenance of effort policies to be 
     offered under this section, the Office of Personnel 
     Management--
       ``(A) shall meet and confer with exclusive representatives 
     of employees through a process to be established by the 
     National Partnership Council; and
       ``(B) shall consult periodically with representatives of 
     employees (other than those described in subparagraph (A)) 
     and of annuitants.
       ``(3) The year described in this paragraph is the contract 
     year immediately preceding the first contract year to which 
     this section applies.
       ``(c) An individual shall be eligible to be covered by a 
     maintenance of effort policy only so long as such individual 
     is also covered by a health benefits plan under this chapter.
       ``(d)(1) The Government shall pay the total enrollment 
     charge under this section in the case of any employee or 
     annuitant for whom Government contributions are being made 
     with respect to any health benefits plan under this chapter.
       ``(2)(A) Any payment under this subsection shall be made at 
     the same time and in the same manner as if it were a 
     Government contribution for a health benefits plan, and shall 
     be made from the same appropriation or fund as from which any 
     such Government contributions would, with respect to the 
     employee or annuitant involved, be made.
       ``(B) The reference to `Government contributions authorized 
     by this section' in section 8906(g) shall be considered to 
     include payments under this subsection.
       ``(e) To the extent that maintenance of effort policies are 
     provided through carriers, section 8902 shall, with respect 
     to the administration of this section, apply to the extent 
     practicable.
       ``(f) No requirement of law relating to limiting the 
     offering of a supplemental health benefit policy shall apply 
     to a maintenance of effort policy offered under this 
     section.''.
       (2) Chapter analysis.--The analysis for chapter 89 is 
     amended by inserting after the item relating to section 8904 
     the following:

``8904a. Maintenance of effort.''.
       (c) Effective Date.--
       (1) In general.--The amendments made by this section shall 
     take effect on the date of the enactment of this Act, and 
     shall apply with respect to contract years beginning with the 
     contract year described in paragraph (2).
       (2) Contract year description.--The contract year described 
     in this paragraph is the contract year beginning in the first 
     full calendar year throughout which the requirements of 
     section 5007 of the Guaranteed Health Insurance Act of 1994 
     (relating to requirement of offering of guaranteed national 
     benefit package by health benefit plans) will be met, or will 
     be deemed to be met, with respect to insured health benefit 
     plans in all the States, as determined by the Office of 
     Personnel Management.
       (3) Savings provision.--For purposes of applying the 
     provisions of chapter 89 of title 5, United States Code, with 
     respect to any contract year before the contract year 
     described in paragraph (2), this section shall be treated as 
     if it had not been enacted.

     SEC. 14102. CONTRIBUTIONS FOR GUARANTEED NATIONAL BENEFITS; 
                   OTHER PROVISIONS TAKING EFFECT IN 1997.

       (a) Average Subscription Charges.--Section 8906(a) is 
     amended to read as follows:
       ``(a) The Office of Personnel Management shall determine 
     the weighted average of the subscription charges in effect on 
     the beginning date of each contract year for all health 
     benefits plans under this chapter (for each class of 
     enrollment).''.
       (b) Government Contribution.--Section 8906(b) is amended--
       (1) in paragraph (1) by striking ``60 percent of the 
     average subscription charge'' and inserting ``80 percent of 
     the applicable weighted average subscription charge''; and
       (2) in paragraph (2) by striking ``75 percent of''.
       (c) Part-Time Career Employment.--Section 8913 is amended 
     by redesignating subsection (d) as subsection (e), and by 
     inserting after subsection (c) the following:
       ``(d) The regulations of the Office may provide that, for 
     purposes of carrying out this chapter in any contract year--
       ``(1) the term `part-time career employment' shall (instead 
     of the meaning which would otherwise apply) have the same 
     meaning as being employed on a `part-time basis' has under 
     section 1106(a) of the Guaranteed Health Insurance Act of 
     1994, but only if, in the judgment of the Office, a greater 
     number of employees would thereby qualify to be treated as 
     occupying a position on a part-time career employment basis 
     in such year; and
       ``(2) any appropriate adjustment in the method for 
     determining the Government contribution under section 
     8906(b)(3) may be made if the alternative definition under 
     paragraph (1) is applied.''.
       (d) Definition of Child.--Section 8901(5) is amended by 
     striking ``22;'' and inserting ``22, or such an unmarried 
     dependent child between 22 and 24 years of age who is a 
     student regularly pursuing a full-time course of study or 
     training in residence at an educational institution referred 
     to in section 8341(a)(4)(C) (determined in a manner similar 
     to that provided for by the last 2 sentences of section 
     8341(a));''.
       (e) Effective Date.--
       (1) In general.--The amendments made by this section shall 
     take effect on the date of the enactment of this Act, and 
     shall apply with respect to contract years beginning with the 
     contract year that begins in 1997.
       (2) Savings provision.--For purposes of applying the 
     provisions of chapter 89 of title 5, United States Code, with 
     respect to any contract year before the first contract year 
     to which the amendments made by this section shall apply, 
     subsections (a) through (d) of this section shall be treated 
     as if they had not been enacted.
       (f) Transition.--For contract years beginning on or after 
     the date of the enactment of this Act and before the 1997 
     contract year, notwithstanding any other provision of law, 
     the dollar amount of the Government contribution under 
     section 8906(b)(1) of title 5, United States Code, may not be 
     less than the dollar amount of the Government contribution 
     under such section 8906(b)(1) in the previous contract year, 
     increased by the same percentage as the percentage increase 
     in the weighted average premium of all health benefit plans 
     offered under chapter 89 of such title between the previous 
     contract year and the year involved.

     SEC. 14103. ANNUALIZATION OF OPEN ENROLLMENT PERIODS.

       Section 8905(f)(1) is amended by striking ``any contract 
     term'' and all that follows through ``provide'' and inserting 
     ``each contract year, provide''.

     SEC. 14104. SUBSIDIES FOR LOW-INCOME FEDERAL EMPLOYEES AND 
                   ANNUITANTS.

       Section 8906 is amended by adding at the end the following:
       ``(j)(1) An employee enrolled under this chapter may be 
     eligible for a premium certificate under part A of title XXII 
     of the Social Security Act.
       ``(2) In the case of an individual enrolled under this 
     chapter who is not an employee, but who would, if such 
     individual were an employee, be eligible for such a premium 
     certificate, for purposes of such part--
       ``(A) the individual shall be deemed to be an employee; and
       ``(B) the administrative entity responsible for 
     administering the provisions of this chapter relating to the 
     enrollment of such individual shall be deemed the employer of 
     such individual.''.

     SEC. 14105. PROVISIONS RELATING TO THE RETIRED FEDERAL 
                   EMPLOYEES HEALTH BENEFITS ACT.

       (a) Program Termination.--The Retired Federal Employees 
     Health Benefits Act (Public Law 86-724; 74 Stat. 849) is 
     repealed as of the date specified in subsection (c), and all 
     contracts under such Act shall terminate not later than such 
     date.
       (b) Continued Availability of Coverage for Retired 
     Employees.--
       (1) In general.--For purposes of health insurance coverage 
     for any period after the date as of which coverage under the 
     Retired Federal Employees Health Benefits Act ceases to be 
     available as a result of the enactment of this section, 
     retired employees who (but for this section) would be 
     eligible for coverage under such Act shall be treated, for 
     purposes of chapter 89 of title 5, United States Code, as if 
     they were annuitants eligible to enroll under such chapter 
     89.
       (2) Automatic coverage.--In the case of any retired 
     employee who is enrolled in a plan under the Retired Federal 
     Employees Health Benefits Act during the last year in which 
     coverage under such Act is offered, and who fails to elect to 
     be covered under such chapter 89 or to decline such coverage 
     with respect to the following year, such retired employee 
     shall be automatically enrolled in a service benefit plan 
     under such chapter 89, as determined under regulations 
     prescribed by the Office of Personnel Management.
       (3) Survivors.--For the purpose of this subsection, the 
     term ``retired employee'' includes a survivor of the retired 
     employee.
       (c) Specification of Date.--The date specified in this 
     subsection is the first day of the first calendar year 
     throughout which subsidies are available under section 
     8906(j)(2) of title 5, United States Code (as added by 
     section 14104) to Federal annuitants.
       (d) Treatment of the Fund.--After the date specified in 
     subsection (c), the Retired Employees Health Benefits Fund 
     shall temporarily remain available, and amounts in that fund 
     shall subsequently be disbursed, in a manner comparable to 
     that provided for under section 14402.
       (e) Regulations.--The Office shall prescribe such 
     regulations as may be necessary to carry out this section.

     SEC. 14106. TEMPORARY EMPLOYEES.

       (a) Nonexcludability.--Paragraph (4) of section 8913(b) is 
     amended to read as follows:
       ``(4) an employee who is employed on a temporary basis, if 
     such employee either--
       ``(A) has completed 3 months of current continuous 
     employment (excluding any break in service of 5 days or 
     less);
       ``(B) has been (or is reasonably expected to be) employed 
     for a period of 4 months during the previous (or succeeding) 
     12-month period; or
       ``(C) meets such other employment requirements as the 
     Office may prescribe.''.
       (b) Repeal.--
       (1) In general.--Section 8906a is repealed.
       (2) Chapter analysis.--The analysis for chapter 89 is 
     amended by repealing the item relating to section 8906a.
       (c) Effective Date.--
       (1) In general.--The amendments made by this section shall 
     take effect on the date of the enactment of this Act and 
     shall first apply to coverage provided on and after such 
     month (not later than the first month that begins more than 3 
     months after the date of the enactment of this Act) as the 
     Office of Personnel Management specifies.
       (2) Transition.--The Office of Personnel Management shall 
     provide for such special enrollment procedures and other 
     rules as may be required to provide for enrollment of 
     individuals described in section 8913(b)(4) of title 5, 
     United States Code, as amended by subsection (a), for 
     coverage on or after the first month described in paragraph 
     (1).

     SEC. 14107. STANDARDIZED CLAIMS PROCESSING.

       (a) In General.--Section 8902 is amended by adding at the 
     end the following:
       ``(o) A claim for payment or reimbursement under this 
     chapter (whether electronic or otherwise) shall be submitted 
     on such a standard form or in such a standard manner as may 
     be required by the Office in relation to health benefit 
     plans. Each contract under this chapter shall include 
     appropriate provisions to carry out the preceding 
     sentence.''.
       (b) Applicability.--The amendment made by subsection (a) 
     shall be implemented as soon as practicable, but in no event 
     later than January 1, 1996.

     SEC. 14108. ADVANCE DIRECTIVES.

       (a) In General.--Section 8907 is amended by adding at the 
     end the following:
       ``(c) The Office shall--
       ``(1) prepare information relating to the use of advance 
     directives regarding the type and intensity of care which an 
     individual desires in the event that such individual becomes 
     unable to communicate by reason of incapacity due to illness 
     or injury; and
       ``(2) require, as a condition for approval of any contract 
     under section 8902 (and in accordance with the applicable 
     provisions (if any) of the Guaranteed Health Insurance Act of 
     1994), that appropriate provisions be included so that such 
     information may be made available to enrollees of the plan 
     involved.''.
       (b) Applicability.--The amendment made by subsection (a) 
     shall apply with respect to contract terms beginning on or 
     after January 1, 1996.

     SEC. 14109. COLLECTIVE BARGAINING AUTHORITY.

       (a) In General.--Any collective bargaining rights available 
     under title 39, United States Code, before the date of the 
     enactment of this Act, with respect to health benefits, shall 
     continue to be available with respect to health benefits 
     provided for as a result of the enactment of this Act.
       (b) Hold Harmless Provision.--In no event shall the 
     Government contribution provided by the United States Postal 
     Service be less than that required pursuant to a collective 
     bargaining agreement under title 39, United States Code (if 
     such agreement was ratified before the date of the enactment 
     of this Act) while such agreement remains in effect. The 
     preceding sentence shall be in addition to any requirement 
     under section 1111(c) of this Act.
       (c) Amendment to Title 39, United States Code.--Section 
     1005(f) of title 39, United States Code, is amended by 
     striking ``87 and 89'' and inserting ``87, 89, and 89A''.
       (d) Related Provision.--Notwithstanding any other provision 
     of (or amendment made by) this Act, any health benefits plan 
     of an organization described in section 5305(c) of this Act 
     may operate without regard to the number of States in which 
     it is licensed to issue group health insurance.
           Subtitle B--Provisions Relating to Universal FEHBP

     SEC. 14201. UNIVERSAL FEHBP.

       For provisions relating to universal FEHBP, see subtitle D 
     of title V of this Act.
                      Subtitle C--Transition Rules

     SEC. 14301. TREATMENT OF COMPREHENSIVE MEDICAL PLANS.

       (a) In General.--Chapter 89 is amended by adding after 
     section 8903a the following:

     ``Sec. 8903b. Treatment of comprehensive medical plans

       ``(a) For the purpose of this section--
       ``(1) the term `FEHBP transition period' means the 7-year 
     period beginning on the first day of the first contract year 
     beginning after the contract year described in subsection 
     (b);
       ``(2) any reference to a particular numbered year in the 
     FEHBP transition period refers to the corresponding contract 
     year in such period;
       ``(3) the term `old rate' means, with respect to a plan, 
     the subscription charge for such plan under this chapter, 
     determined--
       ``(A) as if the Guaranteed Health Insurance Act of 1994 had 
     not been enacted; but
       ``(B) subject to subsection (c)(2);
       ``(4) the term `new rate' means, with respect to a plan, 
     the subscription charge for such plan's corresponding 
     universal FEHBP plan;
       ``(5) the term `corresponding universal FEHBP plan', as 
     used with respect to a comprehensive medical plan, means the 
     plan required by subsection (d) to be offered under universal 
     FEHBP in order that such comprehensive medical plan may be 
     offered under this chapter;
       ``(6) the term `universal FEHBP' means the health insurance 
     program under subtitle D of title V of the Guaranteed Health 
     Insurance Act of 1994;
       ``(7) the term `comprehensive medical plan' means a plan 
     described by section 8903(4); and
       ``(8) the term `guaranteed national benefit package' means 
     the guaranteed national benefit package referred to in 
     section 8904(a).
       ``(b)(1) The contract year described in this subsection is 
     the first contract year--
       ``(A) for which an affirmative certification is made under 
     paragraph (2)(A) that, with respect to each community-rating 
     area in which individuals eligible to enroll under this 
     chapter reside, universal FEHBP is--
       ``(i) operating in a stable health insurance market;
       ``(ii) serving a representative population; and
       ``(iii) offering such a range of types of health plans as 
     is provided under this chapter (including a plan which offers 
     an unlimited choice of providers); and
       ``(B) by the end of which the following provisions of law 
     are in effect with respect to all individuals eligible to 
     enroll in universal FEHBP:
       ``(i)(I) Section 59B of the Internal Revenue Code of 1986 
     and section 1001(b) of the Guaranteed Health Insurance Act of 
     1994 (relating to individual mandate); or
       ``(II) sections 3451 and 3455 of the Internal Revenue Code 
     of 1986 and section 1101(a) of the Guaranteed Health 
     Insurance Act of 1994 (relating to employer mandates).
       ``(ii) Section 5004 of the Guaranteed Health Insurance Act 
     of 1994 (relating to preexisting condition exclusions).
       ``(iii) Subsection (a) of section 5008 of the Guaranteed 
     Health Insurance Act of 1994 (relating to community rating of 
     premiums), except that such subsection shall not, for 
     purposes of this subparagraph, be considered to be in effect 
     until the completion of the transition period established 
     under subsection (b) of such section for all States.
       ``(iv) Section 5007 of the Guaranteed Health Insurance Act 
     of 1994 (relating to requirement of offering of guaranteed 
     national benefit package by health benefit plans).
       ``(v) Section 5003 of the Guaranteed Health Insurance Act 
     of 1994 (relating to open enrollment requirements).
       ``(vi) Part A of title XXII of the Social Security Act 
     (relating to premium certificates).
       ``(2)(A) The Office of Personnel Management shall certify 
     for each contract year, beginning with the 1999 contract 
     year, whether or not universal FEHBP satisfies the conditions 
     set forth in paragraph (1)(A).
       ``(B) The Office shall transmit a report on each 
     certification under subparagraph (A), including the basis for 
     the certification, to Congress and the President not later 
     than the tenth day after the end of the contract year to 
     which the certification relates (unless that tenth day is a 
     Saturday, Sunday, or legal holiday, in which case the 
     deadline shall be the next day which is not one of the 
     aforementioned days).
       ``(3) For purposes of paragraph (2)(A), the condition under 
     paragraph (1)(A)(i) shall not be considered to be satisfied 
     unless the community-rated market sector in which universal 
     FEHBP is operating is large enough to yield credible 
     experience and permit the setting of stable rates.
       ``(c) Notwithstanding section 8902(i) or any other 
     provision of this chapter--
       ``(1) the subscription charge for each comprehensive 
     medical plan shall--
       ``(A) for the first year of the FEHBP transition period, be 
     equal to the old rate;
       ``(B) for the second year of the FEHBP transition period, 
     be equal to the sum of--
       ``(i) 75 percent of the old rate; and
       ``(ii) 25 percent of the new rate;
       ``(C) for the third year of the FEHBP transition period, be 
     equal to the sum of--
       ``(i) 50 percent of the old rate; and
       ``(ii) 50 percent of the new rate; and
       ``(D) for the fourth year of the FEHBP transition period, 
     be equal to the sum of--
       ``(i) 25 percent of the old rate; and
       ``(ii) 75 percent of the new rate; and
       ``(2) the areas for which rates are established under this 
     subsection shall, beginning with not later than the rates 
     determined for the second year of the FEHBP transition 
     period, be the same as under universal FEHBP.
       ``(d) A contract under this chapter for a comprehensive 
     medical plan may not be made, nor may any such plan be 
     approved, for any year in the FEHBP transition period, unless 
     the carrier agrees to offer (in the same area) a health 
     benefits plan under universal FEHBP in such year.
       ``(e) All computations under this section shall be made 
     with respect to each class of enrollment available under the 
     plan involved.
       ``(f)(1) Except in such cases as the Office may provide, 
     effective for items and services furnished after the 
     expiration of the fourth year of the FEHBP transition 
     period--
       ``(A) health insurance coverage under a plan described by 
     section 8903(4) shall not be available under this chapter; 
     and
       ``(B) in applying this chapter, any reference to such plans 
     shall be disregarded.
       ``(2) In the case of any individual who is enrolled in a 
     plan described in section 8903(4) as of the last day of the 
     fourth year of the FEHBP transition period, and who fails to 
     elect to be covered under a plan under either this chapter or 
     universal FEHBP or to decline such coverage with respect to 
     the following year, such individual (if eligible) shall be 
     automatically enrolled in the corresponding or most similar 
     plan offered under universal FEHBP for the same or most 
     similar class of enrollment, as determined under regulations 
     prescribed by the Office.
       ``(g) The Office shall prescribe such regulations as may be 
     necessary to carry out this section.''.
       (b) Treatment of Reserves.--For provisions relating to 
     treatment of reserves, see section 14402.
       (c) Chapter Analysis.--The analysis for chapter 89 is 
     amended by inserting after the item relating to section 8903a 
     the following:

``8903b. Treatment of comprehensive medical plans.''.

     SEC. 14302. ELIGIBILITY FOR UNIVERSAL FEHBP.

       (a) In General.--Chapter 89 is amended by adding after 
     section 8905a the following:

     ``Sec. 8905b. Election of coverage under universal FEHBP

       ``(a) For the purpose of this section, the terms `FEHBP 
     transition period' and `universal FEHBP' have the meanings 
     given such terms by section 8903b.
       ``(b) Effective after the fourth contract year of the FEHBP 
     transition period, any individual who would be eligible to 
     enroll in a health benefits plan under this chapter if the 
     Guaranteed Health Insurance Act of 1994 had not been enacted 
     shall be eligible to enroll in a health benefits plan under 
     universal FEHBP.
       ``(c) Enrollment and all other aspects of participation in 
     universal FEHBP pursuant to this section shall be in 
     accordance with chapter 89A (disregarding the applicability 
     rule under section 8932(a)(2) and any provisions relating 
     thereto). Nothing in this subsection or chapter 89A 
     (including any provision incorporated under chapter 89A by 
     reference) shall, with respect to any period before the end 
     of the FEHBP transition period, have the effect of preventing 
     an election of coverage under this chapter.
       ``(d) The Office of Personnel Management shall prescribe 
     such regulations as may be necessary to carry out this 
     section, including provisions under which any coverage under 
     universal FEHBP shall, for purposes of subsections (b) and 
     (d) of section 8905, be treated as coverage under this 
     chapter.''.
       (b) Coordination of Open Enrollment Periods.--
       (1) In general.--Subsection (f)(1) of section 8905 is 
     amended to read as follows:
       ``(f)(1) The Office shall provide for a period each year 
     (beginning and ending on the same dates as the annual open 
     enrollment period provided for under section 5305(a) of the 
     Guaranteed Health Insurance Act of 1994 in such year) during 
     which any employee, annuitant, former spouse, or other 
     individual eligible to enroll in a health benefits plan under 
     this chapter may--
       ``(A) commence, terminate, or transfer such individual's 
     enrollment in a plan under this chapter or under universal 
     FEHBP; or
       ``(B) make any other election allowable under regulations 
     prescribed by the Office.''.
       (2) Applicability.--The amendment made by paragraph (1) 
     shall take effect on the first day of the fourth year of the 
     FEHBP transition period.
       (c) Coordination Provisions Relating to Other Enrollment 
     Opportunities.--Section 8905 is amended by adding at the end 
     the following:
       ``(g) The periods during which, and the reasons for which, 
     any change allowable under subsection (e) or (f)(2) may be 
     made shall be at least coextensive with the provisions of 
     section 5305(a) of the Guaranteed Health Insurance Act of 
     1994 which relate to special enrollment periods.''.
       (d) Chapter Analysis.--The analysis for chapter 89 is 
     amended by inserting after the item relating to section 8905a 
     the following:

``8905b. Election of coverage under universal FEHBP.''.

     SEC. 14303. TREATMENT OF REMAINING PLANS.

       (a) Treatment of Remaining Plans.--Chapter 89 is amended by 
     adding after section 8903b (as added by section 14301) the 
     following:

     ``Sec. 8903c. Treatment of remaining plans

       ``(a) For the purpose of this section--
       ``(1) the terms `FEHBP transition period' and `universal 
     FEHBP plan' have the meanings given such terms by section 
     8903b;
       ``(2) the rule of construction set forth in section 
     8903b(a)(2) applies;
       ``(3) the term `experience-based rate' means, with respect 
     to a plan, the subscription charge for such plan under this 
     chapter, determined as if the Guaranteed Health Insurance Act 
     of 1994 had not been enacted;
       ``(4) the term `applicable community rate' means, with 
     respect to a health benefits plan offered by a carrier under 
     this chapter--
       ``(A) the subscription charge for the plan through which 
     the guaranteed national benefit package is offered by such 
     carrier under universal FEHBP within the community-rating 
     area involved (if any); or
       ``(B) if subparagraph (A) cannot be applied, the weighted 
     average of the subscription charges for the universal FEHBP 
     plans which, in the preceding contract year, accounted for at 
     least 80 percent of all enrollments under universal FEHBP 
     (taken in descending order, starting with the plan which had 
     the greatest number of enrollments) within the community-
     rating area involved, as determined by the Office of 
     Personnel Management; and
       ``(5) the term `community-rating area' means such an area 
     as applied for purposes of section 5304(a)(1) of the 
     Guaranteed Health Insurance Act of 1994.
       ``(b) Notwithstanding section 8902(i) or any other 
     provision of this chapter, the subscription charge for each 
     plan described by section 8903(1), (2), or (3) shall--
       ``(1)(A) for the fifth year of the FEHBP transition period, 
     be equal to the sum of--
       ``(i) 75 percent of the experience-based rate; and
       ``(ii) 25 percent of the applicable community rate;
       ``(B) for the sixth year of the FEHBP transition period, be 
     equal to the sum of--
       ``(i) 50 percent of the experience-based rate; and
       ``(ii) 50 percent of the applicable community rate; and
       ``(C) for the seventh year of the FEHBP transition period, 
     be equal to the sum of--
       ``(i) 25 percent of the experience-based rate; and
       ``(ii) 75 percent of the applicable community rate; and
       ``(2) beginning with the rates for the fifth year of the 
     FEHBP transition period, be determined on a community-by-
     community basis (except that nothing in this paragraph shall 
     be considered to affect the way in which any experience-based 
     rate, required for purposes of any computation under this 
     section, is determined).
       ``(c) All computations under this section shall be made 
     with respect to each class of enrollment available under the 
     plan involved.
       ``(d)(1) Except in such cases as the Office may provide, 
     effective for items and services furnished after the 
     expiration of the FEHBP transition period--
       ``(A) health insurance coverage under a plan described by 
     section 8903 (other than paragraph (4)) shall not be 
     available under this chapter; and
       ``(B) in applying this chapter, any reference to such plans 
     shall be disregarded.
       ``(2) In the case of any individual who is enrolled in a 
     plan as of the last day of the FEHBP transition period, and 
     who fails to elect to be covered under a plan under universal 
     FEHBP or to decline such coverage with respect to the 
     following year, such individual (if eligible) shall be 
     automatically enrolled in the corresponding or most similar 
     plan offered under universal FEHBP for the same or most 
     similar class of enrollment, as determined under regulations 
     prescribed by the Office.''.
       (b) Treatment of Reserves.--For provisions relating to 
     treatment of reserves, see section 14402.
       (c) Chapter Analysis.--The analysis for chapter 89 is 
     amended by adding after the item relating to section 8903b 
     (as added by section 14301) the following:

``8903c. Treatment of remaining plans.''.
                 Subtitle D--Post-Transition Provisions

     SEC. 14401. INTEGRATION OF FEHBP AND UNIVERSAL FEHBP.

       (a) In General.--Title 5, United States Code is amended by 
     inserting after chapter 89 the following:

 ``CHAPTER 89A--PROVISIONS FOR THE INTEGRATION OF FEHBP AND UNIVERSAL 
                                 FEHBP

``Sec.
``8931. Definitions.
``8932. Applicability.
``8933. Coverage under universal FEHBP.
``8934. Provisions relating to plans offering the guaranteed national 
              benefit package.
``8935. Eligibility for additional benefits.
``8936. Opportunities to enroll.
``8937. Regulations.

     ``Sec. 8931. Definitions

       ``For the purpose of this chapter--
       ``(1) any term used in this chapter which is defined for 
     purposes of chapter 89 has the meaning given such term under 
     such chapter; and
       ``(2) the term `FEHBP transition period' has the meaning 
     given such term by section 8903b(a)(1).

     ``Sec. 8932. Applicability

       ``(a) In General.--
       ``(1) To whom this chapter applies.--This chapter applies 
     with respect to any employee, annuitant, or other individual 
     who (but for the enactment of the Guaranteed Health Insurance 
     Act of 1994) would be eligible for coverage under chapter 89 
     (as determined under subsection (b)).
       ``(2) Periods with respect to which this chapter applies.--
     This chapter applies with respect to any period of coverage 
     (with respect to any such individual) beginning after the end 
     of the FEHBP transition period.
       ``(b) Determining Eligibility for Coverage Under Chapter 
     89.--For purposes of making any determination under 
     subsection (a)(1) as to whether or not a particular 
     individual would be eligible for coverage under chapter 89, 
     the provisions of such chapter (disregarding the effect of 
     sections 8903b and 8903c) shall be applied, except that, in 
     applying section 8905(b), any period of coverage under 
     universal FEHBP shall be counted as a period of coverage 
     under chapter 89.

     ``Sec. 8933. Coverage under universal FEHBP

       ``(a) In General.--An individual to whom this chapter 
     applies is eligible, for purposes of any period with respect 
     to which this chapter applies, for health insurance coverage 
     under universal FEHBP, in accordance with section 5303 of the 
     Guaranteed Health Insurance Act of 1994.
       ``(b) Family Members.--Under rules specified by the Office 
     of Personnel Management, any individual who would be eligible 
     to be enrolled as a family member of another individual under 
     chapter 89 (as determined under section 8932) shall not be 
     disqualified from being so enrolled under universal FEHBP by 
     reason of the way in which `family member' is defined for 
     purposes of universal FEHBP.

     ``Sec. 8934. Provisions relating to plans offering the 
       guaranteed national benefit package

       ``(a) Contributions.--The individual and Government 
     contributions for plans offering the guaranteed national 
     benefit package under universal FEHBP shall be governed by 
     the provisions of section 8906, except that, in applying such 
     provisions for purposes of this section, any reference to the 
     weighted average under section 8906(a) shall be treated as a 
     reference to the weighted average of the applicable premiums 
     under universal FEHBP.
       ``(b) Payment of Contributions.--
       ``(1) In general.--Any Government contribution under this 
     section shall be payable from the appropriation or fund from 
     which any Government contribution on behalf of the individual 
     would have been payable under chapter 89.
       ``(2) Payments for annuitants.--Any Government 
     contributions under this section on behalf of an annuitant 
     shall be paid from annual appropriations which are authorized 
     to be made for that purpose and which may be made available 
     until expended.
       ``(3) Continuation of postal service rule.--The requirement 
     of section 8906(g)(2) shall continue to apply with respect to 
     this section in the same manner as it applies with respect to 
     section 8906.
       ``(c) Eligibility for Premium Subsidies.--An individual to 
     whom this chapter applies who is enrolled under a health 
     benefits plan under universal FEHBP shall be eligible for 
     premium subsidies (referred to in section 8906(j)) to the 
     same extent and in the same manner as would be the case under 
     section 8906(j) with respect to an employee or other 
     individual enrolled in a plan under chapter 89.

     ``Sec. 8935. Eligibility for additional benefits

       ``(a) In General.--An individual to whom this chapter 
     applies who is enrolled under a health benefits plan under 
     universal FEHBP--
       ``(1) may enroll in any supplemental health benefit policy 
     under section 5302(b) of the Guaranteed Health Insurance Act 
     of 1994 for which the individual is eligible;
       ``(2) is eligible to be covered by a maintenance of effort 
     policy under subsection (b); and
       ``(3) is entitled to be provided a contribution under 
     subsection (c).
       ``(b) Maintenance of Effort Policies.--
       ``(1) In general.--The Office shall provide or contract for 
     one or more maintenance of effort policies of the type 
     described in section 8904a(b)(1)(A) and of the type described 
     in section 8904a(b)(1)(B).
       ``(2) Consultation.--In developing maintenance of effort 
     policies to be offered under this subsection, the Office--
       ``(A) shall meet and confer with exclusive representatives 
     of employees through a process to be established by the 
     National Partnership Council; and
       ``(B) shall consult periodically with representatives of 
     employees (other than those described in subparagraph (A)) 
     and of annuitants.
       ``(3) Administration.--To the extent that maintenance of 
     effort policies are provided through carriers, section 8902 
     shall, with respect to the administration of this section, 
     apply to the extent practicable. No requirement of law 
     relating to limiting the offering of a supplemental health 
     benefit policy shall apply to a maintenance of effort policy 
     offered under this section.
       ``(c) Contribution.--
       ``(1) In general.--The Government shall pay the total 
     enrollment charge for a maintenance of effort policy under 
     subsection (b) in the case of any employee or annuitant for 
     whom Government contributions are being made with respect to 
     any health benefits plan under universal FEHBP.
       ``(2) Payment.--Any payment under this subsection shall be 
     made at the same time and in the same manner as if it were a 
     Government contribution for a health benefits plan under 
     section 8934, and shall be made from the same appropriation 
     or fund as from which any such Government contributions 
     would, with respect to the employee or annuitant involved, be 
     made. In applying the previous sentence, the reference to 
     `Government contributions under this section' in section 
     8934(b)(2) shall be considered to include payments under this 
     subsection. The requirement of section 8906(g)(2) shall 
     continue to apply with respect to this subsection in the same 
     manner as it applies with respect to section 8906.

     ``Sec. 8936. Opportunities to enroll

       ``Enrollment in plans under universal FEHBP shall be 
     governed by section 5305(a) of the Guaranteed Health 
     Insurance Act of 1994, except that an election opportunity 
     may not be denied if there occurs any event or circumstance 
     which would, if it had occurred during the last year of the 
     FEHBP transition period, have made such an election allowable 
     under subsection (e) or (f)(2) of section 8905.

     ``Sec. 8937. Regulations

       ``The Office of Personnel Management shall prescribe such 
     regulations as may be necessary to carry out this chapter.''.
       (b) Clerical Amendment.--The table of chapters of subpart G 
     of part III of title 5, United States Code, is amended by 
     adding after the item relating to chapter 89 the following:

``89A. Provisions for the Integration of FEHBP and Universal FEHBP 
    8931''.............................................................

     SEC. 14402. FINAL ACCOUNTING AND DISTRIBUTION OF CERTAIN 
                   RESERVES OF CHAPTER 89 PLANS.

       (a) Definitions and Rule of Construction.--For the purpose 
     of this section--
       (1) the terms ``contingency reserve'' and ``special 
     reserve'' are used in the same way as such terms are used in 
     section 890.503(c) of title 5, Code of Federal Regulations, 
     as in effect on January 1, 1994;
       (2) the term ``qualified health plan distributee'' means an 
     individual who was enrolled--
       (A) on December 31 of the fourth year of the FEHBP 
     transition period, in a comprehensive medical plan described 
     in section 8903(4) of title 5, United States Code; or
       (B) on December 31 of the seventh year of the FEHBP 
     transition period, in a plan described in section 8903(1), 
     (2), or (3) of such title;
       (3) the rule of construction set forth in section 
     8903b(a)(2) of such title applies; and
       (4) the term ``FEHBP transition period'' has the meaning 
     given such term by section 8903b of such title.
       (b) Comprehensive Medical Plans No Longer in Chapter 89.--
       (1) Final accounting.--During the fifth year of the FEHBP 
     transition period, the Office of Personnel Management shall 
     perform a final accounting for the preceding calendar year 
     for each contract with a qualified health maintenance carrier 
     (other than an experience-rated carrier) entered into under 
     section 8902(l) of such title (as such section was in effect 
     during such calendar year).
       (2) Availability for distribution.--After the final 
     accounting under paragraph (1), any balance remaining in the 
     contingency reserve of any such plan shall be available for 
     distribution in accordance with subsection (d).
       (3) Determination of qualified health plan distributees.--
     The Office shall determine who is a qualified health plan 
     distributee with respect to each plan subject to paragraph 
     (1).
       (c) Experience-Rated Plans No Longer in Chapter 89.--
       (1) Final accounting.--
       (A) Fee for service plans.--Except as provided in 
     subparagraph (B), during the third year beginning after the 
     seventh year of the FEHBP transition period, the Office shall 
     perform a final accounting for such seventh year for each 
     plan described by section 8903(1), (2), or (3).
       (B) Comprehensive medical plans.--In the case of a plan 
     described by section 8903(4) that is not subject to 
     subsection (b), the Office shall perform a final accounting 
     during the sixth year of the FEHBP transition period for the 
     fourth year of such period.
       (2) Reconciliation of reserve balances.--Each final 
     accounting required by paragraph (1) shall reconcile the 
     contingency reserves and special reserves of a plan, as 
     follows:
       (A) Claim and special reserves.--First, if the amounts in 
     the reserve for incurred-but-unpaid benefit claims are--
       (i) insufficient to meet incurred-but-unpaid benefit claims 
     of a plan, such claims shall be paid from the special reserve 
     of the plan (if available);
       (ii) insufficient, in combination with any available 
     special reserve of the plan, to meet incurred-but-unpaid 
     benefit claims of a plan, such deficit shall be a negative 
     addition to the plan's special reserve; or
       (iii) greater than the actual incurred-but-unpaid benefit 
     claims, any excess amount in such reserve shall be 
     transferred to the plan's special reserve.
       (B) Treatment of the special reserve of a plan.--Second, if 
     the balance of the special reserve of a plan after 
     subparagraph (A) is carried out is--
       (i) greater than zero, the plan shall transfer the amount 
     in the special reserve to the Office of Personnel Management 
     for credit to the plan's contingency reserve; or
       (ii) less than zero, the moneys in the contingency reserve 
     of the plan shall be transferred to the special reserve in an 
     amount that is sufficient to increase the balance of the 
     special reserve to zero or, if less, an amount that is equal 
     to the balance in such contingency reserve.
       (C) Pre-distribution payments to plan special reserves from 
     combined contingency reserves.--Third, after payments from 
     plan contingency reserves are made under subparagraph (B), 
     remaining balances of all plan contingency reserves shall be 
     combined, and payments shall be made from such aggregate 
     balance (if any) to plans with negative special reserves to 
     increase such special reserves to zero.
       (D) Availability for distribution.--Fourth, any balance 
     remaining in the aggregate contingency reserves after 
     subparagraph (C) is carried out shall be available for 
     distribution in accordance with subsection (d).
       (3) Determination of qualified health plan distributees.--
     The Office shall determine who is a qualified health plan 
     distributee with respect to each plan subject to paragraph 
     (1).
       (d) Distribution of Remaining Contingency Reserves.--
       (1) General rule.--
       (A) Distribution.--Amounts available for distribution 
     pursuant to subsections (b)(2) and (c)(2)(D) shall be 
     distributed to the qualified health plan distributees living 
     on the date of distribution, the United States Government, 
     and the United States Postal Service.
       (B) Amounts.--Such amounts shall be distributed in sums 
     which the Office determines, in accordance with regulations 
     which the Office shall promulgate, to be proportional to 
     their respective contributions to health plans (determined 
     without regard to any collective bargaining agreement under 
     title 39, United States Code) made during the plan year for 
     which a final accounting is made under this section.
       (C) Remaining amounts redistributed to united states 
     government and united states postal service.--Amounts which 
     could not be distributed to a qualified health plan 
     distributee under subparagraph (A) after reasonable efforts 
     shall be redistributed to the United States Government or the 
     United States Postal Service, as appropriate.
       (2) Individual limited to one distribution.--An individual 
     who is determined to be a qualified health plan distributee 
     under both subsections (b)(3) and (c)(3) may receive only one 
     distribution under paragraph (1)(A).
       (3) Treatment of moneys received by the united states 
     government and the united states postal service.--
       (A) United states government.--Amounts received by the 
     United States Government pursuant to paragraph (1) shall be 
     deposited in a special account of the Employees Health 
     Benefits Fund. Such amounts shall be available to be used 
     only for purposes which benefit the health of Federal 
     employees and annuitants, including payment for the 
     Government-provided maintenance of effort policies required 
     by section 8935 of title 5, United States Code, as directed 
     by Congress.
       (B) United states postal service.--Amounts received by the 
     United States Postal Service pursuant to paragraph (1) shall 
     be deposited in a special account in the Postal Service Fund 
     (established by section 2003 of title 39, United States 
     Code). Such amounts shall be available to be used only for 
     purposes which benefit the health of employees and annuitants 
     of the United States Postal Service, including--
       (i) payment for the Government-provided maintenance of 
     effort policies required by section 8935 of title 5, United 
     States Code, or
       (ii) contributions to the financial stability of health 
     benefits plans established on behalf of employees and 
     annuitants of the United States Postal Service, to be made in 
     a manner that is proportional to the number of employees and 
     annuitants of the United States Postal Service to whom each 
     such plan (or its predecessor) provided health benefits on 
     the last day of the plan's participation under chapter 89 of 
     title 5, United States Code,

     as directed by Congress.
       (4) Deadline for distributions.--The distributions under 
     paragraph (1)(A) shall be completed no later than 42 months 
     following the end of the FEHBP transition period.
       (e) Mid-Transition Period Report.--Not later than December 
     31 of the seventh year of the FEHBP transition period, the 
     Office shall submit a report to the Congress which shall 
     include the projected amount to be distributed under 
     subsection (d), as well as the proposed regulations for 
     carrying out the distribution thereunder.

     SEC. 14403. TREATMENT OF INDIVIDUALS RESIDING ABROAD.

       (a) In General.--Chapter 89 is amended by adding at the end 
     the following:

     ``Sec. 8915. Health insurance program for individuals 
       residing abroad

       ``(a)(1) The Office of Personnel Management, upon making 
     the determination described in paragraph (2), shall by 
     regulation establish, directly or by contract, a program 
     under which employees, annuitants, and other individuals who 
     (but for the enactment of the Guaranteed Health Insurance Act 
     of 1994) would be eligible for coverage under this chapter 
     and who, because of residence abroad or other unusual 
     circumstances, have special needs shall be eligible for 
     health insurance.
       ``(2) The determination described in this paragraph is a 
     determination that the establishment of a health insurance 
     program is necessary to assure that health benefits made 
     available under this chapter are available to the individuals 
     described in paragraph (1) because health insurance coverage 
     would otherwise cease to be available as a result of the 
     enactment of the Guaranteed Health Insurance Act of 1994.
       ``(b) To the extent practicable, terms and conditions of 
     coverage provided to individuals under such program shall be 
     the same as the terms and conditions of coverage which would 
     otherwise apply under this chapter to employees.
       ``(c) Any Government contribution payable under such 
     program shall be made from the appropriation or fund from 
     which any Government contribution would have been payable 
     under this chapter on behalf of the individual involved, 
     except that, in the case of an annuitant, any such 
     contribution shall be payable from amounts appropriated 
     pursuant to section 8906(g) (or similar authority under this 
     chapter or chapter 89A).''.
       (b) Chapter Analysis.--The analysis for chapter 89 is 
     amended by adding at the end the following:

``8915. Health insurance program for individuals residing abroad.''.

                  Subtitle E--Miscellaneous Provisions

     SEC. 14501. TECHNICAL AND CONFORMING AMENDMENTS.

       (a) Title 5, United States Code.--Title 5, United States 
     Code, is amended as follows:
       (1) In section 1308(c), by striking ``chapter 89'' and 
     inserting ``chapter 89 and relevant aspects of universal 
     FEHBP (as defined in chapter 89A)''.
       (2) In section 3374(b) (in the matter following paragraph 
     (3)), by inserting ``(or, instead of chapter 89, any other 
     applicable health benefits system)'' after ``89 of this 
     title''.
       (3) In section 3582(a)(2)--
       (A) by striking ``89'' each place it appears and inserting 
     ``89 (or 89A, as applicable)''; and
       (B) by striking ``Benefits Fund'' and inserting ``Benefits 
     Fund (or the Universal FEHBP Health Benefits Fund)''.
       (4) In section 6386--
       (A) by striking ``chapter 89'' and inserting ``chapter 89 
     (or 89A)''; and
       (B) by striking ``(described in section 8909),'' and 
     inserting ``described in section 8909 (or the Universal FEHBP 
     Health Benefits Fund described in section 5306 of the 
     Guaranteed Health Insurance Act of 1994, as the case may 
     be),''.
       (b) Other References to Chapter 89.--Any reference in any 
     provision of law in effect on the day before the date of the 
     enactment of this Act, other than in a provision of law 
     amended by subsection (a)--
       (1) to coverage under chapter 89 of title 5, United States 
     Code, shall be deemed to be a reference to coverage under 
     chapter 89 or 89A of such title, as appropriate; and
       (2) to the ``Employees Health Benefits Fund'' shall be 
     deemed to be a reference to that fund or the Universal FEHBP 
     Health Benefits Fund, as appropriate.

     SEC. 14502. REPORT ON CONFORMING LEGISLATIVE CHANGES.

       The Office of Personnel Management shall, by not later than 
     6 months after the date of the enactment of this Act, submit 
     to Congress proposed legislation that conforms provisions of 
     law to the amendments made by this title.

     SEC. 14503. TREATMENT OF POSTAL SERVICE PLANS AS 
                   MULTIEMPLOYER PLANS.

       For purposes of this Act (and laws amended by this Act), 
     any health plan offered exclusively to employees of the 
     United States Postal Service shall be treated as if it were a 
     multiemployer plan (as defined in section 5102(c)(3) of this 
     Act) in operation prior to September 1, 1993.
                TITLE XV--DEPARTMENT OF VETERANS AFFAIRS

     SEC. 15001. BENEFITS AND ELIGIBILITY THROUGH DEPARTMENT OF 
                   VETERANS AFFAIRS MEDICAL SYSTEM.

       (a) DVA as a Participant in Health Care Reform.--
       (1) In general.--Title 38, United States Code, is amended 
     by inserting after chapter 17 the following new chapter:

  ``CHAPTER 18--ELIGIBILITY AND BENEFITS UNDER ENROLLMENT-BASED SYSTEM


                        ``SUBCHAPTER I--GENERAL

``1801. Definitions.


                      ``SUBCHAPTER II--ENROLLMENT

``1811. Enrollment: veterans.
``1812. Enrollment: CHAMPVA eligibles.
``1813. Enrollment: family members.
``1814. Exclusive enrollment eligibility categories.


                       ``SUBCHAPTER III--BENEFITS

``1821. Benefits for VA enrollees.
``1822. Chapter 17 benefits.
``1823. Supplemental benefits packages and policies.
``1824. Limitation regarding veterans enrolled with health plans 
              outside Department.


                   ``SUBCHAPTER IV--FINANCIAL MATTERS

``1831. Premiums, copayments, etc..
``1832. Recovery of cost of certain care and services.
``1833. Health Plan Fund.
``1834. Guaranteed funding of Government costs

                        ``SUBCHAPTER I--GENERAL

     ``Sec. 1801. Definitions

       ``For purposes of this chapter:
       ``(1) The term `qualified health benefit plan' means an 
     entity that is a qualified health benefit plan for purposes 
     of the Guaranteed Health Insurance Act of 1994.
       ``(2) The term `VA health plan' means a health plan that is 
     established and operated by the Secretary under section 
     7341(a) of this title.
       ``(3) The term `transitional VA health plan' means a VA 
     health plan that is operated by the Secretary during the 
     period before January 1, 1999.
       ``(4) The term `GHIA-qualified VA health plan' means a VA 
     health plan that is certified under title V of the Guaranteed 
     Health Insurance Act of 1994 as a qualified health benefit 
     plan for operation under such Act after December 31, 1998.
       ``(5) The term `VA enrollee' means an individual enrolled 
     under subchapter II of this chapter in a VA health plan.
       ``(6) The term `guaranteed national benefit package' means 
     the package of benefits that as of January 1, 1999, is 
     required to be provided by a qualified health benefit plan 
     under title III of the Guaranteed Health Insurance Act of 
     1994.

                      ``SUBCHAPTER II--ENROLLMENT

     ``Sec. 1811. Enrollment: veterans

       ``Each veteran who is an eligible individual within the 
     meaning of section 1001 of the Guaranteed Health Insurance 
     Act of 1994 may enroll with a VA health plan. After December 
     31, 1998, a veteran who wants to receive the benefits that 
     are included in the guaranteed national benefit package 
     through the Department shall enroll with a VA health plan 
     that is GHIA-qualified VA health plan.

     ``Sec. 1812. Enrollment: CHAMPVA eligibles

       ``(a) Eligibility.--An individual described in subsection 
     (b) who is an eligible individual within the meaning of 
     section 1001 of the Guaranteed Health Insurance Act of 1994 
     may enroll with a VA health plan.
       ``(b) Applicability.--This section applies to the following 
     individuals who are not otherwise eligible for medical care 
     under chapter 55 of title 10 (CHAMPUS):
       ``(1) The surviving spouse or child of a veteran who (A) 
     died as a result of a service-connected disability, or (B) at 
     the time of death had a total disability permanent in nature, 
     resulting from a service-connected disability.
       ``(2) The surviving spouse or child of a person who died in 
     the active military, naval, or air service in the line of 
     duty and not due to such person's own misconduct.

     ``Sec. 1813. Enrollment: family members

       ``(a) Eligibility.--The Secretary shall authorize a VA 
     health plan to enroll members of the family of an enrollee 
     under section 1811 or 1812 of this title. The enrollee shall 
     have the option of enrolling in the VA health plan as an 
     individual or with family members, in accordance with the 
     provisions of the Guaranteed Health Insurance Act of 1994.
       ``(b) Enrollment Eligibility To Survive Death of Veteran.--
     An individual who is enrolled with a VA health plan pursuant 
     to subsection (a) as a member of the family of a veteran 
     enrolled under section 1811 of this title shall not lose 
     eligibility to be enrolled with VA health plans by reason of 
     the death of that veteran.
       ``(c) Members of Family.--For purposes of this section, the 
     members of the family of an enrollee are those individuals 
     (other than the enrollee) included within the term `family' 
     as defined in section 3(a) of the Guaranteed Health Insurance 
     Act of 1994.

     ``Sec. 1814. Exclusive enrollment eligibility categories

       ``Eligibility of individuals for enrollment in a VA health 
     plan shall be exclusively as provided in this subchapter.

                       ``SUBCHAPTER III--BENEFITS

     ``Sec. 1821. Benefits for VA enrollees

       ``The Secretary shall ensure that each VA health plan 
     provides to each individual enrolled with it the items and 
     services in the guaranteed national benefit package. Such 
     benefits are entitlements for each enrolled individual.

     ``Sec. 1822. Chapter 17 benefits

       ``(a) Care and Services Not Included in Guaranteed National 
     Benefit Package.--In the case of care and services that may 
     be provided under chapter 17 of this title that are not 
     included in the guaranteed national benefit package, the 
     Secretary shall provide to any veteran (whether or not 
     enrolled with a VA health plan) the care and services 
     authorized under that chapter in accordance with the terms 
     and conditions applicable to that veteran and that care under 
     such chapter.
       ``(b) Veterans Who Are Not Eligible To Enroll Under 
     Guaranteed Health Insurance Act of 1994.--In the case of a 
     veteran who is not an eligible individual within the meaning 
     of section 1001 of the Guaranteed Health Insurance Act of 
     1994, the Secretary shall provide to the veteran the care and 
     services that may be provided under chapter 17 of this title 
     through any facility of the department, whether or not the 
     facility is operating as or within a VA health plan.
       ``(c) Preservation of Specialized DVA Treatment 
     Capacities.--In carrying out subsection (a), the Secretary 
     shall ensure that the Department maintains the capacity to 
     provide for the specialized treatment and rehabilitative 
     needs of disabled veterans (including veterans with spinal 
     cord dysfunction, blindness, and mental illness) within 
     distinct programs or facilities of the Department that are 
     dedicated to the specialized needs of those veterans in a 
     manner that affords those veterans reasonable access to care 
     and services for those specialized needs. The Secretary shall 
     ensure that overall capacity of the Department to provide 
     such specialized services is not reduced below the capacity 
     of the Department, nationwide, to provide those services, as 
     of the date of the enactment of this chapter. Nothing in this 
     subsection precludes the Secretary from expanding the number 
     or type of facilities or programs that provide treatment and 
     rehabilitation services for the specialized needs of such 
     veterans, including provision of specialized services on an 
     outpatient basis.
       ``(d) Annual Report.--Not later than March 1 of each year, 
     the Secretary shall submit to the Committees on Veterans' 
     Affairs of the Senate and House of Representatives a report 
     describing the actions the Secretary has taken to carry out 
     subsection (c) during the preceding fiscal year. Each such 
     report shall include a statement of the number of veterans to 
     whom the Department provided specialized services that are 
     covered by the report and the expense of providing those 
     services, and a description of the alternatives available in 
     the private sector for the provision of those services to 
     veterans.

     ``Sec. 1823. Supplemental benefits packages and policies

       ``The Secretary may offer supplemental health benefits 
     packages consistent with the requirements of title V of the 
     Guaranteed Health Insurance Act of 1994. However, the 
     Secretary may not offer a supplemental health benefits 
     package to a veteran that provides coverage for services that 
     the Department is required to provide to that veteran under 
     chapter 17 of this title. To the extent that supplemental 
     health benefits packages and supplemental cost sharing 
     policies are offered and accepted, benefits under such 
     packages and policies shall be entitlements for each enrolled 
     individual.

     ``Sec. 1824. Limitation regarding veterans enrolled with 
       health plans outside Department

       ``(a) Reimbursement Required.--After December 31, 1998, a 
     veteran who is enrolled in a health plan other than a GHIA-
     qualified VA health plan may be provided the items and 
     services in the guaranteed national benefit package by a VA 
     health plan operating in that area only if (except as 
     provided in subsection (b)) the plan is reimbursed for the 
     cost of the care provided.
       (b) Exception.--The Secretary may not impose on or collect 
     from a veteran described in subsection (a) a cost-share 
     charge of any kind in the case of treatment for a service-
     connected disability that (as determined by the Secretary) 
     requires a specialized treatment capacity for which the 
     Department has particular expertise.

                   ``SUBCHAPTER IV--FINANCIAL MATTERS

     ``Sec. 1831. Premiums, copayments, etc.

       ``(a) Exemption of Certain Veterans.--(1) In the case of a 
     veteran described in subsection (b) who is a VA enrollee, 
     there may not be imposed or collected from the veteran a 
     cost-share charge of any kind (whether a premium, copayment, 
     deductible, coinsurance charge, or other charge) for items 
     and services in the guaranteed national benefit package that 
     are provided to the veteran by the Secretary within a VA plan 
     provider network.
       ``(2) In the case of a veteran described in subsection (b) 
     who is enrolled in a GHIA-qualified VA health plan and has a 
     premium certificate issued under part A of title XXII of the 
     Social Security Act, the Secretary may require the veteran to 
     tender the certificate to the Secretary and the Secretary may 
     accept the certificate.
       ``(3) The Secretary shall make such arrangements as 
     necessary with the appropriate health insurance purchasing 
     cooperative or with appropriate Federal, State, or other 
     officials in order to carry out this subsection.
       ``(b) Veterans Exempt From Charges.--The veterans referred 
     to in subsection (a) are the following:
       ``(1) Any veteran with a service-connected disability.
       ``(2) Any veteran whose discharge or release from the 
     active military, naval or air service was for a disability 
     incurred or aggravated in the line of duty.
       ``(3) Any veteran who is in receipt of, or who, but for a 
     suspension pursuant to section 1151 of this title (or both 
     such a suspension and the receipt of retired pay), would be 
     entitled to disability compensation, but only to the extent 
     that such a veteran's continuing eligibility for such care is 
     provided for in the judgment or settlement provided for in 
     such section.
       ``(4) Any veteran who is a former prisoner of war.
       ``(5) Any veteran of the Mexican border period or World War 
     I.
       ``(6) Any veteran who is unable to defray the expenses of 
     necessary care as determined under section 1722(a) of this 
     title.
       ``(c) Establishment of Premium Rates.--(1) In the case of a 
     transitional VA health plan, the Secretary shall establish 
     premium rates for enrollees in the plan (other than for 
     veterans described in subsection (b) and enrollees described 
     in paragraph (3)) in accordance with regulations to be 
     prescribed by the Secretary.
       ``(2) In the case of a GHIA-qualified VA health plan, 
     premium rates (other than for veterans described in 
     subsection (b) and enrollees described in paragraph (3)) 
     shall be established in accordance with regulations 
     prescribed by the Secretary of Health and Human Services 
     under title V of the Guaranteed Health Insurance Act of 1994.
       ``(3) The Secretary may not collect a premium from an 
     enrollee in the case of--
       ``(A) an individual who is enrolled in a VA health plan by 
     reason of eligibility under section 1812 of this title; or
       ``(B) an individual who is enrolled in a VA health plan by 
     reason of eligibility under section 1813 of this title and 
     who is described in paragraph (1) of section 1713(a) of this 
     title.
       ``(d) Cost-Share Charges.--(1) In the case of a 
     transitional VA health plan, the Secretary may establish 
     cost-sharing charges (including copayments, deductibles, and 
     other coinsurance amounts) for enrollees in the plan (other 
     than for veterans described in subsection (b)) in accordance 
     with regulations to be prescribed by the Secretary.
       ``(2) In the case of a GHIA-qualified VA health plan, cost-
     sharing charges (including copayments, deductibles, and other 
     coinsurance amounts) for enrollees in the plan (other than 
     for veterans described in subsection (b)) shall be 
     established in accordance with regulations prescribed by the 
     Secretary of Health and Human Services under title V of the 
     Guaranteed Health Insurance Act of 1994.
       ``(3) The Secretary may not charge or collect a copayment, 
     deductible, or other coinsurance amount in the case of care 
     for any disease covered under section 1710(e)(1) of this 
     title.

     ``Sec. 1832. Recovery of cost of certain care and services

       ``(a) Recovery From Third Parties.--In the case of an 
     individual provided care or services through a VA health plan 
     who is covered under a supplemental health insurance policy 
     under the Guaranteed Health Insurance Act of 1994, a Medicare 
     supplemental health insurance plan (as defined in the 
     Guaranteed Health Insurance Act of 1994), or any other plan 
     or policy designed to supplement health insurance coverage, 
     the Secretary has the right to recover or collect charges for 
     care or services (as determined by the Secretary, but not 
     including care or services for a service-connected 
     disability) from the party providing that coverage to the 
     extent that the individual (or the provider of the care or 
     services) would be eligible to receive payment for such care 
     or services from such party if the care or services had not 
     been furnished by a department or agency of the United 
     States.
       ``(b) Procedures.--The provisions of subsections (b) 
     through (f) of section 1729 of this title shall apply with 
     respect to claims by the United States under subsection (a) 
     in the same manner as they apply to claims under subsection 
     (a) of that section.

     ``Sec. 1833. Health Plan Fund

       ``(a) Establishment of Fund.--There is hereby established 
     in the Treasury a revolving fund to be known as the 
     `Department of Veterans Affairs Health Plan Fund'.
       ``(b) Crediting of Amounts to Fund.--There shall be 
     credited to the revolving fund any amount received by the 
     Department by reason of the furnishing of health care by a VA 
     health plan and any amount received by the Department by 
     reason of the enrollment of an individual with a VA health 
     plan (including amounts received as premiums, premium 
     discount payments, copayments or coinsurance, and 
     deductibles), any amount received as a third-party 
     reimbursement, and any amount received as a reimbursement 
     from another health plan for care furnished to one of its 
     enrollees.
       ``(c) Crediting to Treasury.--Any amounts deposited to the 
     revolving fund that are attributable to amounts received by 
     the Department as a premium by reason of the enrollment with 
     a VA health plan of a veteran described in section 1831(b) of 
     this title shall be covered into the General Fund of the 
     Treasury.
       ``(d) Availability of Funds.--Amounts in the revolving fund 
     are hereby authorized to be appropriated for all expenses, 
     both direct and indirect, related to the delivery by a VA 
     health plan of the items and services in the guaranteed 
     national benefit package and any supplemental benefits 
     package or policy offered by the Secretary. The 
     appropriations authorized by this subsection shall be 
     considered mandatory appropriations for all purposes, 
     including for purposes of the Balanced Budget and Emergency 
     Deficit Control Act of 1985 and the Congressional Budget Act 
     of 1974.

     ``Sec. 1834. Guaranteed funding of Government costs

       ``(a) Required Deposits From Treasury.--The Secretary of 
     the Treasury shall deposit into the Department of Veterans 
     Affairs Health Plan Fund on the first day of each fiscal year 
     quarter, from amounts not otherwise appropriated, the amount 
     certified to the Secretary under subsection (b) with respect 
     to the fiscal year quarter beginning on that date.
       ``(b) Certification of Amount.--Not later than 30 days 
     before the beginning of each fiscal year quarter, the 
     Secretary of Veterans Affairs shall certify to the Secretary 
     of the Treasury the amount determined for that quarter under 
     subsection (c).
       ``(c) Determination of Amount.--(1) The amount to be 
     certified to the Secretary of the Treasury under subsection 
     (b) for any fiscal year quarter is the product of--
       ``(A) the projected number of VA enrollees described in 
     section 1831(b) of this title as of the beginning of that 
     fiscal year quarter, and
       ``(B) the capitated enrollment amount for that fiscal year 
     determined under subsection (d).
       ``(2) The Secretary shall adjust future certifications 
     under this subsection to take account of--
       ``(A) differences between the actual number of veterans 
     described in section 1831(b) of this title enrolled for a 
     fiscal year quarter and the projected number used in the 
     certification for that quarter pursuant to paragraph (1); and
       ``(B) any information that the Secretary finds would 
     produce a more accurate capitated enrollment amount by 
     enabling the Secretary to estimate more accurately the costs 
     that the Department will incur during the period covered by 
     any such certification in providing those services that are 
     specified to be included in the guaranteed national benefit 
     package.
       ``(d) Capitated Enrollment Amount.--(1) The Secretary shall 
     determine the capitated enrollment amount for purposes of 
     subsection (c). The initial capitated enrollment amount shall 
     be determined as the amount equal to--
       ``(A) the annual full cost (as defined in OMB Circular A-
     25, issued on July 8, 1993) that has been incurred by the 
     Department in providing those services that are specified to 
     be included in the guaranteed national benefit package, based 
     upon the most recent cost data available as of the time of 
     the determination, adjusted for inflation to the date of the 
     determination based upon the medical care consumer price 
     index calculated by the Bureau of Labor Statistics, divided 
     by
       ``(B) the total number of veterans described in section 
     1831(b) of this title who received those services.
       ``(2) The Secretary shall include in the total annual cost 
     for purposes of paragraph (1)(A) the amount appropriated for 
     fiscal year 1994 for medical and prosthetic research by the 
     Veterans Health Administration.
       ``(3) The Secretary shall develop the methodology for 
     determining the initial capitated enrollment amount under 
     paragraph (1) in consultation with the Comptroller General of 
     the United States. If the Comptroller General disagrees with 
     the methodology proposed to be used by the Secretary, the 
     Comptroller General shall promptly notify the Committees on 
     Veterans' Affairs of the Senate and House of Representatives. 
     The determination of that amount shall be made not later than 
     June 1, 1995.
       ``(4) The initial capitated enrollment amount, as adjusted 
     annually for inflation based upon the medical care consumer 
     price index calculated by the Bureau of Labor Statistics, 
     shall apply through the fifth fiscal year during which the 
     Secretary operates a GHIA-qualified VA health plan.
       ``(5)(A) Not later than the end of the third fiscal year 
     during which the Secretary operates a GHIA-qualified VA 
     health plan, the Secretary shall submit to the Committees on 
     Veterans' Affairs of the Senate and House of Representatives 
     a report on what actions, if any, would be necessary in order 
     for the Department to change the annual capitated enrollment 
     amount by the end of the fifth such year from the initial 
     amount determined under paragraph (1) to an amount determined 
     using the method described in subparagraph (B), or to amounts 
     determined using some other methodology, without a reduction 
     in quality of care.
       ``(B) The method for determining the annual capitated 
     enrollment amount for purposes of the study under this 
     paragraph is to determine the average premium that would be 
     payable under the Guaranteed Health Insurance Act of 1994 for 
     individuals enrolled in health plans other than a GHIA-
     qualified VA health plans which have enrollment populations 
     with disproportionate numbers of persons with similar 
     demographic and patient-risk characteristics to the 
     population of VA enrollees.''.
       (2) Clerical amendment.--The tables of chapters at the 
     beginning of title 38, United States Code, and at the 
     beginning of part II of such title, are amended by inserting 
     after the item relating to chapter 17 the following new item:

``18. Eligibility and Benefits Under Enrollment-Based System1801''.....

       (b) Preservation of Existing Benefits for Facilities Not 
     Operating as Health Plans.--(1) Chapter 17 of title 38, 
     United States Code, is amended by inserting after section 
     1704 the following new section:

     ``Sec. 1705. Facilities not operating within health plans; 
       veterans not eligible to enroll in health plans

       ``The provisions of this chapter shall apply with respect 
     to the furnishing of care and services--
       ``(1) by any facility of the Department that (A) is not 
     operating as or within a GHIA-qualified VA health plan, and 
     (B) is not located in a State (or portion of a State) that is 
     described in section 7342(a) of this title; and
       ``(2) by any facility of the Department (whether or not 
     operating as or within a GHIA-qualified VA health plan) in 
     the case of a veteran who is not an eligible individual with 
     the meaning of section 1001 of the Guaranteed Health 
     Insurance Act of 1994.''.
       (2) The table of sections at the beginning of such chapter 
     is amended by inserting after the item relating to section 
     1704 the following new item:

``1705. Facilities not operating within health plans; veterans not 
              eligible to enroll in health plans.''.

     SEC. 15002. ORGANIZATION OF DEPARTMENT OF VETERANS AFFAIRS 
                   FACILITIES AS HEALTH PLANS.

       (a) In General.--Chapter 73 of title 38, United States 
     Code, is amended--
       (1) by redesignating subchapter IV as subchapter V; and
       (2) by inserting after subchapter III the following new 
     subchapter:

 ``SUBCHAPTER IV--PARTICIPATION AS PART OF NATIONAL HEALTH CARE REFORM

     ``Sec. 7341. Organization of health care facilities as health 
       plans

       ``(a)(1) The Secretary shall organize health plans and 
     operate Department facilities as or within such health plans. 
     The Secretary shall establish standards for the organization 
     and operation of Department health care facilities as or 
     within health plans.
       ``(2) Health plans organized and operated by the Secretary 
     shall be known as `VA health plans'. Such plans shall be 
     known during the period before January 1, 1999, as 
     `transitional VA health plans'.
       ``(3) With respect to the operation of such plans after 
     December 31, 1998, standards established under paragraph (1) 
     shall be consistent with the regulations prescribed by the 
     Secretary of Health and Human Services pursuant to title V of 
     the Guaranteed Health Insurance Act of 1994.
       ``(4) The Secretary shall seek to ensure that each health 
     plan organized by the Secretary before January 1, 1999, is 
     certified as a qualified health benefit plan under title V of 
     the Guaranteed Health Insurance Act of 1994, as provided in 
     subsection (b).
       ``(5) The Secretary may not operate a VA health plan after 
     December 31, 1998, unless the plan is certified as provided 
     in subsection (b).
       ``(b)(1) A health plan established under subsection (a) may 
     be certified as a qualified health benefit plan for purposes 
     of the Guaranteed Health Insurance Act of 1994 in accordance 
     with regulations prescribed by the Secretary of Health and 
     Human Services pursuant to title V of the Guaranteed Health 
     Insurance Act of 1994.
       ``(2) A health plan established by the Secretary under 
     subsection (a) that is certified as provided in paragraph (2) 
     may be referred to as a `GHIA-qualified VA health plan'.
       ``(c) Within a geographic area or region, health care 
     facilities of the Department located within that area or 
     region may be organized to operate as a single health plan 
     encompassing all Department facilities within that area or 
     region or may be organized to operate as several health 
     plans.
       ``(d) The Secretary shall ensure that each health plan 
     established by the Secretary that is certified as a qualified 
     health benefit plan under title V of the Guaranteed Health 
     Insurance Act of 1994 is operated (except as specifically 
     otherwise provided in chapter 18 of this title or in this 
     subchapter) in accordance with the provisions of the 
     Guaranteed Health Insurance Act of 1994 (and the amendments 
     made by the Guaranteed Health Insurance Act of 1994).
       ``(e)(1) In establishing and operating health plans, the 
     Secretary (in consultation with the Comptroller General) 
     shall take appropriate steps to ensure the financial solvency 
     and stability of each VA health plan and of contractors and 
     subcontractors providing services pursuant to section 7343 of 
     this title.
       ``(2) In carrying out paragraph (1), the Secretary may 
     purchase from commercial sources insurance to insure the 
     United States against the financial risks involved in the 
     operation of any VA health plan.

     ``Sec. 7342. Operation of health care facilities within 
       States operating single payer programs or pure managed 
       competition programs

       ``(a) In a State (or portion of a State) that under the 
     Guaranteed Health Insurance Act of 1994 is operating as a 
     single payer program or that uses a pure managed competition 
     program, the Secretary shall seek to achieve the maximum 
     participation of Department health care facilities or GHIA-
     qualified VA health plans, as the case may be, in that State 
     (or portion of a State) that is permitted under applicable 
     provisions of law.
       ``(b) To the extent that the Secretary determines that 
     applicable provisions of law do not permit adequate 
     participation by GHIA-qualified VA health plans or Department 
     health care facilities in such a State (or portion of a 
     State), the Secretary shall submit to Congress a report 
     containing such legislative recommendations as the Secretary 
     considers appropriate. Any such report shall be prepared in 
     coordination with the Secretary of Health and Human Services.

     ``Sec. 7343. Health care resource agreements

       ``(a)(1) In accordance with policies established under 
     subsection (b), an official specified in paragraph (2) may, 
     without regard to any law or regulation specified in 
     paragraph (3), enter into agreements with health care plans, 
     with insurers, and with health care providers, and with any 
     other entity or individual, to furnish or obtain any health-
     care resource.
       ``(2) An official specified in this paragraph is any of the 
     following:
       ``(A) The head of a VA health plan.
       ``(B) The director of a Department health care facility 
     that is operating as or within a VA health plan.
       ``(C) The director of a Department health care facility 
     that is operating in a State (or portion of a State) that is 
     described in section 7342(a) of this title.
       ``(3) A law or regulation specified in this paragraph is 
     any of the following:
       ``(A) Section 1703 of this title.
       ``(B) Any other law or regulation pertaining to--
       ``(i) competitive procedures;
       ``(ii) acquisition procedures or policies (other than 
     contract dispute settlement procedures); or
       ``(iii) bid protests.
       ``(4) For purposes of this subsection, the term `health-
     care resource' has the meaning given that term in section 
     8152 of this title.
       ``(b) Policies established by the Secretary under 
     subsection (a) shall include appropriate provisions to ensure 
     that procurements under that subsection are carried out in a 
     manner consistent with (1) Federal acquisition policies 
     regarding nondiscrimination, equal opportunity, business 
     integrity, and safeguarding against fraud and abuse, and (2) 
     the goal of a streamlined process for the acquisition of 
     health-care resources.
       ``(c) Any proceeds to the Government received from an 
     agreement under subsection (a) shall be credited to the 
     Department of Veterans Affairs Health Plan Fund established 
     under section 1834 of this title and to funds that have been 
     allotted to the facility that furnished the resource 
     involved.

     ``Sec. 7344. Administrative and personnel flexibility

       ``(a) In order to carry out this subchapter, the Secretary 
     may--
       ``(1) subject to section 1822(c) of this title, carry out 
     administrative reorganizations of the Department without 
     regard to those provisions of section 510 of this title 
     following subsection (a) of that section; and
       ``(2) when the Secretary finds it is cost-effective or 
     necessary in order to provide health care services in a 
     timely manner--
       ``(A) enter into contracts for procurement of any 
     commercially available item at a cost of under $100,000 
     without regard to any provision of law or regulation (i) 
     requiring competitive procedures; (ii) mandating or giving 
     priority to any source of supply; or (iii) pertaining to 
     protests; and
       ``(B) enter into contracts without regard to section 
     8110(c) of this title for the performance of services 
     previously performed by employees of the Department.
       ``(b)(1) Whenever the Secretary considers such action 
     necessary for the operation of a VA health plan, the 
     Secretary may establish alternative personnel systems or 
     procedures for personnel at facilities operating as or within 
     VA health plans or for personnel at facilities operating in a 
     State (or portion of a State) that is described in section 
     7342(a) of this title, except that the Secretary shall 
     provide for preference eligibles (as defined in section 2108 
     of title 5) in a manner comparable to the preference for such 
     eligibles under subchapter I of chapter 33, and subchapter I 
     of chapter 35, of such title.
       ``(2) In establishing alternative personnel systems or 
     procedures under this subsection, the Secretary shall include 
     the following:
       ``(A) A system that ensures that applicants for employment 
     and employees are appointed, promoted, and assigned on the 
     basis of merit and fitness.
       ``(B) An equal employment opportunity program.
       ``(C) Compensation systems which will be used to set rates 
     of pay that are competitive with rates of pay paid by health-
     care providers other than the Department and that take into 
     consideration the difficulty, responsibility, and 
     qualification requirements of the work performed.
       ``(D) A formal performance appraisal system.
       ``(E) A system to address unacceptable conduct and 
     performance by employees, including a general statement of 
     violations, sanctions, and procedures which shall be made 
     known to all employees, and a dispute resolution procedure.
       ``(F) A formal policy regarding the accrual and use of sick 
     leave and annual leave.
       ``(c) The Secretary may carry out appropriate promotional, 
     advertising, and marketing activities to inform individuals 
     of the availability of facilities of the Department operating 
     as or within VA health plans.

     ``Sec. 7345. Veterans Health Care Transition Fund

       ``(a) For each of fiscal years 1995, 1996, and 1997, the 
     Secretary of the Treasury shall credit to a special fund (in 
     this section referred to as the `Fund') of the Treasury an 
     amount equal to--
       ``(1) $1,250,000,000 for fiscal year 1995;
       ``(2) $850,000,000 for fiscal year 1996; and
       ``(3) $1,950,000,000 for fiscal year 1997.
       ``(b) Amounts in the Fund shall be available to the 
     Secretary only for the VA health plans authorized under this 
     chapter. Such amounts are available without fiscal year 
     limitation for costs of commencing operation of VA health 
     plans, including consulting services, equipment, marketing, 
     and other costs, minor construction, and (subject to section 
     8104 of this title) major construction.
       ``(c) The Secretary shall submit to Congress, no later than 
     March 1, 1997, a report concerning the operation of the 
     Department of Veterans Affairs health care system during 
     fiscal years 1995 and 1996 in preparing for commencement of 
     operations as VA health plans. The report shall include a 
     discussion of--
       ``(1) the adequacy of amounts in the Fund for the operation 
     of VA health plans;
       ``(2) the quality of care provided by such plans;
       ``(3) the ability of such plans to attract patients; and
       ``(4) the need (if any) for additional funds for the Fund 
     in fiscal years after fiscal year 1997.

     ``Sec. 7346. Funding provisions: grants and other sources of 
       assistance

       ``The Secretary may apply for and accept, if awarded, any 
     grant or other source of funding that is intended to meet the 
     needs of special populations if funds obtained through the 
     grant or other source of funding will be used through a 
     facility of the Department operating as or within a health 
     plan.''.
       (b) Clerical Amendment.--The table of sections at the 
     beginning of chapter 73 is amended by striking out the item 
     relating to the heading for subchapter IV and inserting in 
     lieu thereof the following:

 ``subchapter iv--participation as part of national health care reform

``7341. Organization of health care facilities as health plans.
``7342. Operation of health care facilities within States operating 
              single payer programs or pure managed competition 
              programs.
``7343. Health care resource agreements.
``7344. Administrative and personnel flexibility.
``7345. Veterans Health Care Transition Fund.
``7346. Funding provisions: grants and other sources of assistance.

                ``subchapter v--research corporations''.

     SEC. 15003. ELIGIBILITY FOR CHAPTER 17 CARE.

       (a) Nursing Home Care.--Section 1710(a)(1) of title 38, 
     United States Code, is amended by inserting ``(or, in the 
     case of a veteran described in subparagraph (A) or (D) below, 
     shall furnish nursing home care)'' after ``may furnish 
     nursing home care''.
       (b) Outpatient Care for Enrolled Veterans.--Paragraph (1) 
     of section 1712(a) of such title is amended--
       (1) by striking out ``and'' at the end of subparagraph (C);
       (2) by striking out the period at the end of subparagraph 
     (D) and inserting in lieu thereof a semicolon; and
       (3) by adding at the end the following:
       ``(E) to any veteran described in section 1831(b) of this 
     title who is enrolled under section 1811 of this title and 
     the Guaranteed Health Insurance Act of 1994 with a VA health 
     plan (as defined in section 1801 of this title), for any 
     disability to the extent that care and treatment of that 
     disability is not included within the guaranteed national 
     benefit package (as defined in section 1801 of this 
     title);''.
       (c) Obviate-the-Need Outpatient Care.--(1) Paragraph (2) of 
     such section is amended by striking out ``The Secretary'' and 
     all the follows through ``this subsection--'' and inserting 
     in lieu thereof ``Except as provided in subsection (b) of 
     this section, the Secretary shall furnish on an ambulatory or 
     outpatient basis such medical services as the Secretary 
     determines are needed--''.
       (2) Paragraph (4) of such section is amended by striking 
     out ``medical services for a purpose described in paragraph 
     (5) of this subsection'' and inserting in lieu thereof ``, to 
     the extent that facilities are available, such medical 
     services as the Secretary determines are needed''.
       (3) Such section is further amended--
       (A) by striking out paragraph (5); and
       (B) by redesignating paragraphs (6) and (7) as paragraphs 
     (5) and (6), respectively.
       (d) Conforming Amendments.--(1) Section 1701(6)(A)(i) of 
     such title is amended by striking out ``(except under the 
     conditions described in section 1712(a)(5)(A) of this 
     title)''.
       (2) Section 1701(6)(B)(i)(II) of such title is amended by 
     striking ``section 1712(a)(5)(B)'' and inserting in lieu 
     thereof ``section 1712''.
       (3) Section 1703(a)(2)(B) of such title is amended by 
     striking out ``for a purpose described in section 
     1712(a)(5)(B) of this title'' and inserting in lieu thereof 
     ``to complete treatment incident to hospital, nursing home, 
     or domiciliary care that has been provided by the 
     Department''.
       (4) Section 1712A(b)(1) of such title is amended by 
     striking out ``section 1712(a)(5)(B)'' and inserting in lieu 
     thereof ``section 1703(a)(2)(B)''.

     SEC. 15004. AUTHORITY TO PROVIDE HEALTH CARE FOR HERBICIDE 
                   AND RADIATION EXPOSURE.

       (a) Authorized Inpatient Care.--Section 1710(e) of title 
     38, United States Code, is amended to read as follows:
       ``(e)(1)(A) Subject to paragraph (4), a herbicide-exposed 
     veteran is eligible for hospital care and nursing home care 
     under subsection (a)(1)(G) for any disease specified in 
     subparagraph (B).
       ``(B) The diseases referred to in subparagraph (A) are 
     those for which the National Academy of Sciences, in a report 
     issued in accordance with section 2 of the Agent Orange Act 
     of 1991, has determined--
       ``(i) that there is sufficient evidence to conclude that 
     there is a positive association between occurrence of the 
     disease in humans and exposure to a herbicide agent;
       ``(ii) that there is evidence which is suggestive of an 
     association between occurrence of the disease in humans and 
     exposure to a herbicide agent, but such evidence is limited 
     in nature; or
       ``(iii) that available studies are insufficient to permit a 
     conclusion about the presence or absence of an association 
     between occurrence of the disease in humans and exposure to a 
     herbicide agent.
       ``(2) A radiation-exposed veteran is eligible for hospital 
     care and nursing home care under subsection (a)(1)(G) for--
       ``(A) any disease listed in section 1112(c)(2) of this 
     title; and
       ``(B) any other disease for which the Secretary, based on 
     the advice of the Advisory Committee on Environmental 
     Hazards, determines that there is credible evidence of a 
     positive association between occurrence of the disease in 
     humans and exposure to ionizing radiation.
       ``(3) Subject to paragraph (4), a veteran who the Secretary 
     finds may have been exposed while serving on active duty in 
     the Southwest Asia theater of operations during the Persian 
     Gulf War to a toxic substance or environmental hazard is 
     eligible for hospital care and nursing home care under 
     subsection (a)(1)(G) of this section for any disability which 
     becomes manifest before October 1, 1996, notwithstanding that 
     there is insufficient medical evidence to conclude that such 
     disability may be associated with such exposure.
       ``(4) Hospital and nursing home care may not be provided 
     under or by virtue of paragraph (1) after September 30, 1996, 
     or, in the case of a veteran described in paragraph (3), 
     after September 30, 1998.
       ``(5) For purposes of this subsection and section 1712 of 
     this title--
       ``(A) the term `herbicide-exposed veteran' means a veteran 
     (i) who served on active duty in the Republic of Vietnam 
     during the Vietnam era, and (ii) who the Secretary finds may 
     have been exposed during such service to a herbicide agent;
       ``(B) the term `herbicide agent' has the meaning given that 
     term in section 1116(a)(4) of this title; and
       ``(C) the term `radiation-exposed veteran' has the meaning 
     given that term in section 1112(c)(4) of this title.''.
       (b) Authorized Outpatient Care.--Section 1712 of such title 
     is amended--
       (1) in subsection (a)(1) (as amended by section 15003(b)), 
     by adding at the end the following:
       ``(F) during the period before October 1, 1996, to any 
     herbicide-exposed veteran for any disease listed in section 
     1710(e)(1)(B) of this title; and
       ``(G) to any radiation-exposed veteran for any disease 
     covered under section 1710(e)(1)(C) of this title.''; and
       (2) in subsection (i)(3)--
       (A) by striking out ``(A)''; and
       (B) by striking out ``, or (B)'' and all that follows 
     through ``title''.
       (c) Savings Provision.--The provisions of sections 1710(e) 
     and 1712(a) of title 38, United States Code, as in effect on 
     the day before the date of the enactment of this Act, shall 
     apply with respect to hospital care, nursing home care, and 
     medical services in the case of any veteran furnished care or 
     services before such date of enactment on the basis of 
     presumed exposure to a substance or radiation under the 
     authority of those provisions.

     SEC. 15005. EXTENSION OF AUTHORITY TO PROVIDE PRIORITY 
                   OUTPATIENT HEALTH CARE FOR EXPOSURE TO 
                   ENVIRONMENTAL HAZARDS.

       Section 1712(a)(1)(D) of title 38, United States Code, is 
     amended by striking out ``December 31, 1994, for any 
     disability'' and inserting in lieu thereof ``October 1, 1998, 
     for any disability which becomes manifest before October 1, 
     1996,''.

     SEC. 15006. CONFIDENTIALITY OF MEDICAL RECORDS.

       Subsection (a) of section 5701 of title 38, United States 
     Code, is amended to read as follows:
       ``(a)(1) Except for medical records protected by the 
     Guaranteed Health Insurance Act of 1994, records described in 
     paragraph (2) shall be confidential and privileged, and no 
     disclosure of such records shall be made except as provided 
     in this section.
       ``(2) Paragraph (1) applies to the following records in the 
     possession of the Department:
       ``(A) All records pertaining to any claim under the laws 
     administered by the Secretary.
       ``(B) All records of the names and addresses of present or 
     former members of the Armed Forces, and their dependents, 
     contained in records pertaining to any such claim or derived 
     from records pertaining to any such claim.
       ``(3) For purposes of this paragraph, the term `records' 
     includes files, reports, and other papers and documents.''.

     SEC. 15007. REPORT ON WAIVING COST-SHARING FOR CERTAIN 
                   MEDICAL CARE FOR DEPENDENTS OF PERSIAN GULF 
                   VETERANS WHO MAY HAVE BEEN EXPOSED TO 
                   ENVIRONMENTAL HAZARDS.

       (a) Report.--The Secretary of Veterans Affairs shall submit 
     to Congress a report on the desirability and the feasibility 
     of waiving any requirement for cost-sharing in the case of 
     medical care described in subsection (b) that is provided by 
     a VA health plan under chapter 18 of title 38, United States 
     Code (as added by section 15001), to an individual who is a 
     VA enrollee enrolled under family-member eligibility under 
     section 1813 of that chapter.
       (b) Persian Gulf War Illness.--Medical care referred to in 
     subsection (a) is medical care provided to a family member of 
     a veteran described in subparagraph (C) of section 1710(e)(1) 
     of title 38, United States Code, for any disease or 
     disability occurring in that family member which the 
     Secretary finds may be related to the service of the veteran 
     in the Southwest Asia theater of operations during the 
     Persian Gulf War.
       (c) Matters To Be Considered.--In preparing the report 
     under subsection (a), the Secretary shall consider relevant 
     studies, including those that have been (or that are being) 
     conducted by the Department of Veterans Affairs, the 
     Department of Defense, the National Institutes of Health, the 
     National Academy of Sciences, and private health care 
     providers.
       (d) Submission of Report.--The report under subsection (a) 
     shall be submitted not later than 60 days after the date of 
     the enactment of this Act.

     SEC. 15008. STUDY OF THE EFFECT OF TELEMEDICINE ON THE 
                   DELIVERY OF VA HEALTH CARE SERVICES.

       (a) In General.--During each of fiscal years 1995 through 
     1997, the Secretary of Veterans Affairs shall carry out a 
     study of the effect of telemedicine on the delivery, 
     accessibility, and quality of health care services available 
     to individuals who are eligible for enrollment in a 
     Department of Veterans Affairs health care plan.
       (b) Reports.--Not later than 120 days after the date of the 
     enactment of this Act and annually thereafter through 1998, 
     the Secretary shall submit to the Committees on Veterans' 
     Affairs of the Senate and House of Representatives a report, 
     including descriptions of the telemedicine applications 
     benefiting veterans, relating to the study conducted under 
     subsection (a).
       (c) Consultation.--Each study under subsection (a) shall be 
     carried out in consultation with the Secretary of Health and 
     Human Services, the Secretary of Defense, the Chair of the 
     White House Information Infrastructure Task Force, and the 
     Director of High Performance Computing and Communications in 
     the Executive Office of the President.

     SEC. 15009. CONFORMING REDUCTION IN DISCRETIONARY SPENDING 
                   LIMITS.

       (a) Reduction in Limits.--To reflect the change in certain 
     veterans' health activities from discretionary to mandatory, 
     the spending limits for the discretionary category set forth 
     in section 601(a)(2) of the Congressional Budget Act of 1974 
     (as adjusted in conformance with section 251 of the Balanced 
     Budget and Emergency Deficit Control Act of 1985) are hereby 
     reduced as follows:
       (1) for fiscal year 1996, $2,170,000,000 in new budget 
     authority and in outlays;
       (2) for fiscal year 1997, $6,020,000,000 in new budget 
     authority and in outlays; and
       (3) for fiscal year 1998, $15,650,000,000 in new budget 
     authority and in outlays.
       (b) Deficit Reduction Included on Pay-As-You-Go 
     Scorecard.--The reduction in the discretionary outlay limits 
     under subsection (a) shall be considered a reduction in pay-
     as-you-go outlays for purposes of estimates made for this Act 
     under section 252(d) of the Balanced Budget and Emergency 
     Deficit Control Act of 1985 (in addition to any other pay-as-
     you-go amount estimated for purposes of that section as a 
     result of the enactment of this Act).

     SEC. 15010. EFFECTIVE DATES.

       (a) Chapter 18.--The provisions of chapter 18 of title 38, 
     United States Code, as added by section 15001, shall take 
     effect on October 1, 1996.
       (b) Chapter 17 Eligibility Reform.--The amendments made by 
     section 15003 shall take effect on October 1, 1996.
       (c) Administrative Matters.--The provisions of sections 
     7343 and 7344 of title 38, United States Code, as added by 
     15002(a), shall take effect on the date of the enactment of 
     this Act.
       (d) Early Enrollment.--The Secretary of Veterans Affairs 
     may commence enrollment under chapter 18 of title 38, United 
     States Code, as added by section 15001, and otherwise carry 
     out activities related to preparation for the conduct of 
     health care activities in the form of health plans effective 
     as of the date of the enactment of this Act.
                    TITLE XVI--INDIAN HEALTH SERVICE

     SEC. 16001. POLICY.

       Section 3(a) of the Indian Health Care Improvement Act (25 
     U.S.C. 1602(a)) is amended to read as follows:
       ``(a) The Congress hereby declares that it is the policy of 
     this Nation, in fulfillment of its unique trust 
     responsibility and legal obligation to the American Indian 
     and Alaska Native people--
       ``(1) to assure the highest possible health status for 
     American Indians and Alaska Natives,
       ``(2) to raise the quality of health care delivery to 
     American Indians and Alaska Natives to the highest possible 
     level,
       ``(3) to provide health care services in a culturally 
     appropriate manner which is consistent with the policies of 
     Indian self-determination and tribal self-governance, and
       ``(4) to provide all resources necessary to effect 
     paragraphs (1) through (3).''.

     SEC. 16002. HEALTH SECURITY FOR INDIANS.

       The Indian Health Care Improvement Act (25 U.S.C. 1601 et 
     seq.) is amended by adding at the end the following new 
     title:
                ``TITLE IX--HEALTH SECURITY FOR INDIANS

     ``SEC. 901. DEFINITIONS.

       ``For the purposes of this title:
       ``(1) Guaranteed national benefit package.--The term 
     `guaranteed national benefit package' has the meaning given 
     such term in section 2(5) of the Guaranteed Health Insurance 
     Act of 1994.
       ``(2) Health program of the service.--The term `health 
     program of the Service' means a facility or plan which 
     provides or arranges for the provision of health services 
     through one or more programs operated by the Service, by a 
     health program of an Indian tribe, or by an urban Indian 
     program operated pursuant to title V.
       ``(3) Health program of an indian tribe.--The term `health 
     program of an Indian tribe' means a program which provides or 
     arranges for the provision of health services and is operated 
     by an Indian tribe, tribal organization, or group of Indian 
     tribes or tribal organizations.
       ``(4) Family.--The term `family' has the meaning given such 
     term in section 3 of the Guaranteed Health Insurance Act of 
     1994.
       ``(5) Certified health plan.--The term `certified health 
     plan' has the meaning given such term in section 2(2) of the 
     Guaranteed Health Insurance Act of 1994.

     ``SEC. 902. ELIGIBILITY AND HEALTH SERVICE COVERAGE OF 
                   INDIANS.

       ``(a) Eligibility.--
       ``(1) In general.--An eligible individual (as defined in 
     section 1001(c) of the Guaranteed Health Insurance Act of 
     1994) is eligible to enroll in a health program of the 
     Service if the individual is--
       ``(A) eligible to receive services pursuant to sections 
     36.1--36.14 of title 42, Code of Federal Regulations (1986);
       ``(B) an urban Indian; or
       ``(C) an Indian described in section 809(b).
       ``(2) Election to enroll other tribal members.--In addition 
     to those individuals made eligible to enroll in a health 
     program of the Service under paragraph (1), a tribe, which 
     operates a health program directly or through a tribal 
     organization, may elect to offer enrollment in a health 
     program of the Service to members of the tribe, regardless of 
     their residency or domicile.
       ``(b) Enrollment.--
       ``(1) Automatic enrollment in health program of the 
     service.--The Service shall enroll an individual described in 
     subsection (a)(1) in the health program of the Service in 
     which the individual was last an active user unless the 
     individual elects to enroll in--
       ``(A) another certified health plan,
       ``(B) another health program of the Service, or
       ``(C) medicare part C program (established under title XXI 
     of the Social Security Act).
       ``(2) Elective enrollment in health program of the 
     service.--The Service shall permit an individual described in 
     subsection (a) who is not an active user to enroll in a 
     health program of the Service.
       ``(3) Construction.--Nothing in paragraph (1) shall prevent 
     an individual referred to in such paragraph from disenrolling 
     from the health plan of the Service in order to enroll in 
     another certified health plan or to become a medicare part C 
     eligible individual.
       ``(c) Limitation on Charges.--An individual who is eligible 
     under subsection (a) and who enrolls in a health program of 
     the Service shall not be subject to any charge for health 
     insurance premiums, deductibles, copayments, coinsurance, or 
     any other cost for health services provided under such 
     program.

     ``SEC. 903. PROVISION OF HEALTH SERVICES TO NON-ENROLLEES AND 
                   NON-INDIANS.

       ``(a) Provision of Health Services to Non-Indian Family 
     Members of Indians.--
       ``(1) In general.--A health program of the Service may 
     provide health services to family members of individuals 
     described in section 902(a) if the tribe, tribes, or urban 
     Indian organization served by the program authorizes the 
     provision of services to such family members.
       ``(2) Enrollment in a health program of the service.--
       ``(A) Election.--If a health program of the Service opens 
     enrollment pursuant to paragraph (1) to family members of 
     individuals described in section 902(a), such program shall 
     permit such individuals to elect family enrollment in such 
     program.
       ``(B) Enrollment.--
       ``(i) In general.--An individual who elects family 
     enrollment under subparagraph (A) in a health program of the 
     Service shall enroll in such program.
       ``(ii) Applicable individual charges.--The individual who 
     enrolls in such program under clause (i) is not subject to 
     any charge for health insurance premiums, deductibles, 
     copayments, coinsurance, or any other cost for health 
     services provided under such program attributable to the 
     individual, but the family members who are not eligible for a 
     health program of the Service under section 902(a) are 
     subject to all such charges.
       (b) Contracts with Certified Health Plans.--A health 
     program of the Service may enter into a contract with a 
     certified health plan that is not a health program of the 
     Service for the provision of health care services to 
     individuals enrolled in such certified health plan if the 
     tribe, tribes, or urban Indian organization served by the 
     health program of the Service--
       ``(1) authorizes serving non-Indians, and
       ``(2) determines that allowing such services to non-Indians 
     will not result in a denial or diminution of health services 
     to any individual described in section 902(a) who is enrolled 
     in a health program of the Service.
       ``(c) Provision of Health Services as an Essential 
     Community Provider.--A health program of the Service may 
     elect to provide services as an essential community provider 
     under section 5012 of the Guaranteed Health Insurance Act of 
     1994 if the authorization and determination specified in 
     paragraphs (1) and (2) of subsection (b) are made.
       ``(d) Provision of Health Services as a Certified Health 
     Plan.--A health program of the Service may elect to offer the 
     guaranteed national benefit package to individuals not 
     described in subsection (a) of this section or section 
     902(a), or as a certified health plan under title V of the 
     Guaranteed Health Insurance Act of 1994, if the authorization 
     and determination specified in paragraphs (1) and (2) of 
     subsection (b) are made.
       ``(e) Provision of Health Services as a Program Other than 
     a Certified Health Plan or an Essential Community Provider.--
     A health program of the Service that is not a certified 
     health plan under title V of the Guaranteed Health Insurance 
     Act of 1994 may provide health services to individuals who 
     are not described in subsection (a) of this section or 
     section 902(a) if the authorization and determination 
     specified in paragraphs (1) and (2) of subsection (b) are 
     made.

     ``SEC. 904. PROVISION OF GUARANTEED NATIONAL BENEFIT PACKAGE.

       ``Effective January 1, 1999, the Secretary shall ensure 
     that all health programs of the Service provide or arrange 
     for the provision of the guaranteed national benefit package 
     to individuals described in section 902(a).

     ``SEC. 905. ADMINISTRATIVE PROVISIONS.

       ``(a) Reimbursement for Services Provided to Indians 
     Enrolled in Other Health Programs of the Service.--A health 
     program of the Service shall reimburse another health program 
     of the Service for services provided to its enrollees in 
     accordance with such reimbursement provisions as the 
     Secretary determines to be appropriate.
       ``(b) Retention of Receipts.--
       ``(1) In general.--Amounts received by a health program of 
     the Service pursuant to this title, the Guaranteed Health 
     Insurance Act of 1994, or an amendment made by the Guaranteed 
     Health Insurance Act of 1994 for the delivery of health 
     services shall remain with and may be expended by the health 
     program of the Service.
       ``(2) Availability of funds for expenditure by a health 
     program of the service.--Amounts available to a health 
     program of the Service pursuant to this subsection shall be 
     available without further appropriation and shall remain 
     available until expended, first for payments for the delivery 
     of the items and services in the guaranteed national benefit 
     package and then for other services offered by the health 
     program of the Service, including supplemental Indian health 
     care benefits described in section 905(g).
       ``(c) Risk Sharing.--
       ``(1) Aggregation of receipts.--Health programs of the 
     Service may aggregate fund receipts (including from contracts 
     and subcontracts) for the purposes of retaining risk on a 
     partial or full risk basis.
       ``(2) Reinsurance pools.--The Secretary may establish 
     reinsurance pools on a local, regional, or national basis--
       ``(A) for health programs of the Service operated by the 
     Service,
       ``(B) for health programs of an Indian tribe or an urban 
     Indian organization, at the request of the tribe, tribes, 
     tribal organization, or urban Indian organizations concerned, 
     or
       ``(C) any combination thereof, if authorized by the tribe, 
     tribes, tribal organization, or urban Indian organizations 
     concerned.
       ``(d) Payment for Services Provided by Contractors.--
     Nothing in this title, the Guaranteed Health Insurance Act of 
     1994, or an amendment made by the Guaranteed Health Insurance 
     Act of 1994 shall be construed as--
       ``(1) affecting any other provision of law, regulation, or 
     judicial or administrative interpretation of law or policy 
     concerning the status of the Service as the payor of last 
     resort (as defined in part 36 of title 42, Code of Federal 
     Regulations) for Indians eligible for contract health 
     services under a health program of the Service; or
       ``(2) amending or modifying section 206 of this Act 
     (relating to reimbursement from certain third parties of 
     costs of health services).
       ``(e) Health professional services.--With respect to any 
     individual enrolled in a health program of the Service, in 
     applying the guaranteed national benefit package the term 
     `health professional services' includes health services 
     provided by a traditional Indian healer.
       ``(f) Disposition of Subsidies and Employer Premiums 
     Transferred from the Secretary of the Treasury.--With respect 
     to amounts paid to the Secretary under section 2124(c)(2)(C) 
     of the Social Security Act, the Secretary shall promptly 
     provide for the appropriate distribution of such amounts to 
     such health programs of the Service as provide services to 
     employees and family members with respect to which such 
     payments are made. The Secretary may not offset or limit the 
     amount of funds obligated to any health program of the 
     Service because of receipt of funds under this section.
       ``(g) Facilitation of Application for Premium 
     Certificates.--The Service shall take such actions as may be 
     necessary to facilitate the application for premium 
     certificates under part A of title XXII of the Social 
     Security Act by individuals described in section 902(a).
       ``(h) Supplemental Indian Health Care Benefits.--All 
     individuals described in section 902(a) remain eligible for 
     all services provided under the laws administered by the 
     Service which supplement the guaranteed national benefit 
     package. The individual shall not be subject to any charge or 
     any other cost for such benefits.
       ``(i) Medical residency training programs.--Consistent with 
     the provisions of subtitle A of title VII of the Guaranteed 
     Health Insurance Act of 1994, the Secretary shall develop 
     training sites for medical residency training programs in 
     primary care in health programs of the Service.

     ``SEC. 906. LONG-TERM CARE FOR HOME AND COMMUNITY-BASED 
                   SERVICES.

       ``(a) Distribution of Set-Aside for home and community-
     based services to certain individuals.--The Service shall 
     provide for the fair and equitable distribution of funds 
     received under section 10006(c) of the Guaranteed Health 
     Insurance Act of 1994 to Indian tribes and tribal 
     organizations for the provision of home and community-based 
     services to individuals described in section 902(a) and 
     enrolled family members under section 903(a) of this title 
     with severe disabilities (as defined in section 10002 of the 
     Guaranteed Health Insurance Act of 1994).
       ``(b) Federal Quality Standards.--
       ``(1) In general.--Except as provided in paragraph (2), an 
     Indian tribe or tribal organization may receive funds under 
     subsection (a) if the tribe or tribal organization meets the 
     quality standards prescribed by the Secretary under title X 
     of the Guaranteed Health Insurance Act of 1994 for the 
     provision of home and community-based services for 
     individuals with severe disabilities.
       ``(2) Exception.--No Indian or family member of an Indian 
     served through a health program of the Service shall be 
     required to participate in cost sharing for services provided 
     under this section.

     ``SEC. 907. CAPITAL INVESTMENT AND TRANSITIONAL ASSISTANCE.

       ``(a) Capital Financing.--
       ``(1) Establishment of program.--There is established in 
     the Service a revolving loan program. Under the program, the 
     Secretary, acting through the Service, shall provide 
     guaranteed loans from the amounts appropriated pursuant to 
     paragraph (5) to health programs of an Indian tribe and urban 
     Indian organizations.
       ``(2) Use of funds.--Loans made under paragraph (1) may be 
     used for the construction and renovation of hospitals, health 
     centers, health stations, and other facilities of the 
     Service, tribes, tribal organizations, and urban Indian 
     organizations for the purpose of improving and expanding such 
     facilities to enable the delivery of the full array of items 
     and services guaranteed in the guaranteed national benefit 
     package.
       ``(3) Terms and conditions.--Guaranteed loans under 
     paragraph (1) shall be subject to such terms and conditions 
     as the Secretary may prescribe, to assure that funds are used 
     in a manner consistent with paragraph (2).
       ``(4) Eligibility for other funding.--Receipt of a 
     guaranteed loan under paragraph (1) shall not prevent such 
     health programs from obtaining loans or loan guarantees 
     pursuant to section 2802(a)(2)(A) of the Public Health 
     Service Act.
       ``(5) Aggregate capital financing funding levels.--For 
     purposes of paragraph (1), there is authorized to be 
     appropriated $500,000,000 for each of the fiscal years 1995 
     through 1997.
       ``(b) Transitional Assistance.--
       ``(1) In general.--There is authorized to be appropriated 
     $200,000,000 for each of the fiscal years 1995 through 2000 
     to provide transitional assistance to the Service and to 
     Indian tribes, tribal organizations, and urban Indian 
     organizations to provide the guaranteed national benefit 
     package.
       ``(2) Grants to tribes and tribal organizations.--Subject 
     to the availability of appropriations under paragraph (1), 
     the Service shall make grants to assist Indian tribes, tribal 
     organizations, and urban Indian organizations, under such 
     terms and conditions as the Secretary determines, in 
     developing the capacity (including the establishment of 
     computerized information and billing systems) to deliver or 
     arrange for the delivery of services under the guaranteed 
     national benefit package.

     ``SEC. 908. TREATMENT OF INDIANS ENTITLED TO VETERANS 
                   BENEFITS.

       ``(a) In General.--In the case of an individual described 
     in section 902(a) who is enrolled in a health program of the 
     Service and is a veteran who receives items and services in 
     the guaranteed national benefit package through the Secretary 
     of Veterans' Affairs, the Service shall not be required to 
     provide reimbursement to such Secretary for such items and 
     services.
       ``(b) Cooperative Agreements.--The Secretary shall enter 
     into a cooperative service and payment agreement with the 
     Secretary of Veterans' Affairs to assure that veterans who 
     are described in section 902(a) and also eligible for 
     enrollment in a health plan operated by the Department of 
     Veterans' Affairs are entitled to fully participate in either 
     health plan without payment premiums, copayments, 
     deductibles, or coinsurance.
       ``(c) Survey of Health Services Available to Indian 
     Veterans.--
       ``(1) In general.--The Secretary, in consultation with the 
     Secretary of Veterans Affairs, Indian tribes and tribal 
     organizations, shall conduct a survey to assess the 
     availability and accessibility of health care services for 
     Indian veterans residing on Indian reservations.
       ``(2) Report.--Not later than 180 days after the date of 
     enactment of this title, the Secretary shall submit a report 
     to the Congress, including recommendations, concerning the 
     survey conducted under paragraph (1).''.

     SEC. 16003. TREATMENT OF PAYMENTS UNDER MEDICARE AND MEDICAID 
                   PROGRAMS.

       (a) Health Care Facilities.--
       (1) Medicare.--Section 401(a) of the Indian Health Care 
     Improvement Act (25 U.S.C. 1641) is amended by striking 
     ``facility of the Service (whether operated by the Service or 
     by an Indian tribe or tribal organization pursuant to a 
     contract under the Indian Self-Determination Act)'' and 
     inserting ``of a health program of the Service (as defined in 
     section 901(2))''.
       (2) Medicaid.--Section 402 of the Indian Health Care 
     Improvement Act (25 U.S.C. 1642) is amended--
       (A) in the first sentence of subsection (a)--
       (i) by striking ``facility of the Service'' and inserting 
     ``health program of the Service (as defined in section 
     901(2))''; and
       (ii) by striking ``such Service'' and inserting ``such 
     health programs of the Service'';
       (B) in the second sentence of subsection (a), by striking 
     ``the facilities of the Service'' and inserting ``such health 
     programs of the Service''; and
       (C) in subsection (b), by striking ``such facility'' and 
     inserting ``such health program of the Service''.

     SEC. 16004. ANNUAL CONSULTATION CONCERNING HEALTH CARE 
                   INITIATIVES.

       Title VI of the Indian Health Care Improvement Act (25 
     U.S.C. 1661 et seq.) is amended--
       (1) redesignating section 603 as section 604; and
       (2) by inserting after section 602 the following:


    ``annual consultation and national indian health advisory group

       ``Sec. 603. (a) The Secretary shall consult annually with 
     representatives of Indian tribes, tribal organizations, and 
     urban Indian organizations concerning health care initiatives 
     that affect Indian communities and concerning policy, 
     funding, and administration of health programs of the Service 
     (as defined in section 901(2)). The Secretary shall solicit 
     and consider the views and recommendations provided by Indian 
     tribes, tribal organizations, and urban Indian organizations 
     in making determinations that affect Indians and Indian 
     tribes.
       ``(b)(1) The Secretary shall establish a national Indian 
     advisory group to assess and advise the Secretary on all 
     aspects of the administration of health programs of the 
     Service (as defined in section 901(2)), including development 
     of the budget for such programs.
       ``(2) The advisory group shall be composed of not less than 
     one representative from each Service area, to be appointed by 
     the Secretary from nominees of tribes and tribal 
     organizations in the respective areas and such other 
     appointees as the Secretary determines appropriate, except 
     that a majority of the members must have been nominated by a 
     tribe or tribal organization.
       ``(3) The advisory group shall submit such reports as may 
     be necessary to the Congress.''.

     SEC. 16005. PREEMPTION OF STATE REGULATORY AUTHORITY.

       A State (or an entity of a State) may not impose any 
     standard or requirement on a health program of the Service 
     (as defined in section 901(2) of the Indian Health Care 
     Improvement Act) that is inconsistent with this Act or any 
     regulation prescribed under this Act or the Indian Health 
     Care Improvement Act regarding the operation of any such 
     health program of the Service.

     SEC. 16006. RULES OF CONSTRUCTION.

       Unless otherwise provided by this Act or an amendment made 
     by this Act, no part of this Act or any such amendment shall 
     be construed to rescind or otherwise modify any obligations, 
     findings, or purposes contained in the Indian Health Care 
     Improvement Act (25 U.S.C. 1601 et seq.) and in the Indian 
     Self-Determination and Education Assistance Act.

     SEC. 16007. PROHIBITION ON REDUCTIONS OF FULL-TIME EQUIVALENT 
                   POSITIONS IN THE INDIAN HEALTH SERVICE.

       (a) Prohibition.--Notwithstanding any other provision of 
     law and until January 1, 1999, no reduction may be made in 
     the number of full-time equivalent positions in the Indian 
     Health Service from the number of such positions on September 
     30, 1994.
       (b) Exemption.--During the period that the prohibition 
     specified in subsection (a) is effective, no restriction 
     imposed by law on hiring by executive agencies for the 
     purpose of achieving workforce reductions shall apply to the 
     Indian Health Service, including section 5 of the Federal 
     Workforce Restructuring Act of 1994 (5 U.S.C. 3101 note).
       (c) Rule of Construction.--No law may be construed as 
     suspending or modifying this section unless such law 
     specifically refers to or amends this section.
         TITLE XVII--MEDICAL MALPRACTICE AND ANTITRUST REFORMS
                    Subtitle A--Medical Malpractice

                        PART 1--LIABILITY REFORM

     SEC. 17001. DEFINITIONS.

       In this subtitle, the following definitions apply:
       (1) Alternative dispute resolution system.--The term 
     ``alternative dispute resolution system'' means a system that 
     provides for the resolution of medical malpractice claims in 
     a manner other than through medical malpractice liability 
     actions.
       (2) Arbitration.--The term ``arbitration'' means a nonjury, 
     adversarial dispute resolution process that may result in a 
     final decision as to fact, law, liability, or damages.
       (3) Claimant.--The term ``claimant'' means any person who 
     alleges a medical malpractice claim, and any person on whose 
     behalf such a claim is alleged, including the decedent in the 
     case of an action brought through or on behalf of an estate.
       (4) Contingency fee.--The term ``contingency fee'' means 
     any fee for professional legal services which is, in whole or 
     in part, contingent upon the recovery of any amount of 
     damages, whether through judgment or settlement.
       (5) Future damages.--The term ``future damages'' means 
     damages for economic or noneconomic loss incurred after the 
     time of judgment.
       (6) Health care professional.--The term ``health care 
     professional'' means any individual who provides health care 
     services in a State and who is required by the laws or 
     regulations of the State to be licensed or certified by the 
     State to provide such services in the State.
       (7) Health care provider.--The term ``health care 
     provider'' means any organization or institution that is 
     engaged in the delivery of health care services in a State 
     and that is required by the laws or regulations of the State 
     to be licensed or certified by the State to engage in the 
     delivery of such services in the State.
       (8) Injury.--The term ``injury'' means any illness, 
     disease, or other harm that is the subject of a medical 
     malpractice liability action or a medical malpractice claim.
       (9) Mandatory.--The term ``mandatory'' means required to be 
     used by the parties to attempt to resolve a medical 
     malpractice claim notwithstanding any other provision of an 
     agreement, State law, or Federal law.
       (10) Mediation.--The term ``mediation'' means a settlement 
     process coordinated by a neutral third party and without the 
     ultimate rendering of a formal opinion as to factual or legal 
     findings.
       (11) Medical malpractice claim.--The term ``medical 
     malpractice claim'' means a claim against a health care 
     provider, a health care professional, or a blood or tissue 
     bank licensed or registered by the Food and Drug 
     Administration in which a claimant alleges that injury was 
     caused by the provision of (or the failure to provide) health 
     care services, except that such term does not include--
       (A) any claim based on an allegation of an intentional 
     tort;
       (B) any claim based on an allegation that a product is 
     defective or unreasonably dangerous, or fails to contain an 
     adequate warning; or
       (C) any claim brought pursuant to subtitle D of title IX.
       (12) Medical malpractice liability action.--The term 
     ``medical malpractice liability action'' means a civil action 
     brought in a State or Federal court against a health care 
     provider, a health care professional, or a blood or tissue 
     bank licensed or registered by the Food and Drug 
     Administration in which the plaintiff alleges a medical 
     malpractice claim.

     SEC. 17002. FEDERAL TORT REFORM.

       (a) In General.--Except as provided in section 17003, this 
     part shall apply with respect to any medical malpractice 
     liability action brought in any State or Federal court, 
     except that this part shall not apply to a claim or action 
     for damages arising from a vaccine-related injury or death to 
     the extent that title XXI of the Public Health Service Act 
     applies to the claim or action.
       (b) Preemption.--The provisions of this part shall preempt 
     any State law to the extent such law is inconsistent with 
     such provisions.
       (c) Effect on Sovereign Immunity and Choice of Law or 
     Venue.--Nothing in this part shall be construed to--
       (1) waive or affect any defense of sovereign immunity 
     asserted by any State under any provision of law;
       (2) waive or affect any defense of sovereign immunity 
     asserted by the United States;
       (3) affect the applicability of any provision of the 
     Foreign Sovereign Immunities Act of 1976;
       (4) preempt State choice-of-law rules with respect to 
     claims brought by a foreign nation or a citizen of a foreign 
     nation; or
       (5) affect the right of any court to transfer venue or to 
     apply the law of a foreign nation or to dismiss a claim of a 
     foreign nation or of a citizen of a foreign nation on the 
     ground of inconvenient forum.
       (d) Federal Court Jurisdiction Not Established on Federal 
     Question Grounds.--Nothing in this part shall be construed to 
     establish any jurisdiction in the district courts of the 
     United States over medical malpractice liability actions on 
     the basis of section 1331 or 1337 of title 28, United States 
     Code.

     SEC. 17003. ALTERNATIVE DISPUTE RESOLUTION METHODS.

       (a) Application to Malpractice Claims.--In any medical 
     malpractice liability action, the alternative dispute 
     resolution systems adopted under subsection (b) shall be 
     available to the claimant. Participation in any of such 
     systems shall be in lieu of any alternative dispute 
     resolution method required by any other law or by any 
     contractual arrangement made by or on behalf of the parties 
     before the commencement of the action.
       (b) State Adoption of Alternative Dispute Resolution 
     Methods--Each State shall--
       (1) adopt at least one of the alternative dispute 
     resolution methods specified under subsection (c) for the 
     resolution, subject to subsection (d), of medical malpractice 
     claims;
       (2) disclose to residents of the State the availability and 
     procedures for resolution of consumer grievances regarding 
     the provision of (or failure to provide) health care 
     services, including the alternative dispute resolution 
     methods applicable under paragraph (1); and
       (3) provide that the alternative dispute resolution process 
     may begin before or after, at the option of the claimant, the 
     commencement of a medical malpractice liability action.
       (c) Specification of Permissible Alternative Dispute 
     Resolution Methods.--
       (1) In general.--The Attorney General, in consultation with 
     the Secretary, shall, by regulation, develop requirements 
     with respect to the following alternative dispute resolution 
     methods for the adoption by States:
       (A) Mandatory Mediation.--Mandatory mediation conducted by 
     one or more mediators who are selected by agreement of the 
     parties or, if the parties do not agree, who are qualified 
     under applicable State law and selected by the court.
       (B) Arbitration.--Arbitration entered into by agreement of 
     the parties.
       (2) Standards for establishing methods.--In developing 
     alternative dispute resolution methods under paragraph (1), 
     the Attorney General, in consultation with the Secretary, 
     shall ensure that the methods promote the resolution of 
     medical malpractice claims in a manner that--
       (A) is affordable for the parties involved;
       (B) encourages timely resolution of claims;
       (C) encourages the consistent and fair resolution of 
     claims;
       (D) provides for reasonably convenient access to dispute 
     resolution; and
       (E) in the case of arbitration, provides rules for limiting 
     the use of experts, for expediting discovery, and for waiving 
     applicable rules of evidence.
       (d) Further Redress and Admissibility.--Any party 
     dissatisfied with a determination reached with respect to a 
     medical malpractice claim as a result of an alternative 
     dispute resolution method applied under this section shall 
     not be bound by such determination. The results of any 
     alternative dispute resolution method applied under this 
     section, and all statements, offers, and communications that 
     originate during the application of such method, shall be 
     inadmissible for purposes of adjudicating the claim.

     SEC. 17004. REQUIREMENT FOR AFFIDAVIT OF MERIT.

       (a) Requiring Submission With Complaint.--No medical 
     malpractice liability action may be brought by any individual 
     unless, at the time the individual brings the action (except 
     as provided in subsection (b)(1)), the individual (or the 
     individual's attorney) submits an affidavit declaring that--
       (1) the individual (or the individual's attorney) has 
     consulted and reviewed the facts of the action with a 
     qualified specialist;
       (2) the individual (or the individual's attorney) has 
     obtained a written report by a qualified specialist that 
     clearly identifies the individual and that includes the 
     specialist's statement of belief that, based on a review of 
     the available medical record and other relevant material, 
     there is a reasonable and meritorious cause for the filing of 
     the action against the defendant; and
       (3) on the basis of the qualified specialist's review and 
     consultation, that the individual (or the individual's 
     attorney) has concluded that there is a reasonable and 
     meritorious cause for the filing of the action.
       (b) Extension in Certain Instances.--
       (1) In general.--Subject to paragraph (2), subsection (a) 
     shall not apply with respect to an individual who brings a 
     medical malpractice liability action without submitting an 
     affidavit described in such subsection if--
       (A) the individual is unable to obtain the affidavit before 
     the expiration of the applicable statute of limitations;
       (B) as of the time the individual brings the action, the 
     individual has been unable to obtain adequate medical records 
     or other information necessary to prepare the affidavit; or
       (C) other good cause exists for failing to submit the 
     affidavit.
       (2) Deadline for submission where extension applies.--In 
     the case of an individual who brings an action for which 
     paragraph (1) applies, the action shall be dismissed unless 
     the individual (or the individual's attorney) submits the 
     affidavit described in subsection (a) not later than--
       (A) in the case of an action for which subparagraph (A) of 
     paragraph (1) applies, 90 days after bringing the action;
       (B) in the case of an action for which subparagraph (B) of 
     paragraph (1) applies, 90 days after obtaining the 
     information described in such subparagraph; or
       (C) in the case of an action for which subparagraph (C) of 
     paragraph (1) applies, 90 days after the good cause involved 
     ceases to exist.
       (c) Qualified Specialist Defined.--In subsection (a), a 
     ``qualified specialist'' means, with respect to a medical 
     malpractice liability action, a health care professional who 
     is reasonably believed by the individual bringing the action 
     (or the individual's attorney)--
       (1) to be knowledgeable in the relevant issues involved in 
     the action, and
       (2) to practice (or to have practiced) or to teach (or to 
     have taught) in the same, or a substantially similar, area of 
     health care or medicine that is at issue in the action.
       (d) Sanctions for Submitting False Allegations.--Upon the 
     motion of any party or its own initiative, the court in a 
     medical malpractice liability action may impose a sanction on 
     a party or the party's attorney (or both), including a 
     requirement that the party reimburse the other party to the 
     action for costs and a reasonable attorney's fee, if an 
     affidavit described in subsection (a) is submitted without 
     reasonable cause and is found to be untrue.
       (e) Confidentiality of Specialist.--Upon a showing of good 
     cause by a defendant, the court may ascertain the identity of 
     a specialist referred to in subsection (a) while preserving 
     confidentiality.

     SEC. 17005. LIMITATION ON AMOUNT OF ATTORNEYS' CONTINGENCY 
                   FEES.

       (a) In General.--
       (1) Authority to enter into contingency fee agreements.--
     Notwithstanding any State law, an individual who intends to 
     bring a medical malpractice liability action and an attorney 
     may enter into an agreement for the payment of--
       (A) a fee, on a contingency fee basis for services in 
     connection with the resolution of the action, up to 33 \1/3\ 
     percent of the total amount recovered (exclusive of costs) by 
     judgment or settlement; and
       (B) an additional reasonable fee, subject to the approval 
     of the court, for services in connection with any appeal of a 
     judgment in the action.
       (2) Exclusion of other fees.--An attorney who represents, 
     on a contingency fee basis, a plaintiff in a medical 
     malpractice liability action may not charge, demand, receive, 
     or collect for services rendered in connection with the 
     action any fee in excess of the maximum fee payable under 
     paragraph (1).
       (b) Calculation in Case of Periodic Payments.--For purposes 
     of computing under subsection (a) the limitation on 
     contingency fees, the value of future damages recovered in a 
     judgment or settlement and to be paid on a periodic basis 
     shall be based on the present value of such payments 
     calculated according to an appropriate discount rate. The 
     balance of the judgment or settlement shall then be paid in 
     accordance with the schedule determined under section 17006.

     SEC. 17006. PERIODIC PAYMENT OF AWARDS.

       (a) Authority To Permit Periodic Payments.--The court may 
     instruct the trier of fact to find, or may otherwise order 
     that, part or all of future damages that exceed $250,000 be 
     paid on an appropriate periodic basis. The court shall ensure 
     that the amount and present value of periodic payments 
     constitute full recovery of the damages awarded for the 
     claimant's injury and that the payment schedule is found to 
     be in the best interests of all the parties to the action.
       (b) Bond or Security for Future Damages.--If future damages 
     are awarded on a periodic basis, the court shall require the 
     defendant to post security or a bond, or otherwise ensure the 
     full payment of such damages.
       (c) Modification of Payment Schedule.--Except where the 
     parties agree otherwise, in a medical malpractice liability 
     action, the court shall retain authority to modify, on the 
     basis of changed circumstances, the payment schedule of any 
     periodic payments of future damages awarded in the action.
       (d) Death of Plaintiff.--Except where the parties agree 
     otherwise, if a plaintiff to whom future damages are awarded 
     in a medical malpractice liability action and made payable on 
     a periodic basis dies before completion of the payment of 
     such damages, the court shall order the payment of any 
     remaining portion of such damages be paid to the estate of 
     the plaintiff.

   PART 2--OTHER PROVISIONS RELATING TO MEDICAL MALPRACTICE LIABILITY

     SEC. 17011. PILOT PROGRAM APPLYING PRACTICE GUIDELINES TO 
                   MEDICAL MALPRACTICE LIABILITY ACTIONS.

       (a) Establishment.--Not later than 1 year after the 
     Secretary determines that appropriate practice guidelines are 
     available (including clinical practice guidelines developed 
     under title IX of the Public Health Service Act) and were 
     developed with the input of health care providers, legal 
     professionals, and consumer representatives, the Secretary, 
     in consultation with the Attorney General, shall establish a 
     pilot program under which the Secretary shall provide funds 
     (in such amount as the Secretary considers appropriate) to 
     one or more eligible States to determine the effect of 
     applying practice guidelines in the resolution of medical 
     malpractice liability actions.
       (b) Eligibility of State.--A State is eligible to 
     participate in the pilot program established under subsection 
     (a) if the State submits an application to the Secretary (at 
     such time and in such form as the Secretary may require) 
     containing--
       (1) assurances that, under the law of the State, in the 
     resolution of any medical malpractice liability action based 
     on conduct addressed by an appropriate practice guideline, 
     that--
       (A) compliance with the guideline shall be admissible by 
     any party in a medical malpractice liability action and shall 
     be sufficient to establish a rebuttable presumption that 
     there is no liability for medical malpractice for conduct 
     that is within the scope of the guideline; and
       (B) noncompliance with the guideline shall be admissible by 
     any party in a medical malpractice liability action and shall 
     be sufficient to establish a rebuttable presumption that 
     there is liability for medical malpractice for conduct that 
     is within the scope of the guideline; and
       (2) such other information and assurances as the Secretary 
     may require.
       (c) Selection of Participating States.--In selecting a 
     State to participate in the pilot project established under 
     subsection (a), the Secretary shall determine whether the 
     practice guideline described in the application submitted 
     under subsection (b)--
       (1) is appropriate for purposes of resolving medical 
     malpractice liability actions based on conduct addressed by 
     such guideline; and
       (2) was developed with the input of health care providers, 
     legal professionals, and consumer representatives.
       (d) Reports to Congress.--Not later than 3 months after the 
     last day of each year throughout which the pilot program 
     established under subsection (a) is in effect, the Secretary 
     shall submit, to the Speaker of the House of Representatives 
     and the President pro tempore of the Senate, a report 
     describing the operation of the program during the previous 
     year and containing such recommendations as the Secretary 
     considers appropriate, including recommendations relating to 
     revisions to the laws governing medical malpractice 
     liability.

     SEC. 17012. FEDERAL STUDY ON MEDICAL MALPRACTICE.

       (a) Study.--In order to improve the level of empirical data 
     on the incidence and effect of medical malpractice in the 
     United States, the Secretary, in consultation with the 
     Attorney General, shall carry out a nationwide 
     interdisciplinary study of medical malpractice, including an 
     evaluation of--
       (1) the incidence of injuries resulting from medical 
     treatment and the percentage of such injuries that resulted 
     from the medical malpractice by a health care provider or 
     health care professional;
       (2) the costs of medical expenses and lost wages to the 
     victims of medical malpractice and their families, and their 
     compensation for such losses under current law;
       (3) the costs of legal expenses associated with medical 
     malpractice liability actions, including attorneys' fees that 
     are not paid on a contingency fee basis;
       (4) the number of medical malpractice claims brought and 
     their impact on the legal system;
       (5) methods to reduce the incidence and costs of medical 
     malpractice;
       (6) the cost of medical malpractice insurance and methods 
     for reducing such cost; and
       (7) methods to promote the efficient and fair resolution of 
     legal claims stemming from the incidence of medical 
     malpractice, including methods of resolving small medical 
     malpractice claims in a more efficient and less costly basis.
       (b) Report to Congress.--Not later than 3 years after the 
     date of the enactment of this Act, the Secretary shall 
     submit, to the Speaker of the House of Representatives and 
     the President pro tempore of the Senate, a report describing 
     the results of the evaluation required by subsection (a).
                  Subtitle B--McCarran-Ferguson Reform

     SEC. 17101. SHORT TITLE.

       This subtitle may be cited as the ``Insurance Competitive 
     Pricing Act of 1994''.

     SEC. 17102. RULES OF CONSTRUCTION.

       The amendments made by this subtitle preserve--
       (1) the provisions relating to State taxing and regulatory 
     authority in section 2 of the Act of March 9, 1945 (59 Stat. 
     34; 15 U.S.C. 1012), commonly known as the McCarran-Ferguson 
     Act;
       (2) the availability, to persons engaged in the business of 
     insurance, of the defense of State action in the same manner 
     and to the same extent as such defense is available to other 
     persons;
       (3) the availability, to persons engaged in the business of 
     insurance, of any antitrust immunity or defense that may be 
     applicable under law other than the McCarran-Ferguson Act;
       (4) the legal standards applicable under the McCarran-
     Ferguson Act, as in effect before such Act is amended by this 
     subtitle, to all conduct described in the safe harbors found 
     in subparagraphs (B), (C), (D), and (E) of section 2(b)(1) of 
     the McCarran-Ferguson Act, as amended by this subtitle; and
       (5) the provisions relating to boycott, coercion, or 
     intimidation in section 3(b) of the McCarran-Ferguson Act.

     SEC. 17103. AMENDMENTS.

       Section 2 of the Act of March 9, 1945 (59 Stat. 34; 15 
     U.S.C. 1012), commonly known as the McCarran-Ferguson Act, is 
     amended--
       (1) in subsection (b)--
       (A) by striking ``: Provided,'' and all that follows 
     through ``law.'' and inserting the following:
     ``except as follows:
       ``(1)(A) The antitrust laws shall be applicable to the 
     business of insurance except as provided in subparagraphs 
     (B), (C), (D), and (E).
       ``(B) The antitrust laws shall not be applicable to conduct 
     that consists of making an agreement or engaging in joint 
     conduct--
       ``(i)(I) to collect, compile, classify, or disseminate 
     historical data;
       ``(II) to develop procedures to collect, compile, classify, 
     or disseminate historical data; or
       ``(III) to verify that historical data is accurate and 
     complete;
       ``(ii) to determine, using standard actuarial techniques, 
     or disseminate, a loss development factor or developed 
     losses;
       ``(iii) to develop or disseminate a standard insurance 
     policy form (including a standard addendum to an insurance 
     policy form and standard terminology in an insurance policy 
     form) if such agreement or joint conduct does not include an 
     agreement to adhere to such standard form, or to require 
     adherence to such standard form, except that the fact that 2 
     or more persons engaged in the business of insurance use such 
     standard form--
       ``(I) shall not be sufficient in itself to support a 
     finding that an agreement to adhere, or to require adherence, 
     to such standard form exists; and
       ``(II) may be used only for the purpose of supplementing or 
     explaining direct evidence of the existence of an agreement 
     to adhere, or to require adherence, to such standard form;
       ``(iv) to develop or disseminate, for use in providing 
     insurance in a State, a manual that is filed, before 
     dissemination, with the State entity that regulates the 
     business of insurance under State law, if such manual 
     includes only--
       ``(I) information and conduct described in clauses (i), 
     (ii), and (iii), including relativity factors;
       ``(II) during the transition period, a trend factor or 
     information to which a trend factor has been applied, to the 
     extent permitted under subparagraph (C); and
       ``(III) explanations and instructions for using the manual 
     (or any of the information contained in the manual), if such 
     agreement or joint conduct does not include an agreement 
     among competitors to adhere, or to require adherence, to any 
     of such explanations or instructions;
       ``(v) to provide insurance pursuant to a public necessity 
     market mechanism;
       ``(vi) to provide insurance as a historical underwriting 
     capacity risk pool;
       ``(vii) to administer a public necessity market mechanism 
     in a State, pursuant to the authorization of and under the 
     supervision of such State, if all persons who provide 
     insurance in such State pursuant to such mechanism, and all 
     persons seeking to obtain insurance through such mechanism, 
     have a reasonable opportunity to appeal determinations 
     affecting them to a governmental entity;
       ``(viii) to develop or participate in a program to inspect 
     commercial buildings and fire protection facilities, and 
     evaluate government building code requirements and 
     enforcement of such requirements, to determine the likelihood 
     and potential extent of loss due to fire, wind, hail, 
     earthquake, flood, or tidal wave, pursuant to a State law 
     that provides procedures for making such a determination and 
     provides a reasonable opportunity for an affected person to 
     appeal such a determination to a governmental entity; or
       ``(ix) to develop or participate in a program, pursuant to 
     a workers' compensation insurance plan filed with the State 
     entity that regulates the business of insurance under State 
     law, to measure an employer's experience with respect to 
     occupational accidents and illnesses for which such employer 
     is liable, against the comparable experience of other 
     employers, and to make a modification for an individual 
     employer based on such comparisons, if an affected employer 
     has a reasonable opportunity to appeal a determination under 
     such program to a governmental entity;
     to the extent that such conduct is regulated by State law.
       ``(C) During the transition period, the antitrust laws 
     shall not be applicable to conduct that consists of making an 
     agreement or engaging in joint conduct to determine or 
     disseminate a trend factor, to the extent that such conduct 
     is regulated by State law.
       ``(D) The antitrust laws shall not be applicable to conduct 
     by a director, officer, or employee of a national trade 
     association representing insurance agents, or of a State 
     trade association representing insurance agents that is 
     affiliated with such national trade association, acting 
     within the scope of the authority vested in such director, 
     officer, or employee by the trade association involved, that 
     consists of preparing, disseminating, or discussing a report 
     or comment (including describing, evaluating, and suggesting 
     possible responses for members of the association whose 
     directors, officers, or employees prepared such report or 
     such comment to consider) with respect to any insurer 
     practice affecting the relationship between insurers and 
     insurance agents, if--
       ``(i) such report or such comment includes a conspicuous 
     statement that each insurance agent is expected to make his 
     or her own decision regarding matters contained in such 
     report or such comment and that anticompetitive agreements 
     among insurance agents with respect to any response to such 
     practice are illegal under the antitrust laws;
       ``(ii) such conduct does not involve--
       ``(I) monitoring or policing the extent to which any 
     insurance agent follows, or pressuring any insurance agent to 
     follow, any of such responses;
       ``(II) initiating any communication (including a mailing, 
     association publication, or association meeting) with any 
     member of any such association with respect to such report or 
     such comment (including any of such responses), other than by 
     a means designed to reach all members, or all directors and 
     officers, of such association;
       ``(III) referring to any of such responses in any 
     discussion unless the discussion emphasizes that each 
     insurance agent is expected to make his or her own decision 
     regarding matters contained in such report or such comment 
     and that anticompetitive agreements among insurance agents 
     with respect to any response to such practice are illegal 
     under the antitrust laws; or
       ``(IV) the formal endorsement of such report or such 
     comment (including any of such responses) by any part of the 
     membership of any such association, other than a statement 
     that dissemination of such report or such comment has been 
     approved by the directors or officers of the association 
     whose directors, officers, or employees prepared such report 
     or such comment; and
       ``(iii) the number of directors and officers of any such 
     association who are involved in preparing, disseminating, or 
     discussing such report or such comment (including any of such 
     responses) does not substantially exceed the number of 
     directors and officers of such association serving on April 
     30, 1994;
     and if the business of insurance is regulated by State law.
       ``(E) The antitrust laws shall not be applicable to conduct 
     of an insurance agent that is a member of an association 
     referred to in subparagraph (D) that consists of 
     independently initiating a communication, in an issue of a 
     regularly scheduled association publication or at a regularly 
     scheduled association meeting, to members of a local trade 
     association representing insurance agents of which such agent 
     is a member, that describes or summarizes all or part of the 
     contents of a report or comment described in such 
     subparagraph provided to such agent by such association 
     described in such subsection and that is made only by a means 
     designed to reach all such members, if--
       ``(i) such conduct does not involve--
       ``(I) monitoring or policing the extent to which any 
     insurance agent follows, or pressuring any insurance agent to 
     follow, any of the possible responses contained in such 
     report or such comment;
       ``(II) referring to any of such responses unless the 
     references emphasizes that each insurance agent is expected 
     to make his or her own decision regarding matters contained 
     in such report or such comment and that anticompetitive 
     agreements among insurance agents with respect to any 
     response to an insurance practice discussed in such report or 
     such comment are illegal under the antitrust laws; or
       ``(III) the formal endorsement of such report or such 
     comment (including any of such responses); and
       ``(ii) the primary purpose of such meeting, or of such 
     issue of such publication, is not the discussion of such 
     report or such comment (including any of such responses);
     and if the business of insurance is regulated by State law.
       ``(2) Subsequent to the transition period, the independent 
     purchase of a trend factor by a person engaged in the 
     business of insurance from a person not engaged in providing 
     insurance (and not affiliated with a person engaged in 
     providing insurance) shall be presumed not to violate the 
     antitrust laws.
       ``(3) The Federal Trade Commission Act shall be applicable 
     to the business of insurance to the extent that such business 
     is not regulated by State law, except that, with respect to 
     enforcement of the antitrust laws, section 17105 of such Act 
     shall be applicable to the business of insurance to the same 
     extent as the other antitrust laws.'', and
       (2) by adding at the end the following:
       ``(c) For purposes of subsection (b)--
       ``(1) the term `antitrust laws' has the meaning given it in 
     subsection (a) of the first section of the Clayton Act (15 
     U.S.C. 12), except that such term includes section 5 of the 
     Federal Trade Commission Act (15 U.S.C. 45) as such section 5 
     applies to conduct that constitutes a violation of the 
     Sherman Act or the Clayton Act;
       ``(2) the term `developed losses' means aggregate paid 
     losses and aggregate reserves held for received claims, as 
     adjusted by a loss development factor;
       ``(3) the term `historical underwriting capacity risk pool' 
     means an underwriting capacity risk pool established prior to 
     April 30, 1994--
       ``(A) the purpose of which is to provide insurance for a 
     commercial risk relating to--
       ``(i) an airport, aviation, or aerospace activity;
       ``(ii) a large commercial or industrial property (including 
     machinery, boilers, and pressure vessels);
       ``(iii) a grain elevator or feed mill;
       ``(iv) an oil, gas, or chemical peril;
       ``(v) the construction or operation of a nuclear energy 
     facility;
       ``(vi) an inland marine peril or an ocean marine 
     enterprise;
       ``(vii) a natural disaster;
       ``(viii) an occupational accident or illness;
       ``(ix) transportation of currency, mail, securities, 
     bullion, or other valuables by a person with fiduciary 
     responsibility for their safe transport;
       ``(x) foreign commercial activities undertaken in 
     cooperation with the United States Export-Import Bank; or
       ``(xi) a war, rebellion, riot, or similar civil commotion;
       ``(B) whose conduct has not materially changed from the 
     conduct described in accordance with subparagraph (C)(ii) in 
     which such pool--
       ``(i) was authorized to engage under its charter, bylaws, 
     or other documents of organization or governance filed in 
     accordance with subparagraph (C)(iii); and
       ``(ii) did engage as so authorized;
     prior to April 30, 1994; and
       ``(C) that, before the effective date of the Insurance 
     Competitive Pricing Act of 1994, filed with the Attorney 
     General of the United States, in accordance with such rules 
     as the Attorney General may have issued, a notification--
       ``(i) disclosing the identities of the members of such pool 
     on April 30, 1994;
       ``(ii) describing the nature and scope of the activities of 
     such pool, and the lines of insurance in which such pool was 
     engaged, prior to April 30, 1994; and
       ``(iii) containing the charter, bylaws, and other documents 
     of organization or governance of such pool in effect on or 
     before April 30, 1994;
       ``(4) the term `historical data' means information 
     respecting--
       ``(A) losses paid by, claims received by, reserves for such 
     claims set aside by, or units of exposure to loss in 
     insurance policies sold by any person engaged in the business 
     of insurance; or
       ``(B) insurance premiums received by any person engaged in 
     the business of insurance, if such information is not 
     disseminated in a form from which information respecting 
     premiums received by any separately identifiable person 
     engaged in the business of insurance may be derived;
       ``(5) the term `insurance agent' means a person that is--
       ``(A) engaged as an independent contractor in the business 
     of selling insurance;
       ``(B) licensed under the law of a State as an insurance 
     agent or insurance broker; and
       ``(C) neither an insurer in any State in which such person 
     is so engaged, nor an employee of an insurer;
       ``(6) the term `insurance policy' means a contract under 
     which insurance is sold to an insured;
       ``(7) the term `insurer' means a person that is--
       ``(A) engaged in the business of providing insurance; and
       ``(B) obligated to pay losses under the insurance policies 
     under which it provides insurance;
       ``(8) the term `loss' means an amount paid or to be paid by 
     a person engaged in the business of insurance to (or for the 
     benefit of) a claimant to satisfy a claim on an insurance 
     policy, and includes any attorney, investigatory, or 
     litigation expenses that are separately incurred, identified, 
     and allocated by such person with respect to that particular 
     claim;
       ``(9) the term `loss development factor' means an 
     adjustment to be made to the aggregate of losses incurred 
     during a prior period of time that have been paid or for 
     which claims have been received and reserves are being held, 
     in order to estimate the aggregate of the losses incurred 
     during such period that will ultimately be paid;
       ``(10) the term `loss incurred' means a loss for which the 
     event has occurred that ultimately gives rise to liability on 
     a claim on an insurance policy, without regard to whether a 
     claim based on such event has been received;
       ``(11) the term `public necessity market mechanism' means a 
     plan established by State law or by the State entity that 
     regulates the business of insurance under State law--
       ``(A) for providing a type of insurance in a State;
       ``(B) in which the persons providing such type of insurance 
     pursuant to such mechanism represent a substantial number of 
     the persons engaged in the business of providing such type of 
     insurance in such State and are either required by State law, 
     or formally requested or ordered by such State entity to 
     participate;
       ``(C) the purpose of which is to make such type of 
     insurance available to persons who would not otherwise be 
     able to obtain such type of insurance at affordable cost; and
       ``(D) in which the rate for such type of insurance is 
     subject to the approval or disapproval of such State;
       ``(12) the term `relativity factor' means a ratio comparing 
     one classification of historical data to another such 
     classification, or comparing developed losses in one such 
     classification to developed losses in another such 
     classification;
       ``(13) the term `transition period' means the 2-year period 
     beginning on the effective date of the Insurance Competitive 
     Pricing Act of 1994;
       ``(14) the term `trend factor' means an adjustment to be 
     made to developed losses in order to account for any change 
     that is anticipated to affect losses; and
       ``(15) the term `underwriting capacity risk pool' means a 
     business arrangement or association--
       ``(A) whose members consist of 2 or more persons engaged in 
     the business of insurance; and
       ``(B) that operates for the purpose of providing insurance 
     under which the liability for paying losses is spread among 
     such members.''.

     SEC. 17104. PUBLICATION AND AVAILABILITY OF HISTORICAL 
                   UNDERWRITING CAPACITY RISK POOL NOTIFICATIONS.

       The Attorney General shall, not later than 30 days after 
     receiving a notification filed in accordance with section 
     2(c)(3)(C) of the Act of March 9, 1945 (59 Stat. 34; 15 
     U.S.C. 1012), commonly known as the McCarran-Ferguson Act--
       (1) publish in the Federal Register--
       (A) a summary of such notification; and
       (B) notice that such notification is available to the 
     public; and
       (2) make such notification available to the public.

     SEC. 17105. BUSINESS REVIEW.

       If a person engaged in the business of insurance submits a 
     written request to the Attorney General in accordance with 
     section 50.6 of title 28 of the Code of Federal Regulations 
     (July 1, 1992), as amended from time to time, for a business 
     review letter with respect to the application of the 
     antitrust laws to specified activities of an underwriting 
     capacity risk pool (as defined in section 2(c)(15) of the Act 
     of March 9, 1945, commonly known as the McCarran-Ferguson 
     Act) of which such person is, or intends to become, a member, 
     then the Attorney General shall issue such letter in 
     accordance with such section.

     SEC. 17106. STUDY AND REPORT.

       (a) Study.--During the 5-year period beginning on the 
     effective date of this Act, the Attorney General shall 
     conduct a study to determine the effect of this subtitle, and 
     the amendments made by this subtitle, on the business of 
     insurance.
       (b) Report.--Not later than 1 year after the expiration of 
     the 5-year period referred to in subsection (a), the Attorney 
     General shall submit, to the Speaker of the House of 
     Representatives and the President pro tempore of the Senate, 
     a report summarizing the results of the study required by 
     subsection (a).

     SEC. 17107. EFFECTIVE DATES.

       (a) General Effective Date.--Except as provided in 
     subsection (b), this subtitle shall take effect 1 year after 
     the date of the enactment of this Act.
       (b) Effective Date of Sections 17104 and 17105.--Sections 
     17104 and 17105 shall take effect on the date of the 
     enactment of this Act.

Amendment in the Nature of a Substitute to be Offered by Representative 
                          Sam Johnson of Texas

       Strike out all after the enacting clause and insert in lieu 
     thereof the text of H.R. 4840 (as introduced).
  

  

  


Amendment in the Nature of a Substitute To Be Offered by Representative 
                        McDermott of Washington

       Strike out all after the enacting clause and insert in lieu 
     thereof the following:

     SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

       (a) Short Title.--This Act may be cited as the ``American 
     Health Security Act of 1994''.
       (b) Table of Contents.--The table of contents of this Act 
     is as follows:

Sec. 1. Short title; table of contents.

   TITLE I--ESTABLISHMENT OF A STATE-BASED AMERICAN HEALTH SECURITY 
               PROGRAM; UNIVERSAL ENTITLEMENT; ENROLLMENT

Sec. 101. Establishment of a State-based American Health Security 
              Program.
Sec. 102. Universal entitlement.
Sec. 103. Enrollment.
Sec. 104. Portability of benefits.
Sec. 105. Effective date of benefits.
Sec. 106. Relationship to existing Federal health programs.

  TITLE II--COMPREHENSIVE BENEFITS, INCLUDING PREVENTIVE BENEFITS AND 
                      BENEFITS FOR LONG TERM CARE

Sec. 201. Comprehensive benefits.
Sec. 202. Definitions relating to services.
Sec. 203. Special rules for home and community-based long-term care 
              services.
Sec. 204. Exclusions and limitations.
Sec. 205. Certification; quality review; plans of care.

                   TITLE III--PROVIDER PARTICIPATION

Sec. 301. Provider participation and standards.
Sec. 302. Qualifications for providers.
Sec. 303. Qualifications for comprehensive health service 
              organizations.
Sec. 304. Limitation on certain physician referrals.

                        TITLE IV--ADMINISTRATION

             Subtitle A--General Administrative Provisions

Sec. 401. American Health Security Standards Board.
Sec. 402. American Health Security Advisory Council.
Sec. 403. Professional, technical, and temporary advisory committees.
Sec. 404. American Health Security Quality Council.
Sec. 405. State health security programs.
Sec. 406. Complementary conduct of related health programs.

                Subtitle B--Control Over Fraud and Abuse

Sec. 411. Application of Federal sanctions to all fraud and abuse under 
              American Health Security Program.
Sec. 412. National health care fraud data base.
Sec. 413. Requirements for operation of State health care fraud and 
              abuse control units.
Sec. 414. Assignment of unique provider and patient identifiers.

                      TITLE V--QUALITY ASSESSMENT

Sec. 501. Functions of Quality Council; development of practice 
              guidelines and application to outliers.
Sec. 502. State quality review programs.
Sec. 503. Elimination of existing utilization review programs; 
              transition.
Sec. 504. Development of national electronic data base.

 TITLE VI--NATIONAL HEALTH SECURITY BUDGET; PAYMENTS; COST CONTAINMENT 
                                MEASURES

              Subtitle A--Budgeting and Payments to States

Sec. 601. National health security budget.
Sec. 602. Computation of individual and State capitation amounts.
Sec. 603. State health security budgets.
Sec. 604. Federal payments to States.
Sec. 605. Account for health professional education expenditures.

              Subtitle B--Payments by States to Providers

Sec. 611. Payments to hospitals and other facility-based services for 
              operating expenses on the basis of approved global 
              budgets.
Sec. 612. Payments to health care practitioners based on prospective 
              fee schedule.
Sec. 613. Payments to comprehensive health service organizations.
Sec. 614. Payments for community-based primary health services.
Sec. 615. Payments for prescription drugs.
Sec. 616. Approved devices and equipment.
Sec. 617. Payments for other items and services.
Sec. 618. Payment incentives for medically underserved areas.
Sec. 619. Authority for alternative payment methodologies.

     Subtitle C--Mandatory Assignment and Administrative Provisions

Sec. 621. Mandatory assignment.
Sec. 622. Procedures for reimbursement; appeals.

  TITLE VII--PROMOTION OF PRIMARY HEALTH CARE; DEVELOPMENT OF HEALTH 
     SERVICE CAPACITY; PROGRAMS TO ASSIST THE MEDICALLY UNDERSERVED

   Subtitle A--Promotion and Expansion of Primary Care Professional 
                                Training

Sec. 701. Role of Board; establishment of primary care professional 
              output goals.
Sec. 702. Establishment of Advisory Committee on Health Professional 
              Education.
Sec. 703. Grants for health professions education, nurse education, and 
              the National Health Service Corps.

                Subtitle B--Direct Health Care Delivery

Sec. 711. Setaside for public health block grants.
Sec. 712. Setaside for primary health care delivery.
Sec. 713. Primary care service expansion grants.

             Subtitle C--Primary Care and Outcomes Research

Sec. 721. Set-aside for outcomes research.
Sec. 722. Office of Primary Care and Prevention Research.

               Subtitle D--School-Related Health Services

Sec. 731. Authorizations of appropriations.
Sec. 732. Eligibility for development and operation grants.
Sec. 733. Preferences.
Sec. 734. Grants for development of projects.
Sec. 735. Grants for operation of projects.
Sec. 736. Federal administrative costs.
Sec. 737. Definitions.

 TITLE VIII--FINANCING PROVISIONS; AMERICAN HEALTH SECURITY TRUST FUND

Sec. 800. Amendment of 1986 code; section 15 not to apply.

            Subtitle A--American Health Security Trust Fund

Sec. 801. American health security trust fund.

              Subtitle B--Taxes Based on Income and Wages

Sec. 811. Payroll tax on employers.
Sec. 812. Health care income tax.

        Subtitle C--Increase in Excise Taxes on Tobacco Products

Sec. 821. Increase in excise taxes on tobacco products.

        Subtitle D--Increase in Taxes on Firearms and Ammunition

Sec. 831. Increase in taxes on firearms and ammunition.

   TITLE IX--CONFORMING AMENDMENTS TO THE EMPLOYEE RETIREMENT INCOME 
                          SECURITY ACT OF 1974

Sec. 901. ERISA inapplicable to health coverage arrangements under 
              State health security programs.
Sec. 902. Exemption of State health security programs from ERISA 
              preemption.
Sec. 903. Prohibition of employee benefits duplicative of benefits 
              under State health security programs.
Sec. 904. Repeal of continuation coverage requirements under ERISA and 
              certain other requirements relating to group health 
              plans.
Sec. 905. Effective date of title.

   TITLE I--ESTABLISHMENT OF A STATE-BASED AMERICAN HEALTH SECURITY 
               PROGRAM; UNIVERSAL ENTITLEMENT; ENROLLMENT

     SEC. 101. ESTABLISHMENT OF A STATE-BASED AMERICAN HEALTH 
                   SECURITY PROGRAM.

       (a) In General.--There is hereby established in the United 
     States a State-Based American Health Security Program to be 
     administered by the individual States in accordance with 
     Federal standards specified in, or established under, this 
     Act.
       (b) State Health Security Programs.--In order for a State 
     to be eligible to receive payment under section 604, a State 
     must establish a State health security program in accordance 
     with this Act.
       (c) State Defined.--
       (1) In general.--In this Act, subject to paragraph (2), the 
     term ``State'' means each of the fifty States and the 
     District of Columbia.
       (2) Election.--If the Governor of Puerto Rico, the Virgin 
     Islands, Guam, American Samoa, or the Northern Mariana 
     Islands certifies to the President that the legislature of 
     the Commonwealth or territory has enacted legislation 
     desiring that the Commonwealth or territory be included as a 
     State under the provisions of this Act, such Commonwealth or 
     territory shall be included as a ``State'' under this Act 
     beginning January 1 of the first year beginning ninety days 
     after the President receives the notification.

     SEC. 102. UNIVERSAL ENTITLEMENT.

       (a) In General.--Every individual who is a resident of the 
     United States and is a citizen or national of the United 
     States or lawful resident alien (as defined in subsection (d) 
     is entitled to benefits for health care services under this 
     Act under the appropriate State health security program. In 
     this section, the term ``appropriate State health security 
     program'' means, with respect to an individual, the State 
     health security program for the State in which the individual 
     maintains a primary residence.
       (b) Treatment of Certain Nonimmigrants.--
       (1) In general.--The American Health Security Standards 
     Board (in this Act referred to as the ``Board'') may make 
     eligible for benefits for health care services under the 
     appropriate State health security program under this Act such 
     classes of aliens admitted to the United States as 
     nonimmigrants as the Board may provide.
       (2) Consideration.--In providing for eligibility under 
     paragraph (1), the Board shall consider reciprocity in health 
     care services offered to United States citizens who are 
     nonimmigrants in other foreign states, and such other factors 
     as the Board determines to be appropriate.
       (c) Treatment of Other Individuals.--
       (1) By board.--The Board also may make eligible for 
     benefits for health care services under the appropriate State 
     health security program under this Act other individuals not 
     described in subsection (a) or (b), and regulate the nature 
     of the eligibility of such individuals, in order--
       (A) to preserve the public health of 
     communities,
       (B) to compensate States for the additional health care 
     financing burdens created by such individuals, and
       (C) to prevent adverse financial and medical consequences 
     of uncompensated care, while inhibiting travel and 
     immigration to the United States for the sole 
     purpose of obtaining health care services.
       (2) By states.--Any State health security program may make 
     individuals described in paragraph (1) eligible for benefits 
     at the expense of the State.
       (d) Lawful Resident Alien Defined.--For purposes of this 
     section, the term ``lawful resident alien'' means an alien 
     lawfully admitted for permanent residence and any other alien 
     lawfully residing permanently in the United States under 
     color of law, including an alien with lawful temporary 
     resident status under section 210, 210A, or 234A of the 
     Immigration and Nationality Act (8 U.S.C. 1160, 1161, or 
     1255a).

     SEC. 103. ENROLLMENT.

       (a) In General.--Each State health security program shall 
     provide a mechanism for the enrollment of individuals 
     entitled or eligible for benefits under this Act. The 
     mechanism shall--
       (1) include a process for the automatic enrollment of 
     individuals at the time of birth in the United 
     States and at the time of immigration into the United States 
     or other acquisition of lawful resident status in the United 
     States,
       (2) provide for the enrollment, as of January 1, 1996, of 
     all individuals who are eligible to be enrolled as of such 
     date, and
       (3) include a process for the enrollment of individuals 
     made eligible for health care services under subsections (b) 
     and (c) of section 102.
       (b) Availability of Applications.--Each State health 
     security program shall make applications for enrollment under 
     the program available--
       (1) at employment and payroll offices of employers located 
     in the State,
       (2) at local offices of the Social Security 
     Administration,
       (3) at social services locations,
       (4) at out-reach sites (such as provider and practitioner 
     locations), and
       (5) at other locations (including post offices and schools) 
     accessible to a broad cross-section of individuals 
     eligible to enroll.
       (c) Issuance of Health Security Cards.--In conjunction with 
     an individual's enrollment for benefits under this Act, the 
     State health security program shall provide for the issuance 
     of a health security card which shall be used for purposes of 
     identification and processing of claims for benefits under 
     the program. The State health security program may provide 
     for issuance of such cards by employers for purposes of 
     carrying out enrollment pursuant to subsection (a)(2).

     SEC. 104. PORTABILITY OF BENEFITS.

       (a) In General.--To ensure continuous access to benefits 
     for health care services covered under this Act, each State 
     health security program--
       (1) shall not impose any minimum period of residence in the 
     State, or waiting period, in excess of three months before 
     residents of the State are entitled to, or 
     eligible for, such benefits under the program;
       (2) shall provide continuation of payment for covered 
     health care services to individuals who have terminated their 
     residence in the State and established their residence in 
     another State, for the duration of any waiting period imposed 
     in the State of new residency for establishing entitlement 
     to, or eligibility for, such services; and
       (3) shall provide for the payment for health care services 
     covered under this Act provided to individuals while 
     temporarily absent from the State based on the following 
     principles:
       (A) Payment for such health care services is at the rate 
     that is approved by the State health security program in the 
     State in which the services are provided, unless the States 
     concerned agree to apportion the cost between them in a 
     different manner.
       (B) Payment for such health care services provided outside 
     the United States is made on the basis of the amount that 
     would have been paid by the State health security program for 
     similar services rendered in the State, with due regard, in 
     the case of hospital services, to the size of the hospital, 
     standards of service, and other relevant factors.
       (b) Cross-Border Arrangements.--A State health security 
     program for a State may negotiate with such a program in an 
     adjacent State a reciprocal arrangement for the 
     coverage under such other program of health care 
     services to enrollees residing in the border region.

     SEC. 105. EFFECTIVE DATE OF BENEFITS.

       Benefits shall first be available under this Act for items 
     and services furnished on or after January 1, 1996.

     SEC. 106. RELATIONSHIP TO EXISTING FEDERAL HEALTH PROGRAMS.

       (a) Medicare and Medicaid.--
       (1) In general.--Notwithstanding any other provision of 
     law, subject to paragraph (2)--
       (A) no benefits shall be available under title XVIII of the 
     Social Security Act for any item or service furnished after 
     December 31, 1995,
       (B) no individual is entitled to medical assistance under a 
     State plan approved under title XIX of such Act for any item 
     or service furnished after such date, and
       (C) no payment shall be made to a State under section 
     1903(a) of such Act with respect to medical assistance for 
     any item or service furnished after such date.
       (2) Transition.--In the case of inpatient hospital services 
     and extended care services during a continuous period of stay 
     which began before January 1, 1996, and which had not ended 
     as of such date, for which benefits are provided under title 
     XVIII, or under a State plan under title XIX, of the Social 
     Security Act, the Secretary of Health and Human Services and 
     each State plan, respectively, shall provide for continuation 
     of benefits under such title or plan until the end of the 
     period of stay.
       (b) Federal Employees Health Benefits Program.--No benefits 
     shall be made available under chapter 89 of title 5, United 
     States Code, for any part of a coverage period occurring 
     after December 31, 1995.
       (c) CHAMPUS.--No benefits shall be made available under 
     sections 1079 and 1086 of title 10, United States Code, for 
     items or services furnished after December 31, 1995.
       (d) Treatment of Benefits for Veterans and Native 
     Americans.--Nothing in this Act shall affect the eligibility 
     of veterans for the medical benefits and services provided 
     under title 38, United States Code, or of Indians for the 
     medical benefits and services provided by or through the 
     Indian Health Service.

  TITLE II--COMPREHENSIVE BENEFITS, INCLUDING PREVENTIVE BENEFITS AND 
                      BENEFITS FOR LONG TERM CARE

     SEC. 201. COMPREHENSIVE BENEFITS.

       (a) In General.--Subject to the succeeding provisions of 
     this title, individuals enrolled for benefits under this Act 
     are entitled to have payment made under a State health 
     security program for the following items and services if 
     medically necessary or appropriate for the maintenance of 
     health or for the diagnosis, treatment, or rehabilitation of 
     a health condition:
       (1) Hospital services.--Inpatient and outpatient hospital 
     care, including 24-hour a day emergency services.
       (2) Professional services.--Professional services of health 
     care practitioners authorized to provide health care services 
     under State law, including patient education and training in 
     self-management techniques.
       (3) Community-based primary health services.--Community-
     based primary health services (as defined in section 202(a)).
       (4) Preventive services.--Preventive services (as defined 
     in section 202(b)).
       (5) Long-term, acute, and chronic care services.--
       (A) Nursing facility services.
       (B) Home health services.
       (C) Home and community-based long term care services (as 
     defined in section 202(c)) for individuals described in 
     section 203(a).
       (D) Hospice care.
       (E) Services in intermediate care facilities for 
     individuals with mental retardation.
       (6) Prescription drugs, biologicals, insulin, medical 
     foods.--
       (A) Outpatient prescription drugs and biologicals, as 
     specified by the Board consistent with section 515.
       (B) Insulin.
       (C) Medical foods (as defined in section 202(e)).
       (7) Dental services.--Dental services (as defined in 
     section 202(i)).
       (8) Mental health services.--Mental health services (as 
     defined in section 202(f)).
       (9) Substance abuse treatment services.--Substance abuse 
     treatment services (as defined in section 202(g)).
       (10) Diagnostic tests.--Diagnostic tests.
       (11) Other items and services.--
       (A) Outpatient therapy.--Outpatient physical therapy 
     services, outpatient speech pathology services, and 
     outpatient occupational therapy services in all settings.
       (B) Durable medical equipment.--Durable medical equipment.
       (C) Home dialysis.--Home dialysis supplies and equipment.
       (D) Ambulance.--Emergency ambulance service.
       (E) Prosthetic devices.--Prosthetic devices, including 
     replacements of such devices.
       (F) Additional items and services.--Such other medical or 
     health care items or services as the Board may 
     specify.
       (b) Cost-Sharing.--
       (1) In general.--Except as provided in this subsection, 
     there are no deductibles, coinsurance, or copayments 
     applicable to acute care and preventive benefits provided 
     under this title.
       (2) Cost-sharing for long-term care services.--
       (A) In general.--
       (i) payments for home and community-based long-term care 
     services are subject to coinsurance of 20 percent, and
       (ii) payments for nursing facility services are subject to 
     coinsurance of 35 percent.
       (B) Exception.--With respect to the coinsurance established 
     under subparagraph (A)--
       (i) such coinsurance shall not apply to an individual with 
     income (as defined by the Secretary) of not more than 100 
     percent of the income official poverty line applicable to a 
     family of the size involved; and
       (ii) in the case of an individual with such income that 
     exceeds 100 percent, but is less than 200 percent, of such 
     applicable poverty line, the coinsurance shall be reduced in 
     the same proportion as the proportion of such income is less 
     than 200 percent of such applicable poverty line.
       (c) Prohibition of Balance Billing.--As provided in section 
     531, no person may impose a charge for covered services for 
     which benefits are provided under this Act.
       (d) No Duplicate Health Insurance.--Each State health 
     security program shall prohibit the sale of health insurance 
     in the State if payment under the insurance duplicates 
     payment for any items or services for which payment may be 
     made under such a program.
       (e) State Program May Provide Additional Benefits.--Nothing 
     in this Act shall be construed as limiting the benefits that 
     may be made available under a State health security program 
     to residents of the State at the expense of the State.
       (f) Employers May Provide Additional Benefits.--Nothing in 
     this Act shall be construed as limiting the additional 
     benefits that an employer may provide to employees or their 
     dependents, or to former employees or their dependents.

     SEC. 202. DEFINITIONS RELATING TO SERVICES.

       (a) Community-Based Primary Health Services.--In this 
     title, the term ``community-based primary health services'' 
     means ambulatory health services furnished--
       (1) by a rural health clinic;
       (2) by a Federally-qualified health center (as defined in 
     section 1905(l)(2)(B) of the Social Security Act), and which, 
     for purposes of this Act, include services 
     furnished by State and local health agencies;
       (3) in a school-based setting;
       (4) by public educational agencies and other providers of 
     services to children entitled to assistance under the 
     Individuals with Disabilities Education Act for services 
     furnished pursuant to a written Individualized 
     Family Services Plan or Individual Education Plan 
     under such Act; and
       (5) public and private non-profit entities receiving 
     Federal assistance under the Public Health Service Act.
       (b) Preventive Services.--
       (1) In general.--In this title, the term ``preventive 
     services'' means items and services--
       (A) which--
       (i) are specified in paragraph (2), or
       (ii) the Board determines to be effective in the 
     maintenance and promotion of health or minimizing the effect 
     of illness, disease, or medical condition; and
       (B) which are provided consistent with the periodicity 
     schedule established under paragraph (3).
       (2) Specified preventive services.--The services specified 
     in this paragraph are as follows:
       (A) Basic immunizations.
       (B) Prenatal and well-baby care (for infants under one year 
     of age).
       (C) Well-child care (including periodic physical 
     examinations, hearing and vision screening, and developmental 
     screening and examinations) for individuals under 18 years of 
     age.
       (D) Periodic screening mammography, Pap smears, and 
     colorectal examinations and examinations for prostate cancer.
       (E) Physical examinations.
       (F) Family planning services.
       (G) Routine eye examinations, eyeglasses, and contact 
     lenses.
       (H) Hearing aids, but only upon a determination of a 
     certified audiologist or physician that a hearing problem 
     exists and is caused by a condition that can be corrected by 
     use of a hearing aid.
       (3) Schedule.--The Board shall establish, in consultation 
     with experts in preventive medicine and public health and 
     taking into consideration those preventive services 
     recommended by the Preventive Services Task Force and 
     published as the Guide to Clinical Preventive Services, a 
     periodicity schedule for the coverage of preventive services 
     under paragraph (1). Such schedule shall take into 
     consideration the cost-effectiveness of appropriate 
     preventive care and shall be revised not less frequently than 
     once every 5 years, in consultation with experts in 
     preventive medicine and public health.
       (c) Home and Community-Based Long-Term Care Services.--In 
     this title, the term ``home and community-based long term 
     care services'' means the following services provided to an 
     individual to enable the individual to remain in such 
     individual's place of residence within the community:
       (1) Homemaker services, including meals.
       (2) Home health aide services.
       (3) Adult day health care, social day care or psychiatric 
     day care.
       (4) Medical social work services.
       (5) Care coordination services, as defined in subsection 
     (h)(1).
       (6) Respite care, including training for informal 
     caregivers.
       (7) Personal assistance services.
       (d) Home Health Services.--
       (1) In general.--The term ``home health services'' means 
     items and services described in section 1861(m) of the Social 
     Security Act and includes home infusion services.
       (2) Home infusion services.--The term ``home infusion 
     services'' includes the nursing, pharmacy, and related 
     services that are necessary to conduct the home infusion of a 
     drug regimen safely and effectively under a plan established 
     and periodically reviewed by a physician and that are 
     provided in compliance with quality assurance requirements 
     established by the Secretary.
       (e) Medical Foods.--In this title, the term ``medical 
     foods'' means foods which are formulated to be consumed or 
     administered enterally under the supervision of a physician 
     and which are intended for the specific dietary management of 
     a disease or condition for which distinctive 
     nutritional requirements, based on recognized scientific 
     principles, are established by medical evaluation.
       (f) Mental Health Services.--In this title, the term 
     ``mental health services'' means services related to the 
     prevention, diagnosis, treatment, and rehabilitation of 
     mental illness and promotion of mental health, including the 
     following services:
       (1) Crisis intervention.
       (2) Outpatient mental health services.
       (3) Partial hospitalization and day and evening treatment 
     programs.
       (4) Psychosocial rehabilitation services.
       (5) Pharmacotherapeutic interventions.
       (6) Other rehabilitation services, including halfway and 
     three-quarter-way house care.
       (7) Inpatient mental health services.
       (8) Care coordination services (as defined in subsection 
     (h)(1)).
       (g) Substance Abuse Treatment Services.--In this title, the 
     term ``substance abuse treatment services'' means services 
     for the treatment of dependency on alcohol or controlled 
     substances provided through a treatment program meeting State 
     qualification standards and includes the following services:
       (1) Crisis intervention, including assessment, diagnosis, 
     and referral.
       (2) Detoxification services, in ambulatory and inpatient 
     settings.
       (3) Outpatient services, including intensive day and 
     evening programs, continuing care, and family services.
       (4) Short-term residential services in a hospital or free-
     standing program.
       (5) Long-term residential services, including therapeutic 
     communities and halfway houses.
       (6) Pharmacotherapeutic interventions.
       (7) Care coordination services (as defined in subsection 
     (h)(1)).
       (h) Care Coordination Services.--
       (1) In general.--In this title, the term ``care 
     coordination services'' means services provided by care 
     coordinators (as defined in paragraph (2)) to individuals 
     described in paragraph (3) for the coordination and 
     monitoring of mental health services, substance abuse 
     treatment services, and home and community-based long term 
     care services to ensure appropriate, cost-effective 
     utilization of such services in a comprehensive and 
     continuous manner, and includes--
       (A) transition management between inpatient facilities and 
     community-based services, including assisting patients in 
     identifying and gaining access to appropriate ancillary 
     services; and
       (B) evaluating and recommending appropriate treatment 
     services, in cooperation with patients and other providers 
     and in conjunction with any quality review program or plan of 
     care under section 205.
       (2) Care coordinator.--
       (A) In general.--In this title, the term ``care 
     coordinator'' means an individual or nonprofit or public 
     agency or organization which the State health security 
     program determines--
       (i) is capable of performing directly, efficiently, and 
     effectively the duties of a care coordinator described in 
     paragraph (1), and
       (ii) demonstrates capability in establishing and 
     periodically reviewing and revising plans of care, and in 
     arranging for and monitoring the provision and quality of 
     services under any plan.
       (B) Independence.--State health security programs shall 
     establish safeguards to assure that care coordinators have no 
     financial interest in treatment decisions or placements. Care 
     coordination may not be provided through any structure or 
     mechanism through which quality review is performed.
       (3) Eligible individuals.--An individual described in this 
     paragraph is an individual--
       (A) described in section 203 (relating to individuals 
     qualifying for long term and chronic care services); or
       (B) determined (in a manner specified by the Board)--
       (i) to have a serious mental illness (as defined by the 
     Board), or
       (ii) to have a history of substance abuse displaying severe 
     associated illness or previous treatment failure (as defined 
     by the Board).
       (i) Dental Services.--
       (1) In general.--In this title, subject to subsection (b), 
     the term ``dental services'' means the following:
       (A) Emergency dental treatment, including extractions, for 
     bleeding, pain, acute infections, and injuries to the 
     maxillofacial region.
       (B) Prevention and diagnosis of dental disease, including 
     examinations of the hard and soft tissues of the oral cavity 
     and related structures, radiographs, dental sealants, 
     fluorides, and dental prophylaxis.
       (C) Treatment of dental disease, including non-cast 
     fillings, periodontal maintenance services, and endodontic 
     services.
       (D) Space maintenance procedures to prevent orthodontic 
     complications.
       (E) Orthodontic treatment to prevent severe malocclusions.
       (F) Full dentures.
       (G) Medically necessary oral health care.
       (H) Any items and services for special needs patients that 
     are not described in subparagraphs (A) through (G) and that--
       (i) are required to provide such patients the items and 
     services described in subparagraphs (A) through (G);
       (ii) are required to establish oral function (including 
     general anesthesia for individuals with physical or emotional 
     limitations that prevent the provision of dental care without 
     such anesthesia);
       (iii) consist of orthodontic care for severe dentofacial 
     abnormalities; or
       (iv) consist of prosthetic dental devices for genetic or 
     birth defects or fitting for such devices.
       (I) Any dental care for individuals with a seizure disorder 
     that is not described in subparagraphs (A) through (H) and 
     that is required because of an illness, injury, disorder, or 
     other health condition that results from such seizure 
     disorder.
       (2) Limitations.--Dental services are subject to the 
     following limitations:
       (A) Prevention and Diagnosis.--
       (i) Examinations and prophylaxis.--The examinations and 
     prophylaxis described in paragraph (1)(B) are covered only 
     consistent with a periodicity schedule established by the 
     Board, which schedule may provide for special treatment of 
     individuals less than 18 years of age and of special needs 
     patients.
       (ii) Dental sealants.--The dental sealants described in 
     such paragraph are not covered for individuals 18 years of 
     age or older. Such sealants are covered for individuals less 
     than 10 years of age for protection of the 1st permanent 
     molars. Such sealants are covered for individuals 10 years of 
     age or older for protection of the 2d permanent molars.
       (B) Treatment of dental disease.--Prior to January 1, 2001, 
     the items and services described in paragraph (1)(C) are 
     covered only for individuals less than 18 years of age and 
     special needs patients. On or after such date, such items and 
     services are covered for all individuals enrolled for 
     benefits under this Act, except that endodontic services are 
     not covered for individuals 18 years of age or older.
       (C) Space maintenance.--The items and services described in 
     paragraph (1)(D) are covered only for individuals at least 3 
     years of age, but less than 13 years of age and--
       (i) are limited to posterior teeth;
       (ii) involve maintenance of a space or spaces for permanent 
     posterior teeth that would otherwise be prevented from normal 
     eruption if the space were not maintained; and
       (iii) do not include a space maintainer that is placed 
     within 6 months of the expected eruption of the permanent 
     posterior tooth concerned.
       (D) Orthodontic treatment.--Prior to January 1, 2001, the 
     items and services described in paragraph (1)(E) are covered 
     only for individuals at least 6 years of age, but less than 
     12 years of age, who have severe dentofacial abnormalities. 
     On or after such date, such items and services are covered 
     only for individuals at least 6 years of age, but less than 
     12 years of age.
       (E) Dentures.--Prior to January 1, 2001, the dentures 
     described in paragraph (1)(F) are not covered, except for 
     special needs patients. On or after such date, dentures are 
     covered for an individual consistent with a periodicity 
     schedule established by the Board, except that the limitation 
     of periodicity provided in such schedule shall not apply to a 
     special needs patient.
       (3) Definitions.--For purposes of this title:
       (A) Medically necessary oral health care.--The term 
     ``medically necessary oral health care'' means oral health 
     care that is required as a direct result of, or would have a 
     direct impact on, an underlying medical condition. Such term 
     includes oral health care directed towards control or 
     elimination of pain, infection, or reestablishment of oral 
     function.
       (B) Special needs patient.--The term ``special needs 
     patient'' includes an individual with a genetic or birth 
     defect, a developmental disability, or an acquired medical 
     disability.
       (j) Nursing Facility; Nursing Facility Services.--Except as 
     may be provided by the Board, the terms ``nursing facility'' 
     and ``nursing facility services'' have the meanings given 
     such terms in sections 1919(a) and 1905(f), respectively, of 
     the Social Security Act.
       (k) Services in Intermediate Care Facilities for 
     Individuals With Mental Retardation.--Except as may be 
     provided by the Board--
       (1) the term ``intermediate care facility for individuals 
     with mental retardation'' has the meaning specified in 
     section 1905(d) of the Social Security Act (as in effect 
     before the enactment of this Act); and
       (2) the term ``services in intermediate care facilities for 
     individuals with mental retardation'' means services 
     described in section 1905(a)(15) of such Act (as so in 
     effect) in an intermediate care facility for individuals with 
     mental retardation to an individual determined to require 
     such services in accordance with standards specified by the 
     Board and comparable to the standards described in section 
     1902(a)(31)(A) of such Act (as so in effect).
       (l) Other Terms.--Except as may be provided by the Board, 
     the definitions contained in section 1861 of the Social 
     Security Act shall apply.

     SEC. 203. SPECIAL RULES FOR HOME AND COMMUNITY-BASED LONG-
                   TERM CARE SERVICES.

       (a) Qualifying Individuals.--For purposes of section 
     201(a)(5)(C), individuals described in this subsection are 
     the following individuals:
       (1) Adults.--Individuals 18 years of age or older 
     determined (in a manner specified by the Board)--
       (A) to be unable to perform, without the assistance of an 
     individual, at least 2 of the following 5 activities of daily 
     living (or who has a similar level of disability due to 
     cognitive impairment)--
       (i) bathing;
       (ii) eating;
       (iii) dressing;
       (iv) toileting; and
       (v) transferring in and out of a bed or in and out of a 
     chair; or
       (B) due to cognitive or mental impairments, requires 
     supervision (or queuing to perform activities of daily 
     living) because the individual behaves in a manner that poses 
     health or safety hazards to himself or herself or others.
       (2) Children.--Individuals under 18 years of age determined 
     (in a manner specified by the Board) to meet such alternative 
     standard of disability for children as the Board develops. 
     Such alternative standard shall be comparable to the standard 
     for adults and appropriate for children.
       (b) Limit on Services.--
       (1) In general.--The aggregate expenditures by a State 
     health security program with respect to home and community-
     based long-term care services in a period (specified by the 
     Board) may not exceed 65 percent (or such alternative ratio 
     as the Board establishes under paragraph (2)) of the average 
     of the amount of payment that would have been made under the 
     program during the period if all the home-based long-term 
     care beneficiaries had been residents of nursing facilities 
     in the same area in which the services were provided.
       (2) Alternative ratio.--The Board may establish for 
     purposes of paragraph (1) an alternative ratio (of payments 
     for home and community-based long term care services to 
     payments for nursing facility services) as the Board 
     determines to be more consistent with the goal of providing 
     cost-effective long-term care in the most appropriate and 
     least restrictive setting.

     SEC. 204. EXCLUSIONS AND LIMITATIONS.

       (a) In General.--Subject to section 201(e), benefits for 
     service are not available under this Act unless the 
     services meet the standards specified in section 
     201(a).
       (b) Mental Health Services and Substance Abuse Treatment 
     Services.--
       (1) In general.--Mental health services and substance abuse 
     treatment services furnished for an individual in excess of a 
     threshold specified in paragraph (2) are not covered services 
     unless the services are determined under a utilization review 
     program to meet the standards specified in section 201(a) 
     and, with respect to inpatient or residential treatment 
     services, to be provided in the least restrictive and most 
     appropriate setting.
       (2) Utilization review threshold.--
       (A) In general.--Subject to subparagraphs (B) and (C), the 
     thresholds specified in this paragraph are--
       (i) 20 outpatient visits in a year, and
       (ii) 15 days of inpatient services in a year.
       (B) Alternative national thresholds.--The Board may specify 
     alternative thresholds to those specified in subparagraph 
     (A).
       (C) Additional state thresholds.--A State health security 
     program may specify thresholds in addition to those 
     established under the previous subparagraphs, which 
     thresholds may be higher or lower than the number of 
     outpatient visits or days of inpatient services otherwise 
     specified.
       (3) Special delivery requirements for services provided to 
     children.--
       (A) Requiring services to be provided through organized 
     systems of care.--A State health security program shall 
     ensure that mental health services and substance abuse 
     treatment services are furnished through an organized system 
     of care, as described in subparagraph (B), if--
       (i) the services are provided to an individual less than 22 
     years of age;
       (ii) the individual has a serious emotional disturbance or 
     a substance abuse disorder; and
       (iii) the individual is, or is at imminent risk of being, 
     subject to the authority of, or in need of the services of, 
     at least 1 public agency that serves the needs of children, 
     including an agency involved with child welfare, special 
     education, juvenile justice, or criminal justice.
       (B) Requirements for system of care.--In this paragraph, an 
     ``organized system of care'' is a community-based service 
     delivery network, which may consist of public and private 
     providers, that meets the following requirements:
       (i) The system has established linkages with existing 
     mental health services and substance abuse treatment service 
     delivery programs in the plan service area (or is in the 
     process of developing or operating a system with appropriate 
     public agencies in the area to coordinate the delivery of 
     such services to individuals in the area).
       (ii) The system provides for the participation and 
     coordination of multiple agencies and providers that serve 
     the needs of children in the area, including agencies and 
     providers involved with child welfare, education, juvenile 
     justice, criminal justice, health care, mental health, and 
     substance abuse prevention and treatment.
       (iii) The system provides for the involvement of the 
     families of children to whom mental health services and 
     substance abuse treatment services are provided in the 
     planning of treatment and the delivery of services.
       (iv) The system provides for the development and 
     implementation of individualized treatment plans by 
     multidisciplinary and multiagency teams, which are recognized 
     and followed by the applicable agencies and providers in the 
     area.
       (v) The system ensures the delivery and coordination of the 
     range of mental health services and substance abuse treatment 
     services required by individuals under 22 years of age who 
     have a serious emotion disturbance or a substance abuse 
     disorder.
       (vi) The system provides for the management of the 
     individualized treatment plans described in clause (iv) and 
     for a flexible response to changes in treatment needs over 
     time.
       (c) Treatment of Experimental Services.--In applying 
     subsection (a), the Board shall make, after consultation with 
     a technical advisory committee, national coverage 
     determinations with respect to those services that are 
     experimental in nature. Such determinations shall be made 
     consistent with a process that provides for professional 
     input and public comment.
       (d) Application of National Practice Guidelines.--In the 
     case of services for which the Board has recognized national 
     practice guidelines, the services are considered to meet the 
     standards specified in section 201(a) only if they have been 
     provided in accordance with such guidelines or in accordance 
     with such guidelines as are provided by the State health 
     security program consistent with title V.
       (e) Specific Limitations.--
       (1) Limitations on eyeglasses, contact lenses, hearing 
     aids, and durable medical equipment.--Subject to section 
     201(e), the Board may impose such limits relating to the 
     costs and frequency of replacement of eyeglasses, contact 
     lenses, hearing aids, and durable medical equipment to which 
     individuals enrolled for benefits under this Act are entitled 
     to have payment made under a State health security program as 
     the Board deems appropriate.
       (2) Overlap with preventive services.--The coverage of 
     services described in section 201(a) (other than paragraph 
     (3)) which also are preventive services are required to be 
     covered only to the extent that they are required to be 
     covered as preventive services.
       (3) Miscellaneous exclusions from covered services.--
     Covered services under this Act do not include the following:
       (A) Surgery and other procedures (such as orthodontia) 
     performed solely for cosmetic purposes (as defined in 
     regulations) and hospital or other services incident thereto, 
     unless--
       (i) required to correct a congenital anomaly;
       (ii) required to restore or correct a part of the body 
     which has been altered as a result of accidental injury, 
     disease, or surgery; or
       (iii) otherwise determined to be medically necessary and 
     appropriate under section 201(a).
       (B) Personal comfort items or private rooms in inpatient 
     facilities, unless determined to be medically necessary and 
     appropriate under section 201(a).
       (C) The services of a professional practitioner if they are 
     furnished in a hospital or other facility which is not a 
     participating provider.
       (f) Nursing Facility Services and Home Health Services.--
     Nursing facility services and home health services (other 
     than post-hospital services, as defined by the Board) 
     furnished to an individual who is not described in section 
     203(a) are not covered services unless the services are 
     determined to meet the standards specified in section 201(a) 
     and, with respect to nursing facility services, to be 
     provided in the least restrictive and most appropriate 
     setting.

     SEC. 205. CERTIFICATION; QUALITY REVIEW; PLANS OF CARE.

       (a) Certifications.--State health security programs may 
     require, as a condition of payment for institutional health 
     care services and other services of the type described in 
     such sections 1814(a) and 1835(a) of the Social Security Act, 
     periodic professional certifications of the kind described in 
     such sections.
       (b) Quality Review.--For requirement that each State health 
     security program establish a quality review program that 
     meets the requirements for such a program under title V, see 
     section 405(b)(1)(H).
       (c) Plan of Care Requirements.--A State health security 
     program may require, consistent with standards established by 
     the Board, that payment for services exceeding specified 
     levels or duration be provided only as consistent with a plan 
     of care or treatment formulated by one or more providers of 
     the services or other qualified professionals. Such a plan 
     may include, consistent with subsection (b), case management 
     at specified intervals as a further condition of payment for 
     services.

                   TITLE III--PROVIDER PARTICIPATION

     SEC. 301. PROVIDER PARTICIPATION AND STANDARDS.

       (a) In General.--An individual or other entity furnishing 
     any covered service under a State health security program 
     under this Act is not a qualified provider unless the 
     individual or entity--
       (1) is a qualified provider of the services under section 
     302;
       (2) has filed with the State health security program a 
     participation agreement described in subsection (b); and
       (3) meets such other qualifications and conditions as are 
     established by the Board or the State health security program 
     under this Act.
       (b) Requirements in Participation Agreement.--
       (1) In general.--A participation agreement described in 
     this subsection between a State health security program and a 
     provider shall provide at least for the following:
       (A) Services to eligible persons will be furnished by the 
     provider without discrimination on the ground of race, 
     national origin, income, religion, age, sex or sexual 
     orientation, disability, handicapping condition, or (subject 
     to the professional qualifications of the provider) illness. 
     Nothing in this subparagraph shall be construed as requiring 
     the provision of a type or class of services which services 
     are outside the scope of the provider's normal practice.
       (B) No charge will be made for any covered services other 
     than for payment authorized by this Act.
       (C) The provider agrees to furnish such information as may 
     be reasonably required by the Board or a State health 
     security program, in accordance with uniform reporting 
     standards established under section 401(g)(1), for--
       (i) quality review by designated entities;
       (ii) the making of payments under this Act (including the 
     examination of records as may be necessary for the 
     verification of information on which payments are based);
       (iii) statistical or other studies required for the 
     implementation of this Act; and
       (iv) such other purposes as the Board or State may specify.
       (D) The provider agrees not to bill the program for any 
     services for which benefits are not available because of 
     section 204(d).
       (E) In the case of a provider that is not an individual, 
     the provider agrees not to employ or use for the provision of 
     health services any individual or other provider who or which 
     has had a participation agreement under this subsection 
     terminated for cause.
       (F) In the case of a provider paid under a fee-for-service 
     basis under section 612, the provider agrees to submit bills 
     and any required supporting documentation relating to the 
     provision of covered services within 30 days (or such shorter 
     period as a State health security program may require) after 
     the date of providing such services.
       (2) Termination of participation agreements.--
       (A) In general.--Participation agreements may be 
     terminated, with appropriate notice--
       (i) by the Board or a State health security program for 
     failure to meet the requirements of this title, or
       (ii) by a provider.
       (B) Termination process.--Providers shall be provided 
     notice and a reasonable opportunity to correct deficiencies 
     before the Board or a State health security program 
     terminates an agreement unless a more immediate termination 
     is required for public safety or similar reasons.

     SEC. 302. QUALIFICATIONS FOR PROVIDERS.

       (a) In General.--A health care provider is considered to be 
     qualified to provide covered services if the provider is 
     licensed or certified and meets--
       (1) all the requirements of State law to provide such 
     services,
       (2) applicable requirements of Federal law to provide such 
     services, and
       (3) any applicable standards established under subsection 
     (b).
       (b) Minimum Provider Standards.--
       (1) In general.--The Board shall establish, evaluate, and 
     update national minimum standards to assure the quality of 
     services provided under this Act and to monitor efforts by 
     State health security programs to assure the quality of such 
     services. A State health security program may also establish 
     additional minimum standards which providers must meet.
       (2) National minimum standards.--The national minimum 
     standards under paragraph (1) shall be established for 
     institutional providers of services, individual health care 
     practitioners, and comprehensive health service 
     organizations. Except as the Board may specify in order to 
     carry out this title, a hospital, nursing facility, or other 
     institutional provider of services shall meet standards for 
     such a facility under the medicare program under title XVIII 
     of the Social Security Act. Such standards also may include, 
     where appropriate, elements relating to--
       (A) adequacy and quality of facilities;
       (B) training and competence of personnel (including 
     continuing education requirements);
       (C) comprehensiveness of service;
       (D) continuity of service;
       (E) patient satisfaction (including waiting time and access 
     to services); and
       (F) performance standards (including organization, 
     facilities, structure of services, efficiency of operation, 
     and outcome in palliation, improvement of health, 
     stabilization, cure, or rehabilitation).
       (3) Transition in application.--If the Board provides for 
     additional requirements for providers under this subsection, 
     any such additional requirement shall be implemented in a 
     manner that provides for a reasonable period during which a 
     previously qualified provider is permitted to meet such an 
     additional requirement.
       (4) Exchange of information.--The Board shall provide for 
     an exchange, at least annually, among State health security 
     programs of information with respect to quality assurance and 
     cost containment.

     SEC. 303. QUALIFICATIONS FOR COMPREHENSIVE HEALTH SERVICE 
                   ORGANIZATIONS.

       (a) In General.--For purposes of this Act, a comprehensive 
     health service organization (in this section referred to as a 
     ``CHSO'') is a public or private organization which, in 
     return for a capitated payment amount, undertakes to furnish, 
     arrange for the provision of, or provide payment with respect 
     to--
       (1) a full range of health services (as identified by the 
     Board), including at least hospital services and physicians 
     services, and
       (2) out-of-area coverage in the case of urgently needed 
     services, to an identified population which is living in or 
     near a specified service area and which enrolls voluntarily 
     in the organization.
       (b) Enrollment.--
       (1) In general.--All eligible persons living in or near the 
     specified service area of a CHSO are eligible to enroll in 
     the organization; except that the number of enrollees may be 
     limited to avoid overtaxing the resources of the 
     organization.
       (2) Minimum enrollment period.--Subject to paragraph (3), 
     the minimum period of enrollment with a CHSO shall be twelve 
     months, unless the enrolled individual becomes ineligible to 
     enroll with the organization.
       (3) Withdrawal for cause.--Each CHSO shall permit an 
     enrolled individual to disenroll from the organization for 
     cause at any time.
       (c) Requirements for CHSOs.--
       (1) Accessible services.--Each CHSO, to the maximum extent 
     feasible, shall make all services readily and promptly 
     accessible to enrollees who live in the specified service 
     area.
       (2) Continuity of care.--Each CHSO shall furnish services 
     in such manner as to provide continuity of care and (when 
     services are furnished by different providers) shall provide 
     ready referral of patients to such services and at such times 
     as may be medically appropriate.
       (3) Board of directors.--In the case of a CHSO that is a 
     private organization--
       (A) Consumer representation.--At least one-third of the 
     members of the CHSO's board of directors must be consumer 
     members with no direct or indirect, personal or family 
     financial relationship to the organization.
       (B) Provider representation.--The CHSO's board of directors 
     must include at least one member who represents health care 
     providers.
       (4) Patient grievance program.--Each CHSO must have in 
     effect a patient grievance program and must conduct regularly 
     surveys of the satisfaction of members with services provided 
     by or through the organization.
       (5) Medical standards.--Each CHSO must provide that a 
     committee or committees of health care practitioners 
     associated with the organization will promulgate medical 
     standards, oversee the professional aspects of the delivery 
     of care, perform the functions of a pharmacy and drug 
     therapeutics committee, and monitor and review the quality of 
     all health services (including drugs, education, and 
     preventive services).
       (6) Premiums.--Premiums or other charges by a CHSO for any 
     services not paid for under this Act must be reasonable.
       (7) Utilization and bonus information.--Each CHSO must--
       (A) comply with the requirements of section 1876(i)(8) of 
     the Social Security Act (relating to prohibiting physician 
     incentive plans that provide specific inducements to reduce 
     or limit medically necessary services), and
       (B) make available to its membership utilization 
     information and data regarding financial performance, 
     including bonus or incentive payment arrangements to 
     practitioners.
       (8) Provision of services to enrollees at institutions 
     operating under global budgets.--The organization shall 
     arrange to reimburse for hospital services and other 
     facility-based services (as identified by the Board) for 
     services provided to members of the organization in 
     accordance with the global operating budget of the hospital 
     or facility approved under section 611.
       (9) Broad marketing.--Each CHSO must provide for the 
     marketing of its services (including dissemination of 
     marketing materials) to potential enrollees in a manner that 
     is designed to enroll individuals representative of the 
     different population groups and geographic areas included 
     within its service area and meets such requirements as the 
     Board or a State health security program may 
     specify.
       (10) Additional requirements.--Each CHSO must meet--
       (A) such requirements relating to minimum enrollment,
       (B) such requirements relating to financial solvency,
       (C) such requirements relating to quality and availability 
     of care, and
       (D) such other requirements,
     as the Board or a State health security program may specify.
       (d) Provision of Emergency Services to Nonenrollees.--A 
     CHSO may furnish emergency services to persons who are not 
     enrolled in the organization. Payment for such services, if 
     they are covered services to eligible persons, shall be made 
     to the organization unless the organization requests that it 
     be made to the individual provider who furnished the 
     services.

     SEC. 304. LIMITATION ON CERTAIN PHYSICIAN REFERRALS.

       (a) Application to American Health Security Program.--
     Section 1877 of the Social Security Act, as amended by 
     subsections (b) and (c), shall apply under this Act in the 
     same manner as it applies under title XVIII of the Social 
     Security Act; except that in applying such section under this 
     Act any references in such section to the Secretary or title 
     XVIII of the Social Security Act are deemed references to the 
     Board and the American Health Security Program under this 
     Act, respectively.
       (b) Expansion of Prohibition to Certain Additional 
     Designated Services.--Section 1877(h)(6) of the Social 
     Security Act (42 U.S.C. 1395nn(h)(6)) is amended by adding at 
     the end the following:
       ``(L) Ambulance services.
       ``(M) Home infusion therapy services.''.
       (c) Conforming Amendments.--Section 1877 of such Act is 
     further amended--
       (1) in subsection (a)(1)(A), by striking ``for which 
     payment otherwise may be made under this title'' and by 
     inserting ``for which a charge is imposed'';
       (2) in subsection (a)(1)(B), by striking ``under this 
     title'';
       (3) by amending paragraph (1) of subsection (g) to read as 
     follows:
       ``(1) Denial of payment.--No payment may be made under a 
     State health security program for a designated health service 
     for which a claim is presented in violation of subsection 
     (a)(1)(B). No individual, third party payor, or other entity 
     is liable for payment for designated health services for 
     which a claim is presented in violation of such 
     subsection.''; and
       (4) in subsection (g)(3), by striking ``for which payment 
     may not be made under paragraph (1)'' and by inserting ``for 
     which such a claim may not be presented under subsection 
     (a)(1)''.

                        TITLE IV--ADMINISTRATION

             Subtitle A--General Administrative Provisions

     SEC. 401. AMERICAN HEALTH SECURITY STANDARDS BOARD.

       (a) Establishment.--There is hereby established an American 
     Health Security Standards Board.
       (b) Appointment and Terms of Members.--
       (1) In general.--The Board shall be composed of--
       (A) the Secretary of Health and Human Services, and
       (B) 6 other individuals (described in paragraph (2)) 
     appointed by the President with the advice and consent of the 
     Senate.
     The President shall first nominate individuals under 
     subparagraph (B) on a timely basis so as to provide for the 
     operation of the Board by not later than January 1, 1995.
       (2) Selection of appointed members.--With respect to the 
     individuals appointed under paragraph (1)(B):
       (A) They shall be chosen on the basis of backgrounds in 
     health policy, health economics, the healing professions, and 
     the administration of health care institutions.
       (B) They shall provide a balanced point of view with 
     respect to the various health care interests and at least two 
     of them shall represent the interests of individual 
     consumers.
       (C) Not more than three of them shall be from the same 
     political party.
       (D) To the greatest extent feasible, they shall represent 
     the various geographic regions of the United States and shall 
     reflect the racial, ethnic, and gender composition of the 
     population of the United States.
       (3) Terms of appointed members.--Individuals appointed 
     under paragraph (1)(B) shall serve for a term of 6 years, 
     except that the terms of 5 of the individuals initially 
     appointed shall be, as designated by the President at the 
     time of their appointment, for 1, 2, 3, 4, and 5 years. 
     During a term of membership on the Board, no member shall 
     engage in any other business, vocation or employment.
       (c) Vacancies.--
       (1) In general.--The President shall fill any vacancy in 
     the membership of the Board in the same manner as the 
     original appointment. The vacancy shall not affect the power 
     of the remaining members to execute the duties of the Board.
       (2) Vacancy appointments.--Any member appointed to fill a 
     vacancy shall serve for the remainder of the term for which 
     the predecessor of the member was appointed.
       (3) Reappointment.--The President may reappoint an 
     appointed member of the Board for a second term in the same 
     manner as the original appointment. A member who has served 
     for two consecutive 6-year terms shall not be eligible for 
     reappointment until two years after the member has ceased to 
     serve.
       (4) Removal for cause.--Upon confirmation, members of the 
     Board may not be removed except by the President for cause.
       (d) Chair.--The President shall designate one of the 
     members of the Board, other than the Secretary, to serve at 
     the will of the President as Chair of the Board.
       (e) Compensation.--Members of the Board (other than the 
     Secretary) shall be entitled to compensation at a level 
     equivalent to level II of the Executive Schedule, in 
     accordance with section 5313 of title 5, United States Code.
       (f) General Duties of the Board.--
       (1) In general.--The Board shall develop policies, 
     procedures, guidelines, and requirements to carry out this 
     Act, including those related to--
       (A) eligibility;
       (B) enrollment;
       (C) benefits;
       (D) provider participation standards and qualifications, as 
     defined in title III;
       (E) national and State funding levels;
       (F) methods for determining amounts of payments to 
     providers of covered services, consistent with subtitle B of 
     title VI;
       (G) the determination of medical necessity and 
     appropriateness with respect to coverage of certain services;
       (H) assisting State health security programs with planning 
     for capital expenditures and service delivery;
       (I) planning for health professional education funding (as 
     specified in title VI);
       (J) allocating funds provided under title VII; and
       (K) encouraging States to develop regional planning 
     mechanisms (described in section 405(a)(3)).
       (2) Regulations.--Regulations authorized by this Act shall 
     be issued by the Board in accordance with the provisions of 
     section 553 of title 5, United States Code.
       (g) Uniform Reporting Standards; Annual Report; Studies.--
       (1) Uniform reporting standards.--
       (A) In general.--The Board shall establish uniform 
     reporting requirements and standards to ensure an adequate 
     national data base regarding health services practitioners, 
     services and finances of State health security programs, 
     approved plans, providers, and the costs of facilities and 
     practitioners providing services. Such standards shall 
     include, to the maximum extent feasible, health outcome 
     measures.
       (B) Reports.--The Board shall analyze regularly information 
     reported to it, and to State health security programs 
     pursuant to such requirements and standards.
       (2) Annual report.--Beginning January 1, of the second year 
     beginning after the date of the enactment of this Act, the 
     Board shall annually report to Congress on the 
     following:
       (A) The status of implementation of the Act.
       (B) Enrollment under this Act.
       (C) Benefits under this Act.
       (D) Expenditures and financing under this Act.
       (E) Cost-containment measures and achievements under this 
     Act.
       (F) Quality assurance.
       (G) Health care utilization patterns, including any changes 
     attributable to the program.
       (H) Long-range plans and goals for the delivery of health 
     services.
       (I) Differences in the health status of the populations of 
     the different States, including income and racial 
     characteristics.
       (J) Necessary changes in the education of health personnel.
       (K) Plans for improving service to medically underserved 
     populations.
       (L) Transition problems as a result of implementation of 
     this Act.
       (M) Opportunities for improvements under this Act.
       (3) Statistical analyses and other studies.--The Board may, 
     either directly or by contract--
       (A) make statistical and other studies, on a nationwide, 
     regional, state, or local basis, of any aspect of the 
     operation of this Act, including studies of the effect of the 
     Act upon the health of the people of the United States and 
     the effect of comprehensive health services upon the health 
     of persons receiving such services;
       (B) develop and test methods of providing through payment 
     for services or otherwise, additional incentives for 
     adherence by providers to standards of adequacy, access, and 
     quality; methods of consumer and peer review and 
     peer control of the utilization of drugs, of laboratory 
     services, and of other services; and methods of 
     consumer and peer review of the quality of services;
       (C) develop and test, for use by the Board, records and 
     information retrieval systems and budget systems for health 
     services administration, and develop and test model systems 
     for use by providers of services;
       (D) develop and test, for use by providers of services, 
     records and information retrieval systems useful in the 
     furnishing of preventive or diagnostic services;
       (E) develop, in collaboration with the pharmaceutical 
     profession, and test, improved administrative practices or 
     improved methods for the reimbursement of independent 
     pharmacies for the cost of furnishing drugs as a covered 
     service; and
       (F) make such other studies as it may consider necessary or 
     promising for the evaluation, or for the improvement, of the 
     operation of this Act.
       (4) Report on use of existing federal health care 
     facilities.--Not later than one year after the date of the 
     enactment of this Act, the Board shall recommend to the 
     Congress one or more proposals for the treatment of health 
     care facilities of the Federal Government.
       (h) Executive Director.--
       (1) Appointment.--There is hereby established the position 
     of Executive Director of the Board. The Director shall be 
     appointed by the Board and shall serve as secretary to the 
     Board and perform such duties in the administration of this 
     title as the Board may assign.
       (2) Delegation.--The Board is authorized to delegate to the 
     Director or to any other officer or employee of the Board or, 
     with the approval of the Secretary of Health and Human 
     Services (and subject to reimbursement of identifiable 
     costs), to any other officer or employee of the Department of 
     Health and Human Services, any of its functions or duties 
     under this Act other than--
       (A) the issuance of regulations; or
       (B) the determination of the availability of funds and 
     their allocation to implement this Act.
       (3) Compensation.--The Executive Director of the Board 
     shall be entitled to compensation at a level equivalent to 
     level III of the Executive Schedule, in accordance with 
     section 5314 of title 5, United States Code.
       (i) Inspector General.--The Inspector General Act of 1978 
     (5 U.S.C. App.) is amended--
       (1) in section 11(1) by inserting after ``Corporation;'' 
     the following: ``the Chair of the American Health Security 
     Standards Board;'';
       (2) in section 11(2) by inserting after ``Information 
     Agency,'' the following: ``the American Health Security 
     Standards Board,''; and
       (3) by inserting after the second section 8G the following:

     ``Sec. 8I. Special provisions concerning American Health 
       Security Standards Board

       ``The Inspector General of the American Health Security 
     Standards Board, in addition to the other authorities vested 
     by this Act, shall have the same authority, with respect to 
     the Board and the American Health Security Program under this 
     Act, as the Inspector General for the Department of Health 
     and Human Services has with respect to the Secretary of 
     Health and Human Services and the medicare and medicaid 
     programs, respectively.''.
       (j) Staff.--The Board shall employ such staff as the Board 
     may deem necessary.
       (k) Access to Information.--The Secretary of Health and 
     Human Services shall make available to the Board all 
     information available from sources within the 
     Department or from other sources, pertaining to the 
     duties of the Board.

     SEC. 402. AMERICAN HEALTH SECURITY ADVISORY COUNCIL.

       (a) In General.--The Board shall provide for an American 
     Health Security Advisory Council (in this section referred to 
     as the ``Council'') to advise the Board on its activities.
       (b) Membership.--The Council shall be composed of--
       (1) the Chair of the Board, who shall serve as Chair of the 
     Council, and
       (2) twenty members, not otherwise in the employ of the 
     United States, appointed by the Board without regard to the 
     provisions of title 5, United States Code, governing 
     appointments in the competitive service.
     The appointed members shall include, in accordance with 
     subsection (e), individuals who are representative of State 
     health security programs, public health professionals, 
     providers of health services, and of individuals (who shall 
     constitute a majority of the Council) who are representative 
     of consumers of such services, including a balanced 
     representation of employers, unions, consumer organizations, 
     and population groups with special health care needs. To the 
     greatest extent feasible, the membership of the Council shall 
     represent the various geographic regions of the United States 
     and shall reflect the racial, ethnic, and gender composition 
     of the population of the United States.
       (c) Terms of Members.--Each appointed member shall hold 
     office for a term of four years, except that--
       (1) any member appointed to fill a vacancy occurring during 
     the term for which the member's predecessor was appointed 
     shall be appointed for the remainder of that term; and
       (2) the terms of the members first taking office shall 
     expire, as designated by the Board at the time of 
     appointment, five at the end of the first year, five at the 
     end of the second year, five at the end of the third year, 
     and five at the end of the fourth year after the date of 
     enactment of this Act.
       (d) Vacancies.--
       (1) In general.--The Board shall fill any vacancy in the 
     membership of the Council in the same manner as the original 
     appointment. The vacancy shall not affect the power of the 
     remaining members to execute the duties of the Council.
       (2) Vacancy appointments.--Any member appointed to fill a 
     vacancy shall serve for the remainder of the term for which 
     the predecessor of the member was appointed.
       (3) Reappointment.--The Board may reappoint an appointed 
     member of the Council for a second term in the same manner as 
     the original appointment.
       (e) Qualifications.--
       (1) Public health representatives.--Members of the Council 
     who are representative of State health security programs and 
     public health professionals shall be individuals who have 
     extensive experience in the financing and delivery of care 
     under public health programs.
       (2) Providers.--Members of the Council who are 
     representative of providers of health care shall be 
     individuals who are outstanding in fields related to medical, 
     hospital, or other health activities, or who are 
     representative of organizations or associations of 
     professional health practitioners.
       (3) Consumers.--Members who are representative of consumers 
     of such care shall be individuals, not engaged in and having 
     no financial interest in the furnishing of health services, 
     who are familiar with the needs of various segments of the 
     population for personal health services and are experienced 
     in dealing with problems associated with the consumption of 
     such services.
       (f) Duties.--
       (1) In general.--It shall be the duty of the Council--
       (A) to advise the Board on matters of general policy in the 
     administration of this Act, in the formulation of 
     regulations, and in the performance of the Board's duties 
     under section 401; and
       (B) to study the operation of this Act and the utilization 
     of health services under it, with a view to recommending any 
     changes in the administration of the Act or in its provisions 
     which may appear desirable.
       (2) Report.--The Council shall make an annual report to the 
     Board on the performance of its functions, including any 
     recommendations it may have with respect thereto, and the 
     Board shall promptly transmit the report to the Congress, 
     together with a report by the Board on any recommendations of 
     the Council that have not been followed.
       (g) Staff.--The Council, its members, and any committees of 
     the Council shall be provided with such secretarial, 
     clerical, or other assistance as may be authorized by the 
     Board for carrying out their respective functions.
       (h) Meetings.--The Council shall meet as frequently as the 
     Board deems necessary, but not less than four times each 
     year. Upon request by seven or more members it shall be the 
     duty of the Chair to call a meeting of the Council.
       (i) Compensation.--Members of the Council shall be 
     reimbursed by the Board for travel and per diem in lieu of 
     subsistence expenses during the performance of duties of the 
     Board in accordance with subchapter I of chapter 57 of title 
     5, United States Code.
       (j) FACA Not Applicable.--The provisions of the Federal 
     Advisory Committee Act shall not apply to the Council.

     SEC. 403. PROFESSIONAL, TECHNICAL, AND TEMPORARY ADVISORY 
                   COMMITTEES.

       (a) In General.--The Board shall appoint the standing 
     advisory committees specified in subsections (b) through (f), 
     and such other standing professional and technical committees 
     in order to advise it in carrying out its duties under this 
     Act.
       (b) Advisory Committee on Benefits.--
       (1) In general.--The Board shall appoint a standing 
     Advisory Committee on Benefits to advise it with respect to 
     the several classes of covered services under this 
     Act.
       (2) Membership.--The membership of the committee shall 
     include individuals (in such number as the Board may 
     determine) drawn from the health professions, from consumers 
     of health services, from providers of health services 
     (including non-medical licensed and non-licensed providers), 
     or from other sources, whom the Board deems best qualified to 
     advise it with respect to the professional and technical 
     aspects of the furnishing and utilization of, and the 
     evaluation of, a class of covered services designated by the 
     Board, and with respect to the relationship of that class of 
     services to other covered services. In appointing such 
     individuals, the Board shall assure significant 
     representation of consumers of health services and providers 
     of health services. To the greatest extent feasible, the 
     membership of the committee shall represent the various 
     geographic regions of the United States and shall reflect the 
     racial, ethnic, and gender composition of the population of 
     the United States.
       (c) Advisory Committee on Cost Containment.--
       (1) In general.--The Board shall appoint a standing 
     Advisory Committee on Cost Containment to advise it with 
     respect to the payments and cost containment measures 
     contained in title VI of this Act.
       (2) Membership.--The membership of the committee shall 
     include individuals (in such number as the Board may 
     determine) with national recognition for their expertise in 
     health economics, health care financing, provider 
     reimbursement, and related fields. In appointing individuals 
     the Board shall assure significant representation of 
     consumers of health services and providers of health 
     services. To the greatest extent feasible, the membership of 
     the committee shall represent the various geographic regions 
     of the United States and shall reflect the racial, ethnic, 
     and gender composition of the population of the United 
     States.
       (d) Advisory Committee on Primary Care and the Medically 
     Underserved.--
       (1) In general.--The Board shall appoint a standing 
     Advisory Committee on Primary Care and the Medically 
     Underserved to advise it with respect to title VII of this 
     Act, including with respect to the delivery of services and 
     the education and training of health professionals, and to 
     consider means of increasing the supply and expanding the 
     scope of practice of mid-level professionals and 
     the use of community health outreach workers and other non-
     professional health care workers.
       (2) Membership.--The membership of the committee shall 
     include individuals (in such number as the Board may 
     determine) from the health professions and health services 
     with expertise in--
       (A) primary care services;
       (B) the education and training of primary care 
     practitioners;
       (C) the special health needs of medically underserved 
     populations;
       (D) the training, educational, and financial incentives 
     that would encourage health practitioners to serve in 
     medically underserved areas;
       (E) the delivery of health services through community-based 
     and public facilities; and
       (F) developing alternative models of delivering primary 
     health services to medically underserved populations.

     In appointing such individuals, the Board shall assure 
     significant representation of consumers of health services 
     and providers of health services. To the greatest extent 
     feasible, the membership of the committee shall represent the 
     various geographic regions of the United States and shall 
     reflect the racial, ethnic, and gender composition of the 
     population of the United States.
       (e) Advisory Committee on Mental Health and Substance Abuse 
     Treatment Services.--
       (1) In general.--The Board shall appoint a standing 
     Advisory Committee on Mental Health and Substance Abuse 
     Treatment Services to advise it with respect to the manner in 
     which the benefits under this Act for mental health services 
     and substance abuse treatment services should be modified to 
     best meet the objectives of this Act.
       (2) Membership.--The membership of the committee shall 
     include individuals (in such number as the Board may 
     determine) with expertise in health care economics, who are 
     representative of the multi-disciplinary range of providers 
     of such services, who are consumers of such services, and who 
     represent advocacy groups representing consumers of such 
     services. To the greatest extent feasible, the membership of 
     the committee shall represent the various geographic regions 
     of the United States and shall reflect the racial, ethnic, 
     and gender composition of the population of the United 
     States.
       (3) Responsibilities.--The committee shall--
       (A) study changes in the utilization patterns and costs 
     which accompany the provision of mental health services and 
     substance abuse treatment services;
       (B) study and make recommendations on any changes that may 
     be advisable in the utilization review thresholds specified 
     in section 204(b)(2)(A);
       (C) make recommendations on ways to create a continuum of 
     care and encourage the provision of care in the least 
     restrictive appropriate setting;
       (D) develop a standard set of practices for care 
     coordination services, including--
       (i) the range of care coordination services that should be 
     offered for a specific target population,
       (ii) the organizational structure in which care 
     coordination services should be based,
       (iii) the minimum training requirements for care 
     coordinators, and
       (iv) the standards for the clinical necessity of care 
     coordination services,

     and study (and make recommendations concerning) peer care 
     coordination services; and
       (E) report any initial recommendations to the Board by 
     January 1, 1996.
       (4) Role of substance abuse and mental health services 
     administration.--The Board shall consult with the 
     Administrator of the Substance Abuse and Mental Health 
     Services Administration in the appointment of members to, and 
     operation of, the committee.
       (f) Advisory Committee on Prescription Drugs.--
       (1) In general.--The Board shall appoint a standing 
     Advisory Committee on Prescription Drugs to advise it with 
     respect to the list of approved prescription drugs and 
     biologicals under section 616(a)(1) and other matters 
     relating to the coverage of prescription drugs under this 
     Act.
       (2) Membership.--
       (A) In general.--The membership of the committee shall 
     include individuals (in such number as the Board may 
     determine) with expertise in appropriate utilization of 
     prescription and nonprescription drug and biological 
     therapies and of the relative safety and efficacy of 
     prescription drugs and biologicals.
       (B) Areas of expertise.--A majority of the members of the 
     committee shall be physicians. Members of the committee shall 
     include at least a dentist, a nurse, and a pharmacist, and 
     individuals with special knowledge or expertise in at least 
     the following areas: geriatric, obstetric, pediatric, 
     psychiatric, and neurological problems associated with drug 
     therapies; clinical pharmacology; pharmacoepidemiology; and 
     comparative clinical trials of drugs (including statisticians 
     and biopharmaceutic specialists).
       (C) Conflict of interest prohibition.--No individual who is 
     an employee of a manufacturer of a drug or biological or who 
     otherwise has a material financial interest directly or 
     indirectly with respect to such a manufacturer, or who has an 
     immediate family member (as defined by the Board) who is such 
     an employee or has such an interest, shall serve as a member 
     of the committee.
       (D) Diversity of membership.--To the greatest extent 
     feasible, the membership of the committee shall represent the 
     various geographic regions of the United States and shall 
     reflect the racial, ethnic, and gender composition of the 
     population of the United States.
       (3) Responsibilities.--The committee shall--
       (A) continuously review scientific and medical information 
     pertaining to the relative safety and efficacy, and the 
     comparability, of prescription drugs and biologicals approved 
     for marketing in the United States; and
       (B) recommend drug use classifications and identify, within 
     such a classification, drugs that are therapeutic alternates 
     for a given indication and indications for which particular 
     drugs are superior based on safety and efficacy.

     The committee is not authorized to engage in drug price 
     negotiations nor define acceptable costs for any product.
       (4) Consumer input.--In conducting its activities, the 
     committee shall solicit advice and comments from a panel of 
     consumer advocates.
       (g) Temporary Committees.--The Board is authorized to 
     appoint such temporary professional and technical committees 
     as it deems necessary to advise it on special problems not 
     encompassed in the assignments of standing committees 
     appointed under this section or to supplement the advice of 
     standing committees.
       (h) Reporting.--Committees appointed under this section 
     shall report from time to time (but not less often than 
     biannually) to the Board, and copies of their reports shall 
     be transmitted by the Board to the American Health Security 
     Advisory Council and be made readily available to the public.
       (i) Compensation.--All members of the committees 
     established under this section shall be reimbursed by the 
     Board for travel and per diem in lieu of subsistence expenses 
     during the performance of duties of the Board in accordance 
     with subchapter I of chapter 57 of title 5, United States 
     Code.
       (j) Advice From Prospective Payment Assessment Commission, 
     Practitioner Payment Review Commission, Etc.--For provisions 
     relating to role of certain commissions in reviewing payment 
     rates, see section 620.

     SEC. 404. AMERICAN HEALTH SECURITY QUALITY COUNCIL.

       (a) Establishment.--There is hereby established an American 
     Health Security Quality Council.
       (b) Appointment and Terms of Members.--
       (1) In general.--The Council shall be composed of 10 
     members appointed by the President. The President shall first 
     appoint individuals on a timely basis so as to provide for 
     the operation of the Council by not later than January 1, 
     1995.
       (2) Selection of members.--Each member of the Council shall 
     be a member of a health profession. Six members of the 
     Council shall be physicians. Individuals shall be appointed 
     to the Council on the basis of national reputations for 
     clinical and academic excellence. To the greatest extent 
     feasible, the membership of the Council shall represent the 
     various geographic regions of the United States and shall 
     reflect the racial, ethnic, and gender composition of the 
     population of the United States.
       (3) Terms of members.--Individuals appointed to the Council 
     shall serve for a term of 5 years, except that the terms of 4 
     of the individuals initially appointed shall be, as 
     designated by the President at the time of their appointment, 
     for 1, 2, 3, and 4 years.
       (c) Vacancies.--
       (1) In general.--The President shall fill any vacancy in 
     the membership of the Council in the same manner as the 
     original appointment. The vacancy shall not affect the power 
     of the remaining members to execute the duties of the 
     Council.
       (2) Vacancy appointments.--Any member appointed to fill a 
     vacancy shall serve for the remainder of the term for which 
     the predecessor of the member was appointed.
       (3) Reappointment.--The President may reappoint a member of 
     the Council for a second term in the same manner as the 
     original appointment. A member who has served for two 
     consecutive 5-year terms shall not be eligible for 
     reappointment until two years after the member has ceased to 
     serve.
       (d) Chair.--The President shall designate one of the 
     members of the Council to serve at the will of the President 
     as Chair of the Council.
       (e) Compensation.--Members of the Council who are not 
     employees of the Federal Government shall be entitled to 
     compensation at a level equivalent to level II of the 
     Executive Schedule, in accordance with section 5313 of title 
     5, United States Code.
       (f) General Duties of the Council.--The Council shall 
     develop and update a set of national quality and performance 
     measures which will apply to State health security programs, 
     institutions, and health care professionals. In developing 
     and selecting national measures of quality of performance, 
     the Council shall consult with the Secretary of Health and 
     Human Services and with appropriate interested parties, 
     including States, health care providers, nationally 
     recognized accrediting bodies, experts in quality 
     measurement, and consumers. National measures of quality 
     performance shall be selected and defined in a manner that 
     will provide accurate and comparable information. The Council 
     shall develop minimum criteria for competence for entities 
     that can qualify to conduct ongoing and continuous external 
     quality review for State quality review programs. Such 
     entities must be independent of the State agency responsible 
     for payments under the State health security program. The 
     Council shall ensure coordination and reporting by State 
     review entities to assure national consistency in quality 
     standards. The Council is responsible for quality review 
     activities under title V. The Council shall report to the 
     Board annually on the conduct of activities under such title 
     and shall report to the Board annually specifically on 
     findings from outcomes research and development of practice 
     guidelines that may affect the Board's determination of 
     coverage of services under section 401(f)(1)(G).

     SEC. 405. STATE HEALTH SECURITY PROGRAMS.

       (a) Submission of Plans.--
       (1) In general.--Each State shall submit to the Board a 
     plan for a State health security program for providing for 
     health care services to the residents of the State in 
     accordance with this Act.
       (2) Regional programs.--A State may join with one or more 
     neighboring States to submit to the Board a plan for a 
     regional health security program instead of separate State 
     health security programs.
       (3) Regional planning mechanisms.--The Board shall provide 
     incentives for States to develop regional planning mechanisms 
     to promote the rational distribution of, adequate access to, 
     and efficient use of, tertiary care facilities, equipment, 
     and services.
       (b) Review and Approval of Plans.--
       (1) In general.--The Board shall review plans submitted 
     under subsection (a) and determine whether such plans meet 
     the requirements for approval. The Board shall not approve 
     such a plan unless it finds that the plan (or State law) 
     provides, consistent with the provisions of this Act, for the 
     following:
       (A) Payment for required health services for eligible 
     individuals in the State in accordance with this Act.
       (B) Adequate administration, including the designation of a 
     single State agency responsible for the administration (or 
     supervision of the administration) of the program.
       (C) The establishment of a State health security 
     budget.
       (D) Establishment of payment methodologies (consistent with 
     subtitle B of title VII).
       (E) Assurances that individuals have the freedom to choose 
     practitioners and other health care providers for services 
     covered under this Act.
       (F) A procedure for carrying out long-term regional 
     management and planning functions with respect to the 
     delivery and distribution of health care services that--
       (i) ensures participation of consumers of health services 
     and providers of health services, and
       (ii) gives priority to the most acute shortages and 
     maldistributions of health personnel and facilities and the 
     most serious deficiencies in the delivery of covered services 
     and to the means for the speedy alleviation of these 
     shortcomings.
       (G) The licensure and regulation of all health providers 
     and facilities to ensure compliance with Federal and State 
     laws and to promote quality of care.
       (H) Establishment of a quality review system in accordance 
     with section 502.
       (I) Establishment of an independent ombudsman for consumers 
     to register complaints about the organization and 
     administration of the State health security program and to 
     help resolve complaints and disputes between consumers and 
     providers.
       (J) Publication of an annual report on the operation of the 
     State health security program, which report shall include 
     information on cost, progress towards achieving full 
     enrollment, public access to health services, quality review, 
     health outcomes, health professional training, and the needs 
     of medically underserved populations.
       (K) Provision of a fraud and abuse prevention and control 
     unit that the Inspector General determines meets the 
     requirements of section 413(a).
       (L) Provision that--
       (i) all claims or requests for payment for services shall 
     be accompanied by the unique provider identifier assigned 
     under section 414(a) to the provider and the unique patient 
     identifier assigned to the individual under 
     section 414(b);
       (ii) no payment shall be made under the program for the 
     provision of health care services by any provider unless the 
     provider has furnished the program with the unique provider 
     identifier assigned under section 414(a);
       (iii) the plan shall use the unique patient identifier 
     assigned under section 414(b) to an individual as the 
     identifier of the individual in the processing of claims and 
     other purposes (as specified by the Board); and
       (iv) queries made under section 412(c)(2) shall be made 
     using the unique provider identifier specified under section 
     414(a).
       (M) Prohibit payment in cases of prohibited physician 
     referrals under section 304.
       (N) Effective January 1, 2001, provide for use of a uniform 
     electronic data base in accordance with section 504(a).
       (2) Consequences of failure to comply.--If the Board finds 
     that a State plan submitted under paragraph (1) does not meet 
     the requirements for approval under this section or that a 
     State health security program or specific portion of such 
     program, the plan for which was previously approved, no 
     longer meets such requirements, the Board shall provide 
     notice to the State of such failure and that unless 
     corrective action is taken within a period specified by the 
     Board, the Board shall place the State health security 
     program (or specific portions of such program) in 
     receivership under the jurisdiction of the Board.
       (c) State Health Security Advisory Councils.--
       (1) In general.--For each State, the Governor shall provide 
     for appointment of a State Health Security Advisory Council 
     to advise and make recommendations to the Governor and State 
     with respect to the implementation of the State health 
     security program in the State.
       (2) Membership.--Each State Health Security Advisory 
     Council shall be composed of at least 11 individuals. The 
     appointed members shall include individuals who are 
     representative of the State health security program, public 
     health professionals, providers of health services, and of 
     individuals (who shall constitute a majority) who are 
     representative of consumers of such services, including a 
     balanced representation of employers, unions and 
     consumer organizations. To the greatest extent 
     feasible, the membership of each State Health Security 
     Advisory Council shall represent the various geographic 
     regions of the State and shall reflect the racial, ethnic, 
     and gender composition of the population of the State.
       (3) Duties.--
       (A) In general.--Each State Health Security Advisory 
     Council shall review, and submit comments to the Governor 
     concerning the implementation of the State health security 
     program in the State.
       (B) Assistance.--Each State Health Security Advisory 
     Council shall provide assistance and technical support to 
     community organizations and public and private non-profit 
     agencies submitting applications for funding under 
     appropriate State and Federal public health programs, with 
     particular emphasis placed on assisting those applicants with 
     broad consumer representation.
       (d) State Use of Fiscal Agents.--
       (1) In general.--Each State health security program, using 
     competitive bidding procedures, may enter into such contracts 
     with qualified entities, such as voluntary associations, as 
     the State determines to be appropriate to process claims and 
     to perform other related functions of fiscal agents under the 
     State health security program.
       (2) Restriction.--Except as the Board may provide for good 
     cause shown, in no case may more than one contract described 
     in paragraph (1) be entered into under a State 
     health security program.

     SEC. 406. COMPLEMENTARY CONDUCT OF RELATED HEALTH PROGRAMS.

       In performing functions with respect to health personnel 
     education and training, health research, environmental 
     health, disability insurance, vocational rehabilitation, the 
     regulation of food and drugs, and all other matters 
     pertaining to health, the Secretary of Health and Human 
     Services shall direct all activities of the Department of 
     Health and Human Services toward contributions to the health 
     of the people complementary to this Act.

                Subtitle B--Control Over Fraud and Abuse

     SEC. 411. APPLICATION OF FEDERAL SANCTIONS TO ALL FRAUD AND 
                   ABUSE UNDER AMERICAN HEALTH SECURITY PROGRAM.

       The following sections of the Social Security Act shall 
     apply to State health security programs in the same manner as 
     they apply to State medical assistance plans under title XIX 
     of such Act (except that in applying such provisions any 
     reference to the Secretary is deemed a reference to the 
     Board):
       (1) Section 1128 (relating to exclusion of individuals and 
     entities).
       (2) Section 1128A (civil monetary penalties).
       (3) Section 1128B (criminal penalties).
       (4) Section 1124 (relating to disclosure of ownership and 
     related information).
       (5) Section 1126 (relating to disclosure of certain 
     owners).

     SEC. 412. NATIONAL HEALTH CARE FRAUD DATA BASE.

       (a) Establishment.--The American Health Security Standards 
     Board, through the Inspector General, shall establish a 
     national data base (in this section referred to as 
     the ``data base'') containing information relating 
     to health care fraud and abuse.
       (b) Data Included.--
       (1) In general.--The data base shall include such 
     information as the Inspector General, in consultation with 
     the Board, shall specify, and shall include at 
     least the information described in paragraph (2).
       (2) Specified information.--The information specified in 
     this paragraph is, with respect to providers of health care 
     services, the identity of any provider--
       (A) that has been convicted of a crime for which the 
     provider may be excluded from participation under a health 
     program (as defined in paragraph (3));
       (B) whose license to provide health care has been revoked 
     or suspended (as described in section 1128(b)(5) of the 
     Social Security Act);
       (C) that has been excluded or suspended from a health 
     program under section 1128 of the Social Security Act or from 
     any other Federal or State health care program;
       (D) with respect to whom a civil money penalty has been 
     imposed under this Act or the Social Security Act; or
       (E) that otherwise is subject to exclusion from 
     participation under a health program.
       (3) Health program defined.--In this section, the term 
     ``health program'' means a State health security program and 
     includes the medicare program (under title XVIII of the 
     Social Security Act) and a State health care program (as 
     defined in section 1128(h) of such Act).
       (c) Reporting Requirement.--
       (1) Reporting.--Each State health security program shall 
     provide such information to the Inspector General as the 
     Inspector General may require in order to carry out fraud and 
     abuse control activities and for purposes of maintaining the 
     data base.
       (2) Querying.--In accordance with rules established by the 
     Board (in consultation with the Inspector General), each 
     State health security program shall query periodically (as 
     specified by the Inspector General)--
       (A) the data base to determine if providers of health 
     services for which the program makes payment are not 
     disqualified from providing such services, and
       (B) the Secretary of Health and Human Services, concerning 
     information obtained by the Secretary under part B of the 
     Health Care Quality Improvement Act of 1986 relating to 
     practitioners.
       (3) Coordination with malpractice data base.--The Secretary 
     of Health and Human Services shall provide for the 
     coordination of the reporting and disclosure of information 
     under this section with information under part B of the 
     Health Care Quality Improvement Act of 1986.
       (4) Uniform manner.--Information shall be reported under 
     this subsection in a uniform manner (in accordance with 
     standards of the Inspector General) that permits aggregation 
     of reported information.
       (5) Access for audit.--Each State health security program 
     shall provide the Inspector General such access to 
     information as may be required to verify the information 
     reported under this subsection.
       (6) Penalty for false information.--Any person that submits 
     false information required to be provided under this 
     subsection or that denies access to information under 
     paragraph (5) may be imprisoned for not more than 5 years, or 
     fined, or both, in accordance with title 18, United States 
     Code.
       (7) Confidentiality.--The Board shall establish rules that 
     protect the confidentiality of the information in 
     the data base.

     SEC. 413. REQUIREMENTS FOR OPERATION OF STATE HEALTH CARE 
                   FRAUD AND ABUSE CONTROL UNITS.

       (a) Requirement.--In order to meet the requirement of 
     section 405(b)(1)(K), each State health security program must 
     establish and maintain a health care fraud and abuse control 
     unit (in this section referred to as a ``fraud unit'') that 
     meets requirements of this section and other requirements of 
     the Board. Such a unit may be a State medicaid fraud control 
     unit (described in section 1903(q) of the Social Security 
     Act).
       (b) Structure of Unit.--The fraud unit must--
       (1) be a single identifiable entity of the State 
     government;
       (2) be separate and distinct from the State agency with 
     principal responsibility for the administration of the State 
     health security program; and
       (3) meet 1 of the following requirements:
       (A) It must be a unit of the office of the State Attorney 
     General or of another department of State government which 
     possesses statewide authority to prosecute individuals for 
     criminal violations.
       (B) If it is in a State the constitution of which does not 
     provide for the criminal prosecution of individuals by a 
     statewide authority and has formal procedures, approved by 
     the Board, that (i) assure its referral of suspected criminal 
     violations relating to the State health insurance plan to the 
     appropriate authority or authorities in the States for 
     prosecution, and (ii) assure its assistance of, and 
     coordination with, such authority or authorities in such 
     prosecutions.
       (C) It must have a formal working relationship with the 
     office of the State Attorney General and have formal 
     procedures (including procedures for its referral of 
     suspected criminal violations to such office) which are 
     approved by the Board and which provide effective 
     coordination of activities between the fraud unit and such 
     office with respect to the detection, investigation, and 
     prosecution of suspected criminal violations relating to the 
     State health insurance plan.
       (c) Functions.--The fraud unit must--
       (1) have the function of conducting a statewide program for 
     the investigation and prosecution of violations of all 
     applicable State laws regarding any and all aspects of fraud 
     in connection with any aspect of the provision of health care 
     services and activities of providers of such services under 
     the State health security program;
       (2) have procedures for reviewing complaints of the abuse 
     and neglect of patients of providers and facilities that 
     receive payments under the State health security program, 
     and, where appropriate, for acting upon such complaints under 
     the criminal laws of the State or for referring them to other 
     State agencies for action; and
       (3) provide for the collection, or referral for collection 
     to a single State agency, of overpayments that are made under 
     the State health security program to providers and that are 
     discovered by the fraud unit in carrying out its activities.
       (d) Resources.--The fraud unit must--
       (1) employ such auditors, attorneys, investigators, and 
     other necessary personnel,
       (2) be organized in such a manner, and
       (3) provide sufficient resources (as specified by the 
     Board),

     as is necessary to promote the effective and efficient 
     conduct of the unit's activities.
       (e) Cooperative Agreements.--The fraud unit must have 
     cooperative agreements (as specified by the Board) with--
       (1) similar fraud units in other States,
       (2) the Inspector General, and
       (3) the Attorney General of the United States.
       (f) Reports.--The fraud unit must submit to the Inspector 
     General an application and annual reports containing such 
     information as the Inspector General determines to be 
     necessary to determine whether the unit meets the previous 
     requirements of this section.

     SEC. 414. ASSIGNMENT OF UNIQUE PROVIDER AND PATIENT 
                   IDENTIFIERS.

       (a) Provider Identifiers.--
       (1) In general.--The Board shall provide for the 
     assignment, to each individual or entity providing health 
     care services under a State health security program, of a 
     unique provider identifier.
       (2) Response to queries.--Upon the request of a State 
     health security program with respect to a provider, the Board 
     shall provide the program with the unique provider identifier 
     (if any) assigned to the provider under paragraph (1).
       (b) Patient Identifiers.--The Board shall provide for the 
     assignment, to each eligible individual, of a unique patient 
     identifier. The identifier so assigned may be the Social 
     Security account number of the individual.
       (c) Requirement To Use Identifiers.--Each State health 
     security program is required under section 405(b)(1)(L) to 
     use the unique identifiers assigned under this section.

                      TITLE V--QUALITY ASSESSMENT

     SEC. 501. FUNCTIONS OF QUALITY COUNCIL; DEVELOPMENT OF 
                   PRACTICE GUIDELINES AND APPLICATION TO 
                   OUTLIERS.

       (a) Development of Practice Guidelines.--The American 
     Health Security Quality Council (in this title 
     referred to as the ``Council'')--
       (1) shall collect data from outcomes research, including 
     data on patient satisfaction and post-hospital discharge 
     experience, on an ongoing basis (whether conducted by the 
     Federal Government or other entities), and
       (2) on the basis of such data and existing 
     clinical knowledge, shall develop practice 
     guidelines.

     Such guidelines may vary based upon the area in which the 
     services are provided and the degree of training, 
     specialization, or similar characteristics of providers. Such 
     guidelines must be updated on an annual basis and based on 
     monitoring of outcomes research and other clinical data. Such 
     guidelines shall be based on the degree to which a process of 
     care increases the probability of desired patient outcomes.
       (b) Profiling of Patterns of Practice; Identification of 
     Outliers.--The Council shall adopt methodologies for 
     profiling the patterns of practice of health care 
     professionals and for identifying outliers (as defined in 
     subsection (f)).
       (c) Centers of Excellence.--The Council shall develop 
     guidelines for certain medical procedures designated by the 
     Board to be performed only at tertiary care centers which can 
     meet standards for frequency of procedure performance and 
     intensity of support mechanisms that are consistent with the 
     high probability of desired patient outcome. Reimbursement 
     under this Act for such a designated procedure may only be 
     provided if the procedure was performed at a 
     center that meets such standards.
       (d) Remedial Actions.--The Council shall develop standards 
     for education and sanctions with respect to outliers so as to 
     assure the quality of health care services provided under 
     this Act. The Council shall develop criteria for referral of 
     providers to the State licensing board if education proves 
     ineffective in correcting provider practice behavior.
       (e) Dissemination.--The Council shall disseminate to the 
     State--
       (1) the guidelines developed under subsections (a) and (c),
       (2) the methodologies adopted under subsection (b), and
       (3) the standards developed under subsection (d),

     for use by the States under section 502.
       (f) Outlier Defined.--In this title, the term ``outlier'' 
     means a health care provider whose pattern of practice, 
     relative to applicable practice guidelines, suggests 
     deficiencies in the quality of health care services being 
     provided.

     SEC. 502. STATE QUALITY REVIEW PROGRAMS.

       (a) Requirement.--In order to meet the requirement of 
     section 405(b)(1)(H), each State health security program 
     shall establish one or more qualified entities to conduct 
     quality reviews of persons providing covered services under 
     the program, in accordance with standards established under 
     subsection (b)(1) (except as provided in subsection (b)(2)) 
     and subsection (d).
       (b) Federal Standards.--
       (1) In general.--The Council shall establish standards with 
     respect to--
       (A) the adoption of practice guidelines (developed under 
     section 501(a)),
       (B) the identification of outliers (consistent with 
     methodologies adopted under section 501(b)),
       (C) the development of remedial programs and monitoring for 
     outliers, and
       (D) the application of sanctions (consistent with the 
     standards developed under section 501(c)).
       (2) State discretion.--A State may apply under subsection 
     (a) standards other than those established under paragraph 
     (1) so long as the State demonstrates to the satisfaction of 
     the Council on an annual basis that the standards applied 
     have been as efficacious in promoting and achieving improved 
     quality of care as the application of the standards 
     established under paragraph (1). Positive improvements in 
     quality shall be documented by reductions in the variations 
     of clinical care process and improvement in 
     patient outcomes.
       (c) Qualifications.--
       (1) In general.--An entity is not qualified to conduct 
     quality reviews under subsection (a) unless the entity--
       (A) is administratively independent of the individual or 
     board that administers the State health security program, and
       (B) does not provide any financial incentive to reviewers 
     to favor one pattern of practice over another.
       (2) Provider-specific entities.--Subject to paragraph (1), 
     a State may provide that an individual hospital (or other 
     institutional provider) may serve as a qualified entity to 
     conduct quality reviews under subsection (a).

     SEC. 503. ELIMINATION OF UTILIZATION REVIEW PROGRAMS; 
                   TRANSITION.

       (a) Intent.--It is the intention of this title to replace 
     by January 1, 1998, random utilization controls with a 
     systematic review of patterns of practice that compromise the 
     quality of care.
       (b) Superseding Case Reviews.--
       (1) In general.--Subject to the succeeding provisions of 
     this subsection, the program of quality review provided under 
     the previous sections of this title supersede all existing 
     Federal requirements for utilization review programs, 
     including requirements for random case-by-case reviews and 
     programs requiring pre-certification of medical procedures on 
     a case-by-case basis.
       (2) Transition.--Before January 1, 1998, the Board and the 
     States may employ existing utilization review standards and 
     mechanisms as may be necessary to effect the transition to 
     pattern of practice-based reviews.
       (3) Construction.--Nothing in this subsection shall be 
     construed--
       (A) as precluding the case-by-case review of the provision 
     of care--
       (i) in individual incidents where the quality of care has 
     significantly deviated from acceptable standards of practice, 
     and
       (ii) with respect to a provider who has been determined to 
     be an outlier; or
       (B) as precluding the case management of catastrophic, 
     mental health, or substance abuse cases where such management 
     is necessary to achieve appropriate, cost-effective, and 
     beneficial comprehensive medical care, as provided for in 
     section 204.

     SEC. 504. DEVELOPMENT OF NATIONAL ELECTRONIC DATA BASE.

       (a) Use by States.--In order to meet the requirement of 
     this section, for purposes of section 405(b)(1)(N)), each 
     State health security program shall develop and use a uniform 
     electronic data base which uses the software designated under 
     subsection (b) and which assures confidentiality under 
     subsection (c), for all patient records in order to enable 
     systematic quality review and outcomes analysis. Subject to 
     subsection (c), data in such data base shall be made 
     available, under rules established by the Board, in order to 
     facilitate the portability of patient records and comparative 
     outcomes research analysis.
       (b) Uniform Software.--The Board shall designate the 
     uniform software that shall be used by States in the 
     operation of their electronic data bases, in order to 
     facilitate the portability of patient records and comparative 
     outcomes research analysis. The Board shall not grant any 
     waiver of the requirement of the previous 
     sentence.
       (c) Confidentiality.--The Board shall establish standards 
     that are designed to protect the privacy and otherwise shield 
     the identity of the patients whose records are included in 
     the data base. Under such standards, government agencies 
     shall not have access to information in the data base that 
     will identify individual patients except in cases of quality 
     review procedures which require that individual patients be 
     informed of necessary changes in their treatment.

 TITLE VI--HEALTH SECURITY BUDGET; PAYMENTS; COST CONTAINMENT MEASURES

              Subtitle A--Budgeting and Payments to States

     SEC. 601. NATIONAL HEALTH SECURITY BUDGET.

       (a) National Health Security Budget.--
       (1) In general.--By not later than September 1 before the 
     beginning of each year (beginning with 1995), the Board shall 
     establish a national health security budget, which--
       (A) specifies the total expenditures (including 
     expenditures for administrative costs) to be made by the 
     Federal Government and the States for covered health care 
     services under this Act, and
       (B) allocates those expenditures among the States 
     consistent with section 604.

     Pursuant to subsection (b), such budget for a year shall not 
     exceed the budget for the preceding year increased by the 
     percentage increase in gross domestic product.
       (2) Division of budget into components.--The national 
     health security budget shall consist of at least 4 
     components:
       (A) A component for quality assessment activities 
     (described in title V).
       (B) A component for health professional education 
     expenditures.
       (C) A component for administrative costs.
       (D) A component (in this title referred to as the 
     ``operating component'') for operating and other expenditures 
     not described in subparagraphs (A) through (C), consisting of 
     amounts not included in the other components. A State may 
     provide for the allocation of this component between capital 
     expenditures and other expenditures.
       (3) Allocation among components.--Taking into account the 
     State health security budgets established and submitted under 
     section 603, the Board shall allocate the national health 
     security budget among the components in a manner that--
       (A) assures a fair allocation for quality assessment 
     activities (consistent with the national health security 
     spending growth limit); and
       (B) assures that the health professional education 
     expenditure component is sufficient to provide for the amount 
     of health professional education expenditures sufficient to 
     meet the need for covered health care services (consistent 
     with the national health security spending growth limit under 
     subsection (b)(2)).
       (b) Basis for Total Expenditures.--
       (1) In general.--The total expenditures specified in such 
     budget shall be the sum of the capitation amounts computed 
     under section 602(a) and the amount of Federal administrative 
     expenditures needed to carry out this Act.
       (2) National health security spending growth limit.--For 
     purposes of this subtitle, the national health security 
     spending growth limit described in this paragraph for a year 
     is zero, or, if greater, the percentage increase in the gross 
     domestic product (in current dollars) from the first quarter 
     of the second previous year to the first quarter of the 
     previous year.
       (c) Definitions.--In this title:
       (1) Capital expenditures.--The term ``capital 
     expenditures'' means expenses for the purchase, lease, 
     construction, or renovation of capital facilities and for 
     equipment and includes return on equity capital.
       (2) Health professional education expenditures.--The term 
     ``health professional education expenditures'' means 
     expenditures in hospitals and other health care facilities to 
     cover costs associated with teaching and related research 
     activities.

     SEC. 602. COMPUTATION OF INDIVIDUAL AND STATE CAPITATION 
                   AMOUNTS.

       (a) Capitation Amounts.--
       (1) Individual capitation amounts.--In establishing the 
     national health security budget under section 601(a) and in 
     computing the national average per capita cost under 
     subsection (b) for each year, the Board shall establish a 
     method for computing the capitation amount for each eligible 
     individual residing in each State. The capitation amount for 
     an eligible individual in a State classified within a risk 
     group (established under subsection (d)(2)) is the product 
     of--
       (A) a national average per capita cost for all covered 
     health care services (computed under subsection (b)),
       (B) the State adjustment factor (established under 
     subsection (c)) for the State, and
       (C) the risk adjustment factor (established under 
     subsection (d)) for the risk group.
       (2) State capitation amount.--
       (A) In general.--For purposes of this title, the term 
     ``State capitation amount'' means, for a State for a year, 
     the sum of the capitation amounts computed under paragraph 
     (1) for all the residents of the State in the year, as 
     estimated by the Board before the beginning of the year 
     involved.
       (B) Use of statistical model.--The Board may provide for 
     the computation of State capitation amounts based on 
     statistical models that fairly reflect the elements that 
     comprise the State capitation amount described in 
     subparagraph (A).
       (C) Population information.--The Bureau of the Census shall 
     assist the Board in determining the number, place of 
     residence, and risk group classification of eligible 
     individuals.
       (b) Computation of National Average Per Capita Cost.--
       (1) For 1995.--For 1995, the national average per capita 
     cost under this paragraph is equal to--
       (A) the average per capita health care expenditures in the 
     United States in 1993 (as estimated by the Board),
       (B) increased to 1994 by the Board's estimate of the actual 
     amount of such per capita expenditures during 1994, and
       (C) updated to 1995 by the national health security 
     spending growth limit specified in section 601(b)(2) for 
     1995.
       (2) For succeeding years.--For each succeeding year, the 
     national average per capita cost under this subsection is 
     equal to the national average per capita cost computed under 
     this subsection for the previous year increased by the 
     national health security spending growth limit (specified in 
     section 601(b)(2)) for the year involved.
       (c) State Adjustment Factors.--
       (1) In general.--Subject to the succeeding paragraphs of 
     this subsection, the Board shall develop for each State a 
     factor to adjust the national average per capita costs to 
     reflect differences between the State and the 
     United States in--
       (A) average labor and nonlabor costs that are necessary to 
     provide covered health services;
       (B) any social, environmental, or geographic condition 
     affecting health status or the need for health care services, 
     to the extent such a condition is not taken into account in 
     the establishment of risk groups under subsection (d);
       (C) the geographic distribution of the State's population, 
     particularly the proportion of the population residing in 
     medically underserved areas, to the extent such a condition 
     is not taken into account in the establishment of risk groups 
     under subsection (d); and
       (D) any other factor relating to operating costs required 
     to assure equitable distribution of funds among the States.
       (2) Modification of health professional education 
     component.--With respect to the portion of the national 
     health security budget allocated to expenditures for health 
     professional education, the Board shall modify the State 
     adjustment factors so as to take into account--
       (A) differences among States in health professional 
     education programs in operation as of the date of the 
     enactment of this Act, and
       (B) differences among States in their relative need for 
     expenditures for health professional education, taking into 
     account the health professional education expenditures 
     proposed in State health security budgets under section 
     603(a).
       (3) Budget neutrality.--The State adjustment factors, as 
     modified under paragraph (2), shall be applied under this 
     subsection in a manner that results in neither an increase 
     nor a decrease in the total amount of the Federal 
     contributions to all State health security programs under 
     subsection (b) as a result of the application of such 
     factors.
       (4) Phase-in.--In applying State adjustment factors under 
     this subsection during the five-year period beginning with 
     1995, the Board shall phase-in, over such period, the use of 
     factors described in paragraph (1) in a manner so that the 
     adjustment factor for a State is based on a blend of such 
     factors and a factor that reflects the relative actual 
     average per capita costs of health services of the different 
     States as of the time of enactment of this Act.
       (5) Periodic adjustment.--In establishing the national 
     health security budget before the beginning of each year, the 
     Board shall provide for appropriate adjustments in the State 
     adjustment factors under this subsection.
       (d) Adjustments for Risk Group Classification.--
       (1) In general.--The Board shall develop an adjustment 
     factor to the national average per capita costs computed 
     under subsection (b) for individuals classified in each risk 
     group (as designated under paragraph (2)) to reflect the 
     difference between the average national average per capita 
     costs and the national average per capita cost for 
     individuals classified in the risk group.
       (2) Risk groups.--The Board shall designate a series of 
     risk groups, determined by age, health indicators, and other 
     factors that represent distinct patterns of health care 
     services utilization and costs.
       (3) Periodic adjustment.--In establishing the national 
     health security budget before the beginning of each year, the 
     Board shall provide for appropriate adjustments in the risk 
     adjustment factors under this subsection.

     SEC. 603. STATE HEALTH SECURITY BUDGETS.

       (a) Establishment and Submission of Budgets.--
       (1) In general.--Each State health security program shall 
     establish and submit to the Board for each year a proposed 
     and a final State health security budget, which specifies the 
     following:
       (A) The total expenditures (including expenditures for 
     administrative costs) to be made under the program in the 
     State for covered health care services under this Act, 
     consistent with subsection (b), broken down as follows:
       (i) By the 4 components (described in section 601(a)(2)), 
     consistent with subsection (b).
       (ii) Within the operating component--

       (I) expenditures for operating costs of hospitals and other 
     facility-based services in the State,
       (II) expenditures for payment to comprehensive health 
     service organizations,
       (III) expenditures for payment of services provided by 
     health care practitioners, and
       (IV) expenditures for other covered items and services.

     Amounts included in the operating component include amounts 
     that may be used by providers for capital expenditures.
       (B) The total revenues required to meet the State health 
     security expenditures.
       (2) Proposed budget deadline.--The proposed budget for a 
     year shall be submitted under paragraph (1) not later than 
     June 1 before the year.
       (3) Final budget.--The final budget for a year shall--
       (A) be established and submitted under paragraph (1) not 
     later than October 1 before the year, and
       (B) take into account the amounts established under the 
     national health security budget under section 601 for the 
     year.
       (4) Adjustment in allocations permitted.--
       (A) In general.--Subject to subparagraphs (B) and (C), in 
     the case of a final budget, a State may change the 
     allocation of amounts among components.
       (B) Notice.--No such change may be made unless the State 
     has provided prior notice of the change to the Board.
       (C) Denial.--Such a change may not be made if the Board, 
     within such time period as the Board specifies, disapproves 
     such change.
       (b) Expenditure Limits.--
       (1) In general.--The total expenditures specified in each 
     State health security budget under subsection (a)(1) shall 
     take into account Federal contributions made under 
     section 604.
       (2) Limit on claims processing and billing expenditures.--
     Each State health security budget shall provide that State 
     administrative expenditures, including expenditures for 
     claims processing and billing, shall not exceed 3 percent of 
     the total expenditures under the State health security 
     program, unless the Board determines, on a case-by-case 
     basis, that additional administrative expenditures would 
     improve health care quality and cost 
     effectiveness.
       (3) Worker assistance.--A State health security program may 
     provide that, for budgets for years before 2000, up to 1 
     percent of the budget may be used for purposes of programs 
     providing assistance to workers who are currently performing 
     functions in the administration of the health insurance 
     system and who may experience economic dislocation as a 
     result of the implementation of the program.
       (c) Approval Process for Capital Expenditures Permitted.--
     Nothing in this title shall be construed as preventing a 
     State health security program from providing for a process 
     for the approval of capital expenditures based on information 
     derived from regional planning agencies.

     SEC. 604. FEDERAL PAYMENTS TO STATES.

       (a) In General.--Each State with an approved State health 
     security program is entitled to receive, from amounts in the 
     American Health Security Trust Fund, on a monthly basis each 
     year, of an amount equal to one-twelfth of the product of--
       (1) the State capitation amount (computed under section 
     602(a)(2)) for the State for the year, and
       (2) the Federal contribution percentage (established under 
     subsection (b)).
       (b) Federal Contribution Percentage.--The Board shall 
     establish a formula for the establishment of a Federal 
     contribution percentage for each State. Such formula shall 
     take into consideration a State's per capita income and 
     revenue capacity and such other relevant economic indicators 
     as the Board determines to be appropriate. In addition, 
     during the 5-year period beginning with 1995, the Board may 
     provide for a transition adjustment to the formula in order 
     to take into account current expenditures by the State (and 
     local governments thereof) for health services covered under 
     the State health security program. The weighted-average 
     Federal contribution percentage for all States shall equal 86 
     percent and in no event shall such percentage be less than 81 
     percent nor more than 91 percent.
       (c) Use of Payments.--All payments made under this section 
     may only be used to carry out the State health security 
     program.
       (d) Effect of Spending Excess or Surplus.--
       (1) Spending excess.--If a State exceeds it's budget in a 
     given year, the State shall continue to fund covered health 
     services from its own revenues.
       (2) Surplus.--If a State provides all covered health 
     services for less than the budgeted amount for a year, it may 
     retain its Federal payment for that year for uses consistent 
     with this Act.

     SEC. 605. ACCOUNT FOR HEALTH PROFESSIONAL EDUCATION 
                   EXPENDITURES.

       (a) Separate Account.--Each State health security program 
     shall--
       (1) include a separate account for health professional 
     education expenditures, and
       (2) specify the general manner, consistent with subsection 
     (b), in which such expenditures are to be distributed among 
     different types of institutions and the different areas of 
     the State.
       (b) Distribution Rules.--The distribution of funds to 
     hospitals and other health care facilities from the account 
     must conform to the following principles:
       (1) The disbursement of funds must be consistent with 
     achievement of the national and program goals (specified in 
     section 701(b)) within the State health security program and 
     the distribution of funds from the account must be 
     conditioned upon the receipt of such reports as the Board may 
     require in order to monitor compliance with such goals.
       (2) The distribution of funds from the account must take 
     into account the potentially higher costs of placing health 
     professional students in clinical education programs in 
     health professional shortage areas.

              Subtitle B--Payments by States to Providers

     SEC. 611. PAYMENTS TO HOSPITALS AND OTHER FACILITY-BASED 
                   SERVICES FOR OPERATING EXPENSES ON THE BASIS OF 
                   APPROVED GLOBAL BUDGETS.

       (a) Direct Payment Under Global Budget.--Payment for 
     operating expenses for institutional and facility-based care, 
     including hospital services and nursing facility services, 
     under State health security programs shall be made directly 
     to each institution or facility by each State health security 
     program under an annual prospective global budget approved 
     under the program. Such a budget shall include payment for 
     outpatient care and non-facility-based care that is furnished 
     by or through the facility. In the case of a hospital that is 
     wholly owned (or controlled) by a comprehensive health 
     service organization that is paid under section 614 on the 
     basis of a global budget, the global budget of the 
     organization shall include the budget for the hospital.
       (b) Annual Negotiations; Budget Approval.--
       (1) In general.--The prospective global budget for an 
     institution or facility shall be developed through annual 
     negotiations between the State health security program and 
     the institution or facility and be based on a nationally 
     uniform system of cost accounting established under standards 
     of the Board.
       (2) Considerations.--In developing a budget through 
     negotiations, there shall be taken into account at 
     least the following:
       (A) With respect to inpatient hospital services, the 
     number, and classification by diagnosis-related group, of 
     discharges.
       (B) An institution's or facility's past expenditures.
       (C) The extent to which debt service for capital 
     expenditures has been included in the proposed operating 
     budget.
       (D) Change in the consumer price index and other price 
     indices.
       (E) The cost of reasonable compensation to health care 
     practitioners.
       (F) The compensation level of the institution's or 
     facility's workforce.
       (G) The extent to which the institution or facility is 
     providing health care services to meet the needs of residents 
     in the area served by the institution or facility, including 
     the institution's or facility's occupancy level.
       (H) The institution's or facility's previous financial and 
     clinical performance, based on utilization and outcomes data 
     provided under this Act.
       (I) The type of institution or facility, including whether 
     the institution or facility is part of a clinical education 
     program or serves a health professional education, research 
     or other training purpose.
       (J) Technological advances or changes.
       (K) Costs of the institution or facility associated with 
     meeting Federal and State regulations.
       (L) The costs associated with necessary public outreach 
     activities.
       (M) In the case of a for-profit facility, a reasonable rate 
     of return on equity capital, independent of those operating 
     expenses necessary to fulfill the objectives of this Act.
       (N) Incentives to facilities that maintain costs below 
     previous reasonable budgeted levels without reducing the care 
     provided.
       (O) With respect to facilities that provide mental health 
     services and substance abuse treatment services, any 
     additional costs involved in the treatment of dually 
     diagnosed individuals.

     The portion of such a budget that relates to expenditures for 
     health professional education shall be consistent with the 
     State health security budget for such expenditures.
       (3) Provision of required information; diagnosis-related 
     group.--No budget for an institution or facility for a year 
     may be approved unless the institution or facility has 
     submitted on a timely basis to the State health security 
     program such information as the program or the Board shall 
     specify, including in the case of hospitals information on 
     discharges classified by diagnosis-related group.
       (c) Adjustments in Approved Budgets.--
       (1) Adjustments to global budgets that contract with 
     comprehensive health service organizations.--Each State 
     health security program shall develop an administrative 
     mechanism for reducing operating funds to institutions or 
     facilities in proportion to payments made to such 
     institutions or facilities for services contracted for by a 
     comprehensive health service organization.
       (2) Amendments.--In accordance with standards established 
     by the Board, an operating and capital budget approved under 
     this section for a year may be amended before, during, or 
     after the year if there is a substantial change in any of the 
     factors relevant to budget approval.
       (d) Donations Permissible.--The States health security 
     programs may permit institutions and facilities to raise 
     funds from private sources to pay for newly constructed 
     facilities, major renovations, and equipment. The expenditure 
     of such funds, whether for operating or capital expenditures, 
     does not obligate the State health security program to 
     provide for continued support for such expenditures unless 
     included in an approved global budget.

     SEC. 612. PAYMENTS TO HEALTH CARE PRACTITIONERS BASED ON 
                   PROSPECTIVE FEE SCHEDULE.

       (a) Fee for Service.--
       (1) In general.--Every independent health care practitioner 
     is entitled to be paid, for the provision of covered health 
     services under the State health security program, a fee for 
     each billable covered service.
       (2) Global fee payment methodologies.--The Board shall 
     establish models and encourage State health security programs 
     to implement alternative payment methodologies that 
     incorporate global fees for related services (such as all 
     outpatient procedures for treatment of a condition) or for a 
     basic group of services (such as primary care services) 
     furnished to an individual over a period of time, in order to 
     encourage continuity and efficiency in the provision of 
     services. Such methodologies shall be designed to ensure a 
     high quality of care.
       (3) Billing deadlines; electronic billing.--A State health 
     security program may deny payment for any service of an 
     independent health care practitioner for which it did not 
     receive a bill and appropriate supporting documentation 
     (which had been previously specified) within 30 days after 
     the date the service was provided. Such a program may require 
     that bills for services for which payment may be made under 
     this section, or for any class of such services, be submitted 
     electronically.
       (b) Payment Rates Based on Negotiated Prospective Fee 
     Schedules.--With respect to any payment method for a class of 
     services of practitioners, the State health security program 
     shall establish, on a prospective basis, a payment schedule. 
     The State health security program may establish such a 
     schedule after negotiations with organizations representing 
     the practitioners involved. Such fee schedules shall be 
     designed to provide incentives for practitioners to choose 
     primary care medicine, including general internal medicine 
     and pediatrics, over medical specialization. Nothing in this 
     section shall be construed as preventing a State from 
     adjusting the payment schedule amounts on a quarterly or 
     other periodic basis depending on whether expenditures under 
     the schedule will exceed the budgeted amount with respect to 
     such expenditures.
       (c) Billable Covered Service Defined.--In this section, the 
     term ``billable covered service'' means a service covered 
     under section 201 for which a practitioner is entitled to 
     compensation by payment of a fee determined under this 
     section.

     SEC. 613. PAYMENTS TO COMPREHENSIVE HEALTH SERVICE 
                   ORGANIZATIONS.

       (a) In General.--Payment under a State health security 
     program to a comprehensive health service organization to its 
     enrollees shall be determined by the State--
       (1) based on a global budget described in section 611, or
       (2) based on the basic capitation amount described in 
     subsection (b) for each of its enrollees.
       (b) Basic Capitation Amount.--
       (1) In general.--The basic capitation amount described in 
     this subsection for an enrollee shall be determined by the 
     State health security program on the basis of the average 
     amount of expenditures that is estimated would be made under 
     the State health security program for covered health care 
     services for an enrollee, based on actuarial characteristics 
     (as defined by the State health security program).
       (2) Adjustment for special health needs.--The State health 
     security program shall adjust such average amounts to take 
     into account the special health needs, including a 
     disproportionate number of medically underserved individuals, 
     of populations served by the organization.
       (3) Adjustment for services not provided.--The State health 
     security program shall adjust such average amounts to take 
     into account the cost of covered health care services that 
     are not provided by the comprehensive health service 
     organization under section 303(a).

     SEC. 614. PAYMENTS FOR COMMUNITY-BASED PRIMARY HEALTH 
                   SERVICES.

       (a) In General.--In the case of community-based primary 
     health services, subject to subsection (b), payments under a 
     State health security program shall--
       (1) be based on a global budget described in section 611,
       (2) be based on the basic primary care capitation amount 
     described in subsection (c) for each individual enrolled with 
     the provider of such services, or
       (3) be made on a fee-for-service basis under section 612.
       (b) Payment Adjustment.--Payments under subsection (a) may 
     include, consistent with the budgets developed under this 
     title--
       (1) an additional amount, as set by the State health 
     security program, to cover the costs incurred by a provider 
     which serves persons not covered by this Act whose health 
     care is essential to overall community health and the control 
     of communicable disease, and for whom the cost of such care 
     is otherwise uncompensated,
       (2) an additional amount, as set by the State health 
     security program, to cover the reasonable costs incurred by a 
     provider that furnishes case management services (as defined 
     in section 1915(g)(2) of the Social Security Act), 
     transportation services, and translation services, and
       (3) an additional amount, as set by the State health 
     security program, to cover the costs incurred by a provider 
     in conducting health professional education programs in 
     connection with the provision of such services.
       (c) Basic Primary Care Capitation Amount.--
       (1) In general.--The basic primary care capitation amount 
     described in this subsection for an enrollee with a provider 
     of community-based primary health services shall be 
     determined by the State health security program on the basis 
     of the average amount of expenditures that is estimated would 
     be made under the State health security program for such an 
     enrollee, based on actuarial characteristics (as defined by 
     the State health security program).
       (2) Adjustment for special health needs.--The State health 
     security program shall adjust such average amounts to take 
     into account the special health needs, including a 
     disproportionate number of medically underserved individuals, 
     of populations served by the provider.
       (3) Adjustment for services not provided.--The State health 
     security program shall adjust such average amounts to take 
     into account the cost of community-based primary health 
     services that are not provided by the provider.
       (d) Community-Based Primary Health Services Defined.--In 
     this section, the term ``community-based primary health 
     services'' has the meaning given such term in section 202(a).

     SEC. 615. PAYMENTS FOR PRESCRIPTION DRUGS.

       (a) Establishment of List.--
       (1) In general.--Based upon the recommendations of the 
     Advisory Committee on Prescription Drugs under section 403, 
     the Board shall establish a list of approved prescription 
     drugs and biologicals that the Board determines are necessary 
     for the maintenance or restoration of health or of 
     employability or self-management and eligible for coverage 
     under this Act.
       (2) Exclusions.--The Board may exclude reimbursement under 
     this Act for ineffective, unsafe, or over-priced products 
     where better alternatives are determined to be available.
       (b) Prices.--For each such listed prescription drug or 
     biological covered under this Act, for insulin, and for 
     medical foods, the Board shall from time to time determine a 
     product price or prices which shall constitute the maximum to 
     be recognized under this Act as the cost of a drug to a 
     provider thereof. The Board may conduct negotiations, on 
     behalf of State health security programs, with product 
     manufacturers and distributors in determining the applicable 
     product price or prices.
       (c) Charges by Independent Pharmacies.--Each State health 
     security program shall provide for payment for a prescription 
     drug or biological or insulin furnished by an independent 
     pharmacy based on the drug's cost to the pharmacy (not in 
     excess of the applicable product price established under 
     subsection (b)) plus a dispensing fee. In accordance with 
     standards established by the Board, each State health 
     security program, after consultation with representatives of 
     the pharmaceutical profession, shall establish schedules of 
     dispensing fees, designed to afford reasonable compensation 
     to independent pharmacies after taking into account 
     variations in their cost of operation resulting from regional 
     differences, differences in the volume of prescription drugs 
     dispensed, differences in services provided, the need to 
     maintain expenditures within the budgets established under 
     this title, and other relevant factors.

     SEC. 616. PAYMENTS FOR APPROVED DEVICES AND EQUIPMENT.

       (a) Establishment of List.--The Board shall establish a 
     list of approved durable medical equipment and therapeutic 
     devices and equipment (including eyeglasses, hearing aids, 
     and prosthetic appliances), that the Board determines are 
     necessary for the maintenance or restoration of health or of 
     employability or self-management and eligible for coverage 
     under this Act.
       (b) Considerations and Conditions.--In establishing the 
     list under subsection (a), the Board shall take into 
     consideration the efficacy, safety, and cost of each item 
     contained on such list, and shall attach to any item such 
     conditions as the Board determines appropriate with respect 
     to the circumstances under which, or the frequency with 
     which, the item may be prescribed.
       (c) Prices.--For each such listed item covered under this 
     Act, the Board shall from time to time determine a product 
     price or prices which shall constitute the maximum to be 
     recognized under this Act as the cost of the item to a 
     provider thereof. The Board may conduct negotiations, on 
     behalf of State health security programs, with equipment and 
     device manufacturers and distributors in determining the 
     applicable product price or prices.
       (d) Exclusions.--The Board may exclude from coverage under 
     this Act ineffective, unsafe, or overpriced products where 
     better alternatives are determined to be available.

     SEC. 617. PAYMENTS FOR OTHER ITEMS AND SERVICES.

       In the case of payment for other covered health services, 
     the amount of payment under a State health security program 
     shall be established by the program--
       (1) in accordance with payment methodologies which are 
     specified by the Board, after consultation with the American 
     Health Security Advisory Council, or methodologies 
     established by the State under section 620, and
       (2) consistent with the State health security budget.

     SEC. 618. PAYMENT INCENTIVES FOR MEDICALLY UNDERSERVED AREAS.

       (a) Model Payment Methodologies.--In addition to the 
     payment amounts otherwise provided in this title, the Board 
     shall establish model payment methodologies and other 
     incentives that promote the provision of covered health care 
     services in medically underserved areas, particularly in 
     rural and inner-city underserved areas.
       (b) Construction.--Nothing in this title shall be construed 
     as limiting the authority of State health security programs 
     to increase payment amounts or otherwise provide additional 
     incentives, consistent with the State health security budget, 
     to encourage the provision of medically necessary and 
     appropriate services in underserved areas.

     SEC. 619. AUTHORITY FOR ALTERNATIVE PAYMENT METHODOLOGIES.

       A State health security program, as part of its plan under 
     section 405(a), may use a payment methodology other than a 
     methodology required under this subtitle so long as--
       (1) such payment methodology does not affect the 
     entitlement of individuals to coverage, the weighting of fee 
     schedules to encourage an increase in the number of primary 
     care providers, the ability of individuals to choose among 
     qualified providers, the benefits covered under the program, 
     or the compliance of the program with the State health 
     security budget under subtitle A, and
       (2) the program submits periodic reports to the Board 
     showing the operation and effectiveness of the alternative 
     methodology, in order for the Board to evaluate the 
     appropriateness of applying the alternative methodology to 
     other States.

     Subtitle C--Mandatory Assignment and Administrative Provisions

     SEC. 631. MANDATORY ASSIGNMENT.

       (a) No Balance Billing.--Payments for benefits under this 
     Act shall constitute payment in full for such benefits and 
     the entity furnishing an item or service for which payment is 
     made under this Act shall accept such payment as payment in 
     full for the item or service and may not accept any payment 
     or impose any charge for any such item or service other than 
     accepting payment from the State health security program in 
     accordance with this Act.
       (b) Enforcement.--If an entity knowingly and willfully 
     bills for an item or service or accepts payment in violation 
     of subsection (a), the Board may apply sanctions against the 
     entity in the same manner as sanctions could have been 
     imposed under section 1842(j)(2) of the Social Security Act 
     for a violation of section 1842(j)(1) of such Act. Such 
     sanctions are in addition to any sanctions that a State may 
     impose under its State health security program.

     SEC. 632. PROCEDURES FOR REIMBURSEMENT; APPEALS.

       (a) Procedures for Reimbursement.--In accordance with 
     standards issued by the Board, a State health security 
     program shall establish a timely and administratively simple 
     procedure to assure payment within 60 days of the date of 
     submission of clean claims by providers under this Act.
       (b) Appeals Process.--Each State health security program 
     shall establish an appeals process to handle all grievances 
     pertaining to payment to providers under this title.

  TITLE VII--PROMOTION OF PRIMARY HEALTH CARE; DEVELOPMENT OF HEALTH 
     SERVICE CAPACITY; PROGRAMS TO ASSIST THE MEDICALLY UNDERSERVED

   Subtitle A--Promotion and Expansion of Primary Care Professional 
                                Training

     SEC. 701. ROLE OF BOARD; ESTABLISHMENT OF PRIMARY CARE 
                   PROFESSIONAL OUTPUT GOALS.

       (a) In General.--The Board is responsible for--
       (1) coordinating health professional education policies and 
     goals, in consultation with the Secretary of Health and Human 
     Services (in this title referred to as the ``Secretary''), to 
     achieve the national goals specified in subsection (b);
       (2) overseeing the health professional education 
     expenditures of the State health security programs from the 
     account established under section 602(c);
       (3) developing and maintaining, in cooperation with the 
     Secretary, a system to monitor the number and specialties of 
     individuals through their health professional education, any 
     postgraduate training, and professional practice; and
       (4) developing, coordinating, and promoting other policies 
     that expand the number of primary care practitioners.
       (b) National Goals.--The national goals specified in this 
     subsection are as follows:
       (1) Graduate medical education.--By not later than 5 years 
     after the date of the enactment of this Act, at least 50 
     percent of the residents in medical residency education 
     programs (as defined in subsection (e)(1)) are primary care 
     residents (as defined in subsection (e)(3)).
       (2) Midlevel primary care practitioners.--To assure an 
     adequate supply of primary care practitioners, there shall be 
     a number, specified by the Board, of midlevel primary care 
     practitioners (as defined in subsection (e)(2)) employed in 
     the health care system as of January 1, 2000.
       (c) Method for Attainment of National Goal for Graduate 
     Medical Education; Program Goals.--
       (1) In general.--The Board shall establish a method of 
     applying the national goal in subsection (b)(1) to program 
     goals for each medical residency education program or to 
     medical residency education consortia.
       (2) Consideration.--The program goals under paragraph (1) 
     shall be based on the distribution of medical schools and 
     other teaching facilities within each State health security 
     program, and the number of positions for graduate medical 
     education.
       (3) Medical residency education consortium.--In this 
     subsection, the term ``medical residency education 
     consortium'' means a consortium of medical residency 
     education programs in a contiguous geographic area (which may 
     be an interstate area) if the consortium--
       (A) includes at least one medical school with a teaching 
     hospital and related teaching settings, and
       (B) has an affiliation with qualified community-based 
     primary health service providers described in section 202(a) 
     and with at least one comprehensive health service 
     organization established under section 303.
       (4) Enforcement through state health security budgets.--The 
     Board shall develop a formula for reducing payments to State 
     health security programs (that provide for payments to a 
     medical residency education program) that failed to meet the 
     goal for the program established under this subsection.
       (d) Method for Attainment of National Goal for Midlevel 
     Primary Care Practitioners.--To assist in attaining the 
     national goal identified in subsection (b)(2), the Board 
     shall--
       (1) advise the Public Health Service on allocations of 
     funding under titles VII and VIII of the Public Health 
     Service Act, the National Health Service Corps, and other 
     programs in order to increase the supply of midlevel primary 
     care practitioners, and
       (2) commission a study of the potential benefits and 
     disadvantages of expanding the scope of practice authorized 
     under State laws for any class of midlevel primary care 
     practitioners.
       (e) Definitions.--In this title:
       (1) Medical residency education program.--The term 
     ``medical residency education program'' means a program that 
     provides education and training to graduates of medical 
     schools in order to meet requirements for licensing and 
     certification as a physician, and includes the medical school 
     supervising the program and includes the hospital or other 
     facility in which the program is operated.
       (2) Midlevel primary care practitioner.--The term 
     ``midlevel primary care practitioner'' means a clinical nurse 
     practitioner, certified nurse midwife, physician assistance, 
     or other non-physician practitioner, specified by the Board, 
     as authorized to practice under State law.
       (3) Primary care resident.--The term ``primary care 
     resident'' means (in accordance with criteria established by 
     the Board) a resident being trained in a distinct program of 
     family practice medicine, general practice, general internal 
     medicine, or general pediatrics.

     SEC. 702. ESTABLISHMENT OF ADVISORY COMMITTEE ON HEALTH 
                   PROFESSIONAL EDUCATION.

       (a) In General.--The Board shall provide for an Advisory 
     Committee on Health Professional Education (in this section 
     referred to as the ``Committee'') to advise the Board on its 
     activities under section 701.
       (b) Membership.--The Committee shall be composed of--
       (1) the Chair of the Board, who shall serve as Chair of the 
     Committee, and
       (2) 12 members, not otherwise in the employ of the United 
     States, appointed by the Board without regard to the 
     provisions of title 5, United States Code, governing 
     appointments in the competitive service.
     The appointed members shall provide a balanced point of view 
     with respect to health professional education, primary care 
     disciplines, and health care policy and shall include 
     individuals who are representative of medical schools, other 
     health professional schools, residency programs, primary care 
     practitioners, teaching hospitals, professional associations, 
     public health organizations, State health security 
     programs, and consumers.
       (c) Terms of Members.--Each appointed member shall hold 
     office for a term of five years, except that--
       (1) any member appointed to fill a vacancy occurring during 
     the term for which the member's predecessor was appointed 
     shall be appointed for the remainder of that term; and
       (2) the terms of the members first taking office shall 
     expire, as designated by the Board at the time of 
     appointment, two at the end of the second year, two at the 
     end of the third year, two at the end of the fourth year, and 
     three at the end of the fifth year after the date of 
     enactment of this Act.
       (d) Vacancies.--
       (1) In general.--The Board shall fill any vacancy in the 
     membership of the Committee in the same manner as the 
     original appointment. The vacancy shall not affect the power 
     of the remaining members to execute the duties of the 
     Committee.
       (2) Vacancy appointments.--Any member appointed to fill a 
     vacancy shall serve for the remainder of the term for which 
     the predecessor of the member was appointed.
       (3) Reappointment.--The Board may reappoint an appointed 
     member of the Committee for a second term in the same manner 
     as the original appointment.
       (e) Duties.--It shall be the duty of the Committee to 
     advise the Board concerning graduate medical education 
     policies under this title.
       (f) Staff.--The Committee, its members, and any committees 
     of the Committee shall be provided with such secretarial, 
     clerical, or other assistance as may be authorized by the 
     Board for carrying out their respective functions.
       (g) Meetings.--The Committee shall meet as frequently as 
     the Board deems necessary, but not less than 4 times each 
     year. Upon request by four or more members it shall be the 
     duty of the Chair to call a meeting of the Committee.
       (h) Compensation.--Members of the Committee shall be 
     reimbursed by the Board for travel and per diem in lieu of 
     subsistence expenses during the performance of duties of the 
     Board in accordance with subchapter I of chapter 57 of title 
     5, United States Code.
       (i) FACA Not Applicable.--The provisions of the Federal 
     Advisory Committee Act shall not apply to the Committee.

     SEC. 703. GRANTS FOR HEALTH PROFESSIONS EDUCATION, NURSE 
                   EDUCATION, AND THE NATIONAL HEALTH SERVICE 
                   CORPS.

       (a) Transfers to Public Health Service.--From the amounts 
     provided under subsection (c), the Board shall make transfers 
     from the American Health Security Trust Fund to the Public 
     Health Service under subpart II of part D of title III, title 
     VII, and title VIII of the Public Health Service Act for the 
     support of the National Health Service Corps, health 
     professions education, and nursing education, including 
     education of clinical nurse practitioners, certified 
     registered nurse anesthetists, certified nurse midwives, and 
     physician assistants. Of the amounts so transferred in each 
     year, not less than 50 percent shall be expended for the 
     support of the National Health Service Corps.
       (b) Range of Funds.--The amount of transfers under 
     subsection (a) for any fiscal year shall be an amount 
     (specified by the Board each year) not less than \4/100\ 
     percent and not to exceed \6/100\ percent of the amounts the 
     Board estimates will be expended from the Trust Fund in the 
     fiscal year.
       (c) Funds Supplemental to Other Funds.--The funds provided 
     under this section with respect to provision of services are 
     in addition to, and not in replacement of, funds made 
     available under the provisions referred to in subsection (a) 
     and shall be administered in accordance with the terms of 
     such provisions. The Board shall make no transfer of funds 
     under this section for any fiscal year for which the total 
     appropriations for the programs authorized by such provisions 
     are less than the total amount appropriated for such programs 
     in fiscal year 1993.

                Subtitle B--Direct Health Care Delivery

     SEC. 711. SETASIDE FOR PUBLIC HEALTH.

       (a) Transfers to Public Health Service.--From the amounts 
     provided under subsection (c), the Board shall make transfers 
     from the American Health Security Trust Fund to the Public 
     Health Service for the following purposes (other than payment 
     for services covered under title II):
       (1) For payments to States under the maternal and child 
     health block grants under title V of the Social Security Act.
       (2) For prevention and treatment of tuberculosis under 
     section 317 of the Public Health Service Act.
       (3) For the prevention and treatment of sexually 
     transmitted diseases under section 318 of the Public Health 
     Service Act.
       (4) Preventive health block grants under part A of title 
     XIX of the Public Health Service Act.
       (5) Grants to States for community mental health services 
     under subpart I of part B of title XIX of the Public Health 
     Service Act.
       (6) Grants to States for prevention and treatment of 
     substance abuse under subpart II of part B of title XIX of 
     the Public Health Service Act.
       (7) Grants for HIV health care services under parts A, B, 
     and C of title XXVI of the Public Health Service Act.
       (8) Public health formula grants described in subsection 
     (d).
       (b) Range of Funds.--The amount of transfers under 
     subsection (a) for any fiscal year shall be an amount 
     (specified by the Board each year) not less than \1/10\ 
     percent and not to exceed \14/100\ percent of the amounts the 
     Board estimates will be expended from the Trust Fund in the 
     fiscal year.
       (c) Funds Supplemental to Other Funds.--The funds provided 
     under this section with respect to provision of services are 
     in addition to, and not in replacement of, funds made 
     available under the programs referred to in subsection (a) 
     and shall be administered in accordance with the terms of 
     such programs.
       (d) Required Reports on Health Status.--The Secretary shall 
     require each State receiving funds under this section to 
     submit annual reports to the Secretary on the health status 
     of the population and measurable objectives for improving the 
     health of the public in the State. Such reports shall include 
     the following:
       (1) A comparison of the measures of the State and local 
     public health system compared to relevant objectives set 
     forth in ``Health People 2000'' or subsequent national 
     objectives set by the Secretary.
       (2) A description of health status measures to be improved 
     within the State (at the State and local levels) through 
     expanded public health functions and health promotion and 
     disease prevention programs.
       (3) Measurable outcomes and process objectives for 
     improving health status, and a report on outcomes from the 
     previous year.
       (4) Information regarding how Federal funding has improved 
     population-based prevention activities and programs.
       (5) A description of the core public health functions to be 
     carried out at the local level.
       (6) A description of the relationship between the State's 
     public health system, community-based health promotion and 
     disease prevention providers, and the State health security 
     program.
       (e) Limitation on Fund Transfers.--The Board shall make no 
     transfer of funds under this section for any fiscal year for 
     which the total appropriations for such programs are less 
     than the total amount appropriated for such programs in 
     fiscal year 1993.
       (f) Public Health Formula Grants.--The Secretary shall 
     provide stable funds to States through formula grants for the 
     purpose of carrying out core public health functions to 
     monitor and protect the health of communities from 
     communicable diseases and exposure to toxic environmental 
     pollutants, occupational hazards, harmful products, and poor 
     health outcomes. Such functions include the following:
       (1) Data collection, analysis, and assessment of public 
     health data, vital statistics, and personal health data to 
     assess community health status and outcomes reporting. This 
     function includes the acquisition and installation of 
     hardware and software, and personnel training and technical 
     assistance to operate and support automated and integrated 
     information systems.
       (2) Activities to protect the environment and to assure the 
     safety of housing, workplaces, food, and water.
       (3) Investigation and control of adverse health conditions, 
     and threats to the health status of individuals and the 
     community. This function includes the identification and 
     control of outbreaks of infectious disease, patterns of 
     chronic disease and injury, and cooperative activities to 
     reduce the levels of violence.
       (4) Health promotion and disease prevention activities for 
     which there is a significant need and a high priority of the 
     Public Health Service.
       (5) The provision of public health laboratory services to 
     complement private clinical laboratory services, including--
       (A) screening tests for metabolic diseases in newborns,
       (B) toxicology assessments of blood lead levels and other 
     environmental toxins,
       (C) tuberculosis and other disease requiring partner 
     notification, and
       (D) testing for infectious and food-borne diseases.
       (6) Training and education for the public health 
     professions.
       (7) Research on effective and cost-effective public health 
     practices. This function includes the development, testing, 
     evaluation, and publication of results of new prevention and 
     public health control interventions.
       (8) Integration and coordination of the prevention programs 
     and services of community-based providers, local and State 
     health departments, and other sectors of State and local 
     government that affect health.

     SEC. 712. SETASIDE FOR PRIMARY HEALTH CARE DELIVERY.

       (a) Transfers to Public Health Service.--From the amounts 
     provided under subsection (c), the Board shall make transfers 
     from the American Health Security Trust Fund to the Public 
     Health Service for the program of primary care service 
     expansion grants under subpart V of part D of title III of 
     the Public Health Service Act (as added by section 
     713 of this Act).
       (b) Range of Funds.--The amount of transfers under 
     subsection (a) for any fiscal year shall be an amount 
     (specified by the Board each year) not less than \6/100\ 
     percent and not to exceed \1/10\ percent of the amounts the 
     Board estimates will be expended from the Trust Fund in the 
     fiscal year.
       (c) Funds Supplemental to Other Funds.--The funds provided 
     under this section with respect to provision of services are 
     in addition to, and not in replacement of, funds made 
     available under the sections 329, 330, 340, 340A, 1001, and 
     2655 of the Public Health Service Act. The Board shall make 
     no transfer of funds under this section for any fiscal year 
     for which the total appropriations for such sections are less 
     than the total amount appropriated under such sections in 
     fiscal year 1993.

     SEC. 713. PRIMARY CARE SERVICE EXPANSION GRANTS.

       Part D of title III of the Public Health Service Act (42 
     U.S.C. 254b et seq.) is amended by adding at the end thereof 
     the following new subpart:

                  ``Subpart IX--Primary Care Expansion

     ``SEC. 340E. EXPANDING PRIMARY CARE DELIVERY CAPACITY IN 
                   URBAN AND RURAL AREAS.

       ``(a) Grants for Primary Care Centers.--From the amounts 
     described in subsection (c), the American Health Security 
     Standards Board shall make grants to public and nonprofit 
     private entities for projects to plan and develop primary 
     care centers which will serve medically underserved 
     populations (as defined in section 330(b)(3)) in urban and 
     rural areas and to deliver primary care services to such 
     populations in such areas. The funds provided under such a 
     grant may be used for the same purposes for which a grant may 
     be made under subsection (c) or (d) of section 330.
       ``(b) Process of Awarding Grants.--The provisions of 
     subsection (e)(1) of section 330 shall apply to a grant under 
     this section in the same manner as they apply to a grant 
     under subsection (c) of such section. The provisions of 
     subsection (g)(3) of such section shall apply to grants for 
     projects to plan and develop primary care centers under this 
     section in the same manner as they apply to grants under such 
     section.
       ``(c) Funding as Set-Aside From Trust Fund.--Funding to 
     carry out this section is provided from the American Health 
     Security Trust Fund in accordance with section 912 of the 
     American Health Security Act.
       ``(d) Primary Care Center Defined.--In this section, the 
     term `primary care center' means--
       ``(1) a migrant health center (as defined in section 
     329(a)(1)),
       ``(2) a community health center (as defined in section 
     330(a)),
       ``(3) an entity qualified to receive a grant under section 
     340, 340A, 1001, or 2655, or
       ``(4) a Federally-qualified health center (as defined in 
     section 1905(l)(2)(B) of the Social Security Act).''.

             Subtitle C--Primary Care and Outcomes Research

     SEC. 721. SET-ASIDE FOR OUTCOMES RESEARCH.

       (a) Grants for Outcomes Research.--The Board shall make 
     transfers from the American Health Security Trust Fund to the 
     Agency for Health Care Policy and Research under title IX of 
     the Public Health Service Act for the purpose of carrying out 
     activities under such title. The Secretary shall assure that 
     there is a special emphasis placed on pediatric outcomes 
     research.
       (b) Range of Funds.--The amount of transfers under 
     subsection (a) for any fiscal year shall be an amount 
     (specified by the Board each year) not less than \1/100\ 
     percent and not to exceed \2/100\ percent of the amounts the 
     Board estimates will be expended from the Trust Fund in the 
     fiscal year.
       (c) Funds Supplemental to Other Funds.--The funds provided 
     under this section with respect to provision of services are 
     in addition to, and not in replacement of, funds made 
     available to the Agency for Health Care Policy and Research 
     under section 926 of the Public Health Service Act. The Board 
     shall make no transfer of funds under this section for any 
     fiscal year for which the total appropriations under such 
     section are less than the total amount appropriated under 
     such section and title in fiscal year 1993.
       (d) Conforming Amendment.--Section 926(a) of the Public 
     Health Service Act (42 U.S.C. 299c-5(a)) is amended by 
     striking ``$115,000,000'' and all that follows and inserting 
     ``for each fiscal year (beginning with fiscal year 1994) such 
     sums as may be necessary.''.

     SEC. 722. OFFICE OF PRIMARY CARE AND PREVENTION RESEARCH.

       (a) In General.--Title IV of the Public Health Service Act, 
     as amended by section 141 of Public Law 103-43 (107 Stat. 
     136), is amended--
       (1) by redesignating parts G through I as parts H through 
     J, respectively; and
       (2) by inserting after part F the following new part:

           ``Part G--Research on Primary Care and Prevention

     ``SEC. 486E. OFFICE OF PRIMARY CARE AND PREVENTION RESEARCH.

       ``(a) Establishment.--There is established within the 
     Office of the Director of NIH an office to be known as the 
     Office of Primary Care and Prevention Research (in this part 
     referred to as the `Office'). The Office shall be headed by a 
     director, who shall be appointed by the Director of NIH.
       ``(b) Purpose.--The Director of the Office shall--
       ``(1) identify projects of research on primary care and 
     prevention, for children as well as adults, that should be 
     conducted or supported by the national research institutes, 
     with particular emphasis on--
       ``(A) clinical patient care, with special emphasis on 
     pediatric clinical care and diagnosis,
       ``(B) diagnostic effectiveness,
       ``(C) primary care education,
       ``(D) health and family planning services,
       ``(E) medical effectiveness outcomes of primary care 
     procedures and interventions,
       ``(F) the use of multidisciplinary teams of health care 
     practitioners.
       ``(2) identify multidisciplinary research related to 
     primary care and prevention that should be so conducted;
       ``(3) promote coordination and collaboration among entities 
     conducting research identified under any of paragraphs (1) 
     and (2);
       ``(4) encourage the conduct of such research by entities 
     receiving funds from the national research institutes;
       ``(5) recommend an agenda for conducting and supporting 
     such research;
       ``(6) promote the sufficient allocation of the resources of 
     the national research institutes for conducting and 
     supporting such research; and
       ``(7) prepare the report required in section 486G.
       ``(c) Primary Care and Prevention Research Defined.--For 
     purposes of this part, the term `primary care and prevention 
     research' means research on improvement of the practice of 
     family medicine, general internal medicine, and general 
     pediatrics, and includes research relating to--
       ``(1) obstetrics and gynecology, dentistry, or mental 
     health or substance abuse treatment when provided by a 
     primary care physician or other primary care 
     practitioner, and
       ``(2) primary care provided by multidisciplinary teams.

     ``SEC. 486F. NATIONAL DATA SYSTEM AND CLEARINGHOUSE ON 
                   PRIMARY CARE AND PREVENTION RESEARCH.

       ``(a) Data System.--The Director of NIH, in consultation 
     with the Director of the Office, shall establish a data 
     system for the collection, storage, analysis, retrieval, and 
     dissemination of information regarding primary care and 
     prevention research that is conducted or supported by the 
     national research institutes. Information from the data 
     system shall be available through information systems 
     available to health care professionals and providers, 
     researchers, and members of the public.
       ``(b) Clearinghouse.--The Director of NIH, in consultation 
     with the Director of the Office and with the National Library 
     of Medicine, shall establish, maintain, and operate a program 
     to provide, and encourage the use of, information on research 
     and prevention activities of the national research institutes 
     that relate to primary care and prevention research.

     ``SEC. 486G. BIENNIAL REPORT.

       ``(a) In General.--With respect to primary care and 
     prevention research, the Director of the Office shall, not 
     later than one year after the date of the enactment of this 
     part, and biennially thereafter, prepare a report--
       ``(1) describing and evaluating the progress made during 
     the preceding two fiscal years in research and treatment 
     conducted or supported by the National Institutes of Health;
       ``(2) summarizing and analyzing expenditures made by the 
     agencies of such Institutes (and by such Office) during the 
     preceding two fiscal years; and
       ``(3) making such recommendations for legislative and 
     administrative initiatives as the Director of the Office 
     determines to be appropriate.
       ``(b) Inclusion in Biennial Report of Director of NIH.--The 
     Director of the Office shall submit each report prepared 
     under subsection (a) to the Director of NIH for inclusion in 
     the report submitted to the President and the Congress under 
     section 403.

     ``SEC. 486H. AUTHORIZATION OF APPROPRIATIONS.

       ``For the Office of Primary Care and Prevention Research, 
     there are authorized to be appropriated $150,000,000 for 
     fiscal year 1994, $180,000,000 for fiscal year 1995, and 
     $216,000,000 for fiscal year 1996.''.
       (b) Requirement of Sufficient Allocation of Resources of 
     Institutes.--Section 402(b) of the Public Health Service Act 
     (42 U.S.C. 282(b)) is amended--
       (1) in paragraph (11), by striking ``and'' after the 
     semicolon at the end;
       (2) in paragraph (12), by striking the period at the end 
     and inserting ``; and''; and
       (3) by inserting after paragraph (12) the following new 
     paragraph:
       ``(13) after consultation with the Director of the Office 
     of Primary Care and Prevention Research, shall ensure that 
     resources of the National Institutes of Health are 
     sufficiently allocated for projects on primary care and 
     prevention research that are identified under section 
     486E(b).''.

               Subtitle D--School-Related Health Services

     SEC. 731. AUTHORIZATIONS OF APPROPRIATIONS.

       (a) Funding for School-Related Health Services.--For the 
     purpose of carrying out this subtitle, there are authorized 
     to be appropriated $100,000,000 for fiscal year 1997, 
     $275,000,000 for fiscal year 1998, $350,000,000 for fiscal 
     year 1999, and $400,000,000 for each of the fiscal years 2000 
     and 2001.
       (b) Relation to Other Funds.--The authorizations of 
     appropriations established in subsection (a) are in addition 
     to any other authorizations of appropriations that are 
     available for the purpose described in such subsection.

     SEC. 732. ELIGIBILITY FOR DEVELOPMENT AND OPERATION GRANTS.

       (a) In General.--Entities eligible to apply for and receive 
     grants under section 734 or 735 are the following:
       (1) State health agencies that apply on behalf of local 
     community partnerships and other communities in need of 
     health services for school-aged children within the State.
       (2) Local community partnerships in States in which health 
     agencies have not applied.
       (b) Local Community Partnerships.--
       (1) In general.--A local community partnership under 
     subsection (a)(2) is an entity that, at a minimum, includes--
       (A) a local health care provider with experience in 
     delivering services to school-aged children;
       (B) one or more local public schools; and
       (C) at least one community based organization located in 
     the community to be served that has a history of providing 
     services to school-aged children in the community who are at-
     risk.
       (2) Participation.--A partnership described in paragraph 
     (1) shall, to the maximum extent feasible, involve broad 
     based community participation from parents and adolescent 
     children to be served, health and social service providers, 
     teachers and other public school and school board personnel, 
     development and service organizations for adolescent 
     children, and interested business leaders. Such participation 
     may be evidenced through an expanded partnership, or an 
     advisory board to such partnership.
       (c) Definitions Regarding Children.--For purposes of this 
     subtitle:
       (1) The term ``adolescent children'' means school-aged 
     children who are adolescents.
       (2) The term ``school-aged children'' means individuals who 
     are between the ages of 4 and 19 (inclusive).

     SEC. 733. PREFERENCES.

       (a) In General.--In making grants under sections 734 and 
     735, the Secretary shall give preference to applicants whose 
     communities to be served show the most substantial level of 
     need for such services among school-aged children, as 
     measured by indicators of community health including the 
     following:
       (1) High levels of poverty.
       (2) The presence of a medically underserved population.
       (3) The presence of a health professional shortage area.
       (4) High rates of indicators of health risk among school-
     aged children, including a high proportion of such children 
     receiving services through the Individuals with Disabilities 
     Education Act, adolescent pregnancy, sexually transmitted 
     disease (including infection with the human immunodeficiency 
     virus), preventable disease, communicable disease, 
     intentional and unintentional injuries, community and gang 
     violence, unemployment among adolescent children, juvenile 
     justice involvement, and high rates of drug and alcohol 
     exposure.
       (b) Linkage to Community Health Centers.--In making grants 
     under sections 734 and 735, the Secretary shall give 
     preference to applicants that demonstrate a linkage to 
     community health centers.

     SEC. 734. GRANTS FOR DEVELOPMENT OF PROJECTS.

       (a) In General.--The Secretary may make grants to State 
     health agencies or to local community partnerships to develop 
     school health service sites.
       (b) Use of Funds.--A project for which a grant may be made 
     under subsection (a) may include but not be limited to the 
     cost of the following:
       (1) Planning for the provision of school health services.
       (2) Recruitment, compensation, and training of health and 
     administrative staff.
       (3) The development of agreements, and the acquisition and 
     development of equipment and information services, necessary 
     to support information exchange between school health service 
     sites and health plans, health providers, and other entities 
     authorized to collect information under this Act.
       (4) Other activities necessary to assume operational 
     status.
       (c) Application for Grant.--
       (1) In general.--Applicants shall submit applications in a 
     form and manner prescribed by the Secretary.
       (2) Applications by state health agencies.--
       (A) In the case of applicants that are State health 
     agencies, the application shall contain assurances that the 
     State health agency is applying for funds--
       (i) on behalf of at least one local community partnership; 
     and
       (ii) on behalf of at least one other community identified 
     by the State as in need of the services funded under this 
     subtitle but without a local community partnership.
       (B) In the case of the communities identified in 
     applications submitted by State health agencies that do not 
     yet have local community partnerships (including the 
     community identified under subparagraph (A)(ii)), the State 
     shall describe the steps that will be taken to aid the 
     communities in developing a local community partnership.
       (C) A State applying on behalf of local community 
     partnerships and other communities may retain not more than 
     10 percent of grants awarded under this subtitle for 
     administrative costs.
       (d) Contents of Application.--In order to receive a grant 
     under this section, an applicant must include in the 
     application the following information:
       (1) An assessment of the need for school health services in 
     the communities to be served, using the latest available 
     health data and health goals and objectives established by 
     the Secretary.
       (2) A description of how the applicant will design the 
     proposed school health services to reach the maximum number 
     of school-aged children who are at risk.
       (3) An explanation of how the applicant will integrate its 
     services with those of other health and social service 
     programs within the community.
       (4) A description of a quality assurance program which 
     complies with standards that the Secretary may prescribe.
       (e) Number of Grants.--Not more than one planning grant may 
     be made to a single applicant. A planning grant may not 
     exceed two years in duration.

     SEC. 735. GRANTS FOR OPERATION OF PROJECTS.

       (a) In General.--The Secretary may make grants to State 
     health agencies or to local community partnerships for the 
     cost of operating school health service sites.
       (b) Use of Grant.--The costs for which a grant may be made 
     under this section include but are not limited to the 
     following:
       (1) The cost of furnishing health services that are not 
     otherwise covered under this Act or by any other public or 
     private insurer.
       (2) The cost of furnishing services whose purpose is to 
     increase the capacity of individuals to utilize available 
     health services, including transportation, community and 
     patient outreach, patient education, translation services, 
     and such other services as the Secretary determines to be 
     appropriate in carrying out such purpose.
       (3) Training, recruitment and compensation of health 
     professionals and other staff.
       (4) Outreach services to school-aged children who are at-
     risk and to the parents of such children.
       (5) Linkage of individuals to health plans, community 
     health services and social services.
       (6) Other activities deemed necessary by the Secretary.
       (c) Application for Grant.--Applicants shall submit 
     applications in a form and manner prescribed by the 
     Secretary. In order to receive a grant under this section, an 
     applicant must include in the application the following 
     information:
       (1) A description of the services to be furnished by the 
     applicant.
       (2) The amounts and sources of funding that the applicant 
     will expend, including estimates of the amount of payments 
     the applicant will receive from sources other than the grant.
       (3) Such other information as the Secretary determines to 
     be appropriate.
       (d) Additional Contents of Application.--In order to 
     receive a grant under this section, an applicant must meet 
     the following conditions:
       (1) The applicant furnishes the following services:
       (A) Diagnosis and treatment of simple illnesses and minor 
     injuries.
       (B) Preventive health services, including health 
     screenings.
       (C) Services provided for the purpose described in 
     subsection (b)(2).
       (D) Referrals and followups in situations involving illness 
     or injury.
       (E) Health and social services, counseling services, and 
     necessary referrals, including referrals regarding mental 
     health and substance abuse.
       (F) Such other services as the Secretary determines to be 
     appropriate.
       (2) The applicant is a participating provider in the 
     State's program for medical assistance under title XIX of the 
     Social Security Act.
       (3) The applicant does not impose charges on students or 
     their families for services (including collection of any 
     cost-sharing for services under the comprehensive benefit 
     package that otherwise would be required).
       (4) The applicant has reviewed and will periodically review 
     the needs of the population served by the applicant in order 
     to ensure that its services are accessible to the maximum 
     number of school-aged children in the area, and that, to the 
     maximum extent possible, barriers to access to services of 
     the applicant are removed (including barriers resulting from 
     the area's physical characteristics, its economic, social and 
     cultural grouping, the health care utilization patterns of 
     such children, and available transportation).
       (5) In the case of an applicant which serves a population 
     that includes a substantial proportion of individuals of 
     limited English speaking ability, the applicant has developed 
     a plan to meet the needs of such population to the extent 
     practicable in the language and cultural context most 
     appropriate to such individuals.
       (6) The applicant will provide non-Federal contributions 
     toward the cost of the project in an amount determined by the 
     Secretary.
       (7) The applicant will operate a quality assurance program 
     consistent with section 734(d).
       (e) Duration of Grant.--A grant under this section shall be 
     for a period determined by the Secretary.
       (f) Reports.--A recipient of funding under this section 
     shall provide such reports and information as are required in 
     regulations of the Secretary.

     SEC. 736. FEDERAL ADMINISTRATIVE COSTS.

       Of the amounts made available under section 731, the 
     Secretary may reserve not more than 5 percent for 
     administrative expenses regarding this subtitle.

     SEC. 737. DEFINITIONS.

       For purposes of this subtitle:
       (1) The term ``adolescent children'' has the meaning given 
     such term in section 732(c).
       (2) The term ``at risk'' means at-risk with respect to 
     health.
       (3) The term ``community health center'' has the meaning 
     given such term in section 330 of the Public Health Service 
     Act.
       (4) The term ``health professional shortage area'' means a 
     health professional shortage area designated under section 
     332 of the Public Health Service Act.
       (5) The term ``medically underserved population'' has the 
     meaning given such term in section 330 of the Public Health 
     Service Act.
       (6) The term ``school-aged children'' has the meaning given 
     such term in section 732(c).

 TITLE VIII--FINANCING PROVISIONS; AMERICAN HEALTH SECURITY TRUST FUND

     SEC. 800. AMENDMENT OF 1986 CODE; SECTION 15 NOT TO APPLY.

       (a) Amendment of 1986 Code.--Except as otherwise expressly 
     provided, whenever in this title an amendment or repeal is 
     expressed in terms of an amendment to, or repeal of, a 
     section or other provision, the reference shall be considered 
     to be made to a section or other provision of the Internal 
     Revenue Code of 1986.
       (b) Section 15 Not To Apply.--The amendments made by 
     subtitle B shall not be treated as a change in a rate of tax 
     for purposes of section 15 of the Internal Revenue Code of 
     1986.

            Subtitle A--American Health Security Trust Fund

     SEC. 801. AMERICAN HEALTH SECURITY TRUST FUND.

       (a) In General.--There is hereby created on the books of 
     the Treasury of the United States a trust fund to be known as 
     the American Health Security Trust Fund (in this section 
     referred to as the ``Trust Fund''). The Trust Fund shall 
     consist of such gifts and bequests as may be made and such 
     amounts as may be deposited in, or appropriated to, such 
     Trust Fund as provided in this Act.
       (b) Appropriations Into Trust Fund.--
       (1) Taxes.--There are hereby appropriated to the Trust Fund 
     for each fiscal year (beginning with fiscal year 1995), out 
     of any moneys in the Treasury not otherwise appropriated, 
     amounts equivalent to 100 percent of the aggregate increase 
     in tax liabilities under the Internal Revenue Code of 1986 
     which is attributable to the application of the amendments 
     made by this title. The amounts appropriated by the preceding 
     sentence shall be transferred from time to time (but not less 
     frequently than monthly) from the general fund in the 
     Treasury to the Trust Fund, such amounts to be determined on 
     the basis of estimates by the Secretary of the Treasury of 
     the taxes paid to or deposited into the Treasury; and proper 
     adjustments shall be made in amounts subsequently transferred 
     to the extent prior estimates were in excess of or were less 
     than the amounts that should have been so transferred.
       (2) Current program receipts.--Notwithstanding any other 
     provision of law, there are hereby appropriated to the Trust 
     Fund for each fiscal year (beginning with fiscal year 1995) 
     the amounts that would otherwise have been appropriated to 
     carry out the following programs:
       (A) The medicare program, under parts A and B of title 
     XVIII of the Social Security Act (other than amounts 
     attributable to any premiums under such parts).
       (B) The medicaid program, under State plans approved under 
     title XIX of such Act.
       (C) The Federal employees health benefit program, under 
     chapter 89 of title 5, United States Code.
       (D) The CHAMPUS program, under chapter 55 of title 10, 
     United States Code.
       (E) The maternal and child health program (under title V of 
     the Social Security Act), vocational rehabilitation programs, 
     programs for drug abuse and mental health services under the 
     Public Health Service Act, programs providing general 
     hospital or medical assistance, and any other Federal program 
     identified by the Board, in consultation with the Secretary 
     of the Treasury, to the extent the programs provide for 
     payment for health services the payment of which may be made 
     under this Act.
       (c) Incorporation of Provisions.--The provisions of 
     subsections (b) through (i) of section 1817 of the Social 
     Security Act shall apply to the Trust Fund under this Act in 
     the same manner as they applied to the Federal Hospital 
     Insurance Trust Fund under part A of title XVIII of such Act, 
     except that the American Health Security Standards Board 
     shall constitute the Board of Trustees of the Trust Fund.
       (d) Transfer of Funds.--Any amounts remaining in the 
     Federal Hospital Insurance Trust Fund or the Federal 
     Supplementary Medical Insurance Trust Fund after the 
     settlement of claims for payments under title XVIII have been 
     completed, shall be transferred into the American Health 
     Security Trust Fund.

              Subtitle B--Taxes Based on Income and Wages

     SEC. 811. PAYROLL TAX ON EMPLOYERS.

       (a) In General.--Section 3111 (relating to tax on 
     employers) is amended by redesignating subsection (c) as 
     subsection (d) and by inserting after subsection (b) the 
     following new subsection:
       ``(c) Health Care.--
       ``(1) In general.--In addition to other taxes, there is 
     hereby imposed on every employer an excise tax, with respect 
     to having individuals in his employ, equal to the applicable 
     percentage of the wages (as defined in section 3121(a)) paid 
     by him with respect to employment (as defined in section 
     3121(b)).
       ``(2) Applicable percentage.--For purposes of paragraph 
     (1), the term `applicable percentage' means--
       ``(A) 4 percent in the case of a small employer, and
       ``(B) 8.4 percent in the case of any other employer.
       ``(3) Small employer.--
       ``(A) In general.--For purposes of paragraph (2), the term 
     `small employer' means any employer if--
       ``(i) the average number of full-time employees (or the 
     equivalent) of such employer during the preceding calendar 
     year is less than 75, and
       ``(ii) the average annual wages (as defined in section 
     3121(a)) paid by such employer to such employees during such 
     year is less than $24,000.
       ``(B) Controlled groups.--All persons treated as a single 
     employer under subsection (a) or (b) of section 52 or 
     subsection (m) or (o) of section 414 shall be treated as 1 
     employer for purposes of subparagraph (A).''
       (b) Self-Employment Income.--Section 1401 (relating to rate 
     of tax on self-employment income) is amended by redesignating 
     subsection (c) as subsection (d) and by inserting after 
     subsection (b) the following new subsection:
       ``(c) Health Care.--
       ``(1) In general.--In addition to other taxes, there shall 
     be imposed for each taxable year, on the self-employment 
     income of every individual, a tax equal to the applicable 
     percentage (as defined in section 3111(c)) of the amount of 
     the self-employment income for such taxable year.
       ``(2) Special rule for determining applicable percentage.--
     In determining the applicable percentage for purposes of 
     paragraph (1), section 3111(c) shall be applied by treating 
     such individual as an employee receiving wages equal to such 
     individual's self-employment income for the taxable year.''
       (c) Comparable Taxes for Railroad Services.--
       (1) Tax on employers.--Section 3221 is amended by 
     redesignating subsections (c), (d), and (e) as subsections 
     (d), (e), and (f), respectively, and by inserting after 
     subsection (b) the following new subsection:
       ``(c) Health Care.--In addition to other taxes, there is 
     hereby imposed on every employer an excise tax, with respect 
     to having individuals in his employ, equal to the applicable 
     percentage (as defined in section 3111(c)) of the 
     compensation paid by such employer for services rendered to 
     such employer.''
       (2) Tax on employee representatives.--Subsection (a) of 
     section 3211 (relating to tax on employee representatives) is 
     amended by redesignating paragraph (3) as paragraph (4) and 
     by inserting after paragraph (2) the following new paragraph:
       ``(3) Health care.--
       ``(A) In general.--In addition to other taxes, there is 
     hereby imposed on the income of each employee representative 
     a tax equal to the applicable percentage of the compensation 
     received during the calendar year by such employee 
     representative for services rendered by such employee 
     representative.
       ``(B) Special rule for determining applicable percentage.--
     In determining the applicable percentage for purposes of 
     subparagraph (A), section 3111(c) shall be applied by treated 
     such individual as an employee receiving wages equal to such 
     individual's compensation for the taxable year.''
       (3) No applicable base.--Subparagraph (A) of section 
     3231(e)(2) is amended by adding at the end thereof the 
     following new clause:
       ``(iv) Health care taxes.--Clause (i) shall not apply to 
     the taxes imposed by sections 3221(c) and 3211(a)(3).''
       (4) Technical amendments.--
       (A) Paragraph (4) of section 3211, as redesignated by 
     paragraph (2), is amended by striking ``and (2)'' and 
     inserting ``, (2), and (3)''.
       (B) Subsection (f) of section 3221, as redesignated by 
     paragraph (1), is amended by striking ``and (b)'' and 
     inserting ``, (b), and (c)''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to remuneration paid after December 31, 1996.

     SEC. 812. HEALTH CARE INCOME TAX.

       (a) General Rule.--Subchapter A of chapter 1 (relating to 
     determination of tax liability) is amended by adding at the 
     end thereof the following new part:

           ``PART VIII--HEALTH CARE INCOME TAX ON INDIVIDUALS

``Sec. 59B. Health care income tax.

     ``SEC. 59B. HEALTH CARE INCOME TAX.

       ``(a) Imposition of Tax.--In the case of an individual, 
     there is hereby imposed a tax (in addition to any other tax 
     imposed by this subtitle) equal to 2.1 percent of the taxable 
     income of the taxpayer for the taxable year.
       ``(b) No Credits Against Tax; No Effect on Minimum Tax.--
     The tax imposed by this section shall not be treated as a tax 
     imposed by this chapter for purposes of determining--
       ``(1) the amount of any credit allowable under this 
     chapter, or
       ``(2) the amount of the minimum tax imposed by section 55.
       ``(c) Special Rules.--
       ``(1) Tax to be withheld, etc.--For purposes of this title, 
     the tax imposed by this section shall be treated as imposed 
     by section 1.
       ``(2) Reimbursement of tax by employer not includible in 
     gross income.--The gross income of an employee shall not 
     include any payment by his employer to reimburse the employee 
     for the tax paid by the employee under this section.
       ``(3) Other rules.--The rules of section 59A(d) shall apply 
     to the tax imposed by this section.''
       (b) Clerical Amendment.--The table of parts for subchapter 
     A of chapter 1 is amended by adding at the end the following 
     new item:

``Part VIII. Health care income tax on individuals.''

       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     1996.

        Subtitle C--Increase in Excise Taxes on Tobacco Products

     SEC. 821. INCREASE IN EXCISE TAXES ON TOBACCO PRODUCTS.

       (a) Cigarettes.--Subsection (b) of section 5701 is 
     amended--
       (1) by striking ``$12 per thousand ($10 per thousand on 
     cigarettes removed during 1991 or 1992)'' in paragraph (1) 
     and inserting ``$100 per thousand'', and
       (2) by striking ``$25.20 per thousand ($21 per thousand on 
     cigarettes removed during 1991 or 1992)'' in paragraph (2) 
     and inserting ``$210 per thousand''.
       (b) Cigars.--Subsection (a) of section 5701 is amended--
       (1) by striking ``$1.125 cents per thousand (93.75 cents 
     per thousand on cigars removed during 1991 or 1992)'' in 
     paragraph (1) and inserting ``$9.38 per thousand'', and
       (2) by striking ``equal to'' and all that follows in 
     paragraph (2) and inserting ``equal to 106.25 percent of the 
     price for which sold but not more than $250 per thousand.''
       (c) Cigarette Papers.--Subsection (c) of section 5701 is 
     amended by striking ``0.75 cent (0.625 cent on cigarette 
     papers removed during 1991 or 1992)'' and inserting ``6.25 
     cents''.
       (d) Cigarette Tubes.--Subsection (d) of section 5701 is 
     amended by striking ``1.5 cents (1.25 cents on cigarette 
     tubes removed during 1991 or 1992)'' and inserting ``12.5 
     cents''.
       (e) Smokeless Tobacco.--Subsection (e) of section 5701 is 
     amended--
       (1) by striking ``36 cents (30 cents on snuff removed 
     during 1991 or 1992)'' in paragraph (1) and inserting 
     ``$3.00'', and
       (2) by striking ``12 cents (10 cents on chewing tobacco 
     removed during 1991 or 1992)'' in paragraph (2) and inserting 
     ``$1.00''.
       (f) Pipe Tobacco.--Subsection (f) of section 5701 is 
     amended by striking ``67.5 cents (56.25 cents on pipe tobacco 
     removed during 1991 or 1992)'' and inserting ``$5.63''.
       (g) Effective Date.--The amendments made by this section 
     shall apply to articles removed (as defined in section 
     5702(k) of the Internal Revenue Code of 1986) after December 
     31, 1996.
       (h) Floor Stocks Taxes.--
       (1) Imposition of tax.--On tobacco products and cigarette 
     papers and tubes manufactured in or imported into the United 
     States which are removed before January 1, 1997, and held on 
     such date for sale by any person, there is hereby imposed a 
     tax in an amount equal to the excess of--
       (A) the tax which would be imposed under section 5701 of 
     the Internal Revenue Code of 1986 on the article if the 
     article had been removed on such date, over
       (B) the prior tax (if any) imposed under section 5701 or 
     7652 of such Code on such article.
       (2) Authority to exempt cigarettes held in vending 
     machines.--To the extent provided in regulations prescribed 
     by the Secretary, no tax shall be imposed by paragraph (1) on 
     cigarettes held for retail sale on January 1, 1997, by any 
     person in any vending machine. If the Secretary provides such 
     a benefit with respect to any person, the Secretary may 
     reduce the $500 amount in paragraph (3) with respect to such 
     person.
       (3) Credit against tax.--Each person shall be allowed as a 
     credit against the taxes imposed by paragraph (1) an amount 
     equal to $500. Such credit shall not exceed the amount of 
     taxes imposed by paragraph (1) for which such person is 
     liable.
       (4) Liability for tax and method of payment.--
       (A) Liability for tax.--A person holding any article on 
     January 1, 1997, to which any tax imposed by paragraph (1) 
     applies shall be liable for such tax.
       (B) Method of payment.--The tax imposed by paragraph (1) 
     shall be paid in such manner as the Secretary shall prescribe 
     by regulations.
       (C) Time for payment.--The tax imposed by paragraph (1) 
     shall be paid on or before July 31, 1997.
       (5) Articles in foreign trade zones.--Notwithstanding the 
     Act of June 18, 1934 (48 Stat. 998, 19 U.S.C. 81a) and any 
     other provision of law, any article which is located in a 
     foreign trade zone on January 1, 1997, shall be subject to 
     the tax imposed by paragraph (1) if--
       (A) internal revenue taxes have been determined, or customs 
     duties liquidated, with respect to such article before such 
     date pursuant to a request made under the 1st proviso of 
     section 3(a) of such Act, or
       (B) such article is held on such date under the supervision 
     of a customs officer pursuant to the 2d proviso of such 
     section 3(a).
       (6) Definitions.--For purposes of this subsection--
       (A) In general.--Terms used in this subsection which are 
     also used in section 5702 of the Internal Revenue Code of 
     1986 shall have the respective meanings such terms have in 
     such section.
       (B) Secretary.--The term ``Secretary'' means the Secretary 
     of the Treasury or his delegate.
       (7) Controlled groups.--Rules similar to the rules of 
     section 5061(e)(3) of such Code shall apply for purposes of 
     this subsection.
       (8) Other laws applicable.--All provisions of law, 
     including penalties, applicable with respect to the taxes 
     imposed by section 5701 of such Code shall, insofar as 
     applicable and not inconsistent with the provisions of this 
     subsection, apply to the floor stocks taxes imposed by 
     paragraph (1), to the same extent as if such taxes were 
     imposed by such section 5701. The Secretary may treat any 
     person who bore the ultimate burden of the tax imposed by 
     paragraph (1) as the person to whom a credit or refund under 
     such provisions may be allowed or made.

        Subtitle D--Increase in Taxes on Firearms and Ammunition

     SEC. 831. INCREASE IN TAXES ON FIREARMS AND AMMUNITION.

       (a) Pistols and Revolvers.--The text of section 4181 
     (relating to imposition of tax on firearms) is amended to 
     read as follows:
       ``There is hereby imposed upon the sale by the 
     manufacturer, producer, or importer of any pistol, revolver, 
     firearm, shell, or cartridge a tax equal to 50 percent of the 
     price for which so sold.''
       (b) Additional Taxes Not Added To Wildlife Fund.--Section 
     3(a) of the Act of September 2, 1937 (16 U.S.C. 669b(a)), 
     commonly referred to as the ``Pittman-Robertson Wildlife 
     Restoration Act'', is amended by adding at the end the 
     following new sentence: ``There shall not be covered into the 
     fund the portion of the tax imposed by such section 4181 that 
     is attributable to any increase in amounts received in the 
     Treasury under such section by reason of the amendment made 
     by section 831 of the American Health Security Act, as 
     estimated by the Secretary.''.
       (c) Effective Date.--The amendments made by this section 
     shall take effect on January 1, 1997.
       (d) Floor Stocks Tax.--
       (1) Imposition of tax.--In the case of any taxable article 
     on which tax was imposed under section 4181 of the Internal 
     Revenue Code of 1986 before January 1, 1997, and which is 
     held by a dealer on such date, there is hereby imposed a 
     floor stocks tax equal to the excess of--
       (A) the tax which would be imposed by such section if such 
     article had been sold by the manufacturer, producer, or 
     importer on such date, over
       (B) the tax imposed by such section on such article.
       (2) Liability for tax and method of payment.--
       (A) Liability for tax.--The dealer holding the taxable 
     article on January 1, 1997, to which the tax imposed by 
     paragraph (1) applies shall be liable for such tax.
       (B) Method of payment.--The tax imposed by paragraph (1) 
     shall be paid in such manner as the Secretary of the Treasury 
     or his delegate shall prescribe.
       (C) Time for payment.--The tax imposed by paragraph (1) 
     shall be paid on or before July 31, 1997.
       (3) Definitions.--For purposes of this subsection--
       (A) Taxable article.--The term ``taxable article'' means 
     any article subject to tax under section 4181 of such Code, 
     other than an article exempt from such tax under section 4182 
     of such Code.
       (B) Held by a dealer.--The term ``held by a dealer'' has 
     the meaning given such term by section 6412 of such Code.
       (4) Articles in foreign trade zones.--Notwithstanding the 
     Act of June 18, 1934 (48 Stat. 998, 19 U.S.C. 81a) and any 
     other provision of law, any article which is located in a 
     foreign trade zone on January 1, 1997, shall be subject to 
     the tax imposed by paragraph (1) if--
       (A) internal revenue taxes have been determined, or customs 
     duties liquidated, with respect to such article before such 
     date pursuant to a request made under the 1st proviso of 
     section 3(a) of such Act, or
       (B) such article is held on such date under the supervision 
     of a customs officer pursuant to the 2d proviso of such 
     section 3(a).
       (5) Other laws applicable.--All provisions of law, 
     including penalties, applicable with respect to the taxes 
     imposed by section 4181 of such Code shall, insofar as 
     applicable and not inconsistent with the provisions of this 
     subsection, apply with respect to the floor stock taxes 
     imposed by paragraph (1) to the same extent as if such taxes 
     were imposed by such section 4181.
   TITLE IX--CONFORMING AMENDMENTS TO THE EMPLOYEE RETIREMENT INCOME 
                          SECURITY ACT OF 1974

     SEC. 901. ERISA INAPPLICABLE TO HEALTH COVERAGE ARRANGEMENTS 
                   UNDER STATE HEALTH SECURITY PROGRAMS.

       Section 4 of the Employee Retirement Income Security Act of 
     1974 (29 U.S.C. 1003) is amended--
       (1) in subsection (a), by striking ``subsection (b)'' and 
     inserting ``subsections (b) and (c)''; and
       (2) by adding at the end the following new subsection:
       ``(c) The provisions of this title shall not apply to any 
     arrangement forming a part of a State health security program 
     established pursuant to section 101(b) of the American Health 
     Security Act of 1994.''.

     SEC. 902. EXEMPTION OF STATE HEALTH SECURITY PROGRAMS FROM 
                   ERISA PREEMPTION.

       Section 514(b) of the Employee Retirement Income Security 
     Act of 1974 (29 U.S.C. 1144(b)) is amended by adding at the 
     end the following new paragraph:
       ``(9) Subsection (a) of this section shall not apply to 
     State health security programs established pursuant to 
     section 101(b) of the American Health Security Act of 
     1994.''.

     SEC. 903. PROHIBITION OF EMPLOYEE BENEFITS DUPLICATIVE OF 
                   BENEFITS UNDER STATE HEALTH SECURITY PROGRAMS.

       (a) In General.--Part 5 of subtitle B of title I of the 
     Employee Retirement Income Security Act of 1974 is amended by 
     adding at the end the following new section:


``prohibition of employee benefits duplicative of state health security 
                            program benefits

       ``Sec. 516. No employee benefit plan may provide benefits 
     which duplicate payment for any items or services for which 
     payment may be made under a State health security program 
     established pursuant to section 101(b) of the American Health 
     Security Act of 1994.''.
       (b) Clerical Amendment.--The table of contents in section 1 
     of such Act is amended by inserting after the item relating 
     to section 514 the following new items:

``Sec. 515. Delinquent contributions.
``Sec. 516. Prohibition of employee benefits duplicative of State 
              health security program benefits.''.

     SEC. 904. REPEAL OF CONTINUATION COVERAGE REQUIREMENTS UNDER 
                   ERISA AND CERTAIN OTHER REQUIREMENTS RELATING 
                   TO GROUP HEALTH PLANS.

       (a) In General.--Part 6 of subtitle B of title I of the 
     Employee Retirement Income Security Act of 1974 (29 U.S.C. 
     1161 et seq.) is repealed.
       (b) Conforming Amendments.--
       (1) Section 502(a) of such Act (29 U.S.C. 1132(a)) is 
     amended--
       (A) by adding ``or'' at the end of paragraph (6);
       (B) by striking paragraph (7); and
       (C) by redesignating paragraph (8) as paragraph (7).
       (2) Section 502(c)(1) of such Act (29 U.S.C. 1132(c)(1)) is 
     amended by striking ``paragraph (1) or (4) of section 606 
     or''.
       (3) Section 4301(c)(4) of the Omnibus Budget Reconciliation 
     Act of 1993 (Public Law 103-66; 107 Stat. 377) and the 
     amendments made thereby are repealed.
       (4) The table of contents in section 1 of the Employee 
     Retirement Income Security Act of 1974 is amended by striking 
     the items relating to part 6 of subtitle B of title I of such 
     Act.

     SEC. 905. EFFECTIVE DATE OF TITLE.

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

   Amendment in the Nature of a Substitute to H.R. 3600, as Reported 
                  Offered by Mr. Manzullo of Illinois

       Strike all after the enacting clause and insert the 
     following:

     SECTION 1. SHORT TITLE; FINDINGS.

       (a) Short Title.--This Act may be cited as the ``Small 
     Business Health Insurance Choice Act''.
       (b) Findings Relating to Interstate Commerce.--Congress 
     finds that health insurance is a critical part of the economy 
     of the United States and interstate commerce, consumes a 
     significant percentage of public and private spending, and 
     affects all industries and individuals in the United States.

     SEC. 2. TABLE OF CONTENTS.

       The table of contents of this Act is as follows:

Sec. 1. Short title; findings.
Sec. 2. Table of contents.

           TITLE I--IMPROVED ACCESS TO AFFORDABLE HEALTH CARE

 Subtitle A--Increased Availability and Continuity of Health Coverage 
                    for Employees and Their Families

PART 1--PREEXISTING CONDITIONS AND CONTINUITY OF COVERAGE; RENEWABILITY

Sec. 101. Limitation on pre-existing condition clauses.
Sec. 102. Assurance of continuity of coverage through previous 
              satisfaction of pre-existing condition requirement.
Sec. 103. Requirements relating to renewability generally.

           PART 2--ENFORCEMENT; EFFECTIVE DATES; DEFINITIONS

Sec. 111. Enforcement.
Sec. 112. Effective dates.
Sec. 113. Definitions.

          Subtitle B--Preemption of Scope of State Regulation

Sec. 121. Prohibition of State benefit mandates for group health plans.
Sec. 122. Prohibition of provisions prohibiting employer groups from 
              purchasing health insurance.
Sec. 123. Restrictions on managed care.
Sec. 124. Definitions.

                 Subtitle C--Health Deduction Fairness

Sec. 131. Permanent extension and increase in health insurance tax 
              deduction for self-employed individuals.
Sec. 132. Deduction of health insurance premiums for certain previously 
              uninsured individuals.

               TITLE II--REMOVING ANTI-TRUST IMPEDIMENTS

Sec. 201. Establishment of limited exemption program for health care 
              joint ventures.
Sec. 202. Issuance of health care certificates of public advantage.
Sec. 203. Interagency Advisory Committee on Competition, Antitrust 
              Policy, and Health Care.
Sec. 204. Definitions.
           TITLE I--IMPROVED ACCESS TO AFFORDABLE HEALTH CARE
 Subtitle A--Increased Availability and Continuity of Health Coverage 
                    for Employees and Their Families

PART 1--PREEXISTING CONDITIONS AND CONTINUITY OF COVERAGE; RENEWABILITY

     SEC. 101. LIMITATION ON PRE-EXISTING CONDITION CLAUSES.

       A group health plan may not impose (and an insurer may not 
     require an employer under a group health plan to impose 
     through a waiting period for coverage under a plan or similar 
     requirement) a limitation or exclusion of benefits relating 
     to treatment of a condition based on the fact that the 
     condition pre-existed the effective date of the plan with 
     respect to an individual if--
       (1) the condition relates to a condition that was not 
     diagnosed or treated within 3 months before the date of 
     coverage under the plan;
       (2) the limitation or exclusion extends over more than 6 
     months after the date of coverage under the plan;
       (3) the limitation or exclusion applies to an individual 
     who, as of the date of birth, was covered under the plan; or
       (4) the limitation or exclusion relates to pregnancy.

     In the case of an individual who is eligible for coverage 
     under a plan but for a waiting period imposed by the 
     employer, in applying paragraphs (1) and (2), the individual 
     shall be treated as having been covered under the plan as of 
     the earliest date of the beginning of the waiting period.

     SEC. 102. ASSURANCE OF CONTINUITY OF COVERAGE THROUGH 
                   PREVIOUS SATISFACTION OF PRE-EXISTING CONDITION 
                   REQUIREMENT.

       (a) In General.--Each group health plan shall waive any 
     period applicable to a preexisting condition for similar 
     benefits with respect to an individual to the extent that the 
     individual, prior to the date of such individual's enrollment 
     in such plan, was covered for the condition under any other 
     health plan that was in effect before such date.
       (b) Continuous Coverage Required.--
       (1) In general.--Subsection (a) shall no longer apply if 
     there is a continuous period of more than 60 days (or, in the 
     case of an individual described in paragraph (3), 6 months) 
     on which the individual was not covered under a group health 
     plan.
       (2) Treatment of waiting periods.--In applying paragraph 
     (1), any waiting period imposed by an employer before an 
     employee is eligible to be covered under a plan shall be 
     treated as a period in which the employee was covered under a 
     group health plan.
       (3) Job termination.--An individual is described in this 
     paragraph if the individual loses coverage under a group 
     health plan due to termination of employment.
       (4) Exclusion of cash-only and dread disease plans.--In 
     this subsection, the term ``group health plan'' does not 
     include any group health plan which is offered primarily to 
     provide--
       (A) coverage for a specified disease or illness, or
       (B) a hospital or fixed indemnity policy, unless the 
     Secretary determines that such a plan provides sufficiently 
     comprehensive coverage of a benefit so that it should be 
     treated as a group health plan under this subsection.

     SEC. 103. REQUIREMENTS RELATING TO RENEWABILITY GENERALLY.

       (a) Multiemployer Plans and Exempted Multiple Employer 
     Health Plans.--A multiemployer plan and an exempted multiple 
     employer health plan may not cancel coverage or deny renewal 
     of coverage under such a plan with respect to an employer 
     other than--
       (1) for nonpayment of contributions,
       (2) for fraud or other misrepresentation by the employer,
       (3) for noncompliance with plan provisions,
       (4) for misuse of a provider network provision, or
       (5) because the plan is ceasing to provide any coverage in 
     a geographic area.
       (b) Insurers.--
       (1) In general.--An insurer may not cancel a health 
     insurance plan or deny renewal of coverage under such a plan 
     other than--
       (A) for nonpayment of premiums,
       (B) for fraud or other misrepresentation by the insured,
       (C) for noncompliance with plan provisions,
       (D) for misuse of a provider network provision, or
       (E) because the insurer is ceasing to provide any health 
     insurance plan in a State, or, in the case of a health 
     maintenance organization, in a geographic area.
       (2) Limitation on market reentry.--If an insurer terminates 
     the offering of health insurance plans in an area, the 
     insurer may not offer such a health insurance plan to any 
     employer in the area until 5 years after the date of the 
     termination.

           PART 2--ENFORCEMENT; EFFECTIVE DATES; DEFINITIONS

     SEC. 111. ENFORCEMENT.

       (a) Enforcement by Department of Labor for Employers and 
     Group Health Plans.--
       (1) In general.--For purposes of part 5 of subtitle B of 
     title I of the Employee Retirement Income Security Act of 
     1974, the provisions of part 1 of this subtitle shall be 
     deemed to be provisions of title I of such Act irrespective 
     of exclusions under section 4(b) of such Act.
       (2) Regulatory authority.--With respect to the regulatory 
     authority of the Secretary of Labor under this subtitle 
     pursuant to subsection (a), section 505 of the Employee 
     Retirement Income Security Act of 1974 (29 U.S.C. 1135) shall 
     apply.
       (b) Enforcement by Excise Tax for Insurers.--
       (1) In general.--Chapter 43 of the Internal Revenue Code of 
     1986 (relating to qualified pension, etc., plans) is amended 
     by adding at the end thereof the following new section:

     ``SEC. 4980C. FAILURE OF INSURER TO COMPLY WITH HEALTH 
                   INSURANCE STANDARDS.

       ``(a) Imposition of Tax.--
       ``(1) In general.--There is hereby imposed a tax on the 
     failure of an insurer to comply with the requirements 
     applicable to the insurer under part 1 of subtitle A of title 
     I of the Small Business Health Insurance Choice Act.
       ``(2) Exception.--Paragraph (1) shall not apply to a 
     failure by an insurer in a State if the Secretary of Health 
     and Human Services determines that the State has in effect a 
     regulatory enforcement mechanism that provides adequate 
     sanctions with respect to such a failure by such an insurer.
       ``(b) Amount of Tax.--
       ``(1)  In general.--Subject to paragraph (2), the amount of 
     the tax imposed by subsection (a) shall be $100 for each day 
     during which such failure persists for each individual to 
     which such failure relates. A rule similar to the rule of 
     section 4980B(b)(3) shall apply for purposes of this section.
       ``(2) Limitation.--The amount of the tax imposed by 
     subsection (a) for an insurer with respect to a health 
     insurance plan shall not exceed 25 percent of the amounts 
     received under the plan for coverage during the period such 
     failure persists.
       ``(c) Liability for Tax.--The tax imposed by this section 
     shall be paid by the insurer.
       ``(d) Exceptions.--
       ``(1) Corrections within 30 days.--No tax shall be imposed 
     by subsection (a) by reason of any failure if--
       ``(A) such failure was due to reasonable cause and not to 
     willful neglect, and
       ``(B) such failure is corrected within the 30-day period 
     beginning on earliest date the insurer knew, or exercising 
     reasonable diligence would have known, that such failure 
     existed.
       ``(2) Waiver by secretary.--In the case of a failure which 
     is due to reasonable cause and not to willful neglect, the 
     Secretary may waive part or all of the tax imposed by 
     subsection (a) to the extent that payment of such tax would 
     be excessive relative to the failure involved.
       ``(e) Definitions.--For purposes of this section, the terms 
     `health insurance plan' and `insurer' have the respective 
     meanings given such terms in section 113 of the Small 
     Business Health Insurance Choice Act.''
       (2) Clerical amendment.--The table of sections for chapter 
     43 of such Code is amended by adding at the end thereof the 
     following new items:

``Sec. 4980C. Failure of insurer to comply with health insurance 
              standards.''

     SEC. 112. EFFECTIVE DATES.

       (a) Part 1.--The requirements of part 1 with respect to--
       (1) group health plans and employers shall apply to plans 
     years beginning after December 31, 1994, and
       (2) insurers shall take effect on January 1, 1995.

     SEC. 113. DEFINITIONS.

       (a) In General.--For purposes of this subtitle:
       (1) Employer.--The term ``employer'' shall have the meaning 
     applicable under section 3(5) of the Employee Retirement 
     Income Security Act of 1974.
       (2) Exempted multiple employer health plan.--The term 
     ``exempted multiple employer health plan'' means a multiple 
     employer welfare arrangement treated as an employee welfare 
     benefit plan by reason of an exemption under part 7 of 
     subtitle B of title I of the Employee Retirement Income 
     Security Act of 1974 (as added by part 2 of subtitle C of 
     this title).
       (3) Group health plan; plan.--(A) The term ``group health 
     plan'' means an employee welfare benefit plan providing 
     medical care (as defined in section 213(d) of the Internal 
     Revenue Code of 1986) to participants or beneficiaries 
     directly or through insurance, reimbursement, or otherwise, 
     but does not include any type of coverage excluded from the 
     definition of a health insurance plan under section 
     1107(4)(B).
       (B) The term ``plan'' means, unless used with a modifying 
     term or the context specifically indicates otherwise, a group 
     health plan (including any such plan which is a multiemployer 
     plan), an exempted multiple employer health plan, or an 
     insured multiple employer health plan.
       (4) Health Insurance Plan.--
       (A) In general.--Except as provided in subparagraph (B), 
     the term ``health insurance plan'' means any hospital or 
     medical service policy or certificate, hospital or medical 
     service plan contract, or health maintenance organization 
     group contract offered by an insurer.
       (B) Exception.--Such term does not include any of the 
     following--
       (i) coverage only for accident, dental, vision, disability 
     income, or long-term care insurance, or any combination 
     thereof,
       (ii) medicare supplemental health insurance,
       (iii) coverage issued as a supplement to liability 
     insurance,
       (iv) worker's compensation or similar insurance, or
       (v) automobile medical-payment insurance,

     or any combination thereof.
       (5) Insured multiple employer health plan.--The term 
     ``insured multiple employer health plan'' means a fully 
     insured multiple employer welfare arrangement under which 
     benefits consist solely of medical care described in section 
     607(1) of the Employee Retirement Income Security Act of 1974 
     (disregarding such incidental benefits as the Secretary of 
     Health and Human Services shall specify by regulations).
       (6) Insurer.--The term ``insurer'' means a licensed 
     insurance company, a prepaid hospital or medical service 
     plan, and a health maintenance organization offering such a 
     plan to an employer, and includes a similar organization 
     regulated under State law for solvency.
       (7) State.--The term ``State'' means the 50 States, the 
     District of Columbia, Puerto Rico, the Virgin Islands, Guam, 
     and American Samoa.
          Subtitle B--Preemption of Scope of State Regulation

     SEC. 121. PROHIBITION OF STATE BENEFIT MANDATES FOR GROUP 
                   HEALTH PLANS.

       In the case of a group health plan, no provision of State 
     or local law shall apply that requires the coverage of one or 
     more specific benefits, services, or categories of health 
     care, or services of any class or type of provider of health 
     care.

     SEC. 122. PROHIBITION OF PROVISIONS PROHIBITING EMPLOYER 
                   GROUPS FROM PURCHASING HEALTH INSURANCE.

       No provision of State or local law shall apply that 
     prohibits 2 or more employers from obtaining coverage under 
     an insured multiple employer health plan.

     SEC. 123. RESTRICTIONS ON MANAGED CARE.

       (a) Preemption of State Law Provisions.--Subject to 
     subsection (c), the following provisions of State law are 
     preempted and may not be enforced:
       (1) Restrictions on reimbursement rates or selective 
     contracting.--Any law that restricts the ability of a group 
     health plan to negotiate reimbursement rates with providers 
     or to contract selectively with one provider or a limited 
     number of providers.
       (2) Restrictions on differential financial incentives.--Any 
     law that limits the financial incentives that a group health 
     plan may require a beneficiary to pay when a non-plan 
     provider is used on a non-emergency basis.
       (b) GAO Study.--
       (1) In general.--The Comptroller General shall conduct a 
     study of the benefits and cost effectiveness of the use of 
     managed care in the delivery of health services.
       (2) Report.--By not later than 4 years after the date of 
     the enactment of this Act, the Comptroller General shall 
     submit a report to Congress on the study conducted under 
     paragraph (1) and shall include in the report such 
     recommendations (including whether the provisions of 
     subsection (a) should be extended) as may be appropriate.
       (c) Sunset.--Unless otherwise provided, subsection (a) 
     shall not apply 5 years after the date of the enactment of 
     this Act.

     SEC. 124. DEFINITIONS.

       For purposes of this subtitle, the terms ``employee'', 
     ``employer'', ``group health plan'', ``health insurance 
     plan'', ``insured multiple employer health plan'', and 
     ``State'' have the meanings given such terms in section 113.
                 Subtitle C--Health Deduction Fairness

     SEC. 131. PERMANENT EXTENSION AND INCREASE IN HEALTH 
                   INSURANCE TAX DEDUCTION FOR SELF-EMPLOYED 
                   INDIVIDUALS.

       (a) Permanent Extension of Deduction.--
       (1) In general.--Subsection (l) of section 162 of the 
     Internal Revenue Code of 1986 (relating to special rules for 
     health insurance costs of self-employed individuals) is 
     amended by striking paragraph (6).
       (2) Effective date.--The amendment made by this subsection 
     shall apply to taxable years beginning after December 31, 
     1994.
       (b) Increase in Amount of Deduction.--
       (1) In general.--Paragraph (1) of section 162(l) of such 
     Code is amended by striking ``25 percent of'' and inserting 
     ``100 percent (50 percent in the case of taxable years 
     beginning in 1996 or 1997) of''.
       (2) Effective date.--The amendments made by this subsection 
     shall apply to taxable years beginning after December 31, 
     1994.

     SEC. 132. DEDUCTION OF HEALTH INSURANCE PREMIUMS FOR CERTAIN 
                   PREVIOUSLY UNINSURED INDIVIDUALS.

       (a) In General.--Section 213 of the Internal Revenue Code 
     of 1986 (relating to medical, dental, etc., expenses) is 
     amended by adding at the end thereof the following new 
     subsection:
       ``(f) Deduction for Health Insurance Costs Determined 
     Without Regard to Adjusted Gross Income Threshold.--
       ``(1) In general.--Subsection (a) shall be applied without 
     regard to the limitation based on adjusted gross income in 
     the case of the applicable percentage of the amounts paid for 
     insurance which constitutes medical care for the taxpayer, 
     his spouse, and dependents.
       ``(2) Applicable percentage.--For purposes of paragraph 
     (1), the term `applicable percentage' means--
       ``(A) 25 percent for taxable years beginning in 1995 or 
     1996,
       ``(B) 50 percent for taxable years beginning in 1997 or 
     1998, and
       ``(C) 100 percent for taxable years beginning after 1999.
       ``(3) Deduction not allowed to individuals eligible for 
     employer-subsidized coverage.--
       ``(A) In general.--Paragraph (1) shall not apply to any 
     individual--
       ``(i) who is eligible to participate in any subsidized 
     health plan maintained by an employer of such individual or 
     the spouse of such individual, or
       ``(ii) who is (or whose spouse is) a member of a subsidized 
     class of employees of an employer.
       ``(B) Subsidized class.--For purposes of subparagraph (A), 
     an individual is a member of a subsidized class of employees 
     of an employer if, at any time during the 3 calendar years 
     ending with or within the taxable year, any member of such 
     class was eligible to participate in any subsidized health 
     plan maintained by such employer.
       ``(C) Special rules.--
       ``(i) Controlled groups.--All persons treated as a single 
     employer under subsection (a) or (b) of section 52 or 
     subsection (m) or (o) of section 414 shall be treated as a 
     single employer for purposes of subparagraph (B).
       ``(ii) Classes.--Classes of employees shall be determined 
     under regulations prescribed by the Secretary based on such 
     factors as the Secretary determines appropriate to carry out 
     the purposes of this subsection.
       ``(4) Coordination with deduction for other amounts.--
     Amounts allowable as a deduction under subsection (a) by 
     reason of this subsection shall not be taken into account in 
     determining the deduction under subsection (a) for other 
     amounts.
       ``(5) Subsection not to apply to individuals eligible for 
     medicare.--This subsection shall not apply to amount paid for 
     insurance covering an individual who is eligible for benefits 
     under title XVIII of the Social Security Act.''
       (b) Deduction Allowed Whether or Not Individual Itemizes 
     Other Deductions.--Subsection (a) of section 62 of such Code 
     is amended by inserting after paragraph (15) the following 
     new paragraph:
       ``(16) Costs of certain health insurance.--The deduction 
     allowed by section 213 to the extent allowable by reason of 
     section 213(f).''
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     1994.
               TITLE II--REMOVING ANTI-TRUST IMPEDIMENTS

     SEC. 201. ESTABLISHMENT OF LIMITED EXEMPTION PROGRAM FOR 
                   HEALTH CARE JOINT VENTURES.

       (a) Establishment.--
       (1) In general.--Not later than 6 months after the date of 
     the enactment of this Act, the Attorney General, after 
     consultation with the Secretary of Health and Human Services 
     and the Interagency Advisory Committee on Competition, 
     Antitrust Policy, and Health Care, shall promulgate specific 
     guidelines under which a health care joint venture may submit 
     an application requesting that the Attorney General provide 
     the entities participating in the joint venture with an 
     exemption under which (notwithstanding any other provision of 
     law)--
       (A) monetary recovery on a claim under the antitrust laws 
     shall be limited to actual damages if the claim results from 
     conduct within the scope of the joint venture that occurs 
     while the exemption is in effect; and
       (B) the conduct of the entity in making or performing a 
     contract to carry out the joint venture shall not be deemed 
     illegal per se under the antitrust laws but shall be judged 
     on the basis of its reasonableness, taking into account all 
     relevant factors affecting competition, including (but not 
     limited to) effects on competition in properly defined, 
     relevant research, development, product, process, and service 
     markets (taking into consideration worldwide capacity to the 
     extent that it may be appropriate in the circumstances).
       (2) Deadline for response.--The Attorney General, after 
     consultation with the Secretary and the Advisory Committee, 
     shall approve or disapprove the application of a health care 
     joint venture for an exemption under this subsection not 
     later than 30 days after the Attorney General receives the 
     joint venture's application.
       (3) Providing reasons for disapproval.--If the Attorney 
     General disapproves the application of a health care joint 
     venture for an exemption under this subsection, the Attorney 
     General shall provide the joint venture with a statement 
     explaining the reasons for the Attorney General's 
     disapproval.
       (b) Requirements for Approval.--For purposes of subsection 
     (a), the Attorney General shall approve the application of a 
     health care joint venture for an exemption under subsection 
     (a) if an entity participating in the joint venture submits 
     to the Attorney General an application not later than 30 days 
     after the entity has entered into a written agreement to 
     participate in the joint venture (or not later than 30 days 
     after the date of the enactment of this Act in the case of a 
     joint venture in effect as of such date) that contains the 
     following information and assurances:
       (1) The identities of the parties to the joint venture.
       (2) The nature, objectives, and planned activities of the 
     joint venture.
       (3) Assurances that the entities participating in the joint 
     venture shall notify the Attorney General of any changes in 
     the information described in paragraphs (1) and (2) during 
     the period for which the exemption is in effect.
       (c) Revocation of Exemption.--
       (1) In general.--The Attorney General, after consultation 
     with the Secretary, may revoke an exemption provided to a 
     health care joint venture under this section if, at any time 
     during which the exemption is in effect, the Attorney General 
     finds that the joint venture no longer meets the applicable 
     requirements for approval under subsection (b), except that 
     the Attorney General may not revoke such an exemption if the 
     failure of the health care joint venture to meet such 
     requirements is merely technical in nature.
       (2) Timing.--The revocation of an exemption under paragraph 
     (1) shall apply only to conduct of the health care joint 
     venture occurring after the exemption is no longer in effect.
       (d) Withdrawal of Application.--Any party that submits an 
     application under this section may withdraw such application 
     at any time before the Attorney General's response to the 
     application.
       (e) Requirements Relating to Notice and Publication of 
     Exemptions and Related Information.--
       (1) Publication of approved applications for exemptions in 
     federal register.--
       (A) In general.--With respect to each exemption for a 
     health care joint venture provided under subsection (a), the 
     Attorney General (acting jointly with the Secretary) shall--
       (i) prepare a notice with respect to the joint venture that 
     identifies the parties to the venture and that describes the 
     planned activities of the venture;
       (ii) submit the notice to the entities participating in the 
     joint venture; and
       (iii) after submitting the notice to such entities (but not 
     later than 30 days after approving the application for the 
     exemption for the joint venture), publish the notice in the 
     Federal Register.
       (B) Effect of publication.--An exemption provided by the 
     Attorney General under subsection (a) shall take effect as of 
     the date of the publication in the Federal Register of the 
     notice with respect to the exemption pursuant to subparagraph 
     (A).
       (2) Waiver of disclosure requirements for information 
     relating to applications for exemptions.--
       (A) In general.--All information and documentary material 
     submitted as part of an application of a health care joint 
     venture for an exemption under subsection (a), together with 
     any other information obtained by the Attorney General, the 
     Secretary, or the Advisory Committee in the course of any 
     investigation, administrative proceeding, or case with 
     respect to a potential violation of the antitrust laws by the 
     joint venture with respect to which the exemption applies, 
     shall be exempt from disclosure under section 552 of title 5, 
     United States Code, and shall not be made publicly available 
     by any agency of the United States to which such section 
     applies, except as relevant to a law enforcement 
     investigation or in a judicial or administrative proceeding 
     in which such information and material is subject to any 
     protective order.
       (B) Exception for information included in federal register 
     notice.--Subparagraph (A) shall not apply with respect to 
     information contained in a notice published in the Federal 
     Register pursuant to paragraph (1).
       (3) Use of information to support or answer claims under 
     antitrust laws.--
       (A) In general.--Except as provided in subparagraph (B), 
     the fact of disclosure of conduct under an application for an 
     exemption under subsection (a) and the fact of publication of 
     a notice in the Federal Register under paragraph (1) shall be 
     admissible into evidence in any judicial or administrative 
     proceeding for the sole purpose of establishing that a person 
     is entitled to the protections provided by an exemption 
     granted under subsection (a).
       (B) Effect of rejected application.--If the Attorney 
     General denies, in whole or in part, an application for an 
     exemption under subsection (a), or revokes an exemption under 
     such section, neither the negative determination nor the 
     statement of reasons therefore shall be admissible into 
     evidence in any administrative or judicial proceeding for the 
     purpose of supporting or answering any claim under the 
     antitrust laws.

     SEC. 202. ISSUANCE OF HEALTH CARE CERTIFICATES OF PUBLIC 
                   ADVANTAGE.

       (a) Issuance and Effect of Certificate.--The Attorney 
     General, after consultation with the Secretary and the 
     Advisory Committee, shall issue in accordance with this 
     section a certificate of public advantage to each eligible 
     health care joint venture that complies with the requirements 
     in effect under this section on or after the expiration of 
     the 1-year period that begins on the date of the enactment of 
     this Act (without regard to whether or not the Attorney 
     General has promulgated regulations to carry out this section 
     by such date). Such venture, and the parties to such venture, 
     shall not be liable under any of the antitrust laws for 
     conduct described in such certificate and engaged in by such 
     venture if such conduct occurs while such certificate is in 
     effect.
       (b) Requirements Applicable to Issuance of Certificates.--
       (1) Standards to be met.--The Attorney General shall issue 
     a certificate to an eligible health care joint venture if the 
     Attorney General finds that--
       (A) the benefits that are likely to result from carrying 
     out the venture outweigh the reduction in competition (if 
     any) that is likely to result from the venture, and
       (B) such reduction in competition is reasonably necessary 
     to obtain such benefits.
       (2) Factors to be considered.--
       (A) Weighing of benefits against reduction in 
     competition.--For purposes of making the finding described in 
     paragraph (1)(A), the Attorney General shall consider whether 
     the venture is likely --
       (i) to maintain or to increase the quality of health care,
       (ii) to increase access to health care,
       (iii) to achieve cost efficiencies that will be passed on 
     to health care consumers, such as economies of scale, reduced 
     transaction costs, and reduced administrative costs,
       (iv) to preserve the operation of health care facilities 
     located in underserved geographical areas,
       (v) to improve utilization of health care resources, and
       (vi) to reduce inefficient health care resource 
     duplication.
       (B) Necessity of reduction in competition.--For purposes of 
     making the finding described in paragraph (1)(B), the 
     Attorney General shall consider--
       (i) the ability of the providers of health care services 
     that are (or likely to be) affected by the health care joint 
     venture and the entities responsible for making payments to 
     such providers to negotiate societally optimal payment and 
     service arrangements,
       (ii) the effects of the health care joint venture on 
     premiums and other charges imposed by the entities described 
     in clause (i), and
       (iii) the availability of equally efficient, less 
     restrictive alternatives to achieve the benefits that are 
     intended to be achieved by carrying out the venture.
       (c) Establishment of Criteria and Procedures.--Subject to 
     subsections (d) and (e), not later than 1 year after the date 
     of the enactment of this Act, the Attorney General and the 
     Secretary shall establish jointly by rule the criteria and 
     procedures applicable to the issuance of certificates under 
     subsection (a). The rules shall specify the form and content 
     of the application to be submitted to the Attorney General to 
     request a certificate, the information required to be 
     submitted in support of such application, the procedures 
     applicable to denying and to revoking a certificate, and the 
     procedures applicable to the administrative appeal (if such 
     appeal is authorized by rule) of the denial and the 
     revocation of a certificate. Such information may include the 
     terms of the health care joint venture (in the case of a 
     venture in existence as of the time of the application) and 
     implementation plan for the joint venture.
       (d) Eligible Health Care Joint Venture.--To be an eligible 
     health care joint venture for purposes of this section, a 
     health care joint venture shall submit to the Attorney 
     General an application that complies with the rules in effect 
     under subsection (c) and that includes--
       (1) an agreement by the parties to the venture that the 
     venture will not foreclose competition by entering into 
     contracts that prevent health care providers from providing 
     health care in competition with the venture,
       (2) an agreement that the venture will submit to the 
     Attorney General annually a report that describes the 
     operations of the venture and information regarding the 
     impact of the venture on health care and on competition in 
     health care, and
       (3) an agreement that the parties to the venture will 
     notify the Attorney General and the Secretary of the 
     termination of the venture not later than 30 days after such 
     termination occurs.
       (e) Review of Applications for Certificates.--Not later 
     than 30 days after an eligible health care joint venture 
     submits to the Attorney General an application that complies 
     with the rules in effect under subsection (c) and with 
     subsection (d), the Attorney General shall issue or deny the 
     issuance of such certificate. If, before the expiration of 
     such 30-day period, the Attorney General fails to issue or 
     deny the issuance of such certificate, the Attorney General 
     shall be deemed to have issued such certificate.
       (f) Revocation of Certificate.--Whenever the Attorney 
     General finds that a health care joint venture with respect 
     to which a certificate is in effect does not meet the 
     standards specified in subsection (b), the Attorney General 
     shall revoke such certificate.
       (g) Written Reasons; Judicial Review.--
       (1) Denial and revocation of certificates.--If the Attorney 
     General denies an application for a certificate or revokes a 
     certificate, the Attorney General shall include in the notice 
     of denial or revocation a statement of the reasons relied 
     upon for the denial or revocation of such certificate.
       (2) Judicial review.--
       (A) After administrative proceeding.--(i) If the Attorney 
     General denies an application submitted or revokes a 
     certificate issued under this section after an opportunity 
     for hearing on the record, then any party to the health care 
     joint venture involved may commence a civil action, not later 
     than 60 days after receiving notice of the denial or 
     revocation, in an appropriate district court of the United 
     States for review of the record of such denial or revocation.
       (ii) As part of the Attorney General's answer, the Attorney 
     General shall file in such court a certified copy of the 
     record on which such denial or revocation is based. The 
     findings of fact of the Attorney General may be set aside 
     only if found to be unsupported by substantial evidence in 
     such record taken as a whole.
       (B) Denial or revocation without administrative 
     proceeding.--If the Attorney General denies an application 
     submitted or revokes a certificate issued under this section 
     without an opportunity for hearing on the record, then any 
     party to the health care joint venture involved may commence 
     a civil action, not later than 60 days after receiving notice 
     of the denial or revocation, in an appropriate district court 
     of the United States for de novo review of such denial or 
     revocation.
       (h) Exemption.--A person shall not be liable under any of 
     the antitrust laws for conduct necessary--
       (1) to prepare, agree to prepare, or attempt to agree to 
     prepare an application to request a certificate under this 
     section, or
       (2) to attempt to enter into any health care joint venture 
     with respect to which such a certificate is in effect.

     SEC. 203. INTERAGENCY ADVISORY COMMITTEE ON COMPETITION, 
                   ANTITRUST POLICY, AND HEALTH CARE.

       (a) Establishment.--There is hereby established the 
     Interagency Advisory Committee on Competition, Antitrust 
     Policy, and Health Care. The Advisory Committee shall be 
     composed of--
       (1) the Secretary of Health and Human Services (or the 
     designee of the Secretary);
       (2) the Attorney General (or the designee of the Attorney 
     General);
       (3) the Director of the Office of Management and Budget (or 
     the designee of the Director); and
       (4) a representative of the Federal Trade Commission.
       (b) Duties.--The duties of the Advisory Committee are--
       (1) to discuss and evaluate competition and antitrust 
     policy, and their implications with respect to the 
     performance of health care markets;
       (2) to analyze the effectiveness of health care joint 
     ventures receiving exemptions under the program established 
     under section 201(a) or certificates under section 202 in 
     reducing the costs of and expanding access to the health care 
     services that are the subject of such ventures; and
       (3) to make such recommendations to Congress not later than 
     2 years after the date of the enactment of this Act (and at 
     such subsequent periods as the Advisory Committee considers 
     appropriate) regarding modifications to the program 
     established under section 201(a) or to section 202 as the 
     Advisory Committee considers appropriate, including 
     modifications relating to the costs to health care providers 
     of obtaining an exemption for a joint venture under such 
     program.

     SEC. 204. DEFINITIONS.

       For purposes of this title:
       (1) The term ``Advisory Committee'' means the Interagency 
     Advisory Committee on Competition, Antitrust Policy, and 
     Health Care established under section 203.
       (2) The term ``antitrust laws''--
       (A) has the meaning given it in subsection (a) of the first 
     section of the Clayton Act (15 U.S.C. 12(a)), except that 
     such term includes section 5 of the Federal Trade Commission 
     Act (15 U.S.C. 45) to the extent such section applies to 
     unfair methods of competition; and
       (B) includes any State law similar to the laws referred to 
     in subparagraph (A).
       (3) The term ``certificate'' means a certificate of public 
     advantage authorized to be issued under section 202(a).
       (4) The term ``health care joint venture'' means an 
     agreement (whether existing or proposed) between 2 or more 
     providers of health care services that is entered into solely 
     for the purpose of sharing in the provision of health care 
     services and that involves substantial integration or 
     financial risk-sharing between the parties, but does not 
     include the exchanging of information, the entering into of 
     any agreement, or the engagement in any other conduct that is 
     not reasonably required to carry out such agreement.
       (5) The term ``health care services'' includes services 
     related to the delivery or administration of health care 
     services.
       (6) The term ``liable'' means liable for any civil or 
     criminal violation of the antitrust laws.
       (7) The term ``provider of health care services'' means any 
     individual or entity that is engaged in the delivery of 
     health care services in a State and that is required by State 
     law or regulation to be licensed or certified by the State to 
     engage in the delivery of such services in the State.
       (8) The term ``Secretary'' means the Secretary of Health 
     and Human Services.

                         Amendment To H.R. 3600

                   Offered By Mr. Michel of Illinois


       Strike all after the enacting clause and insert the 
     following:

     SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

       (a) Short Title.--This Act may be cited as the ``Affordable 
     Health Care Now Act of 1994''.
       (b) Table of Contents of Titles and Subtitles in Act.--The 
     following are the titles and subtitles contained in this Act:

           TITLE I--IMPROVED ACCESS TO AFFORDABLE HEALTH CARE

Subtitle A--Increased Availability and Continuity of Health Coverage 
              for Individuals and Their Families
Subtitle B--Reform of Health Insurance
Subtitle C--Preemption
Subtitle D--Health Deduction Fairness
Subtitle E--Improved Access to Community Health Services
Subtitle F--Improved Access to Rural Health Services
Subtitle G--Assistance in Enrolling Uninsured Children in Health 
              Insurance
Subtitle H--Medicaid Reform
Subtitle I--Remedies and Enforcement with Respect to Group Health Plans
Subtitle J--Delivery of Health Care Services to Illegal Immigrants

     TITLE II--HEALTH CARE COST CONTAINMENT AND QUALITY ENHANCEMENT

Subtitle A--Medical Malpractice Liability Reform
Subtitle B--Administrative Cost Savings and Fair Health Information 
              Practices
Subtitle C--Deduction for Cost of Catastrophic Health Plan; Medical 
              Savings Accounts
Subtitle D--Anti-Fraud
Subtitle E--Increased Medicare Beneficiary Choice; Additional Medicare 
              Reforms
Subtitle F--Health Care Antitrust Improvements
Subtitle G--Encouraging Enforcement Activities of Medical Self-
              Regulatory Entities
Subtitle H--Reform of Clinical Laboratory Requirements for Simple Tests
Subtitle I--Miscellaneous Provisions

                       TITLE III--LONG-TERM CARE

Subtitle A--Tax Treatment of Long-term Care Insurance
Subtitle B--Establishment of Federal Standards for Long-term Care 
              Insurance
Subtitle C--Protection of Assets Under Medicaid Through Use of 
              Qualified Long-term Care Insurance
Subtitle D--Studies
Subtitle E--Volunteer Service Credit Demonstration Projects
           TITLE I--IMPROVED ACCESS TO AFFORDABLE HEALTH CARE


                       table of contents of title

           TITLE I--IMPROVED ACCESS TO AFFORDABLE HEALTH CARE

 Subtitle A--Increased Availability and Continuity of Health Coverage 
                   for Individuals and Their Families

Part 1--Required Coverage Options for Eligible Employees, Spouses, and 
                               Dependents

Sec. 1001. Requiring employers to offer option of coverage for eligible 
              individuals.

               Part 2--Portability and Nondiscrimination

Sec. 1011. Nondiscrimination based on health status.
Sec. 1012. Portability.
Sec. 1013. Requirements relating to renewability generally.

Part 3--Standards for Managed Care Arrangements and Essential Community 
                               Providers

Sec. 1021. Standards for managed care arrangements.
Sec. 1022. Utilization review.

           Part 4--Enforcement; Effective Dates; Definitions

Sec. 1031. Enforcement.
Sec. 1032. Effective dates.
Sec. 1033. Definitions and special rules.

                 Subtitle B--Reform of Health Insurance

                 Part 1--Marketplace for Small Business

Sec. 1101. Requirement for insurers to offer MedAccess coverage.
Sec. 1102. MedAccess coverage defined.
Sec. 1103. Establishment of other MedAccess standards.
Sec. 1104. Use of modified community rating, uniform marketing 
              materials, and miscellaneous consumer protections.
Sec. 1105. Monitoring and response to adverse selection; risk 
              adjustment programs.
Sec. 1106. Establishment of reinsurance or allocation of risk 
              mechanisms for high risk individuals in marketplace for 
              small business and marketplace for individuals.

                  Part 2--Marketplace for Individuals

Sec. 1111. Application of similar requirements.

            Part 3--Voluntary Health Purchasing Arrangements

Sec. 1121. Establishment and organization.
Sec. 1122. Agreements with insurers.
Sec. 1123. Provision of information.
Sec. 1124. Enrolling eligible employees and eligible individuals 
              through a purchasing arrangement.
Sec. 1125. Restriction on charges.

            Part 4--Definitions and Miscellaneous Provisions

Sec. 1131. Definitions.
Sec. 1132. Prohibition of improper incentives.
Sec. 1133. Enforcement.
Sec. 1134. Annual reports.
Sec. 1135. Research and demonstration projects; development of a health 
              risk pooling model.

                         Subtitle C--Preemption

                   Part 1--Scope of State Regulation

       Sec. 1201. Prohibition of State benefit mandates for group 
           health plans.
       Sec. 1202. Prohibition of provisions prohibiting employer 
           groups from purchasing health insurance.
       Sec. 1203. Preemption of State anti-managed care laws.
       Sec. 1204. Definitions.

         Part 2--Multiple Employer Health Benefits Protections

       Sec. 1211. Limited exemption from certain restrictions on 
           ERISA preemption of State law for health plans 
           maintained by multiple employers subject to certain 
           Federal standards.

                ``Part 7--Multiple Employer Health Plans

         ``Sec. 701. Definitions.
         ``Sec. 702. Exempted multiple employer health plans 
           relieved of certain restrictions on preemption of State 
           law and treated as employee welfare benefit plans.
         ``Sec. 703. Exemption procedure.
         ``Sec. 704. Eligibility requirements.
         ``Sec. 705. Additional requirements applicable to 
           exempted multiple employer health plans.
         ``Sec. 706. Disclosure to participating employers by 
           arrangements providing medical care.
         ``Sec. 707. Maintenance of reserves.
         ``Sec. 708. Corrective actions.
         ``Sec. 709. Expiration, suspension, or revocation of 
           exemption.
         ``Sec. 710. Review of actions of the Secretary.
       Sec. 1212. Clarification of scope of preemption rules.
       Sec. 1213. Clarification of treatment of single employer 
           arrangements.
       Sec. 1214. Clarification of treatment of certain 
           collectively bargained arrangements.
       Sec. 1215. Employee leasing healthcare arrangements.
       Sec. 1216. Enforcement provisions relating to multiple 
           employer welfare arrangements and employee leasing 
           healthcare arrangements.
       Sec. 1217. Solvency requirements for certain self-insured 
           group health plans.
       Sec. 1218. Filing requirements for multiple employer 
           welfare arrangements providing health benefits.
       Sec. 1219. Cooperation between Federal and State 
           authorities.
       Sec. 1220. Effective date; transitional rules.

Part 3--Encouragement of Multiple Employer Arrangements Providing Basic 
                            Health Benefits

       Sec. 1221. Eliminating commonality of interest or 
           geographic location requirement for tax exempt trust 
           status.
       Sec. 1222. Single annual filing for all participating 
           employers.
       Sec. 1223. Compliance with coverage requirements through 
           multiple employer health arrangements.

                 Subtitle D--Health Deduction Fairness

Sec. 1301. Permanent extension and increase in health insurance tax 
              deduction for self-employed individuals.
Sec. 1302. Deduction of health insurance premiums for certain 
              previously uninsured individuals.

        Subtitle E--Improved Access to Community Health Services

   Part 1--Increased Authorization for Community and Migrant Health 
                                Centers

Sec. 1401. Grant program to promote primary health care services for 
              underserved populations.

   Part 2--Grants for Projects for Coordinating Delivery of Services

Sec. 1411. Projects for coordinating delivery of outpatient primary 
              health services.

                   Part 3--Community Health Networks

Sec. 1421. Qualifications for community health networks.

          Subtitle F--Improved Access to Rural Health Services

 Part 1--Establishment of Rural Emergency Access Care Hospitals under 
                                Medicare

Sec. 1501. Rural emergency access care hospitals described.
Sec. 1502. Coverage of and payment for services.
Sec. 1503. Effective date.

            Part 2--Rural Medical Emergencies Air Transport

Sec. 1511. Grants to States regarding aircraft for transporting rural 
              victims of medical emergencies.

             Part 3--Emergency Medical Services Amendments

Sec. 1521. Establishment of Office of Emergency Medical Services.
Sec. 1522. State offices of emergency medical services.
Sec. 1523. Programs for rural areas.
Sec. 1524. Funding.
Sec. 1525. Conforming amendments.
Sec. 1526. Effective date.

            Part 4--Additional Rural Health Care Provisions

Sec. 1531. Development of community-operated health plans in rural and 
              frontier areas.
Sec. 1532. Primary health care for medically underserved rural 
              communities; increased capacity of hospitals and 
              outpatient facilities.
Sec. 1533. Innovative approaches to delivery of health services in 
              rural areas.
Sec. 1534. Training of rural health professionals other than 
              physicians.
Sec. 1535. General provisions.

   Subtitle G--Assistance in Enrolling Uninsured Children in Health 
                               Insurance

Sec. 1601. Establishment of State programs.

                      Subtitle H--Medicaid Reform

 Part 1--State Flexibility in the Medicaid Program: the Medical Health 
                           Allowance Program

Sec. 1701. Establishment of program.
Sec. 1702. Optional use of program to offer coverage to some or all 
              State residents.

                  Part 2--Medicaid Program Flexibility

Sec. 1711. Modification of Federal requirements to allow States more 
              flexibility in contracting for coordinated care services 
              under medicaid.
Sec. 1712. Period of certain waivers.
Sec. 1713. Elimination of duplicative pediatric immunization program.

           Part 3--Medicaid Disproportionate Share Adjustment

Sec. 1721. 25 percent reduction in amount of payment adjustments for 
              disproportionate share hospitals.

Subtitle I--Remedies and Enforcement With Respect to Group Health Plans

Sec. 1801. Claims procedure for group health plans.
Sec. 1802. Mediation of group health plan claims.

           ``Subpart B--Mediation of Group Health Plan Claims

``Sec. 521. Eligibility for submission to mediation.
``Sec. 522. Facilitators.
``Sec. 523. Role of attorneys.
``Sec. 524. Initiation of mediation.
``Sec. 525. Mediation procedure.
``Sec. 526. Mediation time limit.
``Sec. 527. Cost of mediation.
``Sec. 528. Legal effect of participation in mediation program.
``Sec. 529. Confidentiality and admissibility.
Sec. 1803. Available court remedies.
Sec. 1804. Effective date.

   Subtitle J--Delivery of Health Care Services to Illegal Immigrants

Sec. 1901. Study on the delivery of health care services to illegal 
              immigrants.
Sec. 1902. Report.
 Subtitle A--Increased Availability and Continuity of Health Coverage 
                   for Individuals and Their Families

PART 1--REQUIRED COVERAGE OPTIONS FOR ELIGIBLE EMPLOYEES, SPOUSES, AND 
                               DEPENDENTS

     SEC. 1001. REQUIRING EMPLOYERS TO OFFER OPTION OF COVERAGE 
                   FOR ELIGIBLE INDIVIDUALS.

       (a) In General.--Each employer shall make available with 
     respect to each eligible employee a group health plan under 
     which--
       (1) coverage of each eligible individual with respect to 
     such an eligible employee may be elected on an annual basis 
     for each plan year,
       (2) subject to subsection (d), coverage is provided for at 
     least the required coverage specified in subsection (c), and
       (3) each eligible employee electing such coverage may elect 
     to have any premiums owed by the employee collected through 
     payroll deduction.
     An employer is not required under this subsection to make any 
     contribution to the cost of coverage under such a plan.
       (b) Special Rules.--
       (1) Exclusion of new employers and certain small 
     employers.--Subsection (a) shall not apply to any employer 
     for any plan year if, as of the beginning of such plan year--
       (A) such employer (including any predecessor thereof) has 
     been an employer for less than 2 years,
       (B) such employer has no more than 2 eligible full-time 
     employees, or
       (C) there are no more than 2 full-time eligible employees 
     who both are not covered under any group health plan and do 
     not have health insurance coverage.
       (2) Exclusion of family members.--Under such procedures as 
     the Secretary may prescribe, any relative of an employer may 
     be, at the election of the employer, excluded from 
     consideration as an eligible employee for purposes of 
     applying the requirements of subsection (a). In the case of 
     an employer that is not an individual, an employee who is a 
     relative of a key employee (as defined in section 416(i)(1) 
     of the Internal Revenue Code of 1986) of the employer may, at 
     the election of the key employee, be considered a relative 
     excludable under this paragraph.
       (3) Optional application of waiting period.--A group health 
     plan shall not be treated as failing to meet the requirements 
     of subsection (a) solely because a period of service by an 
     eligible employee of not more than 60 days is required under 
     the plan for coverage under the plan of eligible individuals 
     with respect to such employee.
       (c) Required Coverage.--
       (1) In general.--Except as provided in paragraph (2), the 
     required coverage specified in this subsection is standard 
     coverage (consistent with section 1102(c)), including at 
     least one option (either a fee-for-service option or a point-
     of-service option) that permits covered individuals an 
     unlimited choice of the lawful providers for which covered 
     benefits are made available.
       (2) Special treatment of small employers not contributing 
     to employee coverage.--In the case of a small employer (as 
     defined in section 1131(9)) that has not contributed during 
     the previous plan year to the cost of coverage for any 
     eligible employee under any group health plan, the required 
     coverage specified in this subsection for the plan year (with 
     respect to each eligible employee) is--
       (A) MedAccess standard coverage, with a fee-for-service 
     option and, if available, a point-of-service option and a 
     managed care option (as defined in section 1033);,
       (B) MedAccess catastrophic coverage; and
       (C) if available, MedAccess medisave coverage,
     as such terms are defined in section 1102(a)(2).
       (3) Construction.--Nothing in this section shall be 
     construed as limiting the group health plans, or types of 
     coverage under such a plan, that an employer may offer to an 
     employee.
       (d) 5-Year Transition for Existing Group Health Plans.--
       (1) In general.--The requirement of subsection (a)(2) shall 
     not apply to a group health plan for a plan year if--
       (A) the group health plan is in effect in the plan year in 
     which July 1, 1994, occurs, and
       (B) the employer makes (or offers to make), in such plan 
     year and each subsequent plan year through the plan year 
     involved, a contribution to the plan on behalf of each 
     employee who is eligible to participate in the plan.
       (2) Sunset.--Paragraph (1) shall only apply to a group 
     health plan for each of the 5 plan years beginning with the 
     first plan year to which the requirement of subsection (a) 
     applies.

               PART 2--PORTABILITY AND NONDISCRIMINATION

     SEC. 1011. NONDISCRIMINATION BASED ON HEALTH STATUS.

       (a) In General.--A group health plan and an insurer 
     providing health insurance coverage may not deny or impose 
     (and an insurer may not require an employer under a group 
     health plan to impose or otherwise to impose through a 
     waiting period for coverage under a plan or similar 
     requirement) a limitation or exclusion of benefits relating 
     to treatment of a condition based on health status or based 
     on the fact that the condition preexisted the effective date 
     of coverage of the individual under the plan if--
       (1) in the case of any individual eligible for such 
     coverage, such individual has such coverage at the time at 
     which such individual first becomes eligible;
       (2) the limitation or exclusion applies to an individual 
     who, as of the date of birth, was covered under the plan;
       (3) the limitation or exclusion relates to pregnancy;
       (4) the condition relates to a condition that was not 
     diagnosed or treated within 3 months (or 6 months in the case 
     of coverage not under a group health plan) before the date of 
     such coverage; or
       (5) the limitation or exclusion extends over more than 6 
     months (or 12 months in the case of coverage not under a 
     group health plan) after the date of such coverage.
     In the case of an individual who is eligible for coverage but 
     for a waiting period imposed by the employer, in applying 
     paragraphs (4) and (5), the individual shall be treated as 
     having had such coverage as of the earliest date of the 
     beginning of the waiting period.
       (b) One-Time Amnesty Period.--
       (1) In general.--In the case of an individual who, as of 
     the first date of the amnesty period is--
       (A) covered under a group health plan or has health 
     insurance coverage, such coverage shall not be subject to 
     pre-existing condition exclusions on and after such date; or
       (B) not so covered, if the individual obtains coverage 
     under a group health plan or health insurance coverage during 
     the next available open enrollment period with respect to the 
     individual, coverage so obtained shall not be subject to pre-
     existing condition exclusions on and after the effective date 
     of such coverage.
       (2) Amnesty period.--The amnesty period described in this 
     paragraph, with respect to an individual who is a resident of 
     a State, is the 45-calendar-day period beginning on the 
     effective date of this part (under section 1032(b)).
       (3) Establishment of special allocation of risk pool for 
     amnesty.--Each State shall establish rules and requirements 
     relating to the allocation of risk among insurers with 
     respect to additional risks assumed as a result of the 
     amnesty period under this subsection (including individuals 
     previously covered for whom a preexisting condition exclusion 
     will be no longer applicable).
       (c) Application of Rules by Certain Health Maintenance 
     Organizations.--A health maintenance organization that 
     provides health insurance coverage shall not be considered as 
     failing to meet the requirements of section 1301 of the 
     Public Health Service Act notwithstanding that it provides 
     for an exclusion of the coverage based on a preexisting 
     condition consistent with the provisions of this part so long 
     as such exclusion is applied consistent with the provisions 
     of this part.

     SEC. 1012. PORTABILITY.

       (a) In General.--Each group health plan and an insurer 
     providing health insurance coverage shall waive any period 
     applicable to a preexisting condition for similar benefits 
     with respect to an individual to the extent that the 
     individual, immediately prior to the date of such 
     individual's enrollment in such plan, had health insurance 
     coverage for the condition, or was covered for the condition 
     under a group health plan, that was in effect before such 
     date.
       (b) Continuous Coverage Required.--
       (1) In general.--Subsection (a) shall no longer apply if 
     there is a continuous period of more than 60 days (or, in the 
     case of an individual described in paragraph (2), 6 months) 
     for which the individual did not have health insurance 
     coverage for the condition or was not covered under a group 
     health plan for the condition.
       (2) Job termination.--An individual is described in this 
     paragraph if the individual loses coverage under a group 
     health plan due to termination of employment.
       (3) Exclusion of cash-only and dread disease plans.--In 
     this subsection, the term ``group health plan'' does not 
     include any group health plan which is offered primarily to 
     provide--
       (A) coverage for a specified disease or illness, or
       (B) a hospital or fixed indemnity policy., unless the 
     Secretary determines that such a plan provides sufficiently 
     comprehensive coverage of a benefit so that it should be 
     treated as a group health plan under this subsection.
       (c) Transition for Non-Conforming Policies.--
     Notwithstanding State law or the provision of any agreement 
     to the contrary, effective January 1, 1997, an insurer may 
     cancel or refuse to renew health insurance coverage in a 
     State prior to the application of this subtitle to health 
     insurance coverage issued in the State if the coverage does 
     not provide for either standard or catastrophic coverage, but 
     only if the insurer offers the covered individual affected 
     the opportunity to obtain health insurance coverage that 
     meets the applicable requirements of this title.
       (d) Applicability of Coverage Under Public Insurance.--In 
     this section, an individual shall be considered to have 
     health insurance coverage for a condition without regard to 
     whether such coverage is under a private or public plan.

     SEC. 1013. REQUIREMENTS RELATING TO RENEWABILITY GENERALLY.

       (a) Multiemployer Plans and Exempted Multiple Employer 
     Health Plans.--A multiemployer plan and an exempted multiple 
     employer health plan may not cancel coverage or deny renewal 
     of coverage under such a plan with respect to an employer 
     other than--
       (1) for nonpayment of contributions,
       (2) for fraud or other misrepresentation by the employer,
       (3) for noncompliance with plan provisions, or
       (4) because the plan is ceasing to provide any coverage in 
     a geographic area.
       (b) Insurers.--
       (1) In general.--An insurer may not cancel health insurance 
     coverage or deny renewal of such coverage other than--
       (A) for nonpayment of premiums,
       (B) for fraud or other misrepresentation by the insured,
       (C) for noncompliance with plan provisions, or
       (D) subject to paragraph (2), because the insurer is 
     ceasing to provide any health insurance coverage (or the same 
     type of health insurance coverage in the same individual or 
     small employer insurance market) in a State, or, in the case 
     of a health maintenance organization or other network plan, 
     in a geographic area.
       (2) Notice requirement for market exit.--Paragraph (1)(D) 
     shall not apply to an insurer ceasing to provide coverage 
     unless the insurer provides notice of such termination to 
     employers and individuals covered at least 180 days before 
     the date of termination of coverage.
       (3) Limitation on reentry in employer and individual 
     markets.--If an insurer ceases to offer or provide health 
     insurance coverage (or a type of insurance coverage) in an 
     area with respect to the individual or small group market, 
     the insurer may not offer such health insurance coverage (or 
     type of coverage) in the area in such market until 5 years 
     after the date of the termination.
       (4) Type of coverage and insurance market defined.--In this 
     subsection--
       (A) MedAccess standard coverage, MedAccess catastrophic 
     coverage, and MedAccess medisave coverage shall each be 
     considered to be separate types of health insurance coverage;
       (B) the term ``small group market'' means the insurance 
     market offered to individuals seeking health care coverage on 
     behalf of themselves (and their dependents) on the basis of 
     employment or other relationship with respect to an employer 
     or an association.

PART 3--STANDARDS FOR MANAGED CARE ARRANGEMENTS AND ESSENTIAL COMMUNITY 
                               PROVIDERS

     SEC. 1021. STANDARDS FOR MANAGED CARE ARRANGEMENTS.

       (a) Requirement.--
       (1) In general.--Each group health plan, and each insurer 
     providing health insurance coverage, for health care through 
     a managed care arrangement shall comply with the applicable 
     requirements of this section.
       (2) Definitions.--In this section:
       (A) Managed care arrangement defined.--The term ``managed 
     care arrangement'' means, with respect to an arrangement 
     under a group health plan or under health insurance coverage, 
     providers who have entered into an agreement under the 
     arrangement under which such providers are obligated to 
     provide items and services covered under the arrangement to 
     individuals covered under the plan or who have such coverage.
       (B) Provider network.--The term ``provider network'' means, 
     with respect to a group health plan or health insurance 
     coverage, providers who have entered into an agreement 
     described in subparagraph (A) under a managed care 
     arrangement.
       (b) Scope of Arrangements With Providers.--
       (1) In general.--The entity providing for a managed care 
     arrangement on behalf of a group health plan or under health 
     insurance coverage shall enter into such agreements with 
     health care providers (including primary and specialty 
     providers for children) or have such other arrangements as 
     may be necessary to assure that covered individuals have 
     reasonably prompt access through the entity's provider 
     network to all items and services contained in the package of 
     benefits for which coverage is provided (including access to 
     emergency services on a 24-hour basis where medically 
     necessary), in a manner that assures the continuity of the 
     provision of such items and services.
       (2) Access to centers of excellence.--
       (A) In general.--The entity providing for a managed care 
     arrangement on behalf of a group health plan or under health 
     insurance coverage shall demonstrate that covered individuals 
     (including individuals with chronic diseases) have access 
     through the entity's provider network to specialized 
     treatment expertise of designated centers of excellence. Such 
     entity shall demonstrate such access according to standards 
     developed by the Secretary, including requirements relating 
     to arrangements with such centers and referral of patients to 
     such centers.
       (B) Designation of centers of excellence.--The Secretary 
     shall establish a process for the designation of facilities, 
     including children's hospitals and other pediatric 
     facilities, as centers of excellence for purposes of this 
     paragraph. A facility may not be designated unless the 
     facility is determined--
       (i) to provide specialty care,
       (ii) to deliver care for complex cases requiring 
     specialized treatment and for individuals with chronic 
     diseases, and
       (iii) to meet other requirements that may be established by 
     the Secretary relating to specialized education and training 
     of health professionals, participation in peer-reviewed 
     research, or treatment of patients from outside the 
     geographic area of the facility.
       (3) No referral required for obstetrics and gynecology.--An 
     entity providing for a managed care arrangement may not 
     require an individual to obtain a referral from a physician 
     in order to obtain covered items and services within the 
     network of the arrangement from a physician who specializes 
     in obstetrics and gynecology.
       (c) Provision of Emergency and Urgent Care Services.--
       (1) In general.--The entity providing for a managed care 
     arrangement on behalf of a group health plan or under health 
     insurance coverage must cover medically necessary emergency 
     and urgent care services provided to covered individuals 
     (including trauma services provided by designated trauma 
     centers), without regard to whether or not the provider 
     furnishing such services has a contractual (or other) 
     arrangement with the entity to provide items or services to 
     covered individuals and, in the case of services furnished 
     for the treatment of an emergency medical condition (as 
     defined in section 1867(e)(1) of the Social Security Act), 
     without regard to prior authorization.
       (2) Designated trauma centers defined.--In paragraph (1), 
     the term ``designated trauma center''--
       (A) has the meaning given such term in section 1231 of the 
     Public Health Service Act, and
       (B) includes (for years prior to 2001) a trauma center 
     that--
       (i) is located in a State that has not designated trauma 
     centers under section 1213 of such Act, and
       (ii) the Secretary finds meets the standards under such 
     section to be a designated trauma center.
       (d) Due Process Standards Relating to Provider Networks.--
       (1) Standards for selection of providers for network.--
       (A) Establishment.--The entity providing for a managed care 
     arrangement on behalf of a group health plan or under health 
     insurance coverage shall establish standards to be used by 
     the entity for contracting with health care providers with 
     respect the entity's provider network. Such standards shall 
     be established in consultation with providers who are members 
     of the network.
       (B) Distribution of information.--Descriptive information 
     regarding these standards shall be made available upon 
     request to enrollees, providers who are members of the 
     network, and prospective enrollees and prospective 
     participating providers.
       (2) Notice requirement.--
       (A) In general.--The entity may not terminate or refuse to 
     renew an agreement with a provider to participate in the 
     entity's provider network unless the entity provides written 
     notification to the provider of the entity's decision to 
     terminate or to refuse to renew the agreement. The 
     notification shall include a statement of the reasons for the 
     entity's decision, consistent with the standards established 
     under paragraph (1).
       (B) Timing of notification.--The entity shall provide the 
     notification required under subparagraph (A) at least 45 days 
     prior to the effective date of the termination or expiration 
     of the agreement (whichever is applicable). The previous 
     sentence shall not apply if failure to terminate the 
     agreement prior to the deadline would adversely affect the 
     health or safety of a covered individual.
       (3) Review process.--
       (A) In general.--The entity shall provide a process under 
     which the provider may request a review of the entity's 
     decision to terminate or refuse to renew the provider's 
     participation agreement. Such review shall be conducted by a 
     group of individuals the majority of whom are health care 
     providers who are members of the entity's provider network or 
     employees of the entity, and who are members of the same 
     profession as the provider who requests the review.
       (B) Counsel.--If the provider requests in advance, the 
     entity shall permit an attorney representing the provider to 
     be present at the provider's review.
       (C) Review advisory.--The findings and conclusions of a 
     review under this paragraph shall be advisory and non-
     binding.
       (4) Construction.--Nothing in this subsection shall be 
     construed to affect any other provision of law that provides 
     an appeals process or other form of relief to a provider of 
     health care services.

     SEC. 1022. UTILIZATION REVIEW.

       (a) Requiring Review to Meet Standards.--A group health 
     plan or insurer providing health insurance coverage may not 
     deny coverage of or payment for items and services on the 
     basis of a utilization review program unless the program 
     meets the standards established by the Secretary under this 
     section.
       (b) Establishment of Standards by Secretary.--The Secretary 
     shall establish standards for utilization review programs, 
     consistent with subsection (c), and shall periodically review 
     and update such standards to reflect changes in the delivery 
     of health care services. The Secretary shall establish such 
     standards in consultation with appropriate parties, including 
     representatives of health care providers, specialists, 
     insurers, plan administrators, and other experts.
       (c) Requirements for Standards.--Under the standards 
     established under subsection (a)--
       (1) individuals performing utilization review may not 
     receive financial compensation based upon the number of 
     denials of coverage;
       (2) negative determinations of the medical necessity or 
     appropriateness of services or the site at which services are 
     furnished may be made only by clinically qualified personnel;
       (3) the utilization review program shall provide for a 
     process under which an enrollee or provider may obtain timely 
     review of a denial of coverage;
       (4) utilization review shall be conducted in accordance 
     with uniformly applied standards that are based on the most 
     currently available medical evidence; and
       (5) providers shall participate in the development of the 
     utilization review program.
       (d) Preemption.--For provision preempting State laws 
     relating to utilization review, see section 1203(a)(3).

           PART 4--ENFORCEMENT; EFFECTIVE DATES; DEFINITIONS

     SEC. 1031. ENFORCEMENT.

       (a) Enforcement by Department of Labor for Employers and 
     Group Health Plans.--
       (1) In general.--For purposes of part 5 of subtitle B of 
     title I of the Employee Retirement Income Security Act of 
     1974, the provisions of parts 1 and 2 of this subtitle and 
     part 1 of subtitle B shall be deemed to be provisions of 
     title I of such Act irrespective of exclusions under section 
     4(b) of such Act.
       (2) Regulatory authority.--With respect to the regulatory 
     authority of the Secretary of Labor under this subtitle 
     pursuant to subsection (a), section 505 of the Employee 
     Retirement Income Security Act of 1974 (29 U.S.C. 1135) shall 
     apply.
       (b) Enforcement by Penalty for Insurers.--
       (1) In general.--Chapter 43 of the Internal Revenue Code of 
     1986 (relating to qualified pension, etc., plans) is amended 
     by adding at the end thereof the following new section:

     ``SEC. 4980C. FAILURE OF INSURER TO COMPLY WITH HEALTH 
                   INSURANCE STANDARDS.

       ``(a) Imposition of Penalty.--
       ``(1) In general.--There is hereby imposed a tax on the 
     failure of an insurer to comply with the requirements 
     applicable to the insurer under parts 2 and 3 of subtitle A 
     of title I and subtitle B of the Affordable Health Care Now 
     Act of 1994.
       ``(2) Exception.--Paragraph (1) shall not apply to a 
     failure by an insurer in a State if the Secretary of Health 
     and Human Services determines that the State has in effect a 
     regulatory enforcement mechanism that provides adequate 
     sanctions with respect to such a failure by such an insurer.
       ``(b) Amount of Penalty.--
       ``(1) In general.--Subject to paragraph (2), the amount of 
     the tax imposed by subsection (a) shall be $100 for each day 
     during which such failure persists for each individual to 
     which such failure relates. A rule similar to the rule of 
     section 4980B(b)(3) shall apply for purposes of this section.
       ``(2) Limitation.--The amount of the tax imposed by 
     subsection (a) for an insurer with respect to health 
     insurance coverage shall not exceed 25 percent of the amounts 
     received for such coverage during the period such failure 
     persists.
       ``(c) Liability for Penalty.--The penalty imposed by this 
     section shall be paid by the insurer.
       ``(d) Exceptions.--
       ``(1) Corrections within 30 days.--No tax shall be imposed 
     by subsection (a) by reason of any failure if--
       ``(A) such failure was due to reasonable cause and not to 
     willful neglect, and
       ``(B) such failure is corrected within the 30-day period 
     beginning on the earliest date the insurer knew, or 
     exercising reasonable diligence would have known, that such 
     failure existed.
       ``(2) Waiver by secretary.--In the case of a failure which 
     is due to reasonable cause and not to willful neglect, the 
     Secretary may waive part or all of the tax imposed by 
     subsection (a) to the extent that payment of such tax would 
     be excessive relative to the failure involved.
       ``(e) Definitions.--For purposes of this section, the terms 
     `health insurance coverage' and `insurer' have the respective 
     meanings given such terms in section 1033 of the Affordable 
     Health Care Now Act of 1994.''
       (2) Clerical amendment.--The table of sections for chapter 
     43 of such Code is amended by adding at the end thereof the 
     following new items:

``Sec. 4980C. Failure of insurer to comply with health insurance 
              standards.''

     SEC. 1032. EFFECTIVE DATES.

       (a) Part 1.--The requirements of part 1 shall apply to 
     plans years beginning after December 31, 1996.
       (b) Parts 2 and 3.--The requirements of parts 2 and 3 shall 
     apply with respect to--
       (1) group health plans and employers shall apply to plans 
     years beginning after December 31, 1996, and
       (2) insurers shall take effect on January 1, 1997.

     SEC. 1033. DEFINITIONS AND SPECIAL RULES.

       (a) In General.--For purposes of this subtitle:
       (1) Dependent.--The term ``dependent'' means, with respect 
     to any individual, any person who is--
       (A) the spouse or surviving spouse of the individual, or
       (B) under regulations of the Secretary, a child (including 
     an adopted child) of such individual and--
       (i) under 19 years of age, or
       (ii) under 25 years of age and a full-time student.
       (2) Eligible employee.--The term ``eligible employee'' 
     means, with respect to an employer, an employee who normally 
     performs on a monthly basis at least 10 hours of service per 
     week for that employer. Such term shall not include any 
     employee who is not reasonably expected as of the 1st day of 
     a month to be employed by the employer for a period of 120 
     consecutive days during any 365-day period that includes such 
     1st day.
       (3) Eligible individual.--The term ``eligible individual'' 
     means, with respect to an eligible employee, such employee, 
     and any dependent of such employee.
       (4) Employer.--The term ``employer'' shall have the meaning 
     applicable under section 3(5) of the Employee Retirement 
     Income Security Act of 1974.
       (5) Exempted multiple employer health plan.--The term 
     ``exempted multiple employer health plan'' means a multiple 
     employer welfare arrangement treated as an employee welfare 
     benefit plan by reason of an exemption under part 7 of 
     subtitle B of title I of the Employee Retirement Income 
     Security Act of 1974 (as added by part 2 of subtitle C of 
     this title).
       (6) Group health plan; plan.--(A) The term ``group health 
     plan'' means an employee welfare benefit plan providing 
     medical care (as defined in section 213(d) of the Internal 
     Revenue Code of 1986) to participants or beneficiaries 
     directly or through insurance, reimbursement, or otherwise, 
     but does not include any type of coverage excluded from the 
     definition of a health insurance coverage under section 
     1131(4)(B).
       (B) The term ``plan'' means a group health plan (including 
     any such plan which is a multiemployer plan) and an exempted 
     multiple employer health plan.
       (7) Health insurance coverage.--The term ``health insurance 
     coverage'' shall have the meaning applicable under section 
     1131(4).
       (8) Fully insured.--The term ``fully insured'' shall have 
     the meaning applicable under section 701(9) of Employee 
     Retirement Income Security Act of 1974 (as added by section 
     1211 of this title).
       (9) Insurer.--The term ``insurer'' has the meaning given 
     such term in section 1131(6).
       (10) Multiple employer welfare arrangement.--The term 
     ``multiple employer welfare arrangement'' shall have the 
     meaning applicable under section 3(40) of the Employee 
     Retirement Income Security Act of 1974.
       (11) Options.--
       (A) Fee-for-service option.--Standard coverage is 
     considered to provide a ``fee-for-service option'' if 
     benefits with respect to the covered items and services in 
     the coverage are made available for such items and services 
     provided through any lawful provider of such covered items 
     and services.
       (B) Managed care option.--Standard coverage is considered 
     to provide a ``managed care option'' if benefits with respect 
     to the covered items and services in the coverage are made 
     available exclusively through a managed care arrangement (as 
     defined in section 1021(a)(2)), except in the case of 
     emergency and urgent services and as otherwise required under 
     law.
       (C) Point-of-service option.--Standard coverage is 
     considered to provide a ``point-of-service option'' if the 
     benefits with respect to covered items and services in the 
     coverage are made available principally through a managed 
     care arrangement, with the choice of the enrollee to obtain 
     such benefits for items and services provided through any 
     lawful provider of such covered items and services. The 
     coverage may provide for different cost sharing schedules 
     based on whether the items and services are provided through 
     such an arrangement or outside such an arrangement.
       (b) Application of ERISA Definitions.--Except as otherwise 
     provided in this subtitle, terms used in this subtitle shall 
     have the meanings applicable to such terms under section 3 of 
     the Employee Retirement Income Security Act of 1974 (29 
     U.S.C. 1002).
       (c) Secretary.--Except with respect to references 
     specifically to the Secretary of Labor, the term 
     ``Secretary'' means the Secretary of Health and Human 
     Services.
                 Subtitle B--Reform of Health Insurance

                 PART 1--MARKETPLACE FOR SMALL BUSINESS

     SEC. 1101. REQUIREMENT FOR INSURERS TO OFFER MEDACCESS 
                   COVERAGE.

       (a) Requirement.--
       (1) In general.--Each insurer (as defined in section 
     1131(6)) that makes available any health insurance coverage 
     (as defined in section 1131(4)) to a small employer (as 
     defined in section 1131(9)) in a State--
       (A) shall make available to each small employer in the 
     State MedAccess standard coverage (as defined in section 
     1102(a)(2)), with a fee-for-service option and, if available, 
     a point-of-service option and a managed care option (as 
     defined in section 1033),
       (B) shall make available to each small employer in the 
     State MedAccess catastrophic coverage (as defined in section 
     1102(a)(2)), and
       (C) may make available to each small employer in the State 
     MedAccess medisave coverage (as defined in section 
     1102(a)(2)).
       (2) Special rule for health maintenance organizations.--The 
     requirements of paragraph (1)(A) (with regard to requiring a 
     fee-for-service option), and paragraphs (1)(B) and (1)(C) 
     shall not apply with respect to a health insurance coverage 
     that--
       (A) is provided by a Federally qualified health maintenance 
     organization (as defined in section 1301(a) of the Public 
     Health Service Act), or
       (B) is not provided by such an organization but is provided 
     by an organization recognized under State law as a health 
     maintenance organization or managed care organization or a 
     similar organization regulated under State law for solvency.
       (3) Exception if state provides for guaranteed availability 
     (rather than guaranteed issue).--Paragraph (1) shall not 
     apply to an insurer in a State if the State is providing--
       (A) access to each small employer in the State to MedAccess 
     standard coverage, to MedAccess catastrophic coverage, and to 
     a MedAccess medisave coverage, and
       (B) a risk allocation mechanism described in subsection 
     (c).
       (b) Guaranteed Issue of MedAccess Coverage.--Subject to 
     subsection (c)--
       (1) In general.--Subject to paragraphs (2) and (3), each 
     insurer that offers MedAccess coverage to a small employer in 
     a State--
       (A) must accept every small employer in the State that 
     applies for such coverage; and
       (B) must accept for enrollment under such coverage every 
     eligible individual (as defined in paragraph (5)) who applies 
     for enrollment on a timely basis (consistent with paragraph 
     (4)) and may not place any restriction on the eligibility of 
     an individual to enroll so long as such individual is an 
     eligible individual.
       (2) Special rules for health maintenance organizations.--In 
     the case of coverage offered by a health maintenance 
     organization or other network plan, the organization may--
       (A) limit the employers that may apply for such coverage to 
     those with eligible individuals residing in the service area 
     of the plan;
       (B) limit the individuals who may be enrolled under such 
     coverage to those who reside in the service area for such 
     organization; and
       (C) within the service area of such organization, deny such 
     coverage to such employers if the organization demonstrates 
     that--
       (i) it will not have the capacity to deliver services 
     adequately to enrollees of any additional groups because of 
     its obligations to existing group contract holders and 
     enrollees, and
       (ii) it is applying this subparagraph uniformly to all 
     employers without regard to the health status, claims 
     experience, or duration of coverage of those employers and 
     their employees.
     In this paragraph, the term ``health maintenance 
     organization'' includes an organization recognized under 
     State law as a health maintenance organization or managed 
     care organization or a similar organization regulated under 
     State law for solvency.
       (3) Special rule for financial capacity limits.--In the 
     case of coverage offered by an insurer other than a health 
     maintenance organization or network plan, the insurer may 
     deny such coverage to small employers if the organization 
     demonstrates that--
       (A) it does not have the financial reserves necessary to 
     underwrite additional coverage, and
       (B) it is applying this paragraph uniformly to all 
     employers without regard to the health status, claims 
     experience, or duration of coverage of those employers and 
     their employees.
       (4) Clarification of timely enrollment.--
       (A) General initial enrollment requirement.--Except as 
     provided in this paragraph, enrollment of an eligible 
     individual for MedAccess coverage may be considered not to be 
     timely if the eligible employee or dependent fails to enroll 
     under such coverage during an initial enrollment period, if 
     such period is at least 30 days long.
       (B) Enrollment due to loss of previous coverage.--
     Enrollment under MedAccess coverage is considered to be 
     timely in the case of an eligible individual who--
       (i) was covered under a group health plan or had other 
     health insurance coverage at the time of the individual's 
     initial enrollment period,
       (ii) stated at the time of the initial enrollment period 
     that coverage under a group health plan or other health 
     insurance coverage was the reason for declining enrollment,
       (iii) lost coverage under a group health plan or other 
     health insurance coverage (as a result of the termination of 
     the coverage, termination or reduction of employment, or 
     other reason), and
       (iv) requests enrollment within 30 days after termination 
     of the coverage.
       (C) Requirement applies during open enrollment periods.--
     Each insurer and each group health plan providing MedAccess 
     coverage shall provide for at least one period (of not less 
     than 30 days) each year during which enrollment under such 
     coverage shall be considered to be timely.
       (D) Exception for court orders.--Enrollment of a spouse or 
     minor child of an employee shall be considered to be timely 
     if--
       (i) a court has ordered that coverage be provided for the 
     spouse or child under a covered employee's group health plan, 
     and
       (ii) a request for enrollment is made within 30 days after 
     the date the court issues the order.
       (E) Enrollment of spouses and dependents.--
       (i) In general.--Enrollment of the spouse (including a 
     child of the spouse) and any dependent child of an eligible 
     employee shall be considered to be timely if a request for 
     enrollment is made either--

       (I) within 30 days of the date of the marriage or of the 
     date of the birth or adoption of a child, if family coverage 
     is available as of such date, or
       (II) within 30 days of the date family coverage is first 
     made available.

       (ii) Coverage.--If available coverage includes family 
     coverage and enrollment is made under such coverage on a 
     timely basis under clause (i)(I), the coverage shall become 
     effective not later than the first day of the first month 
     beginning after the date of the marriage or the date of birth 
     or adoption of the child (as the case may be).
       (5) Definitions.--In this subsection, the terms ``eligible 
     individual'' and ``group health plan'' have the meanings 
     given such terms in section 1023(a).
       (c) State Option of Guaranteed Availability Through 
     Allocation of Risk (Rather than Through Guaranteed Issue).--
     The requirements of subsection (b) shall not apply in a State 
     if the State has provided (in accordance with standards 
     established under this part) a mechanism under which--
       (1) each insurer offering health insurance coverage to a 
     small employer in the State must participate in a program for 
     assigning high-risk small employer groups (or individuals 
     within such a group) among some or all such insurers, and
       (2) the insurers to which such high-risk small employer 
     groups or individuals are so assigned comply with the 
     requirements of subsection (b).

     SEC. 1102. MEDACCESS COVERAGE DEFINED.

       (a) MedAccess Coverage Defined.--In this subtitle:
       (1) In general.--The term ``MedAccess coverage'' means a 
     health insurance coverage (whether under a managed-care plan, 
     indemnity plan, or other plan) that meets the following 
     requirements:
       (A) The coverage--
       (i) is designed to provide standard coverage (consistent 
     with subsection (c)) with substantial cost-sharing,
       (ii) is designed to provide only catastrophic coverage 
     (consistent with subsection (d)), or
       (iii) is designed to provide medisave coverage (consistent 
     with subsection (e)).
       (B) The coverage includes only services, including (but not 
     limited to) medical, surgical, hospital, and preventive 
     services, which are essential and medically necessary; except 
     that no specific procedure or treatment, or classes thereof, 
     is required to be included in such coverage, by this Act or 
     through regulations.
       (C) The coverage meets the applicable requirements of 
     section 1101(b) (relating to guaranteed issue).
       (D) The coverage meets the consumer protection standards 
     established under section 1103(a)(1)(B).
       (2) MedAccess standard, catastrophic, and medisave 
     coverage.--The terms ``MedAccess standard coverage'', 
     ``MedAccess catastrophic coverage'', ``MedAccess medisave 
     coverage'' mean MedAccess coverage that provides for at least 
     standard coverage (referred to in paragraph (1)(A)(i)), for 
     only catastrophic coverage (referred to in paragraph 
     (1)(A)(ii)), or medisave coverage (referred to in paragraph 
     (1)(A)(iii)), respectively.
       (b) Set of Rules of Actuarial Equivalence.--
       (1) Initial determination.--The NAIC is requested to submit 
     to the Secretary, within 6 months after the date of the 
     enactment of this Act, a set of rules, including an 
     appropriate set of safe-harbors, which the NAIC determines is 
     sufficient for determining, in the case of any health 
     insurance coverage and for purposes of this section, the 
     actuarial value of the coverage offered.
       (2) Certification.--If the Secretary determines that the 
     NAIC has submitted a set of rules that comply with the 
     requirements of paragraph (1), the Secretary shall certify 
     such set of rules for use under this part. If the Secretary 
     determines that such a set of rules has not been submitted or 
     does not comply with such requirements, the Secretary shall 
     promptly establish a set of rules that meets such 
     requirements.
       (c) Standard Coverage.--
       (1) In general.--For purposes of this Act, health insurance 
     coverage is considered to provide standard coverage 
     consistent with this subsection if the benefits are specified 
     in a written instrument providing for such coverage as 
     essential and medically necessary services described in 
     subsection (a)(1)(B) and determined, in accordance with the 
     set of actuarial equivalence rules certified under subsection 
     (b), to have a value that is within 5 percentage points of 
     the applicable target actuarial value for standard coverage 
     established under paragraph (2).
       (2) Initial determination of applicable target actuarial 
     value for standard coverage.--
       (A) Initial determination.--The NAIC is requested to submit 
     to the Secretary, within 6 months after the date of the 
     enactment of this Act, a procedure for determining the 
     applicable target actuarial value for standard coverage 
     (which may vary by geographic area). Such value shall be 
     equal to the average actuarial value of a representative 
     range of the different types of health benefits provisions 
     (which include cost-sharing) typically offered as standard 
     coverage in the small employer health coverage market. In 
     determining the actuarial value, the benefits considered 
     should be sufficient to cover only services, including (but 
     not limited to) medical, surgical, hospital, and preventive 
     services, which are essential and medically necessary; except 
     that no specific procedure or treatment, or classes thereof, 
     is required to be considered in such determination by this 
     Act or through regulations. The determination of such value 
     shall be based on a representative distribution of the 
     population of eligible employees offered such coverage and a 
     single set of standardized utilization and cost factors 
     (which may vary by geographic area).
       (B) Certification.--If the Secretary determines that the 
     NAIC has submitted a procedure for determining the applicable 
     target actuarial value for standard coverage that complies 
     with the requirements of subparagraph (A), the Secretary 
     shall certify such procedure for use under this part. If the 
     Secretary determines that such a procedure has not been 
     submitted or does not comply with such requirements, the 
     Secretary shall promptly prescribe such a procedure that 
     meets such requirements.
       (d) Catastrophic Coverage.--
       (1) In general.--For purposes of subsection (a)(1)(B), 
     health insurance coverage is considered to provide 
     catastrophic coverage consistent with this subsection if--
       (A) benefits are available under such coverage for a year 
     only to the extent that expenses for covered services in a 
     year exceed a deductible amount that is consistent with the 
     dollar amounts specified in section 220(c)(2)(A) of the 
     Internal Revenue Code of 1986, as added by section 2202, and
       (B) the benefits are determined, in accordance with the set 
     of actuarial equivalence rules certified under subsection 
     (b), to have a value that is within 5 percentage points of 
     the target actuarial value for catastrophic coverage 
     established under paragraph (2).
       (2) Initial determination of target actuarial value for 
     catastrophic coverage.--
       (A) Initial determination.--The NAIC is requested to submit 
     to the Secretary, within 6 months after the date of the 
     enactment of this Act, a target actuarial value for 
     catastrophic coverage equal to the actuarial value that would 
     have been computed under subsection (c)(2)(A) if a deductible 
     that represents the midpoint of the range of deductibles 
     permitted consistent with subsections (b)(2) and (c)(2)(A) of 
     section 220 of the Internal Revenue Code of 1986 were used in 
     place of any deductible that otherwise would be applicable.
       (B) Certification.--If the Secretary determines that the 
     NAIC has submitted a target actuarial value for catastrophic 
     coverage that comply with the requirements of subparagraph 
     (A), the Secretary shall certify such value for use under 
     this part. If the Secretary determines that such a value has 
     not been submitted or does not comply with such requirements, 
     the Secretary shall promptly determine such a target 
     actuarial value that meets such requirements.
       (e) Medisave Coverage.--
       (1) In general.--For purposes of subsection (a)(1)(C), 
     health insurance coverage is considered to provide medisave 
     coverage consistent with this subsection if such coverage 
     consists of--
       (A) coverage under a catastrophic health plan (within the 
     meaning of section 220(c)(2) of the Internal Revenue Code of 
     1986, as inserted by section 2202 of this Act), and
       (B) a medical savings account described in section 
     220(d)(1)(B) of such Code.
       (f) Subsequent Revisions.--
       (1) NAIC.--The NAIC may submit from time to time to the 
     Secretary revisions of the set of rules of actuarial 
     equivalence previously established or determined under this 
     section if the NAIC determines such revision necessary to 
     take into account changes in the relevant types of health 
     benefits provisions, in deductible levels for catastrophic 
     coverage, or in demographic conditions which form the basis 
     for such set of rules. The provisions of subsection (b)(2) 
     shall apply to such a revision in the same manner as they 
     apply to the initial determination of the set of rules.
       (2) Secretary.--The Secretary may by regulation revise such 
     set or rules and values from time to time if the Secretary 
     determines such revision necessary to take into account 
     changes described in paragraph (1).

     SEC. 1103. ESTABLISHMENT OF OTHER MEDACCESS STANDARDS.

       (a) Establishment of General Standards.--
       (1) Role of naic.--The Secretary shall request the NAIC to 
     develop, within 9 months after the date of the enactment of 
     this Act, model regulations that specify standards with 
     respect to each of the following:
       (A)(i) The requirement, under section 1101(a), that 
     insurers make available MedAccess coverage.
       (ii) The requirements of guaranteed availability of 
     MedAccess coverage to small employers under section 1101(b).
       (B) The requirements of section 1104 (relating to use of 
     modified community rating, uniform marketing materials, and 
     miscellaneous consumer protections).
     If the NAIC develops recommended regulations specifying such 
     standards within such period, the Secretary shall review the 
     standards. Such review shall be completed within 60 days 
     after the date the regulations are developed. Unless the 
     Secretary determines within such period that the standards do 
     not meet the requirements, such standards shall serve as the 
     standards under this section, with such amendments as the 
     Secretary deems necessary.
       (2) Contingency.--If the NAIC does not develop such model 
     regulations within such period or the Secretary determines 
     that such regulations do not specify standards that meet the 
     requirements described in paragraph (1), the Secretary shall 
     specify, within 15 months after the date of the enactment of 
     this Act, standards to carry out those requirements.
       (3) Effective date.--The MedAccess standards and consumer 
     protection standards (as defined in paragraph (5)) shall 
     apply to MedAccess coverage and health insurance coverage 
     provided in a State on or after the respective date the 
     standards are implemented in the State under subsections (b) 
     and (c).
       (4) Preemption of state law.--
       (A) In general.--Except as provided in subparagraph (B), a 
     State may not establish or enforce standards for health 
     insurance coverage made available to small employers and 
     individuals that are different from the standards established 
     under this part.
       (B) Grandfather.--In the case of a State that, as of August 
     1, 1994, required that premiums in the individual and small 
     group market sectors be community-rated and not vary based on 
     age, the State continue such standards (and reasonable 
     modifications thereof) in force.
       (5) Definitions.--In this section:
       (A) Consumer protection standards.--The term ``consumer 
     protection standards'' means the standards established under 
     paragraph (1)(B).
       (B) MedAccess standards.--The term ``MedAccess standards'' 
     means the standards established under paragraph (1)(A) 
     (relating to the requirements of section 1101), and includes 
     the consumer protection standards insofar as they relate to 
     MedAccess coverage.
       (b) Application of Standards Through States.--
       (1) Application of medaccess standards.--
       (A) In general.--Each State shall submit to the Secretary, 
     by the deadline specified in subparagraph (B), a report on 
     steps the State is taking to implement and enforce the 
     consumer protection standards with respect to insurers, and 
     MedAccess coverage offered, not later than such deadline.
       (B) Deadline for report.--
       (i) 1 year after standards established.--Subject to clause 
     (ii), the deadline under this subparagraph is 1 year after 
     the date the MedAccess standards are established under 
     subsection (a).
       (ii) Exception for legislation.--In the case of a State 
     which the Secretary identifies, in consultation with the 
     NAIC, as--

       (I) requiring State legislation (other than legislation 
     appropriating funds) in order for insurers and plans 
     providing MedAccess coverage offered to meet the MedAccess 
     standards established under subsection (a), but
       (II) having a legislature which is not scheduled to meet in 
     1995 in a legislative session in which such legislation may 
     be considered,

     the date specified in this subparagraph is the first day of 
     the first calendar quarter beginning after the close of the 
     first legislative session of the State legislature that 
     begins on or after January 1, 1996. For purposes of the 
     previous sentence, in the case of a State that has a 2-year 
     legislative session, each year of such session shall be 
     deemed to be a separate regular session of the State 
     legislature.
       (2) Federal role.--If the Secretary determines that a State 
     has failed to submit a report by the deadline specified under 
     paragraph (1) or finds that the State has not implemented and 
     provided adequate enforcement of the MedAccess standards 
     under such paragraph, the Secretary shall notify the State 
     and provide the State a period of 60 days in which to submit 
     such report or to implement and enforce such standards under 
     such paragraph. If, after such 60-day period, the Secretary 
     finds that such a failure has not been corrected, the 
     Secretary shall provide for such mechanism for the 
     implementation and enforcement of such standards in the State 
     as the Secretary determines to be appropriate. Such 
     implementation and enforcement shall take effect with respect 
     to insurers, and plans providing MedAccess coverage offered 
     or renewed, on or after 3 months after the date of the 
     Secretary's finding under the previous sentence, and until 
     the date the Secretary finds that such a failure has been 
     corrected. In exercising authority under this subparagraph, 
     the Secretary shall determine whether the use of a risk-
     allocation mechanism, described in section 1101(c), would be 
     more consistent with the small employer group health coverage 
     market in the State than the guaranteed availability 
     provisions of section 1101(b).
       (2) Application of consumer protection standards.--
       (A) In general.--Each State shall submit to the Secretary, 
     by the deadline specified in subparagraph (B), a report on 
     steps the State is taking to implement and enforce the 
     MedAccess standards with respect to insurers, and health 
     insurance coverage (other than MedAccess coverage) offered, 
     not later than such deadline.
       (B) Deadline for report.--
       (i) 1 year after standards established.--Subject to clause 
     (ii), the deadline under this subparagraph is 1 year after 
     the date the consumer protection standards are established 
     under subsection (a).
       (ii) Exception for legislation.--In the case of a State 
     which the Secretary identifies, in consultation with the 
     NAIC, as--

       (I) requiring State legislation (other than legislation 
     appropriating funds) in order for insurers and plans 
     providing health insurance coverage offered to meet the 
     consumer protection standards established under subsection 
     (a), but
       (II) having a legislature which is not scheduled to meet in 
     1995 in a legislative session in which such legislation may 
     be considered,

     the date specified in this subparagraph is the first day of 
     the first calendar quarter beginning after the close of the 
     first legislative session of the State legislature that 
     begins on or after January 1, 1996. For purposes of the 
     previous sentence, in the case of a State that has a 2-year 
     legislative session, each year of such session shall be 
     deemed to be a separate regular session of the State 
     legislature.
       (2) Federal role.--If the Secretary determines that a State 
     has failed to submit a report by the deadline specified under 
     paragraph (1) or finds that the State has not implemented and 
     provided adequate enforcement of the consumer protection 
     standards under such paragraph, the Secretary shall notify 
     the State and provide the State a period of 60 days in which 
     to submit such report or to implement and enforce such 
     standards under such paragraph. If, after such 60-day period, 
     the Secretary finds that such a failure has not been 
     corrected, the Secretary shall provide for such mechanism for 
     the implementation and enforcement of such standards in the 
     State as the Secretary determines to be appropriate. Such 
     implementation and enforcement shall take effect with respect 
     to insurers, and health insurance coverage (other than 
     MedAccess coverage) offered or renewed, on or after 3 months 
     after the date of the Secretary's finding under the previous 
     sentence, and until the date the Secretary finds that such a 
     failure has been corrected.

     SEC. 1104. USE OF MODIFIED COMMUNITY RATING, UNIFORM 
                   MARKETING MATERIALS, AND MISCELLANEOUS CONSUMER 
                   PROTECTIONS.

       (a) Use of Modified Community Rating.--
       (1) In general.--As a standard under section 1103(a)(1)(B), 
     subject to paragraph (2), the premium rate established by an 
     insurer for coverage may not vary within a plan design except 
     by the following:
       (A) Age.--By age, based on classes of age established by a 
     State.
       (B) Geographic area.--By geographic area, based on 3-digit 
     zip code or counties, as identified by a State.
       (C) Family size.--Family size, based on a classification of 
     individual, individual with one or more children, married 
     couple without children, and married couple with children.
       (2) Discount for employer wellness program.--An insurer may 
     provide for a group discount with respect to an employer that 
     provides for a wellness program for employees.
       (b) Full Disclosure of Rating Practices.--At the time an 
     insurer offers health insurance coverage to a small employer, 
     the insurer shall fully disclose to the employer rating 
     practices for health insurance coverage, including rating 
     practices for different plan designs.
       (c) Actuarial Certification.--Each insurer that offers 
     health insurance coverage to a small employer in a State 
     shall file annually with the State commissioner of insurance 
     a written statement by a member of the American Academy of 
     Actuaries (or other individual acceptable to the 
     commissioner) that, based upon an examination by the 
     individual which includes a review of the appropriate records 
     and of the actuarial assumptions of the insurer and methods 
     used by the insurer in establishing premium rates for 
     applicable health insurance coverage--
       (1) the insurer is in compliance with the applicable 
     provisions of this section, and
       (2) the rating methods are actuarially sound.
     Each such insurer shall retain a copy of such statement for 
     examination at its principal place of business.
       (d) Registration and Reporting.--Each insurer that issues 
     any health insurance coverage to a small employer in a State 
     shall be registered or licensed with the State commissioner 
     of insurance and shall comply with any reporting requirements 
     of the commissioner relating to such coverage.
       (e) Marketing Material.--Each insurer that issues any 
     health insurance coverage to a small employer in a State 
     shall file with the State those marketing materials relating 
     to the offer and sale of health insurance coverage to be used 
     for distribution before the materials are used. Such 
     materials shall be in a uniform format specified under the 
     standards established under section 1101. Such materials 
     (including information on plan designs offered by different 
     insurers) shall be distributed to employers that do not 
     contribute to health insurance coverage for their employees, 
     in order to distribute such information to their employees as 
     part of the offer of coverage under section 1001(a).

     SEC. 1105. MONITORING AND RESPONSE TO ADVERSE SELECTION; RISK 
                   ADJUSTMENT PROGRAMS.

       (a) Monitoring.--The Secretary of Labor shall monitor the 
     prevalence and impact of adverse risk selection in the fully 
     insured plans made available to small employers resulting 
     from the decision of small employers to self insure. State 
     insurance commissioners may submit to the Secretary such 
     information on such adverse risk selection as they determine 
     to be appropriate.
       (b) Response.--If the Secretary of Labor determines, on the 
     basis of such information or otherwise, that, due to 
     decisions of small employers to self-insure, there has been 
     substantial or significant favorable selection with respect 
     to self-insured plans or unfavorable selection with respect 
     to fully insured plans in a State, the Secretary shall 
     develop a risk adjustment program under subsection (c) that 
     responds to such a pattern in the State. The Secretary shall 
     request the NAIC to submit to the Secretary recommendations 
     regarding the structure and operation of such a program.
       (c) Establishment of Risk Adjustment Program.--The risk 
     adjustment program applied in a State under this subsection--
       (1) shall be designed to be operated on a non-governmental 
     basis,
       (2) shall require participation of each small employer in 
     the State that is self-insured,
       (3) shall require the imposition of such assessments on 
     self-insured plans offered by such employers as may be 
     appropriate to prevent further adverse or favorable 
     selection, and
       (4) shall provide for the distribution of such assessments 
     to the State involved for purposes of making payments to 
     insurers to stabilize the small group insurance market.
     The amounts of the assessments under paragraph (3) for 
     individual employers may take into account the number of 
     lives covered under the plans of such employers and the area 
     of residence of the lives covered.

     SEC. 1106. ESTABLISHMENT OF REINSURANCE OR ALLOCATION OF RISK 
                   MECHANISMS FOR HIGH RISK INDIVIDUALS IN 
                   MARKETPLACE FOR SMALL BUSINESS AND MARKETPLACE 
                   FOR INDIVIDUALS.

       (a) Establishment of Standards.--
       (1) Role of naic.--The Secretary shall request the NAIC to 
     develop, within 9 months after the date of the enactment of 
     this Act, models for reinsurance or allocation of risk 
     mechanisms (each in this section referred to as a 
     ``reinsurance or allocation of risk mechanism'') for health 
     insurance coverage made available to small employers and for 
     whom an insurer is at risk of incurring high costs in 
     providing such coverage. If the NAIC develops such models 
     within such period, the Secretary shall review such models to 
     determine if they provide for an effective reinsurance or 
     allocation of risk mechanism. Such review shall be completed 
     within 30 days after the date the models are developed. 
     Unless the Secretary determines within such period that such 
     a model is not an effective reinsurance or allocation of risk 
     mechanism, such remaining models shall serve as the models 
     under this section, with such amendments as the Secretary 
     deems necessary.
       (2) Contingency.--If the NAIC does not develop such models 
     within such period or the Secretary determines that all such 
     models do not provide for an effective reinsurance or 
     allocation of risk mechanism, the Secretary shall specify, 
     within 15 months after the date of the enactment of this Act, 
     models to carry out this section.
       (b) Implementation of Reinsurance or Allocation of Risk 
     Mechanisms.--
       (1) By states.--Each State shall establish and maintain one 
     or more reinsurance or allocation of risk mechanisms that are 
     consistent with a model established under subsection (a) by 
     not later than the deadline specified in section 
     1103(b)(1)(B). A State may establish and maintain such a 
     mechanism jointly with one or more other States.
       (2) Federal role.--
       (A) In general.--If the Secretary determines that a State 
     has failed to establish or maintain a reinsurance or 
     allocation of risk mechanism in accordance with paragraph 
     (1), the Secretary shall establish and maintain such a 
     reinsurance or allocation of risk mechanism meeting the 
     requirements of this paragraph.
       (B) Reinsurance mechanism.--Unless the Secretary determines 
     under subparagraph (C) that an allocation of risk mechanism 
     is the appropriate mechanism to use in a State under this 
     paragraph, the Secretary shall establish and maintain for use 
     under this section for each State an appropriate reinsurance 
     mechanism.
       (C) Allocation of risk mechanism.--If the Secretary 
     determines that, due to the nature of the health coverage 
     market in the State (including a relatively small number of 
     plans offered providing health insurance coverage or a 
     relatively small number of uninsurable small employers), an 
     allocation of risk mechanism would be a better mechanism than 
     a reinsurance mechanism, the Secretary shall establish and 
     maintain for use under this section for a State an allocation 
     of risk mechanism under which small employers with employees 
     who are at higher risk of significantly higher claims would 
     be equitably assigned among insurers offering health 
     insurance coverage to small employers.
       (c) Construction.--Nothing in this section shall be 
     construed to prohibit reinsurance or allocation of risk 
     arrangements relating to health insurance coverage, whether 
     on a State or multi-State basis, not required under this 
     section.

                  PART 2--MARKETPLACE FOR INDIVIDUALS

     SEC. 1111. APPLICATION OF SIMILAR REQUIREMENTS.

       (a) In General.--Except as provided in subsection (c)--
       (1) the provisions of part 1 of this subtitle shall apply 
     to insurers offering health insurance coverage to individuals 
     in the individual market (as defined in subsection (b)) in 
     the same manner as such provisions apply to insurers offering 
     health insurance coverage to employers, and
       (2) the standards established under section 1103 shall 
     apply under this part in the same manner as they apply under 
     part 1.
     For purposes of this subsection, any reference to an employee 
     or eligible employee is deemed a reference to such an 
     individual.
       (b) Individual Market Defined.--In subsection (a), the term 
     ``individual market'' means the insurance market offered to 
     individuals seeking health care coverage on behalf of 
     themselves (and their dependents) and not seeking coverage on 
     the basis of employment, membership in a organization, or 
     through another group purchasing arrangement.
       (c) Exception and special rule.--
       (1) Wellness discounts.--Section 1104(a)(2) (relating to 
     discounts for employer wellness programs) shall not apply 
     under this part.
       (2) Separate application of risk adjustment to individual 
     market sector.--Section 1105 (relating to monitoring and 
     response to adverse selection; risk adjustment programs) 
     shall be applied under this part in a manner that is separate 
     from its application under part A.
       (3) Separate age rating factor for the individual market.--
     The provisions regarding age under section 1104(a)(1)(A) 
     shall be determined separately for each year of age and not 
     by the classes of age referred to in such section.
       (4) Conversion of permanent health insurance policies.--The 
     provisions of section 1104 shall not apply in connection with 
     a permanent policy of health insurance existing on the 
     effective date, if each individual covered under the policy 
     is given the option to convert the policy to a policy of 
     health insurance subject to this part.
       (d) Application of Requirements.--Coverage offered by an 
     insurer shall not be treated as MedAccess coverage under this 
     part unless the insurer complies with the requirements of 
     part 3 of subtitle A (relating to standards for managed care 
     arrangements and essential community providers) in the same 
     manner as such requirements apply to a group health plan.

            PART 3--VOLUNTARY HEALTH PURCHASING ARRANGEMENTS

     SEC. 1121. ESTABLISHMENT AND ORGANIZATION.

       (a) In General.--Voluntary health purchasing arrangements 
     (in this part referred to as ``purchasing arrangements'') may 
     be established in accordance with this part. Each purchasing 
     arrangement shall be chartered under State law and operated 
     as a not-for-profit corporation. An insurer may not form, 
     underwrite, or possess a majority vote of a purchasing 
     arrangement, but may administer such an arrangement.
       (b) Board of Directors.--
       (1) In general.--Each purchasing arrangement shall be 
     governed by a Board of Directors. Such Board shall initially 
     be appointed under procedures established by the State in 
     which it operates. Subsequently, the Board shall be elected 
     by the members of the arrangement in accordance with 
     paragraph (3). Such Board shall be composed of individuals 
     who are small employers (or representatives of small 
     employers), eligible employees of small employers (or 
     representatives of such employees), and eligible individuals 
     in the area in which the arrangement operates.
       (2) Membership.--A purchasing arrangement shall accept all 
     small employers, eligible employees, and eligible individuals 
     residing within the area served by the arrangement as members 
     if such employers, employees or individuals request such 
     membership.
       (3) Voting.--Members of a purchasing arrangement shall have 
     voting rights consistent with the rules established under the 
     bylaws governing the arrangement.
       (c) Duties of Purchasing Arrangements.--
       (1) In general.--Subject to paragraph (2), each purchasing 
     arrangement shall--
       (A) market MedAccess coverage to members throughout the 
     entire area served by the arrangement;
       (B) enter into agreements with insurers offering MedAccess 
     coverage under section 1122;
       (C) enter into agreements with small employers under 
     section 1123;
       (D) enroll individuals in MedAccess coverage, only in 
     accordance with section 1124; and
       (E) carry out other functions provided for under this part.
       (2) Limitation on activities.--A purchasing arrangement 
     shall not--
       (A) perform any activity (including review, approval, or 
     enforcement) relating to payment rates for providers;
       (B) perform any activity (including certification or 
     enforcement) relating to compliance of insurers or coverage 
     with the requirements of parts 1 or 2;
       (C) assume financial risk in relation to any such coverage; 
     or
       (D) perform other activities identified by the State as 
     being inconsistent with the performance of its duties under 
     paragraph (1).
       (3) Characteristics of service area.--A purchasing 
     arrangement need not serve areas that are contiguous, but the 
     geographic boundaries of such areas shall be consistent with 
     the boundaries established for geographic areas used in 
     establishing premium rates in the individual and small group 
     marketplace. If a purchasing arrangement serves a part of a 
     metropolitan statistical area the arrangement shall serve the 
     entire area.
       (d) Establishment not Required.--Nothing in this section 
     shall be construed as requiring--
       (1) that a purchasing arrangement be established in each 
     area of a State in which it operates; and
       (2) that there be only one purchasing arrangement 
     established with respect to any area.

     SEC. 1122. AGREEMENTS WITH INSURERS.

       (a) Agreements.--
       (1) In general.--Except as provided in paragraph (3), each 
     purchasing arrangement for an area shall enter into an 
     agreement under this section with each insurer that desires 
     to make MedAccess coverage available through the purchasing 
     arrangement (consistent with any procedures established by 
     the State).
       (2) Termination of agreement.--An agreement under paragraph 
     (1) shall remain in effect for a 12-month period, except that 
     the purchasing arrangement may terminate an agreement under 
     paragraph (1) if the insurer's license or certification under 
     State law is terminated or for other good cause shown.
       (3) Limitation on renewal of agreements.--Subsequent to the 
     12-month period described in paragraph (2), a purchasing 
     arrangement may--
       (A) refuse to enter into a subsequent agreement with an 
     insurer if the arrangement determines that the enrollment or 
     premium is too low, and
       (B) if a previous agreement with an insurer was terminated 
     for good cause and the arrangement determines appropriate 
     actions have not been taken to correct the problems, refuse 
     to enter into a subsequent agreement with the insurer.
       (4) No prohibition on offering of coverage.--Nothing in 
     this subsection shall be construed as prohibiting an insurer 
     that does not enter into an agreement under paragraph (1) 
     from offering health insurance coverage to small employers 
     and eligible individuals within any area, so long as the 
     premium rates charged outside such arrangement are the same 
     as those charged within the arrangement (subject to 
     reasonable differences in premiums that only reflect savings 
     in administrative costs under such an arrangement).
       (b) Receipt of Premiums on Behalf of Plans.--
       (1) In general.--Under an agreement under this section 
     between a purchasing arrangement and an insurer--
       (A) premiums shall be payable , and
       (B) payment of premiums may be made by individuals (or 
     employers on their behalf) directly to the purchasing 
     arrangement for the benefit of the insurer.
       (2) Timing of payment of premiums.--Premiums may be payable 
     on a monthly basis (or, at the option of an eligible employee 
     or individual, on a quarterly basis). The purchasing 
     arrangement may provide for reasonable penalties and grace 
     periods for late payment.
       (3) Qualified health plans retain risk of nonpayment.--
     Nothing in this subsection shall be construed as placing upon 
     a purchasing arrangement any risk associated with the failure 
     of individuals and employers to make prompt payment of 
     premiums to the purchasing arrangement (other than the 
     portion of the premium representing the purchasing 
     arrangement administrative fee under section 1125). Each 
     small employer and eligible individual who enrolls with an 
     insurer through the purchasing arrangement is liable to the 
     insurer for premiums.
       (c) Forwarding of Premiums.--
       (1) In general.--If, under an agreement under subsection 
     (a), premium payments for an insurer are made to the 
     purchasing arrangement, the purchasing arrangement shall 
     forward to the insurer the amount of the premiums and the 
     purchasing arrangement (and not the employer or individual) 
     shall be liable for the premium payment collected under such 
     arrangement.
       (2) Payments.--Payments shall be made by the purchasing 
     arrangement under this subsection within a period of days 
     (specified by the Secretary and not to exceed 7 days) after 
     receipt of the premium from the small employer of the 
     eligible employee or the eligible individual, as the case may 
     be.

     SEC. 1123. PROVISION OF INFORMATION.

       (a) In General.--Each purchasing arrangement for an area 
     shall provide, upon request, to each small employer that 
     employs individuals in the area and to each eligible 
     individual who resides in the area--
       (1) information provided to the purchasing arrangement by 
     the State or insurers in accordance with rules by the State 
     in which such arrangement is located, and
       (2) the opportunity to enter into an agreement with the 
     arrangement for the purchase of coverage through the insurer.
       (b) Forwarding Information and Payroll Deductions.--As part 
     of an agreement entered into under this section, a small 
     employer shall forward the information and make the payroll 
     deductions required under section 1001.

     SEC. 1124. ENROLLING ELIGIBLE EMPLOYEES AND ELIGIBLE 
                   INDIVIDUALS THROUGH A PURCHASING ARRANGEMENT.

       A purchasing arrangement shall offer, on behalf of each 
     insurer with which an agreement was entered into under 
     section 1122 and in accordance with the enrollment procedures 
     of such insurers, enrollment in health insurance coverage 
     only to--
       (1) all eligible employees employed by small employers in 
     the area served by the purchasing arrangement; and
       (2) all eligible individuals residing in such area.

     SEC. 1125. RESTRICTION ON CHARGES.

       (a) In General.--A purchasing arrangement may impose an 
     administrative fee with respect to an eligible employee or 
     eligible individual obtaining coverage through the purchasing 
     arrangement.
       (b) Fee.--A purchasing arrangement that elects to impose a 
     fee under subsection (a) shall ensure that such fee is set as 
     a percentage of the premium for such coverage and is imposed 
     uniformly with respect to all coverage provided through the 
     arrangement.

            PART 4--DEFINITIONS AND MISCELLANEOUS PROVISIONS

     SEC. 1131. DEFINITIONS.

       Except as otherwise specifically provided, for purposes of 
     this subtitle:
       (1) Dependent child.--The term ``dependent child'' means a 
     child (including an adopted child) who is under 19 years of 
     age or who is a full-time student and under 25 years of age.
       (2) Eligible employee.--The term ``eligible employee'' 
     means, with respect to an employer, an employee who--
       (A) normally performs on a monthly basis at least 10 hours 
     of service per week for that employer; or
       (B) is reasonably expected as of the 1st day of such month 
     to be employed by the employer for a period of 120 
     consecutive days during any 365-day period that includes such 
     1st day.
       (3) Employer.--The term ``employer'' shall have the meaning 
     applicable under section 3(5) of the Employee Retirement 
     Income Security Act of 1974.
       (4) Health insurance coverage.--
       (A) In general.--Except as provided in subparagraph (B), 
     the term ``health insurance coverage'' means any hospital or 
     medical service policy or certificate, hospital or medical 
     service plan contract, or health maintenance organization 
     group contract offered by an insurer.
       (B) Exception.--Such term does not include any of the 
     following:
       (i) Coverage only for accident, dental, vision, disability 
     income, or long-term care insurance, or any combination 
     thereof.
       (ii) Medicare supplemental health insurance.
       (iii) Coverage issued as a supplement to liability 
     insurance.
       (iv) Liability insurance, including general liability 
     insurance and automobile liability insurance.
       (v) Worker's compensation or similar insurance.
       (vi) Automobile medical-payment insurance.
       (vii) Coverage for a specified disease or illness.
       (viii) A hospital or fixed indemnity policy.
       (5) Network plan.--The term ``network plan'' includes, as 
     defined in standards established under section 1103, an 
     organization that provides health insurance coverage which 
     meets specified standards and under which health services are 
     offered to be provided on a prepaid, at-risk basis primarily 
     through a defined set of providers.
       (6) Insurer.--The term ``insurer'' means a licensed 
     insurance company, an entity offering prepaid hospital or 
     medical services, and a health maintenance organization 
     offering such services to an employer, and includes a similar 
     organization regulated under State law for solvency.
       (7) NAIC.--The term ``NAIC'' means the National Association 
     of Insurance Commissioners.
       (8) Secretary.--The term ``Secretary'' means the Secretary 
     of Health and Human Services.
       (9) Small employer.--The term ``small employer'' means, 
     with respect to a calendar year, an employer that normally 
     employs more than 1 but less than 51 eligible employees on a 
     typical business day. For the purposes of this paragraph, the 
     term ``employee'' includes a self-employed individual. For 
     purposes of determining if an employer is a small employer, 
     rules similar to the rules of subsection (b) and (c) of 
     section 414 of the Internal Revenue Code of 1986 shall apply.
       (10) State.--The term ``State'' means the 50 States, the 
     District of Columbia, Puerto Rico, the Virgin Islands, Guam, 
     and American Samoa.
       (11) State commissioner of insurance.--The term ``State 
     commissioner of insurance'' includes a State superintendent 
     of insurance.

     SEC. 1132. ENFORCEMENT.

       For enforcement of requirements of this subtitle, see 
     section 1031.

     SEC. 1133. PROHIBITION OF IMPROPER INCENTIVES.

       (a) Limitation on Financial Incentives.--No insurer that 
     offers health insurance coverage may vary the commission or 
     financial or other remuneration to a person based on the 
     claims experience or health status of individuals enrolled by 
     or through the person.
       (b) Prohibition of Tie-in Arrangements.--No insurer that 
     offers health insurance coverage may require the purchase of 
     any other insurance or product as a condition for the 
     purchase of such coverage.

     SEC. 1134. ANNUAL REPORTS.

       (a) In General.--The Secretary shall submit to Congress an 
     annual report on the implementation of this subtitle and the 
     need for additional reforms to assure and expand coverage.
       (b) Information Regarding Impact of Reforms.--Each annual 
     report shall include information concerning at least the 
     following:
       (1) Implementation and enforcement of the applicable 
     MedAccess standards and consumer protection standards under 
     this subtitle by the States and by the Secretary.
       (2) An evaluation of the impact of the reforms under this 
     subtitle on the availability of affordable health coverage 
     for individuals and for small employers that purchase group 
     health coverage and for their employees, and, in particular, 
     the impact of--
       (A) guaranteed availability of health coverage,
       (B) limitations of restrictions from coverage of 
     preexisting conditions,
       (C) requirement for continuity of coverage,
       (D) risk-management mechanisms for health coverage,
       (E) limits on premium variations, and
       (F) preemption of State benefit mandates.
     In performing such evaluation, the Secretary shall seek to 
     discount the effect of the insurance cycle on health 
     insurance premiums.
       (3) An assessment of the implications of the reforms on 
     adverse selection among health insurance plans and the 
     distribution of risk among health insurance plans.
       (c) Information Regarding Coverage of the Uninsured.--The 
     report submitted under this section 5 years after the date of 
     the enactment of this Act also shall include findings and 
     recommendations regarding each of the following:
       (1) Characteristics of the insured and uninsured, including 
     demographic characteristics, working status, health status, 
     and geographic distribution.
       (2) Steps which should be taken to improve access to health 
     care and increase health insurance coverage of the 
     chronically uninsured.
       (3) Effectiveness of efforts to measure and improve health 
     care outcomes in the public and private sectors.
       (4) Effectiveness of initiatives targeted to improving 
     access of underserved urban and rural populations to health 
     care services.
       (5) Effectiveness of new Federal subsidy programs, 
     including recommendations to restrain future growth of such 
     programs.

     SEC. 1135. RESEARCH AND DEMONSTRATION PROJECTS; DEVELOPMENT 
                   OF A HEALTH RISK POOLING MODEL.

       (a) Research and Demonstrations.--The Secretary is 
     authorized, directly, by contract, and through grants and 
     cooperative agreements within the Department of Health and 
     Human Services and outside the Department--
       (1) to conduct research on the impact of this subtitle on 
     the availability of affordable health coverage for employees 
     and dependents in the small employers group and individual 
     health care coverage market and other topics described in 
     section 1134(b), and
       (2) to conduct demonstration projects relating to such 
     topics.
       (b) Development of Methods of Measuring Relative Health 
     Risk.--
       (1) In general.--The Secretary shall develop methods for 
     measuring, in terms of the expected costs of providing 
     benefits under health insurance plans and, in particular, 
     MedAccess plans, the relative health risks of eligible 
     individuals.
       (2) Methodology.--The methods--
       (A) shall rely on diagnosis or other health-related 
     information that is predictive of individual health care 
     needs,
       (B) may rely upon information routinely collected in the 
     process of making payments under group health plans, and
       (C) may provide for such random, sample audits of records 
     as may be necessary to verify the accuracy of measurements.
       (c) Development of a Health Risk Pooling Model.--
       (1) In general.--The Secretary shall develop a model, based 
     on the methods of measuring risks under subsection (b), for 
     equitably distributing health risks among insurers and group 
     health plans in the small employer and individual health care 
     coverage market.
       (2) Redistribution of risk.--Under such model, insurers and 
     group health plans with below average health risks would be 
     required to contribute to a common fund for payment to 
     insurers and group health plans with above average health 
     risks, each in relation to the degree of their favorable or 
     adverse risk selection.
       (3) Incentives.--Such model shall include incentives to 
     encourage continuous coverage of individuals and eligible 
     individuals and small employers.
       (d) Consultation.--The methods and model under this section 
     shall be developed in consultation with the NAIC.
       (e) Report.--By not later than January 1, 1996, the 
     Secretary shall submit to Congress a report on the methods 
     and model developed under this section (as well as on 
     research and demonstration projects conducted under 
     subsection (a)). The Secretary shall include in the report 
     such recommendations respecting the application of the model 
     to insurers and group health plans (and, in particular, to 
     MedAccess plans) under this subtitle as the Secretary deems 
     appropriate.
       (f) Authorization of Appropriations.--There are authorized 
     to be appropriated to carry out this section, $5,000,000 in 
     each of fiscal years 1995 through 1999.
                         Subtitle C--Preemption

                   PART 1--SCOPE OF STATE REGULATION

     SEC. 1201. PROHIBITION OF STATE BENEFIT MANDATES FOR GROUP 
                   HEALTH PLANS.

       In the case of a group health plan, no provision of State 
     or local law shall apply that requires the coverage of one or 
     more specific benefits, services, or categories of health 
     care, or services of any class or type of provider of health 
     care.

     SEC. 1202. PROHIBITION OF PROVISIONS PROHIBITING EMPLOYER 
                   GROUPS FROM PURCHASING HEALTH INSURANCE.

       No provision of State or local law shall apply that 
     prohibits 2 or more employers from obtaining coverage under a 
     multiple employer welfare arrangement under which all 
     coverage consists of medical care described in section 607(1) 
     of the Employee Retirement Income Security Act of 1974 and is 
     fully insured.

     SEC. 1203. PREEMPTION OF STATE ANTI-MANAGED CARE LAWS.

       (a) Preemption of State Law Provisions.--Subject to 
     subsection (c), the following provisions of State law are 
     preempted and may not be enforced:
       (1) Restrictions on reimbursement rates or selective 
     contracting.--Any law that restricts the ability of a group 
     health plan or insurer to negotiate reimbursement rates with 
     providers or to contract selectively with one provider or a 
     limited number of providers.
       (2) Restrictions on differential financial incentives.--Any 
     law that limits the financial incentives that a group health 
     plan or insurer may require a beneficiary to pay when a non-
     plan provider is used on a non-emergency basis.
       (3) Restrictions on utilization review methods.--Any law 
     that--
       (A) prohibits utilization review of any or all treatments 
     and conditions,
       (B) requires that such review be made (i) by a resident of 
     the State in which the treatment is to be offered or by an 
     individual licensed in such State, or (ii) by a physician in 
     any particular specialty or with any board certified 
     specialty of the same medical specialty as the provider whose 
     services are being reviewed,
       (C) requires the use of specified standards of health care 
     practice in such reviews or requires the disclosure of the 
     specific criteria used in such reviews,
       (D) requires payments to providers for the expenses of 
     responding to utilization review requests,
       (E) imposes liability for delays in performing such review, 
     or
       (F) requires standards in addition to or inconsistent with 
     standards established under section 1022(b).
     Nothing in subparagraph (B) shall be construed as prohibiting 
     a State from (i) requiring a licensed physician or other 
     health care professional be available at some time in the 
     review or appeal process, or (ii) requiring that any decision 
     in an appeal from such a review be made by a licensed 
     physician.
       (b) GAO Study.--
       (1) In general.--The Comptroller General shall conduct a 
     study of the benefits and cost effectiveness of the use of 
     managed care in the delivery of health services.
       (2) Report.--By not later than 4 years after the date of 
     the enactment of this Act, the Comptroller General shall 
     submit a report to Congress on the study conducted under 
     paragraph (1) and shall include in the report such 
     recommendations (including whether the provisions of 
     subsection (a) should be extended) as may be appropriate.
       (c) Sunset.--Unless otherwise provided, subsection (a) 
     shall not apply 5 years after the date of the enactment of 
     this Act.

     SEC. 1204. DEFINITIONS.

       For purposes of this part, the terms ``dependent'', 
     ``employee'', ``employer'', ``fully insured'', ``group health 
     plan'', ``health insurance plan'', ``multiple employer 
     welfare arrangement'', and ``State'' have the meanings given 
     such terms in section 1023(a).

         PART 2--MULTIPLE EMPLOYER HEALTH BENEFITS PROTECTIONS

     SEC. 1211. LIMITED EXEMPTION FROM CERTAIN RESTRICTIONS ON 
                   ERISA PREEMPTION OF STATE LAW FOR HEALTH PLANS 
                   MAINTAINED BY MULTIPLE EMPLOYERS SUBJECT TO 
                   CERTAIN FEDERAL STANDARDS.

       (a) In General.--Subtitle B of title I of the Employee 
     Retirement Income Security Act of 1974 is amended by adding 
     at the end the following new part:

                ``Part 7--Multiple Employer Health Plans

     ``SEC. 701. DEFINITIONS.

       ``For purposes of this part--
       ``(1) Insurer.--The term `insurer' means an insurance 
     company, insurance service, or insurance organization, 
     licensed to engage in the business of insurance by a State.
       ``(2) Participating employer.--The term `participating 
     employer' means, in connection with a multiple employer 
     welfare arrangement, any employer if any of its employees, or 
     any of the dependents of its employees, are or were covered 
     under such arrangement in connection with the employment of 
     the employees.
       ``(3) Excess/stop loss coverage.--The term `excess/stop 
     loss coverage' means, in connection with a multiple employer 
     welfare arrangement, a contract under which an insurer 
     provides for payment with respect to claims under the 
     arrangement, relating to participants or beneficiaries 
     individually or otherwise, in excess of an amount or amounts 
     specified in such contract.
       ``(4) Qualified actuary.--The term `qualified actuary' 
     means an individual who is a member of the American Academy 
     of Actuaries or meets such reasonable standards and 
     qualifications as the Secretary may provide by regulation.
       ``(5) Sponsor.--The term `sponsor' means, in connection 
     with a multiple employer welfare arrangement, the association 
     or other entity which establishes or maintains the 
     arrangement.
       ``(6) State insurance commissioner.--The term `State 
     insurance commissioner' means the insurance commissioner (or 
     similar official) of a State.
       ``(7) Domicile state.--The term `domicile State' means, in 
     connection with a multiple employer welfare arrangement, the 
     State in which, according to the application for an exemption 
     under this part, most individuals to be covered under the 
     arrangement are located, except that, in any case in which 
     information contained in the latest annual report of the 
     arrangement filed under this part indicates that most 
     individuals covered under the arrangement are located in a 
     different State, such term means such different State.
       ``(8) Fully insured.--Coverage under a multiple employer 
     welfare arrangement is `fully insured' if one or more 
     insurers, health maintenance organizations, similar 
     organizations regulated under State law for solvency, or any 
     combination thereof are liable under one or more insurance 
     policies or contracts for all benefits under the arrangement 
     (irrespective of any recourse they may have against other 
     parties).
       ``(9) Exempted multiple employer health plan.--The term 
     `exempted multiple employer health plan' means a multiple 
     employer welfare arrangement treated as an employee welfare 
     benefit plan by reason of an exemption under this part.
       ``(10) Community health network.--The term `community 
     health network' has the meaning given such term in section 
     1421 of the Affordable Health Care Now Act of 1994.

     ``SEC. 702. EXEMPTED MULTIPLE EMPLOYER HEALTH PLANS RELIEVED 
                   OF CERTAIN RESTRICTIONS ON PREEMPTION OF STATE 
                   LAW AND TREATED AS EMPLOYEE WELFARE BENEFIT 
                   PLANS.

       ``(a) In General.--Subject to subsection (b), a multiple 
     employer welfare arrangement under which coverage is not 
     fully insured and with respect to which there is in effect an 
     exemption granted by the Secretary under this part (or with 
     respect to which there is pending a complete application for 
     such an exemption and the Secretary determines that 
     provisional protection under this part is appropriate)--
       ``(1) shall be treated for purposes of subtitle A and the 
     preceding parts of this subtitle as an employee welfare 
     benefit plan, irrespective of whether such arrangement is an 
     employee welfare benefit plan, and
       ``(2) shall be exempt from section 514(b)(6)(A)(ii).
       ``(b) Benefits Must Consist of Medical Care.--Subsection 
     (a) shall apply to a multiple employer welfare arrangement 
     only if the benefits provided thereunder consist solely of 
     medical care described in section 607(1) (disregarding such 
     incidental benefits as the Secretary shall specify by 
     regulation).
       ``(c) Restriction on Commencement of New Arrangements.--A 
     multiple employer welfare arrangement providing benefits 
     which consist of medical care described in section 607(1) 
     which has not commenced operations as of January 1, 1995, may 
     commence operations only if an exemption granted to the 
     arrangement under this part is in effect (or there is pending 
     with respect to the arrangement a complete application for 
     such an exemption and the Secretary determines that 
     provisional protection under this part is appropriate).

     ``SEC. 703. EXEMPTION PROCEDURE.

       ``(a) In General.--The Secretary shall grant an exemption 
     described in section 702(a) to a multiple employer welfare 
     arrangement if--
       ``(1) an application for such exemption with respect to 
     such arrangement, identified individually or by class, has 
     been duly filed in complete form with the Secretary in 
     accordance with this part,
       ``(2) such application demonstrates compliance with the 
     requirements of section 704 with respect to such arrangement, 
     and
       ``(3) the Secretary finds that such exemption is--
       ``(A) administratively feasible,
       ``(B) not adverse to the interests of the individuals 
     covered under the arrangement, and
       ``(C) protective of the rights and benefits of the 
     individuals covered under the arrangement.
       ``(b) Notice and Hearing.--Before granting an exemption 
     under this section, the Secretary shall publish notice in the 
     Federal Register of the pendency of the exemption, shall 
     require that adequate notice be given to interested persons, 
     including the State insurance commissioner of each State in 
     which covered individuals under the arrangement are, or are 
     expected to be, located, and shall afford interested persons 
     opportunity to present views. The Secretary may not grant an 
     exemption under this section unless the Secretary affords an 
     opportunity for a hearing and makes a determination on the 
     record with respect to the findings required under subsection 
     (a)(3). The Secretary shall, to the maximum extent 
     practicable, make a final determination with respect to any 
     application filed under this section in the case of a newly 
     established arrangement within 90 days after the date which 
     the Secretary determines is the date on which such 
     application is filed in complete form.

     ``SEC. 704. ELIGIBILITY REQUIREMENTS.

       ``(a) Application for Exemption.--
       ``(1) In general.--An exemption may be granted by the 
     Secretary under this part only on the basis of an application 
     filed with the Secretary in such form and manner as shall be 
     prescribed in regulations of the Secretary. Any such 
     application shall be signed by the operating committee and 
     the sponsor of the arrangement.
       ``(2) Filing fee.--The arrangement shall pay to the 
     Secretary at the time of filing an application under this 
     section a filing fee in the amount of $5,000, which shall be 
     available, to the extent provided in appropriation Acts, to 
     the Secretary for the sole purpose of administering the 
     exemption procedures under this part.
       ``(3) Information included.--An application filed under 
     this section shall include, in a manner and form prescribed 
     in regulations of the Secretary, at least the following 
     information:
       ``(A) Identifying information.--The names and addresses 
     of--
       ``(i) the sponsor, and
       ``(ii) the members of the operating committee of the 
     arrangement.
       ``(B) States in which arrangement intends to do business.--
     The States in which individuals covered under the arrangement 
     are to be located and the number of such individuals expected 
     to be located in each such State.
       ``(C) Bonding requirements.--Evidence provided by the 
     operating committee that the bonding requirements of section 
     412 will be met as of the date of the application.
       ``(D) Plan documents.--A copy of the documents governing 
     the arrangement (including any bylaws and trust agreements), 
     the summary plan description, and other material describing 
     the benefits and coverage that will be provided to 
     individuals covered under the arrangement.
       ``(E) Agreements with service providers.--A copy of any 
     agreements between the arrangement and contract 
     administrators and other service providers.
       ``(F) Funding report.--A report setting forth information 
     determined as of a date within the 120-day period ending with 
     the date of the application, including the following:
       ``(i) Reserves.--A statement, certified by the operating 
     committee of the arrangement, and a statement of actuarial 
     opinion, signed by a qualified actuary, that all applicable 
     requirements of section 707 are or will be met in accordance 
     with regulations which the Secretary shall prescribe.
       ``(ii) Adequacy of contribution rates.--A statement of 
     actuarial opinion, signed by a qualified actuary, which sets 
     forth a description of the extent to which contribution rates 
     are adequate to provide for the payment of all obligations 
     and the maintenance of required reserves under the 
     arrangement for the 12-month period beginning with such date 
     within such 120-day period, taking into account the expected 
     coverage and experience of the arrangement. If the 
     contribution rates are not fully adequate, the statement of 
     actuarial opinion shall indicate the extent to which the 
     rates are inadequate and the changes needed to ensure 
     adequacy.
       ``(iii) Current and projected value of assets and 
     liabilities.--A statement of actuarial opinion signed by a 
     qualified actuary, which sets forth the current value of the 
     assets and liabilities accumulated under the arrangement and 
     a projection of the assets, liabilities, income, and expenses 
     of the arrangement for the 12-month period referred to in 
     clause (ii). The income statement shall identify separately 
     the arrangement's administrative expenses and claims.
       ``(iv) Costs of coverage to be charged and other 
     expenses.--A statement of the costs of coverage to be 
     charged, including an itemization of amounts for 
     administration, reserves, and other expenses associated with 
     the operation of the arrangement.
       ``(v) Other information.--Any other information which may 
     be prescribed in regulations of the Secretary as necessary to 
     carry out the purposes of this part.
       ``(b) Other Requirements.--A complete application for an 
     exemption under this part shall include information which the 
     Secretary determines to be complete and accurate and 
     sufficient to demonstrate that the following requirements are 
     met with respect to the arrangement:
       ``(1) Sponsor.--
       ``(A) In general.--Except in a case to which subparagraph 
     (B) or (C) applies, the sponsor is, and has been (together 
     with its immediate predecessor, if any) for a continuous 
     period of not less than 3 years before the date of the 
     application, organized and maintained in good faith, with a 
     constitution and bylaws specifically stating its purpose, as 
     a trade association, an industry association, a professional 
     association, or a chamber of commerce (or similar business 
     group), for substantial purposes other than that of obtaining 
     or providing medical care described in section 607(1), and 
     the applicant demonstrates to the satisfaction of the 
     Secretary that the sponsor is established as a permanent 
     entity which receives the active support of its members.
       ``(B) Special rule for community health networks.--In the 
     case of an arrangement that is a community health network (as 
     defined in section 701(11)), the sponsor is the operating 
     committee of the network.
       ``(C) Special rule for employers in the same trade or 
     business.--In the case of an arrangement under which all 
     participating employers are engaged in a common type of trade 
     or business, the sponsor is the operating committee of the 
     arrangement.
       ``(2) Operating committee.--
       ``(A) In general.--Except as provided in subparagraph (B), 
     the arrangement is operated, pursuant to a trust agreement, 
     by an operating committee which has complete fiscal control 
     over the arrangement and which is responsible for all 
     operations of the arrangement, and the operating committee 
     has in effect rules of operation and financial controls, 
     based on a 3-year plan of operation, adequate to carry out 
     the terms of the arrangement and to meet all requirements of 
     this title applicable to the arrangement. The members of the 
     committee are individuals selected from individuals who are 
     the owners, officers, directors, or employees of the 
     participating employers or who are partners in the 
     participating employers and actively participate in the 
     business. No such member is an owner, officer, director, or 
     employee of, or partner in, a contract administrator or other 
     service provider to the arrangement, except that officers or 
     employees of a sponsor which is a service provider (other 
     than a contract administrator) to the arrangement may be 
     members of the committee if they constitute not more than 25 
     percent of the membership of the committee and they do not 
     provide services to the arrangement other than on behalf of 
     the sponsor. The committee has sole authority to approve 
     applications for participation in the arrangement and to 
     contract with a service provider to administer the day-to-day 
     affairs of the arrangement.
       ``(B) Special rule for community health networks.--In the 
     case of an arrangement that is a community health network (as 
     defined in section 701(11)), the operating committee is the 
     board of the entity that is the network.
       ``(3) Contents of governing instruments.--The instruments 
     governing the arrangement include a written instrument, 
     meeting the requirements of an instrument required under 
     section 1212(a)(1), which--
       ``(A) provides that the committee serves as the named 
     fiduciary required for plans under section 1212(a)(1) and 
     serves in the capacity of a plan administrator (referred to 
     in section 3(16)(A)),
       ``(B) provides that the sponsor is to serve as plan sponsor 
     (referred to in section 3(16)(B)),
       ``(C) incorporates the requirements of section 707, and
       ``(D) provides that, effective upon the granting of an 
     exemption under this part--
       ``(i) all participating employers must be members or 
     affiliated members of the sponsor, except that, in the case 
     of a sponsor which is a professional association or other 
     individual-based association, if at least one of the 
     officers, directors, or employees of an employer, or at least 
     one of the individuals who are partners in an employer and 
     who actively participates in the business, is a member or 
     affiliated member of the sponsor, participating employers may 
     also include such employer, and
       ``(ii) all individuals thereafter commencing coverage under 
     the arrangement must be--

       ``(I) active or retired owners, officers, directors, or 
     employees of, or partners in, participating employers, or
       ``(II) the beneficiaries of individuals described in 
     subclause (I).

       ``(4) Contribution rates.--The contribution rates referred 
     to in subsection (a)(3)(F)(ii) are adequate.
       ``(5) Regulatory requirements.--Such other requirements as 
     the Secretary may prescribe by regulation as necessary to 
     carry out the purposes of this part.
       ``(c) Treatment of Party Seeking Exemption Where Party is 
     Subject to Disqualification.--
       ``(1) In general.--In the case of any application for an 
     exemption under this part with respect to a multiple employer 
     welfare arrangement, if the Secretary determines that the 
     sponsor of the arrangement or any other person associated 
     with the arrangement is subject to disqualification under 
     paragraph (2), the Secretary may deny the exemption with 
     respect to such arrangement.
       ``(2) Disqualification.--A person is subject to 
     disqualification under this paragraph if such person--
       ``(A) has intentionally made a material misstatement in the 
     application for exemption;
       ``(B) has obtained or attempted to obtain an exemption 
     under this part through misrepresentation or fraud;
       ``(C) has misappropriated or converted to such person's own 
     use, or improperly withheld, money held under a plan or any 
     multiple employer welfare arrangement;
       ``(D) is prohibited (or would be prohibited if the 
     arrangement were a plan) from serving in any capacity in 
     connection with the arrangement under section 411,
       ``(E) has failed to appear without reasonable cause or 
     excuse in response to a subpoena, examination, warrant, or 
     any other order lawfully issued by the Secretary compelling 
     such response,
       ``(F) has previously been subject to a determination under 
     this part resulting in the denial, suspension, or revocation 
     of an exemption under this part on similar grounds, or
       ``(G) has otherwise violated any provision of this title 
     with respect to a matter which the Secretary determines of 
     sufficient consequence to merit disqualification for purposes 
     of this part.
       ``(d) Franchise Networks.--In the case of a multiple 
     employer welfare arrangement established and maintained by a 
     franchisor for a franchise network consisting of its 
     franchisees, such franchisor shall be treated as the sponsor 
     referred to in the preceding provisions of this section, such 
     network shall be treated as an association referred to in 
     such provisions, and each franchisee shall be treated as a 
     member (of the association and the sponsor) referred to in 
     such provisions, if all participating employers are such 
     franchisees and the requirements of subsection (b)(1) with 
     respect to a sponsor are met with respect to the network.
       ``(e) Certain Collectively Bargained Arrangements.--In 
     applying the preceding provisions of this section in the case 
     of a multiple employer welfare arrangement which would be 
     described in section 3(40)(A)(i) but for the failure to meet 
     any requirement of section 3(40)(C)--
       ``(1) paragraphs (1) and (2) of subsection (b) and 
     subparagraphs (A), (B), and (D) of paragraph (3) of 
     subsection (b) shall be disregarded, and
       ``(2) the joint board of trustees shall be considered the 
     operating committee of the arrangement.
       ``(f) Certain Arrangements Not Meeting Single Employer 
     Requirement.--
       ``(1) In general.--In any case in which the majority of the 
     employees covered under a multiple employer welfare 
     arrangement are employees of a single employer (within the 
     meaning of clauses (i) and (ii) of section 3(40)(B)), if all 
     other employees covered under the arrangement are employed by 
     employers who are related to such single employer, subsection 
     (b)(3)(D) shall be disregarded.
       ``(2) Related employers.--For purposes of paragraph (1), 
     employers are `related' if there is among all such employers 
     a common ownership interest or a substantial commonality of 
     business operations based on common suppliers or customers.

     ``SEC. 705. ADDITIONAL REQUIREMENTS APPLICABLE TO EXEMPTED 
                   MULTIPLE EMPLOYER HEALTH PLANS.

       ``(a) Notice of Material Changes.--In the case of any 
     exempted multiple employer health plan, descriptions of 
     material changes in any information which was required to be 
     submitted with the application for the exemption granted 
     under this part shall be filed in such form and manner as 
     shall be prescribed in regulations of the Secretary. The 
     Secretary may require by regulation prior notice of material 
     changes with respect to specified matters which might serve 
     as the basis for suspension or revocation of the exemption.
       ``(b) Reporting Requirements.--Under regulations of the 
     Secretary, the requirements of sections 102, 103, and 104 
     shall apply with respect to any multiple employer welfare 
     arrangement which is or has been an exempted multiple 
     employer health plan in the same manner and to the same 
     extent as such requirements apply to employee welfare benefit 
     plans, irrespective of whether such exemption continues in 
     effect. The annual report required under section 103 for any 
     plan year in the case of any such multiple employer welfare 
     arrangement shall also include information described in 
     section 704(a)(3)(F) with respect to the plan year and, 
     notwithstanding section 104(a)(1)(A), shall be filed not 
     later than 90 days after the close of the plan year.
       ``(c) Engagement of Qualified Actuary.--The operating 
     committee of each multiple employer welfare arrangement which 
     is or has been an exempted multiple employer health plan 
     shall engage, on behalf of all covered individuals, a 
     qualified actuary who shall be responsible for the 
     preparation of the materials comprising information necessary 
     to be submitted by a qualified actuary under this part. The 
     qualified actuary shall utilize such assumptions and 
     techniques as are necessary to enable such actuary to form an 
     opinion as to whether the contents of the matters reported 
     under this part--
       ``(1) are in the aggregate reasonably related to the 
     experience of the arrangement and to reasonable expectations, 
     and
       ``(2) represent such actuary's best estimate of anticipated 
     experience under the arrangement.
     The opinion by the qualified actuary shall be made with 
     respect to, and shall be made a part of, the annual report.
       ``(d) Filing Notice of Exemption With States.--An exemption 
     granted to a multiple employer welfare arrangement under this 
     part shall not be effective unless written notice of such 
     exemption is filed with the State insurance commissioner of 
     each State in which at least 5 percent of the individuals 
     covered under the arrangement are located. For purposes of 
     this paragraph, an individual shall be considered to be 
     located in the State in which a known address of such 
     individual is located or in which such individual is 
     employed. The Secretary may by regulation provide in 
     specified cases for the application of the preceding sentence 
     with lesser percentages in lieu of such 5 percent amount.

     ``SEC. 706. DISCLOSURE TO PARTICIPATING EMPLOYERS BY 
                   ARRANGEMENTS PROVIDING MEDICAL CARE.

       ``(a) In General.--A multiple employer welfare arrangement 
     providing benefits consisting of medical care described in 
     section 607(1) shall issue to each participating employer--
       ``(1) a document equivalent to the summary plan description 
     required of plans under part 1,
       ``(2) information describing the contribution rates 
     applicable to participating employers, and
       ``(3) a statement indicating--
       ``(A) that the arrangement is not a licensed insurer under 
     the laws of any State,
       ``(B) whether coverage under the arrangement is fully 
     insured,
       ``(C) if coverage under the arrangement if not fully 
     insured, (i) whether the arrangement is (or has ceased to be) 
     an exempted multiple employer health plan, and (ii) if such 
     an arrangement is an exempted multiple employer health plan, 
     that such arrangement is treated as an employee welfare 
     benefit plan under this title.
       ``(b) Time for Disclosure.--Such information shall be 
     issued to employers within such reasonable period of time 
     before becoming participating employers as may be prescribed 
     in regulations of the Secretary.

     ``SEC. 707. MAINTENANCE OF RESERVES.

       ``(a) In General.--Each multiple employer welfare 
     arrangement which is or has been an exempted multiple 
     employer health plan and under which coverage is not fully 
     insured shall establish and maintain reserves, consisting 
     of--
       ``(1) a reserve for unearned contributions,
       ``(2) a reserve for payment of claims reported and not yet 
     paid and claims incurred but not yet reported, and for 
     expected administrative costs with respect to such claims, 
     and
       ``(3) a reserve, in an amount recommended by the qualified 
     actuary, for any other obligations of the arrangement.
       ``(b) Minimum Amount for Certain Reserves.--The total of 
     the reserves described in subsection (a)(2) shall not be less 
     than an amount equal to 25 percent of expected incurred 
     claims and expenses for the plan year.
       ``(c) Required Margin.--In determining the amounts of 
     reserves required under this section in connection with any 
     multiple employer welfare arrangement, the qualified actuary 
     shall include a margin for error and other fluctuations 
     taking into account the specific circumstances of such 
     arrangement.
       ``(d) Additional Requirements.--The Secretary may provide 
     such additional requirements relating to reserves and excess/
     stop loss coverage as the Secretary considers appropriate. 
     Such requirements may be provided, by regulation or 
     otherwise, with respect to any arrangement or any class of 
     arrangements.
       ``(e) Adjustments for Excess/Stop Loss Coverage.--The 
     Secretary may provide for adjustments to the levels of 
     reserves otherwise required under subsections (a) and (b) 
     with respect to any arrangement or class of arrangements to 
     take into account excess/stop loss coverage provided with 
     respect to such arrangement or arrangements.
       ``(f) Alternative Means of Compliance.--The Secretary may 
     permit an arrangement (including a community health network) 
     to substitute, for all or part of the reserves required under 
     subsection (a), such security, guarantee, or other financial 
     arrangement as the Secretary determines to be adequate to 
     enable the arrangement to fully meet all its financial 
     obligations on a timely basis.

     ``SEC. 708. CORRECTIVE ACTIONS.

       ``(a) Actions To Avoid Depletion of Reserves.--A multiple 
     employer welfare arrangement with respect to which there is 
     or has been in effect an exemption granted under this part 
     shall continue to meet the requirements of section 707, 
     irrespective of whether such exemption continues in effect. 
     The operating committee of such arrangement shall determine 
     semiannually whether the requirements of section 707 are met. 
     In any case in which the committee determines that there is 
     reason to believe that there is or will be a failure to meet 
     such requirements, or the Secretary makes such a 
     determination and so notifies the committee, the committee 
     shall immediately notify the qualified actuary engaged by the 
     arrangement, and such actuary shall, not later than the end 
     of the next following month, make such recommendations to the 
     committee for corrective action as the actuary determines 
     necessary to ensure compliance with section 707. Not later 
     than 10 days after receiving from the actuary recommendations 
     for corrective actions, the committee shall notify the 
     Secretary (in such form and manner as the Secretary may 
     prescribe by regulation) of such recommendations of the 
     actuary for corrective action, together with a description of 
     the actions (if any) that the committee has taken or plans to 
     take in response to such recommendations. The committee shall 
     thereafter report to the Secretary, in such form and 
     frequency as the Secretary may specify to the committee, 
     regarding corrective action taken by the committee until the 
     requirements of section 707 are met.
       ``(b) Termination.--
       ``(1) Notice of termination.--In any case in which the 
     operating committee of a multiple employer welfare 
     arrangement which is or has been an exempted multiple 
     employer health plan determines that there is reason to 
     believe that the arrangement will terminate, the committee 
     shall so inform the Secretary, shall develop a plan for 
     winding up the affairs of the arrangement in connection with 
     such termination in a manner which will result in timely 
     payment of all benefits for which the arrangement is 
     obligated, and shall submit such plan in writing to the 
     Secretary. Actions required under this paragraph shall be 
     taken in such form and manner as may be prescribed in 
     regulations of the Secretary.
       ``(2) Actions required in connection with termination.--In 
     any case in which--
       ``(A) the Secretary has been notified under subsection (a) 
     of a failure of a multiple employer welfare arrangement which 
     is or has been an exempted multiple employer health plan to 
     meet the requirements of section 707 and has not been 
     notified by the operating committee of the arrangement that 
     corrective action has restored compliance with such 
     requirements, and
       ``(B) the Secretary determines that the continuing failure 
     to meet the requirements of section 707 can be reasonably 
     expected to result in a continuing failure to pay benefits 
     for which the arrangement is obligated,
     the operating committee of the arrangement shall, at the 
     direction of the Secretary, terminate the arrangement and, in 
     the course of the termination, take such actions as the 
     Secretary may require as necessary to ensure that the affairs 
     of the arrangement will be, to the maximum extent possible, 
     wound up in a manner which will result in timely payment of 
     all benefits for which the arrangement is obligated.

     ``SEC. 709. EXPIRATION, SUSPENSION, OR REVOCATION OF 
                   EXEMPTION.

       ``(a) Expiration and Renewal of Exemption.--An exemption 
     granted to a multiple employer welfare arrangement under this 
     part shall expire 3 years after the date on which the 
     exemption is granted. An exemption which has expired may be 
     renewed by means of application for an exemption in 
     accordance with section 704.
       ``(b) Suspension or Revocation of Exemption by Secretary.--
     The Secretary may suspend or revoke an exemption granted to a 
     multiple employer welfare arrangement under this part--
       ``(1) for any cause that may serve as the basis for the 
     denial of an initial application for such an exemption under 
     section 704, or
       ``(2) if the Secretary finds that--
       ``(A) the arrangement, or the sponsor thereof, in the 
     transaction of business while under the exemption, has used 
     fraudulent, coercive, or dishonest practices, or has 
     demonstrated incompetence, untrustworthiness, or financial 
     irresponsibility,
       ``(B) the arrangement, or the sponsor thereof, is using 
     such methods or practices in the conduct of its operations, 
     so as to render its further transaction of operations 
     hazardous or injurious to participating employers, or covered 
     individuals,
       ``(C) the arrangement, or the sponsor thereof, has refused 
     to be examined in accordance with this part or to produce its 
     accounts, records, and files for examination in accordance 
     with this part, or
       ``(D) any of the officers of the arrangement, or the 
     sponsor thereof, has refused to give information with respect 
     to the affairs of the arrangement or the sponsor or to 
     perform any other legal obligation relating to such an 
     examination when required by the Secretary in accordance with 
     this part.
     Any such suspension or revocation under this subsection shall 
     be effective only upon a final decision of the Secretary made 
     after notice and opportunity for a hearing is provided in 
     accordance with section 710.
       ``(c) Suspension or Revocation of Exemption Under Court 
     Proceedings.--An exemption granted to a multiple employer 
     welfare arrangement under this part may be suspended or 
     revoked by a court of competent jurisdiction in an action by 
     the Secretary brought under paragraph (2), (5), or (6) of 
     section 502(a), except that the suspension or revocation 
     under this subsection shall be effective only upon 
     notification of the Secretary of such suspension or 
     revocation.
       ``(d) Notification of Participating Employers.--All 
     participating employers in a multiple employer welfare 
     arrangement shall be notified of the expiration, suspension, 
     or revocation of an exemption granted to such arrangement 
     under this part, by such persons and in such form and manner 
     as shall be prescribed in regulations of the Secretary, not 
     later than 20 days after such expiration or after receipt of 
     notice of a final decision requiring such suspension or 
     revocation.
       ``(e) Publication of Expirations, Suspensions, and 
     Revocations.--The Secretary shall publish all expirations of, 
     and all final decisions to suspend or revoke, exemptions 
     granted under this part.

     ``SEC. 710. REVIEW OF ACTIONS OF THE SECRETARY.

       ``(a) In General.--Any decision by the Secretary which 
     involves the denial of an application by a multiple employer 
     welfare arrangement for an exemption under this part or the 
     suspension or revocation of such an exemption shall contain a 
     statement of the specific reason or reasons supporting the 
     Secretary's action, including reference to the specific terms 
     of the exemption and the statutory provision or provisions 
     relevant to the determination.
       ``(b) Denials of Applications.--In the case of the denial 
     of an application for an exemption under this part, the 
     Secretary shall send a copy of the decision to the applicant 
     by certified or registered mail at the address specified in 
     the records of the Secretary. Such decision shall constitute 
     the final decision of the Secretary unless the arrangement, 
     or any party that would be prejudiced by the decision, files 
     a written appeal of the denial within 30 days after the 
     mailing of such decision. The Secretary may affirm, modify, 
     or reverse the initial decision. The decision on appeal shall 
     become final upon the mailing of a copy by certified or 
     registered mail to the arrangement or party that filed the 
     appeal.
       ``(c) Suspensions or Revocations of Exemption.--In the case 
     of the suspension or revocation of an exemption granted under 
     this part, the Secretary shall send a copy of the decision to 
     the arrangement by certified or registered mail at its 
     address, as specified in the records of the Secretary. Upon 
     the request of the arrangement, or any party that would be 
     prejudiced by the suspension or revocation, filed within 15 
     days of the mailing of the Secretary's decision, the 
     Secretary shall schedule a hearing on such decision by 
     written notice, sent by certified or registered mail to the 
     arrangement or party requesting such hearing. Such notice 
     shall set forth--
       ``(1) a specific date and time for the hearing, which shall 
     be within the 10-day period commencing 20 days after the date 
     of the mailing of the notice, and
       ``(2) a specific place for the hearing, which shall be in 
     the District of Columbia or in the State and county thereof 
     (or parish or other similar political subdivision thereof) in 
     which is located the arrangement's principal place of 
     business.
     The decision as affirmed or modified in such hearing shall 
     constitute the final decision of the Secretary, unless such 
     decision is reversed in such hearing.''.
       (b) Conforming Amendment to Definition of Plan Sponsor.--
     Section 3(16)(B) of such Act (29 U.S.C. 1002(16)(B)) is 
     amended by adding at the end the following new sentence: 
     ``Such term also includes the sponsor (as defined in section 
     701(5)) of a multiple employer welfare arrangement which is 
     or has been an exempted multiple employer health plan (as 
     defined in section 701(10)).''.
       (c) Alternative Means of Distribution of Summary Plan 
     Descriptions.--Section 110 of such Act (29 U.S.C. 1030) is 
     amended by adding at the end the following new subsection:
       ``(c) The Secretary shall prescribe, as an alternative 
     method for distributing summary plan descriptions in order to 
     meet the requirements of section 104(b)(1) in the case of 
     multiple employer welfare arrangements providing benefits 
     consisting of medical care described in section 607(1), a 
     means of distribution of such descriptions by participating 
     employers.''.
       (d) Clerical Amendment.--The table of contents in section 1 
     of the Employee Retirement Income Security Act of 1974 is 
     amended by inserting after the item relating to section 608 
     the following new items:

                ``Part 7--Multiple Employer Health Plans

``Sec. 701. Definitions.
``Sec. 702. Exempted multiple employer health plans relieved of certain 
              restrictions on preemption of State law and treated as 
              employee welfare benefit plans.
``Sec. 703. Exemption procedure.
``Sec. 704. Eligibility requirements.
``Sec. 705. Additional requirements applicable to exempted multiple 
              employer health plans.
``Sec. 706. Disclosure to participating employers by arrangements 
              providing medical care.
``Sec. 707. Maintenance of reserves.
``Sec. 708. Corrective actions.
``Sec. 709. Expiration, suspension, or revocation of exemption.
``Sec. 710. Review of actions of the secretary.''

     SEC. 1212. CLARIFICATION OF SCOPE OF PREEMPTION RULES.

       (a) In General.--Section 514(b)(6)(A)(ii) of the Employee 
     Retirement Income Security Act of 1974 (29 U.S.C. 
     1144(b)(6)(A)(ii)) is amended by inserting ``, but only, in 
     the case of an arrangement which provides medical care 
     described in section 607(1) and with respect to which an 
     exemption under part 7 is not in effect,'' before ``to the 
     extent not inconsistent with the preceding sections of this 
     title''.
       (b) Cross-Reference.--Section 514(b)(6) of such Act (29 
     U.S.C. 1144(b)(6)) is amended by adding at the end the 
     following new subparagraph:
       ``(E) For additional rules relating to exemption from 
     subparagraph (A)(ii) of multiple employer welfare 
     arrangements providing medical care, see part 7.''.

     SEC. 1213. CLARIFICATION OF TREATMENT OF SINGLE EMPLOYER 
                   ARRANGEMENTS.

       Section 3(40)(B) of the Employee Retirement Income Security 
     Act of 1974 (29 U.S.C. 1002(40)(B)) is amended--
       (1) in clause (i), by inserting ``for any plan year of any 
     such plan, or any fiscal year of any such other 
     arrangement,'' after ``single employer'', and by inserting 
     ``during such year or at any time during the preceding 1-year 
     period'' after ``common control'';
       (2) in clause (iii), by striking ``common control shall not 
     be based on an interest of less than 25 percent'' and 
     inserting ``an interest of greater than 25 percent may not be 
     required as the minimum interest necessary for common 
     control'', and by striking ``and'' at the end,
       (3) by redesignating clause (iv) as clause (v), and
       (4) by inserting after clause (iii) the following new 
     clause:
       ``(iv) in determining, after the application of clause (i), 
     whether benefits are provided to employees of two or more 
     employers, the arrangement shall be treated as having only 1 
     participating employer if, at the time the determination 
     under clause (i) is made, the number of individuals who are 
     employees and former employees of any one participating 
     employer and who are covered under the arrangement is greater 
     than 95 percent of the aggregate number of all individuals 
     who are employees or former employees of participating 
     employers and who are covered under the arrangement.''.

     SEC. 1214. CLARIFICATION OF TREATMENT OF CERTAIN COLLECTIVELY 
                   BARGAINED ARRANGEMENTS.

       (a) In General.--Section 3(40)(A)(i) of the Employee 
     Retirement Income Security Act of 1974 (29 U.S.C. 
     1002(40)(A)(i)) is amended to read as follows:
       ``(i) under or pursuant to one or more collective 
     bargaining agreements,''.
       (b) Limitations.--Section 3(40) of such Act (29 U.S.C. 
     1002(40)) is amended by adding at the end the following new 
     subparagraphs:
       ``(C) Clause (i) of subparagraph (A) shall apply only if--
       ``(i) the plan or other arrangement, and the employee 
     organization or any other entity sponsoring the plan or other 
     arrangement, do not--

       ``(I) utilize the services of any licensed insurance agent 
     or broker for soliciting or enrolling employers or 
     individuals as participating employers or covered individuals 
     under the plan or other arrangement, or
       ``(II) pay a commission or any other type of compensation 
     to a person that is related either to the volume or number of 
     employers or individuals solicited or enrolled as 
     participating employers or covered individuals under the plan 
     or other arrangement, or to the dollar amount or size of the 
     contributions made by participating employers or covered 
     individuals to the plan or other arrangement,

       ``(ii) not less than 85 percent of the covered individuals 
     under the plan or other arrangement are individuals who--

       ``(I) are employed within a bargaining unit covered by at 
     least one of the collective bargaining agreements with a 
     participating employer (or are covered on the basis of an 
     individual's employment in such a bargaining unit), or
       ``(II) are present or former employees of the sponsoring 
     employee organization, of an employer who is or was a party 
     to at least one of the collective bargaining agreements, or 
     of the plan or other arrangement or a related plan or 
     arrangement (or are covered on the basis of such present or 
     former employment),

       ``(iii) the plan or other arrangement does not provide 
     benefits to individuals (other than individuals described in 
     clause (ii)(II)) who work outside the standard metropolitan 
     statistical area in which the sponsoring employee 
     organization represents employees (or to individuals (other 
     than individuals described in clause (ii)(II)) on the basis 
     of such work by others), except that in the case of a 
     sponsoring employee organization that represents employees 
     who work outside of any standard metropolitan statistical 
     area, this clause shall be applied by reference to the State 
     in which the sponsoring organization represents employees,
       ``(iv) the employee organization or other entity sponsoring 
     the plan or other arrangement certifies to the Secretary each 
     year, in a form and manner which shall be prescribed in 
     regulations of the Secretary--

       ``(I) that the plan or other arrangement meets the 
     requirements of clauses (i), (ii), and (iii), and
       ``(II) if, for any year, 10 percent or more of the covered 
     individuals under the plan are individuals not described in 
     subclause (I) or (II) of clause (ii), the total number of 
     covered individuals and the total number of covered 
     individuals not so described.

       ``(D)(i) Clause (i) of subparagraph (A) shall not apply to 
     a plan or other arrangement that is established or maintained 
     pursuant to one or more collective bargaining agreements 
     which the National Labor Relations Boards determines to have 
     been negotiated or otherwise agreed to in a manner or through 
     conduct which violates section 8(a)(2) of the National Labor 
     Relations Act (29 U.S.C. 158(a)(2)).
       ``(ii)(I) Whenever a State insurance commissioner has 
     reason to believe that this subparagraph is applicable to 
     part or all of a plan or other arrangement, the State 
     insurance commissioner may file a petition with the National 
     Labor Relations Board for a determination under clause (i), 
     along with sworn written testimony supporting the petition.
       ``(II) The Board shall give any such petition priority over 
     all other petitions and cases, other than other petitions 
     under subclause (I) or cases given priority under section 10 
     of the National Labor Relations Act (29 U.S.C. 160).
       ``(III) The Board shall determine, upon the petition and 
     any response, whether, on the facts before it, the plan or 
     other arrangement was negotiated, created, or otherwise 
     agreed to in a manner or through conduct which violates 
     section 8(a)(2) of the National Labor Relations Act (29 
     U.S.C. 158(a)(2)). Such determination shall constitute a 
     final determination for purposes of this subparagraph and 
     shall be binding in all Federal or State actions with respect 
     to the status of the plan or other arrangement under this 
     subparagraph.
       ``(IV) A person aggrieved by the determination of the Board 
     under subclause (III) may obtain review of the determination 
     in any United States court of appeals in the circuit in which 
     the collective bargaining at issue occurred. Commencement of 
     proceedings under this subclause shall not, unless 
     specifically ordered by the court, operate as a stay of any 
     State administrative or judicial action or proceeding related 
     to the status of the plan or other arrangement, except that 
     in no case may the court stay, before the completion of the 
     review, an order which prohibits the enrollment of new 
     individuals into coverage under a plan or arrangement.''.

     SEC. 1215. EMPLOYEE LEASING HEALTHCARE ARRANGEMENTS.

       (a) Employee Leasing Healthcare Arrangement Defined.--
     Section 3 of the Employee Retirement Income Security Act of 
     1974 (29 U.S.C. 1002) is amended by adding at the end the 
     following new paragraph:
       ``(43) Employee Leasing Healthcare Arrangement.--
       ``(A) In general.--Subject to subparagraph (B), the term 
     `employee leasing healthcare arrangement' means any labor 
     leasing arrangement, staff leasing arrangement, extended 
     employee staffing or supply arrangement, or other arrangement 
     under which--
       ``(i) one business or other entity (hereinafter in this 
     paragraph referred to as the `lessee'), under a lease or 
     other arrangement entered into with any other business or 
     other entity (hereinafter in this paragraph referred to as 
     the `lessor'), receives from the lessor the services of 
     individuals to be performed under such lease or other 
     arrangement, and
       ``(ii) benefits consisting of medical care described in 
     section 607(1) are provided to such individuals or such 
     individuals and their dependents as participants and 
     beneficiaries.
       ``(B) Exception.--Such term does not include an arrangement 
     described in subparagraph (A) if, under such arrangement, the 
     lessor retains, both legally and in fact, a complete right of 
     direction and control within the scope of employment over the 
     individuals whose services are supplied under such lease or 
     other arrangement, and such individuals perform a specified 
     function for the lessee which is separate and divisible from 
     the primary business or operations of the lessee.''.
       (b) Treatment of Employee Leasing Healthcare Arrangements 
     as Multiple Employer Welfare Arrangements.--Section 3(40) of 
     such Act (29 U.S.C. 1002(40)) (as amended by the preceding 
     provisions of this title) is further amended by adding at the 
     end the following new subparagraph:
       ``(E) The term `multiple employer welfare arrangement' 
     includes any employee leasing healthcare arrangement.''.
       (c) Special Rules for Employee Leasing Healthcare 
     Arrangements.--
       (1) In general.--Part 7 of subtitle B of title I of such 
     Act (as added by the preceding provisions of this Act) is 
     amended by adding at the end the following new section:

     ``SEC. 711. SPECIAL RULES FOR EMPLOYEE LEASING HEALTHCARE 
                   ARRANGEMENTS.

       ``(a) In General.--The requirements of paragraphs (1), (2), 
     and (3) of section 704(b) shall be treated as satisfied in 
     the case of a multiple employer welfare arrangement that is 
     an employee leasing healthcare arrangement if the application 
     for exemption includes information which the Secretary 
     determines to be complete and accurate and sufficient to 
     demonstrate that the following requirements are met with 
     respect to the arrangement:
       ``(1) 3-year tenure.--The lessor has been in operation for 
     not less than 3 years.
       ``(2) Solicitation restrictions.--Employee leasing services 
     provided under the arrangement are not solicited, advertised, 
     or marketed through licensed insurance agents or brokers 
     acting in such capacity.
       ``(3) Creation of employment relationship.--
       ``(A) Disclosure statement.--Written notice is provided to 
     each applicant for employment subject to coverage under the 
     arrangement, at the time of application for employment and 
     before commencing coverage under the arrangement, stating 
     that the employer is the lessor under the arrangement.
       ``(B) Informed consent.--Each such applicant signs a 
     written statement consenting to the employment relationship 
     with the lessor.
       ``(C) Informed recruitment of lessee's employees.--In any 
     case in which the lessor offers employment to an employee of 
     a lessee under the arrangement, the lessor informs each 
     employee in writing that his or her acceptance of employment 
     with the lessor is voluntary and that refusal of such offer 
     will not be deemed to be resignation from or abandonment of 
     current employment.
       ``(4) Requisite employer-employee relationship under 
     arrangement.--Under the employer-employee relationship with 
     the employees of the lessor--
       ``(A) the lessor retains the ultimate authority to hire, 
     terminate, and reassign such employees,
       ``(B) the lessor is responsible for the payment of wages, 
     payroll-related taxes, and employee benefits, without regard 
     to payment by the lessee to the lessor for its services,
       ``(C) the lessor maintains the right of direction and 
     control over its employees, except to the extent that the 
     lessee is responsible for supervision of the work performed 
     consistent with the lessee's responsibility for its product 
     or service, and
       ``(D) in accordance with section 301(a) of the Labor 
     Management Relations Act, 1947 (29 U.S.C. 185(a)), the lessor 
     retains in the absence of an applicable collective bargaining 
     agreement, the right to enter into arbitration and to decide 
     employee grievances, and
       ``(E) no owner, officer, or director of, or partner in, a 
     lessee is an employee of the lessor, and not more than 10 
     percent of the individuals covered under the arrangement 
     consist of owners, officers, or directors of, or partners in, 
     such a lessee (or any combination thereof).
       ``(b) Definitions.--For purposes of this section--
       ``(1) Lessor.--The term `lessor' means the business or 
     other entity from which services of individuals are obtained 
     under an employee leasing healthcare arrangement.
       ``(2) Lessee.--The term `lessee' means a business or other 
     entity which receives the services of individuals provided 
     under an employee leasing healthcare arrangement.''.
       (2) Clerical amendment.--The table of contents in section 1 
     of such Act (as amended by the preceding provisions of this 
     title) is further amended by inserting after the item 
     relating to section 710 the following new item:

``Sec. 711. Employee leasing healthcare arrangements.''.

     SEC. 1216. ENFORCEMENT PROVISIONS RELATING TO MULTIPLE 
                   EMPLOYER WELFARE ARRANGEMENTS AND EMPLOYEE 
                   LEASING HEALTHCARE ARRANGEMENTS.

       (a) Enforcement of Filing Requirements.--Section 502 of the 
     Employee Retirement Income Security Act of 1974 (29 U.S.C. 
     1132) is amended--
       (1) in subsection (a)(6), by striking ``subsection (c)(2) 
     or (i) or (l)'' and inserting ``paragraph (2) or (4) of 
     subsection (c) or subsection (i) or (l)''; and
       (2) by adding at the end of subsection (c) the following 
     new paragraph:
       ``(4) The Secretary may assess a civil penalty against any 
     person of up to $1,000 a day from the date of such person's 
     failure or refusal to file the information required to be 
     filed with the Secretary under section 101(e).''.
       (b) Actions by States in Federal Court.--Section 502(a) of 
     such Act (29 U.S.C. 1132(a)) is amended--
       (1) in paragraph (5), by striking ``or'' at the end;
       (2) in paragraph (6), by striking the period and inserting 
     ``, or''; and
       (3) by adding at the end the following:
       ``(7) by a State official having authority under the law of 
     such State to enforce the laws of such State regulating 
     insurance, to enjoin any act or practice which violates any 
     provision of part 7 which such State has the power to enforce 
     under part 7.''.
       (c) Criminal Penalties for Certain Willful 
     Misrepresentations.--Section 501 of such Act (29 U.S.C. 1131) 
     is amended--
       (1) by inserting ``(a)'' after ``Sec. 501.''; and
       (2) by adding at the end the following new subsection:
       ``(b) Any person who, either willfully or with willful 
     blindness, falsely represents, to any employee, any 
     employee's beneficiary, any employer, the Secretary, or any 
     State, an arrangement established or maintained for the 
     purpose of offering or providing any benefit described in 
     section 3(1) to employees or their beneficiaries as--
       ``(1) being an exempted multiple employer welfare 
     arrangement (as defined in section 701(10)),
       ``(2) being an employee leasing healthcare arrangement 
     under an exemption granted under part 7, or
       ``(3) having been established or maintained under or 
     pursuant to a collective bargaining agreement,
     shall, upon conviction, be imprisoned not more than five 
     years, be fined under title 18, United States Code, or 
     both.''.
       (d) Cease Activities Orders.--Section 502 of such Act (29 
     U.S.C. 1132) is amended by adding at the end the following 
     new subsection:
       ``(m)(1) Subject to paragraph (2), upon application by the 
     Secretary showing the operation, promotion, or marketing of a 
     multiple employer welfare arrangement providing benefits 
     consisting of medical care described in section 607(1) that--
       ``(A) is not licensed, registered, or otherwise approved 
     under the insurance laws of the States in which the 
     arrangement offers or provides benefits, or
       ``(B) is not operating in accordance with the terms of an 
     exemption granted by the Secretary under part 7,
     a district court of the United States shall enter an order 
     requiring that the arrangement cease activities.
       ``(2) Paragraph (1) shall not apply in the case of a 
     multiple employer welfare arrangement if the arrangement 
     shows that--
       ``(A) coverage under it is fully insured, within the 
     meaning of section 701(9),
       ``(B) it is licensed, registered, or otherwise approved in 
     each State in which it offers or provides benefits, except to 
     the extent that such State does not require licensing, 
     registration, or approval of multiple employer welfare 
     arrangements under which all coverage is fully insured, and
       ``(C) with respect to each such State, it is operating in 
     accordance with applicable State insurance laws that are not 
     superseded under section 514.
       ``(3) The court may grant such additional equitable or 
     remedial relief, including any relief available under this 
     title, as it deems necessary to protect the interests of the 
     public and of persons having claims for benefits against the 
     arrangement.''.
       (e) Responsibility for Claims Procedure.--Section 503 of 
     such Act (29 U.S.C. 1133) is amended by adding at the end 
     (after and below paragraph (2)) the following new sentence: 
     ``The terms of each multiple employer welfare arrangement to 
     which this section applies and which provides benefits 
     consisting of medical care described in section 607(1) shall 
     require the operating committee or the named fiduciary (as 
     applicable) to ensure that the requirements of this section 
     are met in connection with claims filed under the 
     arrangement.''.

     SEC. 1217. SOLVENCY REQUIREMENTS FOR CERTAIN SELF-INSURED 
                   GROUP HEALTH PLANS.

       (a) In General.--The Secretary of Labor shall prescribe by 
     regulation provisions described in subsection (b) applicable 
     to group health plans which are not multiple employer health 
     plans, which offer coverage with respect to employees of 
     small employers (as defined in section 1131), and under which 
     some or all coverage is not fully insured (within the meaning 
     of section 701(9) of the Employee Retirement Income Security 
     Act of 1974)), for the purpose of promoting adequate funding 
     of such plans.
       (b) Requirements.--
       (1) General rule.--Except as provided in paragraph (2), the 
     provisions described in subsection (a) shall require the 
     group health plan to establish and maintain reserves, 
     consisting of--
       (A) a reserve for unearned contributions, and
       (B) a reserve for payment of claims reported and not yet 
     paid and claims incurred but not yet reported, and for 
     expected administrative costs with respect to such claims.
       (2) Exception.--The Secretary may in such regulations 
     permit a group health plan to substitute, for all or part of 
     the reserves required under paragraph (1), such security, 
     guarantee, or other financial arrangement as the Secretary 
     determines to be adequate to enable the plan to fully meet 
     all its financial obligations on a timely basis.
       (c) Criteria for Compliance.--The criteria that the 
     Secretary shall take into account in determining compliance 
     with the requirements described in subsection (b) shall 
     include:
       (1) the size of the employer involved;
       (2) the benefit package provided under the plan;
       (3) whether the coverage provided under the plan is in the 
     form of a fee-for-service arrangement, a health maintenance 
     organization, or any other type of coverage;
       (4) the extent to which excess/stop loss coverage is 
     maintained for the plan; and
       (5) the nature of any security, guarantee, or other 
     financial arrangement described in subsection (b)(2) obtained 
     for the plan.

     SEC. 1218. FILING REQUIREMENTS FOR MULTIPLE EMPLOYER WELFARE 
                   ARRANGEMENTS PROVIDING HEALTH BENEFITS.

       Section 101 of the Employee Retirement Income Security Act 
     of 1974 (29 U.S.C. 1021) is amended--
       (1) by redesignating subsection (e) as subsection (f); and
       (2) by inserting after subsection (d) the following new 
     subsection:
       ``(e)(1) Each multiple employer welfare arrangement shall 
     file with the Secretary a registration statement described in 
     paragraph (2) within 60 days before commencing operations (in 
     the case of an arrangement commencing operations on or after 
     January 1, 1995) and no later than February 15 of each year 
     (in the case of an arrangement in operation since the 
     beginning of such year), unless, as of the date by which such 
     filing otherwise must be made, such arrangement provides no 
     benefits consisting of medical care described in section 
     607(1).
       ``(2) Each registration statement--
       ``(A) shall be filed in such form, and contain such 
     information concerning the multiple employer welfare 
     arrangement and any persons involved in its operation 
     (including whether coverage under the arrangement is fully 
     insured), as shall be provided in regulations which shall be 
     prescribed by the Secretary, and
       ``(B) if coverage under the arrangement is not fully 
     insured, shall contain a certification that copies of such 
     registration statement have been transmitted by certified 
     mail to--
       ``(i) in the case of an arrangement which is an exempted 
     multiple employer health plan (as defined in section 
     701(10)), the State insurance commissioner of the domicile 
     State of such arrangement, or
       ``(ii) in the case of an arrangement which is not an 
     exempted multiple employer health plan, the State insurance 
     commissioner of each State in which the arrangement is 
     located.
       ``(3) The person or persons responsible for filing the 
     annual registration statement are--
       ``(A) the trustee or trustees so designated by the terms of 
     the instrument under which the multiple employer welfare 
     arrangement is established or maintained, or
       ``(B) in the case of a multiple employer welfare 
     arrangement for which the trustee or trustees cannot be 
     identified, or upon the failure of the trustee or trustees of 
     an arrangement to file, the person or persons actually 
     responsible for the acquisition, disposition, control, or 
     management of the cash or property of the arrangement, 
     irrespective of whether such acquisition, disposition, 
     control, or management is exercised directly by such person 
     or persons or through an agent designated by such person or 
     persons.
       ``(4) Any agreement entered into under section 506(c) with 
     a State as the primary domicile State with respect to any 
     multiple employer welfare arrangement shall provide for 
     simultaneous filings of reports required under this 
     subsection with the Secretary and with the State insurance 
     commissioner of such State.''.

     SEC. 1219. COOPERATION BETWEEN FEDERAL AND STATE AUTHORITIES.

       Section 506 of the Employee Retirement Income Security Act 
     of 1974 (29 U.S.C. 1136) is amended by adding at the end the 
     following new subsection:
       ``(c) Responsibility With Respect to Multiple Employer 
     Welfare Arrangements.--
       ``(1) State enforcement.--
       ``(A) Agreements with states.--A State may enter into an 
     agreement with the Secretary for delegation to the State of 
     some or all of the Secretary's authority under sections 502 
     and 504 to enforce the provisions of this title applicable to 
     multiple employer welfare arrangements which are or have been 
     exempted multiple employer health plans (as defined in 
     section 701(10)). The Secretary shall enter into the 
     agreement if the Secretary determines that the delegation 
     provided for therein would not result in a lower level or 
     quality of enforcement of the provisions of this title.
       ``(B) Delegations.--Any department, agency, or 
     instrumentality of a State to which authority is delegated 
     pursuant to an agreement entered into under this paragraph 
     may, if authorized under State law and to the extent 
     consistent with such agreement, exercise the powers of the 
     Secretary under this title which relate to such authority.
       ``(C) Concurrent authority of the secretary.--If the 
     Secretary delegates authority to a State in an agreement 
     entered into under subparagraph (A), the Secretary may 
     continue to exercise such authority concurrently with the 
     State.
       ``(D) Recognition of primary domicile state.--In entering 
     into any agreement with a State under subparagraph (A), the 
     Secretary shall ensure that, as a result of such agreement 
     and all other agreements entered into under subparagraph (A), 
     only one State will be recognized, with respect to any 
     particular multiple employer welfare arrangement, as the 
     primary domicile State to which authority has been delegated 
     pursuant to such agreements.
       ``(2) Assistance to states.--The Secretary shall--
       ``(A) provide enforcement assistance to the States with 
     respect to multiple employer welfare arrangements, including, 
     but not limited to, coordinating Federal and State efforts 
     through the establishment of cooperative agreements with 
     appropriate State agencies under which the Pension and 
     Welfare Benefits Administration keeps the States informed of 
     the status of its cases and makes available to the States 
     information obtained by it,
       ``(B) provide continuing technical assistance to the States 
     with respect to issues involving multiple employer welfare 
     arrangements and this Act,
       ``(C) assist the States in obtaining from the Office of 
     Regulations and Interpretations timely and complete responses 
     to requests for advisory opinions on issues described in 
     subparagraph (B), and
       ``(D) distribute copies of all advisory opinions described 
     in subparagraph (C) to the State insurance commissioner of 
     each State.''.

     SEC. 1220. EFFECTIVE DATE; TRANSITIONAL RULES.

       (a) Effective Date.--The amendments made by this part shall 
     take effect January 1, 1995, except that the Secretary of 
     Labor may issue regulations before such date under such 
     amendments. The Secretary shall issue all regulations 
     necessary to carry out the amendments made by this title 
     before the effective date thereof.
       (b) Transitional Rules.--If the sponsor of a multiple 
     employer welfare arrangement which, as of January 1, 1995, 
     provides benefits consisting of medical care described in 
     section 607(1) of the Employee Retirement Income Security Act 
     of 1974 (29 U.S.C. 1167(1)) files with the Secretary of Labor 
     an application for an exemption under part 7 of subtitle B of 
     title I of such Act within 180 days after such date and the 
     Secretary has not, as of 90 days after receipt of such 
     application, found such application to be materially 
     deficient, section 514(b)(6)(A) of such Act (29 U.S.C. 
     1144(b)(6)(A)) shall not apply with respect to such 
     arrangement during the 18-month period following such date. 
     If the Secretary determines, at any time after the date of 
     enactment of this Act, that any such exclusion from coverage 
     under the provisions of such section 514(b)(6)(A) of such Act 
     of a multiple employer welfare arrangement would be 
     detrimental to the interests of individuals covered under 
     such arrangement, such exclusion shall cease as of the date 
     of the determination. Any determination made by the Secretary 
     under this subsection shall be in the Secretary's sole 
     discretion.

PART 3--ENCOURAGEMENT OF MULTIPLE EMPLOYER ARRANGEMENTS PROVIDING BASIC 
                            HEALTH BENEFITS

     SEC. 1221. ELIMINATING COMMONALITY OF INTEREST OR GEOGRAPHIC 
                   LOCATION REQUIREMENT FOR TAX EXEMPT TRUST 
                   STATUS.

       (a) In General.--Paragraph (9) of section 501(c) of the 
     Internal Revenue Code of 1986 (relating to exempt 
     organizations) is amended--
       (1) by inserting ``(A)'' after ``(9)''; and
       (2) by adding at the end the following:
       ``(B) Any determination of whether a multiple employer 
     health plan (as defined in section 701(10) of the Employee 
     Retirement Income Security Act of 1974) or an insured 
     multiple employer health plan (as defined in section 701(11) 
     of such Act) is a voluntary employees' beneficiary 
     association meeting the requirements of this paragraph shall 
     be made without regard to any determination of commonality of 
     interest or geographic location if--
       ``(i) such plan provides at least standard coverage 
     (consistent with section 102(c) of the Affordable Health Care 
     Now Act of 1994), and
       ``(ii) in the case of an insured multiple employer health 
     plan, it meets the requirements enforcible under section 
     514(b)(6)(B)(i) of the Employee Retirement Income Security 
     Act of 1974 to the extent not preempted by section 1202 of 
     the Affordable Health Care Now Act of 1994.''.
       (b) Effective Date.--The amendments made by subsection (a) 
     shall apply with respect to determinations made on or after 
     January 1, 1995.

     SEC. 1222. SINGLE ANNUAL FILING FOR ALL PARTICIPATING 
                   EMPLOYERS.

       (a) In General.--Section 110 of the Employee Retirement 
     Income Security Act of 1974 (29 U.S.C. 1030), as amended by 
     section 1211(c) of this subtitle, is amended by adding at the 
     end the following new subsection:
       ``(d) The Secretary shall prescribe by regulation or 
     otherwise an alternative method providing for the filing of a 
     single annual report (as referred to in section 104(a)(1)(A)) 
     with respect to all employers who are participating employers 
     under a multiple employer welfare arrangement under which all 
     coverage consists of medical care (described in section 
     607(1)) and is fully insured (as defined in section 
     701(9)).''
       (b) Effective Date.--The amendment made by subsection (a) 
     shall take effect on the date of the enactment of this Act. 
     The Secretary of Labor shall prescribe the alternative method 
     referred to in section 110(d) of the Employee Retirement 
     Income Security Act of 1974, as added by such amendment, 
     within 90 days after the date of the enactment of this Act.

     SEC. 1223. COMPLIANCE WITH COVERAGE REQUIREMENTS THROUGH 
                   MULTIPLE EMPLOYER HEALTH ARRANGEMENTS.

       (a) Compliance with Applicable Requirements Through 
     Multiemployer Plans.--In any case in which an eligible 
     employee is, for any plan year, a participant in a group 
     health plan which is a multiemployer plan, the requirements 
     of section 1001(a) shall be deemed to be met with respect to 
     such employee for such plan year if the employer requirements 
     of subsection (c) are met with respect to the eligible 
     employee, irrespective of whether, or to what extent, the 
     employer makes employer contributions on behalf of the 
     eligible employee.
       (b) Compliance with Applicable Requirements through Other 
     Multiple Employer Health Arrangements.--
       (1) In general.--In any case in which an employer is, for 
     any plan year, a participating employer (as defined in 
     paragraph (3)) in an exempted multiple employer health plan 
     or in a multiple employer welfare arrangement under which all 
     coverage consists of medical care (described in section 
     607(1) of the Employee Retirement Income Security Act of 
     1974) and is fully insured (as defined in section 701(9) of 
     such Act), the requirements of section 1001(a) shall be 
     deemed to be met (and the ERISA requirements of paragraph (2) 
     shall be deemed to be met by the employer) with respect to an 
     eligible employee of the employer if--
       (A) the employer requirements of subsection (c) are met 
     with respect to the eligible employee, and
       (B) the applicable ERISA requirements of paragraph (2) are 
     met by the plan or arrangement with respect to the plan or 
     arrangement,
     irrespective of whether, or to what extent, the employer 
     makes employer contributions on behalf of the eligible 
     employee.
       (2) Applicable erisa requirements.--The applicable ERISA 
     requirements of this paragraph are the requirements of--
       (A) part 1 of subtitle B of title I of the Employee 
     Retirement Income Security Act of 1974 (relating to reporting 
     and disclosure),
       (B) section 503 of such Act (relating to claims procedure), 
     and
       (C) part 6 of subtitle B of such title I (relating to group 
     health plans),
     to the extent that such requirements relate to employers as 
     plan sponsors or plan administrators.
       (3) Participating employer.--In this subsection, the term 
     ``participating employer'' means, in connection with an 
     exempted multiple employer health plan or a multiple employer 
     welfare arrangement under which all coverage consists of 
     medical care (described in section 607(1) of the Employee 
     Retirement Income Security Act of 1974) and is fully insured 
     (as defined in section 701(9) of such Act), any employer if 
     any of its employees, or any of the dependents of its 
     employees, are or were covered under such plan or arrangement 
     in connection with the employment of the employees.
       (c) Employer Requirements.--The employer requirements of 
     this subsection are met under a plan or arrangement with 
     respect to an eligible employee if--
       (1) the employee is eligible under the plan or arrangement 
     to elect coverage on an annual basis and is provided a 
     reasonable opportunity to make the election in such form and 
     manner and at such times as are provided by the plan or 
     arrangement,
       (2) subject to section 1001(c), such coverage includes at 
     least the standard coverage (consistent with section 
     1102(c)),
       (3) the employer facilitates collection of any employee 
     contributions under the plan or arrangement and permits the 
     employee to elect to have employee contributions under the 
     plan or arrangement collected through payroll deduction, and
       (4) in the case of a plan or arrangement to which part 1 of 
     subtitle B of title I of the Employee Retirement Income 
     Security Act of 1974 does not otherwise apply, the employer 
     provides to the employee a summary plan description described 
     in section 102(a)(1) of such Act in the form and manner and 
     at such times as are required under such part 1 with respect 
     to employee welfare benefit plans.
                 Subtitle D--Health Deduction Fairness

     SEC. 1301. PERMANENT EXTENSION AND INCREASE IN HEALTH 
                   INSURANCE TAX DEDUCTION FOR SELF-EMPLOYED 
                   INDIVIDUALS.

       (a) Permanent Extension of Deduction.--
       (1) In general.--Subsection (l) of section 162 of the 
     Internal Revenue Code of 1986 (relating to special rules for 
     health insurance costs of self-employed individuals) is 
     amended by striking paragraph (6).
       (2) Effective date.--The amendment made by this subsection 
     shall apply to taxable years beginning after December 31, 
     1993.
       (b) Increase in Amount of Deduction; Insurance Purchased 
     Must Meet Certain Standards.--
       (1) Increase in amount of deduction.--Paragraph (1) of 
     section 162(l) of such Code is amended by striking ``25 
     percent of'' and inserting ``100 percent (25 percent in the 
     case of taxable years beginning in 1994 or 1995 and 50 
     percent in the case of taxable years beginning in 1996 or 
     1997) of''.
       (2) Insurance purchased must meet certain standards.--
     Paragraph (2) of section 162(l) of such Code is amended by 
     adding at the end thereof the following new subparagraph:
       ``(C) Treatment of group health plans.--For purposes of 
     this subsection, an amount paid into a multiple employer 
     health plan (as defined in section 701(10) of the Employee 
     Retirement Income Security Act of 1974) shall be deemed to be 
     an amount paid for insurance which constitutes medical 
     care.''
       (3) Effective date.--The amendments made by this subsection 
     shall apply to taxable years beginning after December 31, 
     1994.

     SEC. 1302. DEDUCTION OF HEALTH INSURANCE PREMIUMS FOR CERTAIN 
                   PREVIOUSLY UNINSURED INDIVIDUALS.

       (a) In General.--Section 213 of the Internal Revenue Code 
     of 1986 (relating to medical, dental, etc., expenses) is 
     amended by adding at the end thereof the following new 
     subsection:
       ``(f) Deduction for Certain Health Insurance Costs 
     Determined Without Regard to Adjusted Gross Income 
     Threshold.--
       ``(1) In general.--Subsection (a) shall be applied without 
     regard to the limitation based on adjusted gross income in 
     the case of the applicable percentage of the amounts paid for 
     insurance referred to in section 162(l)(2)(C) (and including 
     payments referred to in section 162(l)(2)(D)).
       ``(2) Applicable percentage.--For purposes of paragraph 
     (1), the term `applicable percentage' means--
       ``(A) 25 percent for taxable years beginning in 1994 or 
     1995,
       ``(B) 50 percent for taxable years beginning in 1996 or 
     1997, and
       ``(C) 100 percent for taxable years beginning after 1997.
       ``(3) Deduction not allowed to individuals eligible for 
     employer-subsidized coverage.--
       ``(A) In general.--Paragraph (1) shall not apply to any 
     individual--
       ``(i) who is eligible to participate in any subsidized 
     health plan maintained by an employer of such individual or 
     the spouse of such individual, or
       ``(ii) who is (or whose spouse is) a member of a subsidized 
     class of employees of an employer of such individual or 
     spouse.
       ``(B) Subsidized class.--For purposes of subparagraph (A), 
     an individual is a member of a subsidized class of employees 
     of an employer if, at any time during the 3 calendar years 
     ending with or within the taxable year, any member of such 
     class was eligible to participate in any subsidized health 
     plan maintained by such employer.
       ``(C) Special rules.--
       ``(i) Controlled groups.--All persons treated as a single 
     employer under subsection (a) or (b) of section 52 or 
     subsection (m) or (o) of section 414 shall be treated as a 
     single employer for purposes of subparagraph (B).
       ``(ii) Classes.--Classes of employees shall be determined 
     under regulations prescribed by the Secretary based on such 
     factors as the Secretary determines appropriate to carry out 
     the purposes of this subsection.
       ``(4) Coordination with deduction for other amounts.--
     Amounts allowable as a deduction under subsection (a) by 
     reason of this subsection shall not be taken into account in 
     determining the deduction under subsection (a) for other 
     amounts.
       ``(5) Subsection not to apply to individuals eligible for 
     medicare.--This subsection shall not apply to amount paid for 
     insurance covering an individual who is eligible for benefits 
     under title XVIII of the Social Security Act.''
       (b) Deduction Allowed Whether or Not Individual Itemizes 
     Other Deductions.--Subsection (a) of section 62 of such Code 
     is amended by inserting after paragraph (15) the following 
     new paragraph:
       ``(16) Costs of certain health insurance.--The deduction 
     allowed by section 213 to the extent allowable by reason of 
     section 213(f).''
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     1994.
        Subtitle E--Improved Access to Community Health Services

   PART 1--INCREASED AUTHORIZATION FOR COMMUNITY AND MIGRANT HEALTH 
                                CENTERS

     SEC. 1401. GRANT PROGRAM TO PROMOTE PRIMARY HEALTH CARE 
                   SERVICES FOR UNDERSERVED POPULATIONS.

       (a) Authorization.--The Secretary of Health and Human 
     Services shall provide for a program of grants to migrant and 
     community health centers (receiving grants or contracts under 
     section 329, 330, or 340 of the Public Health Service Act) in 
     order to promote the provision of primary health care 
     services for underserved individuals. Such grants may be 
     used--
       (1) to promote the provision of off-site services (through 
     means such as mobile medical clinics);
       (2) to improve birth outcomes in areas with high infant 
     mortality and morbidity;
       (3) to establish primary care clinics in areas identified 
     as in need of such clinics; and
       (4) for recruitment and training costs of necessary 
     providers and operating costs for unreimbursed services.
       (b) Conditions.--(1) Grants under this subsection shall 
     only be made upon application, approved by the Secretary.
       (2) The amount of grants made under this section shall be 
     determined by the Secretary.
       (c) Authorization of Appropriations.--There are authorized 
     to be appropriated--
       (1) in fiscal year 1995, $100,000,000,
       (2) in fiscal year 1996, $200,000,000,
       (3) in fiscal year 1997, $300,000,000,
       (4) in fiscal year 1998, $400,000,000, and
       (5) in fiscal year 1999, $500,000,000,
     to carry out this section. Of the amounts appropriated each 
     fiscal year under this section, at least 10 percent shall be 
     used for grants described in subsection (a)(1) and at least 
     10 percent shall be used for grants described in subsection 
     (a)(2). The Secretary may use not to exceed 50 percent of the 
     amounts appropriated to carry out this section for the 
     purpose of making new grants or contracts under sections 329, 
     330, and 340 of the Public Health Service Act.
       (d) Study and Report.--The Secretary shall conduct a study 
     of the impact of the grants made under this section to 
     migrant and community health centers on access to health 
     care, birth outcomes, and the use of emergency room services. 
     Not later than 2 years after the date of the enactment of 
     this Act, the Secretary shall submit to Congress a report on 
     such study and on recommendations for changes in the programs 
     under this section in order to promote the appropriate use of 
     cost-effective outpatient services.

   PART 2--GRANTS FOR PROJECTS FOR COORDINATING DELIVERY OF SERVICES

     SEC. 1411. PROJECTS FOR COORDINATING DELIVERY OF OUTPATIENT 
                   PRIMARY HEALTH SERVICES.

       Part D of title III of the Public Health Service Act (42 
     U.S.C. 254b et seq.) is amended by adding at the end the 
     following new subpart:

                  ``Subpart VII--Delivery of Services


            ``projects for coordinating delivery of services

       ``Sec. 340E. (a) Authority for Grants.--
       ``(1) In general.--The Secretary may make grants to public 
     and nonprofit private entities to carry out demonstration 
     projects for the purpose of increasing access to outpatient 
     primary health services in geographic areas described in 
     subsection (b) through coordinating the delivery of such 
     services under Federal, State, local, and private programs.
       ``(2) Requirement regarding plan.--The Secretary may make a 
     grant under paragraph (1) only if--
       ``(A) the applicant involved has received a grant under 
     subsection (l) and the Secretary has approved the plan 
     developed with such grant; and
       ``(B) the applicant agrees to carry out the project under 
     paragraph (1) in accordance with the plan.
       ``(b) Qualified Health Service Areas.--
       ``(1) In general.--A geographic area described in this 
     subsection is a geographic area that--
       ``(A) is a rational area for the delivery of health 
     services;
       ``(B) has a population of not more than 500,000 
     individuals; and
       ``(C)(i) has been designated by the Secretary as an area 
     with a shortage of personal health services; or
       ``(ii) has a significant number of individuals who have low 
     incomes or who have insufficient insurance regarding health 
     care.
       ``(2) Authority regarding multiple political 
     subdivisions.--The Secretary shall make a determination of 
     whether a geographic area is a geographic area described in 
     paragraph (1) without regard to whether the area is a 
     political subdivision, without regard to whether the area is 
     located in 2 or more political subdivisions or States, and 
     without regard to whether the area encompasses 2 or more 
     political subdivisions.
       ``(c) Preferences in Making Grants.--In making grants under 
     subsection (a), the Secretary shall give preference to 
     applicants demonstrating that, with respect to the outpatient 
     primary health services that will be the subject of the 
     project conducted by the applicant under such subsection--
       ``(1)(A) the project will result in the reduction of 
     administrative expenses associated with such services by 
     increasing the efficiency of the administrative processes of 
     the providers participating in the project, and (B) the 
     resulting savings will be expended for the direct provision 
     of such services for the designated population; or
       ``(2) the services that will be the subject of the project 
     will be provided in facilities that are underutilized.
       ``(d) Activities of Project Must Serve Designated 
     Population.--The Secretary may make a grant under subsection 
     (a) to an applicant only if the applicant demonstrates that 
     carrying out the project under such subsection will increase 
     access to outpatient primary health services for a 
     significant segment of the designated population.
       ``(e)  Matching Funds.--
       ``(1) In general.--With respect to the costs of the project 
     to be carried out under subsection (a) by an applicant, the 
     Secretary may make a grant under such subsection only if the 
     applicant agrees to make available (directly or through 
     donations from public or private entities) non-Federal 
     contributions toward such costs in an amount that is not less 
     than 50 percent of such costs.
       ``(2) Determination of amount contributed.--Non-Federal 
     contributions required in paragraph (1) may be in cash or in 
     kind, fairly evaluated, including plant, equipment, or 
     services. Amounts provided by the Federal Government, or 
     services assisted or subsidized to any significant extent by 
     the Federal Government, may not be included in determining 
     the amount of such non-Federal contributions.
       ``(f) Certain Limitations Regarding Grants.--
       ``(1) Provision of health services; construction of 
     facilities.--The Secretary may make a grant under subsection 
     (a) only if the applicant involved agrees that the grant will 
     not be expended for the direct provision of any health 
     service or for the construction or renovation of facilities.
       ``(2) Duration and amount of grant.--The period during 
     which payments are made for a project under subsection (a) 
     may not exceed 4 years, and the aggregate amount of such 
     payments for the period may not exceed $200,000. The 
     provision of such payments shall be subject to annual 
     approval by the Secretary of the payments and subject to the 
     availability of appropriations for the fiscal year involved 
     to make the payments.
       ``(3) Financial capacity for continuation of project after 
     termination of grant.--The Secretary may make a grant under 
     subsection (a) only if the Secretary determines that there is 
     a reasonable basis for believing that, after termination of 
     payments under such subsection pursuant to paragraph (2), the 
     project under such subsection will have the financial 
     capacity to continue operating.
       ``(g) Agreements Among Participants in Projects.--
       ``(1) Required participants.--The Secretary may make a 
     grant under subsection (a) only if the applicant for the 
     grant has, for purposes of carrying out a project under such 
     subsection, entered into agreements with--
       ``(A) the chief public health officers, and the chief 
     health officers for the elementary and secondary schools, of 
     each of the political subdivisions of the qualified health 
     service area in which the project under such subsection is to 
     be carried out (or, in the case of a political subdivision 
     that does not have such an official, with another appropriate 
     official of such subdivision);
       ``(B) each hospital in the qualified health service area;
       ``(C) representatives of entities in such area that provide 
     outpatient primary health services under Federal, State, 
     local, or private programs;
       ``(D) representatives of businesses in such area, including 
     small businesses; and
       ``(E) representatives of nonprofit private entities in such 
     area.
       ``(2) Optional participants.--With respect to compliance 
     with this section, a grantee under subsection (a) may, for 
     purposes of carrying out a project under such subsection, 
     enter into such agreements with public and private entities 
     in the qualified health service area involved (in addition to 
     the entities specified in paragraph (1)) as the grantee may 
     elect.
       ``(h) Expenditures of Grant.--With respect to a project 
     under subsection (a), the purposes for which a grant under 
     such subsection may be expended include (but are not limited 
     to) expenditures to increase the efficiency of the 
     administrative processes of providers participating in the 
     project, paying the costs of hiring and compensating staff, 
     obtaining computers and other equipment (including vehicles 
     to transport individuals to programs providing outpatient 
     primary health services), and developing and operating 
     provider networks.
       ``(i) Maintenance of Effort.--In the case of services and 
     populations that are the subject of a project under 
     subsection (a), the Secretary may make such a grant for a 
     fiscal year only if the applicant involved agrees that the 
     applicant, and each entity making an agreement under 
     subsection (g), will maintain expenditures of non-Federal 
     amounts for such services and populations at a level that is 
     not less than the level of such expenditures maintained by 
     the applicant and the entity, respectively, for the fiscal 
     year preceding the first fiscal year for which the applicant 
     receives such a grant.
       ``(j) Reports to Secretary.--The Secretary may make a grant 
     under subsection (a) only if the applicant involved agrees to 
     submit to the Secretary such reports on the project carried 
     out under such subsection as the Secretary may require.
       ``(k) Evaluations and Dissemination of Information.--The 
     Secretary shall provide for evaluations of projects carried 
     out under subsection (a), and for the collection and 
     dissemination of information developed as a result of such 
     projects and as a result of similar projects.
       ``(l) Planning Grants.--
       ``(1) In general.--The Secretary may make grants to public 
     and nonprofit private entities for the purpose of developing 
     plans to carry out projects under subsection (a). Such a 
     grant may be made only if the applicant involved submits to 
     the Secretary information--
       ``(A) providing a detailed statement of the proposal of the 
     applicant for carrying out the project;
       ``(B) identifying the geographic area in which the project 
     is to be carried out; and
       ``(C) demonstrating that the area is a qualified health 
     service area and that the proposal otherwise is in accordance 
     with the requirements established in this section for the 
     receipt of a grant under subsection (a).
       ``(2) Duration and amount of grant.--The period during 
     which payments are made under paragraph (1) for the 
     development of a plan under such paragraph may not exceed 1 
     year, and the amount of such payments may not exceed 
     $100,000.
       ``(m) Application for Grant.--The Secretary may make a 
     grant under subsection (a) or (l) only if the applicant for 
     the grant submits an application to the Secretary that--
       ``(1) contains any agreements, assurances, and information 
     required in this section with respect to the grant; and
       ``(2) is in such form, is made in such manner, and contains 
     such other agreements, assurances, and information as the 
     Secretary determines to be necessary to carry out the purpose 
     for which the grant is to be provided.
       ``(n) Definitions.--For purposes of this section:
       ``(1) The term `designated population' means individuals 
     described in subsection (b)(1)(C)(ii).
       ``(2) The term `primary health services' includes 
     preventive health services.
       ``(3) The term `qualified health service area' means a 
     geographic area described in subsection (b).
       ``(o) Authorization of Appropriations.--
       ``(1) Planning for projects.--For the purpose of grants 
     under subsection (l), there is authorized to be appropriated 
     $5,000,000 for fiscal year 1995, to remain available until 
     expended.
       ``(2) Operation of projects.--For the purpose of grants 
     under subsection (a), there is authorized to be appropriated 
     an aggregate $10,000,000 for the fiscal years 1996 through 
     1999.''.

                   PART 3--COMMUNITY HEALTH NETWORKS

     SEC. 1421. QUALIFICATIONS FOR COMMUNITY HEALTH NETWORKS.

       (a) Community Health Network Defined.--For purposes of part 
     7 of subtitle B of title I of Employee Retirement Income 
     Security Act of 1974 and this Act, added by section 1211(a) 
     of this title, the term ``community health network'' means an 
     arrangement that--
       (1) is organized by health care providers (including 
     medical practitioners), community groups, or both, and such 
     other organizations as may be designated by the arrangement, 
     to provide health care services to an enrolled population in 
     a service area,
       (2) provides to its enrollees at least the benefits 
     included in standard coverage (consistent with section 
     1102(c)),
       (3) receives payment for such services on a prospective 
     capitated basis, which may vary only by family composition, 
     geographic area, and age,
       (4) meets the requirements of subsection (b) (relating to 
     public accountability),
       (5) meets the requirements of subsection (c) (relating to 
     coordination and integration of care),
       (6) meets the requirements of subsection (d) to the extent 
     the arrangement is organized as a nonprofit entity, and
       (7) meets the requirements of section 707 of the Employee 
     Retirement Income Security Act of 1974 (relating to 
     maintenance of reserves), added by section 1211.
       (b) Public Accountability Requirements.--The public 
     accountability requirements of this subsection, with respect 
     to a network, are as follows:
       (1) Performance measures.--The network must establish and 
     implement procedures for developing, compiling, evaluating, 
     and reporting performance measures, statistics, and other 
     information on--
       (A) the cost and financial performance of network 
     operations,
       (B) the service utilization patterns of enrollees,
       (C) the availability, accessibility, and acceptability of 
     health care services to enrollees,
       (D) ownership and governance of the network, and
       (E) demographic characteristics of enrollees, and
     Such information shall be published annually and disseminated 
     to enrollees and the public.
       (2) Quality assurance program.--The network must have an 
     organizational arrangement for an ongoing quality assurance 
     program for all health services it provides which--
       (A) stresses health outcomes,
       (B) to the maximum extent possible, relies primarily on 
     evaluating and comparing practice patterns (rather than 
     routine case-by-case review) to identify problems,
       (C) provides review by physicians and other health 
     professionals of the outcomes and process followed in the 
     provision of health services, and
       (D) makes the coverage and utilization review requirements 
     of the plan, and the standards applied for such review, 
     available to providers and the public.
       (3) Enrollment.--The network does not expel or refuse to 
     enroll any applicant or limit coverage of services included 
     in standard coverage for any applicant because of the health 
     status or requirements for health services.
       (4) Credentialing.--The network must develop and implement 
     a process for the credentialing (and renewal of credentials) 
     of network providers (including practitioners).
       (5) Grievance process.--The network must have an enrollee 
     complaint and grievance resolution process which shall meet 
     any requirements of applicable law.
       (c) Coordination and Integration of Care Requirements.--The 
     coordination and integration of care requirements of this 
     subsection, with respect to a network, are as follows:
       (1) Coordination and integration of care.--The network must 
     establish and implement mechanisms for coordinating the 
     delivery of care across provider settings and over time, 
     including at least mechanisms for--
       (A) linking patient registration and medical record 
     information so that it is accessible to all parts of the 
     network and, consistent with State law, assures the 
     confidentiality of patient information,
       (B) assisting enrollees to obtain necessary care, including 
     preventive services, and
       (C) coordinating the services furnished to an enrollee when 
     more than one practitioner or provider is involved.
       (2) Out-of-area coverage.--The network must provide care 
     within a defined service area established by the arrangement 
     and must provide for reimbursement for standard coverage 
     (consistent with section 1102(c)) for enrollees who are 
     temporarily outside such area.
       (3) Common malpractice policy.--Providers (including 
     practitioners) that provide standard coverage to network 
     enrollees must be covered for malpractice in accordance with 
     documented criteria established by the arrangement.
       (4) Record keeping.--The network must use a unified patient 
     registration system and medical records system that is 
     accessible to all parts of the network and assures 
     confidentiality of patient information, consistent with State 
     law.
       (d) Requirements for Networks Organized as Nonprofit 
     Entities.--The requirements of this subsection, with respect 
     to a network, are as follows:
       (1) Community health status improvement process.--The 
     network develops and implements a community health status 
     improvement process, in cooperation with other existing 
     networks and community organizations from the same service 
     area, that--
       (A) provides for an assessment of community health status 
     that identifies important health status problems in such 
     area,
       (B) implements measures to address such problems, and
       (C) evaluates the efficiency and effectiveness of such 
     measures in addressing such problems.
     The results of evaluations made pursuant to subparagraph (C) 
     shall be made publicly available on at least an annual basis.
       (2) Enrollment.--The network enrolls individuals who are 
     broadly representative of the various age, social, and income 
     groups within the area it serves.
          Subtitle F--Improved Access to Rural Health Services

 PART 1--ESTABLISHMENT OF RURAL EMERGENCY ACCESS CARE HOSPITALS UNDER 
                                MEDICARE

     SEC. 1501. RURAL EMERGENCY ACCESS CARE HOSPITALS DESCRIBED.

       Section 1861 of the Social Security Act (42 U.S.C. 1395x) 
     is amended by adding at the end the following new subsection:

  ``Rural Emergency Access Care Hospital; Rural Emergency Access Care 
                           Hospital Services

       ``(oo)(1) The term `rural emergency access care hospital' 
     means, for a fiscal year, a facility with respect to which 
     the Secretary finds the following:
       ``(A) The facility is located in a rural area (as defined 
     in section 1886(d)(2)(D)).
       ``(B) The facility was a hospital under this title at any 
     time during the 5-year period that ends on the date of the 
     enactment of this subsection.
       ``(C) The facility is in danger of closing due to low 
     inpatient utilization rates and negative operating losses, 
     and the closure of the facility would limit the access of 
     individuals residing in the facility's service area to 
     emergency services.
       ``(D) The facility has entered into (or plans to enter 
     into), with a hospital with a participation agreement in 
     effect under section 1866(a), and under such agreement the 
     hospital shall accept patients transferred to the hospital 
     from the facility and receives data from and transmits data 
     to the facility.
       ``(E) There is a practitioner who is qualified to provide 
     advanced cardiac life support services (as determined by the 
     State in which the facility is located) on-site at the 
     facility on a 24-hour basis.
       ``(F) A physician is available on-call to provide emergency 
     medical services on a 24-hour basis.
       ``(G) The facility meets such staffing requirements as 
     would apply under section 1861(e) to a hospital located in a 
     rural area, except that--
       ``(i) the facility need not meet hospital standards 
     relating to the number of hours during a day, or days during 
     a week, in which the facility must be open, except insofar as 
     the facility is required to provide emergency care on a 24-
     hour basis under subparagraphs (E) and (F); and
       ``(ii) the facility may provide any services otherwise 
     required to be provided by a full-time, on-site dietician, 
     pharmacist, laboratory technician, medical technologist, or 
     radiological technologist on a part-time, off-site basis.
       ``(H) The facility meets the requirements applicable to 
     clinics and facilities under subparagraphs (C) through (J) of 
     paragraph (2) of section 1861(aa) and of clauses (ii) and 
     (iv) of the second sentence of such paragraph (or, in the 
     case of the requirements of subparagraph (E), (F), or (J) of 
     such paragraph, would meet the requirements if any reference 
     in such subparagraph to a `nurse practitioner' or to `nurse 
     practitioners' was deemed to be a reference to a `nurse 
     practitioner or nurse' or to `nurse practitioners or 
     nurses'), except that in determining whether a facility meets 
     the requirements of this subparagraph, subparagraphs (E) and 
     (F) of that paragraph shall be applied as if any reference to 
     a `physician' is a reference to a physician as defined in 
     section 1861(r)(1).
       ``(2) The term `rural emergency access care hospital 
     services' means medical and other health services furnished 
     by a rural emergency access care hospital.''.

     SEC. 1502. COVERAGE OF AND PAYMENT FOR SERVICES.

       (a) Coverage Under Part B.--Section 1832(a)(2) of the 
     Social Security Act (42 U.S.C. 1395k(a)(2)) is amended--
       (1) by striking ``and'' at the end of subparagraph (I);
       (2) by striking the period at the end of subparagraph (J) 
     and inserting ``; and''; and
       (3) by adding at the end the following new subparagraph:
       ``(K) rural emergency access care hospital services (as 
     defined in section 1861(oo)(2)).''.
       (b) Payment Based on Payment for Outpatient Rural Primary 
     Care Hospital Services.--
       (1) In general.--Section 1833(a)(6) of the Social Security 
     Act (42 U.S.C. 1395l(a)(6)) is amended by striking 
     ``services,'' and inserting ``services and rural emergency 
     access care hospital services,''.
       (2) Payment methodology described.--Section 1834(g) of such 
     Act (42 U.S.C. 1395m(g)) is amended--
       (A) in the heading, by striking ``Services'' and inserting 
     ``Services and Rural Emergency Access Care Hospital 
     Services''; and
       (B) in paragraph (1), by striking ``during a year before 
     1993'' and inserting ``during a year before the prospective 
     payment system described in paragraph (2) is in effect'';
       (C) in paragraph (1), by adding at the end the following:
     ``The amount of payment shall be determined under either 
     method without regard to the amount of the customary or other 
     charge.'';
       (D) in paragraph (2), by striking ``January 1, 1993,'' and 
     inserting ``January 1, 1996,''; and
       (E) by adding at the end the following new paragraph:
       ``(3) Application of methods to payment for rural emergency 
     access care hospital services.--The amount of payment for 
     rural emergency access care hospital services provided during 
     a year shall be determined using the applicable method 
     provided under this subsection for determining payment for 
     outpatient rural primary care hospital services during the 
     year.''.

     SEC. 1503. EFFECTIVE DATE.

       The amendments made by sections 1501 and 1502 shall apply 
     to fiscal years beginning on or after October 1, 1994.

            PART 2--RURAL MEDICAL EMERGENCIES AIR TRANSPORT

     SEC. 1511. GRANTS TO STATES REGARDING AIRCRAFT FOR 
                   TRANSPORTING RURAL VICTIMS OF MEDICAL 
                   EMERGENCIES.

       Part E of title XII of the Public Health Service Act (42 
     U.S.C. 300d-51 et seq.) is amended by adding at the end 
     thereof the following new section:

     ``SEC. 1252. GRANTS FOR SYSTEMS TO TRANSPORT RURAL VICTIMS OF 
                   MEDICAL EMERGENCIES.

       ``(a) In General.--The Secretary shall make grants to 
     States to assist such States in the creation or enhancement 
     of air medical transport systems that provide victims of 
     medical emergencies in rural areas with access to treatments 
     for the injuries or other conditions resulting from such 
     emergencies.
       ``(b) Application and Plan.--
       ``(1) Application.--To be eligible to receive a grant under 
     subsection (a), a State shall prepare and submit to the 
     Secretary an application in such form, made in such manner, 
     and containing such agreements, assurances, and information, 
     including a State plan as required in paragraph (2), as the 
     Secretary determines to be necessary to carry out this 
     section.
       ``(2) State plan.--An application submitted under paragraph 
     (1) shall contain a State plan that shall--
       ``(A) describe the intended uses of the grant proceeds and 
     the geographic areas to be served;
       ``(B) demonstrates that the geographic areas to be served, 
     as described under subparagraph (A), are rural in nature;
       ``(C) demonstrate that there is a lack of facilities 
     available and equipped to deliver advanced levels of medical 
     care in the geographic areas to be served;
       ``(D) demonstrate that in utilizing the grant proceeds for 
     the establishment or enhancement of air medical services the 
     State would be making a cost-effective improvement to 
     existing ground-based or air emergency medical service 
     systems;
       ``(E) demonstrate that the State will not utilize the grant 
     proceeds to duplicate the capabilities of existing air 
     medical systems that are effectively meeting the emergency 
     medical needs of the populations they serve;
       ``(F) demonstrate that in utilizing the grant proceeds the 
     State is likely to achieve a reduction in the morbidity and 
     mortality rates of the areas to be served, as determined by 
     the Secretary;
       ``(G) demonstrate that the State, in utilizing the grant 
     proceeds, will--
       ``(i) maintain the expenditures of the State for air and 
     ground medical transport systems at a level equal to not less 
     than the level of such expenditures maintained by the State 
     for the fiscal year preceding the fiscal year for which the 
     grant is received; and
       ``(ii) ensure that recipients of direct financial 
     assistance from the State under such grant will maintain 
     expenditures of such recipients for such systems at a level 
     at least equal to the level of such expenditures maintained 
     by such recipients for the fiscal year preceding the fiscal 
     year for which the financial assistance is received;
       ``(H) demonstrate that persons experienced in the field of 
     air medical service delivery were consulted in the 
     preparation of the State plan;
       ``(I) contain such other information as the Secretary may 
     determine appropriate.
       ``(c) Considerations in Awarding Grants.--In determining 
     whether to award a grant to a State under this section, the 
     Secretary shall--
       ``(1) consider the rural nature of the areas to be served 
     with the grant proceeds and the services to be provided with 
     such proceeds, as identified in the State plan submitted 
     under subsection (b); and
       ``(2) give preference to States with State plans that 
     demonstrate an effective integration of the proposed air 
     medical transport systems into a comprehensive network or 
     plan for regional or statewide emergency medical service 
     delivery.
       ``(d) State Administration and Use of Grant.--
       ``(1) In general.--The Secretary may not make a grant to a 
     State under subsection (a) unless the State agrees that such 
     grant will be administered by the State agency with principal 
     responsibility for carrying out programs regarding the 
     provision of medical services to victims of medical 
     emergencies or trauma.
       ``(2) Permitted uses.--A State may use amounts received 
     under a grant awarded under this section to award subgrants 
     to public and private entities operating within the State.
       ``(3) Opportunity for public comment.--The Secretary may 
     not make a grant to a State under subsection (a) unless that 
     State agrees that, in developing and carrying out the State 
     plan under subsection (b)(2), the State will provide public 
     notice with respect to the plan (including any revisions 
     thereto) and facilitate comments from interested persons.
       ``(e) Number of Grants.--The Secretary shall award grants 
     under this section to not less than 7 States.
       ``(f) Reports.--
       ``(1) Requirement.--A State that receives a grant under 
     this section shall annually (during each year in which the 
     grant proceeds are used) prepare and submit to the Secretary 
     a report that shall contain--
       ``(A) a description of the manner in which the grant 
     proceeds were utilized;
       ``(B) a description of the effectiveness of the air medical 
     transport programs assisted with grant proceeds; and
       ``(C) such other information as the Secretary may require.
       ``(2) Termination of funding.--In reviewing reports 
     submitted under paragraph (1), if the Secretary determines 
     that a State is not using amounts provided under a grant 
     awarded under this section in accordance with the State plan 
     submitted by the State under subsection (b), the Secretary 
     may terminate the payment of amounts under such grant to the 
     State until such time as the Secretary determines that the 
     State comes into compliance with such plan.
       ``(g) Definition.--As used in this section, the term `rural 
     areas' means geographic areas that are located outside of 
     standard metropolitan statistical areas, as identified by the 
     Secretary.
       ``(h) Authorization of Appropriations.--There are 
     authorized to be appropriated to make grants under this 
     section, $15,000,000 for fiscal year 1994, and such sums as 
     may be necessary for each of the fiscal years 1996 and 
     1997.''.

             PART 3--EMERGENCY MEDICAL SERVICES AMENDMENTS

     SEC. 1521. ESTABLISHMENT OF OFFICE OF EMERGENCY MEDICAL 
                   SERVICES.

       Title XII of the Public Health Service Act (42 U.S.C. 300d 
     et seq.) is amended--
       (1) in the heading for the title, by striking ``TRAUMA 
     CARE'' and inserting ``EMERGENCY MEDICAL SERVICES'';
       (2) in the heading for part A, by striking ``General'' and 
     all that follows and inserting ``General Authorities and 
     Duties''; and
       (3) by amending section 1201 to read as follows:

     ``SEC. 1201. ESTABLISHMENT OF OFFICE OF EMERGENCY MEDICAL 
                   SERVICES.

       ``(a) In General.--The Secretary shall establish an office 
     to be known as the Office of Emergency Medical Services, 
     which shall be headed by a director appointed by the 
     Secretary. The Secretary shall carry out this title acting 
     through the Director of such Office.
       ``(b) General Authorities and Duties.--With respect to 
     emergency medical services (including trauma care), the 
     Secretary shall--
       ``(1) conduct and support research, training, evaluations, 
     and demonstration projects;
       ``(2) foster the development of appropriate, modern systems 
     of such services through the sharing of information among 
     agencies and individuals involved in the study and provision 
     of such services;
       ``(3) sponsor workshops and conferences;
       ``(4) as appropriate, disseminate to public and private 
     entities information obtained in carrying out paragraphs (1) 
     through (4);
       ``(5) provide technical assistance to State and local 
     agencies;
       ``(6) coordinate activities of the Department of Health and 
     Human Services; and
       ``(7) as appropriate, coordinate activities of such 
     Department with activities of other Federal agencies.
       ``(c) Certain Requirements.--With respect to emergency 
     medical services (including trauma care), the Secretary shall 
     ensure that activities under subsection (b) are carried out 
     regarding--
       ``(1) maintaining an adequate number of health 
     professionals with expertise in the provision of the 
     services, including hospital-based professionals and 
     prehospital-based professionals;
       ``(2) developing, periodically reviewing, and revising as 
     appropriate, in collaboration with appropriate public and 
     private entities, guidelines for the provision of such 
     services (including, for various typical circumstances, 
     guidelines on the number and variety of professionals, on 
     equipment, and on training);
       ``(3) the appropriate use of available technologies, 
     including communications technologies; and
       ``(4) the unique needs of underserved inner-city areas and 
     underserved rural areas.
       ``(d) Grants, Cooperative Agreements, and Contracts.--In 
     carrying out subsections (b) and (c), the Secretary may make 
     grants and enter into cooperative agreements and contracts.
       ``(e) Definitions.--For purposes of this part:
       ``(1) The term `hospital-based professional' means a health 
     professional (including an allied health professional) who 
     has expertise in providing one or more emergency medical 
     services and who normally provides the services at a medical 
     facility.
       ``(2) The term `prehospital-based professional' means a 
     health professional (including an allied health professional) 
     who has expertise in providing one or more emergency medical 
     services and who normally provides the services at the site 
     of the medical emergency or during transport to a medical 
     facility.''.

     SEC. 1522. STATE OFFICES OF EMERGENCY MEDICAL SERVICES.

       (a) Technical Amendments to Facilitate Establishment of 
     Program.--
       (1) In general.--Title XII of the Public Health Service Act 
     (42 U.S.C. 300d et seq.) is amended--
       (A) by redesignating section 1239 as section 1235;
       (B) by redesignating sections 1231 and 1233 as sections 
     1236 and 1237, respectively; and
       (C) by redesignating sections 1211 through 1222 as sections 
     1221 through 1232, respectively.
       (2) Modifications in format of title xii.--Title XII of the 
     Public Health Service Act, as amended by paragraph (1) of 
     this subsection, is amended--
       (A) by striking ``Part B'' and all that follow through 
     ``State Plans'' and inserting the following:

  ``Subpart II--Formula Grants With Respect to Modifications of State 
                                Plans'';

       (B) by striking ``Part C--General Provisions'' and 
     inserting the following:

                  ``Subpart III--General Provisions'';

       (C) by redesignating sections 1202 and 1203 as sections 
     1211 and 1212, respectively; and
       (D) by inserting before section 1211 (as so redesignated) 
     the following:

                         ``Part B--Trauma Care

            ``Subpart I--Advisory Council; Clearinghouse''.

       (b) State Offices.--Title XII of the Public Health Service 
     Act, as amended by subsection (a) of this section, is amended 
     by inserting after section 1201 the following new section:

     ``SEC. 1202. STATE OFFICES OF EMERGENCY MEDICAL SERVICES.

       ``(a) Program of Grants.--The Secretary may make grants to 
     States for the purpose of improving the availability and 
     quality of emergency medical services through the operation 
     of State offices of emergency medical services.
       ``(b) Requirement of Matching Funds.--
       ``(1) In general.--The Secretary may not make a grant under 
     subsection (a) unless the State involved agrees, with respect 
     to the costs to be incurred by the State in carrying out the 
     purpose described in such subsection, to provide non-Federal 
     contributions toward such costs in an amount that--
       ``(A) for the first fiscal year of payments under the 
     grant, is not less than $1 for each $3 of Federal funds 
     provided in the grant;
       ``(B) for any second fiscal year of such payments, is not 
     less than $1 for each $1 of Federal funds provided in the 
     grant; and
       ``(C) for any third fiscal year of such payments, is not 
     less than $3 for each $1 of Federal funds provided in the 
     grant.
       ``(2) Determination of amount of non-federal 
     contribution.--
       ``(A) Subject to subparagraph (B), non-Federal 
     contributions required in paragraph (1) may be in cash or in 
     kind, fairly evaluated, including plant, equipment, or 
     services. Amounts provided by the Federal Government, or 
     services assisted or subsidized to any significant extent by 
     the Federal Government, may not be included in determining 
     the amount of such non-Federal contributions.
       ``(B) The Secretary may not make a grant under subsection 
     (a) unless the State involved agrees that--
       ``(i) for the first fiscal year of payments under the 
     grant, 100 percent or less of the non-Federal contributions 
     required in paragraph (1) will be provided in the form of in-
     kind contributions;
       ``(ii) for any second fiscal year of such payments, not 
     more than 50 percent of such non-Federal contributions will 
     be provided in the form of in-kind contributions; and
       ``(iii) for any third fiscal year of such payments, such 
     non-Federal contributions will be provided solely in the form 
     of cash.
       ``(c) Certain Required Activities.--The Secretary may not 
     make a grant under subsection (a) unless the State involved 
     agrees that activities carried out by an office operated 
     pursuant to such subsection will include--
       ``(1) coordinating the activities carried out in the State 
     that relate to emergency medical services;
       ``(2) activities regarding the matters described in 
     paragraphs (1) through (4) section 1201(b);
       ``(3) identifying Federal and State programs regarding 
     emergency medical services and providing technical assistance 
     to public and nonprofit private entities regarding 
     participation in such programs.
       ``(d) Requirement Regarding Annual Budget for Office.--The 
     Secretary may not make a grant under subsection (a) unless 
     the State involved agrees that, for any fiscal year for which 
     the State receives such a grant, the office operated pursuant 
     to subsection (a) will be provided with an annual budget of 
     not less than $50,000.
       ``(e) Certain Uses of Funds.--
       ``(1) Restrictions.--The Secretary may not make a grant 
     under subsection (a) unless the State involved agrees that--
       ``(A) if research with respect to emergency medical 
     services is conducted pursuant to the grant, not more than 10 
     percent of the grant will be expended for such research; and
       ``(B) the grant will not be expended to provide emergency 
     medical services (including providing cash payments regarding 
     such services).
       ``(2) Establishment of office.--Activities for which a 
     State may expend a grant under subsection (a) include paying 
     the costs of establishing an office of emergency medical 
     services for purposes of such subsection.
       ``(f) Reports.--The Secretary may not make a grant under 
     subsection (a) unless the State involved agrees to submit to 
     the Secretary reports containing such information as the 
     Secretary may require regarding activities carried out under 
     this section by the State.
       ``(g) Requirement of Application.--The Secretary may not 
     make a grant under subsection (a) unless an application for 
     the grant is submitted to the Secretary and the application 
     is in such form, is made in such manner, and contains such 
     agreements, assurances, and information as the Secretary 
     determines to be necessary to carry out this section.''.

     SEC. 1523. PROGRAMS FOR RURAL AREAS.

       (a) In General.--Title XII of the Public Health Service 
     Act, as amended by section 1522, is amended--
       (1) by transferring section 1204 to part A;
       (2) by redesignating such section as section 1203;
       (3) by inserting such section after section 1202; and
       (4) in section 1203 (as so redesignated)--
       (A) by redesignating subsection (c) as subsection (d); and
       (B) by inserting after subsection (b) the following new 
     subsection:
       ``(c) Demonstration Program Regarding Telecommunications.--
       ``(1) Linkages for rural facilities.--Projects under 
     subsection (a)(1) shall include demonstration projects to 
     establish telecommunications between rural medical facilities 
     and medical facilities that have expertise or equipment that 
     can be utilized by the rural facilities through the 
     telecommunications.
       ``(2) Modes of communication.--The Secretary shall ensure 
     that the telecommunications technologies demonstrated under 
     paragraph (1) include interactive video telecommunications, 
     static video imaging transmitted through the telephone 
     system, and facsimiles transmitted through such system.''.
       (b) Conforming Amendment.--Section 1203 of the Public 
     Health Service Act, as redesignated by subsection (a)(2) of 
     this section, is amended in the heading for the section by 
     striking ``establishment'' and all that follows and inserting 
     ``programs for rural areas.''.

     SEC. 1524. FUNDING.

       Title XII of the Public Health Service Act, as amended by 
     the preceding provisions of this title, is amended--
       (1) by redesignating parts C through F as parts D through 
     G, respectively;
       (2) by inserting after subpart III of part B the following:

                          ``Part C--Funding'';

       (3) by transferring section 1239 to part C (as so added); 
     and
       (4) in such section, by striking subsections (a) and (b) 
     and inserting the following:
       ``(a) Emergency Medical Services Generally.--
       ``(1) In general.--For the purpose of carrying out section 
     1201 other than with respect to trauma care, there are 
     authorized to be appropriated $2,000,000 for fiscal year 
     1995, and such sums as may be necessary for each of the 
     fiscal years 1996 and 1997.
       ``(2) State offices.--For the purpose of carrying out 
     section 1202, there are authorized to be appropriated 
     $3,000,000 for fiscal year 1995, and such sums as may be 
     necessary for each of the fiscal years 1996 and 1997.
       ``(3) Certain telecommunications demonstrations.--For the 
     purpose of carrying out section 1203(c), there are authorized 
     to be appropriated $10,000,000 for fiscal year 1995 and such 
     sums as may be necessary for each of the fiscal years 1996 
     and 1997.
       ``(b) Trauma Care and Certain Other Activities.--
       ``(1) In general.--For the purpose of carrying out part B, 
     section 1201 with respect to trauma care, and section 1203 
     (other than subsection (c) of such section), there are 
     authorized to be appropriated $60,000,000 for fiscal year 
     1995, and such sums as may be necessary for each of the 
     fiscal years 1996 and 1997.
       ``(2) Allocation of funds by secretary.--
       ``(A) For the purpose of carrying out subpart I of part B, 
     section 1201 with respect to trauma care, and section 1203 
     (other than subsection (c) of such section), the Secretary 
     shall make available 10 percent of the amounts appropriated 
     for a fiscal year under paragraph (1).
       ``(B) For the purpose of carrying out section 1203 (other 
     than subsection (c) of such section), the Secretary shall 
     make available 10 percent of the amounts appropriated for a 
     fiscal year under paragraph (1).
       ``(C)(i) For the purpose of making allotments under section 
     1221(a), the Secretary shall, subject to subsection (c), make 
     available 80 percent of the amounts appropriated for a fiscal 
     year under paragraph (1).
       ``(ii) Amounts paid to a State under section 1221(a) for a 
     fiscal year shall, for the purposes for which the amounts 
     were paid, remain available for obligation until the end of 
     the fiscal year immediately following the fiscal year for 
     which the amounts were paid.''.

     SEC. 1525. CONFORMING AMENDMENTS.

       Title XII of the Public Health Service Act, as amended by 
     the preceding provisions of this title, is amended--
       (1) in section 1203(b), by striking ``1214(c)(1)'' and 
     inserting ``1224(c)(1)'';
       (2) in section 1211(b)(3), by striking ``1213(c)'' and 
     inserting ``1223(c)'';
       (3) in section 1221--
       (A) in subsection (a)--
       (i) by striking ``1218'' and inserting ``1228''; and
       (ii) by striking ``1217'' and inserting ``1227''; and
       (B) in subsection (b)--
       (i) by striking ``1233'' and inserting ``1237''; and
       (ii) by striking ``1213'' and inserting ``1223'';
       (4) in section 1222--
       (A) in subsection (a)--
       (i) in paragraph (1), by striking ``1211(a)'' and inserting 
     ``1221(a)''; and
       (ii) in paragraph (2)(A), by striking ``1211(c)'' and 
     inserting ``1221(c)''; and
       (B) in subsection (b), by striking ``1211(a)'' and 
     inserting ``1221(a)'';
       (5) in section 1223--
       (A) in subsection (a), by striking ``1211(b)'' and 
     inserting ``1221(b)'';
       (B) in subsection (b)--
       (i) in paragraph (1), by striking ``1211(a)'' and inserting 
     ``1221(a)''; and
       (ii) in paragraph (3), by striking ``1211(a)'' and 
     inserting ``1221(a)''; and
       (C) in subsection (d), by striking ``1211(a)'' and 
     inserting ``1221(a)'';
       (6) in section 1224--
       (A) in each of subsections (a) through (c), by striking 
     ``1211(a)'' and inserting ``1221(a)''; and
       (B) in subsection (b), by striking ``1213(a)(7)'' and 
     inserting ``1223(a)(7)'';
       (7) in section 1225--
       (A) in subsection (a)--
       (i) by striking ``1211(a)'' and inserting ``1221(a)''; and
       (ii) by striking ``1233'' and inserting ``1237''; and
       (B) in subsection (b), by striking ``1211(b)'' and 
     inserting ``1221(b)'';
       (8) in section 1226, in each of subsections (a) through 
     (c), by striking ``1211(a)'' and inserting ``1221(a)'';
       (9) in section 1227--
       (A) by striking ``1211(a)'' and inserting ``1221(a)''; and
       (B) by striking ``1214'' and inserting ``1224'';
       (10) in section 1228--
       (A) in each of subsections (a) through (c), by striking 
     ``1211(a)'' each place such term appears and inserting 
     ``1221(a)'';
       (B) in subsection (b), in each of paragraphs (2)(A) and 
     (3)(A), by striking ``1232(a)'' and inserting ``1239(a)''; 
     and
       (C) in subsection (c)(2)--
       (i) by striking ``1232(b)(3)'' and inserting 
     ``1239(b)(3)''; and
       (ii) by striking ``1217'' and inserting ``1227'';
       (11) in section 1229(a), by striking ``1211(a)'' each place 
     such term appears and inserting ``1221(a)'';
       (12) in section 1230(a), by striking ``1211(a)'' each place 
     such term appears and inserting ``1221(a)'';
       (13) in section 1231--
       (A) in each of subsections (a) and (b), by striking 
     ``1211(a)'' each place such term appears and inserting 
     ``1221(a)''; and
       (B) in each of subsections (a) and (b), by striking 
     ``1211(b)'' and inserting ``1221(b)'';
       (14) in section 1232, by striking ``1211'' and inserting 
     ``1221'';
       (15) in section 1236--
       (A) in the matter preceding paragraph (1), by striking 
     ``this title'' and inserting ``this part''; and
       (B) in paragraph (1), by striking ``1213'' and inserting 
     ``1223'';
       (16) in section 1237--
       (A) in each of subsections (a) and (b), by striking 
     ``1211'' each place such term appears and inserting ``1221'';
       (B) in subsection (b)--
       (i) by striking ``part B'' and inserting ``subpart II''; 
     and
       (ii) by striking ``1214(c)(1)'' and inserting 
     ``1224(c)(1)''; and
       (C) in subsection (c), by striking ``1213'' and inserting 
     ``1223''; and
       (17) in section 1239(c)(1)--
       (A) by striking ``1211(a)'' and inserting ``1221(a)'';
       (B) by striking ``1218(a)(2)'' and inserting 
     ``1228(a)(2)''; and
       (C) by striking ``part B'' and inserting ``subpart II''.

     SEC. 1526. EFFECTIVE DATE.

       The amendments made by this part shall take effect October 
     1, 1994, or upon the date of the enactment of this Act, 
     whichever occurs later.

            PART 4--ADDITIONAL RURAL HEALTH CARE PROVISIONS

     SEC. 1531. DEVELOPMENT OF COMMUNITY-OPERATED HEALTH PLANS IN 
                   RURAL AND FRONTIER AREAS.

       (a) Community-Operated Health Plans.--The Secretary of 
     Health and Human Services (in this part referred to as the 
     ``Secretary'') may make grants to public and nonprofit 
     private entities for the purpose of carrying out projects to 
     develop health plans to provide services exclusively in rural 
     and frontier areas.
       (b) Community Involvement.--The Secretary may make a grant 
     under subsection (a) only if the applicant involved meets the 
     following conditions:
       (1) In developing the proposal of the applicant for a 
     project under such subsection, the applicant has consulted 
     with the local governments of the geographic area to be 
     served by the health plan developed through the project, with 
     individuals who reside in the area, and with a reasonable 
     number and variety of health professionals who provide 
     services in the area.
       (2) The applicant agrees that the principal legal authority 
     over the operation of the health plan will be vested in 
     individuals who reside in such geographic area.
       (3) In the proposal the applicant specifies how a full 
     continuum of services will be provided.
       (4) In the proposal the applicant specifies how the 
     proposed health plan will utilize existing health care 
     facilities in a manner that avoids unnecessary duplication.
       (c) Use of Funds.--
       (1) In general.--Funds made available under this section 
     may be used for the following:
       (A) To develop integrated health networks, utilizing 
     existing local providers and facilities where appropriate, 
     with community involvement.
       (B) For information systems, including telecommunications.
       (C) For transportation services.
       (D) To develop rural emergency access care hospitals (as 
     defined in section 1861(oo)(1) of the Social Security Act, as 
     added by section 1501).
       (2) Limitations.--Funds made available under this section 
     shall not be used for the following:
       (A) For a telecommunications system, unless the system is 
     coordinated with, and does not duplicate, such a system 
     existing in the area.
       (B) For paying off existing debt.
       (d) Authorization of Appropriations.--There are authorized 
     to be appropriated $25,000,000 in each of fiscal years 1996, 
     1997, and 1998 to carry out this section.

     SEC. 1532. PRIMARY HEALTH CARE FOR MEDICALLY UNDERSERVED 
                   RURAL COMMUNITIES; INCREASED CAPACITY OF 
                   HOSPITALS AND OUTPATIENT FACILITIES.

       (a) In General.--The Secretary may make grants to public 
     and nonprofit private hospitals in medically underserved 
     rural communities, and to public and nonprofit outpatient 
     facilities in such communities, for the purpose of carrying 
     out projects to develop or increase the capacity of the 
     hospitals and facilities to provide primary health services.
       (b) Medically Underserved Rural Community.--For purposes of 
     this section, the term ``medically underserved rural 
     community'' means--
       (1) a rural area that has a substantial number of 
     individuals who are members of a medically underserved 
     population, as defined in section 330 of the Public Health 
     Service Act; or
       (2) a rural area a significant portion of which is a health 
     professional shortage area designated under section 332 of 
     such Act.
       (c) Certain Expenditures.--The purposes for which the 
     Secretary may authorize a grant under subsection (a) to be 
     expended include the renovation of facilities, the purchase 
     of equipment, and the training of personnel.
       (d) Authorization of Appropriations.--
       (1) Hospitals.--There are authorized to be appropriated 
     $50,000,000 in each of fiscal years 1996, 1997, and 1998 for 
     the purpose of making grants to hospitals under subsection 
     (a).
       (2) Outpatient facilities.--There are authorized to be 
     appropriated $25,000,000 in each of fiscal years 1996, 1997, 
     and 1998 for the purpose of making grants to outpatient 
     facilities under subsection (a).

     SEC. 1533. INNOVATIVE APPROACHES TO DELIVERY OF HEALTH 
                   SERVICES IN RURAL AREAS.

       (a) In General.--The Secretary, acting through the 
     Administrator for Health Care Policy and Research, may make 
     grants to public and nonprofit private entities for the 
     purposes of conducting research and carrying out 
     demonstration projects to develop innovative approaches to 
     the delivery of health care in rural areas, such as the use 
     of telemedicine and the use of mobile delivery units.
       (b) Authorization of Appropriations.--There are authorized 
     to be appropriated $15,000,000 in each of fiscal years 1996 
     through 2000 to carry out this section.

     SEC. 1534. TRAINING OF RURAL HEALTH PROFESSIONALS OTHER THAN 
                   PHYSICIANS.

       (a) Funding for Programs Under Public Health Service Act.--
     With respect to programs of title VII or VIII of the Public 
     Health Service Act that provide for the training of 
     individuals as health professionals other than physicians, 
     there are authorized to be appropriated, in addition to 
     amounts otherwise authorized to be appropriated, $50,000,000 
     in each of fiscal years 1996 through 2000 for the purpose of 
     the Secretary carrying out such programs through entities 
     described in subsection (b).
       (b) Eligibility.--With respect to a program referred to in 
     subsection (a), an entity described in this subsection is an 
     entity--
       (1) that is eligible to receive grants or contracts under 
     the program (as provided in the applicable provisions of 
     title VII or VIII of the Public Health Service Act); and
       (2) a substantial number of whose designated graduates are 
     providing health services in a rural area.
       (c) Definition of Designated Graduate.--For purposes of 
     this section, the term ``designated graduate'', with respect 
     to an entity, means an individual completing the training 
     involved during the 5-year period preceding the fiscal year 
     for which the entity is applying to receive a grant or 
     contract under the applicable program referred to in 
     subsection (a).
       (d) Relationship to Other Funds.--The amounts made 
     available in subsection (a) for carrying out programs 
     referred to in such subsection are in addition to any other 
     amounts that are available for carrying out the programs.

     SEC. 1535. GENERAL PROVISIONS.

       (a) Application for Grant.--The Secretary may make a grant 
     under any section of this part only if an application for the 
     grant is submitted to the Secretary and the application is in 
     such form, is made in such manner, and contains such 
     agreements, assurances, and information as the Secretary 
     determines to be necessary to carry out the program involved.
       (b) Technical Assistance.--The Secretary may provide 
     technical assistance to recipients of grants or contracts 
     under this part with respect to the planning, development, 
     and operation of activities under the grants or contracts.
   Subtitle G--Assistance in Enrolling Uninsured Children in Health 
                               Insurance

     SEC. 1601. ESTABLISHMENT OF STATE PROGRAMS.

       (a) Medicaid State Plan Requirement.--Section 1902(a) of 
     the Social Security Act (42 U.S.C. 1396a(a)) is amended--
       (1) by striking ``and'' at the end of paragraph (61);
       (2) by striking the period at the end of paragraph (62) and 
     inserting ``; and''; and
       (3) by adding at the end the following new paragraph:
       ``(63) provide for a State program furnishing premium 
     subsidies for needy children in accordance with section 
     1932.''.
       (b) State Programs for Premium Subsidies for Needy 
     Children.--Title XIX of the Social Security Act (42 U.S.C. 
     1396 et seq.) is amended by redesignating section 1931 as 
     section 1932 and by inserting after section 1930 the 
     following new section:


          ``state premium subsidy programs for needy children

       ``Sec. 1932. (a) Requirement to Operate State Program.--
       ``(1) In general.--A State with a State plan approved under 
     this title shall have in effect a premium subsidy program for 
     furnishing premium subsidy under subsection (b) to premium 
     subsidy eligible children in the State in fiscal years 
     beginning with fiscal year 1998.
       ``(2) Designation of state agency.--A State may designate 
     any appropriate State agency to administer the program under 
     this section.
       ``(b) Assistance With Premiums for Standard Health 
     Coverage.--
       ``(1) Eligibility.--
       ``(A) In general.--An eligible individual who has been 
     determined by a State to be a premium subsidy eligible child 
     (as defined in paragraph (2)) shall be entitled to premium 
     subsidies in the amount determined under subsection (b).
       ``(B) Premium subsidy eligible child.--For purposes of this 
     section, the term `premium subsidy eligible child' means an 
     individual--
       ``(i) under 19 years of age,
       ``(ii) whose family has a family income determined under 
     this section which does not exceed 185 percent (or such 
     lesser percent as the Secretary may specify for a fiscal 
     year, based on available funds during such fiscal year) of 
     the poverty line, and
       ``(iii) except as provided in subparagraph (C), who is not 
     otherwise eligible for medical assistance under the State 
     plan (or would be eligible for such assistance on the basis 
     of the plan in effect as of the date of the enactment of the 
     Affordable Health Care Now Act of 1994).
       ``(C) Eligibility of children becoming eligible for 
     medicaid.--At the option of the State, a premium subsidy 
     eligible child may include an individual who meets the 
     requirements of clauses (i) and (ii) of subparagraph (B) and 
     is eligible for medical assistance under the State plan if 
     the individual was formerly a premium subsidy eligible child 
     under subparagraph (B).
       ``(D) Additional children using state-only funds.--Nothing 
     in this section shall be construed as preventing a State, 
     using its own funds and without any Federal financial 
     participation, from covering additional children as premium 
     subsidy eligible children.
       ``(c) Amount of Premium Subsidy.--
       ``(1) In general.--
       ``(A) In general.--The premium subsidy amount determined 
     under this paragraph is a monthly amount equal to the subsidy 
     percentage of \1/12\th of the lesser of--
       ``(i) the annual premium for certified standard health 
     coverage provided the child, or
       ``(ii) the actuarial value of the standard option, 
     nationwide service benefit plan (taking into account cost 
     sharing) made available under chapter 89 of title, United 
     States Code for the year, adjusted to reflect a premium for a 
     single child of the age involved and adjusted to reflect the 
     relative cost of premiums for health coverage of premium 
     subsidy eligible children in the geographic area in which the 
     child resides compared to the national average.
       ``(B) Subsidy percentage.--For purposes of paragraph (1), 
     an individual's `subsidy percentage' means 100 percent 
     reduced (but not below zero percent) by 0.85 percentage 
     points for each percentage point (or portion thereof) such 
     individual's income equals or exceeds 100 percent of the 
     poverty line.
       ``(d) Payments.--
       ``(1) In general.--The amount of the premium subsidy 
     available to a premium subsidy eligible child under 
     subsection (b) shall be paid by the State in which the 
     individual resides directly to the insurer that provides the 
     coverage for the premium subsidy eligible child. Payments 
     under the preceding sentence shall commence in the first 
     month during which the individual is provided coverage and 
     determined under this section to be a premium subsidy 
     eligible child.
       ``(2) Administrative errors.--A State is financially 
     responsible for premium subsidy paid based on an eligibility 
     determination error to the extent the State's error rate for 
     eligibility determinations exceeds a maximum permissible 
     error rate to be specified by the Secretary.
       ``(e) Eligibility Determinations.--
       ``(1) In general.--The Secretary shall promulgate 
     regulations specifying requirements for State programs under 
     this section with respect to determining eligibility for 
     premium subsidy, including requirements with respect to--
       ``(A) application procedures;
       ``(B) information verification procedures;
       ``(C) timeliness of eligibility determinations;
       ``(D) procedures for applicants to appeal adverse 
     decisions; and
       ``(E) any other matters determined appropriate by the 
     Secretary.
       ``(2) Specifications for regulations.--The regulations 
     promulgated by the Secretary under paragraph (1) shall 
     include the following requirements:
       ``(A) Frequency of applications.--A State program shall 
     provide that an individual may file an application for 
     assistance with an agency designated by the State at any 
     time, in person or by mail.
       ``(B) Application form.--A State program shall provide for 
     the use of an application form developed by the Secretary 
     under this section.
       ``(C) Distribution of Applications.--A State program shall 
     distribute applications for assistance through employers and 
     appropriate public agencies.
       ``(D) Requirement to submit revised application.--A State 
     program shall, in accordance with regulations promulgated by 
     the Secretary, require individuals to submit revised 
     applications during a year to reflect changes in estimated 
     family incomes, including changes in employment status of 
     family members, during the year. The State shall revise the 
     amount of any premium subsidy based on such a revised 
     application.
       ``(E) Verification.--A State program shall provide for 
     verification of the information supplied in applications 
     under this section. Such verification may include examining 
     return information disclosed to the State for such purpose 
     under section 6103(l)(15) of the Internal Revenue Code of 
     1986.
       ``(f) Administration of State Programs.--
       ``(1) In general.--The Secretary shall establish standards 
     for States operating programs under this section which ensure 
     that such programs are operated in a uniform manner with 
     respect to application procedures, data processing systems, 
     and such other administrative activities as the Secretary 
     determines to be necessary.
       ``(2) Application forms.--The Secretary shall develop an 
     application form for assistance which shall--
       ``(A) be simple in form and understandable to the average 
     individual;
       ``(B) require the provision of information necessary to 
     make a determination as to whether an individual is a premium 
     subsidy eligible child including a declaration of estimated 
     income by the individual based, at the election of the 
     individual--
       ``(i) on multiplying by a factor of 4 the individual's 
     family income for the 3-month period immediately preceding 
     the month in which the application is made, or
       ``(ii) on estimated income for the entire year for which 
     the application is submitted; and
       ``(C) require attachment of such documentation as deemed 
     necessary by the Secretary in order to ensure eligibility for 
     assistance.
       ``(3) Outreach activities.--A State operating a program 
     under this section shall conduct such outreach activities as 
     the Secretary determines appropriate.
       ``(4) Effectiveness of eligibility for premium subsidies.--
     A determination by a State that an individual is a premium 
     subsidy eligible child shall be effective for the calendar 
     year for which such determination is made unless a revised 
     application submitted under paragraph (2) indicates that an 
     individual is no longer eligible for premium subsidies.
       ``(5) Penalties for material misrepresentations.--
       ``(A) In general.--Any individual who knowingly makes a 
     material misrepresentation of information in an application 
     for assistance under this section shall be liable to the 
     Federal Government for the amount of any premium subsidy 
     received by individual on the basis of a misrepresentation 
     and interest on such amount at a rate specified by the 
     Secretary, and shall, in addition, be liable to the Federal 
     Government for $2,000 or, if greater, 3 times the amount any 
     premium subsidy received by individual on the basis of a 
     misrepresentation.
       ``(B) Collection of penalty amounts.--A State which 
     receives an application for assistance with respect to which 
     a material misrepresentation has been made shall collect the 
     penalty amount required under subparagraph (A) and submit 50 
     percent of such amount to the Secretary in a timely manner.
       ``(g) End-of-year Reconciliation for Premium Subsidy.--
       ``(1) In general.--
       ``(A) Requirement to file statement.--An individual who 
     received premium subsidies under this section from a State 
     for any month in a calendar year shall file with the State an 
     income reconciliation statement to verify the individual's 
     family income for the year. Such a statement shall be filed 
     at such time, and contain such information, as the State may 
     specify in accordance with regulations promulgated by the 
     Secretary.
       ``(B) Notice of requirement.--A State shall provide a 
     written notice of the requirement under subparagraph (A) at 
     the end of the year to an individual who received premium 
     subsidies under this part from such State in any month during 
     the year.
       ``(2) Reconciliation of premium subsidy based on actual 
     income.--
       ``(A) In general.--Based on and using the income reported 
     in the reconciliation statement filed under paragraph (1) 
     with respect to an individual, the State shall compute the 
     amount of premium subsidy that should have been provided 
     under this section with respect to the individual for the 
     year involved.
       ``(B) Overpayment of assistance.--If the total amount of 
     the premium subsidy provided was greater than the amount 
     computed under subparagraph (A), the individual is liable to 
     the State to pay an amount equal to the amount of the excess 
     payment. Any amount collected by a State under this 
     subparagraph shall be submitted to the Secretary in a timely 
     manner.
       ``(C) Underpayment of assistance.--If the total amount of 
     the premium subsidy provided was less than the amount 
     computed under subparagraph (A), the State shall pay to the 
     individual an amount equal to the amount of the deficit.
       ``(D) State option.--A State may, in accordance with 
     regulations promulgated by the Secretary, establish a 
     procedure under which any overpayments or underpayments of 
     premium subsidy determined under subparagraphs (A) and (B) 
     with respect to an individual for a year may be collected or 
     paid, as appropriate, through adjustments to the premium 
     subsidy furnished to such individual in the succeeding year.
       ``(3) Verification.--Each State may use such information as 
     it has available to verify income of individuals with 
     applications filed under this section, including return 
     information disclosed to the state for such purpose under 
     section 6103(l)(15) of the internal revenue code of 1986.
       ``(4) Penalties for failure to file.--In the case of an 
     individual who is required to file a statement under this 
     subsection in a year who fails to file such a statement by 
     such date as the Secretary shall specify in regulations, the 
     entire amount of the premium subsidy provided in such year 
     shall be considered an excess amount under paragraph (2)(A) 
     and such individual shall not be eligible for premium subsidy 
     assistance under this section until such statement is filed. 
     A State, using rules established by the Secretary, shall 
     waive the application of this paragraph if the individual 
     establishes, to the satisfaction of the State under such 
     rules, good cause for the failure to file the statement on a 
     timely basis.
       ``(5) Penalties for false information.--Any individual who 
     provides false information in a statement filed under 
     paragraph (1) is subject to the same penalties as are 
     provided under subsection (f)(5) for a misrepresentation of 
     material fact described in such section.
       ``(h) Special Rules on Federal Financial Participation.--
       ``(1) Premium subsidy.--In applying section 1903(a)(1) with 
     respect to expenditures for premium subsidy (other than 
     administrative expenses) under this section--
       ``(A) such expenditures shall be considered to be 
     expenditures on medical assistance;
       ``(B) in the case of assistance for a premium subsidy 
     eligible child not described in subsection (b)(1)(C), the 
     Federal medical assistance percentage is deemed to be 100 
     percent, and
       ``(C) the total amount of Federal financial participation 
     with respect to any State for quarters in any fiscal year 
     shall not exceed the State allotment under subsection (i)(2) 
     for that year.
       ``(2) Administration expenses.--The amount of expenditures 
     that may be taken into account in computing amounts that are 
     payable to a State under section 1903(a) (other than 
     paragraph (1)) with respect to the administration of the 
     program under this section may not exceed 3 percent of the 
     total expenditures
       ``(i) Total Federal Budget for Program; Allotments to 
     States.--
       ``(1) Total federal budget.--
       ``(A) Fiscal years 1998 through 2004.--Subject to 
     subparagraph (E)(iii), for purposes of this section, the 
     total Federal payments to States under this section may not 
     exceed the following:
       ``(i) For fiscal year 1998, $5.2 billion.
       ``(ii) For fiscal year 1999, $7.0 billion.
       ``(iii) For fiscal year 2000, $10.0 billion.
       ``(iv) For fiscal year 2001, $11.3 billion.
       ``(v) For fiscal year 2002, $15.3 billion.
       ``(vi) For fiscal year 2003, $18.0 billion.
       ``(vii) For fiscal year 2004, $22.4 billion.
       ``(B) Subsequent fiscal years.--For purposes of this 
     section, the total Federal budget for State plans under this 
     part for each fiscal year after fiscal year 2004 is the total 
     Federal budget under this subsection for the preceding fiscal 
     year multiplied by the Secretary's estimate of the percentage 
     increase in private sector health expenditures for the year.
       ``(2) Allotments to states.--
       ``(A) In general.--The amount of a State's allotment under 
     this section for a fiscal year shall be equal to the product 
     of--
       ``(i) the limit on the total amount of Federal payments for 
     the year under paragraph (1)(A); and
       ``(ii) the State's allotment percentage under subparagraph 
     (B).
       ``(B) State allotment percentage.--In subparagraph (A), a 
     State's allotment percentage for a fiscal year is equal to 
     the percentage of all premium subsidy eligible children in 
     the United States who are residents of the State (as 
     estimated by the Secretary prior to the beginning of the 
     fiscal year).
       ``(j) Certified Standard Health Coverage Defined.--
       ``(1) In general.--In this section, health insurance 
     coverage is considered to provide certified standard health 
     coverage if--
       ``(A) benefits under such coverage are provided within at 
     least each of the required categories of benefits described 
     in subparagraph (A) of paragraph (2) and consistent with such 
     paragraph;
       ``(B) the actuarial value of the benefits meets the 
     requirements of paragraph (3),
       ``(C) the benefits comply with the minimum requirements 
     specified in paragraph (4), and
       ``(D) the benefits do not violate the anti-discrimination 
     rules described in paragraph (5).
       ``(2) Required categories of covered benefits.--
       ``(A) In general.--The categories of covered benefits 
     described in this subparagraph are the types of benefits 
     specified in subparagraphs (A), (B), (C), (D), and (F) of 
     paragraph (1), and subparagraphs (E) and (F) of paragraph 
     (2), of section 8904(a) of title 5, United States Code 
     (relating to types of benefits required to be in health 
     insurance offered to Federal employees).
       ``(B) Coverage of off-label use.--An off-label use for a 
     drug that has been found to be safe and effective under 
     section 505 of the Federal Food, Drug, and Cosmetic Act shall 
     be covered if the medical indication for which it is used is 
     listed in one of the following 3 compendia: the American 
     Hospital Formulary Service-Drug Information, the American 
     Medical Association Drug Evaluations, and the United States 
     Pharmacopeia-Drug Information.
       ``(C) No coverage of specific treatment, procedures, or 
     classes required.--Nothing in this subsection may be 
     construed to require the coverage of any specific procedure 
     or treatment or class of service in certified standard health 
     coverage under this Act or through regulation.
       ``(3) Standard actuarial value.--
       ``(A) In general.--The actuarial value of the benefits 
     under standard coverage in a rating area meets the 
     requirements of this paragraph if such value is equivalent to 
     the standard actuarial value described in subparagraph (B) 
     for the area, as adjusted for inflation under subparagraph 
     (D). The actuarial value of benefits under standard coverage 
     shall be determined using the standardized population and set 
     of standardized utilization and cost factors described in 
     subparagraph (C).
       ``(B) Standard actuarial value described.--The standard 
     actuarial value described in this subparagraph for coverage 
     in a geographic area is the actuarial value of benchmark 
     coverage during 1994 in such area. Such actuarial value shall 
     be determined using the standardized population and set of 
     standardized utilization and cost factors described in 
     subparagraph (C).
       ``(C) Adjustments for standardized population, standardized 
     utilization and cost factors, and geographic area.--The 
     adjustment under this subparagraph--
       ``(i) for a standardized population shall be made by not 
     taking into account individuals 65 years of age or older, 
     employees of the United States Postal Service, and retirees; 
     and
       ``(ii) for a geographic area shall be made in a manner that 
     reflects the ratio of the actuarial value of benchmark 
     coverage in such geographic area (as adjusted under clause 
     (i)) to such actuarial value for such benchmark coverage for 
     the United States as a whole, taking into account 
     standardized actuarial utilization and cost factors.
       ``(D) Adjustment for inflation.--
       ``(i) In general.--The adjustment under this paragraph for 
     a year (beginning with 1995) is the FEHBP national rolling 
     increase percentage for the year involved, compounded by such 
     increase for each preceding year after 1994.
       ``(ii) FEHBP national rolling increase percentage.--For 
     purposes of this paragraph, the term ``FEHBP national rolling 
     increase percentage'' means, for a year, the 5-year average 
     of the annual national percentage increase in the premiums 
     for health plans offered under the Federal Employees Health 
     Benefits Program (under chapter 89 of title 5, United States 
     Code) for the period ending with the previous year. Such 
     increase shall be determined by the Secretary in consultation 
     with the Director of Office of Personnel Management based on 
     the best information available.
       ``(4) Minimum requirements.--Benefits offered under 
     standard coverage within any category shall be not less than 
     the narrowest scope and shortest duration of benefits within 
     that category, in an approved health benefits plan under 
     chapter 89 of title 5, United States Code, except that under 
     such coverage--
       ``(A) no cost-sharing may be imposed for preventive 
     services (as specified by the Secretary); and
       ``(B) any cost-sharing imposed for other items and services 
     may only be nominal.
       ``(k) Definitions; Determinations of Income.--For purposes 
     of this part:
       ``(1) Determinations of income.--
       ``(A) Family income.--The term `family income' means, with 
     respect to an individual who--
       ``(i) is not a dependent (as defined in subparagraph (B)) 
     of another individual, the sum of the modified adjusted gross 
     incomes (as defined in subparagraph (D)) for the individual, 
     the individual's spouse, and dependents of the individual; or
       ``(ii) is a dependent of another individual, the sum of the 
     modified adjusted gross incomes for the other individual, the 
     other individual's spouse, and dependents of the other 
     individual.
       ``(B) Dependent.--The term `dependent' shall have the 
     meaning given such term under paragraphs (1) or (2) of 
     section 152(a) of the Internal Revenue Code of 1986.
       ``(C) Special rule for foster children.--For purposes of 
     subparagraph (A), a child who is placed in foster care by a 
     State agency shall not be considered a dependent of another 
     individual.
       ``(D) Modified adjusted gross income.--The term `modified 
     adjusted gross income' means adjusted gross income (as 
     defined in section 62(a) of the Internal Revenue Code of 
     1986)--
       ``(i) determined without regard to sections 135, 162(l), 
     911, 931, and 933 of such Code, and
       ``(ii) increased by--

       ``(I) the amount of interest received or accrued by the 
     individual during the taxable year which is exempt from tax, 
     and
       ``(II) the amount of the social security benefits (as 
     defined in section 86(d) of such Code) received during the 
     taxable year to the extent not included in gross income under 
     section 86 of such Code.

     The determination under the preceding sentence shall be made 
     without regard to any carryover or carryback.
       ``(2) Eligible Individual.--
       ``(A) In general.--The term `eligible individual' means an 
     individual who is residing in the United States and who is--
       ``(i) a citizen or national of the United States; or
       ``(ii) an alien permanently residing in the United States 
     under color of law (as defined in subparagraph (C)).
       ``(B) Exclusion.--The term `eligible individual' shall not 
     include an individual who is an inmate of a public 
     institution (except as a patient of a medical institution).
       ``(C) Alien permanently residing in the united states under 
     color of law.--The term `alien permanently residing in the 
     United States under color of law' means an alien lawfully 
     admitted for permanent residence (within the meaning of 
     section 101(a)(20) of the Immigration and Nationality Act), 
     and includes any of the following:
       ``(i) An alien who is admitted as a refugee under section 
     207 of the Immigration and Nationality Act.
       ``(ii) An alien who is granted asylum under section 208 of 
     such Act.
       ``(iii) An alien whose deportation is withheld under 
     section 243(h) of such Act.
       ``(iv) An alien who is admitted for temporary residence 
     under section 210, 210A, or 245A of such Act.
       ``(v) An alien who has been paroled into the United States 
     under section 212(d)(5) of such Act for an indefinite period 
     or who has been granted extended voluntary departure as a 
     member of a nationality group.
       ``(vi) An alien who is the spouse or unmarried child under 
     21 years of age of a citizen of the United States, or the 
     parent of such a citizen if the citizen is over 21 years of 
     age, and with respect to whom an application for adjustment 
     to lawful permanent residence is pending.
       ``(3) Poverty line.--The term `poverty line' means the 
     income official poverty line (as defined by the Office of 
     Management and Budget, and revised annually in accordance 
     with section 673(2) of the Omnibus Budget Reconciliation Act 
     of 1981) that--
       ``(A) in the case of a family of less than five 
     individuals, is applicable to a family of the size involved; 
     and
       ``(B) in the case of a family of more than four 
     individuals, is applicable to a family of four persons.
       ``(4) Premium.--Any reference to the term `premium' 
     includes a reference to premium equivalence for self-insured 
     plans.''.
                      Subtitle H--Medicaid Reform

 PART 1--STATE FLEXIBILITY IN THE MEDICAID PROGRAM: THE MEDICAL HEALTH 
                           ALLOWANCE PROGRAM

     SEC. 1701. ESTABLISHMENT OF PROGRAM.

       (a) In General.--Title XIX of the Social Security Act (42 
     U.S.C. 1396 et seq.), as amended by section 1601, is further 
     amended--
       (1) by redesignating section 1932 as section 1933; and
       (2) by inserting after section 1931 the following new 
     section:


                   ``state health allowance programs

       ``Sec. 1932. (a) Treatment of Expenditures Under Health 
     Allowance Programs as Medical Assistance Under State Plan.--
       ``(1) In general.--Notwithstanding any other provision of 
     this title, for purposes of determining the amount to be paid 
     to a State under section 1903(a)(1) for quarters in any 
     fiscal year, amounts expended by an eligible State (as 
     described in subsection (b)) during the fiscal year under a 
     State health allowance program (as described in subsection 
     (c)) shall be included in the total amount expended during 
     the fiscal year as medical assistance under the State plan 
     (except as provided under paragraphs (2) and (3) and under 
     subsection (d)(1)(C)).
       ``(2) Federal payment restricted to acute care services.--
     No amounts expended under a State health allowance program 
     that are attributable to medical assistance described in 
     paragraphs (4), (14), (15), (23), or (24) of section 1905(a) 
     shall be included in the total amount expended as medical 
     assistance under the State plan.
       ``(3) Amount of federal payment based upon unused premium 
     subsidy program allotment.--In no case shall this subsection 
     result in the total Federal payments to the State under this 
     title (including payments attributable to this section and 
     section 1923) for quarters in a fiscal year exceeding an 
     amount equal to the difference between--
       ``(A) the State's allotment for the premium subsidy program 
     for children under section 1931(i)(2) for such fiscal year; 
     and
       ``(B) the amount paid to the State for such program for 
     such fiscal year.
       ``(b) Eligibility of State.--A State is eligible for 
     purposes of subsection (a) if the State submits (at such time 
     and in such form as the Secretary may require) an application 
     to the Secretary containing such information and assurances 
     as the Secretary may require, including assurances that the 
     State has adopted and is enforcing standards regarding 
     quality assurance for group health plans participating in the 
     State health allowance program, including standards 
     regarding--
       ``(1) uniform reporting requirements for such plans 
     relating to a minimum set of clinical data, patient 
     satisfaction data, and other information that may be used by 
     individuals to compare the quality of various plans; and
       ``(2) the establishment or designation of an entity of the 
     State government to collect the data described in 
     subparagraph (A) and to regularly report such data to the 
     Secretary.
       ``(c) State Health Allowance Program Described.--
       ``(1) Enrollment of participating individuals in approved 
     group health plans.--In this section, a State health 
     allowance program is a program in effect in all the political 
     subdivisions of the State (except as provided in (c)) under 
     which the State makes payments to a group health plan 
     (approved under paragraph (2)) which provides coverage to the 
     individual as an allowance towards the costs of providing the 
     individual with benefits under the plan.
       ``(2) Approved plans described.--For purposes of paragraph 
     (1), a State shall approve group health plans in accordance 
     with such standards as the State may establish, except that--
       ``(A) the State may not approve a plan for a year unless 
     the plan provides certified standard health coverage 
     described in section 1931(j);
       ``(B) at least one of the plans approved by the State shall 
     be a health maintenance organization or other plan under 
     which payments are otherwise made on a capitated basis for 
     providing medical assistance to individuals enrolled in the 
     State plan under this title; and
       ``(C) in the case of an individual who is entitled to 
     benefits under the State plan under this title as of the 
     first month during which the State health allowance program 
     is in effect, an approved plan may not require the individual 
     to contribute a greater amount of cost-sharing than the 
     individual would have been required to contribute under the 
     State plan (except as may be imposed on an individual 
     described in subparagraph (B) or subparagraph (C) of 
     subsection (d)(1)).
       ``(3) Waiver of statewideness requirement.--At the request 
     of a State, the Secretary may waive for a period not to 
     exceed 3 years (subject to one 3-year extension) the 
     requirement under paragraph (1) that the State health 
     allowance program be in effect in all political subdivisions 
     of the State.
       ``(d) Eligibility of Individuals To Participate in 
     Allowance Program.--
       ``(1) Automatic eligibility of medicaid categorically 
     eligible individuals.--Subject to subsection (e), any 
     individual to whom the State makes medical assistance 
     available under the State plan under this title pursuant to 
     clause (i) of section 1902(a)(10)(A) shall be eligible to 
     participate in the State health allowance program.
       ``(2) Mandatory eligibility of pregnant women with income 
     under 150 percent of the poverty level.--
       ``(A) In general.--Subject to subsection (e) and 
     subparagraph (B), an individual lawfully residing in the 
     State shall be eligible to participate in the program if the 
     individual is a pregnant woman and the income of the 
     individual's family is equal to or less than 150 percent of 
     the official poverty line (as defined by the Office of 
     Management and Budget, and revised annually in accordance 
     with section 673(2) of the Omnibus Budget Reconciliation Act 
     of 1991) applicable to a family of the size involved.
       ``(B) Exception.--If the application of subparagraph (A) 
     would result in--
       ``(i) the total State expenditures for a quarter under this 
     title (including expenditures attributable to this section 
     and section 1923), exceeding
       ``(ii) the total State expenditures that the Secretary 
     estimates would have been made under this title for the 
     quarter if the State did not have a program under this 
     section,
     then there shall be substituted for 150 percent in 
     subparagraph (A) such percent as would result in the amount 
     described in clause (i) equaling the amount described in 
     clause (ii).
       ``(3) Optional eligibility of other individuals with income 
     up to 150 percent of poverty level.--
       ``(A) In general.--Subject to subsection (e), a State 
     operating a State health allowance program under this section 
     may make an individual lawfully residing in the State who is 
     not described in paragraph (2) eligible to participate in the 
     program if the income of the individual's family is not 
     greater than 150 percent of such official poverty line.
       ``(B) Contribution may be required.--In the case of an 
     individual who is participating in the program under this 
     paragraph and whose family income is greater than 100 percent 
     of the official poverty line, the program may require such an 
     individual to contribute all (or a portion) of the premiums 
     for such a group health plan if the amount of such 
     contribution is determined in accordance with a sliding scale 
     based on the individual's family income.
       ``(e) Exclusion and Use of Resource Standard.--
       ``(1) Exclusion of elderly medicare-eligible individuals.--
     No individual shall be eligible to participate in the program 
     if the individual is entitled to benefits under title XVIII 
     pursuant to section 226.
       ``(2) Use of resource standard.--A State may require an 
     individual to meet a resource standard as a condition of 
     eligibility to participate in the program only if the 
     Secretary approves the State's use of such a standard.
       ``(f) Construction.--No provision of any Federal law shall 
     prevent a State from enrolling any employee or other 
     individual in accordance with this section. The previous 
     sentence shall not be construed as permitting a State to 
     require the employer of an individual participating in the 
     program to contribute toward the individual's premium 
     required for such participation.
       ``(g) Evaluations and Reports.--
       ``(1) Evaluations.--Not later than 3 years after the date 
     of the enactment of this section (and at such subsequent 
     intervals as the Secretary considers appropriate), the 
     Secretary shall evaluate the effectiveness of the State 
     health allowance programs for which Federal financial 
     participation is provided under this section, and the impact 
     of such programs on increasing the number of individuals with 
     health insurance coverage in participating States and in 
     controlling the costs of health care in such States.
       ``(2) Reports.--Not later than 3 years after the date of 
     the enactment of this section (and at such subsequent 
     intervals as the Secretary considers appropriate), the 
     Secretary shall submit a report on the program to 
     Congress.''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to calendar quarters beginning on or after 
     January 1, 1996.

     SEC. 1702. OPTIONAL USE OF PROGRAM TO OFFER COVERAGE TO SOME 
                   OR ALL STATE RESIDENTS.

       Section 1932 of the Social Security Act, as inserted by 
     section 1701(a)(2), is amended--
       (1) in subsection (c)(2)(A), in the matter before clause 
     (i), by inserting ``, except as provided in subsection 
     (d)(4)(B)(iii),'' after ``unless'', and
       (2) by adding at the end of subsection (d) the following 
     new paragraphs:
       ``(4) Optional enrollment of other individuals.--
       ``(A) In general.--Subject to subsection (e), a State 
     operating a State health allowance program under this section 
     may make any individual (or class of individuals) who is not 
     described in paragraph (1), (2), or (3) and who is not 
     offered coverage under an employer group health plan eligible 
     to participate in the program.
       ``(B) Special rules.--
       ``(i) Contribution may be required.--In the case of an 
     individual who is participating in the program under this 
     paragraph, the program may require such an individual to 
     contribute all (or a portion) of the premiums and cost-
     sharing of such a group health plan.
       ``(ii) No federal matching payments.--For purposes of 
     payment to States under section 1903(a), no amounts expended 
     by the State under the program during a fiscal year on behalf 
     of an individual enrolled under subparagraph (A) may be 
     included in the total amount expended during the fiscal year 
     as medical assistance under the State plan.
       ``(5) Offering of coverage through other programs.--Nothing 
     in this section shall be construed as preventing a State 
     which--
       ``(A) does not operate a State health allowance program 
     under this section from assuring that individuals in the 
     State who are not offered coverage under an employer group 
     health plan are offered coverage under a health plan, or
       ``(B) does operate such a program from assuring that 
     individuals in the State who are not described in paragraph 
     (1), (2), or (3) and who are not offered coverage under an 
     employer group health plan are offered coverage under a 
     health plan other than through such program.''.

                  PART 2--MEDICAID PROGRAM FLEXIBILITY

     SEC. 1711. MODIFICATION OF FEDERAL REQUIREMENTS TO ALLOW 
                   STATES MORE FLEXIBILITY IN CONTRACTING FOR 
                   COORDINATED CARE SERVICES UNDER MEDICAID.

       (a) In General.--Section 1903(m) of the Social Security Act 
     (42 U.S.C. 1396b(m)) is amended--
       (1) by striking all that precedes paragraph (4) and 
     inserting the following:
       ``(m) Coordinated Care.--
       ``(1) Payment conditioned on compliance.--
       ``(A) General rule.--No payment shall be made under this 
     title to a State with respect to expenditures incurred by it 
     for payment to a risk contracting entity or primary care case 
     management entity (as defined in subparagraph (B)), or with 
     respect to an undertaking described in paragraph (6), unless 
     the State and the entity or undertaking meet the applicable 
     requirements of this subsection. For purposes of determining 
     whether payment may be made under this section, the Secretary 
     may reject a State's determination of compliance with any 
     provision of this subsection.
       ``(B) General definitions.--For purposes of this title--
       ``(i) Risk contracting entity.--The term `risk contracting 
     entity' means an entity that has a contract with the State 
     agency under which the entity--

       ``(I) provides or arranges for the provision of health care 
     items or services to individuals eligible for medical 
     assistance under the State plan under this title, and
       ``(II) is at risk (as defined in clause (iv)) for part or 
     all of the cost of such items or services furnished to such 
     individuals.

       ``(ii) Primary care case management program.--The term 
     `primary care case management program' means a State program 
     under which individuals eligible for medical assistance under 
     the State plan under this title are enrolled with primary 
     care case management entities, and are entitled to receive 
     specified health care items and services covered under such 
     plan only as arranged for and approved by such entities.
       ``(iii) At risk.--An entity is `at risk', for purposes of 
     this subparagraph, if it has a contract with the State agency 
     under which it is paid a fixed amount for providing or 
     arranging for the provision of specified health care items or 
     services to an individual eligible for medical assistance and 
     enrolled with the entity, regardless of whether such items or 
     services are furnished to such individual, and is liable for 
     all or part of the cost of furnishing such items or services, 
     regardless of whether or the extent to which such cost 
     exceeds such fixed payment.
       ``(iv) Primary care case management entity.--The term 
     `primary care case management entity' means a health care 
     provider (whether an individual or an entity) that, under a 
     State primary care case management program meeting the 
     requirements of paragraph (7), has a contract with the State 
     agency under which the entity arranges for or authorizes the 
     provision of health care items and services to individuals 
     eligible for medical assistance under the State plan under 
     this title, but is not at risk (as defined in clause (iv)) 
     for the cost of such items or services provided to such 
     individuals.
       ``(2) General requirements for risk contracting entities.--
       ``(A) Federal or state qualification.--Subject to paragraph 
     (3), a risk contracting entity meets the requirements of this 
     subsection only if it either--
       ``(i) is a qualified health maintenance organization as 
     defined in section 1310(d) of the Public Health Service Act, 
     as determined by the Secretary pursuant to section 1312 of 
     that Act, or
       ``(ii) is an entity which the State agency has determined--

       ``(I) affords, to individuals eligible for medical 
     assistance under the State plan and enrolled with the entity, 
     access to health care items and services furnished by the 
     entity, within the area served by the entity, at least 
     equivalent to the access such individuals would have to such 
     health care items and services in such area if not enrolled 
     with the entity, and
       ``(II) has made adequate provision against the risk of 
     insolvency, and assures that individuals eligible for medical 
     assistance under this title are not held liable for the 
     entity's debts in case of the entity's insolvency.

       ``(B) Internal quality assurance.--Subject to paragraph 
     (3), a risk contracting entity meets the requirements of this 
     subsection only if it has in effect an internal quality 
     assurance program that meets the requirements of paragraph 
     (9).
       ``(C) Contract with state agency.--Subject to paragraph 
     (3), a risk contracting entity meets the requirements of this 
     subsection only if the entity has a written contract with the 
     State agency that provides--
       ``(i) that the entity will comply with all applicable 
     provisions of this subsection;
       ``(ii) for a payment methodology based on experience rating 
     or another actuarially sound methodology approved by the 
     Secretary, which guarantees (as demonstrated by such models 
     or formulas as the Secretary may approve) that payments to 
     the entity under the contract shall not exceed 100 percent of 
     expenditures that would have been made by the State agency in 
     the absence of the contract;
       ``(iii) that the Secretary and the State (or any person or 
     organization designated by either) shall have the right to 
     audit and inspect any books and records of the entity (and of 
     any subcontractor) that pertain--

       ``(I) to the ability of the entity to bear the risk of 
     potential financial losses, or
       ``(II) to services performed or determinations of amounts 
     payable under the contract;

       ``(iv) that in the entity's enrollment, reenrollment, or 
     disenrollment of individuals eligible for medical assistance 
     under this title and eligible to enroll, reenroll, or 
     disenroll with the entity pursuant to the contract, the 
     entity will not discriminate among such individuals on the 
     basis of their health status or requirements for health care 
     services;
       ``(v)(I) that individuals eligible for medical assistance 
     under the State plan who have enrolled with the entity are 
     permitted to terminate such enrollment without cause as of 
     the beginning of the first calendar month following a full 
     calendar month after the request is made for such termination 
     (or at such times as required pursuant to paragraph (8)), and
       ``(II) for notification of each such individual, at the 
     time of the individual's enrollment, of the right to 
     terminate enrollment;
       ``(vi) for reimbursement, either by the entity or by the 
     State agency, for medically necessary services provided--

       ``(I) to an individual eligible for medical assistance 
     under the State plan and enrolled with the entity, and
       ``(II) other than through the entity because the services 
     were immediately required due to an unforeseen illness, 
     injury, or condition;

       ``(vii) for disclosure of information in accordance with 
     paragraph (4);
       ``(viii) in the case of an entity that has entered into a 
     contract with a Federally-qualified health center for the 
     provision of services of such center--

       ``(I) that rates of prepayment from the State are adjusted 
     to reflect fully the rates of payment specified in section 
     1902(a)(13)(E), and
       ``(II) that, at the election of such center, payments made 
     by the entity to such center for services described in 
     section 1905(a)(2)(C) are made at the rates of payment 
     specified in section 1902(a)(13)(E);

       ``(ix) that any physician incentive plan that the entity 
     operates meets the requirements of section 1876(i)(8);
       ``(x) for maintenance of sufficient patient encounter data 
     to identify the physician who delivers services to patients; 
     and
       ``(xi) that the entity complies with the requirement of 
     section 1902(w) with respect to each enrollee.
       ``(3) Exceptions to requirements for risk contracting 
     entities.--The requirements of paragraph (2) (other than 
     subparagraph (C)(viii)) do not apply to an entity that--
       ``(A)(i) received a grant of at least $100,000 in the 
     fiscal year ending June 30, 1976, under section 329(d)(1)(A) 
     or 330(d)(1) of the Public Health Service Act, and for the 
     period beginning July 1, 1976, and ending on the expiration 
     of the period for which payments are to be made under this 
     title, has been the recipient of a grant under either such 
     section; and
       ``(ii) provides to its enrollees, on a prepaid capitation 
     or other risk basis, all of the services described in 
     paragraphs (1), (2), (3), (4)(C), and (5) of section 1905(a) 
     and, to the extent required by section 1902(a)(10)(D) to be 
     provided under the State plan, the services described in 
     section 1905(a)(7);
       ``(B) is a nonprofit primary health care entity located in 
     a rural area (as defined by the Appalachian Regional 
     Commission)--
       ``(i) which received in the fiscal year ending June 30, 
     1976, at least $100,000 (by grant, subgrant, or subcontract) 
     under the Appalachian Regional Development Act of 1965), and
       ``(ii) for the period beginning July 1, 1976, and ending on 
     the expiration of the period for which payments are to be 
     made under this title either has been the recipient of a 
     grant, subgrant, or subcontract under such Act or has 
     provided services under a contract (initially entered into 
     during a year in which the entity was the recipient of such a 
     grant, subgrant, or subcontract) with a State agency under 
     this title on a prepaid capitation or other risk basis; or
       ``(C) which has contracted with the State agency for the 
     provision of services (but not including inpatient hospital 
     services) to persons eligible for medical assistance under 
     this title on a prepaid risk basis prior to 1970.''; and
       (2) by adding after paragraph (6) the following new 
     paragraphs:
       ``(7) General requirements for primary care case 
     management.--A State that elects in its State plan under this 
     title to implement a primary care case management program 
     under this subsection shall include in the plan methods for 
     the selection and monitoring of participating primary care 
     case management entities to ensure that--
       ``(A) the numbers, geographic locations, hours of 
     operation, and other relevant characteristics of such 
     entities are sufficient to afford individuals eligible for 
     medical assistance reasonable access to and choice among such 
     entities;
       ``(B) such entities and their professional personnel are 
     qualified to provide health care case management services, 
     through methods including ongoing monitoring of compliance 
     with applicable requirements for licensing of health care 
     providers, providing training and certification of primary 
     care case managers, and providing information and technical 
     assistance; and
       ``(C) such entities are making timely and appropriate 
     decisions with respect to enrollees' need for health care 
     items and services, and are giving timely approval and 
     referral to providers of adequate quality where such items 
     and services are determined to be medically necessary.
       ``(8) State options with respect to enrollment and 
     disenrollment.--
       ``(A) Mandatory enrollment option.--A State plan may 
     require an individual eligible for medical assistance under 
     the State plan (other than a medicare qualified beneficiary) 
     to enroll with a risk contracting entity or primary care case 
     management entity, without regard to the requirement of 
     section 1902(a)(1) (concerning statewideness), the 
     requirements of section 1902(a)(10)(B) (concerning 
     comparability of benefits), or the requirements of section 
     1902(a)(23) (concerning freedom of choice of provider), if 
     the individual is permitted a choice--
       ``(i) between or among two or more risk contracting 
     entities,
       ``(ii) between a risk contracting entity and a primary care 
     case management entity, or
       ``(iii) between or among two or more primary care case 
     management entities.
       ``(B)(i) Restrictions on disenrollment without cause.--A 
     State plan may restrict the period in which individuals 
     enrolled with a qualifying risk contracting entity (as 
     defined in clause (ii)) may terminate such enrollment without 
     cause to the first month of each period of enrollment (as 
     defined in clause (iii)), but only if the State provides 
     notification, at least once during each such enrollment 
     period, to individuals enrolled with such entity of the right 
     to terminate such enrollment and the restriction on the 
     exercise of this right. Such restriction shall not apply to 
     requests for termination of enrollment for cause.
       ``(ii) For purposes of this subparagraph, the term 
     `qualifying risk contracting entity' means a risk contracting 
     entity that is--
       ``(I) a qualified health maintenance organization as 
     defined in section 1310(d) of the Public Health Service Act;
       ``(II) an eligible organization with a contract under 
     section 1876;
       ``(III) an entity that is receiving (and has received 
     during the previous 2 years) a grant of at least $100,000 
     under section 329(d)(1)(A) or 330(d)(1) of the Public Health 
     Service Act;
       ``(IV) an entity that is receiving (and has received during 
     the previous 2 years) at least $100,000 (by grant, subgrant, 
     or subcontract) under the Appalachian Regional Development 
     Act of 1965;
       ``(V) a program pursuant to an undertaking described in 
     paragraph (6) in which at least 25 percent of the membership 
     enrolled on a prepaid basis are individuals who (I) are not 
     insured for benefits under part B of title XVIII or eligible 
     for medical assistance under this title, and (II) (in the 
     case of such individuals whose prepayments are made in whole 
     or in part by any government entity) had the opportunity at 
     the time of enrollment in the program to elect other coverage 
     of health care costs that would have been paid in whole or in 
     part by any governmental entity; or
       ``(VI) an entity that, on the date of enactment of this 
     provision, had a contract with the State agency under a 
     waiver under section 1115 or 1915(b) and was not subject to a 
     requirement under this subsection to permit disenrollment 
     without cause.
       ``(iii) For purposes of this subparagraph, the term `period 
     of enrollment' means--
       ``(I) a period not to exceed 6 months in duration, or
       ``(II) a period not to exceed one year in duration, in the 
     case of a State that, on the effective date of this 
     subparagraph, had in effect a waiver under section 1115 of 
     requirements under this title under which the State could 
     establish a 1-year minimum period of enrollment with risk 
     contracting entities.
       ``(C) Reenrollment of individuals who regain eligibility.--
     In the case of an individual who--
       ``(i) in a month is eligible for medical assistance under 
     the State plan and enrolled with a risk contracting entity 
     with a contract under this subsection,
       ``(ii) in the next month (or next 2 months) is not eligible 
     for such medical assistance, but
       ``(iii) in the succeeding month is again eligible for such 
     benefits,
     the State plan may enroll the individual for that succeeding 
     month with such entity, if the entity continues to have a 
     contract with the State agency under this subsection.
       ``(9) Requirements for internal quality assurance 
     programs.--The requirements for an internal quality assurance 
     program of a risk contracting entity are that program is 
     written and the program--
       ``(A) specifies a systematic process including ongoing 
     monitoring, corrective action, and other appropriate 
     activities to achieve specified and measurable goals and 
     objectives for quality of care, and including annual 
     evaluation of the program;
       ``(B) identifies the organizational units responsible for 
     performing specific quality assurance functions, and ensure 
     that they are accountable to the governing body of the entity 
     and that they have adequate supervision, staff, and other 
     necessary resources to perform these functions effectively;
       ``(C) if any quality assistance functions are delegated to 
     other entities, ensures that the risk contracting entity 
     remains accountable for all quality assurance functions, and 
     has mechanisms to ensure that all quality assurance 
     activities are carried out;
       ``(D) includes methods to ensure that physicians and other 
     health care professionals under contract with the entity are 
     qualified to perform the services they provide, and that 
     these qualifications are ensured through appropriate 
     credentialing and recredentialing procedures;
       ``(E) includes policies addressing enrollee rights and 
     responsibilities, including grievance mechanisms and 
     mechanisms to inform enrollees about access to and use of 
     services provided by the entity;
       ``(F) provides for continuous monitoring of the delivery of 
     health care, including--
       ``(i) identification of clinical areas to be monitored,
       ``(ii) use of quality indicators and standards for 
     assessing care delivered, including availability and 
     accessibility of care,
       ``(iii) monitoring, through use of epidemiological data or 
     chart review, the care of individuals, as appropriate, and 
     patterns of care overall, and
       ``(iv) implementation of corrective actions; and
       ``(G) meets any other requirements prescribed by the 
     Secretary after consultation with States.
       ``(10) Independent review and quality assurance.--
       ``(A) State grievance procedure.--A State contracting with 
     a risk contracting entity or primary care case management 
     entity under this subsection shall provide for a grievance 
     procedure for enrollees of such entity with at least the 
     following elements:
       ``(i) A toll-free telephone number for enrollee questions 
     and grievances.
       ``(ii) A State-operated enrollee grievance procedure.
       ``(iii) Periodic notification of enrollees of their rights 
     with respect to such entity or program.
       ``(iv) Periodic sample reviews of grievances registered 
     with such entity or program or with the State.
       ``(v) Periodic survey and analysis of enrollee satisfaction 
     with such entity or program.
       ``(B) State monitoring of risk contracting entities' 
     quality assurance programs.--A State contracting with a risk 
     contracting entity under this subsection shall periodically 
     review such entity's quality assurance program to ensure that 
     it meets the requirements of paragraph (9).
       ``(C) External independent review of internal quality 
     assurance.--A State contracting with a risk contracting 
     entity under this subsection shall provide for annual 
     external independent review (by a utilization control and 
     peer review organization with a contract under section 1153, 
     or another organization unaffiliated with the State 
     government approved by the Secretary) of such entity's 
     internal quality assurance activities. Such independent 
     review shall include--
       ``(i) review of the entity's medical care, through sampling 
     of medical records or other appropriate methods, for 
     indications of inappropriate utilization and treatment,
       ``(ii) review of enrollee inpatient and ambulatory data, 
     through sampling of medical records or other appropriate 
     methods, to determine quality trends,
       ``(iii) review of the entity's internal quality assurance 
     activities, and
       ``(iv) notification of the entity and the State, and 
     appropriate followup activities, when the review under this 
     subparagraph indicates inappropriate care or treatment.''.
       (b) State Option To Guarantee Medicaid Eligibility.--
     Section 1902(e)(2) of such Act (42 U.S.C. 1396a(e)(2)) is 
     amended--
       (A) in subparagraph (A), by striking all that precedes 
     ``(but for this paragraph)'' and inserting ``In the case of 
     an individual who is enrolled--
       ``(i) with a risk contracting entity (as defined in section 
     1903(m)(1)(B)(i)) responsible for the provision of inpatient 
     hospital services and any other service described in 
     paragraphs (2), (3), (4), (5), and (7) of section 1905(a),
       ``(ii) with any risk contracting entity (as so defined) in 
     a State that, on the effective date of this provision, had in 
     effect a waiver under section 1115 of requirements under this 
     title under which the State could extend eligibility for 
     medical assistance for enrollees of such entity, or
       ``(iii) with an eligible organization with a contract under 
     section 1876 and who would'', and
       (B) in subparagraph (B), by striking ``organization or'' 
     each place it appears.
       (c) Conforming Amendments.--
       (1) Section 1128(b)(6)(C)(i) of such Act (42 U.S.C. 1320a-
     7(b)(6)(C)(i)) is amended by striking ``health maintenance 
     organization'' and inserting ``risk contracting entity''.
       (2) Section 1902(a)(25)(A) of such Act (42 U.S.C. 
     1396a(a)(25)(A)), as amended by section 13622(a)(1) of the 
     Omnibus Budget Reconciliation Act of 1993, is amended by 
     striking ``health maintenance organizations'' and inserting 
     ``risk contracting entities''.
       (3) Section 1902(a)(25)(H) of such Act (42 U.S.C. 
     1396a(a)(25)(H)), as added by section 13622(b)(3) of the 
     Omnibus Budget Reconciliation Act of 1993, is amended by 
     striking ``health maintenance organization'' and inserting 
     ``risk contracting entity''.
       (4) Section 1902(a)(30)(C) of such Act (42 U.S.C. 
     1396a(a)(30)(C)) is amended by striking all that precedes 
     ``with the results'' and inserting ``provide for independent 
     review and quality assurance of entities with contracts under 
     section 1903(m), in accordance with paragraph (10) of such 
     section,''.
       (5) Section 1902(a)(57) of such Act (42 U.S.C. 
     1396a(a)(57)) is amended by striking ``or health maintenance 
     organization'' and inserting ``or risk contracting entity''.
       (6) Section 1902(a) of such Act (42 U.S.C. 1396a(a)), as 
     amended by sections 13623(a), 13625(a), and 13631(a) of the 
     Omnibus Budget Reconciliation Act of 1993, is amended--
       (A) by striking ``and'' at the end of paragraph (61);
       (B) by striking the period at the end of paragraph (62) and 
     inserting ``; and''; and
       (C) by adding at the end the following new paragraph:
       ``(63) at State option, provide for a primary care case 
     management program in accordance with section 1903(m)(7).''.
       (7) Section 1902(p)(2) of such Act (42 U.S.C. 1396a(p)(2)) 
     is amended by striking ``health maintenance organization'' 
     and inserting ``risk contracting entity''.
       (8) Section 1902(w) of such Act (42 U.S.C. 1396a(w)) is 
     amended--
       (A) in paragraph (1), by striking ``section 1903(m)(1)(A)'' 
     and inserting ``section 1903(m)(2)(C)(xi)'', and
       (B) in paragraph (2)(E), by striking ``health maintenance 
     organization'' and ``the organization'' and inserting ``risk 
     contracting entity'' and ``the entity'', respectively.
       (9) Section 1903(k) of such Act (42 U.S.C. 1396b(k)) is 
     amended by striking ``health maintenance organization'' and 
     inserting ``risk contracting entity''.
       (10) Section 1903(m)(4)(A) of such Act (42 U.S.C. 
     1396b(m)(4)(A)) is amended--
       (A) in the first sentence, by striking ``Each health 
     maintenance organization'' and inserting ``Each risk 
     contracting entity'',
       (B) in the first sentence, by striking ``the organization'' 
     each place it appears and inserting ``the entity'', and
       (C) in the second sentence, by striking ``an organization'' 
     and ``the organization'' and inserting ``a risk contracting 
     entity'' and ``the risk contracting entity'', respectively.
       (11) Section 1903(m)(4)(B) of such Act (42 U.S.C. 
     1396b(m)(4)(B)) is amended by striking ``organization'' and 
     inserting ``risk contracting entity''.
       (12) Section 1903(m)(5) of such Act (42 U.S.C. 1396b(m)(5)) 
     is amended in paragraphs (A)(iii) and (B)(ii) by striking 
     ``organization'' and inserting ``entity''.
       (13) Section 1903(o) (42 U.S.C. 1396b(o)), as amended by 
     section 13622(a)(2) of the Omnibus Budget Reconciliation Act 
     of 1993, is amended by striking ``health maintenance 
     organization'' and inserting ``risk contracting entity''.
       (14) Section 1903(w)(7)(A)(viii) of such Act (42 U.S.C. 
     1396b(w)(7)(A)(viii)) is amended by striking ``health 
     maintenance organizations (and other organizations with 
     contracts under section 1903(m))'' and inserting ``risk 
     contracting entities with contracts under section 1903(m)''.
       (15) Section 1905(a) of such Act (42 U.S.C. 1396d(a)) is 
     amended, in the matter preceding clause (i), by inserting 
     ``(which may be on a prepaid capitation or other risk 
     basis)'' after ``payment'' the first place it appears.
       (16) Section 1908(b) of such Act, as added by section 
     13623(b) of the Omnibus Budget Reconciliation Act of 1993, is 
     amended by striking ``health maintenance organization'' and 
     inserting ``risk contracting entity''.
       (17) Section 1916(b)(2)(D) of such Act (42 U.S.C. 
     1396o(b)(2)(D)) is amended by striking ``health maintenance 
     organization'' and inserting ``risk contracting entity''.
       (18) Section 1925(b)(4)(D)(iv) of such Act (42 U.S.C. 
     1396r-6(b)(4)(D)(iv)) is amended--
       (A) in the heading, by striking ``hmo'' and inserting 
     ``risk contracting entity'',
       (B) by striking ``health maintenance organization'' and 
     inserting ``risk contracting entity'' each place it appears, 
     and
       (C) by striking ``section 1903(m)(1)(A)'' and inserting 
     ``section 1903(m)(1)(B)(i)''.
       (19) Paragraphs (1) and (2) of section 1926(a) of such Act 
     (42 U.S.C. 1396r-7(a)) are each amended by striking ``health 
     maintenance organizations'' and inserting ``risk contracting 
     entities''.
       (20) Section 1927 of such Act (42 U.S.C. 1396s) is 
     amended--
       (A) in subsection (c)(1)(C)(i), as amended by section 
     13602(a)(1) of the Omnibus Budget Reconciliation Act of 1993, 
     by striking ``health maintenance organization'' and inserting 
     ``risk contracting entity'' , and
       (B) in subsection (j)(1), by striking ``*** Health 
     Maintenance Organizations, including those organizations'' 
     and inserting ``risk contracting entities''.
       (d) Effective Date.--The amendments made by this section 
     shall become effective with respect to calendar quarters 
     beginning on or after January 1, 1995.

     SEC. 1712. PERIOD OF CERTAIN WAIVERS.

       (a) In General.--Section 1915(h) of the Social Security Act 
     (42 U.S.C. 1396n(h)) is amended by striking ``No waiver'' and 
     all that follows through ``unless the Secretary'' and 
     inserting ``A waiver under this section (other than under 
     subsection (c), (d), or (e)) shall be for an initial term of 
     3 years and, upon the request of a State, shall be extended 
     for additional 5 year periods unless the Secretary''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to waivers pursuant to applications which are 
     approved, and with respect to continuations of waivers for 
     which requests are made, later than 30 days after the date of 
     the enactment of this Act.

     SEC. 1713. ELIMINATION OF DUPLICATIVE PEDIATRIC IMMUNIZATION 
                   PROGRAM.

       Effective as if included in the enactment of the 13621 of 
     the Omnibus Budget Reconciliation Act of 1993, title XIX of 
     the Social Security Act is amended as follows:
       (1) Section 1902(a) is amended--
       (A) by adding ``and'' at the end of paragraph (60),
       (B) by striking ``; and'' at the end of paragraph (61) and 
     inserting a period, and
       (C) by striking paragraph (62).
       (2) Section 1928 is repealed.
       (3) Section 1903(i) is amended--
       (A) by inserting ``or'' at the end of paragraph (12),
       (B) by striking the semicolon at the end of paragraph (13) 
     and inserting a period, and
       (C) by striking paragraphs (14) and (15).
       (4) Section 1902(a)(32) is amended--
       (A) by adding ``and'' at the end of subparagraph (B),
       (B) by striking ``; and'' at the end of subparagraph (C) 
     and inserting a period, and
       (C) by striking subparagraph (D).
       (5) Section 1902(a) is amended--
       (A) in paragraph (11)(B)--
       (ii) by inserting ``and'' before ``(ii)'', and
       (iii) by striking ``to the individual under section 1903, 
     and (iii) providing for coordination of information and 
     education on pediatric vaccinations and delivery of 
     immunization services'' and inserting ``to him under section 
     1903'';
       (B) in paragraph (11)(C), by striking ``, including the 
     provision of information and education on pediatric 
     vaccinations and the delivery of immunization services,'' and
       (C) in paragraph (43)(A), by striking ``and the need for 
     age-appropriate immunizations against vaccine-preventable 
     diseases''.
       (6) Section 1905(r)(1) is amended--
       (A) in subparagraph (A)(i), by striking ``and, with respect 
     to immunizations under subparagraph (B)(iii), in accordance 
     with the schedule referred to in section 1928(c)(2)(B)(i) for 
     pediatric vaccines''; and
       (B) in subparagraph (B)(iii), by striking ``(according to 
     the schedule referred to in section 1928(c)(2)(B)(i) for 
     pediatric vaccines)''.

           PART 3--MEDICAID DISPROPORTIONATE SHARE ADJUSTMENT

     SEC. 1721. 25 PERCENT REDUCTION IN AMOUNT OF PAYMENT 
                   ADJUSTMENTS FOR DISPROPORTIONATE SHARE 
                   HOSPITALS.

       (a) In General.--Section 1923 of the Social Security Act 
     (42 U.S.C. 1396r-4) is amended by adding at the end the 
     following new subsection:
       ``(h) Reduction in Federal Financial Participation for 
     Disproportionate Share Adjustments.--Notwithstanding any 
     other provision of this section, the amount of payments under 
     section 1903(a) with respect to any payment adjustment made 
     under this section for hospitals in a State for quarters in a 
     fiscal year shall not exceed 75 percent of the amount 
     otherwise determined under subsection (f).''.
       (b) Conforming Amendment.--Section 1923(c) of such Act (42 
     U.S.C. 1396r-4(c)) is amended in the matter preceding 
     paragraph (1) by striking ``(f) and (g)'' and inserting 
     ``(f), (g), and (h)''.
       (c) Effective Date.--The amendments made by subsections (a) 
     and (b) shall apply to quarters in fiscal years beginning on 
     or after October 1, 1996.
Subtitle I--Remedies and Enforcement With Respect to Group Health Plans

     SEC. 1801. CLAIMS PROCEDURE FOR GROUP HEALTH PLANS.

       (a) In General.--Section 503 of the Employee Retirement 
     Income Security Act of 1974 (29 U.S.C. 1133) is amended--
       (1) by inserting ``(a) In General.--'' after ``Sec. 503.''; 
     and
       (2) by adding at the end the following new subsection:
       ``(b) Special Rules for Group Health Plans.--
       ``(1) In general.--In addition to meeting the requirements 
     of subsection (a), every group health plan shall afford a 
     reasonable opportunity to any participant or beneficiary, 
     whose request for a preauthorization, an emergency 
     preauthorization, a utilization review determination, or an 
     emergency utilization review determination has been denied, 
     for a full and fair review by the appropriate fiduciary of 
     the decision denying the request
       ``(2) Time limits for deciding claims.--
       ``(A) Initial decisions.--A group health plan shall issue 
     an initial approval or denial of any claim for medical, 
     surgical, or hospital benefits not later than 30 days after 
     its filing completion date. Failure to approve or deny such a 
     claim within such 30-day period shall be treated as a denial 
     of the claim.
       ``(B) Reviews of initial decisions.--Every review by a 
     fiduciary required under paragraph (1) of an initial denial 
     under subparagraph (A) shall be completed not later than 30 
     days after the review filing date. Failure to issue a 
     decision affirming, reversing, or modifying the initial 
     denial shall be treated as a final decision denying the 
     claim.
       ``(3) Time limit for deciding requests for 
     preauthorization.--
       ``(A) General rule.--Except as provided in subparagraph 
     (B)--
       ``(i) Initial decisions.--If a request for preauthorization 
     is required under the terms of a group health plan, the plan 
     shall approve or deny any such request not later than 30 days 
     after its filing completion date. Failure to approve or deny 
     such a request within such 30-day period shall be treated as 
     a denial of the request.
       ``(ii) Reviews of initial decisions.--Every review by a 
     fiduciary required under paragraph (1) of an initial denial 
     under clause (i) shall be completed not later than 30 days 
     after the review filing date. Failure to issue a decision 
     affirming, reversing, or modifying the initial denial within 
     such 30-day period shall be treated as a final decision 
     denying the request.
       ``(B) Requests for emergency preauthorization.--
       ``(i) Initial decisions.--In any case in which a request 
     for preauthorization required under the terms of a group 
     health plan is a request for emergency preauthorization, the 
     plan shall approve or deny any such request not later than 10 
     days after its filing completion date (24 hours after such 
     date in cases involving emergency medical care). Failure to 
     approve or deny such a request within such 10-day period (or 
     24-hour period) shall be treated as a denial of the request.
       ``(ii) Reviews of initial decisions.--Every review by a 
     fiduciary required under paragraph (1) of an initial denial 
     under clause (i) shall be completed not later than 10 days 
     after the review filing date (24 hours after such date in 
     cases involving emergency medical care). Failure to issue a 
     decision affirming, reversing, or modifying the initial 
     denial within such 10-day period (or 24-hour period) shall be 
     treated as a final decision denying the request.
       ``(4) Time limit for deciding requests for utilization 
     review determinations.--
       ``(A) General rule.--Except as provided in subparagraph 
     (B)--
       ``(i) Initial decisions.--If a request for a utilization 
     review determination is required under the terms of a group 
     health plan, the plan shall approve or deny any such request 
     not later than 30 days after its filing completion date. 
     Failure to approve or deny such a request within such 30-day 
     period shall be treated as a denial of the request.
       ``(ii) Reviews of initial decisions.--Every review by a 
     fiduciary required under paragraph (1) of an initial denial 
     under clause (i) shall be completed not later than 30 days 
     after the review filing date. Failure to issue a decision 
     affirming, reversing, or modifying the initial denial within 
     such 30-day period shall be treated as a final decision 
     denying the request.
       ``(B) Requests for emergency utilization review 
     determinations.--
       ``(i) Initial decisions.--In any case in which a request 
     for a utilization review determination required under the 
     terms of a group health plan is a request for an emergency 
     utilization review determination, the plan shall approve or 
     deny any such request not later than 10 days after its filing 
     completion date (24 hours after such date in cases involving 
     emergency medical care). Failure to approve or deny such a 
     request within such 10-day period (or 24-hour period) shall 
     be treated as a denial of the request.
       ``(ii) Reviews of initial decisions.--Every review by a 
     fiduciary required under paragraph (1) of an initial denial 
     under clause (i) shall be completed not later than 10 days 
     after the review filing date (24 hours after such date in 
     cases involving emergency medical care). Failure to issue a 
     decision affirming, reversing, or modifying the initial 
     denial within such 10-day period (or 24-hour period) shall be 
     treated as a final decision denying the request.
       ``(5) Definitions.--For purposes of this subsection--
       ``(A) Claim for medical, surgical, or hospital benefits.--
     The term `claim for medical, surgical, or hospital benefits' 
     means a request for payment by a group health plan of such 
     benefits made by or on behalf of a participant or beneficiary 
     after the expense for medical, surgical, or hospital care has 
     been incurred.
       ``(B) Utilization review determination.--The term 
     `utilization review determination' means a determination 
     under a group health plan solely that proposed medical, 
     surgical, or hospital care is medically necessary (as defined 
     in section 1131(7) of the Health Security Act). Unless 
     otherwise expressly provided under the terms of the plan, any 
     such determination shall not by itself constitute a guarantee 
     that benefits under the plan will be provided.
       ``(C) Preauthorization.--The term `preauthorization' means 
     a determination under a group health plan that proposed 
     medical, surgical, or hospital care meets the plan's terms 
     and conditions of coverage. Such a determination shall 
     constitute a guarantee that benefits under the plan will be 
     provided.
       ``(D) Request for preauthorization.--The term `request for 
     preauthorization' means a request for preauthorization by a 
     group health plan of medical, surgical, or hospital benefits 
     made by or on behalf of a participant or beneficiary before 
     the expense for such care has been incurred.
       ``(E) Request for emergency preauthorization.--The term 
     `request for emergency preauthorization' means a request for 
     preauthorization by a group health plan in any case in which 
     the medical, surgical, or hospital benefits for which the 
     expense is to be incurred constitutes urgent medical care or 
     emergency medical care.
       ``(F) Request for utilization review determination.--The 
     term `request for a utilization review determination' means a 
     request by or on behalf of a participant or beneficiary, made 
     before an expense for medical, hospital, or surgical care has 
     been incurred, for a utilization review determination by a 
     plan.
       ``(G) Request for emergency utilization review 
     determination.--The term `request for an emergency 
     utilization review determination' means a request for a 
     utilization review determination in any case in which the 
     medical, hospital, or surgical care to be incurred 
     constitutes urgent medical care or emergency medical care.
       ``(H) Urgent medical care.--The term `urgent medical care' 
     means medical, surgical, or hospital care in any case in 
     which a physician with appropriate expertise has certified in 
     writing that failure to provide the participant or 
     beneficiary with such care within 45 days will result in 
     either--
       ``(i) the death of the participant or beneficiary within 
     120 days, or
       ``(ii) the immediate, serious, and irreversible 
     deterioration of the health of the participant or beneficiary 
     within 120 days which will significantly increase the 
     reasonable likelihood of death of the participant or 
     beneficiary.
       ``(I) Emergency medical care.--The term `emergency medical 
     care' means medical, surgical, or hospital care in any case 
     in which a physician with appropriate expertise has certified 
     in writing--
       ``(i) that failure to immediately provide the care to the 
     participant or beneficiary could reasonably be expected to 
     result in--

       ``(I) placing the health of such participant or beneficiary 
     (or, with respect to such a participant or beneficiary who is 
     a pregnant woman, the health of the woman or her unborn 
     child) in serious jeopardy,
       ``(II) serious impairment to bodily functions, or
       ``(III) serious dysfunction of any bodily organ or part,

     or
       ``(ii) that immediate provision of the care is necessary 
     because the participant or beneficiary has made or is at 
     serious risk of making an attempt to harm himself or herself 
     or another individual.
       ``(J) Filing completion date.--The term `filing completion 
     date' means, in connection with a group health plan, the date 
     as of which the plan is in receipt of all information 
     reasonably required to make an initial decision to approve or 
     deny a claim for medical, surgical, or hospital benefits, a 
     request for preauthorization, a request for emergency 
     preauthorization, a request for a utilization review 
     determination or a request for an emergency utilization 
     review determination.
       ``(K) Review filing date.--The term `review filing date' 
     means, in connection with a group health plan, the date as of 
     which the appropriate fiduciary is in receipt of all 
     information reasonably required to make a decision upon a 
     full and fair review of the denial, in whole or in part, of a 
     claim for medical, surgical, or hospital benefits, a request 
     for preauthorization, a request for emergency 
     preauthorization, a request for a utilization review 
     determination or a request for an emergency utilization 
     review determination.
       ``(L) Appropriate fiduciary.--The term `appropriate 
     fiduciary' means with respect to any determination under a 
     group health plan a person designated by the plan to make 
     such determination. One or more appropriate fiduciaries shall 
     be designated under each group health plan for making 
     determinations under the plan.''.
       (b) Definition of Group Health Plan.--
       (1) In general.--Section 3 of such Act (29 U.S.C. 1002) is 
     amended by adding at the end the following new paragraph:
       ``(42) The term `group health plan' means an employee 
     welfare benefit plan providing medical care (as defined in 
     section 213(d) of the Internal Revenue Code of 1986) to 
     participants or beneficiaries directly or through insurance, 
     reimbursement, or otherwise.''.
       (2) Conforming amendment.--Section 607 of such Act (29 
     U.S.C. 1167) is amended by striking paragraph (1).

     SEC. 1802. MEDIATION OF GROUP HEALTH PLAN CLAIMS.

       (a) In General.--Part 5 of subtitle B of title I of the 
     Employee Retirement Income Security Act of 1974 is amended--
       (1) by inserting below the heading for part 5 the 
     following:

                       ``Subpart A--In General'';

     and
       (2) by adding at the end the following new subpart:

           ``Subpart B--Mediation of Group Health Plan Claims

     ``SEC. 521. ELIGIBILITY FOR SUBMISSION TO MEDIATION.

       ``(a) In General.--The Secretary shall establish a 
     mediation program under this subpart (hereinafter in this 
     subpart referred to as the `mediation program') for the 
     purpose of facilitating mediation of disputes meeting the 
     requirements specified in subsection (b). At the time notice 
     is provided to any participant or beneficiary of a group 
     health plan's denial of any claim for benefits pursuant to 
     section 503, the plan shall provide reasonable notice in 
     writing to the participant or beneficiary whose claim for 
     benefits under the plan has been denied of the availability 
     of mediation under this subpart at the election of either the 
     claimant or the plan.
       ``(b) Dispute Criteria.--A dispute may be submitted for 
     mediation under the mediation program only if the following 
     requirements are met with respect to such dispute:
       ``(1) Parties.--The dispute consists of an assertion by a 
     participant, a beneficiary, or the duly authorized 
     representative of a participant or beneficiary (or, in the 
     case of an assignment, the assignee) of one or more claims 
     under a group health plan, and a denial of such claims, or a 
     denial of appropriate reimbursement based on such claims, by 
     such plan or an appropriate fiduciary.
       ``(2) Nature of claim.--The claim consists of a claim for 
     benefits for medical, surgical, or hospital expenses under a 
     group health plan which consist of benefits described in 
     section 3(1).
       ``(3) Submission After Exhaustion of Plan Remedies.--The 
     claimant has received a final determination regarding the 
     claim under the plans' claims procedure under section 503, or 
     has otherwise exhausted all remedies under the plan provided 
     pursuant to section 503.
       ``(4) Appropriate fiduciary.--For purposes of this subpart, 
     the term `appropriate fiduciary' has the meaning provided in 
     section 503(b)(5)(K).

     ``SEC. 522. FACILITATORS.

       ``(a) Roster.--The Secretary shall maintain a list of 
     individuals with appropriate expertise to serve as 
     facilitators in proceedings under the mediation program.
       ``(b) Criteria.--In identifying individuals to serve as 
     facilitators, the Secretary shall consider the following:
       ``(1) the individual's experience in dispute resolution;
       ``(2) the individual's ability to act impartially;
       ``(3) the individual's ability to perform evaluations 
     quickly and to present them in nontechnical terms; and
       ``(4) the individual's experience in employee medical, 
     hospital, and surgical benefits.
       ``(c) Appointment of Facilitator.--Within 15 days after 
     either party files with the Secretary an election of 
     mediation with respect to a dispute, the Secretary shall 
     propose a facilitator, selected under a random selection 
     procedure prescribed in regulations, and notify the parties 
     of such selection. Within 10 days after receipt of the 
     notification of the selection of a facilitator, either party 
     may reject the proposed facilitator. If neither party objects 
     to the Secretary's proposed facilitator within such 10-day 
     period, the appointment shall become final. If either party 
     objects to the Secretary's proposed facilitator, the 
     procedure set forth in the preceding provisions of this 
     subsection shall be repeated. Each party is limited to 1 
     objection to the Secretary's proposed facilitator for each 
     mediation.

     ``SEC. 523. ROLE OF ATTORNEYS.

       ``Parties may represent themselves or be represented by 
     attorneys throughout the mediation process.

     ``SEC. 524. INITIATION OF MEDIATION.

       ``(a) Claimant Initiation.--A claimant may initiate 
     mediation of a dispute under this subpart only if no action 
     has been commenced by the claimant under section 502 with 
     respect to any claim involved. To initiate mediation, a 
     claimant shall file an election for mediation with the 
     Secretary (and shall file a copy of the election with the 
     plan or the appropriate fiduciary) within 30 days after a 
     final determination regarding the claim pursuant to section 
     503.
       ``(b) Plan Initiation.--A participant or beneficiary may 
     not commence an action under section 502 with respect to any 
     claim until the participant or beneficiary has provided to 
     the plan or the appropriate fiduciary 10 days advance notice 
     of the filing of such action. Within the earlier of (1) 25 
     days after receipt of such a notice with respect to any claim 
     or (2) the date preceding the date on which such claim is 
     filed in court, the plan or the appropriate fiduciary may 
     elect mediation of a dispute under this subpart involving 
     such claim by filing an election for mediation with the 
     Secretary (and a copy of the election with the claimant). 
     Upon a timely election of mediation by the plan or the 
     appropriate fiduciary, the claimant's right to pursue the 
     claim under section 502 shall be suspended until the earlier 
     of 75 days after the date of the filing of the election of 
     mediation or the termination of the mediation proceedings.
       ``(c) Election for Mediation.--An election by any party for 
     mediation under this subpart shall be in such form and manner 
     as the Secretary shall prescribe by regulation.
       ``(d) Participation.--The claimant and the plan shall 
     participate in the mediation. Each party shall provide the 
     facilitator a written summary of its position with respect to 
     the dispute accompanied by supporting documentation.
       ``(e) Filing Fee.--The party initiating mediation under 
     this section shall include with any election for mediation 
     under this subpart a reasonable nonrefundable filing fee 
     payable to the Secretary. The filing fee shall be determined 
     pursuant to regulations prescribed by the Secretary.
       ``(f) Tolling of Statutes of Limitations.--The applicable 
     statute of limitations with respect to any claim involved in 
     a dispute subject to mediation proceedings under this subpart 
     shall be tolled for the period commencing with the 10-day 
     notice period required under subsection (b) and ending with 
     the termination of the mediation proceedings with respect to 
     such dispute. In no event shall the applicable statute of 
     limitations be tolled beyond the 60-day-time limit for 
     completion of mediation provided under section 526.

     ``SEC. 525. MEDIATION PROCEDURE.

       ``(a) In General.--Mediation proceedings under this subpart 
     shall be conducted, at locations convenient to complainants, 
     by facilitators recruited and assigned by the Secretary under 
     section 522.
       ``(b) Duties of Facilitator.--The Secretary shall prescribe 
     by regulation the duties and role of the facilitator during 
     the mediation process. Such regulations may require the 
     facilitator to identify parties, establish a schedule, 
     request position papers from the parties, and evaluate 
     positions of the parties. Such regulations shall provide that 
     the mediation will be informal, convenient, inexpensive, and 
     expeditious for all parties.
       ``(c) Neutrality of Facilitator.--The facilitator shall 
     maintain a neutral stance between the parties.

     ``SEC. 526. MEDIATION TIME LIMIT.

       ``Any mediation proceedings commenced under this subpart 
     shall be completed within 60 days from the final appointment 
     of a facilitator pursuant to section 522(c).

     ``SEC. 527. COST OF MEDIATION.

       ``All reasonable costs of the mediation process under this 
     subpart with respect to any dispute, including the cost of 
     the facilitator, shall be divided equally among the parties. 
     Facilitators shall be compensated at a rate established by 
     the Secretary by regulation. The Secretary shall prescribe 
     regulations specifying reasonable mediation costs and 
     alternative means of allocating the costs in cases of 
     hardship on the part of the claimant.

     ``SEC. 528. LEGAL EFFECT OF PARTICIPATION IN MEDIATION 
                   PROGRAM.

       ``(a) Nonbinding Mediation.--The results of any mediation 
     under this subpart shall be treated as advisory in nature and 
     nonbinding. Except as provided in subsection (b), the rights 
     of the parties shall not be affected by participation in the 
     mediation program.
       ``(b) Resolution Through Settlement Agreement.--If a 
     dispute is settled through participation in the mediation 
     program, the facilitator shall, upon the request of either 
     party, assist the parties in drawing up a settlement 
     agreement between the parties.

     ``SEC. 529. CONFIDENTIALITY AND ADMISSIBILITY.

       ``(a) In General.--All documents and communications made 
     during or generated in connection with the mediation program, 
     as well as any settlement offers or agreements made or 
     entered into under such program--
       ``(1) shall be privileged and confidential, and
       ``(2) shall not be admissible as evidence in any Federal or 
     State judicial proceeding unless all parties to the mediation 
     consent in writing.
       ``(b) Execution of Privilege.--Any individual or entity 
     involved in the mediation (including any party or facilitator 
     or other individual who acts on behalf of a party or who 
     provides information or an opinion in connection with the 
     mediation) receiving a subpoena or other lawful process 
     seeking disclosure of any information or documents rendered 
     privileged and confidential under subsection (a) shall assert 
     the privilege provided under subsection (a) and promptly 
     notify all parties to the mediation proceedings of the 
     request for disclosure. The privilege provided for in this 
     section shall be in addition to any attorney-client privilege 
     or other privilege which may be asserted by a party and 
     nothing in this section shall constitute a waiver of such 
     attorney-client privilege or other privilege.''.
       (b) Clerical Amendments.--The table of contents in section 
     1 of such Act is amended--
       (1) by inserting after the item relating to the heading for 
     part 5 of subtitle B of title I the following new item:

                   ``Subpart A--General Provisions'';

     and
       (2) by inserting after the item relating to section 514 the 
     following new items:

           ``Subpart B--Mediation of Group Health Plan Claims

``Sec. 521. Eligibility for submission to mediation.
``Sec. 522. Facilitators.
``Sec. 523. Role of attorneys.
``Sec. 524. Initiation of mediation.
``Sec. 525. Mediation procedure.
``Sec. 526. Mediation time limit.
``Sec. 527. Cost of mediation.
``Sec. 528. Legal effect of participation in mediation program.
``Sec. 529. Confidentiality and admissibility.''.

     SEC. 1803. AVAILABLE COURT REMEDIES.

       (a) In General.--Section 502(c) of the Employee Retirement 
     Income Security Act of 1974 (29 U.S.C. 1132) is amended by 
     adding at the end the following new paragraphs:
       ``(5) In any action commenced under subsection (a) by a 
     participant or beneficiary with respect to a group health 
     plan in which the plaintiff alleges that a person, in the 
     capacity of a fiduciary and in violation of the terms of the 
     plan or this title, has taken an action resulting in a 
     failure to provide an item or service, or payment therefor, 
     or has failed to take an action for which such person is 
     responsible under the plan and which is necessary under the 
     plan for provision of such item or service, or payment 
     therefor, upon finding in favor of the plaintiff, the court 
     shall cause to be served on the defendant an order requiring 
     the defendant--
       ``(i) to cease and desist from the alleged action or 
     failure to act,
       ``(ii) to provide the item or service, or payment therefor, 
     and to otherwise comply with the terms of the plan and the 
     applicable requirements of this title,
       ``(iii) to pay to the plaintiff prejudgment interest on the 
     actual costs incurred in obtaining any item or service, or 
     payment therefor, at issue in the complaint, and
       ``(iv) to pay to the plaintiff a reasonable attorney's fee, 
     reasonable expert witness fees, and other reasonable costs 
     relating to the action on the charges on which the plaintiff 
     prevails.
     The remedies provided under this paragraph shall be in 
     addition to remedies otherwise provided under this section.
       ``(6)(A) The Secretary may assess a civil penalty against 
     the plan administrator of, or the appropriate fiduciary (as 
     defined in section 503(b)(5)(K)) of, one or more group health 
     plans for any pattern or practice thereof of repeated 
     failures to provide benefits under the terms of the plan or 
     plans without any reasonable basis or repeated violations 
     thereby of the requirements of section 503 with respect to 
     such plan or plans. Such penalty shall be payable only upon 
     proof by clear and convincing evidence of such pattern or 
     practice.
       ``(B) Such penalty shall be in an amount not to exceed the 
     lesser of--
       ``(i) 20 percent of the aggregate value of claims shown by 
     the Secretary to have been denied, or unlawfully delayed in 
     violation of section 503, under such pattern or practice, or
       ``(ii) $1,000,000.
       ``(C) The plan administrator or the appropriate fiduciary 
     of any group health plan or plans who has engaged in any such 
     pattern or practice with respect to such plans, upon the 
     petition of the Secretary, may be removed by the court from 
     that position, and from any other involvement, with respect 
     to such plan or plans, for a period of not less than 7 years.
       ``(D) For purposes of this paragraph, the phrase `without 
     any reasonable basis' means, in connection with any denial of 
     claims for benefits under a group health plan, that such 
     denial does not have any reasonable basis, support, or 
     justification under--
       ``(i) the facts regarding such claim which were reasonably 
     available to the plan administrator or the appropriate 
     fiduciary at the time the claim was denied, and
       ``(ii) the terms of the plan.
       (b) Conforming Amendment.--Section 502(a)(6) of such Act 
     (29 U.S.C. 1132(a)(6)) is amended by inserting ``or (c)(6)'' 
     after ``(c)(2)''.

     SEC. 1804. EFFECTIVE DATE.

       The amendments made by this subtitle shall take effect 
     January 1, 1995, except that the Secretary of Labor may issue 
     regulations before such date under such amendments. The 
     Secretary shall issue all regulations necessary to carry out 
     the amendments made by this subtitle before the effective 
     date thereof.
Subtitle I--Remedies and Enforcement With Respect to Group Health Plans

     SEC. 1801. CLAIMS PROCEDURE FOR GROUP HEALTH PLANS.

       (a) In General.--Section 503 of the Employee Retirement 
     Income Security Act of 1974 (29 U.S.C. 1133) is amended--
       (1) by inserting ``(a) In General.--'' after ``Sec. 503.''; 
     and
       (2) by adding at the end the following new subsection:
       ``(b) Special Rules for Group Health Plans.--
       ``(1) In general.--In addition to meeting the requirements 
     of subsection (a), every group health plan shall afford a 
     reasonable opportunity to any participant or beneficiary, 
     whose request for a preauthorization, an emergency 
     preauthorization, a utilization review determination, or an 
     emergency utilization review determination has been denied, 
     for a full and fair review by the appropriate fiduciary of 
     the decision denying the request
       ``(2) Time limits for deciding claims.--
       ``(A) Initial decisions.--A group health plan shall issue 
     an initial approval or denial of any claim for medical, 
     surgical, or hospital benefits not later than 30 days after 
     its filing completion date. Failure to approve or deny such a 
     claim within such 30-day period shall be treated as a denial 
     of the claim.
       ``(B) Reviews of initial decisions.--Every review by a 
     fiduciary required under paragraph (1) of an initial denial 
     under subparagraph (A) shall be completed not later than 30 
     days after the review filing date. Failure to issue a 
     decision affirming, reversing, or modifying the initial 
     denial shall be treated as a final decision denying the 
     claim.
       ``(3) Time limit for deciding requests for 
     preauthorization.--
       ``(A) General rule.--Except as provided in subparagraph 
     (B)--
       ``(i) Initial decisions.--If a request for preauthorization 
     is required under the terms of a group health plan, the plan 
     shall approve or deny any such request not later than 30 days 
     after its filing completion date. Failure to approve or deny 
     such a request within such 30-day period shall be treated as 
     a denial of the request.
       ``(ii) Reviews of initial decisions.--Every review by a 
     fiduciary required under paragraph (1) of an initial denial 
     under clause (i) shall be completed not later than 30 days 
     after the review filing date. Failure to issue a decision 
     affirming, reversing, or modifying the initial denial within 
     such 30-day period shall be treated as a final decision 
     denying the request.
       ``(B) Requests for emergency preauthorization.--
       ``(i) Initial decisions.--In any case in which a request 
     for preauthorization required under the terms of a group 
     health plan is a request for emergency preauthorization, the 
     plan shall approve or deny any such request not later than 10 
     days after its filing completion date (24 hours after such 
     date in cases involving emergency medical care). Failure to 
     approve or deny such a request within such 10-day period (or 
     24-hour period) shall be treated as a denial of the request.
       ``(ii) Reviews of initial decisions.--Every review by a 
     fiduciary required under paragraph (1) of an initial denial 
     under clause (i) shall be completed not later than 10 days 
     after the review filing date (24 hours after such date in 
     cases involving emergency medical care). Failure to issue a 
     decision affirming, reversing, or modifying the initial 
     denial within such 10-day period (or 24-hour period) shall be 
     treated as a final decision denying the request.
       ``(4) Time limit for deciding requests for utilization 
     review determinations.--
       ``(A) General rule.--Except as provided in subparagraph 
     (B)--
       ``(i) Initial decisions.--If a request for a utilization 
     review determination is required under the terms of a group 
     health plan, the plan shall approve or deny any such request 
     not later than 30 days after its filing completion date. 
     Failure to approve or deny such a request within such 30-day 
     period shall be treated as a denial of the request.
       ``(ii) Reviews of initial decisions.--Every review by a 
     fiduciary required under paragraph (1) of an initial denial 
     under clause (i) shall be completed not later than 30 days 
     after the review filing date. Failure to issue a decision 
     affirming, reversing, or modifying the initial denial within 
     such 30-day period shall be treated as a final decision 
     denying the request.
       ``(B) Requests for emergency utilization review 
     determinations.--
       ``(i) Initial decisions.--In any case in which a request 
     for a utilization review determination required under the 
     terms of a group health plan is a request for an emergency 
     utilization review determination, the plan shall approve or 
     deny any such request not later than 10 days after its filing 
     completion date (24 hours after such date in cases involving 
     emergency medical care). Failure to approve or deny such a 
     request within such 10-day period (or 24-hour period) shall 
     be treated as a denial of the request.
       ``(ii) Reviews of initial decisions.--Every review by a 
     fiduciary required under paragraph (1) of an initial denial 
     under clause (i) shall be completed not later than 10 days 
     after the review filing date (24 hours after such date in 
     cases involving emergency medical care). Failure to issue a 
     decision affirming, reversing, or modifying the initial 
     denial within such 10-day period (or 24-hour period) shall be 
     treated as a final decision denying the request.
       ``(5) Definitions.--For purposes of this subsection--
       ``(A) Claim for medical, surgical, or hospital benefits.--
     The term `claim for medical, surgical, or hospital benefits' 
     means a request for payment by a group health plan of such 
     benefits made by or on behalf of a participant or beneficiary 
     after the expense for medical, surgical, or hospital care has 
     been incurred.
       ``(B) Utilization review determination.--The term 
     `utilization review determination' means a determination 
     under a group health plan solely that proposed medical, 
     surgical, or hospital care is medically necessary (as defined 
     in section 1131(7) of the Health Security Act). Unless 
     otherwise expressly provided under the terms of the plan, any 
     such determination shall not by itself constitute a guarantee 
     that benefits under the plan will be provided.
       ``(C) preauthorization.--The term `preauthorization' means 
     a determination under a group health plan that proposed 
     medical, surgical, or hospital care meets the plan's terms 
     and conditions of coverage. Such a determination shall 
     constitute a guarantee that benefits under the plan will be 
     provided.
       ``(D) Request for preauthorization.--The term `request for 
     preauthorization' means a request for preauthorization by a 
     group health plan of medical, surgical, or hospital benefits 
     made by or on behalf of a participant or beneficiary before 
     the expense for such care has been incurred.
       ``(E) Request for emergency preauthorization.--The term 
     `request for emergency preauthorization' means a request for 
     preauthorization.0 by a group health plan in any case in 
     which the medical, surgical, or hospital benefits for which 
     the expense is to be incurred constitutes urgent medical care 
     or emergency medical care.
       ``(F) Request for utilization review determination.--The 
     term `request for a utilization review determination' means a 
     request by or on behalf of a participant or beneficiary, made 
     before an expense for medical, hospital, or surgical care has 
     been incurred, for a utilization review determination by a 
     plan.
       ``(G) Request for emergency utilization review 
     determination.--The term `request for an emergency 
     utilization review determination' means a request for a 
     utilization review determination in any case in which the 
     medical, hospital, or surgical care to be incurred 
     constitutes urgent medical care or emergency medical care.
       ``(H) Urgent medical care.--The term `urgent medical care' 
     means medical, surgical, or hospital care in any case in 
     which a physician with appropriate expertise has certified in 
     writing that failure to provide the participant or 
     beneficiary with such care within 45 days will result in 
     either--
       ``(i) the death of the participant or beneficiary within 
     120 days, or
       ``(ii) the immediate, serious, and irreversible 
     deterioration of the health of the participant or beneficiary 
     within 120 days which will significantly increase the 
     reasonable likelihood of death of the participant or 
     beneficiary.
       ``(I) Emergency medical care.--The term `emergency medical 
     care' means medical, surgical, or hospital care in any case 
     in which a physician with appropriate expertise has certified 
     in writing--
       ``(i) that failure to immediately provide the care to the 
     participant or beneficiary could reasonably be expected to 
     result in--

       ``(I) placing the health of such participant or beneficiary 
     (or, with respect to such a participant or beneficiary who is 
     a pregnant woman, the health of the woman or her unborn 
     child) in serious jeopardy,
       ``(II) serious impairment to bodily functions, or
       ``(III) serious dysfunction of any bodily organ or part,

     or
       ``(ii) that immediate provision of the care is necessary 
     because the participant or beneficiary has made or is at 
     serious risk of making an attempt to harm himself or herself 
     or another individual.
       ``(J) Filing completion date.--The term `filing completion 
     date' means, in connection with a group health plan, the date 
     as of which the plan is in receipt of all information 
     reasonably required to make an initial decision to approve or 
     deny a claim for medical, surgical, or hospital benefits, a 
     request for preauthorization, a request for emergency 
     preauthorization, a request for a utilization review 
     determination or a request for an emergency utilization 
     review determination.
       ``(K) Review filing date.--The term `review filing date' 
     means, in connection with a group health plan, the date as of 
     which the appropriate fiduciary is in receipt of all 
     information reasonably required to make a decision upon a 
     full and fair review of the denial, in whole or in part, of a 
     claim for medical, surgical, or hospital benefits, a request 
     for preauthorization, a request for emergency 
     preauthorization, a request for a utilization review 
     determination or a request for an emergency utilization 
     review determination.
       ``(L) Appropriate fiduciary.--The term `appropriate 
     fiduciary' means with respect to any determination under a 
     group health plan a person designated by the plan to make 
     such determination. One or more appropriate fiduciaries shall 
     be designated under each group health plan for making 
     determinations under the plan.''.
       (b) Definition of Group Health Plan.--
       (1) In general.--Section 3 of such Act (29 U.S.C. 1002) is 
     amended by adding at the end the following new paragraph:
       ``(42) The term `group health plan' means an employee 
     welfare benefit plan providing medical care (as defined in 
     section 213(d) of the Internal Revenue Code of 1986) to 
     participants or beneficiaries directly or through insurance, 
     reimbursement, or otherwise.''.
       (2) Conforming amendment.--Section 607 of such Act (29 
     U.S.C. 1167) is amended by striking paragraph (1).

     SEC. 1802. MEDIATION OF GROUP HEALTH PLAN CLAIMS.

       (a) In General.--Part 5 of subtitle B of title I of the 
     Employee Retirement Income Security Act of 1974 is amended--
       (1) by inserting below the heading for part 5 the 
     following:

                       ``Subpart A--In General'';

     and
       (2) by adding at the end the following new subpart:

           ``Subpart B--Mediation of Group Health Plan Claims

     ``SEC. 521. ELIGIBILITY FOR SUBMISSION TO MEDIATION.

       ``(a) In General.--The Secretary shall establish a 
     mediation program under this subpart (hereinafter in this 
     subpart referred to as the `mediation program') for the 
     purpose of facilitating mediation of disputes meeting the 
     requirements specified in subsection (b). At the time notice 
     is provided to any participant or beneficiary of a group 
     health plan's denial of any claim for benefits pursuant to 
     section 503, the plan shall provide reasonable notice in 
     writing to the participant or beneficiary whose claim for 
     benefits under the plan has been denied of the availability 
     of mediation under this subpart at the election of either the 
     claimant or the plan.
       ``(b) Dispute Criteria.--A dispute may be submitted for 
     mediation under the mediation program only if the following 
     requirements are met with respect to such dispute:
       ``(1) Parties.--The dispute consists of an assertion by a 
     participant, a beneficiary, or the duly authorized 
     representative of a participant or beneficiary (or, in the 
     case of an assignment, the assignee) of one or more claims 
     under a group health plan, and a denial of such claims, or a 
     denial of appropriate reimbursement based on such claims, by 
     such plan or an appropriate fiduciary.
       ``(2) Nature of claim.--The claim consists of a claim for 
     benefits for medical, surgical, or hospital expenses under a 
     group health plan which consist of benefits described in 
     section 3(1).
       ``(3) Submission After Exhaustion of Plan Remedies.--The 
     claimant has received a final determination regarding the 
     claim under the plans' claims procedure under section 503, or 
     has otherwise exhausted all remedies under the plan provided 
     pursuant to section 503.
       ``(4) Appropriate fiduciary.--For purposes of this subpart, 
     the term `appropriate fiduciary' has the meaning provided in 
     section 503(b)(5)(K).

     ``SEC. 522. FACILITATORS.

       ``(a) Roster.--The Secretary shall maintain a list of 
     individuals with appropriate expertise to serve as 
     facilitators in proceedings under the mediation program.
       ``(b) Criteria.--In identifying individuals to serve as 
     facilitators, the Secretary shall consider the following:
       ``(1) the individual's experience in dispute resolution;
       ``(2) the individual's ability to act impartially;
       ``(3) the individual's ability to perform evaluations 
     quickly and to present them in nontechnical terms; and
       ``(4) the individual's experience in employee medical, 
     hospital, and surgical benefits.
       ``(c) Appointment of Facilitator.--Within 15 days after 
     either party files with the Secretary an election of 
     mediation with respect to a dispute, the Secretary shall 
     propose a facilitator, selected under a random selection 
     procedure prescribed in regulations, and notify the parties 
     of such selection. Within 10 days after receipt of the 
     notification of the selection of a facilitator, either party 
     may reject the proposed facilitator. If neither party objects 
     to the Secretary's proposed facilitator within such 10-day 
     period, the appointment shall become final. If either party 
     objects to the Secretary's proposed facilitator, the 
     procedure set forth in the preceding provisions of this 
     subsection shall be repeated. Each party is limited to 1 
     objection to the Secretary's proposed facilitator for each 
     mediation.

     ``SEC. 523. ROLE OF ATTORNEYS.

       ``Parties may represent themselves or be represented by 
     attorneys throughout the mediation process.

     ``SEC. 524. INITIATION OF MEDIATION.

       ``(a) Claimant Initiation.--A claimant may initiate 
     mediation of a dispute under this subpart only if no action 
     has been commenced by the claimant under section 502 with 
     respect to any claim involved. To initiate mediation, a 
     claimant shall file an election for mediation with the 
     Secretary (and shall file a copy of the election with the 
     plan or the appropriate fiduciary) within 30 days after a 
     final determination regarding the claim pursuant to section 
     503.
       ``(b) Plan Initiation.--A participant or beneficiary may 
     not commence an action under section 502 with respect to any 
     claim until the participant or beneficiary has provided to 
     the plan or the appropriate fiduciary 10 days advance notice 
     of the filing of such action. Within the earlier of (1) 25 
     days after receipt of such a notice with respect to any claim 
     or (2) the date preceding the date on which such claim is 
     filed in court, the plan or the appropriate fiduciary may 
     elect mediation of a dispute under this subpart involving 
     such claim by filing an election for mediation with the 
     Secretary (and a copy of the election with the claimant). 
     Upon a timely election of mediation by the plan or the 
     appropriate fiduciary, the claimant's right to pursue the 
     claim under section 502 shall be suspended until the earlier 
     of 75 days after the date of the filing of the election of 
     mediation or the termination of the mediation proceedings.
       ``(c) Election for Mediation.--An election by any party for 
     mediation under this subpart shall be in such form and manner 
     as the Secretary shall prescribe by regulation.
       ``(d) Participation.--The claimant and the plan shall 
     participate in the mediation. Each party shall provide the 
     facilitator a written summary of its position with respect to 
     the dispute accompanied by supporting documentation.
       ``(e) Filing Fee.--The party initiating mediation under 
     this section shall include with any election for mediation 
     under this subpart a reasonable nonrefundable filing fee 
     payable to the Secretary. The filing fee shall be determined 
     pursuant to regulations prescribed by the Secretary.
       ``(f) Tolling of Statutes of Limitations.--The applicable 
     statute of limitations with respect to any claim involved in 
     a dispute subject to mediation proceedings under this subpart 
     shall be tolled for the period commencing with the 10-day 
     notice period required under subsection (b) and ending with 
     the termination of the mediation proceedings with respect to 
     such dispute. In no event shall the applicable statute of 
     limitations be tolled beyond the 60-day-time limit for 
     completion of mediation provided under section 526.

     ``SEC. 525. MEDIATION PROCEDURE.

       ``(a) In General.--Mediation proceedings under this subpart 
     shall be conducted, at locations convenient to complainants, 
     by facilitators recruited and assigned by the Secretary under 
     section 522.
       ``(b) Duties of Facilitator.--The Secretary shall prescribe 
     by regulation the duties and role of the facilitator during 
     the mediation process. Such regulations may require the 
     facilitator to identify parties, establish a schedule, 
     request position papers from the parties, and evaluate 
     positions of the parties. Such regulations shall provide that 
     the mediation will be informal, convenient, inexpensive, and 
     expeditious for all parties.
       ``(c) Neutrality of Facilitator.--The facilitator shall 
     maintain a neutral stance between the parties.

     ``SEC. 526. MEDIATION TIME LIMIT.

       ``Any mediation proceedings commenced under this subpart 
     shall be completed within 60 days from the final appointment 
     of a facilitator pursuant to section 522(c).

     ``SEC. 527. COST OF MEDIATION.

       ``All reasonable costs of the mediation process under this 
     subpart with respect to any dispute, including the cost of 
     the facilitator, shall be divided equally among the parties. 
     Facilitators shall be compensated at a rate established by 
     the Secretary by regulation. The Secretary shall prescribe 
     regulations specifying reasonable mediation costs and 
     alternative means of allocating the costs in cases of 
     hardship on the part of the claimant.

     ``SEC. 528. LEGAL EFFECT OF PARTICIPATION IN MEDIATION 
                   PROGRAM.

       ``(a) Nonbinding Mediation.--The results of any mediation 
     under this subpart shall be treated as advisory in nature and 
     nonbinding. Except as provided in subsection (b), the rights 
     of the parties shall not be affected by participation in the 
     mediation program.
       ``(b) Resolution Through Settlement Agreement.--If a 
     dispute is settled through participation in the mediation 
     program, the facilitator shall, upon the request of either 
     party, assist the parties in drawing up a settlement 
     agreement between the parties.

     ``SEC. 529. CONFIDENTIALITY AND ADMISSIBILITY.

       ``(a) In General.--All documents and communications made 
     during or generated in connection with the mediation program, 
     as well as any settlement offers or agreements made or 
     entered into under such program--
       ``(1) shall be privileged and confidential, and
       ``(2) shall not be admissible as evidence in any Federal or 
     State judicial proceeding unless all parties to the mediation 
     consent in writing.
       ``(b) Execution of Privilege.--Any individual or entity 
     involved in the mediation (including any party or facilitator 
     or other individual who acts on behalf of a party or who 
     provides information or an opinion in connection with the 
     mediation) receiving a subpoena or other lawful process 
     seeking disclosure of any information or documents rendered 
     privileged and confidential under subsection (a) shall assert 
     the privilege provided under subsection (a) and promptly 
     notify all parties to the mediation proceedings of the 
     request for disclosure. The privilege provided for in this 
     section shall be in addition to any attorney-client privilege 
     or other privilege which may be asserted by a party and 
     nothing in this section shall constitute a waiver of such 
     attorney-client privilege or other privilege.''.
       (b) Clerical Amendments.--The table of contents in section 
     1 of such Act is amended--
       (1) by inserting after the item relating to the heading for 
     part 5 of subtitle B of title I the following new item:

                   ``Subpart A--General Provisions'';

     and
       (2) by inserting after the item relating to section 514 the 
     following new items:

           ``Subpart B--Mediation of Group Health Plan Claims

``Sec. 521. Eligibility for submission to mediation.
``Sec. 522. Facilitators.
``Sec. 523. Role of attorneys.
``Sec. 524. Initiation of mediation.
``Sec. 525. Mediation procedure.
``Sec. 526. Mediation time limit.
``Sec. 527. Cost of mediation.
``Sec. 528. Legal effect of participation in mediation program.
``Sec. 529. Confidentiality and admissibility.''.

     SEC. 1803. AVAILABLE COURT REMEDIES.

       (a) In General.--Section 502(c) of the Employee Retirement 
     Income Security Act of 1974 (29 U.S.C. 1132) is amended by 
     adding at the end the following new paragraphs:
       ``(5) In any action commenced under subsection (a) by a 
     participant or beneficiary with respect to a group health 
     plan in which the plaintiff alleges that a person, in the 
     capacity of a fiduciary and in violation of the terms of the 
     plan or this title, has taken an action resulting in a 
     failure to provide an item or service, or payment therefor, 
     or has failed to take an action for which such person is 
     responsible under the plan and which is necessary under the 
     plan for provision of such item or service, or payment 
     therefor, upon finding in favor of the plaintiff, the court 
     shall cause to be served on the defendant an order requiring 
     the defendant--
       ``(i) to cease and desist from the alleged action or 
     failure to act,
       ``(ii) to provide the item or service, or payment therefor, 
     and to otherwise comply with the terms of the plan and the 
     applicable requirements of this title,
       ``(iii) to pay to the plaintiff prejudgment interest on the 
     actual costs incurred in obtaining any item or service, or 
     payment therefor, at issue in the complaint, and
       ``(iv) to pay to the plaintiff a reasonable attorney's fee, 
     reasonable expert witness fees, and other reasonable costs 
     relating to the action on the charges on which the plaintiff 
     prevails.
     The remedies provided under this paragraph shall be in 
     addition to remedies otherwise provided under this section.
       ``(6)(A) The Secretary may assess a civil penalty against 
     the plan administrator of, or the appropriate fiduciary (as 
     defined in section 503(b)(5)(K)) of, one or more group health 
     plans for any pattern or practice thereof of repeated 
     failures to provide benefits under the terms of the plan or 
     plans without any reasonable basis or repeated violations 
     thereby of the requirements of section 503 with respect to 
     such plan or plans. Such penalty shall be payable only upon 
     proof by clear and convincing evidence of such pattern or 
     practice.
       ``(B) Such penalty shall be in an amount not to exceed the 
     lesser of--
       ``(i) 20 percent of the aggregate value of claims shown by 
     the Secretary to have been denied, or unlawfully delayed in 
     violation of section 503, under such pattern or practice, or
       ``(ii) $1,000,000.
       ``(C) The plan administrator or the appropriate fiduciary 
     of any group health plan or plans who has engaged in any such 
     pattern or practice with respect to such plans, upon the 
     petition of the Secretary, may be removed by the court from 
     that position, and from any other involvement, with respect 
     to such plan or plans, for a period of not less than 7 years.
       ``(D) For purposes of this paragraph, the phrase `without 
     any reasonable basis' means, in connection with any denial of 
     claims for benefits under a group health plan, that such 
     denial does not have any reasonable basis, support, or 
     justification under--
       ``(i) the facts regarding such claim which were reasonably 
     available to the plan administrator or the appropriate 
     fiduciary at the time the claim was denied, and
       ``(ii) the terms of the plan.
       (b) Conforming Amendment.--Section 502(a)(6) of such Act 
     (29 U.S.C. 1132(a)(6)) is amended by inserting ``or (c)(6)'' 
     after ``(c)(2)''.

     SEC. 1804. EFFECTIVE DATE.

       The amendments made by this subtitle shall take effect 
     January 1, 1995, except that the Secretary of Labor may issue 
     regulations before such date under such amendments. The 
     Secretary shall issue all regulations necessary to carry out 
     the amendments made by this subtitle before the effective 
     date thereof.
   Subtitle J--Delivery of Health Care Services to Illegal Immigrants

     SEC. 1901. STUDY ON THE DELIVERY OF HEALTH CARE SERVICES TO 
                   ILLEGAL IMMIGRANTS.

       (a) In General.--As soon as practicable after the date of 
     the enactment of this Act, the Secretary of Health and Human 
     Services shall conduct a detailed study of health care in the 
     United States to populations of individuals immigrating to 
     the United States illegally, including the effect of illegal 
     immigration on levels of health costs and the shifting of 
     health costs.
       (b) Matters to be Analyzed.--In conducting the study under 
     this section, the Secretary shall analyze--
       (1) the extent to which individuals illegally immigrating 
     into the United States obtain health care services in the 
     United States,
       (2) the costs of such services,
       (3) the means currently used to finance such costs,
       (4) the means currently used for identifying, evaluating, 
     preventing, and resolving health problems of populations 
     comprised of such individuals,
       (5) the extent of efforts currently being undertaken to 
     prevent or resolve such health problems,
       (6) the extent of efforts currently being undertaken to 
     educate populations comprised of such individuals concerning 
     such health problems and to coordinate such efforts,
       (7) the programs currently in place for carrying out the 
     activities described in paragraphs (3) through (6), and
       (8) the extent of intergovernmental cooperation currently 
     in place between the United States and other countries in 
     dealing with health problems described in the preceding 
     provisions of this subsection.

     SEC. 1902. REPORT.

       Not later than one year after the date of the enactment of 
     this Act, the Secretary of Health and Human Services shall 
     submit to each House of the Congress a final report on the 
     matters analyzed in the study conducted under section 1801. 
     The Secretary shall include in such report any 
     recommendations derived by the Secretary regarding 
     appropriate means of--
       (1) alleviating the health problems peculiar to populations 
     of individuals who have immigrated to the United States 
     illegally,
       (2) financing health care provided to such populations, and
       (3) increasing intergovernmental cooperation and 
     coordination of efforts between the United States and other 
     countries to alleviate such health problems and to finance 
     such efforts.
     TITLE II--HEALTH CARE COST CONTAINMENT AND QUALITY ENHANCEMENT

                     table of contents of subtitle

            Subtitle A--Medical Malpractice Liability Reform

                       Part 1--General Provisions

Sec. 2001. Federal reform of medical malpractice liability actions.
Sec. 2002. Definitions.
Sec. 2003. Effective date.

        Part 2--Medical Malpractice and Product Liability Reform

Sec. 2011. Requirement for initial resolution of action through 
              alternative dispute resolution.
Sec. 2012. Calculation and payment of damages.
Sec. 2013. Treatment of attorney's fees and other costs.
Sec. 2014. Joint and several liability.
Sec. 2015. Statute of limitations.
Sec. 2016. Uniform standard for determining negligence.
Sec. 2017. Special provision for certain obstetric services.

 Part 3--Requirements for State Alternative Dispute Resolution Systems 
                                 (ADR)

Sec. 2031. Basic requirements.
Sec. 2032. Certification of State systems; applicability of alternative 
              Federal system.
Sec. 2033. Reports on implementation and effectiveness of alternative 
              dispute resolution systems.

   Part 4--Other Provisions Relating to Medical Malpractice Liability

Sec. 2041. Permitting State professional societies to participate in 
              disciplinary activities.
Sec. 2042. Study of incentives to encourage voluntary service by 
              physicians.
Sec. 2043. Requirements for risk management programs.
Sec. 2044. Grants for medical safety promotion.

  Subtitle B--Administrative Cost Savings and Fair Health Information 
                               Practices

                  Part 1--Administrative Cost Savings

Sec. 2100. Purpose.
Sec. 2101. Definitions.


        SUBPART A--STANDARDS FOR DATA ELEMENTS AND TRANSACTIONS

Sec. 2103. General requirements on Secretary.
Sec. 2104. Standards for data elements of health information.
Sec. 2105. Information transaction standards.
Sec. 2106. Timetables for adoption of standards.


   SUBPART B--REQUIREMENTS WITH RESPECT TO CERTAIN TRANSACTIONS AND 
                              INFORMATION

Sec. 2111. Standard transactions and information.
Sec. 2112. Accessing health information for authorized purposes.
Sec. 2113. Ensuring availability of information.
Sec. 2114. Timetables for compliance with requirements.


                  SUBPART C--MISCELLANEOUS PROVISIONS

Sec. 2121. Standards and certification for health information network 
              services.
Sec. 2122. Imposition of additional requirements.
Sec. 2123. Effect on State law.
Sec. 2124. Grants for demonstration projects.


                 SUBPART D--ASSISTANCE TO THE SECRETARY

Sec. 2131. General requirement on Secretary.
Sec. 2132. Health Information Advisory Committee.

               Part 2--Fair Health Information Practices

Sec. 2140. Definitions.


            SUBPART A--DUTIES OF HEALTH INFORMATION TRUSTEES

Sec. 2141. Inspection of protected health information.
Sec. 2142. Amendment of protected health information.
Sec. 2143. Notice of information practices.
Sec. 2144. Accounting for disclosures.
Sec. 2145. Security.


     SUBPART B--USE AND DISCLOSURE OF PROTECTED HEALTH INFORMATION

       Sec. 2151. General limitations on use and disclosure.
       Sec. 2152. Authorizations for disclosure of protected 
           health information.
       Sec. 2153. Treatment, payment, and oversight.
       Sec. 2154. Next of kin and directory information.
       Sec. 2155. Public health.
       Sec. 2156. Health research.
       Sec. 2157. Emergency circumstances.
       Sec. 2158. Judicial and administrative purposes.
       Sec. 2159. Law enforcement.
       Sec. 2160. Subpoenas, warrants, and search warrants.
       Sec. 2161. Health information service organizations.


           SUBPART C--ACCESS PROCEDURES AND CHALLENGE RIGHTS

       Sec. 2171. Access procedures for law enforcement subpoenas, 
           warrants, and search warrants.
       Sec. 2172. Challenge procedures for law enforcement 
           subpoenas.
       Sec. 2173. Access and challenge procedures for other 
           subpoenas.
       Sec. 2174. Construction of subpart; suspension of statute 
           of limitations.x
       Sec. 2175. Responsibilities of Secretary.


                  SUBPART D--MISCELLANEOUS PROVISIONS

       Sec. 2181. Payment card and electronic payment 
           transactions.
       Sec. 2182. Access to protected health information outside 
           of the United States.
       Sec. 2183. Standards for electronic documents and 
           communications.
       Sec. 2184. Duties and authorities of affiliated persons.
       Sec. 2185. Agents and attorneys.
       Sec. 2186. Minors.
       Sec. 2187. Maintenance of certain protected health 
           information.


                         SUBPART E--ENFORCEMENT

       Sec. 2191. Civil actions.
       Sec. 2192. Civil money penalties.
       Sec. 2193. Alternative dispute resolution.
       Sec. 2194. Amendments to criminal law.


          SUBPART F--AMENDMENTS TO TITLE 5, UNITED STATES CODE

       Sec. 2195. Amendments to title 5, United States Code.


   SUBPART G--REGULATIONS, RESEARCH, AND EDUCATION; EFFECTIVE DATES; 
             APPLICABILITY; AND RELATIONSHIP TO OTHER LAWS

       Sec. 2196. Regulations; research and education.
       Sec. 2197. Effective dates.
       Sec. 2198. Applicability.
       Sec. 2199. Relationship to other laws.

  Subtitle C--Deduction for Cost of Catastrophic Health Plan; Medical 
                            Savings Accounts

Sec. 2201. Individuals allowed deduction from gross income for cost of 
              catastrophic health plan.
Sec. 2202. Medical savings accounts.

                         Subtitle D--Anti-Fraud

Part 1--Establishment of All-payer Health Care Fraud and Abuse Control 
                                Program

Sec. 2301. All-payer health care fraud and abuse control program.
Sec. 2302. Authorization of additional appropriations for investigators 
              and other personnel.
Sec. 2303. Establishment of anti-fraud and abuse trust fund.

       Part 2--Revisions to Current Sanctions for Fraud and Abuse

Sec. 2311. Mandatory exclusion from participation in medicare and State 
              health care programs.
Sec. 2312. Establishment of minimum period of exclusion for certain 
              individuals and entities subject to permissive exclusion 
              from medicare and State health care programs.
Sec. 2313. Revisions to criminal penalties.
Sec. 2315. Revisions to limitations on physician self-referral.
Sec. 2316. Medicare health maintenance organizations.
Sec. 2317. Effective date.

                   Part 3--Amendments to Criminal Law

Sec. 2321. Penalties for health care fraud.
Sec. 2322. Rewards for information leading to prosecution and 
              conviction.
Sec. 2323. Broadening application of mail fraud statute.

                       Part 4--Advisory Opinions

Sec. 2331. Authorizing the Secretary of Health and Human Services to 
              issue advisory opinions under title XI.
Sec. 2332. Authorizing the Secretary of Health and Human Services to 
              issue advisory opinions relating to physician ownership 
              and referral.
Sec. 2333. Effective date.

Subtitle E--Increased Medicare Beneficiary Choice; Additional Medicare 
                                Reforms

             Part 1--Increased Medicare Beneficiary Choice

Sec. 2401. Requirements for health maintenance organizations under 
              medicare.
Sec. 2402. Expansion and revision of medicare select policies.
Sec. 2403. Including notice of available health maintenance 
              organizations in annual notice to beneficiaries.
Sec. 2404. Legislative proposal on enrolling medicare beneficiaries in 
              qualified health plans.
Sec. 2405. Optional interim enrollment of medicare beneficiaries in 
              private health plans.

    Part 2--Medicare Part B Premium; Other Medicare Payment Changes

Sec. 2411. Extension of current rules for computing medicare part B 
              premium.
Sec. 2412. Increase in medicare part B premium for individuals with 
              high income.
Sec. 2413. Improved efficiency through consolidation of administration 
              of parts A and B.
Sec. 2414. Extension of medicare secondary payment provisions.

             Subtitle F--Health Care Antitrust Improvements

Sec. 2501. Protection from antitrust laws for certain competitive and 
              collaborative activities.
Sec. 2502. Designation of safe harbors.
Sec. 2503. Certificates of review.
Sec. 2504. Notifications providing reduction in certain penalties under 
              antitrust law for health care joint ventures.
Sec. 2505. Review and reports on safe harbors, certificates of review, 
              and notifications.
Sec. 2506. Rules, regulations, and guidelines.
Sec. 2507. Establishment of HHS Office of Health Care Competition 
              Policy.
Sec. 2508. Definitions.

    Subtitle G--Encouraging Enforcement Activities of Medical Self-
                          Regulatory Entities

   Part 1--Application of the Clayton Act to Medical Self-regulatory 
                                Entities

Sec. 2601. Antitrust exemption for medical self-regulatory entities.
Sec. 2602. Definitions.

                Part 2--Consultation by Federal Agencies

Sec. 2611. Consultation with medical self-regulatory entities 
              respecting medical professional guidelines and standards.

Subtitle H--Reform of Clinical Laboratory Requirements for Simple Tests

Sec. 2701. Eliminating CLIA requirement for certificate of waiver for 
              simple laboratory examinations and procedures.
Sec. 2702. Amendment related to simple laboratory examinations.
Sec. 2703. Amendment related to study.
Sec. 2704. Amendments related to the Clinical Laboratory Improvement 
              Advisory Committee.

                  Subtitle I--Miscellaneous Provisions

Sec. 2801. Requirement that certain agencies prefund government health 
              benefits contributions for their annuitants.
Sec. 2802. Ineligibility of aliens for SSI and medicaid.
Sec. 2803. Limitation on SSI benefits for drug and alcohol addicts.
            Subtitle A--Medical Malpractice Liability Reform

                       PART 1--GENERAL PROVISIONS

     SEC. 2001. FEDERAL REFORM OF MEDICAL MALPRACTICE LIABILITY 
                   ACTIONS.

       (a) Applicability.--This subtitle shall apply with respect 
     to any medical malpractice liability claim and to any medical 
     malpractice liability action brought in any State or Federal 
     court, except that this subtitle shall not apply to a claim 
     or action for damages arising from a vaccine-related injury 
     or death to the extent that title XXI of the Public Health 
     Service Act applies to the claim or action.
       (b) Preemption.--The provisions of this subtitle shall 
     preempt any State law to the extent such law is inconsistent 
     with the limitations contained in such provisions. The 
     provisions of this subtitle shall not preempt any State law 
     that provides for defenses or places limitations on a 
     person's liability in addition to those contained in this 
     subtitle, places greater limitations on the amount of 
     attorneys' fees that can be collected, or otherwise imposes 
     greater restrictions than those provided in this subtitle.
       (c) Effect on Sovereign Immunity and Choice of Law or 
     Venue.--Nothing in subsection (b) shall be construed to--
       (1) waive or affect any defense of sovereign immunity 
     asserted by any State under any provision of law;
       (2) waive or affect any defense of sovereign immunity 
     asserted by the United States;
       (3) affect the applicability of any provision of the 
     Foreign Sovereign Immunities Act of 1976;
       (4) preempt State choice-of-law rules with respect to 
     claims brought by a foreign nation or a citizen of a foreign 
     nation; or
       (5) affect the right of any court to transfer venue or to 
     apply the law of a foreign nation or to dismiss a claim of a 
     foreign nation or of a citizen of a foreign nation on the 
     ground of inconvenient forum.
       (d) Federal Court Jurisdiction Not Established on Federal 
     Question Grounds.--Nothing in this subtitle shall be 
     construed to establish any jurisdiction in the district 
     courts of the United States over medical malpractice 
     liability actions on the basis of section 1331 or 1337 of 
     title 28, United States Code.

     SEC. 2002. DEFINITIONS.

       As used in this subtitle:
       (1) Alternative dispute resolution system; ADR.--The term 
     ``alternative dispute resolution system'' or ``ADR'' means a 
     system established under this subtitle that provides for the 
     resolution of medical malpractice liability claims in a 
     manner other than through medical malpractice liability 
     actions.
       (2) Claimant.--The term ``claimant'' means any person who 
     alleges a medical malpractice liability claim, and any person 
     on whose behalf such a claim is alleged, including the 
     decedent in the case of an action brought through or on 
     behalf of an estate.
       (3) Clear and convincing evidence.--The term ``clear and 
     convincing evidence'' is that measure or degree of proof that 
     will produce in the mind of the trier of fact a firm belief 
     or conviction as to the truth of the allegations sought to be 
     established, except that such measure or degree of proof is 
     more than that required under preponderance of the evidence, 
     but less than that required for proof beyond a reasonable 
     doubt.
       (4) Economic damages.--The term ``economic damages'' means 
     damages paid to compensate an individual for hospital and 
     other medical expenses, lost wages, lost employment, and 
     other pecuniary losses.
       (5) Health care professional.--The term ``health care 
     professional'' means any individual who provides health care 
     services in a State and who is required by the laws or 
     regulations of the State to be licensed or certified by the 
     State to provide such services in the State.
       (6) Health care provider.--The term ``health care 
     provider'' means any organization or institution that is 
     engaged in the delivery of health care services in a State 
     and that is required by the laws or regulations of the State 
     to be licensed or certified by the State to engage in the 
     delivery of such services in the State.
       (7) Injury.--The term ``injury'' means any illness, 
     disease, or other harm that is the subject of a medical 
     malpractice liability action or a medical malpractice 
     liability claim.
       (8) Medical malpractice liability action.--The term 
     ``medical malpractice liability action'' means a civil action 
     brought in a State or Federal court against a health care 
     provider or health care professional in which the plaintiff 
     alleges a medical malpractice liability claim, but does not 
     include any action in which the plaintiff's sole allegation 
     is an allegation of an intentional tort.
       (9) Medical malpractice liability claim.--The term 
     ``medical malpractice liability claim'' means a claim in 
     which the claimant alleges that injury was caused by the 
     provision of (or the failure to provide) health care services 
     or the use of a medical product.
       (10) Medical product.--
       (A) In general.--The term ``medical product'' means, with 
     respect to the allegation of a claimant, a drug (as defined 
     in section 201(g)(1) of the Federal Food, Drug, and Cosmetic 
     Act (21 U.S.C. 321(g)(1)) or a medical device (as defined in 
     section 201(h) of the Federal Food, Drug, and Cosmetic Act 
     (21 U.S.C. 321(h)) if--
       (i) such drug or device was subject to premarket approval 
     under section 505, 507, or 515 of the Federal Food, Drug, and 
     Cosmetic Act (21 U.S.C. 355, 357, or 360e) or section 351 of 
     the Public Health Service Act (42 U.S.C. 262) with respect to 
     the safety of the formulation or performance of the aspect of 
     such drug or device which is the subject of the claimant's 
     allegation or the adequacy of the packaging or labeling of 
     such drug or device, and such drug or device is approved by 
     the Food and Drug Administration; or
       (ii) the drug or device is generally recognized as safe and 
     effective under regulations issued by the Secretary of Health 
     and Human Services under section 201(p) of the Federal Food, 
     Drug, and Cosmetic Act (21 U.S.C. 321(p)).
       (B) Exception in case of misrepresentation or fraud.--
     Notwithstanding subparagraph (A), the term ``medical 
     product'' shall not include any product described in such 
     subparagraph if the claimant shows that the product is 
     approved by the Food and Drug Administration for marketing as 
     a result of withheld information, misrepresentation, or an 
     illegal payment by manufacturer of the product.
       (11) Noneconomic damages.--The term ``noneconomic damages'' 
     means damages paid to compensate an individual for physical 
     and emotional pain, suffering, inconvenience, physical 
     impairment, mental anguish, disfigurement, loss of enjoyment 
     of life, loss of consortium, and other nonpecuniary losses, 
     but does not include punitive damages.
       (12) Punitive damages; exemplary damages.--The terms 
     ``punitive damages'' and ``exemplary damages'' mean 
     compensation, in addition to compensation for actual harm 
     suffered, that is awarded for the purpose of punishing a 
     person for conduct deemed to be malicious, wanton, willful, 
     or excessively reckless.
       (13) Secretary.--The term ``Secretary'' means the Secretary 
     of Health and Human Services.
       (14) State.--The term ``State'' means each of the several 
     States, the District of Columbia, the Commonwealth of Puerto 
     Rico, the Virgin Islands, Guam, and American Samoa.

     SEC. 2003. EFFECTIVE DATE.

       (a) In General.--Except as provided in subsection (b) and 
     section 2017(c), this subtitle shall apply with respect to 
     claims accruing or actions brought on or after the expiration 
     of the 3-year period that begins on the date of the enactment 
     of this Act.
       (b) Exception for States Requesting Earlier Implementation 
     of Reforms.--
       (1) Application.--A State may submit an application to the 
     Secretary requesting the early implementation of this 
     subtitle with respect to claims or actions brought in the 
     State.
       (2) Decision by secretary.--The Secretary shall issue a 
     response to a State's application under paragraph (1) not 
     later than 90 days after receiving the application. If the 
     Secretary determines that the State meets the requirements of 
     this subtitle at the time of submitting its application, the 
     Secretary shall approve the State's application, and this 
     subtitle shall apply with respect to actions brought in the 
     State on or after the expiration of the 90-day period that 
     begins on the date the Secretary issues the response. If the 
     Secretary denies the State's application, the Secretary shall 
     provide the State with a written explanation of the grounds 
     for the decision.

        PART 2--MEDICAL MALPRACTICE AND PRODUCT LIABILITY REFORM

     SEC. 2011. REQUIREMENT FOR INITIAL RESOLUTION OF ACTION 
                   THROUGH ALTERNATIVE DISPUTE RESOLUTION.

       (a) In General.--
       (1) State cases.--A medical malpractice liability action 
     may not be brought in any State court during a calendar year 
     unless the medical malpractice liability claim that is the 
     subject of the action has been initially resolved under an 
     alternative dispute resolution system certified for the year 
     by the Secretary under section 2032(a), or, in the case of a 
     State in which such a system is not in effect for the year, 
     under the alternative Federal system established under 
     section 2032(b).
       (2) Federal diversity actions.--A medical malpractice 
     liability action may not be brought in any Federal court 
     under section 1332 of title 28, United States Code, during a 
     calendar year unless the medical malpractice liability claim 
     that is the subject of the action has been initially resolved 
     under the alternative dispute resolution system referred to 
     in paragraph (1) that applied in the State whose law applies 
     in such action.
       (3) Claims against united states.--
       (A) Establishment of process for claims.--The Attorney 
     General shall establish an alternative dispute resolution 
     process for the resolution of tort claims consisting of 
     medical malpractice liability claims brought against the 
     United States under chapter 171 of title 28, United States 
     Code. Under such process, the resolution of a claim shall 
     occur after the completion of the administrative claim 
     process applicable to the claim under section 2675 of such 
     title.
       (B) Requirement for initial resolution under process.--A 
     medical malpractice liability action based on a medical 
     malpractice liability claim described in subparagraph (A) may 
     not be brought in any Federal court unless the claim has been 
     initially resolved under the alternative dispute resolution 
     process established by the Attorney General under such 
     subparagraph.
       (b) Initial Resolution of Claims Under ADR.--For purposes 
     of subsection (a), an action is ``initially resolved'' under 
     an alternative dispute resolution system if--
       (A) the ADR reaches a decision on whether the defendant is 
     liable to the plaintiff for damages; and
       (B) if the ADR determines that the defendant is liable, the 
     ADR reaches a decision on the amount of damages assessed 
     against the defendant.
       (c) Procedures for Filing Actions.--
       (1) Notice of intent to contest decision.--Not later than 
     60 days after a decision is issued with respect to a medical 
     malpractice liability claim under an alternative dispute 
     resolution system, each party affected by the decision shall 
     submit a sealed statement to a court of competent 
     jurisdiction indicating whether or not the party intends to 
     contest the decision.
       (2) Deadline for filing action.--A medical malpractice 
     liability action may not be brought by a party unless--
       (A) the party has filed the notice of intent required by 
     paragraph (1); and
       (B) the party files the action in a court of competent 
     jurisdiction not later than 90 days after the decision 
     resolving the medical malpractice liability claim that is the 
     subject of the action is issued under the applicable 
     alternative dispute resolution system.
       (3) Court of competent jurisdiction.--For purposes of this 
     subsection, the term ``court of competent jurisdiction'' 
     means--
       (A) with respect to actions filed in a State court, the 
     appropriate State trial court; and
       (B) with respect to actions filed in a Federal court, the 
     appropriate United States district court.
       (d) Legal Effect of Uncontested ADR Decision.--The decision 
     reached under an alternative dispute resolution system shall, 
     for purposes of enforcement by a court of competent 
     jurisdiction, have the same status in the court as the 
     verdict of a medical malpractice liability action adjudicated 
     in a State or Federal trial court. The previous sentence 
     shall not apply to a decision that is contested by a party 
     affected by the decision pursuant to subsection (c)(1).

     SEC. 2012. CALCULATION AND PAYMENT OF DAMAGES.

       (a) Limitation on Noneconomic Damages.--The total amount of 
     noneconomic damages that may be awarded to a claimant and the 
     members of the claimant's family for losses resulting from 
     the injury which is the subject of a medical malpractice 
     liability action may not exceed $250,000, regardless of the 
     number of parties against whom the action is brought or the 
     number of actions brought with respect to the injury.
       (b) Treatment of Punitive Damages.--
       (1) Basis for recovery.--Punitive or exemplary damages 
     shall not be awarded in a medical malpractice liability 
     action unless the claimant establishes by clear and 
     convincing evidence that the injury suffered was the direct 
     result of conduct manifesting a malicious, wanton, willful, 
     or excessively reckless disregard of the safety of others.
       (2) No award against manufacturer of medical product.--In 
     the case of a medical malpractice liability action in which 
     the plaintiff alleges a claim against the manufacturer of a 
     medical product, no punitive or exemplary damages may be 
     awarded against such manufacturer.
       (3) Payments to state for medical quality assurance 
     activities.--
       (A) In general.--Any punitive or exemplary damages awarded 
     in a medical malpractice liability action shall be paid to 
     the State in which the action is brought or, in a case 
     brought in Federal court, in the State in which the health 
     care services that caused the injury that is the subject of 
     the action were provided.
       (B) Activities described.--A State shall use amounts paid 
     pursuant to subparagraph (A) to carry out activities to 
     assure the safety and quality of health care services 
     provided in the State, including (but not limited to)--
       (i) licensing or certifying health care professionals and 
     health care providers in the State;
       (ii) operating alternative dispute resolution systems;
       (iii) carrying out public education programs relating to 
     medical malpractice and the availability of alternative 
     dispute resolution systems in the State; and
       (iv) carrying out programs to reduce malpractice-related 
     costs for retired providers or other providers volunteering 
     to provide services in medically underserved areas.
       (C) Maintenance of effort.--A State shall use any amounts 
     paid pursuant to subparagraph (A) to supplement and not to 
     replace amounts spent by the State for the activities 
     described in subparagraph (B).
       (c) Periodic Payments for Future Losses.--
       (1) General rule.--In any medical malpractice liability 
     action in which the damages awarded for future economic loss 
     exceeds $100,000, a defendant may not be required to pay such 
     damages in a single, lump-sum payment, but shall be permitted 
     to make such payments periodically based on when the damages 
     are found likely to occur, as such payments are determined by 
     the court.
       (2) Waiver.--A court may waive the application of paragraph 
     (1) with respect to a defendant if the court determines that 
     it is not in the best interests of the plaintiff to receive 
     payments for damages on such a periodic basis.
       (d) Mandatory Offsets for Damages Paid by a Collateral 
     Source.--
       (1) In general.--With respect to a medical malpractice 
     liability claim or action, the total amount of damages 
     received by an individual under such claim or action shall be 
     reduced, in accordance with paragraph (2), by any other 
     payment that has been, or will be, made to an individual to 
     compensate such individual for the injury that was the 
     subject of such claim or action.
       (2) Amount of reduction.--The amount by which an award of 
     damages to an individual for an injury shall be reduced under 
     paragraph (1) shall be--
       (A) the total amount of any payments (other than such 
     award) that have been made or that will be made to such 
     individual to pay costs of or compensate such individual for 
     the injury that was the subject of the claim or action; minus
       (B) the amount paid by such individual (or by the spouse, 
     parent, or legal guardian of such individual) to secure the 
     payments described in subparagraph (A).

     SEC. 2013. TREATMENT OF ATTORNEY'S FEES AND OTHER COSTS.

       (a) Limitation on Amount of Contingency Fees.--
       (1) In general.--An attorney who represents, on a 
     contingency fee basis, a claimant in a medical malpractice 
     liability claim may not charge, demand, receive, or collect 
     for services rendered in connection with such claim in excess 
     of the following amount recovered by judgment or settlement 
     under such claim:
       (A) 25 percent of the first $150,000 (or portion thereof) 
     recovered, plus
       (B) 10 percent of any amount in excess of $150,000 
     recovered.
       (2) Calculation of periodic payments.--In the event that a 
     judgment or settlement includes periodic or future payments 
     of damages, the amount recovered for purposes of computing 
     the limitation on the contingency fee under paragraph (1) 
     shall be based on the cost of the annuity or trust 
     established to make the payments. In any case in which an 
     annuity or trust is not established to make such payments, 
     such amount shall be based on the present value of the 
     payments.
       (b) Requiring Party Contesting ADR Ruling to Pay Attorney's 
     Fees and Other Costs.--
       (1) In general.--The court in a medical malpractice 
     liability action shall require the party that (pursuant to 
     section 2011(c)(1)) contested the ruling of the alternative 
     dispute resolution system with respect to the medical 
     malpractice liability claim that is the subject of the action 
     to pay to the opposing party the costs incurred by the 
     opposing party under the action, including attorney's fees, 
     fees paid to expert witnesses, and other litigation expenses 
     (but not including court costs, filing fees, or other 
     expenses paid directly by the party to the court, or any fees 
     or costs associated with the resolution of the claim under 
     the alternative dispute resolution system), but only if--
       (A) in the case of an action in which the party that 
     contested the ruling is the claimant, the amount of damages 
     awarded to the party under the action does not exceed the 
     amount of damages awarded to the party under the ADR system 
     by at least 10 percent; and
       (B) in the case of an action in which the party that 
     contested the ruling is the defendant, the amount of damages 
     assessed against the party under the action is not at least 
     10 percent less than the amount of damages assessed under the 
     ADR system.
       (2) Exceptions.--Paragraph (1) shall not apply if--
       (A) the party contesting the ruling made under the previous 
     alternative dispute resolution system shows that--
       (i) the ruling was procured by corruption, fraud, or undue 
     means,
       (ii) there was partiality or corruption under the system,
       (iii) there was other misconduct under the system that 
     materially prejudiced the party's rights, or
       (iv) the ruling was based on an error of law;
       (B) the party contesting the ruling made under the 
     alternative dispute resolution system presents new evidence 
     before the trier of fact that was not available for 
     presentation under the ADR system;
       (C) the medical malpractice liability action raised a novel 
     issue of law; or
       (D) the court finds that the application of such paragraph 
     to a party would constitute an undue hardship, and issues an 
     order waiving or modifying the application of such paragraph 
     that specifies the grounds for the court's decision.
       (3) Requirement for performance bond.--The court in a 
     medical malpractice liability action shall require the party 
     that (pursuant to section 2011(c)(1)) contested the ruling of 
     the alternative dispute resolution system with respect to the 
     medical malpractice liability claim that is the subject of 
     the action to post a performance bond (in such amount and 
     consisting of such funds and assets as the court determines 
     to be appropriate), except that the court may waive the 
     application of such requirement to a party if the court 
     determines that the posting of such a bond is not necessary 
     to ensure that the party shall meet the requirements of this 
     subsection to pay the opposing party the costs incurred by 
     the opposing party under the action.
       (4) Limit on attorney's fees paid.--Attorneys' fees that 
     are required to be paid under paragraph (1) by the contesting 
     party shall not exceed the amount of the attorneys' fees 
     incurred by the contesting party in the action. If the 
     attorneys' fees of the contesting party are based on a 
     contingency fee agreement, the amount of attorneys' fees for 
     purposes of the preceding sentence shall not exceed the 
     reasonable value of those services.
       (5) Records.--In order to receive attorneys' fees under 
     paragraph (1), counsel of record in the medical malpractice 
     liability action involved shall maintain accurate, complete 
     records of hours worked on the action, regardless of the fee 
     arrangement with the client involved.
       (c) Contingency Fee Defined.--As used in this section, the 
     term ``contingency fee'' means any fee for professional legal 
     services which is, in whole or in part, contingent upon the 
     recovery of any amount of damages, whether through judgment 
     or settlement.

     SEC. 2014. JOINT AND SEVERAL LIABILITY.

       A defendant may be held severally but not jointly liable in 
     a medical malpractice action. A person found liable for 
     damages in any such action may be found liable, if at all, 
     only for those damages directly attributable to the person's 
     proportionate share of fault or responsibility for the 
     injury, and may not be found liable for damages attributable 
     to the proportionate share of fault or responsibility of any 
     other person (without regard to whether that person is a 
     party to the action) for the injury, including any person 
     bringing the action.

     SEC. 2015. STATUTE OF LIMITATIONS.

       A medical malpractice liability claim may not be brought 
     after the expiration of the 7-year period that begins on the 
     date the alleged injury that is the subject of the claim 
     occurred. If the commencement of such an action is stayed or 
     enjoined, the running of the statute of limitations under 
     this section shall be suspended for the period of the stay or 
     injunction.

     SEC. 2016. UNIFORM STANDARD FOR DETERMINING NEGLIGENCE.

       A defendant in a medical malpractice liability action may 
     not be found to have acted negligently unless the defendant's 
     conduct at the time of providing the health care services 
     that are the subject of the action was not reasonable.

     SEC. 2017. SPECIAL PROVISION FOR CERTAIN OBSTETRIC SERVICES.

       (a) Imposition of Higher Standard of Proof.--In the case of 
     a medical malpractice liability claim relating to services 
     provided during labor or the delivery of a baby, if the 
     health care professional against whom the claim is brought 
     did not previously treat the individual alleged to have been 
     injured for the pregnancy, the trier of fact may not find 
     that the defendant committed malpractice and may not assess 
     damages against the health care professional unless the 
     malpractice is proven by clear and convincing evidence.
       (b) Applicability to Group Practices or Agreements Among 
     Providers.--For purposes of subsection (a), a health care 
     professional shall be considered to have previously treated 
     an individual for a pregnancy if the professional is a member 
     of a group practice whose members previously treated the 
     individual for the pregnancy or is providing services to the 
     individual during labor or the delivery of a baby pursuant to 
     an agreement with another health care professional.
       (c) Effective Date.--This section shall apply with respect 
     to claims accruing or actions brought on or after the 
     expiration of the 2-year period that begins on the date of 
     the enactment of this Act.

 PART 3--REQUIREMENTS FOR STATE ALTERNATIVE DISPUTE RESOLUTION SYSTEMS 
                                 (ADR)

     SEC. 2031. BASIC REQUIREMENTS.

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

     SEC. 2032. CERTIFICATION OF STATE SYSTEMS; APPLICABILITY OF 
                   ALTERNATIVE FEDERAL SYSTEM.

       (a) Certification.--
       (1) In general.--Not later than October 1 of each year 
     (beginning with 1995), the Secretary, in consultation with 
     the Attorney General, shall determine whether a State's 
     alternative dispute resolution system meets the requirements 
     of this part for the following calendar year.
       (2) Basis for certification.--The Secretary shall certify a 
     State's alternative dispute resolution system under this 
     subsection for a calendar year if the Secretary determines 
     under paragraph (1) that the system meets the requirements of 
     section 2031.
       (b) Applicability of Alternative Federal System.--
       (1) Establishment and applicability.--Not later than 
     October 1, 1995, the Secretary, in consultation with the 
     Attorney General, shall establish by rule an alternative 
     Federal ADR system for the resolution of medical malpractice 
     liability claims during a calendar year in States that do not 
     have in effect an alternative dispute resolution system 
     certified under subsection (a) for the year.
       (2) Requirements for system.--Under the alternative Federal 
     ADR system established under paragraph (1)--
       (A) paragraphs (1), (2), (6), and (7) of section 2031(a) 
     shall apply to claims brought under the system;
       (B) if the system provides for the resolution of claims 
     through arbitration, the claims brought under the system 
     shall be heard and resolved by arbitrators appointed by the 
     Secretary in consultation with the Attorney General; and
       (C) with respect to a State in which the system is in 
     effect, the Secretary may (at the State's request) modify the 
     system to take into account the existence of dispute 
     resolution procedures in the State that affect the resolution 
     of medical malpractice liability claims.
       (3) Treatment of States with alternative system in 
     effect.--If the alternative Federal ADR system established 
     under this subsection is applied with respect to a State for 
     a calendar year--
       (A) the State shall reimburse the United States (at such 
     time and in such manner as the Secretary may require) for the 
     costs incurred by the United States during the year as a 
     result of the application of the system with respect to the 
     State; and
       (B) notwithstanding any other provision of law, no funds 
     may be paid to the State (or to any unit of local government 
     in the State) or to any entity in the State pursuant to the 
     Public Health Service Act.

     SEC. 2033. REPORTS ON IMPLEMENTATION AND EFFECTIVENESS OF 
                   ALTERNATIVE DISPUTE RESOLUTION SYSTEMS.

       (a) In General.--Not later than 5 years after the date of 
     the enactment of this Act, the Secretary shall prepare and 
     submit to the Congress a report describing and evaluating 
     State alternative dispute resolution systems operated 
     pursuant to this part and the alternative Federal system 
     established under section 2032(b).
       (b) Contents of Report.--The Secretary shall include in the 
     report prepared and submitted under subsection (a)--
       (1) information on--
       (A) the effect of the alternative dispute resolution 
     systems on the cost of health care within each State,
       (B) the impact of such systems on the access of individuals 
     to health care within the State, and
       (C) the effect of such systems on the quality of health 
     care provided within the State; and
       (2) to the extent that such report does not provide 
     information on no-fault systems operated by States as 
     alternative dispute resolution systems pursuant to this part, 
     an analysis of the feasibility and desirability of 
     establishing a system under which medical malpractice 
     liability claims shall be resolved on a no-fault basis.

   PART 4--OTHER PROVISIONS RELATING TO MEDICAL MALPRACTICE LIABILITY

     SEC. 2041. PERMITTING STATE PROFESSIONAL SOCIETIES TO 
                   PARTICIPATE IN DISCIPLINARY ACTIVITIES.

       (a) Role of Professional Societies.--Notwithstanding any 
     other provision of State or Federal law, a State agency 
     responsible for the conduct of disciplinary actions for a 
     type of health care practitioner may enter into agreements 
     with State or county professional societies of such type of 
     health care practitioner to permit such societies to 
     participate in the licensing of such health care 
     practitioner, and to review any health care malpractice 
     action, health care malpractice claim or allegation, or other 
     information concerning the practice patterns of any such 
     health care practitioner. Any such agreement shall comply 
     with subsection (b).
       (b) Requirements of Agreements.--Any agreement entered into 
     under subsection (a) for licensing activities or the review 
     of any health care malpractice action, health care 
     malpractice claim or allegation, or other information 
     concerning the practice patterns of a health care 
     practitioner shall provide that--
       (1) the health care professional society conducts such 
     activities or review as expeditiously as possible;
       (2) after the completion of such review, such society shall 
     report its findings to the State agency with which it entered 
     into such agreement;
       (3) the conduct of such activities or review and the 
     reporting of such findings be conducted in a manner which 
     assures the preservation of confidentiality of health care 
     information and of the review process; and
       (4) no individual affiliated with such society is liable 
     for any damages or injury directly caused by the individual's 
     actions in conducting such activities or review.
       (c) Agreements Not Mandatory.--Nothing in this section may 
     be construed to require a State to enter into agreements with 
     societies described in subsection (a) to conduct the 
     activities described in such subsection.
       (d) Effective Date.--This section shall take effect 2 years 
     after the date of the enactment of this Act.

     SEC. 2042. STUDY OF INCENTIVES TO ENCOURAGE VOLUNTARY SERVICE 
                   BY PHYSICIANS.

       (a) Study.--The Secretary shall conduct a study analyzing 
     the existence and effectiveness of incentives adopted by 
     State and local governments, insurers, medical societies, and 
     other entities to encourage physicians (whether practicing or 
     retired) to volunteer to provide health care services in 
     medically underserved areas.
       (b) Reports.--(1) Not later than 1 year after the date of 
     the enactment of this Act, the Secretary shall submit an 
     interim report to Congress on the study conducted under 
     subsection (a), together with the Secretary's recommendations 
     for actions to increase the number of physicians volunteering 
     to provide health care services in medically underserved 
     areas.
       (2) Not later than 5 years after the date of the enactment 
     of this Act, the Secretary shall submit a final report to the 
     Congress on the study conducted under subsection (a) (taking 
     into account the effects of this subtitle on the incidence 
     and costs of medical malpractice), together with the 
     Secretary's recommendations for actions to increase the 
     number of physicians volunteering to provide health care 
     services in medically underserved areas.

     SEC. 2043. REQUIREMENTS FOR RISK MANAGEMENT PROGRAMS.

       (a) Requirements for Providers.--Each State shall require 
     each health care professional and health care provider 
     providing services in the State to participate in a risk 
     management program to prevent and provide early warning of 
     practices which may result in injuries to patients or which 
     otherwise may endanger patient safety.
       (b) Requirements for Insurers.--Each State shall require 
     each entity which provides health care professional or 
     provider liability insurance to health care professionals and 
     health care providers in the State to--
       (1) establish risk management programs based on data 
     available to such entity or sanction programs of risk 
     management for health care professionals and health care 
     providers provided by other entities; and
       (2) require each such professional or provider, as a 
     condition of maintaining insurance, to participate in one 
     program described in paragraph (1) at least once in each 3-
     year period.
       (c) Effective Date.--This section shall take effect 2 years 
     after the date of the enactment of this Act.

     SEC. 2044. GRANTS FOR MEDICAL SAFETY PROMOTION.

       (a) Research on Medical Injury Prevention and Compensation.
       (1) In general.--The Secretary shall make grants for the 
     conduct of basic research in the prevention of and 
     compensation for injuries resulting from health care 
     professional or health care provider malpractice, and 
     research of the outcomes of health care procedures.
       (2) Preference for research on certain activities.--In 
     making grants under paragraph (1), the Secretary shall give 
     preference to applications for grants to conduct research on 
     the behavior of health care providers and health care 
     professionals in carrying out their professional duties and 
     of other participants in systems for compensating individuals 
     injured by medical malpractice, the effects of financial and 
     other incentives on such behavior, the determinants of 
     compensation system outcomes, and the costs and benefits of 
     alternative compensation policy options.
       (3) Application.--The Secretary may not make a grant under 
     paragraph (1) unless an applicant submits an application to 
     the Secretary at such time, in such form, in such manner, and 
     containing such information as the Secretary may require.
       (b) Grants for Licensing and Disciplinary Activities.--
       (1) In general.--The Secretary shall make grants to States 
     to assist States in improving the State's ability to license 
     and discipline health care professionals.
       (2) Uses for grants.--A State may use a grant awarded under 
     subsection (a) to develop and implement improved mechanisms 
     for monitoring the practices of health care professionals or 
     for conducting disciplinary activities.
       (3) Technical assistance.--The Secretary shall provide 
     technical assistance to States receiving grants under 
     paragraph (1) to assist them in evaluating their medical 
     practice acts and procedures and to encourage the use of 
     efficient and effective early warning systems and other 
     mechanisms for detecting practices which endanger patient 
     safety and for disciplining health care professionals.
       (4) Applications.--The Secretary may not make a grant under 
     paragraph (1) unless the applicant submits an application to 
     the Secretary at such time, in such form, in such manner, and 
     containing such information as the Secretary shall require.
       (c) Grants for Public Education Programs.--
       (1) In general.--The Secretary shall make grants to States 
     and to local governments, private nonprofit organizations, 
     and health professional schools (as defined in paragraph (3)) 
     for--
       (A) educating the general public about the appropriate use 
     of health care and realistic expectations of medical 
     intervention;
       (B) educating the public about the resources and role of 
     health care professional licensing and disciplinary boards in 
     investigating claims of incompetence or health care 
     malpractice; and
       (C) developing programs of faculty training and curricula 
     for educating health care professionals in quality assurance, 
     risk management, and medical injury prevention.
       (2) Applications.--The Secretary may not make a grant under 
     paragraph (1) unless the applicant submits an application to 
     the Secretary at such time, in such form, in such manner, and 
     containing such information as the Secretary shall require.
       (3) Health professional school defined.--In paragraph (1), 
     the term ``health professional school'' means a school of 
     nursing (as defined in section 853(2) of the Public Health 
     Service Act) or a school or program under section 799(1) of 
     such Act.
       (d) Authorization of Appropriations.--There are authorized 
     to be appropriated not more than $15,000,000 for each of the 
     first 5 fiscal years beginning on or after the date of the 
     enactment of this Act for grants under this section.
  Subtitle B--Administrative Cost Savings and Fair Health Information 
                               Practices

                  PART 1--ADMINISTRATIVE COST SAVINGS

     SEC. 2100. PURPOSE.

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

     SEC. 2101. DEFINITIONS.

       For purposes of this part:
       (1) Code set.--The term ``code set'' means any set of codes 
     used for encoding data elements, such as tables of terms, 
     medical concepts, medical diagnostic codes, or medical 
     procedure codes.
       (2) Coordination of benefits.--The term ``coordination of 
     benefits'' means determining and coordinating the financial 
     obligations of plan sponsors when health care benefits are 
     payable by more than one such sponsor.
       (3) Employer.--The term ``employer'' has the meaning given 
     such term in section 3(5) of the Employee Retirement Income 
     Security Act of 1974.
       (4) Health information.--The term ``health information'' 
     means any information that relates to the past, present, or 
     future physical or mental health or condition or functional 
     status of an individual, the provision of health care to an 
     individual, or payment for the provision of health care to an 
     individual.
       (5) Health information network.--The term ``health 
     information network'' means the health information system 
     that is formed through the application of the requirements 
     and standards established under this part.
       (6) Health information network service.--The term ``health 
     information network service''--
       (A) means a private entity or an entity operated by a State 
     that enters into contracts--
       (i) to process or facilitate the processing of nonstandard 
     data elements of health information into standard data 
     elements;
       (ii) to provide the means by which persons are connected to 
     the health information network for purposes of meeting the 
     requirements of this part, including the holding of standard 
     data elements of health information;
       (iii) to provide authorized access to health information 
     through the health information network; or
       (iv) to provide specific information processing services, 
     such as automated coordination of benefits and claims 
     transaction routing; and
       (B) includes a health information protection service.
       (7) Health information protection service.--The term 
     ``health information protection service'' means a private 
     entity or an entity operated by a State that accesses 
     standard data elements of health information through the 
     health information network, processes such information into 
     non-identifiable health information, and may store such 
     information.
       (8) Health provider.--The term ``health provider'' includes 
     a provider of services (as defined in section 1861(u) of the 
     Social Security Act), a provider of medical or other health 
     services (as defined in section 1861(s) of such Act), and any 
     other person (other than a plan sponsor) furnishing health 
     care items or services.
       (9) Non-identifiable health information.--The term ``non-
     identifiable health information'' means health information 
     that is not protected health information (as defined in part 
     2).
       (10) Plan sponsor.--The term ``plan sponsor'' means--
       (A) a plan (as defined in section 1033(6)(B));
       (B) an insurer (as defined in section 1131(6)) providing 
     health insurance coverage (as defined in section 1131(4)); 
     and
       (C) a State, or the Federal Government, acting in a 
     capacity as a provider of health benefits to eligible 
     individuals that is equivalent to that of an insurer.
       (11) Purchasing arrangement.--The term ``purchasing 
     arrangement'' means a voluntary health purchasing arrangement 
     described in part 3 of subtitle B of title I.
       (12) Secretary.--The term ``Secretary'' means the Secretary 
     of Health and Human Services.
       (13) Standard.--The term ``standard'', when used with 
     reference to a transaction or to data elements of health 
     information, means that the transaction or data elements meet 
     any standard adopted by the Secretary under subpart A that 
     applies to the transaction or data elements.

        Subpart A--Standards for Data Elements and Transactions

     SEC. 2103. GENERAL REQUIREMENTS ON SECRETARY.

       (a) In General.--The Secretary shall adopt standards and 
     modifications to standards under this part that are--
       (1) consistent with the objective of reducing the costs of 
     providing and paying for health care; and
       (2) in use and generally accepted, developed, or modified 
     by the standard-setting organizations accredited by the 
     American National Standard Institute.
       (b) Initial Standards.--The Secretary may develop an 
     expedited process for the adoption of initial standards under 
     this subpart.
       (c) Protection of Commercial Information.--In adopting 
     standards under this part, the Secretary may not require 
     disclosure of trade secrets and confidential commercial 
     information by any person.

     SEC. 2104. STANDARDS FOR DATA ELEMENTS OF HEALTH INFORMATION.

       (a) In General.--The Secretary shall adopt standards 
     necessary to make uniform and compatible for electronic 
     transmission through the health information network the data 
     elements of any health information that the Secretary 
     determines is appropriate for transmission in connection with 
     a transaction described in section 2111.
       (b) Additions.--The Secretary may make additions to any set 
     of data elements adopted under subsection (a) as the 
     Secretary determines appropriate in a manner that minimizes 
     the disruption and cost of compliance with such additions.
       (c) Certain Data Elements.--
       (1) Unique health identifiers.--The Secretary shall 
     establish a system to provide for a standard unique health 
     identifier for each individual, employer, plan sponsor, and 
     health provider for use in the health care system.
       (2) Code sets.--
       (A) In general.--The Secretary, in consultation with 
     experts from the private sector and Federal agencies, shall--
       (i) select code sets for appropriate data elements from 
     among the code sets that have been developed by private and 
     public entities; or
       (ii) establish code sets for such data elements if no code 
     sets for the data elements have been developed.
       (B) Distribution.--The Secretary shall establish efficient 
     and low-cost procedures for distribution of code sets and 
     modifications to code sets.

     SEC. 2105. INFORMATION TRANSACTION STANDARDS.

       (a) In General.--The Secretary shall adopt technical 
     standards that are consistent with part 2 relating to the 
     method by which standard data elements of health information 
     may be transmitted electronically, including standards with 
     respect to the format in which such data elements may be 
     transmitted.
       (b) Special Rule for Coordination of Benefits.--Any 
     standard adopted by the Secretary under paragraph (1) that 
     relates to coordination of benefits shall provide that a 
     claim for reimbursement for health services furnished shall 
     be tested, by an algorithm specified by the Secretary, 
     against all records of enrollment and eligibility for the 
     individual who received such services that are available to 
     the recipient of the claim through the health information 
     network to determine any primary and secondary obligors for 
     payment.
       (c) Electronic Signature.--The Secretary, in coordination 
     with the Secretary of Commerce, shall promulgate regulations 
     specifying procedures for the electronic transmission and 
     authentication of signatures, compliance with which shall be 
     deemed to satisfy State and Federal statutory requirements 
     for written signatures with respect to transactions described 
     in section 2111 and written signatures on health records and 
     prescriptions.
       (d) Standards for Claims for Clinical Laboratory Tests.--
     The standards under this section shall provide that claims 
     for clinical laboratory tests for which benefits are payable 
     by a plan sponsor shall be submitted directly by the person 
     or entity that performed (or supervised the performance of) 
     the tests to the sponsor in a manner consistent with (and 
     subject to such exceptions as are provided under) the 
     requirement for direct submission of such claims under the 
     medicare program.

     SEC. 2106. TIMETABLES FOR ADOPTION OF STANDARDS.

       (a) Initial Standards for Data Elements.--The Secretary 
     shall adopt standards relating to--
       (1) the data elements for the information described in 
     section 2104(a) not later than 9 months after the date of the 
     enactment of this Act (except in the case of standards with 
     respect to data elements for claims attachments, which shall 
     be adopted not later than 24 months after the date of the 
     enactment of this Act); and
       (2) any addition to a set of data elements, in conjunction 
     with making such an addition.
       (b) Initial Standards for Information Transactions.--The 
     Secretary shall adopt standards relating to information 
     transactions under section 2105 not later than 9 months after 
     the date of the enactment of this Act (except in the case of 
     standards for claims attachments, which shall be adopted not 
     later than 24 months after the date of the enactment of this 
     Act).
       (c) Modifications to Standards.--
       (1) In general.--Except as provided in paragraph (2), the 
     Secretary shall review the standards adopted under this 
     subpart and shall adopt modified standards as determined 
     appropriate, but not more frequently than once every 6 
     months. Any modification to standards shall be completed in a 
     manner which minimizes the disruption to, and costs of 
     compliance incurred by, a plan sponsor, health provider, or 
     purchasing arrangement that is required to comply with 
     subpart B.
       (2) Special rules.--
       (A) Modifications during first 12-month period.--Except 
     with respect to additions and modifications to code sets 
     under subparagraph (B), the Secretary may not adopt any 
     modification to a standard adopted under this subpart during 
     the 12-month period beginning on the date the standard is 
     adopted, unless the Secretary determines that the 
     modification is necessary in order to permit a plan sponsor, 
     a health provider, or a purchasing arrangement to comply with 
     subpart B.
       (B) Additions and modifications to code sets.--
       (i) In general.--The Secretary shall ensure that procedures 
     exist for the routine maintenance, testing, enhancement, and 
     expansion of code sets.
       (ii) Additional Rules.--If a code set is modified under 
     this subsection, the modified code set shall include 
     instructions on how data elements that were encoded prior to 
     the modification are to be converted or translated so as to 
     preserve the value of the data elements. Any modification to 
     a code set under this subsection shall be implemented in a 
     manner that minimizes the disruption to, and costs of 
     compliance incurred by, a plan sponsor, health provider, or 
     purchasing arrangement that is required to comply with 
     subpart B.
       (d) Evaluation of Standards.--The Secretary may establish a 
     process to measure or verify the consistency of standards 
     adopted or modified under this subpart. Such process may 
     include demonstration projects and analyses of the cost of 
     implementing such standards and modifications.

   Subpart B--Requirements With Respect to Certain Transactions and 
                              Information

     SEC. 2111. STANDARD TRANSACTIONS AND INFORMATION.

       (a) Transactions by sponsors.--
       (1) Transactions with providers.--If a plan sponsor 
     conducts any of the transactions described in paragraph (3) 
     with a health provider--
       (A) the transaction shall be a standard transaction; and
       (B) the health information transmitted by the sponsor to 
     the provider or by the provider to the sponsor in connection 
     with the transaction shall be in the form of standard data 
     elements.
       (2) Transactions with sponsors.--If a plan sponsor conducts 
     any of the transactions described in paragraph (3) with 
     another plan sponsor--
       (A) the transaction shall be a standard transaction; and
       (B) the health information transmitted by either sponsor in 
     connection with the transaction shall be in the form of 
     standard data elements.
       (3) Transactions.--The transactions referred to in 
     paragraphs (1) and (2) are the following:
       (A) Verification of eligibility for benefits.
       (B) Coordination of benefits.
       (C) Claim submission.
       (D) Claim attachment submission.
       (E) Claim status notification.
       (F) Claim status verification.
       (G) Claim adjudication.
       (H) Payment and remittance advice.
       (I) Certification or authorization of a referral to a 
     health provider who is not part of the defined set of 
     providers providing items and services under a network plan 
     (as defined in section 1131(5)).
       (b) Transactions by purchasing arrangements.--
       (1) In general.--If a purchasing arrangement conducts any 
     of the transactions described in paragraph (2) with a plan 
     sponsor--
       (A) the transaction shall be a standard transaction; and
       (B) the health information transmitted by the arrangement 
     to the sponsor or by the sponsor to the arrangement in 
     connection with the transaction shall be in the form of 
     standard data elements.
       (2) Transactions.--The transactions referred to in 
     paragraph (1) are the following:
       (A) Enrollment and disenrollment.
       (B) Premium payment.
       (c) Use of Health Information Network Services.--A plan 
     sponsor, a health provider, or a purchasing arrangement may 
     comply with any provision of this section by entering into an 
     agreement or other arrangement with a health information 
     network service certified under section 2121 pursuant to 
     which the service undertakes the duties applicable to the 
     sponsor, provider, or arrangement under the provision.

     SEC. 2112. ACCESSING HEALTH INFORMATION FOR AUTHORIZED 
                   PURPOSES.

       (a) Procurement Rule for Government Agencies.--
       (1) In general.--A health information protection service 
     that is certified under section 2121 shall make available to 
     a Federal or State agency, pursuant to a cost-type contract 
     (as defined under the Federal Acquisition Regulation), any 
     non-identifiable health information, including non-
     identifiable health information that is derived from 
     protected health information, that--
       (A) is held by the service or may be obtained by the 
     service under paragraph (2) or subsection (b);
       (B) consists of data elements that are subject to a 
     standard under subpart A; and
       (C) is requested by the agency to fulfill a requirement 
     under this Act.
       (2) Certain information available at low cost.--If a health 
     information protection service requires health information 
     consisting of data elements that are subject to a standard 
     under subpart A from a plan sponsor or a health provider in 
     order to comply with a request made by a Federal or State 
     agency under paragraph (1), the sponsor or provider shall 
     make such information available to such organization for a 
     charge that does not exceed the reasonable cost of 
     transmitting the information.
       (b) Procurement Rule for Information Protection Services.--
     A health information protection service that makes non-
     identifiable health information available to a Federal or 
     State agency under subsection (a) shall make such non-
     identifiable information available, for a charge that does 
     not exceed the reasonable cost of transmitting the 
     information, to any other health information protection 
     service that--
       (A) is certified under section 2121; and
       (B) requests the information.

     SEC. 2113. ENSURING AVAILABILITY OF INFORMATION.

       The Secretary shall establish a procedure under which a 
     plan sponsor or health provider that does not have the 
     ability to transmit standard data elements directly, and does 
     not have access to a health information network service 
     certified under section 2121, may comply with the provisions 
     of this subpart.

     SEC. 2114. TIMETABLES FOR COMPLIANCE WITH REQUIREMENTS.

       (a) Initial Compliance.--
       (1) In general.--Not later than 12 months after the date on 
     which standards are adopted under subpart A with respect to a 
     type of transaction, or data elements for a type of health 
     information, a plan sponsor, health provider, or purchasing 
     arrangement shall comply with the requirements of this 
     subpart with respect to such transaction or information.
       (2) Additional data elements.--Not later than 12 months 
     after the date on which the Secretary adopts an addition to a 
     set of data elements for health information under section 
     2104, a plan sponsor, health provider, or purchasing 
     arrangement shall comply with the requirements of this 
     subpart using such data elements.
       (b) Compliance with Modified Standards.--
       (1) In general.--If the Secretary adopts a modified 
     standard under section 2106(c), a plan sponsor, health 
     provider, or purchasing arrangement shall comply with the 
     modified standard at such time as the Secretary determines 
     appropriate, taking into account the time needed to comply 
     due to the nature and extent of the modification.
       (2) Special rule.--In the case of a modification to a 
     standard that does not occur within the 12-month period 
     beginning on the date the standard is adopted, the time 
     determined appropriate by the Secretary under paragraph (1) 
     may not be--
       (A) earlier than the last day of the 90-day period 
     beginning on the date the modified standard is adopted; or
       (B) later than the last day of the 12-month period 
     beginning on the date the modified standard is adopted.

                  Subpart C--Miscellaneous Provisions

     SEC. 2121. STANDARDS AND CERTIFICATION FOR HEALTH INFORMATION 
                   NETWORK SERVICES.

       (a) Standards for Operation.--The Secretary shall establish 
     standards with respect to the operation of health information 
     network services, including standards ensuring that such 
     services--
       (1) develop, operate, and cooperate with one another to 
     form the health information network;
       (2) meet all of the requirements under part 2 that are 
     applicable to the services;
       (3) make public information concerning their performance, 
     as measured by uniform indicators such as accessibility, 
     transaction responsiveness, administrative efficiency, 
     reliability, dependability, and any other indicator 
     determined appropriate by the Secretary;
       (4) have security procedures that are consistent with the 
     requirements under part 2, including secure methods of 
     accessing and transmitting data; and
       (5) if they are part of a larger organization, have 
     policies and procedures in place which isolate their 
     activities with respect to processing information in a manner 
     that prevents access to such information by such larger 
     organization.
       (b) Certification by the Secretary.--
       (1) Establishment.--Not later than 12 months after the date 
     of the enactment of this Act, the Secretary shall establish a 
     certification procedure for health information network 
     services which ensures that certified services are qualified 
     to meet the requirements of this part and the standards 
     established by the Secretary under this section. Such 
     certification procedure shall be implemented in a manner that 
     minimizes the costs and delays of operations for such 
     services.
       (2) Application.--Each entity desiring to be certified as a 
     health information network service shall apply to the 
     Secretary for certification in a form and manner determined 
     appropriate by the Secretary.
       (3) Audits and reports.--The procedure established under 
     paragraph (1) shall provide for audits by the Secretary and 
     reports by an entity certified under this section as the 
     Secretary determines appropriate in order to monitor such 
     entity's compliance with the requirements of this part, part 
     2, and the standards established by the Secretary under this 
     section.
       (4) Recertification.--A health information network service 
     shall be recertified under this subsection at least every 3 
     years.
       (c) Loss of certification.--
       (1) Mandatory termination.--Except as provided in paragraph 
     (2), if a health information network service violates a 
     requirement imposed on such service under part 2, its 
     certification under this section shall be terminated unless 
     the Secretary determines that appropriate corrective action 
     has been taken.
       (2) Conditional certification--The Secretary may establish 
     a procedure under which a health information network service 
     may remain certified on a conditional basis if the service is 
     operating consistently with a plan intended to correct any 
     violations described in paragraph (1). Such procedure may 
     provide for the appointment of a trustee to continue 
     operation of the service until the requirements for full 
     certification are met.
       (d) Certification by Private Entities.--The Secretary may 
     designate private entities to conduct the certification 
     procedures established by the Secretary under this section. A 
     health information network service certified by such an 
     entity in accordance with such designation shall be 
     considered to be certified by the Secretary.
       (e) Information Held by Health Information Network 
     Services.--If a health information network service certified 
     under this section loses its certified status or takes any 
     action that would threaten the continued availability of the 
     standard data elements of health information held by such 
     service, such data elements shall be transferred to another 
     health information network service certified under this 
     section that has been designated by the Secretary.

     SEC. 2122. IMPOSITION OF ADDITIONAL REQUIREMENTS.

       (a) In General.--Except as provided in subsection (c), 
     after the Secretary has established standards under section 
     2104 that are necessary to make uniform and compatible for 
     electronic transmission the data elements that the Secretary 
     determines are appropriate for transmission in connection 
     with a transaction described in subpart B, an individual or 
     entity may not require an individual or entity, to provide in 
     any manner any additional data element in connection with--
       (1) the transaction; or
       (2) an inquiry with respect to the transaction.
       (b) Transmission Method.--Except as provided in subsection 
     (c), after the Secretary has established standards under 
     section 2105 relating to the method by which data elements 
     that the Secretary determines are appropriate for 
     transmission in connection with a transaction described in 
     subpart B may be transmitted electronically, an individual or 
     entity may not require an individual or entity to transmit 
     any data element in a manner inconsistent with the standards 
     in connection with--
       (1) the transaction; or
       (2) an inquiry with respect to the transaction.
       (c) Exception.--Subsections (a) and (b) do not apply if--
       (1) an individual or entity voluntarily agrees to provide 
     the additional data element; or
       (2) a waiver is granted under subsection (d) to permit the 
     requirement.
       (d) Conditions for Waivers.--
       (1) In general.--An individual or entity may request a 
     waiver from the Secretary in order to impose on an individual 
     or entity a requirement otherwise prohibited under subsection 
     (a) or (b).
       (2) Consideration of waiver requests.--A waiver may not be 
     granted under this subsection to impose an otherwise 
     prohibited requirement unless the Secretary determines that 
     the value of any additional information to be provided under 
     the requirement for research or other purposes significantly 
     outweighs the administrative cost of the imposition of the 
     requirement, taking into account the burden of the timing of 
     the imposition of the requirement.
       (3) Anonymous reporting.--If an individual or entity 
     attempts to impose on an individual or entity a requirement 
     prohibited under subsection (a) or (b), the individual or 
     entity on whom the requirement is being imposed may contact 
     the Secretary. The Secretary shall develop a procedure under 
     which an individual or entity that contacts the Secretary 
     under the preceding sentence shall remain anonymous. The 
     Secretary shall notify the individual or entity imposing the 
     requirement that the requirement may not be imposed unless 
     the other individual or entity voluntarily agrees to such 
     requirement or a waiver is obtained under this subsection.

     SEC. 2123. EFFECT ON STATE LAW.

       (a) In General.--Except as otherwise provided in this 
     section, a provision, requirement, or standard under this 
     part shall supersede any contrary provision of State law.
       (b) State ``Quill and Pen'' Laws.--A State may not 
     establish, continue in effect, or enforce any provision of 
     State law that requires medical or health plan records 
     (including billing information) to be maintained or 
     transmitted in written rather than electronic form, except 
     where the Secretary determines that the provision is 
     necessary to prevent fraud and abuse, with respect to 
     controlled substances, or for other purposes.
       (c) Public Health Reporting.--Nothing in this part shall be 
     construed to invalidate or limit the authority, power, or 
     procedures established under any law providing for the 
     reporting of disease or injury, child abuse, birth, or death, 
     public health surveillance, or public health investigation or 
     intervention.
       (d) Public Use Functions.--Nothing in this part shall be 
     construed to limit the authority of a Federal or State agency 
     to make non-identifiable health information available for 
     public use.
       (e) Payment for Health Care Services or Premiums.--Nothing 
     in this part shall be construed to prohibit a consumer from 
     paying for health care items or services, or plan or health 
     insurance coverage premiums, by debit, credit, or other 
     payment cards or numbers or other electronic payment means.

     SEC. 2124. GRANTS FOR DEMONSTRATION PROJECTS.

       (a) In General.--The Secretary may make grants for 
     demonstration projects to promote the development and use of 
     electronically integrated community-based clinical 
     information systems and computerized patient medical records.
       (b) Applications.--
       (1) Submission.--To apply for a grant under this section 
     for any fiscal year, an applicant shall submit an application 
     to the Secretary in accordance with the procedures 
     established by the Secretary.
       (2) Criteria for approval.--The Secretary may not approve 
     an application submitted under paragraph (1) unless the 
     application includes assurances satisfactory to the Secretary 
     regarding the following:
       (A) Use of existing technology.--Funds received under this 
     section will be used to apply telecommunications and 
     information systems technology that is in existence on the 
     date the application is submitted in a manner that improves 
     the quality of health care, reduces the costs of such care, 
     and protects the privacy and confidentiality of information 
     relating to the physical or mental condition of an 
     individual.
       (B) Use of existing information systems.--Funds received 
     under this section will be used--
       (i) to enhance telecommunications or information systems 
     that are operating on the date the application is submitted;
       (ii) to integrate telecommunications or information systems 
     that are operating on the date the application is submitted; 
     or
       (iii) to connect additional users to telecommunications or 
     information networks or systems that are operating on the 
     date the application is submitted.
       (C) Matching funds.--The applicant shall make available 
     funds for the demonstration project in an amount that equals 
     at least 20 percent of the cost of the project.
       (c) Geographic Diversity.--In making any grants under this 
     section, the Secretary shall, to the extent practicable, make 
     grants to persons representing different geographic areas of 
     the United States, including urban and rural areas.
       (d) Review and Sanctions.--The Secretary shall review at 
     least annually the compliance of a person receiving a grant 
     under this section with the provisions of this section. The 
     Secretary shall establish a procedure for determining whether 
     such a person has failed to comply substantially within the 
     provisions of this section and the sanctions to be imposed 
     for any such noncompliance.
       (e) Annual Report.--The Secretary shall submit an annual 
     report to the President for transmittal to Congress 
     containing a description of the activities carried out under 
     this section.

                 Subpart D--Assistance to the Secretary

     SEC. 2131. GENERAL REQUIREMENT ON SECRETARY.

       In complying with any requirements imposed on the Secretary 
     under this part, the Secretary shall rely on recommendations 
     of the Health Information Advisory Committee established 
     under section 2132 and shall consult with appropriate Federal 
     agencies.

     SEC. 2132. HEALTH INFORMATION ADVISORY COMMITTEE.

       (a) Establishment.--There is established a committee to be 
     known as the Health Care Information Advisory Committee.
       (b) Duty.--
       (1) In general.--The committee shall--
       (A) provide assistance to the Secretary in complying with 
     the requirements imposed on the Secretary under this part and 
     part 2;
       (B) be generally responsible for advising the Secretary and 
     the Congress on the status of the health information network; 
     and
       (C) make recommendations to correct any problems that may 
     occur in the network's implementation and ongoing operations 
     and to refine and improve the network.
       (2) Technical assistance.--In performing its duties under 
     this subsection, the committee shall receive technical 
     assistance from appropriate Federal agencies.
       (c) Membership.--
       (1) In general.--The committee shall consist of 15 members 
     to be appointed by the President not later than 60 days after 
     the date of the enactment of this part. The President shall 
     designate 1 member as the Chair.
       (2) Expertise.--The membership of the committee shall 
     consist of individuals who are of recognized standing and 
     distinction and who possess the demonstrated capacity to 
     discharge the duties imposed on the committee.
       (3) Terms.--Each member of the committee shall be appointed 
     for a term of 5 years, except that the members first 
     appointed shall serve staggered terms such that the terms of 
     no more than 3 members expire at one time.
       (4) Vacancies.--
       (A) In general.--A vacancy on the committee shall be filled 
     in the manner in which the original appointment was made and 
     shall be subject to any conditions which applied with respect 
     to the original appointment.
       (B) Filling unexpired term.--An individual chosen to fill a 
     vacancy shall be appointed for the unexpired term of the 
     member replaced.
       (C) Expiration of terms.--The term of any member shall not 
     expire before the date on which the member's successor takes 
     office.
       (5) Conflicts of interest.--Members of the committee shall 
     disclose upon appointment to the committee or at any 
     subsequent time that it may occur, conflicts of interest.
       (d) Meetings.--
       (1) In general.--Except as provided in paragraph (2), the 
     committee shall meet at the call of the Chair.
       (2) Initial meeting.--Not later than 30 days after the date 
     on which all members of the committee have been appointed, 
     the committee shall hold its first meeting.
       (3) Quorum.--A majority of the members of the committee 
     shall constitute a quorum, but a lesser number of members may 
     hold hearings.
       (e) Power to Hold Hearings.--The committee may hold such 
     hearings, sit and act at such times and places, take such 
     testimony, and receive such evidence as the committee 
     considers advisable to carry out the purposes of this 
     section.
       (f) Other Administrative Provisions.--Subparagraphs (C), 
     (D), and (H) of section 1886(e)(6) of the Social Security Act 
     shall apply to the committee in the same manner as they apply 
     to the Prospective Payment Assessment Commission.
       (g) Reports.--
       (1) In general.--The committee shall annually prepare and 
     submit to Congress and the Secretary a report including at 
     least an analysis of--
       (A) the status of the health information network 
     established under this part, including whether the network is 
     fulfilling the purpose described in section 2100;
       (B) the savings and costs of the network;
       (C) the activities of health information network services 
     certified under section 2121, health providers, and plan 
     sponsors under this part;
       (D) the extent to which entities described in subparagraph 
     (C) are meeting the standards adopted under this part and 
     working together to form an integrated network that meets the 
     needs of its users;
       (E) the extent to which entities described in subparagraph 
     (C) are meeting the privacy and security protections of part 
     2;
       (F) whether the Federal Government and State Governments 
     are receiving information of sufficient quality to meet their 
     responsibilities under this Act;
       (G) any problems with respect to implementation of the 
     network;
       (H) the extent to which timetables under this part for the 
     adoption and implementation of standards are being met; and
       (I) any legislative recommendations related to the health 
     information network.
       (2) Availability to the public.--Any information in the 
     report submitted to Congress under paragraph (1) shall be 
     made available to the public, unless such information may not 
     be disclosed by law.
       (h) Duration.--Notwithstanding section 14(a) of the Federal 
     Advisory Committee Act, the committee shall continue in 
     existence until otherwise provided by law.

               PART 2--FAIR HEALTH INFORMATION PRACTICES

     SEC. 2140. DEFINITIONS.

       (a) Definitions Relating to Protected Health Information.--
     For purposes of this part:
       (1) Disclose.--The term ``disclose'', when used with 
     respect to protected health information that is held by a 
     health information trustee, means to provide access to the 
     information, but only if such access is provided by the 
     trustee to a person other than--
       (A) the trustee or an officer or employee of the trustee;
       (B) an affiliated person of the trustee; or
       (C) a protected individual who is a subject of the 
     information.
       (2) Disclosure.--The term ``disclosure'' means the act or 
     an instance of disclosing.
       (3) Protected health information.--The term ``protected 
     health information'' means any information, whether oral or 
     recorded in any form or medium--
       (A) that is created or received in a State by--
       (i) a health care provider;
       (ii) a health benefit plan sponsor;
       (iii) a health oversight agency;
       (iv) a health information service organization; or
       (v) a public health authority;
       (B) that relates in any way to the past, present, or future 
     physical or mental health or condition or functional status 
     of a protected individual, the provision of health care to a 
     protected individual, or payment for the provision of health 
     care to a protected individual; and
       (C) that--
       (i) identifies the individual; or
       (ii) with respect to which there is a reasonable basis to 
     believe that the information can be used to identify the 
     individual.
       (4) Protected individual.--The term ``protected 
     individual'' means an individual who, with respect to a 
     date--
       (A) is living on the date; or
       (B) has died within the 2-year period ending on the date.
       (5) Use.--The term ``use'', when used with respect to 
     protected health information that is held by a health 
     information trustee, means--
       (A) to use, or provide access to, the information in any 
     manner that does not constitute a disclosure; or
       (B) any act or instance of using, or providing access, 
     described in subparagraph (A).
       (b) Definitions Relating to Health Information Trustees.--
     For purposes of this part:
       (1) Carrier.--The term ``carrier'' means a licensed 
     insurance company, a hospital or medical service corporation 
     (including an existing Blue Cross or Blue Shield 
     organization, within the meaning of section 833(c)(2) of the 
     Internal Revenue Code of 1986), a health maintenance 
     organization, or other entity licensed or certified by a 
     State to provide health insurance or health benefits.
       (2) Health benefit plan.--The term ``health benefit plan'' 
     means--
       (A) any contract of health insurance, including any 
     hospital or medical service policy or certificate, hospital 
     or medical service plan contract, or health maintenance 
     organization group contract, that is provided by a carrier; 
     and
       (B) an employee welfare benefit plan or other arrangement 
     insofar as the plan or arrangement provides health benefits 
     and is funded in a manner other than through the purchase of 
     one or more policies or contracts described in subparagraph 
     (A).
       (3) Health benefit plan sponsor.--The term ``health benefit 
     plan sponsor'' means a person who, with respect to a specific 
     item of protected health information, receives, creates, 
     uses, maintains, or discloses the information while acting in 
     whole or in part in the capacity of--
       (A) a carrier providing a health benefit plan;
       (B) any other provider of a health benefit plan, including 
     any public entity that provides payments for health care 
     items and services under a health benefit plan that are 
     equivalent to payments provided by a private person under 
     such a plan; or
       (C) an officer or employee of a person described in 
     subparagraph (A) or (B).
       (4) Health care provider.--The term ``health care 
     provider'' means a person who, with respect to a specific 
     item of protected health information, receives, creates, 
     uses, maintains, or discloses the information while acting in 
     whole or in part in the capacity of--
       (A) a person who is licensed, certified, registered, or 
     otherwise authorized by law to provide an item or service 
     that constitutes health care in the ordinary course of 
     business or practice of a profession;
       (B) a Federal or State program that directly provides items 
     or services that constitute health care to beneficiaries; or
       (C) an officer or employee of a person described in 
     subparagraph (A) or (B).
       (5) Health information service organization.--The term 
     ``health information service organization'' means a person 
     who, with respect to a specific item of protected health 
     information, receives, creates, uses, maintains, or discloses 
     the information while acting in whole or in part in the 
     capacity of--
       (A) a person, other than an affiliated person, who performs 
     specific functions for which the Secretary has authorized (by 
     means of a designation or certification) the person to 
     receive access to health care data in electronic or magnetic 
     form that are regulated by this Act; or
       (B) an officer or employee of a person described in 
     subparagraph (A).
       (6) Health information trustee.--The term ``health 
     information trustee'' means--
       (A) a health care provider;
       (B) a health information service organization;
       (C) a health oversight agency;
       (D) a health benefit plan sponsor;
       (E) a public health authority;
       (F) a health researcher;
       (G) a person who, with respect to a specific item of 
     protected health information, is not described in 
     subparagraphs (A) through (F) but receives the information--
       (i) pursuant to--

       (I) section 2157 (relating to emergency circumstances);
       (II) section 2158 (relating to judicial and administrative 
     purposes);
       (III) section 2159 (relating to law enforcement); or
       (IV) section 2160 (relating to subpoenas, warrants, and 
     search warrants); or

       (ii) while acting in whole or in part in the capacity of an 
     officer or employee of a person described in clause (i).
       (7) Health oversight agency.--The term ``health oversight 
     agency'' means a person who, with respect to a specific item 
     of protected health information, receives, creates, uses, 
     maintains, or discloses the information while acting in whole 
     or in part in the capacity of--
       (A) a person who performs or oversees the performance of an 
     assessment, evaluation, determination, or investigation 
     relating to the licensing, accreditation, or certification of 
     health care providers;
       (B) a person who--
       (i) performs or oversees the performance of an audit, 
     assessment, evaluation, determination, or investigation 
     relating to the effectiveness of, compliance with, or 
     applicability of, legal, fiscal, medical, or scientific 
     standards or aspects of performance related to the delivery 
     of, or payment for, health care; and
       (ii) is a public agency, acting on behalf of a public 
     agency, acting pursuant to a requirement of a public agency, 
     or carrying out activities under a State or Federal statute 
     regulating the assessment, evaluation, determination, or 
     investigation; or
       (C) an officer or employee of a person described in 
     subparagraph (A) or (B).
       (8) Health researcher.--The term ``health researcher'' 
     means a person who, with respect to a specific item of 
     protected health information, receives the information--
       (A) pursuant to section 2156 (relating to health research); 
     or
       (B) while acting in whole or in part in the capacity of an 
     officer or employee of a person described in subparagraph 
     (A).
       (9) Public health authority.--The term ``public health 
     authority'' means a person who, with respect to a specific 
     item of protected health information, receives, creates, 
     uses, maintains, or discloses the information while acting in 
     whole or in part in the capacity of--
       (A) an authority of the United States, a State, or a 
     political subdivision of a State that is responsible for 
     public health matters;
       (B) a person acting under the direction of such an 
     authority; or
       (C) an officer or employee of a person described in 
     subparagraph (A) or (B).
       (c) Other Definitions.--For purposes of this part:
       (1) Affiliated person.--The term ``affiliated person'' 
     means a person who--
       (A) is not a health information trustee;
       (B) is a contractor, subcontractor, associate, or 
     subsidiary of a person who is a health information trustee; 
     and
       (C) pursuant to an agreement or other relationship with 
     such trustee, receives, creates, uses, maintains, or 
     discloses protected health information.
       (2) Approved health research project.--The term ``approved 
     health research project'' means a biomedical, 
     epidemiological, or health services research or statistics 
     project, or a research project on behavioral and social 
     factors affecting health, that has been approved by a 
     certified institutional review board.
       (3) Certified institutional review board.--The term 
     ``certified institutional review board'' means a board--
       (A) established by an entity to review research involving 
     protected health information and the rights of protected 
     individuals conducted at or supported by the entity;
       (B) established in accordance with regulations of the 
     Secretary under section 2156(e)(1); and
       (C) certified by the Secretary under section 2156(e)(2).
       (4) Health care.--The term ``health care''--
       (A) means--
       (i) any preventive, diagnostic, therapeutic, 
     rehabilitative, maintenance, or palliative care, counseling, 
     service, or procedure--

       (I) with respect to the physical or mental condition, or 
     functional status, of an individual; or
       (II) affecting the structure or function of the human body 
     or any part of the human body, including banking of blood, 
     sperm, organs, or any other tissue; or

       (ii) any sale or dispensing of a drug, device, equipment, 
     or other item to an individual, or for the use of an 
     individual, pursuant to a prescription; but
       (B) does not include any item or service that is not 
     furnished for the purpose of maintaining or improving the 
     health of an individual.
       (5) Law enforcement inquiry.--The term ``law enforcement 
     inquiry'' means a lawful investigation or official proceeding 
     inquiring into a violation of, or failure to comply with, any 
     criminal or civil statute or any regulation, rule, or order 
     issued pursuant to such a statute.
       (6) Person.--The term ``person'' includes an authority of 
     the United States, a State, or a political subdivision of a 
     State.

            Subpart A--Duties of Health Information Trustees

     SEC. 2141. INSPECTION OF PROTECTED HEALTH INFORMATION.

       (a) In General.--Except as provided in subsection (b), a 
     health information trustee described in subsection (g)--
       (1) shall permit a protected individual to inspect any 
     protected health information about the individual that the 
     trustee maintains, any accounting with respect to such 
     information required under section 2144, and any copy of an 
     authorization required under section 2152 that pertains to 
     such information;
       (2) shall provide the protected individual with a copy of 
     the information upon request by the individual and subject to 
     any conditions imposed by the trustee under subsection (d);
       (3) shall permit a person who has been designated in 
     writing by the protected individual to inspect the 
     information on behalf of the individual or to accompany the 
     individual during the inspection; and
       (4) may offer to explain or interpret information that is 
     inspected or copied under this subsection.
       (b) Exceptions.--A health information trustee is not 
     required by this section to permit inspection or copying of 
     protected health information by a protected individual if any 
     of the following conditions apply:
       (1) Mental health treatment notes.--The information 
     consists of psychiatric, psychological, or mental health 
     treatment notes about the individual, the trustee determines 
     in the exercise of reasonable professional judgment that 
     inspection or copying of the notes would cause sufficient 
     harm to the protected individual so as to outweigh the 
     desirability of permitting access, and the trustee does not 
     disclose the notes to any person not directly engaged in 
     treating the individual, except with the authorization of the 
     individual or under compulsion of law.
       (2) Information about others.--The information relates to 
     an individual, other than the protected individual or a 
     health care provider, and the trustee determines in the 
     exercise of reasonable professional judgment that inspection 
     or copying of the information would cause sufficient harm to 
     one or both of the individuals so as to outweigh the 
     desirability of permitting access.
       (3) Endangerment to life or safety.--Inspection or copying 
     of the information could reasonably be expected to endanger 
     the life or physical safety of an individual.
       (4) Confidential source.--The information identifies or 
     could reasonably lead to the identification of an individual 
     (other than a health care provider) who provided information 
     under a promise of confidentiality to a health care provider 
     concerning a protected individual who is a subject of the 
     information.
       (5) Administrative purposes.--The information--
       (A) is used by the trustee solely for administrative 
     purposes and not in the provision of health care to a 
     protected individual who is a subject of the information; and
       (B) is not disclosed by the trustee to any person.
       (6) Duplicative information.--The information duplicates 
     information available for inspection under subsection (a).
       (7) Information compiled in anticipation of litigation.--
     The information is compiled principally--
       (A) in anticipation of a civil, criminal, or administrative 
     action or proceeding; or
       (B) for use in such an action or proceeding.
       (c) Inspection and Copying of Segregable Portion.--A health 
     information trustee shall permit inspection and copying under 
     subsection (a) of any reasonably segregable portion of a 
     record after deletion of any portion that is exempt under 
     subsection (b).
       (d) Conditions.--A health information trustee may--
       (1) require a written request for the inspection and 
     copying of protected health information under this section; 
     and
       (2) charge a reasonable cost-based fee for--
       (A) permitting inspection of information under this 
     section; and
       (B) providing a copy of protected health information under 
     this section.
       (e) Statement of Reasons for Denial.--If a health 
     information trustee denies in whole or in part a request for 
     inspection or copying under this section, the trustee shall 
     provide the protected individual who made the request with a 
     written statement of the reasons for the denial.
       (f) Deadline.--A health information trustee shall comply 
     with or deny a request for inspection or copying of protected 
     health information under this section within the 30-day 
     period beginning on the date the trustee receives the 
     request.
       (g) Applicability.--This section applies to a health 
     information trustee who is--
       (1) a health benefit plan sponsor;
       (2) a health care provider;
       (3) a health information service organization;
       (4) a health oversight agency; or
       (5) a public health authority.

     SEC. 2142. AMENDMENT OF PROTECTED HEALTH INFORMATION.

       (a) In General.--A health information trustee described in 
     subsection (f) shall, within the 45-day period beginning on 
     the date the trustee receives from a protected individual 
     about whom the trustee maintains protected health information 
     a written request that the trustee correct or amend the 
     information, complete the duties described in one of the 
     following paragraphs:
       (1) Correction or amendment and notification.--The trustee 
     shall--
       (A) make the correction or amendment requested;
       (B) inform the protected individual of the amendment or 
     correction that has been made;
       (C) make reasonable efforts to inform any person who is 
     identified by the protected individual, who is not an 
     employee of the trustee, and to whom the uncorrected or 
     unamended portion of the information was previously disclosed 
     of the correction or amendment that has been made; and
       (D) at the request of the individual, make reasonable 
     efforts to inform any known source of the uncorrected or 
     unamended portion of the information about the correction or 
     amendment that has been made.
       (2) Reasons for refusal and review procedures.--The trustee 
     shall inform the protected individual of--
       (A) the reasons for the refusal of the trustee to make the 
     correction or amendment;
       (B) any procedures for further review of the refusal; and
       (C) the individual's right to file with the trustee a 
     concise statement setting forth the requested correction or 
     amendment and the individual's reasons for disagreeing with 
     the refusal of the trustee.
       (b) Standards for Correction or Amendment.--A trustee shall 
     correct or amend protected health information in accordance 
     with a request made under subsection (a) if the trustee 
     determines that the information is not accurate, relevant, 
     timely, or complete for the purposes for which the 
     information may be used or disclosed by the trustee.
       (c) Statement of Disagreement.--After a protected 
     individual has filed a statement of disagreement under 
     subsection (a)(2)(C), the trustee, in any subsequent 
     disclosure of the disputed portion of the information, shall 
     include a copy of the individual's statement and may include 
     a concise statement of the trustee's reasons for not making 
     the requested correction or amendment.
       (d) Construction.--This section may not be construed to 
     require a health information trustee to conduct a hearing or 
     proceeding concerning a request for a correction or amendment 
     to protected health information the trustee maintains.
       (e) Correction.--For purposes of subsection (a), a 
     correction is deemed to have been made to protected health 
     information when--
       (1) information that is not timely, accurate, relevant, or 
     complete is clearly marked as incorrect; or
       (2) supplementary correct information is made part of the 
     information and adequately cross-referenced.
       (f) Applicability.--This section applies to a health 
     information trustee who is--
       (1) a health benefit plan sponsor;
       (2) a health care provider;
       (3) a health information service organization;
       (4) a health oversight agency; or
       (5) a public health authority.

     SEC. 2143. NOTICE OF INFORMATION PRACTICES.

       (a) Preparation of Notice.--A health information trustee 
     described in subsection (d) shall prepare a written notice of 
     information practices describing the following:
       (1) The rights under this part of a protected individual 
     who is the subject of protected health information, including 
     the right to inspect and copy such information and the right 
     to seek amendments to such information, and the procedures 
     for authorizing disclosures of protected health information 
     and for revoking such authorizations.
       (2) The procedures established by the trustee for the 
     exercise of such rights.
       (3) The uses and disclosures of protected health 
     information that are authorized under this part.
       (b) Dissemination of Notice.--A health information 
     trustee--
       (1) shall, upon request, provide any person with a copy of 
     the trustee's notice of information practices (described in 
     subsection (a)); and
       (2) shall make reasonable efforts to inform persons in a 
     clear and conspicuous manner of the existence and 
     availability of such notice.
       (c) Model Notices.--Not later than July 1, 1996, the 
     Secretary, after notice and opportunity for public comment, 
     shall develop and disseminate model notices of information 
     practices for use by health information trustees under this 
     section.
       (d) Applicability.--This section applies to a health 
     information trustee who is--
       (1) a health benefit plan sponsor;
       (2) a health care provider;
       (3) a health information service organization; or
       (4) a health oversight agency.

     SEC. 2144. ACCOUNTING FOR DISCLOSURES.

       (a) In General.--Except as provided in subsection (b) and 
     section 2154, each health information trustee shall create 
     and maintain, with respect to any protected health 
     information the trustee discloses, a record of--
       (1) the date and purpose of the disclosure;
       (2) the name of the person to whom the disclosure was made;
       (3) the address of the person to whom the disclosure was 
     made or the location to which the disclosure was made; and
       (4) where practicable, a description of the information 
     disclosed.
       (b) Regulations.--Not later than July 1, 1996, the 
     Secretary shall promulgate regulations that exempt a health 
     information trustee from maintaining a record under 
     subsection (a) with respect protected health information 
     disclosed by the trustee for purposes of peer review, 
     licensing, certification, accreditation, and similar 
     activities.

     SEC. 2145. SECURITY.

       (a) In General.--Each health information trustee who 
     receives or creates protected health information that is 
     subject to this part shall maintain reasonable and 
     appropriate administrative, technical, and physical 
     safeguards--
       (1) to ensure the integrity and confidentiality of the 
     information;
       (2) to protect against any reasonably anticipated--
       (A) threats or hazards to the security or integrity of the 
     information; and
       (B) unauthorized uses or disclosures of the information; 
     and
       (3) otherwise ensure compliance with this part by the 
     trustee and the officers and employees of the trustee.
       (b) Guidelines.--Not later than July 1, 1996, the 
     Secretary, after notice and opportunity for public comment, 
     shall develop and disseminate guidelines for the 
     implementation of this section. The guidelines shall take 
     into account--
       (1) the technical capabilities of record systems used to 
     maintain protected health information;
       (2) the costs of security measures;
       (3) the need for training persons who have access to 
     protected health information; and
       (4) the value of audit trails in computerized record 
     systems.

     Subpart B--Use and Disclosure of Protected Health Information

     SEC. 2151. GENERAL LIMITATIONS ON USE AND DISCLOSURE.

       (a) Use.--Except as otherwise provided under this part, a 
     health information trustee may use protected health 
     information only for a purpose--
       (1) that is compatible with and directly related to the 
     purpose for which the information--
       (A) was collected; or
       (B) was received by the trustee; or
       (2) for which the trustee is authorized to disclose the 
     information under this part.
       (b) Disclosure.--A health information trustee may disclose 
     protected health information only as authorized under this 
     part.
       (c) Scope of Uses and Disclosures.--
       (1) In general.--A use or disclosure of protected health 
     information by a health information trustee shall be limited, 
     when practicable, to the minimum amount of information 
     necessary to accomplish the purpose for which the information 
     is used or disclosed.
       (2) Guidelines.--Not later than July 1, 1996, the 
     Secretary, after notice and opportunity for public comment, 
     shall issue guidelines to implement paragraph (1), which 
     shall take into account the technical capabilities of the 
     record systems used to maintain protected health information 
     and the costs of limiting use and disclosure.
       (d) Identification of Disclosed Information as Protected 
     Information.--Except with respect to protected health 
     information that is disclosed under section 2154 (relating to 
     next of kin and directory information), a health information 
     trustee may disclose protected health information only if the 
     recipient has been notified that the information is protected 
     health information that is subject to this part.
       (e) Agreement to Limit Use or Disclosure.--A health 
     information trustee who receives protected health information 
     from any person pursuant to a written agreement to restrict 
     use or disclosure of the information to a greater extent than 
     otherwise would be required under this part shall comply with 
     the terms of the agreement, except where use or disclosure of 
     the information in violation of the agreement is required by 
     law. A trustee who fails to comply with the preceding 
     sentence shall be subject to section 2191 (relating to civil 
     actions) with respect to such failure.
       (f) No General Requirement to Disclose.--Nothing in this 
     part shall be construed to require a health information 
     trustee to disclose protected health information not 
     otherwise required to be disclosed by law.

     SEC. 2152. AUTHORIZATIONS FOR DISCLOSURE OF PROTECTED HEALTH 
                   INFORMATION.

       (a) Written Authorizations.--A health information trustee, 
     other than a health information service organization, may 
     disclose protected health information pursuant to an 
     authorization executed by the protected individual who is the 
     subject of the information, if each of the following 
     requirements is satisfied:
       (1) Writing.--The authorization is in writing, signed by 
     the individual, and dated on the date of such signature.
       (2) Separate form.--The authorization is not on a form used 
     to authorize or facilitate the provision of, or payment for, 
     health care.
       (3) Trustee described.--The trustee is specifically named 
     or generically described in the authorization as authorized 
     to disclose such information.
       (4) Recipient described.--The person to whom the 
     information is to be disclosed is specifically named or 
     generically described in the authorization as a person to 
     whom such information may be disclosed.
       (5) Statement of intended uses and disclosures received.--
     The authorization contains an acknowledgment that the 
     individual has received a statement described in subsection 
     (b) from such person.
       (6) Information described.--The information to be disclosed 
     is described in the authorization.
       (7) Authorization timely received.--The authorization is 
     received by the trustee during a period described in 
     subsection (c)(1).
       (8) Disclosure timely made.--The disclosure occurs during a 
     period described in subsection (c)(2).
       (b) Statement of Intended Uses and Disclosures.--
       (1) In general.--A person who wishes to receive from a 
     health information trustee protected health information about 
     a protected individual pursuant to an authorization executed 
     by the individual shall supply the individual, in writing and 
     on a form that is distinct from the authorization, with a 
     statement of the uses for which the person intends the 
     information and the disclosures the person intends to make of 
     the information. Such statement shall be supplied before the 
     authorization is executed.
       (2) Enforcement.--If the person uses or discloses the 
     information in a manner that is inconsistent with such 
     statement, the person shall be subject to section 2191 
     (relating to civil actions) with respect to such failure, 
     except where such use or disclosure is required by law.
       (3) Model statements.--Not later than July 1, 1996, the 
     Secretary, after notice and opportunity for public comment, 
     shall develop and disseminate model statements of intended 
     uses and disclosures of the type described in paragraph (1).
       (c) Time Limitations on Authorizations.--
       (1) Receipt by trustee.--For purposes of subsection (a)(7), 
     an authorization is timely received if it is received by the 
     trustee during--
       (A) the 1-year period beginning on the date that the 
     authorization is signed under subsection (a)(1), if the 
     authorization permits the disclosure of protected health 
     information to--
       (i) a health benefit plan sponsor;
       (ii) a health care provider;
       (iii) a health oversight agency;
       (iv) a public health authority;
       (v) a health researcher; or
       (vi) a person who provides counseling or social services to 
     individuals; or
       (B) the 30-day period beginning on the date that the 
     authorization is signed under subsection (a)(1), if the 
     authorization permits the disclosure of protected health 
     information to a person other than a person described in 
     subparagraph (A).
       (2) Disclosure by trustee.--For purposes of subsection 
     (a)(8), a disclosure is timely made if it occurs before--
       (A) the date or event (if any) specified in the 
     authorization upon which the authorization expires; and
       (B) the expiration of the 6-month period beginning on the 
     date the trustee receives the authorization.
       (d) Revocation or Amendment of Authorization.--
       (1) In general.--A protected individual in writing may 
     revoke or amend an authorization described in subsection (a), 
     in whole or in part, at any time, except insofar as--
       (A) disclosure of protected health information has been 
     authorized to permit validation of expenditures based on 
     health condition by a government authority; or
       (B) action has been taken in reliance on the authorization.
       (2) Notice of revocation.--A health information trustee who 
     discloses protected health information in reliance on an 
     authorization that has been revoked shall not be subject to 
     any liability or penalty under this part if--
       (A) the reliance was in good faith;
       (B) the trustee had no notice of the revocation; and
       (C) the disclosure was otherwise in accordance with the 
     requirements of this section.
       (e) Additional Requirements of Trustee.--A health 
     information trustee may impose requirements for an 
     authorization that are in addition to the requirements in 
     this section.
       (f) Copy.--A health information trustee who discloses 
     protected health information pursuant to an authorization 
     under this section shall maintain a copy of the 
     authorization.
       (g) Construction.--This section may not be construed--
       (1) to require a health information trustee to disclose 
     protected health information; or
       (2) to limit the right of a health information trustee to 
     charge a fee for the disclosure or reproduction of protected 
     health information.
       (h) Subpoenas, Warrants, and Search Warrants.--If a health 
     information trustee discloses protected health information 
     pursuant to an authorization in order to comply with an 
     administrative subpoena or warrant or a judicial subpoena or 
     search warrant, the authorization--
       (1) shall specifically authorize the disclosure for the 
     purpose of permitting the trustee to comply with the 
     subpoena, warrant, or search warrant; and
       (2) shall otherwise meet the requirements in this section.

     SEC. 2153. TREATMENT, PAYMENT, AND OVERSIGHT.

       (a) Disclosures by Plans, Providers, and Oversight 
     Agencies.--A health information trustee described in 
     subsection (d) may disclose protected health information to a 
     health benefit plan sponsor, health care provider, or health 
     oversight agency if the disclosure is--
       (1) for the purpose of providing health care and a 
     protected individual who is a subject of the information has 
     not previously objected to the disclosure in writing;
       (2) for the purpose of providing for the payment for health 
     care furnished to an individual; or
       (3) for use by a health oversight agency for a purpose that 
     is described in subparagraph (A) or (B)(i) of section 
     2140(b)(7).
       (b) Disclosures by Certain Other Trustees.--A health 
     information trustee may disclose protected health information 
     to a health care provider if--
       (1) the disclosure is for the purpose described in 
     subsection (a)(1); and
       (2) the trustee--
       (A) is a public health authority;
       (B) received protected health information pursuant to 
     section 2157 (relating to emergency circumstances); or
       (C) is an officer or employee of a trustee described in 
     subsection (B).
       (c) Use in Action Against Individual.--A person who 
     receives protected health information about a protected 
     individual through a disclosure under this section may not 
     use or disclose the information in any administrative, civil, 
     or criminal action or investigation directed against the 
     individual, except an action or investigation arising out of 
     and related to receipt of health care or payment for health 
     care.
       (d) Applicability.--A health information trustee referred 
     to in subsection (a) is any of the following:
       (1) A health benefit plan sponsor.
       (2) A health care provider.
       (3) A health oversight agency.
       (4) A health information service organization.

     SEC. 2154. NEXT OF KIN AND DIRECTORY INFORMATION.

       (a) Next of Kin.--A health information trustee who is a 
     health care provider, who received protected health 
     information pursuant to section 2157 (relating to emergency 
     circumstances), or who is an officer or employee of such a 
     recipient may orally disclose protected health information 
     about a protected individual to the next of kin of the 
     individual (as defined under State law), or to a person with 
     whom the individual has a close personal relationship, if--
       (1) the trustee has no reason to believe that the 
     individual would consider the information especially 
     sensitive;
       (2) the individual has not previously objected to the 
     disclosure;
       (3) the disclosure is consistent with good medical or other 
     professional practice; and
       (4) the information disclosed is limited to information 
     about health care that is being provided to the individual at 
     or about the time of the disclosure.
       (b) Directory Information.--
       (1) In General.--A health information trustee who is a 
     health care provider, who received protected health 
     information pursuant to section 2157 (relating to emergency 
     circumstances), or who is an officer or employee of a such a 
     recipient may disclose to any person the information 
     described in paragraph (2) if--
       (A) a protected individual who is a subject of the 
     information has not objected in writing to the disclosure;
       (B) the disclosure is otherwise consistent with good 
     medical and other professional practice; and
       (C) the information does not reveal specific information 
     about the physical or mental condition or functional status 
     of a protected individual or about the health care provided 
     to a protected individual.
       (2) Information described.--The information referred to in 
     paragraph (1) is the following:
       (A) The name of an individual receiving health care from a 
     health care provider on a premises controlled by the 
     provider.
       (B) The location of the individual on such premises.
       (C) The general health status of the individual, described 
     in terms of critical, poor, fair, stable, satisfactory, or 
     terms denoting similar conditions.
       (c) No Accounting Required.--A health information trustee 
     who discloses protected health information under this section 
     is not required to maintain an accounting of the disclosure 
     under section 2144.
       (d) Recipients.--A person to whom protected health 
     information is disclosed under this section shall not, by 
     reason of such disclosure, be subject to any requirement 
     under this part.

     SEC. 2155. PUBLIC HEALTH.

       (a) In General.--A health information trustee who is a 
     health care provider or a public health authority may 
     disclose protected health information to--
       (1) a public health authority for use in legally 
     authorized--
       (A) disease or injury reporting;
       (B) public health surveillance; or
       (C) public health investigation or intervention; or
       (2) an individual who is authorized by law to receive the 
     information in a public health intervention.
       (b) Use in Action Against Individual.--A public health 
     authority who receives protected health information about a 
     protected individual through a disclosure under this section 
     may not use or disclose the information in any 
     administrative, civil, or criminal action or investigation 
     directed against the individual, except where the use or 
     disclosure is authorized by law for protection of the public 
     health.
       (c) Individual Recipients.--An individual to whom protected 
     health information is disclosed under subsection (a)(2) shall 
     not, by reason of such disclosure, be subject to any 
     requirement under this part.

     SEC. 2156. HEALTH RESEARCH.

       (a) In General.--A health information trustee described in 
     subsection (d) may disclose protected health information to a 
     person if--
       (1) the person is conducting an approved health research 
     project;
       (2) the information is to be used in the project; and
       (3) the project has been determined by a certified 
     institutional review board to be--
       (A) of sufficient importance so as to outweigh the 
     intrusion into the privacy of the protected individual who is 
     the subject of the information that would result from the 
     disclosure; and
       (B) impracticable to conduct without the information.
       (b) Disclosures by Health Information Service 
     Organizations.--A health information service organization may 
     disclose protected health information under subsection (a) 
     only if the certified institutional review board referred to 
     in subsection (a)(3) has been certified as being qualified to 
     make determinations under such subsection with respect to 
     disclosures by such organizations.
       (c) Limitations on Use and Disclosure; Obligations of 
     Recipient.--A health researcher who receives protected health 
     information about a protected individual pursuant to 
     subsection (a)--
       (1) may use the information solely for purposes of an 
     approved health research project;
       (2) may not use or disclose the information in any 
     administrative, civil, or criminal action or investigation 
     directed against the individual; and
       (3) shall remove or destroy, at the earliest opportunity 
     consistent with the purposes of the approved health research 
     project in connection with which the disclosure was made, 
     information that would enable an individual to be identified, 
     unless a certified institutional review board has determined 
     that there is a health or research justification for 
     retention of such identifiers and there is an adequate plan 
     to protect the identifiers from use and disclosure that is 
     inconsistent with this part.
       (d) Applicability.--A health information trustee referred 
     to in subsection (a) is any health information trustee other 
     than a person who, with respect to the specific protected 
     health information to be disclosed under such subsection, 
     received the information--
       (1) pursuant to--
       (A) section 2158 (relating to judicial and administrative 
     purposes);
       (B) paragraph (1), (2), or (3) of section 2159(a) (relating 
     to law enforcement); or
       (C) section 2160 (relating to subpoenas, warrants, and 
     search warrants); or
       (2) while acting in whole or in part in the capacity of an 
     officer or employee of a person described in paragraph (1).
       (e) Requirements for Institutional Review Boards.--
       (1) Regulations.--Not later than July 1, 1996, the 
     Secretary, after opportunity for notice and comment, shall 
     promulgate regulations establishing requirements for 
     certified institutional review boards under this part. The 
     regulations shall be based on regulations promulgated under 
     section 491(a) of the Public Health Service Act and shall 
     ensure that certified institutional review boards are 
     qualified to assess and protect the confidentiality of 
     research subjects. The regulations shall include specific 
     requirements for certified institutional review boards that 
     make determinations under subsection (a)(3) with respect to 
     disclosures by health information service organizations.
       (2) Certification.--The Secretary shall certify that an 
     institutional review board satisfies the requirements of the 
     regulations promulgated under paragraph (1).

     SEC. 2157. EMERGENCY CIRCUMSTANCES.

       (a) In General.--A health information trustee may disclose 
     protected health information if the trustee believes, on 
     reasonable grounds, that the disclosure is necessary to 
     prevent or lessen a serious and imminent threat to the health 
     or safety of an individual.
       (b) Use in Action Against Individual.--A person who 
     receives protected health information about a protected 
     individual through a disclosure under this section may not 
     use or disclose the information in any administrative, civil, 
     or criminal action or investigation directed against the 
     individual, except an action or investigation arising out of 
     and related to receipt of health care or payment for health 
     care.

     SEC. 2158. JUDICIAL AND ADMINISTRATIVE PURPOSES.

       (a) In General.--A health information trustee described in 
     subsection (d) may disclose protected health information--
       (1) pursuant to the Federal Rules of Civil Procedure, the 
     Federal Rules of Criminal Procedure, or comparable rules of 
     other courts or administrative agencies in connection with 
     litigation or proceedings to which a protected individual who 
     is a subject of the information is a party and in which the 
     individual has placed the individual's physical or mental 
     condition or functional status in issue;
       (2) if directed by a court in connection with a court-
     ordered examination of an individual; or
       (3) to assist in the identification of a dead individual.
       (b) Written Statement.--A person seeking protected health 
     information about a protected individual held by health 
     information trustee under--
       (1) subsection (a)(1)--
       (A) shall notify the protected individual or the attorney 
     of the protected individual of the request for the 
     information;
       (B) shall provide the trustee with a signed document 
     attesting--
       (i) that the protected individual is a party to the 
     litigation or proceedings for which the information is 
     sought;
       (ii) that the individual has placed the individual's 
     physical or mental condition or functional status in issue; 
     and
       (iii) the date on which the protected individual or the 
     attorney of the protected individual was notified under 
     subparagraph (A); and
       (C) shall not accept any requested protected health 
     information from the trustee until the termination of the 10-
     day period beginning on the date notice was given under 
     subparagraph (A); or
       (2) subsection (a)(3) shall provide the trustee with a 
     written statement that the information is sought to assist in 
     the identification of a dead individual.
       (c) Use and Disclosure.--A person to whom protected health 
     information is disclosed under this section may use and 
     disclose the information only to accomplish the purpose for 
     which the disclosure was made.
       (d) Applicability.--A health information trustee referred 
     to in subsection (a) is any of the following:
       (1) A health benefit plan sponsor.
       (2) A health care provider.
       (3) A health oversight agency.
       (4) A person who, with respect to the specific protected 
     health information to be disclosed under such subsection, 
     received the information--
       (A) pursuant to--
       (i) section 2157 (relating to emergency circumstances); or
       (ii) section 2160 (relating to subpoenas, warrants, and 
     search warrants); or
       (B) while acting in whole or in part in the capacity of an 
     officer or employee of a person described in subparagraph 
     (A).

     SEC. 2159. LAW ENFORCEMENT.

       (a) In General.--A health information trustee, other than a 
     health information service organization, may disclose 
     protected health information to a law enforcement agency, 
     other than a health oversight agency--
       (1) if the information is disclosed for use in an 
     investigation or prosecution of a health information trustee;
       (2) in connection with criminal activity committed against 
     the trustee or an affiliated person of the trustee or on 
     premises controlled by the trustee; or
       (3) if the information is needed to determine whether a 
     crime has been committed and the nature of any crime that may 
     have been committed (other than a crime that may have been 
     committed by the protected individual who is the subject of 
     the information).
       (b) Additional Authority of Certain Trustees.--A health 
     information trustee who is not a health information service 
     organization, a public health authority, or a health 
     researcher may disclose protected health information to a law 
     enforcement agency (other than a health oversight agency)--
       (1) to assist in the identification or location of a 
     victim, fugitive, or witness in a law enforcement inquiry;
       (2) pursuant to a law requiring the reporting of specific 
     health care information to law enforcement authorities; or
       (3) if the information is specific health information 
     described in paragraph (2) and the trustee is operated by a 
     Federal agency;
       (c) Certification.--Where a law enforcement agency requests 
     a health information trustee to disclose protected health 
     information under subsection (a) or (b)(1), the agency shall 
     provide the trustee with a written certification that--
       (1) is signed by a supervisory official of a rank 
     designated by the head of the agency;
       (2) specifies the information requested; and
       (3) states that the information is needed for a lawful 
     purpose under this section.
       (d) Restrictions on Disclosure and Use.--A person who 
     receives protected health information about a protected 
     individual through a disclosure under this section may not 
     use or disclose the information--
       (1) in any administrative, civil, or criminal action or 
     investigation directed against the individual, except an 
     action or investigation arising out of and directly related 
     to the action or investigation for which the information was 
     obtained; and
       (2) otherwise unless the use or disclosure is necessary to 
     fulfill the purpose for which the information was obtained 
     and is not prohibited by any other provision of law.

     SEC. 2160. SUBPOENAS, WARRANTS, AND SEARCH WARRANTS.

       (a) In General.--A health information trustee described in 
     subsection (g) may disclose protected health information if 
     the disclosure is pursuant to any of the following:
       (1) A subpoena issued under the authority of a grand jury 
     and the trustee is provided a written certification by the 
     grand jury that the grand jury has complied with the 
     applicable access provisions of section 2171.
       (2) An administrative subpoena or warrant or a judicial 
     subpoena or search warrant and the trustee is provided a 
     written certification by the person seeking the information 
     that the person has complied with the applicable access 
     provisions of section 2171 or 2173(a).
       (3) An administrative subpoena or warrant or a judicial 
     subpoena or search warrant and the disclosure otherwise meets 
     the conditions of one of sections 2153 through 2159.
       (b) Authority of All Trustees.--Any health information 
     trustee may disclose protected health information if the 
     disclosure is pursuant to subsection (a)(3).
       (c) Restrictions on Use and Disclosure.--Protected health 
     information about a protected individual that is disclosed by 
     a health information trustee pursuant to--
       (1) subsection (a)(2) may not be otherwise used or 
     disclosed by the recipient unless the use or disclosure is 
     necessary to fulfill the purpose for which the information 
     was obtained; and
       (2) subsection (a)(3) may not be used or disclosed by the 
     recipient unless the recipient complies with the conditions 
     and restrictions on use and disclosure with which the 
     recipient would have been required to comply if the 
     disclosure by the trustee had been made under the section 
     referred to in subsection (a)(3) the conditions of which were 
     met by the disclosure.
       (d) Restrictions on Grand Juries.--Protected health 
     information that is disclosed by a health information trustee 
     under subsection (a)(1)--
       (1) shall be returnable on a date when the grand jury is in 
     session and actually presented to the grand jury;
       (2) shall be used only for the purpose of considering 
     whether to issue an indictment or report by that grand jury, 
     or for the purpose of prosecuting a crime for which that 
     indictment or report is issued, or for a purpose authorized 
     by rule 6(e) of the Federal Rules of Criminal Procedure or a 
     comparable State rule;
       (3) shall be destroyed or returned to the trustee if not 
     used for one of the purposes specified in paragraph (2); and
       (4) shall not be maintained, or a description of the 
     contents of such information shall not be maintained, by any 
     government authority other than in the sealed records of the 
     grand jury, unless such information has been used in the 
     prosecution of a crime for which the grand jury issued an 
     indictment or presentment or for a purpose authorized by rule 
     6(e) of the Federal Rules of Criminal Procedure or a 
     comparable State rule.
       (e) Use in Action Against Individual.--A person who 
     receives protected health information about a protected 
     individual through a disclosure under this section may not 
     use or disclose the information in any administrative, civil, 
     or criminal action or investigation directed against the 
     individual, except an action or investigation arising out of 
     and directly related to the inquiry for which the information 
     was obtained;
       (f) Construction.--Nothing in this section shall be 
     construed as authority for a health information trustee to 
     refuse to comply with a valid administrative subpoena or 
     warrant or a valid judicial subpoena or search warrant that 
     meets the requirements of this part.
       (g) Applicability.--A health information trustee referred 
     to in subsection (a) is any trustee other than the following:
       (1) A health information service organization.
       (2) A public health authority.
       (3) A health researcher.

     SEC. 2161. HEALTH INFORMATION SERVICE ORGANIZATIONS.

       A health information trustee may disclose protected health 
     information to a health information service organization for 
     the purpose of permitting the organization to perform a 
     function for which the Secretary has authorized (by means of 
     a designation or certification) the organization to receive 
     access to health care data in electronic or magnetic form 
     that are regulated by this Act .

           Subpart C--Access Procedures and Challenge Rights

     SEC. 2171. ACCESS PROCEDURES FOR LAW ENFORCEMENT SUBPOENAS, 
                   WARRANTS, AND SEARCH WARRANTS.

       (a) Probable Cause Requirement.--A government authority may 
     not obtain protected health information about a protected 
     individual from a health information trustee under paragraph 
     (1) or (2) of section 2160(a) for use in a law enforcement 
     inquiry unless there is probable cause to believe that the 
     information is relevant to a legitimate law enforcement 
     inquiry being conducted by the government authority.
       (b) Warrants and Search Warrants.--A government authority 
     that obtains protected health information about a protected 
     individual from a health information trustee under 
     circumstances described in subsection (a) and pursuant to a 
     warrant or search warrant shall, not later than 30 days after 
     the date the warrant was served on the trustee, serve the 
     individual with, or mail to the last known address of the 
     individual, a copy of the warrant.
       (c) Subpoenas.--Except as provided in subsection (d), a 
     government authority may not obtain protected health 
     information about a protected individual from a health 
     information trustee under circumstances described in 
     subsection (a) and pursuant to a subpoena unless a copy of 
     the subpoena has been served by hand delivery upon the 
     individual, or mailed to the last known address of the 
     individual, on or before the date on which the subpoena was 
     served on the trustee, together with a notice (published by 
     the Secretary under section 2175(1)) of the individual's 
     right to challenge the subpoena in accordance with section 
     2172, and--
       (1) 30 days have passed from the date of service, or 30 
     days have passed from the date of mailing, and within such 
     time period the individual has not initiated a challenge in 
     accordance with section 2172; or
       (2) disclosure is ordered by a court under section 2172.
       (d) Application for Delay.--
       (1) In general.--A government authority may apply to an 
     appropriate court to delay (for an initial period of not 
     longer than 90 days) serving a copy of a subpoena and a 
     notice otherwise required under subsection (c) with respect 
     to a law enforcement inquiry. The government authority may 
     apply to the court for extensions of the delay.
       (2) Reasons for delay.--An application for a delay, or 
     extension of a delay, under this subsection shall state, with 
     reasonable specificity, the reasons why the delay or 
     extension is being sought.
       (3) Ex parte order.--The court shall enter an ex parte 
     order delaying, or extending the delay of, the notice and an 
     order prohibiting the trustee from revealing the request for, 
     or the disclosure of, the protected health information being 
     sought if the court finds that--
       (A) the inquiry being conducted is within the lawful 
     jurisdiction of the government authority seeking the 
     protected health information;
       (B) there is probable cause to believe that the protected 
     health information being sought is relevant to a legitimate 
     law enforcement inquiry being conducted by the government 
     authority;
       (C) the government authority's need for the information 
     outweighs the privacy interest of the protected individual 
     who is the subject of the information; and
       (D) there are reasonable grounds to believe that receipt of 
     a notice by the individual will result in--
       (i) endangering the life or physical safety of any 
     individual;
       (ii) flight from prosecution;
       (iii) destruction of or tampering with evidence or the 
     information being sought; or
       (iv) intimidation of potential witnesses.
       (4) Service of application on individual.--Upon the 
     expiration of a period of delay of notice under this 
     subsection, the government authority shall serve upon the 
     individual, with the service of the subpoena and the notice, 
     a copy of any applications filed and approved under this 
     subsection.

     SEC. 2172. CHALLENGE PROCEDURES FOR LAW ENFORCEMENT 
                   SUBPOENAS.

       (a) Motion to Quash Subpoena.--Within 30 days of the date 
     of service, or 30 days of the date of mailing, of a subpoena 
     of a government authority seeking protected health 
     information about a protected individual from a health 
     information trustee under paragraph (1) or (2) of section 
     2160(a) (except a subpoena to which section 2173 applies), 
     the individual may file (without filing fee) a motion to 
     quash the subpoena--
       (1) in the case of a State judicial subpoena, in the court 
     which issued the subpoena;
       (2) in the case of a subpoena issued under the authority of 
     a State that is not a State judicial subpoena, in a court of 
     competent jurisdiction;
       (3) in the case of a subpoena issued under the authority of 
     a Federal court, in any court of the United States of 
     competent jurisdiction; or
       (4) in the case of any other subpoena issued under the 
     authority of the United States, in--
       (A) the United States district court for the district in 
     which the individual resides or in which the subpoena was 
     issued; or
       (B) another United States district court of competent 
     jurisdiction.
       (b) Copy.--A copy of the motion shall be served by the 
     individual upon the government authority by delivery of 
     registered or certified mail.
       (c) Affidavits and Sworn Documents.--The government 
     authority may file with the court such affidavits and other 
     sworn documents as sustain the validity of the subpoena. The 
     individual may file with the court, within 5 days of the date 
     of the authority's filing, affidavits and sworn documents in 
     response to the authority's filing. The court, upon the 
     request of the individual, the government authority, or both, 
     may proceed in camera.
       (d) Proceedings and Decision on Motion.--The court may 
     conduct such proceedings as it deems appropriate to rule on 
     the motion. All such proceedings shall be completed, and the 
     motion ruled on, within 10 calendar days of the date of the 
     government authority's filing.
       (e) Extension of Time Limits for Good Cause.--The court, 
     for good cause shown, may at any time in its discretion 
     enlarge the time limits established by subsections (c) and 
     (d).
       (f) Standard for Decision.--A court may deny a motion under 
     subsection (a) if it finds that there is probable cause to 
     believe that the protected health information being sought is 
     relevant to a legitimate law enforcement inquiry being 
     conducted by the government authority, unless the court finds 
     that the individual's privacy interest outweighs the 
     government authority's need for the information. The 
     individual shall have the burden of demonstrating that the 
     individual's privacy interest outweighs the need established 
     by the government authority for the information.
       (g) Specific Considerations With Respect to Privacy 
     Interest.--In determining under subsection (f) whether an 
     individual's privacy interest outweighs the government 
     authority's need for the information, the court shall 
     consider--
       (1) the particular purpose for which the information was 
     collected by the trustee;
       (2) the degree to which disclosure of the information will 
     embarrass, injure, or invade the privacy of the individual;
       (3) the effect of the disclosure on the individual's future 
     health care;
       (4) the importance of the inquiry being conducted by the 
     government authority, and the importance of the information 
     to that inquiry; and
       (5) any other factor deemed relevant by the court.
       (h) Attorney's Fees.--In the case of any motion brought 
     under subsection (a) in which the individual has 
     substantially prevailed, the court, in its discretion, may 
     assess against a government authority a reasonable attorney's 
     fee and other litigation costs (including expert fees) 
     reasonably incurred.
       (i) No Interlocutory Appeal.--A court ruling denying a 
     motion to quash under this section shall not be deemed a 
     final order and no interlocutory appeal may be taken 
     therefrom by the individual. An appeal of such a ruling may 
     be taken by the individual within such period of time as is 
     provided by law as part of any appeal from a final order in 
     any legal proceeding initiated against the individual arising 
     out of or based upon the protect health information 
     disclosed.

     SEC. 2173. ACCESS AND CHALLENGE PROCEDURES FOR OTHER 
                   SUBPOENAS.

       (a) In General.--A person (other than a government 
     authority seeking protected health information under 
     circumstances described in section 2171(a)) may not obtain 
     protected health information about a protected individual 
     from a health information trustee pursuant to a subpoena 
     under section 2160(a)(2) unless--
       (1) a copy of the subpoena has been served upon the 
     individual or mailed to the last known address of the 
     individual on or before the date on which the subpoena was 
     served on the trustee, together with a notice (published by 
     the Secretary under section 2175(2)) of the individual's 
     right to challenge the subpoena, in accordance with 
     subsection (b); and
       (2) either--
       (A) 30 days have passed from the date of service or 30 days 
     have passed from the date of the mailing and within such time 
     period the individual has not initiated a challenge in 
     accordance with subsection (b); or
       (B) disclosure is ordered by a court under such subsection.
       (b) Motion to Quash.--Within 30 days of the date of service 
     or 30 days of the date of mailing of a subpoena seeking 
     protected health information about a protected individual 
     from a health information trustee under subsection (a), the 
     individual may file (without filing fee) in any court of 
     competent jurisdiction, a motion to quash the subpoena, with 
     a copy served on the person seeking the information. The 
     individual may oppose, or seek to limit, the subpoena on any 
     grounds that would otherwise be available if the individual 
     were in possession of the information.
       (c) Standard for Decision.--The court shall grant an 
     individual's motion under subsection (b) if the person 
     seeking the information has not sustained the burden of 
     demonstrating that--
       (1) there are reasonable grounds to believe that the 
     information will be relevant to a lawsuit or other judicial 
     or administrative proceeding; and
       (2) the need of the person for the information outweighs 
     the privacy interest of the individual.
       (d) Specific Considerations With Respect to Privacy 
     Interest.--In determining under subsection (c) whether the 
     need of the person for the information outweighs the privacy 
     interest of the individual, the court shall consider--
       (1) the particular purpose for which the information was 
     collected by the trustee;
       (2) the degree to which disclosure of the information will 
     embarrass, injure, or invade the privacy of the individual;
       (3) the effect of the disclosure on the individual's future 
     health care;
       (4) the importance of the information to the lawsuit or 
     proceeding; and
       (5) any other factor deemed relevant by the court.
       (e) Attorney's Fees.--In the case of any motion brought 
     under subsection (b) by an individual against a person in 
     which the individual has substantially prevailed, the court, 
     in its discretion, may assess against the person a reasonable 
     attorney's fee and other litigation costs (including expert 
     fees) reasonably incurred.

     SEC. 2174. CONSTRUCTION OF SUBPART; SUSPENSION OF STATUTE OF 
                   LIMITATIONS.

       (a) In General.--Nothing in this subpart shall affect the 
     right of a health information trustee to challenge a request 
     for protected health information. Nothing in this subpart 
     shall entitle a protected individual to assert the rights of 
     a health information trustee.
       (b) Effect of Motion on Statute of Limitations.--If an 
     individual who is the subject of protected health information 
     files a motion under this subpart which has the effect of 
     delaying the access of a government authority to such 
     information, the period beginning on the date such motion was 
     filed and ending on the date on which the motion is decided 
     shall be excluded in computing any period of limitations 
     within which the government authority may commence any civil 
     or criminal action in connection with which the access is 
     sought.

     SEC. 2175. RESPONSIBILITIES OF SECRETARY.

       Not later than July 1, 1996, the Secretary, after notice 
     and opportunity for public comment, shall develop and 
     disseminate brief, clear, and easily understood model 
     notices--
       (1) for use under subsection (c) of section 2171, detailing 
     the rights of a protected individual who wishes to challenge, 
     under section 2172, the disclosure of protected health 
     information about the individual under such subsection; and
       (2) for use under subsection (a) of section 2173, detailing 
     the rights of a protected individual who wishes to challenge, 
     under subsection (b) of such section, the disclosure of 
     protected health information about the individual under such 
     section.

                  Subpart D--Miscellaneous Provisions

     SEC. 2181. PAYMENT CARD AND ELECTRONIC PAYMENT TRANSACTIONS.

       (a) Payment for Health Care Through Card or Electronic 
     Means.--If a protected individual pays a health information 
     trustee for health care by presenting a debit, credit, or 
     other payment card or account number, or by any other 
     electronic payment means, the trustee may disclose to a 
     person described in subsection (b) only such protected health 
     information about the individual as is necessary for the 
     processing of the payment transaction or the billing or 
     collection of amounts charged to, debited from, or otherwise 
     paid by, the individual using the card, number, or other 
     electronic payment means.
       (b) Transaction Processing.--A person who is a debit, 
     credit, or other payment card issuer, is otherwise directly 
     involved in the processing of payment transactions involving 
     such cards or other electronic payment transactions, or is 
     otherwise directly involved in the billing or collection of 
     amounts paid through such means, may only use or disclose 
     protected health information about a protected individual 
     that has been disclosed in accordance with subsection (a) 
     when necessary for--
       (1) the authorization, settlement, billing or collection of 
     amounts charged to, debited from, or otherwise paid by, the 
     individual using a debit, credit, or other payment card or 
     account number, or by other electronic payment means;
       (2) the transfer of receivables, accounts, or interest 
     therein;
       (3) the audit of the credit, debit, or other payment card 
     account information;
       (4) compliance with Federal, State, or local law; or
       (5) a properly authorized civil, criminal, or regulatory 
     investigation by Federal, State, or local authorities.

     SEC. 2182. ACCESS TO PROTECTED HEALTH INFORMATION OUTSIDE OF 
                   THE UNITED STATES.

       (a) In General.--Notwithstanding the provisions of subpart 
     B, and except as provided in subsection (b), a health 
     information trustee may not permit any person who is not in a 
     State to have access to protected health information about a 
     protected individual unless one or more of the following 
     conditions exist:
       (1) Specific authorization.--The individual has 
     specifically consented to the provision of such access 
     outside of the United States in an authorization that meets 
     the requirements of section 2152.
       (2) Equivalent protection.--The provision of such access is 
     authorized under this part and the Secretary has determined 
     that there are fair information practices for protected 
     health information in the jurisdiction where the access will 
     be provided that provide protections for individuals and 
     protected health information that are equivalent to the 
     protections provided for by this part.
       (3) Access required by law.--The provision of such access 
     is required under--
       (A) a Federal statute; or
       (B) a treaty or other international agreement applicable to 
     the United States.
       (b) Exceptions.--Subsection (a) does not apply where the 
     provision of access to protected health information--
       (1) is to a foreign public health authority;
       (2) is authorized under section 2154 (relating to next of 
     kin and directory information), 2156 (relating to health 
     research), or 2157 (relating to emergency circumstances); or
       (3) is necessary for the purpose of providing for payment 
     for health care that has been provided to an individual.

     SEC. 2183. STANDARDS FOR ELECTRONIC DOCUMENTS AND 
                   COMMUNICATIONS.

       (a) Standards.--Not later than July 1, 1996, the Secretary, 
     after notice and opportunity for public comment and in 
     consultation with appropriate private standard-setting 
     organizations and other interested parties, shall establish 
     standards with respect to the creation, transmission, 
     receipt, and maintenance, in electronic and magnetic form, of 
     each type of written document specifically required or 
     authorized under this part. Where a signature is required 
     under any other provision of this part, such standards shall 
     provide for an electronic or magnetic substitute that serves 
     the functional equivalent of a signature.
       (b) Treatment of Complying Documents and Communications.--
     An electronic or magnetic document or communication that 
     satisfies the standards established under subsection (a) with 
     respect to such document or communication shall be treated as 
     satisfying the requirements of this part that apply to an 
     equivalent written document.

     SEC. 2184. DUTIES AND AUTHORITIES OF AFFILIATED PERSONS.

       (a) Requirements on Trustees.--
       (1) Provision of information.--A health information trustee 
     may provide protected health information to a person who, 
     with respect to the trustee, is an affiliated person and may 
     permit the affiliated person to use such information, only 
     for the purpose of conducting, supporting, or facilitating an 
     activity that the trustee is authorized to undertake.
       (2) Notice to affiliated person.--A health information 
     trustee shall notify a person who, with respect to the 
     trustee, is an affiliated person of any duties under this 
     part that the affiliated person is required to fulfill and of 
     any authorities under this part that the affiliated person is 
     authorized to exercise.
       (b) Duties of Affiliated Persons.--
       (1) In general.--An affiliated person shall fulfill any 
     duty under this part that--
       (A) the health information trustee with whom the person has 
     an agreement or relationship described in section 
     2140(c)(1)(C) is required to fulfill; and
       (B) the person has undertaken to fulfill pursuant to such 
     agreement or relationship.
       (2) Construction of other subparts.--With respect to a duty 
     described in paragraph (1) that an affiliated person is 
     required to fulfill, the person shall be considered a health 
     information trustee for purposes of this part. The person 
     shall be subject to subpart E (relating to enforcement) with 
     respect to any such duty that the person fails to fulfill.
       (3) Effect on trustee.--An agreement or relationship with 
     an affiliated person does not relieve a health information 
     trustee of any duty or liability under this part.
       (b) Authorities of Affiliated Persons.--
       (1) In general.--An affiliated person may only exercise an 
     authority under this part that the health information trustee 
     with whom the person is affiliated may exercise and that the 
     person has been given by the trustee pursuant to an agreement 
     or relationship described in section 2140(c)(1)(C). With 
     respect to any such authority, the person shall be considered 
     a health information trustee for purposes of this part. The 
     person shall be subject to subpart E (relating to 
     enforcement) with respect to any act that exceeds such 
     authority.
       (2) Effect on trustee.--An agreement or relationship with 
     an affiliated person does not affect the authority of a 
     health information trustee under this part.

     SEC. 2185. AGENTS AND ATTORNEYS.

       (a) In General.--Except as provided in subsections (b) and 
     (c), a person who is authorized by law (on grounds other than 
     an individual's minority), or by an instrument recognized 
     under law, to act as an agent, attorney, proxy, or other 
     legal representative for a protected individual or the estate 
     of a protected individual, or otherwise to exercise the 
     rights of the individual or estate, may, to the extent 
     authorized, exercise and discharge the rights of the 
     individual or estate under this part.
       (b) Health Care Power of Attorney.--A person who is 
     authorized by law (on grounds other than an individual's 
     minority), or by an instrument recognized under law, to make 
     decisions about the provision of health care to an individual 
     who is incapacitated may exercise and discharge the rights of 
     the individual under this part to the extent necessary to 
     effectuate the terms or purposes of the grant of authority.
       (c) No Court Declaration.--If a health care provider 
     determines that an individual, who has not been declared to 
     be legally incompetent, suffers from a medical condition that 
     prevents the individual from acting knowingly or effectively 
     on the individual's own behalf, the right of the individual 
     to authorize disclosure under section 2152 may be exercised 
     and discharged in the best interest of the individual by--
       (1) a person described in subsection (b) with respect to 
     the individual;
       (2) a person described in subsection (a) with respect to 
     the individual, but only if a person described in paragraph 
     (1) cannot be contacted after a reasonable effort;
       (3) the next of kin of the individual, but only if a person 
     described in paragraph (1) or (2) cannot be contacted after a 
     reasonable effort; or
       (4) the health care provider, but only if a person 
     described in paragraph (1), (2), or (3) cannot be contacted 
     after a reasonable effort.

     SEC. 2186. MINORS.

       (a) Individuals Who Are 18 or Legally Capable.--In the case 
     of an individual--
       (1) who is 18 years of age or older, all rights of the 
     individual shall be exercised by the individual, except as 
     provided in section 2185; or
       (2) who, acting alone, has the legal capacity to apply for 
     and obtain health care and has sought such care, the 
     individual shall exercise all rights of an individual under 
     this part with respect to protected health information 
     relating to such care.
       (b) Individuals Under 18.--Except as provided in subsection 
     (a)(2), in the case of an individual who is--
       (1) under 14 years of age, all the individual's rights 
     under this part shall be exercised through the parent or 
     legal guardian of the individual; or
       (2) 14, 15, 16, or 17 years of age, the right of inspection 
     (under section 2141), the right of amendment (under section 
     2142), and the right to authorize disclosure of protected 
     health information (under section 2152) of the individual may 
     be exercised either by the individual or by the parent or 
     legal guardian of the individual.

     SEC. 2187. MAINTENANCE OF CERTAIN PROTECTED HEALTH 
                   INFORMATION.

       (a) In General.--A State shall establish a process under 
     which the protected health information described in 
     subsection (b) that is maintained by a person described in 
     subsection (c) is delivered to, and maintained by, the State 
     or an individual or entity designated by the State.
       (b) Information Described.--The protected health 
     information referred to in subsection (a) is protected health 
     information that--
       (1) is recorded in any form or medium;
       (2) is created by--
       (A) a health care provider; or
       (B) a health benefit plan sponsor that provides benefits in 
     the form of items and services to enrollees and not in the 
     form of reimbursement for items and services; and
       (3) relates in any way to the past, present, or future 
     physical or mental health or condition or functional status 
     of a protected individual or the provision of health care to 
     a protected individual.
       (c) Persons Described.--A person referred to in subsection 
     (a) is any of the following:
       (A) A health care facility previously located in the State 
     that has closed.
       (B) A professional practice previously operated by a health 
     care provider in the State that has closed.
       (C) A health benefit plan sponsor that--
       (i) previously provided benefits in the form of items and 
     services to enrollees in the State; and
       (ii) has ceased to do business.

                         Subpart E--Enforcement

     SEC. 2191. CIVIL ACTIONS.

       (a) In General.--Any individual whose right under this part 
     has been knowingly or negligently violated--
       (1) by a health information trustee, or any other person, 
     who is not described in paragraph (2), (3), (4), or (5) may 
     maintain a civil action for actual damages and for equitable 
     relief against the health information trustee or other 
     person;
       (2) by an officer or employee of the United States while 
     the officer or employee was acting within the scope of the 
     office or employment may maintain a civil action for actual 
     damages and for equitable relief against the United States;
       (3) by an officer or employee of any government authority 
     of a State that has waived its sovereign immunity to a claim 
     for damages resulting from a violation of this part while the 
     officer or employee was acting within the scope of the office 
     or employment may maintain a civil action for actual damages 
     and for equitable relief against the State government;
       (4) by an officer or employee of a government of a State 
     that is not described in paragraph (3) may maintain a civil 
     action for actual damages and for equitable relief against 
     the officer or employee; or
       (5) by an officer or employee of a government authority 
     while the officer or employee was not acting within the scope 
     of the office or employment may maintain a civil action for 
     actual damages and for equitable relief against the officer 
     or employee.
       (b) Knowing Violations.--Any individual entitled to recover 
     actual damages under this section because of a knowing 
     violation of a provision of this part (other than subsection 
     (c) or (d) of section 2151) shall be entitled to recover the 
     amount of the actual damages demonstrated or $5000, whichever 
     is greater.
       (c) Actual Damages.--For purposes of this section, the term 
     ``actual damages'' includes damages paid to compensate an 
     individual for nonpecuniary losses such as physical and 
     mental injury as well as damages paid to compensate for 
     pecuniary losses.
       (d) Punitive Damages; Attorney's Fees.--In any action 
     brought under this section in which the complainant has 
     prevailed because of a knowing violation of a provision of 
     this part (other than subsection (c) or (d) of section 2151), 
     the court may, in addition to any relief awarded under 
     subsections (a) and (b), award such punitive damages as may 
     be warranted. In such an action, the court, in its 
     discretion, may allow the prevailing party a reasonable 
     attorney's fee (including expert fees) as part of the costs, 
     and the United States shall be liable for costs the same as a 
     private person.
       (e) Limitation.--A civil action under this section may not 
     be commenced more than 2 years after the date on which the 
     aggrieved individual discovered the violation or the date on 
     which the aggrieved individual had a reasonable opportunity 
     to discover the violation, whichever occurs first.
       (f) Inspection and Amendment.--If a health information 
     trustee has established a formal internal procedure that 
     allows an individual who has been denied inspection or 
     amendment of protected health information to appeal the 
     denial, the individual may not maintain a civil action in 
     connection with the denial until the earlier of--
       (1) the date the appeal procedure has been exhausted; or
       (2) the date that is 4 months after the date on which the 
     appeal procedure was initiated.
       (g) No Liability for Permissible Disclosures.--A health 
     information trustee who makes a disclosure of protected 
     health information about a protected individual that is 
     permitted by this part and not otherwise prohibited by State 
     or Federal statute shall not be liable to the individual for 
     the disclosure under common law.
       (h) No Liability for Institutional Review Board 
     Determinations.--If the members of a certified institutional 
     review board have in good faith determined that an approved 
     health research project is of sufficient importance so as to 
     outweigh the intrusion into the privacy of an individual 
     pursuant to section 2156(a)(1), the members, the board, and 
     the parent institution of the board shall not be liable to 
     the individual as a result of such determination.
       (i) Good Faith Reliance on Certification.--A health 
     information trustee who relies in good faith on a 
     certification by a government authority or other person and 
     discloses protected health information about an individual in 
     accordance with this part shall not be liable to the 
     individual for such disclosure.

     SEC. 2192. CIVIL MONEY PENALTIES.

       (a) Violation.--Any health information trustee who the 
     Secretary determines has demonstrated a pattern or practice 
     of failure to comply with the provisions of this part shall 
     be subject, in addition to any other penalties that may be 
     prescribed by law, to a civil money penalty of not more than 
     $10,000 for each such failure. In determining the amount of 
     any penalty to be assessed under the procedures established 
     under subsection (b), the Secretary shall take into account 
     the previous record of compliance of the person being 
     assessed with the applicable requirements of this part and 
     the gravity of the violation.
       (b) Procedures for Imposition of Penalties.--The provisions 
     of section 1128A of the Social Security Act (other than 
     subsections (a) and (b)) shall apply to the imposition of a 
     civil monetary penalty under this section in the same manner 
     as such provisions apply with respect to the imposition of a 
     penalty under section 1128A of such Act.

     SEC. 2193. ALTERNATIVE DISPUTE RESOLUTION.

       (a) In General.--Not later than July 1, 1996, the Secretary 
     shall, by regulation, develop alternative dispute resolution 
     methods for use by individuals, health information trustees, 
     and other persons in resolving claims under section 2191.
       (b) Effect on Initiation of Civil Actions.--
       (1) In general.--Subject to paragraph (2), the regulations 
     established under subsection (a) may provide that an 
     individual alleging that a right of the individual under this 
     part has been violated shall pursue at least one alternative 
     dispute resolution method developed under such subsection as 
     a condition precedent to commencing a civil action under 
     section 2191.
       (2) Limitation.--Such regulations may not require an 
     individual to refrain from commencing a civil action to 
     pursue one or more alternative dispute resolution method for 
     a period that is greater than 6 months.
       (3) Suspension of statute of limitations.--The regulations 
     established by the Secretary under subsection (a) may provide 
     that a period in which an individual described in paragraph 
     (1) pursues (as defined by the Secretary) an alternative 
     dispute resolution method under this section shall be 
     excluded in computing the period of limitations under section 
     2191(e).
       (c) Methods.--The methods under subsection (a) shall 
     include at least the following:
       (1) Arbitration.--The use of arbitration.
       (2) Mediation.--The use of mediation.
       (3) Early offers of settlement.--The use of a process under 
     which parties make early offers of settlement.
       (d) Standards for Establishing Methods.--In developing 
     alternative dispute resolution methods under subsection (a), 
     the Secretary shall ensure that the methods promote the 
     resolution of claims in a manner that--
       (1) is affordable for the parties involved;
       (2) provides for timely and fair resolution of claims; and
       (3) provides for reasonably convenient access to dispute 
     resolution for individuals.

     SEC. 2194. AMENDMENTS TO CRIMINAL LAW.

       (a) In General.--Title 18, United States Code, is amended 
     by inserting after chapter 89 the following:

               ``CHAPTER 90--PROTECTED HEALTH INFORMATION

``Sec.
``1831. Definitions.
``1832. Obtaining protected health information under false pretenses.
``1833. Monetary gain from obtaining protected health information under 
              false pretenses.
``1834. Knowing and unlawful obtaining of protected health information.
``1835. Monetary gain from knowing and unlawful obtaining of protected 
              health information.
``1836. Knowing and unlawful use or disclosure of protected health 
              information.
``1837. Monetary gain from knowing and unlawful sale, transfer, or use 
              of protected health information.

     ``Sec. 1831. Definitions

       ``As used in this chapter--
       ``(1) the term `health information trustee' has the meaning 
     given such term in section 2140(b)(6) of the Affordable 
     Health Care Now Act of 1994;
       ``(2) the term `protected health information' has the 
     meaning given such term in section 2140(a)(3) of such Act; 
     and
       ``(3) the term `protected individual' has the meaning given 
     such term in section 2140(a)(4) of such Act.

     ``Sec. 1832. Obtaining protected health information under 
       false pretenses

       ``Whoever under false pretenses--
       ``(1) requests or obtains protected health information from 
     a health information trustee; or
       ``(2) obtains from a protected individual an authorization 
     for the disclosure of protected health information about the 
     individual maintained by a health information trustee;

     shall be fined under this title or imprisoned not more than 5 
     years, or both.

     ``Sec. 1833. Monetary gain from obtaining protected health 
       information under false pretenses

       ``Whoever under false pretenses--
       ``(1) requests or obtains protected health information from 
     a health information trustee with the intent to sell, 
     transfer, or use such information for profit or monetary 
     gain; or
       ``(2) obtains from a protected individual an authorization 
     for the disclosure of protected health information about the 
     individual maintained by a health information trustee with 
     the intent to sell, transfer, or use such authorization for 
     profit or monetary gain;

     and knowingly sells, transfers, or uses such information or 
     authorization for profit or monetary gain shall be fined 
     under this title or imprisoned not more than 10 years, or 
     both.

     ``Sec. 1834. Knowing and unlawful obtaining of protected 
       health information

       ``Whoever knowingly obtains protected health information 
     from a health information trustee in violation of part 2 of 
     subtitle B of title II of the Affordable Health Care Now Act 
     of 1994, knowing that such obtaining is unlawful, shall be 
     fined under this title or imprisoned not more than 5 years, 
     or both.

     ``Sec. 1835. Monetary gain from knowing and unlawful 
       obtaining of protected health information

       ``Whoever knowingly--
       ``(1) obtains protected health information from a health 
     information trustee in violation of part 2 of subtitle B of 
     title II of the Affordable Health Care Now Act of 1994, 
     knowing that such obtaining is unlawful and with the intent 
     to sell, transfer, or use such information for profit or 
     monetary gain; and
       ``(2) knowingly sells, transfers, or uses such information 
     for profit or monetary gain;

     shall be fined under this title or imprisoned not more than 
     10 years, or both.

     ``Sec. 1836. Knowing and unlawful use or disclosure of 
       protected health information

       ``Whoever knowingly uses or discloses protected health 
     information in violation of part 2 of subtitle B of title II 
     of the Affordable Health Care Now Act of 1994, knowing that 
     such use or disclosure is unlawful, shall be fined under this 
     title or imprisoned not more than 5 years, or both.

     ``Sec. 1837. Monetary gain from knowing and unlawful sale, 
       transfer, or use of protected health information

       ``Whoever knowingly sells, transfers, or uses protected 
     health information in violation of part 2 of subtitle B of 
     title II of the Affordable Health Care Now Act of 1994, 
     knowing that such sale, transfer, or use is unlawful, shall 
     be fined under this title or imprisoned not more than 10 
     years, or both.''.
       (b) Clerical Amendment.--The table of chapters for part I 
     of title 18, United States Code, is amended by inserting 
     after the item relating to chapter 89 the following:

``90. Protected health information..........................1831''.....

          Subpart F--Amendments to Title 5, United States Code

     SEC. 2195. AMENDMENTS TO TITLE 5, UNITED STATES CODE.

       (a) New Subsection.--Section 552a of title 5, United States 
     Code, is amended by adding at the end the following:

       ``(w) Medical Exemptions.--The head of an agency that is a 
     health information trustee (as defined in section 2140(b)(6) 
     of the Affordable Health Care Now Act of 1994) shall 
     promulgate rules, in accordance with the requirements 
     (including general notice) of subsections (b)(1), (b)(2), 
     (b)(3), (c), and (e) of section 553 of this title, to exempt 
     a system of records within the agency, to the extent that the 
     system of records contains protected health information (as 
     defined in section 2140(a)(3) of such Act), from all 
     provisions of this section except subsections (e)(1), (e)(2), 
     subparagraphs (A) through (C) and (E) through (I) of 
     subsection (e)(4), and subsections (e)(5), (e)(6), (e)(9), 
     (e)(12), (l), (n), (o), (p), (q), (r), and (u).''.
       (b) Repeal.--Section 552a(f)(3) of title 5, United States 
     Code, is amended by striking ``pertaining to him,'' and all 
     that follows through the semicolon and inserting ``pertaining 
     to the individual;''.

   Subpart G--Regulations, Research, and Education; Effective Dates; 
             Applicability; and Relationship to Other Laws

     SEC. 2196. REGULATIONS; RESEARCH AND EDUCATION.

       (a) Regulations.--Not later than July 1, 1996, the 
     Secretary shall prescribe regulations to carry out this part.
       (b) Research and Technical Support.--The Secretary may 
     sponsor--
       (1) research relating to the privacy and security of 
     protected health information;
       (2) the development of consent forms governing disclosure 
     of such information; and
       (3) the development of technology to implement standards 
     regarding such information.
       (c) Education.--The Secretary shall establish education and 
     awareness programs--
       (1) to foster adequate security practices by health 
     information trustees;
       (2) to train personnel of health information trustees 
     respecting the duties of such personnel with respect to 
     protected health information; and
       (3) to inform individuals and employers who purchase health 
     care respecting their rights with respect to such 
     information.

     SEC. 2197. EFFECTIVE DATES.

       (a) In General.--Except as provided in subsection (b), this 
     part, and the amendments made by this part, shall take effect 
     on January 1, 1997.
       (b) Provisions Effective Immediately.--A provision of this 
     part shall take effect on the date of the enactment of this 
     Act if the provision--
       (1) imposes a duty on the Secretary to develop, establish, 
     or promulgate regulations, guidelines, notices, statements, 
     or education and awareness programs; or
       (2) authorizes the Secretary to sponsor research or the 
     development of forms or technology.

     SEC. 2198. APPLICABILITY.

       (a) Protected Health Information.--Except as provided in 
     subsections (b) and (c), the provisions of this part shall 
     apply to any protected health information that is received, 
     created, used, maintained, or disclosed by a health 
     information trustee in a State on or after January 1, 1997, 
     regardless of whether the information existed or was 
     disclosed prior to such date.
       (b) Exception.--
       (1) In general.--The provisions of this part shall not 
     apply to a trustee described in paragraph (2), except with 
     respect to protected health information that is received by 
     the trustee on or after January 1, 1997.
       (2) Applicability.--A trustee referred to in paragraph (1) 
     is--
       (A) a health researcher; or
       (B) a person who, with respect to specific protected health 
     information, received the information--
       (i) pursuant to--

       (I) section 2157 (relating to emergency circumstances);
       (II) section 2158 (relating to judicial and administrative 
     purposes);
       (III) section 2159 (relating to law enforcement); or
       (IV) section 2160 (relating to subpoenas, warrants, and 
     search warrants); or

       (ii) while acting in whole or in part in the capacity of an 
     officer or employee of a person described in clause (i).
       (c) Authorizations for Disclosures.--An authorization for 
     the disclosure of protected health information about a 
     protected individual that is executed by the individual 
     before January 1, 1997, and is recognized and valid under 
     State law on December 31, 1996, shall remain valid and shall 
     not be subject to the requirements of section 2152 until 
     January 1, 1998, or the occurrence of the date or event (if 
     any) specified in the authorization upon which the 
     authorization expires, whichever occurs earlier.

     SEC. 2199. RELATIONSHIP TO OTHER LAWS.

       (a) State Law.--Except as otherwise provided in subsections 
     (b), (c), (d), and (f), a State may not establish, continue 
     in effect, or enforce any State law to the extent that the 
     law is inconsistent with, or imposes additional requirements 
     with respect to, any of the following:
       (1) A duty of a health information trustee under this part.
       (2) An authority of a health information trustee under this 
     part to disclose protected health information.
       (3) A provision of subpart C (relating to access procedures 
     and challenge rights), subpart D (miscellaneous provisions), 
     or subpart (E) (relating to enforcement).
       (b) Laws Relating to Public Health and Mental Health.--This 
     part does not preempt, supersede, or modify the operation of 
     any State law regarding public health or mental health to the 
     extent that the law prohibits or regulates a disclosure of 
     protected health information that is permitted under this 
     part.
       (c) Criminal Penalties.--A State may establish and enforce 
     criminal penalties with respect to a failure to comply with a 
     provision of this part.
       (d) Privileges.--A privilege that a person has under law in 
     a court of a State or the United States or under the rules of 
     any agency of a State or the United States may not be 
     diminished, waived, or otherwise affected by--
       (1) the execution by a protected individual of an 
     authorization for disclosure of protected health information 
     under this part, if the authorization is executed for the 
     purpose of receiving health care or providing for the payment 
     for health care; or
       (2) any provision of this part that authorizes the 
     disclosure of protected health information for the purpose of 
     receiving health care or providing for the payment for health 
     care.
       (e) Department of Veterans Affairs.--The limitations on use 
     and disclosure of protected health information under this 
     part shall not be construed to prevent any exchange of such 
     information within and among components of the Department of 
     Veterans Affairs that determine eligibility for or 
     entitlement to, or that provide, benefits under laws 
     administered by the Secretary of Veterans Affairs.
       (f) Certain Duties Under State or Federal Law.--This part 
     shall not be construed to preempt, supersede, or modify the 
     operation of any of the following:
       (1) Any law that provides for the reporting of vital 
     statistics such as birth or death information.
       (2) Any law requiring the reporting of abuse or neglect 
     information about any individual.
       (3) Subpart II of part E of title XXVI of the Public Health 
     Service Act (relating to notifications of emergency response 
     employees of possible exposure to infectious diseases).
       (4) The Americans with Disabilities Act of 1990.
       (5) Any Federal or State statute that establishes a 
     privilege for records used in health professional peer review 
     activities.
       (g) Secretarial Authority.--
       (1) Secretary of Health and Human Services.--A provision of 
     this part does not preempt, supersede, or modify the 
     operation of section 543 of the Public Health Service Act, 
     except to the extent that the Secretary of Health and Human 
     Services determines through regulations promulgated by such 
     Secretary that the provision provides greater protection for 
     protected health information, and the rights of protected 
     individuals, than is provided under such section 543.
       (2) Secretary of Veterans Affairs.--A provision of this 
     part does not preempt, supersede, or modify the operation of 
     section 7332 of title 38, United States Code, except to the 
     extent that the Secretary of Veterans Affairs determines 
     through regulations promulgated by such Secretary that the 
     provision provides greater protection for protected health 
     information, and the rights of protected individuals, than is 
     provided under such section 7332.
  Subtitle C--Deduction for Cost of Catastrophic Health Plan; Medical 
                            Savings Accounts

     SEC. 2201. INDIVIDUALS ALLOWED DEDUCTION FROM GROSS INCOME 
                   FOR COST OF CATASTROPHIC HEALTH PLAN.

       (a) In General.--Subsection (a) of section 62 of the 
     Internal Revenue Code of 1986, as amended by title I, is 
     amended by inserting after paragraph (16) the following new 
     paragraph:
       ``(17) Medical expenses attributable to catastrophic health 
     plan coverage.--
       ``(A) In general.--The deduction allowed by section 213 to 
     the extent attributable to coverage under a catastrophic 
     health plan (as defined in section 220(c)(2)).
       ``(B) Exception.--Subparagraph (A) shall not apply to 
     coverage of an individual who has coverage described in 
     section 220(c)(1)(B)(i).''.
       (b) Coordination With Deduction for Other Medical 
     Expenses.--Subsection (a) of section 213 of such Code is 
     amended to read as follows:
       ``(a) Allowance of Deduction.--There shall be allowed as a 
     deduction the expenses paid during the taxable year, not 
     compensated by insurance or otherwise, for medical care of 
     the taxpayer, his spouse, or a dependent (as defined in 
     section 152) in an amount equal to the sum of--
       ``(1) the portion of such expenses attributable to coverage 
     under a catastrophic health plan (as defined in section 
     220(c)(2)), and
       ``(2) the excess of such expenses (other than expenses 
     described in paragraph (1)) over 7.5 percent of the adjusted 
     gross income of the taxpayer.''
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     1993.

     SEC. 2202. MEDICAL SAVINGS ACCOUNTS.

       (a) In General.--Part VII of subchapter B of chapter 1 of 
     the Internal Revenue Code of 1986 (relating to additional 
     itemized deductions for individuals) is amended by 
     redesignating section 220 as section 221 and by inserting 
     after section 219 the following new section:

     ``SEC. 220. MEDICAL SAVINGS ACCOUNTS.

       ``(a) Deduction Allowed.--
       ``(1) In general.--In the case of an eligible individual, 
     there shall be allowed as a deduction the applicable 
     percentage of the amounts paid in cash during the taxable 
     year by or on behalf of such individual to a medical savings 
     account for the benefit of such individual and (if any) such 
     individual's spouse and dependents if such spouse and 
     dependents are eligible individuals.
       ``(2) Applicable percentage.--For purposes of paragraph 
     (1), the term `applicable percentage' means--
       ``(A) 25 percent for taxable years beginning in 1994 or 
     1995,
       ``(B) 50 percent for taxable years beginning in 1996 or 
     1997, and
       ``(C) 100 percent for taxable years beginning after 1997.
       ``(b) Limitations.--
       ``(1) Only 1 account per family.--Except as provided in 
     regulations prescribed by this Secretary, no deduction shall 
     be allowed under subsection (a) for amounts paid to any 
     medical savings account for the benefit of an individual, 
     such individual's spouse, or any dependent of such individual 
     or spouse if such individual, spouse, or dependent is a 
     beneficiary of any other medical savings account.
       ``(2) Dollar limitation.--The amount allowable as a 
     deduction under subsection (a) for the taxable year shall not 
     exceed whichever of the following is the least:
       ``(A) The lowest deductible under any catastrophic health 
     plan providing coverage to any beneficiary of the medical 
     savings account.
       ``(B) $2,500 ($5,000 if the catastrophic health plan 
     covering the taxpayer provides coverage for more than 1 
     individual).
       ``(C) The excess of--
       ``(i) the applicable target actuarial value for standard 
     coverage established under section 1102(c)(2) of the 
     Affordable Health Care Now Act of 1994, over
       ``(ii) the deduction allowed by section 213 for the taxable 
     year to the extent attributable to coverage under a 
     catastrophic health plan.
     Under rules of the Secretary, the target actuarial value 
     under subparagraph (C)(i) shall be made applicable to 
     individual and family coverage. A beneficiary of such account 
     who has attained age 65 before the close of the taxable year 
     shall not be taken into account in determining the limitation 
     under the preceding sentence.
       ``(c) Definitions.--For purposes of this section--
       ``(1) Eligible individual.--
       ``(A) In general.--The term `eligible individual' means any 
     individual who is covered under a catastrophic health plan 
     throughout the calendar year in which or with which the 
     taxable year ends.
       ``(B) Limitations.--Such term does not include--
       ``(i) an individual who is 65 years of age or older, unless 
     the individual is covered under a catastrophic health plan 
     that is a primary plan (within the meaning of section 
     1862(b)(2)(A) of the Social Security Act); and
       ``(ii) an individual who has coverage under a group health 
     plan or health insurance plan (other than a plan described in 
     1131(4)(B) of the Affordable Health Care Now Act of 1994) 
     that has either a deductible that is less than the minimum 
     deductible required under a catastrophic health plan (as 
     defined in paragraph (2)) or has an actuarial value that is 
     greater than the value for MedAccess catastrophic coverage 
     (as provided in section 1102(d) of such Act).
       ``(C) Deduction not allowed before 1999 to individuals 
     eligible for employer-subsidized coverage.--In the case of 
     any taxable year beginning before January 1, 1999, such term 
     does not include an individual--
       ``(i) who is eligible to participate in any subsidized 
     health plan maintained by an employer of such individual or 
     the spouse of such individual, or
       ``(ii) who is (or whose spouse is) a member of a subsidized 
     class of employees of an employer.

     The rules of subparagraphs (B) and (C) of section 213(f)(3) 
     shall apply for purposes of this preceding sentence.
       ``(2) Catastrophic health plan.--For purposes of paragraph 
     (1)--
       ``(A) In general.--The term `catastrophic health plan' 
     means a health plan covering specified expenses incurred by 
     an individual for medical care for such individual and the 
     spouse and dependents (as defined in section 152) of such 
     individual only to the extent such expenses covered by the 
     plan for any calendar year exceed $1,800 ($3,600 if the 
     catastrophic health plan covering the taxpayer provides 
     coverage for more than 1 individual) or such higher amounts 
     as may be specified by the plan.
       ``(B) Cost-of-living adjustment.--In the case of any 
     calendar year after 1994, each dollar amount in subparagraph 
     (A) shall be increased by an amount equal to--
       ``(i) such dollar amount, multiplied by
       ``(ii) the cost-of-living adjustment determined under 
     section 1(f)(3) for such calendar year.

     If any increase under the preceding sentence is not a 
     multiple of $50, such increase shall be rounded to the 
     nearest multiple of $50.
       ``(d) Medical Savings Accounts.--For purposes of this 
     section--
       ``(1) Medical savings account.--
       ``(A) In general.--The term `medical savings account' means 
     a trust created or organized in the United States exclusively 
     for the purpose of paying the medical expenses of the 
     beneficiaries of such trust, but only if the written 
     governing instrument creating the trust meets the following 
     requirements:
       ``(i) Except in the case of a rollover contribution 
     described in subsection (e)(4), no contribution will be 
     accepted unless it is in cash, and contributions will not be 
     accepted in excess of the amount allowed as a deduction under 
     this section for the taxable year (or would be allowed as 
     such a deduction but for subsection (c)(1)(C)).
       ``(ii) The trustee is a bank (as defined in section 408(n)) 
     or another person who demonstrates to the satisfaction of the 
     Secretary that the manner in which such person will 
     administer the trust will be consistent with the requirements 
     of this section.
       ``(iii) No part of the trust assets will be invested in 
     life insurance contracts.
       ``(iv) The assets of the trust will not be commingled with 
     other property except in a common trust fund or common 
     investment fund.
       ``(v) The interest of an individual in the balance in his 
     account is nonforfeitable.
       ``(vi) Under regulations prescribed by the Secretary, rules 
     similar to the rules of section 401(a)(9) shall apply to the 
     distribution of the entire interest of beneficiaries of such 
     trust.
       ``(B) Treatment of comparable accounts held by insurance 
     companies.--For purposes of this section, an account held by 
     an insurance company in the United States shall be treated as 
     a medical savings account (and such company shall be treated 
     as a bank) if--
       ``(i) such account is part of a health insurance plan that 
     includes a catastrophic health plan (as defined in subsection 
     (c)(2)),
       ``(ii) such account is exclusively for the purpose of 
     paying the medical expenses of the beneficiaries of such 
     account who are covered under such catastrophic health plan, 
     and
       ``(iii) the written instrument governing the account meets 
     the requirements of clauses (i), (v), and (vi) of 
     subparagraph (A).
       ``(2) Medical expenses.--
       ``(A) In general.--The term `medical expenses' means, with 
     respect to an individual, amounts paid or incurred by such 
     individual for--
       ``(i) medical care (as defined in section 213), or
       ``(ii) long-term care (as defined in paragraph (3)),
     for such individual, the spouse of such individual, and any 
     dependent (as defined in section 152) of such individual, but 
     only to the extent such amounts are not compensated for by 
     insurance or otherwise.
       ``(B) Health plan coverage may not be purchased from 
     account.--
       ``(i) In general.--Such term shall not include any amount 
     paid for coverage under a health plan.
       ``(ii) Exception.--Clause (i) shall not apply--

       ``(I) in the case of coverage of an individual under 65 
     years of age under a catastrophic health plan or under a 
     long-term care insurance plan, or
       ``(II) in the case of coverage of an individual 65 years of 
     age or older under a medicare supplemental policy or under a 
     long-term care insurance plan or for payment of premiums 
     under part A or part B of title XVIII of the Social Security 
     Act.

       ``(3) Long-term care.--
       ``(A) In general.--The term `long-term care' means 
     diagnostic, preventive, therapeutic, rehabilitative, 
     maintenance, or personal care services which are required by, 
     and provided to, a chronically ill individual, which have as 
     their primary purpose the direct provision of needed 
     assistance with 1 or more activities of daily living (or the 
     alleviation of the conditions necessitating such assistance) 
     that the individual is certified under subparagraph (B) as 
     being unable to perform, and which are provided in a setting 
     other than an acute care unit of a hospital pursuant to a 
     continuing plan of care prescribed by a physician or 
     registered professional nurse. Such term does not include 
     food or lodging provided in an institutional or other 
     setting, or basic living services associated with the 
     maintenance of a household or participation in community 
     life, such as case management, transportation or legal 
     services, or the performance of home maintenance or household 
     chores.
       ``(B) Chronically ill individual.--The term `chronically 
     ill individual' means an individual who is certified by a 
     physician or registered professional nurse as being unable to 
     perform at least 3 activities of daily living without 
     substantial assistance from another individual. For purposes 
     of this paragraph, the term `activities of daily living' 
     means bathing, dressing, eating, toileting, transferring, and 
     walking.
       ``(4) Time when contributions deemed made.--A contribution 
     shall be deemed to be made on the last day of the preceding 
     taxable year if the contribution is made on account of such 
     taxable year and is made not later than the time prescribed 
     by law for filing the return for such taxable year (not 
     including extensions thereof).
       ``(e) Tax Treatment of Distributions.--
       ``(1) In general.--Any amount paid or distributed out of a 
     medical savings account shall be included in the gross income 
     of the individual for whose benefit such account was 
     established unless such amount is used exclusively to pay the 
     medical expenses of such individual.
       ``(2) Excess contributions returned before due date of 
     return.--Paragraph (1) shall not apply to the distribution of 
     any contribution paid during a taxable year to a medical 
     savings account to the extent that such contribution exceeds 
     the amount allowable as a deduction under subsection (a) if--
       ``(A) such distribution is received by the individual on or 
     before the last day prescribed by law (including extensions 
     of time) for filing such individual's return for such taxable 
     year, and
       ``(B) such distribution is accompanied by the amount of net 
     income attributable to such excess contribution.

     Any net income described in subparagraph (B) shall be 
     included in the gross income of the individual for the 
     taxable year in which it is received.
       ``(3) Penalty for distributions not used for medical 
     expenses.--
       ``(A) In general.--The tax imposed by this chapter for any 
     taxable year in which there is a payment or distribution from 
     a medical savings account which is not used to pay the 
     medical expenses of the individual for whose benefit the 
     account was established shall be increased by 10 percent of 
     the amount of such payment or distribution which is 
     includible in gross income under paragraph (1).
       ``(B) Account balance limitation.--If--
       ``(i) the tax imposed by this chapter is required to be 
     increased under subparagraph (A) by reason of a distribution, 
     and
       ``(ii) after such distribution, the aggregate balance of 
     all medical savings accounts established for the benefit of 
     the individual, is less than the amount of the deductible 
     under the catastrophic health plan covering such individual

     ,subparagraph (A) shall be applied by substituting `50 
     percent' for `10 percent'.
       ``(4) Rollovers.--Paragraph (1) shall not apply to any 
     amount paid or distributed out of a medical savings account 
     to the individual for whose benefit the account is maintained 
     if the entire amount received (including money and any other 
     property) is paid into another medical savings account for 
     the benefit of such individual not later than the 60th day 
     after the day on which he received the payment or 
     distribution.
       ``(5) Penalty for mandatory distributions not made from 
     account.--
       ``(A) In general.--If during any taxable year--
       ``(i) there is a payment of a mandatory distribution 
     expense incurred by a beneficiary of a medical savings 
     account, and
       ``(ii) the person making such payment is not reimbursed for 
     such payment with a distribution from such account before the 
     60th day after such payment

     ,the taxpayer's tax imposed by this chapter for such taxable 
     year shall be increased by 100 percent of the excess of the 
     amount of such payment over the amount of reimbursement made 
     before such 60th day.
       ``(B) Mandatory distribution expense.--For purposes of 
     subparagraph (A), the term `mandatory distribution expense' 
     means--
       ``(i) any expense incurred which may be counted towards a 
     deductible, or for a copayment or coinsurance, under the 
     catastrophic health plan covering such beneficiary, and
       ``(ii) in the case of a beneficiary who has attained age 
     65, any expense for coverage described in subsection 
     (d)(2)(B)(ii)(II) and any expense incurred which may be 
     counted toward a deductible, or for a copayment or 
     coinsurance, under title XVIII of the Social Security Act.
       ``(f) Tax Treatment of Accounts.--
       ``(1) Exemption from tax.--Any medical savings account is 
     exempt from taxation under this subtitle unless such account 
     has ceased to be a medical savings account by reason of 
     paragraph (2) or (3). Notwithstanding the preceding sentence, 
     any such account shall be subject to the taxes imposed by 
     section 511 (relating to imposition of tax on unrelated 
     business income of charitable, etc. organizations).
       ``(2) Account terminates if individual engages in 
     prohibited transaction.--
       ``(A) In general.--If, during any taxable year of the 
     individual for whose benefit the medical savings account was 
     established, such individual engages in any transaction 
     prohibited by section 4975 with respect to the account, the 
     account ceases to be a medical savings account as of the 
     first day of that taxable year.
       ``(B) Account treated as distributing all its assets.--In 
     any case in which any account ceases to be a medical savings 
     account by reason of subparagraph (A) on the first day of any 
     taxable year, paragraph (1) of subsection (e) shall be 
     applied as if there were a distribution on such first day in 
     an amount equal to the fair market value (on such first day) 
     of all assets in the account (on such first day) and no 
     portion of such distribution were used to pay medical 
     expenses.
       ``(3) Effect of pledging account as security.--If, during 
     any taxable year, the individual for whose benefit a medical 
     savings account was established uses the account or any 
     portion thereof as security for a loan, the portion so used 
     is treated as distributed to that individual and not used to 
     pay medical expenses.
       ``(g) Custodial Accounts.--For purposes of this section, a 
     custodial account shall be treated as a trust if--
       ``(1) the assets of such account are held by a bank (as 
     defined in section 408(n)) or another person who demonstrates 
     to the satisfaction of the Secretary that the manner in which 
     he will administer the account will be consistent with the 
     requirements of this section, and
       ``(2) the custodial account would, except for the fact that 
     it is not a trust, constitute a medical savings account 
     described in subsection (d).

     For purposes of this title, in the case of a custodial 
     account treated as a trust by reason of the preceding 
     sentence, the custodian of such account shall be treated as 
     the trustee thereof.
       ``(h) Reports.--The trustee of a medical savings account 
     shall make such reports regarding such account to the 
     Secretary and to the individual for whose benefit the account 
     is maintained with respect to contributions, distributions, 
     and such other matters as the Secretary may require under 
     regulations. The reports required by this subsection shall be 
     filed at such time and in such manner and furnished to such 
     individuals at such time and in such manner as may be 
     required by those regulations.''
       (b) Deduction Allowed Whether or Not Individual Itemizes 
     Other Deductions.--Subsection (a) of section 62 of such Code 
     is amended by inserting after paragraph (17) the following 
     new paragraph:
       ``(18) Medical savings accounts.--The deduction allowed by 
     section 220.''
       (c) Distributions From Medical Savings Accounts Not Allowed 
     As Medical Expense Deduction.--Section 213 of such Code is 
     amended by adding at the end thereof the following new 
     subsection:
       ``(g) Coordination With Medical Savings Accounts.--The 
     amount otherwise taken into account under subsection (a) as 
     expenses paid for medical care shall be reduced by the amount 
     (if any) of the distributions from any medical savings 
     account of the taxpayer during the taxable year which is not 
     includible in gross income by reason of being used for 
     medical care.''
       (d) Exclusion of Employer Contributions To Medical Savings 
     Accounts From Employment Taxes.--
       (1) Social security taxes.--
       (A) Subsection (a) of section 3121 of such Code is amended 
     by striking ``or'' at the end of paragraph (20), by striking 
     the period at the end of paragraph (21) and inserting ``; 
     or'', and by inserting after paragraph (21) the following new 
     paragraph:
       ``(22) remuneration paid to or on behalf of an employee if 
     (and to the extent that) at the time of payment of such 
     remuneration it is reasonable to believe that a corresponding 
     deduction is allowable under section 220.''
       (B) Subsection (a) of section 209 of the Social Security 
     Act is amended by striking ``or'' at the end of paragraph 
     (17), by striking the period at the end of paragraph (18) and 
     inserting ``; or'', and by inserting after paragraph (18) the 
     following new paragraph:
       ``(19) remuneration paid to or on behalf of an employee if 
     (and to the extent that) at the time of payment of such 
     remuneration it is reasonable to believe that a corresponding 
     deduction is allowable under section 220 of the Internal 
     Revenue Code of 1986.''
       (2) Railroad retirement tax.--Subsection (e) of section 
     3231 of such Code is amended by adding at the end thereof the 
     following new paragraph:
       ``(10) Employer contributions to medical savings 
     accounts.--The term `compensation' shall not include any 
     payment made to or on behalf of an employee if (and to the 
     extent that) at the time of payment of such remuneration it 
     is reasonable to believe that a corresponding deduction is 
     allowable under section 220.''
       (3) Unemployment tax.--Subsection (b) of section 3306 of 
     such Code is amended by striking ``or'' at the end of 
     paragraph (15), by striking the period at the end of 
     paragraph (16) and inserting ``; or'', and by inserting after 
     paragraph (16) the following new paragraph:
       ``(17) remuneration paid to or on behalf of an employee if 
     (and to the extent that) at the time of payment of such 
     remuneration it is reasonable to believe that a corresponding 
     deduction is allowable under section 220.''
       (4) Withholding tax.--Subsection (a) of section 3401 of 
     such Code is amended by striking ``or'' at the end of 
     paragraph (19), by striking the period at the end of 
     paragraph (20) and inserting ``; or'', and by inserting after 
     paragraph (20) the following new paragraph:
       ``(21) remuneration paid to or on behalf of an employee if 
     (and to the extent that) at the time of payment of such 
     remuneration it is reasonable to believe that a corresponding 
     deduction is allowable under section 220.''
       (e) Tax on Excess Contributions.--Section 4973 of such Code 
     (relating to tax on excess contributions to individual 
     retirement accounts, certain section 403(b) contracts, and 
     certain individual retirement annuities) is amended--
       (1) by inserting ``medical savings accounts,'' after 
     ``accounts,'' in the heading of such section,
       (2) by redesignating paragraph (2) of subsection (a) as 
     paragraph (3) and by inserting after paragraph (1) the 
     following:
       ``(2) a medical savings account (within the meaning of 
     section 220(d)),'',
       (3) by striking ``or'' at the end of paragraph (1) of 
     subsection (a), and
       (4) by adding at the end thereof the following new 
     subsection:
       ``(d) Excess Contributions to Medical Savings Accounts.--
     For purposes of this section, in the case of a medical 
     savings account (within the meaning of section 220(d)), the 
     term `excess contributions' means the amount by which the 
     amount contributed for the taxable year to the account 
     exceeds the amount excludable from gross income under section 
     220 for such taxable year. For purposes of this subsection, 
     any contribution which is distributed out of the medical 
     savings account in a distribution to which section 220(e)(2) 
     applies shall be treated as an amount not contributed.''
       (f) Tax on Prohibited Transactions.--Section 4975 of such 
     Code (relating to prohibited transactions) is amended--
       (1) by adding at the end of subsection (c) the following 
     new paragraph:
       ``(4) Special rule for medical savings accounts.--An 
     individual for whose benefit a medical savings account 
     (within the meaning of section 220(d)) is established shall 
     be exempt from the tax imposed by this section with respect 
     to any transaction concerning such account (which would 
     otherwise be taxable under this section) if, with respect to 
     such transaction, the account ceases to be a medical savings 
     account by reason of the application of section 220(e)(2)(A) 
     to such account.'', and
       (2) by inserting ``or a medical savings account described 
     in section 220(d)'' in subsection (e)(1) after ``described in 
     section 408(a)''.
       (g) Failure To Provide Reports on Medical Savings 
     Accounts.--Section 6693 of such Code (relating to failure to 
     provide reports on individual retirement account or 
     annuities) is amended--
       (1) by inserting ``or on medical savings accounts'' after 
     ``annuities'' in the heading of such section, and
       (2) by adding at the end of subsection (a) the following: 
     ``The person required by section 220(h) to file a report 
     regarding a medical savings account at the time and in the 
     manner required by such section shall pay a penalty of $50 
     for each failure unless it is shown that such failure is due 
     to reasonable cause.''
       (h) Clerical Amendments.--
       (1) The table of sections for part VII of subchapter B of 
     chapter 1 of such Code is amended by striking the last item 
     and inserting the following:

``Sec. 220. Medical savings accounts.
``Sec. 221. Cross reference.''
       (2) The table of sections for chapter 43 of such Code is 
     amended by striking the item relating to section 4973 and 
     inserting the following:

``Sec. 4973. Tax on excess contributions to individual retirement 
              accounts, medical savings accounts, certain 403(b) 
              contracts, and certain individual retirement annuities.''

       (3) The table of sections for subchapter B of chapter 68 of 
     such Code is amended by inserting ``or on medical savings 
     accounts'' after ``annuities'' in the item relating to 
     section 6693.
       (i) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     1993.
                         Subtitle D--Anti-Fraud

PART 1--ESTABLISHMENT OF ALL-PAYER HEALTH CARE FRAUD AND ABUSE CONTROL 
                                PROGRAM

     SEC. 2301. ALL-PAYER HEALTH CARE FRAUD AND ABUSE CONTROL 
                   PROGRAM.

       (a) In General.--Not later than January 1, 1996, the 
     Attorney General shall establish a program--
       (1) to coordinate Federal, State, and local law enforcement 
     programs to control fraud and abuse with respect to the 
     delivery of and payment for health care in the United States,
       (2) to conduct investigations, audits, evaluations, and 
     inspections relating to the delivery of and payment for 
     health care in the United States, and
       (3) in consultation with the Inspector General of the 
     Department of Health and Human Services, to facilitate the 
     enforcement of the provisions of sections 1128, 1128A, and 
     1128B of the Social Security Act and other statutes 
     applicable to health care fraud and abuse.
       (b) Coordination With Law Enforcement Agencies.--In 
     carrying out the program under subsection (a), the Attorney 
     General shall consult with, and arrange for the sharing of 
     data and resources with Federal, State and local law 
     enforcement agencies, State Medicaid Fraud Control Units, and 
     State agencies responsible for the licensing and 
     certification of health care providers.
       (c) Coordination With Third Party Insurers.--In carrying 
     out the program established under subsection (a), the 
     Attorney General shall consult with, and arrange for the 
     sharing of data with representatives of private sponsors of 
     health benefit plans and other providers of health insurance.
       (d) Regulations.--
       (1) In general.--The Attorney General shall by regulation 
     establish standards to carry out the program under subsection 
     (a).
       (2) Information standards.--
       (A) In general.--Such standards shall include standards 
     relating to the furnishing of information by health insurers 
     (including self-insured health benefit plans), providers, and 
     others to enable the Attorney General to carry out the 
     program (including coordination with law enforcement agencies 
     under subsection (b) and third party insurers under 
     subsection (c)).
       (B) Confidentiality.--Such standards shall include 
     procedures to assure that such information is provided and 
     utilized in a manner that protects the confidentiality of the 
     information and the privacy of individuals receiving health 
     care services.
       (C) Qualified immunity for providing information.--The 
     provisions of section 1157(a) of the Social Security Act 
     (relating to limitation on liability) shall apply to a person 
     providing information to the Attorney General under the 
     program under this section, with respect to the Attorney 
     General's performance of duties under the program, in the 
     same manner as such section applies to information provided 
     to organizations with a contract under part B of title XI of 
     such Act, with respect to the performance of such a contract.

     SEC. 2302. AUTHORIZATION OF ADDITIONAL APPROPRIATIONS FOR 
                   INVESTIGATORS AND OTHER PERSONNEL.

       In addition to any other amounts authorized to be 
     appropriated to the Attorney General for health care anti-
     fraud and abuse activities for a fiscal year, there are 
     authorized to be appropriated such sums as may be necessary 
     to enable the Attorney General to conduct investigations of 
     allegations of health care fraud and otherwise carry out the 
     program established under section 2301 in a fiscal year.

     SEC. 2303. ESTABLISHMENT OF ANTI-FRAUD AND ABUSE TRUST FUND.

       (a) Establishment.--There is hereby created on the books of 
     the Treasury of the United States a trust fund to be known as 
     the ``Anti-Fraud and Abuse Trust Fund'' (in this section 
     referred to as the ``Trust Fund''). The Trust Fund shall 
     consist of such amounts as may be deposited in, or 
     appropriated to, such Trust Fund as provided in this part and 
     section 1128A(f)(3) of the Social Security Act.
       (b) Management.--
       (1) In general.--The Trust Fund shall be managed by the 
     Attorney General through a Managing Trustee designated by the 
     Attorney General.
       (2) Investment of funds.--It shall be the duty of the 
     Managing Trustee to invest such portion of the Trust Fund as 
     is not, in the trustee's judgment, required to meet current 
     withdrawals. Such investments may be made only in interest-
     bearing obligations of the United States or in obligations 
     guaranteed as to both principal and interest by the United 
     States. For such purpose such obligations may be acquired on 
     original issue at the issue price, or by purchase of 
     outstanding obligations at market price. The purposes for 
     which obligations of the United States may be issued under 
     chapter 31 of title 31, United States Code, are hereby 
     extended to authorize the issuance at par of public-debt 
     obligations for purchase by the Trust Fund. Such obligations 
     issued for purchase by the Trust Fund shall have maturities 
     fixed with due regard for the needs of the Trust Fund and 
     shall bear interest at a rate equal to the average market 
     yield (computed by the Managing Trustee on the basis of 
     market quotations as of the end of the calendar month next 
     preceding the date of such issue) on all marketable interest-
     bearing obligations of the United States then forming a part 
     of the public debt which are not due or callable until after 
     the expiration of 4 years from the end of such calendar 
     month, except that where such average is not a multiple of 
     \1/8\ of 1 percent, the rate of interest on such obligations 
     shall be the multiple of \1/8\ of 1 percent nearest such 
     market yield. The Managing Trustee may purchase other 
     interest-bearing obligations of the United States or 
     obligations guaranteed as to both principal and interest by 
     the United States, on original issue or at the market price, 
     only where the Trustee determines that the purchase of such 
     other obligations is in the public interest.
       (3) Any obligations acquired by the Trust Fund (except 
     public-debt obligations issued exclusively to the Trust Fund) 
     may be sold by the Managing Trustee at the market price, and 
     such public-debt obligations may be redeemed at par plus 
     accrued interest.
       (4) The interest on, and the proceeds from the sale or 
     redemption of, any obligations held in the Trust Fund shall 
     be credited to and form a part of the Trust Fund.
       (5) The receipts and disbursements of the Attorney General 
     in the discharge of the functions of the Attorney General 
     shall not be included in the totals of the budget of the 
     United States Government. For purposes of part C of the 
     Balanced Budget and Emergency Deficit Control Act of 1985, 
     the Attorney General and the Trust Fund shall be treated in 
     the same manner as the Federal Retirement Thrift Investment 
     Board and the Thrift Savings Fund, respectively. The United 
     States is not liable for any obligation or liability incurred 
     by the Trust Fund.
       (c) Use of Funds.--Of the amounts in the Trust Fund--
       (1) not less than 60 percent shall be used to support 
     educational activities to prevent the occurrence of 
     violations of anti-fraud and abuse laws, including the 
     issuance of advisory opinions under section 1129 and 1877(i) 
     of the Social Security Act (as added by part 4) and fraud 
     alerts, seminars for providers, and program updates; and
       (2) any amounts remaining after use for activities under 
     paragraph (1) shall be used to assist the Attorney General in 
     carrying out the all-payor fraud and abuse control program 
     established under section 2301(a) in the fiscal year 
     involved.
       (d) Deposit of Federal Health Anti-Fraud and Abuse 
     Penalties Into Trust Fund.--Section 1128A(f)(3) of the Social 
     Security Act (42 U.S.C. 1320a-7a(f)(3)) is amended by 
     striking ``as miscellaneous receipts of the Treasury of the 
     United States'' and inserting ``in the Anti-Fraud and Abuse 
     Trust Fund established under section 2303(a) of the 
     Affordable Health Care Now Act of 1994''.
       (e) Use of Federal Health Anti-Fraud and Abuse Penalties to 
     Repay Beneficiaries for Cost-Sharing.--Section 1128A(f) of 
     the Social Security Act (42 U.S.C. 1320a-7a(f)) is amended in 
     the matter preceding paragraph (1) by striking ``Secretary 
     and disposed of as follows:'' and inserting the following: 
     ``Secretary. If the person against whom such a penalty or 
     assessment was assessed collected a payment from an 
     individual for providing to the individual the service that 
     is the subject of the penalty or assessment, the Secretary 
     shall pay a portion of the amount recovered to the individual 
     in the nature of restitution in an amount equal to the 
     payment so collected. The Secretary shall dispose of any 
     remaining amounts recovered under this section as follows:''.

       PART 2--REVISIONS TO CURRENT SANCTIONS FOR FRAUD AND ABUSE

     SEC. 2311. MANDATORY EXCLUSION FROM PARTICIPATION IN MEDICARE 
                   AND STATE HEALTH CARE PROGRAMS.

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

     SEC. 2312. ESTABLISHMENT OF MINIMUM PERIOD OF EXCLUSION FOR 
                   CERTAIN INDIVIDUALS AND ENTITIES SUBJECT TO 
                   PERMISSIVE EXCLUSION FROM MEDICARE AND STATE 
                   HEALTH CARE PROGRAMS.

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

     SEC. 2313. REVISIONS TO CRIMINAL PENALTIES.

       (a) Clarification of Discount Exception to Anti-Kickback 
     Provisions.--Section 1128B(b)(3)(A) of the Social Security 
     Act (42 U.S.C. 1320a-7b(b)(3)(A)) is amended--
       (1) by inserting ``(regardless of its timing or 
     availability)'' after ``in price''; and
       (2) by striking ``program;'' and inserting ``program and is 
     not paid in the form of currency or coin;''.
       (b) Exemption From Anti-Kickback Penalties for Certain 
     Managed Care Arrangements.--Section 1128B(b)(3) of such Act 
     (42 U.S.C. 1320a-7b(b)(3)) is amended--
       (1) by striking ``and'' at the end of subparagraph (D);
       (2) by striking the period at the end of subparagraph (E) 
     and inserting ``; and''; and
       (3) by adding at the end the following new subparagraph:
       ``(F) any reduction in cost sharing or increased benefits 
     given to an individual, any amounts paid to a provider for an 
     item or service furnished to an individual, or any discount 
     or reduction in price given by the provider for such an item 
     or service, if--
       ``(A) the item or service is provided through an 
     organization described in section 1877(b)(3), or
       ``(B) the item or service is provided through such an 
     organization on behalf of another entity (including but not 
     limited to a self-insured employer or indemnity plan) that 
     assumes financial risk for the provision of the item or 
     service.''.
       (c) Exemption From Anti-Kickback Penalties for Certain 
     Protected Financial Relationships.--Section 1128B(b)(3) of 
     such Act (42 U.S.C. 1320a-7b(b)(3)), as amended by subsection 
     (b), is further amended--
       (1) by striking ``and'' at the end of subparagraph (E);
       (2) by striking the period at the end of subparagraph (F) 
     and inserting ``; and''; and
       (3) by adding at the end the following new subparagraph:
       ``(G) any amount in a financial relationship of a physician 
     (or an immediate family member of such physician) with an 
     entity specified in section 1877(a)(2), if section 1877(a)(1) 
     does not apply to that amount or financial relationship.''.

     SEC. 2315. REVISIONS TO LIMITATIONS ON PHYSICIAN SELF-
                   REFERRAL.

       (a) Clarification of Coverage of Radiology or Diagnostic 
     Services.--Section 1877(h)(6) of the Social Security Act (42 
     U.S.C. 1395nn(h)(6)) is amended by striking subparagraph (D).
       (b) New Exception for Shared Facility Services.--Section 
     1877(b) of such Act (42 U.S.C. 1395nn(b)) is amended--
       (1) by redesignating paragraph (4) as paragraph (5); and
       (2) by inserting after paragraph (3) the following new 
     paragraph:
       ``(4) Shared facility services.--
       ``(A) In general.--In the case of a shared facility service 
     of a shared facility--
       ``(i) that is furnished--

       ``(I) personally by the referring physician who is a shared 
     facility physician or personally by an individual directly 
     employed by such a physician,
       ``(II) by a shared facility in a building in which the 
     referring physician furnishes substantially all of the 
     services of the physician that are unrelated to the 
     furnishing of shared facility services, and
       ``(III) to a patient of a shared facility physician; and

       ``(ii) that is billed by the referring physician.
       ``(B) Shared facility related definitions.--
       ``(i) Shared facility service.--The term `shared facility 
     service' means, with respect to a shared facility, a 
     designated health service furnished by the facility to 
     patients of shared facility physicians.
       ``(ii) Shared facility.--The term `shared facility' means 
     an entity that furnishes shared facility services under a 
     shared facility arrangement.
       ``(iii) Shared facility physician.--The term `shared 
     facility physician' means, with respect to a shared facility, 
     a physician who has a financial relationship under a shared 
     facility arrangement with the facility.
       ``(iv) Shared facility arrangement.--The term `shared 
     facility arrangement' means, with respect to the provision of 
     shared facility services in a building, a financial 
     arrangement--

       ``(I) which is only between physicians who are providing 
     services (unrelated to shared facility services) in the same 
     building,
       ``(II) in which the overhead expenses of the facility are 
     shared, in accordance with methods previously determined by 
     the physicians in the arrangement, among the physicians in 
     the arrangement, and
       ``(III) which, in the case of a corporation, is wholly 
     owned and controlled by shared facility physicians.''.

       (c) Revision to Rural Provider Exception.--Section 
     1877(d)(2) of such Act (42 U.S.C. 1395nn(d)(2)) is amended by 
     striking ``substantially all'' and inserting ``not less than 
     75 percent (as determined in accordance with regulations of 
     the Secretary)''.
       (d) Clarification of Referrals by Nephrologists.--Section 
     1877(h)(5)(C) of such Act (42 U.S.C. 1395nn(H)(5)(C)) is 
     amended--
       (1) by striking ``and a request'' and inserting ``a 
     request'';
       (2) by inserting after ``radiation therapy,'' the 
     following: ``and a request by a nephrologist for items or 
     services related to renal dialysis,''; and
       (3) by striking ``or radiation oncologist'' and inserting 
     ``radiation oncologist, or nephrologist''.
       (e) Revision of Reporting Requirements.--Section 1877(f) of 
     such Act (42 U.S.C. 1395nn(f)) is amended--
       (1) by striking ``Each entity'' and all that follows 
     through paragraph (2) and inserting the following: ``The 
     Secretary may require each entity (other than a physician or 
     physician group practice) providing designated health 
     services to provide the Secretary with the following 
     information concerning the entity's ownership, investment, 
     and compensation arrangements:
       ``(1) the designated health services provided by the 
     entity; and
       ``(2) the names and unique physician identifier numbers of 
     all physicians with an ownership or investment interest (as 
     described in subsection (a)(2)(A)) or with a compensation 
     interest (as described in subsection (a)(2)(B)) in the 
     entity, or whose immediate relatives have such an ownership, 
     investment, or compensation interest in the entity.''; and
       (2) by striking the fifth sentence.
       (f) Exception for Certain Managed Care Arrangements.--
     Section 1877(b)(3) of such Act (42 U.S.C. 1395nn(b)(3)) is 
     amended--
       (1) by striking ``or'' at the end of subparagraph (C);
       (2) by striking the period at the end of subparagraph (D) 
     and inserting a comma; and
       (3) by adding at the end the following new subparagraphs:
       ``(E) with a contract with a State to provide services 
     under the State plan under title XIX (in accordance with 
     section 1903(m)); or
       ``(F) which meets State regulatory requirements applicable 
     to health maintenance organizations and which--
       ``(i) provides designated health services directly or 
     through contractual arrangements with providers;
       ``(ii) assumes financial risk for the provision of services 
     or provides services on behalf of another individual or 
     entity (including but not limited to a self-insured employer, 
     indemnity plan, physician, or physician group) that assumes 
     financial risk for the provision of the item or service; and
       ``(iii) subjects the services to a program of utilization 
     review offered by an organization described in a preceding 
     subparagraph, an organization meeting State regulatory 
     requirements applicable to utilization review, or an 
     organization accredited to perform utilization review 
     considered appropriate by the Secretary.''.
       (g) Preemption of State Law.--Section 1877(g) of such Act 
     (42 U.S.C. 1395nn(g)) is amended by adding at the end the 
     following new paragraph:
       ``(6) Preemption of state law.--The provisions of this 
     section shall supersede any State law to the extent State law 
     prohibits a physician from making a referral, or an entity 
     from presenting a bill, for the furnishing of a service which 
     is not subject to the restrictions applicable under paragraph 
     (1).''.
       (h) Revision of Effective Date Exception Provision.--
     Section 13562(b)(2) of the Omnibus Budget Reconciliation Act 
     of 1993 is amended by striking subparagraphs (A) and (B) and 
     inserting the following:
       ``(A) the second sentence of subsection (a)(2), and 
     subsections (b)(2)(B) and (d)(2), of section 1877 of the 
     Social Security Act (as in effect on the day before the date 
     of the enactment of this Act) shall apply instead of the 
     corresponding provisions in section 1877 (as amended by this 
     Act);
       ``(B) section 1877(b)(4) of the Social Security Act (as in 
     effect on the day before the date of the enactment of this 
     Act) shall apply;
       ``(C) the requirements of section 1877(c)(2) of the Social 
     Security Act (as amended by this Act) shall not apply to any 
     securities of a corporation that meets the requirements of 
     section 1877(c)(2) of the Social Security Act (as in effect 
     on the day before the date of the enactment of this Act);
       ``(D) section 1877(e)(3) of the Social Security Act (as 
     amended by this Act) shall apply, except that it shall not 
     apply to any arrangement that meets the requirements of 
     subsection (e)(2) or subsection (e)(3) of section 1877 of the 
     Social Security Act (as in effect on the day before the date 
     of the enactment of this Act);
       ``(E) the requirements of clauses (iv) and (v) of section 
     1877(h)(4)(A), and of clause (i) of section 1877(h)(4)(B), of 
     the Social Security Act (as amended by this Act) shall not 
     apply; and
       ``(F) section 1877(h)(4)(B) of the Social Security Act (as 
     in effect on the day before the date of the enactment of this 
     Act) shall apply instead of section 1877(h)(4)(A)(ii) of such 
     Act (as amended by this Act).''.
       (i) Effective Date.--The amendments made by this section 
     shall apply to referrals made on or after January 1, 1995, 
     except that the amendments made by subsection (h) shall apply 
     as if included in the enactment of the Omnibus Budget 
     Reconciliation Act of 1993.

     SEC. 2316. MEDICARE HEALTH MAINTENANCE ORGANIZATIONS.

       (a) Study on Costs of Peer Review Contracts for Medicare 
     HMOs.--The Comptroller General shall conduct a study of the 
     costs incurred by eligible organizations with risk-sharing 
     contracts under section 1876(b) of the Social Security Act of 
     complying with the requirement of entering into a written 
     agreement with an entity providing peer review services with 
     respect to services provided by the organization, together 
     with an analysis of how information generated by such 
     entities is used by the Secretary of Health and Human 
     Services to assess the quality of services provided by such 
     eligible organizations.
       (b) Report to Congress.--Not later than July 1, 1997, the 
     Comptroller General shall submit a report to the Committee on 
     Ways and Means and the Committee on Energy and Commerce of 
     the House of Representatives and the Committee on Finance and 
     the Special Committee on Aging of the Senate on the study 
     conducted under subsection (a).

     SEC. 2317. EFFECTIVE DATE.

       Except as otherwise provided, the amendments made by this 
     part shall take effect January 1, 1996.

                   PART 3--AMENDMENTS TO CRIMINAL LAW

     SEC. 2321. PENALTIES FOR HEALTH CARE FRAUD.

       (a) In General.--
       (1) Fines and imprisonment for health care fraud 
     violations.--Chapter 63 of title 18, United States Code, is 
     amended by adding at the end the following:

     ``Sec. 1347. Health care fraud

       ``(a) Whoever knowingly executes, or attempts to execute, a 
     scheme or artifice--
       ``(1) to defraud any health care plan or other person, in 
     connection with the delivery of or payment for health care 
     benefits, items, or services; or
       ``(2) to obtain, by means of false or fraudulent pretenses, 
     representations, or promises, any of the money or property 
     owned by, or under the custody or control of, any health care 
     plan, or person in connection with the delivery of or payment 
     for health care benefits, items, or services;

     shall be guilty of a felony, and fined under this title or 
     imprisoned not more than 5 years, or both.
       ``(b) In determining the amount or scope of any penalty or 
     assessment, the court shall take into account:
       ``(1) the nature of the false or fraudulent claims and the 
     circumstances under which they are presented;
       ``(2) the degree of culpability and history of prior 
     offenses by the convicted health care provider;
       ``(3) the extent to which restitution is paid; and
       ``(4) such other matters as justice may require.
       ``(c) A principal is liable for penalties and assessments 
     under this section for the acts of the principal's agents 
     acting within the scope of the agency.
       ``(d) For purposes of this section, the term `health care 
     plan' means a Federally-funded public program or private 
     program for the delivery of or payment for health care items 
     or services.''.
       (2) Clerical amendment.--The table of sections at the 
     beginning of chapter 63 of title 18, United States Code, is 
     amended by adding at the end the following:

``1347. Health care fraud.''.

     SEC. 2322. REWARDS FOR INFORMATION LEADING TO PROSECUTION AND 
                   CONVICTION.

       Section 3059 of title 18, United States Code, is amended by 
     adding at the end the following new subsection:
       ``(c)(1) In special circumstances and in the Attorney 
     General's sole discretion, the Attorney General may make a 
     payment of up to $10,000 to a person who furnishes 
     information unknown to the Government relating to a possible 
     prosecution under section 1347.
       ``(2) A person is not eligible for a payment under 
     paragraph (1) if--
       ``(A) the person is a current or former officer or employee 
     of a Federal or State government agency or instrumentality 
     who furnishes information discovered or gathered in the 
     course of government employment.
       ``(B) the person knowingly participated in the offense;
       ``(C) the information furnished by the person consists of 
     allegations or transactions that have been disclosed to the 
     public--
       ``(i) in a criminal, civil, or administrative proceeding;
       ``(ii) in a congressional, administrative or General 
     Accounting Office report, hearing, audit or investigation; or
       ``(iii) by the news media, unless the person is the 
     original source of the information; or
       ``(D) when, in the judgment of the Attorney General, it 
     appears that a person whose illegal activities are being 
     prosecuted or investigated could benefit from the award.
       ``(3) For the purposes of paragraph (2)(C)(iii), the term 
     `original source' means a person who has direct and 
     independent knowledge of the information that is furnished 
     and has voluntarily provided the information to the 
     Government prior to disclosure by the news media.
       ``(4) Neither the failure of the Attorney General to 
     authorize a payment under paragraph (1) nor the amount 
     authorized shall be subject to judicial review.''.

     SEC. 2323. BROADENING APPLICATION OF MAIL FRAUD STATUTE.

       Section 1341 of title 18, United States Code, is amended--
       (1) by inserting ``or deposits or causes to be deposited 
     any matter or thing whatever to be sent or delivered by any 
     private or commercial interstate carrier,'' after ``Postal 
     Service,''; and
       (2) by inserting ``or such carrier'' after ``causes to be 
     delivered by mail''.

                       PART 4--ADVISORY OPINIONS

     SEC. 2331. AUTHORIZING THE SECRETARY OF HEALTH AND HUMAN 
                   SERVICES TO ISSUE ADVISORY OPINIONS UNDER TITLE 
                   XI.

       Title XI of the Social Security Act (42 U.S.C. 1301 et 
     seq.) is amended by inserting after section 1128B the 
     following new section:


                          ``advisory opinions

       ``Sec. 1129. (a) Issuance of Advisory Opinions.--The 
     Secretary shall issue advisory opinions as provided in this 
     section.
       ``(b) Matters Subject to Advisory Opinions.--The Secretary 
     shall issue advisory opinions as to the following matters:
       ``(1) What constitutes prohibited remuneration within the 
     meaning of section 1128B(b).
       ``(2) Whether an arrangement or proposed arrangement 
     satisfies the criteria set forth in section 1128B(b)(3) for 
     activities which do not result in prohibited remuneration.
       ``(3) Whether an arrangement or proposed arrangement 
     satisfies the criteria which the Secretary has established, 
     or shall establish by regulation for activities which do not 
     result in prohibited remuneration.
       ``(4) What constitutes an inducement to reduce or limit 
     services to individuals entitled to benefits under title 
     XVIII or title XIX within the meaning of section 1128B(b).
       ``(5) Whether an arrangement, activity or proposed 
     arrangement or proposed activity violates any other provision 
     of this Act.
       ``(c) Matters Not Subject to Advisory Opinions.--Such 
     advisory opinions shall not address the following matters:
       ``(1) Whether the fair market value shall be, or was paid 
     or received for any goods, services or property.
       ``(2) Whether an individual is a bona fide employee within 
     the requirements of section 3121(d)(2) of the Internal 
     Revenue Code of 1986.
       ``(d) Effect of Advisory Opinions.--
       ``(1) Each advisory opinion issued by the Secretary shall 
     be binding as to the Secretary and the party or parties 
     requesting the opinion.
       ``(2) The failure of a party to seek an advisory opinion 
     may not be introduced into evidence to prove that the party 
     intended to violate the provisions of sections 1128, 1128A, 
     or 1128B.
       ``(e) Regulations.--The Secretary within 180 days of the 
     date of enactment, shall issue regulations establishing a 
     system for the issuance of advisory opinions. Such 
     regulations shall provide for--
       ``(1) the procedure to be followed by a party applying for 
     an advisory opinion;
       ``(2) the procedure to be followed by the Secretary in 
     responding to a request for an advisory opinion;
       ``(3) the interval in which the Secretary shall respond;
       ``(4) the reasonable fee to be charged to the party 
     requesting an advisory opinion; and
       ``(5) the manner in which advisory opinions will be made 
     available to the public.
       ``(f) Interval for Issuance of Advisory Opinions.--Under no 
     circumstances shall the interval in which the Secretary shall 
     respond to a party requesting an advisory opinion exceed 30 
     days.''.

     SEC. 2332. AUTHORIZING THE SECRETARY OF HEALTH AND HUMAN 
                   SERVICES TO ISSUE ADVISORY OPINIONS RELATING TO 
                   PHYSICIAN OWNERSHIP AND REFERRAL.

       Section 1877 of the Social Security Act (42 U.S.C. 1395nn) 
     is amended by the addition of the following new subsection:
       ``(i) Advisory Opinions.--
       ``(1) In general.--The Secretary shall issue advisory 
     opinions on whether an arrangement or proposed arrangement 
     will result in a prohibited referral within the meaning of 
     this section.
       ``(2) Effect of Advisory Opinions.--
       ``(A) Each advisory opinion issued by the Secretary shall 
     be binding as to the Secretary and the party or parties 
     requesting the opinion.
       ``(B) The failure of a party to seek an advisory opinion 
     may not be introduced into evidence to prove that the party 
     intended to violate the provisions of this section.
       ``(3) Regulations.--The Secretary within one hundred and 
     eighty days of the date of enactment, shall issue regulations 
     establishing a system for the issuance of advisory opinions. 
     Such regulations shall provide for--
       ``(A) the procedure to be followed by a party applying for 
     an advisory opinion;
       ``(B) the procedure to be followed by the Secretary in 
     responding to a request for an advisory opinion;
       ``(C) the interval in which the Secretary shall respond;
       ``(D) the reasonable fee to be charged to the party 
     requesting an advisory opinion; and
       ``(E) the manner in which advisory opinions will be made 
     available to the public.
       ``(4) Interval for issuance of advisory opinions.--Under no 
     circumstances shall the interval in which the Secretary shall 
     respond to a party requesting an advisory opinion exceed 
     thirty days.''.

     SEC. 2333. EFFECTIVE DATE.

       Unless otherwise specified, the amendments made by this 
     part shall be effective upon the enactment of this Act.
Subtitle E--Increased Medicare Beneficiary Choice; Additional Medicare 
                                Reforms

             PART 1--INCREASED MEDICARE BENEFICIARY CHOICE

     SEC. 2401. REQUIREMENTS FOR HEALTH MAINTENANCE ORGANIZATIONS 
                   UNDER MEDICARE.

       (a) Use of Metropolitan Statistical Areas to Determine 
     Adjusted Average Per Capita Cost.--Section 1876(a)(4) of such 
     Act (42 U.S.C. 1395mm(a)(4)) is amended by striking ``in a 
     geographic area served by an eligible organization or in a 
     similar area'' and inserting ``in the metropolitan 
     statistical area (as defined by the Office of Management and 
     Budget) in which the individual resides, or in the entire 
     portion of the State in which the individual resides which is 
     not located in a metropolitan statistical area in the case of 
     an individual who does not reside in a metropolitan 
     statistical area''.
       (b) Determination of Model Additional Health Benefit 
     Packages.--Section 1876(g) of such Act (42 U.S.C. 1395mm(g)) 
     is amended by inserting after paragraph (3) the following new 
     paragraph:
       ``(4) The Secretary shall develop the following model 
     packages of additional health benefits (referred to in 
     paragraph (3)(B)) which an eligible organization may provide 
     (at its option) under paragraph (2):
       ``(A) Coverage for catastrophic illness (subject to a limit 
     on out-of-pocket expenditures).
       ``(B) Coverage for prescription drugs.
       ``(C) Coverage for preventive services.''.
       (c) Revision of Membership Limitation.--Section 1876(f) of 
     the Social Security Act (42 U.S.C. 1395mm(f)) is amended--
       (1) in paragraph (1), by striking ``one-half'' and 
     inserting ``25 percent''; and
       (2) in paragraph (2)(A), by striking ``50 percent'' and 
     inserting ``75 percent''.
       (d) Enrollment Periods for Medicare Health Maintenance 
     Organizations.--
       (1) Uniform open enrollment period.--Section 
     1876(c)(3)(A)(i) of such Act (42 U.S.C. 1395mm(c)(3)(A)(i)) 
     is amended by striking ``must have'' and all that follows 
     through ``and including'' and inserting the following: 
     ``shall have open enrollment during an annual uniform open 
     enrollment period established by the Secretary for all 
     eligible organizations, together with''.
       (2) Open enrollment for certain disenrolled individuals.--
     Section 1876(c)(3)(A)(ii)(I) of such Act (42 U.S.C. 
     1395mm(c)(3)(A)(ii)(I)) is amended by adding at the end the 
     following: ``Each eligible organization with a risk-sharing 
     contract under this section shall have an open enrollment 
     period for individuals residing in the organization's service 
     area who disenroll from another eligible organization with a 
     risk-sharing contract under this section on the grounds that 
     the individual's primary care physician is no longer a member 
     of the organization's provider network or for cause (in 
     accordance with such standards, and as demonstrated through 
     an appeals process that meets such requirements, as the 
     Secretary may establish).
       (e) Effective Date.--The amendments made by this section 
     shall apply to contracts entered into on or after the date of 
     the enactment of this Act.

     SEC. 2402. EXPANSION AND REVISION OF MEDICARE SELECT 
                   POLICIES.

       (a) Permitting Medicare Select Policies in All States.--
       (1) In general.--Subsection (c) of section 4358 of the 
     Omnibus Budget Reconciliation Act of 1990 (hereafter referred 
     to as ``OBRA-1990'') is hereby repealed.
       (2) Conforming amendment.--Section 4358 of OBRA-1990 is 
     amended by redesignating subsection (d) as subsection (c).
       (b) Requirements of Medicare Select Policies.--Section 
     1882(t)(1) of the Social Security Act (42 U.S.C. 
     1395ss(t)(1)) is amended to read as follows:
       ``(1)(A) If a medicare supplemental policy meets the 1991 
     NAIC Model Regulation or 1991 Federal Regulation and 
     otherwise complies with the requirements of this section 
     except that--
       ``(i) the benefits under such policy are restricted to 
     items and services furnished by certain entities (or reduced 
     benefits are provided when items or services are furnished by 
     other entities), and
       ``(ii) in the case of a policy described in subparagraph 
     (C)(i)--
       ``(I) the benefits under such policy are not one of the 
     groups or packages of benefits described in subsection 
     (p)(2)(A),
       ``(II) except for nominal copayments imposed for services 
     covered under part B of this title, such benefits include at 
     least the core group of basic benefits described in 
     subsection (p)(2)(B), and
       ``(III) an enrollee's liability under such policy for 
     physician's services covered under part B of this title is 
     limited to the nominal copayments described in subclause 
     (II),
     the policy shall nevertheless be treated as meeting those 
     standards if the policy meets the requirements of 
     subparagraph (B).
       ``(B) A policy meets the requirements of this subparagraph 
     if--
       ``(i) full benefits are provided for items and services 
     furnished through a network of entities which have entered 
     into contracts or agreements with the issuer of the policy,
       ``(ii) full benefits are provided for items and services 
     furnished by other entities if the services are medically 
     necessary and immediately required because of an unforeseen 
     illness, injury, or condition and it is not reasonable given 
     the circumstances to obtain the services through the network,
       ``(iii) the network offers sufficient access,
       ``(iv) the issuer of the policy has arrangements for an 
     ongoing quality assurance program for items and services 
     furnished through the network,
       ``(v)(I) the issuer of the policy provides to each enrollee 
     at the time of enrollment an explanation of--
       ``(aa) the restrictions on payment under the policy for 
     services furnished other than by or through the network,
       ``(bb) out of area coverage under the policy,
       ``(cc) the policy's coverage of emergency services and 
     urgently needed care, and
       ``(dd) the availability of a policy through the entity that 
     meets the 1991 Model NAIC Regulation or 1991 Federal 
     Regulation without regard to this subsection and the premium 
     charged for such policy, and
       ``(II) each enrollee prior to enrollment acknowledges 
     receipt of the explanation provided under subclause (I), and
       ``(vi) the issuer of the policy makes available to 
     individuals, in addition to the policy described in this 
     subsection, any policy (otherwise offered by the issuer to 
     individuals in the State) that meets the 1991 Model NAIC 
     Regulation or 1991 Federal Regulation and other requirements 
     of this section without regard to this subsection.
       ``(C)(i) A policy described in this subparagraph--
       ``(I) is offered by an eligible organization (as defined in 
     section 1876(b)),
       ``(II) is not a policy or plan providing benefits pursuant 
     to a contract under section 1876 or an approved demonstration 
     project described in section 603(c) of the Social Security 
     Amendments of 1983, section 2355 of the Deficit Reduction Act 
     of 1984, or section 9412(b) of the Omnibus Budget 
     Reconciliation Act of 1986, and
       ``(III) provides benefits which, when combined with 
     benefits which are available under this title, are 
     substantially similar to benefits under policies offered to 
     individuals who are not entitled to benefits under this 
     title.
       ``(ii) In making a determination under subclause (III) of 
     clause (i) as to whether certain benefits are substantially 
     similar, there shall not be taken into account, except in the 
     case of preventive services, benefits provided under policies 
     offered to individuals who are not entitled to benefits under 
     this title which are in addition to the benefits covered by 
     this title and which are benefits an entity must provide in 
     order to meet the definition of an eligible organization 
     under section 1876(b)(1).''.
       (c) Renewability of Medicare Select Policies.--Section 
     1882(q)(1) of the Social Security Act (42 U.S.C. 
     1395ss(q)(1)) is amended--
       (1) by striking ``(1) Each'' and inserting ``(1)(A) Except 
     as provided in subparagraph (B), each'';
       (2) by redesignating subparagraphs (A) and (B) as clauses 
     (i) and (ii), respectively; and
       (3) by adding at the end the following new subparagraph:
       ``(B)(i) Except as provided in clause (ii), in the case of 
     a policy that meets the requirements of subsection (t), an 
     issuer may cancel or nonrenew such policy with respect to an 
     individual who leaves the service area of such policy.
       ``(ii) If an individual described in clause (i) moves to a 
     geographic area where an issuer described in clause (i), or 
     where an affiliate of such issuer, is issuing medicare 
     supplemental policies, such individual must be permitted to 
     enroll in any medicare supplemental policy offered by such 
     issuer or affiliate that provides benefits comparable to or 
     less than the benefits provided in the policy being canceled 
     or nonrenewed. An individual whose coverage is canceled or 
     nonrenewed under this subparagraph shall, as part of the 
     notice of termination or nonrenewal, be notified of the right 
     to enroll in other medicare supplemental policies offered by 
     the issuer or its affiliates.
       ``(iii) For purposes of this subparagraph, the term 
     `affiliate' shall have the meaning given such term by the 
     1991 NAIC Model Regulation.''.
       (d) Civil Money Penalty.--Section 1882(t)(2) of the Social 
     Security Act (42 U.S.C. 1395ss(t)(2)) is amended--
       (1) by striking ``(2)'' and inserting ``(2)(A)'';
       (2) by redesignating subparagraphs (A), (B), (C), and (D) 
     as clauses (i), (ii), (iii), and (iv), respectively;
       (3) in clause (iv), as so redesignated--
       (A) by striking ``paragraph (1)(E)(i)'' and inserting 
     ``paragraph (1)(B)(v)(I), and
       (B) by striking ``paragraph (1)(E)(ii)'' and inserting 
     ``paragraph (1)(B)(v)(II)'';
       (4) by striking ``the previous sentence'' and inserting 
     ``this subparagraph''; and
       (5) by adding at the end the following new subparagraph:
       ``(B) If the Secretary determines that an issuer of a 
     policy approved under paragraph (1) has made a 
     misrepresentation to the Secretary or has provided the 
     Secretary with false information regarding such policy, the 
     issuer is subject to a civil money penalty in an amount not 
     to exceed $100,000 for each such determination. The 
     provisions of section 1128A (other than the first sentence of 
     subsection (a) and other than subsection (b)) shall apply to 
     a civil money penalty under this subparagraph in the same 
     manner as such provisions apply to a penalty or proceeding 
     under section 1128A(a).''.
       (e) Effective Dates.--
       (1) NAIC standards.--If, within 6 months after the date of 
     the enactment of this Act, the National Association of 
     Insurance Commissioners (hereafter in this subsection 
     referred to as the ``NAIC'') makes changes in the 1991 NAIC 
     Model Regulation (as defined in section 1882(p)(1)(A) of the 
     Social Security Act) to incorporate the additional 
     requirements imposed by the amendments made by this section, 
     section 1882(g)(2)(A) of such Act shall be applied in each 
     State, effective for policies issued to policyholders on and 
     after the date specified in paragraph (3), as if the 
     reference to the Model Regulation adopted on June 6, 1979, 
     were a reference to the 1991 NAIC Model Regulation (as so 
     defined) as changed under this paragraph (such changed 
     Regulation referred to in this subsection as the ``1994 NAIC 
     Model Regulation'').
       (2) Secretary standards.--If the NAIC does not make changes 
     in the 1991 NAIC Model Regulation (as so defined) within the 
     6-month period specified in paragraph (1), the Secretary of 
     Health and Human Services (in this subsection as the 
     ``Secretary'') shall promulgate a regulation and section 
     1882(g)(2)(A) of the Social Security Act shall be applied in 
     each State, effective for policies issued to policyholders on 
     and after the date specified in paragraph (3), as if the 
     reference to the Model Regulation adopted in June 6, 1979, 
     were a reference to the 1991 NAIC Model Regulation (as so 
     defined) as changed by the Secretary under this paragraph 
     (such changed Regulation referred to in this subsection as 
     the ``1994 Federal Regulation'').
       (3) Date specified.--
       (A) In general.--Subject to subparagraph (B), the date 
     specified in this paragraph for a State is the earlier of--
       (i) the date the State adopts the 1994 NAIC Model 
     Regulation or the 1994 Federal Regulation; or
       (ii) 1 year after the date the NAIC or the Secretary first 
     adopts such regulations.
       (B) Additional legislative action required.--In the case of 
     a State which the Secretary identifies, in consultation with 
     the NAIC, as--
       (i) requiring State legislation (other than legislation 
     appropriating funds) in order for medicare supplemental 
     policies to meet the 1994 NAIC Model Regulation or the 1994 
     Federal Regulation, but
       (ii) having a legislature which is not scheduled to meet in 
     1995 in a legislative session in which such legislation may 
     be considered,
     the date specified in this paragraph is the first day of the 
     first calendar quarter beginning after the close of the first 
     legislative session of the State legislature that begins on 
     or after January 1, 1995. For purposes of the previous 
     sentence, in the case of a State that has a 2-year 
     legislative session, each year of such session shall be 
     deemed to be a separate regular session of the State 
     legislature.

     SEC. 2403. INCLUDING NOTICE OF AVAILABLE HEALTH MAINTENANCE 
                   ORGANIZATIONS IN ANNUAL NOTICE TO 
                   BENEFICIARIES.

       Section 1804 of the Social Security Act (42 U.S.C. 1395b-2) 
     is amended--
       (1) by striking ``and'' at the end of paragraph (2);
       (2) by striking the period at the end of paragraph (3) and 
     inserting ``, and''; and
       (3) by inserting after paragraph (3) the following new 
     paragraph:
       ``(4) with respect to the area in which the individual 
     receiving the notice resides, a description of the eligible 
     organizations under section 1833(a)(1) or section 1876 and 
     the carriers offering a medicare supplemental policy 
     described in section 1882(t)(1) which serve the area in which 
     the individual receiving the notice resides.''.

     SEC. 2404. LEGISLATIVE PROPOSAL ON ENROLLING MEDICARE 
                   BENEFICIARIES IN QUALIFIED HEALTH PLANS.

       (a) In General.--
       (1) Legislative proposal.--Not later than 1 year after the 
     date of the enactment of this Act, the Secretary shall 
     develop and submit to Congress a proposal for legislation 
     which provides for the enrollment of medicare beneficiaries 
     in private health insurance plans (including medisave 
     coverage described in section 1102(e)).
       (2) Medicare beneficiary.--For purposes of this section, 
     the term ``medicare beneficiary'' means an individual who is 
     eligible for benefits under part A of title XVIII of the 
     Social Security Act and is enrolled under part B of such 
     title.
       (b) Contents of the Proposal.--A proposal for legislation 
     submitted under subsection (a) shall--
       (1) provide for an appropriate methodology by which the 
     Secretary shall make payment to private health insurance 
     plans for the enrollment of medicare beneficiaries;
       (2) provide individuals the opportunity to remain enrolled 
     in such a plan without an interruption in coverage upon 
     becoming medicare beneficiaries; and
       (3) provide medicare beneficiaries with the opportunity to 
     enroll in a private health insurance plan.

     SEC. 2405. OPTIONAL INTERIM ENROLLMENT OF MEDICARE 
                   BENEFICIARIES IN PRIVATE HEALTH PLANS.

       (a) Interim Enrollment of Medicare Beneficiaries in 
     Qualified Health Plans.--
       (1) In general.--Notwithstanding title XVIII of the Social 
     Security Act, the Secretary shall provide for a monthly 
     payment as provided under subsection (b)(1) to a private 
     health insurance plan on behalf of enrolled medicare 
     beneficiaries who choose to enroll in such a plan.
       (2) Medicare beneficiary.--For purposes of this section, 
     the term ``medicare beneficiary'' means an individual who is 
     eligible for benefits under part A of title XVIII of the 
     Social Security Act and is enrolled under part B of such 
     title.
       (b) Payment Specified.--
       (1) Federal payment.--
       (A) In general.--The amount of payment specified in this 
     paragraph for an individual who is enrolled in a private 
     health insurance plan is the lesser of--
       (i) the applicable rate specified in section 1876(a)(1)(C) 
     of the Social Security Act (but at 100 percent, rather than 
     95 percent, of the applicable amount); or
       (ii) the monthly premium charged the individual for 
     coverage under the private health insurance plan.
       (B) Source of payment.--The payment to a private health 
     insurance plan under this paragraph for individuals entitled 
     to benefits under part A and enrolled under part B of title 
     XVIII of the Social Security Act shall be made from the 
     Federal Hospital Insurance Trust Fund and the Federal 
     Supplementary Medical Insurance Trust Fund, with the 
     allocation to be determined by the Secretary.
       (2) Individual's share.--If the monthly premium for the 
     private plan in which the individual is enrolled is greater 
     than the amount specified under paragraph (1)(A)(i), the 
     individual shall be responsible for paying to the plan the 
     difference between the monthly premium charged the individual 
     for coverage under the plan and the amount specified in 
     paragraph (1)(A)(i).
       (c) Payments Under this Section as Sole Medicare 
     Benefits.--Payments made under this section shall be instead 
     of the amounts that would otherwise be payable, pursuant to 
     sections 1814(b) and 1833(a) of the Social Security Act, for 
     services furnished to medicare beneficiaries.
       (d) Inclusion in Annual Notice to Beneficiaries.--Section 
     1804 of the Social Security Act (42 U.S.C. (42 U.S.C. 1395b-
     2), as amended by section 2403, is amended
       (1) by striking ``and'' at the end of paragraph (3);
       (2) by striking the period at the end of paragraph (4) and 
     inserting ``, and''; and
       (3) by inserting after paragraph (4) the following new 
     paragraph:
       ``(5) a description of the option provided pursuant to 
     section 2405 of the Affordable Health Care Now Act of 1994 
     for payment to be made by the Secretary on the individual's 
     behalf for enrollment in a private health insurance plan.''.

    PART 2--MEDICARE PART B PREMIUM; OTHER MEDICARE PAYMENT CHANGES

     SEC. 2411. EXTENSION OF CURRENT RULES FOR COMPUTING MEDICARE 
                   PART B PREMIUM.

       Section 1839(e) of the Social Security Act (42 U.S.C. 
     1395r(e)) is amended--
       (1) in paragraph (1)(A), by striking ``January 1999'' and 
     inserting ``January 2005''; and
       (2) in paragraph (2), by striking ``January 1998'' and 
     inserting ``January 2004''.

     SEC. 2412. INCREASE IN MEDICARE PART B PREMIUM FOR 
                   INDIVIDUALS WITH HIGH INCOME.

       (a) In General.--Subchapter A of chapter 1 of the Internal 
     Revenue Code of 1986 is amended by adding at the end thereof 
     the following new part:

   ``PART VIII--MEDICARE PART B PREMIUMS FOR HIGH-INCOME INDIVIDUALS

``Sec. 59B. Medicare part B premium tax.

     ``SEC. 59B. MEDICARE PART B PREMIUM TAX.

       ``(a) Imposition of Tax.--In the case of an individual to 
     whom this section applies for the taxable year, there is 
     hereby imposed (in addition to any other tax imposed by this 
     subtitle) a tax for such taxable year equal to the aggregate 
     of the Medicare part B premium taxes for each of the months 
     during such year that such individual is covered by Medicare 
     part B.
       ``(b) Individuals to Whom Section Applies.--This section 
     shall apply to any individual for any taxable year if--
       ``(1) such individual is covered under Medicare part B for 
     any month during such year, and
       ``(2) the modified adjusted gross income of the taxpayer 
     for such taxable year exceeds the threshold amount.
       ``(c) Medicare Part B Premium Tax for Month.--
       ``(1) In general.--The Medicare part B premium tax for any 
     month is \2/3\ the amount equal to the excess of--
       ``(A) 150 percent of the monthly actuarial rate for 
     enrollees age 65 and over determined for that calendar year 
     under section 1839(b) of the Social Security Act, over
       ``(B) the total monthly premium under section 1839 of the 
     Social Security Act (determined without regard to subsections 
     (b) and (f) of section 1839 of such Act).
       ``(2) Phasein of tax.--If the modified adjusted gross 
     income of the taxpayer for any taxable years exceeds the 
     threshold amount by less than $50,000, the Medicare part B 
     premium tax for any month during such taxable year shall be 
     an amount which bears the same ratio to the amount determined 
     under paragraph (1) (without regard to this paragraph) as 
     such excess bears to $50,000. The preceding sentence shall 
     not apply to any individual whose threshold amount is zero.
       ``(d) Other Definitions and Special Rules.--For purposes of 
     this section--
       ``(1) Threshold amount.--The term `threshold amount' 
     means--
       ``(A) except as otherwise provided in this paragraph, 
     $100,000,
       ``(B) $125,000 in the case of a joint return, and
       ``(C) zero in the case of a taxpayer who--
       ``(i) is married at the close of the taxable year but does 
     not file a joint return for such year, and
       ``(ii) does not live apart from his spouse at all times 
     during the taxable year.
       ``(2) Modified adjusted gross income.--The term `modified 
     adjusted gross income' means adjusted gross income--
       ``(A) determined without regard to sections 135, 911, 931, 
     and 933, and
       ``(B) increased by the amount of interest received or 
     accrued by the taxpayer during the taxable year which is 
     exempt from tax.
       ``(3) Medicare part b coverage.--An individual shall be 
     treated as covered under Medicare part B for any month if a 
     premium is paid under part B of title XVIII of the Social 
     Security Act for the coverage of the individual under such 
     part for the month.
       ``(4) Married individual.--The determination of whether an 
     individual is married shall be made in accordance with 
     section 7703.''
       (b) Clerical Amendment.--The table of parts for subchapter 
     A of chapter 1 of such Code is amended by adding at the end 
     thereof the following new item:

``Part VIII. Medicare Part B Premiums For High-Income Individuals.''
       (c) Effective Date.--The amendments made by this section 
     shall apply to months after December 1994 in taxable years 
     ending after December 31, 1994.

     SEC. 2413. IMPROVED EFFICIENCY THROUGH CONSOLIDATION OF 
                   ADMINISTRATION OF PARTS A AND B.

       (a) In General.--The Secretary of Health and Human Services 
     shall take such steps as may be necessary to consolidate the 
     administration (including processing systems) of parts A and 
     B of the medicare program (under title XVIII of the Social 
     Security Act) including over a 5-year period.
       (b) Combination of Intermediary and Carrier Functions.--In 
     taking such steps, the Secretary shall contract with a single 
     entity that combines the fiscal intermediary and carrier 
     functions in each area except where the Secretary finds that 
     special regional or national contracts are appropriate.
       (c) Superseding Conflicting Requirements.--The provisions 
     of sections 1816 and 1842 of the Social Security Act 
     (including provider nominating provisions in such section 
     1816) are superseded to the extent required to carry out this 
     section.

     SEC. 2414. EXTENSION OF MEDICARE SECONDARY PAYMENT 
                   PROVISIONS.

       (a) Extension of Data Match.--
       (1) Section 1862(b)(5)(C)(iii) of the Social Security Act 
     (42 U.S.C. 1395y(b)(5)(C)(iii)) is amended by striking 
     ``1998'' and inserting ``2004''.
       (2) Section 6103(l)(12)(F) of the Internal Revenue Code of 
     1986 is amended--
       (A) in clause (i), by striking ``1998'' and inserting 
     ``2004'',
       (B) in clause (ii)(I), by striking ``1997'' and inserting 
     ``2003'', and
       (C) in clause (ii)(II), by striking ``1998'' and inserting 
     ``2004''.
       (b) Extension of Medicare Secondary Payer to Disabled 
     Beneficiaries.--Section 1862(b)(1)(B)(iii) of such Act (42 
     U.S.C. 1395y(b)(1)(B)(iii)) is amended by striking ``1998'' 
     and inserting ``2004''.
       (c) Extension of Period for End Stage Renal Disease 
     Beneficiaries.--Section 1862(b)(1)(C) of such Act (42 U.S.C. 
     1395y(b)(1)(C)) is amended in the second sentence by striking 
     ``1998'' and inserting ``2004''.
             Subtitle F--Health Care Antitrust Improvements

     SEC. 2501. PROTECTION FROM ANTITRUST LAWS FOR CERTAIN 
                   COMPETITIVE AND COLLABORATIVE ACTIVITIES.

       (a) Protections Described.--An activity relating to the 
     provision of health care services shall receive the following 
     protection from the antitrust laws:
       (1) If the activity is within a safe harbor designated by 
     the Attorney General under section 2502, the safe harbor 
     shall be a defense to all antitrust claims, except for claims 
     for injunctive relief asserted by the Attorney General or the 
     Chair of the Federal Trade Commission in extraordinary 
     circumstances.
       (2) If the activity is specified in and in compliance with 
     the terms of a certificate of review issued by the Attorney 
     General under section 2503 and the activity occurs while the 
     certificate is in effect, the certificate shall be a defense 
     to antitrust claims, other than claims for injunctive relief.
       (b) Award of Attorney's Fees and Costs of Suit.--
       (1) In general.--If any person brings an action alleging a 
     claim under the antitrust laws and the activity on which the 
     claim is based is found by the court to be protected from 
     such laws under subsection (a), the court shall, at the 
     conclusion of the action--
       (A) award to a substantially prevailing claimant the cost 
     of suit attributable to such claim, including a reasonable 
     attorney's fee, or
       (B) award to a substantially prevailing party defending 
     against such claim the cost of such suit attributable to such 
     claim, including reasonable attorney's fee, if the claim, or 
     the claimant's conduct during litigation of the claim, was 
     frivolous, unreasonable, without foundation, or in bad faith.
       (2) Offset in cases of bad faith.--The court may reduce an 
     award made pursuant to paragraph (1) in whole or in part by 
     an award in favor of another party for any part of the cost 
     of suit (including a reasonable attorney's fee) attributable 
     to conduct during the litigation by any prevailing party that 
     the court finds to be frivolous, unreasonable, without 
     foundation, or in bad faith.

     SEC. 2502. DESIGNATION OF SAFE HARBORS.

       (a) In General.--
       (1) Designation by attorney general.--The Attorney General, 
     in consultation with the Secretary of Health and Human 
     Services and the Chair, shall develop and designate pursuant 
     to paragraph (C) safe harbors for purposes of section 
     2501(a)(1) relating to--
       (A) each category of activities referred to in paragraph 
     (2); and
       (B) such other categories of activities as the Attorney 
     General may designate in accordance with the process 
     described in this section.
       (2) Required categories of activities subject to safe 
     harbors.--The categories of activities referred to in this 
     paragraph are as follows:
       (A) Joint purchasing of health care services.--Providing 
     the terms under which consumers of health care services 
     (patients or others acting on their behalf) may jointly 
     negotiate and purchase health care services.
       (B) Small hospital mergers.--Providing for small hospitals 
     lawfully to merge under the antitrust laws without undue 
     delay or review, taking into account the special needs and 
     circumstances of rural health care markets.
       (C) Network formation and operation.--Permitting activities 
     related to the startup and operation of collaborations 
     between State-licensed providers through partial or full 
     integration, including multi-provider networks, hospital 
     networks, physician-hospital organizations, and other efforts 
     to provide health care services more efficiently.
       (D) Activities of medical self-regulatory entities.--
     Permitting standard setting and enforcement activities by 
     medical self-regulatory entities (such as hospital boards and 
     medical societies) to promote health care quality, except 
     that a safe harbor under this paragraph may not provide 
     protection for any activity undertaken for financial gain or 
     for anticompetitive reasons.
       (E) Provision of information to buyers and consumers.--
     Permitting health care providers collectively to supply non-
     price medical information to buyers and consumers relating to 
     the type, quality and efficiency of treatment, including 
     joint views on procedures that should be covered by 
     purchasers and medical protocols, except that a safe harbor 
     under this subparagraph may not provide protection for any 
     collective refusals to deal or collective attempts at 
     coercion.
       (F) Participation in surveys.--Providing the terms under 
     which health care providers may lawfully participate in 
     written surveys of prices of services, reimbursements 
     received, employee compensation, and other relevant areas.
       (G) High-technology and tertiary care joint ventures.--
     Permitting activities of health care joint ventures to 
     purchase or use new or existing high technology or costly 
     equipment, or to provide advanced tertiary care services.
       (H) Market power screens.--Providing market power screens 
     at appropriate levels below which combinations of health care 
     providers are too small to pose a realistic antitrust threat. 
     There may be different levels for different activities and 
     markets, taking into account the special needs of rural 
     health care markets.
       (I) Joint purchasing arrangements.--Providing the terms 
     under which health care providers may make joint purchases of 
     products and services.
       (J) Good faith negotiations.--Providing the terms under 
     which health care providers may engage in discussions 
     relating to legitimate collaborative activities contemplated 
     by the safe harbors.
       (b) Process for Designation of Additional Categories of 
     Activities.--
       (1) Solicitation of proposals.--Not later than 30 days 
     after the date of the enactment of this Act, the Attorney 
     General shall publish a notice in the Federal Register 
     soliciting proposals for safe harbors.
       (2) Review of proposed safe harbors.--Not later than 180 
     days after the date of the enactment of this Act, the 
     Attorney General (in consultation with the Secretary and the 
     Chair) shall review the proposed safe harbors submitted under 
     paragraph (1) and include a description of the safe harbors 
     in the report under subsection (d).
       (3) Additional safe harbors.--After submitting the report 
     under subsection (d), the Attorney General (in consultation 
     with the Secretary and the Chair) may from time to time add 
     additional safe harbors in accordance with the procedures 
     described in this subsection.
       (c) Effective Date of Safe Harbors.--
       (1) Publication.--Not later than 180 days after the date of 
     the enactment of this Act, the Attorney General shall publish 
     in the Federal Register for public comment the safe harbors 
     proposed for designation under this section. Not later than 
     180 days after publishing such proposed safe harbors in the 
     Federal Register, the Attorney General shall issue final 
     rules establishing such safe harbors.
       (2) Effective date.--The safe harbors established under the 
     final rules issued under paragraph (1) shall take effect 90 
     days after issuance, unless disapproved by the Congress.
       (d) Report on Proposed Safe Harbors.--Not later than 180 
     days after the date of the enactment of this Act, the 
     Attorney General (in consultation with the Secretary and the 
     Chair) shall submit a report to Congress describing the 
     proposals from subsections (a) and (b)(1) to be included in 
     the publication of safe harbors described in subsection 
     (c)(1) and the proposals from subsection (b)(1) that are not 
     to be so included, together with explanations therefor.
       (e) Modification or Removal of Safe Harbors.--The Attorney 
     General (in consultation with the Secretary and the Chair) 
     may modify or remove a safe harbor following notice and 
     comment upon a determination that the safe harbor does not 
     meet the criteria of subsection (f).
       (f) Criteria for Safe Harbors.--In establishing safe 
     harbors under this section, the Attorney General shall take 
     into account the following:
       (1) The extent to which a competitive or collaborative 
     activity will accomplish any of the following:
       (A) An increase in access to health care services.
       (B) The enhancement of the quality of health care services.
       (C) The establishment of cost efficiencies that will be 
     passed on to consumers, including economies of scale and 
     reduced transaction and administrative costs.
       (D) An increase in the ability of health care facilities to 
     provide services in medically underserved areas or to 
     medically underserved populations.
       (E) An improvement in the utilization of health care 
     resources or the reduction in the inefficient duplication of 
     the use of such resources.
       (2) Whether the designation of an activity as a safe harbor 
     will result in the following outcomes:
       (A) Health plans and other health care insurers, consumers 
     of health care services, and health care providers will be 
     better able to negotiate payment and service arrangements 
     which will reduce costs to consumers.
       (B) Taking into consideration the characteristics of the 
     particular purchasers and providers involved, competition 
     will not be unduly restricted.
       (C) Equally efficient and less restrictive alternatives do 
     not exist to meet the criteria described in paragraph (1).
       (D) The activity will not unreasonably foreclose 
     competition by denying competitors a necessary element of 
     competition.

     SEC. 2503. CERTIFICATES OF REVIEW.

       (a) Establishment of Program.--In consultation with the 
     Secretary, the Attorney General shall (not later than 180 
     days after the date of the enactment of this Act) issue 
     certificates of review in accordance with this section for 
     providers of health care services and advise and assist any 
     person with respect to applying for such a certificate of 
     review.
       (b) Procedures for Application for Certificate.--
       (1) Submission of application.--
       (A) Form; content.--To apply for a certificate of review, a 
     person shall submit to the Attorney General a written 
     application which--
       (i) specifies the activities relating to the provision of 
     health care services which satisfy the criteria described in 
     section 2502(e) and which will be included in the 
     certificate; and
       (ii) is in a form and contains any information, including 
     information pertaining to the overall market in which the 
     applicant operates, required by rule or regulation 
     promulgated under section 2506.
       (B) Filing fee.--The Attorney General may require a filing 
     fee to be submitted with the application to cover the cost of 
     publication and the cost of review required by this section. 
     The amount of the filing fee shall be determined on a sliding 
     scale established by the Attorney General (based on the 
     monetary size of the transaction involved), except that such 
     fee may not exceed $5,000.
       (2) Publication of notice in federal register.--Within 10 
     days after an application submitted under paragraph (1) is 
     received by the Attorney General, the Attorney General shall 
     publish in the Federal Register a notice that announces that 
     an application for a certificate of review has been 
     submitted, identifies each person submitting the application, 
     and describes the conduct for which the application is 
     submitted.
       (3) Establishment of procedures for issuance of 
     certificate.--In consultation with the Chair and the 
     Secretary, the Attorney General shall establish procedures to 
     be used in applying for and in determining whether to approve 
     an application for a certificate of review under this title. 
     Under such procedures the Attorney General, in consultation 
     with the Secretary, shall approve an application if the 
     Attorney General determines that the activities to be covered 
     under the certificate will satisfy the criteria described in 
     section 2502(f) for safe harbors designated under such 
     section and that the benefits of the issuance of the 
     certificate will outweigh any disadvantages that may result 
     from reduced competition. If the Attorney General, with the 
     concurrence of the Secretary, determines that the 
     requirements for a certificate are met, the Attorney General 
     shall issue to the applicant a certificate of review. The 
     certificate of review shall specify--
       (i) the health care market activities to which the 
     certificate applies,
       (ii) the person to whom the certificate of review is 
     issued, and
       (iii) any terms and conditions the Attorney General or the 
     Secretary deems necessary to assure compliance with the 
     applicable procedures described in paragraph (3).
       (4) Timing for decision on application.--Within 90 days 
     after the Attorney General receives an application for a 
     certificate of review, the Attorney General shall determine 
     whether to grant or deny the certificate.
       (5) Notification of decision.--The Attorney General shall 
     notify the applicant of the Attorney General's determination 
     and if the application is denied, the reasons for the denial.
       (6) Fraudulent procurement.--A certificate of review shall 
     be void ab initio with respect to any health care market 
     activities for which the certificate was procured by fraud.
       (c) Amendment and Revocation of Certificates.--
       (1) Notification of changes.--Any applicant who receives a 
     certificate of review--
       (A) shall promptly report to the Attorney General any 
     change relevant to the matters specified in the certificate; 
     and
       (B) may submit to the Attorney General an application to 
     amend the certificate to reflect the effect of the change on 
     the conduct specified in the certificate.
       (2) Amendment to certificate.--An application for an 
     amendment to a certificate of review shall be treated as an 
     application for the issuance of a certificate. The effective 
     date of an amendment shall be the date on which the 
     application for the amendment is received by the Attorney 
     General.
       (3) Revocation.--
       (A) Grounds for revocation.--In accordance with this 
     paragraph, the Attorney General, in consultation with the 
     Secretary, may revoke in whole or in part a certificate of 
     review issued under this section. There shall be considered 
     as grounds for the revocation of a certificate the fact 
     that--
       (i) after the expiration of the 2-year period beginning on 
     the date a person's certificate is issued, the activities of 
     the person have not substantially accomplished the purposes 
     for the issuance of the certificate;
       (ii) the person has failed to comply with any of the terms 
     or conditions imposed under the certificate by the Attorney 
     General or the Secretary under subsection (b)(4); or
       (iii) the activities covered under the certificate no 
     longer satisfy the criteria set forth in section 2502(f).
       (B) Request for compliance information.--If the Attorney 
     General or the Secretary has reason to believe that any of 
     the grounds for revocation of a certificate of review 
     described in subparagraph (A) may apply to a person holding 
     the certificate, the Attorney General shall request such 
     information from such person as the Attorney General or the 
     Secretary deems necessary to resolve the matter of 
     compliance. Failure to comply with such request shall be 
     grounds for revocation of the certificate under this 
     paragraph.
       (C) Procedures for revocation.--If the Attorney General or 
     the Secretary determines that any of the grounds for 
     revocation of a certificate of review described in 
     subparagraph (A) apply to a person holding the certificate, 
     or that such person has failed to comply with a request made 
     under subparagraph (B), the Attorney General shall give 
     written notice of the determination to such person. The 
     notice shall include a statement of the circumstances 
     underlying, and the reasons in support of, the determination. 
     In the 60-day period beginning 30 days after the notice is 
     given, the Attorney General shall revoke the certificate or 
     modify it as the Attorney General or the Secretary deems 
     necessary to cause the certificate to apply only to 
     activities that meet the criteria set forth in section 
     2502(f).
       (D) Investigation authority.--For purposes of carrying out 
     this paragraph, the Attorney General may conduct 
     investigations in the same manner as the Attorney General 
     conducts investigations under section 3 of the Antitrust 
     Civil Process Act, except that no civil investigative demand 
     may be issued to a person to whom a certificate of review is 
     issued if such person is the target of such investigation.
       (d) Review of Determinations.--
       (1) Availability of review for certain actions.--If the 
     Attorney General denies, in whole or in part, an application 
     for a certificate of review or for an amendment to a 
     certificate, or revokes or modifies a certificate pursuant to 
     paragraph (3), the applicant or certificate holder (as the 
     case may be) may, within 30 days of the denial or revocation, 
     bring an action in the United States District Court for the 
     District of Columbia to set aside the determination on the 
     ground that such determination is clearly erroneous.
       (2) No other review permitted.--Except as provided in 
     paragraph (1), no action by the Attorney General, the Chair, 
     or the Secretary pursuant to this subtitle shall be subject 
     to judicial review.
       (3) Effect of rejected application.--If the Attorney 
     General denies, in whole or in part, an application for a 
     certificate of review or for an amendment to a certificate, 
     or revokes or amends a certificate, neither the negative 
     determination nor the statement of reasons therefore shall be 
     admissible in evidence, in any administrative or judicial 
     proceeding, concerning any claim under the antitrust laws.
       (e) Publication of Decisions.--The Attorney General shall 
     publish a notice in the Federal Register on a timely basis of 
     each decision made with respect to an application for a 
     certificate of review under this section or the amendment or 
     revocation of such a certificate, in a manner that protects 
     the confidentiality of any proprietary information relating 
     to the application.
       (f) Annual Reports.--Every person to whom a certificate of 
     review is issued shall submit to the Attorney General an 
     annual report, in such form and at such time as the Attorney 
     General may require, that contains any necessary updates to 
     the information required under subsection (b) and a 
     description of the activities of the holder under the 
     certificate during the preceding year.
       (g) Restrictions on Disclosure of Information.--
       (1) Waiver of disclosure requirements under administrative 
     procedure act.--Information submitted by any person in 
     connection with the issuance, amendment, or revocation of a 
     certificate of review shall be exempt from disclosure under 
     section 552 of title 5, United States Code.
       (2) Restrictions on disclosure of commercial or financial 
     information.--
       (A) In general.--Except as provided in subparagraph (B), no 
     officer or employee of the United States shall disclose 
     commercial or financial information submitted in connection 
     with the issuance, amendment, or revocation of a certificate 
     of review if the information is privileged or confidential or 
     if disclosure of the information would cause harm to the 
     person who submitted the information.
       (B) Exceptions.--Subparagraph (A) shall not apply with 
     respect to information disclosed--
       (i) upon a request made by the Congress or any committee of 
     the Congress,
       (ii) in a judicial or administrative proceeding, subject to 
     appropriate protective orders,
       (iii) with the consent of the person who submitted the 
     information,
       (iv) in the course of making a determination with respect 
     to the issuance, amendment, or revocation of a certificate of 
     review, if the Attorney General deems disclosure of the 
     information to be necessary in connection with making the 
     determination,
       (v) in accordance with any requirement imposed by a statute 
     of the United States, or
       (vi) in accordance with any rule or regulation promulgated 
     under subsection (i) permitting the disclosure of the 
     information to an agency of the United States or of a State 
     on the condition that the agency will disclose the 
     information only under the circumstances specified in clauses 
     (i) through (v).
       (3) Prohibition against use of information to support or 
     answer claims under antitrust laws.--Any information 
     disclosed in an application for a certificate of review under 
     this section shall only be admissible into evidence in a 
     judicial or administrative proceeding for the sole purpose of 
     establishing whether a person is entitled to the protections 
     provided by such a certificate.

     SEC. 2504. NOTIFICATIONS PROVIDING REDUCTION IN CERTAIN 
                   PENALTIES UNDER ANTITRUST LAW FOR HEALTH CARE 
                   JOINT VENTURES.

       (a) Notifications Described.--
       (1) Submission of notification by venture.--Any party to a 
     health care joint venture, acting on such venture's behalf, 
     may, not later than 90 days after entering into a written 
     agreement to form such venture or not later than 90 days 
     after the date of the enactment of this Act, whichever is 
     later, file with the Attorney General a written notification 
     disclosing--
       (A) the identities of the parties to such venture,
       (B) the nature and objectives of such venture, and
       (C) such additional information as the Attorney General may 
     require by regulation.
       (2) Filing fee.--The Attorney General may require a filing 
     fee to be submitted with the notification to cover the cost 
     of publication and the cost of administering this section, 
     except that the amount of such fee shall not exceed $250.
       (3) Submission of additional information.--
       (A) Request of attorney general.--At any time after 
     receiving a notification filed under paragraph (1), the 
     Attorney General may require the submission of additional 
     information or documentary material relevant to the proposed 
     health care joint venture.
       (B) Parties to venture.--Any party to a health care joint 
     venture may submit such additional information on the 
     venture's behalf as may be appropriate to ensure that the 
     venture will receive the protections provided under 
     subsection (b).
       (C) Required submission of information on changes to 
     venture.--A health care joint venture for which a 
     notification is in effect under this section shall submit 
     information on any change in the membership of the venture 
     not later than 90 days after such change occurs.
       (4) Publication of notification.--
       (A) Information made publicly available.--Not later than 30 
     days after receiving a notification with respect to a venture 
     under paragraph (1), the Attorney General shall publish in 
     the Federal Register a notice with respect to the venture 
     that identifies the parties to the venture and generally 
     describes the purpose and planned activity of the venture. 
     Prior to its publication, the contents of the notice shall be 
     made available to the parties to the venture.
       (B) Restriction on disclosure of other information.--All 
     information and documentary material submitted pursuant to 
     this section and all information obtained by the Attorney 
     General in the course of any investigation or case with 
     respect to a potential violation of the antitrust laws by the 
     health care joint venture (other than information and 
     material described in subparagraph (A)) shall be exempt from 
     disclosure under section 552 of title 5, United States Code, 
     and shall not be made publicly available by any agency of the 
     United States to which such section applies except in a 
     judicial proceeding in which such information and material is 
     subject to any protective order.
       (5) Withdrawal of notification.--Any person who files a 
     notification pursuant to this section may withdraw such 
     notification before a publication by the Attorney General 
     pursuant to paragraph (4).
       (6) No judicial review permitted.--Any action taken or not 
     taken by the Attorney General with respect to notifications 
     filed pursuant to this subsection shall not be subject to 
     judicial review.
       (b) Protections for Ventures Subject to Notification.--
       (1) In general.--
       (A) Protections described.--Except as provided in 
     subsection (c), the provisions of paragraphs (2), (3), (4), 
     and (5) shall apply with respect to any action under the 
     antitrust laws challenging conduct within the scope of a 
     notification which is in effect pursuant to subsection 
     (a)(1).
       (B) Timing of protections.--The protections described in 
     this subsection shall apply to the venture that is the 
     subject of a notification under subsection (a)(1) as of the 
     earlier of--
       (i) the date of the publication in the Federal Register of 
     the notice published with respect to the notification; or
       (ii) if such notice is not published during the period 
     required under subsection (a)(4), the expiration of the 30-
     day period that begins on the date the Attorney General 
     receives any necessary information required to be submitted 
     under subsection (a)(1) or any additional information 
     required by the Attorney General under subsection (a)(3)(A).
       (2) Applicability of rule of reason standard.--In any 
     action under the antitrust laws, the conduct of any person 
     which is within the scope of a notification filed under 
     subsection (a) shall not be deemed illegal per se, but shall 
     be judged on the basis of its reasonableness, taking into 
     account all relevant factors affecting competition, 
     including, but not limited to, effects on competition in 
     relevant markets.
       (3) Limitation on recovery to actual damages and 
     interest.--Notwithstanding section 4 of the Clayton Act, any 
     person who is entitled to recovery under the antitrust laws 
     for conduct that is within the scope of a notification filed 
     under subsection (a) shall recover the actual damages 
     sustained by such person and interest calculated at the rate 
     specified in section 1961 of title 28, United States Code, 
     for the period beginning on the earliest date for which 
     injury can be established and ending on the date of judgment, 
     unless the court finds that the award of all or part of such 
     interest is unjust under the circumstances.
       (4) Award of attorney's fees and costs of suit.--
       (A) In general.--In any action under the antitrust laws 
     brought against a health care joint venture for conduct that 
     is within the scope of a notification filed under subsection 
     (a), the court shall, at the conclusion of the action--
       (i) award to a substantially prevailing claimant the cost 
     of suit attributable to such claim, including a reasonable 
     attorney's fee, or
       (ii) award to a substantially prevailing party defending 
     against such claim the cost of such suit attributable to such 
     claim, including reasonable attorney's fee, if the claim, or 
     the claimant's conduct during litigation of the claim, was 
     frivolous, unreasonable, without foundation, or in bad faith.
       (B) Offset in cases of bad faith.--The court may reduce an 
     award made pursuant to subparagraph (A) in whole or in part 
     by an award in favor of another party for any part of the 
     cost of suit (including a reasonable attorney's fee) 
     attributable to conduct during the litigation by any 
     prevailing party that the court finds to be frivolous, 
     unreasonable, without foundation, or in bad faith.
       (5) Restrictions on admissibility of information.--
       (A) In general.--Any information disclosed in a 
     notification submitted under subsection (a)(1) and the fact 
     of the publication of a notification by the Attorney General 
     under subsection (a)(4) shall only be admissible into 
     evidence in a judicial or administrative proceeding for the 
     sole purpose of establishing whether a party to a health care 
     joint venture is entitled to the protections described in 
     this subsection.
       (B) Actions of attorney general.--No action taken by the 
     Attorney General pursuant to this section shall be admissible 
     into evidence in any judicial or administrative proceeding 
     for the purpose of supporting or answering any claim under 
     the antitrust laws.
       (c) Exception for Certain Activities.--
       (1) Activities described.--The protections described in 
     subsection (b) shall not apply to conduct which constitutes 
     price-fixing, bid-rigging, or market allocation, unless such 
     conduct is related to procompetitive aspects of a health care 
     joint venture (as determined in accordance with the process 
     described in paragraph (2)).
       (2) Process.--If conduct of a health care joint venture 
     which is subject to a notification under subsection (a)(1) is 
     challenged for price-fixing, bid-rigging, or market 
     allocation, any party to the joint venture shall be entitled 
     to show the procompetitive aspects of such conduct. The 
     protections described in subsection (b) shall not apply to 
     the conduct if the party is unable to show that the conduct 
     is not mere price-fixing, bid-rigging, or market allocation.

     SEC. 2505. REVIEW AND REPORTS ON SAFE HARBORS, CERTIFICATES 
                   OF REVIEW, AND NOTIFICATIONS.

       (a) In General.--The Attorney General, in consultation with 
     the Secretary and the Chair, shall periodically review the 
     safe harbors designated under section 2502, the certificates 
     of review issued under section 2503, and notification 
     received under section 2504, and--
       (1) with respect to the safe harbors, issue modifications 
     to such safe harbors in such manner as the Attorney General 
     considers appropriate in accordance with the requirements of 
     section 2502, which modifications shall take effect 90 days 
     after issuance, unless disapproved by the Congress; and
       (2) with respect to the certificates of review and 
     notifications, submit a report to Congress on the issuance of 
     such certificates and receipt of notifications, including a 
     description of the effect of such certificates and 
     notifications on increasing access to high quality health 
     care services at reduced costs.
       (b) Recommendations for Legislation.--The Attorney General 
     shall include in the reports submitted under subsection 
     (a)(2) any recommendations of the Attorney General for 
     legislation to improve the programs for the issuance of 
     certificates of review and receipt of notifications 
     established under this subtitle.

     SEC. 2506. RULES, REGULATIONS, AND GUIDELINES.

       (a) Safe Harbors, Certificates, and Notifications.--The 
     Attorney General, in consultation with the Secretary and the 
     Chair, shall promulgate such rules, regulations, and 
     guidelines as are necessary to carry out sections 2502, 2503, 
     and 2504.
       (b) Guidance for Providers.--
       (1) In general.--To promote greater certainty regarding the 
     application of the antitrust laws to activities in the health 
     care market, the Attorney General, in consultation with the 
     Secretary and the Chair, shall (not later than 1 year after 
     the date of the enactment of this Act), taking into account 
     the criteria used to designate safe harbors under section 
     2502 and grant certificates of review under section 2503, 
     publish guidelines--
       (A) to define or provide assistance in determining relevant 
     geographic and product markets for health care services and 
     providers of health care services;
       (B) to further collaborative activities which may be 
     helpful to enhance services in underserved and geographically 
     disadvantaged areas such as rural markets and inner cities;
       (C) to assist collaboration between providers (such as 
     hospital networks, physician-hospital organizations, and 
     other groups of providers) which will help provide health 
     care services more efficiently;
       (D) to further activities by which public health clinics 
     (including community health centers and migrant health 
     centers under title III of the Public Health Service Act) may 
     participate in networks and other collaborative activities in 
     order to enhance services in underserved areas;
       (E) to assist providers of health care services in 
     analyzing whether the activities of such providers may be 
     subject to a safe harbor under section 2502;
       (F) to provide clarification for activities in the general 
     subject matter areas described in the safe harbors in section 
     2502, but which fall outside the safe harbors; and
       (G) to describe specific types of activities which would 
     meet the requirements for issuance of a certificate of review 
     under section 2503, and summarizing the factual and legal 
     bases on which the activities would meet the requirements.
       (2) Periodic update.--The Attorney General shall 
     periodically update the guidelines published under paragraph 
     (1) as the Attorney General considers appropriate.
       (3) Waiver of administrative procedure act.--Section 553 of 
     title 5, United States Code, shall not apply to the issuance 
     of guidelines under paragraph (1).

     SEC. 2507. ESTABLISHMENT OF HHS OFFICE OF HEALTH CARE 
                   COMPETITION POLICY.

       (a) In General.--There is established within the Department 
     of Health and Human Services an Office to be known as the 
     Office of Health Care Competition Policy (hereafter in this 
     section referred to as the ``Office''). The Office shall be 
     headed by a director, who shall be appointed by the 
     Secretary.
       (b) Duties.--The Office shall coordinate the 
     responsibilities of the Secretary under this subtitle and 
     otherwise assist the Secretary in developing policies 
     relating to the competitive and collaborative activities of 
     providers of health care services.

     SEC. 2508. DEFINITIONS.

       In this subtitle:
       (1) The term ``antitrust laws''--
       (A) has the meaning given it in subsection (a) of the first 
     section of the Clayton Act (15 U.S.C. 12(a)), except that 
     such term includes section 5 of the Federal Trade Commission 
     Act (15 U.S.C. 45) to the extent such section applies to 
     unfair methods of competition; and
       (B) includes any State law similar to the laws referred to 
     in subparagraph (A).
       (2) The term ``Chair'' means the Chair of the Federal Trade 
     Commission.
       (3) The term ``health benefit plan'' means any hospital or 
     medical expense incurred policy or certificate, hospital or 
     medical service plan contract, or health maintenance 
     subscriber contract, or a multiple employer welfare 
     arrangement or employee benefit plan (as defined under the 
     Employee Retirement Income Security Act of 1974) which 
     provides benefits with respect to health care services.
       (4) The term ``health care joint venture'' means a joint 
     venture of 2 or more persons formed for the purpose of 
     providing health care services, including attempts to enter 
     into or perform a contract or agreement to provide such 
     services.
       (5) The term ``health care services'' means any services 
     for which payment may be made under a health benefit plan, 
     including services related to the delivery or administration 
     of such services.
       (6) The term ``medical self-regulatory entity'' means a 
     medical society or association, a specialty board, a 
     recognized accrediting agency, or a hospital medical staff, 
     and includes the members, officers, employees, consultants, 
     and volunteers or committees of such an entity.
       (7) The term ``person'' includes a State or unit of local 
     government.
       (8) The term ``provider of health care services'' means any 
     individual or entity that is engaged in the delivery of 
     health care services in a State and that is required by State 
     law or regulation to be licensed or certified by the State to 
     engage in the delivery of such services in the State.
       (9) The term ``Secretary'' means the Secretary of Health 
     and Human Services.
       (10) The term ``specialty group'' means a medical specialty 
     or subspecialty in which a provider of health care services 
     may be licensed to practice by a State (as determined by the 
     Secretary in consultation with the certification boards for 
     such specialties and subspecialties).
       (11) The term ``standard setting and enforcement 
     activities'' means--
       (A) accreditation of health care practitioners, health care 
     providers, medical education institutions, or medical 
     education programs,
       (B) technology assessment and risk management activities,
       (C) the development and implementation of practice 
     guidelines or practice parameters, or
       (D) official peer review proceedings undertaken by a 
     hospital medical staff (or committee thereof) or a medical 
     society or association for purposes of evaluating the 
     professional conduct or quality of health care provided by a 
     medical professional.
    Subtitle G--Encouraging Enforcement Activities of Medical Self-
                          Regulatory Entities

   PART 1--APPLICATION OF THE CLAYTON ACT TO MEDICAL SELF-REGULATORY 
                                ENTITIES

     SEC. 2601. ANTITRUST EXEMPTION FOR MEDICAL SELF-REGULATORY 
                   ENTITIES.

       (a) In General.--(1) Except as provided in paragraph (2), 
     no damages, interest on damages, cost of suit, or attorney's 
     fee may be recovered under section 4, 4A, or 4C of the 
     Clayton Act (15 U.S.C. 15, 15a, 15c), or under any State law 
     similar to such section, from any medical self-regulatory 
     entity (including its members, officers, employees, 
     consultants, and volunteers or committees thereof) as a 
     result of engaging in standard setting or enforcement 
     activities that are--
       (A) designed to promote the quality of health care provided 
     to patients, and
       (B) not conducted for purposes of financial gain.
       (2) Paragraph (1) shall not prohibit the recovery of actual 
     damages, interest on damages, the cost of suit, or a 
     reasonable attorney's fee under section 4 or 4A of the 
     Clayton Act (15 U.S.C. 15, 15a), or under any State law 
     similar to such section, by a State or the United States from 
     a medical self-regulatory entity (including its members, 
     officers, employees, consultants, and volunteers or 
     committees thereof) for injury sustained as a result of 
     engaging in the conduct described in such paragraph.
       (b) Fees.--In any action under section 4, 4C, or 16 of the 
     Clayton Act (15 U.S.C. 15, 15c, 26), or under a similar State 
     law, brought against any medical self-regulatory entity 
     (including its members, officers, employees, consultants, and 
     volunteers or committees thereof) as a result of engaging in 
     conduct described in subsection (a)(1), the court shall award 
     the cost of suit, including a reasonable attorney's fee, to a 
     substantially prevailing defendant.

     SEC. 2602. DEFINITIONS.

       For purposes of this subtitle:
       (1) The term ``medical self-regulatory entity'' means a 
     medical society or association, a specialty board, a 
     recognized accrediting agency, or a hospital medical staff.
       (2) The term ``standard setting and enforcement 
     activities'' means--
       (A) accreditation of health care practitioners, health care 
     providers, medical education institutions, or medical 
     education programs,
       (B) technology assessment and risk management activities,
       (C) the development and implementation of practice 
     guidelines or practice parameters, or
       (D) official peer review proceedings undertaken by a 
     hospital medical staff (or committee thereof) or a medical 
     society or association for purposes of evaluating the quality 
     of health care provided by a medical professional.

                PART 2--CONSULTATION BY FEDERAL AGENCIES

     SEC. 2611. CONSULTATION WITH MEDICAL SELF-REGULATORY ENTITIES 
                   RESPECTING MEDICAL PROFESSIONAL GUIDELINES AND 
                   STANDARDS.

       Any Federal agency engaged in the establishment of medical 
     professional standards shall consult with appropriate medical 
     societies or associations, specialty boards, or recognized 
     accrediting agencies, if available, in carrying out medical 
     professional standard setting and guidelines or standards 
     relating to the practice of medicine.
Subtitle H--Reform of Clinical Laboratory Requirements for Simple Tests

     SEC. 2701. ELIMINATING CLIA REQUIREMENT FOR CERTIFICATE OF 
                   WAIVER FOR SIMPLE LABORATORY EXAMINATIONS AND 
                   PROCEDURES.

       (a) In General.--Section 353 of the Public Health Service 
     Act (42 U.S.C. 263a) is amended--
       (1) in subsection (b), by inserting before the period at 
     the end the following: ``or unless the laboratory is exempt 
     from the certificate requirement under subsection (d)(2)'';
       (2) by amending paragraph (2) of subsection (d) to read as 
     follows:
       ``(2) Exemption from certificate requirement for 
     laboratories performing only simple examinations and 
     procedures.--A laboratory which performs only laboratory 
     examinations and procedures described in paragraph (3) is not 
     required to have in effect a certificate under this 
     section.'';
       (3) by striking paragraph (4) of subsection (d); and
       (4) in subsection (m)(1), by striking ``, except that the 
     Secretary'' and all that follows and inserting a period.
       (b) Effective Date.--The amendments made by this section 
     shall take effect on the first day of the first month 
     beginning after the date of the enactment of this Act.

     SEC. 2702. AMENDMENT RELATED TO SIMPLE LABORATORY 
                   EXAMINATIONS.

       Section 353(d) of the Public Health Service Act (42 U.S.C. 
     263) is amended by striking paragraph (3) and inserting the 
     following:
       ``(3) Examinations and procedures.--The examinations and 
     procedures identified in paragraph (2) are simple laboratory 
     examinations and procedures which have an insignificant risk 
     of an erroneous result and include those which--
       ``(A) have been approved by the Food and Drug 
     Administration for home use,
       ``(B) employ methodologies that are so simple and accurate 
     as to render the likelihood of erroneous results negligible,
       ``(C) the Secretary has determined pose no reasonable risk 
     of serious harm to the patient if performed incorrectly, or
       ``(D)(i) are performed by or under the direction or 
     supervision of or in collaboration with a doctor of medicine 
     or osteopathy licensed to practice medicine or osteopathy in 
     the State in which the laboratory is located, or by an 
     individual qualified to direct, supervise, or perform 
     examinations and procedures under State laws or such 
     standards as the Secretary may establish; and
       ``(ii) the patient is available for clinical observation; 
     and
       ``(iii) prompt results are needed to evaluate, diagnose, 
     and treat the patient or to avoid additional burdens on the 
     patient that could result from not performing the test.
       ``(4) Definition.--As used in this section, the term 
     `simple laboratory examinations and procedures' includes 
     dipstick tests for total and allergen-specific IgE; 
     microscopic examination of nasal smears (for cells and 
     bacteria); mono spot tests; testing for theophylline using 
     the Accu-Level method; microscopic urinalysis; vaginal wet 
     mount; KOH prep, scabies prep; rapid strep antigen; 
     nonautomated qualitative and quantitative semen analysis; pin 
     worm; prostate smears; synovial fluid analysis for 
     inflammation and infection; post coital test; fern test; 
     occult blood; Gram stain; qualitative drug screen; pulse 
     oximetry; hemoglobin (by hand-held hemoglobinometer); ASO, 
     CRP, RF, and mono screen; sickle cell screen; white blood 
     cell count by manual chamber count; peripheral blood smears; 
     sputum eosinophil; urine culture colony; urine sensitivities; 
     microscopic examination of hair morphology; molluscum smear; 
     fungal cultures, including dermatophyte test medium; Tzank 
     smear; Darkfield examination; agglutination pregnancy test; 
     urethral gram stains, and centrifigal hematology, including 
     white blood cell count, hematocrit, differential, and 
     platelet count.''.

     SEC. 2703. AMENDMENT RELATED TO STUDY.

       (a) Study.--The Secretary of Health and Human Services, 
     acting through the Centers for Disease Control and 
     Prevention, shall use existing appropriations to conduct the 
     study required by section 4 of the Clinical Laboratory 
     Improvement Amendments of 1988 (42 U.S.C. 263a note). The 
     Secretary shall report the results of such study to the 
     Committee on Ways and Means and the Committee on Energy and 
     Commerce of the House of Representatives and the Committee on 
     Finance and the Committee on Labor and Human Resources of the 
     Senate not later than May 1, 1996.
       (b) Sunset.--If the results of the study described in 
     subsection (a) are not reported to the committees of Congress 
     by May 1, 1996, section 353 of the Public Health Service Act 
     shall not be in effect after May 1, 1996.

     SEC. 2704. AMENDMENTS RELATED TO THE CLINICAL LABORATORY 
                   IMPROVEMENT ADVISORY COMMITTEE.

       The Secretary of Health and Human Services shall revise the 
     membership of the Clinical Laboratory Improvement Advisory 
     Committee established by the Secretary in regulations to 
     implement section 353 of the Public Health Service Act 
     (subpart T of part 493 of title 42 Code of Federal 
     Regulations) to contain, in the membership which does not 
     include ex-officio members or officers or employees of the 
     Federal Government, a number of practicing physicians which 
     is proportionate to the number of physician laboratories 
     regulated under such section 353. For purposes of this 
     section, the term ``practicing physician'' means a licensed 
     doctor of medicine or osteopathy who spends at least 80 
     percent of the physician's professional time in direct 
     patient care and who directs an in-office clinical laboratory 
     for the physician's patients.
                  Subtitle I--Miscellaneous Provisions

     SEC. 2801. REQUIREMENT THAT CERTAIN AGENCIES PREFUND 
                   GOVERNMENT HEALTH BENEFITS CONTRIBUTIONS FOR 
                   THEIR ANNUITANTS.

       (a) Definitions.--For the purpose of this section--
       (1) the term ``agency'' means any agency or other 
     instrumentality within the executive branch of the 
     Government, the receipts and disbursements of which are not 
     generally included in the totals of the budget of the United 
     States Government submitted by the President;
       (2) the term ``health benefits plan'' means, with respect 
     to an agency, a health benefits plan, established by or under 
     Federal law, in which employees or annuitants of such agency 
     may participate;
       (3) the term ``health-benefits coverage'' means coverage 
     under a health benefits plan'';
       (4) an individual shall be considered to be an ``annuitant 
     of an agency'' if such individual is entitled to an annuity, 
     under a retirement system established by or under Federal 
     law, by virtue of--
       (A) such individual's service with, and separation from, 
     such agency; or
       (B) being the survivor of an annuitant under subparagraph 
     (A) or of an individual who died while employed by such 
     agency; and
       (5) the term ``Office'' means the Office of Personnel 
     Management.
       (b) Prefunding Requirement.--
       (1) In general.--Effective as of October 1, 1994, each 
     agency (or February 1, 1995, in the case of the agency with 
     the greatest number of employees, as determined by the 
     Office) shall be required to prepay the Government 
     contributions which are or will be required in connection 
     with providing health-benefits coverage for annuitants of 
     such agency.
       (2) Regulations.--The Office shall prescribe such 
     regulations as may be necessary to carry out this section. 
     The regulations shall be designed to ensure at least the 
     following:
       (A) Amounts paid by each agency shall be sufficient to 
     cover the amounts which would otherwise be payable by such 
     agency (on a ``pay-as-you-go'' basis), on or after the 
     applicable effective date under paragraph (1), on behalf of--
       (i) individuals who are annuitants of the agency as of such 
     effective date; and
       (ii) individuals who are employed by the agency as of such 
     effective date, or who become employed by the agency after 
     such effective date, after such individuals have become 
     annuitants of the agency (including their survivors).
       (B)(i) For purposes of determining any amounts payable by 
     an agency--
       (I) this section shall be treated as if it had taken effect 
     at the beginning of the 20-year period which ends on the 
     effective date applicable under paragraph (1) with respect to 
     such agency; and
       (II) in addition to any amounts payable under subparagraph 
     (A), each agency shall also be responsible for paying any 
     amounts for which it would have been responsible, with 
     respect to the 20-year period described in subclause (I), in 
     connection with any individuals who are annuitants or 
     employees of the agency as of the applicable effective date 
     under paragraph (1).
       (ii) Any amounts payable under this subparagraph for 
     periods preceding the applicable effective date under 
     paragraph (1) shall be payable in equal installments over the 
     20-year period beginning on such effective date.
       (c) FASB Standards.--Regulations under subsection (b) shall 
     be in conformance with the provisions of standard 106 of the 
     Financial Accounting Standards Board, issued in December 
     1990.
       (d) Clarification.--Nothing in this section shall be 
     considered to permit or require duplicative payments on 
     behalf of any individuals.
       (e) Draft Legislation.--The Office shall prepare and submit 
     to Congress any draft legislation which may be necessary in 
     order to carry out this section.

     SEC. 2802. INELIGIBILITY OF ALIENS FOR SSI AND MEDICAID.

       (a) In General.--Notwithstanding any other provision of law 
     and except as provided in subsections (b) and (c), no alien 
     shall be eligible for any program referred to in subsection 
     (d).
       (b) Exceptions.--
       (1) Refugee exception.--Subsection (a) shall not apply to 
     an alien admitted to the United States as a refugee under 
     section 207 of the Immigration and Nationality Act until 6 
     years after the date of such alien's arrival into the United 
     States.
       (2) Aged exception.--Subsection (a) shall not apply to an 
     alien who--
       (A) has been lawfully admitted to the United States for 
     permanent residence;
       (B) is over 75 years of age; and
       (C) has resided in the United States for at least 5 years.
       (3) Current resident exception.--Subsection (a) shall not 
     apply to the eligibility of an alien for a program referred 
     to in subsection (d) until 1 year after the date of the 
     enactment of this Act if, on such date of enactment, the 
     alien is residing in the United States and is eligible for 
     the program.
       (c) Programs For Which Aliens May Be Eligible.--The 
     limitation under subsection (a) shall not apply to medical 
     assistance with respect to emergency services (as defined for 
     purposes of section 1916(a)(2)(D) of the Social Security 
     Act).
       (d) Programs For Which Aliens Are Ineligible.--The programs 
     referred to in this subsection are the following:
       (1) The program of medical assistance under title XIX of 
     the Social Security Act, except emergency services as 
     provided in subsection (c).
       (2) The supplemental security income program under title 
     XVI of the Social Security Act.
       (e) Notification of Aliens.--Any Federal agency that 
     administers a program referred to in subsection (d) shall, 
     directly or through the States, notify each alien receiving 
     benefits under the program whose eligibility for the program 
     is or will be terminated by reason of this section.

     SEC. 2803. LIMITATION ON SSI BENEFITS FOR DRUG AND ALCOHOL 
                   ADDICTS.

       (a) In General.--
       (1) Limitation described.--Section 1614(a) of the Social 
     Security Act (42 U.S.C. 1382c(a)) is amended by adding at the 
     end the following:
       ``(5)(A) The Secretary shall identify all recipients of 
     benefits under this title by reason of disability whose 
     disability is a result of addiction to illegal drugs.
       ``(B) The Secretary shall periodically, on a random basis, 
     test each recipient identified under subparagraph (A) to 
     determine whether the recipient is using illegal drugs.
       ``(C)(i) Notwithstanding any other provision of this title, 
     any individual who is determined under subparagraph (B) to be 
     using illegal drugs, or who refuses to submit to testing as 
     provided for under subparagraph (B), shall not be eligible 
     for benefits under this title for a period of at least 1 
     year.
       ``(ii) The period of ineligibility under clause (i) shall 
     terminate (after the last day of such 1-year period) if the 
     individual has 2 tests (at least 2 months apart and not paid 
     for through Federal funds) which establish that the recipient 
     is not using illegal drugs.''.
       (2) Effective date.--The amendment made by paragraph (1) 
     shall apply to quarters beginning after the expiration of the 
     6-month period that begins on the date of the enactment of 
     this Act.
       (b) Representative Payee Reforms.--
       (1) Authority of government agencies to become paid 
     representative payees.--Section 1631(a)(2)(D)(ii) of such Act 
     (42 U.S.C. 1383(a)(2)(D)(ii)) is amended by adding at the end 
     the following: ``The term `qualified organization' also 
     includes any government agency that meets the requirements of 
     items (aa) and (bb) of subclause (II).''.
       (2) Maximum fee payable to representative payees.--Section 
     1631(a)(2)(D)(i) of such Act (42 U.S.C. 1383(a)(2)(D)(i)) is 
     amended by striking ``the lesser of--'' and all that follows 
     and inserting ``10 percent of the monthly benefit 
     involved.''.
                       TITLE III--LONG-TERM CARE


                       table of contents of title

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

Sec. 3001. Treatment of long-term care insurance or plans.
Sec. 3002. Exclusion for benefits provided under long-term care 
              insurance; inclusion of employer-provided coverage.
Sec. 3003. Qualified long-term services treated as medical care.
Sec. 3004. Effective date.

   Subtitle B--Establishment of Federal Standards for Long-term Care 
                               Insurance

Sec. 3101. Establishment of Federal standards for long-term care 
              insurance.

           ``TITLE XXVII--LONG-TERM CARE INSURANCE STANDARDS

         ``Part A--Promulgation of Standards and Model Benefits

``Sec. 2701. Standards.

``Part B--Establishment and Implementation of Long-Term Care Insurance 
                            Policy Standards

``Sec. 2711. Implementation of policy standards.
``Sec. 2712. Regulation of sales practices.
``Sec. 2713. Additional responsibilities for carriers.
``Sec. 2714. Renewability standards for issuance, and basis for 
              cancellation of policies.
``Sec. 2715. Benefit standards.
``Sec. 2716. Nonforfeiture.
``Sec. 2717. Limit of period of contestability and right to return.
``Sec. 2718. Civil money penalty.

      ``Part C--Long-Term Care Insurance Policies, Definition and 
                              Endorsements

``Sec. 2721. Long-term care insurance policy defined.
``Sec. 2722. Code of conduct with respect to endorsements.

                   ``Part D--Miscellaneous Provisions

``Sec. 2731. Funding for long-term care insurance information, 
              counseling, and assistance.
``Sec. 2732. Definitions.

    Subtitle C--Protection of Assets Under Medicaid Through Use of 
                   Qualified Long-term Care Insurance

Sec. 3201. Protection of assets through use of qualified long-term care 
              insurance.

                          Subtitle D--Studies

Sec. 3301. Feasibility of encouraging health care providers to donate 
              services to homebound patients.
Sec. 3302. Feasibility of tax credit for heads of households who care 
              for elderly family members in their homes.
Sec. 3303. Case management of current long-term care benefits.

      Subtitle E--Volunteer Service Credit Demonstration Projects

Sec. 3401. Amendment to the Older Americans Act of 1965.
         Subtitle A--Tax Treatment of Long-term Care Insurance

     SEC. 3001. TREATMENT OF LONG-TERM CARE INSURANCE OR PLANS.

       (a) General Rule.--Subpart E of part I of subchapter L of 
     chapter 1 of the Internal Revenue Code of 1986 is amended by 
     inserting after section 818 the following new section:

     ``SEC. 818A. TREATMENT OF LONG-TERM CARE INSURANCE OR PLANS.

       ``(a) General Rule.--For purposes of this part, a long-term 
     care insurance contract shall be treated as an accident or 
     health insurance contract.
       ``(b) Long-Term Care Insurance Contract.--
       ``(1) In general.--For purposes of this part, the term 
     `long-term care insurance contract' means any insurance 
     contract issued if--
       ``(A) the only insurance protection provided under such 
     contract is coverage of qualified long-term care services and 
     benefits incidental to such coverage,
       ``(B) the maximum benefit under the policy for expenses 
     incurred for any day does not exceed $200,
       ``(C) such contract does not cover expenses incurred for 
     services or items to the extent that such expenses are 
     reimbursable under title XVIII of the Social Security Act or 
     would be so reimbursable but for the application of a 
     deductible or coinsurance amount,
       ``(D) such contract is guaranteed renewable,
       ``(E) such contract does not have any cash surrender value, 
     and
       ``(F) all refunds of premiums, and all policyholder 
     dividends or similar amounts, under such contract are to be 
     applied as a reduction in future premiums or to increase 
     future benefits.
       ``(2) Special rules.--
       ``(A) Per diem, etc. payments permitted.--A contract shall 
     not fail to be treated as described in paragraph (1)(A) by 
     reason of payments being made on a per diem or other periodic 
     basis without regard to the expenses incurred during the 
     period to which the payments relate.
       ``(B) Contract may cover medicare reimbursable expenses 
     where medicare is secondary payor.--Paragraph (1)(C) shall 
     not apply to expenses which are reimbursable under title 
     XVIII of the Social Security Act only as a secondary payor.
       ``(C) Refunds of premiums.--Paragraph (1)(F) shall not 
     apply to any refund of premiums on surrender or cancellation 
     of the contract.
       ``(c) Qualified Long-Term Care Services.--For purposes of 
     this section--
       ``(1) In general.--The term `qualified long-term care 
     services' means necessary diagnostic, preventive, 
     therapeutic, and rehabilitative services, and maintenance or 
     personal care services, which--
       ``(A) are required by a chronically ill individual in a 
     qualified facility, and
       ``(B) are provided pursuant to a plan of care prescribed by 
     a licensed health care practitioner.
       ``(2) Chronically ill individual.--
       ``(A) In general.--The term `chronically ill individual' 
     means any individual who has been certified by a licensed 
     health care practitioner as--
       ``(i)(I) being unable to perform (without substantial 
     assistance from another individual) at least 2 activities of 
     daily living (as defined in subparagraph (B)) for a period of 
     at least 90 days due to a loss of functional capacity, or
       ``(II) having a level of disability similar (as determined 
     by the Secretary in consultation with the Secretary of Health 
     and Human Services) to the level of disability described in 
     subclause (I), or
       ``(ii) having a similar level of disability due to 
     cognitive impairment.
       ``(B) Activities of daily living.--For purposes of 
     subparagraph (A), each of the following is an activity of 
     daily living:
       ``(i) Mobility.--The process of walking or wheeling on a 
     level surface which may include the use of an assistive 
     device such as a cane, walker, wheelchair, or brace.
       ``(ii) Dressing.--The overall complex behavior of getting 
     clothes from closets and drawers and then getting dressed.
       ``(iii) Toileting.--The act of going to the toilet room for 
     bowel and bladder function, transferring on and off the 
     toilet, cleaning after elimination, and arranging clothes or 
     the ability to voluntarily control bowel and bladder 
     function, or in the event of incontinence, the ability to 
     maintain a reasonable level of personal hygiene.
       ``(iv) Transfer.--The process of getting in and out of bed 
     or in and out of a chair or wheelchair.
       ``(v) Eating.--The process of getting food from a plate or 
     its equivalent into the mouth.
       ``(3) Qualified facility.--The term `qualified facility' 
     means--
       ``(A) a nursing, rehabilitative, hospice, or adult day care 
     facility (including a hospital, retirement home, nursing 
     home, skilled nursing facility, intermediate care facility, 
     or similar institution)--
       ``(i) which is licensed under State law, or
       ``(ii) which is a certified facility for purposes of title 
     XVIII or XIX of the Social Security Act, or
       ``(B) an individual's home if a licensed health care 
     practitioner certifies that without home care the individual 
     would have to be cared for in a facility described in 
     subparagraph (A).
       ``(4) Maintenance or personal care services.--The term 
     `maintenance or personal care services' means any care the 
     primary purpose of which is to provide needed assistance with 
     any of the activities of daily living described in paragraph 
     (2)(B).
       ``(5) Licensed health care practitioner.--The term 
     `licensed health care practitioner' means any physician (as 
     defined in section 1861(r) of the Social Security Act) and 
     any registered professional nurse, licensed social worker, or 
     other individual who meets such requirements as may be 
     prescribed by the Secretary.
       ``(d) Continuation Coverage Excise Tax Not To Apply.--This 
     section shall not apply in determining whether section 4980B 
     (relating to failure to satisfy continuation coverage 
     requirements of group health plans) applies.
       ``(e) Inflation Adjustment of $200 Benefit Limit.--
       ``(1) In general.--In the case of a calendar year after 
     1994, the $200 amount contained in subsection (b)(1)(B) shall 
     be increased for such calendar year by the medical care cost 
     adjustment for such calendar year. If any increase determined 
     under the preceding sentence is not a multiple of $10, such 
     increase shall be rounded to the nearest multiple of $10.
       ``(2) Medical care cost adjustment.--For purposes of 
     paragraph (1), the medical care cost adjustment for any 
     calendar year is the percentage (if any) by which--
       ``(A) the medical care component of the Consumer Price 
     Index (as defined in section 1(f)(5)) for August of the 
     preceding calendar year, exceeds
       ``(B) such component for August of 1993.''
       (b) Reserves.--Clause (iii) of section 807(d)(3)(A) is 
     amended by inserting ``(other than a long-term care insurance 
     contract within the meaning of section 818A)'' after 
     ``contract''.
       (c) Clerical Amendment.--The table of sections for such 
     subpart E is amended by inserting after the item relating to 
     section 818 the following new item:

``Sec. 818A. Treatment of long-term care insurance or plans.''

     SEC. 3002. EXCLUSION FOR BENEFITS PROVIDED UNDER LONG-TERM 
                   CARE INSURANCE; INCLUSION OF EMPLOYER-PROVIDED 
                   COVERAGE.

       (a) In General.--Subsection (a) of section 104 of the 
     Internal Revenue Code of 1986 (relating to compensation for 
     injuries or sickness) is amended by striking ``and'' at the 
     end of paragraph (4), by striking the period at the end of 
     paragraph (5) and inserting ``, and'', and by inserting after 
     paragraph (4) the following new paragraph:
       ``(6) benefits under a long-term care insurance contract 
     (as defined in section 818A(b)).''
       (b) Inclusion of Employer-Provided Coverage.--Section 106 
     of such Code (relating to contributions by employer to 
     accident and health plans) is amended by adding at the end 
     thereof the following sentence: ``The preceding sentence 
     shall not apply to any plan providing coverage for long-term 
     care services.''

     SEC. 3003. QUALIFIED LONG-TERM SERVICES TREATED AS MEDICAL 
                   CARE.

       (a) General Rule.--Paragraph (1) of section 213(d) of the 
     Internal Revenue Code of 1986 (defining medical care) is 
     amended by striking ``or'' at the end of subparagraph (B), by 
     redesignating subparagraph (C) as subparagraph (D), and by 
     inserting after subparagraph (B) the following new 
     subparagraph:
       ``(C) for qualified long-term care services (as defined in 
     section 818A(c)), or''.
       (b) Deduction for Long-Term Care Expenses for Parent or 
     Grandparent.--Section 213 of such Code (relating to deduction 
     for medical expenses) is amended by adding at the end the 
     following new subsection:
       ``(g) Special Rule for Certain Long-Term Care Expenses.--
     For purposes of subsection (a), the term `dependent' shall 
     include any parent or grandparent of the taxpayer for whom 
     the taxpayer has expenses for long-term care services 
     described in section 818A(c), but only to the extent of such 
     expenses.''
       (c) Technical Amendments.--
       (1) Subparagraph (D) of section 213(d)(1) of such Code (as 
     redesignated by subsection (a)) is amended by striking 
     ``subparagraphs (A) and (B)'' and inserting ``subparagraphs 
     (A), (B), and (C)''.
       (2)(A) Paragraph (1) of section 213(d) of such Code is 
     amended by adding at the end thereof the following new flush 
     sentence:

     ``In the case of a long-term care insurance contract (as 
     defined in section 818A), only eligible long-term care 
     premiums (as defined in paragraph (10)) shall be taken into 
     account under subparagraph (D).''
       (B) Subsection (d) of section 213 is amended by adding at 
     the end the following new paragraph:
       ``(10) Eligible Long-Term Care Premiums.--
       ``(A) In general.--For purposes of this section, the term 
     `eligible long-term care premiums' means the amount paid 
     during a taxable year for any long-term care insurance 
     contract (as defined in section 818A) covering an individual, 
     to the extent such amount does not exceed the limitation 
     determined under the following table:

``In the case of an                                                    
  individual with an                                                   
  attained age before the                                              
  
  close of the taxable                                                 
  year of:                                       The limitation is:    
    40 or less...................................................$200  
    More than 40 but not more than 50.............................375  
    More than 50 but not more than 60.............................750  
    More than 60 but not more than 70...........................1,600  
    More than 70...............................................2,000.  

       ``(B) Indexing.--
       ``(i) In general.--In the case of any taxable year 
     beginning in a calendar year after 1993, each dollar amount 
     contained in paragraph (1) shall be increased by the medical 
     care cost adjustment of such amount for such calendar year. 
     If any increase determined under the preceding sentence is 
     not a multiple of $10, such increase shall be rounded to the 
     nearest multiple of $10.
       ``(ii) Medical care cost adjustment.--For purposes of 
     clause (i), the medical care cost adjustment for any calendar 
     year is the percentage (if any) by which--

       ``(I) the medical care component of the Consumer Price 
     Index (as defined in section 1(f)(5)) for August of the 
     preceding calendar year, exceeds
       ``(II) such component for August of 1991.''

       (3) Paragraph (6) of section 213(d) of such Code is 
     amended--
       (A) by striking ``subparagraphs (A) and (B)'' and inserting 
     ``subparagraphs (A), (B), and (C)'', and
       (B) by striking ``paragraph (1)(C)'' in subparagraph (A) 
     and inserting ``paragraph (1)(D)''.
       (4) Paragraph (7) of section 213(d) of such Code is amended 
     by striking ``subparagraphs (A) and (B)'' and inserting 
     ``subparagraphs (A), (B), and (C)''.

     SEC. 3004. EFFECTIVE DATE.

       The amendments made by this subtitle shall apply to taxable 
     years beginning after December 31, 1994.
   Subtitle B--Establishment of Federal Standards for Long-term Care 
                               Insurance

     SEC. 3101. ESTABLISHMENT OF FEDERAL STANDARDS FOR LONG-TERM 
                   CARE INSURANCE.

       (a) In General.--The Public Health Service Act is amended--
       (1) by redesignating title XXVII (42 U.S.C. 300cc et seq.) 
     as title XXVIII; and
       (2) by inserting after title XXVI the following new title:
           ``TITLE XXVII--LONG-TERM CARE INSURANCE STANDARDS

         ``Part A--Promulgation of Standards and Model Benefits

     ``SEC. 2701. STANDARDS.

       ``(a) Application of Standards.--
       ``(1) NAIC.--The Secretary shall request that the National 
     Association of Insurance Commissioners (hereinafter in this 
     title referred to as the `NAIC')--
       ``(A) develop specific standards that incorporate the 
     requirements of this title; and
       ``(B) report to the Secretary on such standards,

     by not later than 12 months after enactment of this title. If 
     the NAIC develops such model standards that incorporate the 
     requirements of this title within such period and the 
     Secretary finds that such standards implement the 
     requirements of this title, such standards shall be the 
     standards applied under this title.
       ``(2) Default.--If the NAIC does not promulgate the model 
     standards under paragraph (1) by the deadline established in 
     that paragraph, the Secretary shall promulgate, within 12 
     months after such deadline, a regulation that provides 
     standards that incorporate the requirements of this title and 
     such standards shall apply as provided for in this title.
       ``(3) Relation to state law.--Nothing in this title shall 
     be construed as preventing a State from applying standards 
     that provide greater protection to policyholders of long-term 
     care insurance policies than the standards promulgated under 
     this title, except that such State standards may not be 
     inconsistent or in conflict with any of the requirements of 
     this title.
       ``(b) Deadline for Application of Standards.--
       ``(1) In general.--Subject to paragraph (2), the date 
     specified in this subsection for a State is--
       ``(A) the date the State adopts the standards established 
     under subsection (a)(1); or
       ``(B) the date that is 1 year after the first day of the 
     first regular legislative session that begins after the date 
     such standards are first established under subsection (a)(2);

     whichever is earlier.
       ``(2) State requiring legislation.--In the case of a State 
     which the Secretary identifies, in consultation with the 
     NAIC, as--
       ``(A) requiring State legislation (other than legislation 
     appropriating funds) in order for the standards established 
     under subsection (a) to be applied; but
       ``(B) having a legislature which is not scheduled to meet 
     within 1 year following the beginning of the next regular 
     legislative session in which such legislation may be 
     considered;

     the date specified in this subsection is the first day of the 
     first calendar quarter beginning after the close of the first 
     legislative session of the State legislature that begins on 
     or after January 1, 1994. For purposes of the previous 
     sentence, in the case of a State that has a 2-year 
     legislative session, each year of such session shall be 
     deemed to be a separate regular session of the State 
     legislature.
       ``(c) Items Included in Standards.--The standards 
     promulgated under subsection (a) shall include--
       ``(1) minimum Federal standards for long-term care 
     insurance consistent with the provisions of this title;
       ``(2) standards for the enhanced protection of consumers 
     with long-term care insurance;
       ``(3) procedures for the modification of the standards 
     established under paragraph (1) in a manner consistent with 
     future laws to expand existing Federal or State long-term 
     care benefits or establish a comprehensive Federal or State 
     long-term care benefit program; and
       ``(4) other activities determined appropriate by Congress.
       ``(d) Consultation.--In establishing standards and models 
     of benefits under this section, the Secretary shall provide 
     for and consult with an advisory committee to be chosen by 
     the Secretary, and composed of--
       ``(1) three individuals who are representatives of 
     carriers;
       ``(2) three individuals who are representatives of consumer 
     groups;
       ``(3) three representatives who are representatives of 
     providers of long-term care services;
       ``(4) three other individuals who are not representatives 
     of carriers or of providers of long-term care services and 
     who have expertise in the delivery and financing of such 
     services; and
       ``(5) the Secretary of Veterans Affairs.
       ``(e) Duties.--The advisory committee established under 
     subsection (d) shall--
       ``(1) recommend the appropriate inflationary index to be 
     used with respect to the inflation protection benefit portion 
     of the standards;
       ``(2) recommend the uniform needs assessment mechanism to 
     be used in determining the eligibility of individuals for 
     benefits under a policy;
       ``(3) recommend appropriate standards for benefits under 
     section 2715(c); and
       ``(4) perform such other activities as determined 
     appropriate by the Secretary.
       ``(f) Administrative Provisions.--The following provisions 
     of section 1886(e)(6) of the Social Security Act shall apply 
     to the advisory committee chosen under subsection (d) in the 
     same manner as such provisions apply under such section:
       ``(1) Subparagraph (C) (relating to staffing and 
     administration).
       ``(2) Subparagraph (D) (relating to compensation of 
     members).
       ``(3) Subparagraph (F) (relating to access to information).
       ``(4) Subparagraph (G) (relating to use of funds).
       ``(5) Subparagraph (H) (relating to periodic GAO audits).
       ``(6) Subparagraph (J) (relating to requests for 
     appropriations).

``Part B--Establishment and Implementation of Long-Term Care Insurance 
                            Policy Standards

     ``SEC. 2711. IMPLEMENTATION OF POLICY STANDARDS.

       ``(a) In General.--
       ``(1) Regulatory program.--No long-term care policy (as 
     defined in section (2721)) may be issued, sold, or offered 
     for sale as a long-term care insurance policy in a State on 
     or after the date specified in section 2701(b) unless--
       ``(A) the Secretary determines that the State has 
     established a regulatory program that--
       ``(i) provides for the application and enforcement of the 
     standards established under section 2701(a); and
       ``(ii) complies with the requirements of subsection (b);

     by the date specified in section 2701(b), and the policy has 
     been approved by the State commissioner or superintendent of 
     insurance under such program; or
       ``(B) if the State has not established such a program, or 
     if the State's regulatory program has been decertified, the 
     policy has been certified by the Secretary (in accordance 
     with such procedures as the Secretary may establish) as 
     meeting the standards established under section 2701(a) by 
     the date specified in section 2701(b).
     For purposes of this subsection, the advertising or 
     soliciting with respect to a policy, directly or indirectly, 
     shall be deemed the offering for sale of the policy.
       ``(2) Review of state regulatory programs.--The Secretary 
     periodically shall review regulatory programs described in 
     paragraph (1)(A) to determine if they continue to provide for 
     the application and enforcement of the standards and 
     procedures established under section 2701(a) and (b). If the 
     Secretary determines that a State regulatory program no 
     longer meets such standards and requirements, before making a 
     final determination, the Secretary shall provide the State an 
     opportunity to adopt such a plan of correction as would 
     permit the program to continue to meet such standards and 
     requirements. If the Secretary makes a final determination 
     that the State regulatory program, after such an opportunity, 
     fails to meet such standards and requirements, the Secretary 
     shall assume responsibility under paragraph (1)(B) with 
     respect to certifying policies in the State and shall 
     exercise full authority under section 2701 for carriers, 
     agents, or associations or its subsidiary in the State plans 
     in the State.
       ``(b) Additional Requirements for Approval of State 
     Regulatory Programs.--For purposes of subsection 
     (a)(1)(A)(ii), the requirements of this subsection for a 
     State regulatory program are as follows:
       ``(1) Enforcement.--The enforcement under the program--
       ``(A) shall be designed in a manner so as to secure 
     compliance with the standards within 30 days after the date 
     of a finding of noncompliance with such standards; and
       ``(B) shall provide for notice in the annual report 
     required under paragraph (5) to the Secretary of cases where 
     such compliance is not secured within such 30-day period.
       ``(2) Process.--The enforcement process under each State 
     regulatory program shall provide for--
       ``(A) procedures for individuals and entities to file 
     written, signed complaints respecting alleged violations of 
     the standards;
       ``(B) responding on a timely basis to such complaints;
       ``(C) the investigation of--
       ``(i) those complaints which have a reasonable probability 
     of validity, and
       ``(ii) such other alleged violations of the standards as 
     the program finds appropriate; and
       ``(D) the imposition of appropriate sanctions (which 
     include, in appropriate cases, the imposition of a civil 
     money penalty as provided for in section 2718) in the case of 
     a carrier, agent, or association or its subsidiary determined 
     to have violated the standards.
       ``(3) Consumer access to compliance information.--
       ``(A) In general.--A State regulatory program must provide 
     for consumer access to complaints filed with the State 
     commissioner or superintendent of insurance with respect to 
     long-term care insurance policies.
       ``(B) Confidentiality.--The access provided under 
     subparagraph (A) shall be limited to the extent required to 
     protect the confidentiality of the identity of individual 
     policyholders.
       ``(4) Process for approval of premiums.--
       ``(A) In general.--Each State regulatory program shall--
       ``(i) provide for a process for approving or disapproving 
     proposed premium increases or decreases with respect to long-
     term care insurance policies; and
       ``(ii) establish a policy for receipt and consideration of 
     public comments before approving such a premium increase or 
     decrease.
       ``(B) Conditions for approval.--No premium increase shall 
     be approved (or deemed approved) under subparagraph (A) 
     unless the proposed increase is accompanied by an actuarial 
     memorandum which--
       ``(i) includes a description of the assumptions that 
     justify the increase;
       ``(ii) contains such information as may be required under 
     the Standards; and
       ``(iii) is made available to the public.
       ``(C) Application.--Except as provided in subparagraph (D), 
     this paragraph shall not apply to a group long-term care 
     insurance policy issued to a group described in section 
     4(E)(1) of the NAIC Long Term Care Insurance Model Act 
     (effective January 1991), except that such group policy 
     shall, pursuant to guidelines developed by the NAIC, provide 
     notice to policyholders and certificate holders of any 
     premium change under such group policy.
       ``(D) Exception.--Subparagraph (C) shall not apply to--
       ``(i) group conversion policies;
       ``(ii) the group continuation feature of a group policy if 
     the insurer separately rates employee and continuation 
     coverages; and
       ``(iii) group policies where the function of the employer 
     is limited solely to collecting premiums (through payroll 
     deductions or dues checkoff) and remitting them to the 
     insurer.
       ``(E) Construction.--Nothing in this paragraph shall be 
     construed as preventing the NAIC from promulgating standards, 
     or a State from enacting and enforcing laws, with respect to 
     premium rates or loss ratios for all, including group, long-
     term care insurance policies.
       ``(5) Annual reports.--Each State regulatory program shall 
     provide for annual reports to be submitted to the Secretary 
     on the implementation and enforcement of the standards in the 
     State, including information concerning violations in excess 
     of 30 days.
       ``(6) Access to other information.--The State regulatory 
     program must provide for consumer access to actuarial 
     memoranda provided under paragraph (4).
       ``(7) Default.--In the case of a State without a regulatory 
     program approved under subsection (a), the Secretary shall 
     provide for the enforcement activities described in 
     subsection (c).
       ``(c) Secretarial Enforcement Authority.--
       ``(1) In general.--The Secretary shall exercise authority 
     under this section in the case of a State that does not have 
     a regulatory program approved under this section.
       ``(2) Complaints and investigations.--The Secretary shall 
     establish procedures--
       ``(A) for individuals and entities to file written, signed 
     complaints respecting alleged violations of the requirements 
     of this title;
       ``(B) for responding on a timely basis to such complaints; 
     and
       ``(C) for the investigation of--
       ``(i) those complaints that have a reasonable probability 
     of validity; and
       ``(ii) such other alleged violations of the requirements of 
     this title as the Secretary determines to be appropriate.
     In conducting investigations under this subsection, agents of 
     the Secretary shall have reasonable access necessary to 
     enable such agents to examine evidence of any carrier, agent, 
     or association or its subsidiary being investigated.
       ``(3) Hearings.--
       ``(A) In general.--Prior to imposing an order described in 
     paragraph (4) against a carrier, agent, or association or its 
     subsidiary under this section for a violation of the 
     requirements of this title, the Secretary shall provide the 
     carrier, agent, association or subsidiary with notice and, 
     upon request made within a reasonable time (of not less than 
     30 days, as established by the Secretary by regulation) of 
     the date of the notice, a hearing respecting the violation.
       ``(B) Conduct of hearing.--Any hearing requested under 
     subparagraph (A) shall be conducted before an administrative 
     law judge. If no hearing is so requested, the Secretary's 
     imposition of the order shall constitute a final and 
     unappealable order.
       ``(C) Authority in hearings.--In conducting hearings under 
     this paragraph--
       ``(i) agents of the Secretary and administrative law judges 
     shall have reasonable access necessary to enable such agents 
     and judges to examine evidence of any carrier, agent, or 
     association or its subsidiary being investigated; and
       ``(ii) administrative law judges, may, if necessary, compel 
     by subpoena the attendance of witnesses and the production of 
     evidence at any designated place or hearing.

     In case of contumacy or refusal to obey a subpoena lawfully 
     issued under this subparagraph and upon application of the 
     Secretary, an appropriate district court of the United States 
     may issue an order requiring compliance with such subpoena 
     and any failure to obey such order may be punished by such 
     court as a contempt thereof.
       ``(D) Issuance of orders.--If an administrative law judge 
     determines in a hearing under this paragraph, upon the 
     preponderance of the evidence received, that a carrier, 
     agent, or association or its subsidiary named in the 
     complaint has violated the requirements of this title, the 
     administrative law judge shall state the findings of fact and 
     issue and cause to be served on such carrier, agent, 
     association, or subsidiary an order described in paragraph 
     (4).
       ``(4) Cease and desist order with civil money penalty.--
       ``(A) In general.--Subject to the provisions of 
     subparagraphs (B) through (F), an order under this 
     paragraph--
       ``(i) shall require the agent, association or its 
     subsidiary, or a carrier--

       ``(I) to cease and desist from such violations; and
       ``(II) to pay a civil penalty in an amount not to exceed 
     $15,000 in the case of each agent, and not to exceed $25,000 
     for each association or its subsidiary or a carrier for each 
     such violation; and

       ``(ii) may require the agent, association or its 
     subsidiary, or a carrier to take such other remedial action 
     as is appropriate.
       ``(B) Corrections within 30 days.--No order shall be 
     imposed under this paragraph by reason of any violation if 
     the carrier, agent, or association or its subsidiary 
     establishes to the satisfaction of the Secretary that--
       ``(i) such violation was due to reasonable cause and was 
     not intentional and was not due to willful neglect; and
       ``(ii) such violation is corrected within the 30-day period 
     beginning on the earliest date the carrier, agent, 
     association, or subsidiary knew, or exercising reasonable 
     diligence could have known, that such a violation was 
     occurring.
       ``(C) Waiver by secretary.--In the case of a violation 
     under this title that is due to reasonable cause and not to 
     willful neglect, the Secretary may waive part or all of the 
     civil money penalty imposed under subparagraph (A)(i)(II) to 
     the extent that payment of such penalty would be grossly 
     excessive relative to the violation involved and to the need 
     for deterrence of violations.
       ``(D) Administrative appellate review.--The decision and 
     order of an administrative law judge under this paragraph 
     shall become the final agency decision and order of the 
     Secretary unless, within 30 days, the Secretary modifies or 
     vacates the decision and order, in which case the decision 
     and order of the Secretary shall become a final order under 
     this paragraph.
       ``(E) Judicial review.--A carrier, agent, or association or 
     its subsidiary or any other individual adversely affected by 
     a final order issued under this paragraph may, within 45 days 
     after the date the final order is issued, file a petition in 
     the Court of Appeals for the appropriate circuit for review 
     of the order.
       ``(F) Enforcement of orders.--If a carrier, agent, or 
     association or its subsidiary fails to comply with a final 
     order issued under this paragraph against the carrier, agent, 
     association or subsidiary after opportunity for judicial 
     review under subparagraph (E), the Secretary shall file a 
     suit to seek compliance with the order in any appropriate 
     district court of the United States. In any such suit, the 
     validity and appropriateness of the final order shall not be 
     subject to review.
       ``(d) Demonstration Grant Program.--
       ``(1) In general.--The Secretary may award grants to States 
     for the establishment of demonstration programs to improve 
     the enforcement within such States of long-term care 
     insurance standards applicable under this title.
       ``(2) Application.--To be eligible to receive a grant under 
     paragraph (1), a State shall prepare and submit to the 
     Secretary an application at such time, in such manner, and 
     containing such information as the Secretary may require, 
     including a description of the program for which the State 
     intends to use the amounts provided under the grant.
       ``(3) Minimum amount of grants.--The amount of a grant 
     awarded under this subsection shall not be less than 
     $100,000.
       ``(4) Evaluation.--A State that receives a grant under this 
     subsection shall comply with such evaluation procedures as 
     the Secretary shall by regulation establish. The Secretary 
     shall utilize such evaluations to conduct an overall 
     evaluation of the results of the demonstration programs 
     established under this section.
       ``(5) Authorization of appropriations.--There are 
     authorized to be appropriated to carry out this subsection, 
     $5,000,000 for each of the fiscal years 1996 through 2000.

     ``SEC. 2712. REGULATION OF SALES PRACTICES.

       ``(a) Duty of Good Faith and Fair Dealing.--
       ``(1) In general.--Each agent (as defined in section 2733) 
     or association that is selling or offering for sale a long-
     term care insurance policy has the duty of good faith and 
     fair dealing to the purchaser or potential purchaser of such 
     a policy.
       ``(2) Prohibited practices.--An agent or association is 
     considered to have violated paragraph (1) if the agent or 
     association engages in any of the following practices:
       ``(A) Twisting.--
       ``(i) In general.--Knowingly making any misleading 
     representation (including the inaccurate completion of 
     medical histories) or incomplete or fraudulent comparison of 
     any long-term care insurance policy or insurers for the 
     purpose of inducing, or tending to induce, any person to 
     retain or effect a change with respect to a long-term care 
     insurance policy.
       ``(ii) Policy replacement form.--With respect to any person 
     who elects to replace or effect a change in a long-term care 
     insurance policy, the individual that is selling such policy 
     shall ensure that such person completes a policy replacement 
     form developed by the NAIC. A copy of such form shall be 
     provided to such person and additional copies shall be 
     delivered by the selling individual to the old policy issuer 
     and the new issuer and kept on file for inspection by the 
     State regulatory agency.
       ``(B) High pressure tactics.--Employing any method of 
     marketing having the effect of, or intending to, induce the 
     purchase of long-term care insurance policy through force, 
     fright, threat or undue pressure, whether explicit or 
     implicit.
       ``(C) Cold lead advertising.--Making use directly or 
     indirectly of any method of marketing which fails to disclose 
     in a conspicuous manner that a purpose of the method of 
     marketing is solicitation of insurance and that contact will 
     be made by an insurance agent or insurance company.
       ``(D) Others.--Engaging in such other practices determined 
     inappropriate under guidelines issued by the NAIC.
       ``(b) Financial Standards.--The NAIC shall develop 
     recommended financial minimum standards (including both 
     income and asset criteria) for the purpose of advising 
     individuals considering the purchase of a long-term care 
     insurance policy.
       ``(c) Prohibition of Sale or Issuance to Medicaid 
     Beneficiaries.--An agent, an association, or a carrier may 
     not knowingly sell or issue a long-term care insurance policy 
     to an individual who is eligible for medical assistance under 
     title XIX of the Social Security Act.
       ``(d) Prohibition of Sale or Issuance of Duplicate Service 
     Benefit Policies.--An agent, association or its subsidiary, 
     or a carrier may not sell or issue a service-benefit long-
     term care insurance policy to an individual--
       ``(1) knowing that the policy provides for coverage that 
     duplicates coverage already provided in another service-
     benefit long-term care insurance policy held by such 
     individual (unless the policy is intended to replace such 
     other policy); or
       ``(2) for the benefit of an individual unless the 
     individual (or a representative of the individual) provides a 
     written statement to the effect that the coverage--
       ``(A) does not duplicate other coverage in effect under a 
     service-benefit long-term care insurance policy; or
       ``(B) will replace another service-benefit long-term care 
     insurance policy.
     In this subsection, the term `service-benefit long-term care 
     insurance policy' means a long-term care insurance policy 
     which provides for benefits based on the type and amount of 
     services furnished.
       ``(e) Prohibition Based on Eligibility for Other 
     Benefits.--A carrier may not sell or issue a long-term care 
     insurance policy that reduces, limits or coordinates the 
     benefits provided under the policy on the basis that the 
     policyholder has or is eligible for other long-term care 
     insurance coverage or benefits.
       ``(f) Provision of Outline of Coverage.--No agent, 
     association or its subsidiary, or carrier may sell or offer 
     for a sale a long-term care insurance policy (or for a 
     certificate under a group long-term care insurance policy) 
     without providing to the purchaser or potential purchaser (or 
     representative) an outline of coverage that complies with the 
     standards established under section 2701(a).
       ``(g) Penalties.--Any agent who sells, offers for sale, or 
     issues a long-term care insurance policy in violation of this 
     section may be imprisoned not more than 5 years, or fined in 
     accordance with title 18, United States Code, and, in 
     addition, is subject to a civil money penalty of not to 
     exceed $15,000 for each such violation. Any association or 
     its subsidiary or carrier that sells, offers for sale, or 
     issues a long-term care insurance policy in violation of this 
     section may be fined in accordance with title 18, United 
     States Code, and in addition, is subject to a civil money 
     penalty of not to exceed $25,000 for each violation.
       ``(h) Agent Training and Certification Requirements.--The 
     NAIC, shall establish requirements for long-term care 
     insurance agent training and certification that--
       ``(1) specify requirements for training insurance agents 
     who desire to sell or offer for sale long-term care insurance 
     policies; and
       ``(2) specify procedures for certifying agents who have 
     completed such training and who are as qualified to sell or 
     offer for sale long-term care insurance policies.

     ``SEC. 2713. ADDITIONAL RESPONSIBILITIES FOR CARRIERS.

       ``(a) Refund of Premiums.--If an application for a long-
     term care insurance policy (or for a certificate under a 
     group long-term care insurance policy) is denied or an 
     applicant returns a policy or certificate within 30 days of 
     the date of its issuance pursuant to subsection 2717, the 
     carrier shall refund directly to the applicant, or in the 
     case of an employer to whomever remits the premium, and not 
     by delivery by the agent, not later than 30 days after the 
     date of the denial or return, any premiums paid with respect 
     to such a policy (or certificate).
       ``(b) Mailing of Policy.--If an application for a long-term 
     care insurance policy (or for a certificate under a group 
     long-term care insurance policy) is approved, the carrier 
     shall provide the applicant, or in the case of a group plan 
     the employer, the policy (or certificate) of insurance not 
     later than 30 days after the date of the approval.
       ``(c) Information on Denials of Claims.--If a claim under a 
     long-term care insurance policy is denied, the carrier shall, 
     within 30 days of the date of a written request by the 
     policyholder or certificate holder (or representative)--
       ``(1) provide a written explanation of the reasons for the 
     denial; and
       ``(2) make available all medical and patient records 
     directly relating to such denial.
     Except as provided in subsection (e) of section 2715, no 
     claim under such a policy may be denied on the basis of a 
     failure to disclose a condition at the time of issuance of 
     the policy if the application for the policy failed to 
     request information respecting the condition.
       ``(d) Reporting of Information.--A carrier that issues one 
     or more long-term care insurance policies shall periodically 
     (not less often than annually) report, in a form and in a 
     manner determined by the NAIC, to the Commissioner, 
     superintendent or director of insurance of each State in 
     which the policy is delivered, and shall make available to 
     the Secretary, upon request, information in a form and manner 
     determined by the NAIC concerning--
       ``(1) the long-term care insurance policies of the carrier 
     that are in force;
       ``(2) the most recent premiums for such policies and the 
     premiums imposed for such policies since their initial 
     issuance;
       ``(3) the lapse rate, replacement rate, and rescission 
     rates by policy;
       ``(4) the names of that 10 percent of its agents that--
       ``(A) have the greatest lapse and replacement rate; and
       ``(B) have produced at least $50,000 of long-term care 
     insurance sales in the previous year; and
       ``(5) the claims denied (expressed as a number and as a 
     percentage of claims submitted) by policy.

     Information required under this subsection shall be reported 
     in a format specified in the standards established under 
     section 2701(a). For purposes of paragraph (3), there shall 
     be included (but reported separately) data concerning lapses 
     due to the death of the policyholder. For purposes of 
     paragraph (4), there shall not be included as a claim any 
     claim that is denied solely because of the failure to meet a 
     deductible, waiting period, or exclusionary period.
       ``(e) Standards on Compensation for Sale of Policies.--
       ``(1) In general.--A carrier that issues one or more long-
     term care insurance policies may provide a commission or 
     other compensation to an agent or other representative for 
     the sale of such a policy only if the first year commission 
     or other first year compensation to be paid does not exceed 
     200 percent of the commission or other compensation paid for 
     selling or servicing the policy in the second year, or if the 
     first year commission or other compensation to be paid does 
     not exceed 50 percent of the premium paid on the first year 
     policy, until the NAIC promulgates mandatory standards 
     concerning compensation for the sale of such policies.
       ``(2) Subsequent years.--The commission or other 
     compensation provided for the sale of long-term care 
     insurance policies in years subsequent to the first year of 
     the policy shall be the same as that provided in the second 
     subsequent year and shall be provided for no fewer than 5 
     subsequent years.
       ``(3) Limitation.--No carrier shall provide compensation to 
     its agents for the sale of a long-term care insurance policy 
     and no agent shall receive compensation greater than the 
     renewal compensation payable by the replacing carrier on 
     renewal policies if an existing policy is replaced.
       ``(4) Compensation defined.--As used in this subsection, 
     the term `compensation' includes pecuniary or nonpecuniary 
     remuneration of any kind relating to the sale or renewal of 
     the policy, including but not limited to deferred 
     compensation, bonuses, gifts, prizes, awards, and finders 
     fees.

     ``SEC. 2714. RENEWABILITY STANDARDS FOR ISSUANCE, AND BASIS 
                   FOR CANCELLATION OF POLICIES.

       ``(a) In General.--No long-term care insurance policy may 
     be canceled or nonrenewed for any reason other than 
     nonpayment of premium, material misrepresentation or fraud.
       ``(b) Continuation and Conversion Rights for Group 
     Policies.--
       ``(1) In general.--Each group long-term care insurance 
     policy shall provide covered individuals with a basis for 
     continuation or conversion in accordance with this 
     subsection.
       ``(2) Basis for continuation.--For purposes of paragraph 
     (1), a policy provides a basis for continuation of coverage 
     if the policy maintains coverage under the existing group 
     policy when such coverage would otherwise terminate and which 
     is subject only to the continued timely payment of premium 
     when due. A group policy which restricts provision of 
     benefits and services to or contains incentives to use 
     certain providers or facility, may provide continuation 
     benefits which are substantially equivalent to the benefits 
     of the existing group policy.
       ``(3) Basis for conversion.--For purposes of paragraph (1), 
     a policy provides a basis for conversion of coverage if the 
     policy entitles each individual--
       ``(A) whose coverage under the group policy would otherwise 
     be terminated for any reason; and
       ``(B) who has been continuously insured under the policy 
     (or group policy which was replaced) for at least 6 months 
     before the date of the termination;
     to issuance of a policy providing benefits identical to, 
     substantially equivalent to, or in excess of, those of the 
     policy being terminated, without evidence of insurability.
       ``(4) Treatment of substantial equivalence.--In determining 
     under this subsection whether benefits are substantially 
     equivalent, consideration should be given to the difference 
     between managed care and non-managed care plans.
       ``(5) Group replacement of policies.--If a group long-term 
     care insurance policy is replaced by another long-term care 
     insurance policy purchased by the same policyholder, the 
     succeeding issuer shall offer coverage to all persons covered 
     under the old group policy on its date of termination. 
     Coverage under the new group policy shall not result in any 
     exclusion for preexisting conditions that would have been 
     covered under the group policy being replaced.
       ``(c) Standards for Issuance.--
       ``(1) In general.--
       ``(A) Guarantee.--An agent, association or carrier that 
     sells or issues long-term care insurance policies shall 
     guarantee that such policies shall be sold or issued to an 
     individual, or eligible individual in the case of a group 
     plan, if such individual meets the minimum medical 
     underwriting requirements of such policy.
       ``(B) Premium for converted policy.--If a group policy from 
     which conversion is made is a replacement for a previous 
     group policy, the premium for the converted policy shall be 
     calculated on the basis of the insured's age at the inception 
     of coverage under the group policy from which conversion is 
     made. Where the group policy from which conversion is made 
     replaced previous group coverage, the premium for the 
     converted policy shall be calculated on the basis of the 
     insured's age at inception of coverage under the group policy 
     replaced.
       ``(2) Upgrade for current policies.--The NAIC shall 
     establish standards, including those providing guidance on 
     medical underwriting and age rating, with respect to the 
     access of individuals to policies offering upgraded benefits.
       ``(d) Effect of Incapacitation.--
       ``(1) In general.--
       ``(A) Prohibition.--Except as provided in paragraph (2), a 
     long-term care insurance policy in effect as of the effective 
     date of the standards established under section 2701(a) may 
     not be canceled for nonpayment if the policy holder is 
     determined by a long-term care provider, physician or other 
     health care provider, independent of the issuer of the 
     policy, to be cognitively or mentally incapacitated so as to 
     not make payments in a timely manner.
       ``(B) Reinstatement.--A long-term care policy shall include 
     a provision that provides for the reinstatement of such 
     coverage, in the event of lapse, if the insurer is provided 
     with proof of cognitive or mental incapacitation. Such 
     reinstatement option shall remain available for a period of 
     not less than 5 months after termination and shall allow for 
     the collection of past due premium.
       ``(2) Permitted cancellation.--A long-term care insurance 
     policy may be canceled under paragraph (1) for nonpayment 
     if--
       ``(A) the period of such nonpayment is in excess of 30 
     days; and
       ``(B) notice of intent to cancel is provided to the 
     policyholder or designated representative of the policy 
     holder not less than 30 days prior to such cancellation, 
     except that notice may not be provided until the expiration 
     of 30 days after a premium is due and unpaid.

     Notice under this paragraph shall be deemed to have been 
     given as of 5 days after the mailing date.

     ``SEC. 2715. BENEFIT STANDARDS.

       ``(a) Use of Standard Definitions and Terminology, Uniform 
     Format, and Standard Benefits.--Each long-term care insurance 
     policy shall, with respect to services, providers or 
     facilities, pursuant to standards established under section 
     2701(a)--
       ``(1) use uniform language and definitions, except that 
     such language and definitions may take into account the 
     differences between States with respect to definitions and 
     terminology used for long-term care services and providers;
       ``(2) use a uniform format for presenting the outline of 
     coverage under such a policy; and
       ``(3) provide coverage for at least one standard benefits 
     package (of those developed by the NAIC) that shall include 
     the limitations on the amount of payments per day and the 
     lengths of covered stays for nursing facility and home health 
     care services;

     as prescribed under guidelines issued by the NAIC and 
     periodically updated.
       ``(b) Disclosure.--
       ``(1) Outline of coverage.--
       ``(A) Requirement.--Each carrier that sells or offers for 
     sale a long-term care insurance policy shall provide an 
     outline of coverage under such policy that meets the 
     applicable standards established pursuant to section 2701(a), 
     complies with the requirements of subparagraph (B), and is in 
     a uniform format as prescribed in guidelines issued by the 
     NAIC and periodically updated.
       ``(B) Contents.--The outline of coverage for each long-term 
     care insurance policy shall include at least the following:
       ``(i) A description of the principal benefits and coverage 
     under the policy.
       ``(ii) A statement of the principal exclusions, reductions, 
     and limitations contained in the policy.
       ``(iii) A statement of the terms under which the policy (or 
     certificate) may be continued in force or discontinued, the 
     terms for continuation or conversion, and any reservation in 
     the policy of a right to change premiums.
       ``(iv) A statement, in bold face type on the face of the 
     document in language that is understandable to an average 
     individual, that the outline of coverage is a summary only, 
     not a contract of insurance, and that the policy (or master 
     policy) contains the contractual provisions that govern, 
     except that such summary shall substantially and accurately 
     reflect the contents of the policy or the master policy.
       ``(v) A description of the terms, specified in section 
     2717, under which a policy or certificate may be returned and 
     premium refunded.
       ``(vi) Information on national average costs for nursing 
     facility and home health care and information (in graphic 
     form) on the relationship of the value of the benefits 
     provided under the policy to such national average costs and 
     State average costs, where available.
       ``(vii) A statement of the percentage limit on annual 
     premium increases that is provided under the policy pursuant 
     to this section.
       ``(2) Certificates.--A certificate issued pursuant to a 
     group long-term care insurance policy shall include--
       ``(A) a description of the principal benefits and coverage 
     provided in the policy;
       ``(B) a statement of the principal exclusions, reductions, 
     and limitations contained in the policy; and
       ``(C) a statement that the group master policy determines 
     governing contractual provisions.
       ``(3) Long-term care as part of life insurance.--In the 
     case of a long-term care insurance policy issued as a part 
     of, or a rider on, a life insurance policy, at the time of 
     policy delivery there shall be provided a policy summary that 
     includes--
       ``(A) an explanation of how the long-term care benefits 
     interact with other components of the policy (including 
     deductions from death benefits);
       ``(B) an illustration of the amount of benefits, the length 
     of benefit, and the guaranteed lifetime benefits (if any) for 
     each covered person; and
       ``(C) any exclusions, reductions, and limitations on 
     benefits of long-term care.
       ``(4) Additional information.--The NAIC shall develop 
     recommendations with respect to informing consumers of the 
     long-term economic viability of carriers issuing long-term 
     care insurance policies.
       ``(c) Limiting Conditions on Benefits; Minimum Benefits.--
       ``(1) In general.--A long-term care insurance policy may 
     not condition or limit eligibility--
       ``(A) for benefits for a type of services to the need for 
     or receipt of any other services;
       ``(B) for any benefit on the medical necessity for such 
     benefit;
       ``(C) for benefits furnished by licensed or certified 
     providers in compliance with conditions which are in addition 
     to those required for licensure or certification under State 
     law, except that if no State licensure or certification laws 
     exists, in compliance with qualifications developed by the 
     NAIC; or
       ``(D) for residential care (if covered under the policy) 
     only--
       ``(i) to care provided in facilities which provide a higher 
     level of care; or
       ``(ii) to care provided in facilities which provide for 24-
     hour or other nursing care not required in order to be 
     licensed by the State.
       ``(2) Home health care or community-based services.--If a 
     long-term care insurance policy provides benefits for the 
     payment of specified home health care or community-based 
     services, the policy--
       ``(A) may not limit such benefits to services provided by 
     registered nurses or licensed practical nurses;
       ``(B) may not require benefits for such services to be 
     provided by a nurse or therapist that can be provided by a 
     home health aide or licensed or certified home care worker, 
     except that if no State licensure or certification laws 
     exists, in compliance with qualifications developed by the 
     NAIC;
       ``(C) may not limit such benefits to services provided by 
     agencies or providers certified under title XVIII of the 
     Social Security Act; and
       ``(D) must provide, at a minimum, benefits for personal 
     care services (including home health aide and home care 
     worker services as defined by the NAIC) home health services, 
     adult day care, and respite care in an individual's home or 
     in another setting in the community, or any of these benefits 
     on a respite care basis.
       ``(3) Nursing facility services.--If a long-term care 
     insurance policy provides benefits for the payment of 
     specified nursing facility services, the policy must provide 
     such benefits with respect to all nursing facilities (as 
     defined in section 1919(a) of the Social Security Act or 
     until such time as subsequently provided for by the NAIC in 
     establishing uniform language and definitions under section 
     2715(a)(1)) in the State.
       ``(4) Per diem policies.--
       ``(A) Definition.--For purposes of this title, the term 
     `per diem long-term care insurance policy' means a long-term 
     care insurance policy (or certificate under a group long-term 
     care insurance policy) that provides for benefit payments on 
     a periodic basis due to cognitive impairment or loss of 
     functional capacity without regard to the expenses incurred 
     or services rendered during the period to which the payments 
     relate.
       ``(B) Limitation.--No per diem long-term care insurance 
     policy (or certificate) may condition or otherwise exclude 
     benefit payments based on the receipt of any type of nursing 
     facility, home health care or community-based services.
       ``(d) Prohibition of Discrimination.--A long-term care 
     insurance policy may not treat benefits under the policy in 
     the case of an individual with Alzheimer's disease, with any 
     related progressive degenerative dementia of an organic 
     origin, with any organic or inorganic mental illness, or with 
     mental retardation or any other cognitive or mental 
     impairment differently from an individual having another 
     medical condition for which benefits may be made available.
       ``(e) Limitation on Use of Preexisting Condition Limits.--
       ``(1) Initial issuance.--
       ``(A) In general.--Subject to subparagraph (B), a long-term 
     care insurance policy may not exclude or condition benefits 
     based on a medical condition for which the policyholder 
     received treatment or was otherwise diagnosed before the 
     issuance of the policy.
       ``(B) 6-month limit.--
       ``(i) In general.--No long-term care insurance policy or 
     certificate issued under this title shall utilize a 
     definition of `preexisting condition' that is more 
     restrictive than the following: The term `preexisting 
     condition' means a condition for which medical advice or 
     treatment was recommended by, or received from a provider of 
     health care services, within 6 months preceding the effective 
     date of coverage of an insured individual.
       ``(ii) Prohibition on exclusion of coverage.--No long-term 
     care insurance policy or certificate may exclude coverage for 
     a loss or confinement that is the result of a preexisting 
     condition unless such loss or confinement begins within 6 
     months following the effective date of the coverage of the 
     insured individual.
       ``(2) Replacement policies.--If a long-term care insurance 
     policy replaces another long-term care insurance policy, the 
     issuer of the replacing policy shall waive any time periods 
     applicable to preexisting conditions, waiting period, 
     elimination periods and probationary periods in the new 
     policy for similar benefits to the extent such time was spent 
     under the original policy.
       ``(f) Eligibility for Benefits.--
       ``(1) Long-term care policies.--Each long-term care 
     insurance policy shall--
       ``(A) describe the level of benefits available under the 
     policy; and
       ``(B) specify in clear, understandable terms, the level (or 
     levels) of physical, cognitive, or mental impairment required 
     in order to receive benefits under the policy.
       ``(2) Functional assessment.--In order to submit a claim 
     under any long-term care insurance policy, each claimant 
     shall have a professional functional assessment of his or her 
     physical, cognitive, and mental abilities. Such initial 
     assessment shall be conducted by an individual or entity, 
     meeting the qualifications established by the NAIC to assure 
     the professional competence and credibility of such 
     individual or entity and that such individual meets any 
     applicable State licensure and certification requirements. 
     The individual or entity conducting such assessment may not 
     control, or be controlled by, the issuer of the policy. For 
     purposes of this paragraph and paragraph (4), the term 
     `control' means the direct or indirect possession of the 
     power to direct the management and policies of a person. 
     Control is presumed to exist, if any person directly or 
     indirectly, owns, controls, holds with the power to vote, or 
     holds proxies representing 10 percent of the voting 
     securities of another person.
       ``(3) Claims review.--Except as provided in paragraph (4), 
     each long-term care insurance policy shall be subject to 
     final claims review by the carrier pursuant to the terms of 
     the long-term care insurance policy.
       ``(4) Appeals process.--
       ``(A) In general.--Each long-term care insurance policy 
     shall provide for a timely and independent appeals process, 
     meeting standards established by the NAIC, for individuals 
     who dispute the results of the claims review, conducted under 
     paragraph (3), of the claimant's functional assessment, 
     conducted under paragraph (2).
       ``(B) Independent assessment.--An appeals process under 
     this paragraph shall include, at the request of the claimant, 
     an independent assessment of the claimant's physical, 
     cognitive or mental abilities.
       ``(C) Conduct.--An independent assessment under 
     subparagraph (B) shall be conducted by an individual or 
     entity meeting the qualifications established by the NAIC to 
     assure the professional competence and credibility of such 
     individual or entity and any applicable State licensure and 
     certification requirements and may not be conducted--
       ``(i) by an individual who has a direct or indirect 
     significant or controlling interest in, or direct affiliation 
     or relationship with, the issuer of the policy;
       ``(ii) by an entity that provides services to the 
     policyholder or certificateholder for which benefits are 
     available under the long-term care insurance policy; or
       ``(iii) by an individual or entity in control of, or 
     controlled by, the issuer of the policy.
       ``(5) Standard assessments.--Not later than 2 years after 
     the date of enactment of this title, the advisory committee 
     established under section 2701(d) shall recommend uniform 
     needs assessment mechanisms for the determination of 
     eligibility for benefits under such assessments.
       ``(g) Inflation Protection.--
       ``(1) Option to purchase.--A carrier may not offer a long-
     term care insurance policy unless the carrier also offers to 
     the proposed policyholder, including each group policyholder, 
     the option to purchase a policy that provides for increases 
     in benefit levels, with benefit maximums or reasonable 
     durations that are meaningful, to account for reasonably 
     anticipated increases in the costs of long-term care services 
     covered by the policy. A carrier may not offer to a 
     policyholder an inflation protection feature that is less 
     favorable to the policyholder than one of the following:
       ``(A) With respect to policies that provide for automatic 
     periodic increases in benefits, the policy provides for an 
     annual increase in benefits in a manner so that such 
     increases are computed annually at a rate of not less than 5 
     percent.
       ``(B) With respect to policies that provide for periodic 
     opportunities to elect an increase in benefits, the policy 
     guarantees that the insured individual will have the right to 
     periodically increase the benefit levels under the policy 
     without providing evidence of insurability or health status 
     so long as the option for the previous period was not 
     declined. The amount of any such additional benefit may not 
     be less than the difference between--
       ``(i) the existing policy benefit; and
       ``(ii) such existing benefit compounded annually at a rate 
     of at least 5 percent for the period beginning on the date on 
     which the existing benefit is purchased and extending until 
     the year in which the offer of increase is made.
       ``(C) With respect to service benefit policies, the policy 
     covers a specified percentage of the actual or reasonable 
     charges and does not include a maximum specified indemnity 
     amount or limit.
       ``(2) Exception.--The requirements of paragraph (1) shall 
     not apply to life insurance policies or riders containing 
     accelerated long-term care benefits.
       ``(3) Required information.--Carriers shall include the 
     following information in or together with the outline of 
     coverage provided under this title:
       ``(A) A graphic comparison of the benefit levels of a 
     policy that increases benefits over the policy period with a 
     policy that does not increase benefits. Such comparison shall 
     show benefit levels over not less than a 20-year period.
       ``(B) Any expected premium increases or additional premiums 
     required to pay for any automatic or optional benefit 
     increases, whether the individual who purchases the policy 
     obtains the inflation protection initially or whether such 
     individual delays purchasing such protection until a future 
     time.
       ``(4) Continuation of protection.--Inflation protection 
     benefit increases under this subsection under a policy that 
     contains such protection shall continue without regard to an 
     insured's age, claim status or claim history, or the length 
     of time the individual has been insured under the policy.
       ``(5) Constant premium.--An offer of inflation protection 
     under this subsection that provides for automatic benefit 
     increases shall include an offer of a premium that the 
     carrier expects to remain constant. Such offer shall disclose 
     in a conspicuous manner that the premium may change in the 
     future unless the premium is guaranteed to remain constant.
       ``(6) Rejection.--Inflation protection under this 
     subsection shall be included in a long-term care insurance 
     policy unless a carrier obtains a written rejection of such 
     protection signed by the policyholder.

     ``SEC. 2716. NONFORFEITURE.

       ``(a) In General.--Each long-term care insurance policy (or 
     certificate) shall provide that if the policy lapses after 
     the policy has been in effect for a minimum period (specified 
     under the standards under section 2701(a)), the policy will 
     provide, without payment of any additional premiums, 
     nonforfeiture benefits as determined appropriate by the NAIC.
       ``(b) Establishment of Standards.--The standards under 
     section 2701(a) shall provide that the percentage or amount 
     of benefits under subsection (a) must increase based upon the 
     policyholder's equity in the policy.

     ``SEC. 2717. LIMIT OF PERIOD OF CONTESTABILITY AND RIGHT TO 
                   RETURN.

       ``(a) Contestability.--A carrier may not cancel or renew a 
     long-term care insurance policy or deny a claim under the 
     policy based on fraud or material misrepresentation relating 
     to the issuance of the policy unless notice of such fraud or 
     material misrepresentation is provided within a time period 
     to be determined by the NAIC.
       ``(b) Right to Return.--Each applicant for a long-term care 
     insurance policy shall have the right to return the policy 
     (or certificates) within 30 days of the date of its delivery 
     (and to have the premium refunded) if, after examination of 
     the policy or certificate, the applicant is not satisfied for 
     any reason.

     ``SEC. 2718. CIVIL MONEY PENALTY.

       ``(a) Carrier.--Any carrier, association or its subsidiary 
     that sells or offers for sale a long-term care insurance 
     policy and that--
       ``(1) fails to make a refund in accordance with section 
     2713(a);
       ``(2) fails to transmit a policy in accordance with section 
     2713(b);
       ``(3) fails to provide, make available, or report 
     information in accordance with subsections (c) or (d) of 
     section 2713;
       ``(4) provides a commission or compensation in violation of 
     section 2713(e);
       ``(5) fails to provide an outline of coverage in violation 
     of section 2715(b)(1); or
       ``(6) issues a policy without obtaining certain information 
     in violation of section 2715(f);

     is subject to a civil money penalty of not to exceed $25,000 
     for each such violation.
       ``(b) Agents.--Any agent that sells or offers for sale a 
     long-term care insurance policy and that--
       ``(1) fails to make a refund in accordance with section 
     2713(a);
       ``(2) fails to transmit a policy in accordance with section 
     2713(b);
       ``(3) fails to provide, make available, or report 
     information in accordance with subsections (c) or (d) of 
     section 2713;
       ``(4) fails to provide an outline of coverage in violation 
     of section 2715(b)(1); or
       ``(5) issues a policy without obtaining certain information 
     in violation of section 2715(f);

     is subject to a civil money penalty of not to exceed $15,000 
     for each such violation.

      ``Part C--Long-Term Care Insurance Policies, Definition and 
                              Endorsements

     ``SEC. 2721. LONG-TERM CARE INSURANCE POLICY DEFINED.

       ``(a) In General.--As used in this section, the term `long-
     term care insurance policy' means any insurance policy, rider 
     or certificate advertised, marketed, offered or designed to 
     provide coverage for not less than 12 consecutive months for 
     each covered person on an expense incurred, indemnity prepaid 
     or other basis, for one or more necessary diagnostic, 
     preventive, therapeutic, rehabilitative, maintenance or 
     personal care services, provided in a setting other than an 
     acute care unit of a hospital. Such term includes--
       ``(1) group and individual annuities and life insurance 
     policies, riders or certificates that provide directly, or 
     that supplement long-term care insurance; and
       ``(2) a policy, rider or certificates that provides for 
     payment of benefits based on cognitive impairment or the loss 
     of functional capacity.
       ``(b) Issuance.--Long-term care insurance policies may be 
     issued by--
       ``(1) carriers;
       ``(2) fraternal benefit societies;
       ``(3) nonprofit health, hospital, and medical service 
     corporations;
       ``(4) prepaid health plans;
       ``(5) health maintenance organizations; or
       ``(6) any similar organization to the extent they are 
     otherwise authorized to issue life or health insurance.
       ``(c) Policies Excluded.--The term `long-term care 
     insurance policy' shall not include any insurance policy, 
     rider or certificate that is offered primarily to provide 
     basic Medicare supplement coverage, basic hospital expense 
     coverage, basic medical-surgical expense coverage, hospital 
     confinement indemnity coverage, major medical expense 
     coverage, disability income or related asset-protection 
     coverage, accident only coverage, specified disease or 
     specified accident coverage, or limited benefit health 
     coverage. With respect to life insurance, such term shall not 
     include life insurance policies, riders or certificates that 
     accelerate the death benefit specifically for one or more of 
     the qualifying events of terminal illness, medical conditions 
     requiring extraordinary medical intervention, or permanent 
     institutional confinement, and that provide the option of a 
     lump-sum payment for those benefits and in which neither the 
     benefits nor the eligibility for the benefits is conditioned 
     upon the receipt of long-term care.
       ``(d) Applications.--Notwithstanding any other provision of 
     this title, this title shall apply to any product advertised, 
     marketed or offered as a long-term insurance policy, rider or 
     certificate.

     ``SEC. 2722. CODE OF CONDUCT WITH RESPECT TO ENDORSEMENTS.

       ``Not later than 1 year after the date of enactment of this 
     title the NAIC shall issue guidelines that shall apply to 
     organizations and associations, other than employers and 
     labor organizations that do not accept compensation, and 
     their subsidiaries that provide endorsements of long-term 
     care insurance policies, or that permit such policies to be 
     offered for sale through the organization or association. 
     Such guidelines shall include at minimum the following:
       ``(1) In endorsing or selling long-term care insurance 
     policies, the primary responsibility of an organization or 
     association shall be to educate their members concerning such 
     policies and assist such members in making informed 
     decisions. Such organizations and associations may not 
     function primarily as sales agents for insurance companies.
       ``(2) Organizations and associations shall provide 
     objective information regarding long-term care insurance 
     policies sold or endorsed by such organizations and 
     associations to ensure that members of such organizations and 
     associations have a balanced and complete understanding of 
     both the strengths and weaknesses of the policies that are 
     being endorsed or sold.
       ``(3) Organizations and associations selling or endorsing 
     long-term care insurance policies shall disclose in marketing 
     literature provided to their members concerning such policies 
     the manner in which such policies and the insurance company 
     issuing such policies were selected. If the organization or 
     association and the insurance company have interlocking 
     directorates, the organization or association shall disclose 
     such fact to their members.
       ``(4) Organizations and associations selling or endorsing 
     long-term care insurance policies shall disclose in marketing 
     literature provided to their members concerning such policies 
     the nature and amount of the compensation arrangements 
     (including all fees, commissions, administrative fees and 
     other forms of financial support that the organization or 
     association receives) from the endorsement or sale of the 
     policy to its members.
       ``(5) The Boards of Directors of organizations and 
     associations selling or endorsing long-term care insurance 
     policies, if such organizations and associations have a Board 
     of Directors, shall review and approve such insurance 
     policies, the compensation arrangements and the marketing 
     materials used to promote sales of such policies.

                   ``Part D--Miscellaneous Provisions

     ``SEC. 2731. FUNDING FOR LONG-TERM CARE INSURANCE 
                   INFORMATION, COUNSELING, AND ASSISTANCE.

       ``(a) In General.--The Secretary, acting through the Public 
     Health Service, may award grants to States, and national 
     organizations with demonstrated experience in long-term care 
     insurance, for the establishment of programs to provide 
     information, counseling, and assistance relating to the 
     procurement of adequate and appropriate long-term care 
     insurance.
       ``(b) Application.--To be eligible to receive a grant under 
     subsection (a), a State or national organization shall 
     prepare and submit to the Secretary an application at such 
     time, in such manner, and containing such information as the 
     Secretary may require, including a description of the program 
     for which the State or organization intends to use the 
     amounts provided under the grant.
       ``(c) Authorization of Appropriations.--
       ``(1) In general.--There are authorized to be appropriate 
     for grants to States under subsection (a), $10,000,000 for 
     each of the fiscal years 1996 through 1998.
       ``(2) National organizations.--There are authorized to be 
     appropriate for grants to national organizations under 
     subsection (a), $1,000,000 for each of the fiscal years 1996 
     through 1998.

     ``SEC. 2732. DEFINITIONS.

       ``As used in this title:
       ``(1) Agent.--The term `agent' means--
       ``(A) prior to 2 years after the date of enactment of this 
     Act, an individual who sells or offers for sale a long-term 
     care insurance policy subject to the requirements of this 
     title and is licensed or required to be licensed under State 
     law for such purpose; and
       ``(B) after the date referred to in subparagraph (A), an 
     individual who meets the training and certification 
     requirements established under section 2712(f).
       ``(2) Association.--The term `association' includes the 
     association and its subsidiaries.
       ``(3) Carrier.--The term `carrier' means any person that 
     offers a health benefit plan, whether through insurance or 
     otherwise, including a licensed insurance company, a prepaid 
     hospital or medical service plan, a health maintenance 
     organization, a self-insured carrier, a reinsurance carrier, 
     and a multiple employer welfare arrangement (a combination of 
     employers associated for the purpose of providing health 
     benefit plan coverage for their employees).''.
       (b) Conforming Amendments.--
       (1) Sections 2701 through 2714 of the Public Health Service 
     Act (42 U.S.C. 300cc through 300cc-15) are redesignated as 
     sections 2801 through 2814, respectively.
       (2) Sections 465(f) and 497 of such Act (42 U.S.C. 286(f) 
     and 289(f)) are amended by striking ``2701'' each place that 
     such appears and inserting ``2801''.
    Subtitle C--Protection of Assets Under Medicaid Through Use of 
                   Qualified Long-term Care Insurance

     SEC. 3201. PROTECTION OF ASSETS THROUGH USE OF QUALIFIED 
                   LONG-TERM CARE INSURANCE.

       (a) In General.--Title XIX of the Social Security Act, as 
     amended by sections 1601(a) and 1701(a), is amended--
       (1) by redesignating section 1933 as section 1934; and
       (2) by inserting after section 1932 the following new 
     section:


``special rules for asset disregard in the case of qualified long-term 
                        care insurance contracts

       ``Sec. 1933. (a) In General.--Each State plan under this 
     title may provide, subject to subsection (d), that in 
     determining the eligibility of an individual for medical 
     assistance under the plan with respect to such services there 
     shall be disregarded some or all of the individual's assets 
     which are attributable (as determined under subsection 
     (c)(2)) to coverage under a qualified long-term care 
     insurance contract (as defined in subsection (b)).
       ``(b) Qualified Long-Term Care Insurance Contract 
     Defined.--In this section, the term `qualified long-term care 
     insurance contract' means, with respect to a State, a long-
     term care insurance contract (as defined in section 818A(b) 
     of the Internal Revenue Code of 1986) which--
       ``(1) provides such protection against the costs of 
     receiving long-term care services as the State may require by 
     law;
       ``(2) provides that benefits under the contract shall be 
     paid without regard to eligibility for medical assistance 
     under this title; and
       ``(3) meets such other requirements (such as requirements 
     relating to premiums, disclosure, minimum benefits, rights of 
     conversion, and standards for claims processing) as the State 
     may determine to be appropriate.
       ``(c) Other Definitions.--In this section:
       ``(1) Long-term care services.--The term `long-term care 
     services' means nursing facility services, home health care 
     services, and home and community-based services, and includes 
     such other similar items and services described in section 
     1905(a) as a State may specify.
       ``(2) Attribution rules.--An individual's assets are 
     considered to be `attributable' to a qualified long-term care 
     insurance contract to the extent specified under the State 
     plan. Such a plan shall provide for at least one of the 
     following:
       ``(A) All assets are considered attributable if the 
     insurance contract provides coverage for at least a specified 
     period of coverage (of not less than 3 years and of not more 
     than 6 years) for long-term care services.
       ``(B) An amount of assets, up to the dollar limitation on 
     benefits for long-term care services under the contract, is 
     considered attributable to the contract.
       ``(d) Limitation.--In no case shall this section result in 
     (1) the total Federal payments to the State for the quarter 
     under this title (including payments attributable to this 
     section), exceeding (2) the total Federal payments that the 
     Secretary estimates would have been paid under this title to 
     the State for the quarter if the State did not provide for 
     the determination of eligibility in accordance with 
     subsection (a).''.
       (b) Conforming Amendment.--Section 1902(a)(17)(A) of such 
     Act (42 U.S.C. 1396a(a)(17)(A)) is amended by inserting ``and 
     section 1932'' after ``objectives of this title''.
       (c) Effective Date.--
       (1) In general.--The amendments made by this section shall 
     apply (except as provided under paragraph (2)) to payments to 
     States under title XIX of the Social Security Act for 
     calendar quarters beginning on or after one year after the 
     date of the enactment of this Act, without regard to whether 
     regulations to implement such amendment are promulgated by 
     such date.
       (2) Delay permitted if state legislation required.--In the 
     case of a State plan for medical assistance under title XIX 
     of the Social Security Act which the Secretary of Health and 
     Human Services determines requires State legislation (other 
     than legislation authorizing or appropriating funds) in order 
     for the plan to meet the additional requirements imposed by 
     the amendments made by this section, the State plan shall not 
     be regarded as failing to comply with the requirements of 
     such title solely on the basis of its failure to meet these 
     additional requirements before the first day of the first 
     calendar quarter beginning after the close of the first 
     regular session of the State legislature that begins after 
     the date of the enactment of this Act. For purposes of the 
     previous sentence, in the case of a State that has a 2-year 
     legislative session, each year of such session shall be 
     deemed to be a separate regular session of the State 
     legislature.
                          Subtitle D--Studies

     SEC. 3301. FEASIBILITY OF ENCOURAGING HEALTH CARE PROVIDERS 
                   TO DONATE SERVICES TO HOMEBOUND PATIENTS.

       The Comptroller General of the United States shall conduct 
     a study on the feasibility of encouraging health care 
     providers to donate their services to homebound patients. 
     Such study shall include an examination of the effects of 
     qualifying such services as a charitable contribution.

     SEC. 3302. FEASIBILITY OF TAX CREDIT FOR HEADS OF HOUSEHOLDS 
                   WHO CARE FOR ELDERLY FAMILY MEMBERS IN THEIR 
                   HOMES.

       The Comptroller General of the United States shall conduct 
     a study on the feasibility of providing heads of households 
     who care for elderly family members in their homes with a tax 
     credit. Such study shall estimate the cost of such a tax 
     credit which would apply to expenses incurred in the 
     custodial care of such an elderly family member to the extent 
     such expenses exceed 5 percent of adjusted gross income.

     SEC. 3303. CASE MANAGEMENT OF CURRENT LONG-TERM CARE 
                   BENEFITS.

       (a) In General.--The Secretary of Health and Human Services 
     shall conduct a study of the feasibility of encouraging or 
     requiring the use of a single designated public or nonprofit 
     agency (such as an area agency on aging) to coordinate, 
     through case management, the provision of long-term care 
     benefits under current Federal, State, and local programs in 
     a geographic area.
       (b) Report.--The Secretary shall submit to Congress a 
     report on the study conducted under subsection (a) by not 
     later than 1 year after the date of the enactment of this 
     Act. Such report shall include such recommendations regarding 
     changes in legislation to encourage or require the use 
     (described in subsection (a)) of an agency to coordinate 
     long-term care benefits as may be appropriate.
      Subtitle E--Volunteer Service Credit Demonstration Projects

     SEC. 3401. AMENDMENT TO THE OLDER AMERICANS ACT OF 1965.

       (a) In General.--Part B of title IV of the Older Americans 
     Act of 1965 (42 U.S.C. 3034-3035r) is amended by adding at 
     the end the following:

     ``SEC. 429K. VOLUNTEER SERVICE CREDIT DEMONSTRATION PROJECTS.

       ``(a) Requirements.--The Commissioner shall--
       ``(1) establish and operate (directly, or through the State 
     agency on aging or one or more area agencies on aging) a 
     volunteer service credit demonstration project in all or part 
     of each State;
       ``(2) establish criteria for selecting individuals to whom 
     volunteer services will be provided under volunteer service 
     credit demonstration projects operated under paragraph (1);
       ``(3) recruit and train (directly or through State agencies 
     on aging or area agencies on aging) individuals who volunteer 
     to provide services through such projects;
       ``(4) establish a minimum standard for each service to be 
     provided by volunteers through such projects;
       ``(5) monitor services provided by volunteers through such 
     projects to ensure that standards established under paragraph 
     (4) are met; and
       ``(6) maintain (directly or through State agencies on aging 
     or area agencies on aging) with respect to each individual 
     who provides services through a volunteer service credit 
     demonstration project operated under paragraph (1) a 
     separately identifiable account showing the number of hours 
     such individual provided such services.
       ``(b) Definition.--For purposes of subsection (a), the term 
     `volunteer service credit demonstration project' means a 
     demonstration project through which homemaker services, 
     respite care for families, adult day care, and educational, 
     transportation, and home-delivery services are provided by--
       ``(1) volunteer older individuals for the benefit of older 
     individuals or low-income children; or
       ``(2) volunteer individuals of any age for the benefit of 
     older individuals;
     in return for the receipt of similar services under any such 
     demonstration project (that is established under this 
     section) at a time at which such volunteers are older 
     individuals in need of such services.''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall take effect October 1, 1995.

  Amendment to H.R. 3600, as Reported to be Offered by Representative 
                                 Petri

       Strike all after the enacting clause and insert in lieu 
     thereof the text of H.R. 4469 (as introduced).
                                  ____


        Amendment To H.R. 3600 Offered By Mr. Rowland of Georgia

       Strike all after the enacting clause and insert the 
     following:

     SECTION 1. SHORT TITLE; TABLE OF TITLES AND SUBTITLES.

       (a) Short Title.--This Act may be cited as the ``Bipartisan 
     Health Care Reform Act of 1994''.
       (b) Table of Titles and Subtitles in Act.--The following 
     are the titles and subtitles contained in this Act:

    TITLE I--ASSURING AVAILABILITY AND CONTINUITY OF HEALTH COVERAGE

Subtitle A--Insurance Reforms
Subtitle B--Benefits
Subtitle C--Employer Responsibilities
Subtitle D--Definitions; General Provisions

           TITLE II--REMOVAL OF FINANCIAL BARRIERS TO ACCESS

Subtitle A--Tax Deductibility for Individuals and Self-Employed
Subtitle B--Low-Income Subsidies and Medicaid Reform
Subtitle C--Report and Recommendations on Health Coverage and Access

                     TITLE III--ACCESS IMPROVEMENTS

Subtitle A--Expanding Access in Underserved Areas
Subtitle B--Improved Access in Rural Areas
Subtitle C--Academic Health Centers
Subtitle D--United States-Mexico Border Health Commission

               TITLE IV--HEALTH CARE QUALITY ENHANCEMENT

Subtitle A--Performance Measures for Quality Assurance
Subtitle B--Primary Care Provider Education
Subtitle C--Other Medical Education Grants and Programs

             TITLE V--MARKET INCENTIVES TO CONTAINING COSTS

Subtitle A--Facilitating Establishment of Health Plan Purchasing 
              Organization (HPPOs) and Health Risk Pools
Subtitle B--Preemption of State Benefit Mandates and Anti-Managed Care 
              Laws
Subtitle C--Malpractice Reform
Subtitle D--Paperwork Reduction and Administrative Simplication
Subtitle E--Antitrust
Subtitle F--Fraud and Abuse
Subtitle G--Billing for Laboratory Services

                    TITLE VI--MEDICARE AND MEDICAID

Subtitle A--Increased Medicare Beneficiary Choice; Improved Program 
              Efficiency
Subtitle B--Savings in Medicare and Medicaid

       TITLE VII--INCENTIVES TO PURCHASE LONG-TERM CARE INSURANCE

Subtitle A--Establishment of Federal Standards for Long-term Care 
              Insurance
Subtitle B--Tax Treatment of Long-term Care Insurance

              TITLE VIII--MISCELLANEOUS SAVINGS PROVISIONS

                TITLE IX--DEPARTMENT OF VETERANS AFFAIRS

               TITLE X--AUTOMOBILE INSURANCE COORDINATION

    TITLE I--ASSURING AVAILABILITY AND CONTINUITY OF HEALTH COVERAGE


                       table of contents of title

                      Subtitle A--Insurance Reform

              Part 1--Guaranteed Access to Health Coverage

Sec. 1001. Guaranteed offer by carriers.
Sec. 1002. Guaranteed issue by carriers.
Sec. 1003. Guaranteed renewal.
Sec. 1004. Prohibiting preexisting condition exclusions.
Sec. 1005. Assuring choice of coverage through open enrollment.

                     Part 2--Provision of Benefits

Sec. 1011. Standards for managed care arrangements.
Sec. 1012. Utilization review.
Sec. 1013. Requirements for arrangements with essential community 
              providers.
Sec. 1014. Medical savings accounts.

                     Part 3--Fair Rating Practices

Sec. 1021. Use of fair rating practices.
Sec. 1022. Coordination with premium assistance certificate program.
Sec. 1023. Establishment of risk adjustment mechanisms.

                      Part 4--Consumer Protections

Sec. 1031. Requirement for provision of information.
Sec. 1032. Prohibition of improper incentives.
Sec. 1033. Written policies and procedures respecting advance 
              directives.

 Part 5--Standards and Certification; Enforcement; Preemption; General 
                               Provisions

Sec. 1051. Establishment of standards.
Sec. 1052. Application of standards to carriers through States.
Sec. 1053. Application to group health plans.
Sec. 1054. Enforcement.
Sec. 1055. Limitation on self insurance for small employers.

         Part 6--Multiple Employer Health Benefits Protections

Sec. 1071. Limited exemption from certain restrictions on erisa 
              preemption of State law for health plans maintained by 
              multiple employers subject to certain Federal standards.

                ``Part 7--Multiple Employer Health Plans

``Sec. 701. Definitions.
``Sec. 702. Certified multiple employer health plans relieved of 
              certain restrictions on preemption of State law and 
              treated as employee welfare benefit plans.
``Sec. 703. Certification procedure.
``Sec. 704. Eligibility requirements.
``Sec. 705. Additional requirements applicable to certified multiple 
              employer health plans.
``Sec. 706. Disclosure to participating employers by arrangements 
              providing medical care.
``Sec. 707. Maintenance of reserves.
``Sec. 708. Corrective actions.
``Sec. 709. Expiration, suspension, or revocation of certification.
``Sec. 710. Review of actions of the Secretary.
Sec. 1072. Clarification of scope of preemption rules.
Sec. 1073. Clarification of treatment of single employer arrangements.
Sec. 1074. Clarification of treatment of certain collectively bargained 
              arrangements.
Sec. 1075. Employee leasing health care arrangements.
Sec. 1076. Enforcement provisions relating to multiple employer welfare 
              arrangements and employee leasing health care 
              arrangements.
Sec. 1077. Filing requirements for multiple employer welfare 
              arrangements providing health benefits.
Sec. 1078. Cooperation between Federal and State authorities.
Sec. 1079. Effective date; transitional rules.

   Part 7--Simplifying Filing of Reports for Employers Covered Under 
Multiple Employer Welfare Arrangements Providing Fully Insured Coverage 
                       Consisting of Medical Care

Sec. 1081. Single annual filing for all participating employers.

                          Subtitle B--Benefits

Sec. 1101. Qualified health coverage.
Sec. 1102. Standard coverage.
Sec. 1103. High-deductible coverage.
Sec. 1104. Actuarial valuation of benefits.
Sec. 1105. Anti-discrimination rule.
Sec. 1106. Family coverage option; supplemental coverage.
Sec. 1107. Level playing field for providers.

                 Subtitle C--Employer Responsibilities

Sec. 1201. Requiring employers to offer option of coverage.
Sec. 1202. Nondiscrimination under group health plans.
Sec. 1203. Effective dates.

              Subtitle D--Definitions; General Provisions

Sec. 1901. General definitions.
Sec. 1902. Definitions relating to employment.
Sec. 1903. Definitions relating to health coverage, plans, and 
              carriers.
Sec. 1904. Definitions relating to residence and immigration status.
Sec. 1905. Effective dates.
                      Subtitle A--Insurance Reform

              PART 1--GUARANTEED ACCESS TO HEALTH COVERAGE

     SEC. 1001. GUARANTEED OFFER BY CARRIERS.

       (a) In General.--Each carrier that offers health insurance 
     coverage in the individual or small group market in a service 
     area shall make available, to each qualifying individual or 
     small employer (covered in such market) in the service area--
       (1) qualified standard coverage consistent with section 
     1102, and
       (2) subject to subsection (b), qualified high-deductible 
     coverage consistent with section 1103.
       (b) High-deductible Coverage.--.
       (1) Exception to offer requirement for health maintenance 
     organizations.--The requirements of subsection (a)(2) shall 
     not apply with respect to a health insurance coverage that--
       (A) is provided by a Federally qualified health maintenance 
     organization (as defined in section 1301(a) of the Public 
     Health Service Act), or
       (B) is not provided by such an organization but is provided 
     by an organization recognized under State law as a health 
     maintenance organization or managed care organization or a 
     similar organization regulated under State law for solvency.
       (2) Option to offer medisave coverage.--The offer of high-
     deductible coverage under subsection (a)(2) may be 
     accompanied by the contribution by an employer to a medical 
     savings account (in accordance with section 7705 of the 
     Internal Revenue Code of 1986).
       (c) Establishment of Service Areas.--
       (1) In general.--Each carrier shall establish one or more 
     service areas with respect to qualified insurance coverage it 
     provides in a State.
       (2) Nondiscrimination.--The establishment of such service 
     areas shall be subject to approval of the appropriate 
     regulatory authority and shall not be established in a 
     discriminatory manner.
       (3) Coverage of area.--With respect to each service area, 
     the carrier shall provide for coverage of benefits for items 
     and services furnished throughout the service area.
       (d) Family Coverage Option.--The offer of coverage under 
     this section with respect to an individual shall include the 
     option of coverage of family members of the individual.
       (e) Limitation on Carriers.--A carrier may not require an 
     employer under a group health plan to impose or otherwise to 
     impose through a waiting period for health coverage under a 
     plan or similar requirement a limitation or condition on 
     health coverage or benefits based on the health status of an 
     individual, claims experience of an individual, receipt of 
     health care by an individual, medical history of an 
     individual, receipt of public subsidies by an individual, or 
     lack of evidence of insurability of an individual.

     SEC. 1002. GUARANTEED ISSUE BY CARRIERS.

       (a) In General.--Subject to subsections (b) and (c) and 
     section 1003, each carrier that offers health insurance 
     coverage in the individual and small group market in a 
     service area--
       (1) must accept every small employer in the service area 
     that applies for such coverage during an enrollment period 
     provided under section 1005; and
       (2) must accept for enrollment under such coverage every 
     qualifying individual (and family member of such an 
     individual) who applies for enrollment during an enrollment 
     period provided under section 1005 and may not place any 
     restriction on the eligibility of an individual to enroll so 
     long as such individual is a qualifying individual.
       (b) Special Rules for Managed Care Arrangements.--In the 
     case of coverage offered by an carrier or under a group 
     health plan that provides benefits through a managed care 
     arrangement, the carrier or plan may--
       (1) limit the employers that may apply for such coverage to 
     those with qualifying individuals residing in the service 
     area in which the coverage is provided;
       (2) limit the individuals who may be enrolled under such 
     coverage to those who reside in such service area; and
       (3) within such service area, deny such coverage to such 
     employers or individuals if the organization demonstrates to 
     the applicable regulatory authority that--
       (A) it will not have the capacity to deliver services 
     adequately to enrollees of any additional groups or 
     additional enrollees because of its obligations to existing 
     group contract holders and enrollees, and
       (B) it is applying this paragraph uniformly to all 
     employers and individuals without regard to the health 
     status, claims experience, or duration of coverage of those 
     employers and their employees.
       (c) Special Rule for Financial Capacity Limits.--In the 
     case of coverage offered by any carrier, the carrier may deny 
     coverage to a small employer or individual if the carrier 
     demonstrates to the applicable regulatory authority that--
       (1) it does not have the financial reserves necessary to 
     underwrite additional coverage, and
       (2) it is applying this subsection uniformly to all 
     employers and individuals without regard to the health 
     status, claims experience, or duration of coverage of those 
     employers and their employees.

     SEC. 1003. GUARANTEED RENEWAL.

       (a) Limitation on Termination by Carriers.--Subject to 
     subsection (c), a carrier may deny, cancel, or not renew 
     health coverage of a qualifying individual or eligible 
     employer only on the basis of--
       (1) nonpayment of premiums,
       (2) fraud or misrepresentation, or
       (3) subject to subsection (b), because the carrier is 
     ceasing to provide any health insurance coverage in the 
     individual and small group markets a State, or, in the case 
     of a health maintenance organization, in a geographic area.
       (b) Limitations on Market Exit by Carriers.--
       (1) Notice, etc.--Subsection (a)(3) shall not apply to a 
     carrier ceasing to provide health insurance coverage unless--
       (A) such termination of coverage takes effect at the end of 
     a contract year, and
       (B) the carrier provides notice of such termination to 
     employers and individuals covered at least 30 days before the 
     date of an annual open enrollment period established with 
     respect to the employer or individual under section 1005
       (3) Limitation on reentry in individual and small group 
     market.--If a carrier ceases to offer or provide health 
     insurance coverage in an area with respect to the individual 
     or small group market, the insurer may not offer such health 
     insurance coverage in the area in such market until 5 years 
     after the date of the termination.
       (c) Rule for Multiemployer Plans.--A multiemployer plan and 
     a certified multiple employer health plan may not cancel 
     coverage or deny renewal of coverage under such a plan with 
     respect to an employer other than--
       (1) for nonpayment of contributions,
       (2) for fraud or other misrepresentation by the employer, 
     or
       (3) because the plan is ceasing to provide any coverage in 
     a geographic area.

     SEC. 1004. PROHIBITING PREEXISTING CONDITION EXCLUSIONS.

       (a) In General.--Except as provided in this section, a 
     carrier or group health plan providing qualified health 
     coverage may not exclude health coverage with respect to 
     services related to treatment of a condition based on the 
     fact that the condition existed before the effective date of 
     coverage of the individual.
       (b) Limitation on Duration of Exclusion to6 Months; 
     Crediting of Previous Coverage.--
       (1) In general.--Subject to paragraph (2), the period of an 
     exclusion under subsection (a) may not exceed 6 months 
     beginning on the date of coverage.
       (2) Crediting of previous coverage.--A carrier or group 
     health plan providing qualified health coverage shall provide 
     that if a covered individual is in a period of continuous 
     coverage (as defined in paragraph (4)) as of the date of 
     initial coverage, any period of exclusion of coverage with 
     respect to a preexisting condition (as defined in paragraph 
     (3)) for such services or type of services shall be reduced 
     by 1 month for each month in the period of continuous 
     coverage.
       (3) Preexisting condition defined.--In this subsection, the 
     term ``preexisting condition'' means, with respect to health 
     coverage, a condition which has been diagnosed or treated 
     during the 3-month period ending on the day before the first 
     date of such coverage (without regard to any waiting period).
       (4) Period of continuous coverage.--In this subsection, 
     subject to paragraphs (5) and (6), the term ``period of 
     continuous coverage'' means the period beginning on the date 
     an individual has health coverage (or coverage under a public 
     plan providing medical benefits) and ends on the date the 
     individual does not have such coverage for a continuous 
     period of more than 3 months.
       (5) Exceptions for children.--A child who is covered at the 
     time of birth or adoption is considered to be in a period of 
     continuous coverage as of the date of birth or adoption.
       (6) Transitional amnesty at time of initial enrollment.--
     For purposes of this paragraph, each individual who--
       (A) has health coverage as of the first day of an amnesty 
     period described in section 1105(a)(1) shall be considered to 
     have had a period of continuous coverage during the previous 
     6 months, or
       (B) does not have health coverage as of the first day of 
     such an amnesty period but obtains such coverage during the 
     period, shall be considered to have had a period of 
     continuous coverage during the 6 months preceding the 
     effective date of the coverage.
       (c) Exclusion Not Applicable to Pregnancy.--The exclusion 
     of coverage shall not apply if the exclusion relates to 
     pregnancy.
       (d) Application of Rules by Certain Health Maintenance 
     Organizations.--A health maintenance organization that 
     provides health insurance coverage shall not be considered as 
     failing to meet the requirements of section 1301 of the 
     Public Health Service Act notwithstanding that it provides 
     for an exclusion of the coverage based on a preexisting 
     condition consistent with the provisions of this part so long 
     as such exclusion is applied consistent with the provisions 
     of this part.

     SEC. 1005. ASSURING CHOICE OF COVERAGE THROUGH OPEN 
                   ENROLLMENT.

       (a) Open Enrollment Periods.--
       (1) Amnesty periods.--
       (A) Initial period.--There shall be an initial amnesty and 
     open enrollment period, with respect to individuals who are 
     residents of a State, during the 60-day period beginning on 
     January 1, 1997.
       (B) Continuous open enrollment for fully subsidized 
     individuals.--There shall be an individual amnesty and 
     continuous open enrollment period, with respect to an 
     individual at any time the individual is eligible for the 
     full amount of the premium assistance under part A of title 
     XXI of the Social Security Act and does not have qualified 
     health coverage.
       (C) Newly eligible for subsidies.--There shall be an 
     individual amnesty and open enrollment period, with respect 
     to an individual not described in subparagraph (B) at the 
     time the individual first becomes eligible for premium 
     assistance under part A of title XXI of the Social Security 
     Act, during the 60-day period beginning on the first date the 
     individual becomes so eligible.
       (2) Other open enrollment periods.--Each carrier and each 
     group health plan providing health coverage (and each health 
     plan purchasing organization under subtitle A of title V) in 
     the individual and small group market shall provide for at 
     least one period (of not less than 30 days) each year during 
     which qualifying individuals and eligible employers may 
     obtain qualified health coverage from the carrier or group. 
     Such period shall be in addition to the amnesty periods under 
     paragraph (1).
       (b) Special Enrollment Periods.--
       (1) Newly eligible in an area.--For each qualifying 
     individual, at the time the individual moves outside the 
     service area of coverage provided by a carrier to the 
     individual, there shall be an open enrollment period (of not 
     less than 30 days) during which the individual may enroll in 
     health insurance coverage.
       (2) Family or employment changes.--In the case of a 
     qualifying individual who--
       (A) through marriage, divorce, birth or adoption of a 
     child, or similar circumstances, experience a change in 
     family composition, or
       (B) experience a change in employment status (including a 
     significant change in the terms and conditions of employment 
     or the terms and conditions of employment of a spouse),
     the individual shall have a period (of at least 30 days) in 
     which the individual is permitted to change the individual or 
     family basis of coverage or the health coverage in which the 
     individual is enrolled. The circumstances under which such 
     special enrollment periods are required and the duration of 
     such periods shall be specified by the Secretary.
       (3) Enrollment due to loss of previous coverage.--In the 
     case of a qualifying individual who--
       (A) had health coverage at the time of the individual's 
     initial enrollment period,
       (B) stated at the time of the initial enrollment period 
     that having other health coverage was the reason for 
     declining enrollment, and
       (C) lost the other health coverage as a result of the 
     termination of the coverage, termination or reduction of 
     employment, or other reason, except termination at the option 
     of the individual,
     there shall be a special enrollment period during the 30-day 
     period beginning on the date of termination of the other 
     coverage.
       (4) Exception for court orders.--If a court has ordered 
     that coverage be provided for a spouse or child of an 
     employee under a covered employee's group health plan, there 
     shall be a special enrollment period during the 30-day period 
     beginning on the date of issuance of the court order.
       (5) Enrollment of family members.--There shall be an open 
     enrollment period with respect to family members of an 
     individual (including children of a spouse) during the 30-day 
     period beginning on the date of the marriage or of the date 
     of the birth or adoption of a child, if family coverage is 
     available as of such date.
       (c) Period of Coverage.--
       (1) Open enrollment periods.--In the case of a qualifying 
     individual who enrolls under health coverage during a general 
     enrollment period under subsection (a), the coverage shall 
     begin on the first day of the first month beginning at least 
     15 days after the end of such period.
       (2) Special enrollment periods.--
       (A) In general.--In the case of a qualifying individual who 
     enrolls under health coverage during a special enrollment 
     period under subsection (b), coverage shall begin on such 
     date (not later than the first day of the first month that 
     begins at least 15 days after the date of enrollment) as the 
     Secretary shall specify, consistent with this paragraph.
       (B) Coverage of family members.--The Secretary shall 
     provide for coverage of family members to begin as soon as 
     possible on or after the date of the event that gives rise to 
     the special enrollment period (or, in the case of birth or 
     adoption, as of the date of birth or adoption).

                     PART 2--PROVISION OF BENEFITS

     SEC. 1011. STANDARDS FOR MANAGED CARE ARRANGEMENTS.

       (a) Application of Requirements.--Each group health plan, 
     and each carrier providing health insurance coverage, that 
     provides for health care through a managed care arrangement 
     (as defined in section 1903) shall comply with the applicable 
     requirements of this section.
       (b) Scope of Arrangements With Providers.--
       (1) Access to care.--The entity providing for a managed 
     care arrangement with respect to health coverage shall enter 
     into such agreements with health care providers (including 
     primary and specialty providers, such as providers for 
     children) or have such other arrangements as may be necessary 
     to assure that covered individuals have reasonably prompt 
     access through the entity's provider network to all items and 
     services contained in the package of benefits for which 
     coverage is provided (including access to emergency services 
     on a 24-hour basis where medically necessary), in a manner 
     that assures the continuity of the provision of such items 
     and services. Such access shall take into account the diverse 
     needs of enrollees and proximity to the workplaces or 
     residences of enrollees.
       (2) Access to centers of excellence.--
       (A) In general.--The entity providing for a managed care 
     arrangement under health coverage shall demonstrate that 
     covered individuals (including individuals with chronic 
     diseases) have access through the entity's provider network 
     to specialized treatment expertise. Such entity may 
     demonstrate such access through contracts with centers of 
     excellence described in subparagraph (B).
       (B) Designation of centers of excellence.--The Secretary 
     shall establish a process for the designation of facilities, 
     including children's hospitals and other pediatric 
     facilities, as centers of excellence for purposes of this 
     paragraph. A facility may not be designated unless the 
     facility is determined--
       (i) to provide specialty care,
       (ii) to deliver care for complex cases requiring 
     specialized treatment and for individuals with chronic 
     diseases, and
       (iii) to meet other requirements that may be established by 
     the Secretary relating to specialized education and training 
     of health professionals, participation in peer-reviewed 
     research, or treatment of patients from outside the 
     geographic area of the facility.
       (3) Choice of personal physician.--The entity providing for 
     a managed care arrangement under health coverage shall permit 
     each enrollee to choose a personal physician from among 
     participating physicians and change that selection as 
     appropriate.
       (c) Provision of Emergency Care Services.--
       (1) In general.--The entity providing for a managed care 
     arrangement under health coverage must cover medically 
     necessary emergency care services provided to covered 
     individuals (including trauma services, such as those 
     provided by designated trauma centers), without regard to 
     whether or not the provider furnishing such services has a 
     contractual (or other) arrangement with the entity to provide 
     items or services to covered individuals and, in the case of 
     services furnished for the treatment of an emergency medical 
     condition (as defined in section 1867(e)(1) of the Social 
     Security Act), without regard to prior authorization.
       (2) Designated trauma centers defined.--In paragraph (1), 
     the term ``designated trauma center''--
       (A) has the meaning given such term in section 1231 of the 
     Public Health Service Act, and
       (B) includes (for years prior to 2001) a trauma center 
     that--
       (i) is located in a State that has not designated trauma 
     centers under section 1213 of such Act, and
       (ii) the Secretary finds meets the standards under such 
     section to be a designated trauma center.
       (d) Due Process Standards Relating to Provider Networks.--
       (1) Standards for selection of providers for network.--
       (A) Establishment.--The entity providing for a managed care 
     arrangement under health coverage shall establish standards 
     (including competitive criteria for quality, efficiency, 
     credentialing, and services) to be used by the entity for 
     contracting with health care providers with respect to the 
     entity's provider network. Such standards shall be 
     established in consultation with providers who are members of 
     the network.
       (B) Distribution of information.--Descriptive information 
     regarding these standards and criteria shall be made 
     available to enrollees, providers who are members of the 
     network, and prospective enrollees and prospective 
     participating providers, including notice of when 
     applications for participation will be accepted.
       (C) Notice of denials.--The entity shall provide written 
     notice of any denial of an application to participate in the 
     provider network.
       (2) Notice requirement.--
       (A) In general.--The entity may not terminate or refuse to 
     renew an agreement with a provider to participate in the 
     entity's provider network unless the entity provides written 
     notification to the provider of the entity's decision to 
     terminate or refuse to renew the agreement. The notification 
     shall include a statement of the reasons for the entity's 
     decision, consistent with the standards established under 
     paragraph (1).
       (B) Timing of notification.--The entity shall provide the 
     notification required under subparagraph (A) at least 45 days 
     prior to prior to the effective date of the termination or 
     expiration of the agreement (whichever is applicable). The 
     previous sentence shall not apply if failure to terminate the 
     agreement prior to the deadline would adversely affect the 
     health or safety of a covered individual.
       (3) Review process.--
       (A) In general.--The entity shall provide a process under 
     which the provider may request a review of the entity's 
     decision to terminate or refuse to renew the provider's 
     participation agreement. Such review shall be conducted by a 
     group of individuals the majority of whom are health care 
     providers who are members of the entity's provider network or 
     employees of the entity, and who are members of the same 
     profession as the provider who requests the review.
       (B) Counsel.--If the provider requests in advance, the 
     entity shall permit an attorney representing the provider to 
     be present at the provider's review.
       (C) Review advisory.--The findings and conclusions of a 
     review under this paragraph shall be advisory and non-
     binding.
       (4) Advisory committee.--The entity shall establish an 
     advisory committee of participating physicians with whom it 
     consults, on an advisory basis, on the termination of 
     physicians who have been participating in the provider 
     network. In making recommendations to the entity, such an 
     advisory committee may consider such features of the 
     physician's practice, relating to case mix and age of 
     patients, as may lead the physician to have higher than 
     expected treatment costs for the patients of the physician 
     who are enrollees.
       (5) Construction.--Nothing in this subsection shall be 
     construed to affect any other provision of law that provides 
     an appeals process or other form of relief to a provider of 
     health care services.
       (e) Reference to Preemption of State Laws Restricting 
     Utilization Review Programs.--For preemption of States laws 
     restricting utilization review programs, see section 5103.

     SEC. 1012. UTILIZATION REVIEW.

       (a) Requiring Review to Meet Standards.--A group health 
     plan or insurer providing health insurance coverage may not 
     deny coverage of or payment for items and services on the 
     basis of a utilization review program unless the program 
     meets the standards established by the Secretary under this 
     section.
       (b) Establishment of Standards by Secretary.--The Secretary 
     shall establish standards for utilization review programs, 
     consistent with subsection (b), and shall periodically review 
     and update such standards to reflect changes in the delivery 
     of health care services. The Secretary shall establish such 
     standards in consultation with appropriate parties.
       (c) Requirements for Standards.--Under the standards 
     established under subsection (a)--
       (1) individuals performing utilization review may not 
     receive financial compensation based upon the number of 
     denials of coverage;
       (2) negative determinations of the medical necessity or 
     appropriateness of services or the site at which services are 
     furnished may be made only by clinically qualified personnel;
       (3) the utilization review program shall provide for a 
     process under which an enrollee or provider may obtain timely 
     review of a denial of coverage, including upon request a 
     review conducted by the medical director of the carrier or 
     plan or a physician designated by the carrier or plan;
       (4) utilization review shall be conducted in accordance 
     with uniformly applied standards that are based on currently 
     available medical evidence; and
       (5) providers shall participate in the development of the 
     utilization review program.
       (d) Preemption.--For provision preempting State laws 
     relating to utilization review, see subtitle B of title V.

     SEC. 1013. REQUIREMENTS FOR ARRANGEMENTS WITH ESSENTIAL 
                   COMMUNITY PROVIDERS.

       (a) Requirement.--
       (1) In general.--Subject to subsection (d), each group 
     health plan and each carrier providing qualified health 
     coverage shall, with respect to at least one essential 
     community provider (as defined in subsection (c)) within each 
     class of such a provider (as described in paragraph (2)) 
     located within the service area with respect to the plan or 
     coverage, enter into a written provider participation 
     agreement (described in subsection (b)) with the provider.
       (2) Class defined.--For purposes of the paragraph (1), 
     providers described in each paragraph of subsection (c) shall 
     constitute a separate ``class'' of providers.
       (b) Participation Agreement.--A participation agreement 
     between a group health plan or carrier and an essential 
     community provider under this subsection shall provide that 
     the plan or carrier agrees to treat the provider in 
     accordance with terms and conditions at least as favorable as 
     those that are applicable to other providers with a 
     participation agreement with the plan or carrier with respect 
     to the scope of services for which payment is made by the 
     plan or carrier to the provider.
       (c) Essential Community Providers Described.--In this 
     section, an ``essential community provider'' means any of the 
     following:
       (1) Certain medicare disproportionate share hospitals.--A 
     hospital--
       (A) described in section 1886(d)(5)(F)(i)(II) of the Social 
     Security Act;
       (B) described in section 1886(d)(5)(F)(iv)(I) of such Act 
     with a disproportionate patient percentage (as defined in 
     section 1886(d)(5)(F)(vi) of such Act) greater than 20.2; or
       (C) that would be described in subparagraph (A) or (B) if--
       (i) the hospital were a subsection (d) hospital (as defined 
     in section 1886(d)(1)(B) of such Act), or
       (ii) in the case of a hospital whose inpatients are 
     predominantly individuals under 18 years of age, if the 
     hospital were a subsection (d) hospital with more than 100 
     beds.
       (2) Sole community hospitals.--A sole community hospital 
     (as described in section 1886(d)(5)(D)(iii) of such Act).
       (3) Medicare-dependent, small rural hospitals.--A medicare-
     dependent, small rural hospital (as described in section 
     1886(d)(5)(G)(iii) of such Act), or a hospital that would be 
     a medicare-dependent, small rural hospital if the hospital 
     were a subsection (d) hospital (as defined in section 
     1886(d)(1)(B) of such Act).
       (4) Federally qualified health centers.--A Federally 
     qualified health center (as defined in section 1861(aa)(4) of 
     the Social Security Act) or an entity that would be such a 
     center but for its failure to meet the requirement described 
     in section 329(f)(2)(G)(i) of the Public Health Service Act 
     or the requirement described in section 330(e)(3)(G)(i) of 
     such Act (relating to the composition of the entity's 
     governing board).
       (5) Rural health clinics.--A rural health clinic (as 
     defined in section 1861(aa)(2) of the Social Security Act).
       (6) Local health departments.--A health department of a 
     unit of State or local government which provides health 
     services directly to individuals.
       (d) Sunset.--The requirement of subsection (a) shall not 
     apply to health coverage provided after December 31, 1999.

     SEC. 1014. MEDICAL SAVINGS ACCOUNTS.

       (a) In General.--Chapter 79 of the Internal Revenue Code of 
     1986 is amended by adding at the end the following new 
     section:

     ``SEC. 7705. MEDICAL SAVINGS ACCOUNTS.

       ``(a) General Rule.--For purposes of this title, the term 
     `medical savings account' means a trust created or organized 
     in the United States for the exclusive benefit of an 
     individual or his beneficiaries, but only if the written 
     instrument creating the trust meets the following 
     requirements:
       ``(1) Except in the case of a rollover contribution 
     described in subsection (d)(3), no contribution will be 
     accepted unless--
       ``(A) it is in cash, and
       ``(B) such individual is an eligible employee for the 
     period for which such contribution is made.
       ``(2) The trustee is a bank (as defined in section 408(n)), 
     insurance company (as defined in section 816), or such other 
     person who demonstrates to the satisfaction of the Secretary 
     that the manner in which such other person will administer 
     the trust will be consistent with the requirements of this 
     section.
       ``(3) No part of the trust funds will be invested in life 
     insurance contracts.
       ``(4) The interest of an individual in the balance of the 
     account is nonforfeitable.
       ``(5) The assets of the trust will not be commingled with 
     other property except in a common trust fund or common 
     investment fund.
       ``(b) Eligible Employee.--For purposes of this section--
       ``(1) In general.--The term `eligible employee' means any 
     employee who has high-deductible coverage (as defined in 
     section 1103 of the Bipartisan Health Care Reform Act of 
     1994) offered by the employer.
       ``(2) Exception.--An employee shall be treated as not being 
     an eligible employee for any calendar year if, for any month 
     during such year, it is reasonably expected that such 
     employee--
       ``(A) will have adjusted gross income that is less than 100 
     percent of the income official poverty line (as determined by 
     the Director of the Office of Management and Budget) for a 
     family of the size involved; or
       ``(B) is an AFDC recipient or SSI recipient.
       ``(3) Definitions.--For purposes of paragraph (2)--
       ``(A) AFDC recipient.--The term `AFDC recipient' means, for 
     a month, an individual who is receiving aid or assistance 
     under any plan of the State approved under title I, X, XIV, 
     or XVI, or part A or part E of title IV, of the Social 
     Security Act for the month.
       ``(B) SSI recipient.--The term `SSI recipient' means, for a 
     month, an individual--
       ``(i) with respect to whom supplemental security income 
     benefits are being paid under title XVI of the Social 
     Security Act for the month,
       ``(ii) who is receiving a supplementary payment under 
     section 1616 of such Act or under section 212 of Public Law 
     93-66 for the month,
       ``(iii) who is receiving monthly benefits under section 
     1619(a) of the Social Security Act (whether or not pursuant 
     to section 1616(c)(3) of such Act) for the month, or
       ``(iv) who is treated under section 1619(b) of the Social 
     Security Act as receiving supplemental security income 
     benefits in a month for purposes of title XIX of such Act.
       ``(c) Tax Treatment of Accounts.--
       ``(1) Account taxed as grantor trust.--
       ``(A) In general.--Except as provided in subparagraph (B), 
     the account beneficiary of a medical savings account shall be 
     treated for purposes of this title as the owner of such 
     account and shall be subject to tax thereon in accordance 
     with subpart E of part I of subchapter J of this chapter 
     (relating to grantors and others treated as substantial 
     owners).
       ``(B) Treatment of capital losses.--With respect to assets 
     held in a medical savings account, any capital loss for a 
     taxable year from the sale or exchange of such an asset shall 
     be allowed only to the extent of capital gains from such 
     assets for such taxable year. Any capital loss which is 
     disallowed under the preceding sentence shall be treated as a 
     capital loss from the sale or exchange of such an asset in 
     the next taxable year. For purposes of this subparagraph, all 
     medical savings accounts of the account beneficiary shall be 
     treated as 1 account.
       ``(2) Account terminates if individual engages in 
     prohibited transaction.--
       ``(A) In general.--If, during any taxable year of the 
     account beneficiary, such beneficiary engages in any 
     transaction prohibited by section 4975 with respect to the 
     account, the account shall cease to be a medical savings 
     account as of the first day of such taxable year.
       ``(B) Account treated as distributing all its assets.--In 
     any case in which any account ceases to be a medical savings 
     account by reason of subparagraph (A) on the first day of any 
     taxable year, subsection (d) shall be applied as if--
       ``(i) there were a distribution on such first day in an 
     amount equal to the fair market value (on such first day) of 
     all assets in the account (on such first day), and
       ``(ii) no portion of such distribution were used to pay 
     qualified medical expenses.
       ``(3) Effect of pledging account as security.--If, during 
     any taxable year, the account beneficiary uses the account or 
     any portion thereof as security for a loan, the portion so 
     used is treated as distributed and not used to pay qualified 
     medical expenses.
       ``(d) Tax Treatment of Distributions.--
       ``(1) Inclusion of amounts not used for qualified medical 
     expenses.--
       ``(A) In general.--Any amount paid or distributed out of a 
     medical savings account which is not used exclusively to pay 
     the qualified medical expenses of the account beneficiary or 
     of the spouse or dependents (as defined in section 152) of 
     such beneficiary shall be included in the gross income of 
     such beneficiary to the extent such amount does not exceed 
     the excess of--
       ``(i) the aggregate contributions to such account which 
     were not includible in gross income by reason of section 
     106(2), over
       ``(ii) the aggregate prior payments or distributions from 
     such account which were includible in gross income under this 
     paragraph.
       ``(B) Special rules.--For purposes of subparagraph (A)--
       ``(i) all medical savings accounts of the account 
     beneficiary shall be treated as 1 account,
       ``(ii) all payments and distributions during any taxable 
     year shall be treated as 1 distribution, and
       ``(iii) any distribution of property shall be taken into 
     account at its fair market value on the date of the 
     distribution.
       ``(2) Penalty for distributions not used for qualified 
     medical expenses.--
       ``(A) In general.--The tax imposed by chapter 1 on the 
     account beneficiary for any taxable year in which there is a 
     payment or distribution from a medical savings account of 
     such beneficiary which is includible in gross income under 
     paragraph (1) shall be increased by 100 percent of the amount 
     which is so includible.
       ``(B) Exception for distributions after age 65.--
     Subparagraph (A) shall not apply to any payment or 
     distribution after the date on which the account beneficiary 
     attains age 65.
       ``(C) Exception for disability or death.--Subparagraph (A) 
     shall not apply if the payment or distribution is made after 
     the account beneficiary becomes disabled within the meaning 
     of section 72(m)(7) or dies.
       ``(3) Rollover contribution.--An amount is described in 
     this paragraph as a rollover contribution if it meets the 
     requirements of subparagraphs (A) and (B).
       ``(A) In general.--Paragraph (1) shall not apply to any 
     amount paid or distributed from a medical savings account to 
     the account beneficiary to the extent the amount received is 
     paid into a medical savings account for the benefit of such 
     beneficiary not later than the 60th day after the day on 
     which he receives the payment or distribution.
       ``(B) Limitation.--This paragraph shall not apply to any 
     amount described in subparagraph (A) received by an 
     individual from a medical savings account if, at any time 
     during the 1-year period ending on the day of such receipt, 
     such individual received any other amount described in 
     subparagraph (A) from a medical savings account which was not 
     includible in his gross income because of the application of 
     this paragraph.
       ``(4) Coordination with medical expense deduction.--For 
     purposes of section 213, any payment or distribution out of a 
     medical savings account for qualified medical expenses shall 
     not be treated as an expense paid for medical care to the 
     extent of the amount of such payment or distribution which is 
     excludable from gross income solely by reason of paragraph 
     (1)(A).
       ``(e) Definitions.--For purposes of this section--
       ``(1) Qualified medical expenses.--The term `qualified 
     medical expenses' means any expense for medical care (as 
     defined in section 213(d)); except that such term shall not 
     include any amount paid for insurance.
       ``(2) Account beneficiary.--The term `account beneficiary' 
     means the individual for whose benefit the medical savings 
     account is maintained.
       ``(f) Custodial Accounts.--For purposes of this section, a 
     custodial account shall be treated as a trust if--
       ``(1) the assets of such account are held by a bank (as 
     defined in section 408(n)), insurance company (as defined in 
     section 816), or another person who demonstrates to the 
     satisfaction of the Secretary that the manner in which he 
     will administer the account will be consistent with the 
     requirements of this section, and
       ``(2) the custodial account would, except for the fact that 
     it is not a trust, constitute a medical savings account 
     described in subsection (a).
     For purposes of this title, in the case of a custodial 
     account treated as a trust by reason of the preceding 
     sentence, the custodian of such account shall be treated as 
     the trustee thereof.
       ``(g) Reports.--The trustee of a medical savings account 
     shall keep such records and make such reports regarding such 
     account to the Secretary and to the account beneficiary with 
     respect to contributions, distributions, and such other 
     matters as the Secretary may require under regulations. The 
     reports required by this subsection shall be filed at such 
     time and in such manner and furnished to such individuals at 
     such time and in such manner as may be required by such 
     regulations.''
       (b) Income and Employment Tax Treatment of Employer 
     Contributions.--
       (1) Employer payments excluded from gross income.--The text 
     of section 106 of such Code is amended to read as follows:
       ``Gross income of an employee does not include--
       ``(1) employer-provided coverage under an accident or 
     health plan, and
       ``(2) employer contributions to any medical savings account 
     (as defined in section 7705) of an eligible employee, but 
     only to the extent that the amount contributed does not 
     exceed the excess of premium for standard coverage over the 
     premium for high-deductible coverage (as such terms are 
     defined in section 1903 of the Bipartisan Health Care Reform 
     Act of 1994).''
       (2) Employer payments excluded from employment tax base.--
       (A) Social security taxes.--
       (i) Subsection (a) of section 3121 of such Code is amended 
     by striking ``or'' at the end of paragraph (20), by striking 
     the period at the end of paragraph (21) and inserting ``; 
     or'', and by inserting after paragraph (21) the following new 
     paragraph:
       ``(22) any payment made to or for the benefit of an 
     employee if at the time of such payment it is reasonable to 
     believe that the employee will be able to exclude such 
     payment from income under section 106(2).''
       (ii) Subsection (a) of section 209 of the Social Security 
     Act is amended by striking ``or'' at the end of paragraph 
     (18), by striking the period at the end of paragraph (19) and 
     inserting ``; or'', and by inserting after paragraph (19) the 
     following new paragraph:
       ``(20) any payment made to or for the benefit of an 
     employee if at the time of such payment it is reasonable to 
     believe that the employee will be able to exclude such 
     payment from income under section 106(2) of the Internal 
     Revenue Code of 1986.''
       (B) Railroad retirement tax.--Subsection (e) of section 
     3231 of such Code is amended by adding at the end the 
     following new paragraph:
       ``(10) medical savings account contributions.--The term 
     `compensation' shall not include any payment made to or for 
     the benefit of an employee if at the time of such payment it 
     is reasonable to believe that the employee will be able to 
     exclude such payment from income under section 106(2).''
       (C) Unemployment tax.--Subsection (b) of section 3306 of 
     such Code is amended by striking ``or'' at the end of 
     paragraph (15), by striking the period at the end of 
     paragraph (16) and inserting ``; or'', and by inserting after 
     paragraph (16) the following new paragraph:
       ``(17) any payment made to or for the benefit of an 
     employee if at the time of such payment it is reasonable to 
     believe that the employee will be able to exclude such 
     payment from income under section 106(2).''
       (D) Withholding tax.--Subsection (a) of section 3401 of 
     such Code is amended by striking ``or'' at the end of 
     paragraph (19), by striking the period at the end of 
     paragraph (20) and inserting ``; or'', and by inserting after 
     paragraph (20) the following new paragraph:
       ``(21) any payment made to or for the benefit of an 
     employee if at the time of such payment it is reasonable to 
     believe that the employee will be able to exclude such 
     payment from income under section 106(2).''
       (c) Technical Amendments.--
       (1) Tax on prohibited transactions.--Section 4975 of such 
     Code (relating to prohibited transactions) is amended--
       (A) by adding at the end of subsection (c) the following 
     new paragraph:
       ``(4) Special rule for medical savings accounts.--An 
     individual for whose benefit a medical savings account 
     (within the meaning of section 7705) is established shall be 
     exempt from the tax imposed by this section with respect to 
     any transaction concerning such account (which would 
     otherwise be taxable under this section) if, with respect to 
     such transaction, the account ceases to be a medical savings 
     account by reason of the application of section 7705(c)(2)(A) 
     to such account.'', and
       (B) by inserting ``or a medical savings account described 
     in section 7705'' in subsection (e)(1) after ``described in 
     section 408(a)''.
       (2) Failure to provide reports on medical savings 
     accounts.--Section 6693 of such Code (relating to failure to 
     provide reports on individual retirement account or 
     annuities) is amended--
       (A) by inserting ``OR ON MEDICAL SAVINGS ACCOUNTS'' after 
     ``ANNUITIES'' in the heading of such section, and
       (B) by adding at the end of subsection (a) the following: 
     ``The person required by section 7705(g) to file a report 
     regarding a medical savings account at the time and in the 
     manner required by such section shall pay a penalty of $50 
     for each failure unless it is shown that such failure is due 
     to reasonable cause.''
       (3) Clerical Amendments.--
       (A) The table of sections for chapter 79 of such Code is 
     amended by adding at the end the following:

``Sec. 7705. Medical savings accounts.''

       (B) The table of sections for subchapter B of chapter 68 of 
     such Code is amended by inserting ``or on medical savings 
     accounts'' after ``annuities'' in the item relating to 
     section 6693.
       (d) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     1996.

                     PART 3--FAIR RATING PRACTICES

     SEC. 1021. USE OF FAIR RATING PRACTICES.

       (a) Use of Fair Rating Practices.--The premium rate 
     established by an carrier for health insurance coverage in 
     the individual and small group market may not vary within a 
     benefit design except by the following:
       (1) Age.--By age, based on classes of age established by a 
     the Secretary, in consultation with the NAIC, consistent with 
     subsection (b).
       (2) Geographic area.--By geographic area, as identified by 
     a State consistent with subsection (c).
       (3) Family size.--Family size, based on the following 4 
     classes of family coverage: individual, individual with one 
     or more children, married couple without children, and 
     married couple with children.
       (b) Limitation on Variation by Age.--
       (1) In general.--Any variation in premium rates by age 
     under subsection (a)(1) may not result in the ratio of the 
     highest age rate to the lowest age rate exceeding the 
     limiting ratio described in paragraph (2).
       (2) Limiting ratio.--For purposes of paragraph (1), the 
     limiting ratio described in this paragraph is--
       (A) 4-to-1, for premiums for months in 1997,
       (B) 3.67-to-1, for premiums for months in 1998,
       (C) 3.33-to-1, for premiums for months in 1999, and
       (D) 3-to-1, for premiums for months in 2000 and any 
     succeeding year.
       (3) Preemption.--For preemption of State laws relating to 
     establishment of premium rates, see section 5105.
       (c) Geographic Area Variations.--For purposes of subsection 
     (a)(2), a State--
       (1) may not identify an area that divides a 3-digit zip 
     code, a county or all portions of a metropolitan statistical 
     area within the State, and
       (2) may, upon agreement with one or more adjacent States, 
     identify multi-state geographic areas consistent with 
     paragraph (1).
       (d) Premium Rating in Group Health Plans.--The premium rate 
     established under a group health plan for health insurance 
     coverage may not vary within a benefit design except by the 
     factors described in subsection (a) and subject to the 
     limitation specified in subsection (b).
       (e) Actuarial Certification.--Each carrier that offers 
     health insurance coverage in a State shall file annually with 
     the State commissioner of insurance a written statement by a 
     member of the American Academy of Actuaries (or other 
     individual acceptable to the commissioner) that, based upon 
     an examination by the individual which includes a review of 
     the appropriate records and of the actuarial assumptions of 
     the insurer and methods used by the insurer in establishing 
     premium rates for applicable health insurance coverage--
       (1) the carrier is in compliance with the applicable 
     provisions of this section, and
       (2) the rating methods are actuarially sound.

     Each such carrier shall retain a copy of such statement for 
     examination at its principal place of business.

     SEC. 1022. COORDINATION WITH PREMIUM ASSISTANCE CERTIFICATE 
                   PROGRAM.

       Each carrier or group health plan providing qualified 
     health coverage shall accept and apply (as a reduction 
     against premiums otherwise imposed) any premium certificate 
     issued under a State premium assistance program under part A 
     of title XXI of the Social Security Act.

     SEC. 1023. ESTABLISHMENT OF RISK ADJUSTMENT MECHANISMS.

       (a) Establishment of Standards.--
       (1) Development of models.--
       (A) In general.--The Secretary shall request the NAIC to 
     develop, within 9 months after the date of the enactment of 
     this Act, one or more model risk adjustment systems (each in 
     this section referred to as a ``risk adjustment mechanism'') 
     under which premiums applicable to health insurance coverage 
     in the individual and small group market would be adjusted to 
     take into account such factors as may be appropriate to 
     predict the future need and use of services by covered 
     individuals in the market. Such factors may include the age, 
     gender, geographic residence, health status, socio-economic 
     status, or other demographic characteristics of individuals 
     enrolled in such plans.
       (B) Review and application.--If the NAIC develops such 
     models within such period, the Secretary shall review such 
     models to determine if they provide for an effective risk 
     adjustment mechanism. Such review shall be completed within 
     90 days after the date the models are developed. Unless the 
     Secretary determines within such period that such a model is 
     not an effective risk adjustment mechanism, such remaining 
     models shall serve as the models under this section, with 
     such amendments as the Secretary deems necessary.
       (2) Contingency.--If the NAIC does not develop such models 
     within such period or the Secretary determines that all such 
     models do not provide for an effective risk adjustment 
     mechanism, the Secretary shall specify, within 15 months 
     after the date of the enactment of this Act, models to carry 
     out this section.
       (b) Implementation of Risk Adjustment Mechanisms.--Each 
     State shall establish and maintain one or more risk 
     adjustment mechanisms that are consistent with a model 
     established under subsection (a) by not later than January 1, 
     1997. A State may establish and maintain such a mechanism 
     jointly with one or more other States.
       (c) Construction.--Nothing in this section shall be 
     construed to prohibit risk adjustment, reinsurance, or 
     allocation of risk arrangements relating to health insurance 
     coverage, whether on a State or multi-State basis, not 
     required under this section.

                      PART 4--CONSUMER PROTECTIONS

     SEC. 1031. REQUIREMENT FOR PROVISION OF INFORMATION.

       (a) Carriers.--Each carrier that offers health insurance 
     coverage to small employers (or eligible employees of small 
     employers) or qualifying individuals must disclose to such 
     prospective enrollees, to brokers, and to health plan 
     purchasing organizations the information that the Secretary 
     may specify relating to the performance of the carrier in 
     providing such coverage, consistent with any quality measures 
     established under section 4002.
       (b) Group Health Plans.--Each group health plan that 
     provides health coverage must disclose to enrollees and 
     potential enrollees information, similar to the information 
     described in subsection (a), relating to performance of the 
     plan in providing such coverage, consistent with any quality 
     measures established under section 4002.

     SEC. 1032. PROHIBITION OF IMPROPER INCENTIVES.

       (a) Limitation on Financial Incentives.--No carrier that 
     provides health insurance coverage may vary the commission or 
     financial or other remuneration to a person based on the 
     claims experience or health status of individuals enrolled by 
     or through the person.
       (b) Nondiscrimination in Agent Compensation.--A carrier--
       (1) may not vary or condition the compensation provided to 
     an agent or broker related to the sale or renewal of health 
     insurance coverage because of the health status or claims 
     experience of any individuals enrolled with the carrier 
     through the agent or broker; and
       (2) may not terminate, fail to renew, or limit its contract 
     or agreement of representation with an agent or broker for 
     any reason related to the health status or claims experience 
     of any individuals enrolled with the carrier through the 
     agent or broker.
       (c) Prohibition of Tie-in Arrangements.--No carrier that 
     offers health insurance coverage may require the purchase of 
     any other insurance or product as a condition for the 
     purchase of such coverage.

     SEC. 1033. WRITTEN POLICIES AND PROCEDURES RESPECTING ADVANCE 
                   DIRECTIVES.

       An insurer and a group health plan offering health coverage 
     shall meet the requirements of section 1866(f) of the Social 
     Security Act (relating to maintaining written policies and 
     procedures respecting advance directives), insofar as such 
     requirements would apply to the insurer or plan if the 
     insurer or plan were an eligible organization.

 PART 5--STANDARDS AND CERTIFICATION; ENFORCEMENT; PREEMPTION; GENERAL 
                               PROVISIONS

     SEC. 1051. ESTABLISHMENT OF STANDARDS.

       (a) Role of NAIC.--
       (1) In general.--The Secretary shall request the NAIC to 
     develop, within 9 months after the date of the enactment of 
     this Act, model regulations that specify standards with 
     respect the requirements of this subtitle.
       (2) Review of standards.--If the NAIC develops recommended 
     regulations specifying such standards within such period, the 
     Secretary shall review the standards. Such review shall be 
     completed within 60 days after the date the regulations are 
     developed. Unless the Secretary determines within such period 
     that the standards do not meet the requirements, such 
     standards shall serve as the standards under this part, with 
     such amendments as the Secretary deems necessary.
       (b) Contingency.--If the NAIC does not develop such model 
     regulations within such period or the Secretary determines 
     that such regulations do not specify standards that meet the 
     requirements described in subsection (a), the Secretary shall 
     specify, within 15 months after the date of the enactment of 
     this Act, standards to carry out those requirements.

     SEC. 1052. APPLICATION OF STANDARDS TO CARRIERS THROUGH 
                   STATES.

       (a) Application of Standards.--
       (1) In general.--Each State shall submit to the Secretary, 
     by the deadline specified in paragraph (2), a report on steps 
     the State is taking to implement and enforce the standards 
     established under section 1051 with respect to carriers and 
     health insurance coverage offered not later than such 
     deadline.
       (2) Deadline for report.--The deadline under this paragraph 
     is 1 year after the date the standards are established under 
     section 1051.
       (b) Federal Role.--
       (1) Notice of deficiency.--If the Secretary determines that 
     a State has failed to submit a report by the deadline 
     specified under subsection (a) or finds that the State has 
     not implemented and provided adequate enforcement of the 
     standards under such subsection, the Secretary shall notify 
     the State and provide the State a period of 60 days in which 
     to submit such report or to implement and enforce such 
     standards under such subsection.
       (2) Implementation of alternative.--
       (A) In general.--If, after such 60-day period, the 
     Secretary finds that such a failure has not been corrected, 
     the Secretary shall provide for such mechanism for the 
     implementation and enforcement of such standards in the State 
     as the Secretary determines to be appropriate.
       (B) Effective period.--Such implementation and enforcement 
     shall take effect with respect to carriers, and health 
     insurance coverage offered or renewed, on or after 3 months 
     after the date of the Secretary's finding under the previous 
     sentence, and until the date the Secretary finds that such a 
     failure has been corrected.

     SEC. 1053. APPLICATION TO GROUP HEALTH PLANS.

       (a) In General.--Subject to subsection (b), section 1051 
     and 1052 shall apply to group health plans providing health 
     coverage in the same manner as they apply to carriers 
     providing health insurance coverage.
       (b) Substitution of Federal Officials.--For purposes of 
     subsection (a), any reference in section 1051 or 1052 to--
       (1) a State or the Secretary of Health and Human Services 
     is deemed a reference to the Secretary of Labor, and
       (2) any reference to a carrier or health insurance coverage 
     is deemed a reference to a group health plan and health 
     coverage, respectively.

     SEC. 1054. ENFORCEMENT.

       (a) Enforcement by Department of Labor for Employers and 
     Group Health Plans.--
       (1) In general.--For purposes of part 5 of subtitle B of 
     title I of the Employee Retirement Income Security Act of 
     1974, the provisions of this title insofar as they relate to 
     group health plans or employers shall be deemed to be 
     provisions of title I of such Act irrespective of exclusions 
     under section 4(b) of such Act.
       (2) Regulatory authority.--With respect to the regulatory 
     authority of the Secretary of Labor under this subtitle 
     pursuant to paragraph (1), section 505 of the Employee 
     Retirement Income Security Act of 1974 (29 U.S.C. 1135) shall 
     apply.
       (b) Enforcement by Excise Tax for Carriers.--
       (1) In general.--Chapter 43 of the Internal Revenue Code of 
     1986 (relating to qualified pension, etc., plans) is amended 
     by adding at the end thereof the following new section:

     ``SEC. 4980C. FAILURE OF CARRIER TO COMPLY WITH HEALTH 
                   INSURANCE STANDARDS.

       ``(a) Imposition of Tax.--
       ``(1) In general.--There is hereby imposed a tax on the 
     failure of an insurer to comply with the requirements 
     applicable to the insurer under parts 1 through 4 of subtitle 
     A and subtitle B of title I of the Bipartisan Health Care 
     Reform Act of 1994.
       ``(2) Exception.--Paragraph (1) shall not apply to a 
     failure by a carrier in a State if the Secretary of Health 
     and Human Services determines that the State has in effect a 
     regulatory enforcement mechanism that provides adequate 
     sanctions with respect to such a failure by such an carrier.
       ``(b) Amount of Tax.--
       ``(1) In general.--Subject to paragraph (2), the amount of 
     the tax imposed by subsection (a) shall be $100 for each day 
     during which such failure persists for each individual to 
     which such failure relates. A rule similar to the rule of 
     section 4980B(b)(3) shall apply for purposes of this section.
       ``(2) Limitation.--The amount of the tax imposed by 
     subsection (a) for a carrier with respect to health insurance 
     coverage shall not exceed 25 percent of the amounts received 
     for such coverage during the period such failure persists.
       ``(c) Liability for Tax.--The tax imposed by this section 
     shall be paid by the carrier.
       ``(d) Exceptions.--
       ``(1) Corrections within 30 days.--No tax shall be imposed 
     by subsection (a) by reason of any failure if--
       ``(A) such failure was due to reasonable cause and not to 
     willful neglect, and
       ``(B) such failure is corrected within the 30-day period 
     beginning on the earliest date the insurer knew, or 
     exercising reasonable diligence would have known, that such 
     failure existed.
       ``(2) Waiver by secretary.--In the case of a failure which 
     is due to reasonable cause and not to willful neglect, the 
     Secretary may waive part or all of the tax imposed by 
     subsection (a) to the extent that payment of such tax would 
     be excessive relative to the failure involved.
       ``(e) Definitions.--For purposes of this section, the terms 
     `health insurance coverage' and `carrier' have the respective 
     meanings given such terms in section 1903 of the Bipartisan 
     Health Care Reform Act of 1994.''
       (2) Clerical amendment.--The table of sections for chapter 
     43 of such Code is amended by adding at the end thereof the 
     following new items:

``Sec. 4980C. Failure of carrier to comply with health insurance 
              standards.''

     SEC. 1055. LIMITATION ON SELF INSURANCE FOR SMALL EMPLOYERS.

       (a) In General.--A single employer plan (as defined in 
     section 1213 of the Employee Retirement Income Security Act 
     of 1974) may not offer health coverage other than through a 
     carrier unless the plan has at least 100 eligible employees.
       (b) Reference to Small Employer Pooling Arrangements.--For 
     provisions providing for small employer pooling arrangements, 
     see section 5011.

         PART 6--MULTIPLE EMPLOYER HEALTH BENEFITS PROTECTIONS

     SEC. 1071. LIMITED EXEMPTION FROM CERTAIN RESTRICTIONS ON 
                   ERISA PREEMPTION OF STATE LAW FOR HEALTH PLANS 
                   MAINTAINED BY MULTIPLE EMPLOYERS SUBJECT TO 
                   CERTAIN FEDERAL STANDARDS.

       (a) In General.--Subtitle B of title I of the Employee 
     Retirement Income Security Act of 1974 is amended by adding 
     at the end the following new part:

                ``Part 7--Multiple Employer Health Plans

     ``SEC. 701. DEFINITIONS.

       ``For purposes of this part--
       ``(1) Insurer.--The term `insurer' means an insurance 
     company, insurance service, or insurance organization, 
     licensed to engage in the business of insurance by a State.
       ``(2) Participating employer.--The term `participating 
     employer' means, in connection with a multiple employer 
     welfare arrangement, any employer if any of its employees, or 
     any of the dependents of its employees, are or were covered 
     under such arrangement in connection with the employment of 
     the employees.
       ``(3) Excess/stop loss coverage.--The term `excess/stop 
     loss coverage' means, in connection with a multiple employer 
     welfare arrangement, a contract under which an insurer 
     provides for payment with respect to claims under the 
     arrangement, relating to participants or beneficiaries 
     individually or otherwise, in excess of an amount or amounts 
     specified in such contract.
       ``(4) Qualified actuary.--The term `qualified actuary' 
     means an individual who is a member of the American Academy 
     of Actuaries or meets such reasonable standards and 
     qualifications as the Secretary may provide by regulation.
       ``(5) Sponsor.--The term `sponsor' means, in connection 
     with a multiple employer welfare arrangement, the association 
     or other entity which establishes or maintains the 
     arrangement.
       ``(6) State insurance commissioner.--The term `State 
     insurance commissioner' means the insurance commissioner (or 
     similar official) of a State.
       ``(7) Domicile state.--The term `domicile State' means, in 
     connection with a multiple employer welfare arrangement, the 
     State in which, according to the application for a 
     certification under this part, most individuals to be covered 
     under the arrangement are located, except that, in any case 
     in which information contained in the latest annual report of 
     the arrangement filed under this part indicates that most 
     individuals covered under the arrangement are located in a 
     different State, such term means such different State.
       ``(8) Fully insured.--Coverage under a multiple employer 
     welfare arrangement is `fully insured' if one or more 
     insurers, health maintenance organizations, similar 
     organizations regulated under State law for solvency, or any 
     combination thereof are liable under one or more insurance 
     policies or contracts for all benefits under the arrangement 
     (irrespective of any recourse they may have against other 
     parties).
       ``(9) Certified multiple employer health plan.--The term 
     `certified multiple employer health plan' means a multiple 
     employer welfare arrangement treated as an employee welfare 
     benefit plan by reason of certification under this part.

     ``SEC. 702. CERTIFIED MULTIPLE EMPLOYER HEALTH PLANS RELIEVED 
                   OF CERTAIN RESTRICTIONS ON PREEMPTION OF STATE 
                   LAW AND TREATED AS EMPLOYEE WELFARE BENEFIT 
                   PLANS.

       ``(a) In General.--Subject to subsection (b), a multiple 
     employer welfare arrangement under which coverage is not 
     fully insured and with respect to which there is in effect a 
     certification granted by the Secretary under this part (or 
     with respect to which there is pending a complete application 
     for such an certification and the Secretary determines that 
     provisional protection under this part is appropriate)--
       ``(1) shall be treated for purposes of subtitle A and the 
     preceding parts of this subtitle as an employee welfare 
     benefit plan, irrespective of whether such arrangement is an 
     employee welfare benefit plan, and
       ``(2) shall be exempt from section 514(b)(6)(A)(ii).
       ``(b) Benefits Must Consist of Medical Care.--Subsection 
     (a) shall apply to a multiple employer welfare arrangement 
     only if the benefits provided thereunder consist solely of 
     medical care described in section 607(1) (disregarding such 
     incidental benefits as the Secretary shall specify by 
     regulation).
       ``(c) Restriction on Commencement of New Arrangements.--A 
     multiple employer welfare arrangement providing benefits 
     which consist of medical care described in section 607(1) 
     which has not commenced operations as of January 1, 1995, may 
     commence operations only if a certification granted to the 
     arrangement under this part is in effect (or there is pending 
     with respect to the arrangement a complete application for 
     such a certification and the Secretary determines that 
     provisional protection under this part is appropriate).

     ``SEC. 703. CERTIFICATION PROCEDURE.

       ``(a) In General.--The Secretary shall grant a 
     certification described in section 702(a) to a multiple 
     employer welfare arrangement if--
       ``(1) an application for such certification with respect to 
     such arrangement, identified individually or by class, has 
     been duly filed in complete form with the Secretary in 
     accordance with this part,
       ``(2) such application demonstrates compliance with the 
     requirements of section 704 with respect to such arrangement, 
     and
       ``(3) the Secretary finds that such certification is--
       ``(A) administratively feasible,
       ``(B) not adverse to the interests of the individuals 
     covered under the arrangement, and
       ``(C) protective of the rights and benefits of the 
     individuals covered under the arrangement.
       ``(b) Notice and Hearing.--Before granting a certification 
     under this section, the Secretary shall publish notice in the 
     Federal Register of the pendency of the certification, shall 
     require that adequate notice be given to interested persons, 
     including the State insurance commissioner of each State in 
     which covered individuals under the arrangement are, or are 
     expected to be, located, and shall afford interested persons 
     opportunity to present views. The Secretary may not grant an 
     certification under this section unless the Secretary affords 
     an opportunity for a hearing and makes a determination on the 
     record with respect to the findings required under subsection 
     (a)(3). The Secretary shall, to the maximum extent 
     practicable, make a final determination with respect to any 
     application filed under this section in the case of a newly 
     established arrangement within 90 days after the date which 
     the Secretary determines is the date on which such 
     application is filed in complete form.

     ``SEC. 704. ELIGIBILITY REQUIREMENTS.

       ``(a) Application for Certification.--
       ``(1) In general.--A certification may be granted by the 
     Secretary under this part only on the basis of an application 
     filed with the Secretary in such form and manner as shall be 
     prescribed in regulations of the Secretary. Any such 
     application shall be signed by the operating committee and 
     the sponsor of the arrangement.
       ``(2) Filing fee.--The arrangement shall pay to the 
     Secretary at the time of filing an application under this 
     section a filing fee in the amount of $5,000, which shall be 
     available, to the extent provided in appropriation Acts, to 
     the Secretary for the sole purpose of administering the 
     certification procedures under this part.
       ``(3) Information included.--An application filed under 
     this section shall include, in a manner and form prescribed 
     in regulations of the Secretary, at least the following 
     information:
       ``(A) Identifying information.--The names and addresses 
     of--
       ``(i) the sponsor, and
       ``(ii) the members of the operating committee of the 
     arrangement.
       ``(B) States in which arrangement intends to do business.--
     The States in which individuals covered under the arrangement 
     are to be located and the number of such individuals expected 
     to be located in each such State.
       ``(C) Bonding requirements.--Evidence provided by the 
     operating committee that the bonding requirements of section 
     412 will be met as of the date of the application.
       ``(D) Plan documents.--A copy of the documents governing 
     the arrangement (including any bylaws and trust agreements), 
     the summary plan description, and other material describing 
     the benefits and coverage that will be provided to 
     individuals covered under the arrangement.
       ``(E) Agreements with service providers.--A copy of any 
     agreements between the arrangement and contract 
     administrators and other service providers.
       ``(F) Funding report.--A report setting forth information 
     determined as of a date within the 120-day period ending with 
     the date of the application, including the following:
       ``(i) Reserves.--A statement, certified by the operating 
     committee of the arrangement, and a statement of actuarial 
     opinion, signed by a qualified actuary, that all applicable 
     requirements of section 707 are or will be met in accordance 
     with regulations which the Secretary shall prescribe.
       ``(ii) Adequacy of contribution rates.--A statement of 
     actuarial opinion, signed by a qualified actuary, which sets 
     forth a description of the extent to which contribution rates 
     are adequate to provide for the payment of all obligations 
     and the maintenance of required reserves under the 
     arrangement for the 12-month period beginning with such date 
     within such 120-day period, taking into account the expected 
     coverage and experience of the arrangement. If the 
     contribution rates are not fully adequate, the statement of 
     actuarial opinion shall indicate the extent to which the 
     rates are inadequate and the changes needed to ensure 
     adequacy.
       ``(iii) Current and projected value of assets and 
     liabilities.--A statement of actuarial opinion signed by a 
     qualified actuary, which sets forth the current value of the 
     assets and liabilities accumulated under the arrangement and 
     a projection of the assets, liabilities, income, and expenses 
     of the arrangement for the 12-month period referred to in 
     clause (ii). The income statement shall identify separately 
     the arrangement's administrative expenses and claims.
       ``(iv) Costs of coverage to be charged and other 
     expenses.--A statement of the costs of coverage to be 
     charged, including an itemization of amounts for 
     administration, reserves, and other expenses associated with 
     the operation of the arrangement.
       ``(v) Other information.--Any other information which may 
     be prescribed in regulations of the Secretary as necessary to 
     carry out the purposes of this part.
       ``(b) Other Requirements.--A complete application for a 
     certification under this part shall include information which 
     the Secretary determines to be complete and accurate and 
     sufficient to demonstrate that the following requirements are 
     met with respect to the arrangement:
       ``(1) Sponsor.--
       ``(A) In general.--Except in a case to which subparagraph 
     (B) applies, the sponsor is, and has been (together with its 
     immediate predecessor, if any) for a continuous period of not 
     less than 3 years before the date of the application, 
     organized and maintained in good faith, with a constitution 
     and bylaws specifically stating its purpose, as a trade 
     association, an industry association, a professional 
     association, or a chamber of commerce (or similar business 
     group), for substantial purposes other than that of obtaining 
     or providing medical care described in section 607(1), and 
     the applicant demonstrates to the satisfaction of the 
     Secretary that the sponsor is established as a permanent 
     entity which receives the active support of its members.
       ``(B) Special rule for employers in the same trade or 
     business.--In the case of an arrangement under which all 
     participating employers are engaged in a common type of trade 
     or business, the sponsor is the operating committee of the 
     arrangement.
       ``(2) Operating committee.--The arrangement is operated, 
     pursuant to a trust agreement, by an operating committee 
     which has complete fiscal control over the arrangement and 
     which is responsible for all operations of the arrangement, 
     and the operating committee has in effect rules of operation 
     and financial controls, based on a 3-year plan of operation, 
     adequate to carry out the terms of the arrangement and to 
     meet all requirements of this title applicable to the 
     arrangement. The members of the committee are individuals 
     selected from individuals who are the owners, officers, 
     directors, or employees of the participating employers or who 
     are partners in the participating employers and actively 
     participate in the business. No such member is an owner, 
     officer, director, or employee of, or partner in, a contract 
     administrator or other service provider to the arrangement, 
     except that officers or employees of a sponsor which is a 
     service provider (other than a contract administrator) to the 
     arrangement may be members of the committee if they 
     constitute not more than 25 percent of the membership of the 
     committee and they do not provide services to the arrangement 
     other than on behalf of the sponsor. The committee has sole 
     authority to approve applications for participation in the 
     arrangement and to contract with a service provider to 
     administer the day-to-day affairs of the arrangement.
       ``(3) Contents of governing instruments.--The instruments 
     governing the arrangement include a written instrument, 
     meeting the requirements of an instrument required under 
     section 5022(a)(1), which--
       ``(A) provides that the committee serves as the named 
     fiduciary required for plans under section 5022(a)(1) and 
     serves in the capacity of a plan administrator (referred to 
     in section 3(16)(A)),
       ``(B) provides that the sponsor is to serve as plan sponsor 
     (referred to in section 3(16)(B)),
       ``(C) incorporates the requirements of section 707, and
       ``(D) provides that, effective upon the granting of a 
     certification under this part--
       ``(i) all participating employers must be members or 
     affiliated members of the sponsor, except that, in the case 
     of a sponsor which is a professional association or other 
     individual-based association, if at least one of the 
     officers, directors, or employees of an employer, or at least 
     one of the individuals who are partners in an employer and 
     who actively participates in the business, is a member or 
     affiliated member of the sponsor, participating employers may 
     also include such employer, and
       ``(ii) all individuals thereafter commencing coverage under 
     the arrangement must be--

       ``(I) active or retired owners, officers, directors, or 
     employees of, or partners in, participating employers, or
       ``(II) the beneficiaries of individuals described in 
     subclause (I).

       ``(4) Contribution rates.--The contribution rates referred 
     to in subsection (a)(3)(F)(ii) are adequate.
       ``(5) Regulatory requirements.--Such other requirements as 
     the Secretary may prescribe by regulation as necessary to 
     carry out the purposes of this part.
       ``(c) Treatment of Party Seeking Certification Where Party 
     is Subject to Disqualification.--
       ``(1) In general.--In the case of any application for a 
     certification under this part with respect to a multiple 
     employer welfare arrangement, if the Secretary determines 
     that the sponsor of the arrangement or any other person 
     associated with the arrangement is subject to 
     disqualification under paragraph (2), the Secretary may deny 
     the certification with respect to such arrangement.
       ``(2) Disqualification.--A person is subject to 
     disqualification under this paragraph if such person--
       ``(A) has intentionally made a material misstatement in the 
     application for certification;
       ``(B) has obtained or attempted to obtain a certification 
     under this part through misrepresentation or fraud;
       ``(C) has misappropriated or converted to such person's own 
     use, or improperly withheld, money held under a plan or any 
     multiple employer welfare arrangement;
       ``(D) is prohibited (or would be prohibited if the 
     arrangement were a plan) from serving in any capacity in 
     connection with the arrangement under section 411,
       ``(E) has failed to appear without reasonable cause or 
     excuse in response to a subpoena, examination, warrant, or 
     any other order lawfully issued by the Secretary compelling 
     such response,
       ``(F) has previously been subject to a determination under 
     this part resulting in the denial, suspension, or revocation 
     of a certification under this part on similar grounds, or
       ``(G) has otherwise violated any provision of this title 
     with respect to a matter which the Secretary determines of 
     sufficient consequence to merit disqualification for purposes 
     of this part.
       ``(d) Franchise Networks.--In the case of a multiple 
     employer welfare arrangement established and maintained by a 
     franchisor for a franchise network consisting of its 
     franchisees, such franchisor shall be treated as the sponsor 
     referred to in the preceding provisions of this section, such 
     network shall be treated as an association referred to in 
     such provisions, and each franchisee shall be treated as a 
     member (of the association and the sponsor) referred to in 
     such provisions, if all participating employers are such 
     franchisees and the requirements of subsection (b)(1) with 
     respect to a sponsor are met with respect to the network.
       ``(e) Certain Collectively Bargained Arrangements.--In 
     applying the preceding provisions of this section in the case 
     of a multiple employer welfare arrangement which would be 
     described in section 3(40)(A)(i) but for the failure to meet 
     any requirement of section 3(40)(C)--
       ``(1) paragraphs (1) and (2) of subsection (b) and 
     subparagraphs (A), (B), and (D) of paragraph (3) of 
     subsection (b) shall be disregarded, and
       ``(2) the joint board of trustees shall be considered the 
     operating committee of the arrangement.
       ``(f) Certain Arrangements Not Meeting Single Employer 
     Requirement.--
       ``(1) In general.--In any case in which the majority of the 
     employees covered under a multiple employer welfare 
     arrangement are employees of a single employer (within the 
     meaning of clauses (i) and (ii) of section 3(40)(B)), if all 
     other employees covered under the arrangement are employed by 
     employers who are related to such single employer, subsection 
     (b)(3)(D) shall be disregarded.
       ``(2) Related employers.--For purposes of paragraph (1), 
     employers are `related' if there is among all such employers 
     a common ownership interest or a substantial commonality of 
     business operations based on common suppliers or customers.

     ``SEC. 705. ADDITIONAL REQUIREMENTS APPLICABLE TO CERTIFIED 
                   MULTIPLE EMPLOYER HEALTH PLANS.

       ``(a) Notice of Material Changes.--In the case of any 
     certified multiple employer health plan, descriptions of 
     material changes in any information which was required to be 
     submitted with the application for the certification granted 
     under this part shall be filed in such form and manner as 
     shall be prescribed in regulations of the Secretary. The 
     Secretary may require by regulation prior notice of material 
     changes with respect to specified matters which might serve 
     as the basis for suspension or revocation of the 
     certification.
       ``(b) Reporting Requirements.--Under regulations of the 
     Secretary, the requirements of sections 102, 103, and 104 
     shall apply with respect to any multiple employer welfare 
     arrangement which is or has been an certified multiple 
     employer health plan in the same manner and to the same 
     extent as such requirements apply to employee welfare benefit 
     plans, irrespective of whether such certification continues 
     in effect. The annual report required under section 103 for 
     any plan year in the case of any such multiple employer 
     welfare arrangement shall also include information described 
     in section 704(a)(3)(F) with respect to the plan year and, 
     notwithstanding section 104(a)(1)(A), shall be filed not 
     later than 90 days after the close of the plan year.
       ``(c) Engagement of Qualified Actuary.--The operating 
     committee of each multiple employer welfare arrangement which 
     is or has been an certified multiple employer health plan 
     shall engage, on behalf of all covered individuals, a 
     qualified actuary who shall be responsible for the 
     preparation of the materials comprising information necessary 
     to be submitted by a qualified actuary under this part. The 
     qualified actuary shall utilize such assumptions and 
     techniques as are necessary to enable such actuary to form an 
     opinion as to whether the contents of the matters reported 
     under this part--
       ``(1) are in the aggregate reasonably related to the 
     experience of the arrangement and to reasonable expectations, 
     and
       ``(2) represent such actuary's best estimate of anticipated 
     experience under the arrangement.
     The opinion by the qualified actuary shall be made with 
     respect to, and shall be made a part of, the annual report.
       ``(d) Filing Notice of Certification With States.--A 
     certification granted to a multiple employer welfare 
     arrangement under this part shall not be effective unless 
     written notice of such certification is filed with the State 
     insurance commissioner of each State in which at least 5 
     percent of the individuals covered under the arrangement are 
     located. For purposes of this paragraph, an individual shall 
     be considered to be located in the State in which a known 
     address of such individual is located or in which such 
     individual is employed. The Secretary may by regulation 
     provide in specified cases for the application of the 
     preceding sentence with lesser percentages in lieu of such 5 
     percent amount.

     ``SEC. 706. DISCLOSURE TO PARTICIPATING EMPLOYERS BY 
                   ARRANGEMENTS PROVIDING MEDICAL CARE.

       ``(a) In General.--A multiple employer welfare arrangement 
     providing benefits consisting of medical care described in 
     section 607(1) shall issue to each participating employer--
       ``(1) a document equivalent to the summary plan description 
     required of plans under part 1,
       ``(2) information describing the contribution rates 
     applicable to participating employers, and
       ``(3) a statement indicating--
       ``(A) that the arrangement is not a licensed insurer under 
     the laws of any State,
       ``(B) whether coverage under the arrangement is fully 
     insured,
       ``(C) if coverage under the arrangement if not fully 
     insured, (i) whether the arrangement is (or has ceased to be) 
     an certified multiple employer health plan, and (ii) if such 
     an arrangement is an certified multiple employer health plan, 
     that such arrangement is treated as an employee welfare 
     benefit plan under this title.
       ``(b) Time for Disclosure.--Such information shall be 
     issued to employers within such reasonable period of time 
     before becoming participating employers as may be prescribed 
     in regulations of the Secretary.

     ``SEC. 707. MAINTENANCE OF RESERVES.

       ``(a) In General.--Each multiple employer welfare 
     arrangement which is or has been an certified multiple 
     employer health plan and under which coverage is not fully 
     insured shall establish and maintain reserves, consisting 
     of--
       ``(1) a reserve for unearned contributions,
       ``(2) a reserve for payment of claims reported and not yet 
     paid and claims incurred but not yet reported, and for 
     expected administrative costs with respect to such claims, 
     and
       ``(3) a reserve, in an amount recommended by the qualified 
     actuary, for any other obligations of the arrangement.
       ``(b) Minimum Amount for Certain Reserves.--The total of 
     the reserves described in subsection (a)(2) shall not be less 
     than an amount equal to 25 percent of expected incurred 
     claims and expenses for the plan year.
       ``(c) Required Margin.--In determining the amounts of 
     reserves required under this section in connection with any 
     multiple employer welfare arrangement, the qualified actuary 
     shall include a margin for error and other fluctuations 
     taking into account the specific circumstances of such 
     arrangement.
       ``(d) Additional Requirements.--The Secretary may provide 
     such additional requirements relating to reserves and excess/
     stop loss coverage as the Secretary considers appropriate. 
     Such requirements may be provided, by regulation or 
     otherwise, with respect to any arrangement or any class of 
     arrangements.
       ``(e) Adjustments for Excess/Stop Loss Coverage.--The 
     Secretary may provide for adjustments to the levels of 
     reserves otherwise required under subsections (a) and (b) 
     with respect to any arrangement or class of arrangements to 
     take into account excess/stop loss coverage provided with 
     respect to such arrangement or arrangements.
       ``(f) Alternative Means of Compliance.--The Secretary may 
     permit an arrangement to substitute, for all or part of the 
     reserves required under subsection (a), such security, 
     guarantee, or other financial arrangement as the Secretary 
     determines to be adequate to enable the arrangement to fully 
     meet all its financial obligations on a timely basis.

     ``SEC. 708. CORRECTIVE ACTIONS.

       ``(a) Actions To Avoid Depletion of Reserves.--A multiple 
     employer welfare arrangement with respect to which there is 
     or has been in effect a certification granted under this part 
     shall continue to meet the requirements of section 707, 
     irrespective of whether such certification continues in 
     effect. The operating committee of such arrangement shall 
     determine semiannually whether the requirements of section 
     707 are met. In any case in which the committee determines 
     that there is reason to believe that there is or will be a 
     failure to meet such requirements, or the Secretary makes 
     such a determination and so notifies the committee, the 
     committee shall immediately notify the qualified actuary 
     engaged by the arrangement, and such actuary shall, not later 
     than the end of the next following month, make such 
     recommendations to the committee for corrective action as the 
     actuary determines necessary to ensure compliance with 
     section 707. Not later than 10 days after receiving from the 
     actuary recommendations for corrective actions, the committee 
     shall notify the Secretary (in such form and manner as the 
     Secretary may prescribe by regulation) of such 
     recommendations of the actuary for corrective action, 
     together with a description of the actions (if any) that the 
     committee has taken or plans to take in response to such 
     recommendations. The committee shall thereafter report to the 
     Secretary, in such form and frequency as the Secretary may 
     specify to the committee, regarding corrective action taken 
     by the committee until the requirements of section 707 are 
     met.
       ``(b) Termination.--
       ``(1) Notice of termination.--In any case in which the 
     operating committee of a multiple employer welfare 
     arrangement which is or has been an certified multiple 
     employer health plan determines that there is reason to 
     believe that the arrangement will terminate, the committee 
     shall so inform the Secretary, shall develop a plan for 
     winding up the affairs of the arrangement in connection with 
     such termination in a manner which will result in timely 
     payment of all benefits for which the arrangement is 
     obligated, and shall submit such plan in writing to the 
     Secretary. Actions required under this paragraph shall be 
     taken in such form and manner as may be prescribed in 
     regulations of the Secretary.
       ``(2) Actions required in connection with termination.--In 
     any case in which--
       ``(A) the Secretary has been notified under subsection (a) 
     of a failure of a multiple employer welfare arrangement which 
     is or has been an certified multiple employer health plan to 
     meet the requirements of section 707 and has not been 
     notified by the operating committee of the arrangement that 
     corrective action has restored compliance with such 
     requirements, and
       ``(B) the Secretary determines that the continuing failure 
     to meet the requirements of section 707 can be reasonably 
     expected to result in a continuing failure to pay benefits 
     for which the arrangement is obligated,
     the operating committee of the arrangement shall, at the 
     direction of the Secretary, terminate the arrangement and, in 
     the course of the termination, take such actions as the 
     Secretary may require as necessary to ensure that the affairs 
     of the arrangement will be, to the maximum extent possible, 
     wound up in a manner which will result in timely payment of 
     all benefits for which the arrangement is obligated.

     ``SEC. 709. EXPIRATION, SUSPENSION, OR REVOCATION OF 
                   CERTIFICATION.

       ``(a) Expiration and Renewal of Certification.--A 
     certification granted to a multiple employer welfare 
     arrangement under this part shall expire 3 years after the 
     date on which the certification is granted. A certification 
     which has expired may be renewed by means of application for 
     a certification in accordance with section 704.
       ``(b) Suspension or Revocation of Certification by 
     Secretary.--The Secretary may suspend or revoke a 
     certification granted to a multiple employer welfare 
     arrangement under this part--
       ``(1) for any cause that may serve as the basis for the 
     denial of an initial application for such a certification 
     under section 704, or
       ``(2) if the Secretary finds that--
       ``(A) the arrangement, or the sponsor thereof, in the 
     transaction of business while under the certification, has 
     used fraudulent, coercive, or dishonest practices, or has 
     demonstrated incompetence, untrustworthiness, or financial 
     irresponsibility,
       ``(B) the arrangement, or the sponsor thereof, is using 
     such methods or practices in the conduct of its operations, 
     so as to render its further transaction of operations 
     hazardous or injurious to participating employers, or covered 
     individuals,
       ``(C) the arrangement, or the sponsor thereof, has refused 
     to be examined in accordance with this part or to produce its 
     accounts, records, and files for examination in accordance 
     with this part, or
       ``(D) any of the officers of the arrangement, or the 
     sponsor thereof, has refused to give information with respect 
     to the affairs of the arrangement or the sponsor or to 
     perform any other legal obligation relating to such an 
     examination when required by the Secretary in accordance with 
     this part.
     Any such suspension or revocation under this subsection shall 
     be effective only upon a final decision of the Secretary made 
     after notice and opportunity for a hearing is provided in 
     accordance with section 710.
       ``(c) Suspension or Revocation of Certification Under Court 
     Proceedings.--A certification granted to a multiple employer 
     welfare arrangement under this part may be suspended or 
     revoked by a court of competent jurisdiction in an action by 
     the Secretary brought under paragraph (2), (5), or (6) of 
     section 502(a), except that the suspension or revocation 
     under this subsection shall be effective only upon 
     notification of the Secretary of such suspension or 
     revocation.
       ``(d) Notification of Participating Employers.--All 
     participating employers in a multiple employer welfare 
     arrangement shall be notified of the expiration, suspension, 
     or revocation of a certification granted to such arrangement 
     under this part, by such persons and in such form and manner 
     as shall be prescribed in regulations of the Secretary, not 
     later than 20 days after such expiration or after receipt of 
     notice of a final decision requiring such suspension or 
     revocation.
       ``(e) Publication of Expirations, Suspensions, and 
     Revocations.--The Secretary shall publish all expirations of, 
     and all final decisions to suspend or revoke, certifications 
     granted under this part.

     ``SEC. 710. REVIEW OF ACTIONS OF THE SECRETARY.

       ``(a) In General.--Any decision by the Secretary which 
     involves the denial of an application by a multiple employer 
     welfare arrangement for a certification under this part or 
     the suspension or revocation of such a certification shall 
     contain a statement of the specific reason or reasons 
     supporting the Secretary's action, including reference to the 
     specific terms of the certification and the statutory 
     provision or provisions relevant to the determination.
       ``(b) Denials of Applications.--In the case of the denial 
     of an application for a certification under this part, the 
     Secretary shall send a copy of the decision to the applicant 
     by certified or registered mail at the address specified in 
     the records of the Secretary. Such decision shall constitute 
     the final decision of the Secretary unless the arrangement, 
     or any party that would be prejudiced by the decision, files 
     a written appeal of the denial within 30 days after the 
     mailing of such decision. The Secretary may affirm, modify, 
     or reverse the initial decision. The decision on appeal shall 
     become final upon the mailing of a copy by certified or 
     registered mail to the arrangement or party that filed the 
     appeal.
       ``(c) Suspensions or Revocations of Certification.--In the 
     case of the suspension or revocation of a certification 
     granted under this part, the Secretary shall send a copy of 
     the decision to the arrangement by certified or registered 
     mail at its address, as specified in the records of the 
     Secretary. Upon the request of the arrangement, or any party 
     that would be prejudiced by the suspension or revocation, 
     filed within 15 days of the mailing of the Secretary's 
     decision, the Secretary shall schedule a hearing on such 
     decision by written notice, sent by certified or registered 
     mail to the arrangement or party requesting such hearing. 
     Such notice shall set forth--
       ``(1) a specific date and time for the hearing, which shall 
     be within the 10-day period commencing 20 days after the date 
     of the mailing of the notice, and
       ``(2) a specific place for the hearing, which shall be in 
     the District of Columbia or in the State and county thereof 
     (or parish or other similar political subdivision thereof) in 
     which is located the arrangement's principal place of 
     business.
     The decision as affirmed or modified in such hearing shall 
     constitute the final decision of the Secretary, unless such 
     decision is reversed in such hearing.''
       (b) Conforming Amendment to Definition of Plan Sponsor.--
     Section 3(16)(B) of such Act (29 U.S.C. 1002(16)(B)) is 
     amended by adding at the end the following new sentence: 
     ``Such term also includes the sponsor (as defined in section 
     701(5)) of a multiple employer welfare arrangement which is 
     or has been an certified multiple employer health plan (as 
     defined in section 701(9)).''.
       (c) Alternative Means of Distribution of Summary Plan 
     Descriptions.--Section 110 of such Act (29 U.S.C. 1030) is 
     amended by adding at the end the following new subsection:
       ``(c) The Secretary shall prescribe, as an alternative 
     method for distributing summary plan descriptions in order to 
     meet the requirements of section 104(b)(1) in the case of 
     multiple employer welfare arrangements providing benefits 
     consisting of medical care described in section 607(1), a 
     means of distribution of such descriptions by participating 
     employers.''.
       (d) Clerical Amendment.--The table of contents in section 1 
     of the Employee Retirement Income Security Act of 1974 is 
     amended by inserting after the item relating to section 608 
     the following new items:

                ``Part 7--Multiple Employer Health Plans

``Sec. 701. Definitions.
``Sec. 702. Certified multiple employer health plans relieved of 
              certain restrictions on preemption of State law and 
              treated as employee welfare benefit plans.
``Sec. 703. Certification procedure.
``Sec. 704. Eligibility requirements.
``Sec. 705. Additional requirements applicable to certified multiple 
              employer health plans.
``Sec. 706. Disclosure to participating employers by arrangements 
              providing medical care.
``Sec. 707. Maintenance of reserves.
``Sec. 708. Corrective actions.
``Sec. 709. Expiration, suspension, or revocation of certification.
``Sec. 710. Review of actions of the secretary.

     SEC. 1072. CLARIFICATION OF SCOPE OF PREEMPTION RULES.

       (a) In General.--Section 514(b)(6)(A)(ii) of the Employee 
     Retirement Income Security Act of 1974 (29 U.S.C. 
     1144(b)(6)(A)(ii)) is amended by inserting ``, but only, in 
     the case of an arrangement which provides medical care 
     described in section 607(1) and with respect to which a 
     certification under part 7 is not in effect,'' before ``to 
     the extent not inconsistent with the preceding sections of 
     this title''.
       (b) Cross-Reference.--Section 514(b)(6) of such Act (29 
     U.S.C. 1144(b)(6)) is amended by adding at the end the 
     following new subparagraph:
       ``(E) For additional rules relating to certification from 
     subparagraph (A)(ii) of multiple employer welfare 
     arrangements providing medical care, see part 7.''.

     SEC. 1073. CLARIFICATION OF TREATMENT OF SINGLE EMPLOYER 
                   ARRANGEMENTS.

       Section 3(40)(B) of the Employee Retirement Income Security 
     Act of 1974 (29 U.S.C. 1002(40)(B)) is amended--
       (1) in clause (i), by inserting ``for any plan year of any 
     such plan, or any fiscal year of any such other 
     arrangement,'' after ``single employer'', and by inserting 
     ``during such year or at any time during the preceding 1-year 
     period'' after ``common control'';
       (2) in clause (iii), by striking ``common control shall not 
     be based on an interest of less than 25 percent'' and 
     inserting ``an interest of greater than 25 percent may not be 
     required as the minimum interest necessary for common 
     control'', and by striking ``and'' at the end,
       (3) by redesignating clause (iv) as clause (v), and
       (4) by inserting after clause (iii) the following new 
     clause:
       ``(iv) in determining, after the application of clause (i), 
     whether benefits are provided to employees of two or more 
     employers, the arrangement shall be treated as having only 1 
     participating employer if, at the time the determination 
     under clause (i) is made, the number of individuals who are 
     employees and former employees of any one participating 
     employer and who are covered under the arrangement is greater 
     than 95 percent of the aggregate number of all individuals 
     who are employees or former employees of participating 
     employers and who are covered under the arrangement.''.

     SEC. 1074. CLARIFICATION OF TREATMENT OF CERTAIN COLLECTIVELY 
                   BARGAINED ARRANGEMENTS.

       (a) In General.--Section 3(40)(A)(i) of the Employee 
     Retirement Income Security Act of 1974 (29 U.S.C. 
     1002(40)(A)(i)) is amended to read as follows:
       ``(i) under or pursuant to one or more collective 
     bargaining agreements,''.
       (b) Limitations.--Section 3(40) of such Act (29 U.S.C. 
     1002(40)) is amended by adding at the end the following new 
     subparagraphs:
       ``(C) Clause (i) of subparagraph (A) shall apply only if--
       ``(i) the plan or other arrangement, and the employee 
     organization or any other entity sponsoring the plan or other 
     arrangement, do not--

       ``(I) utilize the services of any licensed insurance agent 
     or broker for soliciting or enrolling employers or 
     individuals as participating employers or covered individuals 
     under the plan or other arrangement, or
       ``(II) pay a commission or any other type of compensation 
     to a person that is related either to the volume or number of 
     employers or individuals solicited or enrolled as 
     participating employers or covered individuals under the plan 
     or other arrangement, or to the dollar amount or size of the 
     contributions made by participating employers or covered 
     individuals to the plan or other arrangement,

       ``(ii) not less than 85 percent of the covered individuals 
     under the plan or other arrangement are individuals who--

       ``(I) are employed within a bargaining unit covered by at 
     least one of the collective bargaining agreements with a 
     participating employer (or are covered on the basis of an 
     individual's employment in such a bargaining unit), or
       ``(II) are present or former employees of the sponsoring 
     employee organization, of an employer who is or was a party 
     to at least one of the collective bargaining agreements, or 
     of the plan or other arrangement or a related plan or 
     arrangement (or are covered on the basis of such present or 
     former employment),

       ``(iii) the plan or other arrangement does not provide 
     benefits to individuals (other than individuals described in 
     clause (ii)(II)) who work outside the standard metropolitan 
     statistical area in which the sponsoring employee 
     organization represents employees (or to individuals (other 
     than individuals described in clause (ii)(II)) on the basis 
     of such work by others), except that in the case of a 
     sponsoring employee organization that represents employees 
     who work outside of any standard metropolitan statistical 
     area, this clause shall be applied by reference to the State 
     in which the sponsoring organization represents employees,
       ``(iv) the employee organization or other entity sponsoring 
     the plan or other arrangement certifies to the Secretary each 
     year, in a form and manner which shall be prescribed in 
     regulations of the Secretary--

       ``(I) that the plan or other arrangement meets the 
     requirements of clauses (i), (ii), and (iii), and
       ``(II) if, for any year, 10 percent or more of the covered 
     individuals under the plan are individuals not described in 
     subclause (I) or (II) of clause (ii), the total number of 
     covered individuals and the total number of covered 
     individuals not so described.

       ``(D)(i) Clause (i) of subparagraph (A) shall not apply to 
     a plan or other arrangement that is established or maintained 
     pursuant to one or more collective bargaining agreements 
     which the National Labor Relations Boards determines to have 
     been negotiated or otherwise agreed to in a manner or through 
     conduct which violates section 8(a)(2) of the National Labor 
     Relations Act (29 U.S.C. 158(a)(2)).
       ``(ii)(I) Whenever a State insurance commissioner has 
     reason to believe that this subparagraph is applicable to 
     part or all of a plan or other arrangement, the State 
     insurance commissioner may file a petition with the National 
     Labor Relations Board for a determination under clause (i), 
     along with sworn written testimony supporting the petition.
       ``(II) The Board shall give any such petition priority over 
     all other petitions and cases, other than other petitions 
     under subclause (I) or cases given priority under section 10 
     of the National Labor Relations Act (29 U.S.C. 160).
       ``(III) The Board shall determine, upon the petition and 
     any response, whether, on the facts before it, the plan or 
     other arrangement was negotiated, created, or otherwise 
     agreed to in a manner or through conduct which violates 
     section 8(a)(2) of the National Labor Relations Act (29 
     U.S.C. 158(a)(2)). Such determination shall constitute a 
     final determination for purposes of this subparagraph and 
     shall be binding in all Federal or State actions with respect 
     to the status of the plan or other arrangement under this 
     subparagraph.
       ``(IV) A person aggrieved by the determination of the Board 
     under subclause (III) may obtain review of the determination 
     in any United States court of appeals in the circuit in which 
     the collective bargaining at issue occurred. Commencement of 
     proceedings under this subclause shall not, unless 
     specifically ordered by the court, operate as a stay of any 
     State administrative or judicial action or proceeding related 
     to the status of the plan or other arrangement, except that 
     in no case may the court stay, before the completion of the 
     review, an order which prohibits the enrollment of new 
     individuals into coverage under a plan or arrangement.''.

     SEC. 1075. EMPLOYEE LEASING HEALTH CARE ARRANGEMENTS.

       (a) Employee Leasing Health Care Arrangement Defined.--
     Section 3 of the Employee Retirement Income Security Act of 
     1974 (29 U.S.C. 1002) is amended by adding at the end the 
     following new paragraph:
       ``(43) Employee Leasing Health Care Arrangement.--
       ``(A) In general.--Subject to subparagraph (B), the term 
     `employee leasing health care arrangement' means any labor 
     leasing arrangement, staff leasing arrangement, extended 
     employee staffing or supply arrangement, or other arrangement 
     under which--
       ``(i) one business or other entity (hereinafter in this 
     paragraph referred to as the `lessee'), under a lease or 
     other arrangement entered into with any other business or 
     other entity (hereinafter in this paragraph referred to as 
     the `lessor'), receives from the lessor the services of 
     individuals to be performed under such lease or other 
     arrangement, and
       ``(ii) benefits consisting of medical care described in 
     section 607(1) are provided to such individuals or such 
     individuals and their dependents as participants and 
     beneficiaries.
       ``(B) Exception.--Such term does not include an arrangement 
     described in subparagraph (A) if, under such arrangement, the 
     lessor retains, both legally and in fact, a complete right of 
     direction and control within the scope of employment over the 
     individuals whose services are supplied under such lease or 
     other arrangement, and such individuals perform a specified 
     function for the lessee which is separate and divisible from 
     the primary business or operations of the lessee.''.
       (b) Treatment of Employee Leasing Health Care Arrangements 
     as Multiple Employer Welfare Arrangements.--Section 3(40) of 
     such Act (29 U.S.C. 1002(40)) (as amended by the preceding 
     provisions of this title) is further amended by adding at the 
     end the following new subparagraph:
       ``(E) The term `multiple employer welfare arrangement' 
     includes any employee leasing health care arrangement.''.
       (c) Special Rules for Employee Leasing Health Care 
     Arrangements.--
       (1) In general.--Part 7 of subtitle B of title I of such 
     Act (as added by the preceding provisions of this Act) is 
     amended by adding at the end the following new section:

     ``SEC. 712. SPECIAL RULES FOR EMPLOYEE LEASING HEALTH CARE 
                   ARRANGEMENTS.

       ``(a) In General.--The requirements of paragraphs (1), (2), 
     and (3) of section 704(b) shall be treated as satisfied in 
     the case of a multiple employer welfare arrangement that is 
     an employee leasing health care arrangement if the 
     application for certification includes information which the 
     Secretary determines to be complete and accurate and 
     sufficient to demonstrate that the following requirements are 
     met with respect to the arrangement:
       ``(1) 3-year tenure.--The lessor has been in operation for 
     not less than 3 years.
       ``(2) Solicitation restrictions.--Employee leasing services 
     provided under the arrangement are not solicited, advertised, 
     or marketed through licensed insurance agents or brokers 
     acting in such capacity.
       ``(3) Creation of employment relationship.--
       ``(A) Disclosure statement.--Written notice is provided to 
     each applicant for employment subject to coverage under the 
     arrangement, at the time of application for employment and 
     before commencing coverage under the arrangement, stating 
     that the employer is the lessor under the arrangement.
       ``(B) Informed consent.--Each such applicant signs a 
     written statement consenting to the employment relationship 
     with the lessor.
       ``(C) Informed recruitment of lessee's employees.--In any 
     case in which the lessor offers employment to an employee of 
     a lessee under the arrangement, the lessor informs each 
     employee in writing that his or her acceptance of employment 
     with the lessor is voluntary and that refusal of such offer 
     will not be deemed to be resignation from or abandonment of 
     current employment.
       ``(4) Requisite employer-employee relationship under 
     arrangement.--Under the employer-employee relationship with 
     the employees of the lessor--
       ``(A) the lessor retains the ultimate authority to hire, 
     terminate, and reassign such employees,
       ``(B) the lessor is responsible for the payment of wages, 
     payroll-related taxes, and employee benefits, without regard 
     to payment by the lessee to the lessor for its services,
       ``(C) the lessor maintains the right of direction and 
     control over its employees, except to the extent that the 
     lessee is responsible for supervision of the work performed 
     consistent with the lessee's responsibility for its product 
     or service, and
       ``(D) in accordance with section 301(a) of the Labor 
     Management Relations Act, 1947 (29 U.S.C. 185(a)), the lessor 
     retains in the absence of an applicable collective bargaining 
     agreement, the right to enter into arbitration and to decide 
     employee grievances, and
       ``(E) no owner, officer, or director of, or partner in, a 
     lessee is an employee of the lessor, and not more than 10 
     percent of the individuals covered under the arrangement 
     consist of owners, officers, or directors of, or partners in, 
     such a lessee (or any combination thereof).
       ``(b) Definitions.--For purposes of this section--
       ``(1) Lessor.--The term `lessor' means the business or 
     other entity from which services of individuals are obtained 
     under an employee leasing health care arrangement.
       ``(2) Lessee.--The term `lessee' means a business or other 
     entity which receives the services of individuals provided 
     under an employee leasing health care arrangement.''.
       (2) Clerical amendment.--The table of contents in section 1 
     of such Act (as amended by the preceding provisions of this 
     title) is further amended by inserting after the item 
     relating to section 710 the following new item:

``Sec. 712. Employee leasing health care arrangements.''.

     SEC. 1076. ENFORCEMENT PROVISIONS RELATING TO MULTIPLE 
                   EMPLOYER WELFARE ARRANGEMENTS AND EMPLOYEE 
                   LEASING HEALTH CARE ARRANGEMENTS.

       (a) Enforcement of Filing Requirements.--Section 502 of the 
     Employee Retirement Income Security Act of 1974 (29 U.S.C. 
     1132) is amended--
       (1) in subsection (a)(6), by striking ``subsection (c)(2) 
     or (i) or (l)'' and inserting ``paragraph (2) or (4) of 
     subsection (c) or subsection (i) or (l)''; and
       (2) by adding at the end of subsection (c) the following 
     new paragraph:
       ``(4) The Secretary may assess a civil penalty against any 
     person of up to $1,000 a day from the date of such person's 
     failure or refusal to file the information required to be 
     filed with the Secretary under section 101(e).''.
       (b) Actions by States in Federal Court.--Section 502(a) of 
     such Act (29 U.S.C. 1132(a)) is amended--
       (1) in paragraph (5), by striking ``or'' at the end;
       (2) in paragraph (6), by striking the period and inserting 
     ``, or''; and
       (3) by adding at the end the following:
       ``(7) by a State official having authority under the law of 
     such State to enforce the laws of such State regulating 
     insurance, to enjoin any act or practice which violates any 
     provision of part 7 which such State has the power to enforce 
     under part 7.''.
       (c) Criminal Penalties for Certain Willful 
     Misrepresentations.--Section 501 of such Act (29 U.S.C. 1131) 
     is amended--
       (1) by inserting ``(a)'' after ``Sec. 501.''; and
       (2) by adding at the end the following new subsection:
       ``(b) Any person who, either willfully or with willful 
     blindness, falsely represents, to any employee, any 
     employee's beneficiary, any employer, the Secretary, or any 
     State, an arrangement established or maintained for the 
     purpose of offering or providing any benefit described in 
     section 3(1) to employees or their beneficiaries as--
       ``(1) being an certified multiple employer welfare 
     arrangement (as defined in section 701(9)),
       ``(2) being an employee leasing health care arrangement 
     under a certification granted under part 7, or
       ``(3) having been established or maintained under or 
     pursuant to a collective bargaining agreement,
     shall, upon conviction, be imprisoned not more than five 
     years, be fined under title 18, United States Code, or 
     both.''.
       (d) Cease Activities Orders.--Section 502 of such Act (29 
     U.S.C. 1132) is amended by adding at the end the following 
     new subsection:
       ``(m)(1) Subject to paragraph (2), upon application by the 
     Secretary showing the operation, promotion, or marketing of a 
     multiple employer welfare arrangement providing benefits 
     consisting of medical care described in section 607(1) that--
       ``(A) is not licensed, registered, or otherwise approved 
     under the insurance laws of the States in which the 
     arrangement offers or provides benefits, or
       ``(B) is not operating in accordance with the terms of a 
     certification granted by the Secretary under part 7,
     a district court of the United States shall enter an order 
     requiring that the arrangement cease activities.
       ``(2) Paragraph (1) shall not apply in the case of a 
     multiple employer welfare arrangement if the arrangement 
     shows that--
       ``(A) coverage under it is fully insured, within the 
     meaning of section 701(8),
       ``(B) it is licensed, registered, or otherwise approved in 
     each State in which it offers or provides benefits, except to 
     the extent that such State does not require licensing, 
     registration, or approval of multiple employer welfare 
     arrangements under which all coverage is fully insured, and
       ``(C) with respect to each such State, it is operating in 
     accordance with applicable State insurance laws that are not 
     superseded under section 514.
       ``(3) The court may grant such additional equitable or 
     remedial relief, including any relief available under this 
     title, as it deems necessary to protect the interests of the 
     public and of persons having claims for benefits against the 
     arrangement.''.
       (e) Responsibility for Claims Procedure.--Section 503 of 
     such Act (29 U.S.C. 1133) is amended by adding at the end 
     (after and below paragraph (2)) the following new sentence: 
     ``The terms of each multiple employer welfare arrangement to 
     which this section applies and which provides benefits 
     consisting of medical care described in section 607(1) shall 
     require the operating committee or the named fiduciary (as 
     applicable) to ensure that the requirements of this section 
     are met in connection with claims filed under the 
     arrangement.''.

     SEC. 1077. FILING REQUIREMENTS FOR MULTIPLE EMPLOYER WELFARE 
                   ARRANGEMENTS PROVIDING HEALTH BENEFITS.

       Section 101 of the Employee Retirement Income Security Act 
     of 1974 (29 U.S.C. 1021) is amended--
       (1) by redesignating subsection (e) as subsection (f); and
       (2) by inserting after subsection (d) the following new 
     subsection:
       ``(e)(1) Each multiple employer welfare arrangement shall 
     file with the Secretary a registration statement described in 
     paragraph (2) within 60 days before commencing operations (in 
     the case of an arrangement commencing operations on or after 
     January 1, 1995) and no later than February 15 of each year 
     (in the case of an arrangement in operation since the 
     beginning of such year), unless, as of the date by which such 
     filing otherwise must be made, such arrangement provides no 
     benefits consisting of medical care described in section 
     607(1).
       ``(2) Each registration statement--
       ``(A) shall be filed in such form, and contain such 
     information concerning the multiple employer welfare 
     arrangement and any persons involved in its operation 
     (including whether coverage under the arrangement is fully 
     insured), as shall be provided in regulations which shall be 
     prescribed by the Secretary, and
       ``(B) if coverage under the arrangement is not fully 
     insured, shall contain a certification that copies of such 
     registration statement have been transmitted by certified 
     mail to--
       ``(i) in the case of an arrangement which is an certified 
     multiple employer health plan (as defined in section 701(9)), 
     the State insurance commissioner of the domicile State of 
     such arrangement, or
       ``(ii) in the case of an arrangement which is not an 
     certified multiple employer health plan, the State insurance 
     commissioner of each State in which the arrangement is 
     located.
       ``(3) The person or persons responsible for filing the 
     annual registration statement are--
       ``(A) the trustee or trustees so designated by the terms of 
     the instrument under which the multiple employer welfare 
     arrangement is established or maintained, or
       ``(B) in the case of a multiple employer welfare 
     arrangement for which the trustee or trustees cannot be 
     identified, or upon the failure of the trustee or trustees of 
     an arrangement to file, the person or persons actually 
     responsible for the acquisition, disposition, control, or 
     management of the cash or property of the arrangement, 
     irrespective of whether such acquisition, disposition, 
     control, or management is exercised directly by such person 
     or persons or through an agent designated by such person or 
     persons.
       ``(4) Any agreement entered into under section 506(c) with 
     a State as the primary domicile State with respect to any 
     multiple employer welfare arrangement shall provide for 
     simultaneous filings of reports required under this 
     subsection with the Secretary and with the State insurance 
     commissioner of such State.''.

     SEC. 1078. COOPERATION BETWEEN FEDERAL AND STATE AUTHORITIES.

       Section 506 of the Employee Retirement Income Security Act 
     of 1974 (29 U.S.C. 1136) is amended by adding at the end the 
     following new subsection:
       ``(c) Responsibility With Respect to Multiple Employer 
     Welfare Arrangements.--
       ``(1) State enforcement.--
       ``(A) Agreements with states.--A State may enter into an 
     agreement with the Secretary for delegation to the State of 
     some or all of the Secretary's authority under sections 502 
     and 504 to enforce the provisions of this title applicable to 
     multiple employer welfare arrangements which are or have been 
     certified multiple employer health plans (as defined in 
     section 701(9)). The Secretary shall enter into the agreement 
     if the Secretary determines that the delegation provided for 
     therein would not result in a lower level or quality of 
     enforcement of the provisions of this title.
       ``(B) Delegations.--Any department, agency, or 
     instrumentality of a State to which authority is delegated 
     pursuant to an agreement entered into under this paragraph 
     may, if authorized under State law and to the extent 
     consistent with such agreement, exercise the powers of the 
     Secretary under this title which relate to such authority.
       ``(C) Concurrent authority of the secretary.--If the 
     Secretary delegates authority to a State in an agreement 
     entered into under subparagraph (A), the Secretary may 
     continue to exercise such authority concurrently with the 
     State.
       ``(D) Recognition of primary domicile state.--In entering 
     into any agreement with a State under subparagraph (A), the 
     Secretary shall ensure that, as a result of such agreement 
     and all other agreements entered into under subparagraph (A), 
     only one State will be recognized, with respect to any 
     particular multiple employer welfare arrangement, as the 
     primary domicile State to which authority has been delegated 
     pursuant to such agreements.
       ``(2) Assistance to states.--The Secretary shall--
       ``(A) provide enforcement assistance to the States with 
     respect to multiple employer welfare arrangements, including, 
     but not limited to, coordinating Federal and State efforts 
     through the establishment of cooperative agreements with 
     appropriate State agencies under which the Pension and 
     Welfare Benefits Administration keeps the States informed of 
     the status of its cases and makes available to the States 
     information obtained by it,
       ``(B) provide continuing technical assistance to the States 
     with respect to issues involving multiple employer welfare 
     arrangements and this Act,
       ``(C) assist the States in obtaining from the Office of 
     Regulations and Interpretations timely and complete responses 
     to requests for advisory opinions on issues described in 
     subparagraph (B), and
       ``(D) distribute copies of all advisory opinions described 
     in subparagraph (C) to the State insurance commissioner of 
     each State.''.

     SEC. 1079. EFFECTIVE DATE; TRANSITIONAL RULES.

       (a) Effective Date.--The amendments made by this part shall 
     take effect January 1, 1996, except that the Secretary of 
     Labor may issue regulations before such date under such 
     amendments. The Secretary shall issue all regulations 
     necessary to carry out the amendments made by this title 
     before the effective date thereof.
       (b) Transitional Rules.--If the sponsor of a multiple 
     employer welfare arrangement which, as of January 1, 1996, 
     provides benefits consisting of medical care described in 
     section 607(1) of the Employee Retirement Income Security Act 
     of 1974 (29 U.S.C. 1167(1)) files with the Secretary of Labor 
     an application for a certification under part 7 of subtitle B 
     of title I of such Act within 180 days after such date and 
     the Secretary has not, as of 90 days after receipt of such 
     application, found such application to be materially 
     deficient, section 514(b)(6)(A) of such Act (29 U.S.C. 
     1144(b)(6)(A)) shall not apply with respect to such 
     arrangement during the 18-month period following such date. 
     If the Secretary determines, at any time after the date of 
     enactment of this Act, that any such exclusion from coverage 
     under the provisions of such section 514(b)(6)(A) of such Act 
     of a multiple employer welfare arrangement would be 
     detrimental to the interests of individuals covered under 
     such arrangement, such exclusion shall cease as of the date 
     of the determination. Any determination made by the Secretary 
     under this subsection shall be in the Secretary's sole 
     discretion.

   PART 7--SIMPLIFYING FILING OF REPORTS FOR EMPLOYERS COVERED UNDER 
MULTIPLE EMPLOYER WELFARE ARRANGEMENTS PROVIDING FULLY INSURED COVERAGE 
                       CONSISTING OF MEDICAL CARE

     SEC. 1081. SINGLE ANNUAL FILING FOR ALL PARTICIPATING 
                   EMPLOYERS.

       (a) In General.--Section 110 of the Employee Retirement 
     Income Security Act of 1974 (29 U.S.C. 1030), as amended by 
     section 5021(c) of this subtitle, is amended by adding at the 
     end the following new subsection:
       ``(d) The Secretary shall prescribe by regulation or 
     otherwise an alternative method providing for the filing of a 
     single annual report (as referred to in section 104(a)(1)(A)) 
     with respect to all employers who are participating employers 
     under a multiple employer welfare arrangement under which all 
     coverage consists of medical care (described in section 
     607(1)) and is fully insured (as defined in section 
     701(9)).''
       (b) Effective Date.--The amendment made by subsection (a) 
     shall take effect on the date of the enactment of this Act. 
     The Secretary of Labor shall prescribe the alternative method 
     referred to in section 110(d) of the Employee Retirement 
     Income Security Act of 1974, as added by such amendment, 
     within 90 days after the date of the enactment of this Act.
                          Subtitle B--Benefits

     SEC. 1101. QUALIFIED HEALTH COVERAGE.

       In this Act, the term ``qualified health coverage'' means 
     health coverage that--
       (1) provides--
       (A) at least standard coverage consistent with section 
     1102, or
       (B) at least high-deductible coverage consistent with 
     section 1103; and
       (2) meets other requirements of subtitle A applicable to 
     the coverage and the carrier or group health plan providing 
     the coverage.

     SEC. 1102. STANDARD COVERAGE.

       (a) In General.--Health insurance coverage is considered to 
     provide standard coverage consistent with this subsection 
     if--
       (1) benefits under such coverage are provided within at 
     least each of the required categories of benefits described 
     in paragraph (1) of subsection (b) and consistent with such 
     subsection;
       (2) the actuarial value of the benefits meets the 
     requirements of subsection (c),
       (3) the benefits comply with the minimum requirements 
     specified in subsection (d), and
       (4) the benefits do not violate the anti-discrimination 
     rules described in section 1105.
       (b) Required Categories of Covered Benefits.--
       (1) In general.--The categories of covered benefits 
     described in this paragraph are the types of benefits 
     specified in subparagraphs (A), (B), (C), (D), and (F) of 
     paragraph (1), and subparagraphs (E) and (F) of paragraph 
     (2), of section 8904(a) of title 5, United States Code 
     (relating to types of benefits required to be in health 
     insurance offered to Federal employees).
       (2) Coverage of treatments in approved research trials.--
       (A) In general.--Coverage of the routine medical costs (as 
     defined in subparagraph (B)) associated with the delivery of 
     treatments shall be considered to be medically appropriate 
     only if the treatment is part of an approved research trial 
     (as defined in subparagraph (C)).
       (B) Routine medical costs defined.--In subparagraph (A), 
     the term ``routine medical costs'' means the cost of health 
     services required to provide treatment according to the 
     design of the trial, except those costs normally paid for by 
     other funding sources (as defined by the Secretary). Such 
     costs do not include the cost of the investigational agent, 
     devices or procedures themselves, the costs of any nonhealth 
     services that might be required for a person to receive the 
     treatment, or the costs of managing the research.
       (C) Approved research trial defined.--In subparagraph (A), 
     the term ``approved research trial'' means a trial--
       (i) conducted for the primary purpose of determining the 
     safety, effectiveness, efficacy, or health outcomes of a 
     treatment, compared with the best available alternative 
     treatment, and
       (ii) approved by the Secretary.
     A trial is deemed to be approved under clause (ii) if it is 
     approved by the National Institutes of Health, the Food and 
     Drug Administration (through an investigational new drug 
     exemption), the Department of Veterans Affairs, or by a 
     qualified nongovernmental research entity (as identified in 
     guidelines issued by one or more of the National Institutes 
     of Health).
       (3) Coverage of off-label use.--An off-label use for a drug 
     that has been found to be safe and effective under section 
     505 of the Federal Food, Drug, and Cosmetic Act shall be 
     covered if the medical indication for which it is used is 
     listed in one of the following 3 compendia: the American 
     Hospital Formulary Service-Drug Information, the American 
     Medical Association Drug Evaluations, and the United States 
     Pharmacopeia-Drug Information.
       (c) Standard Actuarial Value.--
       (1) In general.--The actuarial value of the benefits under 
     standard coverage in a fair rating area (as identified under 
     section 1021(c)) meets the requirements of this subsection if 
     such value is equivalent to the standard actuarial value 
     described in paragraph (2) for the area, as adjusted for 
     inflation under paragraph (4). The actuarial value of 
     benefits under standard coverage shall be determined using 
     the standardized population and set of standardized 
     utilization and cost factors described in paragraph (3).
       (2) Standard actuarial value described.--The standard 
     actuarial value described in this paragraph for coverage in a 
     geographic area is the actuarial value of benchmark coverage 
     during 1994 in such area. Such actuarial value shall be 
     determined using the standardized population and set of 
     standardized utilization and cost factors described in 
     paragraph (3).
       (3) Adjustments for standardized population, standardized 
     utilization and cost factors, and geographic area.--The 
     adjustment under this paragraph--
       (A) for a standardized population shall be made by not 
     taking into account individuals 65 years of age or older, 
     employees of the United States Postal Service, and retirees; 
     and
       (B)(i) except as provided in clause (ii), for a geographic 
     area shall be made in a manner that reflects the ratio of the 
     actuarial value of benchmark coverage in such geographic area 
     (as adjusted under subparagraph (A)) to such actuarial value 
     for such benchmark coverage for the United States as a whole, 
     taking into account standardized actuarial utilization and 
     cost factors, and

       (ii) in the case of a group health plan operating in more 
     than one geographic area, the ratio described in clause (i) 
     shall be determined in accordance with regulations 
     promulgated by the Secretary.

     At the election of a group health plan under subparagraph 
     (B)(ii), the ratio under such subparagraph shall be 1.
       (4) Adjustment for inflation.--
       (A) In general.--The adjustment under this paragraph for a 
     year (beginning with 1995) is the FEHBP national rolling 
     increase percentage for the year involved, compounded by such 
     increase for each preceding year after 1994.
       (B) FEHBP national rolling increase percentage.--For 
     purposes of this paragraph, the term ``FEHBP national rolling 
     increase percentage'' means, for a year, the 5-year average 
     of the annual national percentage increase in the premiums 
     for health plans offered under the Federal Employees Health 
     Benefits Program (under chapter 89 of title 5, United States 
     Code) for the period ending with the previous year. Such 
     increase shall be determined by the Secretary in consultation 
     with the Director of Office of Personnel Management based on 
     the best information available.
       (d) Minimum Requirements Within a Category.--Benefits 
     offered in the standard plan within any category shall be not 
     less than the narrowest scope and shortest duration of 
     benefits so offered within that category, in an approved 
     health benefits plan under chapter 89 of title 5, United 
     States Code (relating to Federal Employees Health Benefits 
     Program) .
       (e) No Coverage of Specific Treatment, Procedures, or 
     Classes Required.--Nothing in this section (or section 1103) 
     may be construed to require the coverage of any specific 
     procedure or treatment or class of service in health coverage 
     under this Act or through regulation.
       (f) Construction.--Nothing in this section (or section 
     1103) shall be construed as requiring coverage to include 
     benefits for items and services that are not medically 
     necessary or appropriate.

     SEC. 1103. HIGH-DEDUCTIBLE COVERAGE.

       Health insurance coverage is considered to provide high-
     deductible coverage consistent with this section if--
       (1) benefits under such coverage comply with requirements 
     described in section 1102(b) and 1102(d);
       (2) the deductible amount is the amount established under 
     section 1104(b)(1);
       (3) benefits under the coverage in any year are covered 
     only to the extent expenses incurred for items and services 
     included in the coverage for the year exceed the deductible 
     amount specified in paragraph (2);
       (4) the actuarial value of the coverage (as determined 
     under rules consistent with section 1102(c)) is equivalent to 
     80 percent of the actuarial value established under such 
     section for standard coverage; and
       (5) the benefits do not violate the anti-discrimination 
     rules described in section 1105.

     SEC. 1104. ACTUARIAL VALUATION OF BENEFITS.

       (a) In General.--The Secretary, in consultation with the 
     National Association of Insurance Commissioners and the 
     American Academy of Actuaries, shall establish (and may from 
     time to time modify) procedures by which health insurance 
     benefits are valued for purposes of this subtitle.
       (b) Deductible; Model Benefit Packages.--The Secretary, in 
     consultation with the National Association of Insurance 
     Commissioners and the American Academy of Actuaries, shall 
     establish--
       (1) the deductible amount for high-deductible coverage for 
     the purposes of section 1103(2) such that the actuarial value 
     of high-deductible coverage described in section 1103 is 20 
     percent less than the actuarial value of standard coverage 
     described in section 1102; and
       (2) model benefit packages that may be treated, for 
     purposes of this title, as meeting the requirements for 
     standard or high-deductible coverage under sections 1102 and 
     1103, respectively, and which shall include model cost 
     sharing arrangements for fee-for-service options, managed 
     care options, and point-of-service options.

     SEC. 1105. ANTI-DISCRIMINATION RULE.

       A carrier and a group health plan providing health coverage 
     may not establish a limitation on benefits covered in a 
     manner that has the effect of differentiating with respect to 
     different serious illnesses or conditions or limiting the 
     duration of or reimbursement for such an illness or 
     condition.

     SEC. 1106. FAMILY COVERAGE OPTION; SUPPLEMENTAL COVERAGE.

       (a) Family Coverage Option.--Each carrier and group health 
     plan that offers health insurance coverage shall provide for 
     an option under which children under 26 years of age (without 
     regard to whether they are full-time students or disabled) 
     will be treated (with respect to family coverage) as family 
     members. The carrier or plan may impose an additional premium 
     for such option.
       (b) Construction.--Nothing in this title shall be construed 
     as limiting the benefits that may be offered as part of a 
     group health plan or health insurance coverage.

     SEC. 1107. LEVEL PLAYING FIELD FOR PROVIDERS.

       (a) In General.--Nothing in this subtitle may be construed 
     to require or prohibit the use of a particular class of 
     provider, among the providers that are legally authorized to 
     provide such treatment.
       (b) Coverage of Certain Other Providers.--
       (1) In general.--For purposes of this subtitle, benefits 
     under standard coverage shall include the following:
       (A) Coverage provided at an individual's home by a 
     Christian Science practitioner or Christian Science nurse.
       (B) Coverage provided in a Christian Science Sanitorium (as 
     defined in section 1861(y) of the Social Security Act), 
     including coverage provided by a Christian Science 
     practitioner.
       (2) Qualifications of providers.--A Christian Science 
     practitioner or Christian Science nurse is qualified for 
     purposes of paragraph (1) if the practitioner or nurse is 
     listed as such a practitioner or nurse by the First Church of 
     Christ, Scientist, in Boston, Massachusetts.
                 Subtitle C--Employer Responsibilities

     SEC. 1201. REQUIRING EMPLOYERS TO OFFER OPTION OF COVERAGE.

       (a) In General.--Subject to subsections (c) and (d), each 
     employer shall make available with respect to each qualifying 
     employee health coverage under a group health plan (whether 
     fully-insured or self-insured) which meets the following 
     requirements (and the applicable requirements of subtitle A):
       (1) Annual offering.--The employee may elect health 
     coverage for the employee and family members on an annual 
     basis for each plan year and at such other times as may be 
     specified by the Secretary of Labor, in a manner consistent 
     with the standards established to carry out section 1105.
       (2) Choice of coverage.--
       (A) In general.--Subject to subsection (c), such coverage 
     is provided for at least--
       (i) a competing choice of qualified standard coverage 
     (consistent with section 1102), including at least one option 
     (either a fee-for-service option or a point-of-service 
     option) that permits covered individuals an unrestricted 
     choice of the lawful providers for which benefits are made 
     available; and
       (ii) high-deductible coverage (consistent with section 
     1103).
       (B) Coverage floor.--Any such coverage (other than coverage 
     for supplemental benefits) shall include benefits the 
     actuarial value of which is not less than the actuarial value 
     of high-deductible coverage if such coverage is consistent 
     with the requirements specified in paragraph (1), (3), and 
     (4) of section 1102(a).
       (C) Disclosure for certain coverage.--If an employer offers 
     coverage the actuarial value of which is more than the 
     actuarial value for high-deductible coverage but less than 
     such value for standard coverage, the employer must disclose 
     to the employees detailed information on how the coverage 
     offered compares to the standard and high-deductible coverage 
     offered by the employer.
       (D) Use of standardized factors.--For purposes of this 
     paragraph, actuarial value of coverage shall be determined 
     using the standardized population and standardized 
     utilization and cost factors described in section 1102(c)(4).
       (E) Family coverage option.--The offer of coverage under 
     this section with respect to a qualifying employee shall 
     include the option of coverage of family members of the 
     employee.
       (3) Payroll withholding.--The employee electing such 
     coverage may elect to have any premiums owed by the employee 
     collected through payroll deduction.
       (4) Nondiscrimination in contributions based on price of 
     coverage selected.--
       (A) In general.--The employer may not vary the amount of 
     any employer contribution, within a class of family coverage, 
     with respect to such coverage, on the basis of the total 
     premium price of the coverage selected.
       (B) Special rules.--In applying subparagraph (A)--
       (i) the ``total premium price'' shall include, in the case 
     of high-deductible coverage, amounts paid by an employer into 
     a medical savings account (established under section 7705 of 
     the Internal Revenue Code of 1986); and
       (ii) if the employee selects health coverage the premium 
     for which is less than the amount of the employer 
     contribution, the employer shall pay the amount of such 
     difference to the employee (or, at the employee's option in 
     the case of an employee who has high-deductible coverage, to 
     such a medical savings account).
       (C) Construction.--Nothing in this paragraph shall be 
     construed as requiring the amount of contributions to be the 
     same for employees in different geographic areas or classes 
     of family coverage.
       (b) No Employer Mandate.--Subject to subsection (a)(4) 
     (relating to equal contribution rule), an employer is not 
     required under this section to make any contribution to the 
     cost of health coverage.
       (c) Grandfather for Existing Contracts.--
       (1) In general.--The requirement of subsection (a)(2) shall 
     not apply to a group health plan for a plan year if--
       (A) the group health plan is in effect in the plan year in 
     which July 1, 1994, occurs, and
       (B) the employer makes (or offers to make), in such plan 
     year and the plan year involved, a contribution to the plan 
     on behalf of each employee who is eligible to participate in 
     the plan.
       (2) Sunset.--Paragraph (1) shall only apply to a group 
     health plan until the expiration of a contract in effect on 
     the date of the enactment of this Act or, if earlier, January 
     1, 2000.
       (d) Special Rules.--
       (1) Employers contracting with voluntary purchasing 
     arrangements, etc..--An employer is deemed to have satisfied 
     the requirements of subsection (a) with respect to an 
     employee if the employer enters into a contract with a health 
     plan purchasing organization (established under subtitle A of 
     title V), a small employer pooling arrangement (described in 
     section 5011), a multiemployer plan providing health 
     benefits, or a certified multiple employer health plan (as 
     defined in section 701(9) of the Employee Retirement Income 
     Security Act of 1974) to offer coverage with respect to the 
     employee.
       (2) Exclusion of new employers and certain small 
     employers.--Subsection (a) shall not apply to any small 
     employer for any plan year if, as of the beginning of such 
     plan year--
       (A) such employer (including any predecessor thereof) has 
     been an employer for less than 1 year,
       (B) such employer has no more than 2 qualifying employees, 
     or
       (C) no more than 2 qualifying employees of the employer are 
     not covered under any group health plan.
       (3) Exclusion of family members.--Under such procedures as 
     the Secretary may prescribe, any relative of an employer may 
     be, at the election of the employer, excluded from 
     consideration as an qualifying employee for purposes of 
     applying the requirements of subsection (a). In the case of 
     an employer that is not an individual, an employee who is a 
     relative of a key employee (as defined in section 416(i)(1) 
     of the Internal Revenue Code of 1986) of the employer may, at 
     the election of the key employee, be considered a relative 
     excludable under this paragraph.
       (e) Construction on Range of Coverage Offerings.--Nothing 
     in this section shall be construed--
       (1) as limiting the number of standard and high-deductible 
     coverage options that an employer may offer to an employee,
       (2) as preventing employers from offering supplemental 
     benefits (as defined in section 1101(f)), or
       (3) as preventing an employer from providing for 
     contributions to a medical savings account in connection with 
     the offering of high-deductible coverage, subject to 
     subsection (a)(4) and the requirements of section 7705 of the 
     Internal Revenue Code of 1986.

     SEC. 1202. NONDISCRIMINATION UNDER GROUP HEALTH PLANS.

       (a) Application of Rules Similar to Medicare 
     Nondiscrimination Rules.--Subject to paragraph (2), the 
     provisions of paragraphs (1)(A), (1)(D), (1)(E), (3)(A), and 
     (3)(C) of section 1862(b) of the Social Security Act shall 
     apply to an individual eligible for low-income assistance 
     under subtitle A of title II in relation to an employer in 
     the same manner as such provisions apply to an individual age 
     65 or over who is entitled to benefits under title XVIII of 
     such Act under section 226(a) of such Act in relation to such 
     employer.
       (b) Rules of Application.--In applying subsection (a)--
       (1) in applying clauses (ii) and (iii) of section 
     1862(b)(1)(A) of the Social Security Act, any reference to 
     ``20 or more employees'' is deemed a reference to ``5 or more 
     employees'';
       (2) clause (iv) of section 1862(b)(1)(A) of such Act shall 
     not apply; and
       (3) any reference to title XVIII of such Act is deemed a 
     reference to assistance under title XXI of such Act (as added 
     by subtitle A of title II of this Act).
       (c) Enforcement.--
       (1) In general.--Chapter 47 of the Internal Revenue Code of 
     1986 (relating to excise taxes on qualified pension, etc. 
     plans) is amended by inserting after section 5000 the 
     following new section:

     ``SEC. 5000A. EMPLOYER REQUIREMENTS.

       ``(a) General Rule.--There is hereby imposed a tax on the 
     failure of any employer to comply with the requirements of 
     section 1201 and section 1202 of the Bipartisan Health Care 
     Reform Act of 1994.
       ``(b) Amount of Tax.--The amount of tax imposed by 
     subsection (a) shall be equal to $100 for each day for each 
     individual for which such a failure occurs.
       ``(c) Limitation on Tax.--
       ``(1) Tax not to apply where failures corrected within 30 
     days.--No tax shall be imposed by subsection (a) with respect 
     to any failure if--
       ``(A) such failure was due to reasonable cause and not to 
     willful neglect, and
       ``(B) such failure is corrected during the 30-day period 
     (or such period as the Secretary may determine appropriate) 
     beginning on the 1st date any of the individuals on whom the 
     tax is imposed knew, or exercising reasonable diligence would 
     have known, that such failure existed.
       ``(2) Waiver by secretary.--In the case of a failure which 
     is due to reasonable cause and not to willful neglect, the 
     Secretary may waive part or all of the tax imposed by 
     subsection (a) to the extent that the payment of such tax 
     would be excessive relative to the failure involved.''.
       (2) Clerical amendment.--The table of sections for such 
     chapter 47 is amended by adding at the end the following new 
     item:

``Sec. 5000A. Employer requirements.''.

       (3) Effective date.--The amendments made by this subsection 
     shall take effect on January 1, 1997.

     SEC. 1203. EFFECTIVE DATES.

       Except as otherwise provided, the requirements of sections 
     1201 and 1202 shall apply to plan years beginning after 
     December 31, 1996.
              Subtitle D--Definitions; General Provisions

     SEC. 1901. GENERAL DEFINITIONS.

       For purposes of this Act:
       (1) Applicable regulatory authority.--The term ``applicable 
     regulatory authority'' means, with respect to a carrier 
     operating in a State--
       (A) the State insurance commissioner, or
       (B) the Secretary, in the case described in section 
     1052(b).
       (2) Family member.--
       (A) In general.--Individuals are considered to be members 
     of a family if--
       (i) they are married, or
       (ii) they have a legal parent-to-child relationship 
     (whether by natural birth or adoption), if the child is--

       (I) under 19 years of age,
       (II) is under 25 years of age and a full-time student, or
       (III) an unmarried dependent regardless of age who is 
     incapable of self-support because of mental or physical 
     disability which existed before age 22.

       (B) Special rules.--Family members--
       (i) include an adopted child and a recognized natural 
     child;
       (ii) include a stepchild or foster child with respect to an 
     individual but only if the child lives with the individual in 
     a regular parent-child relationship; and
       (iii) include such other children as the Secretary may 
     specify, but shall not include an emancipated minor.
       (3) Prisoner.--The term ``prisoner'' means, as specified by 
     the Secretary, an individual during a period of imprisonment 
     under Federal, State, or local authority after conviction as 
     an adult.
       (4) Secretary.--The term ``Secretary'' means the Secretary 
     of Health and Human Services.
       (5) State.--The term ``State'' means the 50 States and the 
     District of Columbia

     SEC. 1902. DEFINITIONS RELATING TO EMPLOYMENT.

       (a) Application of ERISA Definitions.--Except as otherwise 
     provided in this Act, terms used in this Act shall have the 
     meanings applicable to such terms under section 3 of the 
     Employee Retirement Income Security Act of 1974 (29 U.S.C. 
     1002).
       (b) Additional Definitions.--For purposes of this title:
       (1) Countable employee.--The term ``countable employee'' 
     means, with respect to an employer for a month, any employee 
     other than an employee whose normal work week is less than 10 
     hours.
       (2) Large employer.--The term ``large employer'' means an 
     employer that is not a small employer (as defined in 
     paragraph (4)).
       (3) Qualifying employee.--
       (A) In general.--The term ``qualifying employee'' means, 
     with respect to an employer for a month, any employee other 
     than--
       (i) a part-time, seasonal, or temporary employee (as 
     defined in subparagraph (B)); or
       (ii) an employee who is a child described in section 
     1901(2)(A)(ii).
       (B) Part-time, seasonal, or temporary employee defined.--
     For purposes of subparagraph (A), the term ``part-time, 
     seasonal, or temporary employee'' means any of the following 
     employees with respect to a month:
       (i) Certain part-time employees.--Any employee whose normal 
     work week is reasonably expected as of the 1st day of such 
     month to be less than 20 hours.
       (ii) Seasonal or temporary employees.--Any employee who is 
     not reasonably expected as of the 1st day of such month to be 
     employed by the employer for a period of 120 consecutive days 
     during any 365-day period that includes such 1st day.
       (iii) Delay for certain part-time employees.--Any employee 
     whose normal work week is reasonably expected as of the 1st 
     day of such month to be at least 20 hours, but less than 35 
     hours, and the normal work week of the employee during the 
     preceding 3 months was less than 20 hours.
       (4) Small employer.--The term ``small employer'' means, 
     with respect to a calendar year, an employer that normally 
     employs more than 1 but less than 100 countable employees on 
     a typical business day. For the purposes of this paragraph, 
     the term ``employee'' includes a self-employed individual. 
     For purposes of determining if an employer is a small 
     employer, rules similar to the rules of subsection (b) and 
     (c) of section 414 of the Internal Revenue Code of 1986 shall 
     apply.

     SEC. 1903. DEFINITIONS RELATING TO HEALTH COVERAGE, PLANS, 
                   AND CARRIERS.

       Except as otherwise provided, for purposes of this Act:
       (1) Benchmark coverage.--The term ``benchmark coverage'' 
     means the standard option of the Blue Cross-Blue Shield plan 
     offered under the Federal Employees Health Benefits Program 
     under chapter 89 of title 5, United States Code, as in effect 
     during 1994.
       (2) Carrier.--The term ``carrier'' means a licensed 
     insurance company, an entity offering prepaid hospital or 
     medical services, and a health maintenance organization 
     offering such services to an employer, and includes a similar 
     organization regulated under State law for solvency.
       (3) Certified multiple employer health plan.--The term 
     ``certified multiple employer health plan'' means a multiple 
     employer welfare arrangement treated as an employee welfare 
     benefit plan by reason of an certification under part 7 of 
     subtitle B of title I of the Employee Retirement Income 
     Security Act of 1974 (as added by part 6 of this subtitle).
       (4) Class of family coverage.--The term ``class of family 
     coverage'' means the 4 classes described in section 
     1021(a)(3).
       (5) Group health plan.--The term ``group health plan'' 
     means an employee welfare benefit plan providing medical care 
     (as defined in section 213(d) of the Internal Revenue Code of 
     1986) to participants or beneficiaries directly or through 
     insurance, reimbursement, or otherwise, but does not include 
     any type of coverage excluded from the definition of a health 
     insurance coverage under paragraph (7)(B).
       (6) Health coverage.--The term ``health coverage'' means 
     health insurance coverage provided by a carrier or medical 
     care provided under a group health plan.
       (7) Health insurance coverage.--
       (A) In general.--Except as provided in subparagraph (B), 
     the term ``health insurance coverage'' means any hospital or 
     medical service policy or certificate, hospital or medical 
     service plan contract, or health maintenance organization 
     group contract offered by a carrier.
       (B) Exception.--Such term does not include any of the 
     following (or any combination of the following):
       (i) Coverage only for accident, dental, vision, disability 
     income, or long-term care insurance, or any combination 
     thereof.
       (ii) Medicare supplemental health insurance.
       (iii) Coverage issued as a supplement to liability 
     insurance.
       (iv) Liability insurance, including general liability 
     insurance and automobile liability insurance.
       (v) Workers' compensation or similar insurance.
       (vi) Automobile medical-payment insurance.
       (vii) Coverage for a specified disease or illness.
       (viii) A hospital or fixed indemnity policy.
       (ix) Coverage provided exclusively to individuals who are 
     not eligible individuals.
       (8) Health maintenance organization.--The term ``health 
     maintenance organization'' includes, as defined in standards 
     established under section 1103, a an organization that 
     provides health insurance coverage which meets specified 
     standards and under which health services are offered to be 
     provided on a prepaid, at-risk basis primarily through a 
     defined set of providers.
       (9) Health plan purchasing organization.--The term ``health 
     plan purchasing organization'' means an organization 
     established under subtitle A of title V.
       (10) Individual market.--The term ``individual market'' 
     means the insurance market offered to individuals seeking 
     health insurance coverage for standard coverage or high-
     deductible coverage on behalf of themselves (and their 
     dependents) and not seeking coverage on the basis of 
     employment, membership in a organization, or through any 
     group purchasing arrangement.
       (11) Managed care arrangements.--
       (A) Managed care arrangement.--The term ``managed care 
     arrangement'' means, with respect to an arrangement under a 
     group health plan or under health insurance coverage, 
     providers who have entered into an agreement under the 
     arrangement under which such providers are obligated to 
     provide items and services covered under the arrangement to 
     individuals covered under the plan or who have such coverage.
       (B) Provider network.--The term ``provider network'' means, 
     with respect to a group health plan or health insurance 
     coverage, providers who have entered into an agreement 
     described in subparagraph (A) under a managed care 
     arrangement.
       (12) Multiple employer welfare arrangement.--The term 
     ``multiple employer welfare arrangement'' shall have the 
     meaning applicable under section 3(40) of the Employee 
     Retirement Income Security Act of 1974.
       (13) NAIC.--The term ``NAIC'' means the National 
     Association of Insurance Commissioners.
       (14) Options.--
       (A) Fee-for-service option.--Standard coverage is 
     considered to provide a ``fee-for-service option'' if 
     benefits with respect to the covered items and services in 
     the coverage are made available for such items and services 
     provided through any lawful provider of such covered items 
     and services.
       (B) Managed care option.--Standard coverage is considered 
     to provide a ``managed care option'' if benefits with respect 
     to the covered items and services in the coverage are made 
     available exclusively through a managed care arrangement, 
     except in the case of emergency services and as otherwise 
     required under law.
       (C) Point-of-service option.--Standard coverage is 
     considered to provide a ``point-of-service option'' if the 
     benefits with respect to covered items and services in the 
     coverage are made available principally through a managed 
     care arrangement, with the choice of the enrollee to obtain 
     such benefits for items and services provided through any 
     lawful provider of such covered items and services. The 
     coverage may provide for different cost sharing schedules 
     based on whether the items and services are provided through 
     such an arrangement or outside such an arrangement.
       (15) Qualified health coverage.--The term ``qualified 
     health coverage'' has the meaning given such term in section 
     1101.
       (16) Small group market.--The term ``small group market'' 
     means the insurance market offered to small employers seeking 
     health insurance coverage on behalf of their employees (and 
     their dependents).
       (17) Standard coverage.--The term ``standard coverage'' 
     means coverage provided consistent with section 1102.
       (18) State commissioner of insurance.--The term ``State 
     commissioner of insurance'' includes a State superintendent 
     of insurance.

     SEC. 1904. DEFINITIONS RELATING TO RESIDENCE AND IMMIGRATION 
                   STATUS.

       Except as otherwise provided, for purposes of this Act:
       (1) Alien permanently residing in the united states under 
     color of law.--The term ``alien permanently residing in the 
     United States under color of law'' means an alien lawfully 
     admitted for permanent residence (within the meaning of 
     section 101(a)(20) of the Immigration and Nationality Act), 
     and includes any of the following (such status not having 
     changed):
       (A) An alien who is admitted as a refugee under section 207 
     of the Immigration and Nationality Act.
       (B) An alien who is granted asylum under section 208 of 
     such Act.
       (C) An alien whose deportation is withheld under section 
     243(h) of such Act.
       (D) An alien whose deportation is suspended pursuant to 
     section 244 of such Act.
       (E) An alien who is granted conditional entry pursuant to 
     section 203(a)(7) of such Act as in effect before April 1, 
     1980.
       (F) An alien who is admitted for temporary residence under 
     section 210, 210A, or 245A of such Act.
       (E) An alien who is within a class of aliens lawfully 
     present in the United States pursuant to any other provision 
     of such Act, if (i) the Attorney General determines that the 
     continued presence of such class of aliens serves a 
     humanitarian or other compelling public interest, and (ii) 
     the Secretary determines that such interest would be further 
     served by treating each such alien within such class as an 
     ``legal permanent resident'' for purposes of this Act or who 
     has been granted extended voluntary departure as a member of 
     a nationality group.
       (F) An alien who is the spouse or unmarried child under 21 
     years of age of a citizen of the United States, or the parent 
     of such a citizen if the citizen is over 21 years of age, and 
     with respect to whom an application for adjustment to lawful 
     permanent residence is pending.
       (G) An alien within such other classification of permanent 
     resident aliens as the Secretary may establish by regulation.
       (2) Long-term nonimmigrant.--The term ``long-term 
     nonimmigrant'' means a nonimmigrant described in subparagraph 
     (E), (H), (I), (K), (L), (N), (O), (Q), or (R) of section 
     101(a)(15) of the Immigration and Nationality Act.
       (3) Qualifying individual.--The term ``qualifying 
     individual'' means, an individual who is a resident of the 
     United States, who is not a prisoner, and is--
       (A) a citizen or national of the United States;
       (B) an alien permanently residing in the United States 
     under color of law (as defined in paragraph (1)); or
       (C) a long-term nonimmigrant (as defined in paragraph (2)).

     SEC. 1905. EFFECTIVE DATES.

       The requirements of this title shall apply with respect 
     to--
       (1) group health plans for plan years beginning on or after 
     January 1, 1997, and
       (2) carriers (with respect to coverage other than under a 
     group health plan) as of January 1, 1997.
           TITLE II--REMOVAL OF FINANCIAL BARRIERS TO ACCESS

                       table of contents of title

           TITLE II--REMOVAL OF FINANCIAL BARRIERS TO ACCESS

    Subtitle A--Tax Deductibility for Individuals and Self-Employed

Sec. 2101. Deduction for health insurance costs of self-employed 
              individuals increased and made permanent.
Sec. 2102. Deduction for health insurance costs of individuals who are 
              not self-employed.

          Subtitle B--Low Income Subsidies and Medicaid Reform

Sec. 2100. Description of transition from current medicaid system to 
              new acute care low-income assistance program.

   Part 1--Premium Subsidy and Supplemental Benefit Programs for Low-
                           income Individuals

Sec. 2101. State premium subsidy programs.

 ``TITLE XXI--STATE PREMIUM AND COST-SHARING SUBSIDY PROGRAMS FOR LOW-
  INCOME INDIVIDUALS; STATE SUPPLEMENTAL BENEFITS PROGRAMS; FINANCING 
                           FAILSAFE MECHANISM

       ``Part A--State Premium and Cost-sharing Subsidy Programs

``Sec. 2101. Establishment of State programs.
``Sec. 2102. Eligibility.
``Sec. 2103. Premium and cost-sharing assistance.
``Sec. 2104. Eligibility determinations.
``Sec. 2105. End-of-year reconciliation for premium assistance.
``Sec. 2106. Payments to States.
``Sec. 2107. Health care assurance trust fund.
``Sec. 2108. Requirement of State maintenance-of-effort payments.
``Sec. 2109. Definitions and determinations of income.

             ``Part B--State Supplemental Benefits Programs

``Sec. 2131. Establishment of State supplemental benefits programs.
``Sec. 2132. Eligibility.
``Sec. 2133. Scope and provision of benefits; benefits administration.
``Sec. 2134. Payments to States.
``Sec. 2135. Limitation on payments to States.
``Sec. 2136. State maintenance of effort requirement.

                 ``Part C--Financing Failsafe Mechanism

``Sec. 2151. Financing failsafe mechanism.

                   Part 2--Immediate Medicaid Reforms

Sec. 2111. Modification of Federal requirements to allow States more 
              flexibility in contracting for coordinated care services 
              under medicaid.
Sec. 2112. Continuation of State medicaid eligibility categories.

 Part 3--Integration of AFDC and Non-cash Medicaid Beneficiaries Into 
                     State Premium Subsidy Program

Sec. 2121. Division of medicaid benefits into 2 groups; requirement for 
              integration of AFDC recipients and non-cash medicaid 
              beneficiaries into State premium subsidy programs.
Sec. 2122. 25 percent reduction in amount of payment adjustments for 
              disproportionate share hospitals.

  Subtitle C--Report and Recommendations on Health Coverage and Access

Sec. 2201. Objective of full access and coverage.
Sec. 2202. Report and recommendations on achievement of objective for 
              health coverage and access.
    Subtitle A--Tax Deductibility for Individuals and Self-Employed

     SEC. 2101. DEDUCTION FOR HEALTH INSURANCE COSTS OF SELF-
                   EMPLOYED INDIVIDUALS INCREASED AND MADE 
                   PERMANENT.

       (a) In General.--Paragraph (1) of section 162(l) of the 
     Internal Revenue Code of 1986 (relating to special rules for 
     health insurance costs of self-employed individuals) is 
     amended by striking ``25 percent'' and inserting ``the 
     applicable percentage''.
       (b) Deduction Made Permanent; Applicable Percentage.--
     Paragraph (6) of section 162(l) of such Code is amended to 
     read as follows:
       ``(6) Applicable percentage.--For purposes of paragraph 
     (1)--

      In the case of taxable                                           
        years beginning in                               The applicable
        calendar year:                                   percentage is:
        1996, 1997, or 1998..................................25 percent
        1999.................................................50 percent
        2000 or thereafter...............................100 percent.''

       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     1995.

     SEC. 2102. DEDUCTION FOR HEALTH INSURANCE COSTS OF 
                   INDIVIDUALS WHO ARE NOT SELF-EMPLOYED.

       (a) In General.--Part VII of subchapter B of chapter 1 of 
     the Internal Revenue Code of 1986 (relating to additional 
     itemized deductions) is amended by redesignating section 220 
     as section 221 and by inserting after section 219 the 
     following new section:

     ``SEC. 220. HEALTH INSURANCE COSTS OF INDIVIDUALS WHO ARE NOT 
                   SELF-EMPLOYED.

       ``(a) In General.--In the case of an individual who is not 
     a self-employed individual (as defined in section 401(c)(1)), 
     there shall be allowed as a deduction an amount equal to 25 
     percent of the amount paid during the taxable year for 
     insurance which constitutes medical care for the taxpayer, 
     his spouse, and dependents.
       ``(b) Coordination with Deduction for Self-employed 
     Individuals.--The amount which would (but for this paragraph) 
     be allowed as a deduction under subsection (a) for the 
     taxable year shall be reduced (but not below zero) by the 
     amount (if any) allowed as a deduction under section 162(l) 
     for such taxable year.
       ``(c) Other Coverage.--Subsection (a) shall not apply to 
     any taxpayer for any calendar month for which the taxpayer is 
     eligible to participate in any subsidized health plan 
     maintained by any employer of the taxpayer or of the spouse 
     of the taxpayer.
       ``(d) Coordination With Medical Deduction, Etc.--Any amount 
     paid by a taxpayer for insurance to which subsection (a) 
     applies shall not be taken into account in computing the 
     amount allowable to the taxpayer as a deduction under section 
     213(a).''
       (b) Deduction Allowed Whether or Not Taxpayer Itemizes 
     Other Deductions.--Subsection (a) of section 62 of such Code 
     is amended by adding at the end the following new paragraph:
       ``(16) Health insurance costs.--The deduction allowed by 
     section 220.''
       (c) Clerical Amendment.--The table of sections for part VII 
     of subchapter B of chapter 1 of such Code is amended by 
     striking the last item and inserting the following new items:

``Sec. 220. Health insurance costs of individuals who are not self-
              employed.
``Sec. 221. Cross reference.''

       (d) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     1995.
          Subtitle B--Low Income Subsidies and Medicaid Reform

     SEC. 2100. DESCRIPTION OF TRANSITION FROM CURRENT MEDICAID 
                   SYSTEM TO NEW ACUTE CARE LOW-INCOME ASSISTANCE 
                   PROGRAM.

       This subtitle provides for a transition from the current 
     medicaid system to a new system of acute care low-income 
     assistance through the following:
       (1) Immediate medicaid reforms.--During 1995, 1996, and 
     1997, States are permitted to enroll medicaid recipients 
     under coordinated care arrangements, but are restricted from 
     eliminating eligibility categories currently in effect.
       (2) Substitution of new premium and cost-sharing assistance 
     program for afdc and non-cash beneficiaries.--Beginning 
     January 1, 1998--
       (A) States are required to establish a new premium 
     assistance program under title XXI of the Social Security 
     Act, and
       (B) with respect to AFDC and non-cash medicaid 
     beneficiaries and other low-income individuals--
       (i) States are required to provide for premium assistance 
     for standard benefits through that program and additional 
     benefits through a supplemental benefits grant program, and
       (ii) States will no longer provide such individuals with 
     medicaid coverage for standard acute care services.

   PART 1--PREMIUM SUBSIDY AND SUPPLEMENTAL BENEFIT PROGRAMS FOR LOW-
                           INCOME INDIVIDUALS

     SEC. 2101. STATE PREMIUM SUBSIDY PROGRAMS.

       (a) Medicaid State Plan Requirement.--
       (1) In general.--Section 1902(a) of the Social Security Act 
     (42 U.S.C. 1396a(a)), as amended by section 6111(1), is 
     amended by inserting after paragraph (61) the following new 
     paragraph:
       ``(62) provide for a State program furnishing premium 
     subsidies for low-income individuals in accordance with part 
     A of title XXI.''.
       (2) Effective Date.--The requirement of section 1902(a)(62) 
     of the Social Security Act shall apply to Federal financial 
     participation for calendar quarters beginning on or after 
     January 1, 1998.
       (b) Requirements for State Premium Subsidy Programs for 
     Low-Income Individuals.--Such Act is further amended by 
     adding at the end the following new title:

 ``TITLE XXI--STATE PREMIUM AND COST-SHARING SUBSIDY PROGRAMS FOR LOW-
  INCOME INDIVIDUALS; STATE SUPPLEMENTAL BENEFITS PROGRAMS; FINANCING 
                           FAILSAFE MECHANISM

       ``Part A--State Premium and Cost-Sharing Subsidy Programs

     ``SEC. 2101. ESTABLISHMENT OF STATE PROGRAMS.

       ``(a) In General.--As a requirement under section 
     1902(a)(62), effective January 1, 1998, each State shall 
     establish and maintain a premium and cost-sharing subsidy 
     program (in this title referred to as a `State subsidy 
     program') that provides for--
       ``(1) premium assistance described in section 2103 to 
     premium subsidy eligible individuals described in section 
     2102 in accordance with this part, and
       ``(2) State maintenance-of-effort contributions in 
     accordance with section 2108.
       ``(b) Availability of Funds.--Each State with a State 
     subsidy program approved under this part is entitled, for 
     calendar quarters beginning on or after January 1, 1998, to 
     payment under section 2106.
       ``(c) Approval of State Programs.--The Secretary may not 
     approve a State subsidy program unless the State has 
     submitted a detailed description of the form and manner in 
     which it will carry out the program and the Secretary finds 
     that the program meets the applicable requirements of this 
     part.
       ``(d) Designation of State Agency.--A State may designate 
     any appropriate State agency to administer the state subsidy 
     program.

     ``SEC. 2102. ELIGIBILITY.

       ``(a) Assistance.--
       ``(1) Premium subsidy.--Each premium subsidy eligible 
     individual (as defined in subsection (b)) is entitled to 
     premium assistance under section 2103(a)(1).
       ``(2) Cost-sharing subsidy.--Each cost-sharing subsidy 
     eligible individual (as defined in subsection (c)) is 
     entitled to cost-sharing assistance described in section 
     2103(a)(2).
       ``(b) Premium Subsidy Eligible Individual Defined.--
       ``(1) In general.--In this title, subject to the succeeding 
     provisions of this section and part C, the term `premium 
     subsidy eligible individual' means a individual who has been 
     determined under section 2104 to have family modified 
     adjusted income below the following applicable percentage of 
     the applicable poverty line (for a family of the size 
     involved):

                                                             Applicable
``Calendar year:                                 applicable percentage:
  1998............................................................100  
  1999............................................................115  
  2000............................................................130  
  2001............................................................145  
  2002............................................................160  
  2003............................................................175  
  2004............................................................200  

       ``(2) Special rule for children.--In this title, subject to 
     the succeeding provisions of this section and part C, the 
     term `premium subsidy eligible individual' includes a child 
     under 18 years of age who has been determined under section 
     2104 to have family modified adjusted income below the 
     following applicable percentage of the applicable poverty 
     line (for a family of the size involved):

                                                             Applicable
``Calendar year:                                 applicable percentage:
  1998............................................................140  
  1999............................................................150  
  2000............................................................160  
  2001............................................................170  
  2002............................................................180  
  2003............................................................200  
  2004............................................................240  

       ``(3) Special rule for pregnant women.--In this title, 
     subject to the succeeding provisions of this section and part 
     C, the term `premium subsidy eligible individual' includes a 
     pregnant woman who has been determined under section 2104 to 
     have family modified adjusted income below the following 
     applicable percentage of the applicable poverty line (for a 
     family of the size involved):

                                                             Applicable
``Calendar year:                                 applicable percentage:
  1998............................................................140  
  1999............................................................150  
  2000............................................................160  
  2001............................................................170  
  2002............................................................180  
  2003............................................................200  
  2004............................................................240  

       ``(4) Adjustment of percentages based on failsafe 
     mechanism.--The percentages specified in paragraphs (1), (2), 
     and (3) are subject to adjustment under part C of this title.
       ``(c) Cost-Sharing Subsidy Eligible Individual Defined.--
       ``(1) In general.--In this title, subject to the succeeding 
     provisions of this section and part C, the term `cost-sharing 
     subsidy eligible individual' means an individual who has been 
     determined under section 2104 to have family modified 
     adjusted income below 100 percent of the applicable poverty 
     line (for a family of the size involved).
       ``(2) Adjustment of percentage based on failsafe 
     mechanism.--The percentage specified in paragraph (1) shall 
     in no case be greater than the percentage specified in 
     subsection (b).
       ``(d) Exclusion of Certain Individuals.--
       ``(1) In general.--The terms `premium subsidy eligible 
     individual' and `cost-sharing subsidy eligible individual' do 
     not include, with respect to a month, any of the following 
     individuals:
       ``(A) Medicare beneficiary.--An individual who is entitled 
     to benefits under part A or B of title XVIII for the month.
       ``(B) SSI recipient.--An individual who is an SSI recipient 
     (as defined in paragraph (3)) for the month.
       ``(C) Inmates.--An individual who as of the first day of 
     the month is an inmate of a public institution (except as a 
     patient of a medical institution).
       ``(D) Certain aliens.--An individual who is neither a 
     citizen or national of the United States or an alien 
     permanently residing in the United States under color of law 
     (as defined in paragraph (2).
       ``(E) Nonresidents.--An individual who is not residing in 
     the United States.
       ``(2) Alien permanently residing in the united states under 
     color of law.--The term `alien permanently residing in the 
     United States under color of law' means an alien lawfully 
     admitted for permanent residence (within the meaning of 
     section 101(a)(20) of the Immigration and Nationality Act), 
     and includes any of the following:
       ``(A) An alien who is admitted as a refugee under section 
     207 of the Immigration and Nationality Act.
       ``(B) An alien who is granted asylum under section 208 of 
     such Act.
       ``(C) An alien whose deportation is withheld under section 
     243(h) of such Act.
       ``(D) An alien who is admitted for temporary residence 
     under section 210, 210A, or 245A of such Act.
       ``(E) An alien who has been paroled into the United States 
     under section 212(d)(5) of such Act for an indefinite period 
     or who has been granted extended voluntary departure as a 
     member of a nationality group.
       ``(F) An alien who is the spouse or unmarried child under 
     21 years of age of a citizen of the United States, or the 
     parent of such a citizen if the citizen is over 21 years of 
     age, and with respect to whom an application for adjustment 
     to lawful permanent residence is pending.
       ``(3) SSI recipient.--In this subsection, the term `SSI 
     recipient' means, for a month, an individual--
       ``(A) with respect to whom supplemental security income 
     benefits are being paid under title XVI for the month,
       ``(B) who is receiving a supplemental payment under section 
     1616 or under section 212 of Public Law 93-66 for the month,
       ``(C) who is receiving monthly benefits under section 
     1619(a) (whether or not pursuant to section 1616(c)(3)) for 
     the month, or
       ``(D) who is treated under section 1619(b) as receiving 
     supplemental security income benefits in a month for purposes 
     of title XIX.
       ``(e) Protection of Current Beneficiaries.--The term 
     `premium subsidy eligible individual' also includes, with 
     respect to a State as of December 31, 1997, an individual 
     who--
       ``(1) is not excluded under subsection (d),
       ``(2) is entitled to receive medical assistance under the 
     State plan under title XIX (and for which Federal financial 
     participation was available) as of December 31, 1997, and
       ``(3) would remain eligible for medical assistance under 
     the State plan under title XIX but for amendments made by the 
     Bipartisan Health Care Reform Act of 1994.

     ``SEC. 2103. PREMIUM AND COST-SHARING ASSISTANCE.

       ``(a) In General.--
       ``(1) Premium assistance.--The premium assistance under a 
     State subsidy program shall be in the form of a premium 
     reduction certificate with an amount equal to the premium 
     assistance computed under subsection (b). A carrier providing 
     health insurance coverage or a group health plan that is 
     tendered such a certificate with respect to an individual 
     shall reduce the amount of the premium by the amount of the 
     certificate. For purposes of this part, VA health coverage 
     (as defined in section 1801(2) of title 38, United States 
     Code) provided by the Department of Veterans Affairs shall be 
     considered to be health insurance coverage provided by a 
     carrier.
       ``(2) Cost-sharing assistance.--The cost-sharing assistance 
     under a State subsidy program shall be in the form of a cost-
     sharing reduction certificate (or other means). A carrier 
     providing health insurance coverage or a group health plan 
     that is tendered such a certificate with respect to an 
     individual shall reduce the cost-sharing otherwise imposed 
     with respect to health coverage to amounts that are nominal 
     (as specified by the State, consistent with the regulations 
     established to carry out section 1916(a)(3)).
       ``(3) Consolidated and electronic certificates.--Nothing in 
     this section shall be construed as preventing a State from--
       ``(A) in the case of an individual who is both a premium 
     subsidy eligible individual and a cost-sharing eligible 
     individual, from consolidating the premium and cost-sharing 
     certificates of the individual, and
       ``(B) providing premium and cost-sharing certificates 
     through electronic or other means.
       ``(b) Amount of Premium Assistance.--
       ``(1) In general.--Except as provided in paragraph (4), the 
     amount of premium assistance for a month for a premium 
     subsidy eligible individual is the lesser of--
       ``(A) the premium assistance amount determined under 
     paragraph (2); or
       ``(B) the amount of the premium for qualified standard 
     health coverage provided the individual,

     reduced by the amount of any contribution made by an employer 
     with respect to coverage of the individual.
       ``(2) Premium assistance amount determined.--
       ``(A) In general.--The premium assistance amount determined 
     under this paragraph is an amount equal to the subsidy 
     percentage specified in paragraph (3) multiplied by \1/12\ of 
     the lesser of--
       ``(i) the annual premium for qualified standard health 
     coverage provided the individual, or
       ``(ii) the weighted average annual premium for the 
     individual's class of enrollment (determined in accordance 
     with subparagraph (B)) for standard health insurance coverage 
     offered in the geographic area (identified under 1021(c) of 
     the Bipartisan Health Care Reform Act of 1994) in the 
     individual and small group market in which the individual 
     resides.
       ``(B) Determination of weighted average annual premium.--
     For purposes of subparagraph (A)(ii), the weighted average 
     annual premium for a class of enrollment for coverage 
     described in subparagraph (A)(i) shall be based on the number 
     of families and individuals covered in the class and area 
     involved.
       ``(C) Class of enrollment.--In this title, the term `class 
     of enrollment' means the classes described in section 
     1021(a)(3) of the Bipartisan Health Care Reform Act of 1994.
       ``(3) Subsidy percentage.--For purposes of paragraph (2), 
     the term `subsidy percentage' means 100 percent reduced (but 
     not below zero) by the number of percentage points (rounded 
     to the nearest whole number) by which such individual's 
     family income (expressed as a percent) exceeds 100 percent of 
     the poverty line.
       ``(c) Payments of Assistance.--
       ``(1) Premium assistance.--
       ``(A) In general.--The State issuing a premium assistance 
     certificate shall, upon tender to the State of such 
     certificate by the carrier or group health plan providing 
     coverage, pay the carrier or plan the amount of the 
     certificate.
       ``(B) Timing of payments.--Payments under this paragraph 
     shall commence in the first month during which the individual 
     obtains qualified standard health coverage and is determined 
     under section 2104 to be a premium subsidy eligible 
     individual.
       ``(C) Treatment of surpluses and deficits.--If the premium 
     for coverage is greater than the amount of the premium 
     assistance for an individual, the individual is responsible 
     for payment of any difference. If the premium for coverage is 
     less than the amount of the premium assistance for an 
     individual, the difference shall not be paid to the 
     individual or the carrier or plan but shall revert to the 
     Federal Government.
       ``(2) Cost-sharing assistance.--
       ``(A) In general.--The State issuing a cost-sharing 
     assistance certificate shall, upon presentation to the State 
     of evidence of such certificate by the carrier or group 
     health plan providing coverage and evidence of cost-sharing 
     amounts otherwise incurred for which a reduction is available 
     under the certificate, pay the carrier or plan the amount of 
     the reduction certificate.
       ``(B) Timing of payments.--Payments under this paragraph 
     shall commence in the first month during which the individual 
     obtains qualified standard health coverage and is determined 
     under section 2104 to be a premium subsidy eligible 
     individual.
       ``(3) Administrative errors.--A State is financially 
     responsible for premium or cost-sharing assistance paid based 
     on an eligibility determination error to the extent the 
     State's error rate for eligibility determinations exceeds a 
     maximum permissible error rate to be specified by the 
     Secretary.

     ``SEC. 2104. ELIGIBILITY DETERMINATIONS.

       ``(a) In General.--The Secretary shall promulgate 
     regulations specifying requirements for State subsidy 
     programs with respect to determining eligibility for premium 
     and cost-sharing assistance, including requirements with 
     respect to--
       ``(1) application procedures;
       ``(2) information verification procedures;
       ``(3) timeliness of eligibility determinations;
       ``(4) procedures for applicants to appeal adverse 
     decisions; and
       ``(5) any other matters determined appropriate by the 
     Secretary.
       ``(b) Specifications for Regulations.--The regulations 
     promulgated by the Secretary under subsection (a) shall 
     include the following requirements:
       ``(1) Frequency of applications.--A State program shall 
     provide that an individual may file an application for 
     assistance with an agency designated by the State at any 
     time, in person.
       ``(2) Application form.--A State program shall provide for 
     the use of an application form developed by the Secretary 
     under subsection (c).
       ``(3) Distribution of Applications.--A State program shall 
     distribute applications for assistance through employers, 
     health plan purchasing organizations, and appropriate public 
     agencies.
       ``(4) Convenient location to submit applications.--A State 
     program shall provide convenient locations for premium 
     subsidy eligible individuals to apply for premium and cost-
     sharing assistance.
       ``(4) Requirement to submit revised application.--A State 
     program shall, in accordance with regulations promulgated by 
     the Secretary, require individuals to submit revised 
     applications during a year to reflect changes in estimated 
     family incomes, including changes in employment status of 
     family members, during the year. The State shall revise the 
     amount of any premium and cost-sharing assistance based on 
     such a revised application.
       ``(5) AFDC applicants.--A State program shall include a 
     procedure under which individuals applying for benefits under 
     title IV shall have an opportunity to apply for assistance 
     under this part in connection with such application.
       ``(6) Verification.--A State program shall provide for 
     verification of the information supplied in applications 
     under this part. Such verification may include examining 
     return information disclosed to the State for such purpose 
     under section 6103(l)(15) of the Internal Revenue Code of 
     1986.
       ``(c) Administration of State Programs.--
       ``(1) In general.--The Secretary shall establish standards 
     for States operating programs under this part which ensure 
     that such programs are operated in a uniform manner with 
     respect to application procedures, data processing systems, 
     and such other administrative activities as the Secretary 
     determines to be necessary.
       ``(2) Application forms.--The Secretary shall develop an 
     application form for assistance which shall--
       ``(A) be simple in form and understandable to the average 
     individual;
       ``(B) require the provision of information necessary to 
     make a determination as to whether an individual is a premium 
     or cost-sharing subsidy eligible individual including a 
     declaration of estimated income by the individual based, at 
     the election of the individual--
       ``(i) on multiplying by a factor of 4 the individual's 
     family income for the 3-month period immediately preceding 
     the month in which the application is made, or
       ``(ii) on estimated income for the entire year for which 
     the application is submitted; and
       ``(C) require attachment of such documentation as deemed 
     necessary by the Secretary in order to ensure eligibility for 
     assistance.
       ``(3) Outreach activities.--A State operating a program 
     under this part shall conduct such outreach activities as the 
     Secretary determines appropriate.
       ``(d) Effectiveness of Eligibility for Premium and Cost-
     Sharing Assistance.--A determination by a State that an 
     individual is a premium or cost-sharing subsidy eligible 
     individual shall be effective for the calendar year for which 
     such determination is made unless a revised application 
     submitted under subsection (b)(4) indicates that an 
     individual is no longer eligible for premium or cost-sharing 
     assistance.
       ``(e) Penalties for Material Misrepresentations.--
       ``(1) In general.--Any individual who knowingly makes a 
     material misrepresentation of information in an application 
     for assistance under this part shall be liable to the Federal 
     Government for the amount any premium assistance and cost-
     sharing assistance received by an individual on the basis of 
     a misrepresentation and interest on such amount at a rate 
     specified by the Secretary, and shall, in addition, be liable 
     to the Federal Government for $2,000 or, if greater, 3 times 
     the amount any premium assistance and cost-sharing assistance 
     provided on the basis of a misrepresentation.
       ``(2) Collection of penalty amounts.--A State which 
     receives an application for assistance with respect to which 
     a material misrepresentation has been made shall collect the 
     penalty amount required under paragraph (1) and submit 50 
     percent of such amount to the Secretary in a timely manner.

     ``SEC. 2105. END-OF-YEAR RECONCILIATION FOR PREMIUM 
                   ASSISTANCE.

       ``(a) In General.--
       ``(1) Requirement to file statement.--An individual who 
     received premium assistance under this part from a State for 
     any month in a calendar year shall file with the State an 
     income reconciliation statement to verify the individual's 
     family income for the year. Such a statement shall be filed 
     at such time, and contain such information, as the State may 
     specify in accordance with regulations promulgated by the 
     Secretary.
       ``(2) Notice of requirement.--A State shall provide a 
     written notice of the requirement under paragraph (1) at the 
     end of the year to an individual who received premium 
     assistance under this part from such State in any month 
     during the year.
       ``(b) Reconciliation of Premium Assistance Based on Actual 
     Income.--
       ``(1) In general.--Based on and using the income reported 
     in the reconciliation statement filed under subsection (a) 
     with respect to an individual, the State shall compute the 
     amount of premium assistance that should have been provided 
     under this part with respect to the individual for the year 
     involved.
       ``(2) Overpayment of assistance.--If the total amount of 
     the premium assistance provided was greater than the amount 
     computed under paragraph (1), the excess amount shall be 
     treated as an underpayment of a tax imposed by chapter 1 of 
     the Internal Revenue Code of 1986 and paid by the Secretary 
     of the Treasury to the taxpayer involved.
       ``(3) Underpayment of assistance.--If the total amount of 
     the premium assistance provided was less than the amount 
     computed under paragraph (1), the amount of the difference 
     shall be treated as an overpayment of tax imposed by such 
     chapter, or in the event the taxpayer involved is entitled to 
     a refund of such a tax, subject to the provisions of section 
     6402(d) of such Code.
       ``(c) Verification.--Each State may use such information as 
     it has available to verify income of individuals with 
     applications filed under this part, including return 
     information disclosed to the State for such purpose under 
     section 6103(l)(15) of the Internal Revenue Code of 1986.
       ``(d) Penalties for Failure to File.--In the case of an 
     individual who is required to file a statement under this 
     section in a year who fails to file such a statement by such 
     date as the Secretary shall specify in regulations, the 
     entire amount of the premium assistance provided in such year 
     shall be considered an excess amount under subsection (b)(2) 
     and such individual shall not be eligible for premium 
     assistance under this part until such statement is filed. A 
     State, using rules established by the Secretary, shall waive 
     the application of this subsection if the individual 
     establishes, to the satisfaction of the State under such 
     rules, good cause for the failure to file the statement on a 
     timely basis.
       ``(e) Penalties for False Information.--Any individual who 
     provides false information in a statement filed under 
     subsection (a) is subject to the same penalties as are 
     provided under section 2104(e) for a misrepresentation of 
     material fact described in such section.
       ``(f) No Reconciliation for Cost-Sharing Reductions.--No 
     reconciliation statement is required under this section with 
     respect to cost-sharing assistance.

     ``SEC. 2106. PAYMENTS TO STATES.

       ``(a) In General.--
       ``(1) Payments for premium and cost-sharing assistance.--
     Subject to paragraph (3) and section 2151, the Secretary 
     shall provide for payment to each State operating a State 
     subsidy program in an amount equal to--
       ``(A) the sum of--
       ``(i) the amount of premium assistance paid on behalf of 
     premium subsidy eligible individuals, and
       ``(ii) the amount of the cost-sharing assistance paid on 
     behalf of cost-sharing subsidy eligible individuals; less
       ``(B) the amount of any maintenance-of-effort payments that 
     the State has failed to pay under section 2108.

     Such payments shall be made at such time and in such form as 
     provided in regulations promulgated by the Secretary, based 
     on the form and manner in which payments are made under 
     section 1903.
       ``(2) Matching payments for administrative expenses.--
       ``(A) In general.--Subject to section 2151 and 
     subparagraphs (B) and (C), the Secretary shall pay to each 
     State operating a State subsidy program, for each quarter 
     beginning with the quarter commencing January 1, 1998, an 
     amount equal to 50 percent of the amounts expended during the 
     quarter as found necessary by the Secretary for the proper 
     and efficient administration of the State subsidy program.
       ``(B) Limitation.--The amount of funds which the Secretary 
     is otherwise obligated to pay a State during a quarter under 
     subparagraph (A) shall not exceed 1.5 percent of the total 
     expenditures under the State subsidy program in the quarter.
       ``(C) Exception for failure to establish and maintain risk 
     adjustment mechanism.--No amounts are payable to a State 
     under subparagraph (A) if the State has failed to establish 
     and maintain a risk adjustment mechanism in accordance with 
     section 1023(b) of the Bipartisan Health Care Reform Act of 
     1994.
       ``(3) Limitation.--The total amount of payments made under 
     paragraph (1) with respect to a State for all quarters in a 
     year may not exceed the amount of the limitation that would 
     be imposed under section 2135 with respect to Federal 
     payments to the State for the quarter if any reference in 
     such section to supplemental benefits were treated as a 
     reference to core benefits.
       ``(4) State entitlement.--This subsection constitutes 
     budget authority in advance of appropriations Acts, and 
     represents the obligation of the Federal Government to 
     provide payments to States under this part in accordance with 
     this subsection.
       ``(b) Funding.--The amount paid to States under subsection 
     (a) shall be paid by the Secretary from the Health Care 
     Assurance Trust Fund (established under section 2107).
       ``(c) Audits.--The Secretary shall conduct regular audits 
     of the activities under the State programs conducted under 
     this part.

     ``SEC. 2107. HEALTH CARE ASSURANCE TRUST FUND.

       ``(a) Creation of Trust Fund.--There is established in the 
     Treasury of the United States a trust fund to be known as the 
     `Health Care Assurance Trust Fund' (in this section referred 
     to as the `Trust Fund'), consisting of such amounts as may be 
     appropriated or credited to it under this section.
       ``(b) Transfers to the Trust Fund.--
       ``(1) In general.--There are hereby appropriated to the 
     Trust Fund--
       ``(A) the amount determined by the Secretary, after 
     consultation with the Secretary of Health and Human Services, 
     to be equal to the sum of--
       ``(i) the decrease in Federal expenditures under title XIX 
     of the Social Security Act by reason of the provisions of, 
     and the amendments made by, the Bipartisan Health Care Reform 
     Act of 1994, and
       ``(ii) any reduction in payments to States under such title 
     by reason of the State maintenance-of-effort requirement 
     under section 2108, and
       ``(C) amounts equivalent to the following amounts received 
     in the Treasury:
       ``(i) Criminal fines imposed and collected, and amounts 
     resulting from the forfeiture of property, in cases involving 
     a Federal health care offense (as defined in section 1128D of 
     the Social Security Act).
       ``(ii) Penalties and damages imposed and collected under 
     the False Claims Act (31 U.S.C. 3729 et seq.), in cases 
     involving claims related to the provision of health care 
     items and services (other than funds awarded to a relator or 
     for restitution).
       ``(iii) Administrative penalties and assessments imposed 
     and collected under section 1128A of the Social Security Act 
     (except as otherwise provided by law).
       ``(2) Transfers from other trust funds.--The Secretary of 
     Health and Human Services shall transfer each fiscal year to 
     the Trust Fund from the Federal Hospital Insurance Trust Fund 
     and the Federal Supplementary Medical Insurance Trust Fund 
     the amount which the Secretary estimates is equal to the 
     decrease in expenditures in each such trust fund attributable 
     to the provisions of title VI of the Bipartisan Health Care 
     Reform Act of 1994.
       ``(3) Transfers from certain recovered amounts and gifts.--
     The Secretary of Health and Human Services shall transfer 
     each fiscal year to the Trust Fund--
       ``(A) the portion of amounts recovered under section 
     1128A(a) with respect to a qualified health coverage or 
     qualified long-term care policy which is not repaid to the 
     plan or policy, or
       ``(B) any money gifts or bequests made to or on behalf of 
     the United States for allocation to the Trust Fund.
       ``(c) Expenditures.--Amounts in the Trust Fund are 
     appropriated to the Secretary to carry out the health 
     insurance premium assistance program and the cost-sharing 
     grant program established under part B of title XIX of the 
     Social Security Act, and to the extent any such amount is not 
     expended during any fiscal year, such amount shall be 
     available for such purpose for subsequent fiscal years.

     ``SEC. 2108. REQUIREMENT OF STATE MAINTENANCE-OF-EFFORT 
                   PAYMENTS.

       ``(a) In General.--As a condition of payment of amounts to 
     a State under section 2106, each State shall provide for 
     payments to the Secretary, in a form, manner, and time 
     specified by the Secretary, of the maintenance of effort 
     amount computed under subsection (b)(1) for the State. The 
     Secretary shall permit payment of such amounts as an offset 
     against the amounts otherwise payable to the State under 
     section 2106.
       ``(b) Maintenance of Effort Amount.--The maintenance of 
     effort amount computed under this paragraph for a State for a 
     quarter in a year is equal to the product of--
       ``(1) the amount that would be computed as the limit on 
     Federal expenditures under section 2106(a)(3) for the State 
     for the quarter if the FEHBP State rolling increase 
     percentage (as defined in section 2136(b)(2)) were 
     substituted for the FEHBP national rolling increase 
     percentage in section 2135(a)(2)(B) and 2135(b)(1); and
       ``(2) the Federal-to-State conversion factor (specified 
     under section 2135(b)(3)).
       ``(c) Crediting.--Payments made under this section shall be 
     deposited by the Secretary to the credit of the Bipartisan 
     Health Insurance Trust Fund.

     ``SEC. 2109. DEFINITIONS AND DETERMINATIONS OF INCOME.

       ``For purposes of this part:
       ``(1) Qualified standard health plan.--The term `qualified 
     standard health plan' has the meaning given such term in 
     section ____ of the Bipartisan Health Care Reform Act of 
     1994.
       ``(2) Determinations of income.--
       ``(A) Family income.--The term `family income' means, with 
     respect to an individual who--
       ``(i) is not a dependent (as defined in subparagraph (B)) 
     of another individual, the sum of the modified adjusted gross 
     incomes (as defined in subparagraph (D)) for the individual, 
     the individual's spouse, and dependents of the individual; or
       ``(ii) is a dependent of another individual, the sum of the 
     modified adjusted gross incomes for the other individual, the 
     other individual's spouse, and dependents of the other 
     individual.
       ``(B) Dependent.--The term `dependent' shall have the 
     meaning given such term under paragraphs (1) or (2) of 
     section 152(a) of the Internal Revenue Code of 1986.
       ``(C) Special rule for foster children.--For purposes of 
     subparagraph (A), a child who is placed in foster care by a 
     State agency shall not be considered a dependent of another 
     individual.
       ``(D) Modified adjusted gross income.--The term `modified 
     adjusted gross income' means adjusted gross income (as 
     defined in section 62(a) of the Internal Revenue Code of 
     1986)--
       ``(i) determined without regard to sections 135, 162(l), 
     911, 931, and 933 of such Code, and
       ``(ii) increased by--

       ``(I) the amount of interest received or accrued by the 
     individual during the taxable year which is exempt from tax,
       ``(II) the amount of the social security benefits (as 
     defined in section 86(d) of such Code) received during the 
     taxable year to the extent not included in gross income under 
     section 86 of such Code,
       ``(III) the amount of aid to families with dependent 
     children received during the taxable year under part A of 
     title IV to the extent not included in gross income under 
     such Code, and
       ``(IV) the amount of any supplemental security income 
     benefits provided under title XVI.

     The determination under the preceding sentence shall be made 
     without regard to any carryover or carryback.
       ``(3) Medical consumer price index.--The term `medical 
     consumer price index' means the medical care services 
     component of the consumer price index (for urban consumers) 
     as determined by the Bureau of Labor Statistics.
       ``(4) Poverty line.--The term `poverty line' means the 
     income official poverty line (as defined by the Office of 
     Management and Budget, and revised annually in accordance 
     with section 673(2) of the Omnibus Budget Reconciliation Act 
     of 1981) that--
       ``(A) in the case of a family of less than five 
     individuals, is applicable to a family of the size involved; 
     and
       ``(B) in the case of a family of more than four 
     individuals, is applicable to a family of four persons.
       ``(5) Pregnant woman.--The term `pregnant woman' means a 
     woman described in section 1902(l)(1)(A).
       ``(6) Premium.--Any reference to the term `premium' 
     includes a reference to premium equivalence for self-insured 
     plans.
       ``(7) State.--The term `State' means each of the 50 States 
     and the District of Columbia.

             ``Part B--State Supplemental Benefits Programs

     ``SEC. 2131. ESTABLISHMENT OF STATE SUPPLEMENTAL BENEFITS 
                   PROGRAMS.

       ``(a) In General.--Each State shall establish a State 
     supplemental benefits program (in this title referred to as 
     the `State supplemental benefits program') that provides 
     supplemental medical benefits for supplemental benefit 
     eligible individuals.
       ``(b) Availability of Funds.--Each State with a State 
     supplemental benefits program approved under this part is 
     entitled, for calendar quarters beginning on or after January 
     1, 1998, to payment under section 2136.
       ``(c) Approval of State Programs.--The Secretary may not 
     approve a State supplemental benefits program unless the 
     State has submitted a detailed description of the form and 
     manner in which it will carry out the program and the 
     Secretary finds that the program meets the applicable 
     requirements of this part.

     ``SEC. 2132. ELIGIBILITY.

       ``(a) In General.--In this part, the term `supplemental 
     benefit eligible individual' means an individual who, as of 
     the time of provision of supplemental medical benefits, is--
       ``(1) a premium subsidy eligible individual (as defined in 
     section 2102(b)), or
       ``(2) a pregnant woman or child who would be eligible for 
     medical assistance under section 1902(l) or otherwise but for 
     the elimination of coverage under such section.
       ``(b) Protection of Current Beneficiaries.--The term 
     `supplemental benefit eligible individual' also includes, 
     with respect to a State as of December 31, 1997, an 
     individual who--
       ``(1) is not described in section 2102(d),
       ``(2) is entitled to receive medical assistance under the 
     State plan under title XIX (and for which Federal financial 
     participation was available) as of December 31, 1997, and
       ``(3) would remain eligible for medical assistance under 
     the State plan under title XIX but for amendments made by the 
     Bipartisan Health Care Reform Act of 1994.
       ``(c) Construction.--Nothing in this part shall be 
     construed to create an entitlement for supplemental benefit 
     eligible individuals. The provisions of section 2105 
     (relating to reconciliation) shall not apply to any 
     assistance provided under this part.

     ``SEC. 2133. SCOPE AND PROVISION OF BENEFITS; BENEFITS 
                   ADMINISTRATION.

       ``(a) In General.--The supplemental medical benefits that 
     may be made available under a State supplemental benefits 
     program may include benefits included in the supplemental 
     medical benefits group described in section 1932(b)(2).
       ``(b) Coverage of Benefits.--
       ``(1) In general.--Each State supplemental benefits program 
     shall include, in the document submitted to the Secretary 
     describing the program, a description of--
       ``(A) the methods and standards used to select the types, 
     and the amount, duration, and scope, of supplemental medical 
     benefits included in the program and to assure access to, and 
     the quality of, services included in such benefits;
       ``(B) the nondiscriminatory manner or basis under which 
     such benefits are to be made available to and allocated among 
     supplemental benefits eligible individuals;
       ``(C) the manner in which such benefits are coordinated 
     with each other and with benefits provided under qualified 
     health plans for supplemental benefits eligible individuals; 
     and
       ``(D) the manner in which the program will not duplicate 
     benefits available under health insurance plans or other 
     health benefit programs for which supplemental benefit 
     eligible individuals may qualify.
       ``(2) Flexibility in meeting individual needs.--Nothing in 
     paragraph (1) shall be construed as preventing a State 
     supplemental benefits program from varying the benefits 
     available under the program based on individual needs.
       ``(3) Limitation on use of funds for abortions.--None of 
     the funds appropriated to carry out this title shall be 
     expended for any abortion except where the procedure is 
     necessary to save the life of the mother or where the 
     pregnancy is the result of an act of rape or incest.
       ``(c) Payment Methods.--Benefits under a program may be 
     made available in the form of direct provision of services, 
     reimbursement of providers, prepayment to providers or health 
     plans on a capitation basis, reimbursement of supplemental 
     benefit eligible individuals for expenses incurred for 
     expenses included in supplemental medical benefits, or a 
     combination of these methods.
       ``(d) Administration.--
       ``(1) State agency.--Each State supplemental benefits 
     program shall designate the State agency designated under 
     section 2101(d) to administer the State premium and cost-
     sharing assistance program under part A.
       ``(2) Administrative expenditures.--Each State supplemental 
     benefits program shall contain assurances that not more than 
     3 percent of expenditures under the program for all quarters 
     in any fiscal year shall be for administrative costs.
       ``(3) Coordination.--The State supplemental benefits 
     program shall specify how the program--
       ``(A) will be integrated with the State medicaid plan, 
     titles V and XX of the Social Security Act, part A of this 
     title, and any other Federal or State programs that provide 
     services or assistance targeted to supplemental benefit 
     eligible individuals, and
       ``(B) will be coordinated with qualified health plans.
       ``(e) Reports and Information to Secretary; Audits.--Each 
     State supplemental benefits program shall furnish to the 
     Secretary--
       ``(1) such reports, and cooperate with such audits, as the 
     Secretary determines are needed concerning the State's 
     administration of program under this part, including the 
     processing of any claims under the plan, and
       ``(2) such data and information as the Secretary may 
     require in order to carry out the Secretary's 
     responsibilities.
       ``(f) Use of State Funds for Matching.--Each State 
     supplemental benefits program shall provide assurances 
     satisfactory to the Secretary that Federal funds will not be 
     used to provide for the State share of expenditures under 
     this part.

     ``SEC. 2134. PAYMENTS TO STATES.

       ``(a) Matching payments.--Subject to sections 2133(d)(2), 
     2135(a), 2136, and 2151, for each quarter beginning with the 
     quarter commencing January 1, 1996, the Secretary, in 
     accordance with the Cash Management Improvement Act, shall 
     authorize payment to each State with an approved State 
     supplemental benefits program under this part, an amount 
     equal to the sum of--
       ``(1) the Federal medical assistance percentage (as defined 
     in section 1905(b)) of amount demonstrated by State to have 
     been expended under the program during the quarter for 
     supplemental medical benefits for supplemental benefit 
     eligible individuals; and
       ``(2) an amount equal to 50 percent of the remainder of the 
     amounts expended during the quarter as found necessary by the 
     Secretary for the proper and efficient administration of the 
     program.

     This subsection constitutes budget authority in advance of 
     appropriations Acts, and represents the obligation of the 
     Federal Government to provide payments to States under this 
     part in accordance with this subsection.
       ``(b) Payments on Estimates with Retrospective 
     Adjustments.--The method of computing and making payments 
     under this section shall be as follows:
       ``(1) The Secretary shall, prior to the beginning of each 
     quarter, estimate the amount to be paid to the State under 
     subsection (a) for such quarter, based on a report filed by 
     the State containing its estimate of the total sum to be 
     expended in such quarter, and such other information as the 
     Secretary may find necessary.
       ``(2) From the allotment available therefore, the Secretary 
     shall provide for payment of the amount so estimated, reduced 
     or increased, as the case may be, by any sum (not previously 
     adjusted under this section) by which the Secretary finds 
     that the estimate of the amount to be paid the State for any 
     prior period under this section was greater or less than the 
     amount which should have been paid.
       ``(c) Funding.--The amount paid to States under subsection 
     (a) shall be paid by the Secretary from amounts made 
     available under the Health Care Assurance Trust Fund 
     established under section 2107.
       ``(d) Audits.--The Secretary shall conduct regular audits 
     of the activities under the State programs conducted under 
     this title.

     ``SEC. 2135. LIMITATION ON PAYMENTS TO STATES.

       ``(a) Limitation.--
       ``(1) Computation of baseline for calendar year.--The 
     baseline under this paragraph for 1997 is the product of--
       ``(A) \1/4\ of the State's per capita Federal supplemental 
     allotment (determined under subsection (b)) for 1994, 
     increased (on a compounded basis) by the FEHBP national 
     rolling increase percentage for 1995, 1996, and 1997, and
       ``(B) the average monthly number of AFDC recipients and 
     non-cash medicaid beneficiaries in the State in 1997.
       ``(2) Limitation.--
       ``(A) In general.--Subject to section 2151 and paragraph 
     (3), the total amount of payments that may be made to a State 
     under section 2134 for a quarter in a year (beginning with 
     1998) is \1/4\ of the product described in this subparagraph 
     (or paragraph (1)) for the previous year, increased by the 
     supplemental benefit factor under subparagraph (B) for the 
     year.
       ``(B) Supplemental benefit factor described.--For purposes 
     of subparagraph (A), the `supplemental benefit factor' for a 
     year for a State is equal to the sum of--
       ``(i) FEHBP national rolling increase factor (described in 
     paragraph (2)) for the year,
       ``(ii) the annual percentage increase in the population of 
     the State (as estimated by the Secretary), and
       ``(iii)(I) 1 percentage point for the first 4 quarters in 
     which this paragraph applies,
       ``(II) .67 percentage points for the next 4 quarters,
       ``(III) .33 percentage points for the next 4 quarters, and
       ``(IV) 0 percentage points thereafter.
       ``(2) FEHBP national rolling increase percentage.--For 
     purposes of this section, the term `FEHBP national rolling 
     increase percentage' means, for a year, the 5-year average of 
     the annual national percentage increase in the premiums for 
     health plans offered under the Federal Employees Health 
     Benefits Program (under chapter 89 of title 5, United States 
     Code) for the period ending with the previous year. Such 
     increase shall be determined by the Secretary in consultation 
     with the Director of Office of Personnel Management based on 
     the best information available and shall be adjusted to take 
     into account the age distribution in the Federal workforce 
     and to disregard any changes due to changes in the benefit 
     package under such chapter after 1994.
       ``(3) Adjustment for availability of additional funds.--If 
     the Secretary determines for a year that the total amount of 
     the Federal payments under section 2134 for a year for all 
     the States is less than the sum of the limitations for the 
     year for all the States established under paragraph (1), the 
     limitation for each State under this subsection shall be 
     increased in a pro-rata manner by such an amount as will not 
     result in such total Federal payments under section 2134 
     exceeding the sum of such limits for all the States for the 
     year.
       ``(b) Per Capita Federal Supplemental Allotment Defined.--
       ``(1) In general.--For purposes of subsection (a)(1), the 
     `per capita Federal supplemental allotment' for a State for a 
     year is equal to the base per capita allotment (described in 
     paragraph (2)), increased by the FEHBP national rolling 
     increase percentage (as defined in subsection (a)(4)) for the 
     year involved.
       ``(2) Base per capita allotment.--The `base per capita 
     allotment' described in this paragraph, for a State, is--
       ``(A) the baseline Federal medicaid supplemental 
     expenditures (as defined in paragraph (3)) for the State, 
     divided by
       ``(B) the number of AFDC recipients and non-cash medicaid 
     beneficiaries enrolled in the State medicaid plan under title 
     XIX in 1994, as determined under paragraph (4).
       ``(3) Determination of baseline Federal medicaid 
     expenditures.--
       ``(A) In general.--For purposes of paragraph (2)(A), the 
     `baseline medicaid supplemental expenditures' for a State is 
     the amount of Federal payments made under section 1903(a)(1) 
     under the State medicaid plan under title XIX with respect to 
     medical assistance furnished for items and services included 
     in the supplemental medical benefits group (described in 
     section 1932(b)(2)) for AFDC recipients and non-cash medicaid 
     beneficiaries for all calendar quarters in 1994.
       ``(B) Disproportionate share payments not included.--In 
     applying subparagraph (A), payments attributable to section 
     1923 shall not be counted in the amount of payments.
       ``(C) Treatment of disallowances.--The amount determined 
     under this paragraph shall take into account amounts (or an 
     estimate of amounts) disallowed.
       ``(4) Determination of number of afdc recipients and non-
     cash medicaid beneficiaries.--For purposes of paragraph 
     (2)(B), the number of AFDC recipients and non-cash medicaid 
     beneficiaries for a State for 1994 shall be determined based 
     on actual reports submitted by the State to the Secretary. In 
     the case of individuals who were not recipients or 
     beneficiaries for the entire fiscal year, the number shall 
     take into account only the portion of the year in which they 
     were such recipients. The Secretary may audit such reports.
       ``(5) Application to particular items and services.--For 
     purposes of this subsection, in determining the per capita 
     Federal supplemental allotment for a category of items and 
     services (within the supplemental medical benefits group) 
     furnished in a State, there shall be counted only that 
     proportion of such expenditures (determined only with respect 
     to medical assistance furnished to AFDC recipients and non-
     cash medicaid beneficiaries) that were attributable to items 
     and services included in the group (taking into account any 
     limitation on amount, duration, or scope of items and 
     services included in such package).

     ``SEC. 2136. STATE MAINTENANCE OF EFFORT REQUIREMENT.

       ``(a) In General.--Payment to a State under section 2134 
     for a quarter (beginning after 1996) is conditioned upon the 
     State making expenditures for supplemental benefits under 
     this part for AFDC recipients and non-cash beneficiaries 
     equal to at least the maintenance of effort amount computed 
     under subsection (b).
       ``(b) Maintenance of Effort Amount.--
       ``(1) In general.--The maintenance of effort amount 
     computed under this subsection for a State for a quarter in a 
     year is equal to the product of--
       ``(A) the amount that would be computed as the minimum 
     limitation under section 2135 for the State for the quarter 
     (determined without regard to subsection (a)(5)) if the FEHBP 
     State rolling increase percentage (as defined in paragraph 
     (2)) were substituted for the FEHBP national rolling increase 
     percentage in section 2135(a)(2)(B) and 2135(b)(1); and
       ``(B) the Federal-to-State conversion factor (specified 
     under paragraph (3)).
       ``(2) FEHBP state rolling increase percentage.--For 
     purposes of this section, the term `FEHBP State rolling 
     increase percentage' means, for a year with respect to a 
     State, the 5-year average of the annual percentage increase 
     in the premiums for health plans offered under the Federal 
     Employees Health Benefits Program (under chapter 89 of title 
     5, United States Code) for the period ending with the 
     previous year, based upon health plans offered in the State. 
     Such increase shall be determined by the Secretary in 
     consultation with the Director of Office of Personnel 
     Management based on the best information available and shall 
     be adjusted to take into account the age distribution in the 
     Federal workforce (in relation to the State workforce) and to 
     disregard any changes due to changes in the benefit package 
     under such chapter after 1994.
       ``(3) Federal-to-state conversion factor.--For purposes of 
     paragraph (1), the `Federal-to-State conversion factor' for a 
     State is equal to the ratio of--
       ``(A) 1 minus the Federal medical assistance percentage for 
     the State for 1994, to
       ``(B) such Federal medical assistance percentage.

                 ``Part C--Financing Failsafe Mechanism

     ``SEC. 2151. FINANCING FAILSAFE MECHANISM.

       ``(a) Purpose.--
       ``(1) In general.--The purpose of this section is to ensure 
     that the amount of the additional targeted expenditures 
     provided under the Bipartisan Health Care Reform Act of 1994 
     do not exceed the amount of the health care expenditure 
     reductions achieved under such Act and, thus, do not result 
     in an increase in the Federal deficit.
       ``(2) Additional targeted expenditures defined.--In this 
     section, the term `additional targeted expenditures' means 
     the following:
       ``(A) Premium and cost-sharing subsidies and supplemental 
     benefits.--Payments to States under parts A and B of this 
     title.
       ``(B) Tax expenditures for premium deductions, etc..--
     Reductions in revenues attributable to the amendments made to 
     section 162 of the Internal Revenue Code of 1986 (by section 
     2101 of the Bipartisan Health Care Reform Act of 1994) and 
     the addition of section 220 to such Code (as added by section 
     2202 of this Act).
       ``(3) Health care expenditure reductions.--In this section, 
     the term `health care expenditure reductions' means net 
     reductions in Federal payments under titles XVIII and XIX 
     resulting from the amendments by the Bipartisan Health Care 
     Reform Act of 1994.
       ``(4) Contingency.--Any direct payment authority provided 
     under part A or B to premium and cost-sharing assistance or 
     supplemental medical benefits is subject to the operation of 
     this section.
       ``(b) Determination of Unfinanced Health Spending.--
       ``(1) Current health spending estimate.--
       ``(A) Fiscal years through 2004.--Not later than the date 
     that is 60 days after the date of enactment of this Act, the 
     President shall issue an executive order setting forth the 
     current health spending estimate for fiscal year 1995 and for 
     each subsequent fiscal year through 2004, which shall consist 
     of estimates (for each year) projecting what Federal outlays 
     or revenues would have been if this Act had not been enacted, 
     for the following:
       ``(i) total Federal outlays under titles XVIII and XIX of 
     the Social Security Act (including administrative costs and 
     offsetting receipts); and
       ``(ii) revenue losses attributable to section 162(l) of the 
     Internal Revenue Code of 1986.
       ``(B) Fiscal years after 2004.--For each fiscal year 
     following fiscal year 2004, the current health spending 
     estimate is the estimate set forth in the executive order for 
     fiscal year 2004, modified by an annual adjustment factor set 
     forth in such order.
       ``(2) President to transmit health reform estimates.--
       ``(A) Estimates for upcoming fiscal year and current 
     year.--By January 31 before the beginning of each fiscal year 
     (beginning with fiscal year 1997), the President shall 
     transmit to Congress a report that includes a health reform 
     estimate (as specified in paragraph (3)) with respect to the 
     upcoming fiscal year and the current fiscal year.
       ``(B) Determinations for prior fiscal year.--By January 31 
     before the beginning of each fiscal year (beginning with 
     fiscal year 1998), the President shall transmit to Congress a 
     report that includes determinations for the fiscal year which 
     ended the prior September, with respect to the items 
     specified in the health reform estimate (as specified in 
     paragraph (3)).
       ``(3) Health reform estimate.--
       ``(A) In general.--The health reform estimate is a 
     calculation, for the applicable fiscal year, of--
       ``(i) updated projections for the applicable fiscal year 
     for each item set forth in the current health estimate (as 
     set forth in paragraph (1)); plus
       ``(ii) the health reform outlays set forth in subparagraph 
     (B); minus
       ``(iii) the net health reform revenues set forth in 
     subparagraph (C).
       ``(B) Health reform outlays.--Health reform outlays equal 
     total outlays under parts A and B (including administrative 
     costs) projected for the fiscal year.
       ``(C) Net health reform revenues.-- Net health reform 
     revenues equal total revenue losses projected for the 
     applicable fiscal year due to the amendments made to section 
     162 of the Internal Revenue Code of 1986 (by section 2101 of 
     the Bipartisan Health Care Reform Act of 1994) and the 
     addition of section 220 to such Code (as added by section 
     2202 of this Act).
       ``(4) Determination of unfinanced health spending and 
     excess health financing.--
       ``(A) In general.--Each health reform estimate required by 
     this subsection shall be accompanied by a comparison of such 
     estimate with the current health spending estimate for the 
     applicable fiscal year.
       ``(B) Deficit.--If the applicable health reform estimate 
     exceeds the applicable current health spending estimate, the 
     President shall report the amount of the excess as unfinanced 
     health spending for the applicable fiscal year.
       ``(C) Excess.--If the applicable health reform estimate is 
     less than the applicable current health spending estimate, 
     the President shall report such difference as excess health 
     financing for the applicable fiscal year.
       ``(d) Offsetting Unfinanced Health Spending.--
       ``(1) Requirement to fully offset unfinanced health 
     spending.--If the President's report includes a determination 
     of unfinanced health spending pursuant to subsection (c)(4) 
     for the upcoming fiscal year, the current fiscal year, or the 
     fiscal year which ended the prior October, such determination 
     shall be accompanied by an executive order effective on 
     October 1 of that calendar year which fully offsets in the 
     fiscal year beginning October 1 the sum of such unfinanced 
     health spending (for the upcoming fiscal year, the current 
     fiscal year, and the prior fiscal year) in the manner 
     provided in this subsection. Such executive order shall be 
     accompanied by such regulations as are required under 
     subsection (d)(4).
       ``(2) Offsets.--The offsets required by this subsection 
     shall be accomplished through a combination of--
       ``(A) reducing the applicable percentages specified in the 
     tables under section 2102(b), and
       ``(B) reducing the limitation on payments to each State 
     under section 2135 by an equal percentage.
       ``(3) Proportional reduction.--The President shall apply 
     the offset mechanisms described in subparagraphs (A) and (B) 
     of paragraph (2) proportionally so as to result in a 
     reduction in Federal expenditures under part A and part B of 
     this title in the same ratio as the ratio of the total amount 
     of Federal payments that are estimated would otherwise be 
     made under part A to such amount under part B for the fiscal 
     year involved. The reduction in percentages under paragraphs 
     (1), (2), and (3) of section 2102(b) shall be done in a pro-
     rata manner reflecting the percentages specified in the 
     tables in such respective paragraphs.
       ``(4) Consultation.--In making the determinations required 
     by this subsection, the President shall consult with the 
     Director of the Office of Management and Budget, the 
     Secretary of the Treasury, and the Director of the 
     Congressional Budget Office.
       ``(e) Application of Excess Health Financing.--
       ``(1) Increase in applicable percentages.--If the 
     President's report includes a determination of excess health 
     financing pursuant to subsection (c)(4) for a fiscal year, 
     such determination shall be accompanied by an executive order 
     effective on October 1 of that calendar year which provides 
     for an increase in the fiscal year beginning October 1 in the 
     applicable percentages provided under paragraphs (1), (2), 
     and (3) of section 2102(b) in the manner provided in this 
     subsection. Such executive order shall be accompanied by such 
     regulations as are required under subsection (d)(4).
       ``(2) Proportional increase.--The President the increase 
     described in paragraph (1) shall apply under paragraphs (1), 
     (2), and (3) of section 2102(b) in a pro-rata manner 
     reflecting the percentages specified in the tables in such 
     respective paragraphs.
       ``(3) Consultation.--In making the determinations required 
     by this subsection, the President shall consult with the 
     Director of the Office of Management and Budget, the 
     Secretary of the Treasury, and the Director of the 
     Congressional Budget Office.
       ``(f) GAO Audit of Reductions.--If the President has issued 
     an executive order under subsection (d)(1), the General 
     Accounting Office shall report to Congress, as soon 
     thereafter as possible following the date of transmittal of 
     the President's report, an analysis of whether the executive 
     order has fully complied with the requirements of this 
     section.''.
       (b) Application of SAVE Provisions.--Section 1137(b) of the 
     Social Security Act (42 U.S.C. 1320b-7(b)) is amended--
       (1) by striking ``and'' at the end of paragraph (4),
       (2) by striking the period at the end of paragraph (5) and 
     inserting ``; and'', and
       (3) by adding at the end the following:
       ``(6) a State premium and cost-sharing assistance program 
     under part A of title XXI.''.

                   PART 2--IMMEDIATE MEDICAID REFORMS

     SEC. 2111. MODIFICATION OF FEDERAL REQUIREMENTS TO ALLOW 
                   STATES MORE FLEXIBILITY IN CONTRACTING FOR 
                   COORDINATED CARE SERVICES UNDER MEDICAID.

       (a) In General.--
       (1) Payment provisions.--Section 1903(m) of the Social 
     Security Act (42 U.S.C. 1396b(m)) is amended to read as 
     follows:
       ``(m)(1) No payment shall be made under this title to a 
     State with respect to expenditures incurred by such State for 
     payment to an entity which is at risk (as defined in section 
     1932(a)(4)) for services provided by such entity to 
     individuals eligible for medical assistance under the State 
     plan under this title, unless the entity is a risk 
     contracting entity (as defined in section 1932(a)(3)) and the 
     State and such entity comply with the applicable provisions 
     of section 1932.
       ``(2) No payment shall be made under this title to a State 
     with respect to expenditures incurred by such State for 
     payment for services provided to an individual eligible for 
     medical assistance under the State plan under this title if 
     such payment by the State is contingent upon the individual 
     receiving such services from a specified health care provider 
     or subject to the approval of a specified health care 
     provider, unless the entity receiving payment is a primary 
     care case management entity (as defined in section 
     1932(a)(2)) and the State and such entity comply with the 
     applicable provisions of section 1932.''.
       (2) Requirements for coordinated care services.--Title XIX 
     of such Act (42 U.S.C. 1396 et seq.) is amended by 
     redesignating section 1931 as section 1932 and by inserting 
     after section 1930 the following new section:


              ``requirements for coordinated care services

       ``Sec. 1932. (a) Definitions.--For purposes of this title--
       ``(1) Primary care case management program.--The term 
     `primary care case management program' means a program 
     operated by a State agency under which such State agency 
     enters into contracts with primary care case management 
     entities for the provision of health care items and services 
     which are specified in such contracts and the provision of 
     case management services to individuals who are--
       ``(A) eligible for medical assistance under the State plan,
       ``(B) enrolled with such primary care case management 
     entities, and
       ``(C) entitled to receive such specified health care items 
     and services and case management services only as approved 
     and arranged for, or provided, by such entities.
       ``(2) Primary care case management entity.--The term 
     `primary care case management entity' means a health care 
     provider which--
       ``(A) must be a physician, group of physicians, a Federally 
     qualified health center, a rural health clinic, a community 
     health authority (under section 1934), or an entity employing 
     or having other arrangements with physicians operating under 
     a contract with a State to provide services under a primary 
     care case management program,
       ``(B) receives payment on a fee for service basis (or, in 
     the case of a Federally qualified health center or a rural 
     health clinic, on a reasonable cost per encounter basis) for 
     the provision of health care items and services specified in 
     such contract to enrolled individuals,
       ``(C) receives an additional fixed fee per enrollee for a 
     period specified in such contract for providing case 
     management services (including approving and arranging for 
     the provision of health care items and services specified in 
     such contract on a referral basis) to enrolled individuals, 
     and
       ``(D) is not an entity that is at risk (as defined in 
     paragraph (4)) for such case management services.
       ``(3) Risk contracting entity.--The term `risk contracting 
     entity' means an entity which has a contract with the State 
     agency (or a health insuring organization described in 
     subsection (n)(2)) under which the entity--
       ``(A) provides or arranges for the provision of health care 
     items or services which are specified in such contract to 
     individuals eligible for medical assistance under the State 
     plan, and
       ``(B) is at risk (as defined in paragraph (4)) for part or 
     all of the cost of such items or services furnished to 
     individuals eligible for medical assistance under such plan.
       ``(4) At risk.--The term `at risk' means an entity which--
       ``(A) has a contract with the State agency under which such 
     entity is paid a fixed amount for providing or arranging for 
     the provision of health care items or services specified in 
     such contract to an individual eligible for medical 
     assistance under the State plan and enrolled with such 
     entity, regardless of whether such items or services are 
     furnished to such individual, and
       ``(B) is liable for all or part of the cost of furnishing 
     such items or services, regardless of whether such cost 
     exceeds such fixed payment.
       ``(b) General Requirements for Risk Contracting Entities.--
       ``(1) Organization.--A risk contracting entity meets the 
     requirements of this section only if such entity--
       ``(A)(i) is a qualified health maintenance organization as 
     defined in section 1310(d) of the Public Health Service Act, 
     as determined by the Secretary pursuant to section 1312 of 
     such Act; or
       ``(ii) is described in subparagraph (C), (D), (E), (F), or 
     (G) of subsection (e)(4);
       ``(B) is a Federally qualified health center, a rural 
     health clinic, or a community health authority (under section 
     1934) which has made adequate provision against the risk of 
     insolvency (pursuant to the guidelines and regulations issued 
     by the Secretary under this section), and ensures that 
     individuals eligible for medical assistance under the State 
     plan are not held liable for such entity's debts in case of 
     such entity's insolvency; or
       ``(C) is an entity which meets all applicable State 
     licensing requirements and has made adequate provision 
     against the risk of insolvency (pursuant to the guidelines 
     and regulations issued by the Secretary under this section), 
     and ensures that individuals eligible for medical assistance 
     under the State plan are not held liable for such entity's 
     debts in case of such entity's insolvency.
       ``(2) Guarantees of enrollee access.--A risk contracting 
     entity meets the requirements of this section only if--
       ``(A) the geographic locations, hours of operation, patient 
     to staff ratios, and other relevant characteristics of such 
     entity are sufficient to afford individuals eligible for 
     medical assistance under the State plan access to such 
     entities that is at least equivalent to the access to health 
     care providers that would be available to such individuals if 
     such individuals were not enrolled with such entity;
       ``(B) such entity has reasonable and adequate hours of 
     operation, including 24-hour availability of--
       ``(i)(I) treatment for an unforeseen illness, injury, or 
     condition of an individual eligible for medical assistance 
     under the State plan and enrolled with such entity; or
       ``(II) referral to other health care providers for such 
     treatment; and
       ``(ii) other information, as determined by the Secretary or 
     the State; and
       ``(C) such entity complies with such other requirements 
     relating to access to care as the Secretary or the State may 
     impose.
       ``(3) Contract with state agency.--A risk contracting 
     entity meets the requirements of this section only if such 
     entity has a written contract with the State agency which 
     provides--
       ``(A) that the entity will comply with all applicable 
     provisions of this section, that the State has the right to 
     penalize the entity for failure to comply with such 
     requirements and to terminate the contract in accordance with 
     subsection (j), and that the entity will be subject to 
     penalties imposed by the Secretary under subsection (i) for 
     failure to comply with such requirements;
       ``(B) for a payment methodology based on experience rating 
     or another actuarially sound methodology approved by the 
     Secretary, which guarantees (as demonstrated by such models 
     or formulas as the Secretary may approve) that--
       ``(i) payments to the entity under the contract shall not 
     exceed an amount equal to 100 percent of the costs (which 
     shall include administrative costs and which may include 
     costs for inpatient hospital services that would have been 
     incurred in the absence of such contract) that would have 
     been incurred by the State agency in the absence of the 
     contract; and
       ``(ii) the financial risk for inpatient hospital services 
     is limited to an extent established by the State;
       ``(C) that the Secretary and the State (or any person or 
     organization designated by either) shall have the right to 
     audit and inspect any books and records of the entity (and of 
     any subcontractor) that pertain--
       ``(i) to the ability of the entity (or a subcontractor) to 
     bear the risk of potential financial losses; or
       ``(ii) to services performed or determinations of amounts 
     payable under the contract;
       ``(D) that in the entity's enrollment, reenrollment, or 
     disenrollment of individuals eligible for medical assistance 
     under the State plan and eligible to enroll, reenroll, or 
     disenroll with the entity pursuant to the contract, the 
     entity will not discriminate among such individuals on the 
     basis of such individuals' health status or requirements for 
     health care services;
       ``(E)(i) individuals eligible for medical assistance under 
     the State plan who have enrolled with the entity are 
     permitted to terminate such enrollment without cause as of 
     the beginning of the first calendar month (or in the case of 
     an entity described in subsection (e)(4), as of the beginning 
     of the first enrollment period) following a full calendar 
     month after a request is made for such termination;
       ``(ii) that when an individual has relocated outside the 
     entity's service area, and the entity has been notified of 
     the relocation, services (within reasonable limits) furnished 
     by a health care provider outside the service area will be 
     reimbursed either by the entity or by the State agency; and
       ``(iii) for written notification of each such individual's 
     right to terminate enrollment, which shall be provided at the 
     time of such individual's enrollment, and, in the case of a 
     child with special health care needs as defined in subsection 
     (e)(1)(B)(ii), at the time the entity identifies such a 
     child;
       ``(F) in the case of services immediately required to treat 
     an unforeseen illness, injury, or condition, of an individual 
     eligible for medical assistance under the State plan and 
     enrolled with the entity--
       ``(i) that such services shall not be subject to a 
     preapproval requirement; and
       ``(ii) where such services are furnished by a health care 
     provider other than the entity, for reimbursement of such 
     provider either by the entity or by the State agency;
       ``(G) for disclosure of information in accordance with 
     subsection (h) and section 1124;
       ``(H) that any physician incentive plan operated by the 
     entity meets the requirements of section 1876(i)(8);
       ``(I) for maintenance of sufficient patient encounter data 
     to identify the physician who delivers services to patients;
       ``(J) that the entity will comply with the requirement of 
     section 1902(w) with respect to each enrollee;
       ``(K) that the entity will implement a grievance system, 
     inform enrollees in writing about how to use such grievance 
     system, ensure that grievances are addressed in a timely 
     manner, and report grievances to the State at intervals to be 
     determined by the State;
       ``(L) that contracts between the entity and each 
     subcontractor of such entity will require each 
     subcontractor--
       ``(i) to cooperate with the entity in the implementation of 
     its internal quality assurance program under paragraph (4) 
     and adhere to the standards set forth in the quality 
     assurance program, including standards with respect to access 
     to care, facilities in which patients receive care, and 
     availability, maintenance, and review of medical records;
       ``(ii) to cooperate with the Secretary, the State agency 
     and any contractor to the State in monitoring and evaluating 
     the quality and appropriateness of care provided to enrollees 
     as required by Federal or State laws and regulations; and
       ``(iii) where applicable, to adhere to regulations and 
     program guidance with respect to reporting requirements under 
     section 1905(r);
       ``(M) that, where the State deems it necessary to ensure 
     the timely provision to enrollees of the services listed in 
     subsection (f)(2)(C)(ii), the State may arrange for the 
     provision of such services by health care providers other 
     than the entity and may adjust its payments to the entity 
     accordingly;
       ``(N) that the entity and the State will comply with 
     guidelines and regulations issued by the Secretary with 
     respect to procedures for marketing and information that must 
     be provided to individuals eligible for medical assistance 
     under the State plan;
       ``(O) that the entity must provide payments to hospitals 
     for inpatient hospital services furnished to infants who have 
     not attained the age of 1 year, and to children who have not 
     attained the age of 6 years and who receive such services in 
     a disproportionate share hospital, in accordance with 
     paragraphs (2) and (3) of section 1902(s);
       ``(P) that the entity shall report to the State, at such 
     time and in such manner as the State shall require, on the 
     rates paid for hospital services (by type of hospital and 
     type of service) furnished to individuals enrolled with the 
     entity;
       ``(Q) detailed information regarding the relative 
     responsibilities of the entity and the State, for providing 
     (or arranging for the provision of), and making payment for, 
     the following items and services:
       ``(i) immunizations;
       ``(ii) the purchase of vaccines;
       ``(iii) lead screening and treatment services;
       ``(iv) screening and treatment for tuberculosis;
       ``(v) screening and treatment for, and preventive services 
     related to, sexually transmitted diseases, including HIV 
     infection;
       ``(vi) screening, diagnostic, and treatment services 
     required under section 1905(r);
       ``(vii) family planning services;
       ``(viii) services prescribed under--

       ``(I) an Individual Education Plan or Individualized Family 
     Service Plan under part B or part H of the Individuals with 
     Disabilities Education Act; and
       ``(II) any other individual plan of care or treatment 
     developed under this title or title V;

       ``(ix) transportation needed to obtain services to which 
     the enrollee is entitled under the State plan or pursuant to 
     an individual plan of care or treatment described in 
     subclauses (I) and (II) of clause (viii); and
       ``(x) such other services as the Secretary may specify;
       ``(R) detailed information regarding the procedures for 
     coordinating the relative responsibilities of the entity and 
     the State to ensure prompt delivery of, compliance with any 
     applicable reporting requirements related to, and appropriate 
     record keeping with respect to, the items and services 
     described in subparagraph (Q); and
       ``(S) such other provisions as the Secretary may require.
       ``(4) Internal quality assurance.--A risk contracting 
     entity meets the requirements of this section only if such 
     entity has in effect a written internal quality assurance 
     program which includes a systematic process to achieve 
     specified and measurable goals and objectives for access to, 
     and quality of, care, which--
       ``(A) identifies the organizational units responsible for 
     performing specific quality assurance functions, and ensures 
     that such units are accountable to the governing body of the 
     entity and that such units have adequate supervision, staff, 
     and other necessary resources to perform these functions 
     effectively,
       ``(B) if any quality assurance functions are delegated to 
     other entities, ensures that the risk contracting entity 
     remains accountable for all quality assurance functions and 
     has mechanisms to ensure that all quality assurance 
     activities are carried out,
       ``(C) includes methods to ensure that physicians and other 
     health care professionals under contract with the entity are 
     licensed or certified as required by State law, or are 
     otherwise qualified to perform the services such physicians 
     and other professionals provide, and that these 
     qualifications are ensured through appropriate credentialing 
     and recredentialing procedures,
       ``(D) provides for continuous monitoring of the delivery of 
     health care, through--
       ``(i) identification of clinical areas to be monitored, 
     including immunizations, prenatal care, services required 
     under section 1905(r), and other appropriate clinical areas, 
     to reflect care provided to enrollees eligible for medical 
     assistance under the State plan,
       ``(ii) use of quality indicators and standards for 
     assessing the quality and appropriateness of care delivered, 
     and the availability and accessibility of all services for 
     which the entity is responsible under such entity's contract 
     with the State,
       ``(iii) use of epidemiological data or chart review, as 
     appropriate, and patterns of care overall,
       ``(iv) patient surveys, spot checks, or other appropriate 
     methods to determine whether--

       ``(I) enrollees are able to obtain timely appointments with 
     primary care providers and specialists, and
       ``(II) enrollees are otherwise guaranteed access and care 
     as provided under paragraph (2),

       ``(v) provision of written information to health care 
     providers and other personnel on the outcomes, quality, 
     availability, accessibility, and appropriateness of care, and
       ``(vi) implementation of corrective actions,
       ``(E) includes standards for timely enrollee access to 
     information and care which at a minimum shall incorporate 
     standards used by the State or professional or accreditation 
     bodies for facilities furnishing perinatal and neonatology 
     care and other forms of specialized medical and surgical 
     care,
       ``(F) includes standards for the facilities in which 
     patients receive care,
       ``(G) includes standards for managing and treating medical 
     conditions prevalent among such entity's enrollees eligible 
     for medical assistance under the State plan,
       ``(H) includes mechanisms to ensure that enrollees eligible 
     for medical assistance under the State plan receive services 
     for which the entity is responsible under the contract which 
     are consistent with standards established by the applicable 
     professional societies or government agencies,
       ``(I) includes standards for the availability, maintenance, 
     and review of medical records consistent with generally 
     accepted medical practice,
       ``(J) provides for dissemination of quality assurance 
     procedures to health care providers under contract with the 
     entity, and
       ``(K) meets any other requirements prescribed by the 
     Secretary or the State.
       ``(5) Transitional agreements with essential community 
     providers.--A risk contracting entity meets the requirements 
     of this section only if such entity complies with the 
     requirements of section 1013 of the Bipartisan Health Care 
     Reform Act of 1994 (subject to the sunset contained in 
     subsection (j) of such section).
       ``(c) General Requirements for Primary Care Case Management 
     Programs.--A primary care case management program implemented 
     by a State under this section shall--
       ``(1) provide that each primary care case management entity 
     participating in such program has a written contract with the 
     State agency,
       ``(2) include methods for selection and monitoring of 
     participating primary care case management entities to 
     ensure--
       ``(A) that the geographic locations, hours of operation, 
     patient to staff ratio, and other relevant characteristics of 
     such entities are sufficient to afford individuals eligible 
     for medical assistance under the State plan access to such 
     entities that is at least equivalent to the access to health 
     care providers that would be available to such individuals if 
     such individuals were not enrolled with such entity,
       ``(B) that such entities and their professional personnel 
     are licensed as required by State law and qualified to 
     provide case management services, through methods such as 
     ongoing monitoring of compliance with applicable requirements 
     and providing information and technical assistance, and
       ``(C) that such entities--
       ``(i) provide timely and appropriate primary care to such 
     enrollees consistent with standards established by applicable 
     professional societies or governmental agencies, or such 
     other standards prescribed by the Secretary or the State, and
       ``(ii) where other items and services are determined to be 
     medically necessary, give timely approval of such items and 
     services and referral to appropriate health care providers,
       ``(3) provide that no preapproval shall be required for 
     emergency health care items or services, and
       ``(4) permit individuals eligible for medical assistance 
     under the State plan who have enrolled with a primary care 
     case management entity to terminate such enrollment without 
     cause not later than the beginning of the first calendar 
     month following a full calendar month after the request is 
     made for such termination.
       ``(d) Exemptions From State Plan Requirements.--A State 
     plan may permit or require an individual eligible for medical 
     assistance under such plan to enroll with a risk contracting 
     entity or a primary care case management entity without 
     regard to the requirements set forth in the following 
     paragraphs of section 1902(a):
       ``(1) Paragraph (1) (concerning statewideness).
       ``(2) Paragraph (10)(B) (concerning comparability of 
     benefits), to the extent benefits not included in the State 
     plan are provided.
       ``(3) Paragraph (23) (concerning freedom of choice of 
     provider), except with respect to services described in 
     section 1905(a)(4)(C) and except as required under subsection 
     (e).
       ``(e) State Options With Respect to Enrollment and 
     Disenrollment.--
       ``(1) Mandatory enrollment.--
       ``(A) In general.--Except as provided in subparagraph (B), 
     a State plan may require an individual eligible for medical 
     assistance under such plan to enroll with a risk contracting 
     entity or a primary care case management entity only if the 
     individual is permitted a choice within a reasonable service 
     area (as defined by the State)--
       ``(i) between or among 2 or more risk contracting entities,
       ``(ii) among a risk contracting entity and a primary care 
     case management program, or
       ``(iii) among primary care case management entities.
       ``(B) Special needs children.--
       ``(i) In general.--A State may not require a child with 
     special health care needs (as defined in clause (ii)) to 
     enroll with a risk contracting entity or a primary care case 
     management entity.
       ``(ii) Definition.--For purposes of this subparagraph, the 
     term `child with special health care needs' refers to an 
     individual eligible for supplemental security income under 
     title XVI, a child described under section 501(a)(1)(D), or a 
     child described in section 1902(e)(3).
       ``(2) Reenrollment of individuals who regain eligibility.--
     In the case of an individual who--
       ``(A) in a month is eligible for medical assistance under 
     the State plan and enrolled with a risk contracting entity 
     with a contract under this section,
       ``(B) in the next month (or next 2 months) is not eligible 
     for such medical assistance, but
       ``(C) in the succeeding month is again eligible for such 
     benefits,
     the State agency (subject to subsection (b)(3)(E)) may enroll 
     the individual for that succeeding month with such entity, if 
     the entity continues to have a contract with the State agency 
     under this subsection.
       ``(3) Disenrollment.--
       ``(A) Restrictions on disenrollment without cause.--Except 
     as provided in subparagraph (C), a State plan may restrict 
     the period in which individuals enrolled with risk 
     contracting entities described in paragraph (4) may terminate 
     such enrollment without cause to the first month of each 
     period of enrollment (as defined in subparagraph (B)), but 
     only if the State provides notification, at least once during 
     each such enrollment period, to individuals enrolled with 
     such entity of the right to terminate such enrollment and the 
     restriction on the exercise of this right. Such restriction 
     shall not apply to requests for termination of enrollment for 
     cause.
       ``(B) Period of enrollment.--For purposes of this 
     paragraph, the term `period of enrollment' means--
       ``(i) a period not to exceed 6 months in duration, or
     ``(ii) a period not to exceed 1 year in duration, in the case 
     of a State that, on the effective date of this paragraph, had 
     in effect a waiver under section 1115 of requirements under 
     this title under which the State could establish a 1-year 
     minimum period of enrollment with risk contracting entities.
       ``(C) Special needs children.--A State may not restrict 
     disenrollment of a child with special health care needs (as 
     defined in paragraph (1)(B)(ii)).
       ``(4) Entities eligible for disenrollment restrictions.--A 
     risk contracting entity described in this paragraph is--
       ``(A) a qualified health maintenance organization as 
     defined in section 1310(d) of the Public Health Service Act,
       ``(B) an eligible organization with a contract under 
     section 1876,
       ``(C) an entity that is receiving (and has received during 
     the previous 2 years) a grant of at least $100,000 under 
     section 329(d)(1)(A) or 330(d)(1) of the Public Health 
     Service Act,
       ``(D) an entity that--
       ``(i) received a grant of at least $100,000 under section 
     329(d)(1)(A) or section 330(d)(1) of the Public Health 
     Service Act in the fiscal year ending June 30, 1976, and has 
     been a grantee under either such section for all periods 
     after that date, and
       ``(ii) provides to its enrollees, on a prepaid capitation 
     or other risk basis, all of the services described in 
     paragraphs (1), (2), (3), (4)(C), and (5) of section 1905(a) 
     (and the services described in section 1905(a)(7), to the 
     extent required by section 1902(a)(10)(D)),
       ``(E) an entity that is receiving (and has received during 
     the previous 2 years) at least $100,000 (by grant, subgrant, 
     or subcontract) under the Appalachian Regional Development 
     Act of 1965,
       ``(F) a nonprofit primary health care entity located in a 
     rural area (as defined by the Appalachian Regional 
     Commission)--
       ``(i) which received in the fiscal year ending June 30, 
     1976, at least $100,000 (by grant, subgrant, or subcontract) 
     under the Appalachian Regional Development Act of 1965, and
       ``(ii) which, for all periods after such date, either has 
     been the recipient of a grant, subgrant, or subcontract under 
     such Act or has provided services on a prepaid capitation or 
     other risk basis under a contract with the State agency 
     initially entered into during a year in which the entity was 
     the recipient of such a grant, subgrant, or subcontract,
       ``(G) an entity that had contracted with the State agency 
     prior to 1970 for the provision, on a prepaid risk basis, of 
     services (which did not include inpatient hospital services) 
     to individuals eligible for medical assistance under the 
     State plan,
       ``(H) a program pursuant to an undertaking described in 
     subsection (n)(3) in which at least 25 percent of the 
     membership enrolled on a prepaid basis are individuals who--
       ``(i) are not insured for benefits under part B of title 
     XVIII or eligible for medical assistance under the State 
     plan, and
       ``(ii) (in the case of such individuals whose prepayments 
     are made in whole or in part by any government entity) had 
     the opportunity at the time of enrollment in the program to 
     elect other coverage of health care costs that would have 
     been paid in whole or in part by any governmental entity,
       ``(I) an entity that, on the date of enactment of this 
     provision, had a contract with the State agency under a 
     waiver under section 1115 or 1915(b) and was not subject to a 
     requirement under this title to permit disenrollment without 
     cause, or
       ``(J) an entity that has a contract with the State agency 
     under a waiver under section 1915(b)(5).
       ``(f) State Monitoring and External Review.--
       ``(1) State grievance procedure.--A State contracting with 
     a risk contracting entity or a primary care case management 
     entity under this section shall provide for a grievance 
     procedure for enrollees of such entity with at least the 
     following elements:
       ``(A) A toll-free telephone number for enrollee questions 
     and grievances.
       ``(B) Periodic notification of enrollees of their rights 
     with respect to such entity or program.
       ``(C) Periodic sample reviews of grievances registered with 
     such entity or program or with the State.
       ``(D) Periodic survey and analysis of enrollee satisfaction 
     with such entity or program, including interviews with 
     individuals who disenroll from the entity or program.
       ``(2) State monitoring of quality and access.--
       ``(A) Risk contracting entities.--A State contracting with 
     a risk contracting entity under this section shall provide 
     for ongoing monitoring of such entity's compliance with the 
     requirements of subsection (b), including compliance with the 
     requirements of such entity's contract under subsection 
     (b)(3), and shall undertake appropriate followup activities 
     to ensure that any problems identified are rectified and that 
     compliance with the requirements of subsection (b) and the 
     requirements of the contract under subsection (b)(3) is 
     maintained.
       ``(B) Primary care case management entities.--A State 
     electing to implement a primary care case management program 
     shall provide for ongoing monitoring of the program's 
     compliance with the requirements of subsection (c) and shall 
     undertake appropriate followup activities to ensure that any 
     problems identified are rectified and that compliance with 
     subsection (c) is maintained.
       ``(C) Services.--
       ``(i) In general.--The State shall establish procedures (in 
     addition to those required under subparagraphs (A) and (B)) 
     to ensure that the services listed in clause (ii) are 
     available in a timely manner to an individual enrolled with a 
     risk contracting entity or a primary care case management 
     entity. Where necessary to ensure the timely provision of 
     such services, the State shall arrange for the provision of 
     such services by health care providers other than the risk 
     contracting entity or the primary care case management entity 
     in which an individual is enrolled.
       ``(ii) Services listed.--The services listed in this clause 
     are--

       ``(I) prenatal care;
       ``(II) immunizations;
       ``(III) lead screening and treatment;
       ``(IV) prevention, diagnosis and treatment of tuberculosis, 
     sexually transmitted diseases (including HIV infection), and 
     other communicable diseases; and
       ``(V) such other services as the Secretary may specify.

       ``(iii) Report.--The procedures referred to in clause (i) 
     shall be described in an annual report to the Secretary 
     provided by the State.
       ``(3) External independent review.--
       ``(A) In general.--Except as provided in paragraph (4), a 
     State contracting with a risk contracting entity under this 
     section shall provide for an annual external independent 
     review of the quality and timeliness of, and access to, the 
     items and services specified in such entity's contract with 
     the State agency. Such review shall be conducted by a 
     utilization control and peer review organization with a 
     contract under section 1153 or another organization 
     unaffiliated with the State government or with any risk 
     contracting entity and approved by the Secretary.
       ``(B) Contents of review.--An external independent review 
     conducted under this paragraph shall include the following:
       ``(i) A review of the entity's medical care, through 
     sampling of medical records or other appropriate methods, for 
     indications of quality of care and inappropriate utilization 
     (including overutilization) and treatment.
       ``(ii) A review of enrollee inpatient and ambulatory data, 
     through sampling of medical records or other appropriate 
     methods, to determine trends in quality and appropriateness 
     of care.
       ``(iii) Notification of the entity and the State when the 
     review under this paragraph indicates inappropriate care, 
     treatment, or utilization of services (including 
     overutilization).
       ``(iv) Other activities as prescribed by the Secretary or 
     the State.
       ``(C) Availability.--The results of each external 
     independent review conducted under this paragraph shall be 
     available to the public consistent with the requirements for 
     disclosure of information contained in section 1160.
       ``(4) Deemed compliance with external independent quality 
     of care review requirements.--
       ``(A) In general.--The Secretary may deem the State to have 
     fulfilled the requirement for independent external review of 
     quality of care with respect to an entity which has been 
     accredited by an organization described in subparagraph (B) 
     and approved by the Secretary.
       ``(B) Accrediting organization.--An accrediting 
     organization described in this subparagraph must--
       ``(i) exist for the primary purpose of accrediting 
     coordinated care organizations;
       ``(ii) be governed by a group of individuals representing 
     health care providers, purchasers, regulators, and consumers 
     (a minority of which shall be representatives of health care 
     providers);
       ``(iii) have substantial experience in accrediting 
     coordinated care organizations, including an organization's 
     internal quality assurance program;
       ``(iv) be independent of health care providers or 
     associations of health care providers;
       ``(v) be a nonprofit organization; and
       ``(vi) have an accreditation process which meets 
     requirements specified by the Secretary.
       ``(5) Federal monitoring responsibilities.--The Secretary 
     shall review the external independent reviews conducted 
     pursuant to paragraph (3) and shall monitor the effectiveness 
     of the State's monitoring and followup activities required 
     under subparagraph (A) of paragraph (2). If the Secretary 
     determines that a State's monitoring and followup activities 
     are not adequate to ensure that the requirements of paragraph 
     (2) are met, the Secretary shall undertake appropriate 
     followup activities to ensure that the State improves its 
     monitoring and followup activities.
       ``(g) Participation of Certain Providers.--Each risk 
     contracting entity shall meet the requirements of section 
     1013 of the Bipartisan Health Care Reform Act of 1994 in the 
     same manner as they would apply to a group health plan (when 
     such section becomes effective).
       ``(h) Transactions With Parties in Interest.--
       ``(1) In general.--Each risk contracting entity which is 
     not a qualified health maintenance organization (as defined 
     in section 1310(d) of the Public Health Service Act) must 
     report to the State and, upon request, to the Secretary, the 
     Inspector General of the Department of Health and Human 
     Services, and the Comptroller General of the United States a 
     description of transactions between the entity and a party in 
     interest (as defined in section 1318(b) of such Act), 
     including the following transactions:
       ``(A) Any sale or exchange, or leasing of any property 
     between the entity and such a party.
       ``(B) Any furnishing for consideration of goods, services 
     (including management services), or facilities between the 
     entity and such a party, but not including salaries paid to 
     employees for services provided in the normal course of their 
     employment.
       ``(C) Any lending of money or other extension of credit 
     between the entity and such a party.
     The State or the Secretary may require that information 
     reported with respect to a risk contracting entity which 
     controls, or is controlled by, or is under common control 
     with, another entity be in the form of a consolidated 
     financial statement for the risk contracting entity and such 
     entity.
       ``(2) Availability of information.--Each risk contracting 
     entity shall make the information reported pursuant to 
     paragraph (1) available to its enrollees upon reasonable 
     request.
       ``(i) Remedies for Failure To Comply.--
       ``(1) In general.--If the Secretary determines that a risk 
     contracting entity or a primary care case management entity--
       ``(A) fails substantially to provide services required 
     under section 1905(r), when such an entity is required to do 
     so, or provide medically necessary items and services that 
     are required to be provided to an individual enrolled with 
     such an entity, if the failure has adversely affected (or has 
     substantial likelihood of adversely affecting) the 
     individual;
       ``(B) imposes premiums on individuals enrolled with such an 
     entity in excess of the premiums permitted under this title;
       ``(C) acts to discriminate among individuals in violation 
     of the provision of subsection (b)(3)(D), including expulsion 
     or refusal to reenroll an individual or engaging in any 
     practice that would reasonably be expected to have the effect 
     of denying or discouraging enrollment (except as permitted by 
     this section) by eligible individuals with the entity whose 
     medical condition or history indicates a need for substantial 
     future medical services;
       ``(D) misrepresents or falsifies information that is 
     furnished--
       ``(i) to the Secretary or the State under this section; or
       ``(ii) to an individual or to any other entity under this 
     section; or
       ``(E) fails to comply with the requirements of section 
     1876(i)(8),
     the Secretary may provide, in addition to any other remedies 
     available under law, for any of the remedies described in 
     paragraph (2).
       ``(2) Additional 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 (C) or (D)(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 paragraph (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)(C), $15,000 for each 
     individual not enrolled as a result of a practice described 
     in such paragraph, or
       ``(B) denial of payment to the State for medical assistance 
     furnished by a risk contracting entity or a primary care case 
     management entity under this section for individuals enrolled 
     after the date the Secretary notifies the entity 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.

     The provisions of section 1128A (other than subsections (a) 
     and(b)) shall apply to a civil money penalty under 
     subparagraph (A) in the same manner as such provisions apply 
     to a penalty or proceeding under section 1128A(a).
       ``(j) Termination of Contract by State.--Any State which 
     has a contract with a risk contracting entity or a primary 
     care case management entity may terminate such contract if 
     such entity fails to comply with the terms of such contract 
     or any applicable provision of this section.
       ``(k) Fair Hearing.--Nothing in this section shall affect 
     the rights of an individual eligible to receive medical 
     assistance under the State plan to obtain a fair hearing 
     under section 1902(a)(3) or under applicable State law.
       ``(l) Disproportionate Share Hospitals.--Nothing in this 
     section shall affect any requirement on a State to comply 
     with section 1923.
       ``(m) Referral Payments.--For 1 year following the date on 
     which individuals eligible for medical assistance under the 
     State plan in a service area are required to enroll with a 
     risk contracting entity or a primary care case management 
     entity, Federally qualified health centers and rural health 
     centers located in such service area or providing care to 
     such enrollees, shall receive a fee for educating such 
     enrollees about the availability of services from the risk 
     contracting entity or primary care case management entity 
     with which such enrollees are enrolled.
       ``(n) Special Rules.--
       ``(1) Nonapplicability of certain provisions to certain 
     risk contracting entities.--
     In the case of any risk contracting entity which--
       ``(A)(i) is an individual physician or a physician group 
     practice of less than 50 physicians, and
       ``(ii) is not described in paragraphs (A) and (B) of 
     subsection (b)(1), and
       ``(B) is at risk only for the health care items and 
     services directly provided by such entity,
     paragraphs (3)(K), (3)(L), (3)(O), (3)(P), and (4) of 
     subsection (b), and paragraph (3) of subsection (f), shall 
     not apply to such entity.
       ``(2) Exception from definition of risk contracting 
     entity.--For purposes of this section, the term `risk 
     contracting entity' shall not include a health insuring 
     organization which was used by a State before April 1, 1986, 
     to administer a portion of the State plan of such State on a 
     statewide basis.
       ``(3) New jersey.--The rules under section 1903(m)(6) as in 
     effect on the day before the effective date of this section 
     shall apply in the case of an undertaking by the State of New 
     Jersey (as described in such section 1903(m)(6)).
       ``(o) Continuation of Certain Coordinated Care Programs.--
     The Secretary may provide for the continuation of any 
     coordinated care program operating under section 1115 or 1915 
     without requiring compliance with any provision of this 
     section which conflicts with the continuation of such program 
     and without requiring any additional waivers under such 
     sections 1115 and 1915 if the program has been successful in 
     assuring quality and containing costs (as determining by the 
     Secretary) and is likely to continue to be successful in the 
     future.
       ``(p) Guidelines, Regulations, and Model Contract.--
       ``(1) Guidelines and regulations on solvency.--At the 
     earliest practicable time after the date of enactment of this 
     section, the Secretary shall issue guidelines and regulations 
     concerning solvency standards for risk contracting entities 
     and subcontractors of such risk contracting entities. Such 
     guidelines and regulations shall take into account 
     characteristics that may differ among risk contracting 
     entities including whether such an entity is at risk for 
     inpatient hospital services.
       ``(2) Guidelines and regulations on marketing.--At the 
     earliest practicable time after the date of enactment of this 
     section, the Secretary shall issue guidelines and regulations 
     concerning--
       ``(A) marketing undertaken by any risk contracting entity 
     or any primary care case management program to individuals 
     eligible for medical assistance under the State plan, and
       ``(B) information that must be provided by States or any 
     such entity to individuals eligible for medical assistance 
     under the State plan with respect to--
       ``(i) the options and rights of such individuals to enroll 
     with, and disenroll from, any such entity, as provided in 
     this section, and
       ``(ii) the availability of services from any such entity 
     (including a list of services for which such entity is 
     responsible or must approve and information on how to obtain 
     services for which such entity is not responsible).
     In developing the guidelines and regulations under this 
     paragraph, the Secretary shall address the special 
     circumstances of children with special health care needs (as 
     defined in subsection (e)(1)(B)(ii)) and other individuals 
     with special health care needs.
       ``(3) Model contract.--The Secretary shall develop a model 
     contract to reflect the requirements of subsection (b)(3) and 
     such other requirements as the Secretary determines 
     appropriate.''.
       (b) Waivers From Requirements on Coordinated Care 
     Programs.--Section 1915(b) of such Act (42 U.S.C. 1396n) is 
     amended--
       (1) in the matter preceding paragraph (1), by striking ``as 
     may be necessary'' and inserting ``, and section 1932 as may 
     be necessary'';
       (2) in paragraph (1), by striking ``a primary care case 
     management system or'';
       (3) by striking ``and'' at the end of paragraph (3);
       (4) by striking the period at the end of paragraph (4) and 
     inserting ``, and''; and
       (5) by inserting after paragraph (4) the following new 
     paragraph:
       ``(5) to permit a risk contracting entity (as defined in 
     section 1932(a)(3)) to restrict the period in which 
     individuals enrolled with such entity may terminate such 
     enrollment without cause in accordance with section 
     1932(e)(3)(A).''.
       (c) State Option To Guarantee Medicaid Eligibility.--
     Section 1902(e)(2) of such Act (42 U.S.C. 1396a(e)(2)) is 
     amended--
       (1) in subparagraph (A), by striking all that precedes 
     ``(but for this paragraph)'' and inserting ``In the case of 
     an individual who is enrolled--
       ``(i) with a qualified health maintenance organization (as 
     defined in title XIII of the Public Health Service Act) or 
     with a risk contracting entity (as defined in section 
     1932(a)(3)), or
       ``(ii) with any risk contracting entity (as defined in 
     section 1932(a)(3)) in a State that, on the effective date of 
     this provision, had in effect a waiver under section 1115 of 
     requirements under this title under which the State could 
     extend eligibility for medical assistance for enrollees of 
     such entity, or
       ``(iii) with an eligible organization with a contract under 
     section 1876,

     and who would'',
       (2) in subparagraph (B), by striking ``organization or'' 
     each place it appears, and
       (3) by adding at the end the following new subparagraph:
       ``(C) The State plan may provide, notwithstanding any other 
     provision of this title, that an individual shall be deemed 
     to continue to be eligible for benefits under this title 
     until the end of the month following the month in which such 
     individual would (but for this paragraph) lose such 
     eligibility because of excess income and resources, if the 
     individual is enrolled with a risk contracting entity or 
     primary care case management entity (as those terms are 
     defined in section 1932(a)).''.
       (d) Enhanced Match Related To Quality Review.--Section 
     1903(a)(3)(C) of such Act (42 U.S.C. 1396b(a)(3)(C)) is 
     amended--
       (1) by striking ``organization or by'' and inserting 
     ``organization, by''; and
       (2) by striking ``section 1152, as determined by the 
     Secretary,'' and inserting ``section 1152, as determined by 
     the Secretary, or by another organization approved by the 
     Secretary which is unaffiliated with the State government or 
     with any risk contracting entity (as defined in section 
     1932(a)(3)),''.
       (e) Accumulation of Reserves by Certain Entities.--Any 
     organization referred to in section 329, 330, or 340, of the 
     Public Health Service Act which has contracted with a State 
     agency as a risk contracting entity under section 
     1932(g)(3)(A) of the Social Security Act may accumulate 
     reserves with respect to payments made to such organization 
     under section 1932(g)(3)(C) of such Act.
       (f) Conforming Amendments.--
       (1) Section 1128(b)(6)(C)(i) of such Act (42 U.S.C. 1320a-
     7(b)(6)(C)(i)) is amended by striking ``health maintenance 
     organization'' and inserting ``risk contracting entity''.
       (2) Section 1902(a)(23) of such Act (42 U.S.C. 
     1396a(a)(23)) is amended by striking ``primary care-case 
     management system (described in section 1915(b)(1)), a health 
     maintenance organization,'' and inserting ``primary care case 
     management program (as defined in section 1932(a)(1)), a risk 
     contracting entity (as defined in section 1932(a)(3)),''.
       (3) Section 1902(a)(30)(C) of such Act (42 U.S.C. 
     1396a(a)(30)(C)) is amended by striking ``use a utilization'' 
     and all that follows through ``with the results'' and 
     inserting ``provide for independent review and quality 
     assurance of entities with contracts under section 1932, in 
     accordance with subsection (f) of such section 1932, with the 
     results''.
       (4) Section 1902(a)(57) of such Act (42 U.S.C. 
     1396a(a)(57)) is amended by striking ``or health maintenance 
     organization (as defined in section 1903(m)(1)(A))'' and 
     inserting ``risk contracting entity, or primary care case 
     management entity (as defined in section 1932(a))''.
       (5) Section 1902(a) of such Act (42 U.S.C. 1396a), as 
     amended by sections 6001(a) and 6011(b), is amended--
       (A) by striking ``and'' at the end of paragraph (63);
       (B) by striking the period at the end of paragraph (64) and 
     inserting ``; and''; and
       (C) by adding at the end the following new paragraphs:
       ``(65) at State option, provide for a primary care case 
     management program in accordance with section 1932; and
       ``(66) at State option, provide for a program under which 
     the State contracts with risk contracting entities in 
     accordance with section 1932.''.
       (6) Section 1902(p)(2) of such Act (42 U.S.C. 1396a(p)(2)) 
     is amended by striking ``health maintenance organization (as 
     defined in section 1903(m))'' and inserting ``risk 
     contracting entity (as defined in section 1932(a)(3))''.
       (7) Section 1902(w) of such Act (42 U.S.C. 1396a(w)) is 
     amended--
       (A) in paragraph (1), by striking ``section 1903(m)(1)(A)'' 
     and inserting ``section 1932(a)(3)'', and
       (B) in paragraph (2)(E)--
       (i) by striking ``health maintenance organization'' and 
     inserting ``risk contracting entity'', and
       (ii) by striking ``organization'' and inserting ``entity''.
       (8) Section 1903(k) of such Act (42 U.S.C. 1396b(k)) is 
     amended by striking ``health maintenance organization which 
     meets the requirements of subsection (m) of this section'' 
     and inserting ``risk contracting entity which meets the 
     requirements of section 1932''.
       (9) Section 1903(w)(7)(A)(viii) of such Act (42 U.S.C. 
     1396b(w)(7)(A)(viii)) is amended by striking ``health 
     maintenance organizations (and other organizations with 
     contracts under section 1903(m))'' and inserting ``risk 
     contracting entities with contracts under section 1932''.
       (10) Section 1905(a) of such Act (42 U.S.C. 1396d(a)) is 
     amended, in the matter preceding clause (i), by inserting 
     ``(which may be on a prepaid capitation or other risk 
     basis)'' after ``payment''.
       (11) Section 1916(b)(2)(D) of such Act (42 U.S.C. 
     1396o(b)(2)(D)) is amended by striking ``health maintenance 
     organization (as defined in section 1903(m))'' and inserting 
     ``risk contracting entity (as defined in section 
     1932(a)(3))''.
       (12) Section 1925(b)(4)(D)(iv) of such Act (42 U.S.C. 
     1396r-6(b)(4)(D)(iv)) is amended--
       (A) in the heading, by striking ``hmo'' and inserting 
     ``risk contracting entity'',
       (B) by striking ``health maintenance organization (as 
     defined in section 1903(m)(1)(A))'' and inserting ``risk 
     contracting entity (as defined in section 1932(a)(3)'', and
       (C) by striking ``health maintenance organization in 
     accordance with section 1903(m)'' and inserting ``risk 
     contracting entity in accordance with section 1932''.
       (13) Paragraphs (1) and (2) of section 1926(a) of such Act 
     (42 U.S.C. 1396r-7(a)) are each amended by striking ``health 
     maintenance organizations under section 1903(m)'' and 
     inserting ``risk contracting entities under section 1932''.
       (14) Section 1927(j)(1) of such Act is amended by striking 
     ``* * * Health Maintenance Organizations, including those 
     organizations that contract under section 1903(m)'' and 
     inserting ``risk contracting entities (as defined in section 
     1932(a)(3))''.
       (g) Effective Date.--The amendments made by this section 
     shall become effective with respect to calendar quarters 
     beginning on or after January 1, 1995.

     SEC. 2112. CONTINUATION OF STATE MEDICAID ELIGIBILITY 
                   CATEGORIES.

       (a) In General.--Section 1902(a) of the Social Security Act 
     (42 U.S.C. 1369a(a)), as amended by sections 6111(1) and 
     2101(a)(1), is amended--
       (1) by striking ``and'' at the end of paragraph (62);
       (2) by striking the period at the end of paragraph (63) and 
     inserting ``; and ''; and
       (3) by adding at the end the following new paragraph:
       ``(64) subject to section 1932(c), provide for the 
     continuation through December 31, 1997, of eligibility for 
     medical assistance under section 1902(a)(10)(A) of any class 
     or category of individuals eligible for medical assistance 
     under such section during fiscal year 1994.''.
       (b) Effective Date.--The amendments made by subsection (a) 
     shall apply to payments for calendar quarters beginning on or 
     after January 1, 1995.

 PART 3--INTEGRATION OF AFDC AND NON-CASH MEDICAID BENEFICIARIES INTO 
                     STATE PREMIUM SUBSIDY PROGRAM

     SEC. 2121. DIVISION OF MEDICAID BENEFITS INTO 2 GROUPS; 
                   REQUIREMENT FOR INTEGRATION OF AFDC RECIPIENTS 
                   AND NON-CASH MEDICAID BENEFICIARIES INTO STATE 
                   PREMIUM SUBSIDY PROGRAMS.

       (a) In General.--Title XIX of the Social Security Act, as 
     amended by section 2111(a)(2), is amended by redesignating 
     section 1933 as section 1934 and by inserting after section 
     1932 the following new section:


  ``transitional medicaid reform rules for benefits for acute medical 
    services for afdc recipients and non-cash medicaid beneficiaries

       ``Sec. 1933. (a) Application of Section.--This section 
     applies with respect to medical assistance for acute medical 
     services (as defined in subsection (f)) under State plans 
     under this title for calendar quarters during 1995, 1996, and 
     1997 to AFDC recipients and non-cash medicaid categorical 
     beneficiaries. To the extent this section applies, it 
     supersedes provisions of this title (and other applicable 
     law) to the contrary.
       ``(b) Division of Acute Medical Service Benefits.--The 
     Secretary shall divide the class of benefits for acute 
     medical services into--
       ``(1) a group of those benefits with respect to such 
     services typically included in the services covered under a 
     qualified standard health plan (in this section referred to 
     as `core benefits'), and
       ``(2) a group of benefits with respect to such services (in 
     this section referred to as `supplemental medical benefits').
       ``(c) Sunset in Medical Assistance.--For calendar quarters 
     beginning on or after January 1, 1998, with respect to any 
     individual who is AFDC recipient or non-cash medicaid 
     beneficiary and who is a premium subsidy eligible individual 
     under part A of title XXI--
       ``(1) the individual is not entitled to receive medical 
     assistance for core benefits under the State plan, and
       ``(2) Federal financial participation under section 1903(a) 
     shall not be paid to the State to the extent that 
     expenditures for such assistance.
       ``(d) State Maintenance of Effort Required.--
       ``(1) In general.--Payment to a State under section 1903(a) 
     for a quarter (beginning after 1997) is conditioned upon the 
     State making expenditures under this title for core benefits 
     for AFDC recipients and non-cash beneficiaries equal to at 
     least the maintenance of effort amount computed under 
     paragraph (2).
       ``(2) Maintenance of effort amount.--The maintenance of 
     effort amount computed under this paragraph for a State for a 
     quarter in a year is equal to the product of--
       ``(A) the amount that would be computed as the per capita 
     core benefits expenditure limit under subsection (c)(2) for 
     the State for the quarter if the FEHBP State rolling increase 
     percentage (as defined in section 2136(b)(2)) were 
     substituted for the FEHBP national rolling increase 
     percentage in section 2135(a)(2)(B) and 2135(b)(1); and
       ``(B) the Federal-to-State conversion factor (specified 
     under section 2135(b)(3)).
       ``(e) Reference to Payments Under New State Supplementary 
     Medical Benefits Program.--For payments to States for 
     operation of State supplementary benefit programs, see part B 
     of title XXI.
       ``(f) Definitions.--In this section:
       ``(1) Acute medical services.--``The term `acute medical 
     services' means items and services described in section 
     1905(a) other than the following:
       ``(A) Nursing facility services (as defined in section 
     1905(f)).
       ``(B) Intermediate care facility for the mentally retarded 
     services (as defined in section 1905(d)).
       ``(C) Personal care services (as described in section 
     1905(a)(24)).
       ``(D) Private duty nursing services (as referred to in 
     section 1905(a)(8)).
       ``(E) Home or community-based services furnished under a 
     waiver granted under subsection (c), (d), or (e) of section 
     1915.
       ``(F) Home and community care furnished to functionally 
     disabled elderly individuals under section 1929.
       ``(G) Community supported living arrangements services 
     under section 1930.
       ``(H) Case-management services (as described in section 
     1915(g)(2)).
       ``(I) Home health care services (as referred to in section 
     1905(a)(7)), clinic services, and rehabilitation services 
     that are furnished to an individual who has a condition or 
     disability that qualifies the individual to receive any of 
     the services described in a previous subparagraph.
       ``(J) Hospice care.
       ``(2) AFDC recipient.--The term `AFDC recipient' means an 
     individual who is receiving aid or assistance under any plan 
     of the State approved under title I, X, XIV, or XVI, or part 
     A or part E of title IV.
       ``(3) Non-cash medicaid beneficiary.--The term `non-cash 
     medicaid beneficiary' means an individual described in 
     section 1902(a)(10)(A) who is not an AFDC recipient or an SSI 
     recipient.
       ``(4) SSI recipient.--The term `SSI recipient' means, for a 
     month, an individual--
       ``(A) with respect to whom supplemental security income 
     benefits are being paid under title XVI of the Social 
     Security Act for the month,
       ``(B) who is receiving a supplementary payment under 
     section 1616 of such Act or under section 212 of Public Law 
     93-66 for the month,
       ``(C) who is receiving monthly benefits under section 
     1619(a) of the Social Security Act (whether or not pursuant 
     to section 1616(c)(3) of such Act) for the month, or
       ``(D) who is treated under section 1619(b) of the Social 
     Security Act as receiving supplemental security income 
     benefits in a month for purposes of title XIX of such Act.
       ``(5) State.--This section shall only apply with respect to 
     the 50 States and the District of Columbia.''.

     SEC. 2122. 25 PERCENT REDUCTION IN AMOUNT OF PAYMENT 
                   ADJUSTMENTS FOR DISPROPORTIONATE SHARE 
                   HOSPITALS.

       (a) In General.--Section 1923 of the Social Security Act 
     (42 U.S.C. 1396r-4) is amended by adding at the end the 
     following new subsection:
       ``(h) Reduction in Federal Financial Participation for 
     Disproportionate Share Adjustments.--Notwithstanding any 
     other provision of this section, the amount of payments under 
     section 1903(a) with respect to any payment adjustment made 
     under this section for hospitals in a State for quarters in a 
     fiscal year shall not exceed the following percent of the 
     amount otherwise determined under subsection (f):
       ``(1) For fiscal years 1997 and 1998, 75 percent.
       ``(2) For fiscal years 1999 and 2000, 70 percent.
       ``(3) For fiscal years 2001 and thereafter 2004, 65 
     percent.''.
       (b) Conforming Amendment.--Section 1923(c) of such Act (42 
     U.S.C. 1396r-4(c)) is amended in the matter preceding 
     paragraph (1) by striking ``(f) and (g)'' and inserting 
     ``(f), (g), and (h)''.
       (c) Effective Date.--The amendments made by subsections (a) 
     and (b) shall apply to quarters in fiscal years beginning on 
     or after October 1, 1996.
  Subtitle C--Report and Recommendations on Health Coverage and Access

     SEC. 2201. OBJECTIVE OF FULL ACCESS AND COVERAGE.

       It is an objective of this Act to assure by 2002 that--
       (1) all eligible individuals in the United States have 
     access to private or public health coverage, and
       (2) at least 95 percent of such individuals have such 
     coverage.

     SEC. 2202. REPORT AND RECOMMENDATIONS ON ACHIEVEMENT OF 
                   OBJECTIVE FOR HEALTH COVERAGE AND ACCESS.

       (a) Study.--The Secretary shall monitor and evaluate the 
     extent to which eligible individuals in the United States 
     have access to health coverage and have health coverage.
       (b) Report.--Not later than January 31, 2002, the Secretary 
     shall submit to Congress a report on the evaluation conducted 
     under subsection (a). The Secretary shall include in the 
     report a determination of whether the objective described in 
     section 2201 has been met.
       (c) Recommendations.--If the Secretary determines that such 
     objective has not been met, the Secretary shall include in 
     the report such recommendations as may be appropriate to 
     achieve the objective at the earliest possible date.
                     TITLE III--ACCESS IMPROVEMENTS

                       table of contents of title

           Subtitle A--Expanding Access in Underserved Areas

Sec. 3001. Community health authorities demonstration projects.
Sec. 3002. Health center program amendments.

               Subtitle B--Improved Access in Rural Areas

      Part 1--Grants to Encourage Community Rural Health Networks

Sec. 3101. Assistance for development of access plans for chronically 
              underserved areas.
Sec. 3102. Technical assistance grants for networks.
Sec. 3103. Development grants for networks.
Sec. 3104. Definitions.

 Part 2--Incentives for Health Professionals to Practice in Rural Areas

            Subpart A--National Health Service Corps Program

Sec. 3111. National Health Service Corps loan repayments excluded from 
              gross income.
Sec. 3112. Modification in criteria for designation as health 
              professional shortage area.
Sec. 3113. Other provisions regarding national health service corps.

               Subpart B--Incentives Under Other Programs

Sec. 3121. Extension of additional payment under medicare for 
              physicians' services furnished in former shortage areas.
Sec. 3122. Refinement of geographic adjustment factor for medicare 
              physicians' services.
Sec. 3123. Development of model State scope of practice law.

             Part 3--Assistance for Institutional Providers

            Subpart A--Community and Migrant Health Centers

Sec. 3131. Community and migrant health centers.

                  Subpart B--Emergency Medical Systems

Sec. 3141. Emergency medical services.
Sec. 3142. Grants to States regarding aircraft for transporting rural 
              victims of medical emergencies.

        Subpart C--Assistance to Rural Providers Under Medicare

Sec. 3151. Amendments to essential access community hospital (EACH) 
              program under medicare.
Sec. 3152. Rural emergency access care hospitals described.
Sec. 3153. Coverage of and payment for services.
Sec. 3154. Effective date.

 Subpart D--Demonstration Projects to Encourage Primary Care and Rural-
                    Based Graduate Medical Education

Sec. 3161. State and consortium demonstration projects.
Sec. 3162. Goals for projects.
Sec. 3163. Definitions.

            Part 4--Hospital Affiliated Primary Care Center

Sec. 3171. Hospital-affiliated primary care centers.

                  Subtitle C--Academic Health Centers

Sec. 3201. Study of payments for medical education at sites other than 
              hospitals.

       Subtitle D--United States-Mexico Border Health Commission

Sec. 3301. Agreement to establish binational commission.
Sec. 3302. Duties.
Sec. 3303. Other authorized functions.
Sec. 3304. Membership.
Sec. 3305. Regional offices.
Sec. 3306. Reports.
Sec. 3307. Definitions.
           Subtitle A--Expanding Access in Underserved Areas

     SEC. 3001. COMMUNITY HEALTH AUTHORITIES DEMONSTRATION 
                   PROJECTS.

       (a) In General.--Title XIX of the Social Security Act, as 
     amended by sections 2111(a) and 2121(a), is amended--
       (1) by redesignating section 1934 as section 1935; and
       (2) by inserting after section 1933 the following new 
     section:


         ``community health authorities demonstration projects

       ``Sec. 1934. (a) In General.--In order to test the 
     effectiveness of various innovative health care delivery 
     approaches through the operation of community health 
     authorities, the Secretary shall operate a program under 
     which States establish projects to demonstrate the 
     effectiveness of such approaches in providing access to cost-
     effective preventive and primary care and related services 
     for various areas and populations, including low-income 
     residents of medically underserved areas or for medically 
     underserved populations. A State may operate more than one 
     such project.
       ``(b) Selection of State Projects.--
       ``(1) In general.--A State is eligible to participate in 
     the program, and establish a demonstration project, under 
     this section only if--
       ``(A) the State submits to the Secretary an application, at 
     such time and in such form as the Secretary may require, for 
     participation in the program; and
       ``(B) the Secretary finds that--
       ``(i) the application contains assurances that the State 
     will support the development of a community health authority 
     that meets the requirements of this section,
       ``(ii) the community health authority will meet the 
     requirements for such an authority under subsection (c),
       ``(iii) the State provides sufficient assurances that the 
     demonstration project of a community health authority meets 
     (or, when operational, will meet) the requirements of 
     subsection (d), and
       ``(iv) the State will comply with the requirements of 
     subsections (g) and (h).
       ``(2) Contents of application.--Each application submitted 
     under paragraph (1) for a demonstration project shall include 
     at least the following:
       ``(A) A description of the proposed community health 
     authority and of the area or population that the authority 
     will serve.
       ``(B) A demonstration that the CHA will serve at least one 
     geographic area or population group that is designated as 
     medically underserved under section 330 of the Public Health 
     Service Act or as having a shortage of health professionals 
     under section 332 of such Act.
       ``(C) An assessment of the area's or population's need for 
     services and an assurance that the services of the CHA will 
     be responsive to those needs.
       ``(D) A list of the items and services to be furnished by 
     the CHA under the project, broken down by those items and 
     services that are treated as medical assistance under the 
     State plan under this title and other items and services that 
     will be provided by the CHA (either directly or through 
     coordination with other entities).
       ``(E) An assurance that the CHA has entered into (or plans 
     to enter into) written participation agreements with a 
     sufficient number of providers to enable the CHA to furnish 
     all of such items and services to enrolled individuals.
       ``(F) An assurance that the State plan under this title 
     will provide payment to the authority in accordance with 
     subsection (e).
       ``(G) Evidence of support and assistance from other State 
     agencies with responsibility for providing or supporting the 
     provision of preventive and primary care services to 
     underserved and at-risk populations.
       ``(H) A proposed budget for the CHA.
       ``(3) Period of approval.--Each project approved under this 
     section shall be approved for a period of not less than 3 
     years, subject to renewal for subsequent periods unless such 
     approval is withdrawn for cause by the Secretary or at the 
     request of the State.
       ``(c) Community Health Authority (CHA) Defined.--In this 
     section, the terms `community health authority' and `CHA' 
     mean a nonprofit entity that meets the following 
     requirements:
       ``(1) The entity serves (or will serve at the time it 
     becomes operational under a project) a geographic area or 
     population group that includes those designated--
       ``(A) under section 330 of the Public Health Service Act as 
     medically underserved, or
       ``(B) under section 332 of such Act as a health professions 
     shortage area.
       ``(2) The entity enrolls--
       ``(A) individuals and families who are medicaid-eligible;
       ``(B) within the limits of its available resources and 
     capacity, other individuals who have incomes below 200 
     percent of the Federal official poverty level; and
       ``(C) within the limits of its available resources and 
     capacity, other individuals and families who are able to pay 
     the costs of enrollment.
       ``(3) Through its participating providers, the entity 
     provides or, through contracts, arranges for the provision of 
     (or, by the time it become operational, will so provide or 
     arrange for the provision of) at least preventive services, 
     primary care services, inpatient and outpatient hospital 
     services, and any other service provided by a participating 
     provider for which payment may be made under the State plan 
     under this title to enrolled individuals.
       ``(4) The entity must include (to the maximum extent 
     practicable) as participating providers any of the following 
     providers that furnish services provided by (or arranged by) 
     the entity that are located in or serve the area or 
     population to be covered:
       ``(A) Federally-qualified health centers.
       ``(B) Rural health clinics.
       ``(C) Local public health agencies that furnish such 
     services.
       ``(D) A hospital (or other provider of inpatient or 
     outpatient hospital services) which has a participation 
     agreement in effect with the State under its plan under this 
     title, which is located in or serving the area or population 
     to be served.
       ``(5) The entity may include as participating providers 
     other providers (which may include private physicians or 
     group practice offices, other community clinics, limited 
     service providers (such as prenatal clinics), and health 
     professionals teaching programs (such as area health 
     educational centers)) and take other appropriate steps, to 
     the extent needed to assure that the network is reasonable in 
     size and able to provide (or arrange for the provision of) 
     the services it proposes to furnish to its enrollees.
       ``(6) The entity must maintain written agreements with each 
     participating provider under which the provider agrees to 
     participate in the CHA and agrees to accept payment from the 
     CHA as payment in full for services furnished to individuals 
     enrolled with the CHA.
       ``(7) Under the written agreements described in paragraph 
     (6), if a majority of the board of directors of the entity 
     has determined that a participating provider is failing to 
     meet any of the requirements of the participation agreement, 
     the board may terminate the provider's participation 
     agreement in accordance with the following requirements:
       ``(A) Subject to subparagraph (B), prior to any termination 
     of a provider's participation agreement, the provider shall 
     be entitled to 30 days prior notice, a reasonable opportunity 
     to correct any deficiencies, and an opportunity for a full 
     and fair hearing conducted by the entity to dispute the 
     reasons for termination. The provider shall be entitled to 
     appeal the board of directors' decision directly to a 
     committee consisting of representatives of all of the 
     entity's participating providers.
       ``(B) If a majority of the board of directors of the entity 
     determines that the continued participation of a provider 
     presents an immediate threat to the health and safety of 
     patients or a substantial risk of improper diversion of 
     funds, the board may suspend the provider's participation 
     agreement (including the receipt of funds under the 
     agreement) for a period of up to 60 days. During this period, 
     the entity shall take steps to ensure that patients who were 
     assigned to or cared for by the suspended provider are 
     appropriately assigned or referred to alternative 
     participating providers. The suspended provider shall be 
     entitled to a hearing within the period of the suspension to 
     show cause why the suspension should be lifted and its 
     participation agreement restored. If dissatisfied with the 
     board's decision, the provider shall be entitled to appeal 
     the decision directly to a committee consisting of 
     representatives of all of the entity's participating 
     providers.
       ``(C) For all other disputes between the entity and its 
     participating providers (including disputes over the amounts 
     due or interim rates to be paid to a provider), the entity 
     shall provide an opportunity for a full and fair hearing.
       ``(8) The entity must be governed by a board of directors 
     that includes representatives of the participating providers 
     and, as appropriate, other health professionals, civic or 
     business leaders, elected officials, and residents of the 
     area or population served. Not less than 51 percent of such 
     board shall be composed of individuals who are enrolled in 
     the CHA and who are representatives of the community served.
       ``(d) Demonstration Project Requirements.--The requirements 
     of this subsection, with respect to a demonstration project 
     of a CHA under this section, are as follows:
       ``(1)(A) All services furnished by the CHA under the 
     project shall be available and accessible to all enrolled 
     individuals and, except as provided in subparagraph (B), must 
     be available without regard to an individual's ability to pay 
     for such services.
       ``(B) A CHA shall prepare a schedule of discounts to be 
     applied to the payment of premiums by individuals who are not 
     medicaid-eligible individuals which shall be adjusted on the 
     basis of the individual's ability to pay.
       ``(2) The CHA shall take appropriate steps to emphasize the 
     provision of preventive and primary care services, and shall 
     ensure that each enrolled individual is assigned to a primary 
     care physician (to the greatest extent appropriate and 
     feasible), except that the CHA shall establish a process 
     through which an enrolled individual may be assigned to 
     another primary care physician for good cause shown.
       ``(3) The CHA must make reasonable efforts to reduce the 
     unnecessary or inappropriate use of hospital or other high-
     cost services through an emphasis on preventive and primary 
     care services, the implementation of utilization review or 
     other appropriate methods.
       ``(4) The State must regularly provide the CHA with 
     information on other medical, health, and related benefits 
     that may be available to individuals enrolled with the CHA 
     under programs other than the State plan under this title, 
     and the CHA must provide its enrolled individuals with 
     enrollment information and other non-cash assistance to 
     assist them in obtaining such benefits.
       ``(5) The State and the CHA must meet such financial 
     standards and requirements and reporting requirements as the 
     Secretary specifies and must prepare and submit to the 
     Secretary an annual independent financial audit conducted in 
     accordance with requirements specified by the Secretary.
       ``(6) In collaboration with the State, the CHA must adopt 
     and use community-oriented, patient-responsive quality 
     assurance and control systems in accordance with requirements 
     specified by the Secretary. Such systems must include at 
     least an ongoing quality assurance program that measures 
     consumer satisfaction with the care provided under the 
     network, stresses improved health outcomes, and operates a 
     community health status improvement process that identifies 
     and investigates community health problems and implements 
     measures designed to remedy them.
       ``(e) Capitation Payments.--
       ``(1) In general.--Under a demonstration project under this 
     section, the State shall enter into an annual contract with 
     the CHA under which the State shall make monthly payments to 
     the CHA for covered services furnished through the CHA to 
     individuals entitled to medical assistance under this title 
     in the amount specified in paragraph (2). Payment shall be 
     made at the beginning of each month on the basis of estimates 
     of the amounts payable and amounts subsequently paid are 
     subject to adjustment to reflect the amounts by which 
     previous payments were greater or less than the amount of 
     payments that should have been made.
       ``(2) Amount of capitation payment.--The amount of a 
     monthly payment under paragraph (1) during a contract year, 
     shall be not less than \1/12\ of the product of--
       ``(A)(i) the average per capita amounts expended under this 
     title under the State plan for covered services to be 
     furnished under the demonstration project for similar 
     Medicaid-eligible individuals for the most recent 12-month 
     period ending before the date of the enactment of this 
     section, increased by (ii) the percentage change in the 
     consumer price index for all urban consumers (all items; U.S. 
     city average) during the period that begins upon the 
     expiration of such 12-month period and ends upon the 
     expiration of the most recent 12-month period ending before 
     the first month of the contract year for which complete 
     financial data on such index is available, and
       ``(B) the number of Medicaid-eligible individuals enrolled 
     under the project as of the 15th day of the month prior to 
     the first month of the contract year (or, in the case of the 
     first year for which a contract is in effect under this 
     subsection, the CHA's reasonable estimate of the number of 
     such individuals who will be enrolled in the project as of 
     the 15th day of such month).
       ``(f) Additional State Assistance for Planning, 
     Development, and Operations.--
       ``(1) In general.--Subject to paragraph (2), in addition to 
     the payments under subsection (e), demonstration projects 
     approved under this section are eligible to have approved 
     expenditures described in paragraph (3) treated, for purposes 
     of section 1903(a)(7), as expenditures found necessary by the 
     Secretary for the proper and efficient administration of the 
     State plan under this title.
       ``(2) Special rules.--
       ``(A) Limitation with respect to any community health 
     authority.--The total amount of expenditures with respect to 
     any CHA that may be treated as expenditures for medical 
     assistance under paragraph (1) for any 12-month period shall 
     not exceed $250,000.
       ``(B) Limitation on number of years.--The number of 12-
     month periods for which expenditures are treated as 
     expenditures for medical assistance under paragraph (1) for a 
     CHA shall not exceed--
       ``(i) 2 for expenditures for planning and development 
     assistance, described in paragraph (3)(A), and
       ``(ii) 2 for expenditures for operational assistance, 
     described in paragraph (3)(B).
       ``(C) No resulting reduction in amounts provided under phsa 
     grants.--No grant to a CHA or one of its participating 
     providers under the Public Health Service Act or this Act may 
     be reduced on the ground that activities of the CHA that are 
     considered approved expenditures under paragraph (3) are 
     activities for which the CHA or the participating providers 
     received funds under such Act.
       ``(3) Approved expenditures.--The approved expenditures 
     described in this paragraph are as follows:
       ``(A) Planning and development.--Expenditures for planning 
     and development with respect to a CHA, including--
       ``(i) developing internal management, legal and financial 
     and clinical, information, and reporting systems for the CHA, 
     and carrying out other operating activities of the CHA;
       ``(ii) recruiting, training and compensating management 
     staff of the CHA and, as appropriate and necessary, 
     management and clinical staff of any participating provider;
       ``(iii) purchasing essential equipment and acquiring, 
     modernizing, expanding, or (if cost-effective) renovating 
     facilities for the CHA and for participating providers 
     (including amortization costs and payment of interest on 
     loans); and
       ``(iv) entering into arrangements to obtain or participate 
     in emerging medical technologies, including telemedicine.
       ``(B) Operations.--Expenditures in support of the 
     operations of a CHA, including--
       ``(i) the ongoing management of the CHA, including daily 
     program administration, recordkeeping and reporting, 
     assurance of proper financial management (including billings 
     and collections) and oversight of program quality;
       ``(ii) developing and operating systems to enroll eligible 
     individuals in the CHA;
       ``(iii) data collection, in collaboration with the State 
     medicaid agency and the State health department, designed to 
     measure changes in patient access to care, the quality of 
     care furnished, and patient health status, and health care 
     outcomes;
       ``(iv) ongoing community outreach and community education 
     to all residents of the area or population served, to promote 
     the enrollment of eligible individuals and the appropriate 
     utilization of health services by such individuals;
       ``(v) the establishment of necessary reserves or purchase 
     of stop-loss coverage; and
       ``(vi) activities relating to health professions training, 
     including residency training at participating provider sites.
       ``(g) Additional Requirements.--
       ``(1) Mandatory enrollment of medicaid-eligible 
     individuals.--Notwithstanding any provision of section 
     1903(m), a State participating in a demonstration project 
     under this section may, until December 31, 1997, require that 
     each medicaid-eligible resident in the service area of a CHA 
     operating under the project is not eligible to receive any 
     medical assistance under the State plan that may be obtained 
     through enrollment with the CHA unless the individual 
     receives such assistance through enrollment with the CHA.
       ``(2) Continued entitlement to additional benefits.--In the 
     case of a medicaid-eligible individual enrolled with a CHA 
     under a demonstration project under this section, the 
     individual shall remain entitled to medical assistance for 
     services which are not covered services under the project, 
     until December 31, 1997.
       ``(3) HMO-related requirements.--A CHA under this section 
     shall be deemed to meet the requirements of section 1903(m) 
     (subject to paragraph (1)) in the same manner as an entity 
     listed under section 1903(m)(2)(G).
       ``(4) Outstationing eligibility workers.--Under the 
     project, the State may (in addition to meeting the 
     requirements of section 1902(a)(55)) provide for, or pay the 
     reasonable costs of, stationing eligibility workers at 
     appropriate service sites under the project, and may permit 
     medicaid-eligible individuals to be enrolled under the State 
     plan at such a CHA or at such a site.
       ``(5) Purchase of stop-loss coverage.--The State shall 
     ensure that the CHA has purchased stop-loss coverage to 
     protect against default on its obligations under the project. 
     If an entity otherwise qualified to serve as a CHA is 
     prohibited under State law from purchasing such coverage, the 
     State shall waive the application of such law to the extent 
     necessary to permit the entity to purchase such coverage.
       ``(h) Evaluation and Reporting.--
       ``(1) CHA.--Each CHA in a State with a demonstration 
     project approved under this section shall prepare and submit 
     to the State an annual report on its activities during the 
     previous year.
       ``(2) State.--Taking into account the reports submitted 
     pursuant to paragraph (1), each State with a demonstration 
     project approved under this section shall prepare and submit 
     to the Secretary an annual evaluation of its activities and 
     services under this section. Such evaluation shall include an 
     analysis of the effectiveness of the project in providing 
     cost-effective health care to enrolled individuals.
       ``(3) Report to congress.--Not later than 3 years after the 
     date of the enactment of this section, the Secretary shall 
     submit to Congress a report on the demonstration projects 
     conducted under this section. Such report shall include an 
     analysis of the effectiveness of such projects in providing 
     cost-effective health care for the areas or populations 
     served.
       ``(i) Collaboration in Administration.--In carrying out 
     this section, the Secretary shall assure the highest possible 
     level of collaboration between the Health Care Financing 
     Administration and the Public Health Service. Such 
     collaboration may include (if appropriate and feasible) any 
     of the following:
       ``(1) The provision by the Public Health Service of new or 
     increased grant support to eligible entities participating in 
     a CHA, in order to expand the availability of services 
     (particularly preventive and primary care services).
       ``(2) The placement of health professionals at eligible 
     locations and collaboration with Federally-assisted health 
     professions training programs located in or near the areas 
     served by community health authorities.
       ``(3) The provision of technical and other nonfinancial 
     assistance.
       ``(j) Definitions.--In this section:
       ``(1) Medicaid-eligible individual.--The term `medicaid-
     eligible individual' means an individual described in section 
     1902(a)(10)(A) and entitled to medical assistance under the 
     State plan.
       ``(2) Participating provider.--The term `participating 
     provider' means, with respect to a CHA, a provider that has 
     entered into an agreement with the CHA for the provision of 
     covered services under a project under this section.
       ``(3) Preventive and primary care services.--`Preventive' 
     and `primary' services include those services described in 
     section 1905(l)(2)(A) and included as Federally-qualified 
     health center services.''.
       (b) Exception to Anti-Kickback Law.--Section 1128B(b)(3) of 
     such Act (42 U.S.C. 1320a-7b(b)(3)) is amended--
       (1) by striking ``and'' at the end of subparagraph (D),
       (2) by striking the period at the end of subparagraph (E) 
     and inserting ``; and'', and
       (3) by adding at the end the following new subparagraph:
       ``(F) any remuneration paid, or received, by a Federally 
     qualified health center, rural health clinic, or other entity 
     which is a participating provider under a demonstration 
     project under section 1934 as part of an arrangement for the 
     procurement of goods or services or the referral of patients 
     or the lease or purchase of space or equipment.''.
       (c) Transition.--A premium subsidy eligible individual may 
     use premium assistance certificates issued under title XXI of 
     the Social Security Act to purchase coverage offered by a 
     community health authority.
       (d) Effective Date.--The amendments made by this section 
     shall apply to calendar quarters beginning on or after 
     October 1, 1994.

     SEC. 3002. HEALTH CENTER PROGRAM AMENDMENTS.

       (a) Authorization of Grants for Network Development.--
       (1) Migrant health centers.--
       (A) In general.--Section 329 of the Public Health Service 
     Act (42 U.S.C. 254b) is amended by adding at the end the 
     following:
       ``(j)(1) The Secretary may make a grant, to an entity 
     receiving a grant under this section or to a group of such 
     entities, to support the planning and development of health 
     service networks (as defined in paragraph (3)) which will 
     serve high impact areas, medically underserved areas, or 
     medically underserved populations within the area they serve 
     (or propose to serve).
       ``(2) A grant under this subsection for the planning and 
     development of a health service network may be used for the 
     following costs:
       ``(A) The costs of developing the network corporate entity, 
     including planning and needs assessment.
       ``(B) The costs of developing internal management for the 
     network, as well as costs of developing legal, financial, 
     clinical, information, billing, and reporting systems, and 
     other costs necessary to achieve operational status.
       ``(C) The costs of recruitment, training, and compensation 
     of management staff of the network and, as appropriate and 
     necessary, the management and clinical staff of any 
     participating provider.
       ``(D) The costs of developing additional primary health and 
     related service sites, including costs related to purchase of 
     essential equipment, acquisition, modernization, expansion, 
     or, if cost-effective, construction of facilities.
       ``(3) In this subsection, the term `health service network' 
     means a nonprofit private entity that--
       ``(A) through its participating providers (which may 
     provide services directly or through contract) assures the 
     provision of primary health and related services and, as 
     appropriate, supplemental health services to residents of the 
     high impact area or medically underserved area or members of 
     the medically underserved population covered by the network,
       ``(B) includes, as participating providers, at least all 
     recipients of grants under this section or section 330, 340, 
     or 340A that provide primary health and related services to 
     the residents of the area it serves (or proposes to serve), 
     and that may include, at the entity's option, any other 
     providers of primary health or supplemental health services 
     to residents of the high impact area or medically underserved 
     area or members of the medically underserved population 
     covered by the network, but only if such participating 
     providers agree to provide services without regard to an 
     individual's ability to pay, and
       ``(C) is governed by individuals a majority of whom are 
     patients, employees, or board members of its participating 
     providers that receive grants under this section or section 
     330, 340, or 340A.''.
       (B) Conforming change.--Section 329(h)(1)(A) of such Act 
     (42 U.S.C. 254b(h)(1)(A)) is amended by inserting ``and 
     subsection (j)'' after ``through (e)''.
       (2) Community health centers.--Section 330 of such Act (42 
     U.S.C. 254c) is amended by adding at the end the following:
       ``(l)(1) The Secretary may make a grant, to an entity 
     receiving a grant under this section or to a group of such 
     entities, to support the planning and development of health 
     service networks (as defined in section 329(j)(3)) which will 
     serve high impact areas, medically underserved areas, or 
     medically underserved populations within the area they serve 
     (or propose to serve).
       ``(2) A grant under this subsection for the planning and 
     development of a health service network may be used for the 
     costs described in section 329(j)(2).''.
       (3) Effective date.--The amendments made by this subsection 
     shall take effect on the date of the enactment of this Act.
       (b) Extension of Authorization of Appropriations.--For 
     extension of authorization of appropriations for migrant 
     health centers and community health centers, see section 
     3131.
               Subtitle B--Improved Access in Rural Areas

      PART 1--GRANTS TO ENCOURAGE COMMUNITY RURAL HEALTH NETWORKS

     SEC. 3101. ASSISTANCE FOR DEVELOPMENT OF ACCESS PLANS FOR 
                   CHRONICALLY UNDERSERVED AREAS.

       (a) Availability of Financial Assistance to Implement 
     Action Plans to Increase Access.--
       (1) In general.--The Secretary shall provide grants (in 
     amounts determined in accordance with paragraph (3)) over a 
     3-year period to an eligible State for the development of 
     plans to increase access to health care services during such 
     period for residents of areas in the State that are 
     designated as chronically underserved areas in accordance 
     with subsection (b).
       (2) Eligibility requirements.--A State is eligible to 
     receive grants under this section if the State submits to the 
     Secretary (at such time and in such form as the Secretary may 
     require) assurances that the State has developed (or is in 
     the process of developing) a plan to increase the access of 
     residents of a chronically underserved area to health care 
     services that meets the requirements of subsection (c), 
     together with such other information and assurances as the 
     Secretary may require.
       (3) Amount of assistance.--
       (A) In general.--Subject to subparagraph (B), the amount of 
     assistance provided to a State under this subsection with 
     respect to any plan during a 3-year period shall be equal 
     to--
       (i) for the first year of the period, an amount equal to 
     100% of the amounts expended by the State during the year to 
     implement the plan described in paragraph (1) (as reported to 
     the Secretary in accordance with such requirements as the 
     Secretary may impose);
       (ii) for the second year of the period, an amount equal to 
     50% of the amounts expended by the State during the year to 
     implement the plan; and
       (iii) for the third year of the period, an amount equal to 
     33% of the amounts expended by the State during the year to 
     implement the plan.
       (B) Aggregate per plan limit.--The amount of assistance 
     provided to a State under this subsection with respect to any 
     plan may not exceed $100,000 during any year of the 3-year 
     period for which the State receives assistance.
       (b) Designation of Areas.--
       (1) Designation by governor.--In accordance with the 
     guidelines developed under paragraph (2), the Governor of a 
     State may designate an area in the State as a chronically 
     underserved area for purposes of this section upon the 
     request of a local official of the area or upon the 
     Governor's initiative.
       (2) Guidelines for designation.--
       (A) Development by secretary.--Not later than 1 year after 
     the date of the enactment of this Act, the Secretary shall 
     develop guidelines for the designation of areas as 
     chronically underserved areas under this section.
       (B) Factors considered in development of guidelines.--In 
     developing guidelines under paragraph (1), the Secretary 
     shall consider the following factors:
       (i) Whether the area (or a significant portion of the 
     area)--

       (I) is designated as a health professional shortage area 
     (under section 332(a) of the Public Health Service Act), or 
     meets the criteria for designation as such an area; or
       (II) was previously designated as such an area or 
     previously met such criteria for an extended period prior to 
     the designation of the area under this section (in accordance 
     with criteria established by the Secretary).

       (ii) The availability and adequacy of health care providers 
     and facilities for residents of the area.
       (iii) The extent to which the availability of assistance 
     under other Federal and State programs has failed to 
     alleviate the lack of access to health care services for 
     residents of the area.
       (iv) The percentage of residents of the area whose income 
     is at or below the poverty level.
       (v) The percentage of residents of the area who are age 65 
     or older.
       (vi) The existence of cultural or geographic barriers to 
     access to health care services in the area, including weather 
     conditions.
       (3) Review by secretary.--No designation under paragraph 
     (1) shall take effect under this section unless the 
     Secretary--
       (A) has been notified of the proposed designation; and
       (B) has not, within 60 days after the date of receipt of 
     the notice, disapproved the designation.
       (4) Period of designation.--A designation under this 
     section shall be effective during a period specified by the 
     Governor of not longer than 3 years. The Governor may extend 
     the designation for additional 3-year periods, except that a 
     State may not receive assistance under subsection (a)(3) for 
     amounts expended during any such additional periods.
       (c) Requirements for State Access Plans.--A State plan to 
     increase the access of residents of chronically underserved 
     areas to health care services meets the requirements of this 
     section if the Secretary finds that the plan was developed 
     with the participation of health care providers and 
     facilities and residents of the area that is the subject of 
     the plan, together with such other requirements as the 
     Secretary may impose.
       (d) Authorization of Appropriations.--There are authorized 
     to be appropriated for assistance under this section 
     $10,000,000 for each of the first 3 fiscal years beginning 
     after the date on which the Secretary develops guidelines for 
     the designation of areas as chronically underserved areas 
     under subsection (b)(2).

     SEC. 3102. TECHNICAL ASSISTANCE GRANTS FOR NETWORKS.

       (a) In General.--The Secretary shall make funds available 
     under this section to provide technical assistance (including 
     information regarding eligibility for other Federal programs) 
     and advice for entities described in subsection (b) seeking 
     to establish or enhance a community rural health network in 
     an underserved rural area.
       (b) Entities Eligible to Receive Funds.--The following 
     entities are eligible to receive funds for technical 
     assistance under this section:
       (1) An entity receiving a grant under section 3103.
       (2) A State or unit of local government.
       (3) An entity providing health care services (including 
     health professional education services) in the area involved.
       (c) Use of Funds.--
       (1) In general.--Funds made available under this section 
     may be used--
       (A) for planning a community health network and the 
     submission of the plan for the network to the Secretary under 
     section 3103(c) (subject to the limitation described in 
     paragraph (2));
       (B) to provide assistance in conducting community-based 
     needs and prioritization, identifying existing regional 
     health resources, and developing networks, utilizing existing 
     local providers and facilities where appropriate;
       (C) to provide advice on obtaining the proper balance of 
     primary and secondary facilities for the population served by 
     the network;
       (D) to provide assistance in coordinating arrangements for 
     tertiary care;
       (E) to provide assistance in recruitment and retention of 
     health care professionals;
       (F) to provide assistance in coordinating the delivery of 
     emergency services with the provision of other health care 
     services in the area served by the network;
       (G) to provide assistance in coordinating arrangements for 
     mental health and substance abuse treatment services; and
       (H) to provide information regarding the area or proposed 
     network's eligibility for Federal and State assistance for 
     health care-related activities, together with information on 
     funds available through private sources.
       (2) Limitation on amount available for development of 
     network.--The amount of financial assistance available for 
     activities described in paragraph (1) may not exceed $50,000 
     and may not be available for a period of time exceeding 1 
     year.
       (d) Use of Rural Health Offices.--In carrying out this 
     section with respect to entities in rural areas, the 
     Secretary shall make funds available through--
       (1) not more than 10 regional centers acting as 
     clearinghouses for the distribution of such funds;
       (2) State Offices of Rural Health, or any combination of 
     such centers and Offices.
       (e) Authorization of Appropriations.--There are authorized 
     to be appropriated $10,000,000 for each of fiscal years 1996 
     through 2000 to carry out this section. Amounts appropriated 
     under this section shall be available until expended.

     SEC. 3103. DEVELOPMENT GRANTS FOR NETWORKS.

       (a) In General.--The Secretary shall provide financial 
     assistance to eligible entities in order to provide for the 
     development and implementation of community rural health 
     networks.
       (b) Eligible Entities.--
       (1) In general.--An entity is eligible to receive financial 
     assistance under this section only if the entity--
       (A) is (i) based in a rural area or (ii) is described in 
     paragraph (2), (3), or (4) of section 3102(b),
       (B) is undertaking to develop and implement a community 
     rural health network in an underserved rural area (or 
     underserved rural areas) with the active participation of at 
     least 3 health care providers or facilities in the area, and
       (C) has consulted with the local governments of the area to 
     be served by the network and with individuals who reside in 
     the area.
       (2) Coordination with providers outside of area 
     permitted.--Nothing in this section shall be construed as 
     preventing an entity that coordinates the delivery of 
     services in an underserved rural area with an entity outside 
     the area from qualifying for financial assistance under this 
     section, or as preventing an entity consisting of a consortia 
     of members located in adjoining States from qualifying for 
     such assistance.
       (3) Permitting entities not receiving funding for 
     development of plan to receive funding for implementation.--
     An entity that is eligible to receive financial assistance 
     under this section may receive assistance to carry out 
     activities described in subsection (c)(1)(B) notwithstanding 
     that the entity does not receive assistance to carry out 
     activities described in subsection (c)(1)(A).
       (c) Use of Funds.--
       (1) In general.--Financial assistance made available to 
     eligible entities under this section may be used only--
       (A) for the development of a community health network and 
     the submission of the plan for the network to the Secretary; 
     and
       (B) after the Secretary approves the plan for the network, 
     for activities to implement the network, including (but not 
     limited to)--
       (i) establishing information systems, including 
     telecommunications,
       (ii) recruiting health care providers,
       (iii) providing services to enable individuals to have 
     access to health care services, including transportation and 
     language interpretation services (including interpretation 
     services for the hearing-impaired), and
       (iv) establishing and operating a community health advisor 
     program described in paragraph (2).
       (2) Community health advisor program.--
       (A) Program described.--In paragraph (1), a ``community 
     health advisor program'' is a program under which community 
     health advisors carry out the following activities:
       (i) Collaborating efforts with health care providers and 
     related entities to facilitate the provision of health 
     services and health-related social services.
       (ii) Providing public education on health promotion and 
     disease prevention and efforts to facilitate the use of 
     available health services and health-related social services.
       (iii) Providing health-related counseling.
       (iv) Making referrals for available health services and 
     health-related social services.
       (v) Improving the ability of individuals to use health 
     services and health-related social services under Federal, 
     State, and local programs through assisting individuals in 
     establishing eligibility under the programs.
       (vi) Providing outreach services to inform the community of 
     the availability of the services provided under the program.
       (B) Community health advisor defined.--In subparagraph (A), 
     the term ``community health advisor'' means, with respect to 
     a community health advisor program, an individual--
       (i) who has demonstrated the capacity to carry out one or 
     more of the activities carried out under the program; and
       (ii) who, for not less than one year, has been a resident 
     of the community in which the program is to be operated.
       (3) Limitations on activities funded.--Financial assistance 
     made available under this section may not be used for any of 
     the following:
       (A) For a telecommunications system unless such system is 
     coordinated with, and does not duplicate, a system existing 
     in the area.
       (B) For construction or remodeling of health care 
     facilities.
       (4) Limitation on amount available for development of 
     network.--The amount of financial assistance available for 
     activities described in paragraph (1)(A) may not exceed 
     $50,000 and may not be made available for a period of time 
     exceeding 1 year.
       (d) Application.--
       (1) In general.--No financial assistance shall be provided 
     under this section to an entity unless the entity has 
     submitted to the Secretary, in a time and manner specified by 
     the Secretary, and had approved by the Secretary an 
     application.
       (2) Information to be included.--Each such application 
     shall include--
       (A) a description of the community rural health network, 
     including service area and capacity, and
       (B) a description of how the proposed network will utilize 
     existing health care facilities in a manner that avoids 
     unnecessary duplication.
       (e) Authorization of Appropriations.--
       (1) In general.--There are authorized to be appropriated 
     $100,000,000 for each of fiscal years 1996 through 2000 to 
     carry out this section. Amounts appropriated under this 
     section shall be available until expended.
       (2) Integration of other authorizations.--In order to 
     provide for the authorization of appropriations under 
     paragraph (1), notwithstanding any other provision of law, no 
     funds are authorized to be appropriated to carry out the 
     following programs in fiscal years after fiscal year 1994:
       (A) The rural health transition grant program (under 
     section 4005(e) of the Omnibus Budget Reconciliation Act of 
     1987).
       (B) The rural health outreach program (for which 
     appropriations were annually provided under the Departments 
     of Labor, Health and Human Services, and Education, and 
     Related Agencies Appropriation Acts).
       (3) Annual limit on assistance to grantee.--The amount of 
     financial assistance provided to an entity under this section 
     during a year may not exceed $250,000.

     SEC. 3104. DEFINITIONS.

       For purposes of this part:
       (1) Community rural health network.--The term ``community 
     rural health network'' means a formal cooperative arrangement 
     between participating hospitals, physicians, and other health 
     care providers which--
       (A) is located in an underserved rural area;
       (B) furnishes health care services to individuals residing 
     in the area; and
       (C) is governed by a board of directors selected by 
     participating health care providers and residents of the 
     area.
       (2) Rural area.--The term ``rural area'' has the meaning 
     given such term in section 1886(d)(2)(D) of the Social 
     Security Act.
       (3) Secretary.--The term ``Secretary'' means the Secretary 
     of Health and Human Services.
       (4) State.--The term ``State'' means each of the several 
     States, the District of Columbia, Puerto Rico, the Virgin 
     Islands, Guam, the Northern Mariana Islands, and American 
     Samoa.
       (5) Underserved rural area.--The term ``underserved rural 
     area'' means a rural area designated--
       (A) as a health professional shortage area under section 
     332(a) of the Public Health Service Act; or
       (B) as a chronically underserved area under section 3101.

 PART 2--INCENTIVES FOR HEALTH PROFESSIONALS TO PRACTICE IN RURAL AREAS

            Subpart A--National Health Service Corps Program

     SEC. 3111. NATIONAL HEALTH SERVICE CORPS LOAN REPAYMENTS 
                   EXCLUDED FROM GROSS INCOME.

       (a) In General.--Part III of subchapter B of chapter 1 of 
     the Internal Revenue Code of 1986 (relating to items 
     specifically excluded from gross income) is amended by 
     redesignating section 137 as section 138 and by inserting 
     after section 136 the following new section:``

     SEC. 137. NATIONAL HEALTH SERVICE CORPS LOAN REPAYMENTS.

       ``(a) General Rule.--Gross income shall not include any 
     qualified loan repayment.
       ``(b) Qualified Loan Repayment.--For purposes of this 
     section, the term `qualified loan repayment' means any 
     payment made on behalf of the taxpayer by the National Health 
     Service Corps Loan Repayment Program under section 338B(g) of 
     the Public Health Service Act.''.
       (b) Conforming Amendment.--Paragraph (3) of section 338B(g) 
     of the Public Health Service Act is amended by striking 
     ``Federal, State, or local'' and inserting ``State or 
     local''.
       (c) Clerical Amendment.--The table of sections for part III 
     of subchapter B of chapter 1 of the Internal Revenue Code of 
     1986 is amended by striking the item relating to section 137 
     and inserting the following:

``Sec. 137. National Health Service Corps loan repayments.
``Sec. 138. Cross references to other Acts.''.

       (d) Effective Date.--The amendments made by this section 
     shall apply to payments made under section 338B(g) of the 
     Public Health Service Act after the date of the enactment of 
     this Act.

     SEC. 3112. MODIFICATION IN CRITERIA FOR DESIGNATION AS HEALTH 
                   PROFESSIONAL SHORTAGE AREA.

       (a) Considerations Regarding Medicare and Medicaid Programs 
     as Means of Payment.--Section 332(b) of the Public Health 
     Service Act (42 U.S.C. 254e(b)) is amended by adding at the 
     end the following paragraph:
       ``(4) With respect to determining the need for health 
     services through the indicators of need under paragraphs (1) 
     and (2), consideration of the following:
       ``(A) The number of individuals in the population involved 
     whose means of payment for health services is the program 
     under title XVIII of the Social Security Act.
       ``(B) The number of individuals in the population whose 
     means of payment for health services is the program under 
     title XIX of such Act.
       ``(C) The number of individuals in the population who are 
     uninsured with respect to health policies or plans.
       ``(D) The percentage of the population constituted by the 
     aggregate number of individuals under subparagraphs (A) 
     through (C).
       ``(E) In the case of community-based physicians who provide 
     primary health services and who are accepting additional 
     patients whose means of payment is through the program 
     established in title XVIII or XIX of the Social Security Act, 
     the percentage constituted by the ratio of the number of such 
     physicians to the number of individuals in the population.''.
       (b) Relevance of Travel Times Within Frontier Areas.--
     Section 332(a) of the Public Health Service Act (42 U.S.C. 
     245e(a)) is amended by adding at the end the following new 
     paragraph:
       ``(4) With respect to meeting the criteria under paragraph 
     (1)(A) for an area to be designated as a health professional 
     shortage area, the Secretary shall, in the case of a frontier 
     area, make the determination of whether the frontier area is 
     a rational area for the delivery of health services without 
     regard to--
       ``(A) the travel time between population centers in the 
     frontier area; or
       ``(B) the travel time to contiguous area resources in the 
     frontier area.''.
       (c) Agency Recommendations for Improvements.--Not later 
     than July 1, 1995, the Secretary of Health and Human Services 
     shall submit to the Congress a report specifying the 
     recommendations of the Secretary for improving the manner of 
     determining the extent to which a geographic area has a need 
     for assignments of members of the National Health Service 
     Corps, and for equitably allocating such assignments among 
     the geographic areas with a need for such assignments.
       (d) Effective Date.--This section shall take effect on 
     October 1, 1994, or upon the date of the enactment of this 
     Act, whichever occurs later.

     SEC. 3113. OTHER PROVISIONS REGARDING NATIONAL HEALTH SERVICE 
                   CORPS.

       (a) Scholarship and Loan Repayment Programs.--
       (1) Authorization of appropriations.--Section 338H(b)(1) of 
     the Public Health Service Act (42 U.S.C. 254q(b)(1)) is 
     amended--
       (A) by striking ``and'' after ``1991,''; and
       (B) by striking ``through 2000.'' and inserting ``through 
     1999, $175,000,000 for fiscal year 1996, $180,000,000 for 
     fiscal year 1997, $185,000,000 for fiscal year 1998, 
     $190,000,000 for fiscal year 1999, and $195,000,000 for 
     fiscal year 2000.''.
       (2) Allocation for participation of nurses in scholarship 
     program.--Section 338H(b)(2) of the Public Health Service Act 
     (42 U.S.C. 254q(b)(2)) is amended by adding at the end the 
     following subparagraph:
       ``(C) Of the amounts appropriated under paragraph (1) for 
     fiscal year 1995 and subsequent fiscal years, the Secretary 
     shall reserve such amounts as may be necessary to ensure 
     that, of the aggregate number of individuals who are 
     participants in the Scholarship Program, the total number who 
     are being educated as nurses or are serving as nurses, 
     respectively, is increased to 20 percent.''.
       (b) Increase in Number of Mental Health Professionals in 
     Shortage Areas.--
       (1) In general.--Section 338H(b) of the Public Health 
     Service Act (42 U.S.C. 254q(b)) is amended by adding at the 
     end the following paragraph:
       ``(3) Mental health professionals.--In providing contracts 
     under this subpart for scholarships and loan repayments, the 
     Secretary shall ensure that an appropriate number of mental 
     health professionals is assigned under section 333 for health 
     professional shortage areas.''.
       (2) Applicability.--With respect to contracts for 
     scholarships and loan repayments under subpart III of part D 
     of title III of the Public Health Service Act, the amendment 
     made by subsection (a) applies with respect to contracts 
     entered into on or after October 1, 1994.

               Subpart B--Incentives Under Other Programs

     SEC. 3121. EXTENSION OF ADDITIONAL PAYMENT UNDER MEDICARE FOR 
                   PHYSICIANS' SERVICES FURNISHED IN FORMER 
                   SHORTAGE AREAS.

       (a) In General.--Section 1833(m) of the Social Security Act 
     (42 U.S.C. 1395l(m)) is amended by striking ``area,'' and 
     inserting ``area (or, in the case of an area for which the 
     designation as a health professional shortage area under such 
     section is withdrawn, in the case of physicians' services 
     furnished to such an individual during the 3-year period 
     beginning on the effective date of the withdrawal of such 
     designation),''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to physicians' services furnished in an area for 
     which the designation as a health professional shortage area 
     under section 332(a)(1)(A) of the Public Health Service Act 
     is withdrawn on or after January 1, 1995.

     SEC. 3122. REFINEMENT OF GEOGRAPHIC ADJUSTMENT FACTOR FOR 
                   MEDICARE PHYSICIANS' SERVICES.

       (a) Deadline for Initial Review and Revision.--Section 
     1848(e)(1)(C) of the Social Security Act (42 U.S.C. 1395w-
     4(e)(1)(C)) is amended by adding at the end the following: 
     ``The first such review and revision shall apply to services 
     furnished on or after January 1, 1995.''.
       (b) Authority To Adjust Index Value for Input Component 
     Under Certain Circumstances.--(1) Section 1848(e)(1) of the 
     Social Security Act (42 U.S.C. 1395w-4(e)(1)) is amended--
       (A) in subparagraph (A), by striking ``(B) and (C)'' and 
     inserting ``(B), (C), and (D)'';
       (B) by redesignating subparagraph (C) as subparagraph (D); 
     and
       (C) by inserting after subparagraph (B) the following:
       ``(C) Special adjustment to correct for unique local 
     circumstances.--The Secretary may adjust the value assigned 
     to an input component of an index in a fee schedule area if 
     the Secretary determines that the value that would otherwise 
     apply in such area does not accurately reflect the relative 
     costs of such input for such area because of unique local 
     circumstances.''.
       (2) Section 1848(i)(1)(D) of the Social Security Act (42 
     U.S.C. 1395w-4(i)(1)(D)) is amended by inserting ``(including 
     any adjustment under subparagraph (C) thereof)'' after 
     ``subsection (e)''.
       (c) Report on Review Process.--Not later than April 1, 
     1996, the Secretary of Health and Human Services (in this 
     section referred to as the ``Secretary'') shall study and 
     report to the Committee on Finance of the Senate and the 
     Committees on Ways and Means and Energy and Commerce of the 
     House of Representatives on--
       (1) the data necessary to review and revise the indices 
     established under section 1848(e)(1)(A) of the Social 
     Security Act, including--
       (A) the shares allocated to physicians' work effort, 
     practice expenses (other than malpractice expenses), and 
     malpractice expenses;
       (B) the weights assigned to the input components of such 
     shares; and
       (C) the index values assigned to such components;
       (2) any limitations on the availability of data necessary 
     to review and revise such indices at least every three years;
       (3) ways of addressing such limitations, with particular 
     attention to the development of alternative data sources for 
     input components for which current index values are based on 
     data collected less frequently than every three years; and
       (4) the costs of developing more accurate and timely data 
     sources.
       (d) Study on Low-Volume Adjustment in Isolated Areas.--(1) 
     Not later than July 1, 1996, the Physician Payment Review 
     Commission shall study and report to the Committee on Finance 
     of the Senate and the Committees on Ways and Means and Energy 
     and Commerce of the House of Representatives on the 
     feasibility and desirability of providing for a special 
     adjustment to the index value of the medical equipment and 
     supplies input component of the index used under section 
     1848(e) of the Social Security Act with respect to services 
     described in paragraph (2).
       (2) Services described in this paragraph are services--
       (A) furnished by a physician who practices in an isolated 
     area;
       (B) requiring the presence of expensive medical equipment 
     and supplies in the physician's office; and
       (C) with respect to which the cost per service of operating 
     the equipment is increased because of the low volume of 
     patients of such physician.

     SEC. 3123. DEVELOPMENT OF MODEL STATE SCOPE OF PRACTICE LAW.

       (a) In General.--The Secretary of Health and Human Services 
     shall develop and publish a model law that may be adopted by 
     States to increase the access of individuals residing in 
     underserved rural areas to health care services by expanding 
     the services which non-physician health care professionals 
     may provide in such areas.
       (b) Deadline.--The Secretary shall publish the model law 
     developed under subsection (a) not later than 1 year after 
     the date of the enactment of this Act.

             PART 3--ASSISTANCE FOR INSTITUTIONAL PROVIDERS

            Subpart A--Community and Migrant Health Centers

     SEC. 3131. COMMUNITY AND MIGRANT HEALTH CENTERS.

       (a) Migrant Health Centers.--Section 329(h)(1)(A) of the 
     Public Health Service Act (42 U.S.C. 254b(h)(1)(A)) is 
     amended--
       (1) by striking ``and'' after ``1991,''; and
       (2) by inserting before the period the following: ``, 
     $75,000,0000 for fiscal year 1996, $80,000,0000 for fiscal 
     year 1997, $85,000,0000 for fiscal year 1998, $90,000,0000 
     for fiscal year 1999, and $95,000,0000 for fiscal year 
     2000''.
       (b) Community Health Centers.--Section 330(g)(1)(A) of the 
     Public Health Service Act (42 U.S.C. 254c(g)(1)(A)) is 
     amended--
       (1) by striking ``and'' after ``1991,''; and
       (2) by inserting before the period the following: ``, 
     $650,000,0000 for fiscal year 1996, $675,000,0000 for fiscal 
     year 1997, $700,000,0000 for fiscal year 1998, $725,000,0000 
     for fiscal year 1999, and $750,000,0000 for fiscal year 
     2000''.

                  Subpart B--Emergency Medical Systems

     SEC. 3141. EMERGENCY MEDICAL SERVICES.

       (a) Establishment of Federal Office.--Title XII of the 
     Public Health Service Act (42 U.S.C. 300d et seq.) is 
     amended--
       (1) in the heading for the title, by striking ``TRAUMA 
     CARE'' and inserting ``EMERGENCY MEDICAL AND TRAUMA CARE 
     SERVICES'';
       (2) in the heading for part A, by striking ``General'' and 
     all that follows and inserting ``General Authorities and 
     Duties''; and
       (3) by amending section 1201 to read as follows:

     ``SEC. 1201. ESTABLISHMENT OF OFFICE OF EMERGENCY MEDICAL AND 
                   TRAUMA CARE SERVICES.

       ``(a) In General.--The Secretary shall establish an office 
     to be known as the Office of Emergency Medical and Trauma 
     Care Services, which shall be headed by a director appointed 
     by the Secretary. The Secretary shall carry out this title 
     acting through the Director of such Office.
       ``(b) General Authorities and Duties.--With respect to 
     emergency medical services (including trauma care), the 
     Secretary shall--
       ``(1) conduct and support research, training, evaluations, 
     and demonstration projects;
       ``(2) foster the development of appropriate, modern systems 
     of such services through the sharing of information among 
     agencies and individuals involved in the study and provision 
     of such services;
       ``(3) foster the development of regional systems for the 
     provision of such services;
       ``(4) sponsor workshops and conferences;
       ``(5) as appropriate, disseminate to public and private 
     entities information obtained in carrying out paragraphs (1) 
     through (4);
       ``(6) provide technical assistance to State and local 
     agencies;
       ``(7) coordinate activities of the Department of Health and 
     Human Services; and
       ``(8) as appropriate, coordinate activities of such 
     Department with activities of other Federal agencies.
       ``(c) Certain Requirements.--With respect to emergency 
     medical services (including trauma care), the Secretary shall 
     ensure that activities under subsection (b) are carried out 
     regarding--
       ``(1) maintaining an adequate number of health 
     professionals with expertise in the provision of the 
     services, including hospital-based professionals and 
     prehospital-based professionals;
       ``(2) developing, periodically reviewing, and revising as 
     appropriate, in collaboration with appropriate public and 
     private entities, guidelines for the provision of such 
     services (including, for various typical circumstances, 
     guidelines on the number and variety of professionals, on 
     equipment, and on training);
       ``(3) the appropriate use of available technologies, 
     including communications technologies; and
       ``(4) the unique needs of underserved inner-city areas and 
     underserved rural areas.
       ``(d) Grants, Cooperative Agreements, and Contracts.--In 
     carrying out subsections (b) and (c), the Secretary may make 
     grants and enter into cooperative agreements and contracts.
       ``(e) Definitions.--For purposes of this part:
       ``(1) The term `hospital-based professional' means a health 
     professional (including an allied health professional) who 
     has expertise in providing one or more emergency medical 
     services and who normally provides the services at a medical 
     facility.
       ``(2) The term `prehospital-based professional' means a 
     health professional (including an allied health professional) 
     who has expertise in providing one or more emergency medical 
     services and who normally provides the services at the site 
     of the medical emergency or during transport to a medical 
     facility.''.
       (b) State Offices of Emergency Medical Services; 
     Demonstration Program Regarding Telecommunications.--Part A 
     of title XII of the Public Health Service Act (42 U.S.C. 300d 
     et seq.), as amended by section 601(b) of Public Law 103-183 
     (107 Stat. 2238), is amended--
       (1) by redesignating sections 1202 and 1203 as sections 
     1203 and 1204, respectively;
       (2) by inserting after section 1201 the following section:

     ``SEC. 1202. STATE OFFICES OF EMERGENCY MEDICAL SERVICES.

       ``(a) Program of Grants.--The Secretary may make grants to 
     States for the purpose of improving the availability and 
     quality of emergency medical services through the operation 
     of State offices of emergency medical services.
       ``(b) Requirement of Matching Funds.--
       ``(1) In general.--The Secretary may not make a grant under 
     subsection (a) unless the State involved agrees, with respect 
     to the costs to be incurred by the State in carrying out the 
     purpose described in such subsection, to provide non-Federal 
     contributions toward such costs in an amount that--
       ``(A) for the first fiscal year of payments under the 
     grant, is not less than $1 for each $3 of Federal funds 
     provided in the grant;
       ``(B) for any second fiscal year of such payments, is not 
     less than $1 for each $1 of Federal funds provided in the 
     grant; and
       ``(C) for any third fiscal year of such payments, is not 
     less than $3 for each $1 of Federal funds provided in the 
     grant.
       ``(2) Determination of amount of non-federal 
     contribution.--
       ``(A) Subject to subparagraph (B), non-Federal 
     contributions required in paragraph (1) may be in cash or in 
     kind, fairly evaluated, including plant, equipment, or 
     services. Amounts provided by the Federal Government, or 
     services assisted or subsidized to any significant extent by 
     the Federal Government, may not be included in determining 
     the amount of such non-Federal contributions.
       ``(B) The Secretary may not make a grant under subsection 
     (a) unless the State involved agrees that--
       ``(i) for the first fiscal year of payments under the 
     grant, 100 percent or less of the non-Federal contributions 
     required in paragraph (1) will be provided in the form of in-
     kind contributions;
       ``(ii) for any second fiscal year of such payments, not 
     more than 50 percent of such non-Federal contributions will 
     be provided in the form of in-kind contributions; and
       ``(iii) for any third fiscal year of such payments, such 
     non-Federal contributions will be provided solely in the form 
     of cash.
       ``(c) Certain Required Activities.--The Secretary may not 
     make a grant under subsection (a) unless the State involved 
     agrees that activities carried out by an office operated 
     pursuant to such subsection will include--
       ``(1) coordinating the activities carried out in the State 
     that relate to emergency medical services;
       ``(2) activities regarding the matters described in 
     paragraphs (1) through (4) section 1201(b); and
       ``(3) identifying Federal and State programs regarding 
     emergency medical services and providing technical assistance 
     to public and nonprofit private entities regarding 
     participation in such programs.
       ``(d) Requirement Regarding Annual Budget for Office.--The 
     Secretary may not make a grant under subsection (a) unless 
     the State involved agrees that, for any fiscal year for which 
     the State receives such a grant, the office operated pursuant 
     to subsection (a) will be provided with an annual budget of 
     not less than $50,000.
       ``(e) Certain Uses of Funds.--
       ``(1) Restrictions.--The Secretary may not make a grant 
     under subsection (a) unless the State involved agrees that--
       ``(A) if research with respect to emergency medical 
     services is conducted pursuant to the grant, not more than 10 
     percent of the grant will be expended for such research; and
       ``(B) the grant will not be expended to provide emergency 
     medical services (including providing cash payments regarding 
     such services).
       ``(2) Establishment of office.--Activities for which a 
     State may expend a grant under subsection (a) include paying 
     the costs of establishing an office of emergency medical 
     services for purposes of such subsection.
       ``(f) Reports.--The Secretary may not make a grant under 
     subsection (a) unless the State involved agrees to submit to 
     the Secretary reports containing such information as the 
     Secretary may require regarding activities carried out under 
     this section by the State.
       ``(g) Requirement of Application.--The Secretary may not 
     make a grant under subsection (a) unless an application for 
     the grant is submitted to the Secretary and the application 
     is in such form, is made in such manner, and contains such 
     agreements, assurances, and information as the Secretary 
     determines to be necessary to carry out this section.''; and
       (3) in section 1204 (as redesignated by paragraph (1) of 
     this subsection)--
       (A) by redesignating subsection (c) as subsection (d); and
       (B) by inserting after subsection (b) the following new 
     subsection:
       ``(c) Demonstration Program Regarding Telecommunications.--
       ``(1) Linkages for rural facilities.--Projects under 
     subsection (a)(1) shall include demonstration projects to 
     establish telecommunications between rural medical facilities 
     and medical facilities that have expertise or equipment that 
     can be utilized by the rural facilities through the 
     telecommunications.
       ``(2) Modes of communication.--The Secretary shall ensure 
     that the telecommunications technologies demonstrated under 
     paragraph (1) include interactive video telecommunications, 
     static video imaging transmitted through the telephone 
     system, and facsimiles transmitted through such system.''.
       (c) Funding.--Section 1232 of the Public Health Service Act 
     (42 U.S.C. 300d-32) is amended by striking subsections (a) 
     and (b) and inserting the following:
       ``(a) Emergency Medical Services Generally.--For the 
     purpose of carrying out section 1201 other than with respect 
     to trauma care, and for the purpose of carrying out section 
     1204(c), there are authorized to be appropriated $2,000,000 
     for each of the fiscal years 1996, 1997, and 1998.
       ``(b) State Offices.--For the purpose of carrying out 
     section 1202, there are authorized to be appropriated 
     $3,000,000 for each of the fiscal years 1996, 1997, and 
     1998.''.

     SEC. 3142. GRANTS TO STATES REGARDING AIRCRAFT FOR 
                   TRANSPORTING RURAL VICTIMS OF MEDICAL 
                   EMERGENCIES.

       Part E of title XII of the Public Health Service Act (42 
     U.S.C. 300d-51 et seq.) is amended by adding at the end the 
     following new section:

     ``SEC. 1252. GRANTS FOR SYSTEMS TO TRANSPORT RURAL VICTIMS OF 
                   MEDICAL EMERGENCIES.

       ``(a) In General.--The Secretary shall make grants to 
     States to assist such States in the creation or enhancement 
     of air medical transport systems that provide victims of 
     medical emergencies in rural areas with access to treatments 
     for the injuries or other conditions resulting from such 
     emergencies.
       ``(b) Application and Plan.--
       ``(1) Application.--To be eligible to receive a grant under 
     subsection (a), a State shall prepare and submit to the 
     Secretary an application in such form, made in such manner, 
     and containing such agreements, assurances, and information, 
     including a State plan as required in paragraph (2), as the 
     Secretary determines to be necessary to carry out this 
     section.
       ``(2) State plan.--An application submitted under paragraph 
     (1) shall contain a State plan that shall--
       ``(A) describe the intended uses of the grant proceeds and 
     the geographic areas to be served;
       ``(B) demonstrate that the geographic areas to be served, 
     as described under subparagraph (A), are rural in nature;
       ``(C) demonstrate that there is a lack of facilities 
     available and equipped to deliver advanced levels of medical 
     care in the geographic areas to be served;
       ``(D) demonstrate that in utilizing the grant proceeds for 
     the establishment or enhancement of air medical services the 
     State would be making a cost-effective improvement to 
     existing ground-based or air emergency medical service 
     systems;
       ``(E) demonstrate that the State will not utilize the grant 
     proceeds to duplicate the capabilities of existing air 
     medical systems that are effectively meeting the emergency 
     medical needs of the populations they serve;
       ``(F) demonstrate that in utilizing the grant proceeds the 
     State is likely to achieve a reduction in the morbidity and 
     mortality rates of the areas to be served, as determined by 
     the Secretary;
       ``(G) demonstrate that the State, in utilizing the grant 
     proceeds, will--
       ``(i) maintain the expenditures of the State for air and 
     ground medical transport systems at a level equal to not less 
     than the level of such expenditures maintained by the State 
     for the fiscal year preceding the fiscal year for which the 
     grant is received; and
       ``(ii) ensure that recipients of direct financial 
     assistance from the State under such grant will maintain 
     expenditures of such recipients for such systems at a level 
     at least equal to the level of such expenditures maintained 
     by such recipients for the fiscal year preceding the fiscal 
     year for which the financial assistance is received;
       ``(H) demonstrate that persons experienced in the field of 
     air medical service delivery were consulted in the 
     preparation of the State plan; and
       ``(I) contain such other information as the Secretary may 
     determine appropriate.
       ``(c) Considerations in Awarding Grants.--In determining 
     whether to award a grant to a State under this section, the 
     Secretary shall--
       ``(1) consider the rural nature of the areas to be served 
     with the grant proceeds and the services to be provided with 
     such proceeds, as identified in the State plan submitted 
     under subsection (b); and
       ``(2) give preference to States with State plans that 
     demonstrate an effective integration of the proposed air 
     medical transport systems into a comprehensive network or 
     plan for regional or statewide emergency medical service 
     delivery.
       ``(d) State Administration and Use of Grant.--
       ``(1) In general.--The Secretary may not make a grant to a 
     State under subsection (a) unless the State agrees that such 
     grant will be administered by the State agency with principal 
     responsibility for carrying out programs regarding the 
     provision of medical services to victims of medical 
     emergencies or trauma.
       ``(2) Permitted uses.--A State may use amounts received 
     under a grant awarded under this section to award subgrants 
     to public and private entities operating within the State.
       ``(3) Opportunity for public comment.--The Secretary may 
     not make a grant to a State under subsection (a) unless that 
     State agrees that, in developing and carrying out the State 
     plan under subsection (b)(2), the State will provide public 
     notice with respect to the plan (including any revisions 
     thereto) and facilitate comments from interested persons.
       ``(e) Number of Grants.--The Secretary shall award grants 
     under this section to not less than 7 States.
       ``(f) Reports.--
       ``(1) Requirement.--A State that receives a grant under 
     this section shall annually (during each year in which the 
     grant proceeds are used) prepare and submit to the Secretary 
     a report that shall contain--
       ``(A) a description of the manner in which the grant 
     proceeds were utilized;
       ``(B) a description of the effectiveness of the air medical 
     transport programs assisted with grant proceeds; and
       ``(C) such other information as the Secretary may require.
       ``(2) Termination of funding.--In reviewing reports 
     submitted under paragraph (1), if the Secretary determines 
     that a State is not using amounts provided under a grant 
     awarded under this section in accordance with the State plan 
     submitted by the State under subsection (b), the Secretary 
     may terminate the payment of amounts under such grant to the 
     State until such time as the Secretary determines that the 
     State comes into compliance with such plan.
       ``(g) Definition.--As used in this section, the term `rural 
     areas' means geographic areas that are located outside of 
     standard metropolitan statistical areas, as identified by the 
     Secretary.
       ``(h) Authorization of Appropriations.--There are 
     authorized to be appropriated to make grants under this 
     section, $15,000,000 for each of the fiscal years 1996, 1997, 
     and 1998.''.

        Subpart C--Assistance to Rural Providers Under Medicare

     SEC. 3151. AMENDMENTS TO ESSENTIAL ACCESS COMMUNITY HOSPITAL 
                   (EACH) PROGRAM UNDER MEDICARE.

       (a) Increasing Number of Participating States.--Section 
     1820(a)(1) of the Social Security Act (42 U.S.C. 1395i-
     4(a)(1)) is amended by striking ``7'' and inserting ``9''.
       (b) Treatment of Inpatient Hospital Services Provided in 
     Rural Primary Care Hospitals.--
       (1) In general.--Section 1820(f)(1)(F) of such Act (42 
     U.S.C. 1395i-4(f)(1)(F)) is amended to read as follows:
       ``(F) subject to paragraph (4), provides not more than 6 
     inpatient beds (meeting such conditions as the Secretary may 
     establish) for providing inpatient care to patients requiring 
     stabilization before discharge or transfer to a hospital, 
     except that the facility may not provide any inpatient 
     hospital services--
       ``(i) to any patient whose attending physician does not 
     certify that the patient may reasonably be expected to be 
     discharged or transferred to a hospital within 72 hours of 
     admission to the facility; or
       ``(ii) consisting of surgery or any other service requiring 
     the use of general anesthesia (other than surgical procedures 
     specified by the Secretary under section 1833(i)(1)(A)), 
     unless the attending physician certifies that the risk 
     associated with transferring the patient to a hospital for 
     such services outweighs the benefits of transferring the 
     patient to a hospital for such services.''.
       (2) Limitation on average length of stay.--Section 1820(f) 
     of such Act (42 U.S.C. 1395i-4(f)) is amended by adding at 
     the end the following new paragraph:
       ``(4) Limitation on average length of inpatient stays.--The 
     Secretary may terminate a designation of a rural primary care 
     hospital under paragraph (1) if the Secretary finds that the 
     average length of stay for inpatients at the facility during 
     the previous year in which the designation was in effect 
     exceeded 72 hours. In determining the compliance of a 
     facility with the requirement of the previous sentence, there 
     shall not be taken into account periods of stay of inpatients 
     in excess of 72 hours to the extent such periods exceed 72 
     hours because transfer to a hospital is precluded because of 
     inclement weather or other emergency conditions.''.
       (3) Conforming amendment.--Section 1814(a)(8) of such Act 
     (42 U.S.C. 1395f(a)(8)) is amended by striking ``such 
     services'' and all that follows and inserting ``the 
     individual may reasonably be expected to be discharged or 
     transferred to a hospital within 72 hours after admission to 
     the rural primary care hospital.''.
       (4) GAO reports.--Not later than 2 years after the date of 
     the enactment of this Act, the Comptroller General shall 
     submit reports to Congress on--
       (A) the application of the requirements under section 
     1820(f) of the Social Security Act (as amended by this 
     subsection) that rural primary care hospitals provide 
     inpatient care only to those individuals whose attending 
     physicians certify may reasonably be expected to be 
     discharged within 72 hours after admission and maintain an 
     average length of inpatient stay during a year that does not 
     exceed 72 hours; and
       (B) the extent to which such requirements have resulted in 
     such hospitals providing inpatient care beyond their 
     capabilities or have limited the ability of such hospitals to 
     provide needed services.
       (c) Designation of Hospitals.--
       (1) Permitting designation of hospitals located in urban 
     areas.--
       (A) In general.--Section 1820 of such Act (42 U.S.C. 1395i-
     4) is amended--
       (i) by striking paragraph (1) of subsection (e) and 
     redesignating paragraphs (2) through (6) as paragraphs (1) 
     through (5);
       (ii) in subsection (e)(1)(A) (as redesignated by 
     subparagraph (A))--

       (I) by striking ``is located'' and inserting ``except in 
     the case of a hospital located in an urban area, is 
     located'',
       (II) by striking ``, (ii)'' and inserting ``or (ii)'', and
       (III) by striking ``or (iii)'' and all that follows through 
     ``section,''; and

       (iii) in subsection (i)(1)(B), by striking ``paragraph 
     (3)'' and inserting ``paragraph (2)''.
       (B) No change in medicare prospective payment.--Section 
     1886(d)(5)(D) of such Act (42 U.S.C. 1395ww(d)(5)(D)) is 
     amended--
       (i) in clause (iii)(III), by inserting ``located in a rural 
     area and'' after ``that is'', and
       (ii) in clause (v), by inserting ``located in a rural area 
     and'' after ``in the case of a hospital''.
       (2) Permitting hospitals located in adjoining states to 
     participate in state program.--
       (A) In general.--Section 1820 of such Act (42 U.S.C. 1395i-
     4) is amended--
       (i) by redesignating subsection (k) as subsection (l); and
       (ii) by inserting after subsection (j) the following new 
     subsection:
       ``(k) Eligibility of Hospitals Not Located in Participating 
     States.--Notwithstanding any other provision of this 
     section--
       ``(1) for purposes of including a hospital or facility as a 
     member institution of a rural health network, a State may 
     designate a hospital or facility that is not located in the 
     State as an essential access community hospital or a rural 
     primary care hospital if the hospital or facility is located 
     in an adjoining State and is otherwise eligible for 
     designation as such a hospital;
       ``(2) the Secretary may designate a hospital or facility 
     that is not located in a State receiving a grant under 
     subsection (a)(1) as an essential access community hospital 
     or a rural primary care hospital if the hospital or facility 
     is a member institution of a rural health network of a State 
     receiving a grant under such subsection; and
       ``(3) a hospital or facility designated pursuant to this 
     subsection shall be eligible to receive a grant under 
     subsection (a)(2).''.
       (B) Conforming amendments.--(i) Section 1820(c)(1) of such 
     Act (42 U.S.C. 1395i-4(c)(1)) is amended by striking 
     ``paragraph (3)'' and inserting ``paragraph (3) or subsection 
     (k)''.
       (ii) Paragraphs (1)(A) and (2)(A) of section 1820(i) of 
     such Act (42 U.S.C. 1395i-4(i)) are each amended--
       (I) in clause (i), by striking ``(a)(1)'' and inserting 
     ``(a)(1) (except as provided in subsection (k))'', and
       (II) in clause (ii), by striking ``subparagraph (B)'' and 
     inserting ``subparagraph (B) or subsection (k)''.
       (d) Skilled Nursing Services in Rural Primary Care 
     Hospitals.--Section 1820(f)(3) of such Act (42 U.S.C. 1395i-
     4(f)(3)) is amended by striking ``because the facility'' and 
     all that follows and inserting the following: ``because, at 
     the time the facility applies to the State for designation as 
     a rural primary care hospital, there is in effect an 
     agreement between the facility and the Secretary under 
     section 1883 under which the facility's inpatient hospital 
     facilities are used for the furnishing of extended care 
     services, except that the number of beds used for the 
     furnishing of such services may not exceed the total number 
     of licensed inpatient beds at the time the facility applies 
     to the State for such designation (minus the number of 
     inpatient beds used for providing inpatient care pursuant to 
     paragraph (1)(F)). For purposes of the previous sentence, the 
     number of beds of the facility used for the furnishing of 
     extended care services shall not include any beds of a unit 
     of the facility that is licensed as a distinct-part skilled 
     nursing facility at the time the facility applies to the 
     State for designation as a rural primary care hospital.''.
       (e) Deadline for Development of Prospective Payment System 
     for Inpatient Rural Primary Care Hospital Services.--Section 
     1814(l)(2) of such Act (42 U.S.C. 1395f(l)(2)) is amended by 
     striking ``January 1, 1993'' and inserting ``January 1, 
     1996''.
       (f) Payment for Outpatient Rural Primary Care Hospital 
     Services.--
       (1) Implementation of prospective payment system.--Section 
     1834(g) of such Act (42 U.S.C. 1395m(g)) is amended--
       (A) in paragraph (1), by striking ``during a year before 
     1993'' and inserting ``during a year before the prospective 
     payment system described in paragraph (2) is in effect''; and
       (B) in paragraph (2), by striking ``January 1, 1993,'' and 
     inserting ``January 1, 1996,''.
       (2) No use of customary charge in determining payment.--
     Section 1834(g)(1) of such Act (42 U.S.C. 1395m(g)(1)) is 
     amended by adding at the end the following new flush 
     sentence: ``The amount of payment shall be determined under 
     either method without regard to the amount of the customary 
     or other charge.''.
       (g) Clarification of Physician Staffing Requirement for 
     Rural Primary Care Hospitals.--Section 1820(f)(1)(H) of such 
     Act (42 U.S.C. 1395i-4(f)(1)(H)) is amended by striking the 
     period and inserting the following: ``, except that in 
     determining whether a facility meets the requirements of this 
     subparagraph, subparagraphs (E) and (F) of that paragraph 
     shall be applied as if any reference to a `physician' is a 
     reference to a physician as defined in section 1861(r)(1).''.
       (h) Technical Amendments Relating to Part A Deductible, 
     Coinsurance, and Spell of Illness.--(1) Section 1812(a)(1) of 
     such Act (42 U.S.C. 1395d(a)(1)) is amended--
       (A) by striking ``inpatient hospital services'' the first 
     place it appears and inserting ``inpatient hospital services 
     or inpatient rural primary care hospital services'';
       (B) by striking ``inpatient hospital services'' the second 
     place it appears and inserting ``such services''; and
       (C) by striking ``and inpatient rural primary care hospital 
     services''.
       (2) Sections 1813(a) and 1813(b)(3)(A) of such Act (42 
     U.S.C. 1395e(a), 1395e(b)(3)(A)) are each amended by striking 
     ``inpatient hospital services'' each place it appears and 
     inserting ``inpatient hospital services or inpatient rural 
     primary care hospital services''.
       (3) Section 1813(b)(3)(B) of such Act (42 U.S.C. 
     1395e(b)(3)(B)) is amended by striking ``inpatient hospital 
     services'' and inserting ``inpatient hospital services, 
     inpatient rural primary care hospital services''.
       (4) Section 1861(a) of such Act (42 U.S.C. 1395x(a)) is 
     amended--
       (A) in paragraph (1), by striking ``inpatient hospital 
     services'' and inserting ``inpatient hospital services, 
     inpatient rural primary care hospital services''; and
       (B) in paragraph (2), by striking ``hospital'' and 
     inserting ``hospital or rural primary care hospital''.
       (i) Authorization of Appropriations.--Section 1820(l) of 
     such Act (42 U.S.C. 1395i-4(l)), as redesignated by 
     subsection (c)(2)(A), is amended by striking ``1990, 1991, 
     and 1992'' and inserting ``1990 through 2000''.
       (j) Effective Date.--The amendments made by this section 
     shall take effect on the date of the enactment of this Act.

     SEC. 3152. RURAL EMERGENCY ACCESS CARE HOSPITALS DESCRIBED.

       (a) In General.--Section 1861 of the Social Security Act 
     (42 U.S.C. 1395x) is amended by adding at the end the 
     following new subsection:

  ``Rural Emergency Access Care Hospital; Rural Emergency Access Care 
                           Hospital Services

       ``(oo)(1) The term `rural emergency access care hospital' 
     means, for a fiscal year, a facility with respect to which 
     the Secretary finds the following:
       ``(A) The facility is located in a rural area (as defined 
     in section 1886(d)(2)(D)).
       ``(B) The facility was a hospital under this title at any 
     time during the 5-year period that ends on the date of the 
     enactment of this subsection.
       ``(C) The facility is in danger of closing due to low 
     inpatient utilization rates and negative operating losses, 
     and the closure of the facility would limit the access of 
     individuals residing in the facility's service area to 
     emergency services.
       ``(D) The facility has entered into (or plans to enter 
     into) an agreement with a hospital with a participation 
     agreement in effect under section 1866(a), and under such 
     agreement the hospital shall accept patients transferred to 
     the hospital from the facility and receive data from and 
     transmit data to the facility.
       ``(E) There is a practitioner who is qualified to provide 
     advanced cardiac life support services (as determined by the 
     State in which the facility is located) on-site at the 
     facility on a 24-hour basis.
       ``(F) A physician is available on-call to provide emergency 
     medical services on a 24-hour basis.
       ``(G) The facility meets such staffing requirements as 
     would apply under section 1861(e) to a hospital located in a 
     rural area, except that--
       ``(i) the facility need not meet hospital standards 
     relating to the number of hours during a day, or days during 
     a week, in which the facility must be open, except insofar as 
     the facility is required to provide emergency care on a 24-
     hour basis under subparagraphs (E) and (F); and
       ``(ii) the facility may provide any services otherwise 
     required to be provided by a full-time, on-site dietician, 
     pharmacist, laboratory technician, medical technologist, or 
     radiological technologist on a part time, off-site basis.
       ``(H) The facility meets the requirements applicable to 
     clinics and facilities under subparagraphs (C) through (J) of 
     paragraph (2) of section 1861(aa) and of clauses (ii) and 
     (iv) of the second sentence of such paragraph (or, in the 
     case of the requirements of subparagraph (E), (F), or (J) of 
     such paragraph, would meet the requirements if any reference 
     in such subparagraph to a `nurse practitioner' or to `nurse 
     practitioners' was deemed to be a reference to a `nurse 
     practitioner or nurse' or to `nurse practitioners or 
     nurses'); except that in determining whether a facility meets 
     the requirements of this subparagraph, subparagraphs (E) and 
     (F) of that paragraph shall be applied as if any reference to 
     a `physician' is a reference to a physician as defined in 
     section 1861(r)(1).
       ``(2) The term `rural emergency access care hospital 
     services' means the following services provided by a rural 
     emergency access care hospital:
       ``(A) An appropriate medical screening examination (as 
     described in section 1867(a)).
       ``(B) Necessary stabilizing examination and treatment 
     services for an emergency medical condition and labor (as 
     described in section 1867(b)).''.
       (b) Requiring Rural Emergency Access Care Hospitals to Meet 
     Hospital Anti-Dumping Requirements.--Section 1867(e)(5) of 
     such Act (42 U.S.C. 1395dd(e)(5)) is amended by striking 
     ``1861(mm)(1))'' and inserting ``1861(mm)(1)) and a rural 
     emergency access care hospital (as defined in section 
     1861(oo)(1))''.

     SEC. 3153. COVERAGE OF AND PAYMENT FOR SERVICES.

       (a) Coverage Under Part B.--Section 1832(a)(2) of the 
     Social Security Act (42 U.S.C. 1395k(a)(2)) is amended--
       (1) by striking ``and'' at the end of subparagraph (I);
       (2) by striking the period at the end of subparagraph (J) 
     and inserting ``; and''; and
       (3) by adding at the end the following new subparagraph:
       ``(K) rural emergency access care hospital services (as 
     defined in section 1861(oo)(2)).''.
       (b) Payment Based on Payment for Outpatient Rural Primary 
     Care Hospital Services.--
       (1) In general.--Section 1833(a)(6) of the Social Security 
     Act (42 U.S.C. 1395l(a)(6)) is amended by striking 
     ``services,'' and inserting ``services and rural emergency 
     access care hospital services,''.
       (2) Payment methodology described.--Section 1834(g) of such 
     Act (42 U.S.C. 1395m(g)) is amended--
       (A) in the heading, by striking ``Services'' and inserting 
     ``Services and Rural Emergency Access Care Hospital 
     Services''; and
       (B) in paragraph (1), by striking ``during a year before 
     1993'' and inserting ``during a year before the prospective 
     payment system described in paragraph (2) is in effect'';
       (C) in paragraph (1), by adding at the end the following: 
     ``The amount of payment shall be determined under either 
     method without regard to the amount of the customary or other 
     charge.'';
       (D) in paragraph (2), by striking ``January 1, 1993,'' and 
     inserting ``January 1, 1996,''; and
       (E) by adding at the end the following new paragraph:
       ``(3) Application of methods to payment for rural emergency 
     access care hospital services.--The amount of payment for 
     rural emergency access care hospital services provided during 
     a year shall be determined using the applicable method 
     provided under this subsection for determining payment for 
     outpatient rural primary care hospital services during the 
     year.''.

     SEC. 3154. EFFECTIVE DATE.

       The amendments made by this subpart shall apply to fiscal 
     years beginning on or after October 1, 1994.

 Subpart D--Demonstration Projects to Encourage Primary Care and Rural-
                    Based Graduate Medical Education

     SEC. 3161. STATE AND CONSORTIUM DEMONSTRATION PROJECTS.

       (a) In General.--
       (1) Participation of states and consortia.--The Secretary 
     shall establish and conduct a demonstration project to 
     increase the number and percentage of medical students 
     entering primary care practice relative to those entering 
     nonprimary care practice under which the Secretary shall make 
     payments in accordance with subsection (d)--
       (A) to not more than 10 States for the purpose of testing 
     and evaluating mechanisms to meet the goals described in 
     section 3162; and
       (B) to not more than 10 health care training consortia for 
     the purpose of testing and evaluating mechanisms to meet such 
     goals.
       (2) Exclusion of consortia in participating states.--A 
     consortia may not receive payments under the demonstration 
     project under paragraph (1)(B) if any of its members is 
     located in a State receiving payments under the project under 
     paragraph (1)(A).
       (b) Applications.--
       (1) In general.--Each State and consortium desiring to 
     conduct a demonstration project under this section shall 
     prepare and submit to the Secretary an application, at such 
     time, in such manner, and containing such information as the 
     Secretary may require to assure that the State or consortium 
     will meet the goals described in section 3162. In the case of 
     an application of a State, the application shall include--
       (A) information demonstrating that the State has consulted 
     with interested parties with respect to the project, 
     including State medical associations, State hospital 
     associations, and medical schools located in the State;
       (B) an assurance that no hospital conducting an approved 
     medical residency training program in the State will lose 
     more than 10 percent of such hospital's approved medical 
     residency positions in any year as a result of the project; 
     and
       (C) an explanation of a plan for evaluating the impact of 
     the project in the State.
       (2) Approval of applications.--A State or consortium that 
     submits an application under paragraph (1) may begin a 
     demonstration project under this subsection--
       (A) upon approval of such application by the Secretary; or
       (B) at the end of the 60-day period beginning on the date 
     such application is submitted, unless the Secretary denies 
     the application during such period.
       (3) Notice and comment.--A State or consortium shall issue 
     a public notice on the date it submits an application under 
     paragraph (1) which contains a general description of the 
     proposed demonstration project. Any interested party may 
     comment on the proposed demonstration project to the State or 
     consortium or the Secretary during the 30-day period 
     beginning on the date the public notice is issued.
       (c) Specific Requirements for Participants.--
       (1) Requirements for states.--Each State participating in 
     the demonstration project under this subtitle shall use the 
     payments provided under subsection (d) to test and evaluate 
     either of the following mechanisms to increase the number and 
     percentage of medical students entering primary care practice 
     relative to those entering nonprimary care practice:
       (A) Use of alternative weighting factors.--
       (i) In general.--The State may make payments to hospitals 
     in the State for direct graduate medical education costs in 
     amounts determined under the methodology provided under 
     section 1886(h) of the Social Security Act, except that the 
     State shall apply weighting factors that are different than 
     the weighting factors otherwise set forth in section 
     1886(h)(4)(C) of the Social Security Act.
       (ii) Use of payments for primary care residents.--In 
     applying different weighting factors under clause (i), the 
     State shall ensure that the amount of payment made to 
     hospitals for costs attributable to primary care residents 
     shall be greater than the amount that would have been paid to 
     hospitals for costs attributable to such residents if the 
     State had applied the weighting factors otherwise set forth 
     in section 1886(h)(4)(C) of the Social Security Act.
       (B) Payments for medical education through consortium.--The 
     State may make payments for graduate medical education costs 
     through payments to a health care training consortium (or 
     through any entity identified by such a consortium as 
     appropriate for receiving payments on behalf of the 
     consortium) that is established in the State but that is not 
     otherwise participating in the demonstration project.
       (2) Requirements for consortium.--
       (A) In general.--In the case of a consortium participating 
     in the demonstration project under this subtitle, the 
     Secretary shall make payments for graduate medical education 
     costs through a health care training consortium whose members 
     provide medical residency training (or through any entity 
     identified by such a consortium as appropriate for receiving 
     payments on behalf of the consortium).
       (B) Use of payments.--
       (i) In general.--Each consortium receiving payments under 
     subparagraph (A) shall use such funds to conduct activities 
     which test and evaluate mechanisms to increase the number and 
     percentage of medical students entering primary care practice 
     relative to those entering nonprimary care practice, and may 
     use such funds for the operation of the consortium.
       (ii) Payments to participating programs.--The consortium 
     shall ensure that the majority of the payments received under 
     subparagraph (A) are directed to consortium members for 
     primary care residency programs, and shall designate for each 
     resident assigned to the consortium a hospital operating an 
     approved medical residency training program for purposes of 
     enabling the Secretary to calculate the consortium's payment 
     amount under the project. Such hospital shall be the hospital 
     where the resident receives the majority of the resident's 
     hospital-based, nonambulatory training experience.
       (d) Allocation of Portion of Medicare GME Payments for 
     Activities Under Project.--Notwithstanding any provision of 
     title XVIII of the Social Security Act, the following rules 
     apply with respect to each State and each health care 
     training consortium participating in the demonstration 
     project established under this section during a year:
       (1) In the case of a State--
       (A) the Secretary shall reduce the amount of each payment 
     made to hospitals in the State during the year for direct 
     graduate medical education costs under section 1886(h) of the 
     Social Security Act by 3 percent; and
       (B) the Secretary shall pay the State an amount equal to 
     the Secretary's estimate of the sum of the reductions made 
     during the year under subparagraph (A) (as adjusted by the 
     Secretary in subsequent years for over- or under-estimations 
     in the amount estimated under this subparagraph in previous 
     years).
       (2) In the case of a consortium--
       (A) the Secretary shall reduce the amount of each payment 
     made to hospitals who are members of the consortium during 
     the year for direct graduate medical education costs under 
     section 1886(h) of the Social Security Act by 3 percent; and
       (B) the Secretary shall pay the consortium an amount equal 
     to the Secretary's estimate of the sum of the reductions made 
     during the year under subparagraph (A) (as adjusted by the 
     Secretary in subsequent years for over- or under-estimations 
     in the amount estimated under this subparagraph in previous 
     years).
       (e) Additional Grant for Planning and Evaluation.--
       (1) In general.--The Secretary may award grants to States 
     and consortia participating in the demonstration project 
     under this section for the purpose of developing and 
     evaluating such projects. A State or consortia may conduct 
     such an evaluation or contract with a private entity to 
     conduct the evaluation. Each State and consortia desiring to 
     receive a grant under this paragraph shall prepare and submit 
     to the Secretary an application, at such time, in such 
     manner, and containing such information as the Secretary may 
     require.
       (2) Authorization of appropriations.--There are authorized 
     to be appropriated such sums as may be necessary for grants 
     under this paragraph for fiscal years 1996 through 2000.
       (f) Duration.--A demonstration project under this section 
     shall be conducted for a period not to exceed 5 years. The 
     Secretary may terminate a project if the Secretary determines 
     that the State or consortium conducting the project is not in 
     substantial compliance with the terms of the application 
     approved by the Secretary.
       (g) Evaluations and Reports.--
       (1) Evaluations.--Each State or consortium participating in 
     the demonstration project shall submit to the Secretary a 
     final evaluation within 360 days of the termination of the 
     State or consortium's participation and such interim 
     evaluations as the Secretary may require.
       (2) Reports to congress.--Not later than 360 days after the 
     first demonstration project under this subtitle begins, and 
     annually thereafter for each year in which such a project is 
     conducted, the Secretary shall submit a report to Congress 
     which evaluates the effectiveness of the State and consortium 
     activities conducted under such projects and includes any 
     legislative recommendations determined appropriate by the 
     Secretary.
       (h) Maintenance of Effort.--Any funds available for the 
     activities covered by a demonstration project under this 
     subtitle shall supplement, and shall not supplant, funds that 
     are expended for similar purposes under any State, regional, 
     or local program.

     SEC. 3162. GOALS FOR PROJECTS.

       The goals referred to in this section for a State or 
     consortium participating in the demonstration project under 
     this subtitle are as follows:
       (1) The training of an equal number of physician and non-
     physician primary care providers.
       (2) The recruiting of residents for graduate medical 
     education training programs who received a portion of 
     undergraduate training in a rural area.
       (3) The allocation of not less than 50 percent of the 
     training spent in a graduate medical residency training 
     program at sites at which acute care inpatient hospital 
     services are not furnished.
       (4) The rotation of residents in approved medical residency 
     training programs among practices that serve residents of 
     rural areas.
       (5) The development of a plan under which, after a 5-year 
     transition period, not less than 50 percent of the residents 
     who begin an initial residency period in an approved medical 
     residency training program shall be primary care residents.

     SEC. 3163. DEFINITIONS.

       In this subpart:
       (1) Approved medical residency training program.--The term 
     ``approved medical residency training program'' has the 
     meaning given such term in section 1886(h)(5)(A) of the 
     Social Security Act.
       (2) Health care training consortium.--The term ``health 
     care training consortium'' means a State, regional, or local 
     entity consisting of at least one of each of the following:
       (A) A hospital operating an approved medical residency 
     training program at which residents receive training at 
     ambulatory training sites located in rural areas.
       (B) A school of medicine or osteopathic medicine.
       (C) A school of allied health or a program for the training 
     of physician assistants (as such terms are defined in section 
     799 of the Public Health Service Act).
       (D) A school of nursing (as defined in section 853 of the 
     Public Health Service Act).
       (3) Primary care.--The term ``primary care'' means family 
     practice, general internal medicine, general pediatrics, and 
     obstetrics and gynecology.
       (4) Resident.--The term ``resident'' has the meaning given 
     such term in section 1886(h)(5)(H) of the Social Security 
     Act.
       (5) Rural area.--The term ``rural area'' has the meaning 
     given such term in section 1886(d)(2)(D) of the Social 
     Security Act.

            PART 4--HOSPITAL AFFILIATED PRIMARY CARE CENTER

     SEC. 3171. HOSPITAL-AFFILIATED PRIMARY CARE CENTERS.

       (a) Definitions.--For purposes of this section:
       (1) Community hospital.--The term ``community hospital'' 
     means a public general hospital, owned and operated by a 
     State, county or local unit of government, or a private 
     community hospital that--
       (A) has less than 50 beds; and
       (B) primarily serves a medically underserved population as 
     defined in section 330(b)(3) of the Public Health Service Act 
     (42 U.S.C. 254c(b)(3)) or a health professional shortage area 
     as defined in section 322(a)(1) of such Act (42 U.S.C. 
     254c(a)(1).
       (2) Hospital-affiliated primary care center.--The term 
     ``hospital-affiliated primary care center'' (referred to in 
     this section as a ``primary care center'') means a distinct 
     administrative unit of a community hospital, located in, or 
     adjacent to, the hospital, that--
       (A) delivers primary health services as defined in section 
     330(b)(1) of such Act (42 U.S.C. 354c(b)(1)) to a catchment 
     area determined by the hospital and approved by the 
     Secretary; and
       (B) provides referrals to providers of supplemental health 
     services as defined in section 330(b)(2) of such Act (42 
     U.S.C. 354c(b)(2)).
       (3) Primary care group practice.--
       (A) The term ``primary care group practice'' means any 
     combination of 3 or more primary care physicians who are--
       (i) organized to provide primary health services in a 
     manner that is consistent with the needs of the population 
     served;
       (ii) located in, or adjacent to, the community hospital;
       (iii) who have admitting privileges at the community 
     hospital; and
       (iv)(I) who are salaried by the hospital such that a 
     majority of the members of the group practice is full time in 
     the primary care center; or
       (II) who are organized into a legal entity (partnership, 
     corporation, or professional association) that has a contract 
     approved by the Secretary with the community hospital to 
     provide primary health services.
       (B) Special rule for hpsas and near-hpsas.--In the case of 
     a group that is located in an area that--
       (i) is designated as a primary care health professional 
     shortage area under section 332 of the Public Health Service 
     Act (42 U.S.C. 254e); or
       (ii) would meet the requirements for designation as a 
     primary care health professional shortage area if there were 
     25 percent fewer physicians in the area;

     the requirement that a group practice have 3 or more primary 
     care physicians may be met by substituting a nurse 
     practitioner or a physician assistant for 1 member of the 
     group.
       (C) Special rule for frontier areas.--In the case of a 
     group that is located in a frontier area, subparagraph (A) 
     shall be applied by substituting ``two'' for ``three'' in the 
     matter preceding clause (i).
       (D) Other requirements for group.--
       (i) physicians in specialties other than primary care 
     specialties may become members of a primary care group 
     practice as needed, but may not be used to satisfy the 
     requirement of subsection (b)(2)(D); and
       (ii) nonphysician providers, particularly physician 
     assistants, certified nurse midwives, and nurse 
     practitioners, shall be used where practicable in concert 
     with the physicians of a primary care group practice.
       (4) Frontier area.--The term ``frontier area'' means a 
     county in which there are 6 or fewer individuals residing per 
     square mile.
       (5) Primary care physician.--The term ``primary care 
     physician'' means a physician in the specialty of family 
     practice, general internal medicine, general pediatrics, or 
     obstetrics and gynecology.
       (6) Primary care resident.--The term ``primary care 
     resident'' means a graduate physician in training, whose 
     training program is approved by appropriate certifying bodies 
     and is in a primary care specialty.
       (b) Establishment of Grant Program.--
       (1) In general.--The Secretary of Health and Human Services 
     (referred to in this section as the ``Secretary'') shall make 
     grants to community hospitals to assist such hospitals in 
     planning, developing, and operating primary care services in 
     medically underserved areas. In making such grants, the 
     Secretary shall avoid duplication of efforts in areas where 
     existing community health centers, migrant health centers, 
     rural emergency access care hospitals, federally qualified 
     health centers, and other facilities are adequate to meet the 
     needs of the medically underserved population.
       (2) Eligibility for grants.--In order to be eligible for a 
     grant under this subsection, a community hospital shall 
     submit an application that contains or is supported by 
     assurances, satisfactory to the Secretary, that--
       (A) the services of the primary care center will be 
     delivered through a primary care group practice;
       (B) to the extent practicable, primary health services in 
     the community hospital will be delivered only through the 
     primary care center;
       (C) qualified personnel trained in triage will be placed in 
     the emergency room, the outpatient department, and the 
     primary care center to screen and direct patients to the 
     appropriate location for care;
       (D) each patient of the primary care center will have an 
     identified member of the group practice responsible for 
     continuous management of the patient, including emergency 
     services and referrals of the patients for inpatient or 
     outpatient services;
       (E) to the extent practicable, excess facilities and 
     equipment in or owned by the community hospital will be 
     covered for use in the primary care center;
       (F) the hospital and the primary care center will avoid 
     unnecessary duplication of facilities and equipment, except 
     that the primary care center may install appropriate support 
     equipment for routine primary health services;
       (G) the primary care center will be maintained as a 
     separate and distinct cost and revenue center for accounting 
     purposes;
       (H) the primary care center will be operated in accordance 
     with all of the requirements specified for community health 
     centers in section 330(e)(3) of the Public Health Service Act 
     (other than subparagraph (G));
       (I) the hospital has an advisory committee that--
       (i) is composed of individuals, a majority of whom are 
     health consumers in the catchment area of the hospital; and
       (ii) meets at least 6 times a year to review the operations 
     of the primary care center and develop recommendations to the 
     governing board of the hospital about the operation of the 
     center and the types of services to be provided;
       (J) the primary care center will maintain an information 
     program for its patients that fully discloses--
       (i) the covered professional services and referral 
     capabilities offered by the primary care center; and
       (ii) the method by which patients of the primary care 
     center may resolve grievances about billing for covered 
     professional services and the quality of such services.
       (3) Other requirements.--
       (A) Use of primary care residents.--(i) Primary health 
     services may be delivered by primary care residents if such 
     services are delivered under the supervision of a member of 
     the group practice.
       (ii)(I) Medical and other health science students may 
     receive primary care training in the primary care center, 
     except that no full-time member of the group practice may 
     also spend full time in the teaching of residents and 
     students.
       (II) The Secretary shall issue regulations to assure that 
     teaching does not detract significantly from the actual 
     delivery of service in the primary care center.
       (B) Costs of primary care centers.--(i) Only costs clearly 
     associated with the provision of services in the primary care 
     setting may be assigned to a primary care center.
       (ii) Inpatient-related costs may not be included in the 
     costs of operating a primary care center.
       (iii) Costs associated with the education and training of 
     residents, medical, and other health science students may not 
     be included in the costs of operating a primary care center, 
     except that salaries and other costs associated with the 
     delivery of services by residents may be included in such 
     costs as long as such costs are prorated based on the actual 
     percentage of time spent by the resident in the primary care 
     center.
       (C) Advisory committee.--(i) The advisory committee 
     referred to in paragraph (2)(I) shall participate in the 
     development of an application for a grant under this section 
     and the development of any grant renewal application.
       (ii) The Secretary may not approve the application for a 
     grant under this subsection unless the application has been 
     approved by the advisory committee.
       (4) Use of grants.--(A) A grant under this subsection may 
     be used to cover costs associated with (i) planning, (ii) 
     developing (including modernization and renovation of space), 
     and (iii) operating, primary care centers.
       (B) Not more than 25 percent of any grant may be used for 
     the purposes specified in subparagraph (A)(ii).
       (c) Technical Assistance.--The Secretary shall, upon 
     request, provide technical and other nonfinancial assistance 
     (including fiscal and program management assistance and 
     training in such management) to a community hospital to 
     assist it in developing plans for, and in operating, a 
     primary care center. Funds appropriated under this section 
     may be used to carry out the purposes of this section.
       (d) Retention of Earned Income.--The Secretary shall 
     establish, by regulation, a plan to allow primary care 
     centers to retain earned income from the operation of the 
     center if the income is used to--
       (1) expand or improve the services of the center;
       (2) expand the population eligible to utilize the services 
     of the center;
       (3) make managerial or physical improvements to the center; 
     or
       (4) establish a reserve fund for conversion to a prepaid 
     reimbursement methodology.
       (e) Use of Appropriations.--For a fiscal year after 1995, 
     not more than 35 percent of the excess of the amount 
     appropriated for such fiscal year under section 330(g)(1)(A) 
     of the Public Health Service Act (42 U.S.C. 254c(g)(1)(A)) 
     over the amount appropriated under such section for fiscal 
     year 1995 may be used by the Secretary for the purpose of 
     making grants under subsection (b).
                  Subtitle C--Academic Health Centers

     SEC. 3201. STUDY OF PAYMENTS FOR MEDICAL EDUCATION AT SITES 
                   OTHER THAN HOSPITALS.

       (a) Study.--The Secretary of Health and Human Services 
     shall conduct a study of the feasibility and desirability of 
     making payments to facilities that are not hospitals for the 
     direct and indirect costs of graduate medical education 
     attributable to residents trained at such facilities. In 
     conducting the study, the Secretary shall evaluate new 
     payment methodologies--
       (1) under which each entity which incurs costs of graduate 
     medical education shall receive reimbursement for such costs; 
     and
       (2) which would encourage the training of primary care 
     physicians.
       (b) Report.--Not later than 2 years after the date of the 
     enactment of this Act, the Secretary shall submit a report to 
     Congress a report on the study conducted under subsection 
     (a), and shall include in the report such recommendations as 
     the Secretary considers appropriate.
       Subtitle D--United States-Mexico Border Health Commission

     SEC. 3301. AGREEMENT TO ESTABLISH BINATIONAL COMMISSION.

       The President is authorized and encouraged to conclude an 
     agreement with Mexico to establish a binational commission to 
     be known as the United States-Mexico Border Health 
     Commission.

     SEC. 3302. DUTIES.

       It should be the duty of the Commission--
       (1) to conduct a comprehensive needs assessment in the 
     United States-Mexico border area for the purposes of 
     identifying, evaluating, preventing, and resolving health 
     problems that affect the general population of the area;
       (2) to implement the actions recommended by the needs 
     assessment by--
       (A) assisting in the coordination of the efforts of public 
     and private entities to prevent and resolve such health 
     problems,
       (B) assisting in the coordination of the efforts of public 
     and private entities to educate such population concerning 
     such health problems, and
       (C) assisting in the development and implementation of 
     programs to prevent and resolve such health problems and 
     (where necessary) to educate such population concerning such 
     health programs; and
       (3) to formulate recommendations to the Governments of the 
     United States and Mexico concerning a fair and reasonable 
     method by which the government of one country would reimburse 
     a public or private entity in the other country for the cost 
     of a health care service that the entity furnishes to a 
     citizen of the first country who is unable, through insurance 
     or otherwise, to pay for the service.

     SEC. 3303. OTHER AUTHORIZED FUNCTIONS.

       In addition to the duties described in section 3302, the 
     Commission should be authorized to perform the following 
     additional functions as the Commission determines to be 
     appropriate:
       (1) To conduct or sponsor investigations, research, or 
     studies designed to identify, study, and monitor health 
     problems that affect the general population in the United 
     States-Mexico border area.
       (2) To provide financial, technical, or administrative 
     assistance to public or private entities who act to prevent, 
     resolve, or educate such population concerning such health 
     problems.

     SEC. 3304. MEMBERSHIP.

       (a) Number and Appointment of United States Section.--The 
     United States section of the Commission should be composed of 
     13 members. The section should consist of the following 
     members:
       (1) The Secretary of Health and Human Services or such 
     individual's delegate.
       (2) The commissioners of health from the States of Texas, 
     New Mexico, California, and Arizona or such individuals' 
     delegates.
       (3) 2 individuals from each of the States of Texas, New 
     Mexico, California, and Arizona who are nominated by the 
     chief executive officer of one of such States and are 
     appointed by the President from among individuals who have 
     demonstrated ties to community-based organizations and have a 
     demonstrated interest in health issues of the United States-
     Mexico border area.
       (b) Commissioner.--The Commissioner of the United States 
     section of the Commission should be the Secretary of Health 
     and Human Services or such individual's delegate to the 
     Commission. The Commissioner should be the leader of the 
     section.

     SEC. 3305. REGIONAL OFFICES.

       The Commission should establish no fewer than 2 regional 
     border offices in locations selected by the Commission.

     SEC. 3306. REPORTS.

       Not later than February 1 of each year that occurs more 
     than 1 year after the date of the establishment of the 
     Commission, the Commission should submit an annual report to 
     both the United States Government and the Government of 
     Mexico regarding all activities of the Commission during the 
     preceding calendar year.

     SEC. 3307. DEFINITIONS.

       For purposes of this subtitle:
       (1) Commission.--The term ``Commission'' means the United 
     States-Mexico Border Health Commission authorized in section 
     3301.
       (2) Health problem.--The term ``health problem'' means a 
     disease or medical ailment or an environmental condition that 
     poses the risk of disease or medical ailment. The term 
     includes diseases, ailments, or risks of disease or ailment 
     caused by or related to environmental factors, control of 
     animals and rabies, control of insect and rodent vectors, 
     disposal of solid and hazardous waste, and control and 
     monitoring of air and water quality.
       (3) United states-mexico border area.--The term ``United 
     States-Mexico border area'' means the area located in the 
     United States and Mexico within 100 kilometers of the border 
     between the United States and Mexico.
               TITLE IV--HEALTH CARE QUALITY ENHANCEMENT


                       table of contents of title

         Subtitle A--Performance Measures for Quality Assurance

Sec. 4001. Health Quality Advisory Council.
Sec. 4002. Assessment of health plans using performance measures.

              Subtitle B--Primary Care Provider Education

Sec. 4101. Area health education centers.
Sec. 4102. Public health and preventive medicine.
Sec. 4103. Family medicine.
Sec. 4104. General internal medicine and pediatrics.
Sec. 4105. Physician assistants.
Sec. 4106. Allied health project grants and contracts.
Sec. 4107. Nurse practitioner and nurse midwife programs.

        Subtitle C--Other Medical Education Grants and Programs

Sec. 4201. Scholarship and loan repayment programs of National Health 
              Service Corps.
Sec. 4202. Area health education centers.
Sec. 4203. Public health and preventive medicine.
Sec. 4204. Family medicine.
Sec. 4205. General internal medicine and pediatrics.
Sec. 4206. Physician assistants.
Sec. 4207. Allied health project grants and contracts.
Sec. 4208. Nurse allied health project grants and contracts.
Sec. 4209. Nurse practitioner and nurse midwife programs.
         Subtitle A--Performance Measures for Quality Assurance

     SEC. 4001. HEALTH QUALITY ADVISORY COUNCIL.

       (a) Establishment.--The Secretary shall provide for the 
     establishment of an advisory council to be known as the 
     ``Health Quality Advisory Council'' (in this subtitle 
     referred to as the ``Council'').
       (b) Duties.--
       (1) Initial performance measures.--
       (A) Development.--The Council shall develop an initial set 
     of performance measures to be used to assess the quality of 
     health plans. The performance measures shall include measures 
     that provide information with respect to a health plan on the 
     following subjects:
       (i) Outcomes of care for specified medical conditions.
       (ii) Health status of enrollees.
       (iii) Health promotion activities.
       (iv) Prevention of diseases, disorders, disabilities, 
     injuries, and other adverse health conditions.
       (v) Risk management and reduction.
       (vi) Consumer satisfaction with the plan, services, 
     providers, and care provided.
       (B) Recommendations.--Not later than the date that is 9 
     months from the date of the enactment of this Act, the 
     Council shall recommend to the Secretary the initial set of 
     measures developed under subparagraph (A), along with a 
     recommended schedule for phasing in the assessment of health 
     plans using the measures.
       (2) Updating measures.--The Council shall make 
     recommendations to the Secretary with respect to updating, as 
     additional health care data with respect to health plans 
     becomes valid and available, any set of performance measures 
     selected by the Secretary under section 4002.
       (c) Membership.--
       (1) In general.--The Council shall, in accordance with this 
     subsection, be composed of appointed members and ex officio 
     members. All members of the Council shall be voting members, 
     other than officials designated under paragraph (3)(B) as ex 
     officio members of the Council.
       (2) Appointed members.--The Secretary shall appoint to the 
     Council 9 appropriately qualified individuals who are not 
     officers or employees of the United States. Members appointed 
     under this paragraph shall include--
       (A) individuals distinguished in the field of health 
     outcomes;
       (B) representatives of health plans;
       (C) health care providers; and
       (D) consumers of health care.
       (3) Ex officio members.--The Secretary shall designate as 
     ex officio members of the Council the Director of the 
     National Institutes of Health, the Director of the Centers 
     for Disease Control, the Administrator of the Health Care 
     Financing Administration, the Assistant Secretary of Defense 
     (Health Affairs), and the Chief Medical Officer of the 
     Department of Veterans Affairs.
       (d) Terms.--
       (1) In general.--Except as provided in paragraph (2), 
     members of the Council appointed under subsection (c)(2) 
     shall serve for a term of 3 years.
       (2) Staggered rotation.--Of the members first appointed to 
     the Council under subsection (c)(2), the Secretary shall 
     appoint 3 members to serve for a term of 3 years, 3 members 
     to serve for a term of 2 years, and 3 members to serve for a 
     term of 1 year.
       (3) Service beyond term.--A member of the Council appointed 
     under subsection (c)(2) may continue to serve after the 
     expiration of the term of the member until a successor is 
     appointed.
       (e) Vacancies.--If a member of the Council appointed under 
     subsection (c)(2) does not serve the full term applicable 
     under subsection (d), the individual appointed to fill the 
     resulting vacancy shall be appointed for the remainder of the 
     term of the predecessor of the individual.
       (f) Chair.--The Secretary shall, from among the members of 
     the Council appointed under subsection (c)(2), designate an 
     individual to serve as the chair of the Council.
       (g) Meetings.--The Council shall meet not less than once 
     during each discrete 4-month period and shall otherwise meet 
     at the call of the Administrator or the chair.
       (h) Compensation and Reimbursement of Expenses.--
       (1) Appointed members.--Members of the Council appointed 
     under subsection (c)(2) shall receive compensation for each 
     day (including traveltime) engaged in carrying out the duties 
     of the Council. Such compensation may not be in an amount in 
     excess of the maximum rate of basic pay payable for GS-18 of 
     the General Schedule.
       (2) Ex officio members.--Officials designated under 
     subsection (c)(3) as ex officio members of the Council may 
     not receive compensation for service on the Council in 
     addition to the compensation otherwise received for duties 
     carried out as officers of the United States.
       (i) Staff.--The Secretary shall provide to the Council such 
     staff, information, and other assistance as may be necessary 
     to carry out the duties of the Council.
       (j) Duration.--Notwithstanding section 14(a) of the Federal 
     Advisory Committee Act, the Council shall continue in 
     existence until otherwise provided by law.

     SEC. 4002. ASSESSMENT OF HEALTH PLANS USING PERFORMANCE 
                   MEASURES.

       (a) Selection of Initial Performance Measures.--
       (1) Evaluation of recommendations.--If the Council 
     recommends an initial set of performance measures and an 
     implementation schedule to the Secretary not later than the 
     deadline in section 4001(b)(1)(B), the Secretary shall 
     evaluate the set and schedule to determine whether they will 
     provide for effective measurement of the quality of health 
     plans. The Secretary shall complete such evaluation not later 
     than the date that is 90 days from the date on which the 
     Secretary receives the recommendations of the Council.
       (2) Modification.--Prior to the initiation of the rule 
     making under paragraph (3), the Secretary may modify the 
     recommended set of performance measures, or the 
     implementation schedule with respect to the set, as the 
     Secretary determines appropriate from the evaluation under 
     paragraph (1).
       (3) Rule making.--After notice and opportunity for public 
     comment, the Secretary shall promulgate a rule that--
       (A) establishes an initial set of performance measures and 
     a schedule for phasing in the assessment of health plans 
     using the measures;
       (B) specifies the amount and nature of the data that health 
     plans will be required to transmit under subsection (b) in 
     order to permit States to conduct assessments under the 
     subsection; and
       (C) specifies the frequency with which, and the method by 
     which, such data will be required to be transmitted.
       (b) Assessment of Compliance by States.--
       (1) Data transmission.--A health plan shall transmit to a 
     State the data determined to be necessary by the Secretary 
     under subsection (a)(3).
       (2) Assessment.--Each State shall assess the completeness, 
     accuracy, and validity of the data supplied by each health 
     plan offered in the State. A State may satisfy this 
     requirement by entering into a contract or other agreement 
     with any appropriate individual or entity.
       (3) Ensuring compliance.--A State may take appropriate 
     action to ensure compliance by health plans offered in the 
     State with the requirements of paragraph (1). Such action may 
     include the imposition of a penalty on a health plan that 
     transmits incomplete, false, or misleading data to the State.
       (4) Publication of results.--Each health plan shall publish 
     a report on the performance measures as required and shall 
     send the report to employers, brokers, health plan purchasing 
     organizations, and consumers in its service area.
       (c) Updating Measures.--The Secretary, after receiving the 
     recommendations of the Council and after notice and 
     opportunity for public comment, may update a set of 
     performance measures or an implementation schedule 
     established under this section.
              Subtitle B--Primary Care Provider Education

     SEC. 4101. AREA HEALTH EDUCATION CENTERS.

       Section 746(i)(1)(A) of the Public Health Service Act (42 
     U.S.C. 293j(i)(1)(A)) is amended by striking ``through 1995'' 
     and inserting ``through 1994 and $30,000,000 for each of the 
     fiscal years 1995 through 1999''.

     SEC. 4102. PUBLIC HEALTH AND PREVENTIVE MEDICINE.

       Section 765(a) of the Public Health Service Act (42 U.S.C. 
     294c(a)) is amended by striking ``through 1995'' and 
     inserting ``through 1999''.

     SEC. 4103. FAMILY MEDICINE.

       Section 747(d)(1) of the Public Health Service Act (42 
     U.S.C. 293k(d)(1)) is amended by striking ``through 1995'' 
     and inserting ``through 1999''.

     SEC. 4104. GENERAL INTERNAL MEDICINE AND PEDIATRICS.

       Section 748(c) of the Public Health Service Act (42 U.S.C. 
     293l(c)) is amended by striking ``through 1995'' and 
     inserting ``through 1999''.

     SEC. 4105. PHYSICIAN ASSISTANTS.

       Section 750(d)(1) of the Public Health Service Act (42 
     U.S.C. 293n(d)(1)) is amended by striking ``through 1995'' 
     and inserting ``through 1999''.

     SEC. 4106. ALLIED HEALTH PROJECT GRANTS AND CONTRACTS.

       Section 767(d) of the Public Health Service Act (42 U.S.C. 
     294e(d)) is amended by striking ``through 1995'' and 
     inserting ``through 1999''.

     SEC. 4107. NURSE PRACTITIONER AND NURSE MIDWIFE PROGRAMS.

       Section 822(d) of the Public Health Service Act (42 U.S.C. 
     296m(d)) is amended by striking ``and 1994'' and inserting 
     ``through 1999''.
        Subtitle C--Other Medical Education Grants and Programs

     SEC. 4201. SCHOLARSHIP AND LOAN REPAYMENT PROGRAMS OF 
                   NATIONAL HEALTH SERVICE CORPS.

       Section 338H(b)(1) of the Public Health Service Act (42 
     U.S.C. 254q(b)(1)) is amended--
       (1) by striking ``and'' after ``1991,''; and
       (2) by striking ``through 2000.'' and inserting ``through 
     1994, $150,000,000 for fiscal year 1995, $175,000,000 for 
     fiscal year 1996, $200,000,000 for fiscal year 1997, 
     $225,000,000 for fiscal year 1998, and $250,000,000 for 
     fiscal year 1999.''.

     SEC. 4202. AREA HEALTH EDUCATION CENTERS.

       Section 746(i)(1)(A) of the Public Health Service Act (42 
     U.S.C. 293j(i)(1)(A)) is amended by striking ``through 1995'' 
     and inserting ``through 1994 and $30,000,000 for each of the 
     fiscal years 1995 through 1999''.

     SEC. 4203. PUBLIC HEALTH AND PREVENTIVE MEDICINE.

       Section 765(a) of the Public Health Service Act (42 U.S.C. 
     294c(a)) is amended by striking ``through 1995'' and 
     inserting ``through 1999''.

     SEC. 4204. FAMILY MEDICINE.

       Section 747(d)(1) of the Public Health Service Act (42 
     U.S.C. 293k(d)(1)) is amended by striking ``through 1995'' 
     and inserting ``through 1999''.

     SEC. 4205. GENERAL INTERNAL MEDICINE AND PEDIATRICS.

       Section 748(c) of the Public Health Service Act (42 U.S.C. 
     293l(c)) is amended by striking ``through 1995'' and 
     inserting ``through 1999''.

     SEC. 4206. PHYSICIAN ASSISTANTS.

       Section 750(d)(1) of the Public Health Service Act (42 
     U.S.C. 293n(d)(1)) is amended by striking ``through 1995'' 
     and inserting ``through 1999''.

     SEC. 4207. ALLIED HEALTH PROJECT GRANTS AND CONTRACTS.

       Section 767(d) of the Public Health Service Act (42 U.S.C. 
     294e(d)) is amended by striking ``through 1995'' and 
     inserting ``through 1999''.

     SEC. 4208. NURSE ALLIED HEALTH PROJECT GRANTS AND CONTRACTS.

       Section 767(d) of the Public Health Service Act (42 U.S.C. 
     294e(d)) is amended by striking ``through 1995'' and 
     inserting ``through 1999''.

     SEC. 4209. NURSE PRACTITIONER AND NURSE MIDWIFE PROGRAMS.

       Section 822(d) of the Public Health Service Act (42 U.S.C. 
     296m(d)) is amended by striking ``and 1994'' and inserting 
     ``through 1999''.
        Subtitle C--Other Medical Education Grants and Programs

     SEC. 4201. SCHOLARSHIP AND LOAN REPAYMENT PROGRAMS OF 
                   NATIONAL HEALTH SERVICE CORPS.

       Section 338H(b)(1) of the Public Health Service Act (42 
     U.S.C. 254q(b)(1)) is amended--
       (1) by striking ``and'' after ``1991,''; and
       (2) by striking ``through 2000.'' and inserting ``through 
     1994, $150,000,000 for fiscal year 1995, $175,000,000 for 
     fiscal year 1996, $200,000,000 for fiscal year 1997, 
     $225,000,000 for fiscal year 1998, and $250,000,000 for 
     fiscal year 1999.''.

     SEC. 4202. AREA HEALTH EDUCATION CENTERS.

       Section 746(i)(1)(A) of the Public Health Service Act (42 
     U.S.C. 293j(i)(1)(A)) is amended by striking ``through 1995'' 
     and inserting ``through 1994 and $30,000,000 for each of the 
     fiscal years 1995 through 1999''.

     SEC. 4203. PUBLIC HEALTH AND PREVENTIVE MEDICINE.

       Section 765(a) of the Public Health Service Act (42 U.S.C. 
     294c(a)) is amended by striking ``through 1995'' and 
     inserting ``through 1999''.

     SEC. 4204. FAMILY MEDICINE.

       Section 747(d)(1) of the Public Health Service Act (42 
     U.S.C. 293k(d)(1)) is amended by striking ``through 1995'' 
     and inserting ``through 1999''.

     SEC. 4205. GENERAL INTERNAL MEDICINE AND PEDIATRICS.

       Section 748(c) of the Public Health Service Act (42 U.S.C. 
     293l(c)) is amended by striking ``through 1995'' and 
     inserting ``through 1999''.

     SEC. 4206. PHYSICIAN ASSISTANTS.

       Section 750(d)(1) of the Public Health Service Act (42 
     U.S.C. 293n(d)(1)) is amended by striking ``through 1995'' 
     and inserting ``through 1999''.

     SEC. 4207. ALLIED HEALTH PROJECT GRANTS AND CONTRACTS.

       Section 767(d) of the Public Health Service Act (42 U.S.C. 
     294e(d)) is amended by striking ``through 1995'' and 
     inserting ``through 1999''.

     SEC. 4208. NURSE ALLIED HEALTH PROJECT GRANTS AND CONTRACTS.

       Section 767(d) of the Public Health Service Act (42 U.S.C. 
     294e(d)) is amended by striking ``through 1995'' and 
     inserting ``through 1999''.

     SEC. 4209. NURSE PRACTITIONER AND NURSE MIDWIFE PROGRAMS.

       Section 822(d) of the Public Health Service Act (42 U.S.C. 
     296m(d)) is amended by striking ``and 1994'' and inserting 
     ``through 1999''.
             TITLE V--MARKET INCENTIVES TO CONTAINING COSTS


                       table of contents of title

   Subtitle A--Facilitating Establishment of Health Plan Purchasing 
               Organization (HPPOs) and Health Risk Pools

              Part 1--Health Plan Purchasing Organizations

Sec. 5001. Establishment and organization.
Sec. 5002. Agreements to offer qualified health coverage.
Sec. 5003. Provision of information.
Sec. 5004. Enrolling eligible employees and qualifying individuals for 
              qualified health coverage through a purchasing 
              organization.
Sec. 5005. Restriction on charges.
Sec. 5006. State report on establishment of purchasing organizations.

              Part 2--Small Employer Pooling Arrangements

Sec. 5011. Small employer pooling arrangements.

Part 3--Encouragement of Multiple Employer Arrangements Providing Basic 
                            Health Benefits

Sec. 5021. Eliminating commonality of interest or geographic location 
              requirement for tax exempt trust status.

               Part 4--Tax Exemption for High Risk Pools

Sec. 5031. Tax exemption for high risk insurance pools.

Subtitle B--Preemption of State Benefit Mandates and Anti-Managed Care 
                                  Laws

Sec. 5101. Preemption from State benefit mandates.
Sec. 5102. Preemption of State law restrictions on managed care 
              arrangements.
Sec. 5103. Preemption of State laws restricting utilization review 
              programs.
Sec. 5104. Prohibition of provisions prohibiting employer groups from 
              purchasing health insurance.
Sec. 5105. Preemption relating to different insurance standards.
Sec. 5106. GAO study on managed care.

                     Subtitle C--Malpractice Reform

            Part 1--Uniform Standards for Malpractice Claims

Sec. 5201. Applicability.
Sec. 5202. Requirement for initial resolution of action through 
              alternative dispute resolution.
Sec. 5203. Optional application of practice guidelines.
Sec. 5204. Treatment of noneconomic and punitive damages.
Sec. 5205. Periodic payments for future losses.
Sec. 5206. Treatment of attorney's fees and other costs.
Sec. 5207. Uniform statute of limitations.
Sec. 5208. Special provision for certain obstetric services.
Sec. 5209. Uniform standard for determining liability in actions based 
              on negligence.
Sec. 5210. Jurisdiction of Federal courts.
Sec. 5211. Preemption.

 Part 2--Requirements for State Alternative Dispute Resolution Systems 
                                 (ADR)

Sec. 5221. Basic requirements.
Sec. 5222. Certification of State systems; applicability of alternative 
              Federal system.
Sec. 5223. Reports on implementation and effectiveness of alternative 
              dispute resolution systems.

                          Part 3--Definitions

Sec. 5231. Definitions.

   Subtitle D--Paperwork Reduction and Administrative Simplification

Sec. 5301. Preemption of State ``quill and pen'' laws.
Sec. 5302. Confidentiality of electronic health care information.
Sec. 5303. Standardization of electronic receipt and transmission of 
              claims and eligibility information.
Sec. 5304. Use of uniform health claims forms and identification 
              numbers.
Sec. 5305. Priority among carriers, group health plans, and multiple 
              employer welfare arrangements.
Sec. 5306. Exchange of information among carriers, group health plans, 
              and multiple employer welfare arrangements.
Sec. 5307. Failure to satisfy certain health plan requirements.
Sec. 5308. Definition.

                         Subtitle E--Antitrust

Sec. 5401. Publication of antitrust guidelines on activities of health 
              plans.
Sec. 5402. Issuance of health care certificates of public advantage.
Sec. 5403. Study of impact on competition.

                      Subtitle F--Fraud and Abuse

Part 1--Establishment of All-Payer Health Care Fraud and Abuse Control 
                                Program

Sec. 5501. All-payer health care fraud and abuse control program.
Sec. 5502. Authorization of additional appropriations for investigators 
              and other personnel.
Sec. 5503. Establishment of anti-fraud and abuse trust fund.

       Part 2--Revisions to Current Sanctions for Fraud and Abuse

Sec. 5511. Mandatory exclusion from participation in medicare and State 
              health care programs.
Sec. 5512. Establishment of minimum period of exclusion for certain 
              individuals and entities subject to permissive exclusion 
              from medicare and State health care programs.
Sec. 5513. Revisions to criminal penalties.
Sec. 5515. Revisions to limitations on physician self-referral.
Sec. 5516. Medicare health maintenance organizations.
Sec. 5517. Effective date.

                   Part 3--Amendments to Criminal Law

Sec. 5521. Penalties for health care fraud.
Sec. 5522. Rewards for information leading to prosecution and 
              conviction.
Sec. 5523. Broadening application of mail fraud statute.

                       Part 4--Advisory Opinions

Sec. 5531. Authorizing the Secretary of Health and Human Services to 
              issue advisory opinions under Title XI.
Sec. 5532. Authorizing the Secretary of Health and Human Services to 
              issue advisory opinions relating to physician ownership 
              and referral.
Sec. 5533. Effective date.

       Part 5--Payments for State Health Care Fraud Control Units

Sec. 5541. Establishment of State fraud units.
Sec. 5542. Requirements for State fraud units.
Sec. 5543. Scope and purpose.
Sec. 5544. Payments to States.

              Subtitle G--Billing for Laboratory Services

Sec. 5601. Easing restrictions on billing for laboratory and other 
              services.

                 ``TITLE XXVII--RESTRICTIONS ON BILLING

``Sec. 2701. Prohibition.
``Sec. 2702. Exceptions.
``Sec. 2703. Sanctions.
``Sec. 2704. Regulations.
``Sec. 2705. Definitions.
Sec. 5602. Effective date.
   Subtitle A--Facilitating Establishment of Health Plan Purchasing 
               Organization (HPPOs) and Health Risk Pools

              PART 1--HEALTH PLAN PURCHASING ORGANIZATIONS

     SEC. 5001. ESTABLISHMENT AND ORGANIZATION.

       (a) In General.--Health plan purchasing organizations (each 
     in this part referred to as a ``purchasing organization'') 
     may be established in accordance with this part. Each 
     purchasing organization shall be chartered under State law 
     and operated as a not-for-profit corporation. A carrier may 
     not form, underwrite, or possess a majority vote of a 
     purchasing organization, but may administer such an 
     organization.
       (b) Board of Directors.--
       (1) In general.--Each purchasing organization shall be 
     governed by a Board of Directors. Such Board shall initially 
     be appointed under procedures established by the State in 
     which it operates. Subsequently, the Board shall be elected 
     by the members of the organization in accordance with 
     paragraph (3). Such Board shall be composed of individuals 
     who are small employers (or representatives of small 
     employers), eligible employees of small employers (or 
     representatives of such employees), and qualifying 
     individuals in the area in which the organization operates.
       (2) Membership.--A purchasing organization shall accept all 
     small employers and eligible employees and other individuals 
     who are in the individual or small employer market sector 
     within the area served by the organization as members if such 
     employers, employees, or individuals request such membership.
       (3) Voting.--Members of a purchasing organization shall 
     have voting rights consistent with the rules established 
     under the bylaws governing the organization.
       (c) Duties of Purchasing Organizations.--
       (1) In general.--Subject to paragraph (2), each purchasing 
     organization shall--
       (A) market health insurance coverage to members throughout 
     the entire area served by the organization;
       (B) enter into agreements under section 5002 with carriers 
     offering qualified health coverage under this subtitle;
       (C) enter into agreements with small employers under 
     section 5003;
       (D) enroll individuals with carriers offering qualified 
     health coverage, only in accordance with section 5004; and
       (E) carry out other functions provided for under this part.
       (2) Limitation on activities.--A purchasing organization 
     shall not--
       (A) perform any activity (including review, approval, or 
     enforcement) relating to payment rates for providers;
       (B) perform any activity (including certification or 
     enforcement) relating to compliance of carriers (and health 
     coverage provided by carriers) with the requirements of 
     subtitle A of title I;
       (C) assume financial risk in relation to any such carrier; 
     or
       (D) perform other activities identified by the State as 
     being inconsistent with the performance of its duties under 
     paragraph (1).
       (3) Characteristics of service area.--
       (A) In general.--A purchasing organization need not serve 
     areas that are contiguous, but the geographic boundaries of 
     such areas shall be consistent with the boundaries 
     established under section 1021 for geographic areas used in 
     establishing premium rates in the individual and small group 
     market sectors.
       (B) Service of entire metropolitan statistical area.--If a 
     purchasing organization serves a part of a metropolitan 
     statistical area the organization shall serve the entire 
     area.
       (d) Establishment not Required.--Nothing in this section 
     shall be construed as requiring--
       (1) that a purchasing organization be established in each 
     area of a State in which it operates; and
       (2) that there be only one purchasing organization 
     established with respect to any area.

     SEC. 5002. AGREEMENTS TO OFFER QUALIFIED HEALTH COVERAGE.

       (a) Agreements.--
       (1) In general.--Except as provided in paragraph (3), each 
     purchasing organization for an area shall enter into an 
     agreement under this section with each carrier that desires 
     to provide qualified health coverage to be made available 
     through the purchasing organization (consistent with any 
     procedures established by the State).
       (2) Termination of agreement.--An agreement under paragraph 
     (1) shall remain in effect for a 12-month period, except that 
     the purchasing organization may terminate an agreement under 
     paragraph (1) if the carrier's license or certification under 
     State law is terminated or for other good cause shown.
       (3) Limitation on renewal of agreements.--Subsequent to the 
     12-month period described in paragraph (2), a purchasing 
     organization may--
       (A) refuse to enter into a subsequent agreement with a 
     carrier if the organization determines that the number of 
     enrollees or the premium for coverage is too low, and
       (B) if a previous agreement with a carrier was terminated 
     for good cause and the organization determines appropriate 
     actions have not been taken to correct the problems, refuse 
     to enter into a subsequent agreement with the carrier.
       (b) Receipt of Premiums on Behalf of Carriers.--
       (1) In general.--Under an agreement under this section 
     between a purchasing organization and a carrier--
       (A) premiums shall be payable, and
       (B) payment of premiums may be made by individuals (or 
     employers on their behalf) directly to the purchasing 
     organization for the benefit of the carrier.
       (2) Timing of payment of premiums.--Premiums may be payable 
     on a monthly basis (or, at the option of an eligible employee 
     or individual, on a quarterly basis). The purchasing 
     organization may provide for reasonable penalties and grace 
     periods for late payment.
       (3) Carriers retain risk of nonpayment.--Nothing in this 
     subsection shall be construed as placing upon a purchasing 
     organization any risk associated with the failure of 
     individuals and employers to make prompt payment of premiums 
     (other than the portion of the premium representing the 
     purchasing organization administrative fee under section 
     5005). Each small employer and qualifying individual who 
     enrolls with a carrier providing qualified health coverage 
     through the purchasing organization is liable to the carrier 
     for premiums.
       (c) Forwarding of Premiums.--
       (1) In general.--If, under an agreement under subsection 
     (a), premium payments for qualified health coverage are made 
     to the purchasing organization, the purchasing organization 
     shall forward to the carrier the amount of the premiums.
       (2) Payments.--Payments shall be made by the purchasing 
     organization under this subsection within a period of days 
     (specified by the Secretary and not to exceed 7 days) after 
     receipt of the premium from the small employer of the 
     eligible employee or the qualifying individual, as the case 
     may be.

     SEC. 5003. PROVISION OF INFORMATION.

       (a) In General.--Each purchasing organization for an area 
     shall make available to small employers that employ 
     individuals in the area and to qualifying individuals who 
     reside in the area--
       (1) information provided to the purchasing organization by 
     the State or carriers, and
       (2) the opportunity to enter into an agreement with the 
     organization for the purchase of qualified health coverage.
       (b) Forwarding Information and Payroll Deductions.--As part 
     of an agreement entered into under this section, a small 
     employer shall forward the information and make the payroll 
     deductions required under section 1201(a).

     SEC. 5004. ENROLLING ELIGIBLE EMPLOYEES AND QUALIFYING 
                   INDIVIDUALS FOR QUALIFIED HEALTH COVERAGE 
                   THROUGH A PURCHASING ORGANIZATION.

       A purchasing organization shall offer, on behalf of each 
     carrier with which an agreement was entered into under 
     section 5002 and in accordance with the enrollment procedures 
     of such carriers and the open enrollment periods provided 
     under 1005, enrollment for the coverage only to--
       (1) all eligible employees employed by small employers in 
     the area served by the purchasing organization; and
       (2) all qualifying individuals residing in such area.

     SEC. 5005. RESTRICTION ON CHARGES.

       (a) In General.--A purchasing organization may impose an 
     administrative fee with respect to an eligible employee or 
     qualifying individual enrolled for qualified health coverage 
     offered through the purchasing organization.
       (b) Fee.--A purchasing organization that elects to impose a 
     fee under subsection (a) shall ensure that such fee is set as 
     a percentage of the premium for each such coverage option, is 
     imposed uniformly with respect to all coverage options 
     offered through the organization, and is disclosed explicitly 
     as an addition to the premium.

     SEC. 5006. STATE REPORT ON ESTABLISHMENT OF PURCHASING 
                   ORGANIZATIONS.

       (a) In General.--Not later than January 1, 2000, each State 
     shall conduct a review of access of residents of the State 
     who are not employees of large employers or medicare 
     beneficiaries to obtaining standard health insurance coverage 
     through a purchasing organization.
       (b) Response.--If the State determines, based on such 
     review, that such residents are unable to obtain such 
     coverage through such an organization, the State shall take 
     such actions as the State determines appropriate to ensure 
     public or private entities provide access to such an 
     organization by such residents.

              PART 2--SMALL EMPLOYER POOLING ARRANGEMENTS

     SEC. 5011. SMALL EMPLOYER POOLING ARRANGEMENTS.

       (a)  Requirements for SEPAs Applicable where Significant 
     Number of Small Employers Participate.--In any case in which 
     coverage is provided for the current plan year under a 
     multiple employer health plan and more than 10 percent of the 
     participating employers in the arrangement are small 
     employers (as defined in section 1902), the entity sponsoring 
     such arrangement shall ensure that such arrangement is 
     maintained for such year in the form of a small employer 
     pooling arrangement.
       (b) Requirements for Small Employer Pooling Arrangements.--
     For purposes of this title, an arrangement is maintained in 
     the form of a small employer pooling arrangement for any 
     applicable fiscal year, if--
       (1) the benefits under the arrangement consist solely of 
     medical care described in section 607(1) of the Employee 
     Retirement Income Security Act of 1974 (disregarding such 
     incidental benefits as the Secretary of Labor shall specify 
     by regulations),
       (2) the general requirements of subsection (c) are met with 
     respect to the arrangement, and
       (3) the following requirements are met with respect to the 
     arrangement:
       (A) in the case of an arrangement under which all coverage 
     is fully-insured, the requirements of subsection (d) are met 
     with respect to carriers providing coverage under the 
     arrangement, or
       (B) in the case of an arrangement under which some or all 
     coverage is not fully-insured, the arrangement constitutes an 
     exempted multiple employer health plan, and the requirements 
     of subsection (e) are met with respect to the arrangement.
       (c) General Requirements.--The general requirements of this 
     subsection with respect to a multiple employer welfare 
     arrangement are the following:
       (1) Required coverage.--The coverage provided under the 
     arrangement consists of at least the forms of health coverage 
     required to be offered by employers under section 1201(a)(2).
       (2) Applicability of certain health insurance marketplace 
     reforms.--The coverage provided under the arrangement 
     complies with the requirements of sections 1003 through 1005.
       (3) Employee and individual eligibility.--Under the 
     arrangement, each eligible employee and each qualifying 
     individual with respect to each participating employer is 
     made eligible for coverage required under this section.
       (d) Requirements for Arrangements Providing Self-Insured 
     Coverage.--
       (1) In general.--The requirements of this subsection with 
     respect to a multiple employer welfare arrangement under 
     which some or all coverage is not fully-insured are (in 
     addition to the requirements for exempted multiple employer 
     welfare arrangements under part 7 of subtitle B of title I of 
     the Employee Retirement Income Security Act of 1974 (added by 
     this Act)) the following:
       (A) the arrangement meets the requirements of section 1002 
     (relating to guaranteed issue), irrespective of the type 
     coverage provided, as if the arrangement were a carrier,
       (B) the arrangement meets the requirements of sections 1021 
     and 1022 (relating to premiums), as if the arrangement were a 
     carrier, and
       (C) the arrangement participates in any risk adjustment 
     mechanisms established under section 1024, and
       (D) under the arrangement, with respect to all 
     participating employers as of the beginning of each plan 
     year, the total number of eligible employees is not less than 
     100.
       (2) Required scope of eligibility for participating 
     employers.
       (A) In general.--Under the terms of the written instruments 
     governing the arrangement, all restrictions on the 
     eligibility of employers to be participating employers in the 
     arrangement are specifically set forth and consist solely of 
     criteria described in subparagraph (B), and all employers 
     with respect to whom such criteria are met may be 
     participating employers. No such restrictions under the 
     arrangement shall be considered enforceable unless they are 
     so specified.
       (B) Criteria for restrictions on participating employers.--
     The terms of the arrangement shall define restrictions on 
     eligibility of employers to be participating employers only 
     by reference to one or more of the following criteria:
       (i) Participating employers are restricted to those located 
     in one or more specified geographic locations.
       (ii) Participating employers are restricted to those who 
     are (or whose owners, officers, or employees are) members of 
     one or more trade associations, industry associations, 
     professional associations, or chambers of commerce (or 
     similar business groups).
       (iii) Participating employers are restricted to those who 
     are otherwise related by specified supply contracts, 
     franchise arrangements, or common ownership interests.
       (iv) Participating employers are restricted to employers 
     whose employees are covered under one or more specified 
     collective bargaining agreements.
       (e) Reference to Limitation on Self-Insurance by Small 
     Employers.--For restriction on self-insurance by small 
     employers, see section 1055.

PART 3--ENCOURAGEMENT OF MULTIPLE EMPLOYER ARRANGEMENTS PROVIDING BASIC 
                            HEALTH BENEFITS

     SEC. 5021. ELIMINATING COMMONALITY OF INTEREST OR GEOGRAPHIC 
                   LOCATION REQUIREMENT FOR TAX EXEMPT TRUST 
                   STATUS.

       (a) In General.--Paragraph (9) of section 501(c) of the 
     Internal Revenue Code of 1986 (relating to exempt 
     organizations) is amended--
       (1) by inserting ``(A)'' after ``(9)''; and
       (2) by adding at the end the following:
       ``(B) Any determination of whether a multiple employer 
     health plan (as defined in section 701(10) of the Employee 
     Retirement Income Security Act of 1974) or an insured 
     multiple employer health plan (as defined in section 701(11) 
     of such Act) is a voluntary employees' beneficiary 
     association meeting the requirements of this paragraph shall 
     be made without regard to any determination of commonality of 
     interest or geographic location if--
       ``(i) such plan provides at least standard coverage 
     (consistent with section 1102 of the Bipartisan Health Care 
     Reform Act of 1994), and
       ``(ii) in the case of an insured multiple employer health 
     plan, it meets the requirements enforceable under section 
     514(b)(6)(B)(i) of the Employee Retirement Income Security 
     Act of 1974 to the extent not preempted by section 5104 of 
     the Bipartisan Health Care Reform Act of 1994.''.
       (b) Effective Date.--The amendments made by subsection (a) 
     shall apply with respect to determinations made on or after 
     January 1, 1996.

               PART 4--TAX EXEMPTION FOR HIGH RISK POOLS

     SEC. 5031. TAX EXEMPTION FOR HIGH RISK INSURANCE POOLS.

       (a) In General.--Subsection (c) of section 501 of the 
     Internal Revenue Code of 1986 (relating to list of exempt 
     organizations) is amended by adding at the end the following 
     new paragraph:
       ``(27) In the case of taxable years beginning before 
     January 1, 1997, any corporation, association, or similar 
     legal entity which is created by any State or political 
     subdivision thereof to establish a risk pool to provide 
     health insurance coverage to any person unable to obtain 
     health insurance coverage in the private insurance market 
     because of health conditions and no part of the net earnings 
     of which inures to the benefit of any private shareholder, 
     member, or individual.''
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to taxable years beginning after December 31, 
     1989.
Subtitle B--Preemption of State Benefit Mandates and Anti-Managed Care 
                                  Laws

     SEC. 5101. PREEMPTION FROM STATE BENEFIT MANDATES.

       Effective as of January 1, 1997, no State shall establish 
     or enforce any law or regulation that--
       (1) requires the offering, as part of health insurance 
     coverage, of any services, category of care, or services of 
     any class or type of provider; or
       (2) specifies the individuals to be provided health 
     insurance coverage or the duration of such coverage.

     SEC. 5102. PREEMPTION OF STATE LAW RESTRICTIONS ON MANAGED 
                   CARE ARRANGEMENTS.

       (a) Limitation on Restrictions on Network Plans.--Effective 
     as of January 1, 1997--
       (1) a State may not prohibit or limit a carrier or group 
     health plan providing health coverage from including 
     incentives for enrollees to use the services of participating 
     providers;
       (2) a State may not prohibit or limit such a carrier or 
     plan from limiting coverage of services to those provided by 
     a participating provider;
       (3) a State may not prohibit or limit the negotiation of 
     rates and forms of payments for providers by such a carrier 
     or plan with respect to health coverage;
       (4) a State may not prohibit or limit such a carrier or 
     plan from limiting the number of participating providers;
       (5) a State may not prohibit or limit such a carrier or 
     plan from requiring that services be provided (or authorized) 
     by a practitioner selected by the enrollee from a list of 
     available participating providers; and
       (6) a State may not prohibit or limit the corporate 
     practice of medicine.
       (b) Definitions.--In this section:
       (1) Managed care coverage.--The term ``managed care 
     coverage'' means health coverage to the extent the coverage 
     is provided through a managed care arrangement (as defined in 
     section 1903(11)(A)) that meets the applicable requirements 
     of such section.
       (2) Participating provider.--The term ``participating 
     provider'' means an entity or individual which provides, 
     sells, or leases health care services as part of a provider 
     network (as defined in section 1903(11)(B)).
       (c) Reference to Standards for Managed Care Arrangements.--
     For requirements relating to managed care arrangements, see 
     section 1011.

     SEC. 5103. PREEMPTION OF STATE LAWS RESTRICTING UTILIZATION 
                   REVIEW PROGRAMS.

       (a) In General.--Effective January 1, 1997, no State law or 
     regulation shall prohibit or regulate activities under a 
     utilization review program (as defined in subsection (b)).
       (b) Utilization Review Program Defined.--In this section, 
     the term ``utilization review program'' means a system of 
     reviewing the medical necessity and appropriateness of 
     patient services (which may include inpatient and outpatient 
     services) using specified guidelines. Such a system may 
     include preadmission certification, the application of 
     practice guidelines, continued stay review, discharge 
     planning, preauthorization of ambulatory procedures, and 
     retrospective review.

     SEC. 5104. PROHIBITION OF PROVISIONS PROHIBITING EMPLOYER 
                   GROUPS FROM PURCHASING HEALTH INSURANCE.

       No provision of State or local law shall apply that 
     prohibits 2 or more employers from obtaining coverage under 
     an insured multiple employer health plan.

     SEC. 5105. PREEMPTION RELATING TO DIFFERENT INSURANCE 
                   STANDARDS.

       A State may not establish or enforce standards for health 
     insurance coverage made available in the individual and small 
     group markets that are different from the standards 
     established under title I.

     SEC. 5106. GAO STUDY ON MANAGED CARE.

       (a) In General.--The Comptroller General shall conduct a 
     study of the benefits and cost effectiveness of the use of 
     managed care in the delivery of health services.
       (b) Report.--By not later than 4 years after the date of 
     the enactment of this Act, the Comptroller General shall 
     submit a report to Congress on the study conducted under 
     subsection (a) and shall include in the report such 
     recommendations as may be appropriate.
                     Subtitle C--Malpractice Reform

            PART 1--UNIFORM STANDARDS FOR MALPRACTICE CLAIMS

     SEC. 5201. APPLICABILITY.

       Except as provided in section 5221, this part shall apply 
     to any medical malpractice liability action brought in a 
     Federal or State court, and to any medical malpractice claim 
     subject to an alternative dispute resolution system, that is 
     initiated on or after January 1, 1996.

     SEC. 5202. REQUIREMENT FOR INITIAL RESOLUTION OF ACTION 
                   THROUGH ALTERNATIVE DISPUTE RESOLUTION.

       (a) In General.--
       (1) State cases.--A medical malpractice liability action 
     may not be brought in any State court during a calendar year 
     unless the medical malpractice liability claim that is the 
     subject of the action has been initially resolved under an 
     alternative dispute resolution system certified for the year 
     by the Secretary under section 5212(a), or, in the case of a 
     State in which such a system is not in effect for the year, 
     under the alternative Federal system established under 
     section 5222(b).
       (2) Federal diversity actions.--A medical malpractice 
     liability action may not be brought in any Federal court 
     under section 1332 of title 28, United States Code, during a 
     calendar year unless the medical malpractice liability claim 
     that is the subject of the action has been initially resolved 
     under the alternative dispute resolution system referred to 
     in paragraph (1) that applied in the State whose law applies 
     in such action.
       (3) Claims against united states.--
       (A) Establishment of process for claims.--The Attorney 
     General shall establish an alternative dispute resolution 
     process for the resolution of tort claims consisting of 
     medical malpractice liability claims brought against the 
     United States under chapter 171 of title 28, United States 
     Code. Under such process, the resolution of a claim shall 
     occur after the completion of the administrative claim 
     process applicable to the claim under section 2675 of such 
     title.
       (B) Requirement for initial resolution under process.--A 
     medical malpractice liability action based on a medical 
     malpractice liability claim described in subparagraph (A) may 
     not be brought in any Federal court unless the claim has been 
     initially resolved under the alternative dispute resolution 
     process established by the Attorney General under such 
     subparagraph.
       (b) Initial Resolution of Claims Under ADR.--For purposes 
     of subsection (a), an action is ``initially resolved'' under 
     an alternative dispute resolution system if--
       (1) the ADR reaches a decision on whether the defendant is 
     liable to the plaintiff for damages; and
       (2) if the ADR determines that the defendant is liable, the 
     ADR reaches a decision on the amount of damages assessed 
     against the defendant.
       (c) Procedures for Filing Actions.--
       (1) Notice of intent to contest decision.--Not later than 
     60 days after a decision is issued with respect to a medical 
     malpractice liability claim under an alternative dispute 
     resolution system, each party affected by the decision shall 
     submit a sealed statement to a court of competent 
     jurisdiction indicating whether or not the party intends to 
     contest the decision.
       (2) Deadline for filing action.--A medical malpractice 
     liability action may not be brought by a party unless--
       (A) the party has filed the notice of intent required by 
     paragraph (1); and
       (B) the party files the action in a court of competent 
     jurisdiction not later than 90 days after the decision 
     resolving the medical malpractice liability claim that is the 
     subject of the action is issued under the applicable 
     alternative dispute resolution system.
       (3) Court of competent jurisdiction.--For purposes of this 
     subsection, the term ``court of competent jurisdiction'' 
     means--
       (A) with respect to actions filed in a State court, the 
     appropriate State trial court; and
       (B) with respect to actions filed in a Federal court, the 
     appropriate United States district court.
       (d) Legal Effect of Uncontested ADR Decision.--The decision 
     reached under an alternative dispute resolution system shall, 
     for purposes of enforcement by a court of competent 
     jurisdiction, have the same status in the court as the 
     verdict of a medical malpractice liability action adjudicated 
     in a State or Federal trial court. The previous sentence 
     shall not apply to a decision that is contested by a party 
     affected by the decision pursuant to subsection (c)(1).

     SEC. 5203. OPTIONAL APPLICATION OF PRACTICE GUIDELINES.

       (a) Development and Certification of Guidelines.--Each 
     State may develop, for certification by the Secretary, a set 
     of specialty clinical practice guidelines, based on 
     recommended guidelines developed by the Agency for Health 
     Care Policy and Research.
       (b) Provision of Health Care Under Guidelines.--
     Notwithstanding any other provision of law, in any medical 
     malpractice liability action arising from the conduct of a 
     health care provider or health care professional, if such 
     conduct was in accordance with a guideline developed by the 
     State in which the conduct occurred and certified by the 
     Secretary under subsection (a), the guideline--
       (1) may be introduced by any party to the action (including 
     a health care provider, health care professional, or 
     patient); and
       (2) if introduced, shall establish a rebuttable presumption 
     that the conduct was in accordance with the appropriate 
     standard of medical care, which may only be overcome by the 
     presentation of clear and convincing evidence on behalf of 
     the party against whom the presumption operates.

     SEC. 5204. TREATMENT OF NONECONOMIC AND PUNITIVE DAMAGES.

       (a) Limitation on Noneconomic Damages.--The total amount of 
     noneconomic damages that may be awarded to a claimant and the 
     members of the claimant's family for losses resulting from 
     the injury which is the subject of a medical malpractice 
     liability action may not exceed $250,000, regardless of the 
     number of parties against whom the action is brought or the 
     number of actions brought with respect to the injury.
       (b) No Award of Punitive Damages Against Manufacturer of 
     Medical Product.--In the case of a medical malpractice 
     liability action in which the plaintiff alleges a claim 
     against the manufacturer of a medical product, no punitive or 
     exemplary damages may be awarded against such manufacturer.
       (c) Joint and Several Liability for Noneconomic Damages.--
     The liability of each defendant for noneconomic damages shall 
     be several only and shall not be joint, and each defendant 
     shall be liable only for the amount of noneconomic damages 
     allocated to the defendant in direct proportion to the 
     defendant's percentage of responsibility (as determined by 
     the trier of fact).
       (d) Use of Punitive Damage Awards for Operation of ADR 
     Systems in States.--
       (1) In general.--The total amount of any punitive damages 
     awarded in a medical malpractice liability action shall be 
     paid to the State in which the action is brought (or, in a 
     case brought in Federal court, in the State in which the 
     health care services that caused the injury that is the 
     subject of the action were provided), and shall be used by 
     the State solely to implement and operate the State 
     alternative dispute resolution system certified by the 
     Secretary under section 5222 (except as provided in paragraph 
     (2)).
       (2) Use of remaining amounts for provider licensing and 
     disciplinary activities.--If the amount of punitive damages 
     paid to a State under paragraph (1) for a year is greater 
     than the State's costs of implementing and operating the 
     State alternative dispute resolution system during the year, 
     the balance of such punitive damages paid to the State shall 
     be used solely to carry out activities to assure the safety 
     and quality of health care services provided in the State, 
     including (but not limited to)--
       (A) licensing or certifying health care professionals and 
     health care providers in the State; and
       (B) carrying out programs to reduce malpractice-related 
     costs for providers volunteering to provide services in 
     medically underserved areas.
       (3) Maintenance of effort.--A State shall use any amounts 
     paid pursuant to paragraph (1) to supplement and not to 
     replace amounts spent by the State for implementing and 
     operating the State alternative dispute resolution system or 
     carrying out the activities described in paragraph (2).

     SEC. 5205. PERIODIC PAYMENTS FOR FUTURE LOSSES.

       (a) In General.--In any medical malpractice liability 
     action in which the damages awarded for future economic loss 
     exceeds $100,000, a defendant may not be required to pay such 
     damages in a single, lump-sum payment, but may be permitted 
     to make such payments on a periodic basis. The periods for 
     such payments shall be determined by the court, based upon 
     projections of when such expenses are likely to be incurred.
       (b) Waiver.--A court may waive the application of 
     subsection (a) with respect to a defendant if the court 
     determines that it is not in the best interests of the 
     plaintiff to receive payments for damages on such a periodic 
     basis.

     SEC. 5206. TREATMENT OF ATTORNEY'S FEES AND OTHER COSTS.

       (a) Requiring Party Contesting ADR Ruling To Pay Attorney's 
     Fees and Other Costs.--
       (1) In general.--The court in a medical malpractice 
     liability action shall require the party that (pursuant to 
     section 5202(c)(1)) contested the ruling of the alternative 
     dispute resolution system with respect to the medical 
     malpractice liability claim that is the subject of the action 
     to pay to the opposing party the costs incurred by the 
     opposing party under the action, including attorney's fees, 
     fees paid to expert witnesses, and other litigation expenses 
     (but not including court costs, filing fees, or other 
     expenses paid directly by the party to the court, or any fees 
     or costs associated with the resolution of the claim under 
     the alternative dispute resolution system), but only if--
       (A) in the case of an action in which the party that 
     contested the ruling is the claimant, the amount of damages 
     awarded to the party under the action is less than the amount 
     of damages awarded to the party under the ADR system; and
       (B) in the case of an action in which the party that 
     contested the ruling is the defendant, the amount of damages 
     assessed against the party under the action is greater than 
     the amount of damages assessed under the ADR system.
       (2) Exceptions.--Paragraph (1) shall not apply if--
       (A) the party contesting the ruling made under the previous 
     alternative dispute resolution system shows that--
       (i) the ruling was procured by corruption, fraud, or undue 
     means,
       (ii) there was partiality or corruption under the system,
       (iii) there was other misconduct under the system that 
     materially prejudiced the party's rights, or
       (iv) the ruling was based on an error of law;
       (B) the party contesting the ruling made under the 
     alternative dispute resolution system presents new evidence 
     before the trier of fact that was not available for 
     presentation under the ADR system;
       (C) the medical malpractice liability action raised a novel 
     issue of law; or
       (D) the court finds that the application of such paragraph 
     to a party would constitute an undue hardship, and issues an 
     order waiving or modifying the application of such paragraph 
     that specifies the grounds for the court's decision.
       (3) Limit on attorney's fees paid.--Attorneys' fees that 
     are required to be paid under paragraph (1) by the contesting 
     party shall not exceed the amount of the attorneys' fees 
     incurred by the contesting party in the action. If the 
     attorneys' fees of the contesting party are based on a 
     contingency fee agreement, the amount of attorneys' fees for 
     purposes of the preceding sentence shall not exceed the 
     reasonable value of those services.
       (4) Records.--In order to receive attorneys' fees under 
     paragraph (1), counsel of record in the medical malpractice 
     liability action involved shall maintain accurate, complete 
     records of hours worked on the action, regardless of the fee 
     arrangement with the client involved.
       (b) Contingency Fee Defined.--As used in this section, the 
     term ``contingency fee'' means any fee for professional legal 
     services which is, in whole or in part, contingent upon the 
     recovery of any amount of damages, whether through judgment 
     or settlement.

     SEC. 5207. UNIFORM STATUTE OF LIMITATIONS.

       (a) In General.--No medical malpractice claim may be 
     initiated after the expiration of the 2-year period that 
     begins on the date on which the alleged injury that is the 
     subject of such claim was discovered, but in no event may 
     such a claim be initiated after the expiration of the 4-year 
     period that begins on the date on which the alleged injury 
     that is the subject of such claim occurred.
       (b) Exception for Minors.--In the case of an alleged injury 
     suffered by a minor who has not attained 6 years of age, a 
     medical malpractice claim may not be initiated after the 
     expiration of the 2-year period that begins on the date on 
     which the alleged injury that is the subject of such claim 
     was discovered or should reasonably have been discovered, but 
     in no event may such a claim be initiated after the date on 
     which the minor attains 12 years of age.

     SEC. 5208. SPECIAL PROVISION FOR CERTAIN OBSTETRIC SERVICES.

       (a) In General.--In the case of a medical malpractice claim 
     relating to services provided during labor or the delivery of 
     a baby, if the health care professional or health care 
     provider against whom the claim is brought did not previously 
     treat the claimant for the pregnancy, the trier of fact may 
     not find that such professional or provider committed 
     malpractice and may not assess damages against such 
     professional or provider unless the malpractice is proven by 
     clear and convincing evidence.
       (b) Applicability to Group Practices or Agreements Among 
     Providers.--For purposes of subsection (a), a health care 
     professional shall be considered to have previously treated 
     an individual for a pregnancy if the professional is a member 
     of a group practice whose members previously treated the 
     individual for the pregnancy or is providing services to the 
     individual during labor or the delivery of a baby pursuant to 
     an agreement with another professional.

     SEC. 5209. UNIFORM STANDARD FOR DETERMINING LIABILITY IN 
                   ACTIONS BASED ON NEGLIGENCE.

       (a) Standard of Reasonableness.--Except as provided in 
     subsection (b), a defendant in a medical malpractice 
     liability action may not be found to have committed 
     malpractice unless the defendant's conduct at the time of 
     providing the health care services that are the subject of 
     the action was not reasonable.
       (b) Actions Brought Under Strict Liability.--Subsection (a) 
     shall not apply with respect to a medical malpractice action 
     if (in accordance with applicable State law) the theory of 
     liability upon which the action is based is a theory of 
     strict liability.

     SEC. 5210. JURISDICTION OF FEDERAL COURTS.

       Nothing in this part shall be construed to establish any 
     jurisdiction over any medical malpractice liability action in 
     the district courts of the United States on the basis of 
     sections 1331 or 1337 of title 28, United States Code.

     SEC. 5211. PREEMPTION.

       (a) In General.--The provisions of this part shall preempt 
     any State law to the extent such law is inconsistent with the 
     limitations contained in such provisions. The provisions of 
     this part shall not preempt any State law that provides for 
     defenses or places limitations on a person's liability in 
     addition to those contained in this part, places greater 
     limitations on the amount of attorneys' fees that can be 
     collected, or otherwise imposes greater restrictions than 
     those provided in this part.
       (b) Effect on Sovereign Immunity and Choice of Law or 
     Venue.--Nothing in this part shall be construed to--
       (1) waive or affect any defense of sovereign immunity 
     asserted by any State under any provision of law;
       (2) waive or affect any defense of sovereign immunity 
     asserted by the United States;
       (3) affect the applicability of any provision of the 
     Foreign Sovereign Immunities Act of 1976;
       (4) preempt State choice-of-law rules with respect to 
     claims brought by a foreign nation or a citizen of a foreign 
     nation; or
       (5) affect the right of any court to transfer venue or to 
     apply the law of a foreign nation or to dismiss a claim of a 
     foreign nation or of a citizen of a foreign nation on the 
     ground in inconvenient forum.

 PART 2--REQUIREMENTS FOR STATE ALTERNATIVE DISPUTE RESOLUTION SYSTEMS 
                                 (ADR)

     SEC. 5221. BASIC REQUIREMENTS.

       (a) In General.--A State's alternative dispute resolution 
     system meets the requirements of this section if the system--
       (1) applies to all medical malpractice liability claims 
     under the jurisdiction of the courts of that State;
       (2) requires that a written opinion resolving the dispute 
     be issued not later than 6 months after the date by which 
     each party against whom the claim is filed has received 
     notice of the claim (other than in exceptional cases for 
     which a longer period is required for the issuance of such an 
     opinion), and that the opinion contain--
       (A) findings of fact relating to the dispute, and
       (B) a description of the costs incurred in resolving the 
     dispute under the system (including any fees paid to the 
     individuals hearing and resolving the claim), together with 
     an appropriate assessment of the costs against any of the 
     parties;
       (3) requires individuals who hear and resolve claims under 
     the system to meet such qualifications as the State may 
     require (in accordance with regulations of the Secretary);
       (4) is approved by the State or by local governments in the 
     State;
       (5) with respect to a State system that consists of 
     multiple dispute resolution procedures--
       (A) permits the parties to a dispute to select the 
     procedure to be used for the resolution of the dispute under 
     the system, and
       (B) if the parties do not agree on the procedure to be used 
     for the resolution of the dispute, assigns a particular 
     procedure to the parties;
       (6) provides for the transmittal to the State agency 
     responsible for monitoring or disciplining health care 
     professionals and health care providers of any findings made 
     under the system that such a professional or provider 
     committed malpractice, unless, during the 90-day period 
     beginning on the date the system resolves the claim against 
     the professional or provider, the professional or provider 
     brings an action contesting the decision made under the 
     system; and
       (7) provides for the regular transmittal to the 
     Administrator for Health Care Policy and Research of 
     information on disputes resolved under the system, in a 
     manner that assures that the identity of the parties to a 
     dispute shall not be revealed.
       (b) Application of Malpractice Liability Standards to 
     Alternative Dispute Resolution.--The provisions of part 1 
     (other than section 5202) shall apply with respect to claims 
     brought under a State alternative dispute resolution system 
     or the alternative Federal system in the same manner as such 
     provisions apply with respect to medical malpractice 
     liability actions brought in the State.

     SEC. 5222. CERTIFICATION OF STATE SYSTEMS; APPLICABILITY OF 
                   ALTERNATIVE FEDERAL SYSTEM.

       (a) Certification.--
       (1) In general.--Not later than October 1 of each year 
     (beginning with 1995), the Secretary, in consultation with 
     the Attorney General, shall determine whether a State's 
     alternative dispute resolution system meets the requirements 
     of this part for the following calendar year.
       (2) Basis for certification.--The Secretary shall certify a 
     State's alternative dispute resolution system under this 
     subsection for a calendar year if the Secretary determines 
     under paragraph (1) that the system meets the requirements of 
     section 5221, including the requirement described in section 
     5204 that punitive damages awarded under the system are paid 
     to the State for the uses described in such section.
       (b) Applicability of Alternative Federal System.--
       (1) Establishment and applicability.--Not later than 
     October 1, 1995, the Secretary, in consultation with the 
     Attorney General, shall establish by rule an alternative 
     Federal ADR system for the resolution of medical malpractice 
     liability claims during a calendar year in States that do not 
     have in effect an alternative dispute resolution system 
     certified under subsection (a) for the year.
       (2) Requirements for system.--Under the alternative Federal 
     ADR system established under paragraph (1)--
       (A) paragraphs (1), (2), (6), and (7) of section 5221(a) 
     shall apply to claims brought under the system;
       (B) if the system provides for the resolution of claims 
     through arbitration, the claims brought under the system 
     shall be heard and resolved by arbitrators appointed by the 
     Secretary in consultation with the Attorney General; and
       (C) with respect to a State in which the system is in 
     effect, the Secretary may (at the State's request) modify the 
     system to take into account the existence of dispute 
     resolution procedures in the State that affect the resolution 
     of medical malpractice liability claims.
       (3) Treatment of States with alternative system in 
     effect.--If the alternative Federal ADR system established 
     under this subsection is applied with respect to a State for 
     a calendar year, the State shall make a payment to the United 
     States (at such time and in such manner as the Secretary may 
     require) in an amount equal to 110 percent of the costs 
     incurred by the United States during the year as a result of 
     the application of the system with respect to the State.

     SEC. 5223. REPORTS ON IMPLEMENTATION AND EFFECTIVENESS OF 
                   ALTERNATIVE DISPUTE RESOLUTION SYSTEMS.

       (a) In General.--Not later than 5 years after the date of 
     the enactment of this Act, the Secretary shall prepare and 
     submit to the Congress a report describing and evaluating 
     State alternative dispute resolution systems operated 
     pursuant to this part and the alternative Federal system 
     established under section 5222(b).
       (b) Contents of Report.--The Secretary shall include in the 
     report prepared and submitted under subsection (a)--
       (1) information on--
       (A) the effect of the alternative dispute resolution 
     systems on the cost of health care within each State,
       (B) the impact of such systems on the access of individuals 
     to health care within the State, and
       (C) the effect of such systems on the quality of health 
     care provided within the State; and
       (2) to the extent that such report does not provide 
     information on no-fault systems operated by States as 
     alternative dispute resolution systems pursuant to this part, 
     an analysis of the feasibility and desirability of 
     establishing a system under which medical malpractice 
     liability claims shall be resolved on a no-fault basis.

                          PART 3--DEFINITIONS

     SEC. 5231. DEFINITIONS.

       As used in this subtitle:
       (1) Alternative dispute resolution system.--The term 
     ``alternative dispute resolution system'' means a system that 
     is enacted or adopted by a State to resolve medical 
     malpractice claims other than through a medical malpractice 
     liability action.
       (2) Claimant.--The term ``claimant'' means any person who 
     brings a health care liability action and, in the case of an 
     individual who is deceased, incompetent, or a minor, the 
     person on whose behalf such an action is brought.
       (3) Clear and convincing evidence.--The term ``clear and 
     convincing evidence'' is that measure or degree of proof that 
     will produce in the mind of the trier of fact a firm belief 
     or conviction as to the truth of the allegations sought to be 
     established, except that such measure or degree of proof is 
     more than that required under preponderance of the evidence, 
     but less than that required for proof beyond a reasonable 
     doubt.
       (4) Economic damages.--The term ``economic damages'' means 
     damages paid to compensate an individual for losses for 
     hospital and other medical expenses, lost wages, lost 
     employment, and other pecuniary losses.
       (5) Health care professional.--The term ``health care 
     professional'' means any individual who provides health care 
     services in a State and who is required by State law or 
     regulation to be licensed or certified by the State to 
     provide such services in the State.
       (6) Health care provider.--The term ``health care 
     provider'' means any organization or institution that is 
     engaged in the delivery of health care services in a State 
     that is required by State law or regulation to be licensed or 
     certified by the State to engage in the delivery of such 
     services in the State.
       (7) Injury.--The term ``injury'' means any illness, 
     disease, or other harm that is the subject of a medical 
     malpractice claim.
       (8) Medical malpractice liability action.--The term 
     ``medical malpractice liability action'' means any civil 
     action brought pursuant to State law in which a plaintiff 
     alleges a medical malpractice claim against a health care 
     provider or health care professional, but does not include 
     any action in which the plaintiff's sole allegation is an 
     allegation of an intentional tort.
       (9) Medical malpractice claim.--The term ``medical 
     malpractice claim'' means any claim relating to the provision 
     of (or the failure to provide) health care services or the 
     use of a medical product, without regard to the theory of 
     liability asserted, and includes any third-party claim, 
     cross-claim, counterclaim, or contribution claim in a medical 
     malpractice liability action.
       (10) Medical product.--
       (A) In general.--The term ``medical product'' means, with 
     respect to the allegation of a claimant, a drug (as defined 
     in section 201(g)(1) of the Federal Food, Drug, and Cosmetic 
     Act (21 U.S.C. 321(g)(1)) or a medical device (as defined in 
     section 201(h) of the Federal Food, Drug, and Cosmetic Act 
     (21 U.S.C. 321(h)) if--
       (i) such drug or device was subject to premarket approval 
     under section 505, 507, or 515 of the Federal Food, Drug, and 
     Cosmetic Act (21 U.S.C. 355, 357, or 360e) or section 351 of 
     the Public Health Service Act (42 U.S.C. 262) with respect to 
     the safety of the formulation or performance of the aspect of 
     such drug or device which is the subject of the claimant's 
     allegation or the adequacy of the packaging or labeling of 
     such drug or device, and such drug or device is approved by 
     the Food and Drug Administration; or
       (ii) the drug or device is generally recognized as safe and 
     effective under regulations issued by the Secretary of Health 
     and Human Services under section 201(p) of the Federal Food, 
     Drug, and Cosmetic Act (21 U.S.C. 321(p)).
       (B) Exception in case of misrepresentation or fraud.--
     Notwithstanding subparagraph (A), the term ``medical 
     product'' shall not include any product described in such 
     subparagraph if the claimant shows that the product is 
     approved by the Food and Drug Administration for marketing as 
     a result of withheld information, misrepresentation, or an 
     illegal payment by manufacturer of the product.
       (11) Noneconomic damages.--The term ``noneconomic damages'' 
     means damages paid to compensate an individual for losses for 
     physical and emotional pain, suffering, inconvenience, 
     physical impairment, mental anguish, disfigurement, loss of 
     enjoyment of life, loss of consortium, and other nonpecuniary 
     losses, but does not include punitive damages.
       (12) Punitive damages.--The term ``punitive damages'' means 
     compensation, in addition to compensation for actual harm 
     suffered, that is awarded for the purpose of punishing a 
     person for conduct deemed to be malicious, wanton, willful, 
     or excessively reckless.
       (13) Secretary.--The term ``Secretary'' means the Secretary 
     of Health and Human Services.
       (14) State.--The term ``State'' means each of the several 
     States, the District of Columbia, the Commonwealth of Puerto 
     Rico, the Virgin Islands, and Guam.
   Subtitle D--Paperwork Reduction and Administrative Simplification

     SEC. 5301. PREEMPTION OF STATE ``QUILL AND PEN'' LAWS.

       (a) In General.--Any provision of State law that requires 
     medical or health insurance records (including billing 
     information) to be maintained in written, rather than 
     electronic, form is deemed to be satisfied if the records are 
     maintained in an electronic form that meets standards 
     established by the Secretary under subsection (b).
       (b) Secretarial Authority.--Not later than 1 year after the 
     date of the enactment of this Act, the Secretary shall issue 
     regulations to carry out subsection (a). The regulations 
     shall provide for an electronic substitute that is in the 
     form of a unique identifier (assigned to each authorized 
     individual) that serves the functional equivalent of a 
     signature. The regulations may provide for such exceptions to 
     subsection (a) as the Secretary determines to be necessary to 
     prevent fraud and abuse, to prevent the illegal distribution 
     of controlled substances, and in such other cases as the 
     Secretary deems appropriate.
       (c) Effective Date.--Subsection (a) shall take effect on 
     the first day of the first month that begins more than 30 
     days after the date the Secretary issues the regulations 
     referred to in subsection (b).

     SEC. 5302. CONFIDENTIALITY OF ELECTRONIC HEALTH CARE 
                   INFORMATION.

       (a) Promulgation of Requirements.--
       (1) In general.--The Secretary shall promulgate, and may 
     modify from time to time, requirements to facilitate and 
     ensure the uniform, confidential treatment of individually 
     identifiable health information in electronic environments.
       (2) Definition.--For purposes of this subtitle, the term 
     ``individually identifiable health information'' means 
     information that--
       (A) relates in any way to--
       (i) the past, present, or future physical or mental health 
     or condition or functional status of an individual;
       (ii) the provision of health care to an individual; or
       (iii) payment for the provision of such care; and
       (B) identifies the individual or with respect to which 
     there is a reasonable basis to believe that the information 
     can be used to identify the individual.
       (3) Items to be included.--The requirements under this 
     subsection--
       (A) shall provide for the preservation of confidentiality 
     and privacy rights during the processes of electronic health 
     care claims processing and payment;
       (B) shall apply to the collection, storage, handling, and 
     transmission (including initial and subsequent disclosures) 
     of individually identifiable health care data in electronic 
     form by all carriers, group health plans, and multiple 
     employer welfare arrangements providing health coverage, 
     public third-party payers, providers, and all other entities 
     involved in the collection, storage, handling, or 
     transmission of such information;
       (C) may not apply to public health reporting required under 
     State or Federal law;
       (D) shall delineate protocols for securing electronic 
     storage, processing, and transmission of individually 
     identifiable health information;
       (E) shall specify fair information practices that--
       (i) create a proper balance between what individually 
     identifiable health information an individual is expected to 
     divulge to a record-keeping organization and what information 
     the individual may obtain from such an organization;
       (ii) minimize the extent to which individually identifiable 
     health information is used against an individual; and
       (iii) create and define obligations respecting the uses and 
     disclosures that may be made of such information;
       (F) shall require publication of a list of data banks 
     containing individually identifiable health information;
       (G) shall establish appropriate protections for highly 
     sensitive individually identifiable health information (such 
     as data concerning mental health, substance abuse, and 
     communicable and genetic diseases);
       (H) shall encourage the use of alternative dispute 
     resolution mechanisms (where appropriate) to resolve disputes 
     concerning the use and disclosure of individually 
     identifiable health information;
       (I) shall provide for the deletion of individually 
     identifiable health information that is no longer needed to 
     carry out the purpose for which the information was 
     collected, or a related purpose; and
       (J) shall specify an effective date for the requirements.
       (4) Consultation with working group.--In promulgating and 
     modifying requirements under this subsection, the Secretary 
     shall consult with a working group of knowledgeable 
     individuals representing all interested parties (including 
     carriers, group health plans, and multiple employer welfare 
     arrangements, public third-party payers, providers, 
     consumers, employers, information managers, and technical 
     experts).
       (5) Deadline.--The Secretary shall first promulgate 
     requirements under this subsection by not later than 12 
     months after the date of the enactment of this Act.
       (b) Application of Requirements.--
       (1) State enforcement of similar requirements.--The 
     requirements promulgated under subsection (a) shall not apply 
     to individually identifiable health information in a State 
     if--
       (A) the State has applied to the Secretary for a 
     determination that the State has in effect a law that 
     provides for the application of requirements with respect to 
     such information (and enforcement provisions with respect to 
     such requirements) consistent with the requirements 
     promulgated under subsection (a) and the enforcement 
     provisions of subsection (d); and
       (B) the Secretary determines that the State has such a law 
     in effect.
       (2) Application to current information.--The Secretary 
     shall specify the extent to which (and manner in which) the 
     requirements promulgated under subsection (a) shall apply to 
     individually identifiable health information created or 
     received before the effective date of the requirements.
       (c) Defense for Proper Disclosures.--An individual or 
     entity that establishes that the individual or entity has 
     disclosed individually identifiable health information in 
     accordance with the requirements promulgated under subsection 
     (a) has established a defense in an action brought under 
     subsection (d) for improper disclosure of such information.
       (d) Penalties for Violations.--An individual or entity that 
     receives, stores, handles, transmits, or discloses 
     individually identifiable health information in violation of 
     the requirements promulgated under this section shall be 
     liable in a civil action to any person aggrieved by such 
     violation for compensatory damages, appropriate equitable 
     relief, and attorneys' fees (if appropriate), in accordance 
     with regulations of the Secretary.

     SEC. 5303. STANDARDIZATION OF ELECTRONIC RECEIPT AND 
                   TRANSMISSION OF CLAIMS AND ELIGIBILITY 
                   INFORMATION.

       (a) Goals.--The Secretary shall establish national goals, 
     and time frames for such goals, respecting the progress to be 
     made by the health care industry in eliminating unnecessary 
     paperwork, and achieving appropriate standardization, 
     consistent with the requirements promulgated under section 
     5302, in the areas of electronic--
       (A) receipt and transmission of health care claims; and
       (B) verification of eligibility for health coverage.
       (b) Contingent Requirements.--If the Secretary determines 
     that the health care industry has failed to meet the goals 
     established under subsection (a) in the time frames 
     established under such subsection, the Secretary shall 
     promulgate (and may, from time to time, modify) standards and 
     requirements to achieve such goals.
       (c) Consultation.--The Secretary shall conduct activities 
     under this section in consultation with the American National 
     Standards Institute, carriers, group health plans, and 
     multiple employer welfare arrangements providing health 
     coverage, public third-party payers, providers, and others.

     SEC. 5304. USE OF UNIFORM HEALTH CLAIMS FORMS AND 
                   IDENTIFICATION NUMBERS.

       (a) Goals.--The Secretary shall establish national goals, 
     and time frames for such goals, respecting the progress to be 
     made by the health care industry in achieving uniformity--
       (1) in the format and content of basic paper claims forms 
     for health care coverage;
       (2) in the use of common identification numbers for 
     individuals, and common identification numbers for providers, 
     to be used for all health-related purposes.
       (b) Contingent Requirements.--If the Secretary determines 
     that the health care industry has failed to meet the goals 
     established under subsection (a) in the time frames 
     established by the Secretary under such subsection, the 
     Secretary shall promulgate (and may, from time to time, 
     modify) standards and requirements to achieve such goals.
       (c) Consultation.--The Secretary shall conduct activities 
     under this section in consultation with the Workgroup for 
     Electronic Data Interchange and with carriers, group health 
     plans, and multiple employer welfare arrangements providing 
     health coverage, public third-party payers, providers, and 
     others.

     SEC. 5305. PRIORITY AMONG CARRIERS, GROUP HEALTH PLANS, AND 
                   MULTIPLE EMPLOYER WELFARE ARRANGEMENTS.

       (a) Goals.--The Secretary shall establish national goals, 
     and time frames for such goals, respecting the progress to be 
     made by the health care industry in achieving uniformity in 
     the rules for determining the liability of carriers, group 
     health plans, and multiple employer welfare arrangements when 
     health benefits with respect to an individual are payable by 
     2 or more such parties.
       (b) Contingent Requirements.--If the Secretary determines 
     that the health care industry has failed to meet the goals 
     established under subsection (a) in the time frames 
     established by the Secretary under such subsection, the 
     Secretary shall promulgate (and may, from time to time, 
     modify) rules described in such subsection.
       (c) Consultation.--The Secretary shall conduct activities 
     under this section in consultation with carriers, group 
     health plans, and multiple employer welfare arrangements.

     SEC. 5306. EXCHANGE OF INFORMATION AMONG CARRIERS, GROUP 
                   HEALTH PLANS, AND MULTIPLE EMPLOYER WELFARE 
                   ARRANGEMENTS.

       (a) Goals.--The Secretary shall establish national goals, 
     and time frames for such goals, respecting the progress to be 
     made by the health care industry in achieving uniformity with 
     respect to the exchange of information among carriers, group 
     health plans, and multiple employer welfare arrangements when 
     health benefits with respect to an individual may be payable 
     by 2 or more such parties.
       (b) Contingent Requirements.--If the Secretary determines 
     that the health care industry has failed to meet the goals 
     established under subsection (a) in the time frames 
     established by the Secretary under such subsection, the 
     Secretary shall promulgate (and may, from time to time, 
     modify) requirements concerning the exchange among carriers, 
     group health plans, and multiple employer welfare 
     arrangements (and annual updating) of appropriate information 
     (which may include requirements for the use of common 
     identification numbers and for the listing of all individuals 
     having health care coverage).
       (c) Consultation.--The Secretary shall conduct activities 
     under this section in consultation with carriers, group 
     health plans, and multiple employer welfare arrangements.

     SEC. 5307. FAILURE TO SATISFY CERTAIN HEALTH PLAN 
                   REQUIREMENTS.

       (a) In General.--Chapter 47 of the Internal Revenue Code of 
     1986 (relating to taxes on group health plans), as amended by 
     section 1002(c)(1), is amended by adding at the end the 
     following new section:

     ``SEC. 5000B. FAILURE TO SATISFY CERTAIN HEALTH PLAN 
                   REQUIREMENTS.

       ``(a) General Rule.--There is hereby imposed, on any 
     administrator of a health plan, a tax on any failure to 
     comply with an applicable requirement of sections 5303 
     through 5306 of the Bipartisan Health Care Reform Act of 
     1994.
       ``(b) Amount of Tax.--The amount of tax imposed by 
     subsection (a) which an administrator fails to comply with a 
     requirement described in that subsection shall be equal to 
     $100 for each such failure.
       ``(c) Limitations on Tax.--
       ``(1) Tax not to apply where failure not discovered 
     exercising reasonable diligence.--No tax shall be imposed by 
     subsection (a) with respect to any failure for which it is 
     established to the satisfaction of the Secretary that the 
     person liable for tax did not know, and by exercising 
     reasonable diligence would not have known, that the failure 
     existed.
       ``(2) Tax not to apply to failures corrected within 30 
     days.--No tax shall be imposed by subsection (a) on any 
     failure if--
       ``(A) the failure was due to reasonable cause and not to 
     willful neglect, and
       ``(B) the failure is corrected during the 30-day period 
     beginning on the 1st date the person liable for the tax knew, 
     or by exercising reasonable diligence would have known, that 
     the failure existed.
       ``(3) Waiver by secretary.--In the case of a failure which 
     is due to reasonable cause and not to willful neglect, the 
     Secretary may waive part or all of the tax imposed by 
     subsection (a) to the extent that the payment of that tax 
     would be excessive relative to the failure involved.''
       (b) Nondeductibility of Tax.--Paragraph (6) of section 
     275(a) of that Code (relating to nondeductibility of certain 
     taxes) is amended by inserting ``47,'' after ``46,''.
       (c) Clerical Amendments.--The table of sections for chapter 
     47 of that Code, as amended by section 1002(c)(2), is amended 
     by adding at the end the following new item:

``5000B. Failure to satisfy certain health plan requirements.''.

     SEC. 5308. DEFINITION.

       For purposes of this subtitle, the term ``provider'' means 
     a physician, hospital, pharmacy, laboratory, or other person 
     licensed or otherwise authorized under applicable State laws 
     to furnish health care items or services.
                         Subtitle E--Antitrust

     SEC. 5401. PUBLICATION OF ANTITRUST GUIDELINES ON ACTIVITIES 
                   OF HEALTH PLANS.

       (a) In General.--The Attorney General shall provide for the 
     development and publication of explicit guidelines on the 
     application of antitrust laws to the activities of health 
     plans. The guidelines shall be designed to facilitate 
     development and operation of plans, consistent with the 
     antitrust laws.
       (b) Review Process.--The Attorney General shall establish a 
     review process under which the administrator or sponsor of a 
     health plan (or organization that proposes to administer or 
     sponsor a health plan) may submit a request to the Attorney 
     General to obtain a prompt opinion (but in no event later 
     than 90 days after the Attorney General receives the request) 
     from the Department of Justice on the plan's conformity with 
     the Federal antitrust laws.
       (c) Definitions.--In this section--
       (1) the term ``antitrust laws''--
       (A) has the meaning given it in subsection (a) of the first 
     section of the Clayton Act (15 U.S.C. 12(a)), except that 
     such term includes section 5 of the Federal Trade Commission 
     Act (15 U.S.C. 45) to the extent such section applies to 
     unfair methods of competition, and
       (B) includes any State law similar to the laws referred to 
     in subparagraph (A); and
       (2) the term ``health plan'' means any contract or 
     arrangement under which an entity bears all or part of the 
     cost of providing health care items and services, including a 
     hospital or medical expense incurred policy or certificate, 
     hospital or medical service plan contract, or health 
     maintenance subscriber contract, but does not include--
       (A) coverage only for accident, dental, vision, disability, 
     or long term care, medicare supplemental health insurance, or 
     any combination thereof,
       (B) coverage issued as a supplement to liability insurance,
       (C) workers' compensation or similar insurance, or
       (D) automobile medical-payment insurance.

     SEC. 5402. ISSUANCE OF HEALTH CARE CERTIFICATES OF PUBLIC 
                   ADVANTAGE.

       (a) Issuance and Effect of Certificate.--The Attorney 
     General, after consultation with the Secretary, shall issue 
     in accordance with this section a certificate of public 
     advantage to each eligible health care collaborative activity 
     that complies with the requirements in effect under this 
     section on or after the expiration of the 1-year period that 
     begins on the date of the enactment of this Act (without 
     regard to whether or not the Attorney General has promulgated 
     regulations to carry out this section by such date). Such 
     activity, and the parties to such activity, shall not be 
     liable under any of the antitrust laws for conduct described 
     in such certificate and engaged in by such activity if such 
     conduct occurs while such certificate is in effect.
       (b) Requirements Applicable to Issuance of Certificates.--
       (1) Standards to be met.--The Attorney General shall issue 
     a certificate to an eligible health care collaborative 
     activity if the Attorney General finds that--
       (A) the benefits that are likely to result from carrying 
     out the activity outweigh the reduction in competition (if 
     any) that is likely to result from the activity, and
       (B) such reduction in competition is necessary to obtain 
     such benefits.
       (2) Factors to be considered.--
       (A) Weighing of benefits against reduction in 
     competition.--For purposes of making the finding described in 
     paragraph (1)(A), the Attorney General shall consider whether 
     the activity is likely --
       (i) to maintain or to increase the quality of health care 
     by providing new services not currently offered in the 
     relevant market,
       (ii) to increase access to health care,
       (iii) to achieve cost efficiencies that will be passed on 
     to health care consumers, such as economies of scale, reduced 
     transaction costs, and reduced administrative costs, that 
     cannot be achieved by the provision of available services and 
     facilities in the relevant market,
       (iv) to preserve the operation of health care facilities 
     located in underserved geographical areas,
       (v) to improve utilization of health care resources, and
       (vi) to reduce inefficient health care resource 
     duplication.
       (B) Necessity of reduction in competition.--For purposes of 
     making the finding described in paragraph (1)(B), the 
     Attorney General shall consider--
       (i) the ability of the providers of health care services 
     that are (or likely to be) affected by the health care 
     collaborative activity and the entities responsible for 
     making payments to such providers to negotiate societally 
     optimal payment and service arrangements,
       (ii) the effects of the health care collaborative activity 
     on premiums and other charges imposed by the entities 
     described in clause (i), and
       (iii) the availability of equally efficient, less 
     restrictive alternatives to achieve the benefits that are 
     intended to be achieved by carrying out the activity.
       (c) Establishment of Criteria and Procedures.--Subject to 
     subsections (d) and (e), not later than 1 year after the date 
     of the enactment of this Act, the Attorney General and the 
     Secretary shall establish jointly by rule the criteria and 
     procedures applicable to the issuance of certificates under 
     subsection (a). The rules shall specify the form and content 
     of the application to be submitted to the Attorney General to 
     request a certificate, the information required to be 
     submitted in support of such application, the procedures 
     applicable to denying and to revoking a certificate, and the 
     procedures applicable to the administrative appeal (if such 
     appeal is authorized by rule) of the denial and the 
     revocation of a certificate. Such information may include the 
     terms of the health care collaborative activity (in the case 
     of an activity in existence as of the time of the 
     application) and implementation plan for the collaborative 
     activity.
       (d) Eligible Health Care Collaborative Activity.--To be an 
     eligible health care collaborative activity for purposes of 
     this section, a health care collaborative activity shall 
     submit to the Attorney General an application that complies 
     with the rules in effect under subsection (c) and that 
     includes--
       (1) an agreement by the parties to the activity that the 
     activity will not foreclose competition by entering into 
     contracts that prevent health care providers from providing 
     health care in competition with the activity,
       (2) an agreement that the activity will submit to the 
     Attorney General annually a report that describes the 
     operations of the activity and information regarding the 
     impact of the activity on health care and on competition in 
     health care, and
       (3) an agreement that the parties to the activity will 
     notify the Attorney General and the Secretary of the 
     termination of the activity not later than 30 days after such 
     termination occurs.
       (e) Review of Applications for Certificates.--Not later 
     than 90 days after an eligible health care collaborative 
     activity submits to the Attorney General an application that 
     complies with the rules in effect under subsection (c) and 
     with subsection (d), the Attorney General shall issue or deny 
     the issuance of such certificate. If, before the expiration 
     of such 90-day period, the Attorney General may extend the 
     time for issuance for good cause.
       (f) Revocation of Certificate.--Whenever the Attorney 
     General finds that a health care collaborative activity with 
     respect to which a certificate is in effect does not meet the 
     standards specified in subsection (b), the Attorney General 
     shall revoke such certificate.
       (g) Written Reasons; Judicial Review.--
       (1) Denial and revocation of certificates.--If the Attorney 
     General denies an application for a certificate or revokes a 
     certificate, the Attorney General shall include in the notice 
     of denial or revocation a statement of the reasons relied 
     upon for the denial or revocation of such certificate.
       (2) Judicial review.--
       (A) After administrative proceeding.--(i) If the Attorney 
     General denies an application submitted or revokes a 
     certificate issued under this section after an opportunity 
     for hearing on the record, then any party to the health care 
     collaborative activity involved may commence a civil action, 
     not later than 60 days after receiving notice of the denial 
     or revocation, in an appropriate district court of the United 
     States for review of the record of such denial or revocation.
       (ii) As part of the Attorney General's answer, the Attorney 
     General shall file in such court a certified copy of the 
     record on which such denial or revocation is based. The 
     findings of fact of the Attorney General may be set aside 
     only if found to be unsupported by substantial evidence in 
     such record taken as a whole.
       (B) Denial or revocation without administrative 
     proceeding.--If the Attorney General denies an application 
     submitted or revokes a certificate issued under this section 
     without an opportunity for hearing on the record, then any 
     party to the health care collaborative activity involved may 
     commence a civil action, not later than 60 days after 
     receiving notice of the denial or revocation, in an 
     appropriate district court of the United States for de novo 
     review of such denial or revocation.
       (h) Exemption.--A person shall not be liable under any of 
     the antitrust laws for conduct necessary--
       (1) to prepare, agree to prepare, or attempt to agree to 
     prepare an application to request a certificate under this 
     section, or
       (2) to attempt to enter into any health care collaborative 
     activity with respect to which such a certificate is in 
     effect.
       (i) Definitions.--In this section:
       (1) The term ``antitrust laws'' has the meaning given it in 
     section 5401(c)(1).
       (2) The term ``certificate'' means a certificate of public 
     advantage authorized to be issued under subsection (a).
       (3) The term ``health care collaborative activity'' means 
     an agreement (whether existing or proposed) between 2 or more 
     providers of health care services that is entered into solely 
     for the purpose of sharing in the provision and coordination 
     of health care services and that involves substantial 
     integration and financial risk-sharing between the parties, 
     but does not include the exchanging of information, the 
     entering into of any agreement, or the engagement in any 
     other conduct that is not reasonably required to carry out 
     such agreement.
       (4) The term ``health care services'' includes services 
     related to the delivery or administration of health care 
     services.
       (5) The term ``liable'' means liable for any civil or 
     criminal violation of the antitrust laws.
       (6) The term ``provider of health care services'' means any 
     individual or entity that is engaged in the delivery of 
     health care services in a State and that is required by State 
     law or regulation to be licensed or certified by the State to 
     engage in the delivery of such services in the State.

     SEC. 5403. STUDY OF IMPACT ON COMPETITION.

       The Attorney General, in consultation with the Chairman of 
     the Federal Trade Commission, annually shall submit to the 
     Congress a report as part of the annual budget oversight 
     proceedings concerning the Antitrust Division of the 
     Department of Justice. The report shall enable the Congress 
     to determine how enforcement of antitrust laws is affecting 
     the formation of efficient, cost-saving joint ventures and if 
     the certificate of public advantage procedure set forth in 
     section 5402 has resulted in undesirable reduction in 
     competition in the health care marketplace. The report shall 
     include an evaluation of the factors set forth in paragraphs 
     (2)(A) and (2)(B) of section 5402(b).
                      Subtitle F--Fraud and Abuse

PART 1--ESTABLISHMENT OF ALL-PAYER HEALTH CARE FRAUD AND ABUSE CONTROL 
                                PROGRAM

     SEC. 5501. ALL-PAYER HEALTH CARE FRAUD AND ABUSE CONTROL 
                   PROGRAM.

       (a) In General.--Not later than January 1, 1996, the 
     Attorney General shall establish a program--
       (1) to coordinate Federal, State, and local law enforcement 
     programs to control fraud and abuse with respect to the 
     delivery of and payment for health care in the United States,
       (2) to conduct investigations, audits, evaluations, and 
     inspections relating to the delivery of and payment for 
     health care in the United States, and
       (3) in consultation with the Inspector General of the 
     Department of Health and Human Services, to facilitate the 
     enforcement of the provisions of sections 1128, 1128A, and 
     1128B of the Social Security Act and other statutes 
     applicable to health care fraud and abuse.
       (b) Coordination With Law Enforcement Agencies.--In 
     carrying out the program under subsection (a), the Attorney 
     General shall consult with, and arrange for the sharing of 
     data and resources with Federal, State and local law 
     enforcement agencies, State Medicaid Fraud Control Units, and 
     State agencies responsible for the licensing and 
     certification of health care providers.
       (c) Coordination With Third Party Insurers.--In carrying 
     out the program established under subsection (a), the 
     Attorney General shall consult with, and arrange for the 
     sharing of data with representatives of private sponsors of 
     health benefit plans and other providers of health insurance.
       (d) Regulations.--
       (1) In general.--The Attorney General shall by regulation 
     establish standards to carry out the program under subsection 
     (a).
       (2) Information standards.--
       (A) In general.--Such standards shall include standards 
     relating to the furnishing of information by health insurers 
     (including self-insured health benefit plans), providers, and 
     others to enable the Attorney General to carry out the 
     program (including coordination with law enforcement agencies 
     under subsection (b) and third party insurers under 
     subsection (c)).
       (B) Confidentiality.--Such standards shall include 
     procedures to assure that such information is provided and 
     utilized in a manner that protects the confidentiality of the 
     information and the privacy of individuals receiving health 
     care services.
       (C) Qualified immunity for providing information.--The 
     provisions of section 1157(a) of the Social Security Act 
     (relating to limitation on liability) shall apply to a person 
     providing information to the Attorney General under the 
     program under this section, with respect to the Attorney 
     General's performance of duties under the program, in the 
     same manner as such section applies to information provided 
     to organizations with a contract under part B of title XI of 
     such Act, with respect to the performance of such a contract.

     SEC. 5502. AUTHORIZATION OF ADDITIONAL APPROPRIATIONS FOR 
                   INVESTIGATORS AND OTHER PERSONNEL.

       In addition to any other amounts authorized to be 
     appropriated to the Attorney General for health care anti-
     fraud and abuse activities for a fiscal year, there are 
     authorized to be appropriated such sums as may be necessary 
     to enable the Attorney General to conduct investigations of 
     allegations of health care fraud and otherwise carry out the 
     program established under section 5501 in a fiscal year.

     SEC. 5503. ESTABLISHMENT OF ANTI-FRAUD AND ABUSE TRUST FUND.

       (a) Establishment.--There is hereby created on the books of 
     the Treasury of the United States a trust fund to be known as 
     the ``Anti-Fraud and Abuse Trust Fund'' (in this section 
     referred to as the ``Trust Fund''). The Trust Fund shall 
     consist of such amounts as may be deposited in, or 
     appropriated to, such Trust Fund as provided in this part and 
     section 1128A(f)(3) of the Social Security Act.
       (b) Management.--
       (1) In general.--The Trust Fund shall be managed by the 
     Attorney General through a Managing Trustee designated by the 
     Attorney General.
       (2) Investment of funds.--It shall be the duty of the 
     Managing Trustee to invest such portion of the Trust Fund as 
     is not, in the trustee's judgment, required to meet current 
     withdrawals. Such investments may be made only in interest-
     bearing obligations of the United States or in obligations 
     guaranteed as to both principal and interest by the United 
     States. For such purpose such obligations may be acquired on 
     original issue at the issue price, or by purchase of 
     outstanding obligations at market price. The purposes for 
     which obligations of the United States may be issued under 
     chapter 31 of title 31, United States Code, are hereby 
     extended to authorize the issuance at par of public-debt 
     obligations for purchase by the Trust Fund. Such obligations 
     issued for purchase by the Trust Fund shall have maturities 
     fixed with due regard for the needs of the Trust Fund and 
     shall bear interest at a rate equal to the average market 
     yield (computed by the Managing Trustee on the basis of 
     market quotations as of the end of the calendar month next 
     preceding the date of such issue) on all marketable interest-
     bearing obligations of the United States then forming a part 
     of the public debt which are not due or callable until after 
     the expiration of 4 years from the end of such calendar 
     month, except that where such average is not a multiple of 
     \1/8\ of 1 percent, the rate of interest on such obligations 
     shall be the multiple of \1/8\ of 1 percent nearest such 
     market yield. The Managing Trustee may purchase other 
     interest-bearing obligations of the United States or 
     obligations guaranteed as to both principal and interest by 
     the United States, on original issue or at the market price, 
     only where the Trustee determines that the purchase of such 
     other obligations is in the public interest.
       (3) Any obligations acquired by the Trust Fund (except 
     public-debt obligations issued exclusively to the Trust Fund) 
     may be sold by the Managing Trustee at the market price, and 
     such public-debt obligations may be redeemed at par plus 
     accrued interest.
       (4) The interest on, and the proceeds from the sale or 
     redemption of, any obligations held in the Trust Fund shall 
     be credited to and form a part of the Trust Fund.
       (5) The receipts and disbursements of the Attorney General 
     in the discharge of the functions of the Attorney General 
     shall not be included in the totals of the budget of the 
     United States Government. For purposes of part C of the 
     Balanced Budget and Emergency Deficit Control Act of 1985, 
     the Attorney General and the Trust Fund shall be treated in 
     the same manner as the Federal Retirement Thrift Investment 
     Board and the Thrift Savings Fund, respectively. The United 
     States is not liable for any obligation or liability incurred 
     by the Trust Fund.
       (c) Use of Funds.--Of the amounts in the Trust Fund--
       (1) not less than 60 percent shall be used to support 
     educational activities to prevent the occurrence of 
     violations of anti-fraud and abuse laws, including the 
     issuance of advisory opinions under section 1129 and 1877(i) 
     of the Social Security Act (as added by part 4) and fraud 
     alerts, seminars for providers, and program updates; and
       (2) any amounts remaining after use for activities under 
     paragraph (1) shall be used to assist the Attorney General in 
     carrying out the all-payor fraud and abuse control program 
     established under section 5501(a) in the fiscal year 
     involved.
       (d) Deposit of Federal Health Anti-Fraud and Abuse 
     Penalties Into Trust Fund.--Section 1128A(f)(3) of the Social 
     Security Act (42 U.S.C. 1320a-7a(f)(3)) is amended by 
     striking ``as miscellaneous receipts of the Treasury of the 
     United States'' and inserting ``in the Anti-Fraud and Abuse 
     Trust Fund established under section 5503(a) of the 
     Bipartisan Health Care Reform Act of 1994''.
       (e) Use of Federal Health Anti-Fraud and Abuse Penalties to 
     Repay Beneficiaries for Cost-Sharing.--Section 1128A(f) of 
     the Social Security Act (42 U.S.C. 1320a-7a(f)) is amended in 
     the matter preceding paragraph (1) by striking ``Secretary 
     and disposed of as follows:'' and inserting the following: 
     ``Secretary. If the person against whom such a penalty or 
     assessment was assessed collected a payment from an 
     individual for providing to the individual the service that 
     is the subject of the penalty or assessment, the Secretary 
     shall pay a portion of the amount recovered to the individual 
     in the nature of restitution in an amount equal to the 
     payment so collected. The Secretary shall dispose of any 
     remaining amounts recovered under this section as follows:''.

       PART 2--REVISIONS TO CURRENT SANCTIONS FOR FRAUD AND ABUSE

     SEC. 5511. MANDATORY EXCLUSION FROM PARTICIPATION IN MEDICARE 
                   AND STATE HEALTH CARE PROGRAMS.

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

     SEC. 5512. ESTABLISHMENT OF MINIMUM PERIOD OF EXCLUSION FOR 
                   CERTAIN INDIVIDUALS AND ENTITIES SUBJECT TO 
                   PERMISSIVE EXCLUSION FROM MEDICARE AND STATE 
                   HEALTH CARE PROGRAMS.

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

     SEC. 5513. REVISIONS TO CRIMINAL PENALTIES.

       (a) Clarification of Discount Exception to Anti-Kickback 
     Provisions.--Section 1128B(b)(3)(A) of the Social Security 
     Act (42 U.S.C. 1320a-7b(b)(3)(A)) is amended--
       (1) by inserting ``(regardless of its timing or 
     availability)'' after ``in price''; and
       (2) by striking ``program;'' and inserting ``program and is 
     not paid in the form of currency or coin;''.
       (b) Exemption From Anti-Kickback Penalties for Certain 
     Managed Care Arrangements.--Section 1128B(b)(3) of such Act 
     (42 U.S.C. 1320a-7b(b)(3)) is amended--
       (1) by striking ``and'' at the end of subparagraph (D);
       (2) by striking the period at the end of subparagraph (E) 
     and inserting ``; and''; and
       (3) by adding at the end the following new subparagraph:
       ``(F) any reduction in cost sharing or increased benefits 
     given to an individual, any amounts paid to a provider for an 
     item or service furnished to an individual, or any discount 
     or reduction in price given by the provider for such an item 
     or service, if--
       ``(A) the item or service is provided through an 
     organization described in section 1877(b)(3), or
       ``(B) the item or service is provided through such an 
     organization on behalf of another entity (including but not 
     limited to a self-insured employer or indemnity plan) that 
     assumes financial risk for the provision of the item or 
     service.''.
       (c) Exemption From Anti-Kickback Penalties for Certain 
     Protected Financial Relationships.--Section 1128B(b)(3) of 
     such Act (42 U.S.C. 1320a-7b(b)(3)), as amended by subsection 
     (b), is further amended--
       (1) by striking ``and'' at the end of subparagraph (E);
       (2) by striking the period at the end of subparagraph (F) 
     and inserting ``; and''; and
       (3) by adding at the end the following new subparagraph:
       ``(G) any amount in a financial relationship of a physician 
     (or an immediate family member of such physician) with an 
     entity specified in section 1877(a)(2), if section 1877(a)(1) 
     does not apply to that amount or financial relationship.''.
       (d) Exemption From Anti-Kickback Penalties for Certain 
     Collaborative Efforts That Benefit Medically Underserved 
     Persons.--
       (1) In general.--Section 1128B(b)(3) of such Act (42 U.S.C. 
     1320a-7b(b)(3)), as amended by subsections (b) and (c), is 
     further amended--
       (A) by striking ``and'' at the end of subparagraph (F);
       (B) by striking the period at the end of subparagraph (G) 
     and inserting ``; and''; and
       (C) by adding at the end the following new subparagraph:
       ``(F) any remuneration paid by or to a recipient or 
     subrecipient of Federal grant funds under or in connection 
     with an arrangement for the procurement of goods or services 
     by the recipient or subrecipient, the referral of patients, 
     or the lease or purchase of space or equipment, if--
       ``(i) the arrangement is in writing and signed by the 
     parties;
       ``(ii) the arrangement will result in the savings of 
     Federal grant funds or increased revenues to the recipient or 
     subrecipient that will be used to increase the availability 
     or accessibility of services to a medically underserved 
     population served by the recipient or subrecipient or an 
     improvement in the quality of services to such population, 
     except that the recipient or subrecipient may seek a prior 
     determination from the Public Health Service that this 
     requirement is met and, if the recipient or subrecipient does 
     so, Public Health Service approval shall be conclusive and 
     binding on the Federal Government;
       ``(iii) the arrangement will not result in private 
     inurement to any current employees or members of the Board of 
     Directors of the recipient or subrecipient, or to agents of 
     the recipient or subrecipient who were involved in 
     recommending or negotiating the arrangement;
       ``(iv) with respect to an arrangement under which a 
     recipient or subrecipient is procuring goods or services, the 
     provider of the goods or services is the only provider able 
     to supply such goods or services, or the recipient or 
     subrecipient has engaged in a competitive process to procure 
     the goods or services that meets the requirements for 
     competition under Federal grant awards;
       ``(v) with respect to an arrangement for a referral of 
     patients, the arrangement will assure that all patients 
     covered or affected by the arrangement are advised that they 
     may request a referral to any person or entity of their 
     choosing, subject to appropriate contractual limitations 
     under which the recipient or subrecipient may operate as a 
     health plan or as a contract health plan provider and such 
     limitations as the patient may be under as an enrollee of a 
     health plan;
       ``(vi) with respect to an arrangement for a referral of 
     patients, the arrangement will not interfere with the 
     discretion of health professionals to refer patients in a 
     manner they believe will most appropriately deal with a 
     patient's particular circumstances, subject to appropriate 
     contractual limitations under which the recipient or 
     subrecipient may operate as a health plan or as a contract 
     health plan provider and such limitations as the patient may 
     be under as an enrollee of a health plan; and
       ``(vii) with respect to an arrangement that does not meet 
     the requirements of any of the preceding clauses, the 
     recipient or subrecipient of Federal grant funds involved has 
     applied to the Secretary for approval of the arrangement and 
     the Secretary, after consultation with the Inspector General 
     of the Department of Health and Human Services, has approved 
     the arrangement based upon a finding that the arrangement 
     will produce a substantial benefit to a medically underserved 
     population that outweighs the arrangement's failure to fully 
     satisfy all of the above requirements.

     In this subparagraph, a `recipient' means a public or 
     nonprofit private entity that receives a grant or cooperative 
     agreement under the Public Health Service Act or title V, and 
     a `subrecipient' means a public or nonprofit private entity 
     that performs substantive work under a grant or cooperative 
     agreement under the Public Health Service Act or title V to a 
     recipient.''.
       (2) Effective date.--The amendments made by paragraph (1) 
     shall take effect after the expiration of the 6-month period 
     that begins on the date of the enactment of this Act.

     SEC. 5515. REVISIONS TO LIMITATIONS ON PHYSICIAN SELF-
                   REFERRAL.

       (a) Clarification of Coverage of Radiology or Diagnostic 
     Services.--Section 1877(h)(6) of the Social Security Act (42 
     U.S.C. 1395nn(h)(6)) is amended by striking subparagraph (D).
       (b) New Exception for Shared Facility Services.--Section 
     1877(b) of such Act (42 U.S.C. 1395nn(b)) is amended--
       (1) by redesignating paragraph (4) as paragraph (5); and
       (2) by inserting after paragraph (3) the following new 
     paragraph:
       ``(4) Shared facility services.--
       ``(A) In general.--In the case of a shared facility service 
     of a shared facility--
       ``(i) that is furnished--

       ``(I) personally by the referring physician who is a shared 
     facility physician or personally by an individual directly 
     employed by such a physician,
       ``(II) by a shared facility in a building in which the 
     referring physician furnishes substantially all of the 
     services of the physician that are unrelated to the 
     furnishing of shared facility services, and
       ``(III) to a patient of a shared facility physician; and

       ``(ii) that is billed by the referring physician.
       ``(B) Shared facility related definitions.--
       ``(i) Shared facility service.--The term `shared facility 
     service' means, with respect to a shared facility, a 
     designated health service furnished by the facility to 
     patients of shared facility physicians.
       ``(ii) Shared facility.--The term `shared facility' means 
     an entity that furnishes shared facility services under a 
     shared facility arrangement.
       ``(iii) Shared facility physician.--The term `shared 
     facility physician' means, with respect to a shared facility, 
     a physician who has a financial relationship under a shared 
     facility arrangement with the facility.
       ``(iv) Shared facility arrangement.--The term `shared 
     facility arrangement' means, with respect to the provision of 
     shared facility services in a building, a financial 
     arrangement--

       ``(I) which is only between physicians who are providing 
     services (unrelated to shared facility services) in the same 
     building,
       ``(II) in which the overhead expenses of the facility are 
     shared, in accordance with methods previously determined by 
     the physicians in the arrangement, among the physicians in 
     the arrangement, and
       ``(III) which, in the case of a corporation, is wholly 
     owned and controlled by shared facility physicians.''.

       (c) Revision to Rural Provider Exception.--Section 
     1877(d)(2) of such Act (42 U.S.C. 1395nn(d)(2)) is amended by 
     striking ``substantially all'' and inserting ``not less than 
     75 percent (as determined in accordance with regulations of 
     the Secretary)''.
       (d) Clarification of Referrals by Nephrologists.--Section 
     1877(h)(5)(C) of such Act (42 U.S.C. 1395nn(H)(5)(C)) is 
     amended--
       (1) by striking ``and a request'' and inserting ``a 
     request'';
       (2) by inserting after ``radiation therapy,'' the 
     following: ``and a request by a nephrologist for items or 
     services related to renal dialysis,''; and
       (3) by striking ``or radiation oncologist'' and inserting 
     ``radiation oncologist, or nephrologist''.
       (e) Revision of Reporting Requirements.--Section 1877(f) of 
     such Act (42 U.S.C. 1395nn(f)) is amended--
       (1) by striking ``Each entity'' and all that follows 
     through paragraph (2) and inserting the following: ``The 
     Secretary may require each entity (other than a physician or 
     physician group practice) providing designated health 
     services to provide the Secretary with the following 
     information concerning the entity's ownership, investment, 
     and compensation arrangements:
       ``(1) the designated health services provided by the 
     entity; and
       ``(2) the names and unique physician identifier numbers of 
     all physicians with an ownership or investment interest (as 
     described in subsection (a)(2)(A)) or with a compensation 
     interest (as described in subsection (a)(2)(B)) in the 
     entity, or whose immediate relatives have such an ownership, 
     investment, or compensation interest in the entity.''; and
       (2) by striking the fifth sentence.
       (f) Exception for Certain Managed Care Arrangements.--
     Section 1877(b)(3) of such Act (42 U.S.C. 1395nn(b)(3)) is 
     amended--
       (1) by striking ``or'' at the end of subparagraph (C);
       (2) by striking the period at the end of subparagraph (D) 
     and inserting a comma; and
       (3) by adding at the end the following new subparagraphs:
       ``(E) with a contract with a State to provide services 
     under the State plan under title XIX (in accordance with 
     section 1903(m)); or
       ``(F) which meets State regulatory requirements applicable 
     to health maintenance organizations and which--
       ``(i) provides designated health services directly or 
     through contractual arrangements with providers;
       ``(ii) assumes financial risk for the provision of services 
     or provides services on behalf of another individual or 
     entity (including but not limited to a self-insured employer, 
     indemnity plan, physician, or physician group) that assumes 
     financial risk for the provision of the item or service; and
       ``(iii) subjects the services to a program of utilization 
     review offered by an organization described in a preceding 
     subparagraph, an organization meeting State regulatory 
     requirements applicable to utilization review, or an 
     organization accredited to perform utilization review 
     considered appropriate by the Secretary.''.
       (g) Preemption of State Law.--Section 1877(g) of such Act 
     (42 U.S.C. 1395nn(g)) is amended by adding at the end the 
     following new paragraph:
       ``(6) Preemption of state law.--The provisions of this 
     section shall supersede any State law to the extent State law 
     prohibits a physician from making a referral, or an entity 
     from presenting a bill, for the furnishing of a service which 
     is not subject to the restrictions applicable under paragraph 
     (1).''.
       (h) Revision of Effective Date Exception Provision.--
     Section 13562(b)(2) of the Omnibus Budget Reconciliation Act 
     of 1993 is amended by striking subparagraphs (A) and (B) and 
     inserting the following:
       ``(A) the second sentence of subsection (a)(2), and 
     subsections (b)(2)(B) and (d)(2), of section 1877 of the 
     Social Security Act (as in effect on the day before the date 
     of the enactment of this Act) shall apply instead of the 
     corresponding provisions in section 1877 (as amended by this 
     Act);
       ``(B) section 1877(b)(4) of the Social Security Act (as in 
     effect on the day before the date of the enactment of this 
     Act) shall apply;
       ``(C) the requirements of section 1877(c)(2) of the Social 
     Security Act (as amended by this Act) shall not apply to any 
     securities of a corporation that meets the requirements of 
     section 1877(c)(2) of the Social Security Act (as in effect 
     on the day before the date of the enactment of this Act);
       ``(D) section 1877(e)(3) of the Social Security Act (as 
     amended by this Act) shall apply, except that it shall not 
     apply to any arrangement that meets the requirements of 
     subsection (e)(2) or subsection (e)(3) of section 1877 of the 
     Social Security Act (as in effect on the day before the date 
     of the enactment of this Act);
       ``(E) the requirements of clauses (iv) and (v) of section 
     1877(h)(4)(A), and of clause (i) of section 1877(h)(4)(B), of 
     the Social Security Act (as amended by this Act) shall not 
     apply; and
       ``(F) section 1877(h)(4)(B) of the Social Security Act (as 
     in effect on the day before the date of the enactment of this 
     Act) shall apply instead of section 1877(h)(4)(A)(ii) of such 
     Act (as amended by this Act).''.
       (i) Effective Date.--The amendments made by this section 
     shall apply to referrals made on or after January 1, 1995, 
     except that the amendments made by subsection (h) shall apply 
     as if included in the enactment of the Omnibus Budget 
     Reconciliation Act of 1993.

     SEC. 5516. MEDICARE HEALTH MAINTENANCE ORGANIZATIONS.

       (a) Study on Costs of Peer Review Contracts for Medicare 
     HMO's.--The Comptroller General shall conduct a study of the 
     costs incurred by eligible organizations with risk-sharing 
     contracts under section 1876(b) of the Social Security Act of 
     complying with the requirement of entering into a written 
     agreement with an entity providing peer review services with 
     respect to services provided by the organization, together 
     with an analysis of how information generated by such 
     entities is used by the Secretary of Health and Human 
     Services to assess the quality of services provided by such 
     eligible organizations.
       (b) Report to Congress.--Not later than July 1, 1997, the 
     Comptroller General shall submit a report to the Committee on 
     Ways and Means and the Committee on Energy and Commerce of 
     the House of Representatives and the Committee on Finance and 
     the Special Committee on Aging of the Senate on the study 
     conducted under subsection (a).

     SEC. 5517. EFFECTIVE DATE.

       Except as otherwise provided, the amendments made by this 
     part shall take effect January 1, 1996.

                   PART 3--AMENDMENTS TO CRIMINAL LAW

     SEC. 5521. PENALTIES FOR HEALTH CARE FRAUD.

       (a) In General.--
       (1) Fines and imprisonment for health care fraud 
     violations.--Chapter 63 of title 18, United States Code, is 
     amended by adding at the end the following:

     ``Sec. 1347. Health care fraud

       ``(a) Whoever knowingly executes, or attempts to execute, a 
     scheme or artifice--
       ``(1) to defraud any health care plan or other person, in 
     connection with the delivery of or payment for health care 
     benefits, items, or services; or
       ``(2) to obtain, by means of false or fraudulent pretenses, 
     representations, or promises, any of the money or property 
     owned by, or under the custody or control of, any health care 
     plan, or person in connection with the delivery of or payment 
     for health care benefits, items, or services;

     shall be guilty of a felony, and fined under this title or 
     imprisoned not more than 5 years, or both.
       ``(b) In determining the amount or scope of any penalty or 
     assessment, the court shall take into account:
       ``(1) the nature of the false or fraudulent claims and the 
     circumstances under which they are presented;
       ``(2) the degree of culpability and history of prior 
     offenses by the convicted health care provider;
       ``(3) the extent to which restitution is paid; and
       ``(4) such other matters as justice may require.
       ``(c) A principal is liable for penalties and assessments 
     under this section for the acts of the principal's agents 
     acting within the scope of the agency.
       ``(d) For purposes of this section, the term `health care 
     plan' means a Federally-funded public program or private 
     program for the delivery of or payment for health care items 
     or services.''.
       (2) Clerical amendment.--The table of sections at the 
     beginning of chapter 63 of title 18, United States Code, is 
     amended by adding at the end the following:

``1347. Health care fraud.''.

     SEC. 5522. REWARDS FOR INFORMATION LEADING TO PROSECUTION AND 
                   CONVICTION.

       Section 3059 of title 18, United States Code, is amended by 
     adding at the end the following new subsection:
       ``(c)(1) In special circumstances and in the Attorney 
     General's sole discretion, the Attorney General may make a 
     payment of up to $10,000 to a person who furnishes 
     information unknown to the Government relating to a possible 
     prosecution under section 1347.
       ``(2) A person is not eligible for a payment under 
     paragraph (1) if--
       ``(A) the person is a current or former officer or employee 
     of a Federal or State government agency or instrumentality 
     who furnishes information discovered or gathered in the 
     course of government employment.
       ``(B) the person knowingly participated in the offense;
       ``(C) the information furnished by the person consists of 
     allegations or transactions that have been disclosed to the 
     public--
       ``(i) in a criminal, civil, or administrative proceeding;
       ``(ii) in a congressional, administrative or General 
     Accounting Office report, hearing, audit or investigation; or
       ``(iii) by the news media, unless the person is the 
     original source of the information; or
       ``(D) when, in the judgment of the Attorney General, it 
     appears that a person whose illegal activities are being 
     prosecuted or investigated could benefit from the award.
       ``(3) For the purposes of paragraph (2)(C)(iii), the term 
     `original source' means a person who has direct and 
     independent knowledge of the information that is furnished 
     and has voluntarily provided the information to the 
     Government prior to disclosure by the news media.
       ``(4) Neither the failure of the Attorney General to 
     authorize a payment under paragraph (1) nor the amount 
     authorized shall be subject to judicial review.''.

     SEC. 5523. BROADENING APPLICATION OF MAIL FRAUD STATUTE.

       Section 1341 of title 18, United States Code, is amended--
       (1) by inserting ``or deposits or causes to be deposited 
     any matter or thing whatever to be sent or delivered by any 
     private or commercial interstate carrier,'' after ``Postal 
     Service,''; and
       (2) by inserting ``or such carrier'' after ``causes to be 
     delivered by mail''.

                       PART 4--ADVISORY OPINIONS

     SEC. 5531. AUTHORIZING THE SECRETARY OF HEALTH AND HUMAN 
                   SERVICES TO ISSUE ADVISORY OPINIONS UNDER TITLE 
                   XI.

       Title XI of the Social Security Act (42 U.S.C. 1301 et 
     seq.) is amended by inserting after section 1128B the 
     following new section:


                          ``advisory opinions

       ``Sec. 1129. (a) Issuance of Advisory Opinions.--The 
     Secretary shall issue advisory opinions as provided in this 
     section.
       ``(b) Matters Subject to Advisory Opinions.--The Secretary 
     shall issue advisory opinions as to the following matters:
       ``(1) What constitutes prohibited remuneration within the 
     meaning of section 1128B(b).
       ``(2) Whether an arrangement or proposed arrangement 
     satisfies the criteria set forth in section 1128B(b)(3) for 
     activities which do not result in prohibited remuneration.
       ``(3) Whether an arrangement or proposed arrangement 
     satisfies the criteria which the Secretary has established, 
     or shall establish by regulation for activities which do not 
     result in prohibited remuneration.
       ``(4) What constitutes an inducement to reduce or limit 
     services to individuals entitled to benefits under title 
     XVIII or title XIX within the meaning of section 1128B(b).
       ``(5) Whether an arrangement, activity or proposed 
     arrangement or proposed activity violates any other provision 
     of this Act.
       ``(c) Matters Not Subject to Advisory Opinions.--Such 
     advisory opinions shall not address the following matters:
       ``(1) Whether the fair market value shall be, or was paid 
     or received for any goods, services or property.
       ``(2) Whether an individual is a bona fide employee within 
     the requirements of section 3121(d)(2) of the Internal 
     Revenue Code of 1986.
       ``(d) Effect of Advisory Opinions.--
       ``(1) Each advisory opinion issued by the Secretary shall 
     be binding as to the Secretary and the party or parties 
     requesting the opinion.
       ``(2) The failure of a party to seek an advisory opinion 
     may not be introduced into evidence to prove that the party 
     intended to violate the provisions of sections 1128, 1128A, 
     or 1128B.
       ``(e) Regulations.--The Secretary within 180 days of the 
     date of enactment, shall issue regulations establishing a 
     system for the issuance of advisory opinions. Such 
     regulations shall provide for--
       ``(1) the procedure to be followed by a party applying for 
     an advisory opinion;
       ``(2) the procedure to be followed by the Secretary in 
     responding to a request for an advisory opinion;
       ``(3) the interval in which the Secretary shall respond;
       ``(4) the reasonable fee to be charged to the party 
     requesting an advisory opinion; and
       ``(5) the manner in which advisory opinions will be made 
     available to the public.
       ``(f) Interval for Issuance of Advisory Opinions.--Under no 
     circumstances shall the interval in which the Secretary shall 
     respond to a party requesting an advisory opinion exceed 30 
     days.''.

     SEC. 5532. AUTHORIZING THE SECRETARY OF HEALTH AND HUMAN 
                   SERVICES TO ISSUE ADVISORY OPINIONS RELATING TO 
                   PHYSICIAN OWNERSHIP AND REFERRAL.

       Section 1877 of the Social Security Act (42 U.S.C. 1395nn) 
     is amended by the addition of the following new subsection:
       ``(i) Advisory Opinions.--
       ``(1) In general.--The Secretary shall issue advisory 
     opinions on whether an arrangement or proposed arrangement 
     will result in a prohibited referral within the meaning of 
     this section.
       ``(2) Effect of Advisory Opinions.--
       ``(A) Each advisory opinion issued by the Secretary shall 
     be binding as to the Secretary and the party or parties 
     requesting the opinion.
       ``(B) The failure of a party to seek an advisory opinion 
     may not be introduced into evidence to prove that the party 
     intended to violate the provisions of this section.
       ``(3) Regulations.--The Secretary within one hundred and 
     eighty days of the date of enactment, shall issue regulations 
     establishing a system for the issuance of advisory opinions. 
     Such regulations shall provide for--
       ``(A) the procedure to be followed by a party applying for 
     an advisory opinion;
       ``(B) the procedure to be followed by the Secretary in 
     responding to a request for an advisory opinion;
       ``(C) the interval in which the Secretary shall respond;
       ``(D) the reasonable fee to be charged to the party 
     requesting an advisory opinion; and
       ``(E) the manner in which advisory opinions will be made 
     available to the public.
       ``(4) Interval for issuance of advisory opinions.--Under no 
     circumstances shall the interval in which the Secretary shall 
     respond to a party requesting an advisory opinion exceed 
     thirty days.''.

     SEC. 5533. EFFECTIVE DATE.

       Unless otherwise specified, the amendments made by this 
     part shall be effective upon the enactment of this Act.

       PART 5--PAYMENTS FOR STATE HEALTH CARE FRAUD CONTROL UNITS

     SEC. 5541. ESTABLISHMENT OF STATE FRAUD UNITS.

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

     SEC. 5542. REQUIREMENTS FOR STATE FRAUD UNITS.

       (a) In General.--The State Fraud Unit must--
       (1) be a single identifiable entity of the State 
     government;
       (2) be separate and distinct from any State agency with 
     principal responsibility for the administration of any 
     Federally-funded or mandated health care program;
       (3) meet the other requirements of this section.
       (b) Specific Requirements Described.--The State Fraud Unit 
     shall--
       (1) be a Unit of the office of the State Attorney General 
     or of another department of State government which possesses 
     statewide authority to prosecute individuals for criminal 
     violations;
       (2) if it is in a State the constitution of which does not 
     provide for the criminal prosecution of individuals by a 
     statewide authority and has formal procedures, (A) assure its 
     referral of suspected criminal violations to the appropriate 
     authority or authorities in the State for prosecution, and 
     (B) assure its assistance of, and coordination with, such 
     authority or authorities in such prosecutions; or
       (3) have a formal working relationship with the office of 
     the State Attorney General or the appropriate authority or 
     authorities for prosecution and have formal procedures 
     (including procedures for its referral of suspected criminal 
     violations to such office) which provide effective 
     coordination of activities between the Fraud Unit and such 
     office with respect to the detection, investigation, and 
     prosecution of suspected criminal violations relating to any 
     Federally-funded or mandated health care programs.
       (c) Staffing Requirements.--The Fraud Unit must--
       (1) employ attorneys, auditors, investigators and other 
     necessary personnel; and
       (2) be organized in such a manner and provide sufficient 
     resources as is necessary to promote the effective and 
     efficient conduct of Fraud Unit activities.
       (d) Cooperative Agreements;Memoranda of Understanding.--The 
     Fraud Unit must have cooperative agreements with--
       (1) Federally-funded or mandated health care programs;
       (2) similar Fraud Units in other States, as exemplified 
     through membership and participation in the National 
     Association of Medicaid Fraud Control Units or its successor; 
     and
       (3) the Attorney General of the United States.
       (e) Reports.--The Fraud Unit shall submit to the Attorney 
     General an application and an annual report containing such 
     information as the Attorney General determines to be 
     necessary to determine whether the Fraud Unit meets the 
     requirements of this section.
       (f) Funding Source; Participation in All-Payer Program.--
     The Fraud Unit may receive funding for its activities from 
     such sources as the State considers appropriate. The Fraud 
     Unit shall participate in the all-payer fraud and abuse 
     control program established under section 5501.

     SEC. 5543. SCOPE AND PURPOSE.

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

     SEC. 5544. PAYMENTS TO STATES.

       (a) In General.--
       (1) Matching payments to States.--Subject to subsection 
     (c), for each year for which a State has a Fraud Unit 
     approved under section 5542(b) in operation the Attorney 
     General shall pay to the State for each quarter in a fiscal 
     year an amount equal to the applicable percentage of the sums 
     expended during the quarter by the Fraud Unit.
       (2) Time of payment.--The Attorney General shall make a 
     payment under paragraph (1) for a quarter by not later than 
     30 days after the end of the quarter.
       (b) Applicable Percentage Defined.--
       (1) In general.--In subsection (a), the ``applicable 
     percentage'' with respect to a State for a fiscal year is--
       (A) 90 percent, for quarters occurring during the first 3 
     years for which the Fraud Unit is in operation; or
       (B) 75 percent, for any other quarters.
       (2) Treatment of states with medicaid fraud control 
     units.--In the case of a State with a State medicaid fraud 
     control in operation prior to or as of the date of the 
     enactment of this Act, in determining the number of years for 
     which the State's Fraud Unit under this part has been in 
     operation, there shall be included the number of years for 
     which such State medicaid fraud control unit was in 
     operation.
       (c) Limit on Payment.--Notwithstanding subsection (a), the 
     total amount of payments made to a State under this section 
     for a fiscal year may not exceed--
       (1) for fiscal year 1996, 4 times the amount paid to the 
     State under section 1903(a)(6) of the Social Security Act 
     during the first quarter of 1995; and
       (2) for each succeeding fiscal year, the amount determined 
     under this subsection in the previous fiscal year, increased 
     by the percentage increase in the consumer price index for 
     all urban consumers (U.S. city average) for the year.
              Subtitle G--Billing for Laboratory Services

     SEC. 5601. EASING RESTRICTIONS ON BILLING FOR LABORATORY AND 
                   OTHER SERVICES.

       (a) In General.--The Public Health Service Act is amended--
       (1) by redesignating title XXVII (42 U.S.C. 300cc et seq.) 
     as title XXVIII; and
       (2) by inserting after title XXVI the following new title:
                 ``TITLE XXVII--RESTRICTIONS ON BILLING

     ``SEC. 2701. PROHIBITION.

       ``(a) Billing of Others for Ancillary Health Services.--
     Except as provided in section 2702, it shall be unlawful for 
     any person (including any individual or entity) who furnishes 
     ancillary health services (as defined in section 2705(1)) to 
     present or cause to be presented, a claim, bill, or demand 
     for payment to any person other than the patient receiving 
     such services.
       ``(b) Billing of Recipient of Services.--Except as provided 
     in section 2702, it shall be unlawful for any physician, or 
     the agent of any physician, to present, or cause to be 
     presented, a claim, bill, or demand for payment for ancillary 
     health services to any recipient of such services unless the 
     services covered by the claim, bill, or demand were 
     furnished--
       ``(1) personally by, or under the supervision of, the 
     referring physician;
       ``(2) personally by, or under the supervision of, a 
     physician who is a member of the same group practice as the 
     referring physician; or
       ``(3) personally by individuals who are employed by such 
     physician or group practice and who are personally supervised 
     by the physician or by another physician in the group 
     practice.
       ``(c) General Exception for Services Under Medicare.--This 
     section does not apply with respect to any ancillary health 
     services for which payment may be made under title XVIII of 
     the Social Security Act.

     ``SEC. 2702. EXCEPTIONS.

       ``Notwithstanding the provisions of section 2701, a person 
     who furnishes ancillary health services to an individual may 
     present, or cause to be presented, for payment for actual 
     services rendered a claim, bill, or demand to--
       ``(1) an immediate family member of the recipient of the 
     services or any other person legally responsible for the 
     debts or care of the recipient of the services;
       ``(2) a third party payor designated by the recipient of 
     the services;
       ``(3) a health maintenance organization, or other health 
     plan providing coverage through a managed care arrangement, 
     in which the recipient of the services is enrolled;
       ``(4) a hospital or skilled nursing facility where the 
     recipient of the services was an inpatient or outpatient at 
     the time the services were provided;
       ``(5) an employer where the recipient of the services is an 
     employee of such employer and the employer is responsible for 
     payment for the services;
       ``(6) a governmental agency or specified agent, on behalf 
     of the recipient of the services;
       ``(7) a substance abuse program where the clients of such a 
     program were the recipient of the services;
       ``(8) a clinic or other health care provider that has been 
     designated (or that is operated by an organization that has 
     been designated) as tax-exempt pursuant to section 501(c)(3) 
     of the Internal Revenue Code of 1986 whose purpose is the 
     promotion of public health, if the services rendered relate 
     to testing for sexually transmitted disease, acquired immune 
     deficiency syndrome, pregnancy, pregnancy termination, or 
     other conditions where the Secretary has determined that 
     compliance with section 2701 could seriously compromise the 
     recipient's need for confidentiality;
       ``(9) a person engaged in bona fide research studies;
       ``(10) the party requesting the ancillary health services 
     where Federal, State, or local law requires that the identity 
     of the recipient be kept confidential;
       ``(11) another person furnishing the same ancillary health 
     services for which payment is sought (hereafter referred to 
     in this paragraph as the `requesting party') where the person 
     presenting, or causing to be presented, the claim, bill, or 
     demand for payment furnished the services at the request of 
     the requesting party, except that the requesting party may 
     not be a facility owned or operated by the physician 
     requesting the ancillary health service; and
       ``(12) an entity approved to receive such claims, bills or 
     demands by the Secretary in regulations.

     The persons described in paragraphs (1) through (12) who have 
     received a claim, bill, or demand for payment for such 
     ancillary health services may present, or cause to be 
     presented, such claim, bill, or demand to the responsible 
     party.

     ``SEC. 2703. SANCTIONS.

       ``(a) Payment.--No payment may be made for a service that 
     is provided in violation of section 2701.
       ``(b) Collection of Amounts.--
       ``(1) Liability on collection.--If a person collects any 
     amounts that were billed in violation of section 2701(a), 
     such person shall be liable for, and shall refund on a timely 
     basis to the individual whom such amounts were collected, any 
     amounts so collected.
       ``(2) Collection by physician.--If a physician collects any 
     amounts from a recipient of services, or from another person 
     on behalf of the recipient of services (including a third-
     party payor) that were billed in violation of section 
     2701(b), such physician shall be liable for, and shall refund 
     on a timely basis to the recipient or person, any amounts so 
     collected.
       ``(c) Repeated Claims.--Any person that presents, or causes 
     to be presented, on a repeated basis, a bill or a claim that 
     such person knows, or should have known, is for a service for 
     which payment may not be made under subsection (a), or for 
     which a refund has not been made under subsection (b), shall 
     be subject to a civil money penalty of not more than $5,000 
     for each such bill or claim. The provisions of section 1128A 
     of the Social Security Act (other than the first sentence of 
     subsection (a) and subsection (b)) shall apply to a civil 
     money penalty assessed under the previous sentence in the 
     same manner as such provisions apply to a penalty or 
     proceeding under such section 1128A(a).
       ``(d) Suspension of Laboratory Certification.--If the 
     Secretary finds, after reasonable notice and opportunity for 
     a hearing, that a laboratory which holds a certificate 
     pursuant to section 353 has violated section 2701, the 
     Secretary may suspend, revoke or limit such certification in 
     accordance with the procedures established in section 353(k).
       ``(e) Exclusion From Other Programs.--
       ``(1) Authority.--The Secretary may exclude from 
     participation in any program under title XVIII of the Social 
     Security Act, any individual or entity that the Secretary 
     determines has violated section 2701 and may direct that such 
     individual and entity be excluded from participation in any 
     State health care program receiving Federal funds.
       ``(2) Application of other law.--The provisions of section 
     1128(e) of the Social Security Act shall apply to any 
     exclusion under paragraph (1) in the same manner as such 
     provisions apply to a proceeding under such section 1128.

     ``SEC. 2704. REGULATIONS.

       ``The Secretary shall by regulation impose such other 
     requirements as may be necessary to implement the purposes of 
     this title.

     ``SEC. 2705. DEFINITIONS.

       ``As used in this title:
       ``(1) Ancillary health services.--The term `ancillary 
     health services' means--
       ``(A) clinical laboratory services;
       ``(B) diagnostic x-ray tests and other diagnostic imaging 
     services including CT and magnetic resonance imaging 
     services;
       ``(C) other diagnostic tests;
       ``(D) durable medical equipment; and
       ``(E) physical therapy services.
       ``(2) Group practices.--The term `group practice' means a 
     group of 2 or more physicians legally organized as a 
     partnership, professional corporation, foundation, not-for-
     profit corporation, faculty practice plan, or similar 
     association--
       ``(A) in which each physician who is a member of the group 
     provides substantially the full range of services that the 
     physician routinely provides (including medical care, 
     consultation, diagnosis, or treatment) through the joint use 
     of shared office space, facilities, equipment, and personnel;
       ``(B) for which substantially all of the services of the 
     physicians who are members of the group are provided through 
     the group and are billed in the name of the group and amounts 
     so received are treated as receipts of the group;
       ``(C) in which the overhead expenses of and the income from 
     the practice are distributed in accordance with methods 
     previously determined by members of the group; and
       ``(D) which meets such other standards as the Secretary may 
     impose by regulation.

     In the case of a faculty practice plan associated with a 
     hospital with an approved medical residency training program 
     in which physician members may provide a variety of different 
     specialty services and provide professional services both 
     within and outside the group (as well as perform other tasks, 
     such as research), the definition of such term shall be 
     limited with respect to the services provided outside of the 
     faculty practice plan.
       ``(3) Immediate family member.--The term `immediate family 
     member' shall include spouses, natural and adoptive parents, 
     natural and adoptive children, natural and adopted siblings, 
     stepparents, stepchildren and stepsiblings, fathers-in-law, 
     mothers-in-law, brothers-in-law, sisters-in-law, sons-in-law 
     and daughters-in-law, grandparents and grandchildren, and 
     such additional family members as may be specified in 
     regulations adopted by the Secretary.
       ``(4) Physician.--The term `physician' means--
       ``(A) a doctor of medicine or osteopathy legally authorized 
     to practice medicine and perform surgery by the State in 
     which such individual performs such function or action;
       ``(B) a doctor of dental surgery or of dental medicine who 
     is legally authorized to practice dentistry in the State in 
     which such individual performs such functions;
       ``(C) a doctor of podiatric medicine;
       ``(D) a doctor of optometry; or
       ``(E) a chiropractor.
       ``(5) Third party payor.--The term `third party payor' 
     means any health care insurer, including any hospital 
     services corporation, health services corporation, medical 
     expense indemnity corporation, mutual insurance company, or 
     self-insured corporation, that provides coverage for health 
     or health-related items or service.''.
       (b) Conforming Amendments.--
       (1) Sections 2701 through 2714 of the Public Health Service 
     Act (42 U.S.C. 300cc through 300cc-15) are redesignated as 
     sections 2801 through 2814, respectively.
       (2)(A) Sections 465(f) and 497 of such Act (42 U.S.C. 
     286(f) and 289) are amended by striking out ``2701'' each 
     place that such appears and inserting in lieu thereof 
     ``2801''.
       (B) Section 305(i) of such Act (42 U.S.C. 242c(i)) is 
     amended by striking out ``2711'' each place that such appears 
     and inserting in lieu thereof ``2811''.

     SEC. 5602. EFFECTIVE DATE.

       (a) In General.--Title XXVII of the Public Health Service 
     Act, as added by section 5601(a), shall become effective 
     December 31, 1994.
       (b) Regulations.--Not later than July 1, 1995, the 
     Secretary of Health and Human Services shall promulgate such 
     regulations as may be appropriate to carry out such title.
                    TITLE VI--MEDICARE AND MEDICAID

                     table of contents of subtitle

  Subtitle A--Increased Medicare Beneficiary Choice; Improved Program 
                               Efficiency

             Part 1--Increased Medicare Beneficiary Choice

Sec. 6001. Requirements for health maintenance organizations under 
              medicare.
Sec. 6002. Expansion and revision of medicare select policies.
Sec. 6003. Including notice of available health maintenance 
              organizations in annual notice to beneficiaries.
Sec. 6004. Legislative proposal on enrolling medicare beneficiaries in 
              qualified health plans.
Sec. 6005. Optional interim enrollment of medicare beneficiaries in 
              private health plans.

                  Part 2--Improved Program Efficiency

Sec. 6011. Improved efficiency through consolidation of administration 
              of parts A and B.

               Part 3--Notice of Advance Directive Rights

Sec. 6021. Providing notice of rights regarding medical care to 
              individuals entering medicare.

              Subtitle B--Savings in Medicare and Medicaid

              Part 1--Savings Relating to Medicare Part A

Sec. 6101. Reduction in update for payments for inpatient hospital 
              services.
Sec. 6102. Reduction in payments for capital-related costs for 
              inpatient hospital services.

              Part 2--Savings Relating to Medicare Part B

Sec. 6111. Establishment of cumulative expenditure goals for physician 
              services.
Sec. 6112. Imposition of coinsurance on laboratory services.
Sec. 6113. Increase in medicare part B premium for individuals with 
              high income.
Sec. 6114. Extension of 25 percent part B premium.
Sec. 6115. Reduction in hospital outpatient services through 
              establishment of prospective payment system.

           Part 3--Savings Relating to Medicare Parts A and B

Sec. 6121. Reduction in home health services through establishment of 
              prospective payment system.
Sec. 6122. Medicare secondary payer.

                      Part 4--Savings in Medicaid

Sec. 6131. Elimination of medicaid pediatric immunization program.
Sec. 6132. 25 percent reduction in amount of payment adjustments for 
              disproportionate share hospitals.
Sec. 6133. Denial of medicaid eligibility for certain aliens.
Sec. 6134. Elimination of medically needy program for individuals not 
              in an institution.
  Subtitle A--Increased Medicare Beneficiary Choice; Improved Program 
                               Efficiency

             PART 1--INCREASED MEDICARE BENEFICIARY CHOICE

     SEC. 6001. REQUIREMENTS FOR HEALTH MAINTENANCE ORGANIZATIONS 
                   UNDER MEDICARE.

       (a) Use of Metropolitan Statistical Areas to Determine 
     Adjusted Average Per Capita Cost.--Section 1876(a)(4) of the 
     Social Security Act (42 U.S.C. 1395mm(a)(4)) is amended by 
     striking ``in a geographic area served by an eligible 
     organization or in a similar area'' and inserting ``in the 
     metropolitan statistical area (as defined by the Office of 
     Management and Budget) in which the individual resides, or in 
     the entire portion of the State in which the individual 
     resides which is not located in a metropolitan statistical 
     area in the case of an individual who does not reside in a 
     metropolitan statistical area''.
       (b) Determination of Model Additional Health Benefit 
     Packages.--Section 1876(g) of such Act (42 U.S.C. 1395mm(g)) 
     is amended by inserting after paragraph (3) the following new 
     paragraph:
       ``(4) The Secretary shall develop the following model 
     packages of additional health benefits (referred to in 
     paragraph (3)(B)) which an eligible organization may provide 
     (at its option) under paragraph (2):
       ``(A) Coverage for catastrophic illness (subject to a limit 
     on out-of-pocket expenditures).
       ``(B) Coverage for prescription drugs.
       ``(C) Coverage for preventive services.''.
       (c) Revision of Membership Limitation.--Section 1876(f) of 
     such Act (42 U.S.C. 1395mm(f)) is amended--
       (1) in paragraph (1), by striking ``one-half'' and 
     inserting ``25 percent''; and
       (2) in paragraph (2)(A), by striking ``50 percent'' and 
     inserting ``75 percent''.
       (d) Enrollment Periods for Medicare Health Maintenance 
     Organizations.--
       (1) Uniform open enrollment period.--Section 
     1876(c)(3)(A)(i) of such Act (42 U.S.C. 1395mm(c)(3)(A)(i)) 
     is amended by striking ``must have'' and all that follows 
     through ``and including'' and inserting the following: 
     ``shall have open enrollment during an annual uniform open 
     enrollment period established by the Secretary for all 
     eligible organizations, together with''.
       (2) Open enrollment for certain disenrolled individuals.--
     Section 1876(c)(3)(A)(ii)(I) of such Act (42 U.S.C. 
     1395mm(c)(3)(A)(ii)(I)) is amended by adding at the end the 
     following: ``Each eligible organization with a risk-sharing 
     contract under this section shall have an open enrollment 
     period for individuals residing in the organization's service 
     area who disenroll from another eligible organization with a 
     risk-sharing contract under this section on the grounds that 
     the individual's primary care physician is no longer a member 
     of the organization's provider network or for cause (in 
     accordance with such standards, and as demonstrated through 
     an appeals process that meets such requirements, as the 
     Secretary may establish).
       (e) Effective Date.--The amendments made by this section 
     shall apply to contracts entered into on or after the date of 
     the enactment of this Act.

     SEC. 6002. EXPANSION AND REVISION OF MEDICARE SELECT 
                   POLICIES.

       (a) Permitting Medicare Select Policies in All States.--
       (1) In general.--Subsection (c) of section 4358 of the 
     Omnibus Budget Reconciliation Act of 1990 (hereafter referred 
     to as ``OBRA-1990'') is hereby repealed.
       (2) Conforming amendment.--Section 4358 of OBRA-1990 is 
     amended by redesignating subsection (d) as subsection (c).
       (b) Requirements of Medicare Select Policies.--Section 
     1882(t)(1) of the Social Security Act (42 U.S.C. 
     1395ss(t)(1)) is amended to read as follows:
       ``(1)(A) If a medicare supplemental policy meets the 1991 
     NAIC Model Regulation or 1991 Federal Regulation and 
     otherwise complies with the requirements of this section 
     except that--
       ``(i) the benefits under such policy are restricted to 
     items and services furnished by certain entities (or reduced 
     benefits are provided when items or services are furnished by 
     other entities), and
       ``(ii) in the case of a policy described in subparagraph 
     (C)(i)--
       ``(I) the benefits under such policy are not one of the 
     groups or packages of benefits described in subsection 
     (p)(2)(A),
       ``(II) except for nominal copayments imposed for services 
     covered under part B of this title, such benefits include at 
     least the core group of basic benefits described in 
     subsection (p)(2)(B), and
       ``(III) an enrollee's liability under such policy for 
     physician's services covered under part B of this title is 
     limited to the nominal copayments described in subclause 
     (II),

     the policy shall nevertheless be treated as meeting those 
     standards if the policy meets the requirements of 
     subparagraph (B).
       ``(B) A policy meets the requirements of this subparagraph 
     if--
       ``(i) full benefits are provided for items and services 
     furnished through a network of entities which have entered 
     into contracts or agreements with the issuer of the policy,
       ``(ii) full benefits are provided for items and services 
     furnished by other entities if the services are medically 
     necessary and immediately required because of an unforeseen 
     illness, injury, or condition and it is not reasonable given 
     the circumstances to obtain the services through the network,
       ``(iii) the network offers sufficient access,
       ``(iv) the issuer of the policy has arrangements for an 
     ongoing quality assurance program for items and services 
     furnished through the network,
       ``(v)(I) the issuer of the policy provides to each enrollee 
     at the time of enrollment an explanation of--
       ``(aa) the restrictions on payment under the policy for 
     services furnished other than by or through the network,
       ``(bb) out of area coverage under the policy,
       ``(cc) the policy's coverage of emergency services and 
     urgently needed care, and
       ``(dd) the availability of a policy through the entity that 
     meets the 1991 Model NAIC Regulation or 1991 Federal 
     Regulation without regard to this subsection and the premium 
     charged for such policy, and
       ``(II) each enrollee prior to enrollment acknowledges 
     receipt of the explanation provided under subclause (I), and
       ``(vi) the issuer of the policy makes available to 
     individuals, in addition to the policy described in this 
     subsection, any policy (otherwise offered by the issuer to 
     individuals in the State) that meets the 1991 Model NAIC 
     Regulation or 1991 Federal Regulation and other requirements 
     of this section without regard to this subsection.
       ``(C)(i) A policy described in this subparagraph--
       ``(I) is offered by an eligible organization (as defined in 
     section 1876(b)),
       ``(II) is not a policy or plan providing benefits pursuant 
     to a contract under section 1876 or an approved demonstration 
     project described in section 603(c) of the Social Security 
     Amendments of 1983, section 2355 of the Deficit Reduction Act 
     of 1984, or section 9412(b) of the Omnibus Budget 
     Reconciliation Act of 1986, and
       ``(III) provides benefits which, when combined with 
     benefits which are available under this title, are 
     substantially similar to benefits under policies offered to 
     individuals who are not entitled to benefits under this 
     title.
       ``(ii) In making a determination under subclause (III) of 
     clause (i) as to whether certain benefits are substantially 
     similar, there shall not be taken into account, except in the 
     case of preventive services, benefits provided under policies 
     offered to individuals who are not entitled to benefits under 
     this title which are in addition to the benefits covered by 
     this title and which are benefits an entity must provide in 
     order to meet the definition of an eligible organization 
     under section 1876(b)(1).''.
       (c) Renewability of Medicare Select Policies.--Section 
     1882(q)(1) of the Social Security Act (42 U.S.C. 
     1395ss(q)(1)) is amended--
       (1) by striking ``(1) Each'' and inserting ``(1)(A) Except 
     as provided in subparagraph (B), each'';
       (2) by redesignating subparagraphs (A) and (B) as clauses 
     (i) and (ii), respectively; and
       (3) by adding at the end the following new subparagraph:
       ``(B)(i) Except as provided in clause (ii), in the case of 
     a policy that meets the requirements of subsection (t), an 
     issuer may cancel or nonrenew such policy with respect to an 
     individual who leaves the service area of such policy.
       ``(ii) If an individual described in clause (i) moves to a 
     geographic area where an issuer described in clause (i), or 
     where an affiliate of such issuer, is issuing medicare 
     supplemental policies, such individual must be permitted to 
     enroll in any medicare supplemental policy offered by such 
     issuer or affiliate that provides benefits comparable to or 
     less than the benefits provided in the policy being canceled 
     or nonrenewed. An individual whose coverage is canceled or 
     nonrenewed under this subparagraph shall, as part of the 
     notice of termination or nonrenewal, be notified of the right 
     to enroll in other medicare supplemental policies offered by 
     the issuer or its affiliates.
       ``(iii) For purposes of this subparagraph, the term 
     `affiliate' shall have the meaning given such term by the 
     1991 NAIC Model Regulation.''.
       (d) Civil Money Penalty.--Section 1882(t)(2) of the Social 
     Security Act (42 U.S.C. 1395ss(t)(2)) is amended--
       (1) by striking ``(2)'' and inserting ``(2)(A)'';
       (2) by redesignating subparagraphs (A), (B), (C), and (D) 
     as clauses (i), (ii), (iii), and (iv), respectively;
       (3) in clause (iv), as so redesignated--
       (A) by striking ``paragraph (1)(E)(i)'' and inserting 
     ``paragraph (1)(B)(v)(I), and
       (B) by striking ``paragraph (1)(E)(ii)'' and inserting 
     ``paragraph (1)(B)(v)(II)'';
       (4) by striking ``the previous sentence'' and inserting 
     ``this subparagraph''; and
       (5) by adding at the end the following new subparagraph:
       ``(B) If the Secretary determines that an issuer of a 
     policy approved under paragraph (1) has made a 
     misrepresentation to the Secretary or has provided the 
     Secretary with false information regarding such policy, the 
     issuer is subject to a civil money penalty in an amount not 
     to exceed $100,000 for each such determination. The 
     provisions of section 1128A (other than the first sentence of 
     subsection (a) and other than subsection (b)) shall apply to 
     a civil money penalty under this subparagraph in the same 
     manner as such provisions apply to a penalty or proceeding 
     under section 1128A(a).''.
       (e) Effective Dates.--
       (1) NAIC standards.--If, within 6 months after the date of 
     the enactment of this Act, the National Association of 
     Insurance Commissioners (hereafter in this subsection 
     referred to as the ``NAIC'') makes changes in the 1991 NAIC 
     Model Regulation (as defined in section 1882(p)(1)(A) of the 
     Social Security Act) to incorporate the additional 
     requirements imposed by the amendments made by this section, 
     section 1882(g)(2)(A) of such Act shall be applied in each 
     State, effective for policies issued to policyholders on and 
     after the date specified in paragraph (3), as if the 
     reference to the Model Regulation adopted on June 6, 1979, 
     were a reference to the 1991 NAIC Model Regulation (as so 
     defined) as changed under this paragraph (such changed 
     Regulation referred to in this subsection as the ``1994 NAIC 
     Model Regulation'').
       (2) Secretary standards.--If the NAIC does not make changes 
     in the 1991 NAIC Model Regulation (as so defined) within the 
     6-month period specified in paragraph (1), the Secretary of 
     Health and Human Services (in this subsection as the 
     ``Secretary'') shall promulgate a regulation and section 
     1882(g)(2)(A) of the Social Security Act shall be applied in 
     each State, effective for policies issued to policyholders on 
     and after the date specified in paragraph (3), as if the 
     reference to the Model Regulation adopted in June 6, 1979, 
     were a reference to the 1991 NAIC Model Regulation (as so 
     defined) as changed by the Secretary under this paragraph 
     (such changed Regulation referred to in this subsection as 
     the ``1994 Federal Regulation'').
       (3) Date specified.--
       (A) In general.--Subject to subparagraph (B), the date 
     specified in this paragraph for a State is the earlier of--
       (i) the date the State adopts the 1994 NAIC Model 
     Regulation or the 1994 Federal Regulation; or
       (ii) 1 year after the date the NAIC or the Secretary first 
     adopts such regulations.
       (B) Additional legislative action required.--In the case of 
     a State which the Secretary identifies, in consultation with 
     the NAIC, as--
       (i) requiring State legislation (other than legislation 
     appropriating funds) in order for medicare supplemental 
     policies to meet the 1994 NAIC Model Regulation or the 1994 
     Federal Regulation, but
       (ii) having a legislature which is not scheduled to meet in 
     1995 in a legislative session in which such legislation may 
     be considered,

     the date specified in this paragraph is the first day of the 
     first calendar quarter beginning after the close of the first 
     legislative session of the State legislature that begins on 
     or after January 1, 1995. For purposes of the previous 
     sentence, in the case of a State that has a 2-year 
     legislative session, each year of such session shall be 
     deemed to be a separate regular session of the State 
     legislature.

     SEC. 6003. INCLUDING NOTICE OF AVAILABLE HEALTH MAINTENANCE 
                   ORGANIZATIONS IN ANNUAL NOTICE TO 
                   BENEFICIARIES.

       Section 1804 of the Social Security Act (42 U.S.C. 1395b-2) 
     is amended--
       (1) by striking ``and'' at the end of paragraph (2);
       (2) by striking the period at the end of paragraph (3) and 
     inserting ``, and''; and
       (3) by inserting after paragraph (3) the following new 
     paragraph:
       ``(4) with respect to the area in which the individual 
     receiving the notice resides, a description of the eligible 
     organizations under section 1833(a)(1) or section 1876 and 
     the carriers offering a medicare supplemental policy 
     described in section 1882(t)(1) which serve the area in which 
     the individual receiving the notice resides.''.

     SEC. 6004. LEGISLATIVE PROPOSAL ON ENROLLING MEDICARE 
                   BENEFICIARIES IN QUALIFIED HEALTH PLANS.

       (a) In General.--
       (1) Legislative proposal.--Not later than 1 year after the 
     date of the enactment of this Act, the Secretary shall 
     develop and submit to Congress a proposal for legislation 
     which provides for the enrollment of medicare beneficiaries 
     in private health insurance plans.
       (2) Medicare beneficiary.--For purposes of this section, 
     the term ``medicare beneficiary'' means an individual who is 
     eligible for benefits under part A of title XVIII of the 
     Social Security Act and is enrolled under part B of such 
     title.
       (b) Contents of the Proposal.--A proposal for legislation 
     submitted under subsection (a) shall--
       (1) provide for an appropriate methodology by which the 
     Secretary shall make payment to private health insurance 
     plans for the enrollment of medicare beneficiaries;
       (2) provide individuals the opportunity to remain enrolled 
     in such a plan without an interruption in coverage upon 
     becoming medicare beneficiaries; and
       (3) provide medicare beneficiaries with the opportunity to 
     enroll in a private health insurance plan.

     SEC. 6005. OPTIONAL INTERIM ENROLLMENT OF MEDICARE 
                   BENEFICIARIES IN PRIVATE HEALTH PLANS.

       (a) Interim Enrollment of Medicare Beneficiaries in 
     Qualified Health Plans.--
       (1) In general.--Notwithstanding title XVIII of the Social 
     Security Act, the Secretary shall provide for a monthly 
     payment as provided under subsection (b)(1) to a private 
     health insurance plan on behalf of enrolled medicare 
     beneficiaries who choose to enroll in such a plan.
       (2) Medicare beneficiary.--For purposes of this section, 
     the term ``medicare beneficiary'' means an individual who is 
     eligible for benefits under part A of title XVIII of the 
     Social Security Act and is enrolled under part B of such 
     title.
       (b) Payment Specified.--
       (1) Federal payment.--
       (A) In general.--The amount of payment specified in this 
     paragraph for an individual who is enrolled in a private 
     health insurance plan is the lesser of--
       (i) the applicable rate specified in section 1876(a)(1)(C) 
     of the Social Security Act (but at 100 percent, rather than 
     95 percent, of the applicable amount); or
       (ii) the monthly premium charged the individual for 
     coverage under the private health insurance plan.
       (B) Source of payment.--The payment to a private health 
     insurance plan under this paragraph for individuals entitled 
     to benefits under part A and enrolled under part B of title 
     XVIII of the Social Security Act shall be made from the 
     Federal Hospital Insurance Trust Fund and the Federal 
     Supplementary Medical Insurance Trust Fund, with the 
     allocation to be determined by the Secretary.
       (2) Individual's share.--If the monthly premium for the 
     private plan in which the individual is enrolled is greater 
     than the amount specified under paragraph (1)(A)(i), the 
     individual shall be responsible for paying to the plan the 
     difference between the monthly premium charged the individual 
     for coverage under the plan and the amount specified in 
     paragraph (1)(A)(i).
       (c) Payments Under this Section as Sole Medicare 
     Benefits.--Payments made under this section shall be instead 
     of the amounts that would otherwise be payable, pursuant to 
     sections 1814(b) and 1833(a) of the Social Security Act, for 
     services furnished to medicare beneficiaries.
       (d) Inclusion in Annual Notice to Beneficiaries.--Section 
     1804 of the Social Security Act (42 U.S.C. 1395b-2), as 
     amended by section 6003, is amended
       (1) by striking ``and'' at the end of paragraph (3);
       (2) by striking the period at the end of paragraph (4) and 
     inserting ``, and''; and
       (3) by inserting after paragraph (4) the following new 
     paragraph:
       ``(5) a description of the option provided pursuant to 
     section 6005 of the Bipartisan Health Care Reform Act of 1994 
     for payment to be made by the Secretary on the individual's 
     behalf for enrollment in a private health insurance plan.''.

                  PART 2--IMPROVED PROGRAM EFFICIENCY

     SEC. 6011. IMPROVED EFFICIENCY THROUGH CONSOLIDATION OF 
                   ADMINISTRATION OF PARTS A AND B.

       (a) In General.--The Secretary of Health and Human Services 
     shall take such steps as may be necessary to consolidate the 
     administration (including processing systems) of parts A and 
     B of the medicare program (under title XVIII of the Social 
     Security Act) including over a 5-year period.
       (b) Combination of Intermediary and Carrier Functions.--In 
     taking such steps, the Secretary shall contract with a single 
     entity that combines the fiscal intermediary and carrier 
     functions in each area except where the Secretary finds that 
     special regional or national contracts are appropriate.
       (c) Superseding Conflicting Requirements.--The provisions 
     of sections 1816 and 1842 of the Social Security Act 
     (including provider nominating provisions in such section 
     1816) are superseded to the extent required to carry out this 
     section.

               PART 3--NOTICE OF ADVANCE DIRECTIVE RIGHTS

     SEC. 6021. PROVIDING NOTICE OF RIGHTS REGARDING MEDICAL CARE 
                   TO INDIVIDUALS ENTERING MEDICARE.

       (a) In General.--Section 1804 of the Social Security Act 
     (42 U.S.C. 1395b-2) is amended--
       (1) in paragraph (2), by striking ``and'' at the end;
       (2) in paragraph (3), by striking the period at the end and 
     inserting ``, and''; and
       (3) by inserting after paragraph (3) the following new 
     paragraph:
       ``(4) a description of an individual's rights under State 
     law to make decisions concerning medical care, including the 
     right to accept or refuse medical or surgical treatment and 
     the right to formulate advance directives (as defined in 
     section 1866(f)(3)).''.
       (b) Effective Date.--The amendments made by subsection (a) 
     shall apply to notices provided under section 1804 of the 
     Social Security Act on or after January 1 of the first year 
     beginning after the date of the enactment of this Act.
              Subtitle B--Savings in Medicare and Medicaid

              PART 1--SAVINGS RELATING TO MEDICARE PART A

     SEC. 6101. REDUCTION IN UPDATE FOR PAYMENTS FOR INPATIENT 
                   HOSPITAL SERVICES.

       Section 1886(b)(3)(B)(i) of the Social Security Act (42 
     U.S.C. 1395ww(b)(3)(B)(i)) is amended--
       (1) in subclause (XII)--
       (A) by striking ``fiscal year 1997'' and inserting ``for 
     each of the fiscal years 1997 through 2000'', and
       (B) by striking ``0.5 percentage point'' and inserting 
     ``2.0 percentage points''; and
       (2) in subclause (XIII), by striking ``fiscal year 1998'' 
     and inserting ``fiscal year 2005''.

     SEC. 6102. REDUCTION IN PAYMENTS FOR CAPITAL-RELATED COSTS 
                   FOR INPATIENT HOSPITAL SERVICES.

       (a) PPS Hospitals.--
       (1) Reduction in base payment rates.--Section 1886(g)(1)(A) 
     of the Social Security Act (42 U.S.C. 1395ww(g)(1)(A)) is 
     amended by adding at the end the following new sentence: ``In 
     addition to the reduction described in the preceding 
     sentence, for discharges occurring after September 30, 1995, 
     the Secretary shall reduce by 7.31 percent the unadjusted 
     standard Federal capital payment rate (as described in 42 CFR 
     412.308(c), as in effect on the date of the enactment of the 
     Bipartisan Health Care Reform Act of 1994) and shall reduce 
     by 10.41 percent the unadjusted hospital-specific rate (as 
     described in 42 CFR 412.328(e)(1), as in effect on the date 
     of the enactment of the Health Security Act).''.
       (2) Reduction in update.--Section 1886(g)(1) of such Act 
     (42 U.S.C. 1395ww(g)(1)) is amended--
       (A) in subparagraph (B)(i)--
       (i) by striking ``and (II)'' and inserting ``(II)'', and
       (ii) by striking the semicolon at the end and inserting the 
     following: ``, and (III) an annual update factor established 
     for the prospective payment rates applicable to discharges in 
     a fiscal year which (subject to reduction under subparagraph 
     (C)) will be based upon such factor as the Secretary 
     determines appropriate to take into account amounts necessary 
     for the efficient and effective delivery of medically 
     appropriate and necessary care of high quality;'';
       (B) by redesignating subparagraph (C) as subparagraph (D); 
     and
       (C) by inserting after subparagraph (B) the following new 
     subparagraph:
       ``(C)(i) With respect to payments attributable to portions 
     of cost reporting periods or discharges occurring during each 
     of the fiscal years 1996 through 2005, the Secretary shall 
     include a reduction in the annual update factor established 
     under subparagraph (B)(i)(III) for discharges in the year 
     equal to the applicable update reduction described in clause 
     (ii) to adjust for excessive increases in capital costs per 
     discharge for fiscal years prior to fiscal year 1992 (but in 
     no event may such reduction result in an annual update factor 
     less than zero).
       ``(ii) In clause (i), the term `applicable update 
     reduction' means, with respect to the update factor for a 
     fiscal year--
       ``(I) 4.9 percentage points; or
       ``(II) if the annual update factor for the previous fiscal 
     year was less than the applicable update reduction for the 
     previous year, the sum of 4.9 percentage points and the 
     difference between the annual update factor for the previous 
     year and the applicable update reduction for the previous 
     year.''.
       (b) PPS-Exempt Hospitals.--Section 1861(v)(1) of such Act 
     (42 U.S.C. 1395x(v)(1)) is further amended by adding at the 
     end the following new subparagraph:
       ``(T) Such regulations shall provide that, in determining 
     the amount of the payments that may be made under this title 
     with respect to the capital-related costs of inpatient 
     hospital services furnished by a hospital that is not a 
     subsection (d) hospital (as defined in section 1886(d)(1)(B)) 
     or a subsection (d) Puerto Rico hospital (as defined in 
     section 1886(d)(9)(A)), the Secretary shall reduce the 
     amounts of such payments otherwise established under this 
     title by 15 percent for payments attributable to portions of 
     cost reporting periods occurring during each of the fiscal 
     years 1996 through 2005.''.

              PART 2--SAVINGS RELATING TO MEDICARE PART B

     SEC. 6111. ESTABLISHMENT OF CUMULATIVE EXPENDITURE GOALS FOR 
                   PHYSICIAN SERVICES.

       (a) Use of Cumulative Performance Standard.--Section 
     1848(f)(2) of the Social Security Act (42 U.S.C. 1395w-
     4(f)(2)) is amended--
       (1) in subparagraph (A)--
       (A) in the heading, by striking ``In general'' and 
     inserting ``Fiscal years 1991 through 1994.--'',
       (B) in the matter preceding clause (i), by striking ``a 
     fiscal year (beginning with fiscal year 1991)'' and inserting 
     ``fiscal years 1991, 1992, 1993, and 1994'', and
       (C) in the matter following clause (iv), by striking 
     ``subparagraph (B)'' and inserting ``subparagraph (C)'';
       (2) in subparagraph (B), by striking ``subparagraph (A)'' 
     and inserting ``subparagraphs (A) and (B)'';
       (3) by redesignating subparagraphs (B) and (C) as 
     subparagraphs (C) and (D); and
       (4) by inserting after subparagraph (A) the following new 
     subparagraph:
       ``(B) Fiscal years beginning with fiscal year 1995.--Unless 
     Congress otherwise provides, the performance standard rate of 
     increase, for all physicians' services and for each category 
     of physicians' services, for a fiscal year beginning with 
     fiscal year 1995 shall be equal to the performance standard 
     rate of increase determined under this paragraph for the 
     previous fiscal year, increased by the product of--
       ``(i) 1 plus the Secretary's estimate of the weighted 
     average percentage increase (divided by 100) in the fees for 
     all physicians' services or for the category of physicians' 
     services, respectively, under this part for portions of 
     calendar years included in the fiscal year involved,
       ``(ii) 1 plus the Secretary's estimate of the percentage 
     increase or decrease (divided by 100) in the average number 
     of individuals enrolled under this part (other than HMO 
     enrollees) from the previous fiscal year to the fiscal year 
     involved,
       ``(iii) 1 plus the Secretary's estimate of the average 
     annual percentage growth (divided by 100) in volume and 
     intensity of all physicians' services or of the category of 
     physicians' services, respectively, under this part for the 
     5-fiscal-year period ending with the preceding fiscal year 
     (based upon information contained in the most recent annual 
     report made pursuant to section 1841(b)(2)), and
       ``(iv) 1 plus the Secretary's estimate of the percentage 
     increase or decrease (divided by 100) in expenditures for all 
     physicians' services or of the category of physicians' 
     services, respectively, in the fiscal year (compared with the 
     previous fiscal year) which are estimated to result from 
     changes in law or regulations affecting the percentage 
     increase described in clause (i) and which is not taken into 
     account in the percentage increase described in clause (i),

     minus 1, multiplied by 100, and reduced by the performance 
     standard factor (specified in subparagraph (C)).''.
       (b) Treatment of Default Update.--
       (1) In general.--Section 1848(d)(3)(B) of such Act (42 
     U.S.C. 1395w-4(d)(3)(B)) is amended--
       (A) in clause (i)--
       (i) in the heading, by striking ``In general'' and 
     inserting ``1992 through 1996'', and
       (ii) by striking ``for a year'' and inserting ``for 1992, 
     1993, 1994, 1995, and 1996''; and
       (B) by adding after clause (ii) the following new clause:
       ``(iii) Years beginning with 1997.--

       ``(I) In general.--The update for a category of physicians' 
     services for a year beginning with 1997 provided under 
     subparagraph (A) shall be increased or decreased by the same 
     percentage by which the cumulative percentage increase in 
     actual expenditures for such category of physicians' services 
     for such year was less or greater, respectively, than the 
     performance standard rate of increase (established under 
     subsection (f)) for such category of services for such year.
       ``(II) Cumulative percentage increase defined.--In 
     subclause (I), the `cumulative percentage increase in actual 
     expenditures' for a year shall be equal to the product of the 
     adjusted increases for each year beginning with 1995 up to 
     and including the year involved, minus 1 and multiplied by 
     100. In the previous sentence, the `adjusted increase' for a 
     year is equal to 1 plus the percentage increase in actual 
     expenditures for the year.''.

       (2) Conforming amendment.--Section 1848(d)(3)(A)(i) of such 
     Act (42 U.S.C. 1395w-4(d)(3)(A)(i)) is amended by striking 
     ``subparagraph (B)'' and inserting ``subparagraphs (B) and 
     (C)''.
       (c) Use of Real GDP to Adjust for Volume and Intensity.--
     Section 1848(f)(2)(B)(iii) of such Act (42 U.S.C. 1395w-
     4(f)(2)(B)(iii)), as added by subsection (a), is amended to 
     read as follows:
       ``(iii) 1 plus the average per capita growth in the real 
     gross domestic product (divided by 100) for the 5-fiscal-year 
     period ending with the previous fiscal year (increased by 1.5 
     percentage points for the category of services consisting of 
     primary care services), and''.
       (d) Repeal of Restriction on Maximum Reduction.--Section 
     1848(d)(3)(B)(ii) of such Act (42 U.S.C. 1395w-
     4(d)(3)(B)(ii)) is amended--
       (1) in the heading, by inserting ``in certain years'' after 
     ``adjustment'';
       (2) in the matter preceding subclause (I), by striking 
     ``for a year'';
       (3) in subclause (I), by adding ``and'' at the end;
       (4) in subclause (II), by striking ``, and'' and inserting 
     a period; and
       (5) by striking subclause (III).
       (e) Repeal of Performance Standard Factor.--
       (1) In general.--Section 1842(f)(2) of such Act, as amended 
     by subsection (a)(3), is amended by striking subparagraph (C) 
     and redesignating subparagraph (D) as subparagraph (C).
       (2) Conforming amendment.--Section 1842(f)(2)(B) of such 
     Act, as added by subsection (a), is amended in the matter 
     following clause (iv) by striking ``1, multiplied by 100'' 
     and all that follows through ``subparagraph (C))'' and 
     inserting ``1 and multiplied by 100''.
       (f) Reduction in Conversion Factor for Physician Fee 
     Schedule for 1995.--Section 1848(d)(1) of the Social Security 
     Act (42 U.S.C. 1395w-4(d)(1)) is amended--
       (1) in subparagraph (A), by inserting after ``subparagraph 
     (B)'' the following: ``, and, in the case of 1995, specified 
     in subparagraph (C)'';
       (2) by redesignating subparagraph (C) as subparagraph (D); 
     and
       (3) by inserting after subparagraph (B) the following new 
     subparagraph:
       ``(C) Special provision for 1995.--For purposes of 
     subparagraph (A), the conversion factor specified in this 
     subparagraph for 1995 is--
       ``(i) in the case of physicians' services included in the 
     category of primary care services (as defined in subsection 
     (j)(1)), the conversion factor established under this 
     subsection for 1994 adjusted by the update established under 
     paragraph (3) for 1995; and
       ``(ii) in the case of any other physicians' services, the 
     conversion factor established under this subsection for 1994 
     reduced by 3 percent and adjusted by the update established 
     under paragraph (3) for 1995.''.

     SEC. 6112. IMPOSITION OF COINSURANCE ON LABORATORY SERVICES.

       (a) In General.--Paragraphs (1)(D) and (2)(D) of section 
     1833(a) of the Social Security Act (42 U.S.C. 1395l(a)) are 
     each amended--
       (1) by striking ``(or 100 percent'' and all that follows 
     through ``the first opinion))''; and
       (2) by striking ``100 percent of such negotiated rate'' and 
     inserting ``80 percent of such negotiated rate''.
       (b) Effective Date.--The amendments made by subsection (a) 
     shall apply to tests furnished on or after January 1, 1995.

     SEC. 6113. INCREASE IN MEDICARE PART B PREMIUM FOR 
                   INDIVIDUALS WITH HIGH INCOME.

       (a) In General.--Subchapter A of chapter 1 of the Internal 
     Revenue Code of 1986 is amended by adding at the end thereof 
     the following new part:

   ``PART VIII--MEDICARE PART B PREMIUMS FOR HIGH-INCOME INDIVIDUALS

``Sec. 59B. Medicare part B premium tax.

     ``SEC. 59B. MEDICARE PART B PREMIUM TAX.

       ``(a) Imposition of Tax.--In the case of an individual to 
     whom this section applies for the taxable year, there is 
     hereby imposed (in addition to any other tax imposed by this 
     subtitle) a tax for such taxable year equal to the aggregate 
     of the Medicare part B premium taxes for each of the months 
     during such year that such individual is covered by Medicare 
     part B.
       ``(b) Individuals to Whom Section Applies.--This section 
     shall apply to any individual for any taxable year if--
       ``(1) such individual is covered under Medicare part B for 
     any month during such year, and
       ``(2) the modified adjusted gross income of the taxpayer 
     for such taxable year exceeds the threshold amount.
       ``(c) Medicare Part B Premium Tax for Month.--
       ``(1) In general.--The Medicare part B premium tax for any 
     month is the applicable percentage (as defined in paragraph 
     (2)) of the amount equal to the excess of--
       ``(A) 150 percent of the monthly actuarial rate for 
     enrollees age 65 and over determined for that calendar year 
     under section 1839(b) of the Social Security Act, over
       ``(B) the total monthly premium under section 1839 of the 
     Social Security Act (determined without regard to subsections 
     (b) and (f) of section 1839 of such Act).
       ``(2) Phase-in of tax.--If the modified adjusted gross 
     income of the taxpayer for any taxable years exceeds the 
     threshold amount by--
       ``(A) less than $25,000, the applicable percentage under 
     this paragraph is 33\1/3\ percent;
       ``(B) at least $25,000, but less than $50,000, the 
     applicable percentage under this paragraph is 66\2/3\ 
     percent,
       ``(C) at least $50,000, but less than $75,000, the 
     applicable percentage under this paragraph is 65/75 
     (expressed as a percent), or
       ``(D) at least $75,000, the applicable percentage under 
     this paragraph is 100 percent.
       ``(d) Other Definitions and Special Rules.--For purposes of 
     this section--
       ``(1) Threshold amount.--The term `threshold amount' 
     means--
       ``(A) except as otherwise provided in this paragraph, 
     $75,000,
       ``(B) $100,000 in the case of a joint return, and
       ``(C) zero in the case of a taxpayer who--
       ``(i) is married at the close of the taxable year but does 
     not file a joint return for such year, and
       ``(ii) does not live apart from his spouse at all times 
     during the taxable year.
       ``(2) Modified adjusted gross income.--The term `modified 
     adjusted gross income' means adjusted gross income--
       ``(A) determined without regard to sections 135, 911, 931, 
     and 933, and
       ``(B) increased by the amount of interest received or 
     accrued by the taxpayer during the taxable year which is 
     exempt from tax.
       ``(3) Medicare part b coverage.--An individual shall be 
     treated as covered under Medicare part B for any month if a 
     premium is paid under part B of title XVIII of the Social 
     Security Act for the coverage of the individual under such 
     part for the month.
       ``(4) Married individual.--The determination of whether an 
     individual is married shall be made in accordance with 
     section 7703.''.
       (b) Clerical Amendment.--The table of parts for subchapter 
     A of chapter 1 of such Code is amended by adding at the end 
     thereof the following new item:

``Part VIII. Medicare Part B Premiums For High-Income Individuals.''.

       (c) Effective Date.--The amendments made by this section 
     shall apply to months after December 1995 in taxable years 
     ending after December 31, 1995.

     SEC. 6114. EXTENSION OF 25 PERCENT PART B PREMIUM.

       Section 1839(e) of the Social Security Act (42 U.S.C. 
     1395r(e)) is amended--
       (1) in paragraph (1)(A), by striking ``after after December 
     1995 and prior to January 1999'' and inserting ``after 
     December 1995'';
       (2) by striking ``(1)(A)'' and inserting ``(1)'';
       (3) by striking paragraph (2); and
       (4) by redesignating subparagraph (B) of paragraph (1) as 
     paragraph (2) (and redesignating the clauses of such 
     subparagraph accordingly).

     SEC. 6115. REDUCTION IN HOSPITAL OUTPATIENT SERVICES THROUGH 
                   ESTABLISHMENT OF PROSPECTIVE PAYMENT SYSTEM.

       (a) In General.--Section 1833(a)(2)(B) of the Social 
     Security Act (42 U.S.C. 1395l(a)(2)(B)) is amended by 
     striking ``section 1886)--'' and all that follows and 
     inserting the following: ``section 1886), an amount equal to 
     a prospectively determined payment rate established by the 
     Secretary that provides for payments for such items and 
     services to be based upon a national rate adjusted to take 
     into account the relative costs of furnishing such items and 
     services in various geographic areas, except that for items 
     and services furnished during cost reporting periods (or 
     portions thereof) in years beginning with 1996, such amount 
     shall be equal to 95 percent of the amount that would 
     otherwise have been determined;''.
       (b) Establishment of Prospective Payment System.--Not later 
     than July 1, 1995, the Secretary of Health and Human Services 
     shall establish the prospective payment system for hospital 
     outpatient services necessary to carry out section 
     1833(a)(2)(B) of the Social Security Act (as amended by 
     subsection (a)).
       (c) Effective Date.--The amendment made by subsection (a) 
     shall apply to items and services furnished on or after 
     January 1, 1996.

           PART 3--SAVINGS RELATING TO MEDICARE PARTS A AND B

     SEC. 6121. REDUCTION IN HOME HEALTH SERVICES THROUGH 
                   ESTABLISHMENT OF PROSPECTIVE PAYMENT SYSTEM.

       (a) In General.--Section 1833(a)(2)(A) of the Social 
     Security Act (42 U.S.C. 1395l(a)(2)(A)) is amended by 
     striking ``section 1861(s)(10)(A), the lesser of--'' and all 
     that follows and inserting the following: ``section 
     1861(s)(10)(A), an amount equal to a prospectively determined 
     payment rate established by the Secretary that provides for 
     payments for such services to be based upon a national rate 
     adjusted to take into account the relative costs of 
     furnishing such services in various geographic areas, except 
     that for services furnished during cost reporting periods (or 
     portions thereof) in years beginning with 1996, such amount 
     shall be equal to 95 percent of the amount that would 
     otherwise have been determined;''.
       (b) Establishment of Prospective Payment System.--Not later 
     than July 1, 1995, the Secretary of Health and Human Services 
     shall establish the prospective payment system for home 
     health services necessary to carry out section 1833(a)(2)(A) 
     of the Social Security Act (as amended by subsection (a)).
       (c) Effective Date.--The amendment made by subsection (a) 
     shall apply to items and services furnished on or after 
     January 1, 1996.

     SEC. 6122. MEDICARE SECONDARY PAYER.

       (a) Delay in Sunset of Data Matching Requirements.--(1) 
     Section 1862(b)(5)(C)(iii) of the Social Security Act (42 
     U.S.C. 1395y(b)(5)(C)(iii)) is amended by striking ``1998'' 
     and inserting ``2005''.
       (2) Section 6103(l)(12)(F) of the Internal Revenue Code of 
     1986 is amended--
       (A) in clause (i), by striking ``1998'' and inserting 
     ``2005'',
       (B) in clause (ii)(I), by striking ``1997'' and inserting 
     ``2004'', and
       (C) in clause (ii)(II), by striking ``1998'' and inserting 
     ``2005''.
       (b) Extension of Medicare Secondary Payer to Disabled 
     Beneficiaries.--Section 1862(b)(1)(B)(iii) of the Social 
     Security Act (42 U.S.C. 1395y(b)(1)(B)(iii)) is amended by 
     striking ``1998'' and inserting ``2005''.
       (c) Extension of Coverage for Individuals With End Stage 
     Renal Disease.--Section 1862(b)(1)(C) of such Act (42 U.S.C. 
     1395y(b)(1)(C)) is amended--
       (1) in the second sentence, by striking ``October 1, 1998'' 
     and inserting ``October 1, 1995''; and
       (2) by adding at the end the following: ``Effective for 
     items and services furnished on or after October 1, 1995, and 
     before October 1, 2005 (with respect to periods beginning on 
     or after April 1, 1994), clauses (i) and (ii) shall be 
     applied by substituting `24-month' for `12-month' each place 
     it appears.''.

                      PART 4--SAVINGS IN MEDICAID

     SEC. 6131. ELIMINATION OF MEDICAID PEDIATRIC IMMUNIZATION 
                   PROGRAM.

       Effective as if included in the enactment of the 13621 of 
     the Omnibus Budget Reconciliation Act of 1993, title XIX of 
     the Social Security Act is amended as follows:
       (1) Section 1902(a) (42 U.S.C. 1396a(a)) is amended by 
     striking paragraph (62).
       (2) Section 1928 (42 U.S.C. 1396s) is repealed.
       (3) Section 1903(i) (42 U.S.C. 1396b(i)) is amended--
       (A) by inserting ``or'' at the end of paragraph (12),
       (B) by striking the semicolon at the end of paragraph (13) 
     and inserting a period, and
       (C) by striking paragraphs (14) and (15).
       (4) Section 1902(a)(32) (42 U.S.C. 1396a(a)(32)) is 
     amended--
       (A) by adding ``and'' at the end of subparagraph (B),
       (B) by striking ``; and'' at the end of subparagraph (C) 
     and inserting a period, and
       (C) by striking subparagraph (D).
       (5) Section 1902(a) (42 U.S.C. 1396a(a)) is amended--
       (A) in paragraph (11)(B)--
       (ii) by inserting ``and'' before ``(ii)'', and
       (iii) by striking ``to the individual under section 1903, 
     and (iii) providing for coordination of information and 
     education on pediatric vaccinations and delivery of 
     immunization services'' and inserting ``to him under section 
     1903'';
       (B) in paragraph (11)(C), by striking ``, including the 
     provision of information and education on pediatric 
     vaccinations and the delivery of immunization services,'' and
       (C) in paragraph (43)(A), by striking ``and the need for 
     age-appropriate immunizations against vaccine-preventable 
     diseases''.
       (6) Section 1905(r)(1) (42 U.S.C. 1396d(r)(1)) is amended--
       (A) in subparagraph (A)(i), by striking ``and, with respect 
     to immunizations under subparagraph (B)(iii), in accordance 
     with the schedule referred to in section 1928(c)(2)(B)(i) for 
     pediatric vaccines''; and
       (B) in subparagraph (B)(iii), by striking ``(according to 
     the schedule referred to in section 1928(c)(2)(B)(i) for 
     pediatric vaccines)''.

     SEC. 6132. 25 PERCENT REDUCTION IN AMOUNT OF PAYMENT 
                   ADJUSTMENTS FOR DISPROPORTIONATE SHARE 
                   HOSPITALS.

       (a) In General.--Section 1923 of the Social Security Act 
     (42 U.S.C. 1396r-4) is amended by adding at the end the 
     following new subsection:
       ``(h) Reduction in Federal Financial Participation for 
     Disproportionate Share Adjustments.--
       ``(1) In general.--Notwithstanding any other provision of 
     this section, the amount of payments under section 1903(a) 
     with respect to any payment adjustment made under this 
     section for hospitals in a State for quarters in a fiscal 
     year shall not the applicable percentage of the amount 
     otherwise determined under subsection (f)
       ``(2) Applicable percentage defined.--In paragraph (1), the 
     applicable percentage for a fiscal year is as follows:
       ``(A) For each of the fiscal years 1997 and 1998, 75 
     percent.
       ``(B) For fiscal year 1999, 70 percent.
       ``(C) For fiscal year 2000 and each succeeding fiscal year, 
     65 percent.''.
       (b) Conforming Amendment.--Section 1923(c) of such Act (42 
     U.S.C. 1396r-4(c)) is amended in the matter preceding 
     paragraph (1) by striking ``(f) and (g)'' and inserting 
     ``(f), (g), and (h)''.
       (c) Effective Date.--The amendments made by subsections (a) 
     and (b) shall apply to quarters in fiscal years beginning on 
     or after October 1, 1995.

     SEC. 6133. DENIAL OF MEDICAID ELIGIBILITY FOR CERTAIN ALIENS.

       (a) In General.--Section 1903(v) of the Social Security Act 
     (42 U.S.C. 1396b(v)(1)) is amended--
       (1) in paragraph (1)--
       (A) by striking ``paragraph (2)'' and inserting 
     ``paragraphs (2) and (3)'', and
       (B) by striking ``who is not lawfully admitted'' and all 
     that follows and inserting a period;
       (2) in paragraph (2), by striking ``described in paragraph 
     (1)''; and
       (3) by adding at the end the following new paragraph:
       ``(4) The limitation on payments provided under paragraph 
     (1) shall not apply with respect to medical assistance 
     furnished to an alien--
       ``(A) who is 75 years of age or older;
       ``(B) in the case of an alien who has qualified for 
     conditional entry pursuant to section 207 or 208 of the 
     Immigration and Nationality Act, during the 5-year period 
     beginning on the date such alien enters the United States; or
       ``(C) in the case of any other alien, during the 1-year 
     period beginning on the date such alien enters the United 
     States.''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to medical assistance furnished during quarters 
     beginning on or after the expiration of the 1-year period 
     that begins on the date of the enactment of this Act, without 
     regard to whether or not regulations to carry out such 
     amendments have been promulgated by such date.

     SEC. 6134. ELIMINATION OF MEDICALLY NEEDY PROGRAM FOR 
                   INDIVIDUALS NOT IN AN INSTITUTION.

       (a) In General.--Section 1902(a)(10)(C) of the Social 
     Security Act (42 U.S.C. 1396a(a)(10)(C)) is amended by 
     inserting ``such assistance is restricted to individuals in 
     institutions and'' after ``, then''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to calendar quarters beginning on or after 
     January 1, 1998.
       TITLE VII--INCENTIVES TO PURCHASE LONG-TERM CARE INSURANCE


                       table of contents of title

       TITLE VII--INCENTIVES TO PURCHASE LONG-TERM CARE INSURANCE

   Subtitle A--Establishment of Federal Standards for Long-term Care 
                               Insurance

Sec. 7001. Establishment of Federal standards for long-term care 
              insurance.

           ``TITLE XXVII--LONG-TERM CARE INSURANCE STANDARDS

         ``Part A--Promulgation of Standards and Model Benefits

``Sec. 2701. Standards.

``Part B--Establishment and Implementation of Long-term Care Insurance 
                            Policy Standards

``Sec. 2711. Implementation of policy standards.
``Sec. 2712. Regulation of sales practices.
``Sec. 2713. Additional responsibilities for carriers.
``Sec. 2714. Renewability standards for issuance, and basis for 
              cancellation of policies.
``Sec. 2715. Benefit standards.
``Sec. 2716. Nonforfeiture.
``Sec. 2717. Limit of period of contestability and right to return.
``Sec. 2718. Civil money penalty.

      ``Part C--long-term Care Insurance Policies, Definition and 
                              Endorsements

``Sec. 2721. Long-term care insurance policy defined.
``Sec. 2722. Code of conduct with respect to endorsements.

                   ``Part D--miscellaneous Provisions

``Sec. 2731. Definitions.

         Subtitle B--Tax Treatment of Long-term Care Insurance

Sec. 7101. Treatment of long-term care insurance or plans.
Sec. 7102. Exclusion for benefits provided under long-term care 
              insurance; inclusion of employer-provided coverage.
Sec. 7103. Qualified long-term services treated as medical care.
Sec. 7104. Exclusion from gross income for amounts otherwise includible 
              on the surrender or cancellation of any life insurance 
              policy which are used for long-term care insurance 
              premiums.
Sec. 7105. Effective date.

                          Subtitle C--Studies

Sec. 7201. Feasibility of encouraging health care providers to donate 
              services to homebound patients.
Sec. 7202. Feasibility of tax credit for heads of households who care 
              for elderly family members in their homes.
Sec. 7203. Case management of current long-term care benefits.
Sec. 7204. Subacute care study.
Sec. 7205. Study of long-term care insurance.
   Subtitle A--Establishment of Federal Standards for Long-term Care 
                               Insurance

     SEC. 7001. ESTABLISHMENT OF FEDERAL STANDARDS FOR LONG-TERM 
                   CARE INSURANCE.

       (a) In General.--The Public Health Service Act is amended--
       (1) by redesignating title XXVII (42 U.S.C. 300cc et seq.) 
     as title XXVIII; and
       (2) by inserting after title XXVI the following new title:
           ``TITLE XXVII--LONG-TERM CARE INSURANCE STANDARDS

         ``Part A--Promulgation of Standards and Model Benefits

     ``SEC. 2701. STANDARDS.

       ``(a) Application of Standards.--
       ``(1) NAIC.--The Secretary shall request that the National 
     Association of Insurance Commissioners (hereinafter in this 
     title referred to as the `NAIC')--
       ``(A) develop specific standards that incorporate the 
     requirements of this title; and
       ``(B) report to the Secretary on such standards,

     by not later than 12 months after enactment of this title. If 
     the NAIC develops such model standards that incorporate the 
     requirements of this title within such period and the 
     Secretary finds that such standards implement the 
     requirements of this title, such standards shall be the 
     standards applied under this title.
       ``(2) Default.--If the NAIC does not promulgate the model 
     standards under paragraph (1) by the deadline established in 
     that paragraph, the Secretary shall promulgate, within 12 
     months after such deadline, a regulation that provides 
     standards that incorporate the requirements of this title and 
     such standards shall apply as provided for in this title.
       ``(3) Relation to state law.--Nothing in this title shall 
     be construed as preventing a State from applying standards 
     that provide greater protection to policyholders of long-term 
     care insurance policies than the standards promulgated under 
     this title, except that such State standards may not be 
     inconsistent or in conflict with any of the requirements of 
     this title.
       ``(b) Deadline for Application of Standards.--
       ``(1) In general.--Subject to paragraph (2), the date 
     specified in this subsection for a State is--
       ``(A) the date the State adopts the standards established 
     under subsection (a)(1); or
       ``(B) the date that is 1 year after the first day of the 
     first regular legislative session that begins after the date 
     such standards are first established under subsection (a)(2);

     whichever is earlier.
       ``(2) State requiring legislation.--In the case of a State 
     which the Secretary identifies, in consultation with the 
     NAIC, as--
       ``(A) requiring State legislation (other than legislation 
     appropriating funds) in order for the standards established 
     under subsection (a) to be applied; but
       ``(B) having a legislature which is not scheduled to meet 
     within 1 year following the beginning of the next regular 
     legislative session in which such legislation may be 
     considered;

     the date specified in this subsection is the first day of the 
     first calendar quarter beginning after the close of the first 
     legislative session of the State legislature that begins on 
     or after January 1, 1995. For purposes of the previous 
     sentence, in the case of a State that has a 2-year 
     legislative session, each year of such session shall be 
     deemed to be a separate regular session of the State 
     legislature.
       ``(c) Items Included in Standards.--The standards 
     promulgated under subsection (a) shall include--
       ``(1) minimum Federal standards for long-term care 
     insurance consistent with the provisions of this title;
       ``(2) standards for the enhanced protection of consumers 
     with long-term care insurance;
       ``(3) procedures for the modification of the standards 
     established under paragraph (1) in a manner consistent with 
     future laws to expand existing Federal or State long-term 
     care benefits or establish a comprehensive Federal or State 
     long-term care benefit program; and
       ``(4) other activities determined appropriate by Congress.
       ``(d) Consultation.--In establishing standards and models 
     of benefits under this section, the Secretary shall provide 
     for and consult with an advisory committee to be chosen by 
     the Secretary, and composed of--
       ``(1) three individuals who are representatives of 
     carriers;
       ``(2) three individuals who are representatives of consumer 
     groups;
       ``(3) three representatives who are representatives of 
     providers of long-term care services;
       ``(4) three other individuals who are not representatives 
     of carriers or of providers of long-term care services and 
     who have expertise in the delivery and financing of such 
     services; and
       ``(5) the Secretary of Veterans Affairs.
       ``(e) Duties.--The advisory committee established under 
     subsection (d) shall--
       ``(1) recommend the appropriate inflationary index to be 
     used with respect to the inflation protection benefit portion 
     of the standards;
       ``(2) recommend the uniform needs assessment mechanism to 
     be used in determining the eligibility of individuals for 
     benefits under a policy;
       ``(3) recommend appropriate standards for benefits under 
     section 2715(c); and
       ``(4) perform such other activities as determined 
     appropriate by the Secretary.
       ``(f) Administrative Provisions.--The following provisions 
     of section 1886(e)(6) of the Social Security Act shall apply 
     to the advisory committee chosen under subsection (d) in the 
     same manner as such provisions apply under such section:
       ``(1) Subparagraph (C) (relating to staffing and 
     administration).
       ``(2) Subparagraph (D) (relating to compensation of 
     members).
       ``(3) Subparagraph (F) (relating to access to information).
       ``(4) Subparagraph (G) (relating to use of funds).
       ``(5) Subparagraph (H) (relating to periodic GAO audits).
       ``(6) Subparagraph (J) (relating to requests for 
     appropriations).

``Part B--Establishment and Implementation of Long-Term Care Insurance 
                            Policy Standards

     ``SEC. 2711. IMPLEMENTATION OF POLICY STANDARDS.

       ``(a) In General.--
       ``(1) Regulatory program.--No long-term care policy (as 
     defined in section (2721)) may be issued, sold, or offered 
     for sale as a long-term care insurance policy in a State on 
     or after the date specified in section 2701(b) unless--
       ``(A) the Secretary determines that the State has 
     established a regulatory program that--
       ``(i) provides for the application and enforcement of the 
     standards established under section 2701(a); and
       ``(ii) complies with the requirements of subsection (b);

     by the date specified in section 2701(b), and the policy has 
     been approved by the State commissioner or superintendent of 
     insurance under such program; or
       ``(B) if the State has not established such a program, or 
     if the State's regulatory program has been decertified, the 
     policy has been certified by the Secretary (in accordance 
     with such procedures as the Secretary may establish) as 
     meeting the standards established under section 2701(a) by 
     the date specified in section 2701(b).

     For purposes of this subsection, the advertising or 
     soliciting with respect to a policy, directly or indirectly, 
     shall be deemed the offering for sale of the policy.
       ``(2) Review of state regulatory programs.--The Secretary 
     periodically shall review regulatory programs described in 
     paragraph (1)(A) to determine if they continue to provide for 
     the application and enforcement of the standards and 
     procedures established under section 2701(a) and (b). If the 
     Secretary determines that a State regulatory program no 
     longer meets such standards and requirements, before making a 
     final determination, the Secretary shall provide the State an 
     opportunity to adopt such a plan of correction as would 
     permit the program to continue to meet such standards and 
     requirements. If the Secretary makes a final determination 
     that the State regulatory program, after such an opportunity, 
     fails to meet such standards and requirements, the Secretary 
     shall assume responsibility under paragraph (1)(B) with 
     respect to certifying policies in the State and shall 
     exercise full authority under section 2701 for carriers, 
     agents, or associations or its subsidiary in the State plans 
     in the State.
       ``(b) Additional Requirements for Approval of State 
     Regulatory Programs.--For purposes of subsection 
     (a)(1)(A)(ii), the requirements of this subsection for a 
     State regulatory program are as follows:
       ``(1) Enforcement.--The enforcement under the program--
       ``(A) shall be designed in a manner so as to secure 
     compliance with the standards within 30 days after the date 
     of a finding of noncompliance with such standards; and
       ``(B) shall provide for notice in the annual report 
     required under paragraph (5) to the Secretary of cases where 
     such compliance is not secured within such 30-day period.
       ``(2) Process.--The enforcement process under each State 
     regulatory program shall provide for--
       ``(A) procedures for individuals and entities to file 
     written, signed complaints respecting alleged violations of 
     the standards;
       ``(B) responding on a timely basis to such complaints;
       ``(C) the investigation of--
       ``(i) those complaints which have a reasonable probability 
     of validity, and
       ``(ii) such other alleged violations of the standards as 
     the program finds appropriate; and
       ``(D) the imposition of appropriate sanctions (which 
     include, in appropriate cases, the imposition of a civil 
     money penalty as provided for in section 2718) in the case of 
     a carrier, agent, or association or its subsidiary determined 
     to have violated the standards.
       ``(3) Consumer access to compliance information.--
       ``(A) In general.--A State regulatory program must provide 
     for consumer access to complaints filed with the State 
     commissioner or superintendent of insurance with respect to 
     long-term care insurance policies.
       ``(B) Confidentiality.--The access provided under 
     subparagraph (A) shall be limited to the extent required to 
     protect the confidentiality of the identity of individual 
     policyholders.
       ``(4) Process for approval of premiums.--
       ``(A) In general.--Each State regulatory program shall--
       ``(i) provide for a process for approving or disapproving 
     proposed premium increases or decreases with respect to long-
     term care insurance policies; and
       ``(ii) establish a policy for receipt and consideration of 
     public comments before approving such a premium increase or 
     decrease.
       ``(B) Conditions for approval.--No premium increase shall 
     be approved (or deemed approved) under subparagraph (A) 
     unless the proposed increase is accompanied by an actuarial 
     memorandum which--
       ``(i) includes a description of the assumptions that 
     justify the increase;
       ``(ii) contains such information as may be required under 
     the Standards; and
       ``(iii) is made available to the public.
       ``(C) Application.--Except as provided in subparagraph (D), 
     this paragraph shall not apply to a group long-term care 
     insurance policy issued to a group described in section 
     4(E)(1) of the NAIC Long Term Care Insurance Model Act 
     (effective January 1991), except that such group policy 
     shall, pursuant to guidelines developed by the NAIC, provide 
     notice to policyholders and certificate holders of any 
     premium change under such group policy.
       ``(D) Exception.--Subparagraph (C) shall not apply to--
       ``(i) group conversion policies;
       ``(ii) the group continuation feature of a group policy if 
     the insurer separately rates employee and continuation 
     coverages; and
       ``(iii) group policies where the function of the employer 
     is limited solely to collecting premiums (through payroll 
     deductions or dues checkoff) and remitting them to the 
     insurer.
       ``(E) Construction.--Nothing in this paragraph shall be 
     construed as preventing the NAIC from promulgating standards, 
     or a State from enacting and enforcing laws, with respect to 
     premium rates or loss ratios for all, including group, long-
     term care insurance policies.
       ``(5) Annual reports.--Each State regulatory program shall 
     provide for annual reports to be submitted to the Secretary 
     on the implementation and enforcement of the standards in the 
     State, including information concerning violations in excess 
     of 30 days.
       ``(6) Access to other information.--The State regulatory 
     program must provide for consumer access to actuarial 
     memoranda provided under paragraph (4).
       ``(7) Default.--In the case of a State without a regulatory 
     program approved under subsection (a), the Secretary shall 
     provide for the enforcement activities described in 
     subsection (c).
       ``(c) Secretarial Enforcement Authority.--
       ``(1) In general.--The Secretary shall exercise authority 
     under this section in the case of a State that does not have 
     a regulatory program approved under this section.
       ``(2) Complaints and investigations.--The Secretary shall 
     establish procedures--
       ``(A) for individuals and entities to file written, signed 
     complaints respecting alleged violations of the requirements 
     of this title;
       ``(B) for responding on a timely basis to such complaints; 
     and
       ``(C) for the investigation of--
       ``(i) those complaints that have a reasonable probability 
     of validity; and
       ``(ii) such other alleged violations of the requirements of 
     this title as the Secretary determines to be appropriate.

     In conducting investigations under this subsection, agents of 
     the Secretary shall have reasonable access necessary to 
     enable such agents to examine evidence of any carrier, agent, 
     or association or its subsidiary being investigated.
       ``(3) Hearings.--
       ``(A) In general.--Prior to imposing an order described in 
     paragraph (4) against a carrier, agent, or association or its 
     subsidiary under this section for a violation of the 
     requirements of this title, the Secretary shall provide the 
     carrier, agent, association or subsidiary with notice and, 
     upon request made within a reasonable time (of not less than 
     30 days, as established by the Secretary by regulation) of 
     the date of the notice, a hearing respecting the violation.
       ``(B) Conduct of hearing.--Any hearing requested under 
     subparagraph (A) shall be conducted before an administrative 
     law judge. If no hearing is so requested, the Secretary's 
     imposition of the order shall constitute a final and 
     unappealable order.
       ``(C) Authority in hearings.--In conducting hearings under 
     this paragraph--
       ``(i) agents of the Secretary and administrative law judges 
     shall have reasonable access necessary to enable such agents 
     and judges to examine evidence of any carrier, agent, or 
     association or its subsidiary being investigated; and
       ``(ii) administrative law judges, may, if necessary, compel 
     by subpoena the attendance of witnesses and the production of 
     evidence at any designated place or hearing.

     In case of contumacy or refusal to obey a subpoena lawfully 
     issued under this subparagraph and upon application of the 
     Secretary, an appropriate district court of the United States 
     may issue an order requiring compliance with such subpoena 
     and any failure to obey such order may be punished by such 
     court as a contempt thereof.
       ``(D) Issuance of orders.--If an administrative law judge 
     determines in a hearing under this paragraph, upon the 
     preponderance of the evidence received, that a carrier, 
     agent, or association or its subsidiary named in the 
     complaint has violated the requirements of this title, the 
     administrative law judge shall state the findings of fact and 
     issue and cause to be served on such carrier, agent, 
     association, or subsidiary an order described in paragraph 
     (4).
       ``(4) Cease and desist order with civil money penalty.--
       ``(A) In general.--Subject to the provisions of 
     subparagraphs (B) through (F), an order under this 
     paragraph--
       ``(i) shall require the agent, association or its 
     subsidiary, or a carrier--

       ``(I) to cease and desist from such violations; and
       ``(II) to pay a civil penalty in an amount not to exceed 
     $15,000 in the case of each agent, and not to exceed $25,000 
     for each association or its subsidiary or a carrier for each 
     such violation; and

       ``(ii) may require the agent, association or its 
     subsidiary, or a carrier to take such other remedial action 
     as is appropriate.
       ``(B) Corrections within 30 days.--No order shall be 
     imposed under this paragraph by reason of any violation if 
     the carrier, agent, or association or its subsidiary 
     establishes to the satisfaction of the Secretary that--
       ``(i) such violation was due to reasonable cause and was 
     not intentional and was not due to willful neglect; and
       ``(ii) such violation is corrected within the 30-day period 
     beginning on the earliest date the carrier, agent, 
     association, or subsidiary knew, or exercising reasonable 
     diligence could have known, that such a violation was 
     occurring.
       ``(C) Waiver by secretary.--In the case of a violation 
     under this title that is due to reasonable cause and not to 
     willful neglect, the Secretary may waive part or all of the 
     civil money penalty imposed under subparagraph (A)(i)(II) to 
     the extent that payment of such penalty would be grossly 
     excessive relative to the violation involved and to the need 
     for deterrence of violations.
       ``(D) Administrative appellate review.--The decision and 
     order of an administrative law judge under this paragraph 
     shall become the final agency decision and order of the 
     Secretary unless, within 30 days, the Secretary modifies or 
     vacates the decision and order, in which case the decision 
     and order of the Secretary shall become a final order under 
     this paragraph.
       ``(E) Judicial review.--A carrier, agent, or association or 
     its subsidiary or any other individual adversely affected by 
     a final order issued under this paragraph may, within 45 days 
     after the date the final order is issued, file a petition in 
     the Court of Appeals for the appropriate circuit for review 
     of the order.
       ``(F) Enforcement of orders.--If a carrier, agent, or 
     association or its subsidiary fails to comply with a final 
     order issued under this paragraph against the carrier, agent, 
     association or subsidiary after opportunity for judicial 
     review under subparagraph (E), the Secretary shall file a 
     suit to seek compliance with the order in any appropriate 
     district court of the United States. In any such suit, the 
     validity and appropriateness of the final order shall not be 
     subject to review.

     ``SEC. 2712. REGULATION OF SALES PRACTICES.

       ``(a) Duty of Good Faith and Fair Dealing.--
       ``(1) In general.--Each agent (as defined in section 2733) 
     or association that is selling or offering for sale a long-
     term care insurance policy has the duty of good faith and 
     fair dealing to the purchaser or potential purchaser of such 
     a policy.
       ``(2) Prohibited practices.--An agent or association is 
     considered to have violated paragraph (1) if the agent or 
     association engages in any of the following practices:
       ``(A) Twisting.--
       ``(i) In general.--Knowingly making any misleading 
     representation (including the inaccurate completion of 
     medical histories) or incomplete or fraudulent comparison of 
     any long-term care insurance policy or insurers for the 
     purpose of inducing, or tending to induce, any person to 
     retain or effect a change with respect to a long-term care 
     insurance policy.
       ``(ii) Policy replacement form.--With respect to any person 
     who elects to replace or effect a change in a long-term care 
     insurance policy, the individual that is selling such policy 
     shall ensure that such person completes a policy replacement 
     form developed by the NAIC. A copy of such form shall be 
     provided to such person and additional copies shall be 
     delivered by the selling individual to the old policy issuer 
     and the new issuer and kept on file for inspection by the 
     State regulatory agency.
       ``(B) High pressure tactics.--Employing any method of 
     marketing having the effect of, or intending to, induce the 
     purchase of long-term care insurance policy through force, 
     fright, threat or undue pressure, whether explicit or 
     implicit.
       ``(C) Cold lead advertising.--Making use directly or 
     indirectly of any method of marketing which fails to disclose 
     in a conspicuous manner that a purpose of the method of 
     marketing is solicitation of insurance and that contact will 
     be made by an insurance agent or insurance company.
       ``(D) Others.--Engaging in such other practices determined 
     inappropriate under guidelines issued by the NAIC.
       ``(b) Financial Standards.--The NAIC shall develop 
     recommended financial minimum standards (including both 
     income and asset criteria) for the purpose of advising 
     individuals considering the purchase of a long-term care 
     insurance policy.
       ``(c) Prohibition of Sale or Issuance to Medicaid 
     Beneficiaries.--An agent, an association, or a carrier may 
     not knowingly sell or issue a long-term care insurance policy 
     to an individual who is eligible for medical assistance under 
     title XIX of the Social Security Act.
       ``(d) Prohibition of Sale or Issuance of Duplicate Service 
     Benefit Policies.--An agent, association or its subsidiary, 
     or a carrier may not sell or issue a service-benefit long-
     term care insurance policy to an individual--
       ``(1) knowing that the policy provides for coverage that 
     duplicates coverage already provided in another service-
     benefit long-term care insurance policy held by such 
     individual (unless the policy is intended to replace such 
     other policy); or
       ``(2) for the benefit of an individual unless the 
     individual (or a representative of the individual) provides a 
     written statement to the effect that the coverage--
       ``(A) does not duplicate other coverage in effect under a 
     service-benefit long-term care insurance policy; or
       ``(B) will replace another service-benefit long-term care 
     insurance policy.

     In this subsection, the term `service-benefit long-term care 
     insurance policy' means a long-term care insurance policy 
     which provides for benefits based on the type and amount of 
     services furnished.
       ``(e) Prohibition Based on Eligibility for Other 
     Benefits.--A carrier may not sell or issue a long-term care 
     insurance policy that reduces, limits or coordinates the 
     benefits provided under the policy on the basis that the 
     policyholder has or is eligible for other long-term care 
     insurance coverage or benefits.
       ``(f) Provision of Outline of Coverage.--No agent, 
     association or its subsidiary, or carrier may sell or offer 
     for a sale a long-term care insurance policy (or for a 
     certificate under a group long-term care insurance policy) 
     without providing to the purchaser or potential purchaser (or 
     representative) an outline of coverage that complies with the 
     standards established under section 2701(a).
       ``(g) Penalties.--Any agent who sells, offers for sale, or 
     issues a long-term care insurance policy in violation of this 
     section may be imprisoned not more than 5 years, or fined in 
     accordance with title 18, United States Code, and, in 
     addition, is subject to a civil money penalty of not to 
     exceed $15,000 for each such violation. Any association or 
     its subsidiary or carrier that sells, offers for sale, or 
     issues a long-term care insurance policy in violation of this 
     section may be fined in accordance with title 18, United 
     States Code, and in addition, is subject to a civil money 
     penalty of not to exceed $25,000 for each violation.
       ``(h) Agent Training and Certification Requirements.--The 
     NAIC, shall establish requirements for long-term care 
     insurance agent training and certification that--
       ``(1) specify requirements for training insurance agents 
     who desire to sell or offer for sale long-term care insurance 
     policies; and
       ``(2) specify procedures for certifying agents who have 
     completed such training and who are as qualified to sell or 
     offer for sale long-term care insurance policies.

     ``SEC. 2713. ADDITIONAL RESPONSIBILITIES FOR CARRIERS.

       ``(a) Refund of Premiums.--If an application for a long-
     term care insurance policy (or for a certificate under a 
     group long-term care insurance policy) is denied or an 
     applicant returns a policy or certificate within 30 days of 
     the date of its issuance pursuant to subsection 2717, the 
     carrier shall refund directly to the applicant, or in the 
     case of an employer to whomever remits the premium, and not 
     by delivery by the agent, not later than 30 days after the 
     date of the denial or return, any premiums paid with respect 
     to such a policy (or certificate).
       ``(b) Mailing of Policy.--If an application for a long-term 
     care insurance policy (or for a certificate under a group 
     long-term care insurance policy) is approved, the carrier 
     shall provide the applicant, or in the case of a group plan 
     the employer, the policy (or certificate) of insurance not 
     later than 30 days after the date of the approval.
       ``(c) Information on Denials of Claims.--If a claim under a 
     long-term care insurance policy is denied, the carrier shall, 
     within 30 days of the date of a written request by the 
     policyholder or certificate holder (or representative)--
       ``(1) provide a written explanation of the reasons for the 
     denial; and
       ``(2) make available all medical and patient records 
     directly relating to such denial.

     Except as provided in subsection (e) of section 2715, no 
     claim under such a policy may be denied on the basis of a 
     failure to disclose a condition at the time of issuance of 
     the policy if the application for the policy failed to 
     request information respecting the condition.
       ``(d) Reporting of Information.--A carrier that issues one 
     or more long-term care insurance policies shall periodically 
     (not less often than annually) report, in a form and in a 
     manner determined by the NAIC, to the Commissioner, 
     superintendent or director of insurance of each State in 
     which the policy is delivered, and shall make available to 
     the Secretary, upon request, information in a form and manner 
     determined by the NAIC concerning--
       ``(1) the long-term care insurance policies of the carrier 
     that are in force;
       ``(2) the most recent premiums for such policies and the 
     premiums imposed for such policies since their initial 
     issuance;
       ``(3) the lapse rate, replacement rate, and rescission 
     rates by policy;
       ``(4) the names of that 10 percent of its agents that--
       ``(A) have the greatest lapse and replacement rate; and
       ``(B) have produced at least $50,000 of long-term care 
     insurance sales in the previous year; and
       ``(5) the claims denied (expressed as a number and as a 
     percentage of claims submitted) by policy.

     Information required under this subsection shall be reported 
     in a format specified in the standards established under 
     section 2701(a). For purposes of paragraph (3), there shall 
     be included (but reported separately) data concerning lapses 
     due to the death of the policyholder. For purposes of 
     paragraph (4), there shall not be included as a claim any 
     claim that is denied solely because of the failure to meet a 
     deductible, waiting period, or exclusionary period.
       ``(e) Standards on Compensation for Sale of Policies.--
       ``(1) In general.--A carrier that issues one or more long-
     term care insurance policies may provide a commission or 
     other compensation to an agent or other representative for 
     the sale of such a policy only if the first year commission 
     or other first year compensation to be paid does not exceed 
     200 percent of the commission or other compensation paid for 
     selling or servicing the policy in the second year, or if the 
     first year commission or other compensation to be paid does 
     not exceed 50 percent of the premium paid on the first year 
     policy, until the NAIC promulgates mandatory standards 
     concerning compensation for the sale of such policies.
       ``(2) Subsequent years.--The commission or other 
     compensation provided for the sale of long-term care 
     insurance policies in years subsequent to the first year of 
     the policy shall be the same as that provided in the second 
     subsequent year and shall be provided for no fewer than 5 
     subsequent years.
       ``(3) Limitation.--No carrier shall provide compensation to 
     its agents for the sale of a long-term care insurance policy 
     and no agent shall receive compensation greater than the 
     renewal compensation payable by the replacing carrier on 
     renewal policies if an existing policy is replaced.
       ``(4) Compensation defined.--As used in this subsection, 
     the term `compensation' includes pecuniary or nonpecuniary 
     remuneration of any kind relating to the sale or renewal of 
     the policy, including but not limited to deferred 
     compensation, bonuses, gifts, prizes, awards, and finders 
     fees.

     ``SEC. 2714. RENEWABILITY STANDARDS FOR ISSUANCE, AND BASIS 
                   FOR CANCELLATION OF POLICIES.

       ``(a) In General.--No long-term care insurance policy may 
     be canceled or nonrenewed for any reason other than 
     nonpayment of premium, material misrepresentation or fraud.
       ``(b) Continuation and Conversion Rights for Group 
     Policies.--
       ``(1) In general.--Each group long-term care insurance 
     policy shall provide covered individuals with a basis for 
     continuation or conversion in accordance with this 
     subsection.
       ``(2) Basis for continuation.--For purposes of paragraph 
     (1), a policy provides a basis for continuation of coverage 
     if the policy maintains coverage under the existing group 
     policy when such coverage would otherwise terminate and which 
     is subject only to the continued timely payment of premium 
     when due. A group policy which restricts provision of 
     benefits and services to or contains incentives to use 
     certain providers or facility, may provide continuation 
     benefits which are substantially equivalent to the benefits 
     of the existing group policy.
       ``(3) Basis for conversion.--For purposes of paragraph (1), 
     a policy provides a basis for conversion of coverage if the 
     policy entitles each individual--
       ``(A) whose coverage under the group policy would otherwise 
     be terminated for any reason; and
       ``(B) who has been continuously insured under the policy 
     (or group policy which was replaced) for at least 6 months 
     before the date of the termination;

     to issuance of a policy providing benefits identical to, 
     substantially equivalent to, or in excess of, those of the 
     policy being terminated, without evidence of insurability.
       ``(4) Treatment of substantial equivalence.--In determining 
     under this subsection whether benefits are substantially 
     equivalent, consideration should be given to the difference 
     between managed care and non-managed care plans.
       ``(5) Group replacement of policies.--If a group long-term 
     care insurance policy is replaced by another long-term care 
     insurance policy purchased by the same policyholder, the 
     succeeding issuer shall offer coverage to all persons covered 
     under the old group policy on its date of termination. 
     Coverage under the new group policy shall not result in any 
     exclusion for preexisting conditions that would have been 
     covered under the group policy being replaced.
       ``(c) Standards for Issuance.--
       ``(1) In general.--
       ``(A) Guarantee.--An agent, association or carrier that 
     sells or issues long-term care insurance policies shall 
     guarantee that such policies shall be sold or issued to an 
     individual, or eligible individual in the case of a group 
     plan, if such individual meets the minimum medical 
     underwriting requirements of such policy.
       ``(B) Premium for converted policy.--If a group policy from 
     which conversion is made is a replacement for a previous 
     group policy, the premium for the converted policy shall be 
     calculated on the basis of the insured's age at the inception 
     of coverage under the group policy from which conversion is 
     made. Where the group policy from which conversion is made 
     replaced previous group coverage, the premium for the 
     converted policy shall be calculated on the basis of the 
     insured's age at inception of coverage under the group policy 
     replaced.
       ``(2) Upgrade for current policies.--The NAIC shall 
     establish standards, including those providing guidance on 
     medical underwriting and age rating, with respect to the 
     access of individuals to policies offering upgraded benefits.
       ``(d) Effect of Incapacitation.--
       ``(1) In general.--
       ``(A) Prohibition.--Except as provided in paragraph (2), a 
     long-term care insurance policy in effect as of the effective 
     date of the standards established under section 2701(a) may 
     not be canceled for nonpayment if the policy holder is 
     determined by a long-term care provider, physician or other 
     health care provider, independent of the issuer of the 
     policy, to be cognitively or mentally incapacitated so as to 
     not make payments in a timely manner.
       ``(B) Reinstatement.--A long-term care policy shall include 
     a provision that provides for the reinstatement of such 
     coverage, in the event of lapse, if the insurer is provided 
     with proof of cognitive or mental incapacitation. Such 
     reinstatement option shall remain available for a period of 
     not less than 5 months after termination and shall allow for 
     the collection of past due premium.
       ``(2) Permitted cancellation.--A long-term care insurance 
     policy may be canceled under paragraph (1) for nonpayment 
     if--
       ``(A) the period of such nonpayment is in excess of 30 
     days; and
       ``(B) notice of intent to cancel is provided to the 
     policyholder or designated representative of the policy 
     holder not less than 30 days prior to such cancellation, 
     except that notice may not be provided until the expiration 
     of 30 days after a premium is due and unpaid.

     Notice under this paragraph shall be deemed to have been 
     given as of 5 days after the mailing date.

     ``SEC. 2715. BENEFIT STANDARDS.

       ``(a) Use of Standard Definitions and Terminology, Uniform 
     Format, and Standard Benefits.--Each long-term care insurance 
     policy shall, with respect to services, providers or 
     facilities, pursuant to standards established under section 
     2701(a)--
       ``(1) use uniform language and definitions, except that 
     such language and definitions may take into account the 
     differences between States with respect to definitions and 
     terminology used for long-term care services and providers;
       ``(2) use a uniform format for presenting the outline of 
     coverage under such a policy; and
       ``(3) provide coverage for at least one standard benefits 
     package (of those developed by the NAIC) that shall include 
     the limitations on the amount of payments per day and the 
     lengths of covered stays for nursing facility and home health 
     care services;

     as prescribed under guidelines issued by the NAIC and 
     periodically updated.
       ``(b) Disclosure.--
       ``(1) Outline of coverage.--
       ``(A) Requirement.--Each carrier that sells or offers for 
     sale a long-term care insurance policy shall provide an 
     outline of coverage under such policy that meets the 
     applicable standards established pursuant to section 2701(a), 
     complies with the requirements of subparagraph (B), and is in 
     a uniform format as prescribed in guidelines issued by the 
     NAIC and periodically updated.
       ``(B) Contents.--The outline of coverage for each long-term 
     care insurance policy shall include at least the following:
       ``(i) A description of the principal benefits and coverage 
     under the policy.
       ``(ii) A statement of the principal exclusions, reductions, 
     and limitations contained in the policy.
       ``(iii) A statement of the terms under which the policy (or 
     certificate) may be continued in force or discontinued, the 
     terms for continuation or conversion, and any reservation in 
     the policy of a right to change premiums.
       ``(iv) A statement, in bold face type on the face of the 
     document in language that is understandable to an average 
     individual, that the outline of coverage is a summary only, 
     not a contract of insurance, and that the policy (or master 
     policy) contains the contractual provisions that govern, 
     except that such summary shall substantially and accurately 
     reflect the contents of the policy or the master policy.
       ``(v) A description of the terms, specified in section 
     2717, under which a policy or certificate may be returned and 
     premium refunded.
       ``(vi) Information on national average costs for nursing 
     facility and home health care and information (in graphic 
     form) on the relationship of the value of the benefits 
     provided under the policy to such national average costs and 
     State average costs, where available.
       ``(vii) A statement of the percentage limit on annual 
     premium increases that is provided under the policy pursuant 
     to this section.
       ``(2) Certificates.--A certificate issued pursuant to a 
     group long-term care insurance policy shall include--
       ``(A) a description of the principal benefits and coverage 
     provided in the policy;
       ``(B) a statement of the principal exclusions, reductions, 
     and limitations contained in the policy; and
       ``(C) a statement that the group master policy determines 
     governing contractual provisions.
       ``(3) Long-term care as part of life insurance.--In the 
     case of a long-term care insurance policy issued as a part 
     of, or a rider on, a life insurance policy, at the time of 
     policy delivery there shall be provided a policy summary that 
     includes--
       ``(A) an explanation of how the long-term care benefits 
     interact with other components of the policy (including 
     deductions from death benefits);
       ``(B) an illustration of the amount of benefits, the length 
     of benefit, and the guaranteed lifetime benefits (if any) for 
     each covered person; and
       ``(C) any exclusions, reductions, and limitations on 
     benefits of long-term care.
       ``(4) Additional information.--The NAIC shall develop 
     recommendations with respect to informing consumers of the 
     long-term economic viability of carriers issuing long-term 
     care insurance policies.
       ``(c) Limiting Conditions on Benefits; Minimum Benefits.--
       ``(1) In general.--A long-term care insurance policy may 
     not condition or limit eligibility--
       ``(A) for benefits for a type of services to the need for 
     or receipt of any other services;
       ``(B) for any benefit on the medical necessity for such 
     benefit;
       ``(C) for benefits furnished by licensed or certified 
     providers in compliance with conditions which are in addition 
     to those required for licensure or certification under State 
     law, except that if no State licensure or certification laws 
     exists, in compliance with qualifications developed by the 
     NAIC; or
       ``(D) for residential care (if covered under the policy) 
     only--
       ``(i) to care provided in facilities which provide a higher 
     level of care; or
       ``(ii) to care provided in facilities which provide for 24-
     hour or other nursing care not required in order to be 
     licensed by the State.
       ``(2) Home health care or community-based services.--If a 
     long-term care insurance policy provides benefits for the 
     payment of specified home health care or community-based 
     services, the policy--
       ``(A) may not limit such benefits to services provided by 
     registered nurses or licensed practical nurses;
       ``(B) may not require benefits for such services to be 
     provided by a nurse or therapist that can be provided by a 
     home health aide or licensed or certified home care worker, 
     except that if no State licensure or certification laws 
     exists, in compliance with qualifications developed by the 
     NAIC;
       ``(C) may not limit such benefits to services provided by 
     agencies or providers certified under title XVIII of the 
     Social Security Act; and
       ``(D) must provide, at a minimum, benefits for personal 
     care services (including home health aide and home care 
     worker services as defined by the NAIC) home health services, 
     adult day care, and respite care in an individual's home or 
     in another setting in the community, or any of these benefits 
     on a respite care basis.
       ``(3) Nursing facility services.--If a long-term care 
     insurance policy provides benefits for the payment of 
     specified nursing facility services, the policy must provide 
     such benefits with respect to all nursing facilities (as 
     defined in section 1919(a) of the Social Security Act or 
     until such time as subsequently provided for by the NAIC in 
     establishing uniform language and definitions under section 
     2715(a)(1)) in the State.
       ``(4) Per diem policies.--
       ``(A) Definition.--For purposes of this title, the term 
     `per diem long-term care insurance policy' means a long-term 
     care insurance policy (or certificate under a group long-term 
     care insurance policy) that provides for benefit payments on 
     a periodic basis due to cognitive impairment or loss of 
     functional capacity without regard to the expenses incurred 
     or services rendered during the period to which the payments 
     relate.
       ``(B) Limitation.--No per diem long-term care insurance 
     policy (or certificate) may condition or otherwise exclude 
     benefit payments based on the receipt of any type of nursing 
     facility, home health care or community-based services.
       ``(d) Prohibition of Discrimination.--A long-term care 
     insurance policy may not treat benefits under the policy in 
     the case of an individual with Alzheimer's disease, with any 
     related progressive degenerative dementia of an organic 
     origin, with any organic or inorganic mental illness, or with 
     mental retardation or any other cognitive or mental 
     impairment differently from an individual having another 
     medical condition for which benefits may be made available.
       ``(e) Limitation on Use of Preexisting Condition Limits.--
       ``(1) Initial issuance.--
       ``(A) In general.--Subject to subparagraph (B), a long-term 
     care insurance policy may not exclude or condition benefits 
     based on a medical condition for which the policyholder 
     received treatment or was otherwise diagnosed before the 
     issuance of the policy.
       ``(B) 6-month limit.--
       ``(i) In general.--No long-term care insurance policy or 
     certificate issued under this title shall utilize a 
     definition of `preexisting condition' that is more 
     restrictive than the following: The term `preexisting 
     condition' means a condition for which medical advice or 
     treatment was recommended by, or received from a provider of 
     health care services, within 6 months preceding the effective 
     date of coverage of an insured individual.
       ``(ii) Prohibition on exclusion of coverage.--No long-term 
     care insurance policy or certificate may exclude coverage for 
     a loss or confinement that is the result of a preexisting 
     condition unless such loss or confinement begins within 6 
     months following the effective date of the coverage of the 
     insured individual.
       ``(2) Replacement policies.--If a long-term care insurance 
     policy replaces another long-term care insurance policy, the 
     issuer of the replacing policy shall waive any time periods 
     applicable to preexisting conditions, waiting period, 
     elimination periods and probationary periods in the new 
     policy for similar benefits to the extent such time was spent 
     under the original policy.
       ``(f) Eligibility for Benefits.--
       ``(1) Long-term care policies.--Each long-term care 
     insurance policy shall--
       ``(A) describe the level of benefits available under the 
     policy; and
       ``(B) specify in clear, understandable terms, the level (or 
     levels) of physical, cognitive, or mental impairment required 
     in order to receive benefits under the policy.
       ``(2) Functional assessment.--In order to submit a claim 
     under any long-term care insurance policy, each claimant 
     shall have a professional functional assessment of his or her 
     physical, cognitive, and mental abilities. Such initial 
     assessment shall be conducted by an individual or entity, 
     meeting the qualifications established by the NAIC to assure 
     the professional competence and credibility of such 
     individual or entity and that such individual meets any 
     applicable State licensure and certification requirements. 
     The individual or entity conducting such assessment may not 
     control, or be controlled by, the issuer of the policy. For 
     purposes of this paragraph and paragraph (4), the term 
     `control' means the direct or indirect possession of the 
     power to direct the management and policies of a person. 
     Control is presumed to exist, if any person directly or 
     indirectly, owns, controls, holds with the power to vote, or 
     holds proxies representing 10 percent of the voting 
     securities of another person.
       ``(3) Claims review.--Except as provided in paragraph (4), 
     each long-term care insurance policy shall be subject to 
     final claims review by the carrier pursuant to the terms of 
     the long-term care insurance policy.
       ``(4) Appeals process.--
       ``(A) In general.--Each long-term care insurance policy 
     shall provide for a timely and independent appeals process, 
     meeting standards established by the NAIC, for individuals 
     who dispute the results of the claims review, conducted under 
     paragraph (3), of the claimant's functional assessment, 
     conducted under paragraph (2).
       ``(B) Independent assessment.--An appeals process under 
     this paragraph shall include, at the request of the claimant, 
     an independent assessment of the claimant's physical, 
     cognitive or mental abilities.
       ``(C) Conduct.--An independent assessment under 
     subparagraph (B) shall be conducted by an individual or 
     entity meeting the qualifications established by the NAIC to 
     assure the professional competence and credibility of such 
     individual or entity and any applicable State licensure and 
     certification requirements and may not be conducted--
       ``(i) by an individual who has a direct or indirect 
     significant or controlling interest in, or direct affiliation 
     or relationship with, the issuer of the policy;
       ``(ii) by an entity that provides services to the 
     policyholder or certificateholder for which benefits are 
     available under the long-term care insurance policy; or
       ``(iii) by an individual or entity in control of, or 
     controlled by, the issuer of the policy.
       ``(5) Standard assessments.--Not later than 2 years after 
     the date of enactment of this title, the advisory committee 
     established under section 2701(d) shall recommend uniform 
     needs assessment mechanisms for the determination of 
     eligibility for benefits under such assessments.
       ``(g) Inflation Protection.--
       ``(1) Option to purchase.--A carrier may not offer a long-
     term care insurance policy unless the carrier also offers to 
     the proposed policyholder, including each group policyholder, 
     the option to purchase a policy that provides for increases 
     in benefit levels, with benefit maximums or reasonable 
     durations that are meaningful, to account for reasonably 
     anticipated increases in the costs of long-term care services 
     covered by the policy. A carrier may not offer to a 
     policyholder an inflation protection feature that is less 
     favorable to the policyholder than one of the following:
       ``(A) With respect to policies that provide for automatic 
     periodic increases in benefits, the policy provides for an 
     annual increase in benefits in a manner so that such 
     increases are computed annually at a rate of not less than 5 
     percent.
       ``(B) With respect to policies that provide for periodic 
     opportunities to elect an increase in benefits, the policy 
     guarantees that the insured individual will have the right to 
     periodically increase the benefit levels under the policy 
     without providing evidence of insurability or health status 
     so long as the option for the previous period was not 
     declined. The amount of any such additional benefit may not 
     be less than the difference between--
       ``(i) the existing policy benefit; and
       ``(ii) such existing benefit compounded annually at a rate 
     of at least 5 percent for the period beginning on the date on 
     which the existing benefit is purchased and extending until 
     the year in which the offer of increase is made.
       ``(C) With respect to service benefit policies, the policy 
     covers a specified percentage of the actual or reasonable 
     charges and does not include a maximum specified indemnity 
     amount or limit.
       ``(2) Exception.--The requirements of paragraph (1) shall 
     not apply to life insurance policies or riders containing 
     accelerated long-term care benefits.
       ``(3) Required information.--Carriers shall include the 
     following information in or together with the outline of 
     coverage provided under this title:
       ``(A) A graphic comparison of the benefit levels of a 
     policy that increases benefits over the policy period with a 
     policy that does not increase benefits. Such comparison shall 
     show benefit levels over not less than a 20-year period.
       ``(B) Any expected premium increases or additional premiums 
     required to pay for any automatic or optional benefit 
     increases, whether the individual who purchases the policy 
     obtains the inflation protection initially or whether such 
     individual delays purchasing such protection until a future 
     time.
       ``(4) Continuation of protection.--Inflation protection 
     benefit increases under this subsection under a policy that 
     contains such protection shall continue without regard to an 
     insured's age, claim status or claim history, or the length 
     of time the individual has been insured under the policy.
       ``(5) Constant premium.--An offer of inflation protection 
     under this subsection that provides for automatic benefit 
     increases shall include an offer of a premium that the 
     carrier expects to remain constant. Such offer shall disclose 
     in a conspicuous manner that the premium may change in the 
     future unless the premium is guaranteed to remain constant.
       ``(6) Rejection.--Inflation protection under this 
     subsection shall be included in a long-term care insurance 
     policy unless a carrier obtains a written rejection of such 
     protection signed by the policyholder.

     ``SEC. 2716. NONFORFEITURE.

       ``(a) In General.--Each long-term care insurance policy (or 
     certificate) shall provide that if the policy lapses after 
     the policy has been in effect for a minimum period (specified 
     under the standards under section 2701(a)), the policy will 
     provide, without payment of any additional premiums, 
     nonforfeiture benefits as determined appropriate by the NAIC.
       ``(b) Establishment of Standards.--The standards under 
     section 2701(a) shall provide that the percentage or amount 
     of benefits under subsection (a) must increase based upon the 
     policyholder's equity in the policy.

     ``SEC. 2717. LIMIT OF PERIOD OF CONTESTABILITY AND RIGHT TO 
                   RETURN.

       ``(a) Contestability.--A carrier may not cancel or renew a 
     long-term care insurance policy or deny a claim under the 
     policy based on fraud or material misrepresentation relating 
     to the issuance of the policy unless notice of such fraud or 
     material misrepresentation is provided within a time period 
     to be determined by the NAIC.
       ``(b) Right to Return.--Each applicant for a long-term care 
     insurance policy shall have the right to return the policy 
     (or certificates) within 30 days of the date of its delivery 
     (and to have the premium refunded) if, after examination of 
     the policy or certificate, the applicant is not satisfied for 
     any reason.

     ``SEC. 2718. CIVIL MONEY PENALTY.

       ``(a) Carrier.--Any carrier, association or its subsidiary 
     that sells or offers for sale a long-term care insurance 
     policy and that--
       ``(1) fails to make a refund in accordance with section 
     2713(a);
       ``(2) fails to transmit a policy in accordance with section 
     2713(b);
       ``(3) fails to provide, make available, or report 
     information in accordance with subsections (c) or (d) of 
     section 2713;
       ``(4) provides a commission or compensation in violation of 
     section 2713(e);
       ``(5) fails to provide an outline of coverage in violation 
     of section 2715(b)(1); or
       ``(6) issues a policy without obtaining certain information 
     in violation of section 2715(f);

     is subject to a civil money penalty of not to exceed $25,000 
     for each such violation.
       ``(b) Agents.--Any agent that sells or offers for sale a 
     long-term care insurance policy and that--
       ``(1) fails to make a refund in accordance with section 
     2713(a);
       ``(2) fails to transmit a policy in accordance with section 
     2713(b);
       ``(3) fails to provide, make available, or report 
     information in accordance with subsections (c) or (d) of 
     section 2713;
       ``(4) fails to provide an outline of coverage in violation 
     of section 2715(b)(1); or
       ``(5) issues a policy without obtaining certain information 
     in violation of section 2715(f);

     is subject to a civil money penalty of not to exceed $15,000 
     for each such violation.

      ``Part C--Long-Term Care Insurance Policies, Definition and 
                              Endorsements

     ``SEC. 2721. LONG-TERM CARE INSURANCE POLICY DEFINED.

       ``(a) In General.--As used in this section, the term `long-
     term care insurance policy' means any insurance policy, rider 
     or certificate advertised, marketed, offered or designed to 
     provide coverage for not less than 12 consecutive months for 
     each covered person on an expense incurred, indemnity prepaid 
     or other basis, for one or more necessary diagnostic, 
     preventive, therapeutic, rehabilitative, maintenance or 
     personal care services, provided in a setting other than an 
     acute care unit of a hospital. Such term includes--
       ``(1) group and individual annuities and life insurance 
     policies, riders or certificates that provide directly, or 
     that supplement long-term care insurance; and
       ``(2) a policy, rider or certificates that provides for 
     payment of benefits based on cognitive impairment or the loss 
     of functional capacity.
       ``(b) Issuance.--Long-term care insurance policies may be 
     issued by--
       ``(1) carriers;
       ``(2) fraternal benefit societies;
       ``(3) nonprofit health, hospital, and medical service 
     corporations;
       ``(4) prepaid health plans;
       ``(5) health maintenance organizations; or
       ``(6) any similar organization to the extent they are 
     otherwise authorized to issue life or health insurance.
       ``(c) Policies Excluded.--The term `long-term care 
     insurance policy' shall not include any insurance policy, 
     rider or certificate that is offered primarily to provide 
     basic Medicare supplement coverage, basic hospital expense 
     coverage, basic medical-surgical expense coverage, hospital 
     confinement indemnity coverage, major medical expense 
     coverage, disability income or related asset-protection 
     coverage, accident only coverage, specified disease or 
     specified accident coverage, or limited benefit health 
     coverage. With respect to life insurance, such term shall not 
     include life insurance policies, riders or certificates that 
     accelerate the death benefit specifically for one or more of 
     the qualifying events of terminal illness, medical conditions 
     requiring extraordinary medical intervention, or permanent 
     institutional confinement, and that provide the option of a 
     lump-sum payment for those benefits and in which neither the 
     benefits nor the eligibility for the benefits is conditioned 
     upon the receipt of long-term care.
       ``(d) Applications.--Notwithstanding any other provision of 
     this title, this title shall apply to any product advertised, 
     marketed or offered as a long-term insurance policy, rider or 
     certificate.

     ``SEC. 2722. CODE OF CONDUCT WITH RESPECT TO ENDORSEMENTS.

       ``Not later than 1 year after the date of enactment of this 
     title the NAIC shall issue guidelines that shall apply to 
     organizations and associations, other than employers and 
     labor organizations that do not accept compensation, and 
     their subsidiaries that provide endorsements of long-term 
     care insurance policies, or that permit such policies to be 
     offered for sale through the organization or association. 
     Such guidelines shall include at minimum the following:
       ``(1) In endorsing or selling long-term care insurance 
     policies, the primary responsibility of an organization or 
     association shall be to educate their members concerning such 
     policies and assist such members in making informed 
     decisions. Such organizations and associations may not 
     function primarily as sales agents for insurance companies.
       ``(2) Organizations and associations shall provide 
     objective information regarding long-term care insurance 
     policies sold or endorsed by such organizations and 
     associations to ensure that members of such organizations and 
     associations have a balanced and complete understanding of 
     both the strengths and weaknesses of the policies that are 
     being endorsed or sold.
       ``(3) Organizations and associations selling or endorsing 
     long-term care insurance policies shall disclose in marketing 
     literature provided to their members concerning such policies 
     the manner in which such policies and the insurance company 
     issuing such policies were selected. If the organization or 
     association and the insurance company have interlocking 
     directorates, the organization or association shall disclose 
     such fact to their members.
       ``(4) Organizations and associations selling or endorsing 
     long-term care insurance policies shall disclose in marketing 
     literature provided to their members concerning such policies 
     the nature and amount of the compensation arrangements 
     (including all fees, commissions, administrative fees and 
     other forms of financial support that the organization or 
     association receives) from the endorsement or sale of the 
     policy to its members.
       ``(5) The Boards of Directors of organizations and 
     associations selling or endorsing long-term care insurance 
     policies, if such organizations and associations have a Board 
     of Directors, shall review and approve such insurance 
     policies, the compensation arrangements and the marketing 
     materials used to promote sales of such policies.

                   ``Part D--Miscellaneous Provisions

     ``SEC. 2731. DEFINITIONS.

       ``As used in this title:
       ``(1) Agent.--The term `agent' means--
       ``(A) prior to 2 years after the date of enactment of this 
     Act, an individual who sells or offers for sale a long-term 
     care insurance policy subject to the requirements of this 
     title and is licensed or required to be licensed under State 
     law for such purpose; and
       ``(B) after the date referred to in subparagraph (A), an 
     individual who meets the training and certification 
     requirements established under section 2712(f).
       ``(2) Association.--The term `association' includes the 
     association and its subsidiaries.
       ``(3) Carrier.--The term `carrier' means any person that 
     offers a health benefit plan, whether through insurance or 
     otherwise, including a licensed insurance company, a prepaid 
     hospital or medical service plan, a health maintenance 
     organization, a self-insured carrier, a reinsurance carrier, 
     and a multiple employer welfare arrangement (a combination of 
     employers associated for the purpose of providing health 
     benefit plan coverage for their employees).''.
       (b) Conforming Amendments.--
       (1) Sections 2701 through 2714 of the Public Health Service 
     Act (42 U.S.C. 300cc through 300cc-15) are redesignated as 
     sections 2801 through 2814, respectively.
       (2) Sections 465(f) and 497 of such Act (42 U.S.C. 286(f) 
     and 289(f)) are amended by striking ``2701'' each place that 
     such appears and inserting ``2801''.
         Subtitle B--Tax Treatment of Long-term Care Insurance

     SEC. 7101. TREATMENT OF LONG-TERM CARE INSURANCE OR PLANS.

       (a) General Rule.--Subpart E of part I of subchapter L of 
     chapter 1 of the Internal Revenue Code of 1986 is amended by 
     inserting after section 818 the following new section:

     ``SEC. 818A. TREATMENT OF LONG-TERM CARE INSURANCE OR PLANS.

       ``(a) General Rule.--For purposes of this part, a long-term 
     care insurance contract shall be treated as an accident or 
     health insurance contract.
       ``(b) Long-Term Care Insurance Contract.--
       ``(1) In general.--For purposes of this part, the term 
     `long-term care insurance contract' means any insurance 
     contract issued if--
       ``(A) the only insurance protection provided under such 
     contract is coverage of qualified long-term care services and 
     benefits incidental to such coverage,
       ``(B) the maximum benefit under the policy for expenses 
     incurred for any day does not exceed $200,
       ``(C) such contract does not cover expenses incurred for 
     services or items to the extent that such expenses are 
     reimbursable under title XVIII of the Social Security Act or 
     would be so reimbursable but for the application of a 
     deductible or coinsurance amount,
       ``(D) such contract is guaranteed renewable,
       ``(E) such contract does not have any cash surrender value, 
     and
       ``(F) all refunds of premiums, and all policyholder 
     dividends or similar amounts, under such contract are to be 
     applied as a reduction in future premiums or to increase 
     future benefits.
       ``(2) Special rules.--
       ``(A) Per diem, etc. payments permitted.--A contract shall 
     not fail to be treated as described in paragraph (1)(A) by 
     reason of payments being made on a per diem or other periodic 
     basis without regard to the expenses incurred during the 
     period to which the payments relate.
       ``(B) Contract may cover medicare reimbursable expenses 
     where medicare is secondary payor.--Paragraph (1)(C) shall 
     not apply to expenses which are reimbursable under title 
     XVIII of the Social Security Act only as a secondary payor.
       ``(C) Refunds of premiums.--Paragraph (1)(F) shall not 
     apply to any refund of premiums on surrender or cancellation 
     of the contract.
       ``(c) Qualified Long-Term Care Services.--For purposes of 
     this section--
       ``(1) In general.--The term `qualified long-term care 
     services' means necessary diagnostic, preventive, 
     therapeutic, and rehabilitative services, and maintenance or 
     personal care services, which--
       ``(A) are required by a chronically ill individual in a 
     qualified facility, and
       ``(B) are provided pursuant to a plan of care prescribed by 
     a licensed health care practitioner.
       ``(2) Chronically ill individual.--
       ``(A) In general.--The term `chronically ill individual' 
     means any individual who has been certified by a licensed 
     health care practitioner as--
       ``(i)(I) being unable to perform (without substantial 
     assistance from another individual) at least 2 activities of 
     daily living (as defined in subparagraph (B)) for a period of 
     at least 90 days due to a loss of functional capacity, or
       ``(II) having a level of disability similar (as determined 
     by the Secretary in consultation with the Secretary of Health 
     and Human Services) to the level of disability described in 
     subclause (I), or
       ``(ii) having a similar level of disability due to 
     cognitive impairment.
       ``(B) Activities of daily living.--For purposes of 
     subparagraph (A), each of the following is an activity of 
     daily living:
       ``(i) Mobility.--The process of walking or wheeling on a 
     level surface which may include the use of an assistive 
     device such as a cane, walker, wheelchair, or brace.
       ``(ii) Dressing.--The overall complex behavior of getting 
     clothes from closets and drawers and then getting dressed.
       ``(iii) Toileting.--The act of going to the toilet room for 
     bowel and bladder function, transferring on and off the 
     toilet, cleaning after elimination, and arranging clothes or 
     the ability to voluntarily control bowel and bladder 
     function, or in the event of incontinence, the ability to 
     maintain a reasonable level of personal hygiene.
       ``(iv) Transfer.--The process of getting in and out of bed 
     or in and out of a chair or wheelchair.
       ``(v) Eating.--The process of getting food from a plate or 
     its equivalent into the mouth.
       ``(3) Qualified facility.--The term `qualified facility' 
     means--
       ``(A) a nursing, rehabilitative, hospice, or adult day care 
     facility (including a hospital, retirement home, nursing 
     home, skilled nursing facility, intermediate care facility, 
     or similar institution)--
       ``(i) which is licensed under State law, or
       ``(ii) which is a certified facility for purposes of title 
     XVIII or XIX of the Social Security Act, or
       ``(B) an individual's home if a licensed health care 
     practitioner certifies that without home care the individual 
     would have to be cared for in a facility described in 
     subparagraph (A).
       ``(4) Maintenance or personal care services.--The term 
     `maintenance or personal care services' means any care the 
     primary purpose of which is to provide needed assistance with 
     any of the activities of daily living described in paragraph 
     (2)(B).
       ``(5) Licensed health care practitioner.--The term 
     `licensed health care practitioner' means any physician (as 
     defined in section 1861(r) of the Social Security Act) and 
     any registered professional nurse, licensed social worker, or 
     other individual who meets such requirements as may be 
     prescribed by the Secretary.
       ``(d) Continuation Coverage Excise Tax Not To Apply.--This 
     section shall not apply in determining whether section 4980B 
     (relating to failure to satisfy continuation coverage 
     requirements of group health plans) applies.
       ``(e) Inflation Adjustment of $200 Benefit Limit.--
       ``(1) In general.--In the case of a calendar year after 
     1994, the $200 amount contained in subsection (b)(1)(B) shall 
     be increased for such calendar year by the medical care cost 
     adjustment for such calendar year. If any increase determined 
     under the preceding sentence is not a multiple of $10, such 
     increase shall be rounded to the nearest multiple of $10.
       ``(2) Medical care cost adjustment.--For purposes of 
     paragraph (1), the medical care cost adjustment for any 
     calendar year is the percentage (if any) by which--
       ``(A) the medical care component of the Consumer Price 
     Index (as defined in section 1(f)(5)) for August of the 
     preceding calendar year, exceeds
       ``(B) such component for August of 1993.''
       (b) Clerical Amendment.--The table of sections for such 
     subpart E is amended by inserting after the item relating to 
     section 818 the following new item:

``Sec. 818A. Treatment of long-term care insurance or plans.''

     SEC. 7102. EXCLUSION FOR BENEFITS PROVIDED UNDER LONG-TERM 
                   CARE INSURANCE; INCLUSION OF EMPLOYER-PROVIDED 
                   COVERAGE.

       (a) In General.--Subsection (a) of section 104 of the 
     Internal Revenue Code of 1986 (relating to compensation for 
     injuries or sickness) is amended by striking ``and'' at the 
     end of paragraph (4), by striking the period at the end of 
     paragraph (5) and inserting ``, and'', and by inserting after 
     paragraph (4) the following new paragraph:
       ``(6) benefits under a long-term care insurance contract 
     (as defined in section 818A(b)).''
       (b) Inclusion of Employer-Provided Coverage.--Section 106 
     of such Code (relating to contributions by employer to 
     accident and health plans) is amended by adding at the end 
     thereof the following sentence: ``The preceding sentence 
     shall not apply to any plan providing coverage for long-term 
     care services.''

     SEC. 7103. QUALIFIED LONG-TERM SERVICES TREATED AS MEDICAL 
                   CARE.

       (a) General Rule.--Paragraph (1) of section 213(d) of the 
     Internal Revenue Code of 1986 (defining medical care) is 
     amended by striking ``or'' at the end of subparagraph (B), by 
     redesignating subparagraph (C) as subparagraph (D), and by 
     inserting after subparagraph (B) the following new 
     subparagraph:
       ``(C) for qualified long-term care services (as defined in 
     section 818A(c)), or''.
       (b) Deduction for Long-Term Care Expenses for Parent or 
     Grandparent.--Section 213 of such Code (relating to deduction 
     for medical expenses) is amended by adding at the end the 
     following new subsection:
       ``(g) Special Rule for Certain Long-Term Care Expenses.--
     For purposes of subsection (a), the term `dependent' shall 
     include any parent or grandparent of the taxpayer for whom 
     the taxpayer has expenses for long-term care services 
     described in section 818A(c), but only to the extent of such 
     expenses.''
       (c) Technical Amendments.--
       (1) Subparagraph (D) of section 213(d)(1) of such Code (as 
     redesignated by subsection (a)) is amended by striking 
     ``subparagraphs (A) and (B)'' and inserting ``subparagraphs 
     (A), (B), and (C)''.
       (2)(A) Paragraph (1) of section 213(d) of such Code is 
     amended by adding at the end thereof the following new flush 
     sentence:

     ``In the case of a long-term care insurance contract (as 
     defined in section 818A), only eligible long-term care 
     premiums (as defined in paragraph (10)) shall be taken into 
     account under subparagraph (D).''
       (B) Subsection (d) of section 213 is amended by adding at 
     the end the following new paragraph:
       ``(10) Eligible Long-Term Care Premiums.--
       ``(A) In general.--For purposes of this section, the term 
     `eligible long-term care premiums' means the amount paid 
     during a taxable year for any long-term care insurance 
     contract (as defined in section 818A) covering an individual, 
     to the extent such amount does not exceed the limitation 
     determined under the following table:

  ``In the case of an individual with an attained age before the close 
                                                of thThe limitation is:
    40 or less...................................................$200  
    More than 40 but not more than 50.............................375  
    More than 50 but not more than 60.............................750  
    More than 60 but not more than 70...........................1,600  
    More than 70...............................................2,000.  

       ``(B) Indexing.--
       ``(i) In general.--In the case of any taxable year 
     beginning in a calendar year after 1993, each dollar amount 
     contained in paragraph (1) shall be increased by the medical 
     care cost adjustment of such amount for such calendar year. 
     If any increase determined under the preceding sentence is 
     not a multiple of $10, such increase shall be rounded to the 
     nearest multiple of $10.
       ``(ii) Medical care cost adjustment.--For purposes of 
     clause (i), the medical care cost adjustment for any calendar 
     year is the percentage (if any) by which--

       ``(I) the medical care component of the Consumer Price 
     Index (as defined in section 1(f)(5)) for August of the 
     preceding calendar year, exceeds
       ``(II) such component for August of 1991.''

       (3) Paragraph (6) of section 213(d) of such Code is 
     amended--
       (A) by striking ``subparagraphs (A) and (B)'' and inserting 
     ``subparagraphs (A), (B), and (C)'', and
       (B) by striking ``paragraph (1)(C)'' in subparagraph (A) 
     and inserting ``paragraph (1)(D)''.
       (4) Paragraph (7) of section 213(d) of such Code is amended 
     by striking ``subparagraphs (A) and (B)'' and inserting 
     ``subparagraphs (A), (B), and (C)''.

     SEC. 7104. EXCLUSION FROM GROSS INCOME FOR AMOUNTS OTHERWISE 
                   INCLUDIBLE ON THE SURRENDER OR CANCELLATION OF 
                   ANY LIFE INSURANCE POLICY WHICH ARE USED FOR 
                   LONG-TERM CARE INSURANCE PREMIUMS.

       (a) In General.--Part III of subchapter B of chapter 1 of 
     the Internal Revenue Code of 1986 (relating to items 
     specifically excluded from gross income) is amended by 
     redesignating section 137 as section 138 and by inserting 
     after section 136 the following new section:

     ``SEC. 137. AMOUNTS RECEIVED ON CANCELLATION, ETC., OF LIFE 
                   INSURANCE CONTRACTS AND USED TO PAY PREMIUMS 
                   FOR QUALIFIED LONG-TERM CARE INSURANCE.

       ``No amount which would (but for this section) be 
     includible in the gross income of an individual shall be 
     included in gross income on the whole or partial surrender, 
     cancellation, or exchange of any life insurance contract 
     during the taxable year if--
       ``(1) such individual has attained age 65 on or before the 
     date of the transaction, and
       ``(2) the amount otherwise includible in gross income is 
     used during such year to pay premiums for any qualified long-
     term care insurance policy (as defined in section 2721(a) of 
     the Public Health Service Act) for the benefit of such 
     individual or the spouse of such individual if such spouse 
     has attained age 65 on or before the date of the 
     transaction.''.
       (b) Clerical Amendment.--The table of sections for such 
     part III is amended by striking the last item and inserting 
     the following new items:

``Sec. 137. Amounts received on cancellation, etc., of life insurance 
              contracts and used to pay premiums for qualified long-
              term care insurance.
``Sec. 138. Cross references to other Acts.''.

       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     1995.

     SEC. 7105. EFFECTIVE DATE.

       The amendments made by this subtitle shall apply to taxable 
     years beginning after December 31, 1995.
                          Subtitle C--Studies

     SEC. 7201. FEASIBILITY OF ENCOURAGING HEALTH CARE PROVIDERS 
                   TO DONATE SERVICES TO HOMEBOUND PATIENTS.

       The Comptroller General of the United States shall conduct 
     a study on the feasibility of encouraging health care 
     providers to donate their services to homebound patients. 
     Such study shall include an examination of the effects of 
     qualifying such services as a charitable contribution.

     SEC. 7202. FEASIBILITY OF TAX CREDIT FOR HEADS OF HOUSEHOLDS 
                   WHO CARE FOR ELDERLY FAMILY MEMBERS IN THEIR 
                   HOMES.

       The Comptroller General of the United States shall conduct 
     a study on the feasibility of providing heads of households 
     who care for elderly family members in their homes with a tax 
     credit. Such study shall estimate the cost of such a tax 
     credit which would apply to expenses incurred in the 
     custodial care of such an elderly family member to the extent 
     such expenses exceed 5 percent of adjusted gross income.

     SEC. 7203. CASE MANAGEMENT OF CURRENT LONG-TERM CARE 
                   BENEFITS.

       (a) In General.--The Secretary of Health and Human Services 
     shall conduct a study of the feasibility of encouraging or 
     requiring the use of a single designated public or nonprofit 
     agency (such as an area agency on aging) to coordinate, 
     through case management, the provision of long-term care 
     benefits under current Federal, State, and local programs in 
     a geographic area.
       (b) Report.--The Secretary shall submit to Congress a 
     report on the study conducted under subsection (a) by not 
     later than 1 year after the date of the enactment of this 
     Act. Such report shall include such recommendations regarding 
     changes in legislation to encourage or require the use 
     (described in subsection (a)) of an agency to coordinate 
     long-term care benefits as may be appropriate.

     SEC. 7204. SUBACUTE CARE STUDY.

       (a) Study.--The Secretary of Health and Human Services 
     shall--
       (1) define the level and type of care that should 
     constitute subacute care;
       (2) determine the appropriateness of furnishing subacute 
     care in different settings by evaluating the quality of care 
     and patient outcomes;
       (3) determine the cost and effectiveness of providing 
     subacute care under the medicare program under title XVIII of 
     the Social Security Act to individuals who are eligible for 
     benefits under part A of such title;
       (4) determine the extent to which hospital DRG prospective 
     payment rates under section 1886(d) of such Act (42 U.S.C. 
     1395ww(d)) are appropriate for the less restrictive 
     institutional settings that provide subacute care; and
       (5) study the relationships between institutions and their 
     payment methodologies in order to develop ways in which to 
     maximize the continuity of care for each patient episode in 
     which subacute care is furnished.
       (b) Report.--Not later than October 1, 1996, the Secretary 
     shall submit to the Congress a report on the matters 
     described in subsection (a).

     SEC. 7205. STUDY OF LONG-TERM CARE INSURANCE.

       (a) Report.--Not later than one year after the date of 
     enactment of this Act, the Secretary of Health and Human 
     Services shall report to Congress on alternatives for 
     extending access to long-term care through the private 
     insurance market. The Secretary shall specifically study the 
     cost of current policies, their effectiveness in providing 
     care and their availability to the general population.
       (b) Recommendations.--The Secretary shall recommend any 
     changes in Federal law which may be necessary to increase 
     access to long-term care for all Americans through the 
     private insurance market. In conducting this study, the 
     Secretary shall consult with the National Association of 
     Insurance Commissioners and other private entities with 
     expertise in private health insurance and long-term care.
              TITLE VIII--MISCELLANEOUS SAVINGS PROVISIONS


                       table of contents of title

Sec. 8001. Requirement that certain agencies prefund government health 
              benefits contributions for their annuitants.
Sec. 8002. Ineligibility of aliens for SSI and medicaid.
Sec. 8003. Limitation on SSI benefits for drug and alcohol addicts.

     SEC. 8001. REQUIREMENT THAT CERTAIN AGENCIES PREFUND 
                   GOVERNMENT HEALTH BENEFITS CONTRIBUTIONS FOR 
                   THEIR ANNUITANTS.

       (a) Definitions.--For the purpose of this section--
       (1) the term ``agency'' means any agency or other 
     instrumentality within the executive branch of the 
     Government, the receipts and disbursements of which are not 
     generally included in the totals of the budget of the United 
     States Government submitted by the President;
       (2) the term ``health benefits plan'' means, with respect 
     to an agency, a health benefits plan, established by or under 
     Federal law, in which employees or annuitants of such agency 
     may participate;
       (3) the term ``health-benefits coverage'' means coverage 
     under a health benefits plan'';
       (4) an individual shall be considered to be an ``annuitant 
     of an agency'' if such individual is entitled to an annuity, 
     under a retirement system established by or under Federal 
     law, by virtue of--
       (A) such individual's service with, and separation from, 
     such agency; or
       (B) being the survivor of an annuitant under subparagraph 
     (A) or of an individual who died while employed by such 
     agency; and
       (5) the term ``Office'' means the Office of Personnel 
     Management.
       (b) Prefunding Requirement.--
       (1) In general.--Effective as of October 1, 1994, each 
     agency (or February 1, 1995, in the case of the agency with 
     the greatest number of employees, as determined by the 
     Office) shall be required to prepay the Government 
     contributions which are or will be required in connection 
     with providing health-benefits coverage for annuitants of 
     such agency.
       (2) Regulations.--The Office shall prescribe such 
     regulations as may be necessary to carry out this section. 
     The regulations shall be designed to ensure at least the 
     following:
       (A) Amounts paid by each agency shall be sufficient to 
     cover the amounts which would otherwise be payable by such 
     agency (on a ``pay-as-you-go'' basis), on or after the 
     applicable effective date under paragraph (1), on behalf of--
       (i) individuals who are annuitants of the agency as of such 
     effective date; and
       (ii) individuals who are employed by the agency as of such 
     effective date, or who become employed by the agency after 
     such effective date, after such individuals have become 
     annuitants of the agency (including their survivors).
       (B)(i) For purposes of determining any amounts payable by 
     an agency--
       (I) this section shall be treated as if it had taken effect 
     at the beginning of the 20-year period which ends on the 
     effective date applicable under paragraph (1) with respect to 
     such agency; and
       (II) in addition to any amounts payable under subparagraph 
     (A), each agency shall also be responsible for paying any 
     amounts for which it would have been responsible, with 
     respect to the 20-year period described in subclause (I), in 
     connection with any individuals who are annuitants or 
     employees of the agency as of the applicable effective date 
     under paragraph (1).
       (ii) Any amounts payable under this subparagraph for 
     periods preceding the applicable effective date under 
     paragraph (1) shall be payable in equal installments over the 
     20-year period beginning on such effective date.
       (c) FASB Standards.--Regulations under subsection (b) shall 
     be in conformance with the provisions of standard 106 of the 
     Financial Accounting Standards Board, issued in December 
     1990.
       (d) Clarification.--Nothing in this section shall be 
     considered to permit or require duplicative payments on 
     behalf of any individuals.
       (e) Draft Legislation.--The Office shall prepare and submit 
     to Congress any draft legislation which may be necessary in 
     order to carry out this section.

     SEC. 8002. INELIGIBILITY OF ALIENS FOR SSI AND MEDICAID.

       (a) In General.--Notwithstanding any other provision of law 
     and except as provided in subsections (b) and (c), no alien 
     shall be eligible for any program referred to in subsection 
     (d).
       (b) Exceptions.--
       (1) Refugee exception.--Subsection (a) shall not apply to 
     an alien admitted to the United States as a refugee under 
     section 207 of the Immigration and Nationality Act until 6 
     years after the date of such alien's arrival into the United 
     States.
       (2) Aged exception.--Subsection (a) shall not apply to an 
     alien who--
       (A) has been lawfully admitted to the United States for 
     permanent residence;
       (B) is over 75 years of age; and
       (C) has resided in the United States for at least 5 years.
       (3) Current resident exception.--Subsection (a) shall not 
     apply to the eligibility of an alien for a program referred 
     to in subsection (d) until 1 year after the date of the 
     enactment of this Act if, on such date of enactment, the 
     alien is residing in the United States and is eligible for 
     the program.
       (c) Programs For Which Aliens May Be Eligible.--The 
     limitation under subsection (a) shall not apply to medical 
     assistance with respect to emergency services (as defined for 
     purposes of section 1916(a)(2)(D) of the Social Security 
     Act).
       (d) Programs For Which Aliens Are Ineligible.--The programs 
     referred to in this subsection are the following:
       (1) The program of medical assistance under title XIX of 
     the Social Security Act, except emergency services as 
     provided in subsection (c).
       (2) The supplemental security income program under title 
     XVI of the Social Security Act.
       (e) Notification of Aliens.--Any Federal agency that 
     administers a program referred to in subsection (d) shall, 
     directly or through the States, notify each alien receiving 
     benefits under the program whose eligibility for the program 
     is or will be terminated by reason of this section.

     SEC. 8003. LIMITATION ON SSI BENEFITS FOR DRUG AND ALCOHOL 
                   ADDICTS.

       (a) In General.--
       (1) Limitation described.--Section 1614(a) of the Social 
     Security Act (42 U.S.C. 1382c(a)) is amended by adding at the 
     end the following:
       ``(5)(A) The Secretary shall identify all recipients of 
     benefits under this title by reason of disability whose 
     disability is a result of addiction to illegal drugs.
       ``(B) The Secretary shall periodically, on a random basis, 
     test each recipient identified under subparagraph (A) to 
     determine whether the recipient is using illegal drugs.
       ``(C)(i) Notwithstanding any other provision of this title, 
     any individual who is determined under subparagraph (B) to be 
     using illegal drugs, or who refuses to submit to testing as 
     provided for under subparagraph (B), shall not be eligible 
     for benefits under this title for a period of at least 1 
     year.
       ``(ii) The period of ineligibility under clause (i) shall 
     terminate (after the last day of such 1-year period) if the 
     individual has 2 tests (at least 2 months apart and not paid 
     for through Federal funds) which establish that the recipient 
     is not using illegal drugs.''.
       (2) Effective date.--The amendment made by paragraph (1) 
     shall apply to quarters beginning after the expiration of the 
     6-month period that begins on the date of the enactment of 
     this Act.
       (b) Representative Payee Reforms.--
       (1) Authority of government agencies to become paid 
     representative payees.--Section 1631(a)(2)(D)(ii) of such Act 
     (42 U.S.C. 1383(a)(2)(D)(ii)) is amended by adding at the end 
     the following: ``The term `qualified organization' also 
     includes any government agency that meets the requirements of 
     items (aa) and (bb) of subclause (II).''.
       (2) Maximum fee payable to representative payees.--Section 
     1631(a)(2)(D)(i) of such Act (42 U.S.C. 1383(a)(2)(D)(i)) is 
     amended by striking ``the lesser of--'' and all that follows 
     and inserting ``10 percent of the monthly benefit 
     involved.''.
                TITLE IX--DEPARTMENT OF VETERANS AFFAIRS


                       table of contents of title

Sec. 9001. Benefits and eligibility through Department of Veterans 
              Affairs medical system.

  ``CHAPTER 18--ELIGIBILITY AND BENEFITS UNDER ENROLLMENT-BASED SYSTEM

                        ``SUBCHAPTER I--GENERAL

``1801. Definitions.

                      ``SUBCHAPTER II--ENROLLMENT

``1811. Enrollment: veterans.
``1812. Enrollment: CHAMPVA eligibles.
``1813. Enrollment: family members.

                       ``SUBCHAPTER III--BENEFITS

``1821. Benefits for VA enrollees.
``1822. Chapter 17 benefits.
``1823. Supplemental benefits packages and policies.
``1824. Limitation regarding veterans who elect not to enroll to obtain 
              VA health coverage.
``1825. Limitation on use of funds for abortions.

                   ``SUBCHAPTER IV--FINANCIAL MATTERS

``1831. Premiums, copayments, etc.
``1832. Recovery of cost of certain care and services.
``1833. Health Coverage Fund.
Sec. 9002. Organization of Department of Veterans Affairs facilities as 
              facilities offering qualified health coverage.

 ``SUBCHAPTER IV--PARTICIPATION AS PART OF NATIONAL HEALTH CARE REFORM

``7341. Organization of health care facilities as facilities offering 
              qualified health coverage.
``7342. Operation of health care facilities within States operating as 
              single payer areas.
``7343. Health care resource agreements.
``7344. Administrative and personnel flexibility.
``7345. Veterans Health Care Transition Fund.
``7346. Funding provisions: grants and other sources of assistance.
Sec. 9003. Eligibility for Chapter 17 care.
Sec. 9004. Authority to provide health care for herbicide and radiation 
              exposure.
Sec. 9005. Extension of authority to provide priority outpatient health 
              care for exposure to environmental hazards.
Sec. 9006. Report on waiving cost-sharing for certain medical care for 
              dependents of Persian Gulf veterans who may have been 
              exposed to environmental hazards.
Sec. 9007. Study of the effect of telemedicine on the delivery of VA 
              health care services.
Sec. 9008. Legislative proposal on VA health coverage for medicare 
              beneficiaries.

     SEC. 9001. BENEFITS AND ELIGIBILITY THROUGH DEPARTMENT OF 
                   VETERANS AFFAIRS MEDICAL SYSTEM.

       (a) DVA as a Participant in Health Care Reform.--
       (1) In general.--Title 38, United States Code, is amended 
     by inserting after chapter 17 the following new chapter:

  ``CHAPTER 18--ELIGIBILITY AND BENEFITS UNDER ENROLLMENT-BASED SYSTEM


                        ``SUBCHAPTER I--GENERAL

``1801. Definitions.


                      ``SUBCHAPTER II--ENROLLMENT

``1811. Enrollment: veterans.
``1812. Enrollment: CHAMPVA eligibles.
``1813. Enrollment: family members.


                       ``SUBCHAPTER III--BENEFITS

``1821. Benefits for VA enrollees.
``1822. Chapter 17 benefits.
``1823. Supplemental benefits packages and policies.
``1824. Limitation regarding veterans who elect not to enroll with a VA 
              health plan.


                   ``SUBCHAPTER IV--FINANCIAL MATTERS

``1831. Premiums, copayments, etc..
``1832. Medicare coverage and reimbursement.
``1833. Recovery of cost of certain care and services.
``1834. Health Plan Fund.
``1835. Guaranteed funding of Government costs

                        ``SUBCHAPTER I--GENERAL

     ``Sec. 1801. Definitions

       ``For purposes of this chapter:
       ``(1) The term `qualified health coverage' has the meaning 
     given such term in section 1101 of the Bipartisan Health Care 
     Reform Act of 1994.
       ``(2) The term `VA health coverage' means qualified health 
     coverage provided by the Secretary under section 7341 of this 
     title.
       ``(3) The term `VA enrollee' means an individual enrolled 
     under subchapter II of this chapter with VA health coverage.
       ``(4) The term `standard coverage' has the meaning given 
     such term in section 1102 of the Bipartisan Health Care 
     Reform Act of 1994.

                      ``SUBCHAPTER II--ENROLLMENT

     ``Sec. 1811. Enrollment: veterans

       ``Each veteran residing in the United States may enroll to 
     obtain VA health coverage. A veteran who wants to receive the 
     standard coverage through the Department shall enroll to 
     obtain VA health coverage.

     ``Sec. 1812. Enrollment: CHAMPVA eligibles

       ``(a) Eligibility.--An individual described in subsection 
     (b) who resides in the United States may enroll to obtain VA 
     health coverage.
       ``(b) Applicability.--This section applies to the following 
     individuals who are not otherwise eligible for medical care 
     under chapter 55 of title 10 (CHAMPUS):
       ``(1) The surviving spouse or child of a veteran who (A) 
     died as a result of a service-connected disability, or (B) at 
     the time of death had a total disability permanent in nature, 
     resulting from a service-connected disability.
       ``(2) The surviving spouse or child of a person who died in 
     the active military, naval, or air service in the line of 
     duty and not due to such person's own misconduct.
       ``(c) Definition of Child.--For purposes of this section, 
     the term `child' means a child described in section 
     1901(2)(B) of the Bipartisan Health Care Reform Act of 1994.

     ``Sec. 1813. Enrollment: family members

       ``(a) Eligibility.--The Secretary shall authorize the 
     Secretary to enroll members of the family of an enrollee 
     under section 1811 or 1812 of this title. The enrollee shall 
     have the option of enrolling to obtain VA health coverage as 
     an individual or with family members. If the enrollee chooses 
     to enroll to obtain VA health coverage with family members, 
     all such family members must be so enrolled.
       ``(b) Required Payments.--Any family member with VA health 
     coverage shall (except as provided in section 1831(c)(2)(B) 
     of this title) be subject to payment of premiums, 
     deductibles, copayments, and coinsurance in accordance with 
     the Bipartisan Health Care Reform Act of 1994.
       ``(c) Enrollment Eligibility To Survive Death of Veteran.--
     An individual with VA health coverage pursuant to subsection 
     (a) as a member of the family of a veteran enrolled under 
     section 1811 of this title shall not lose eligibility to 
     obtain such coverage by reason of the death of that veteran.
       ``(d) Members of Family.--For purposes of this section, the 
     members of the family of an enrollee are those individuals 
     (other than the enrollee) included within the term `family' 
     as defined in section 1901(2) of the Bipartisan Health Care 
     Reform Act of 1994.

                       ``SUBCHAPTER III--BENEFITS

     ``Sec. 1821. Benefits for VA enrollees

       ``The Secretary shall ensure that each individual enrolled 
     with VA health coverage is provided the items and services in 
     standard coverage under the Bipartisan Health Care Reform Act 
     of 1994.

     ``Sec. 1822. Chapter 17 benefits

       ``(a) Care and Services Not Included in Standard 
     Coverage.--In the case of care and services that may be 
     provided under chapter 17 of this title that are not included 
     in standard coverage, the Secretary shall provide to any 
     veteran (whether or not enrolled with qualified health 
     coverage) the care and services authorized under that chapter 
     in accordance with the terms and conditions applicable to 
     that veteran and that care under that chapter.
       ``(b) Veterans Who Are Not Eligible To Enroll Under the 
     Bipartisan Health Care Reform Act of 1994.--In the case of a 
     veteran who is not eligible for enrollment under this 
     chapter, the Secretary shall provide to the veteran the care 
     and services that may be provided under chapter 17 of this 
     title through any facility of the department, whether or not 
     the facility is operating pursuant to VA health coverage.
       ``(c) Preservation of Specialized DVA Treatment 
     Capacities.--In carrying out subsection (a), the Secretary 
     shall ensure that the Department maintains the capacity to 
     provide for the specialized treatment and rehabilitative 
     needs of disabled veterans (including veterans with spinal 
     cord dysfunction, blindness, and mental illness) within 
     distinct programs or facilities of the Department that are 
     dedicated to the specialized needs of those veterans in a 
     manner that affords those veterans reasonable access to care 
     and services for those specialized needs. The Secretary shall 
     ensure that overall capacity of the Department to provide 
     such specialized services is not reduced below the capacity 
     of the Department, nationwide, to provide those services, as 
     of the date of the enactment of this chapter. Nothing in this 
     subsection precludes the Secretary from expanding the number 
     or type of facilities or programs that provide treatment and 
     rehabilitation services for the specialized needs of such 
     veterans, including provision of specialized services on an 
     outpatient basis.
       ``(d) Annual Report.--Not later than March 1 of each year, 
     the Secretary shall submit to the Committees on Veterans' 
     Affairs of the Senate and House of Representatives a report 
     describing the actions the Secretary has taken to carry out 
     subsection (c) during the preceding fiscal year. Each such 
     report shall include a statement of the number of veterans to 
     whom the Department provided specialized services that are 
     covered by the report and the expense of providing those 
     services, and a description of the alternatives available in 
     the private sector for the provision of those services to 
     veterans.

     ``Sec. 1823. Supplemental benefits packages and policies

       ``VA health coverage may include supplemental health 
     benefits packages and supplemental cost sharing policies 
     consistent with the Bipartisan Health Care Reform Act of 
     1994. However, such coverage may not include a supplemental 
     health benefits package to a veteran that provides coverage 
     for services that the Department is required to provide to 
     that veteran under chapter 17 of this title.

     ``Sec. 1824. Limitation regarding veterans who elect not to 
       enroll to obtain VA health coverage

       ``(a) Reimbursement Required.--A veteran who is residing in 
     an area in which the Department offers VA health coverage and 
     who elects not to enroll to obtain such coverage may be 
     provided the items and services in standard coverage through 
     VA health coverage offered in that area only if (except as 
     provided in subsection (b)) the plan is reimbursed for the 
     cost of the care provided.
       (b) Exception.--The Secretary may not impose on or collect 
     from a veteran described in subsection (a) a cost-share 
     charge of any kind in the case of treatment for a service-
     connected disability that (as determined by the Secretary) 
     requires a specialized treatment capacity for which the 
     Department has particular expertise.

     ``Sec. 1825. Limitation on use of funds for abortions

       ``None of the funds appropriated to carry out this title 
     shall be expended for any abortion except when it is made 
     known to the Secretary that such procedure is necessary to 
     save the life of the mother or that the pregnancy is the 
     result of an act of rape or incest.

                   ``SUBCHAPTER IV--FINANCIAL MATTERS

     ``Sec. 1831. Premiums, copayments, etc.

       ``(a) Exemption of Certain Veterans.--Subject to subsection 
     (f), in the case of a veteran described in subsection (b) who 
     is a VA enrollee, there may not be imposed or collected from 
     the veteran a cost-share charge of any kind (whether a 
     premium, copayment, deductible, coinsurance charge, or other 
     charge) for items and services in standard coverage that are 
     provided to the veteran by the Secretary within a VA plan 
     provider network.
       ``(b) Veterans Exempt From Charges.--The veterans referred 
     to in subsection (a) are the following:
       ``(1) Any veteran with a service-connected disability rated 
     at 10 percent or greater.
       ``(2) Any veteran whose discharge or release from the 
     active military, naval or air service was for a disability 
     incurred or aggravated in the line of duty.
       ``(3) Any veteran who is in receipt of, or who, but for a 
     suspension pursuant to section 1151 of this title (or both 
     such a suspension and the receipt of retired pay), would be 
     entitled to disability compensation, but only to the extent 
     that such a veteran's continuing eligibility for such care is 
     provided for in the judgment or settlement provided for in 
     such section.
       ``(4) Any veteran who is a former prisoner of war.
       ``(5) Any veteran of the Mexican border period or World War 
     I.
       ``(6) Any veteran who is unable to defray the expenses of 
     necessary care as determined under section 1722(a) of this 
     title.
       ``(c) Other Enrollees.--(1) In the case of a VA enrollee 
     who is not described in subsection (b), the Secretary shall 
     (except as provided in paragraph (2)) charge premiums and 
     shall establish copayments, deductibles, and coinsurance 
     amounts.
       ``(2) The Secretary may not collect from an enrollee a 
     premium in the case of--
       ``(A) an individual with VA health coverage by reason of 
     eligibility under section 1812 of this title; or
       ``(B) an individual with VA health coverage by reason of 
     eligibility under section 1813 of this title and who is 
     described in paragraph (1) of section 1713(a) of this title.
       ``(3) The Secretary may not charge a copayment, deductible, 
     or other coinsurance amount in the case of care for any 
     disease covered under section 1710(e)(1) of this title.
       ``(d) Establishment of Rates.--The premium rate, and the 
     rates for deductibles and copayments, applicable under VA 
     health coverage shall be established by such coverage based 
     on rules applicable to all health coverage offered in the 
     geographic area in which such VA health coverage is offered.
       ``(e) Duties of Employers.--The obligations (including 
     obligations with respect to payment of premiums) under the 
     Bipartisan Health Care Reform Act of 1994 of an employer with 
     respect to employees with VA health coverage, and with 
     respect to such a plan, shall be the same as those that apply 
     with respect to other employees and other health coverage.
       ``(f) Acceptance of Premium Certificates.--In the case of a 
     veteran who has been issued a premium certificate or voucher 
     under the Bipartisan Health Care Reform Act of 1994, the 
     Secretary may require the veteran to tender the certificate 
     to the Secretary as a condition of enrollment and the 
     Secretary may accept the certificate.

     ``Sec. 1832. Recovery of cost of certain care and services

       ``(a) Recovery From Third Parties.--In the case of an 
     individual provided care or services through VA health 
     coverage who has coverage under any supplemental health 
     insurance policy, including a Medicare supplemental health 
     insurance plan, the Secretary has the right to recover or 
     collect charges for care or services (as determined by the 
     Secretary, but not including care or services for a service-
     connected disability) from the party providing that coverage 
     to the extent that the individual (or the provider of the 
     care or services) would be eligible to receive payment for 
     such care or services from such party if the care or services 
     had not been furnished by a department or agency of the 
     United States.
       ``(b) Procedures.--The provisions of subsections (b) 
     through (f) of section 1729 of this title shall apply with 
     respect to claims by the United States under subsection (a) 
     in the same manner as they apply to claims under subsection 
     (a) of that section.

     ``Sec. 1833. Health Coverage Fund

       ``(a) Establishment of Fund.--There is hereby established 
     in the Treasury a revolving fund to be known as the 
     `Department of Veterans Affairs Health Coverage Fund'.
       ``(b) Crediting of Amounts to Fund.--There shall be 
     credited to the revolving fund any amount received by the 
     Department by reason of the furnishing of health care under 
     VA health coverage and any amount received by the Department 
     by reason of the enrollment of an individual with VA health 
     coverage (including amounts received as premiums, premium 
     certificates or vouchers, copaymentsor coinsurance, and 
     deductibles), any amount received as a third-party 
     reimbursement, and any amount received as a reimbursement 
     from other health coverage for care furnished to one of its 
     enrollees.
       ``(c) Crediting to Treasury.--Any amounts deposited to the 
     revolving fund that are attributable to amounts received by 
     the Department as a premium, including a premium certificate 
     or voucher, by reason of the enrollment with VA health 
     coverage of a veteran described in section 1831(b) of this 
     title shall be covered into the General Fund of the Treasury.
       ``(d) Amounts Not Permitted to be Retained.--
     Notwithstanding subsection (b), the Department may not retain 
     amounts received for care furnished to a VA enrollee in a 
     case in which the costs of such care have been covered by 
     appropriations. Such amounts shall be deposited in the 
     General Fund of the Treasury.
       ``(e) Availability of Funds.--Amounts in the revolving fund 
     are hereby made available for all expenses, both direct and 
     indirect, related to the delivery through VA health coverage 
     of the items and services in standard coverage and any 
     supplemental benefits package or policy offered through such 
     coverage.''.
       (b) Preservation of Existing Benefits for Facilities Not 
     Offering Services Through Qualified Health Coverage.--(1) 
     Chapter 17 of title 38, United States Code, is amended by 
     inserting after section 1704 the following new section:

     ``Sec. 1705. Facilities not offering qualified health 
       coverage; veterans not eligible to enroll to obtain 
       coverage

       ``The provisions of this chapter shall apply with respect 
     to the furnishing of care and services--
       ``(1) by any facility of the Department that (A) is not 
     offering qualified health coverage under the Bipartisan 
     Health Care Reform Act of 1994, and (B) is not located in a 
     State (or portion of a State) that is a single payer area; 
     and
       ``(2) by any facility of the Department (whether or not 
     offering qualified health coverage under the Bipartisan 
     Health Care Reform Act of 1994) in the case of a veteran who 
     is not an eligible for enrollment under chapter 18 of this 
     title.''.
       (2) The table of sections at the beginning of such chapter 
     is amended by inserting after the item relating to section 
     1704 the following new item:

``1705. Facilities not offering qualified health coverage; veterans not 
              eligible to enroll to obtain coverage.''.

     SEC. 9002. ORGANIZATION OF DEPARTMENT OF VETERANS AFFAIRS 
                   FACILITIES AS FACILITIES OFFERING QUALIFIED 
                   HEALTH COVERAGE.

       (a) In General.--Chapter 73 of title 38, United States 
     Code, is amended--
       (1) by redesignating subchapter IV as subchapter V; and
       (2) by inserting after subchapter III the following new 
     subchapter:

 ``SUBCHAPTER IV--PARTICIPATION AS PART OF NATIONAL HEALTH CARE REFORM

     ``Sec. 7341. Organization of health care facilities as 
       facilities offering qualified health coverage

       ``(a) Except as provided in section 7342 of this title, the 
     Secretary shall organize Department plans and facilities as 
     plans and facilities offering qualified health coverage under 
     the Bipartisan Health Care Reform Act of 1994 subject to 
     adjustment under subsection (g). The Secretary shall 
     prescribe regulations establishing standards for the 
     operation of Department health care facilities as facilities 
     offering qualified health coverage under the Bipartisan 
     Health Care Reform Act of 1994. In prescribing those 
     standards, the Secretary shall assure that they conform, to 
     the maximum extent practicable, to the requirements for 
     qualified health coverage generally set forth in the 
     Bipartisan Health Care Reform Act of 1994.
       ``(b) Within a geographic area or region, health care 
     facilities of the Department located within that area or 
     region may be organized to operate as a single entity 
     offering qualified health coverage encompassing all 
     Department facilities within that area or region or may be 
     organized to operate as several entities offering qualified 
     health coverage.
       ``(c) Within a geographic area or region other than a State 
     (or portion of a State) that operates as a single payer area, 
     any health insurance purchasing cooperative, or similar 
     entity that offer health insurance plans shall offer as an 
     option to eligible individuals enrollment to obtain VA health 
     coverage that is offered in that area or region.
       ``(d) Any health insurance program that is provided for 
     Federal employees shall include enrollment to obtain VA 
     health coverage as enrollment options for eligible 
     individuals. Premiums shall be paid for VA health coverage 
     under any such insurance program based upon enrollment with 
     that plan in the same manner as to any other health coverage.
       ``(e)(1) In establishing and operating standard health 
     coverage, the Secretary, in consultation with the Comptroller 
     General, shall take appropriate steps to ensure the financial 
     solvency and stability of the VA health coverage and of 
     contractors and subcontractors providing services pursuant to 
     section 7343 of this title.
       ``(2) In carrying out paragraph (1), the Secretary may 
     purchase from commercial sources insurance to insure the 
     Department against the financial risks involved in the 
     offering of VA health coverage.
       ``(3) Notwithstanding any other provision of law, there 
     shall be no requirements applicable to the offering of VA 
     health coverage with respect to the maintenance of a reserve 
     fund, requirements to reinsure, or payments into any other 
     financial integrity fund other than as established pursuant 
     to paragraph (1).
       ``(f) In carrying out responsibilities under the Bipartisan 
     Health Care Reform Act of 1994, a State (or a State-
     established entity)--
       ``(1) may not impose any standard or requirement on VA 
     health coverage that is inconsistent with this section or any 
     regulation prescribed under this section or other Federal 
     laws regarding the operation of this section; and
       ``(2) may not deny certification of VA health coverage 
     under the Bipartisan Health Care Reform Act of 1994 on the 
     basis of a conflict between a rule of a State (or State-
     established entity) and this section or regulations 
     prescribed under this section or other Federal laws regarding 
     the operation of this section.
       ``(g) Notwithstanding any provision of the Bipartisan 
     Health Care Reform Act of 1994 or this subchapter, any 
     reference in this subchapter to `qualified health coverage' 
     under such Act shall be considered a reference to coverage of 
     a standardized package of benefits established by the 
     Secretary with an actuarial value not less than the actuarial 
     value of qualified health coverage under such Act.

     ``Sec. 7342. Operation of health care facilities within 
       States operating as single payer areas

       ``(a) In a State (or portion of a State) that operates as a 
     single payer system, Department health care facilities in 
     that State (or portion of a State) shall serve as providers 
     to individuals residing in that State (or portion of a State) 
     who would be eligible to enroll under chapter 18 of this 
     title to obtain VA health coverage if they were residing in 
     an area where qualified health coverage was offered under the 
     Bipartisan Health Care Reform Act of 1994. Such facilities 
     may provide those individuals any covered service in standard 
     coverage.
       ``(b) A Department facility providing care to residents of 
     a single payer area pursuant to subsection (a) shall be 
     reimbursed for that care on the same basis as any other 
     provider furnishing the same services in that area.
       ``(c) A veteran described in section 1831(b) of this title 
     shall be exempt from any otherwise applicable charges for 
     such care. Any other individual provided care pursuant to 
     subsection (a) shall be subject to all applicable 
     requirements respecting copayments, deductibles, and 
     coinsurance. Notwithstanding the preceding sentence, section 
     1831(c)(3) of this title shall apply to any such charge.

     ``Sec. 7343. Health care resource agreements

       ``(a)(1) In accordance with policies established under 
     subsection (b), an official specified in paragraph (2) may, 
     without regard to any law or regulation specified in 
     paragraph (3), enter into agreements with health care plans, 
     with insurers, and with health care providers, and with any 
     other entity or individual, to furnish or obtain any health-
     care resource.
       ``(2) An official specified in this paragraph is any of the 
     following:
       ``(A) The head official offering VA health coverage.
       ``(B) The director of a Department health care facility 
     that is providing service through VA health coverage.
       ``(C) The director of a Department health care facility 
     that is operating in a State (or portion of a State) that is 
     operating under a single payer system.
       ``(3) A law or regulation specified in this paragraph is 
     any of the following:
       ``(A) Section 1703 of this title.
       ``(B) Any other law or regulation pertaining to--
       ``(i) competitive procedures;
       ``(ii) acquisition procedures or policies (other than 
     contract dispute settlement procedures); or
       ``(iii) bid protests.
       ``(4) For purposes of this subsection, the term `health-
     care resource' has the meaning given that term in section 
     8152 of this title.
       ``(b) Policies established by the Secretary under 
     subsection (a) shall include appropriate provisions to ensure 
     that procurements under that subsection are carried out in a 
     manner consistent with (1) Federal acquisition policies 
     regarding nondiscrimination, equal opportunity, business 
     integrity, and safeguarding against fraud and abuse, and (2) 
     the goal of a streamlined process for the acquisition of 
     health-care resources.
       ``(c) Any proceeds to the Government received from an 
     agreement under subsection (a) shall be credited to the 
     Department of Veterans Affairs Health Coverage Fund 
     established under section 1834 of this title and to funds 
     that have been allotted to the facility that furnished the 
     resource involved.

     ``Sec. 7344. Administrative and personnel flexibility

       ``(a) In order to carry out this subchapter, the Secretary 
     may--
       ``(1) subject to section 1822(c) of this title, carry out 
     administrative reorganizations of the Department without 
     regard to those provisions of section 510 of this title 
     following subsection (a) of that section; and
       ``(2) when the Secretary finds it is cost-effective or 
     necessary in order to provide health care services in a 
     timely manner--
       ``(A) enter into contracts for procurement of any 
     commercially available item at a cost of under $100,000 
     without regard to any provision of law or regulation (i) 
     requiring competitive procedures; (ii) mandating or giving 
     priority to any source of supply; or (iii) pertaining to 
     protests; and
       ``(B) enter into contracts without regard to section 
     8110(c) of this title for the performance of services 
     previously performed by employees of the Department.
       ``(b)(1) The Secretary may establish alternative personnel 
     systems or procedures for personnel at facilities offering 
     qualified health coverage under this title, or for personnel 
     at facilities operating in a State (or portion of a State) 
     that is operating under a single payer system, whenever the 
     Secretary considers such action necessary, except that the 
     Secretary shall provide for preference eligibles (as defined 
     in section 2108 of title 5) in a manner comparable to the 
     preference for such eligibles under subchapter I of chapter 
     33, and subchapter I of chapter 35, of such title.
       ``(2) In establishing alternative personnel systems or 
     procedures under this subsection, the Secretary shall include 
     the following:
       ``(A) A system that ensures that applicants for employment 
     and employees are appointed, promoted, and assigned on the 
     basis of merit and fitness.
       ``(B) An equal employment opportunity program.
       ``(C) Compensation systems which will be used to set rates 
     of pay that are competitive with rates of pay paid by health-
     care providers other than the Department and that take into 
     consideration the difficulty, responsibility, and 
     qualification requirements of the work performed.
       ``(D) A formal performance appraisal system.
       ``(E) A system to address unacceptable conduct and 
     performance by employees, including a general statement of 
     violations, sanctions, and procedures which shall be made 
     known to all employees, and a dispute resolution procedure.
       ``(F) A formal policy regarding the accrual and use of sick 
     leave and annual leave.
       ``(c) The Secretary may carry out appropriate promotional, 
     advertising, and marketing activities to inform individuals 
     of the availability of facilities of the Department offering 
     qualified health coverage.

     ``Sec. 7345. Veterans Health Care Transition Fund

       ``(a) For each of fiscal years 1995 and 1996, the Secretary 
     of the Treasury shall credit to a special fund (in this 
     section referred to as the `Fund') of the Treasury an amount 
     equal to--
       ``(1) $1,200,000,000 for fiscal year 1995; and
       ``(2) $800,000,000 for fiscal year 1996.
       ``(b) Amounts in the Fund shall be available to the 
     Secretary only for VA health coverage authorized under this 
     chapter. Such amounts are available without fiscal year 
     limitation for costs of commencing the offering of VA health 
     coverage, including consulting services, equipment, 
     marketing, and other costs, minor construction, and (subject 
     to section 8104 of this title) major construction.
       ``(c) The Secretary shall submit to Congress, no later than 
     March 1, 1996, a report concerning the operation of the 
     Department of Veterans Affairs health care system in 
     preparing for, and operating under, national health care 
     reform under the Bipartisan Health Care Reform Act of 1994 
     during fiscal years 1995 and 1996. The report shall include a 
     discussion of--
       ``(1) the adequacy of amounts in the Fund for the offering 
     of VA health coverage;
       ``(2) the quality of care provided by such plans; and
       ``(3) the ability of such plans to attract patients.

     ``Sec. 7346. Funding provisions: grants and other sources of 
       assistance

       ``The Secretary may apply for and accept, if awarded, any 
     grant or other source of funding that is intended to meet the 
     needs of special populations and that but for this section is 
     unavailable to facilities of the Department or to qualified 
     health coverage offered by the Government if funds obtained 
     through the grant or other source of funding will be used 
     through a facility of the Department offering qualified 
     health coverage.''.
       (b) Clerical Amendment.--The table of sections at the 
     beginning of chapter 73 is amended by striking out the item 
     relating to the heading for subchapter IV and inserting in 
     lieu thereof the following:

 ``subchapter iv--participation as part of national health care reform

``7341. Organization of health care facilities as facilities offering 
              qualified health coverage
``7342. Operation of health care facilities within States operating as 
              single payer areas.
``7343. Health care resource agreements.
``7344. Administrative and personnel flexibility.
``7345. Veterans Health Coverage Transition Fund.
``7346. Funding provisions: grants and other sources of assistance.

                ``subchapter v--research corporations''.

     SEC. 9003. ELIGIBILITY FOR CHAPTER 17 CARE.

       (a) Nursing Home Care--Section 1710(a)(1) of title 38, 
     United States Code, is amended by inserting ``(or, in the 
     case of a veteran described in subparagraph (A) or (D) below, 
     shall furnish nursing home care)'' after ``may furnish 
     nursing home care''.
       (b) Outpatient Care for Enrolled Veterans.--Paragraph (1) 
     of section 1712(a) of such title is amended--
       (1) by striking out ``and'' at the end of subparagraph (C);
       (2) by striking out the period at the end of subparagraph 
     (D) and inserting in lieu thereof a semicolon; and
       (3) by adding at the end the following:
       ``(E) to any veteran described in section 1831(b) of this 
     title who is enrolled under section 1811 of this title and 
     the Bipartisan Health Care Reform Act of 1994 with VA health 
     coverage (as defined in section 1801 of this title), for any 
     disability to the extent that care and treatment of that 
     disability is not included within standard coverage (as 
     defined in section 1801 of this title);''.
       (c) Obviate-the-Need Outpatient Care.--(1) Paragraph (2) of 
     such section is amended by striking out ``The Secretary'' and 
     all the follows through ``this subsection--'' and inserting 
     in lieu thereof ``Except as provided in subsection (b) of 
     this section, the Secretary shall furnish on an ambulatory or 
     outpatient basis such medical services as the Secretary 
     determines are needed--''.
       (2) Paragraph (4) of such section is amended by striking 
     out ``medical services for a purpose described in paragraph 
     (5) of this subsection'' and inserting in lieu thereof ``, to 
     the extent that facilities are available, such medical 
     services as the Secretary determines are needed''.
       (3) Such section is further amended--
       (A) by striking out paragraph (5); and
       (B) by redesignating paragraphs (6) and (7) as paragraphs 
     (5) and (6), respectively.
       (d) Conforming Amendments.--(1) Section 1701(6)(A)(i) of 
     such title is amended by striking out ``(except under the 
     conditions described in section 1712(a)(5)(A) of this 
     title)''.
       (2) Section 1701(6)(B)(i)(II) of such title is amended by 
     striking ``section 1712(a)(5)(B)'' and inserting in lieu 
     thereof ``section 1712''.
       (3) Section 1703(a)(2)(B) of such title is amended by 
     striking out ``for a purpose described in section 
     1712(a)(5)(B) of this title'' and inserting in lieu thereof 
     ``to complete treatment incident to hospital, nursing home, 
     or domiciliary care that has been provided by the 
     Department''.
       (4) Section 1712A(b)(1) of such title is amended by 
     striking out ``section 1712(a)(5)(B)'' and inserting in lieu 
     thereof ``section 1703(a)(2)(B)''.

     SEC. 9004. AUTHORITY TO PROVIDE HEALTH CARE FOR HERBICIDE AND 
                   RADIATION EXPOSURE.

       (a) Authorized Inpatient Care.--Section 1710(e) of title 
     38, United States Code, is amended to read as follows:
       ``(e)(1)(A) Subject to paragraph (4), a herbicide-exposed 
     veteran is eligible for hospital care and nursing home care 
     under subsection (a)(1)(G) for any disease specified in 
     subparagraph (B).
       ``(B) The diseases referred to in subparagraph (A) are 
     those for which the National Academy of Sciences, in a report 
     issued in accordance with section 2 of the Agent Orange Act 
     of 1991, has determined--
       ``(i) that there is sufficient evidence to conclude that 
     there is a positive association between occurrence of the 
     disease in humans and exposure to a herbicide agent;
       ``(ii) that there is evidence which is suggestive of an 
     association between occurrence of the disease in humans and 
     exposure to a herbicide agent, but such evidence is limited 
     in nature; or
       ``(iii) that available studies are insufficient to permit a 
     conclusion about the presence or absence of an association 
     between occurrence of the disease in humans and exposure to a 
     herbicide agent.
       ``(2) A radiation-exposed veteran is eligible for hospital 
     care and nursing home care under subsection (a)(1)(G) for--
       ``(A) any disease listed in section 1112(c)(2) of this 
     title; and
       ``(B) any other disease for which the Secretary, based on 
     the advice of the Advisory Committee on Environmental 
     Hazards, determines that there is credible evidence of a 
     positive association between occurrence of the disease in 
     humans and exposure to ionizing radiation.
       ``(3) Subject to paragraph (4), a veteran who the Secretary 
     finds may have been exposed while serving on active duty in 
     the Southwest Asia theater of operations during the Persian 
     Gulf War to a toxic substance or environmental hazard is 
     eligible for hospital care and nursing home care under 
     subsection (a)(1)(G) of this section for any disability which 
     becomes manifest before October 1, 1996, notwithstanding that 
     there is insufficient medical evidence to conclude that such 
     disability may be associated with such exposure.
       ``(4) Hospital and nursing home care may not be provided 
     under or by virtue of paragraph (1) after September 30, 1996, 
     or, in the case of a veteran described in paragraph (3), 
     after September 30, 1998.
       ``(5) For purposes of this subsection and section 1712 of 
     this title--
       ``(A) the term `herbicide-exposed veteran' means a veteran 
     (i) who served on active duty in the Republic of Vietnam 
     during the Vietnam era, and (ii) who the Secretary finds may 
     have been exposed during such service to a herbicide agent;
       ``(B) the term `herbicide agent' has the meaning given that 
     term in section 1116(a)(4) of this title; and
       ``(C) the term `radiation-exposed veteran' has the meaning 
     given that term in section 1112(c)(4) of this title.''.
       (b) Authorized Outpatient Care.--Section 1712 of such title 
     is amended--
       (1) in subsection (a)(1) (as amended by section 9003(b)), 
     by adding at the end the following:
       ``(F) during the period before October 1, 1996, to any 
     herbicide-exposed veteran for any disease listed in section 
     1710(e)(1)(B) of this title; and
       ``(G) to any radiation-exposed veteran for any disease 
     covered under section 1710(e)(1)(C) of this title.''; and
       (2) in subsection (i)(3)--
       (A) by striking out ``(A)''; and
       (B) by striking out ``, or (B)'' and all that follows 
     through ``title''.
       (c) Savings Provision.--The provisions of sections 1710(e) 
     and 1712(a) of title 38, United States Code, as in effect on 
     the day before the date of the enactment of this Act, shall 
     apply with respect to hospital care, nursing home care, and 
     medical services in the case of any veteran furnished care or 
     services before such date of enactment on the basis of 
     presumed exposure to a substance or radiation under the 
     authority of those provisions.

     SEC. 9005. EXTENSION OF AUTHORITY TO PROVIDE PRIORITY 
                   OUTPATIENT HEALTH CARE FOR EXPOSURE TO 
                   ENVIRONMENTAL HAZARDS.

       Section 1712(a)(1)(D) of title 38, United States Code, is 
     amended by striking out ``December 31, 1994, for any 
     disability'' and inserting in lieu thereof ``October 1, 1998, 
     for any disability which becomes manifest before October 1, 
     1996,''.

     SEC. 9006. REPORT ON WAIVING COST-SHARING FOR CERTAIN MEDICAL 
                   CARE FOR DEPENDENTS OF PERSIAN GULF VETERANS 
                   WHO MAY HAVE BEEN EXPOSED TO ENVIRONMENTAL 
                   HAZARDS.

       (a) Report.--The Secretary of Veterans Affairs shall submit 
     to Congress a report on the desirability and the feasibility 
     of waiving any requirement for cost-sharing in the case of 
     medical care described in subsection (b) that is provided 
     through VA health coverage under chapter 18 of title 38, 
     United States Code (as added by section 9001), to an 
     individual who is a VA enrollee enrolled under family-member 
     eligibility under section 1813 of that chapter.
       (b) Persian Gulf War Illness.--Medical care referred to in 
     subsection (a) is medical care provided to a family member of 
     a veteran described in subparagraph (C) of section 1710(e)(1) 
     of title 38, United States Code, for any disease or 
     disability occurring in that family member which the 
     Secretary finds may be related to the service of the veteran 
     in the Southwest Asia theater of operations during the 
     Persian Gulf War.
       (c) Matters To Be Considered.--In preparing the report 
     under subsection (a), the Secretary shall consider relevant 
     studies, including those that have been (or that are being) 
     conducted by the Department of Veterans Affairs, the 
     Department of Defense, the National Institutes of Health, the 
     National Academy of Sciences, and private health care 
     providers.
       (d) Submission of Report.--The report under subsection (a) 
     shall be submitted not later than 60 days after the date of 
     the enactment of this Act.

     SEC. 9007. STUDY OF THE EFFECT OF TELEMEDICINE ON THE 
                   DELIVERY OF VA HEALTH CARE SERVICES.

       (a) In General.--During each of fiscal years 1995 through 
     1997, the Secretary of Veterans Affairs shall carry out a 
     study of the effect of telemedicine on the delivery, 
     accessibility, and quality of health care services available 
     to individuals who are eligible for enrollment in a 
     Department of Veterans Affairs health care plan.
       (b) Reports.--Not later than 120 days after the date of the 
     enactment of this Act and annually thereafter through 1998, 
     the Secretary shall submit to the Committees on Veterans' 
     Affairs of the Senate and House of Representatives a report, 
     including descriptions of the telemedicine applications 
     benefiting veterans, relating to the study conducted under 
     subsection (a).
       (c) Consultation.--Each study under subsection (a) shall be 
     carried out in consultation with the Secretary of Health and 
     Human Services, the Secretary of Defense, the Chair of the 
     White House Information Infrastructure Task Force, and the 
     Director of High Performance Computing and Communications in 
     the Executive Office of the President.

     SEC. 9008. LEGISLATIVE PROPOSAL ON VA HEALTH COVERAGE FOR 
                   MEDICARE BENEFICIARIES.

       (a) In General.--
       (1) Legislative proposal.--Not later than 1 year after the 
     date of the enactment of this Act, the Secretary, in 
     consultation with the Secretary of Veterans Affairs, shall 
     develop and submit to Congress a proposal for legislation 
     which provides for obtaining VA health coverage for medicare 
     beneficiaries who are veterans.
       (2) Medicare beneficiary.--For purposes of this section, 
     the term ``medicare beneficiary'' means an individual who is 
     eligible for benefits under part A of title XVIII of the 
     Social Security Act and is enrolled under part B of such 
     title.
       (b) Contents of the Proposal.--A proposal for legislation 
     submitted under subsection (a) shall--
       (1) provide for an appropriate methodology by which the 
     Secretary shall make payment to the Secretary of Veterans 
     Affairs for the enrollment of medicare beneficiaries;
       (2) provide individuals the opportunity to remain enrolled 
     to obtain VA health coverage without an interruption in 
     coverage upon becoming medicare beneficiaries; and
       (3) provide medicare beneficiaries who are veterans with 
     the opportunity to enroll to obtain VA health coverage as an 
     individual or with family members.
               TITLE X--AUTOMOBILE INSURANCE COORDINATION


                       table of contents of title

Sec. 10001. Definitions.
Sec. 10002. Provision of automobile insurance medical services through 
              health plans.
Sec. 10003. Payment for automobile insurance medical services.
Sec. 10004. Payment facilitation.
Sec. 10005. Construction.

     SEC. 10001. DEFINITIONS.

       In this title--
       (1) Injured individual.--The term ``injured individual'' 
     means an individual who has a bodily injury or illness 
     sustained in an automobile accident and who is entitled to 
     receive automobile insurance medical services from a health 
     plan.
       (2) Automobile insurance medical services.--The term 
     ``automobile insurance medical services'' means services and 
     items covered by automobile insurance that are medically 
     necessary or appropriate for treatment of bodily injuries or 
     illnesses sustained in automobile accidents and that are 
     within the scope of the benefits to which an injured 
     individual is entitled under his or her health plan.
       (3) Automobile insurance carrier.--The term ``automobile 
     insurance carrier'' means an insurance company, employer, or 
     fund that is liable for payment for automobile insurance 
     medical services based either on a direct contractual 
     obligation to an injured individual or an obligation on 
     behalf of a person responsible for causation of an injured 
     individual's bodily injury or illness.
       (4) Health plan.--The term ``health plan'' means a plan or 
     organization that pays for the services of health care 
     providers and is subject to Federal or State regulation.

     SEC. 10002. PROVISION OF AUTOMOBILE INSURANCE MEDICAL 
                   SERVICES THROUGH HEALTH PLANS.

       (a) In General.--An individual enrolled in a health plan 
     shall receive automobile insurance medical services 
     exclusively through the provision (or arrangement for the 
     provision) of such services by the health plan. Such services 
     shall be subject to all quality, cost containment, and anti-
     fraud and abuse provisions that apply generally to medical 
     services provided by or through health plans.
       (b) Alternative Permitted.--
       (1) By agreement.--Subsection (a) shall not prevent an 
     individual and an automobile insurance carrier from agreeing 
     that treatment for bodily injury or illness sustained in an 
     automobile accident shall be provided other than by or 
     through the health plan in which the individual is enrolled. 
     Notice of any such agreement shall be filed with the injured 
     individual's health plan. Upon receipt of such notice, the 
     health plan shall be absolved of all responsibility for 
     payment of any services covered by the agreement.
       (2) Medicare and medicaid.--Subsection (a) shall not 
     prevent a State from requiring automobile insurance carrier 
     to make direct payment to health care providers for 
     automobile insurance medical services that are covered both 
     by (A) medicare or medicaid, and (B) and automobile insurance 
     contract that is required by law and provides for direct 
     payment of medical services regardless of fault. Payment for 
     automobile insurance medical services in such circumstances 
     shall be made to the extent of the automobile insurance 
     carrier's liability under the applicable contract, in 
     accordance with fee schedules prescribed under section 
     10003(d), and such services shall be subject to all quality, 
     cost containment, and anti-fraud and abuse provisions that 
     apply generally to medical services provided by or through 
     health plans.

     SEC. 10003. PAYMENT FOR AUTOMOBILE INSURANCE MEDICAL 
                   SERVICES.

       (a) Payment to Health Plans.--Each automobile insurance 
     carrier that is liable for payment for automobile insurance 
     medical services provided to an injured individual by a 
     health plan shall make payment to the health plan for such 
     services to the extent of its obligations under the 
     applicable automobile insurance contract. Any federally 
     funded health care plan shall have first priority, over the 
     right of any other person, to receive payment pursuant to any 
     obligation under an automobile insurance policy covering 
     automobile insurance medical services.
       (b) Reimbursement for Cost Sharing.--Each automobile 
     insurance carrier shall remain liable, to the extent of its 
     obligations under the applicable automobile insurance 
     contract, for reimbursement of any deductibles or coinsurance 
     paid by an injured individual for automobile insurance 
     medical services.
       (c) Limitation of Liability.--Except with respect to 
     payments to health plans as required by subsection (a) and to 
     reimbursement of deductibles and coinsurance in accordance 
     with subsection (b), nothing in this title or any other 
     provision of law shall require an automobile insurance 
     carrier or any person insured by such a carrier to make any 
     payment to a health plan, health care provider, or any other 
     person for (1) automobile insurance medical services, or (2) 
     other health care services or items used to treat an injury 
     or illness sustained in an automobile accident that are not 
     medically necessary or appropriate.
       (d) Use of Fee Schedules.--
       (1) In general.--Irrespective of the type of health plan 
     providing automobile insurance medical services, payment by 
     automobile insurance carriers for such services shall be made 
     to the plan in accordance with any fee schedule or schedules 
     established for health care services generally. Each State 
     shall develop or approve a fee schedule applicable to payment 
     for any automobile insurance medical services that are not 
     covered by a generally applicable fee schedule or schedules.
       (2) Alternative payment methodologies.--Fee schedules shall 
     not be required in any case in which an automobile insurance 
     carrier and a health plan have agreed on an alternative 
     payment arrangement.
       (e) Reimbursement for Payments Made.--Nothing in this title 
     or any other provision of law shall impair the right of a 
     health plan or automobile insurance carrier to seek 
     reimbursement from any person liable for a bodily injury or 
     illness sustained in an automobile accident for payments made 
     for automobile insurance medical services to treat such 
     injury or illness.
       (f) Rights to Coverage for Additional Treatment.--Subject 
     to the provisions of subsection (c), nothing in this title 
     shall impair any rights with respect to medically necessary 
     or appropriate services and items to which an individual 
     injured in an automobile accident is entitled that are not 
     automobile insurance medical services as defined in this 
     title.

     SEC. 10004. PAYMENT FACILITATION.

       (a) In General.--In each State, an efficient and effective 
     system shall be established for prompt payment for automobile 
     insurance medical services by automobile insurance carriers 
     to health plans. Such systems shall require automobile 
     insurance carriers and health plans to interface effectively, 
     including through the use of cost-effective computer data 
     programs, in order to specify the automobile insurance 
     carrier or carriers liable for payment for automobile 
     insurance medical services. Such systems also shall include 
     mechanisms for resolution, including arbitration, of any 
     issues or disputes that may arise in connection with such 
     payment. The results of the resolution of issues and disputes 
     under the mechanisms prescribed pursuant to this subsection, 
     including the use of any fee schedule under section 10003(d), 
     shall be admissible in evidence only for purposes of recovery 
     under section 10003(e).
       (b) Sanctions.--In each State, appropriate sanctions shall 
     be prescribed for the failure of a health plan, an automobile 
     insurance carrier, or any other person to comply with the 
     requirements established pursuant to subsection (a). Such 
     sanctions shall include a penalty for late payment, which 
     shall be imposed on any automobile insurance carrier that 
     delays payment to a health plan after the amount of 
     reimbursement is established pursuant to the procedures 
     prescribed under subsection (a).

     SEC. 10005. CONSTRUCTION.

       (a) Coordination With Other Provisions of This Act.--The 
     provisions of this title shall be construed to be consistent 
     with and shall be implemented in accordance with the other 
     provisions of this Act.
       (b) Effect on Workers' Compensation Law.--Nothing in this 
     title shall affect rights or obligations under workers' 
     compensation law.

Amendment in the Nature of a Substitute to be Offered by Representative 
                           Stearns of Florida

       Strike out all after the enacting clause and insert in lieu 
     thereof the text of H.R. 4550 (as introduced.).