[Congressional Record Volume 140, Number 112 (Friday, August 12, 1994)]
[Senate]
[Page S]
From the Congressional Record Online through the Government Printing Office [www.gpo.gov]


[Congressional Record: August 12, 1994]
From the Congressional Record Online via GPO Access [wais.access.gpo.gov]

 
                          HEALTH SECURITY ACT

                                 ______


                      MITCHELL AMENDMENT NO. 2560

  Mr. MITCHELL proposed an amendment to the bill (S. 2351) to achieve 
universal health insurance coverage, and for other purposes; as 
follows:

       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 ``Health 
     Security Act''.
       (b) Table of Contents.--The table of contents of this Act 
     is as follows:

Sec. 1. Short title; table of contents.

  TITLE I--IMPROVED ACCESS TO STANDARDIZED AND AFFORDABLE HEALTH PLANS

       Subtitle A--Rules and Definitions of General Applicability

                 Part 1--Rules of General Applicability

Sec. 1001. Access to standardized coverage.
Sec. 1002. Standard health plan principles.
Sec. 1003. Protection of consumer choice.

                          Part 2--Definitions

Sec. 1011. Definitions relating to health plans.
Sec. 1012. Definitions relating to employment and income.
Sec. 1013. Other general definitions.

                   Subtitle B--Health Plan Standards

           Part 1--Establishment and Application of Standards

Sec. 1101. Establishment of national standards.
Sec. 1102. General rules.

                    Part 2--Insurance Market Reform

Sec. 1111. Guaranteed issue, availability, and renewability. 
Sec. 1112. Enrollment.
Sec. 1113. Coverage of dependents.
Sec. 1114. Nondiscrimination based on health status.
Sec. 1115. Benefits.
Sec. 1116. Community rating requirements.
Sec. 1117. Risk adjustment and reinsurance.
Sec. 1118. Financial solvency requirements and consumer protection 
              against provider claims.

                     Part 3--Delivery System Reform

Sec. 1121. Prohibition of discrimination.
Sec. 1122. Quality assurance standards.
Sec. 1123. Consumer grievance process.
Sec. 1124. Health security cards.
Sec. 1125. Information and marketing standards.
Sec. 1126. Information regarding a patient's right to self-
              determination in health care services.
Sec. 1127. Contracts with purchasing cooperatives.
Sec. 1128. Health plan arrangements with providers.
Sec. 1129. Utilization management protocols and physician incentive 
              plans.

               Part 4--Supplemental Health Benefits Plans

Sec. 1141. Supplemental health benefits plans.

                 Subtitle C--Benefits and Cost-Sharing

                   Part 1--Standard Benefits Packages

Sec. 1201. General description of standard benefits packages.
Sec. 1202. Description of categories of items and services.
Sec. 1203. Definitions.

                 Part 2--National Health Benefits Board

Sec. 1211. Creation of National health benefits board; membership.
Sec. 1212. Qualifications of board members.
Sec. 1213. General duties and responsibilities.
Sec. 1214. Powers.
Sec. 1215. Funding.
Sec. 1216. Applicability of Federal Advisory Committee Act.
Sec. 1217. Congressional consideration of Board proposals.

                   Subtitle D--Access to Health Plans

                    Part 1--Access Through Employers

Sec. 1301. General employer responsibilities.
Sec. 1302. Auditing of records.
Sec. 1303. Prohibition of certain employer discrimination.
Sec. 1304. Evasion of obligations.
Sec. 1305. Prohibition on self-insuring cost-sharing benefits.
Sec. 1306. Development of large employer purchasing groups.
Sec. 1307. Responsibilities in single-payer States.
Sec. 1308. Rules governing litigation involving retiree health 
              benefits.
Sec. 1309. Enforcement.

    Part 2--Access Through Health Insurance Purchasing Cooperatives


                    SUBPART A--GENERAL REQUIREMENTS-

Sec. 1321. Organization and operation.
Sec. 1322. Membership.
Sec. 1323. Agreements with certified standard health plans.
Sec. 1324. Membership and marketing fees.


                  SUBPART B--COMMUNITY-RATED EMPLOYERS

Sec. 1331. Duties of purchasing cooperatives.


          SUBPART C--FEDERAL EMPLOYEES HEALTH BENEFITS PROGRAM

Sec. 1341. Requirements applicable to FEHBP.
Sec. 1342. Special rules for FEHBP supplemental plans.
Sec. 1343. Definitions.

                 Part 3--Treatment of Association Plans

Sec. 1351. Rules relating to multiple employer welfare arrangements.
Sec. 1352. Association plans.

                  Subtitle E--Federal Responsibilities

             Part 1--Secretary of Health and Human Services


                       SUBPART A--GENERAL DUTIES

Sec. 1401. General duties and responsibilities.
Sec. 1402. Annual report.
Sec. 1403. Assistance with family collections.
Sec. 1404. Advisory opinions.
Sec. 1403. Funding.


 SUBPART B--RESPONSIBILITIES RELATING TO REVIEW AND APPROVAL OF STATE 
                                SYSTEMS

Sec. 1411. Federal review and action on State systems.
Sec. 1412. Failure of participating States to meet conditions for 
              compliance.
Sec. 1413. Reduction in payments for health programs by Secretary of 
              Health and Human Services.
Sec. 1414. Review of Federal determinations.
Sec. 1415. Federal support for State implementation.


        SUBPART C--RESPONSIBILITIES IN ABSENCE OF STATE SYSTEMS

Sec. 1421. Application of subpart.
Sec. 1422. Federal assumption of responsibilities in non-participating 
              States.
Sec. 1423. Imposition of surcharge on premiums under federally-operated 
              system.
Sec. 1424. Return to State operation.


    SUBPART D--ESTABLISHMENT OF CLASS FACTORS FOR CHARGING PREMIUMS

Sec. 1431. Premium class and age class factors.


 SUBPART E--RISK ADJUSTMENT AND REINSURANCE METHODOLOGY FOR PAYMENT OF 
                                 PLANS

Sec. 1435. Development of a risk adjustment and reinsurance 
              methodology.


         SUBPART F--RESPONSIBILITIES FOR FINANCIAL REQUIREMENTS

Sec. 1441. Capital standards for community-rated plans.
Sec. 1442. Standard for guaranty funds.


                       SUBPART G--OPEN ENROLLMENT

Sec. 1445. Periods of authorized changes in enrollment.
Sec. 1446. Distribution of comparative information.

                 Part 2--Essential Community Providers

Sec. 1461. Certification.
Sec. 1462. Categories of providers automatically certified.
Sec. 1463. Standards for additional providers.
Sec. 1464. Certification process; review; termination of 
              certifications.
Sec. 1465. Notification of participating States.
Sec. 1466. Health plan requirement.
Sec. 1467. Recommendation on continuation of requirement.
Sec. 1468. Definitions.

        Part 3--Specific Responsibilities of Secretary of Labor.

Sec. 1481. Responsibilities of Secretary of Labor.
Sec. 1482. Federal role with respect to multistate self-insured health 
              plans.
Sec. 1483. Assistance with employer collections.
Sec. 1484. Penalties for failure of large employer purchasing groups to 
              meet requirements.
Sec. 1485. Applicability of ERISA enforcement mechanisms for 
              enforcement of certain requirements.
Sec. 1486. Workplace wellness program.

                 Part 4--Office of Rural Health Policy

Sec. 1491. Office of Rural Health Policy.

            Part 5--Collective Bargaining Dispute Resolution

Sec.  1495. Findings and purpose.
Sec. 1496. Application limited to transition period.
Sec. 1497. Request for appointment of board of inquiry.
Sec. 1498. Appointment of board of inquiry.
Sec. 1499. Public factfinding.
Sec. 1499A. Compensation of members of boards of inquiry.
Sec. 1499B. Maintenance of status quo.

            Subtitle F--Participating State Responsibilities

                    Part 1--General Responsibilities

Sec. 1501. State plan and certification of standard health plans and 
              supplemental health benefits plans.
Sec. 1502. Community rating areas and health plan service areas.
Sec. 1503. Open enrollment periods.
Sec. 1504. Risk adjustment program.
Sec. 1505. Guaranty funds.
Sec. 1506. Enrollment activities.
Sec. 1507. Rural and medically underserved areas.
Sec. 1508. Public access sites.
Sec. 1509. Requirements relating to possessions of the United States.
Sec. 1510. Right of recovery of certain taxes against providers.

                    Part 2--Treatment of State Laws

Sec. 1511. Preemption of certain State laws relating to health plans.
Sec. 1512. State law restrictions on health professional licensure.
Sec. 1514. Preemption from State benefit mandates.

                       Part 3--State Flexibility


                     SUBPART A--EXISTING STATE LAWS

Sec. 1521. Continuance of existing Federal law waivers.
Sec. 1522. Hawaii Prepaid Health Care Act.
Sec. 1523. Alternative State provider payment systems.
Sec. 1524. Alternative State hospital services payment systems.


         SUBPART B--REQUIREMENTS FOR STATE SINGLE-PAYER SYSTEMS

Sec. 1531. Single-payer system described.
Sec. 1532. General requirements for single-payer systems.
Sec. 1533. Special rules for States operating Statewide single-payer 
              system.
Sec. 1534. Special rules for community rating area-specific single-
              payer systems.


    SUBPART C--EARLY IMPLEMENTATION OF COMPREHENSIVE STATE PROGRAMS

Sec. 1541. Early implementation of comprehensive State programs

                  Subtitle G--Miscellaneous Provisions

Sec. 1601. Provision of items or services contrary to religious belief 
              or moral conviction.
Sec. 1602. Antidiscrimination.
Sec. 1603. Neutrality concerning union organizing.

                         TITLE II--NEW BENEFITS

   Subtitle A--Coverage of Outpatient Prescription Drugs in Medicare

Sec. 2000. References in subtitle.
Sec. 2001. Coverage of outpatient prescription drugs.
Sec. 2002. Payment rules and related requirements for covered 
              outpatient drugs.
Sec. 2003. Medicare rebates for covered outpatient drugs.
Sec. 2004. Prescription Drug Payment Review Commission.
Sec. 2005. Coverage of home infusion drug therapy services.
Sec. 2006. Medicare drug benefit plans.
Sec. 2007. Payment for covered outpatient drug benefit under medicare 
              contracts with HMOs and CMPs.
Sec. 2008. Maintenance of effort.

             Subtitle B--Home and Community-Based Services

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

Sec. 2101. State programs for home and community-based services for 
              individuals with disabilities.
Sec. 2102. State plans.
Sec. 2103. Individuals with disabilities defined.
Sec. 2104. Home and community-based services covered under State plan.
Sec. 2105. Cost sharing.
Sec. 2106. Quality assurance and safeguards.
Sec. 2107. Advisory groups.
Sec. 2108. Payments to States.
Sec. 2109. Appropriations; allotments to States.
Sec. 2110. Federal evaluations.

Part 2--Grants Relating to the Development of Hospital Linkage Programs

Sec. 2111. Information and technical assistance grants relating to 
              development of hospital linkage programs.

  Subtitle C--Long-Term Care Insurance Improvement and Accountability

Sec. 2200. Short title.

          Part 1--Promulgation of Standards and Model Benefits

Sec. 2201. Standards.

 Part 2--Establishment and Implementation of Long-Term Care Insurance 
                            Policy Standards

Sec. 2211. Implementation of policy standards.
Sec. 2212. Regulation of sales practices.
Sec. 2213. Additional responsibilities for carriers.
Sec. 2214. Renewability standards for issuance, and basic for 
              cancellation of policies.
Sec. 2215. Benefit standards.
Sec. 2216. Nonforfeiture.
Sec. 2217. Limit of period of contestability and right to return.
Sec. 2218. Civil money penalty.

 Part 3--Long-Term Care Insurance Policies, Definition and Endorsements

Sec. 2221. Long-term care insurance policy defined.
Sec. 2222. Code of conduct with respect to endorsements.

                         Subtitle D--Life Care

Sec. 2301. Short title.
Sec. 2302. Life care: public insurance program for nursing home care.

                      Subtitle E--Study and Report

Sec. 2401. Study of issues related to end of life care.

 TITLE III--HEALTH PROFESSIONS WORKFORCE AND PUBLIC HEALTH INITIATIVES

        Subtitle A--Workforce Priorities Under Federal Payments

Sec. 3000. Definitions.

 Part 1--Institutional Costs of Graduate Medical Education; Workforce 
                               Priorities


       SUBPART A--NATIONAL COUNCIL REGARDING WORKFORCE PRIORITIES

Sec. 3001. National Council on Graduate Medical Education.


         SUBPART B--AUTHORIZED POSITIONS IN SPECIALTY TRAINING

Sec. 3012. Cooperation regarding approved physician training programs.
Sec. 3013. Annual authorization of number of specialty positions; 
              requirements regarding primary health care.
Sec. 3014. National Council recommendation of number of graduate 
              medical education positions.
Sec. 3015. Allocations among specialities and programs.


             SUBPART C--COSTS OF GRADUATE MEDICAL EDUCATION

      Chapter 1--Operation Of Approved Physician Training Programs

Sec. 3031. Federal formula payments to qualified entities for the costs 
              of the operation of approved physician training programs.
Sec. 3032. Application for payments.
Sec. 3033. Availability of funds for payments; annual amount of 
              payments.
Sec. 3034. Payments for dental and podiatric positions.

Chapter 2--Federal Formula Payments for Nursing and Health Professions 
                               Education

Sec. 3041. Federal formula payments for nursing and health professions 
              education.
Sec. 3042. Availability of funds for payments; amount of payments.

   Chapter 3--Academic Health Centers and Other Eligible Institutions

Sec. 3051. Federal formula payments to academic health centers and 
              other eligible institutions.
Sec. 3052. Request for payments.
Sec. 3053. Availability of funds for payments; annual amount of 
              payments.


                   SUBPART D--TRANSITIONAL PROVISIONS

Sec. 3055. Transitional payments to institutions.
Sec. 3056. Waiver of foreign country residence requirement with respect 
              to international medical graduates.

              Part 2--Health Professions Schools Payments


                 SUBPART A--PAYMENTS TO MEDICAL SCHOOLS

Sec. 3061. Federal payments to medical schools.
Sec. 3062. Application for payments.
Sec. 3063. Authorization of appropriations; annual amount of payments.


                SUBPART B--PAYMENTS TO NURSING PROGRAMS

Sec. 3071. Federal payments to graduate nurse training programs.
Sec. 3072. National Council on Graduate Nurse Training.


                 SUBPART C--PAYMENTS TO DENTAL SCHOOLS

Sec. 3073. Dental schools.


            SUBPART D--PAYMENTS TO SCHOOLS OF PUBLIC HEALTH

Sec. 3074. Schools of public health.

                        Part 3--Related Programs


                    SUBPART A--WORKFORCE DEVELOPMENT

Sec. 3081. Programs of the Secretary of Health and Human Services.
Sec. 3082. Programs of the Secretary of Labor.


       SUBPART B--TRANSITIONAL PROVISIONS FOR WORKFORCE STABILITY

Sec. 3091. Application.
Sec. 3092. Definitions.
Sec. 3093. Obligations of displacing employer and affiliated 
              enterprises in event of displacement.
Sec. 3094. Employment with successors.
Sec. 3095. Collective bargaining obligations during transition period.
Sec. 3096. General provisions.

                  Subtitle B--Academic Health Centers

Sec. 3101. Discretionary grants regarding access to centers.

                Subtitle C--Health Research Initiatives

                 Part 1--Programs for Certain Agencies

Sec. 3201. Biomedical, behavioral and health services research.
Sec. 3202. Health services research.
Sec. 3203. AHCPR conforming amendments.

                      Part 2--Funding for Program

Sec. 3211. Authorizations of appropriations.

                Part 3--Medical Technology Impact Study

Sec. 3221. Medical technology impact study.

    Subtitle D--Core Functions of Public Health Programs; National 
                Initiatives Regarding Preventive Health

                            Part 1--Funding

Sec. 3301. Authorizations of appropriations.

            Part 2--Core Functions of Public Health Programs

Sec. 3311. Purposes.
Sec. 3312. Grants to States for core functions of public health.
Sec. 3313. Submission of information.
Sec. 3314. Reports.
Sec. 3315. Application for grant.
Sec. 3316. Allocations for certain activities.
Sec. 3317. Definitions.
Sec. 3318. Single application and uniform reporting systems for core 
              functions of public health and public health categorical 
              grant programs administered by the Centers for Disease 
              Control and Prevention.

  Part 3--National Initiatives Regarding Health Promotion and Disease 
                               Prevention


                       SUBPART A--GENERAL GRANTS

Sec. 3331. Grants for national prevention initiatives.
Sec. 3332. Priorities.
Sec. 3333. Submission of information.
Sec. 3334. Application for grant.


   SUBPART B--DEVELOPMENT OF TELEMEDICINE IN RURAL UNDERSERVED AREAS

Sec. 3341. Grants for development of rural telemedicine.
Sec. 3342. Report and evaluation of telemedicine.
Sec. 3343. Regulations on reimbursement of telemedicine.
Sec. 3344. Authorization of appropriations.
Sec. 3345. Reimbursement for telemedicine services under the medicare 
              program.
Sec. 3346. Maintenance of effort.
Sec. 3345. Definition.

   Subtitle E--Health Services for Medically Underserved Populations

             Part 1--Initiatives for Access to Health Care


               SUBPART A--AUTHORIZATION OF APPROPRIATIONS

Sec. 3411. Authorizations of appropriations.


SUBPART B--DEVELOPMENT OF COMMUNITY HEALTH GROUPS AND HEALTH CARE SITES 
                              AND SERVICES

Sec. 3421. Grants and contracts for development of plans and networks 
              and the expansion and development of health care sites 
              and services.
Sec. 3422. Certain uses of awards.
Sec. 3423. Application.
Sec. 3424. Purposes and conditions.


 SUBPART C--CAPITAL COST OF DEVELOPMENT OF COMMUNITY HEALTH GROUPS AND 
                             OTHER PURPOSES

Sec. 3441. Direct loans and grants.
Sec. 3442. Certain requirements.
Sec. 3443. Defaults; right of recovery.
Sec. 3444. Provisions regarding construction or expansion of 
              facilities.
Sec. 3445. Application for assistance.
Sec. 3446. Administration of programs.


             SUBPART D--ENABLING AND SUPPLEMENTAL SERVICES

Sec. 3461. Grants and contracts for enabling and supplemental services.
Sec. 3462. Authorizations of appropriations.


          SUBPART E--RURAL HEALTH PLAN DEMONSTRATION PROJECTS

Sec. 3465. Rural health plan demonstration projects.

                 Part 2--National Health Service Corps

Sec. 3471. Authorizations of appropriations.
Sec. 3472. Allocation for participation of nurses in scholarship and 
              loan repayment programs.
Sec. 3473. Allocation for participation of psychiatrists, 
              psychologists, and clinical social workers in scholarship 
              and loan repayment programs.

               Subtitle F--Mental Health; Substance Abuse

           Part 1--Authorities Regarding Participating States

Sec. 3510. Integration of mental health and substance abuse systems.
Sec. 3511. Report on integration of mental health systems.

Part 2--Assistance for State Managed Mental Health and Substance Abuse 
                                Programs

Sec. 3531. Availability of assistance.
Sec. 3532. Plan requirements.
Sec. 3533. Additional Federal responsibilities.
Sec. 3534. Authorization of appropriations.

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

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

Sec. 3601. Purposes.
Sec. 3602. Healthy students-healthy schools grants.
Sec. 3603. Healthy Students-Healthy Schools Interagency Task Force.
Sec. 3604. Duties of the Secretary.

                 Part 2--School-related Health Services


                  SUBPART A--DEVELOPMENT AND OPERATION

Sec. 3681. Authorization of appropriations.
Sec. 3682. Eligibility for grants.
Sec. 3683. Preferences.
Sec. 3684. Planning and development grants.
Sec. 3685. Grants for operation of school health services.


            SUBPART B--CAPITAL COSTS OF DEVELOPING PROJECTS

Sec. 3691. Funding.

              Subtitle H--Public Health Service Initiative

Sec. 3695. Public Health Service initiative.

       Subtitle I--Additional Provisions Regarding Public Health

Sec. 3901. Curriculum development and implementation regarding domestic 
              violence and women's health.
Sec. 3902. Community scholarship programs.

               Subtitle J--Occupational Safety and Health

Sec. 3903. Occupational injury and illness prevention.
Sec. 3905. Full funding for WIC.

                 Subtitle L--Border Health Improvement

Sec. 3908. Border Health Commission.

                    TITLE IV--MEDICARE AND MEDICAID

Sec. 4000. References in title.

                          Subtitle A--Medicare

             Part 1--Integration of Medicare Beneficiaries

Sec. 4001. Individual election to remain in certain health plans.
Sec. 4002. Enrollment and termination of enrollment.

                 Part 2--Provisions Relating to Part A

Sec. 4101. Inpatient hospital services update for PPS hospitals.
Sec. 4102. Reduction in payments for capital-related costs for 
              inpatient hospital services.
Sec. 4103. Reductions in disproportionate share payments.
Sec. 4104. Extension of freeze on updates to routine service cost 
              limits for skilled nursing facilities.
Sec. 4105. Medicare-dependent, small rural hospitals.
Sec. 4106. Provisions relating to rural health transition grant 
              program.
Sec. 4107. Payments for sole community hospitals with teaching programs 
              and multihospital campuses.
Sec. 4108. Moratorium on designation of new long-term hospitals.
Sec. 4109. Revised payment methodology for rehabilitation and long-term 
              care hospitals.
Sec. 4110. Termination of indirect medical education payments.
Sec. 4111. Limited service hospital program.
Sec. 4112. Subacute care study.
Sec. 4113. Psychology services in hospitals.

                 Part 3--Provisions Relating to Part B

Sec. 4201. Updates for physicians' services.
Sec. 4202. Substitution of real GDP to adjust for volume and intensity; 
              repeal of restriction on maximum reduction permitted in 
              default update.
Sec. 4203. Payment for physicians' services relating to inpatient stays 
              in certain hospitals.
Sec. 4204. Changes in underserved area bonus payments.
Sec. 4205. Correction of MVPS upward bias.
Sec. 4206. Demonstration projects for medicare State-based performance 
              standard rate of increase.
Sec. 4207. Elimination of formula-driven overpayments for certain 
              outpatient hospital services.
Sec. 4208. Eye or eye and ear hospitals. 
Sec. 4209. Imposition of coinsurance on laboratory services.
Sec. 4210. Application of competitive acquisition process for part B 
              items and services.
Sec. 4211. Application of competitive acquisition procedures for 
              laboratory services.
Sec. 4212. Expanded coverage for physician assistants and nurse 
              practitioners.
Sec. 4213. Elimination of balance billing.
Sec. 4214. Development and implementation of resource-based methodology 
              for practice expenses.
Sec. 4215. Payments for durable medical equipment.
Sec. 4216. Clarification of regulations to distinguish orthotics and 
              prosthetics from durable medical equipment.
Sec. 4217. General part B premium.

              Part 4--Provisions Relating to Parts A and B

Sec. 4301. Medicare secondary payer changes.
Sec. 4302. Increase in medicare secondary payer coverage for end stage 
              renal disease services to 24 months.
Sec. 4303. Expansion of centers of excellence.
Sec. 4304. Reduction in routine cost limits for home health services.
Sec. 4305. Imposition of 20 percent coinsurance on home health 
              services.
Sec. 4306. Termination of graduate medical education payments.
Sec. 4307. Medicare select.

       Part 5--Repeal of Medicare and Medicaid Coverage Data Bank

Sec. 4401. Repeal of medicare and medicaid coverage data bank.

                      Subtitle B--Medicaid Program

Part 1--Integration of Certain Medicaid Eligibles Into Reformed Health 
                              Care System

Sec. 4601. Limiting coverage under medicaid of items and services 
              covered under standard benefit package.

   Part 2--Coordinated Care Services for Disabled Medicaid Eligibles

Sec. 4605. Coordinated care services for disabled medicaid eligibles.

      Part 3--Payments to Hospitals Serving Vulnerable Populations

Sec. 4611. Replacement of DSH payment provisions with provisions 
              relating to payments to hospitals serving vulnerable 
              populations.

               Part 4--Medicaid Long-term Care Provisions

Sec. 4615. Increased resource disregard for individuals receiving 
              certain services.
Sec. 4616. Frail elderly demonstration project waivers.
Sec. 4617. Elimination of requirement of prior institutionalization 
              with respect to habilitation services furnished under a 
              waiver for home or community-based services.
Sec. 4618. Elimination of rule regarding availability of beds in 
              certain institutions.
Sec. 4619. Preadmission screening for mentally retarded individuals.

                         Part 5--Miscellaneous

Sec. 4621. Medicaid coverage of all certified nurse practitioner and 
              clinical nurse specialist services.
Sec. 4622. Relief from third party liability requirements when cost-
              effective.
Sec. 4623. Extension of moratorium on treatment of certain facilities 
              as institutions for mental diseases.
Sec. 4624. Allowing certain entities to participate in a waiver.

                TITLE V--QUALITY AND CONSUMER PROTECTION

             Subtitle A--Quality Management and Improvement

Sec. 5001. National Quality Council.
Sec. 5002. National goals and performance measures of quality.
Sec. 5003. Standards and performance measures for health plans.
Sec. 5004. Plan data analysis and consumer surveys.
Sec. 5005. Evaluation and reporting of quality performance.
Sec. 5006. Development and dissemination of practice guidelines.
Sec. 5007. Research on health care quality.
Sec. 5008. Quality improvement foundations.
Sec. 5009. Consumer information and advocacy.
Sec. 5010. Authorization of appropriations.
Sec. 5011. Role of health plans in quality management. 
Sec. 5012. Information on health care providers.
Sec. 5013. Conforming amendments to Public Health Service Act.

               Subtitle B--Administrative Simplification

                    Part 1--Purpose and Definitions

Sec. 5101. Purpose.
Sec. 5102. Definitions.

    Part 2--Standards for Data Elements and Information Transactions

Sec. 5111. General requirements on Secretary.
Sec. 5112. Standards for data elements of health information.
Sec. 5113. Information transaction standards.
Sec. 5114. Standards relating to written explanations of benefits.
Sec. 5115. Timetables for adoption of standards.

     Part 3--Requirements With Respect to Certain Transactions and 
                              Information

Sec. 5121. Requirements with respect to certain transactions and 
              information.
Sec. 5122. Timetables for compliance with requirements.

                  Part 4--Accessing Health Information

Sec. 5131. Accessing health information for authorized purposes.
Sec. 5132. Responding to access requests.
Sec. 5133. Length of time information should be accessible.
Sec. 5134. Timetables for adoption of standards and compliance.

   Part 5--Standards and Certification for Health Information Network

Sec. 5141. Standards and certification for health information network 
              services.
Sec. 5142. Ensuring availability of information.

                           Part 6--Penalties

Sec. 5151. General penalty for failure to comply with requirements and 
              standards.

                    Part 7--Miscellaneous Provisions

Sec. 5161. Imposition of additional requirements.
Sec. 5162. Effect on State law.
Sec. 5164. Health information continuity.
Sec. 5165. Protection of commercial information.
Sec. 5166. Payment for health care services or health plan premiums.
Sec. 5167. Health security cards.
Sec. 5168. Misuse of health security card or personal health 
              identifier.
Sec. 5169. Direct billing for clinical laboratory services.
Sec. 5170. Authorization of appropriations.

                  Part 8--Assistance to the Secretary

Sec. 5171. General requirement on Secretary.
Sec. 5172. Health Information Advisory Committee.

Part 9--Demonstration Projects for Community-based Clinical Information 
                                Systems

Sec. 5181. Grants for demonstration projects.

               Subtitle C--Privacy of Health Information

                    Part 1--Findings and Definitions

Sec. 5201. Findings and purposes.
Sec. 5202. Definitions.

                     Part 2--Authorized Disclosures


                     SUBPART A--GENERAL PROVISIONS

Sec. 5206. General rules regarding disclosure.
Sec. 5207. Authorizations for disclosure of protected health 
              information.
Sec. 5208. Certified health information network services.


          SUBPART B--SPECIFIC DISCLOSURES RELATING TO PATIENT

Sec. 5211. Disclosures for treatment and financial and administrative 
              transactions.
Sec. 5212. Next of kin and directory information.
Sec. 5213. Emergency circumstances.


   SUBPART C--DISCLOSURE FOR OVERSIGHT, PUBLIC HEALTH, AND RESEARCH 
                                PURPOSES

Sec. 5216. Oversight.
Sec. 5217. Public health.
Sec. 5218. Health research.


SUBPART D--DISCLOSURE FOR JUDICIAL, ADMINISTRATIVE, AND LAW ENFORCEMENT 
                                PURPOSES

Sec. 5221. Judicial and administrative purposes.
Sec. 5222. Law enforcement.


    SUBPART E--DISCLOSURE PURSUANT TO GOVERNMENT SUBPOENA OR WARRANT

Sec. 5226. Government subpoenas and warrants.
Sec. 5227. Access procedures for law enforcement subpoenas and 
              warrants.
Sec. 5228. Challenge procedures for law enforcement warrants and 
              subpoenas.


        SUBPART F--DISCLOSURE PURSUANT TO PRIVATE PARTY SUBPOENA

Sec. 5231. Private party subpoenas.
Sec. 5232. Access procedures for private party subpoenas.
Sec. 5233. Challenge procedures for private party subpoenas.

     Part 3--Procedures for Ensuring Security of Protected Health 
                              Information


                 SUBPART A--ESTABLISHMENT OF SAFEGUARDS

Sec. 5236. Establishment of safeguards.
Sec. 5237. Accounting for disclosures.


 SUBPART B--REVIEW OF PROTECTED HEALTH INFORMATION BY SUBJECTS OF THE 
                              INFORMATION

Sec. 5241. Inspection of protected health information.
Sec. 5242. Amendment of protected health information.
Sec. 5243. Notice of information practices.


            SUBPART C--STANDARDS FOR ELECTRONIC DISCLOSURES

Sec. 5246. Standards for electronic disclosures.

                           Part 4--Sanctions


            SUBPART A--NO SANCTIONS FOR PERMISSIBLE ACTIONS

Sec. 5251. No liability for permissible disclosures.
Sec. 5252. No liability for institutional review board determinations.
Sec. 5253. Reliance on certified entity.


                       SUBPART B--CIVIL SANCTIONS

Sec. 5256. Civil penalty.
Sec. 5257. Civil action.


                     SUBPART C--CRIMINAL SANCTIONS

Sec. 5261. Wrongful disclosure of protected health information.

                   Part 5--Administrative Provisions

Sec. 5266. Relationship to other laws.
Sec. 5267. Rights of incompetents.
Sec. 5268. Exercise of rights.

  Subtitle D--Expanded Efforts To Combat Health Care Fraud and Abuse 
                   Affecting Federal Outlay Programs

                      Part 1--Improved Enforcement

Sec. 5301. Health care fraud and abuse affecting Federal outlay 
              programs.
Sec. 5302. Establishment of Federal Outlay Program Fraud and Abuse 
              Control Account.
Sec. 5303. Use of funds by Inspector General.
Sec. 5304. Rewards for information leading to prosecution and 
              conviction.

              Part 2--Civil Penalties and Rights of Action

Sec. 5311. Civil monetary penalties.
Sec. 5312. Permitting parties to bring actions on own behalf.
Sec. 5313. Exclusion from program participation.

                   Part 3--Amendments to Criminal Law

Sec. 5321. Health care fraud.
Sec. 5322. Theft or embezzlement.
Sec. 5323. False Statements.
Sec. 5324. Bribery and graft.
Sec. 5325. Injunctive relief relating to health care offenses.
Sec. 5326. Grand jury disclosure.
Sec. 5327. Forfeitures for violations of fraud statutes.

              Part 4--Amendments to Civil False Claims Act

Sec. 5331. Amendments to Civil False Claims Act.

                         Part 5--Effective Date

Sec. 5341. Effective date.

                  Subtitle E--Medical Liability Reform

                         Part 1--System Reforms

Sec. 5401. Federal tort reform.
Sec. 5402. State-based alternative dispute resolution mechanisms.
Sec. 5403. Requirement of certificate of merit.
Sec. 5404. Limitation on amount of attorney's contingency fees.
Sec. 5405. Periodic payment of awards.
Sec. 5406. Federal study on medical negligence.

Part 2--Demonstration Project Relating to Medical Malpractice Liability

Sec. 5411. Pilot program applying practice guidelines to medical 
              malpractice liability actions.
Sec. 5412. Enterprise liability demonstration project.

                  Subtitle F--Remedies and Enforcement

   Part 1--Review of Benefit Determinations for Enrolled Individuals


                        SUBPART A--GENERAL RULES

Sec. 5501. Health plan claims procedure.
Sec. 5502. Review in area complaint review offices of grievances based 
              on acts or practices by health plans.
Sec. 5503. Initial proceedings in complaint review offices.
Sec. 5504. Hearings before hearing officers in complaint review 
              offices.
Sec. 5505. Civil money penalties.


                  SUBPART B--EARLY RESOLUTION PROGRAMS

Sec. 5511. Establishment of early resolution programs in complaint 
              review offices.
Sec. 5512. Initiation of participation in mediation proceedings.
Sec. 5513. Mediation proceedings.
Sec. 5514. Legal effect of participation in mediation proceedings.
Sec. 5515. Enforcement of settlement agreements.
Sec. 5516. Due process for health care providers.

         Part 2--Additional Remedies and Enforcement Provisions

Sec. 5531. Judicial review of Federal action on State systems.
Sec. 5532. Civil enforcement.
Sec. 5533. Priority of certain bankruptcy claims.
Sec. 5534. Private right to enforce State responsibilities.
Sec. 5535. Private right to enforce Federal responsibilities in 
              operating a system in a State.
Sec. 5536. Private right to enforce responsibilities of cooperatives 
              and health plans.
Sec. 5537. Enforcement of consumer protections.
Sec. 5538. Discrimination claims.
Sec. 5539. Nondiscrimination in federally assisted programs.
Sec. 5540. Civil and administration action by essential community 
              provider.
Sec. 5541. Facial constitutional challenges.
Sec. 5542. Treatment of plans as parties in civil actions.
Sec. 5543. Whistleblower protections.
Sec. 5544. General nonpreemption of rights and remedies.

                    Subtitle G--Repeal of Exemption

Sec. 5601. Repeal of exemption for health insurance.

              TITLE VI--INDIVIDUAL AND EMPLOYER SUBSIDIES

Sec. 6000. Marketing fees and cooperative fees included in premium.

       Subtitle A--Individual Premium and Cost-Sharing Assistance

Sec. 6001. Requirement to operate State program.
Sec. 6002. Assistance with certified standard health plan premiums.
Sec. 6003. Assistance with cost-sharing for certified standard health 
              plans.
Sec. 6004. Eligibility determinations.
Sec. 6005. End-of-year reconciliation for premium assistance.
Sec. 6006. Enrollment outreach.
Sec. 6007. Payments to States.
Sec. 6008. Definitions and determinations of income.
Sec. 6009. Coordination with premium financing provisions.

                     Subtitle B--Employer Subsidies

Sec. 6101. Purpose.
Sec. 6102. Eligible employers.
Sec. 6103. Employer certification.
Sec. 6104. Amount of subsidy.
Sec. 6105. Definition.

                     TITLE VII--REVENUE PROVISIONS

Sec. 7000. Amendment of 1986 Code.

                    Subtitle A--Financing Provisions

              Part 1--Increase in Tax on Tobacco Products

Sec. 7101. Increase in excise taxes on tobacco products.
Sec. 7102. Modifications of certain tobacco tax provisions.
Sec. 7103. Imposition of excise tax on manufacture or importation of 
              roll-your-own tobacco.

                   Part 2--Health Related Assessments

Sec. 7111. Assessments on insured and self-insured health plans.
Sec. 7112. High cost health plan assessment.

           Part 3--Recapture of Certain Health Care Subsidies

Sec. 7121. Recapture of certain health care subsidies received by high-
              income individuals.

                        Part 4--Other Provisions

Sec. 7131. Increase in tax on certain hollow point and large caliber 
              handgun ammunition.
Sec. 7132. Modification to self-employment tax treatment of certain S 
              corporation shareholders and partners.
Sec. 7133. Extending medicare coverage of, and application of hospital 
              insurance tax to, all State and local government 
              employees.

       Subtitle B--Tax Treatment of Employer-Provided Health Care

                       Part 1--General Provisions

Sec. 7201. Limitation on exclusion for employer-provided health 
              benefits.
Sec. 7202. Health benefits may not be provided under cafeteria plans.
Sec. 7203. Increase in deduction for health insurance costs of self-
              employed individuals.
Sec. 7204. Limitation on prepayment of medical insurance premiums.

               Part 2--Employer Health Care Contributions

Sec. 7211. Tax treatment of employer health care contributions.

              Subtitle C--Exempt Health Care Organizations

                       Part 1--General Provisions

Sec. 7301. Qualification and disclosure requirements for nonprofit 
              health care organizations.
Sec. 7302. Excise taxes for private inurement by tax-exempt health care 
              organizations.
Sec. 7303. Treatment of health maintenance organizations, parent 
              organizations, and health insurance purchasing 
              cooperatives.
Sec. 7304. Tax treatment of taxable organizations providing health 
              insurance and other prepaid health care services.
Sec. 7305. Repeal of section 833.
Sec. 7306. Tax exemption for high-risk insurance pools.

            Part 2--Tax Treatment of Section 501(c)(3) Bonds

Sec. 7311. Tax treatment of 501(c)(3) bonds similar to governmental 
              bonds.

   Subtitle D--Tax Treatment of Long-Term Care Insurance and Services

Sec. 7401. Qualified long-term care services treated as medical care.
Sec. 7402. Treatment of long-term care insurance.
Sec. 7403. Tax treatment of accelerated death benefits under life 
              insurance contracts.
Sec. 7404. Tax treatment of companies issuing qualified accelerated 
              death benefit riders.

                  Subtitle E--Other Revenue Provisions

                  Part 1--Employment Status Provisions

Sec. 7501. Employment status proposal required from Department of the 
              Treasury.
Sec. 7502. Increase in services reporting penalties.

          Part 2--Tax Incentives for Health Services Providers

Sec. 7511. Nonrefundable credit for certain primary health services 
              providers.
Sec. 7512. Expensing of medical equipment.

                    Part 3--Miscellaneous Provisions

Sec. 7521. Post-retirement medical and life insurance reserves.
Sec. 7522. Credit for cost of personal assistance services required by 
              employed individuals.
Sec. 7523. Disclosure of return information for administration of 
              certain programs under the Health Security Act.

  Subtitle F--Graduate Medical Education and Academic Health Centers 
                               Trust Fund

Sec. 7601. Establishment of Graduate Medical Education and Academic 
              Health Centers Trust Fund.

                   TITLE VIII--OTHER FEDERAL PROGRAMS

                   Subtitle A--Indian Health Service

Sec. 8101. Purposes.
Sec. 8102. Definitions.

                      Part 1--Indian Health Plans

Sec. 8111. Organization of health care facilities as health plans.
Sec. 8112. Contract authority for facilities operating as or within 
              health plans.
Sec. 8113. Resource sharing authority.
Sec. 8114. Administrative and personnel flexibility.
Sec. 8115. Expenditure authority.
Sec. 8116. Indian Health Care Investment Fund.
Sec. 8117. Tribal authority.

               Part 2--Eligibility, Benefits and Coverage

Sec. 8121. Eligibility and health service coverage of Indians.
Sec. 8122. Benefits.
Sec. 8123. Supplemental Indian health care benefits.
Sec. 8124. Premiums, copayments, and other charges.
Sec. 8125. Provision of health services to non-Indians.
Sec. 8126. Essential community providers.
Sec. 8127. Payment by other providers.
Sec. 8128. Contracting authority.
Sec. 8129. Consultation.
Sec. 8130. Transitional studies.
Sec. 8131. Loans and loan guarantees.
Sec. 8132. Simplification of billing.
Sec. 8133. Long-term care demonstrations.
Sec. 8134. Technical assistance.
Sec. 8135. Public health programs.
Sec. 8136. Survey of health services available to Indian veterans.
Sec. 8137. Rule of construction.

                Part 3--Authorization of Appropriations

Sec. 8141. Authorization of appropriations.
Sec. 8142. Funding methodology.

               Subtitle B--Department of Veterans Affairs

Sec. 8201. Short title.
Sec. 8202. Benefits and eligibility through Department of Veterans 
              Affairs Medical System.
Sec. 8203. Organization of Department of Veterans Affairs facilities as 
              health plans.

  TITLE IX--WORKERS COMPENSATION AND AUTOMOBILE INSURANCE COORDINATION

           Subtitle A--Workers Compensation Medical Services

Sec. 9001. Application of information requirements.
Sec. 9002. Provision of care in disputed cases.
Sec. 9003. Demonstration projects.
Sec. 9004. Commission on Workers Compensation Medical Services.

                    Subtitle G--Automobile Insurance

Sec. 9101. Definitions.

 Part 1--Requirements Relating to Automobile Insurance Medical Services

Sec. 9111. Provision of automobile insurance medical services through 
              health plans.
Sec. 9112. Payment for automobile insurance medical services.

                         Part 2--Administration

Sec. 9121. Payment facilitation.

                       TITLE X--PREMIUM FINANCING

     Subtitle A--National Health Care Cost and Coverage Commission

Sec. 10001. National Health Care Cost and Coverage Commission.
Sec. 10002. Composition.
Sec. 10003. Duties of Commission.
Sec. 10004. Congressional consideration of Commission recommendations.
Sec. 10005. Operation of the Commission.

Subtitle B--Employer and Individual Premium Requirements and Assistance

Sec. 10101. Application of subtitle.
Sec. 10102. Definitions.

                   Part 1--Employer Premium Payments

Sec. 10111. Obligation.
Sec. 10112. Community-rated employers.
Sec. 10113. Experience rated employers.
Sec. 10114. Payments relating to nonenrolling employees.
Sec. 10115. Rules of construction.

                Part 2--Family Payment Responsibilities

Sec. 10131. Enrollment and premium payments.
Sec. 10132. Family share of premiums.
Sec. 10133. Amount of premium.
Sec. 10134. Collection shortfall add-on.
Sec. 10135. No loss of coverage.

                           Part 3--Reporting

Sec. 10141. Reporting requirements.

            TITLE XI--ENSURING HEALTH CARE REFORM FINANCING

Sec. 11001. Ensuring health care reform financing.
  TITLE I--IMPROVED ACCESS TO STANDARDIZED AND AFFORDABLE HEALTH PLANS
       Subtitle A--Rules and Definitions of General Applicability

                 PART 1--RULES OF GENERAL APPLICABILITY

     SEC. 1001. ACCESS TO STANDARDIZED COVERAGE.

       (a) In General.--A participating State system shall require 
     that each health plan (whether insured or self-insured) or 
     long-term care policy issued, sold, offered for sale, or 
     operated in the State shall be certified by the appropriate 
     certifying authority as one of the following:
       (1) A certified standard health plan.
       (2) A certified supplemental health benefits plan.
       (3) A certified long-term care policy under part 2 of 
     subtitle B of title II.
       (b) Federal Certification of Multistate Self-Insured 
     Plans.--For Federal certification of multistate self-insured 
     health plans, see section 1482.

     SEC. 1002. STANDARD HEALTH PLAN PRINCIPLES.

       In accordance with this Act, the following principles shall 
     apply to all standard health plans:
       (1) No standard health plan may discriminate on the basis 
     of medical history, health status, pre-existing medical 
     conditions, or genetic predisposition to medical conditions.
       (2) A standard health plan--
       (A) shall offer an annual open enrollment period and accept 
     all eligible individuals for coverage;
       (B) shall not impose a rider that serves to exclude 
     coverage to an individual; and
       (C) shall not impose waiting periods before coverage 
     begins.
       (3) A standard health plan shall ensure that all medically 
     necessary or appropriate services, as defined in the benefits 
     package, are provided.
       (4) Health benefits coverage shall be portable from one 
     standard health plan to another.

     Nothing in this section shall be construed so as to relieve a 
     standard health plan of any obligation or requirement imposed 
     under this Act.

     SEC. 1003. PROTECTION OF CONSUMER CHOICE.

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

                          PART 2--DEFINITIONS

     SEC. 1011. DEFINITIONS RELATING TO HEALTH PLANS.

       Except as otherwise specifically provided, in this Act the 
     following definitions and rules apply:
       (1) Health plan.--
       (A) In general.--The term ``health plan'' means any plan or 
     arrangement which provides, or pays the cost of, health 
     benefits.
       (B) Exclusions.--Such term does not include the following, 
     or any combination thereof:
       (i) Coverage only for accidental death or dismemberment.
       (ii) Coverage providing wages or payments in lieu of wages 
     for any period during which the employee is absent from work 
     on account of sickness or injury.
       (iii) A medicare supplemental policy (as defined in section 
     1882(g)(1) of the Social Security Act).
       (iv) Coverage issued as a supplement to liability 
     insurance.
       (v) Worker's compensation or similar insurance.
       (vi) Automobile medical-payment insurance.
       (vii) A long-term care policy, including a nursing home 
     fixed indemnity policy (unless the Secretary determines that 
     such a policy provides sufficiently comprehensive coverage of 
     a benefit so that it should be treated as a health plan).
       (viii) An equivalent health care program.
       (ix) Such other plan or arrangement as the Secretary 
     determines is not a health plan.
       (C) Certain plans included.--Such term includes any plan or 
     arrangement not described in any clause of subparagraph (B) 
     which provides for benefit payments, on a periodic basis, 
     for--
       (i) a specified disease or illness, or
       (ii) period of hospitalization,

     without regard to the costs incurred or services rendered 
     during the period to which the payments relate.
       (B) Insured health plan.--
       (i) In general.--The term ``insured health plan'' means any 
     health plan which is a hospital or medical service policy or 
     certificate, hospital or medical service plan contract, or 
     health maintenance organization group contract offered by a 
     carrier.
       (ii) 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 
     Internal Revenue Code of 1986 as in effect before the date of 
     the enactment of this Act), a health maintenance 
     organization, or other entity licensed or certified by the 
     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 Act.
       (C) Self-insured health plan.--The term `self-insured 
     health plan' means an employee welfare benefit plan, church 
     plan, or other arrangement which--
       (i) provides health benefits funded in a manner other than 
     through the purchase of one or more insured health plans, but
       (ii) does not include any coverage or insurance described 
     in clauses (i) through (ix) of subparagraph (A).
       (2) Certified standard health plan.--
       (A) In general.--The term ``certified standard health 
     plan'' means a standard health plan which is certified by the 
     appropriate certifying authority as meeting the other 
     applicable requirements of this title.
       (B) Standard health plan.--The term ``standard health 
     plan'' means a health plan which provides for the standard 
     benefits package or the alternative standard benefits package 
     established under subtitle C.
       (3) Certified supplemental health benefits plan.--
       (A) In general.--The term ``certified supplemental health 
     benefits plan'' means a supplemental health benefits plan 
     which is certified by the appropriate certifying authority as 
     meeting the applicable requirements of part 4 of subtitle B.
       (B) Supplemental health benefits plan.--The term 
     ``supplemental health benefits plan'' means an insured or 
     self-insured health plan which provides health benefits which 
     consist of supplemental services or cost-sharing described in 
     part 4 of subtitle B. Such term does not include a plan which 
     provides for benefit payments, on a periodic basis, for a 
     specified disease or illness or period of hospitalization 
     without regard to the costs incurred or services rendered 
     during the period to which the payments relate.
       (4) Certified long-term care insurance policy.--
       (A) In general.--The term ``certified long-term care 
     insurance policy'' means a long-term care insurance policy 
     which is certified by the applicable certifying authority as 
     meeting the applicable requirements of part 2 of subtitle B 
     of title II.
       (B) Long-term care insurance policy.--The term ``long-term 
     care insurance policy'' has the meaning given such term by 
     section 2721.
       (5) Terms and rules relating to community and experience 
     rating.--
       (A) Community-rated plan.--The term ``community-rated 
     plan'' means a health plan provided to community-rated 
     individuals which meets the requirements of section 1116.
       (B) Community-rated employer.--The term ``community-rated 
     employer'' means, with respect to an employee, an employer 
     that is not an experience-rated employer with respect to such 
     employee.
       (C) Community-rated individual.--The term ``community-rated 
     individual'' means an individual--
       (i) who is not an experience-rated individual, or
       (ii) who is an experience-rated individual (determined 
     without regard to this subparagraph) who is not a full-time 
     employee of an experience-rated employer and who does not 
     enroll in a certified standard health plan offered by the 
     employer.
       (D) Experience-rated plan.--The term ``experience-rated 
     plan'' means a health plan which--
       (i) is a self-insured health plan of an experience-rated 
     employer, or
       (ii) is an insured health plan which is experience-rated,
     but any such plan may cover only experience-rated 
     individuals.
       (E) Experience-rated employer.--
       (i) In general.--The term ``experience-rated employer'' 
     means, with respect to any calendar year--

       (I) 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 500 
     employees for some portion of the day; or
       (II) a multiemployer plan or rural electric cooperative or 
     rural telephone cooperative association plan that covers 500 
     or more individuals.

       (ii) Special rule for leasing businesses.--In the case of 
     an employer the primary trade or business of which is 
     employee leasing--

       (I) all of the employees which such employer leases to 
     other employers shall be treated as community-rated 
     individuals, and
       (II) this Act shall be applied separately with respect to 
     its other employees.

       (iii) U.S. postal service.--Such term includes the United 
     States Postal Service for any period during which the Postal 
     Service is not covered by the FEHBP.
       (F) Experience-rated individual.--The term ``experience-
     rated individual'' means an individual who is an employee of 
     an experience-rated employer or a member of a plan described 
     in subparagraph (E)(i)(II).
       (6) Full-time employee.--The term ``full-time employee'' 
     means, with respect to any month, an employee who normally 
     performs at least 24 hours of service per week for an 
     employer in the month (not including the month which includes 
     the hiring date of such employee).
       (7) Special rule for spouses and dependents.--If any 
     individual is offered coverage under a health plan as the 
     spouse or a dependent of a primary enrollee of such plan, 
     such individual shall have the status of such enrollee unless 
     such individual is eligible to elect other coverage and so 
     elects.

     SEC. 1012. DEFINITIONS RELATING TO EMPLOYMENT AND INCOME.

       Except as otherwise specifically provided, in this Act the 
     following definitions and rules apply:
       (1) Employer, employee, employment, and wages defined.--
     Except as provided in this section--
       (A) the terms ``wages'' and ``employment'' have the 
     meanings given such terms under section 3121 of the Internal 
     Revenue Code of 1986,
       (B) the term ``employee'' has the meaning given such term 
     under section 3121 of such Code, subject to the provisions of 
     chapter 25 of such Code, and
       (C) the term ``employer'' has the same meaning as the term 
     ``employer'' as used in such section 3121.
       (2) Exceptions.--For purposes of paragraph (1)--
       (A) Employment.--
       (i) Employment included.--Paragraphs (1), (2), (5), (7) 
     (other than clauses (i) through (iv) of subparagraph (C) and 
     clauses (i) through (v) of subparagraph (F)), (8), (9), (10), 
     (11), (13), (15), (18), and (19) of section 3121(b) of the 
     Internal Revenue Code of 1986 shall not apply.
       (ii) Exclusion of inmates as employees.--Employment shall 
     not include services performed in a penal institution by an 
     inmate thereof or in a hospital or other health care 
     institution by a patient thereof.
       (iii) Exclusion of part-time domestic service.--Employment 
     shall not include domestic service in a private home of the 
     employer (within the meaning section 3121(a)(7)(B), 
     determined without dollar limitation) by an individual who is 
     not a full-time employee.
       (iv) Exclusion of seasonal or temporary.--Employment shall 
     not include seasonal or temporary services performed for an 
     employer for less than 6 months in a calendar year.
       (v) Consideration of industry practice.--As provided under 
     regulation by the Secretary of Labor, an employee shall be 
     considered to be employed on a full-time basis by an employer 
     (and to be a full-time employee of an employer) for a month 
     (or for all months in a 12-month period) if the employee is 
     employed by that employer on a continuing basis that, taking 
     into account the structure or nature of employment in the 
     industry, represents full-time employment in that industry.
       (B) Wages.--Paragraph (1) of section 3121(a) of the 
     Internal Revenue Code of 1986 shall not apply.
       (C) Employees.--
       (i) Treatment of self-employed.--The term ``employee'' 
     includes a self-employed individual.
       (ii) Exclusion of certain foreign employment.--The term 
     ``employee'' does not include an individual with respect to 
     service, if the individual is not a citizen or resident of 
     the United States and the service is performed outside the 
     United States.
       (3) Aggregation rules for employers.--For purposes of this 
     Act--
       (A) all employers treated as a single employer under 
     subsection (a) or (b) of section 52 of the Internal Revenue 
     Code of 1986 shall be treated as a single employer, and
       (B) under regulations of the Secretary of Labor, all 
     employees of organizations which are under common control 
     with one or more organizations which are exempt from income 
     tax under subtitle A of the Internal Revenue Code of 1986 
     shall be treated as employed by a single employer.

     The regulations prescribed under subparagraph (B) shall be 
     based on principles similar to the principles which apply to 
     taxable organizations under subparagraph (A).

     SEC. 1013. OTHER GENERAL DEFINITIONS.

       Except as otherwise specifically provided, in this Act the 
     following definitions apply:
       (1) Appropriate certifying authority.--The term 
     `appropriate certifying authority' means--
       (A) except as provided in subparagraph (B), in the case of 
     a standard health plan, a supplemental health benefits plan, 
     or a long-term care insurance plan, the State commissioner or 
     superintendent of insurance or other State authority in the 
     participating State; or
       (B) in the case of a multistate self-insured health plan or 
     a multistate self-insured supplemental health benefits plan, 
     the Secretary of Labor.
       (2) Community rating area.--The term ``community rating 
     area'' means an area specified by a State under section 
     1502(a).
       (3) Equivalent health care program.--The term ``equivalent 
     health care program'' means--
       (A) part A or part B of the medicare program under title 
     XVIII of the Social Security Act,
       (B) the medicaid program under title XIX of the Social 
     Security Act,
       (C) the health care program for active military personnel 
     under title 10, United States Code,
       (D) the veterans health care program under chapter 17 of 
     title 38, United States Code,
       (E) the Civilian Health and Medical Program of the 
     Uniformed Services (CHAMPUS), as defined in section 1073(4) 
     of title 10, United States Code,
       (F) the Indian health service program under the Indian 
     Health Care Improvement Act (25 U.S.C. 1601 et seq.), and
       (G) a State single-payer system approved by the Secretary 
     under subpart B of part 3 of subtitle F.
       (4) Essential community provider.--The term ``essential 
     community provider'' means an entity certified as such a 
     provider under subpart B of part 2 of subtitle E.
       (5) Health plan sponsor.--The term ``health plan sponsor'' 
     means--
       (A) with respect to a community-rated plan, the carrier 
     providing the plan,
       (B) with respect to an insured experience-rated plan, the 
     carrier providing the plan, and
       (C) with respect to a self-insured experience-rated plan, 
     the experience-rated employer providing the plan.
       (6) Medicare program.--The term ``medicare program'' means 
     the health insurance program under title XVIII of the Social 
     Security Act.
       (7) Medicare-eligible individual.--The term ``medicare-
     eligible individual'' means an individual who is entitled to 
     benefits under part A of the medicare program.
       (8) 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.
       (9) Naic.--The term ``NAIC'' means the National Association 
     of Insurance Commissioners.
       (10) Participating provider.--The term ``participating 
     provider'' means, wiih respect to a health plan, a provider 
     of health care services who is a member of a provider network 
     of the plan.
       (11) Participating state.--The term ``participating State'' 
     means a State establishing a State program under this title.
       (12) Purchasing cooperative.--The term ``purchasing 
     cooperative'' means a health insurance cooperative 
     established under part 2 of subtitle D.
       (13) Residence.--
       (A) In general.--An individual is considered to reside in 
     the location in which the individual maintains a primary 
     residence (as established under rules of the Secretary).
       (B) Multiple residences.--Under such rules and subject to 
     section 1112, in the case of an individual who maintains more 
     than one residence, the primary residence of the individual 
     shall be determined taking into account the proportion of 
     time spent at each residence.
       (C) Couple.--In the case of a couple only one spouse of 
     which is a qualifying employee, except as the Secretary may 
     provide, the residence of the employee shall be the residence 
     of the couple.
       (14) 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.
       (15) 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.
       (16) Secretary.--The term ``Secretary'' means the Secretary 
     of Health and Human Services.
       (17) State.--The term ``State'' includes the District of 
     Columbia, Puerto Rico, the Virgin Islands, Guam, American 
     Samoa, and the Northern Mariana Islands.
       (18) 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.
                   Subtitle B--Health Plan Standards

           PART 1--ESTABLISHMENT AND APPLICATION OF STANDARDS

     SEC. 1101. ESTABLISHMENT OF NATIONAL STANDARDS.

       In order for a standard health plan to be eligible to be 
     certified as a standard health plan by an appropriate 
     certifying authority, the standard health plan shall, 
     beginning on January 1, 1997, meet the requirements of this 
     Act, including the following uniform national standards 
     established in this subtitle and described in regulations 
     promulgated by the Secretary:
       (1) The insurance market reform standards of part 2.
       (2) The delivery system reform standards of part 3.
       (3) Standards for participation in a guaranty fund 
     established by the State under section 1505 (established by 
     the Secretary of Labor in the case of multistate self-insured 
     standard health plans), except in the case of a health plan 
     described in section 1011(1)(C).
       (4) Standards for the collection and reporting of data in 
     accordance with subtitle B of title V.
       (5) Standards for effective grievance procedures that 
     enrollees may utilize in pursuing complaints in accordance 
     with subtitle C of title V.

     SEC. 1102. GENERAL RULES.

       (a) Construction.--Whenever in this subtitle a requirement 
     or standard is imposed on a standard health plan, the 
     requirement or standard is deemed to have been imposed on the 
     insurer or sponsor of the plan or policy in relation to that 
     plan or policy.
       (b) Use of Interim, Final Regulations.--In order to permit 
     the timely implementation of the provisions of this subtitle, 
     the Secretary and the Secretary of Labor are each authorized 
     to issue regulations under this subtitle on an interim basis 
     that become final on the date of publication, subject to 
     change based on subsequent public comment.

                    PART 2--INSURANCE MARKET REFORM

     SEC. 1111. GUARANTEED ISSUE, AVAILABILITY, AND RENEWABILITY.

       (a) Guaranteed Issue.--Except as otherwise provided in this 
     section, a standard health plan sponsor--
       (1) offering a community-rated standard health plan shall 
     offer such plan to any community-rated individual applying 
     for coverage (either directly with the plan or through an 
     employer or a purchasing cooperative); and
       (2) offering an experience-rated standard health plan shall 
     offer such plan to any experience-rated individual eligible 
     for coverage under the plan through such individual's 
     experience-rated employer.

     No plan may engage in any practice that has the effect of 
     attracting or limiting enrollees on the basis of personal 
     characteristics, such as occupation or affiliation with any 
     person or entity, or other characteristics described in 
     section 1602.
       (b) Availability.--
       (1) In general.--A community-rated standard health plan 
     shall be made available to community-rated individuals 
     throughout the entire community rating area in which such 
     plan is offered, including through any employer purchasing 
     cooperative choosing to offer such plan.
       (2) Geographic limitations.--
       (A) Nonnetwork plans.--A community-rated nonnetwork plan 
     (as defined in section 1128(d)(6)(D)) may deny coverage under 
     the plan to a community-rated individual who resides outside 
     the community rating area in which such plan is offered.
       (B) Network plans.--A community-rated network plan (as 
     defined in section 1128(d)(6)(A)) may deny coverage under the 
     plan to a community-rated individual who resides outside the 
     health plan service area in which such plan is offered.
       (C) Rules regarding denials.--No denial may be made under 
     subparagraph (A) or (B) unless such denial is applied 
     uniformly, without regard to health status, insurability of 
     individuals, or other characteristics described in section 
     1602.
       (3) Capacity limitations.--
       (A) In general.--With the approval of the appropriate 
     regulatory authority, a standard health plan may limit 
     enrollment because of the plan's capacity to deliver services 
     or to maintain financial stability. If such a limitation is 
     imposed, the limitation may not be imposed on a basis of 
     personal characteristics, such as occupation or affiliation 
     with any person or entity, or other characteristics described 
     in section 1602.
       (B) Restrictions.--If such a limitation is imposed--
       (i) the plan may only enroll individuals under the plan 
     consistent with rules established by the State consistent 
     with subparagraph (C); and
       (ii) the plan may not discriminate based on the method 
     through which a family seeks enrollment under the plan.
       (C) State oversight.--Each State shall, in accordance with 
     rules promulgated by the Secretary, establish procedures and 
     methods to assure equal opportunity of enrollment for all 
     families, regardless of when during the open enrollment 
     period, or the method by which, the enrollment has been 
     sought.
       (c) Renewability; Limitation on Termination.--
       (1) In general.--Except as provided in paragraphs (2) and 
     (3), a standard health plan that is issued to an individual 
     shall be renewed, at the option of the individual.
       (2) Grounds for refusal to renew or terminate.--A standard 
     health plan sponsor may refuse to renew, or may terminate, a 
     standard health plan under this title only for--
       (A) in the case of plan in a participating State and any 
     community rating area in such State with respect to which the 
     requirements of title X have not become effective, nonpayment 
     of premiums;
       (B) fraud on the part of the individual relating to such 
     plan; or
       (C) misrepresentation of material facts on the part of the 
     individual relating to an application for coverage or claim 
     for benefits.
       (3) Termination of plans.--A standard health plan may elect 
     not to renew or make available the standard health plan 
     through a particular type of delivery system in a community 
     rating area, but only if the standard health plan--
       (A) elects not to renew all of its standard health plans 
     using such delivery system in such community rating area; and
       (B) provides notice to the appropriate certifying authority 
     and each individual covered under the plan of such 
     termination at least 180 days before the date of expiration 
     of the plan.

     In such case, a standard health plan sponsor may not provide 
     for the issuance of any standard health plan using such a 
     delivery system in such community rating area during a 5-year 
     period beginning on the date of the termination of the last 
     plan not so renewed. For purposes of this paragraph, the term 
     ``delivery system'' means a delivery system used by a network 
     plan (as defined in section 1128(d)(6)(A)) or a nonnetwork 
     plan (as defined in section 1128(d)(6)(D)).
       (d) Certain Excluded Plans.--The provisions of this 
     section, other than subsections (c) and (e)(2)(B), shall not 
     apply to any religious fraternal benefit society in existence 
     as of September 1993, which bears the risk of providing 
     insurance to its members, and which is an organization 
     described in section 501(c)(8) of the Internal Revenue Code 
     of 1986 which is exempt from taxation under section 501(a) of 
     such Code.
       (e) Application of Interim Standards.--
       (1) In general.--During the interim standards application 
     period, a health plan sponsor may only offer a health plan in 
     a State if such plan sponsor publicly discloses the health 
     plans such sponsor offers in the State and each offered plan 
     meets the standards specified in paragraph (2).
       (2) Specified standards.--
       (A) Issue and availability.--The standards specified in 
     subsections (a) and (b) if the individual or group applies 
     for coverage during the open enrollment period required under 
     section 1112(h).
       (B) Renewal.--The standards specified in subsection (c), 
     except paragraph (3) shall be applied by substituting 
     ``State'' for ``community rating area''.
       (3) Interim standards application periods.--The interim 
     standards application period is--
       (A) in the case of the standard specified in paragraph 
     (2)(A), on or after January 1, 1995, and before January 1, 
     1997; and
       (B) in the case of the standard specified in paragraph 
     (2)(B), on or after August 1, 1994, and before January 1, 
     1997.
       (4) Preemption.--The requirements of this subsection do not 
     preempt any State law unless State law directly conflicts 
     with such requirements. The provision of additional 
     protections under State law shall not be considered to 
     directly conflict with such requirements. The Secretary may 
     issue letter determinations with respect to whether this 
     subsection preempts a provision of State law.
       (5) Construction.--The provisions of this subsection shall 
     be construed in a manner that assures, to the greatest extent 
     practicable, continuity of health benefits under health plans 
     in effect on the effective date of this title.
       (6) Special rules for acquisitions and transfers.--The 
     Secretary may issue regulations regarding the application of 
     this subsection in the case of health plans (or groups of 
     such plans) which are transferred from one health plan 
     sponsor to another sponsor through assumption, acquisition, 
     or otherwise.

     SEC. 1112. ENROLLMENT.

       (a) In General.--Each standard health plan shall establish 
     an enrollment process consistent with this section.
       (b) Annual Open Enrollment Period.--Each standard health 
     plan shall permit eligible individuals to enroll (or change 
     enrollment) in the plan during each annual open enrollment 
     period for each community rating area specified by the 
     appropriate certifying authority under section 1503.
       (c) Additional Periods of Authorized Changes in 
     Enrollment.--
       (1) In general.--Each standard health plan shall provide 
     for changes in enrollment with respect to such other periods 
     and occurrences (including changes in residence, appropriate 
     changes in employment, and the insolvency of carriers or 
     experience-rated employers) for which an individual is 
     authorized to change enrollment in standard health plans, as 
     the Secretary shall specify.
       (2) Disenrollment for Cause.--
       (A) In general.--The Secretary shall establish procedures 
     by which individuals enrolled in a standard health plan may 
     disenroll from such plan for good cause (as defined by 
     Secretary) at any time during a year and enroll in another 
     standard health plan. Such procedures shall be implemented by 
     participating States in a manner that ensures continuity of 
     coverage for the standard benefits package or the alternative 
     standard benefits package for such individuals during the 
     year.
       (B) Additional remedies.--In the case of an individual who 
     changes enrollment from a plan for good cause due to a 
     pattern of underservice under a plan, the Secretary may 
     provide rules under which the carrier providing the standard 
     health plan is liable, to the subsequent standard health plan 
     in which the individual is enrolled, for excess costs (as 
     identified in accordance with such rules) during the period 
     for which it may be reasonably anticipated that the 
     individual would (but for such cause) have continued 
     enrollment with the original standard health plan.
       (d) Effectiveness of Change of Enrollment.--Except as the 
     Secretary may provide, changes in enrollment during an annual 
     open enrollment period under subsection (a) shall take effect 
     as determined by the appropriate certifying authority. The 
     Secretary shall also provide when a change of enrollment 
     under subsection (c) becomes effective.
       (e) Direct Enrollment.--
       (1) In general.--Subject to paragraph (2), each community-
     rated standard health plan shall provide for the direct 
     enrollment of community-rated individuals in the plan under 
     methods and procedures established by the Secretary.
       (2) Enrollment processes.--The Secretary shall provide 
     standards for States to ensure the broad availability and 
     processing of enrollment forms, including direct enrollment 
     through the mail, and other such processes as the Secretary 
     may designate.
       (f) Marketing Fees.--
       (1) Plans offered outside purchasing cooperatives.--A 
     community-rated standard health plan may impose a marketing 
     fee surcharge for community-rated individuals enrolling in 
     the plan through an agent, broker, or other authorized sales 
     method, or through a direct enrollment process. Such 
     surcharge shall be in addition to the weighted average of 
     marketing fees of such plan for community-rated individuals 
     enrolled in such a plan through any purchasing cooperative in 
     the community rating area. Such surcharges shall be applied 
     uniformly for individuals using the same enrollment 
     mechanism.
       (2) Plans offered through purchasing cooperatives.--For the 
     imposition of marketing fees in the case of enrollment in 
     standard health plans through purchasing cooperatives, see 
     section 1324(b).
       (g) Change of Enrollment.--As used in this section, the 
     term ``change of enrollment'' includes, with respect to an 
     individual--
       (1) a change in the standard health plan in which the 
     individual is enrolled,
       (2) a change in the type of family enrollment, and
       (3) the enrollment of the individual at the time the 
     individual's status changes to a community-rated individual, 
     experience-rated individual, or a premium subsidy-eligible 
     individual under section 6002.
       (h) Application of Interim Standard.--
       (1) In general.--During the interim standard application 
     period, a health plan sponsor may only offer a health plan in 
     a State if such plan sponsor publicly discloses the health 
     plans such sponsor offers in the State and each offered plan 
     provides for an annual open enrollment period of at least 30 
     days.
       (2) Interim standard application periods.--The interim 
     standard application period is on or after January 1, 1995, 
     and before January 1, 1997.
       (3) Application of rules.--Paragraphs (4), (5), and (6) of 
     section 1111(d) shall apply to this subsection.

     SEC. 1113. COVERAGE OF DEPENDENTS.

       (a) In General.--Except as otherwise provided in this Act, 
     a standard health plan shall enroll all members of the same 
     family (as defined in subsection (b)).
       (b) Family Defined.--In this Act, unless otherwise 
     provided, the term ``family''--
       (1) means, with respect to an individual who is not a child 
     (as defined in subsection (c)), the individual; and
       (2) includes the following persons (if any):
       (A) The individual's spouse.
       (B) The individual's children (and, if applicable, the 
     children of the individual's spouse).
       (c) Classes of Enrollment; Terminology.--
       (1) In general.--In this Act, 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 only of a child (referred to in this Act as 
     the `single child' enrollment or class of enrollment).
       (C) Coverage only of 2 or more children (referred to in 
     this Act as the `multiple children' enrollment or class of 
     enrollment).
       (D) Coverage of a married couple without children (referred 
     to in this Act as the ``couple-only'' enrollment or class of 
     enrollment).
       (E) Coverage of an individual and one or more children 
     (referred to in this Act as the ``single parent'' enrollment 
     or class of enrollment).
       (F) Coverage of a married couple and one or more children 
     (referred to in this Act as the ``dual parent'' enrollment or 
     class of enrollment).
       (2) References to family and couple classes of 
     enrollment.--In this Act:
       (A) Family.--The terms ``family enrollment'' and ``family 
     class of enrollment'', refer to enrollment in a class of 
     enrollment described in any subparagraph of paragraph (1) 
     (other than subparagraph (A)).
       (B) Couple.--The term ``couple class of enrollment'' refers 
     to enrollment in a class of enrollment described in 
     subparagraph (D) or (F) of paragraph (1).
       (d) Spouse; Married; Couple.--
       (1) In general.--In this Act, the terms ``spouse'' and 
     ``married'' mean, with respect to a person, another 
     individual who is the spouse of the person or married to the 
     person, as determined under applicable State law.
       (2) Couple.--The term ``couple'' means an individual and 
     the individual's spouse.
       (e) Child Defined.--
       (1) In general.--In this Act, except as otherwise provided, 
     the term ``child'' means an individual who is a child (as 
     determined under paragraph (3)) who--
       (A) is under 25 years of age or is disabled,
       (B) is unmarried, and
       (C) is a dependent of another individual (within the 
     meaning of section 152(a) of the Internal Revenue Code of 
     1986.

     The Secretary may adjust the age limitation in subparagraph 
     (A) with respect to part-time or full-time students.
       (2) Application of state law.--Subject to paragraph (3), 
     determinations of whether a person is the child of another 
     person shall be made in accordance with applicable State law.
       (3) National rules.--The Secretary may establish such 
     national rules respecting individuals who will be treated as 
     children under this Act as the Secretary determines to be 
     necessary. Such rules shall be consistent with the following 
     principles:
       (A) Step child.--A child includes a step child who is an 
     individual living with an adult in a parent-child 
     relationship.
       (B) Disabled child.--A child includes an unmarried 
     dependent individual regardless of age who is incapable of 
     self-support because of mental or physical disability which 
     existed before age 25.
       (C) Certain intergenerational families.--A child includes 
     the grandchild of an individual if--
       (i) the parent of the grandchild is a child and the parent 
     and grandchild are living with the grandparent; or
       (ii) the grandparent has legal custody of the grandchild.
       (D) Treatment of emancipated minors.--An emancipated minor 
     shall not be treated as a child.
       (E) Children placed for adoption.--
       (i) In general.--A child includes a child who is placed for 
     adoption with an individual, except when the child is a child 
     in State-supervised care.
       (ii) Placed for adoption.--The term ``placed for adoption'' 
     in connection with any placement for adoption of a child with 
     any individual, means the assumption and retention by such 
     individual of a legal obligation for total or partial support 
     of such child in anticipation of the adoption of such child.
       (f) Additional Rules.--
       (1) In general.--The Secretary shall provide for such 
     additional exceptions and special rules, including rules 
     relating to--
       (A) families in which members are not residing in the same 
     area or in which children are not residing with their 
     parents,
       (B) changes in family composition occurring during a year,
       (C) treatment of children in State-supervised care, and
       (D) treatment of children of parents who are separated or 
     divorced,

     as the Secretary finds appropriate.
       (2) Children in state-supervised care.--
       (A) In general.--In the case of a child in State-supervised 
     care (as described in subparagraph (B)), the child shall be 
     considered as a family of one and enrolled by the State 
     agency who has been awarded temporary or permanent custody of 
     the child (or which has legal responsibility for the child) 
     in a high cost-sharing plan unless the State agency has 
     established a special health service delivery system 
     designated to customize and more efficiently provide health 
     services to children in State-supervised care, in which case 
     the State agency will enroll the child in the plan 
     appropriate to ensure access to such a special health service 
     delivery system.
       (B) Children in state-supervised care.--For purposes of 
     subparagraph (A), the term ``child in State-supervised care'' 
     means any child who is residing away from the child's parents 
     and is temporarily or permanently, on a voluntary or 
     involuntary basis, under the responsibility of a public child 
     welfare or juvenile services agency or court. Such term 
     includes any child who is not yet made a ward of the court or 
     adjudicated as a delinquent residing in emergency shelter 
     care, any child in the physical custody of public or private 
     agencies, and any child who is with foster parents, or other 
     group or residential care providers. Such term also includes 
     any child who is legally adopted and for whom the Federal or 
     State government is providing adoption assistance payments.
       (g) Application of Interim Standards.--
       (1) In general.--During the interim standards application 
     period, a health plan sponsor may only offer a health plan in 
     a State if such plan meets the standards specified in this 
     section.
       (2) Interim standards application periods.--The interim 
     standards application period is on or after January 1, 1995, 
     and before January 1, 1997.
       (3) Application of rules.--Paragraphs (4), (5), and (6) of 
     section 1111(d) shall apply to this subsection.

     SEC. 1114. NONDISCRIMINATION BASED ON HEALTH STATUS.

       (a) No Limits on Coverage; No Pre-Existing Condition 
     Limits.--Except as provided in subsections (b) and (c), a 
     standard health plan may not--
       (1) terminate, restrict, or limit coverage or establish 
     premiums based on the health status, medical condition, 
     claims experience, receipt of health care, medical history, 
     anticipated need for health care services, disability, 
     genetic predisposition to medical conditions, or lack of 
     evidence of insurability of an individual;
       (2) terminate, restrict, or limit coverage in any portion 
     of the plan's community rating area, except as provided in 
     section 1111(b)(2);
       (3) except as provided in section 1111(c)(2), cancel 
     coverage for any community-rated individual until that 
     individual is enrolled in another applicable standard health 
     plan;
       (4) impose waiting periods before coverage begins; or
       (5) impose a rider that serves to exclude coverage of 
     particular individuals or particular health conditions.
       (b) Treatment of Preexisting Condition Exclusions.--
       (1) In general.--Subject to paragraph (4), before January 
     1, 2002, a standard health plan may impose a limitation or 
     exclusion of benefits relating to treatment of a condition 
     based on the fact that the condition preexisted the effective 
     date of the plan with respect to an individual if--
       (A) the condition was diagnosed or treated during the 3-
     month period ending on the day before the date of enrollment 
     under the plan;
       (B) the limitation or exclusion extends for a period not 
     more than 6 months after the date of enrollment under the 
     plan;
       (C) the limitation or exclusion does not apply to an 
     individual who, as of the date of birth, was covered under 
     the plan; or
       (D) the limitation or exclusion does not relate to 
     pregnancy.
       (2) Continuous coverage.--A standard health plan shall 
     provide that if an individual under such plan is in a period 
     of continuous coverage with respect to particular services as 
     of the date of enrollment under such plan, any period of 
     exclusion of coverage with respect to a preexisting condition 
     as permitted under paragraph (1) shall be prohibited.
       (3) Definitions.--As used in this subsection:
       (A) Period of continuous coverage.--The term ``period of 
     continuous coverage'' means the period beginning on the date 
     an individual is enrolled under a health plan or health care 
     program which provides benefits equivalent to those provided 
     by the plan in which the individual is seeking to enroll with 
     respect to coverage of a preexisting condition and ends on 
     the date the individual is not so enrolled for a continuous 
     period of more than 3 months.
       (B) Preexisting condition.--The term ``preexisting 
     condition'' means, with respect to coverage under a standard 
     health plan, a condition which was diagnosed, or which was 
     treated, within the 3-month period ending on the day before 
     the first date of such coverage (without regard to any 
     waiting period).
       (4) No exclusion during amnesty period or with respect to a 
     subsidy-eligible individual.--This subsection shall not 
     apply--
       (A) during the first annual open enrollment period 
     specified by the appropriate certifying authority under 
     section 1503, and
       (B) with respect to the enrollment of an individual 
     eligible for a full premium subsidy under subtitle A of title 
     VI.
       (c) Special Preexisting Rule for Certain Plans.--In the 
     case of a health plan described in section 1011(1)(C)(i), 
     subsection (b) shall be applied by substituting--
       (1) ``Beginning in January 1, 1995,'' for ``Subject to 
     paragraph (4), before January 1, 2002,'' in paragraph (1);
       (2) ``5-year'' for ``3-month'' in paragraphs (1)(A) and 
     (3)(B); and
       (3) ``5 years'' for ``6 months'' in paragraph (1)(B).
       (d) Application of Interim Standards.--
       (1) In general.--During the interim standard application 
     period, a health plan sponsor may only offer a health plan 
     (other than a plan described in subsection (c)) in a State if 
     such plan meets the standards specified in paragraph (2).
       (2) Specified standards.--
       (A) Exclusion.--The standards specified in subsection (b) 
     by substituting ``6-month'' for ``3-month'' in paragraphs 
     (1)(A) and (3)(B).
       (B) Coverage.--A self-insured health plan may not reduce or 
     limit coverage of any condition or course of treatment that 
     is expected to cost more than $2,500 during any 12-month 
     period.
       (3) Interim standards application period.--The interim 
     standards application period is--
       (A) in the case of the standard specified in paragraph 
     (2)(A), on or after January 1, 1995, and before January 1, 
     1997.
       (B) in the case of the standard specified in paragraph 
     (2)(B), on or after August 1, 1994, and before January 1, 
     1997.
       (4) Application of rules.--Paragraphs (4), (5), and (6) of 
     section 1111(e) shall apply to this subsection.

     SEC. 1115. BENEFITS.

       (a) In General.--A standard health plan (other than a 
     health plan described in section 1011(1)(C)) shall offer to 
     all enrollees in the plan the standard benefits package or 
     the alternative standard benefits package established under 
     subtitle C.
       (b) Alternative Standard Benefits Package.--
       (1) In general.--A carrier may only offer a standard health 
     plan with an alternative standard benefits package in a 
     community rating area if such carrier also offers a standard 
     health plan with a standard benefits package in such area.
       (2) Inclusion in risk adjustment and reinsurance 
     programs.--Any standard health plan with an alternative 
     standard benefits packages shall be included in any 
     reinsurance or risk adjustment program under section 1117 
     operating in the community rating area in which such plan is 
     offered.
       (3) Offer prohibited if mandates required.--A carrier may 
     not offer an alternative benefits package in a participating 
     State and any community rating area in such State with 
     respect to which the requirements of title X have become 
     effective.

     SEC. 1116. COMMUNITY RATING REQUIREMENTS.

       (a) Applicability.--Except as provided in subsection (e), 
     the provisions of this section shall apply to community-rated 
     standard health plans.
       (b) Standard Premiums With Respect to Community-Rated 
     Individuals.--Subject to subsection (d), each community-rated 
     standard health plan shall establish within each community 
     rating area in which the plan is to be offered a standard 
     premium for individual enrollment for the standard benefits 
     package and the alternative standard benefits package 
     established under subtitle C.
       (c) Uniform Premiums Within Community Rating Areas.--
       (1) In general.--Subject to paragraph (2), the standard 
     premium described in subsection (b) shall be the same for all 
     community-rated individuals within a community rating area.
       (2) Application to enrollees.--
       (A) In general.--The premium charged for coverage in a 
     standard health plan shall be the product of--
       (i) the standard premium established under paragraph (1);
       (ii) in the case of enrollment other than individual 
     enrollment, the family adjustment factor specified under 
     subparagraph (B); and
       (iii) the age adjustment factor specified under 
     subparagraph (C).
       (B) Family adjustment factor.--The Secretary, in 
     consultation with the NAIC, shall develop a family adjustment 
     factor that reflects the relative actuarial costs of benefit 
     packages based on the applicable family enrollment (as 
     compared with such costs for individual enrollment).
       (C) Age adjustment factor.--The Secretary, in consultation 
     with the NAIC, shall specify, within 6 months of the date of 
     the enactment of this Act, uniform age categories and rating 
     increments for age adjustment factors that reflect the 
     relative actuarial costs of benefit packages among enrollees. 
     The highest age adjustment factor may not exceed twice the 
     lowest age adjustment factor for individuals 18 to 65 years 
     of age. The Secretary shall also provide for the gradual 
     phaseout of age adjustment factors during the period 
     beginning after December 31, 2004, and ending before January 
     1, 2010.
       (d) Lower Premium Through Purchasing Cooperatives.--
     Notwithstanding any other provision of this section, no 
     premium may be charged to a community-rated individual by a 
     community-rated standard health plan in a community rating 
     area which is not the lowest premium negotiated for such plan 
     offered through any purchasing cooperative in such area.
       (e) Experience Rating.--
       (1) Applicability.--The provisions of this subsection shall 
     apply to experience-rated standard health plans.
       (2) Rating.--For purposes of applying this section to 
     experience-rated employers, the employees of the employer 
     involved shall constitute the community with respect to the 
     determination of the premium.
       (3) Premiums.--An experience-rated standard health plan may 
     not vary the premium imposed with respect to experience-rated 
     individuals enrolled in the plan, except as may be allowed 
     under this section with respect to geographic and family 
     coverage factors (as determined by the Secretary of Labor) 
     under the plan.

     SEC. 1117. RISK ADJUSTMENT AND REINSURANCE.

       (a) In General.--Except as provided in subsection (b), each 
     standard health plan (other than a health plan described in 
     section 1011(1)(C)) shall participate in a standard health 
     plan risk adjustment program and a reinsurance program 
     implemented by the State in accordance with section 1504.
       (b) Multistate Plans.--Each multistate self-insured 
     standard health plan shall participate in a reinsurance 
     program developed by the Secretary of Labor under section 
     1482.

     SEC. 1118. FINANCIAL SOLVENCY REQUIREMENTS AND CONSUMER 
                   PROTECTION AGAINST PROVIDER CLAIMS.

       (a) Solvency Protection.--Each standard health plan shall 
     meet financial solvency requirements to assure protection of 
     enrollees with respect to potential insolvency. Each standard 
     health plan shall meet requirements relating to capital and 
     solvency established by the Secretary under section 1401(h).
       (b) Protection Against Provider Claims.--In the case of a 
     failure of a standard health plan to make payments with 
     respect to the standard benefits covered under the plan for 
     any reason, an individual who is enrolled under the plan is 
     not liable to any health care provider with respect to the 
     provision of health services within such set of benefits for 
     payments in excess of the amount for which the enrollee would 
     have been liable if the plan were to have made payments in a 
     timely manner.

                     PART 3--DELIVERY SYSTEM REFORM

     SEC. 1121. PROHIBITION OF DISCRIMINATION.

       (a) In General.--Each standard health plan shall comply 
     with the antidiscrimination requirements of section 1602.
       (b) Additional antidiscrimination requirements.--
       (1) In general.--No State, standard health plan, or 
     standard health plan sponsor may discriminate in 
     participation, reimbursement, or indemnification against a 
     health care provider who is acting within the scope of the 
     provider's license or certification under applicable State or 
     Federal law solely on the basis of such license or 
     certification of such provider.
       (2) Number and type.--Nothing in this Act shall--
       (A) prevent a standard health plan from matching the number 
     and type of health care providers to the needs of the plan 
     members; or
       (B) except as specifically provided in this Act, establish 
     any other measure designed to maintain quality or to control 
     costs.

     SEC. 1122. QUALITY ASSURANCE STANDARDS.

       (a) In General.--Each standard health plan shall comply 
     with the plan performance standards in accordance with 
     subtitle A of title V. Each standard health plan shall 
     establish procedures, including ongoing quality improvement 
     procedures, to ensure that the health care services provided 
     to enrollees under the plan will be provided under reasonable 
     standards of quality of care consistent with prevailing 
     professionally recognized standards of medical practice and 
     the quality standards established under subtitle A of title 
     V.
       (b) Internal Quality Assurance Program.--Each standard 
     health plan shall establish, and communicate to its enrollees 
     and its providers, an ongoing internal program, including 
     periodic reporting, to monitor and evaluate the quality and 
     cost effectiveness of its health care services, pursuant to 
     standards established by the National Quality Council.

     SEC. 1123. CONSUMER GRIEVANCE PROCESS.

       Each standard health plan shall demonstrate to the 
     appropriate certifying authority the capability to administer 
     the plan in a manner which ensures due process for all 
     enrollees under rules established by the Secretary under 
     subtitle F of title V.

     SEC. 1124. HEALTH SECURITY CARDS.

       Each standard health plan shall issue a health security 
     card to each individual enrolled in such plan in accordance 
     with subtitle B of title V and regulations promulgated by the 
     Secretary.

     SEC. 1125. INFORMATION AND MARKETING STANDARDS.

       (a) In General.--Each standard health plan shall provide 
     information to the participating State and each purchasing 
     cooperative through which such plan is offered which is 
     required to be provided under sections 1401(d) and 5009, 
     other applicable information requirements of this Act, and 
     rules promulgated by the Secretary.
       (b) Marketing Methods; Advertising Materials.--A standard 
     health plan may utilize direct marketing, agency, or other 
     arrangements to distribute health plan information, subject 
     to applicable fair marketing practices laws and standards 
     established by the State or by the Secretary, including 
     standards to prevent selective marketing. All advertising, 
     promotional materials, and other communications with health 
     plan members and the general public must be factually 
     accurate and responsive to the needs of served populations. A 
     standard health plan may not distribute marketing materials 
     to an area smaller than the entire community rating area of 
     the plan.
       (c) Payment of Agent Commissions.--A standard health plan--
       (1) may pay a commission or other remuneration to an agent 
     or broker in marketing the plan to individuals or groups, but
       (2) may not vary such remuneration based, directly or 
     indirectly, on the anticipated or actual claims experience 
     associated with the group or individuals to which the plan 
     was sold.
       (d) Materials in Appropriate Languages.--In the case of a 
     community rating area that includes a significant number or 
     proportion of residents with limited English proficiency, 
     each standard health plan in such area shall provide 
     materials under this Act in the native languages of such 
     residents, as appropriate.

     SEC. 1126. INFORMATION REGARDING A PATIENT'S RIGHT TO SELF-
                   DETERMINATION IN HEALTH CARE SERVICES.

       (a) In General.--Each standard health plan shall--
       (1) provide written information to each individual 
     enrolling in such plan of--
       (A) such individual's right under State law (whether 
     statutory or as recognized by the courts of the State) to 
     make decisions concerning medical care, including the right 
     to accept or refuse medical treatment and the right to 
     formulate advance directives (as defined in section 
     1866(f)(3) of the Social Security Act (42 U.S.C. 
     1395cc(f)(3))), and
       (B) the written policies of the plan with respect to such 
     right; and
       (2) require participating primary care physicians to 
     include in their patients' charts the wishes of the patient 
     concerning advance directives and organ donation.
       (b) Promotion of Shared Decision Making.--Each standard 
     health plan shall promote shared decision making by assuring 
     that patients are appropriately informed about health care 
     treatment options.

     SEC. 1127. CONTRACTS WITH PURCHASING COOPERATIVES.

       (a) Contracts with Cooperatives.--A community-rated 
     standard health plan provided by a carrier shall enter into 
     contracts with each purchasing cooperative seeking such a 
     contract in the community rating area served by the plan.
       (b) Pricing.--No community-rated standard health plan shall 
     offer a rate to a purchasing cooperative in the community 
     rating area served by the plan that is more than the premium 
     rate determined under section 1116. Such a plan may charge a 
     marketing fee as specified under section 1324(b)(1).

     SEC. 1128. HEALTH PLAN ARRANGEMENTS WITH PROVIDERS.

       (a) Providers Outside Area.--A State may not limit the 
     ability of any plan to contract with a health care provider 
     located outside of the geographic boundaries of a community 
     rating area or the State.
       (b) Treatment of Cost-Sharing.--Each standard health plan 
     which provides the standard benefits package established 
     under subtitle C shall include in its payments to health care 
     providers such additional reimbursements as may be necessary 
     to reflect cost-sharing reductions to which individuals are 
     entitled under subtitle A of title VI.
       (c) Provider Verification.--Each standard health plan shall 
     ensure that all health care providers reimbursed by the plan 
     are authorized under State law to provide applicable 
     services. Each standard health plan shall--
       (1) verify the credentials of practitioners and facilities;
       (2) ensure that all health care providers meet applicable 
     State licensing and certification standards;
       (3) ensure that each health care provider participating in 
     the plan annually discloses information regarding operations, 
     ownership, finances, and workforce necessary to evaluate the 
     provider's compliance with this Act;
       (4) oversee the quality and performance of participating 
     providers, consistent with section 1122; and
       (5) investigate and resolve consumer complaints against 
     participating providers.
       (d) Requirements for Network Plans.--
       (1) Arrangements with health care providers.--
       (A) In general.--Each network plan through its provider 
     network shall demonstrate that it appropriately recognizes 
     and serves the diverse health care needs of the population in 
     the health plan service area (established under section 
     1502(d)) served by the plan.
       (B) Availability.--Each network plan through its provider 
     network shall include a sufficient number, mix, and 
     distribution of participating health care providers within 
     the network to ensure that all network items and services are 
     available and accessible to all enrollees throughout the 
     health plan service area of the plan--
       (i) with reasonable promptness;
       (ii) within reasonable proximity to the residence of the 
     enrollees;
       (iii) during reasonable hours of operation, including 
     after-hours services; and
       (iv) in the case of emergency and urgent care services, 
     when medically necessary, 24-hours a day, 7-days a week,

     in a manner which does not conflict with the plan's 
     responsibilities to establish measures designed to maintain 
     quality and to control costs.
       (2) Information to enrollees and prospective enrollees.--
     Each network plan shall provide enrollees and prospective 
     enrollees with information identifying--
       (A) the number, mix, and distribution of participating 
     health care providers; and
       (B) any such health care provider refusing to provide a 
     network item or service pursuant to section 1601.
       (3) Gatekeeper.--With respect to each network plan that 
     utilizes a gatekeeper or similar process to approve network 
     items and services, such plan shall ensure that such 
     gatekeeper or process does not create an undue burden for 
     enrollees with complex or chronic health conditions and shall 
     ensure access to relevant specialists for the continued care 
     of such enrollees when medically indicated. In cases of a 
     patient with a severe, complex, or chronic health condition, 
     such plan shall determine, in conjunction with the enrollee 
     and the enrollee's primary care provider, whether it is 
     medically necessary or appropriate to use a specialist or a 
     care coordinator from an interdisciplinary team as the 
     gatekeeper or in the health care approval process.
       (4) Continued care.--Each network plan shall develop and 
     implement mechanisms for coordinating the delivery of care 
     among different providers so as to enhance continuity of care 
     for the patient.
       (5) Eligible centers of specialized treatment expertise.--
       (A) In general.--Each network plan shall demonstrate that 
     adults, children, and individuals with disabilities have 
     access to specialized treatment expertise when medically 
     indicated by meeting evaluation criteria established by the 
     Secretary. In establishing such criteria, the Secretary may 
     consider a process by which a network plan could be deemed to 
     meet such evaluation criteria if such plan demonstrates 
     referrals to designated centers of specialized care when 
     medically necessary or appropriate, informs enrollees of the 
     availability of referral care, and ensures compliance with 
     section 1123.
       (B) Eligible centers.--The Secretary shall establish 
     criteria for designating centers of specialized care and 
     shall designate eligible centers based on such criteria. The 
     criteria shall include requirements for staff credentials and 
     experience, and requirements for measured outcomes in the 
     diagnosis and treatment of patients. The Secretary shall 
     develop additional criteria for outcomes of specialized 
     treatment as research findings become available. To be 
     designated as a center of specialized care, a center shall--
       (i) attract patients from outside the center's local 
     geographic region, from across the State or the United 
     States; and
       (ii) either sponsor, participate in, or have medical staff 
     who participate in peer-reviewed research.
       (C) Limitation.--A State may not establish rules or 
     policies that require or encourage network plans to give 
     preference to centers of specialized treatment expertise 
     within the State or within the community rating area. A 
     network plan shall not prohibit an academic health center, 
     teaching hospital, or other center for specialized care with 
     which the plan contracts from contracting with one or more 
     other plans.
       (D) Specialized treatment expertise.--For purposes of this 
     paragraph, the term ``specialized treatment expertise'', with 
     respect to the treatment of a health condition by an eligible 
     center, means expertise in diagnosing and treating unusual 
     diseases or conditions, diagnosing and treating diseases or 
     conditions which are unusually difficult to diagnose or 
     treat, and providing other specialized health care.
       (6) Definitions relating to network plans.--For purposes of 
     this Act--
       (A) Network plan defined.--The term ``network plan'' means 
     a standard health plan that utilizes a provider network.
       (B) Provider network defined.--The term ``provider 
     network'' means, with respect to a standard health plan, 
     health care providers that have entered into an agreement 
     with the plan under which such providers are obligated to 
     provide network items and services to individuals enrolled in 
     the plan, or have an agreement to provide network items and 
     services on a fee-for-service basis.
       (C) Network items and services.--The term ``network items 
     and services'' means items or services provided to an 
     individual enrolled under a standard health plan with a 
     standard benefits package established under subtitle C by a 
     health care provider who is a member of a provider network of 
     the plan.
       (D) Nonnetwork plan defined.--The term ``nonnetwork plan'' 
     means a standard health plan that does not utilize a provider 
     network.
       (E) Nonnetwork items and services.--The term ``nonnetwork 
     items and services'' means items or services provided to an 
     individual enrolled under a standard health plan by a health 
     care provider who is not a member of a provider network of 
     the plan.
       (e) Emergency and Urgent Care Services.--
       (1) In general.--Each standard health plan shall cover 
     emergency and urgent care services provided to enrollees, 
     without regard to whether or not the health care 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 emergency services 
     without regard to prior authorization.
       (2) Payment amounts.--In the case of emergency and urgent 
     care provided to an enrollee outside of a standard health 
     plan's community rating area, the payment amounts of the plan 
     shall be based on the applicable fee schedule described in 
     subsection (f).
       (f) Application of Plan Fee Schedule.--
       (1) In general.--Subject to paragraph (2), each standard 
     health plan that provides for payment for services on a fee-
     for-service basis and has not established an agreement or 
     contractual arrangement with health care providers specifying 
     a basis for payment shall make such payment to such providers 
     under a fee schedule established by the plan.
       (2) Rule of construction.--Nothing in the paragraph (1) 
     shall be construed to prevent a standard health plan from 
     providing for a different basis or level of payment than the 
     fee schedule established under such paragraph as part of a 
     contractual agreement with participating providers under the 
     plan.
       (g) Provider Participation Program; Requirement of Direct 
     Billing.--
       (1) Provider participation program.--Each standard health 
     plan shall establish a program under which participating 
     health care providers may agree to accept the plan's payment 
     schedule as payment in full, and agree not to charge patients 
     more than the cost-sharing required by such plan for 
     nonnetwork items and services. Each such plan shall make 
     available the list of participating health care providers to 
     enrollees and prospective enrollees. To the extent possible, 
     the program under this subparagraph shall meet the 
     requirements of subsection (d).
       (2) Direct billing.--
       (A) In general.--A health care provider may not charge or 
     collect from an enrollee amounts that are payable by the 
     standard health plan (including any cost-sharing reduction 
     assistance payable by the plan) and shall submit charges to 
     such plan in accordance with any applicable requirements of 
     subtitle B of title V (relating to health information 
     systems).
       (B) Prohibition.--An individual or entity that performs 
     clinical laboratory services may not present or cause to be 
     presented, a claim, bill, or demand for payment to any person 
     other than the individual receiving such services, or to the 
     standard health plan of the individual, except that the 
     Secretary may by regulation establish appropriate exceptions 
     to the requirement of this subparagraph.
       (3) Prohibition of balance billing of taxes.--Any agreement 
     entered into between a standard health plan and a health care 
     provider shall prohibit the provider from charging patients 
     the amount of any tax recovered from the provider under 
     section 4518 of the Internal Revenue Code of 1986.
       (4) Rule of construction.--Nothing in this Act shall be 
     construed to--
       (A) require or force an individual to receive health care 
     solely through the individual's standard health plan; or
       (B) prohibit any individual from privately contracting with 
     any health care provider and paying for the treatment or 
     service provider by such provider on a cash basis or any 
     other basis as agreed to between the individual and the 
     provider.
       (i) Relation to Detention.--A standard health plan is not 
     required to provide any reimbursement to any detention 
     facility for services performed in that facility for 
     detainees in the facility.
       (j) Physician Participation.--
       (1) In general.--Each standard health plan shall establish 
     mechanisms through which physicians have input into matters 
     affecting patient care and through which patients have the 
     ability to choose any primary care physician from available 
     practitioners.
       (2) Contract procedures.--Each standard health plan shall 
     provide not less than 30 days notification to physicians of 
     decisions to cancel or deny renewal of contracts and shall 
     establish an informal, non-binding, and advisory review 
     process for appeals.
       (k) Ethical Business Conduct.--Each standard health plan 
     shall develop and implement a code of ethical business 
     conduct for its activities, including those of its 
     components, and assure proficient management and planning 
     functions.
       (l) Enrollment.--A standard health plan may not knowingly 
     accept the enrollment of an individual who is enrolled in 
     another standard health plan.

     SEC. 1129. UTILIZATION MANAGEMENT PROTOCOLS AND PHYSICIAN 
                   INCENTIVE PLANS.

       (a) Requiring Consumer Disclosure.--Each standard health 
     plan shall disclose upon request to enrollees (and 
     prospective enrollees) and to participating providers (and 
     prospective providers), the protocols and financial 
     incentives used by the plan, including utilization management 
     protocols and physician incentive plans for controlling 
     utilization and costs, while protecting proprietary business 
     information to the extent specified by the Secretary.
       (b) Utilization Management.--The utilization review and 
     management activities of each standard health plan, provided 
     either directly or through contract, shall meet the following 
     standards as defined by the Secretary:
       (1) Personnel.--All review determinations shall be made by 
     health care providers are licensed, certified, or otherwise 
     credentialed and who are qualified to review utilization of 
     the treatment being sought.
       (2) Review process.--Each standard health plan shall base 
     utilization management on current scientific knowledge, 
     stress the efficient delivery of health care and quality 
     outcomes, rely primarily on evaluating and comparing practice 
     patterns rather than routine case-by-case review, be 
     consistent and timely in application, and have a process for 
     making review determinations for urgent and emergency care 24 
     hours a day.
       (3) No financial incentive.--Utilization management by each 
     standard health plan may not create financial incentives for 
     reviewers or health care providers to reduce or limit 
     medically necessary or appropriate services.
       (c) Physician Incentive Plans.--A standard health plan may 
     not operate a physician incentive plan unless such incentive 
     plan meets the requirements of section 1876(i)(8)(A) of the 
     Social Security Act (42 U.S.C. 1395mm(i)(8)(A)).

               PART 4--SUPPLEMENTAL HEALTH BENEFITS PLANS

     SEC. 1141. SUPPLEMENTAL HEALTH BENEFITS PLANS.

       (a) Treatment of Supplemental Health Benefits Plans.--
       (1) In general.--Nothing in this Act may be construed as 
     preventing a standard health plan sponsor from offering and 
     pricing (in a manner that is separate from the offering and 
     pricing of the standard health plans offered by such sponsor 
     in the community rating area) supplemental health benefits 
     plans pursuant to the State certification plan, the 
     requirements of this section, and regulations promulgated by 
     the Secretary.
       (2) Plans defined.--In this Act--
       (A) Supplemental health benefits plan.--The term 
     ``supplemental health benefits plan'' means a supplemental 
     services plan or a cost-sharing plan.
       (B) Supplemental services plan.--The term ``supplemental 
     services plan'' means a health plan which provides--
       (i) coverage for services and items not included in the 
     standard benefits package established under subtitle C,
       (ii) coverage for items and services included in such 
     package but not covered because of a limitation in amount, 
     duration, or scope of benefits, or
       (iii) both.
       (C) Cost-sharing plan.--The term ``cost-sharing plan'' 
     means a health plan which provides coverage for deductibles 
     and coinsurance imposed as part of the standard benefits 
     package established under subtitle C.
       (b) Requirements for Supplemental Services Plans.--
       (1) Application of certain health plan standards.--
       (A) In general.--The standards specified in subparagraph 
     (B) shall apply with respect to each supplemental services 
     plan in the same manner as such standards apply with respect 
     to a certified standard health plan.
       (B) Specified standards.--The standards specified in this 
     subparagraph are as follows:
       (i) Section 1111 (relating to guaranteed issue, 
     availability, and renewability).
       (ii) Section 1112 (relating to enrollment).
       (iii) Section 1114 (relating to nondiscrimination based on 
     health status).
       (iv) Section 1116 (relating to rating limitations for 
     community-rated market).
       (2) No duplicative health benefits.--A standard health plan 
     sponsor or any other entity may not offer any supplemental 
     services plan that--
       (A) duplicates the standard benefits package established 
     under subtitle C, or
       (B) duplicates any coverage provided under the medicare 
     program to any medicare-eligible individual.
       (3) Restrictions on marketing abuses.--Not later than May 
     1, 1995, the Secretary shall develop minimum standards that 
     prohibit marketing practices by standard health plan sponsors 
     and other entities offering supplemental services plans that 
     involve--
       (A) providing monetary incentives for, or tying or 
     otherwise conditioning, the sale of the plan to enrollees in 
     a certified standard health plan of the sponsor or entity;
       (B) linking in any manner to the plan's standard benefits 
     package; or
       (C) using or disclosing to any party information about the 
     health status or claims experience of participants in a 
     certified standard health plan for the purpose of marketing a 
     supplemental services plan.
       (c) Requirements for Cost-Sharing Plans.--
       (1) Rules for offering of policies.--A cost-sharing plan 
     may be offered to an individual only if--
       (A) the plan is offered by the standard health plan in 
     which the individual is enrolled;
       (B) the standard health plan offers the plan to all 
     individuals enrolled in the standard health plan;
       (C) the individual is not enrolled in an alternative 
     benefits package; and
       (D) the plan is offered only during the enrollment periods 
     for standard health plans specified in section 1112.
       (2) Prohibition of coverage of copayments.--A cost-sharing 
     plan may not provide any benefits relating to any copayments 
     established under subtitle C.
       (3) Equivalent coverage for all services.--A cost-sharing 
     plan shall provide coverage for items and services in the 
     standard benefits package to the same extent as the plan 
     provides coverage for all items and services in the package.
       (4) Requirements for pricing.--
       (A) In general.--The price of any cost-sharing plan shall--
       (i) be the same for each individual or class of family to 
     whom the plan is offered;
       (ii) include any expected increase in utilization resulting 
     from the purchase of the plan by individuals enrolled in the 
     standard health plan; and
       (iii) not result in a loss-ratio of less than 90 percent.
       (B) Loss-ratio defined.--In subparagraph (A)(iii), a 
     ``loss-ratio'' is the ratio of the premium returned to the 
     consumer in payout relative to the total premium collected.
                 Subtitle C--Benefits and Cost-Sharing

                   PART 1--STANDARD BENEFITS PACKAGES

     SEC. 1201. GENERAL DESCRIPTION OF STANDARD BENEFITS PACKAGES.

       (a) Standard Benefits Package.--For purposes of this title, 
     a standard benefits package is a benefits package that--
       (1)(A) provides all of the items and services under the 
     categories of health care items and services described in 
     section 1202; and
       (B) provides for at least one of the 3 cost-sharing 
     schedules established under section 1213(c)(2) by the 
     National Health Benefits Board established under section 1211 
     (referred to in this part as the ``Board'') for such a 
     package; and
       (2) has an actuarial value that is equivalent to the 
     actuarial value of the benefits package provided by the Blue 
     Cross/Blue Shield Standard Option under the Federal Employees 
     Health Benefits Program during 1994, adjusted for cost 
     differences after 1994.
       (b) Alternative Standard Benefits Package.--For purposes of 
     this title, an alternative standard benefits package is a 
     benefits package that--
       (1)(A) provides all of the items and services under the 
     categories of health care items and services described in 
     section 1202; and
       (B) provides for the very high deductible cost-sharing 
     schedule established under section 1213(c)(3) by the Board 
     for such a package; and
       (2) has an actuarial value that is less than the actuarial 
     value of the benefits package provided by the Blue Cross/Blue 
     Shield Standard Option under the Federal Employees Health 
     Benefits Program during 1994, adjusted for cost differences 
     after 1994.
       (c) Actuarial Values.--The Board shall determine the 
     actuarial values referred to in subsections (a)(2) and 
     (b)(2). In determining whether a benefits package meets the 
     requirements of subsection (a)(2) or (b)(2), the Board shall 
     use utilization and unit cost measures based on nationwide 
     experience and shall make appropriate adjustments to reflect 
     differences in the cost effectiveness of the delivery system 
     used by the health plan providing the package.

     SEC. 1202. DESCRIPTION OF CATEGORIES OF ITEMS AND SERVICES.

       (a) In General.--The categories of health care items and 
     services described in this section are the following, as 
     defined by the Board under section 1213(a):
       (1) Hospital services.--The hospital (as defined in section 
     1203(7)) services described in this paragraph include the 
     following:
       (A) Inpatient hospital services.
       (B) Outpatient hospital services.
       (C) 24-hour a day hospital emergency services.
       (2) Health professional services.--The items and services 
     described in this paragraph are--
       (A) health professional services (as defined in section 
     1203(3)), including consultations, that are provided in a 
     home, office, or other ambulatory care setting, or an 
     institutional setting; and
       (B) services and supplies (including drugs and biologicals 
     which cannot be self-administered) furnished as incident to 
     such health professional services.
       (3) Emergency and ambulatory medical and surgical 
     services.--The items and services described in this paragraph 
     are 24-hour a day emergency services and ambulatory medical 
     or surgical services provided in a facility that is legally 
     authorized to provide such services in the State in which 
     such services are provided.
       (4) Clinical preventive services.--The items and services 
     described in this paragraph are clinical preventive services, 
     including services for high risk populations, age-appropriate 
     immunizations, tests, and clinician visits furnished 
     consistent with any periodicity schedule specified by the 
     Board under section 1213(a)(2)(B).
       (5) Mental illness and substance abuse services.--The items 
     and services described in this paragraph are mental illness 
     and substance abuse services, including inpatient, 
     outpatient, residential non-hospital, and intensive non-
     residential services, for the treatment of mental illness and 
     substance abuse disorders (as defined in section 1203(9)).
       (6) Family planning services and services for pregnant 
     women.--The services described in this section include the 
     following items and services:
       (A) Voluntary comprehensive family planning services, 
     including counseling and education.
       (B) Contraceptive drugs and devices that are subject to 
     approval by the Secretary under the Federal Food, Drug, and 
     Cosmetic Act.
       (C) Services for pregnant women.
       (7) Hospice care.--The hospice care described in this 
     paragraph is items and services provided for end of life care 
     (as defined in section 1203(6)).
       (8) Home health care.--
       (A) In general.--The home health care described in this 
     paragraph is home health care (as defined in section 1203(4)) 
     and home infusion drug therapy services (as defined in 
     section 1203(5)).
       (B) Limitations.--Coverage for home health care is subject 
     to the following limitations:
       (i) Inpatient treatment alternative.--Such care is covered 
     only as an alternative to inpatient treatment in a hospital, 
     skilled nursing facility (as defined in section 1203(15)), or 
     rehabilitation facility (as defined in section 1203(14)) 
     after an illness, injury, disorder, or other health 
     condition.
       (ii) Reevaluation.--At the end of each 60-day period of 
     home health care, the need for continued care shall be 
     reevaluated by the person who is primarily responsible for 
     providing the home health care. Additional periods of care 
     are covered only if such person determines that the 
     requirement in clause (i) is satisfied.
       (9) Extended care services--
       (A) In general.--The extended care services described in 
     this section are the items and services described in section 
     1861(h) of the Social Security Act, when provided to an 
     inpatient of a skilled nursing facility or a rehabilitation 
     facility.
       (B) Limitations.--Extended care services are covered only 
     as an alternative to receiving inpatient hospital services as 
     a result of an illness, injury, disorder, or other health 
     condition.
       (10) Ambulance services.--
       (A) In general.--The ambulance services described in this 
     paragraph are covered only when indicated by the medical 
     condition of the individual receiving such services. Such 
     services include the following:
       (i) Ground transportation by ambulance.
       (ii) Air or water transportation by an aircraft or vessel 
     equipped for transporting an injured or sick individual in 
     cases in which there is no other method of transportation or 
     where use of another method of transportation is contra-
     indicated by the medical condition of such individual.
       (11) Outpatient laboratory, radiology, and diagnostic 
     services.--The items and services described in this paragraph 
     are laboratory, radiology, and diagnostic services provided 
     upon prescription to individuals who are not inpatients of a 
     hospital, hospice, skilled nursing facility, or 
     rehabilitation facility.
       (12) Outpatient prescription drugs.--The items described in 
     this paragraph are the following used for a medically 
     accepted indication (as defined in section 1203(8)):
       (A) Outpatient prescription drugs.
       (B) Blood clotting factors (as defined in section 1203(1)).
       (C) Drugs used for home infusion therapy.
       (D) Biologicals.
       (E) Accessories and supplies used directly with the items 
     described in subparagraphs (A) through (D).
       (13) Outpatient rehabilitation services.--
       (A) In general.--The outpatient rehabilitation services 
     described in this paragraph are--
       (i) outpatient occupational therapy;
       (ii) outpatient physical therapy;
       (iii) outpatient respiratory therapy; and
       (iv) outpatient speech-language pathology services and 
     outpatient audiology services.
       (B) Limitations.--Coverage for outpatient rehabilitation 
     services is subject to the following limitations:
       (i) Service limitation.--Such services shall include only 
     items or services used to restore or maintain functional 
     capacity or to prevent or minimize limitations on physical 
     and cognitive functions as a result of an illness, injury, 
     disorder, or other health condition, including items or 
     services used to attain new functional abilities at an age-
     appropriate rate.
       (ii) Reevaluation.--At the end of each 60-day period of 
     outpatient rehabilitation services, the need for continued 
     services shall be reevaluated by the person who is primarily 
     responsible for providing the services. Additional periods of 
     services are covered only if such person determines that the 
     requirement of clause (i) is satisfied.
       (14) Durable medical equipment and prosthetic and orthotic 
     devices.--
       (A) In general.--The items and services described in this 
     paragraph are--
       (i) durable medical equipment (as defined in section 
     1203(2);
       (ii) prosthetic devices (as defined in section 1203(12);
       (iii) orthotics (as defined in section 1203(10)) and 
     prosthetics (as defined in section 1203(11)); and
       (iv) accessories and supplies used directly with the 
     equipment or devices described in clauses (i) through (iv).
       (B) Repair, maintenance, etc.--The items and services 
     described in this paragraph include the following with 
     respect to the equipment and devices described in 
     subparagraph (A):
       (i) Repair and maintenance of such equipment or devices.
       (ii) Replacement of such equipment or devices when required 
     due to loss, irreparable damage, wear, or because of a change 
     in the patient's condition.
       (iii) Fitting and training for the use of such equipment or 
     devices.
       (15) Vision care, hearing care, and dental care.--
       (A) In general.--The items described in this paragraph are 
     the vision care described in subparagraph (B), dental care 
     described in subparagraph (C), and hearing care described in 
     subparagraph (D).
       (B) Vision care.--The vision care described in this 
     subparagraph is routine eye examinations, diagnosis, and 
     treatment for defects in vision furnished to individuals who 
     are under 22 years of age, including eyeglasses and contact 
     lenses furnished according to a periodicity schedule 
     established by the Board.
       (C) Dental care.--
       (i) Individuals under 22.--The dental care described in 
     this subparagraph shall include the following, as specified 
     by the Board, furnished to individuals who are under 22 years 
     of age:

       (I) Emergency dental treatment.
       (II) Prevention and diagnosis of dental disease.
       (III) Treatment of dental disease.
       (IV) Space maintenance procedures to prevent orthodontic 
     complications.
       (V) Interceptive orthodontic treatment to prevent severe 
     malocclusion.

       (ii) Individuals over 22.--The dental care described in 
     this subparagraph for individuals who are over 22 years of 
     age is emergency dental treatment, as specified by the Board.
       (D) Hearing care.--The hearing care items and services 
     described in this paragraph are the following when furnished 
     to an individual who is under 22 years of age:
       (i) Routine ear examinations and diagnosis for defects in 
     hearing as part of a physician visit.
       (ii) Hearing aids when recommended by a physician or 
     audiologist.
       (16) Investigational treatments.--The items and services 
     described in this paragraph are items and services required 
     to provide patient care pursuant to the design of a qualified 
     investigational treatment (as defined in section 1203(13)).
       (b) Limitation.--
       (1) In general.--Items and services under the categories 
     described in subsection (a) shall be furnished to health plan 
     enrollees when medically necessary or appropriate.
       (2) Definition.--For purposes of this subtitle, the term 
     ``medically necessary or appropriate'' when referring to an 
     item or service means an item or service intended to maintain 
     or improve the biological, psychological, or functional 
     condition of a health plan enrollee or to prevent or mitigate 
     an adverse health outcome to an enrollee.

     SEC. 1203. DEFINITIONS.

       For purposes of this subtitle:
       (1) Blood Clotting Factors.--The term ``blood clotting 
     factors'' has the meaning given such term in section 
     1861(s)(2)(I) of the Social Security Act.
       (2) Durable medical equipment.--The term ``durable medical 
     equipment'' has the meaning given such term in section 
     1861(n) of the Social Security Act.
       (3) Health professional services.--The term ``health 
     professional services'' means professional services that--
       (A) are lawfully provided by a physician; or
       (B) would be described in subparagraph (A) if provided by a 
     physician, but are provided by another person who is legally 
     authorized to provide such services in the State in which the 
     services are provided.
       (4) Home health care.--The term ``home health care'' means 
     the items and services described in section 1861(m) of the 
     Social Security Act.
       (5) Home infusion drug therapy services.--The term ``home 
     infusion drug therapy services'' means the home infusion drug 
     therapy services described in section 1861(ll) of the Social 
     Security Act.
       (6) Hospice care.--The term ``hospice care'' means the 
     items and services described in paragraph (1) of section 
     1861(dd) of the Social Security Act, except that in applying 
     such section for purposes of this paragraph--
       (A) paragraphs (4)(B) and (5) shall be disregarded; and
       (B) all references to the Secretary of Health and Human 
     Services shall be treated as references to the Board.
       (7) Hospital.--The term ``hospital'' has the meaning given 
     such term in section 1861(e) of the Social Security Act, 
     except that such term shall include a facility operated by 
     the uniformed services, the Department of Veterans Affairs, 
     and the Indian Health Service that is primarily engaged in 
     providing services to inpatients that are equivalent to the 
     services provided by a hospital defined in such section 
     1861(e).
       (8) Medically accepted indication.--The term ``medically 
     accepted indication'' means with respect to the use of a 
     drug, any use which has been approved by the Food and Drug 
     Administration for the drug, and includes another use of the 
     drug if--
       (A) the drug has been approved by the Food and Drug 
     Administration; and
       (B) such use is supported by one or more citations which 
     are included (or approved for inclusion) in one or more of 
     the following compendia: the American Hospital Formulary 
     Service-Drug Information, the American Medical Association 
     Drug Evaluations, the United States Pharmacopoeia-Drug 
     Information, and other authoritative compendia as identified 
     by the Secretary.
       (9) Mental illness and substance abuse disorders.--The term 
     ``mental illness and substance abuse disorder'' means a 
     mental or substance abuse disorder listed in the Diagnostic 
     and Statistical Manual of Mental Disorders, Fourth Edition, 
     or the International Classification of Diseases, 9th 
     Revision, the Clinical Modification, Third Edition, or 
     revised versions of such manuals or texts.
       (10) Orthotics.--The term ``orthotics'' includes--
       (A) an accessory or supply used directly with a prosthetic 
     device to achieve therapeutic benefits and proper 
     functioning; and
       (B) leg, arm, back, and neck braces.
       (11) Prosthetics.--The term ``prosthetics'' includes 
     artificial legs, arms, and eyes.
       (12) Prosthetic devices.--The term ``prosthetic devices'' 
     means devices that replace all or part of the function of a 
     body organ.
       (13) Qualified investigational treatment.--The term 
     ``qualified investigational treatment'' means an 
     investigational treatment that is part of a peer-reviewed and 
     approved research program (as defined by the Secretary) or 
     research trials approved by the Secretary, the Directors of 
     the National Institutes of Health, the Commissioner of the 
     Food and Drug Administration, the Secretary of Veterans 
     Affairs, the Secretary of Defense, or a qualified 
     nongovernmental research entity as defined in guidelines of 
     the National Institutes of Health, including guidelines for 
     cancer center support grants designated by the National 
     Cancer Institute.
       (14) Rehabilitation facility.--The term ``rehabilitation 
     facility'' means an institution (or a distinct part of an 
     institution) which is established and operated for the 
     purpose of providing diagnostic, therapeutic, and 
     rehabilitation services to individuals for rehabilitation 
     from illness, injury, disorder, or other health condition. An 
     entity qualifying as a hospital (as defined in paragraph (7)) 
     may also qualify as a rehabilitation facility for the 
     purposes of section 1202(a)(9).
       (15) Skilled nursing facility.--The term ``skilled nursing 
     facility'' means an institution (or a distinct part of an 
     institution) which is primarily engaged in providing to 
     residents--
       (A) skilled nursing care and related services for residents 
     who require medical or nursing care; or
       (B) rehabilitation services to residents for rehabilitation 
     from illness, injury, disorder, or other health condition.

                 PART 2--NATIONAL HEALTH BENEFITS BOARD

     SEC. 1211. CREATION OF NATIONAL HEALTH BENEFITS BOARD; 
                   MEMBERSHIP.

       (a) In General.--There is hereby established in the 
     Department of Health and Human Services a National Health 
     Benefits Board (referred to in this part as the ``Board'').
       (b) Composition.--The Board is composed of 7 members 
     appointed by the President, by and with the advice and 
     consent of the Senate. No more than 4 members of the Board 
     may be affiliated with the same political party. Members 
     shall be appointed not later than 90 days after the date of 
     the enactment of this title.
       (c) Chair.--The President shall designate one of the 
     members of the Board as chair.
       (d) Terms.--
       (1) In general.--Except as provided in paragraph (2), the 
     term of each member of the Board is 6 years and begins when 
     the term of the predecessor of that member ends.
       (2) Initial terms.--The initial terms of the members of the 
     Board first taking office after the date of the enactment of 
     this title, shall expire as designated by the President, two 
     at the end of two years, two at the end of four years, and 
     three at the end of six years.
       (3) Continuation in office.--Upon the expiration of a term 
     of office, a member shall continue to serve until a successor 
     is appointed and qualified.
       (e) Vacancies.--
       (1) In general.--If a vacancy occurs, other than by 
     expiration of term, a successor shall be appointed by the 
     President, by and with the consent of the Senate, to fill 
     such vacancy. The appointment shall be for the remainder of 
     the term of the predecessor.
       (2) No impairment of function.--A vacancy in the membership 
     of the Board does not impair the authority of the remaining 
     members to exercise all of the powers of the Board.
       (3) Acting chair.--The Board may designate a member to act 
     as chair during any period in which there is no chair 
     designated by the President.
       (f) Meetings; Quorum.--
       (1) Meetings.--The chair shall preside at meetings of the 
     Board, and in the absence of the chair, the Board shall elect 
     a member to act as chair pro tempore.
       (2) Frequency.--The Board shall meet not less frequently 
     than 4 times each year.
       (3) Quorum.--Four members of the Board shall constitute a 
     quorum thereof.

     SEC. 1212. QUALIFICATIONS OF BOARD MEMBERS.

       (a) Citizenship.--Each member of the Board shall be a 
     citizen of the United States.
       (b) Basis of Selection.--Board members shall be selected on 
     the basis of their experience and expertise in relevant 
     subjects, including the practice of medicine, nursing, or 
     other clinical practices, health care financing and delivery, 
     State health systems, consumer protection, business, law, and 
     delivery of care to vulnerable populations.
       (c) Pay and Travel Expenses.--
       (1) Pay.--
       (A) Chair.--The chair of the Board shall be paid at a rate 
     equal to the daily equivalent of the minimum annual rate of 
     basic pay payable for level II of the Executive Schedule 
     under section 5315 of title 5, United States Code, for each 
     day (including travel time) during which the chair is engaged 
     in the actual performance of duties vested in the Board.
       (B) Members.--Each member of the Board shall be paid at a 
     rate equal to the daily equivalent of the minimum annual rate 
     of basic pay payable for level III of the Executive Schedule 
     under section 5315 of title 5, United States Code, for each 
     day (including travel time) during which the member is 
     engaged in the actual performance of duties vested in the 
     Board.
       (2) Travel expenses.--Members of the Board shall receive 
     travel expenses, including per diem in lieu of subsistence, 
     in accordance with sections 5702 and 5703 of title 5, United 
     States Code.

     SEC. 1213. GENERAL DUTIES AND RESPONSIBILITIES.

       (a) Clarification and Refinement of Items and Services.--
       (1) In general.--The Board shall promulgate such 
     regulations or establish such guidelines as may be necessary 
     to clarify and refine the items and services under the 
     categories of health care items and services described in 
     section 1202 in accordance with the requirements of 
     subsections (a)(2) and (b)(2) of section 1201.
       (2) Schedules for items and services.--
       (A) In general.--The Board shall establish and update 
     periodicity schedules for the items and services in the 
     categories of health care items and services described in 
     section 1202.
       (B) Special rule with respect to clinical preventive 
     services.--With respect to clinical preventive services, the 
     Board--
       (i) shall specify and define specific items and services as 
     clinical preventive services and shall establish and update a 
     periodicity schedule for such items and services; and
       (ii) in specifying clinical preventive services and 
     establishing and updating periodicity schedules under clause 
     (i), shall consult with experts in clinical preventive 
     services, including, for clinical preventive services with 
     respect to immunization, the Advisory Committee on 
     Immunization Practices, for clinical preventive services for 
     reproductive health and other related women's health issues, 
     the American College of Obstetricians and Gynecologists, for 
     clinical preventive services for children, the American 
     Academy of Pediatrics, and for clinical preventive services 
     in general, the U.S. Preventive Services Task Force.
       (3) Mental illness and substance abuse services.--
       (A) Parity.--
       (i) In general.--The Board shall design mental illness and 
     substance abuse services so as to achieve parity with 
     services for other medical conditions. Except as provided in 
     clause (iii), day or visit limits or cost-sharing 
     requirements, including out-of-pocket limits, may not be 
     applied to mental illness and substance abuse services that 
     are not applied to services for other medical conditions.
       (ii) Parity defined.--For purposes of this subparagraph, 
     the term ``parity'' means comprehensive, coverage for all 
     medically necessary or appropriate mental illness and 
     substance abuse services in inpatient, outpatient, 
     residential, and intensive non-residential settings.
       (iii) Special rule.--

       (I) Effect on other benefits.--If the Board determines that 
     parity of mental illness and substance abuse services with 
     services for other medical conditions cannot be achieved 
     without imposing unduly burdensome cost-sharing requirements 
     on other services, the Board may design mental illness and 
     substance abuse services such that they include the limit 
     described in subclause (II). If, after limiting mental 
     illness and substance abuse services as described in 
     subclause (II), the Board determines that such parity cannot 
     be achieved without imposing unduly burdensome cost-sharing 
     requirements on other services, the Board may also limit such 
     services as described in subclause (III).
       (II) Limit on inpatient hospital care.--The Board may limit 
     inpatient hospital care, but in the case of mental illness 
     the limit may not be set at a level below 30 days per year, 
     and in the case of substance abuse services the limit may not 
     be set at a level below the level sufficient to provide 
     detoxification services.
       (III) Coinsurance for outpatient adult psychotherapy.--The 
     Board may set the coinsurance for outpatient adult 
     psychotherapy at a level higher than the coinsurance for 
     other services, but no higher than a 50 percent coinsurance 
     level, after the first 5 visits for such services.
       (IV) Requirement to achieve parity by date certain.--
     Consistent with the process described in section 3510, the 
     Board shall ensure that parity for mental illness and 
     substance abuse services with services for other medical 
     conditions is established no later than January 1, 2001. If 
     the Board finds that establishing parity for mental illness 
     and substance abuse services with services for other medical 
     conditions cannot be achieved by January 1, 2001, without 
     imposing unduly burdensome cost-sharing on all services, the 
     Board shall develop a legislative proposal for an extension 
     of such date. Not later than January 1, 2000, the Board shall 
     submit to the Congress an implementing bill which contains 
     such statutory provisions as are necessary or appropriate to 
     implement the legislative proposal developed under the 
     preceding sentence.

       (B) Management of services.--
       (i) In general.--The Board shall develop standards for the 
     appropriate management of mental illness and substance abuse 
     services. Such standards shall include quality managed care 
     techniques.
       (ii) Quality managed care.--For purposes of clause (i), the 
     term ``quality managed care'' refers to the administration of 
     benefits through methods of central intake, preauthorization, 
     and utilization review under circumstances that protect 
     individuals from unwarranted denial of services.
       (C) Settings.--The Board shall give priority to ensuring 
     that mental illness and substance abuse services are provided 
     in the least restrictive setting that is clinically 
     appropriate and encouraging the use of outpatient and 
     intensive nonresidential treatments to the greatest extent 
     possible.
       (b) Determining Medical Necessity or Appropriateness.--
       (1) In general.--The Board shall be authorized to 
     establish--
       (A) criteria for determinations of medical necessity or 
     appropriateness;
       (B) procedures for determinations of medical necessity or 
     appropriateness; and
       (C) regulations or guidelines to be used in determining 
     whether an item or service under the categories of health 
     care items and services described in section 1202 is 
     medically necessary or appropriate.
       (2) Requirements.--The Board shall include the following in 
     establishing criteria, procedures, and regulations under this 
     subsection:
       (A) Special rules with respect to enrollees under 22 years 
     of age.--In making any determination with respect to medical 
     necessity or appropriateness with respect to an enrollee 
     under 22 years of age, the Board shall consider whether the 
     item or service is--
       (i) is appropriate for the age and health status of the 
     enrollee;
       (ii) will prevent or ameliorate the effects of a condition, 
     illness, injury, or disorder;
       (iii) will aid the overall physical and mental growth and 
     development of the enrollee; or
       (iv) will assist in achieving or maintaining maximum 
     functional capacity in performing daily activities

     This subparagraph shall apply to all items and services under 
     the categories of health care items and services described in 
     section 1202 as clarified and refined by the Board under 
     subsection (a).
       (B) Consultations with expert authorities.--The Board shall 
     consider the opinions of outside experts in establishing 
     criteria, procedures, and regulations with regard to medical 
     necessity or appropriateness.
       (C) Recommendations to secretary.--In the absence of 
     sufficient evidence to develop regulations with respect to 
     any particular coverage determination, the Board shall 
     recommend to the Secretary specific areas for which 
     priorities should be given to undertake clinical trials or 
     establish practice guidelines.
       (3) Health plan requirements.--The regulations established 
     by the Board under this subsection shall provide that--
       (A) in reviewing any determination with respect to medical 
     necessity or appropriateness made by an enrollee and the 
     health professional furnishing any item or service, health 
     plans shall consider the criteria and procedures established 
     by the Board under this subsection and available scientific 
     evidence; and
       (B) if a health plan has developed a clinical practice 
     guideline or utilization protocol, or has made a general 
     coverage determination, the plan shall--
       (i) provide a copy of, and a written statement of the basis 
     for, the guideline, protocol, or determination at least 60 
     days prior to the effective date of such guideline, protocol, 
     or determination, to each affected provider with which the 
     plan has a contract and the government entity which certifies 
     the plan;
       (ii) provide any or all of such information upon request to 
     enrollees, potential enrollees, or other interested parties, 
     including provider groups and specialty organizations; and
       (iii) revise such guidelines, protocols, or determinations 
     periodically, or, if new scientific evidence becomes 
     available, as soon as possible after such evidence is 
     available.
       (c) Cost-Sharing.--The Board shall establish cost-sharing 
     schedules to be provided by health plans providing a standard 
     benefits package or an alternative standard benefits package. 
     In establishing such cost-sharing schedules, the Board shall 
     meet the following requirements:
       (1) Annual basis.--The Board shall review and update cost-
     sharing schedules as determined appropriate by the Board, but 
     on at least an annual basis.
       (2) Plans providing standard benefits package.--The Board 
     shall establish 3 cost-sharing schedules for health plans 
     providing the standard benefits package which permit a 
     variety of delivery system options, including fee-for-
     service, preferred provider organizations, point of service, 
     and managed care. Such cost-sharing schedules shall consist 
     of--
       (A) a low cost-sharing schedule;
       (B) a high cost-sharing schedule; and
       (C) a combination cost-sharing schedule.
       (3) Plans providing alternative standard benefits 
     package.--The Board shall establish only one very high 
     deductible cost-sharing schedule for health plans providing 
     the alternative standard benefits package. Such cost-sharing 
     schedule shall provide for a higher deductible than any 
     deductible under a schedule established for health plans 
     providing a standard benefits package.
       (4) Clinical preventive services.--No cost-sharing schedule 
     established by the Board for health plans providing the 
     standard benefits package may include cost-sharing for 
     clinical preventive services and prenatal care.
       (5) Cost-sharing rules.--Cost-sharing schedules established 
     by the Board shall include copayments, coinsurance, 
     deductibles, and out-of-pocket limits. The copayments, 
     coinsurance, deductibles and out-of-pocket limits on cost-
     sharing for a year under the schedules shall be applied based 
     upon expenses incurred for covered items and services 
     furnished in the year.
       (6) Lifetime limits.--No cost-sharing schedule established 
     by the Board may include lifetime limits.
       (d) Legislative Proposals on Actuarial Equivalence and 
     Health Service Categories.--
       (1) In general.--The Board may develop legislative 
     proposals for modifications to the actuarial equivalence 
     provisions of section 1201 and the categories of health care 
     items and services under section 1202.
       (2) Implementing bill.--The Board shall submit to the 
     Congress an implementing bill which contains such statutory 
     provisions as are necessary or appropriate to implement the 
     legislative proposals developed under paragraph (1).
       (e) Reports.--
       (1) Dental care.--The Board shall undertake a study to 
     determine the costs of providing--
       (A) preventive dental care to all adults;
       (B) restorative dental care to all adults; and
       (C) preventive dental care to adults with developmental, 
     cognitive, and other mental disabilities.

     Not later than July 1, 1996, the Board shall prepare and 
     submit to the Secretary and the Congress, a report concerning 
     such study.
       (2) In vitro fertilization.--The Board shall undertake a 
     study to determine the costs of providing coverage for in 
     vitro fertilization in the standard benefits package. Not 
     later than July 1, 1996, the Board shall prepare and submit 
     to the Secretary and the Congress, a report concerning such 
     study.
       (3) Substance abuse cost-sharing.--
       (A) In general.--Not later than 1 year after the date on 
     which all members of the Board are appointed under this part, 
     the Board shall conduct a study and make recommendations to 
     Congress regarding the feasibility of eliminating any cost-
     sharing requirements imposed on substance abuse treatment 
     services under the cost-sharing schedules established by the 
     Board under subsection (c).
       (B) Elements of study.--The study conducted by the Board 
     under subparagraph (A) shall--
       (i) examine separately the implications of eliminating 
     cost-sharing requirements on substance abuse treatment 
     services for each of the following groups of individuals--

       (I) pregnant and post-partum women;
       (II) alcohol abusers; and
       (III) abusers of illegal drugs; and

       (ii) quantify the health, economic, crime-control, and 
     other benefits of eliminating such requirements.
       (f) Other Requirements.--The Board shall satisfy any other 
     requirements imposed on the Board under this title.

     SEC. 1214. POWERS.

       (a) Executive Director; Staff.--
       (1) Executive director.--
       (A) In general.--The Board shall, without regard to section 
     5311(b) of title 5, United States Code, appoint an Executive 
     Director.
       (B) Pay.--The Executive Director shall be paid at a rate 
     equivalent to a rate for the Senior Executive Service.
       (2) Staff.--
       (A) In general.--Subject to subparagraphs (B) and (C), the 
     Executive Director, with the approval of the Board, may 
     appoint and fix the pay of additional personnel.
       (B) Pay.--The Executive Director may make such appointments 
     without regard to the provisions of title 5, United States 
     Code, governing appointments in the competitive service, and 
     any personnel so appointed may be paid without regard to the 
     provisions of chapter 51 and subchapter III of chapter 53 of 
     such title, relating to classification and General Schedule 
     pay rates, except that an individual so appointed may not 
     receive pay in excess of 120 percent of the annual rate of 
     basic pay payable for GS-15 of the General Schedule.
       (C) Detailed personnel.--Upon request of the Executive 
     Director, the head of any Federal department or agency may 
     detail any of the personnel of that department or agency to 
     the Board to assist the Board in carrying out its duties 
     under this Act.
       (b) Contract Authority.--To the extent provided in advance 
     in appropriations Acts, the Board may contract with any 
     person (including an agency of the Federal Government) for 
     studies and analysis as required to execute its functions. 
     Any employee of the Executive Branch may be detailed to the 
     Board to assist the Board in carrying out its duties.
       (c) Consultations With Experts.--The Board may consult with 
     any outside expert individuals or groups that the Board 
     determines appropriate in performing its duties under section 
     1213. The Board may establish advisory committees.
       (d) Access to Information.--The Board may secure directly 
     from any department or agency of the United States 
     information necessary to enable it to carry out its 
     functions, to the extent such information is otherwise 
     available to a department or agency of the United States. 
     Upon request of the chair, the head of that department or 
     agency shall furnish that information to the Board.
       (e) Delegation of Authority.--Except as otherwise provided, 
     the Board may delegate any function to such officers and 
     employees as the Board may designate and may authorize such 
     successive redelegations of such functions with the Board as 
     the Board deems to be necessary or appropriate. No delegation 
     of functions by the Board shall relieve the Board of 
     responsibility for the administration of such functions.
       (f) Rulemaking.--The Board is authorized to establish such 
     rules as may be necessary to carry out this subtitle.

     SEC. 1215. FUNDING.

       (a) Authorization of Appropriations.--There are authorized 
     to be appropriated to the Board $5,000,000 for each year and 
     such additional sums as may be necessary to carry out the 
     purposes of this part.
       (b) Submission of Budget.--Under the procedures of chapter 
     11 of title 31, United States Code, the budget for the Board 
     for a fiscal year shall be reviewed by the Director of the 
     Office of Management and Budget and submitted to the Congress 
     as part of the President's submission of the Budget of the 
     United States for the fiscal year.

     SEC. 1216. APPLICABILITY OF FEDERAL ADVISORY COMMITTEE ACT.

       The Federal Advisory Committee Act (5 U.S.C. App.) shall 
     not apply to the Board.

     SEC. 1217. CONGRESSIONAL CONSIDERATION OF BOARD PROPOSALS.

       (a) In General.--Any implementing bill described in section 
     1213 shall be considered by Congress under the procedures for 
     consideration described in subsection (b).
       (b) Congressional Consideration.--
       (1) Rules of house of representatives and senate.--This 
     subsection is enacted by Congress--
       (A) as an exercise of the rulemaking power of the House of 
     Representatives and the Senate, respectively, and as such is 
     deemed a part of the rules of each House, respectively, but 
     applicable only with respect to the procedure to be followed 
     in that House in the case of an implementing bill described 
     in subsection (a), and supersedes other rules only to the 
     extent that such rules are inconsistent therewith; and
       (B) with full recognition of the constitutional right of 
     either House to change the rules (so far as relating to the 
     procedure of that House) at any time, in the same manner, and 
     to the same extent as in the case of any other rule of that 
     House.
       (2) Introduction and referral.--On the day on which the 
     implementing bill described in subsection (a) is transmitted 
     to the House of Representatives and the Senate, such bill 
     shall be introduced (by request) in the House of 
     Representatives by the Majority Leader of the House, for 
     himself or herself and the Minority Leader of the House, or 
     by Members of the House designated by the Majority Leader and 
     Minority Leader of the House and shall be introduced (by 
     request) in the Senate by the Majority Leader of the Senate, 
     for himself or herself and the Minority Leader of the Senate, 
     or by Members of the Senate designated by the Majority Leader 
     and Minority Leader of the Senate. If either House is not in 
     session on the day on which the implementing bill is 
     transmitted, the bill shall be introduced in the House, as 
     provided in the preceding sentence, on the first day 
     thereafter on which the House is in session. The implementing 
     bill introduced in the House of Representatives and the 
     Senate shall be referred to the appropriate committees of 
     each House.
       (3) Amendments prohibited.--No amendment to an implementing 
     bill shall be in order in either the House of Representatives 
     or the Senate and no motion to suspend the application of 
     this subsection shall be in order in either House, nor shall 
     it be in order in either House for the Presiding Officer to 
     entertain a request to suspend the application of this 
     subsection by unanimous consent.
       (4) Period for committee and floor consideration.--
       (A) In general.--Except as provided in subparagraph (B), if 
     the committee or committees of either House to which an 
     implementing bill has been referred have not reported it at 
     the close of the 45th day after its introduction, such 
     committee or committees shall be automatically discharged 
     from further consideration of the implementing bill and it 
     shall be placed on the appropriate calendar. A vote on final 
     passage of the implementing bill shall be taken in each House 
     on or before the close of the 45th day after the implementing 
     bill is reported by the committees or committee of that House 
     to which it was referred, or after such committee or 
     committees have been discharged from further consideration of 
     the implementing bill. If prior to the passage by one House 
     of an implementing bill of that House, that House receives 
     the same implementing bill from the other House then--
       (i) the procedure in that House shall be the same as if no 
     implementing bill had been received from the other House; but
       ``(ii) the vote on final passage shall be on the 
     implementing bill of the other House.
       (B) Computation of days.--For purposes of subparagraph (A), 
     in computing a number of days in either House, there shall be 
     excluded--
       (i) the days on which either House is not in session 
     because of an adjournment of more than 3 days to a day 
     certain, or an adjournment of the Congress sine die, and
       (ii) any Saturday and Sunday not excluded under clause (i) 
     when either House is not in session.
       (5) Floor consideration in the house of representatives.--
       (A)  Motion to proceed.--A motion in the House of 
     Representatives to proceed to the consideration of an 
     implementing bill shall be highly privileged and not 
     debatable. An amendment to the motion shall not be in order, 
     nor shall it be in order to move to reconsider the vote by 
     which the motion is agreed to or disagreed to.
       (B)  Debate.--Debate in the House of Representatives on an 
     implementing bill shall be limited to not more than 20 hours, 
     which shall be divided equally between those favoring and 
     those opposing the bill. A motion further to limit debate 
     shall not be debatable. It shall not be in order to move to 
     recommit an implementing bill or to move to reconsider the 
     vote by which an implementing bill is agreed to or disagreed 
     to.
       (C) Motion to postpone.--Motions to postpone, made in the 
     House of Representatives with respect to the consideration of 
     an implementing bill, and motions to proceed to the 
     consideration of other business, shall be decided without 
     debate.
       (D) Appeals.--All appeals from the decisions of the Chair 
     relating to the application of the Rules of the House of 
     Representatives to the procedure relating to an implementing 
     bill shall be decided without debate.
       (E) General rules apply.--Except to the extent specifically 
     provided in the preceding provisions of this paragraph, 
     consideration of an implementing bill shall be governed by 
     the Rules of the House of Representatives applicable to other 
     bills and resolutions in similar circumstances.
       (6) Floor consideration in the senate.--
       (A) Motion to proceed.--A motion in the Senate to proceed 
     to the consideration of an implementing bill shall be 
     privileged and not debatable. An amendment to the motion 
     shall not be in order, nor shall it be in order to move to 
     reconsider the vote by which the motion is agreed to or 
     disagreed to.
       (B) General debate.--Debate in the Senate on an 
     implementing bill, and all debatable motions and appeals in 
     connection therewith, shall be limited to not more than 20 
     hours. The time shall be equally divided between, and 
     controlled by, the Majority Leader and the Minority Leader or 
     their designees.
       (C) Debate of motions and appeals.--Debate in the Senate on 
     any debatable motion or appeal in connection with an 
     implementing bill shall be limited to not more than one hour, 
     to be equally divided between, and controlled by, the mover 
     and the manager of the implementing bill, except that in the 
     event the manager of the implementing bill is in favor of any 
     such motion or appeal, the time in opposition thereto, shall 
     be controlled by the Minority Leader or his designee. Such 
     leaders, or either of them, may, from time under their 
     control on the passage of an implementing bill, allot 
     additional time to any Senator during the consideration of 
     any debatable motion or appeal.
       (D) Other motions.--A motion in the Senate to further limit 
     debate is not debatable. A motion to recommit an implementing 
     bill is not in order.
                   Subtitle D--Access to Health Plans

                    PART 1--ACCESS THROUGH EMPLOYERS

     SEC. 1301. GENERAL EMPLOYER RESPONSIBILITIES.

       (a) Offer of Plans.--
       (1) In general.--Each employer--
       (A) shall make available to each employee of the employer 
     the opportunity--
       (i) in the case of an experienced-rated employer, to enroll 
     through the employer in one of at least 3 certified 
     experience-rated standard health plans which provide the 
     standard benefits package established under subtitle C, 
     including, if available, a fee-for-service plan, a 
     combination cost-sharing plan, and a low cost-sharing plan as 
     established under such subtitle, or
       (ii) in the case of a community-rated employer--

       (I) to enroll in any community-rated plan offered through a 
     purchasing cooperative operating in the community rating area 
     in which such employer is located, and if such cooperative is 
     not a purchasing cooperative described in section 1341, then 
     also through a cooperative so described, and
       (II) at the option of the employer, to enroll through the 
     employer in one of at least 3 certified community-rated 
     standard health plans which provide the standard benefits 
     package established under subtitle C, including, if 
     available, a fee-for-service plan, a combination cost-sharing 
     plan, and a low cost-sharing plan as established under such 
     subtitle; and

       (B) shall provide, upon request, payroll withholding of the 
     employee's premiums.
       (2) Waiver of requirement.--The Governor of a participating 
     State (or, the Secretary of Labor, in the case of sponsors of 
     multistate self-insured health plans) may waive the 
     requirement under paragraph (1) for any employer in a rural 
     area of such State which demonstrates an insufficient 
     population density to support 3 types of certified standard 
     health plans. Such an employer shall at least offer a fee-
     for-service plan as established under subtitle C.
       (3) Prohibition on offering of alternative package.--No 
     employer may offer an alternative standard benefits package 
     established under subtitle C.
       (b) Forwarding of Information.--
       (1) Information regarding plans.--An employer must provide 
     each employee of such employer--
       (A) with information provided by the State under section 
     1508 regarding all certified standard health plans offered in 
     the community rating area in which the employer is located, 
     and
       (B) if the employer knows that an employee resides in 
     another community rating area, information regarding how to 
     obtain information on certified standard health plans offered 
     to residents of such other community rating area.
       (2) Information regarding employees.--An employer shall 
     forward the name and address (and any other necessary 
     identifying information specified by the Secretary) of each 
     employee enrolling through the employer--
       (A) to the certified standard health plan in which such 
     employee is enrolling, or
       (B) to the purchasing cooperative (if any) through which 
     such employee is enrolling.

     SEC. 1302. AUDITING OF RECORDS.

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

     SEC. 1303. PROHIBITION OF CERTAIN EMPLOYER DISCRIMINATION.

       (a) In General.--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) Other Prohibitions.--For the prohibition of other 
     employer discriminatory practices, see section 4522 of the 
     Internal Revenue Code of 1986.

     SEC. 1304. 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 community-rated or experience-rated 
     individual, as a full-time employee, or as a part-time 
     employee, or if a purpose of such action is to evade or avoid 
     any obligation under this Act.

     SEC. 1305. PROHIBITION ON SELF-INSURING COST-SHARING 
                   BENEFITS.

       A community-rated employer (and an experience-rated 
     employer with respect to employees who are community-rated 
     eligible individuals) may provide benefits to employees that 
     consist of the benefits included in a cost-sharing plan (as 
     defined in section 1141(a)(2)(C)) only through a contribution 
     toward the purchase of a cost-sharing plan which is funded 
     primarily through insurance.

     SEC. 1306. DEVELOPMENT OF LARGE EMPLOYER PURCHASING GROUPS.

       (a) In General.--Nothing in this title shall be construed 
     as prohibiting 2 or more experience-rated employers from 
     joining together to purchase insurance for their employees, 
     except that each such employer shall be responsible for 
     meeting the employer's requirements under this title with 
     respect to its employees.
       (b) Rules by Secretary.--The Secretary of Labor shall 
     provide rules for large employer purchasing groups similar to 
     the rules applicable to purchasing cooperatives, including 
     rules regarding fiduciary responsibilities and financial 
     management.
       (c) No Use of Purchasing Cooperatives.--An experience-rated 
     employer shall be ineligible to purchase health insurance 
     through a purchasing cooperative, except with respect to 
     health insurance for individuals described in paragraphs (1) 
     and (2) of section 1308(d).

     SEC. 1307. RESPONSIBILITIES IN SINGLE-PAYER STATES.

       In the case of an individual who resides in a single-payer 
     State and an employer with respect to employees who reside in 
     such a State, the responsibilities of such individual and 
     employer under such system shall supersede the obligations of 
     the individual and employer under this subtitle.

     SEC. 1308. RULES GOVERNING LITIGATION INVOLVING RETIREE 
                   HEALTH BENEFITS.

       (a) Maintenance of Benefits.--
       (1) In general.--If--
       (A) retiree health benefits or plan or plan sponsor 
     payments in connection with such benefits are to be or have 
     been terminated or reduced under an employee welfare benefit 
     plan; and
       (B) an action is brought by any participant or beneficiary 
     to enjoin or otherwise modify such termination or reduction,

     the court without requirement of any additional showing shall 
     promptly order the plan and plan sponsor to maintain the 
     retiree health benefits and payments at the level in effect 
     immediately before the termination or reduction while the 
     action is pending in any court. No security or other 
     undertaking shall be required of any participant or 
     beneficiary as a condition for issuance of such relief. An 
     order requiring such maintenance of benefits may be refused 
     or dissolved only upon determination by the court, on the 
     basis of clear and convincing evidence, that the action is 
     clearly without merit.
       (2) Modifications.--Nothing in this section shall preclude 
     a court from modifying the obligation of a plan or plan 
     sponsor to the extent retiree benefits are otherwise being 
     paid.
       (b) Burden of Proof.--In addition to the relief authorized 
     in subsection (a) or otherwise available, if, in any action 
     described in subsection (a), the terms of the employee 
     welfare benefit plan summary plan description or other 
     materials distributed to employees at the time of a 
     participant's retirement or disability are silent or are 
     ambiguous, either on their face or after consideration of 
     extrinsic evidence, as to whether retiree health benefits and 
     payments may be terminated or reduced for a participant and 
     his or her beneficiaries after the participant's retirement 
     or disability, then the benefits and payments shall not be 
     terminated or reduced for the participant and his or her 
     beneficiaries unless the plan or plan sponsor establishes by 
     a preponderance of the evidence that the summary plan 
     description and other materials about retiree benefits--
       (1) were distributed to the participant at least 90 days in 
     advance of retirement or disability;
       (2) did not promise retiree health benefits for the 
     lifetime of the participant and his or her spouse; and
       (3) clearly and specifically disclosed that the plan 
     allowed such termination or reduction as to the participant 
     after the time of his or her retirement or disability.
     The disclosure described in paragraph (3) must have been made 
     prominently and in language which can be understood by the 
     average plan participant.
       (c) Representation.--Notwithstanding any other 
     provision of law, an employee representative of any retired 
     employee or the employee's spouse or dependents may--
       (1) bring an action described in this section on behalf of 
     such employee, spouse, or dependents; or
       (2) appear in such an action on behalf of such employee, 
     spouse or dependents.
       (d) Retiree Health Benefits.--For the purposes of this 
     section, the term ``retiree health benefits'' means health 
     benefits (including coverage) which are provided to--
       (1) retired or disabled employees who, immediately before 
     the termination or reduction, are entitled to receive such 
     benefits upon retirement or becoming disabled; and
       (2) their spouses and dependents.
       (e) Effective Date.--The amendments made by this section 
     shall apply to actions relating to terminations or reductions 
     of retiree health benefits which are pending or brought, on 
     or after July 20, 1993.

     SEC. 1309. ENFORCEMENT.

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

    PART 2--ACCESS THROUGH HEALTH INSURANCE PURCHASING COOPERATIVES

                    Subpart A--General Requirements-

     SEC. 1321. ORGANIZATION AND OPERATION.

       (a) Designation of Cooperatives.--A State shall certify 
     health insurance purchasing cooperatives (in this Act 
     referred to as ``purchasing cooperatives'') in accordance 
     with this part. Each cooperative shall be chartered under 
     State law and operated as a not-for-profit corporation.
       (b) Board of Directors.--
       (1) In general.--Each cooperative shall be governed by a 
     Board of Directors to be composed of members of the 
     cooperative who are representatives of community-rated 
     employers, community-rated employees, and community-rated 
     individuals elected by the members of the purchasing 
     cooperative.
       (2) Initial board.--The initial Board of Directors of a 
     purchasing cooperative shall be composed of members selected 
     by the sponsoring entity of the cooperative. Subsequent 
     members of the Board of Directors shall be elected as 
     provided for under paragraph (1) after being nominated by a 
     nominating committee appointed by the preceding Board of 
     Directors.
       (c) Establishment by State or Local Government.--A State or 
     local government may establish or sponsor a purchasing 
     cooperative to serve a community rating area. The Secretary 
     shall establish special rules concerning the legal and 
     governing structure of a State or local government purchasing 
     cooperative.
       (d) Membership.--A purchasing cooperative shall accept all 
     community-rated employers, community-rated employees, and 
     community-rated individuals residing within the area served 
     by the cooperative as members if such employers, employees, 
     or individuals request such membership. Members of a 
     cooperative shall have voting rights to select members of the 
     Board of Directors consistent with rules established by the 
     State.
       (e) Prohibition.--An insurer may not form or underwrite a 
     purchasing cooperative but may administer such a cooperative.
       (f) Duties of Cooperatives.--Each purchasing cooperative 
     shall--
       (1) negotiate (regarding premiums and marketing fees) with 
     and enter into agreements with certified standard health 
     plans under section 1323;
       (2) enter into agreements with community-rated employers;
       (3) enroll community-rated employees and community-rated 
     individuals in certified standard health plans;
       (4) collect premiums and make payments to certified 
     standard health plans on behalf of community-rated employers 
     and community-rated individuals;
       (5) provide for coordination with other purchasing 
     cooperatives;
       (6) provide comparative information to the public and the 
     participating State on certified standard health plans 
     offered through the purchasing cooperative from information 
     provided by the plans under section 1125;
       (7) have the capability of accepting data from certified 
     standard health plans as required under subtitle B of title 
     V;
       (8) comply with such fiduciary responsibility, financial 
     management, and administrative requirements as the Secretary 
     may establish;
       (9) comply with rules established by the Secretary to 
     prohibit conflicts of interest on the part of officers and 
     employees of the purchasing cooperative; and
       (10) carry out other functions provided for under this 
     title.
       (g) Limitation on Activities.--A cooperative shall not--
       (1) perform any activity (including review, approval, or 
     enforcement) relating to payment rates for providers;
       (2) perform any activity (including certification or 
     enforcement) relating to compliance of standard health plans 
     with the requirements of this Act;
       (3) assume insurance risk; or
       (4) perform other activities identified by the State as 
     being inconsistent with the performance of its duties under 
     this Act.
       (h) Rules of Construction.--
       (1) Multiple cooperatives.--Noting in this section shall be 
     construed to prevent a State from certifying or establishing 
     more than one purchasing cooperative in a community rating 
     area.
       (2) Exclusive cooperative.--
       (A) In general.--Nothing in this section shall be construed 
     as requiring a State to certify or establish more than one 
     purchasing cooperative serving a community rating area.
       (B) Special rules.--If a State chooses to certify only one 
     purchasing cooperative in a community rating area, then such 
     cooperative (other than a cooperative established under 
     section 1341) may not negotiate regarding premiums as 
     described in subsection (f)(1) and, notwithstanding section 
     1323(a)(1), shall enter into an agreement with each certified 
     standard health plan operating in the area which desires such 
     an agreement.
       (2) Single organization serving multiple community rating 
     areas.--Nothing in this section shall be construed as 
     preventing a single not-for-profit corporation from being the 
     purchasing cooperative for more than one community rating 
     area.
       (3) Voluntary participation.--Nothing in this section shall 
     be construed as requiring any community-rated individual, 
     community-rated employee, or community-rated employer to 
     purchase a certified standard health plan exclusively through 
     a cooperative.

     SEC. 1322. MEMBERSHIP.

       (a) In General.--A purchasing cooperative shall offer all 
     community-rated individuals and community-rated employees 
     residing within the community rating area served by the 
     cooperative the opportunity to enroll in any certified 
     standard health plan that has entered into an agreement with 
     the cooperative under section 1323.
       (b) Enrollment Process.--A purchasing cooperative shall 
     establish an enrollment process for certified standard health 
     plans in accordance with rules established by the Secretary.
       (c) Coordination Among Purchasing Cooperatives.--Each 
     participating State shall establish rules consistent with 
     this section for coordination among purchasing cooperatives 
     in cases in which community-rated employers are located in 
     one community rating area and their community-rated employees 
     reside in a different community rating area.

     SEC. 1323. AGREEMENTS WITH CERTIFIED STANDARD HEALTH PLANS.

       (a) Agreements.--
       (1) In general.--Except as provided in paragraph (2), each 
     purchasing cooperative for a community rating area may enter 
     into an agreement under this section with any certified 
     standard health plan that the purchasing cooperative desires 
     to be made available through such purchasing cooperative.
       (2) Minimum requirement.--
       (A) In general.--Except as provided in subparagraph (B), 
     each purchasing cooperative shall enter into an agreement 
     under paragraph (1) with at least 3 types of certified 
     standard health plans which provide the standard benefits 
     package established under subtitle C, including, if 
     available, a fee-for-service plan, a combination cost-sharing 
     plan, and a low cost-sharing plan as established under such 
     subtitle.
       (B) Waiver of requirement.--The Governor of a participating 
     State may waive the requirement under subparagraph (A), in a 
     manner consistent with section 1301(a)(2)), for any 
     purchasing cooperative in a rural area of such State which 
     demonstrates an insufficient population density to support 3 
     types of certified standard health plans. Such a purchasing 
     cooperative shall at least offer a fee-for-service plan as 
     established under such subtitle.
       (3) Limitation.--A purchasing cooperative may not enter 
     into an agreement under this section with a standard health 
     plan unless such plan is certified by the State under 
     subtitle E.
       (4) Termination of agreement.--An agreement under paragraph 
     (1) shall remain in effect for a 12-month period. The State 
     shall establish a process for the termination of agreements 
     entered into under this section and a process for appealing 
     such termination under this paragraph. In accordance with 
     rules established by the State--
       (A) a cooperative may terminate an agreement with a 
     certified standard health plan if the health plan's 
     certification for the community rating area involved is 
     terminated or if the health plan fails to fulfill the 
     requirements of the agreement; and
       (B) a certified standard health plan may appeal the 
     termination of an agreement with a cooperative under this 
     paragraph to the State in accordance with rules and 
     procedures established by the State.
       (b) Receipt of Gross Premiums.--
       (1) In general.--A purchasing cooperative may require that 
     a certified standard health plan with which such cooperative 
     has an agreement under this section provide for the payment 
     of premiums directly to the cooperative in accordance with 
     rules promulgated by the Secretary.
       (2) Forwarding of premiums.--A purchasing cooperative that 
     requires direct payment of premiums under paragraph (1) shall 
     forward to the certified standard health plan the amounts 
     collected on the behalf of the enrollees in such plan in 
     accordance with the State program of reinsurance and risk 
     adjustment.
       (3) Certified standard health plans retain risk of 
     nonpayment.--Nothing in this subsection shall be construed as 
     placing upon a purchasing cooperative 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 cooperative administrative fee 
     under section 1324(a)).

     SEC. 1324. MEMBERSHIP AND MARKETING FEES.

       (a) Cooperative Fees.--A purchasing cooperative shall 
     charge members a uniform membership fee to cover the cost of 
     activities undertaken by the cooperative (including all 
     administrative costs incurred by the cooperative).
       (b) Marketing Fees.--
       (1) In general.--A purchasing cooperative shall charge 
     members a separate marketing fee which a certified standard 
     health plan may charge to cover the cost of marketing and 
     administrative activities undertaken by such plan in such 
     cooperative.
       (2) Negotiation.--A purchasing cooperative and a certified 
     standard health plan shall negotiate the marketing fee. Such 
     negotiated fee shall not be binding on such health plan with 
     respect to other purchasing cooperatives through which the 
     plan is offered.
       (3) Limitation.--In no case shall a marketing fee assessed 
     by a certified standard health plan offered outside of a 
     purchasing cooperative be lower than the weighted average of 
     the marketing fees negotiated with all purchasing 
     cooperatives for the community rating area involved.
       (c) Overall Limitation on Membership and Marketing Fees.--
     In no event may the sum of the membership fee and the 
     marketing fee charged by a purchasing cooperative with 
     respect to a certified standard health plan exceed 1.5 
     percent of the premium for such plan.
       (d) Disclosure and Multiple Cooperatives.--
       (1) Disclosure.--A purchasing cooperative shall, prior to 
     the time of enrollment, publish the membership fee of such 
     cooperative and the marketing fees for each certified 
     standard health plan offered through the cooperative. Such 
     fees shall be calculated and identified as separate charges 
     from the premium charged by the certified standard health 
     plans offered by the purchasing cooperative.
       (2) Submissions to State.--
       (A) In general.--Each purchasing cooperative in a community 
     rating area shall provide the State with information on the 
     fees described in paragraph (1) under rules developed by the 
     State.
       (B) Documentation.--Pursuant to regulations issued by the 
     Secretary, certified standard health plans shall submit 
     actuarial data and such other documentation as the State may 
     require in order to verify the basis for variation in 
     marketing fees across cooperatives and other insurance 
     distribution sources. States shall use such information in 
     order to make a determination that each plan's marketing fees 
     are based on legitimate variation in marketing and 
     distribution costs across alternative distribution sources.
       (3) Multiple cooperatives.--In community rating areas in 
     which States have certified multiple purchasing cooperatives, 
     such cooperatives may compete for members on the basis of the 
     fees described in this section.

                  Subpart B--Community-Rated Employers

     SEC. 1331. DUTIES OF PURCHASING COOPERATIVES.

       (a) In General.--A purchasing cooperative for a community 
     rating area shall offer to enter into an agreement under this 
     section with each community-rated employer that employs 
     individuals in the community rating area and that desires to 
     join the cooperative. An agreement between such an employer 
     and a cooperative shall include provisions consistent with 
     the requirements of this subtitle.
       (b) Election of Enrollment.--
       (1) In general.--An employee of a community-rated employer 
     may select coverage under any of the certified standard 
     health plans offered through a purchasing cooperative of 
     which the employer is a member.
       (2) Enrollment outside the cooperative.--An employee of a 
     community-rated employer may elect to enroll in a plan 
     offered through the purchasing cooperative with which the 
     employer has entered into an agreement or directly with a 
     certified standard health plan selected by the employer (if 
     such plan is not offered by the cooperative selected by the 
     employer). A community-rated employee not residing in the 
     community rating area served by the purchasing cooperative 
     selected by the employer shall enroll in a certified standard 
     health plan consistent with rules promulgated by the 
     Secretary. The purchasing cooperative selected by the 
     employer shall be responsible for forwarding premium payments 
     to the appropriate plan or cooperative for each community-
     rated employee.
       (3) Voluntary employer contribution.--If an employer 
     voluntarily contributes to the cost of health insurance 
     coverage for its employees, the employer shall not be 
     required to make a contribution on behalf of an employee who 
     elects to obtain coverage directly from a certified standard 
     health plan not chosen by such employer or from a purchasing 
     cooperative not chosen by such employer, unless such 
     cooperative is one established under section 1341.
       (c) Forwarding Information on Eligible Employees.--Under an 
     agreement between an employer and a cooperative, the employer 
     must forward to the appropriate cooperative such information 
     as may be required by the Secretary.

          Subpart C--Federal Employees Health Benefits Program

     SEC. 1341. REQUIREMENTS APPLICABLE TO FEHBP.

       (a) Availability of Plans.--
       (1) Community-rated individuals.--All certified standard 
     health plans offered by FEHBP through a purchasing 
     cooperative joined or established by FEHBP in a community 
     rating area under subsection (b) shall be made available to 
     all community-rated individuals residing within that area at 
     the community-rated premium established under section 1116.
       (2) Federal employees and annuitants.--Until January 1, 
     2005, any Federal employee or annuitant shall obtain coverage 
     under any FEHBP plan offered through such a purchasing 
     cooperative in the community rating area in which such 
     employee or annuitant resides at the rate established under 
     chapter 89 of title 5, United States Code, for such plan.
       (3) Offer of national plans.--Each purchasing cooperative 
     joined or established under paragraph (1) shall, not later 
     than January 1, 1998, offer to community-rated individuals 
     covered by such cooperative all national FEHBP plans 
     (including employee organization plans) at a community-rated 
     premium under rules established by the Office of Personnel 
     Management.
       (b) Agreements With Purchasing Cooperatives.--
       (1) In general.--The Office of Personnel Management shall 
     make every effort to enter into an agreement with a 
     purchasing cooperative in each community rating area in the 
     United States to carry out its responsibilities under this 
     section.
       (2) Establishment by opm.--During the period in which no 
     purchasing cooperative exists in an area or the Office of 
     Personnel Management is unsuccessful in reaching such an 
     agreement, the Office of Personnel Management shall establish 
     and administer a purchasing cooperative in such area. Such 
     cooperative shall meet all the requirements of this part 
     except rules regarding governance and fiduciary 
     responsibility.
       (3) Designation as purchasing cooperative.--All FEHBP 
     eligible employees residing in the community rating area 
     served by a cooperative described in paragraph 1 or (2) shall 
     enroll in a certified standard health plan through such 
     cooperative.
       (c) Requirement of OPM.--
       (1) In general.--The Office of Personnel Management is 
     hereby authorized to take such actions as are appropriate to 
     fulfill its responsibilities under this subpart.
       (2) Rate blending.--The Office of Personnel Management 
     shall implement rules to blend after January 1, 2005, the 
     premiums for FEHBP plans offered through purchasing 
     cooperatives to Federal employees and community-rated 
     individuals in each community rating area.
       (d) Amendments to Title 5.--
       (1) In general.--Chapter 89 of title 5, United States Code, 
     is amended by adding at the end the following new section:

     ``Sec. 8915. Relationship to the Health Security Act

       ``(a) The provisions of this chapter shall be subject to 
     the provisions of the Health Security Act, to the extent of 
     any inconsistency between such provisions.
       ``(b) Individuals who are not Federal employees or 
     annuitants and who are enrolled in a health benefits plan 
     pursuant to section 1341 of the Health Security Act shall for 
     all administrative purposes be treated separately from 
     Federal employees and annuitants enrolled under this chapter.
       ``(c) No provision of the Health Security Act shall be 
     construed to authorize the payment or deposit of any monies 
     from or into the Employees Health Benefits Fund, except as 
     authorized by the Office of Personnel Management to 
     facilitate the termination of a plan provided under this 
     chapter to employees and annuitants of the United States 
     Postal Service and the reestablishment of such plan as a 
     certified standard health plan under the Health Security 
     Act.''.
       (2) Conforming amendment.--Section 8914 of title 5, United 
     States Code, is amended by striking out ``Any provision of 
     law'' and inserting in lieu thereof ``Except for the 
     provisions of the Health Security Act, any provision of 
     law''.
       (3) Technical amendment.--The table of sections for chapter 
     89 of title 5, United States Code, is amended by adding after 
     the item relating to section 8914 the following new item:

``8915. Relationship to the Health Security Act.''.

     SEC. 1342. SPECIAL RULES FOR FEHBP SUPPLEMENTAL PLANS.

       (a) Development.--The Office of Personnel Management shall 
     develop FEHBP supplemental health benefit plans. The Office 
     of Personnel Management shall meet and confer with 
     representatives of Federal employees and annuitants regarding 
     the supplemental services plans and the cost-sharing plans to 
     be offered (including premium contributions, if any, to be 
     made by the Federal Government with respect to such plans for 
     Federal employees and annuitants) through a process to be 
     established by the National Partnership Council.
       (b) Offering.--The Federal Government shall offer FEHBP 
     supplemental health benefit plans developed in accordance 
     with subsection (a) and cost-sharing plans as provided in 
     section 1141 to Federal employees, annuitants, and any other 
     community-rated individual.

     SEC. 1343. DEFINITIONS.

       For purposes of this Act:
       (1) Annuitant.--The term ``annuitant'' means an 
     ``annuitant'' as defined by section 8901 of title 5, United 
     States Code.
       (2) FEHBP.--The term ``FEHBP'' means the health insurance 
     program under chapter 89 of title 5, United States Code.
       (3) Federal employee.--The term ``Federal employee'' means 
     an ``employee'' as defined by section 8901 of title 5, United 
     States Code.

                 PART 3--TREATMENT OF ASSOCIATION PLANS

     SEC. 1351. RULES RELATING TO MULTIPLE EMPLOYER WELFARE 
                   ARRANGEMENTS.

       (a) General Rule.--A multiple employer welfare 
     arrangement--
       (1) shall meet all requirements of this Act applicable to 
     standard health plans, and
       (2) may elect to be treated as a health insurance 
     purchasing cooperative if it meets the requirements of part 2 
     and other applicable requirements of this Act.
       (b) Treatment For Rating Purpose.--
       (1) In general.--Except as provided in paragraph (2), a 
     plan to which subsection (a) applies shall be treated as a 
     community-rated plan and shall meet all requirements of this 
     Act applicable to a community-rated plan.
       (2) Experience-rated plan.--A plan shall be treated as an 
     experience-rated plan only if the only participants in the 
     plan are experience-rated individuals.
       (b) Coordination With ERISA.--Section 514(b) of the 
     Employee Retirement Income Security Act of 1974 (29 U.S.C. 
     1144(b)) is amended by striking paragraph (6).
       (c) Multiple Employer Welfare Arrangement.--For purposes of 
     this section, the term ``multiple employer welfare 
     arrangement'' has the meaning given such term by section 
     3(40) of the Employer Retirement Income Security Act of 1974.

     SEC. 1352. ASSOCIATION PLANS.

       (a) General Rule.--Any health plan to which section 1351 
     does not apply which is maintained by a trade association, 
     industry association, professional association, chamber of 
     commerce, a religious organization, or a public entity 
     association, or similar entity shall meet all requirements of 
     this Act applicable to standard health plans.
       (b) Treatment for Rating Purposes.--
       (1) In general.--Except as provided in paragraph (2), a 
     plan to which subsection (a) applies shall be treated as a 
     community-rated plan and shall meet all requirements of this 
     Act applicable to a community-rated plan.
       (2) Experience-rated plan.--A plan shall be treated as an 
     experience-rated plan only if the only participants in the 
     plan are experience-rated individuals.
                  Subtitle E--Federal Responsibilities

             PART 1--SECRETARY OF HEALTH AND HUMAN SERVICES

                       Subpart A--General Duties

     SEC. 1401. GENERAL DUTIES AND RESPONSIBILITIES.

       (a) In General.--Except as otherwise specifically provided 
     in this Act (or with respect to the administration of 
     provisions in the Internal Revenue Code of 1986 or in the 
     Employee Retirement Income Security Act of 1974), the 
     Secretary of Health and Human Services shall administer and 
     implement all of the provisions of this Act.
       (b) Coverage and Families.--The Secretary shall develop and 
     implement standards relating to the eligibility of 
     individuals for coverage in applicable health plans under 
     subtitle B and may provide such additional exceptions and 
     special rules relating to the treatment of family members 
     under section 1113 as the Secretary finds appropriate.
       (c) Quality Management and Improvement.--The Secretary 
     shall establish and have ultimate responsibility for a 
     performance-based system of quality management and 
     improvement as required by section 5001.
       (d) Information System and Information related Functions.--
       (1) In general.--The Secretary shall--
       (A) develop and implement standards to establish a national 
     health information system to measure quality as required by 
     title V;
       (B) provide model format and content requirements for 
     summary plan descriptions, to be made available at public 
     access sites under section 1508;
       (C) provide model format and content requirements for 
     comparative plan brochures under section 1125, to be made 
     available by purchasing cooperatives under section 1321, and 
     at public access sites under section 1508; and
       (D) establish standards for the provision of information on 
     purchasing cooperatives in accordance with section 1508, 
     including information on marketing and purchasing cooperative 
     fees and purchasing cooperative membership applications.
       (2) Information related functions.--
       (A) Designation.--The Secretary shall provide for the use 
     of entities in the national health data network to perform 
     information related functions under this section with respect 
     to employers, States, contracting entities, and purchasing 
     cooperatives.
       (B) Functions.--The functions referred to in subparagraph 
     (A) shall include--
       (i) receipt of information submitted by employers under 
     section 1301,
       (ii) with respect to the information received, transmittal 
     to the States, and
       (iii) such other functions as the Secretary specifies.
       (e) Participating State Requirements.--Consistent with the 
     provisions of subtitle F, the Secretary shall--
       (1) establish requirements for participating States,
       (2) monitor State compliance with those requirements, and
       (3) provide technical assistance,

     in a manner that ensures access to the standard benefit 
     package for all eligible individuals.
       (f) Development of Premium and Age Class Factors.--The 
     Secretary shall establish premium class and age class factors 
     under subpart D.
       (g) Development of Reinsurance and Risk-Adjustment 
     Methodology.--The Secretary shall develop a methodology for 
     the reinsurance and risk-adjustment of premium payments to 
     community-rated and experience-rated health plans in 
     accordance with section 1504.
       (h) Financial Requirements.--
       (1) In general.--The Secretary shall establish minimum 
     capital requirements and requirements for guaranty funds and 
     financial reporting and auditing standards under subpart F.
       (2) Financial management standards.--The Secretary, in 
     consultation with the Secretary of Labor, shall establish, 
     for purposes of section 1118, standards relating to the 
     management of finances, maintenance of records, accounting 
     practices, auditing procedures, and financial reporting for 
     States, consumer purchasing cooperatives and health plans. 
     Such standards shall take into account current Federal laws 
     and regulations relating to fiduciary responsibilities and 
     financial management of funds.
       (3) Auditing state performance.--The Secretary shall 
     perform periodic financial and other audits of States to 
     assure that such States are carrying out their 
     responsibilities under this Act consistent with this Act. 
     Such audits shall include audits of State performance in the 
     areas of--
       (A) assuring enrollment of all community-rated individuals 
     in health plans;
       (B) management of premium and cost sharing discounts and 
     reductions provided;
       (C) financial management (including the financial 
     activities of cooperatives and State-designated contracting 
     entities); and
       (D) assuring enforcement of the antidiscrimination 
     provisions of this Act.
       (i) Standards for Health Plan Grievance Procedures.--The 
     Secretary shall establish standards for health plan grievance 
     procedures that are used by enrollees in pursuing complaints.
       (j) Fiduciary requirements.--The Secretary shall, in 
     consultation with the Secretary of Labor, develop and 
     promulgate fiduciary requirements for the management of funds 
     by States, plans, cooperatives, and employers.
       (k) Guaranty Funds.--The Secretary shall establish 
     standards for guaranty funds as provided for in section 1442.
       (l) Standards for Utilization Management Programs.--
       (1) In general.--Not later than 12 months after the date of 
     enactment of this Act, the Secretary, in consultation with 
     interested parties which may include one or more accrediting 
     organizations, shall promulgate uniform Federal standards for 
     utilization management programs, to include the activities 
     described in section 1129.
       (2) Compliance.--States shall ensure compliance with the 
     Federal standards established under paragraph (1), consistent 
     with their role in certifying health plans.
       (3) Review and update.--The Secretary shall periodically 
     review and update utilization management standards to reflect 
     appropriate policies and practices in health care delivery.
       (m) Collection Activities.--The Secretary may provide 
     (through contract or otherwise) for collection activities for 
     the collection of amounts owed to States, health plans and 
     purchasing cooperatives for health insurance coverage subject 
     to the provisions of this title.

     SEC. 1402. ANNUAL REPORT.

       (a) In General.--The Secretary, in consultation with the 
     National Health Benefits Board and the Health Care Cost and 
     Coverage Commission, shall prepare and submit to the 
     President and the Congress an annual report concerning the 
     overall implementation of the new health care system under 
     this Act.
       (b) Matters To Be Included.--The Secretary shall include in 
     each annual report under this section the following:
       (1) Information on Federal and State implementation.
       (2) Data related to quality improvement.
       (3) Recommendations or changes in the administration and 
     regulation of laws related to health care financing, 
     delivery, and coverage.

     SEC. 1403. ASSISTANCE WITH FAMILY COLLECTIONS.

       The Secretary shall provide States with such technical and 
     other assistance as may promote the efficient collection of 
     amounts owed by families under this Act.

     SEC. 1404. ADVISORY OPINIONS.

       (a) In General.--Community- and provider-based plans, and 
     individuals and organizations seeking to establish such 
     plans, shall be eligible to receive advisory opinions from 
     appropriate Federal entities, including opinions concerning 
     whether their arrangement complies with Federal self-
     referral, fraud and abuse, and anti-trust laws.
       (b) Regulations.--The Secretary shall issue regulations 
     setting forth the procedures for obtaining advisory opinions 
     described in subsection (a).
       (c) Timing of Opinions.--An advisory opinions shall be 
     issued not later than 90 days after receipt of a request for 
     such opinion from a plan.
       (d) Fees.--Applicants under this section shall pay a fee, 
     the amount of which to be determined by the Secretary, to 
     cover the costs of providing an opinion under this section.

     SEC. 1403. FUNDING.

       There are authorized to be appropriated to the Secretary, 
     such sums as may be necessary to carry out this subpart for 
     each of the fiscal years 1995 through 1999.

 Subpart B--Responsibilities Relating to Review and Approval of State 
                                Systems

     SEC. 1411. FEDERAL REVIEW AND ACTION ON STATE SYSTEMS.

       (a) Approval of State Systems by Secretary.--
       (1) In general.--The Secretary shall approve a State health 
     care system for which a plan is submitted under section 
     1501(a) unless the Secretary determines that the system (as 
     set forth in the plan) does not (or will not) meet the 
     responsibilities for a participating State under this Act.
       (2) Regulations.--Not later than July 1, 1995, the 
     Secretary shall issue regulations, prescribing the 
     requirements for State health care systems under this title, 
     except that in the case of a plan submitted under section 
     1501(a) before the date of issuance of such regulations, the 
     Secretary shall take action on such document notwithstanding 
     the fact that such regulations have not been issued.
       (3) No approval permitted for years prior to 1996.--Except 
     as otherwise specifically provided in this Act, the Secretary 
     may not approve a State health care system under this subpart 
     for any year prior to 1996.
       (b) Review of Completeness of Plans.--
       (1) In general.--When a State submits a plan under 
     subsection (a)(1), the Secretary shall notify the State, not 
     later than 7 working days after the date of submission, 
     whether or not the plan is complete and provides the 
     Secretary with sufficient information to approve or 
     disapprove the document.
       (2) Additional information on incomplete plan.--If the 
     Secretary notifies a State that the State's plan is not 
     complete, the State shall be provided such additional period 
     (not to exceed 45 days) as the Secretary may by regulation 
     establish in which to submit such additional information as 
     the Secretary may require. Not later than 7 working days 
     after the State submits the additional information, the 
     Secretary shall notify the State respecting the completeness 
     of the plan.
       (c) Action on Completed Documents.--
       (1) In general.--The Secretary shall make a determination 
     (and notify the State) on whether the State's plan provides 
     for the implementation of a State system that meets the 
     applicable requirements of this title--
       (A) in the case of a State that did not require an 
     additional period described in subsection (b)(2) to file a 
     complete plan, not later than 90 days after notifying a State 
     under subsection (b) that the State's plan is complete, or
       (B) in the case of a State that required an additional 
     period described in subsection (b)(2) to file a complete 
     plan, not later than 90 days after notifying a State under 
     subsection (b) that the State's plan is complete.
       (2) Review of coverage area.--The Secretary shall review 
     the State designation of community rating area boundaries to 
     determine whether such boundaries comply with sections 1502 
     and 1602, and in particular, the requirements of such 
     sections concerning non-discrimination in the establishment 
     of coverage area boundaries.
       (3) Plans deemed approved.--If the Secretary does not meet 
     the applicable deadline for making a determination and 
     providing notice under paragraph (1) with respect to a 
     State's plan, the Secretary shall be deemed to have approved 
     the State's plan for purposes of this Act.
       (d) Opportunity to Respond to Rejected Plan.--
       (1) In general.--If (within the applicable deadline under 
     subsection (c)(1)) the Secretary notifies a State that its 
     plan does not provide for the implementation of a State 
     system that meets the applicable requirements of this title, 
     the Secretary shall provide the State with a period of 60 
     days in which to submit such additional information and 
     assurances as the Secretary may require.
       (2) Deadline for response.--Not later than 30 days after 
     receiving additional information and assurances under 
     paragraph (1), the Secretary shall make a determination (and 
     notify the State) on whether the State's plan provides for 
     the implementation of a State system that meets the 
     applicable requirements of this title.
       (3) Plan deemed approved.--If the Secretary does not meet 
     the deadline established under paragraph (2) with respect to 
     a State, the Secretary shall be deemed to have approved the 
     State's plan for purposes of this Act.
       (e) Approval of Previously Terminated States.--If the 
     Secretary has approved a State system under this part for a 
     year but subsequently terminated the approval of the system 
     under section 1412(b)(2), the Secretary shall approve the 
     system for a succeeding year if the State--
       (1) demonstrates to the satisfaction of the Secretary that 
     the failure that formed the basis for the termination no 
     longer exists, and
       (2) provides reasonable assurances that the types of 
     actions (or inactions) which formed the basis for such 
     termination will not recur.
       (f) Revisions to State System.--
       (1) Submission.--A State may revise a system approved for a 
     year under this section, except that such revision shall not 
     take effect unless the State has submitted to the Secretary a 
     document describing such revision and the Secretary has 
     approved such revision.
       (2) Actions on revisions.--Not later than 60 days after a 
     document is submitted under paragraph (1), the Secretary 
     shall make a determination (and notify the State) on whether 
     the implementation of the State system, as proposed to be 
     revised, meets the applicable requirements of this title. If 
     the Secretary fails to meet the requirement of the preceding 
     sentence, the Secretary shall be deemed to have approved the 
     implementation of the State system as proposed to be revised.
       (3) Rejection of revisions.--Subsection (d) shall apply to 
     an amendment submitted under this subsection in the same 
     manner as it applies to a completed plan submitted under 
     subsection (b).

     SEC. 1412. FAILURE OF PARTICIPATING STATES TO MEET CONDITIONS 
                   FOR COMPLIANCE.

       (a) In General.--In the case of a participating State, if 
     the Secretary determines that the operation of the State 
     system under this title fails to meet the applicable 
     requirements of this Act, the Secretary shall apply against 
     the State in accordance with subsection (b).
       (b) Type of Sanction Applicable.--The sanctions applicable 
     under this section are as follows:
       (1) If the Secretary determines that the State's failure 
     does not substantially jeopardize the ability of eligible 
     individuals in the State to obtain coverage for the standard 
     benefit package, the Secretary shall reduce payments with 
     respect to the State in accordance with section 1413.
       (2) If the Secretary determines that the failure 
     substantially jeopardizes the ability of eligible individuals 
     in the State to obtain coverage for the standard benefit 
     package--
       (A) the Secretary shall terminate its approval of the State 
     system; and
       (B) the Secretary shall assume the responsibilities 
     described in section 1422.
       (c) Termination of Sanction.--A State against which a 
     sanction is imposed under this section may submit information 
     at any time to the Secretary to demonstrate that the failure 
     that led to the imposition of the sanction has been 
     corrected.
       (d) Protection of Access to Benefits.--The Secretary shall 
     take actions under this section with respect to a State only 
     in a manner that assures the continuous coverage of eligible 
     individuals enrolled in community-rated health plans.

     SEC. 1413. REDUCTION IN PAYMENTS FOR HEALTH PROGRAMS BY 
                   SECRETARY OF HEALTH AND HUMAN SERVICES.

       (a) In General.--Upon a determination by the Secretary 
     under section 1412(b)(1), the Secretary shall reduce the 
     amount of any of the payments described in subsection (b) 
     that would otherwise be made to individuals and entities in 
     the State by such amount as the Secretary determines to be 
     appropriate.
       (b) Payments Described.--The payments described in this 
     subsection are as follows:
       (1) Payments to academic health centers in the State under 
     subtitle B of title III.
       (2) Payments to individuals and entities in the State for 
     health research activities under section 301 and title IV of 
     the Public Health Service Act.
       (3) Payments to hospitals in the State under part 4 of 
     subtitle E of title III (relating to payments to hospitals 
     serving vulnerable populations)

     SEC. 1414. REVIEW OF FEDERAL DETERMINATIONS.

       Any State affected by a determination by the Secretary 
     under this subpart may appeal such determination in 
     accordance with section 5531.

     SEC. 1415. FEDERAL SUPPORT FOR STATE IMPLEMENTATION.

       (a) Planning Grants.--
       (1) In general.--Not later than 90 days after the date of 
     enactment of this Act, the Secretary shall, to the extent 
     amounts are appropriated, make available to each State a 
     planning grant to assist the State in the development of a 
     health care system necessary to enable the State to become a 
     participating State under this title.
       (2) Formula.--The Secretary shall establish a formula for 
     the distribution of funds made available under this 
     subsection.
       (3) Authorization of appropriations.--There are authorized 
     to be appropriated $50,000,000 for each of the fiscal years 
     1995 and 1996 for grants under this subsection.
       (b) Grants for Start-up Support.--
       (1) In general.--The Secretary shall, to the extent amounts 
     are appropriated, make available to States, upon their 
     becoming participating States, grants to assist in the 
     establishment of purchasing cooperatives.
       (2) Formula.--The Secretary shall establish a formula for 
     the distribution of funds made available under this 
     subsection.
       (3) State matching funds required.--Funds are payable to a 
     State under this subsection only if the State provides 
     assurances, satisfactory to the Secretary, that amounts of 
     State funds (at least equal to the amount made available 
     under this subsection) will be expended for the purposes 
     described in paragraph (1).
       (4) Authorization of appropriations.--There are authorized 
     to be appropriated $313,000,000 for fiscal year 1996, 
     $625,000,000 for fiscal year 1997, and $313,000,000 for 
     fiscal year 1998, for grants under this subsection.

        Subpart C--Responsibilities in Absence of State Systems

     SEC. 1421. APPLICATION OF SUBPART.

       (a) Initial Application.--This subpart shall apply with 
     respect to a State as of January 1, 1997, unless--
       (1) the State submits a plan for a State system under 
     section 1411(a)(1) by July 1, 1996, and
       (2) the Secretary determines under section 1411 that such 
     system meets the requirements of subtitle F.
       (b) Termination of Approval of System of Participating 
     State.--In the case of a participating State for which the 
     Secretary terminates approval of the State system under 
     section 1412(b)(2), this subpart shall apply with respect to 
     the State as of such date as is appropriate to assure the 
     continuity of coverage for the standard benefit package for 
     eligible individuals in the State.

     SEC. 1422. FEDERAL ASSUMPTION OF RESPONSIBILITIES IN NON-
                   PARTICIPATING STATES.

       Upon determining that this subpart will apply to a State 
     for a calendar year, the Secretary shall take such steps as 
     are necessary to ensure that the standard benefit package is 
     provided to eligible individuals in the State during the 
     year, including the establishment of community-rating areas 
     within such State as appropriate.

     SEC. 1423. IMPOSITION OF SURCHARGE ON PREMIUMS UNDER 
                   FEDERALLY-OPERATED SYSTEM.

       If this subpart applies to a State for a calendar year, the 
     premiums charged by community-rated health plans in the State 
     shall be equal to premiums that would otherwise be charged, 
     increased by 15 percent. Such 15 percent increase shall be 
     used to reimburse the Secretary for any administrative or 
     other expenses incurred as a result of establishing and 
     operating the system in that State.

     SEC. 1424. RETURN TO STATE OPERATION.

       (a) Application Process.--After the establishment and 
     operation of a system by the Secretary in a State under 
     section 1422, the State may at any time apply to the 
     Secretary for the approval of a State system in accordance 
     with the procedures described in section 1411.
       (b) Timing.--If the Secretary approves the system of a 
     State for which the Secretary has operated a system under 
     this subpart during a year, the Secretary shall terminate the 
     operation of the system, and the State shall establish and 
     operate its approved system, as of January 1 of the first 
     year beginning after the Secretary approves the State system. 
     The termination of the Secretary's system and the operation 
     of the State's system shall be conducted in a manner that 
     assures the continuous coverage of eligible individuals in 
     the State under community-rated health plans.

    Subpart D--Establishment of Class Factors for Charging Premiums

     SEC. 1431. PREMIUM CLASS AND AGE CLASS FACTORS.

       (a) In General.--For purposes of this title and title X, 
     the Secretary shall establish premium class and age class 
     factors in accordance with section 1113(c).
       (b) Conditions.--In establishing such factors, the factor 
     for the class of individual enrollment shall be 1 and the 
     factor for the couple-only class of family enrollment shall 
     be 2.

Subpart E--Risk Adjustment and Reinsur- ance Methodology for Payment of 
                                 Plans

     SEC. 1435. DEVELOPMENT OF A RISK ADJUSTMENT AND REINSURANCE 
                   METHODOLOGY.

       (a) Establishment.--The Secretary shall develop a risk 
     adjustment and reinsurance methodology in accordance with 
     section 1504.
       (b) Research and Demonstration.--The Secretary shall 
     conduct and support research and demonstration projects to 
     develop and improve, on a continuing basis, the risk 
     adjustment and reinsurance methodology under this subpart.
       (c) Technical Assistance.--The Secretary shall provide 
     technical assistance to States in implementing the 
     methodology developed under this subpart.

         Subpart F--Responsibilities for Financial Requirements

     SEC. 1441. CAPITAL STANDARDS FOR COMMUNITY-RATED PLANS.

       (a) In General.--The Secretary shall establish, in 
     consultation with the States, minimum capital requirements 
     for carriers, for purposes of section 1118.
       (b) $500,000 Minimum.--Subject to subsection (c), under 
     such requirements there shall be not less than $500,000 of 
     capital maintained for each carrier.
       (c) Additional Capital Requirements.--The Secretary shall 
     establish standards that provide for additional capital for 
     purposes of this section. The amount of such additional 
     capital required shall reflect factors likely to affect the 
     financial stability of a carrier, including the following:
       (1) Projected plan enrollment and number of providers 
     participating in plans of the carrier.
       (2) Market share and strength of competition.
       (3) Extent and nature of risk-sharing with participating 
     providers and the financial stability of risk-sharing 
     providers.
       (4) Prior performance of the carrier, risk history, and 
     liquidity of assets.
       (d) Community- and Provider-Based Plans.--
       (1) In general.--States shall consider alternative 
     financial instruments and methods for community- and 
     provider-based plans (as defined in paragraph (2)) to meet 
     the capital and solvency standards developed in accordance 
     with this section. Provisions made for such plans shall 
     ensure the fiscal integrity and financial solvency of such 
     plans.
       (2) Eligible plans.--Plans eligible for special 
     consideration by States must be offered by public or not-for-
     profit entities that are owned, or in which a majority share 
     of the plan's investment is held by--
       (A) health care providers who practice in the plan;
       (B) individuals who live in the area, or not-for-profit 
     organizations located in the area serviced by the plan;
       (C) a combination of individuals and organizations 
     described in subparagraphs (A) and (B); or
       (D) organizations located outside the service area which 
     provide for control over local operations by individuals 
     described in subparagraphs (A) or (B).
       (e) Development of Standards by NAIC.--The Secretary may 
     request the National Association of Insurance Commissioners 
     to develop model standards for the additional capital 
     requirements described in subsection (c) and to present such 
     standards to the Secretary not later than July 1, 1995. The 
     Secretary may accept such standards as the standards to be 
     applied under subsection (c) or modify the standards in any 
     appropriate manner.

     SEC. 1442. STANDARD FOR GUARANTY FUNDS.

       (a) In General.--In consultation with the States, the 
     Secretary shall establish standards for guaranty funds 
     established by States for community-rated health plans.
       (b) Guaranty Fund Standards.--The standards established 
     under subsection (a) for a guaranty fund shall include the 
     following:
       (1) Each fund must have a method to generate sufficient 
     resources to pay health providers and others in the case of a 
     failure of a health plan in order to meet obligations with 
     respect to--
       (A) services rendered by the health plan for the standard 
     benefit package, including any supplemental coverage for cost 
     sharing provided by the health plan, and
       (B) services rendered prior to health plan insolvency and 
     services to patients after the insolvency but prior to their 
     enrollment in other health plans.
       (2) Each fund shall be liable for all claims against the 
     plan by health care providers with respect to their provision 
     of items and services covered under the standard benefit 
     package to enrollees of the failed plan. Such claims, in 
     full, shall take priority over all other claims. The fund is 
     liable, to the extent and in the manner provided in 
     accordance with rules established by the Secretary, for other 
     claims, including other claims of such providers and the 
     claims of contractors, employees, governments, or any other 
     claimants.
       (3) The fund stands as a creditor for any payments owed the 
     plan to the extent of the payments made by the fund for 
     obligations of the plan.
       (4) The fund has authority to borrow against future 
     assessments in order to meet the obligations of failed plans 
     participating in the fund.

                       Subpart G--Open Enrollment

     SEC. 1445. PERIODS OF AUTHORIZED CHANGES IN ENROLLMENT.

       The Secretary shall specify periods of enrollment in 
     accordance with section 1112(c).

     SEC. 1446. DISTRIBUTION OF COMPARATIVE INFORMATION.

       The Secretary shall specify a period of time prior to open 
     enrollment during which States must provide for the 
     distribution to community-rated individuals enrollment 
     materials and comparative information on health plans and 
     purchasing cooperatives.

                 PART 2--ESSENTIAL COMMUNITY PROVIDERS

     SEC. 1461. CERTIFICATION.

       For purposes of this Act, the Secretary shall certify as an 
     ``essential community provider'' any health care provider or 
     organization that--
       (1) is within any of the categories of providers and 
     organizations specified in section 1462(a), or
       (2) meets the standards for certification under section 
     1463(a).

     SEC. 1462. CATEGORIES OF PROVIDERS AUTOMATICALLY CERTIFIED.

       (a) In General.--The categories of providers and 
     organizations, including subrecipients, specified in this 
     subsection are as follows:
       (1) Category 1 entities.--The following entities shall be 
     considered category 1 entities:
       (A) Covered entities as defined in section 340B(a)(4) of 
     the Public Health Service Act (42 U.S.C. 256b(a)(4)), except 
     that subsections (a)(4)(L)(iii) and (a)(7) of such section 
     shall not apply.
       (B) School health services centers under title III.
       (C) Public or nonprofit hospitals, including children's 
     hospitals--
       (i) that meet the criteria for public hospitals which are 
     eligible entities under section 340B of the Public Health 
     Service Act in any cost reporting period in the 3-year period 
     prior to the date of enactment of this Act, except that 
     subsection (a)(4)(L)(iii) of such section shall not apply; or
       (ii) meeting alternative criteria developed by the 
     Secretary after the date of enactment of this Act which are 
     comparable to the criteria utilized in determining 
     eligibility under such section 340B;
       (D) Public and private, nonprofit mental health and 
     substance abuse providers receiving funds under title V or 
     XIX of the Public Health Service Act.
       (E) Runaway homeless youth centers or transitional living 
     programs for homeless youth providing health services under 
     the Runaway Homeless Youth Act of 1974 (42 U.S.C. 5701 et 
     seq.).
       (F) Public or nonprofit maternal and child health providers 
     that receive funding under title V of the Social Security 
     Act.
       (G) Rural health clinics as defined under section 
     1861(aa)(2) of the Social Security Act.
       (H) Programs of the Indian Health Service (as defined in 
     section 8302(3)).
       (2) Category 2 entities.--The following entities shall be 
     considered category 2 entities:
       (A) Medicare dependent small rural hospitals under section 
     1886(d)(8)(iii) of the Social Security Act.
       (B) Children's hospitals meeting comparable criteria 
     determined appropriate by the Secretary.
       (b) Study of Federally Certified Rural Health Clinics.--The 
     Secretary shall conduct an evaluation of the Rural Health 
     Clinics program as defined in section 1861(aa)(2) of the 
     Social Security Act to examine the causes of the growth in 
     the program and the characteristics of providers certified as 
     rural health clinics and the characteristics of the 
     population served by rural health clinics to ensure that the 
     program meets the needs of rural underserved communities. The 
     Secretary shall report the findings of such evaluation, 
     together with any recommended changes in the rural health 
     clinics program, to the Congress not later than January 1, 
     1996.

     SEC. 1463. STANDARDS FOR ADDITIONAL PROVIDERS.

       (a) Standards.--The Secretary shall publish standards for 
     the certification of additional categories of health care 
     providers and organizations as essential community providers, 
     including the categories described in subsection (b). Such a 
     health care provider or organization shall not be certified 
     unless the Secretary determines, under such standards, that 
     health plans operating in the area served by the applicant 
     would not otherwise be able to assure adequate access to 
     items and services included in the standard benefit package 
     if such a provider was not so certified.
       (b) Categories To Be Included.--The categories described in 
     this subsection are as follows:
       (1) Certain health professionals.--A health professional 
     who--
       (A) for at least 20 hours per week--
       (i) is located in an area (or areas) designated as a health 
     professional shortage area (under section 332 of the Public 
     Health Service Act) or serves a population (or populations) 
     designated as a medically underserved population (under 
     section 330 of the Public Health Service Act); or
       (ii)(I) is located or provides services in a neighborhood 
     or community whose residents are at risk of underservice; and
       (II) is available to patients at such location on evenings 
     and weekends; and
       (B) if the health professional is a physician--
       (i) is licensed to practice in the jurisdiction; and
       (ii) is either--

       (I) granted privileges to practice at one or more 
     hospitals; or
       (II) has a consultation and referral arrangement with one 
     or more physicians who are granted privileges to practice at 
     one or more hospitals.

       (2) Institutional providers.--Public and private nonprofit 
     hospitals and other public and nonprofit institutional health 
     care providers, including family planning clinics, located in 
     health professional shortage areas (as defined under section 
     332 of the Public Health Service Act) or receiving funding 
     under subtitle E of title III of this Act).
       (3) Other providers.--
       (A) In general.--Other public and private nonprofit 
     agencies and organizations that--
       (i) are located in such an area or providing health 
     services to such a population, and
       (ii) provide health care and services essential to 
     residents of such an area or such populations.
       (B) Nonprofit hospitals.--Nonprofit hospitals with a 
     minimum of 200 beds, located in urban areas where--
       (i) the cumulative total of its services provided to 
     individuals who are entitled to benefits under title XVIII of 
     the Social Security Act or under a State plan under title XIX 
     of such Act equals a minimum of 65 percent; and
       (ii) a minimum of 20 percent of its services are provided 
     to individuals eligible for assistance under such title XIX.

     SEC. 1464. CERTIFICATION PROCESS; REVIEW; TERMINATION OF 
                   CERTIFICATIONS.

       (a) Certification Process.--
       (1) Publication of procedures.--The Secretary shall 
     publish, not later than 6 months after the date of the 
     enactment of this Act, the procedures to be used by health 
     care professionals, providers, agencies, and organizations 
     seeking certification under this subpart, including the form 
     and manner in which an application for such certification is 
     to be made.
       (2) Timely determination.--The Secretary shall make a 
     determination upon such an application not later than 60 days 
     (or 15 days in the case of a certification for an entity 
     described in section 1462) after the date the complete 
     application has been submitted. The determination on an 
     application for certification of an entity described in 
     section 1462 shall only involve the verification that the 
     entity is an entity described in such section.
       (b) Review of Certifications.--The Secretary shall 
     periodically review whether professionals, providers, 
     agencies, and organizations certified under this subpart 
     continue to meet the requirements for such certification.
       (c) Termination or Denial of Certification.--
       (1) Preliminary finding.--If the Secretary preliminarily 
     finds that an entity seeking certification under this section 
     does not meet the requirements for such certification or such 
     an entity certified under this subpart fails to continue to 
     meet the requirements for such certification, the Secretary 
     shall notify the entity of such preliminary finding and 
     permit the entity an opportunity, under subtitle C of title 
     V, to rebut such findings.
       (2) Final determination.--If, after such opportunity, the 
     Secretary continues to find that such an entity continues to 
     fail to meet such requirements, the Secretary shall terminate 
     the certification and shall notify the entity and the State 
     of such termination and the effective date of the 
     termination.

     SEC. 1465. NOTIFICATION OF PARTICIPATING STATES.

       (a) In General.--Not less often than annually the Secretary 
     shall notify each participating State of essential community 
     providers that have been certified under this subpart.
       (b) Contents.--Such notice shall include sufficient 
     information to permit each State to notify health plans of 
     the identity of each entity certified as an essential 
     community provider, including--
       (1) the location of the provider within each plan's service 
     area,
       (2) the health services furnished by the provider, and
       (3) other information necessary for health plans to carry 
     out this subpart.

     SEC. 1466. HEALTH PLAN REQUIREMENT.

       (a) In General.--
       (1) Category 1 entities.--With respect to each essential 
     community provider described in section 1462(a)(1) (other 
     than a provider of school health services) that makes an 
     election under subsection (d), that serves the health plan 
     service area of such health plan, and that requests 
     participation under this section, a health plan shall 
     either--
       (A) enter into a written provider participation agreement 
     (described in subsection (b)) with such providers, or
       (B) make payments to such provider in accordance with 
     subsection (c).
       (2) Category 2 entities.--
       (A) In general.--With respect to at least one essential 
     community provider described in subparagraph (A) and at least 
     one essential community provider described in subparagraph 
     (B) of section 1462(a)(2), that makes an election under 
     subsection (d), that serves the health plan service area of 
     such health plan, and that requests participation under this 
     section, a health plan shall either--
       (i) enter into a written provider participation agreement 
     (described in subsection (b)) with such providers, or
       (ii) enter into a written agreement under which the plan 
     shall make payments to such provider in accordance with 
     subsection (c).
       (B) Exception.--A State, as part of the State plan under 
     section 1501(a), may submit to the Secretary for approval a 
     request that the Secretary permit the State to--
       (i) require health plans operating in certain community 
     rating areas in the State to contract with more than one 
     essential community provider of each type referred to in 
     subparagraph (A), based on geographic proximity, cultural and 
     language needs, capacity to meet the needs of enrollees, or 
     other factors determined relevant by the State; and
       (ii) establish additional types of essential community 
     providers under section 1462(a)(2) that a health plan must 
     contract with under subparagraph (A).
       (C) Discretion of secretary.--With respect to a State 
     request under subparagraph (B), the Secretary shall--
       (i) approve such request; or
       (ii) require the designation of such additional essential 
     community providers in the State as the Secretary determines 
     necessary.
       (b) Participation Agreement.--A participation agreement 
     between a health plan and an electing essential community 
     provider under this subsection shall provide that the health 
     plan agrees to treat the provider in accordance with terms 
     and conditions the same as those that are applicable to other 
     providers participating in the health plan with respect to 
     each of the following:
       (1) The scope of services for which payment is made by the 
     plan to the provider.
       (2) The rate of payment for covered care and services.
       (3) The availability of financial incentives to 
     participating providers.
       (4) Limitations on financial risk provided to other 
     participating providers.
       (5) Assignment of enrollees to participating providers.
       (6) Access by the provider's patients to providers in 
     medical specialties or subspecialties participating in the 
     plan.
       (c) Payments for Providers Without Participation 
     Agreements.--
       (1) In general.--Payment in accordance with this subsection 
     is payment based, as elected by the electing essential 
     community provider, either--
       (A) on the fee schedule developed by the State; or
       (B) on payment methodologies and rates used under the 
     applicable Medicare payment methodology and rates (or the 
     most closely applicable methodology under such program as the 
     Secretary specifies in regulations).
       (2) Special rule for federally qualified health centers and 
     rural health clinics.--With respect to each federally 
     qualified health center (as such term is defined in section 
     1861(aa) of the Social Security Act) and each rural health 
     clinic that is an essential community provider, a health plan 
     shall make payments based on the reasonable cost rates 
     applicable under section 1833(a)(3) of the Social Security 
     Act, except that the federally qualified health center may 
     accept other payment amounts.
       (3) No application of gate-keeper limitations.--Payment in 
     accordance with this subsection may be subject to utilization 
     review, but may not be subject to otherwise applicable 
     gatekeeper requirements under the plan.
       (d) Election.--
       (1) In general.--In this part, the term ``electing 
     essential community provider'' means, with respect to a 
     health plan, an essential community provider certified under 
     this subpart that elects under this subpart to apply to the 
     health plan.
       (2) Form of election.--An election under this subsection 
     shall be made in a form and manner specified by the 
     Secretary, and shall include notice to the health plan 
     involved. Such an election may be made annually with respect 
     to a health plan, except that the plan and provider may agree 
     to make such an election on a more frequent basis.
       (e) Special Rule for Providers of School Health Services.--
     A health plan shall pay, to each provider of school health 
     services located in the plan's service area, an amount 
     determined by the Secretary for such services furnished to 
     enrollees of the plan.

     SEC. 1467. RECOMMENDATION ON CONTINUATION OF REQUIREMENT.

       (a) Studies.--In order to prepare recommendations under 
     subsection (b), the Secretary shall conduct studies regarding 
     essential community providers, including studies that 
     assess--
       (1) the definition of essential community provider,
       (2) the sufficiency of the funding levels for providers, 
     including the special rule for federally qualified health 
     centers under section 1466(c)(2), for both covered and 
     uncovered benefits under this Act,
       (3) the effects of contracting requirements relating to 
     such providers on such providers, health plans, and 
     enrollees,
       (4) the impact of the payment rules for such providers, and
       (5) the impact of national health reform on such providers.
       (b) Recommendations to and Consideration by Congress.--
       (1) In general.--Not later than 5 years after the date of 
     enactment of this Act, the Secretary shall submit to 
     Congress, specific recommendations concerning whether, and to 
     what extent, section 1466 should continue to apply to some or 
     all essential community providers. Such recommendations may 
     include a description of the particular types of such 
     providers and circumstances under which such section should 
     continue to apply.
       (2) Joint resolution and consideration by congress.--
       (A) In general.--The recommendations under paragraph (1) 
     shall be implemented unless a joint resolution (described in 
     subparagraph (B)) disapproving such recommendations is 
     enacted in accordance with the provisions of subparagraph 
     (C), before the end of the 45-day period beginning on the 
     date on which such recommendations were submitted. For 
     purposes of applying the preceding sentence and subparagraphs 
     (B) and (C), the days on which either House of Congress is 
     not in session because of an adjournment of more than three 
     days to a day certain shall be excluded in the computation of 
     a period.
       (B) Joint resolution of disapproval.--A joint resolution 
     described in this subparagraph means only a joint resolution 
     which is introduced within the 10-day period beginning on the 
     date on which the Secretary submits recommendations under 
     paragraph (1) and--
       (i) which does not have a preamble;
       (ii) the matter after the resolving clause of which is as 
     follows: ``That Congress disapproves the recommendations of 
     the Secretary of Health and Human Services concerning the 
     extension of certain essential community provider provisions, 
     as submitted by the Secretary on ______________.'', the blank 
     space being filled in with the appropriate date; and
       (iii) the title of which is as follows: ``Joint resolution 
     disapproving recommendations of the Secretary of Health and 
     Human Services concerning the extension of certain essential 
     community provider provisions, as submitted by the Secretary 
     on ______________.'', the blank space being filled in with 
     the appropriate date.
       (C) Procedures for consideration of resolution of 
     disapproval.--Subject to subparagraph (D), the provisions of 
     section 2908 (other than subsection (a)) of the Defense Base 
     Closure and Realignment Act of 1990 shall apply to the 
     consideration of a joint resolution described in subparagraph 
     (B) in the same manner as such provisions apply to a joint 
     resolution described in section 2908(a) of such Act.
       (D) Special rules.--For purposes of applying subparagraph 
     (C) with respect to such provisions--
       (i) any reference to the Committee on Armed Services of the 
     House of Representatives shall be deemed a reference to an 
     appropriate Committee of the House of Representatives 
     (specified by the Speaker of the House of Representatives at 
     the time of submission of recommendations under paragraph 
     (1)) and any reference to the Committee on Armed Services of 
     the Senate shall be deemed a reference to an appropriate 
     Committee of the Senate (specified by the Majority Leader of 
     the Senate at the time of submission of recommendations under 
     paragraph (1)); and
       (ii) any reference to the date on which the President 
     transmits a report shall be deemed a reference to the date on 
     which the Secretary submits a recommendation under paragraph 
     (1).

     SEC. 1468. DEFINITIONS.

       As used in subpart:
       (1) Children's hospital.--The term ``children's hospital'' 
     means those hospitals whose inpatients are certified by the 
     Secretary or the State to be predominantly under the age of 
     18.
       (2) Health professional.--The term ``health professional'' 
     means a physician, nurse, nurse practitioner, certified nurse 
     midwife, physician assistant, psychologist, dentist, 
     pharmacist, chiropractor, clinical social worker, and other 
     health care professional recognized by the Secretary.
       (3) Subrecipient.--The term ``subrecipient'' means, with 
     respect to a recipient of a grant under a particular 
     authority, an entity that--
       (A) is receiving funding from such a grant under a contract 
     with the principal recipient of such a grant, and
       (B) meets the requirements established to be a recipient of 
     such a grant.

        PART 3--SPECIFIC RESPONSIBILITIES OF SECRETARY OF LABOR.

     SEC. 1481. RESPONSIBILITIES OF SECRETARY OF LABOR.

       (a) In General.--The Secretary of Labor is responsible--
       (1) under subtitle D, for the enforcement of requirements 
     applicable to employers (including requirements relating to 
     payment of premiums under title X if applicable) and the 
     administration of large employer purchasing groups;
       (2) for the temporary assumption of the operation of self-
     insured employer sponsored health plans that are insolvent;
       (3) for carrying out any other responsibilities assigned to 
     the Secretary under this Act; and
       (4) for administering title I of the Employee Retirement 
     Income Security Act of 1974 as it relates to group health 
     plans maintained by large employer purchasing groups.
       (b) Agreements with States.--The Secretary of Labor may 
     enter into agreements with States in order to enforce 
     responsibilities of employers and large employer purchasing 
     groups, and requirements of employer sponsored health plans, 
     under subtitle B of title I of the Employee Retirement Income 
     Security Act of 1974.
       (c) Consultation.--In carrying out activities under this 
     Act with respect to large employer purchasing groups, 
     employer sponsored health plans, and employers, the Secretary 
     of Labor shall consult with the Secretary of Health and Human 
     Services.
       (d) Guaranty Funds.--
       (1) In general.--The Secretary of Labor shall establish 
     standards for guaranty funds to be established by a State 
     with respect to a self-insured plan operating wholly within 
     the State.
       (2) Multistate plans.--The Secretary of Labor shall 
     establish and administer a guaranty fund with respect to 
     multistate self-insured plans.
       (e) Employer-Related Requirements.--
       (1) In general.--The Secretary of Labor, in consultation 
     with the Secretary, shall be responsible for assuring that 
     employers--
       (A) make payments of any employer premiums (and withhold 
     and make payment of the family share of premiums with respect 
     to qualifying employees) and provide discounts to employees 
     as required under this Act, including auditing of collection 
     activities with respect to such payments,
       (B) submit timely reports as required under this Act, and
       (C) otherwise comply with requirements imposed on employers 
     under this Act.
       (2) Audit and similar authorities.--The Secretary of 
     Labor--
       (A) may carry out such audits (directly or through 
     contract) and such investigations of employers and States and 
     large employer purchasing groups,
       (B) may exercise such authorities under section 504 of 
     Employee Retirement Income Security Act of 1974 (in relation 
     to activities under this Act),
       (C) may provide (through contract or otherwise) for such 
     collection activities (in relation to amounts owed to large 
     employer purchasing groups, and for the benefit of such 
     groups), and
       (D) may impose such civil penalties in accordance with this 
     Act,

     as may be necessary to carry out such Secretary's 
     responsibilities under this section.
       (3) Auditing of employer payments.--
       (A) In general.--Each State is responsible for auditing the 
     records of community-rated employers to assure that employer 
     payments (including the payment of amounts withheld) were 
     made in the appropriate amount as provided under subtitle B 
     of title X.
       (B) Employers with employees residing in different 
     community-rating areas.--In the case of a community-rated 
     employer which has employees who reside in more than one 
     community rating area in more than one State, the Secretary 
     of Labor, in consultation with the Secretary, shall establish 
     a process for the coordination of State auditing activities 
     among the States involved.
       (C) Appeal.--In the case of an audit conducted by a State 
     on an employer under this paragraph, an employer or other 
     State that is aggrieved by the determination in the audit is 
     entitled to review of such audit by the Secretary of Labor in 
     a manner to be provided by such Secretary.
       (f) Authority.--The Secretary of Labor is authorized to 
     issue such regulations as may be necessary to carry out 
     section 1305 and responsibilities of the Secretary under this 
     Act.

     SEC. 1482. FEDERAL ROLE WITH RESPECT TO MULTISTATE SELF-
                   INSURED HEALTH PLANS.

       (a) In General.--In the case of a multistate self-insured 
     health plan or a multistate self-insured supplemental health 
     benefits plan, the Secretary of Labor shall be responsible 
     for certifying such plans and carrying out activities under 
     this title in the same manner as a participating State would 
     carry out activities under this title with respect to a 
     standard health plan.
       (b) Self-Insured Plan Standards.--The Secretary of Labor 
     shall develop and publish standards applicable to self-
     insured plans offered by large employers. The Secretary shall 
     develop and publish such standards by not later than the date 
     that is 6 months after the date of enactment of this Act. 
     Such standards shall be the certified standard health plan 
     standards applicable to self-insured plans under this title.
       (c) Determination of Multistate Status.--For purposes of 
     this Act, a self-insured health plan or a self-insured 
     supplemental health benefits plan shall be considered a 
     multistate health plan if established or maintained by an 
     experience-rated employer which has a substantial number of 
     employees enrolled in such plan in each of 2 or more States 
     (as determined by the Secretary of Labor).

     SEC. 1483. ASSISTANCE WITH EMPLOYER COLLECTIONS.

       The Secretary of Labor shall provide States with such 
     technical and other assistance as may promote the efficient 
     collection of all amounts owed under this Act by employers.

     SEC. 1484. PENALTIES FOR FAILURE OF LARGE EMPLOYER PURCHASING 
                   GROUPS TO MEET REQUIREMENTS.

       If the Secretary of Labor finds that a large employer 
     purchasing group has failed substantially to meet the 
     applicable requirements of subtitle D, the Secretary shall 
     impose a civil money penalty of not to exceed $10,000 for 
     each such violation.

     SEC. 1485. APPLICABILITY OF ERISA ENFORCEMENT MECHANISMS FOR 
                   ENFORCEMENT OF CERTAIN REQUIREMENTS.

       The provisions of sections 502 (relating to civil 
     enforcement), 504 (relating to investigative authority) and 
     506 (relating to criminal enforcement) of the Employee 
     Retirement Income Security Act of 1974 shall apply to 
     enforcement by the Secretary of Labor of the applicable 
     requirements for large group purchasers in the same manner 
     and to same extent as such provisions apply to enforcement of 
     title I of such Act.

     SEC. 1486. WORKPLACE WELLNESS PROGRAM.

       (a) In General.--The Secretary shall develop certification 
     criteria for workplace wellness programs.
       (b) Application of Section.--Any health plan may offer a 
     uniform premium discount, not to exceed 5 percent, to 
     employers maintaining certified workplace wellness programs.

                 PART 4--OFFICE OF RURAL HEALTH POLICY

     SEC. 1491. OFFICE OF RURAL HEALTH POLICY.

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

            PART 5--COLLECTIVE BARGAINING DISPUTE RESOLUTION

     SEC. 1495. FINDINGS AND PURPOSE.

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

     SEC. 1496. APPLICATION LIMITED TO TRANSITION PERIOD.

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

     SEC. 1497. REQUEST FOR APPOINTMENT OF BOARD OF INQUIRY.

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

     SEC. 1498. 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 
     1496. Each such Board shall be composed of such number of 
     individuals as the Director may deem desirable. No member 
     appointed under this section shall have any interest or 
     involvement in the health care institutions or the employee 
     organizations involved in the dispute.
       (b) Limitation.--With respect to the appointment of a 
     Health Care Board of Inquiry under paragraph (1), if the 
     Director determines that--
       (1) the health care entity is--
       (A) otherwise exempt from coverage under the Labor 
     Management Relations Act, as amended (29 U.S.C. 141 et seq.); 
     and
       (B) subject to State laws containing procedures for the 
     resolution of impasses in collective bargaining that are 
     comparable to those that would be followed by a Board of 
     Inquiry under this section; or
       (2) the parties involved have agreed to procedures for the 
     resolution of the impasse in collective bargaining that are 
     comparable to those that would be followed by a Board of 
     Inquiry;

     the Director may refuse the request for the appointment of 
     such a Board.

     SEC. 1499. PUBLIC FACTFINDING.

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

     SEC. 1499A. COMPENSATION OF MEMBERS OF BOARDS OF INQUIRY.

       (a) Employees if Federal Government.--Members of any board 
     established under this part who are otherwise employed by the 
     Federal Government shall serve without compensation but shall 
     be reimbursed for travel, subsistence, and other necessary 
     expenses incurred by such members in carrying out its duties 
     under this section.
       (b) Other Members.--Members of any board established under 
     this section who are not subject to subsection (a) shall 
     receive compensation at a rate prescribed by the Director but 
     not to exceed the daily rate prescribed for GS-128 of the 
     General Schedule under section 5332 of title 5, United States 
     Code, including travel for each day they are engaged in the 
     performance of their duties under this section and shall be 
     entitled to reimbursement for travel, subsistence, and other 
     necessary expenses incurred by them in carrying out their 
     duties under this part.

     SEC. 1499B. MAINTENANCE OF STATUS QUO.

       After the establishment of a board under section 1497, and 
     for 15 days after any such board has issued its report, no 
     change in the status quo in effect prior to the expiration of 
     the contract in the case of negotiations for a contract 
     renewal, or in effect prior to the time the parties began 
     their bargaining in the case of an initial beginning 
     negotiation, except by agreement, shall be made by the 
     parties to the controversy.
            Subtitle F--Participating State Responsibilities

                    PART 1--GENERAL RESPONSIBILITIES

     SEC. 1501. STATE PLAN AND CERTIFICATION OF STANDARD HEALTH 
                   PLANS AND SUPPLEMENTAL HEALTH BENEFITS PLANS.

       (a) State Plan.--
       (1) In general.--For purposes of the approval of a State 
     health care system by the Secretary under section 1411, a 
     State is a ``participating State'' if the State meets the 
     applicable requirements of this subtitle.
       (2) Submission of plan.--In order to be approved as a 
     participating State under section 1411, a State shall submit 
     to the Secretary a State plan (in a form and manner specified 
     by the Secretary) that describes the State health care system 
     that the State is establishing (or has established).
       (3) Deadline.--If a State is not a participating State with 
     a State health care system in operation by January 1, 1997, 
     the provisions of subpart C of part 1 of subtitle E (relating 
     to responsibilities in absence of State systems) shall take 
     effect.
       (4) Submission of information subsequent to approval.--A 
     State approved as a participating State under section 1411 
     shall submit to the Secretary an annual update to the State 
     health care system not later than February 15 of each year 
     following the first year for which the State is a 
     participating State. The update shall contain--
       (A) such information as the Secretary may require to 
     determine that the system shall meet the applicable 
     requirements of this Act for the succeeding year; and
       (B) such information as the Secretary may require to 
     determine that the State operated the system during the 
     previous year in accordance with the Secretary's approval of 
     the system for such previous year.
       (b) Health Plan Accreditation, Certification and 
     Enforcement Program.--
       (1) Establishment.--The Secretary shall establish a program 
     for the accreditation, certification and enforcement of 
     health plan standards by States (hereafter referred to in 
     this subsection as the ``ACE program''). Under such program, 
     the Secretary shall--
       (A) develop guidelines for the accreditation, certification 
     and enforcement of standards for certified standard health 
     plans;
       (B) approve State ACE programs as meeting such guidelines; 
     and
       (C) monitor the compliance of States with such guidelines.
       (2) Program elements.--The guidelines referred to in 
     paragraph (1) shall include the following components:
       (A) Certification.--State certification, and 
     recertification not less frequently than once during each 3-
     year period, of standard health plans determined by the State 
     to be in compliance with the standards established under 
     subtitle B and with the regulations promulgated by the 
     Secretary concerning such standards.
       (B) Disenrollment data.--State review of enrollee 
     disenrollment from each standard health plan to determine 
     whether there is a pattern of disenrollment that does not 
     reflect the distribution of such plans' reenrolling 
     membership.
       (C) Monitoring.--State monitoring of the performance of 
     each standard health plan to ensure that such plans continue 
     to meet the criteria for certification.
       (3) State programs.--Each participating State shall develop 
     accreditation, certification and enforcement programs in 
     accordance with the guidelines established by the Secretary 
     under paragraph (1).
       (4) Use of private organizations.--
       (A) In general.--A State may utilize private accreditation 
     organizations to review the compliance by standard health 
     plans with specific standards with which such organizations 
     have demonstrated expertise. A State may use such reviews as 
     the basis for determining plan compliance with such 
     standards. The Secretary shall approve eligible accreditation 
     organizations and promulgate regulations prohibiting 
     conflicts of interest in the use of such bodies by States.
       (B) Limitations.--The use of private accreditation 
     organizations by a State under subparagraph (A) shall not 
     relieve such State of its obligations under this subsection. 
     In no case shall a State delegate enforcement authority or 
     enforcement responsibilities to private organizations.
       (5) Enforcement.--A State ACE program shall establish a 
     process for imposing sanctions on standard health plans that 
     fail to comply with the standards established under this 
     title. Such sanctions may include--
       (A) limiting or prohibiting new member enrollment;
       (B) permitting existing members to disenroll from the 
     health plan without penalty;
       (C) State operation of a health plan to provide 
     transitional access;
       (D) the imposition of civil monetary penalties in 
     accordance with this Act;
       (E) requiring that a plan follow a corrective action plan 
     developed by the State; and
       (F) decertification or denial of recertification, but only 
     after the plan has been provided a reasonable opportunity to 
     comply with such standards.
       (6) Multi-state plans.--The Secretary of Labor, in 
     consultation with the Secretary, shall carry out all 
     certification and enforcement activities described in this 
     subsection with respect to multistate self-insured plans.
       (c) Other State Duties.--A participating State shall--
       (1) certify each purchasing cooperative that meets the 
     requirements of part 2 of subtitle D; and
       (5) administer the State subsidies as provided for in title 
     VI.
       (d) Effective Date.--Subsection (b) shall apply to standard 
     health plans and supplemental health benefits plans sold, 
     issued, or renewed on or after January 1, 1997.

     SEC. 1502. COMMUNITY RATING AREAS AND HEALTH PLAN SERVICE 
                   AREAS.

       (a) In General.--In accordance with this section, each 
     participating State shall, subject to approval by the 
     Secretary, provide for the division of the State into 1 or 
     more community rating areas.
       (b) Multiple Areas.--With respect to a community rating 
     area--
       (1) no metropolitan statistical area in a State may be 
     incorporated into more than 1 such area in the State;
       (2) the number of individuals residing within such an area 
     may not be less than 250,000; and
       (3) no area incorporated in a community rating area may be 
     incorporated into another such area.
       (c) Boundaries.--
       (1) In general.--In establishing boundaries for community 
     rating areas, a participating State shall comply with the 
     antidiscrimination requirements of section 1602.
       (2) Coordinating multiple community rating areas.--Nothing 
     in this section shall be construed as preventing a 
     participating State from coordinating the activities of one 
     or more community rating areas in the State.
       (3) Interstate community rating areas.--Community rating 
     areas with respect to interstate areas shall be established 
     in accordance with rules established by the Secretary.
       (4) Coordination in multi-state areas.--One or more 
     participating States may coordinate their operations in 
     contiguous community rating areas. Such coordination may 
     include, the following activities, adoption of joint 
     operating rules, contracting with standard health plans, 
     enforcement activities, and establishment of fee schedules 
     for health providers.
       (d) Health Plan Service Areas.--
       (1) In general.--Pursuant to guidelines developed under 
     paragraph (2), each State shall designate, by not later than 
     January 1, 1997, health plan service areas.
       (2) Guidelines.--The State shall designate one or more 
     health plan service areas within each community rating area 
     in the State, that--
       (A) prevent discrimination in accordance with section 1602; 
     and
       (B) do not cross community rating area boundaries.

     SEC. 1503. OPEN ENROLLMENT PERIODS.

       Each participating State, based on rules and procedures 
     established by the Secretary, shall specify a uniform, annual 
     open enrollment period for each community rating area during 
     which all eligible individuals are permitted the opportunity 
     to change enrollment among the standard health plans offered 
     to such individuals in such area under this Act. The initial 
     annual open enrollment period shall be for a period of 90 
     days.

     SEC. 1504. RISK ADJUSTMENT PROGRAM.

       (a) Requirement for Implementation.--In accordance with 
     rules established by the Secretary, each State shall 
     implement a risk adjustment methodology developed by the 
     Secretary under subsection (d).
       (b) State Risk Adjustment Organization.--Each State shall 
     establish a State risk adjustment organization to carry out 
     the adjustments required under the methodology implemented by 
     the State under subsection (a) and make payments in 
     accordance with subsection (c). Such organization shall meet 
     standards established by the Secretary relating to 
     organizational structure, operation, fiduciary 
     responsibilities and financial management.
       (c) Adjustments and Payments.--
       (1) Classes of purchasers.--The Secretary shall specify 
     classes of individual health plan purchasers whose expected 
     expenditures are higher than those of employed individuals 
     covered under community-rated plans.
       (2) Estimates.--The Secretary shall annually estimate the 
     amount by which the expected expenditures related to 
     specified high-cost community-rated individual health plan 
     purchasers (as specified by the Secretary under the 
     methodologies developed under subsection (a)) for the year 
     involved will exceed the expected average expenditures for 
     other community-rated health plan enrollees. Based on such 
     estimates, the Secretary shall develop a per capita 
     adjustment amount with respect to each community rating area.
       (3) Payments.--
       (A) In general.--The State risk adjustment organization 
     shall, using the methodologies developed by the Secretary 
     under subsection (a), apply the per capita adjustment amount 
     to community-rated and experience-rated (and multistate plans 
     under subparagraph (C)) health plans offered within each 
     community rating area in the State.
       (B) Standard plans.--Standard health plans subject to an 
     assessment under subparagraph (A) shall make payments to the 
     State risk adjustment organization for the State in which 
     such plans provide coverage.
       (C) Multistate Plans.--A multistate community-rated or 
     experience-rated plan that is subject to an assessment under 
     subparagraph (A) shall make payments to a single State risk 
     adjustment organization and provide such organization with 
     information concerning the geographic distribution of the 
     enrollees in such plan. Such organization shall determine the 
     amount of such payments that are applicable to each 
     community-rating area and distribute such amounts to the 
     appropriate State risk adjustment organization.
       (D) Distribution.--State risk adjustment organizations 
     shall distribute amounts collected under this paragraph to 
     community-rated or experience-rated health plans that are 
     determined to have expected expenditures for items and 
     services provided to enrolled individuals that are greater 
     than the average expenditures for enrollees in standard 
     health plans. The amounts of such distributions shall be 
     based on the methodology applied by the organization 
     involved.
       (d) Development of Methodologies.--
       (1) In general.--Not later than January 1, 1995, the 
     Secretary, in consultation with an advisory committee 
     established by the Secretary, shall develop a risk adjustment 
     and reinsurance methodology for use by States in accordance 
     with this section.
       (2) Methodology.--
       (A) Purposes.--The risk adjustment methodology developed 
     under paragraph (1) shall--
       (i) ensure that assessments imposed on or payments provided 
     to standard health plans reflect the expected relative 
     utilization and expenditures for covered items and services 
     by the enrollees of each plan compared to the average 
     utilization and expenditures for all eligible individuals, 
     and
       (ii) protect standard health plans that enroll a 
     disproportionate share of eligible individuals with respect 
     to whom expected utilization of health care services 
     (included in the benefit package) and expected health care 
     expenditures for such services are greater than the average 
     level of such utilization and expenditures for eligible 
     individuals.
       (B) Factors to be considered.--The methodology shall take 
     into account the following factors:
       (i) Demographic characteristics.
       (ii) Health status, including prior use of health services.
       (iii) Geographic area of residence.
       (iv) Socio-economic status.
       (v) The cost sharing of the plan.
       (vi) Any other factors determined by the Secretary to be 
     material to the purposes described in subparagraph (A).
       (3) Special consideration for mental illness and mental 
     retardation.--In developing the methodology under this 
     section, the Secretary shall give consideration to the unique 
     problems of adjusting payments relating to health plans with 
     respect to individuals with mental illness and mental 
     retardation.
       (4) Mandatory reinsurance.--
       (A) In general.--The methodology developed under this 
     section shall include a system of mandatory reinsurance as a 
     component of the risk adjustment methodology.
       (B) Reinsurance system.--The Secretary, in developing the 
     methodology for a mandatory reinsurance system under 
     subparagraph (A), shall--
       (i) provide for standard health plans to make payments to 
     state-established reinsurance programs for the purpose of 
     reinsuring all or part of the health care expenditures for 
     items and services included in the standard benefit package 
     for classes of high-cost individual health plan purchasers 
     (as specified by the Secretary) or specific high-cost 
     treatments or diagnosis; and
       (ii) specify the manner of creation, structure, and 
     operation of the system in each State, including--

       (I) the manner (which may be prospective or retrospective) 
     in which standard health plans make payments to the system, 
     and
       (II) the type and level of reinsurance coverage provided by 
     the system.

       (5) Cost-sharing adjustment.--The standards developed by 
     the Secretary under this subsection shall include a cost-
     sharing adjustment mechanism to adjust for losses among all 
     standard health plans, except multistate self-insured health 
     plans, resulting from the reduced cost-sharing obligations of 
     individuals receiving assistance as is provided under the 
     program described in subtitle A of title VI.
       (6) Confidentiality of information.--The methodology shall 
     be developed under this section in a manner that is 
     consistent with privacy standards promulgated under title V. 
     In developing such standards, the Secretary shall take into 
     account any potential need of States for certain individually 
     identifiable health information in order to carry out risk-
     adjustment and reinsurance activities under this Act, but 
     only to the minimum extent necessary to carry out such 
     activities and with protections provided to minimize the 
     identification of the individuals to whom the information 
     relates.

     SEC. 1505. GUARANTY FUNDS.

       A State, in accordance with the standards established by 
     the Secretary under section 1442, shall establish a State 
     guaranty fund with respect to community-rated plans offered 
     in such State. The State shall establish a separate guaranty 
     fund with respect to self-insured plans operating in the 
     State in accordance with section 1481.

     SEC. 1506. ENROLLMENT ACTIVITIES.

       (a) Provider-Based Enrollment Mechanisms.--The Secretary 
     shall promulgate rules regarding the establishment by each 
     participating State, in accordance with section 6006, of 
     provider-based enrollment mechanisms for individuals seeking 
     care who are not enrolled in a standard health plan. Such 
     rules shall include provisions requiring standard health 
     plans to pay providers for care delivered to individuals 
     prior to the individual's enrollment in the plan and be 
     consistent with section 1114.
       (b) Coordination of Enrollment Activities.--Each 
     participating State shall coordinate its activities, 
     including plan enrollment and disenrollment activities, with 
     other States in a manner specified by the Secretary that 
     ensures continuous, nonduplicative coverage of community-
     rated and experience-rated individuals in standard health 
     plans and that minimizes administrative procedures and 
     paperwork.

     SEC. 1507. RURAL AND MEDICALLY UNDERSERVED AREAS.

       (a) In General.--If, in accordance with appropriate rules 
     established by the Secretary, a State determines that there 
     is inadequate access in the provision of health services by 
     standard health plans in any area of a State, the State may 
     authorize--
       (1) a standard health plan to be the only standard health 
     plan in the area; or
       (2) two or more standard health plans to take joint action 
     to develop and implement a program.
       (b) Medically Underserved Area Defined.--For purposes of 
     this subtitle the term ``medically underserved area'' means 
     an urban or rural area designated by the Secretary as an area 
     with a shortage of health professional or of health services 
     or facilities.

     SEC. 1508. PUBLIC ACCESS SITES.

       (a) Designation.--A State shall designate public access 
     sites within each community rating area through which 
     residents of such areas can obtain consumer information 
     concerning health plans and purchasing cooperatives offered 
     in such areas. Such sites shall be designated in a manner 
     that ensures ready access to such information by health care 
     consumers throughout the community rating area.
       (b) Information.--
       (1) In general.--A State shall, through the public access 
     sites designated under subsection (a) and using the 
     information provided to the State under sections 1125, 
     1321(f)(6), 1401, and 5005 prepare and make available 
     information, in a comparative form, concerning standard 
     health plans certified by the State and purchasing 
     cooperatives operating in the State, including summary plan 
     descriptions, consumer report cards and performance reports 
     and other consumer information required under this Act. The 
     State shall provide such materials to employers located 
     within the State.
       (2) 1995-1997.--With respect to calendar years 1995 through 
     1997, a State shall, through the public access sites 
     designated under subsection (a), provide the information 
     disclosed by plans under section 1111(e)(1).

     SEC. 1509. REQUIREMENTS RELATING TO POSSESSIONS OF THE UNITED 
                   STATES.

       (a) In General.--A possession of the United States shall be 
     a participating State meeting the requirements of this Act 
     only if there is an agreement in effect between the United 
     States and such possession pursuant to which--
       (1) the laws of such possession impose a part B premium 
     recapture assessment (as defined in subsection (b));
       (2) 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 assessment;
       (3) any amount received in the Treasury of such possession 
     by reason of such assessment shall be paid (at such time and 
     in such manner as the Secretary of the Treasury shall 
     prescribe) to the Federal Supplementary Medical Insurance 
     Trust Fund;
       (4) such assessment is coordinated with the assessment 
     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) not more than the applicable amount 
     for such period; and
       (5) 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 assessment may apply shall furnish 
     to the Secretary and the Secretary of the Treasury.
       (b) Qualified Part B Premium Recapture Assessment.--In 
     subsection (a), the term ``qualified medicare part B premium 
     recapture assessment'' means an assessment imposed and 
     collected by such a possession that is--
       (1) equivalent to the assessment imposed under section 59B 
     of the Internal Revenue Code of 1986; and
       (2) imposed on all individuals who are bona fide residents 
     of the possession, to the extent such individuals have not 
     paid the assessment imposed under such section 59B to the 
     United States by reason of subsection (d)(5) of such section.

     SEC. 1510. RIGHT OF RECOVERY OF CERTAIN TAXES AGAINST 
                   PROVIDERS.

       Each participating State shall provide that issuers and 
     plan sponsors of certified standard health plans shall have 
     the right of recovery against providers described in section 
     4518 of the Internal Revenue Code of 1986 and shall provide 
     methods of enforcing such right.

                    PART 2--TREATMENT OF STATE LAWS

     SEC. 1511. PREEMPTION OF CERTAIN STATE LAWS RELATING TO 
                   HEALTH PLANS.

       (a) Laws Restricting Plans Other Than Fee-for-Service 
     Plans.--Except as may otherwise be provided in this section, 
     no State law shall apply to any services provided under a 
     health plan that is not a fee-for-service plan (or a fee-for-
     service component of a plan) if such law has the effect of 
     prohibiting or otherwise restricting plans from--
       (1) limiting the number and type of health care providers 
     who participate in the plan;
       (2) requiring enrollees to obtain health services (other 
     than emergency services) from participating providers or from 
     providers authorized by the plan;
       (3) requiring enrollees to obtain a referral for treatment 
     by a specialized physician or health institution;
       (4) establishing different payment rates for participating 
     providers and providers outside the plan;
       (5) creating incentives to encourage the use of 
     participating providers; or
       (6) requiring the use of single-source suppliers for 
     pharmacy, non-serviced medical equipment, and other health 
     products and services.
       (b) Preemption of State Corporate Practice Acts.--Any State 
     law related to the corporate practice of medicine and to 
     provider ownership of health plans or other providers shall 
     not apply to arrangements between health plans that are not 
     fee-for-service plans and their participating providers.

     SEC. 1512. STATE LAW RESTRICTIONS ON HEALTH PROFESSIONAL 
                   LICENSURE.

       (a) In General.--Except as otherwise provided in this 
     section, nothing in this title shall be construed as limiting 
     any State's authority to enact and enforce laws with respect 
     to the licensure or certification of any class of health 
     professional or the provision of any class of health 
     professional services.
       (b) Scope of Practice.--Effective as of January 1, 1996, a 
     State may not restrict through licensure or otherwise the 
     practice of any class of health professionals beyond what is 
     justified by the skills and training of such professionals.
       (c) Academic Degree.--Effective as of January 1, 1996, a 
     State may not restrict the participation, reimbursement, or 
     indemnification of a health professional solely on the basis 
     of the academic degree of such professional if the 
     professional is acting within the scope of the professional's 
     license under applicable State law.

     SEC. 1513. PREEMPTION FROM STATE BENEFIT MANDATES.

       Effective as of January 1, 1996, no State shall establish 
     or enforce any law or regulation that requires any standard 
     health plan to cover items and services that are different 
     from the items and services specified under subtitle C.

                       PART 3--STATE FLEXIBILITY

                     Subpart A--Existing State Laws

     SEC. 1521. CONTINUANCE OF EXISTING FEDERAL LAW WAIVERS.

       Nothing in this Act shall preempt any feature of a State 
     health care system operating under a waiver granted before 
     the date of the enactment of this Act under titles XVIII or 
     XIX of the Social Security Act (42 U.S.C. 1395 et seq. or 
     1396 et seq.) or the Employee Retirement Income Security Act 
     of 1974 (29 U.S.C. 1001 et seq.).

     SEC. 1522. HAWAII PREPAID HEALTH CARE ACT.

       (a) ERISA Waiver.--
       (1) In general.--Section 514(b)(5) of the Employee 
     Retirement Income Security Act of 1974 (29 U.S.C. 1144(b)(5)) 
     is amended to read as follows:
       ``(5)(A) Except as provided in subparagraphs (B) and (C), 
     subsection (a) shall not apply to the Hawaii Prepaid Health 
     Care Act (Haw. Rev. Stat. Sec. Sec. 393-1 through 393-51).
       ``(B) Nothing in subparagraph (A) shall be construed to 
     exempt from subsection (a) any State tax law relating to 
     employee benefits plans.
       ``(C) If the Secretary of Labor notifies the Governor of 
     the State of Hawaii that as the result of an amendment to the 
     Hawaii Prepaid Health Care Act enacted after the date of the 
     enactment of this paragraph--
       ``(i) the proportion of the population with health care 
     coverage under such Act is less than such proportion on such 
     date, or
       ``(ii) the level of benefit coverage provided under such 
     Act is less than the actuarial equivalent of such level of 
     coverage on such date,

     subparagraph (A) shall not apply with respect to the 
     application of such amendment to such Act after the date of 
     such notification.''.
       (2) Effective date.--The amendment made by paragraph (1) 
     shall take effect on the date of the enactment of this Act.
       (b) HSA Waiver.--
       (1) In general.--The Secretary shall, at the request of the 
     Governor of the State of Hawaii and in accordance with this 
     section, grant a waiver to the State from the requirements of 
     this Act (other than the requirements specified in paragraph 
     (3)).
       (2) Scope of waiver.--The waiver granted under paragraph 
     (1) shall exempt--
       (A) the State of Hawaii;
       (B) health plans offered within the State; and
       (C) health plan participants, including employers, 
     employees, residents, and health plan sponsors within the 
     State,
     from requirements otherwise applicable to the State and such 
     plans and participants.
       (3) Required compliance of other requirements.--The waiver 
     shall initially be granted under paragraph (1) if the State 
     of Hawaii demonstrates to the Secretary that the State 
     maintains--
       (A) a requirement that employers make premium contributions 
     comparable to the requirements of this Act;
       (B) a comprehensive benefit package (including cost 
     sharing) that is comparable with the requirements of subtitle 
     B of this title;
       (C) a percentage of State population with health care 
     coverage that is not less than the national average;
       (D) a quality control mechanism and data system that are 
     comparable to the applicable requirements of title V; and
       (E) health care cost containment consistent with the 
     provisions of this Act.
       (4) Waiver period.--The waiver initially granted under 
     paragraph (1) shall extend for the period during which the 
     State of Hawaii continues to comply with the requirements 
     specified in paragraph (3). The Secretary may require the 
     State, every 5 years, to demonstrate to the Secretary the 
     State's continued compliance with such requirements.
       (5) Procedure in the event of non-compliance.--
       (A) Notice.--If, at any time after granting a waiver under 
     paragraph (1), the Secretary finds that the State of Hawaii 
     is not meeting the requirements specified in paragraph (3), 
     the Secretary shall notify the State of the Secretary's 
     findings.
       (B) Opportunity to contest.--The State may contest the 
     Secretary's findings under the procedures provided under 
     section 5231.
       (C) Opportunity for correction.--
       (i) Findings not contested.--If the State does not contest 
     the Secretary's findings within the 30-day period beginning 
     on the date of receipt of a notice of such findings, the 
     State shall have--

       (I) a 90-day period beginning on such date to show a good 
     faith effort to remedy the non-compliance, and
       (II) an additional 12-month period to take such actions as 
     may be required to bring the State into compliance with the 
     requirements specified in paragraph (3).

       (ii) Contested findings.--If the State contests the 
     Secretary's findings within such 30-day period but such 
     findings are upheld, the State shall have--

       (I) a 90-day period beginning on the date of final 
     adjudication to show a good faith effort to remedy the non-
     compliance, and
       (II) an additional 12-month period to take such actions as 
     may be required to bring the State into compliance with the 
     requirements specified in paragraph (3).

       (D) Termination.--If the State fails to demonstrate a good 
     faith effort under subparagraph (C)(i)(I) or (C)(ii)(I) or to 
     take actions under subparagraph (C)(i)(II) or (C)(ii)(II) 
     within the time period specified, the Secretary may revoke 
     the waiver granted in paragraph (1).
       (6) Cooperative agreement with the secretary.--The 
     Secretary shall enter into cooperative agreements with 
     appropriate officials of the State of Hawaii--
       (A) to develop standards and reporting requirements 
     necessary for the issuance and maintenance of the State's 
     waiver under paragraph (1); and
       (B) otherwise to effectuate the provisions of this 
     subsection.
       (7) Eligibility for federal funds provided to participating 
     states.--Nothing in this subsection shall preclude the 
     eligibility of the State of Hawaii to participate in any 
     public health initiative, grant, or financial aid program 
     under this Act (including the medicaid program under title 
     XIX of the Social Security Act), or the sharing of revenue 
     resulting from the amendments made by title VII, designed to 
     implement the purpose of this Act. The Secretary shall work 
     with appropriate officials of the State of Hawaii to develop 
     comparable, alternative standards to govern the State's 
     entitlement under title XI.

     SEC. 1523. ALTERNATIVE STATE PROVIDER PAYMENT SYSTEMS.

       Notwithstanding any other provision of law, if a hospital 
     reimbursement system operated by a State meets the 
     requirements of section 1814(b) of the Social Security Act 
     (42 U.S.C. 1395f(b)) and has been approved by the Secretary 
     and in continuous operation since July 1, 1977, the payment 
     rates and methodologies required under the system for 
     services provided in the State shall apply to all purchasers 
     and payers, including those under employee welfare benefit 
     plans authorized under the Employee Retirement Income 
     Security Act of 1974 (29 U.S.C. 1001 et seq.), workers' 
     compensation programs under State law, the Federal Employees' 
     Compensation Act under chapter 81 of title 5, United States 
     Code, and Federal employee health benefit plans under chapter 
     89 of title 5, United States Code.

     SEC. 1524. ALTERNATIVE STATE HOSPITAL SERVICES PAYMENT 
                   SYSTEMS.

       (a) In General.--No State shall be prevented from 
     enforcing--
       (1) a State system described in subsection (b), or
       (2) a State system described in subsection (c),

     by any provision of the Employee Retirement Income Security 
     Act of 1974 (29 U.S.C. 1001 et seq.) or chapter 81 or 89 of 
     title 5, United States Code.
       (b) Reimbursement Control System.--A State system is 
     described in this subsection if it is a State reimbursement 
     control system in operation before the date of the enactment 
     of this Act which--
       (1) applies to substantially all non-Federal acute care 
     hospitals in the State, and
       (2) regulates substantially all rates of payment (including 
     maximum charges) in the State for inpatient hospital 
     services, except payments made under title XVIII of the 
     Social Security Act (42 U.S.C. 1395 et seq.).
       (c) Health Insurance Reform System.--A State system is 
     described in this subsection if it is a State health 
     insurance reform system in operation before the date of the 
     enactment of this Act which requires any insurer (including a 
     health maintenance organization) to comply with requirements 
     governing open enrollment and community rating, including 
     premium adjustments or other health care assessments for the 
     purpose of risk adjustment.
       (d) Effective Dates.--
       (1) Subsection (b).--In the case of a State system 
     described in subsection (b), the provisions of this section 
     shall apply before, on, and after the date of the enactment 
     of this Act.
       (2) Subsection (c).--In the case of a State system 
     described in subsection (c), the provisions of this section 
     shall apply before, on, and after the date of the enactment 
     of this Act, and before the effective date of section 1116 of 
     this Act.

         Subpart B--Requirements for State Single-Payer Systems

     SEC. 1531. SINGLE-PAYER SYSTEM DESCRIBED.

       The Secretary shall approve an application of a State to 
     operate a single-payer system if the Secretary finds that the 
     system--
       (1) meets the requirements of section 1532;
       (2)(A) in the case of a system offered throughout a State, 
     meets the requirements for a Statewide single-payer system 
     under section 1533; or
       (B) in the case of a system offered in a single community 
     rating area of a State, meets the requirements for an area 
     specific single-payer system under section 1534.

     SEC. 1532. GENERAL REQUIREMENTS FOR SINGLE-PAYER SYSTEMS.

       Each single-payer system shall meet the following 
     requirements:
       (1) Establishment by state.--The system is established 
     under State law, and State law provides for mechanisms to 
     enforce the requirements of the system.
       (2) Operation by state.--The system is operated by the 
     State or a designated agency of the State.
       (3) Enrollment of individuals.--
       (A) Mandatory enrollment of all community-rated 
     individuals.--The system shall provide for the enrollment of 
     all community-rated individuals residing in the State (or, in 
     the case of an area-specific single-payer system, in the 
     community rating area) who are not medicare-eligible 
     individuals.
       (B) Optional enrollment of medicare-eligible individuals.--
     At the option of the State and if the Secretary has approved 
     an application submitted by the State, the system may provide 
     for the enrollment of medicare-eligible individuals residing 
     in the State (or, in the case of an area-specific single-
     payer system, in the community rating area).
       (C) Optional enrollment of experience-rated individuals.--
     At the option of the State, a single-payer system may provide 
     for the enrollment of experience-rated individuals residing 
     in the State (or, in the case of an area-specific single-
     payer system, in the community rating area).
       (D) Options included in state system document.--A State may 
     not exercise any of the options described in subparagraphs 
     (B) or (C) for a year unless the State included a description 
     of the option in the submission of its system document to the 
     Secretary for the year under section 1501(a).
       (E) Exclusion of certain individuals.--A single-payer 
     system may not require the enrollment of veterans, active 
     duty military personnel, and American Indians.
       (4) Direct payment to providers.--
       (A) In general.--With respect to providers who furnish 
     items and services included in the standard benefits package 
     established under subtitle C to individuals enrolled in the 
     system, the State shall make payments directly, or through 
     fiscal intermediaries, to such providers and assume (subject 
     to subparagraph (B)) all financial risk associated with 
     making such payments.
       (B) Capitated payments permitted.--Nothing in subparagraph 
     (A) shall be construed to prohibit providers furnishing items 
     and services under the system from receiving payments on a 
     capitated, at-risk basis based on prospectively determined 
     rates.
       (5) Provision of standard benefits package.--
       (A) In general.--The system shall provide for coverage of 
     the standard benefits package established under subtitle C, 
     including the cost-sharing provided under the package 
     (subject to subparagraph (B)), to all individuals enrolled in 
     the system.
       (B) Imposition of reduced cost-sharing.--The system may 
     decrease the cost-sharing otherwise provided in the standard 
     benefits package established under subtitle C with respect to 
     any individuals enrolled in the system or any class of 
     services included in the package, so long as the system does 
     not increase the cost-sharing otherwise imposed with respect 
     to any other individuals or services.
       (6) Cost containment.--The system shall provide for 
     mechanisms to ensure, in a manner satisfactory to the 
     Secretary, that--
       (A) the rate of growth in health care spending will not be 
     higher than the target established under this Act;
       (B) the expenditures described in subparagraph (A) are 
     computed and effectively monitored;
       (C) automatic, mandatory, nondiscretionary reductions in 
     payments to health care providers will be imposed to the 
     extent required to assure that such per capita expenditures 
     do not exceed the applicable target referred to in 
     subparagraph (A); and
       (D) Federal payments to a single payer State or health care 
     coverage area shall be limited to the payments that would 
     have been made in the absence of the implementation of the 
     single payer system.
       (7) Federal payments.--The system shall provide for 
     mechanisms to ensure, in a manner satisfactory to the 
     Secretary, that Federal payments to a single-payer State or 
     community rating area shall be limited to the payments that 
     would have been made in the absence of the implementation of 
     the single-payer system.
       (8) Requirements generally applicable to standard health 
     plans.--The system shall meet the requirements applicable to 
     a standard health plan, except that--
       (A) the system does not have the authority provided to 
     standard health plans under section 1111(b)(3) (relating to 
     permissible limitations on the enrollment of community-rated 
     eligible individuals on the basis of limits on the plan's 
     capacity); and
       (B) the system is not required to meet the requirements of 
     sections 1116 (relating to rating limitations for community-
     rated market), 1118(a) (relating to plan solvency), and 
     section 1125 (relating to restrictions on the marketing of 
     plan materials).

     SEC. 1533. SPECIAL RULES FOR STATES OPERATING STATEWIDE 
                   SINGLE-PAYER SYSTEM.

       (a) In General.--In the case of a State operating a 
     Statewide single-payer system--
       (1) the State shall operate the system throughout the 
     State; and
       (2) except as provided in subsection (b), the State shall 
     meet the requirements for participating States under part 1.
       (b) Exceptions to Certain Requirements for Participating 
     States.--In the case of a State operating a Statewide single-
     payer system, the State is not required to meet the following 
     requirements otherwise applicable to participating States 
     under part 1:
       (1) Establishment of community rating and service areas.--
     The requirements of sections 1502(a) (relating to the 
     establishment of community rating areas) and 1502(b) 
     (relating to the designation of health plan service areas).
       (2) Other references inapplicable.--Any requirement which 
     the Secretary determines is not appropriate to apply to a 
     State single-payer system.
       (c) Financing.--
       (1) In general.--A State operating a Statewide single-payer 
     system shall provide for the financing of the system using, 
     at least in part, a payroll-based financing system that 
     requires employers to pay at least the amount that the 
     employers would be required to pay if the employers were 
     subject to the requirements of title X (determined without 
     regard to any effective date).
       (2) Use of financing methods.--Such a State may use, 
     consistent with paragraph (1), any other method of financing.
       (d) Single-Payer State Defined.--In this title, the term 
     ``single-payer State`' means a State with a Statewide single-
     payer system in effect that has been approved by the 
     Secretary in accordance with this part.

     SEC. 1534. SPECIAL RULES FOR COMMUNITY RATING AREA-SPECIFIC 
                   SINGLE-PAYER SYSTEMS.

       (a) In General.--In the case of a State operating a 
     community rating area specific single-payer system, except as 
     provided in subsection (b), the State shall meet the 
     requirements for participating States under part 1.
       (b) Exceptions to Certain Requirements for Participating 
     States.--
       (1) Establishment of service areas.--The requirement of 
     section 1502(b) (relating to the designation of health plan 
     service areas).
       (2) Other references inapplicable.--Any requirement which 
     the Secretary determines is not appropriate to apply to a 
     community rating area specific single-payer system.

    Subpart C--Early Implementation of Comprehensive State Programs

     SEC. 1541. EARLY IMPLEMENTATION OF COMPREHENSIVE STATE 
                   PROGRAMS

       (a) Application.--
       (1) In general.--In accordance with this section, each 
     State desiring to implement the reform standards established 
     in this Act before the applicable effective date for such 
     standards, may submit an application to the Secretary of 
     Health and Human Services and the Secretary of Labor to 
     request approval of a State comprehensive health care reform 
     program established under State law which meets the 
     requirements specified in subsection (b).
       (2) Establishment of criteria.--The Secretaries shall 
     establish not later than January 1, 1995, criteria for--
       (A) the approval of such applications, and
       (B) the continuing review of such State programs consistent 
     with the provisions of subpart B of part 1.
       (3) Expedited procedure.--The Secretaries shall establish 
     an expedited procedure for the consideration and disposition 
     of applications under this subsection. The procedure 
     established by the Secretaries shall provide that such 
     consideration and disposition be completed within 90 days, 
     and that if the application is approved, multistate employers 
     be notified of such approval.
       (b) Requirements Specified.--The State program shall be 
     consistent with the reform standards established in this Act 
     and the interim and final (if any) regulations promulgated by 
     the Secretaries, including--
       (1) a standardized benefits package meeting the 
     requirements established under subtitle C, or in the event 
     such requirements have not been fully promulgated on the date 
     of the application, the requirements for a qualified health 
     maintenance organization (as defined in section 1310(d) of 
     the Public Health Service Act (42 U.S.C. 300e-9(d));
       (2) insurance reforms and rating requirements as specified 
     under part 2 of subtitle B;
       (3) standards for health plans as specified under part 3 of 
     subtitle B;
       (4) the recognition of, and standards for, purchasing 
     cooperatives, as specified in part 2 of subtitle D;
       (5) compliance with the data collection and privacy 
     procedures established under subtitle B of title V;
       (6) consumer grievance process as specified in section 
     1123;
       (7) the imposition of employer and individual 
     responsibilities as specified in part 1 of subtitle D and 
     title X (determined without regard to any effective date);
       (8) the establishment of the subsidy program under this 
     Act; and
       (9) health care cost containment under this Act.
       (c) Qualification for Federal Funds.--For purposes of this 
     Act, a State with an approved State program under this 
     section shall be considered a participating State and shall 
     maintain such status if such State meets the requirements of 
     this Act as such provisions become effective.
       (d) Employer Certification Process.--In the case of any 
     multistate self-insured health plan, certification by the 
     plan to the Secretary of Labor that such plan is in 
     compliance with the applicable Federal standards described in 
     subsection (b) shall satisfy compliance with any State 
     program approved under this section.
       (e) Funding.--The Secretary of Health and Human Services 
     shall pay over to each State with an approved application 
     under this section for each calendar quarter ending before 
     1997 an amount equal to the estimated decrease in Federal 
     expenditures (net of any estimated decrease in Federal 
     revenues) for such quarter with respect to such State 
     resulting from the implementation of the State comprehensive 
     health care reform program.
                  Subtitle G--Miscellaneous Provisions

     SEC. 1601. PROVISION OF ITEMS OR SERVICES CONTRARY TO 
                   RELIGIOUS BELIEF OR MORAL CONVICTION.

       (a) In General.--A health professional or a health facility 
     may not be required to provide an item or service in the 
     standard benefit package if the professional or facility 
     objects to doing so on the basis of a religious belief or 
     moral conviction.
       (b) Notice.--A health professional or health facility that 
     intends to refuse to provide an item or service in the 
     standard benefit package under subsection (a), shall provide 
     written notice with respect to such item or service to any 
     health plan through which such professional or facility 
     offers or intends to offer items or services.

     SEC. 1602. ANTIDISCRIMINATION.

       (a) In General.--The Secretary of Health and Human 
     Services, and any State, health plan, purchasing cooperative, 
     employer, health program or activity receiving Federal 
     financial assistance, or other entity subject to this Act, 
     shall not directly or through contractual arrangements--
       (1) deny or limit access to or the availability of health 
     care services, or otherwise discriminate in connection with 
     the provision of health care services; or
       (2) limit, segregate, or classify an individual in any way 
     which would deprive or tend to deprive such individual of 
     health care services, or otherwise adversely affect his or 
     her access to health care services;

     on the basis of race, national origin, sex, religion, 
     language, income, age, sexual orientation, disability, health 
     status, or anticipated need for health services.
       (b) Application of Section to Specific Actions.--This 
     section shall apply to, but is not limited to, the following 
     actions:
       (1) The establishing of boundaries for community rating 
     areas under section 1502, the enrollment of individuals in a 
     health care plan or the marketing of a health care plan, and 
     the selection of providers or the setting of the terms or 
     conditions under which providers participate in a health care 
     plan or provider network.
       (2) The determination of the scope of services provided by 
     a health care plan, and the providing of such services and 
     determining of the site or location of health care 
     facilities.
       (c) Regulations.--Not later than 1 year after the date of 
     the enactment of this Act, the Secretary of Health and Human 
     Services shall issue regulations to carry out this section.
       (d) Effect on Other Laws. Nothing in this Act shall be 
     construed to limit the scope of, or the availability of 
     relief under, any other Federal or State law prohibiting 
     discrimination or providing relief therefore.

     SEC. 1603. NEUTRALITY CONCERNING UNION ORGANIZING.

       Amounts appropriated to carry out this Act may not be 
     utilized to assist, promote or deter union organizing.
                         TITLE II--NEW BENEFITS
   Subtitle A--Coverage of Outpatient Prescription Drugs in Medicare

     SEC. 2000. REFERENCES IN SUBTITLE.

       (a) Amendments to Social Security Act.--Except as otherwise 
     specifically provided, whenever in this subtitle 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 subtitle, 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.

     SEC. 2001. 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.''; 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:
       ``(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 (but only if provided as a covered 
     home infusion drug).
       ``(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;
       ``(B) when furnished as part of, or as incident to, 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); 
     or
       ``(C) which is listed under paragraph (2) of section 
     1927(d) (other than subparagraph (I) or (J) of such 
     paragraph) 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.
       ``(4) For purposes of this subsection, the term `medically 
     accepted indication', with respect to the use of an 
     outpatient drug, includes any use which has been approved by 
     the Food and Drug Administration for the drug, and includes 
     another use of the drug if--
       ``(A) the drug has been approved by the Food and Drug 
     Administration; and
       ``(B)(i) such use is supported by one or more citations 
     which are included (or approved for inclusion) in one or more 
     of the following compendia: the American Hospital Formulary 
     Service-Drug Information, the American Medical Association 
     Drug Evaluations, the United States Pharmacopoeia-Drug 
     Information, and other authoritative compendia as identified 
     by the Secretary, unless the Secretary has determined that 
     the use is not medically appropriate or the use is identified 
     as not indicated in one or more such compendia, or
       ``(ii) the carrier involved determines, based upon guidance 
     provided by the Secretary to carriers for determining 
     accepted uses of drugs, that such use is medically accepted 
     based on supportive clinical evidence in peer reviewed 
     medical literature appearing in publications which have been 
     identified for purposes of this clause by the Secretary.
     The Secretary may revise the list of compendia in 
     subparagraph (B)(i) designated as appropriate for identifying 
     medically accepted indications for drugs.
       ``(5)(A) For purposes of this subsection, 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) in 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, 1999, (and periodically 
     thereafter), the Secretary shall publish a list of the drugs, 
     and indications for such drugs, that are covered home 
     infusion drugs, with respect to which home infusion drug 
     therapy may be provided under this title.''.
       (c) Conforming Amendments Repealing Separate Coverage of 
     Certain Drugs and Products.--(1) Effective January 1, 1999, 
     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, 1999, 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, 1999, 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; and
       (B) in paragraph (11)--
       (i) by striking ``(11)(A)'' and inserting ``(11)'', and
       (ii) by striking subparagraphs (B) and (C).

     SEC. 2002. 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 1999, an amount equal to the amount determined 
     under clause (ii)(I);
       ``(II) for 2000, the amount (rounded to the nearest dollar) 
     that the Secretary estimates will ensure that the percentage 
     of individuals covered under this part (other than 
     individuals enrolled with an eligible organization under 
     section 1876, an organization described in section 
     1833(a)(1)(A), or a medicare drug benefit plan under section 
     1851) during the year who will incur expenses for covered 
     outpatient drugs equal to or greater than such amount will be 
     the same as the percentage for the previous year;
       ``(III) for 2001, an amount equal to the amount determined 
     under clause (ii)(II); and
       ``(IV) for any succeeding year, the amount (rounded to the 
     nearest dollar) that the Secretary estimates will ensure that 
     the percentage of individuals covered under this part (other 
     than individuals enrolled with an eligible organization under 
     section 1876, an organization described in section 
     1833(a)(1)(A), or a medicare drug benefit plan under section 
     1851) during the year who will incur expenses for covered 
     outpatient drugs equal to or greater than such amount will be 
     the same as the percentage for the previous year.

       ``(ii) For purposes of clause (i), the amount determined 
     under this clause is--

       ``(I) in 1999, an amount determined by the Secretary such 
     that the amount so determined will result in projected 
     incurred spending and administrative costs (net of projected 
     rebates under section 1851 and any portion of the part B 
     premium attributable to the covered outpatient drug benefit) 
     for providing payment under this title for covered outpatient 
     drugs that would be equal to a spending target equal to 
     $13,400,000,000; and
       ``(II) in 2001, an amount determined by the Secretary 
     (based on actual experience) that the Secretary estimates 
     will ensure that the percentage of individuals covered under 
     this part (other than individuals enrolled with an eligible 
     organization under section 1876, an organization described in 
     section 1833(a)(1)(A), or a medicare drug benefit plan under 
     section 1851) during the year who will incur expenses for 
     covered outpatient drugs equal to or greater than such amount 
     will be the same as the percentage that would have incurred 
     such expenses had actual experience in such incurred spending 
     and administrative costs (described in subclause (I)) for 
     1999 been equal to the spending target for 1999 (described in 
     subclause (I)).

       ``(iii) The Secretary shall promulgate the deductible 
     amount for 1999 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 1999, $1275; and
       ``(II) for any succeeding year, the amount (rounded to the 
     nearest dollar) that the Secretary estimates will ensure that 
     the percentage of individuals covered under this part (other 
     than individuals enrolled with an eligible organization under 
     section 1876, an organization described in section 
     1833(a)(1)(A), or a medicare drug benefit plan under section 
     1851) during the year who will incur expenses for covered 
     outpatient drugs equal to or greater than such amount will be 
     the same as the percentage for the previous year.

       ``(ii) The Secretary shall promulgate the out-of-pocket 
     limit for 1999 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 a 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) In general.--The Secretary shall determine, for the 
     dispensing or providing of a covered outpatient drug product 
     in the payment calculation period, the estimated acquisition 
     cost for the drug product. With respect to any covered 
     outpatient drug product, the estimated acquisition 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.
       ``(ii) 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 clause (i), 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) 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 to review the information provided.
       ``(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 1999, an amount equal to $5; 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) 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 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) Mail order pharmacy option.--
       ``(A) Establishment of mail order option.--The Secretary 
     may establish a competitive bidding process to award 
     contracts to mail order pharmacies for the provision of 
     covered outpatient drugs that are maintenance drugs to 
     individuals who opt to receive such drugs through the mail 
     order pharmacies. The payment amount for a covered outpatient 
     drug under this section to a mail order pharmacy under such a 
     contract shall be equal to the amount bid by such plan under 
     this subparagraph instead of the payment limit determined in 
     accordance with paragraph (4).
       ``(B) Sharing of savings.--To the extent that payment is 
     made under this section for maintenance drugs that are 
     provided through a mail order pharmacy pursuant to 
     subparagraph (A), an individual that opts to receive such 
     drugs from such pharmacy shall receive from the Secretary a 
     rebate or a contribution toward the individual's cost sharing 
     in an amount equal to 25 percent of the excess of the payment 
     limit determined in accordance with paragraph (4) over the 
     amount charged by the mail order pharmacy for such drug.
       ``(7) 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 to the extent 
     that the Secretary finds such a requirement to be feasible 
     and desirable, to implement such a requirement to be 
     effective on and after January 1, 2000.

       ``(C) Prior authorization.--
       ``(i) Development of list of misused drugs.--The Secretary 
     shall develop (and periodically) update a list of covered 
     outpatient drugs which the Secretary has determined, based on 
     data collected, may be subject to misuse or inappropriate 
     use. The Secretary shall provide a means for manufacturers to 
     appeal an initial decision to include a drug on the list.
       ``(ii) Prior authorization for drugs on list.--The 
     Secretary shall establish a process under which (subject to 
     clause (iii)) the Secretary may require advance approval for 
     any covered outpatient drug included on the list developed 
     under clause (i).
       ``(iii) Restrictions on denial of approval.--The Secretary 
     may not deny the approval of a drug under the process 
     established under clause (ii) 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 (as defined by the Secretary).

       ``(iv) Expansion to other drugs.--If the rate of growth of 
     payments under this part for covered outpatient drugs exceeds 
     the average rate of growth for parts A and B expenditures and 
     the Secretary finds such action to be feasible and desirable, 
     the Secretary may require advance approval under this 
     subparagraph for the dispensing of a covered outpatient drug 
     in cases where a more cost-effective therapeutically or 
     generically equivalent drug is available
       ``(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) 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.
       ``(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.--The Secretary shall 
     establish, by not later than January 1, 1998, a point-of-sale 
     electronic system for use by carriers and pharmacies in the 
     submission of information respecting covered outpatient drugs 
     dispensed to medicare beneficiaries under this part. Such 
     system shall be consistent with the standards established by 
     the National Council of Prescription Drug Programs.
       ``(10) Requiring pharmacy supplier numbers.--
       ``(A) In general.--Payment may not be made under this part 
     with respect to a covered outpatient drug dispensed by a 
     pharmacy unless the entity has obtained a supplier number 
     from the Secretary.
       ``(B) Standards for issuing supplier numbers.--The 
     Secretary may not issue a supplier number to an entity for 
     purposes of subparagraph (A) unless 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).
       ``(11) Study on pharmaceutical care services.--The 
     Secretary shall conduct a study to develop, in consultation 
     with actively practicing pharmacists, a payment methodology 
     (to be in addition to the administrative allowance 
     established under paragraph (5)) which is based upon and 
     reflects the reasonable charges for varying levels of 
     pharmacist services, including patient consultations provided 
     to individuals under this section. The Secretary shall submit 
     a report, including such recommendations as the Secretary 
     determines to be appropriate, to Congress on the methodology 
     developed under this paragraph not later than September 30, 
     1998.
       ``(12) Definitions.--In this subsection:
       ``(A) Multiple and single source drugs.--The terms 
     `multiple source drug' and `single source drug' have the 
     meanings given 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 calendar 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 established under 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 established 
     under 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''.
       (e) 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) 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''.
       (4) 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. 2003. 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 COVERED OUTPATIENT DRUGS

       ``Sec. 1850. (a) Requirement for Rebate Agreement.--In 
     order for payment to be available under this part for covered 
     outpatient drugs of a manufacturer dispensed or provided on 
     or after January 1, 1999, the manufacturer must have entered 
     into and have in effect a rebate agreement with the Secretary 
     meeting the requirements of subsection (b).
       ``(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.--
     Drugs subject to rebate with respect to a calendar quarter 
     are drugs which are dispensed or provided during such quarter 
     to individuals (other than individuals enrolled with an 
     entity with a contract under section 1876 or a medicare drug 
     benefit plan with a contract under section 1851) eligible for 
     benefits under this part, as reported to the Secretary.
       ``(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, 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 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 innovator-
     multiple source drug, 15 percent of the average manufacturer 
     retail price, or
       ``(ii) in the case of a noninnovator-multiple source drug, 
     insulin, or an enteral nutrient, 6 percent (or the applicable 
     percent if the Secretary implements the sliding scale 
     developed in accordance with paragraph (4)) 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 
     or 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.
       ``(4) Applicable percent.--
       ``(A) Noninnovator-multiple source drug.--
       ``(i) In general.--For purposes of this subparagraph, the 
     Secretary may develop and implement a sliding scale to 
     determine the applicable percent for rebates based on the 
     relationship between the average manufacturer retail price of 
     the noninnovator-multiple source drug and the average 
     manufacturer retail price of the equivalent innovator drug 
     (except as provided in subparagraph (B)).
       ``(ii) Sliding scale described.--The sliding scale 
     developed by the Secretary under clause (i) shall--

       ``(I) require that the applicable percent be not less than 
     2 percent and not be greater than 15 percent; and
       ``(II) ensure that the total level of rebates collected 
     under such a sliding scale would be equivalent to a flat 6 
     percent rebate on such drugs.

       ``(B) Enteral nutrients and insulin.--For purposes of this 
     subparagraph, the applicable percent for enteral nutrients 
     and insulin under the sliding scale would be equal to 6 
     percent.
       ``(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--
       ``(A) as the Secretary determines to be necessary to carry 
     out this section,
       ``(B) to permit the Comptroller General to review the 
     information provided, and
       ``(C) to permit the Director of the Congressional Budget 
     Office to review the information provided.
       ``(e) 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 given 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. 2004. PRESCRIPTION DRUG PAYMENT REVIEW COMMISSION.

       Part B of title XVIII is amended by inserting after section 
     1846 the following new section:


             ``prescription drug payment review commission

       ``Sec. 1847. (a)(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, one individual representing a research-
     based pharmaceutical company, and one individual representing 
     a biotechnology company.
       ``(b)(1) The Commission shall submit to Congress an annual 
     report no later than May 1 of each year, beginning with 
     1997--
       ``(A) concerning the implementation and the operation of 
     the coverage of covered outpatient drugs under this part, 
     including recommendations to Congress on changes to the 
     program to improve access to prescription drugs, the quality 
     of prescription drug care, and program efficiencies;
       ``(B) reviewing the process of contracting with medicare 
     drug benefits plans under section 1851;
       ``(C) concerning the fiscal soundness of the furnishing of 
     covered outpatient drugs under this part;
       ``(D) concerning the appropriateness, fairness and 
     effectiveness of the rebate structure under section 1850; and
       ``(E) concerning the advisability of developing a review 
     process to exempt small manufacturers of single source or 
     innovator multiple source drugs from rebates under section 
     1850 based on the manufacturer's sales and the historic 
     pricing of the manufacturer's products.
       ``(c) Section 1845(c)(1) shall apply to the Commission in 
     the same manner as it applies to the Physician Payment Review 
     Commission.
       ``(d) 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.''.

     SEC. 2005. 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 subsection (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 nursing or 
     pharmacy services and providing or arranging for the other 
     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 services 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 1999 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, 1999.

     SEC. 2006. MEDICARE DRUG BENEFIT PLANS.

       (a) In General.--Part B of title XVIII of the Social 
     Security Act (42 U.S.C. 1395 et seq.), as amended by section 
     2003, is further amended by adding at the end the following 
     new section:

     ``SEC. 1851. MEDICARE DRUG BENEFIT PLANS.

       ``(a) In General.--
       ``(1) General permission to contract.--The Secretary shall 
     enter into contracts with medicare drug benefit plans in a 
     State for the provision of covered outpatient drugs (as 
     defined in section 1861(t)(2)) (except as provided in 
     subsection (i)(3)(G)) to individuals entitled to benefits 
     under part A and enrolled under part B if the plan meets the 
     requirements of this section with respect to individuals 
     enrolled under this section.
       ``(2) Entities eligible to enter into a contract.--The 
     Secretary may enter into a contract under this section with a 
     medicare drug benefit plan that is--
       ``(A) a certified standard health plan but only if such 
     plan has not entered into a contract with the Secretary under 
     section 1876 in the State;
       ``(B) a network of chain and independent pharmacy 
     providers;
       ``(C) a pharmacy benefit management company; or
       ``(D) any other entity that the Secretary determines is 
     appropriate.
       ``(3) Availability of plans.--
       ``(A) In general.--Every individual entitled to benefits 
     under part A and enrolled under part B shall be eligible to 
     enroll under this section with any medicare drug benefit plan 
     with a contract under this section which serves the State in 
     which the individual resides.
       ``(B) Enrollment by an individual.--In accordance with the 
     enrollment periods established under subsection (e)(1), an 
     individual may enroll under this section with a medicare drug 
     benefit plan with a contract under this section only through 
     a third party designated by the Secretary in regulations and 
     the individual may only terminate enrollment in accordance 
     with subsection (e)(2).
       ``(C) Information distributed by the secretary.--
       ``(i) In general.--The Secretary shall develop and 
     distribute comparative materials to individuals eligible to 
     enroll under this section regarding all medicare drug benefit 
     plans with contracts under this section, the availability of 
     payment for covered outpatient drugs under section 1834(d), 
     and the availability of covered outpatient drugs to enrollees 
     of entities with contracts under section 1876. Each medicare 
     drug benefit plan with a contract in the State shall 
     contribute to the cost of developing and distributing such 
     materials in accordance with a method to be determined by the 
     Secretary. The Secretary shall include in such comparative 
     materials a notice that each medicare drug benefit plan with 
     a contract under this section is authorized by law to 
     terminate or refuse to renew the contract, and that 
     termination or nonrenewal of the contract may result in 
     termination of the enrollments of individuals enrolled with 
     the plan under this section.
       ``(ii) Provision of information by the plan.--Each medicare 
     drug benefit plan with a contract under this section shall 
     collect and provide such standard information as the 
     Secretary shall prescribe by regulation as necessary to 
     evaluate the performance and quality of such plan, including 
     enrollee satisfaction, and to compare such performance and 
     quality with competing plans.
       ``(4) Payments.--
       ``(A) Payments in lieu of normal payments.--Payments under 
     a contract to a medicare drug benefit plan under this section 
     shall be instead of the amounts which (in the absence of the 
     contract) would be otherwise payable, pursuant to section 
     1834, for covered outpatient drugs furnished by or through 
     the plan to individuals enrolled with the plan under this 
     section.
       ``(B) Source of payment.--The payment to a medicare drug 
     benefit plan under this section for individuals enrolled 
     under this section with the plan and entitled to benefits 
     under part A and enrolled under part B shall be made from the 
     Federal Supplementary Medical Insurance Trust Fund.
       ``(5) Definitions.--
       ``(A) Service area.--The term `health plan service area' 
     means a health plan service area designated by the State 
     under section 1502(d) of the Health Security Act.
       ``(B) Certified standard health plan.--The term `certified 
     standard health plan' has the meaning given such term in 
     section 1011(2) of the Health Security Act.
       ``(b) Payment Rules under Contracts.--
       ``(1) In General.--
       ``(A) Payments.--With respect to any calendar year, each 
     medicare drug benefit plan with a contract under this section 
     shall receive a payment under this title with respect to each 
     individual enrolled with the plan for each month such 
     individual is enrolled equal to the applicable monthly 
     percentage of the lesser of--
       ``(i) 95 percent of the fee for service component 
     determined under paragraph (2)(B)(i) adjusted by the rate 
     factor determined under subparagraph (C) for the class of 
     such individual; or
       ``(ii) the medicare drug benefit plan component determined 
     under paragraph (2)(B)(ii) for the plan's service area 
     adjusted by the rate factor determined under subparagraph (C) 
     for the class of such individual.
       ``(B) Applicable monthly percentage.--For purposes of 
     subparagraph (A), the Secretary shall annually set the 
     applicable monthly percentage for each month of the calendar 
     year. Such percentage for a month shall be equal to the 
     Secretary's estimate of the proportion of the total covered 
     outpatient drug benefit incurred in such month under section 
     1834 to the total covered outpatient drug benefit incurred 
     for such year under section 1834.
       ``(C) Determination of classes of individuals and rate 
     factors for such classes.--
       ``(i) Determination of classes.--For purposes of this 
     section, the Secretary shall define appropriate classes of 
     individuals based on such factors as the Secretary determines 
     to be appropriate.
       ``(ii) Rate factors.--The Secretary shall annually 
     determine the rate factors for each class of individuals 
     defined in clause (i) reflecting the differences in the 
     average per capita spending for providing covered outpatient 
     drug coverage under part B among individuals in such classes.
       ``(2) Determination of payment rate.--
       ``(A) Determination by secretary.--The Secretary shall 
     annually determine under subparagraph (B), and shall announce 
     (in a manner intended to provide notice to interested 
     parties) not later than October 1 before the calendar year 
     concerned, the payment for each service area.
       ``(B) Formulas for determining payment amounts.--
       ``(i) Fee-for-service component.--The amount determined 
     under this clause is the projected average annual per capita 
     drug fee-for-service costs (as defined in subparagraph (D)) 
     for covered outpatient drugs for the service area for 
     individuals not enrolled in medicare drug benefit plans with 
     contracts under this section or entities with contracts under 
     section 1876, adjusted by the factor described in clause 
     (ii)(I).
       ``(ii) Medicare drug benefit plan component.--The medicare 
     drug benefit plan component determined under this clause is 
     the sum of the following amounts determined with respect to 
     each medicare drug benefit plan--

       ``(I) the amount of the uniform annual premium submitted by 
     the plan to the Secretary under subparagraph (C), adjusted by 
     a factor determined by the Secretary to normalize the 
     difference in the distribution of individuals projected to be 
     enrolled in the plan among the various classes of individuals 
     defined by the Secretary to the national distribution of all 
     individuals in the program under this title among such 
     classes; multiplied by
       ``(II) a fraction (expressed as a percentage), the 
     numerator of which is the number of all individuals enrolled 
     in the plan (as projected by the plan using either historical 
     experience or some other methodology developed by the 
     Secretary), and the denominator of which is the number of all 
     individuals enrolled in all medicare drug benefit plans in 
     the service area.

       ``(C) Uniform annual premiums; premium for additional 
     services.--
       ``(i) In general.--Each medicare drug benefit plan shall, 
     not later than August 1 of each year, submit to the Secretary 
     a bid for the next calendar year for each service area with 
     respect to which the plan proposes to serve under a contract 
     under this section. A bid with respect to a service area 
     shall include the following:

       ``(I) Uniform annual premium.--A statement of the uniform 
     annual premium amount that the plan intends to charge for 
     individuals enrolled under this section with the plan.
       ``(II) Premium for supplemental plan.--A statement of the 
     fixed monthly premium amount that the plan intends to charge 
     for each supplemental plan offering additional cost-sharing 
     benefits.

       ``(ii) Notice before bid submissions.--At least 45 days 
     before the date for submitting bids under clause (i) for a 
     year, the Secretary shall provide for notice to medicare drug 
     benefit plans of--

       ``(I) proposed changes to be made in the methodology or 
     benefit coverage assumptions from the methodology and 
     assumptions used in the previous calendar year and shall 
     provide such plans an opportunity to comment on such proposed 
     changes;
       ``(II) the applicable monthly percentage for each month of 
     the calendar year as determined by the Secretary under 
     paragraph (1)(B); and
       ``(III) the rate factors for such calendar year determined 
     under paragraph (1)(C).

       ``(D) Projected average annual per capita fee-for-service 
     costs.--
       ``(i) In general.--For purposes of subparagraph (B), the 
     term `projected average annual per capita drug fee-for-
     service costs' means, with respect to a service area, the 
     annual amount that the Secretary estimates in advance would 
     be payable in any contract year for providing payment for 
     covered outpatient drugs for individuals enrolled under part 
     B (including administrative costs incurred by organizations 
     described in section 1842), if the services were to be 
     furnished by other than a medicare drug benefit plan with a 
     contract under this section or by an entity with a contract 
     under section 1876.
       ``(ii) Basis for estimates.--The estimate made by the 
     Secretary under clause (i) shall be made on the basis of 
     actual experience of the service area or, if the Secretary 
     determines that the data in that service area are inadequate 
     to make an accurate estimate, the Secretary may use the 
     actual experience of a similar area, with appropriate 
     adjustments to assure actuarial equivalence, including 
     adjustments the Secretary may determine appropriate to adjust 
     for demographics, health status, and the presence of specific 
     medical conditions. For the first 2 years that contracts are 
     entered into under this section, the Secretary shall base 
     such estimates on the best available data.
       ``(3) Payment rules.--
       ``(A) Amount of premium.--
       ``(i) Standard package.--Each medicare drug benefit plan 
     with a contract under this section must provide to 
     individuals enrolled with the plan under this section, for 
     each month of the duration of such enrollment during each 
     contract period, the coverage described in subsection (d) for 
     the lesser of--

       ``(I) the applicable monthly percentage of the uniform 
     annual premium amount submitted under paragraph (2)(C)(i)(I); 
     or
       ``(II) the applicable monthly percentage of the amount 
     described in subsection (b)(1)(A).

       ``(ii) Supplemental plan.--

       ``(I) In general.--Each medicare drug benefit plan with a 
     contract under this section must provide to individuals 
     enrolled with the plan under this section, for the duration 
     of such enrollment during each contract period, a fixed 
     monthly premium for the supplemental plan described in 
     paragraph (2)(C)(i)(II) equal to the premium amount 
     determined by the plan under such paragraph. An individual 
     that elects to enroll in the supplemental plan shall be 
     responsible for paying to the plan the fixed monthly premium 
     amount described in the preceding sentence.
       ``(II) Payment greater than fixed monthly premium.--If, 
     with respect to any individual enrolled in a medicare drug 
     benefit plan with a contract under this section, the amount 
     paid to the plan under subsection (b)(1)(A) exceeds the 
     applicable monthly percentage of the uniform annual premium 
     amount submitted under paragraph (2)(C)(i)(I), the plan shall 
     apply such excess to a premium for any supplemental policy 
     described in paragraph (2)(C)(ii) that the individual may 
     elect. If the individual does not elect such a policy, the 
     medicare drug benefit plan shall pay such excess to the 
     Secretary for deposit in the Federal Supplementary Medical 
     Insurance Trust Fund.

       ``(B) Monthly payments.--
       ``(i) In general.--The Secretary shall make monthly 
     payments in advance and in accordance with the rate 
     determined under paragraph (1)(A) to each medicare drug 
     benefit plan with a contract under this section for each 
     individual enrolled with the plan under this section.
       ``(ii) Adjustments.--The amount of payment under this 
     subparagraph may be retroactively adjusted to take into 
     account any difference between the actual number of 
     individuals enrolled in the plan under this section and the 
     number of such individuals estimated to be so enrolled in 
     determining the amount of the advance payment.
       ``(iii) Payment to plan only.--If an individual is enrolled 
     under this section with a medicare drug benefit plan with a 
     contract under this section, only the plan shall be entitled 
     to receive payments from the Secretary under this title for 
     covered outpatient drugs furnished to the individual.
       ``(d) Coverage of Benefits.--
       ``(1) Drugs provided.--A medicare drug benefit plan with a 
     contract under this section must provide to individuals 
     enrolled in the plan under this section covered outpatient 
     drugs (as defined in section 1861(t)(2)), except as provided 
     in subsection (i)(3)(G).
       ``(2) Provision of medically necessary care.--Each medicare 
     drug benefit plan with a contract under this section must--
       ``(A) make the covered outpatient drugs described in 
     paragraph (1)--
       ``(i) available and accessible to enrolled individuals 
     within the State with reasonable promptness and in a manner 
     which assures continuity, and
       ``(ii) when medically necessary, available and accessible 
     twenty-four hours a day and seven days a week, and
       ``(B) provide for reimbursement with respect to drugs which 
     are described in subparagraph (A) and which are provided to 
     such an individual other than through the plan, if--
       ``(i) the drugs were medically necessary and immediately 
     required because of an unforeseen illness, injury, or 
     condition, and
       ``(ii) it was not reasonable given the circumstances to 
     obtain the drugs through the plan.
       ``(3) Cost-sharing.--Each medicare drug benefit plan with a 
     contract under this section must provide to individuals 
     enrolled under this section with respect to the drugs 
     described in paragraph (1), cost-sharing requirements that 
     are equal to 95 percent of the actuarial value of the cost 
     sharing requirements under section 1834.
       ``(4) Cost-sharing for supplemental plans.--A supplemental 
     plan may not have cost-sharing that applies differential 
     cost-sharing based on the therapeutic class of drug 
     prescribed or other cost-sharing structures that the 
     Secretary determines would be likely to discourage enrollment 
     by individuals with medical conditions that require extensive 
     use of prescription drugs.
       ``(5) Actuarial equivalence of standard plan and 
     supplemental plan.--The premium charged to an individual 
     enrolled under this section for a supplemental policy that 
     eliminates or reduces the cost-sharing requirement imposed on 
     such individual and the actuarial value of any remaining 
     cost-sharing requirement under the plan shall not exceed 95 
     percent of the actuarial value of the cost-sharing 
     requirements under section 1834.
       ``(e) Enrollment.--
       ``(1) Enrollment periods.--Each medicare drug benefit plan 
     with a contract under this section must have a uniform open 
     enrollment period (which shall be the period specified by the 
     Secretary under section 1876(c)(3)(A)(i)), for the enrollment 
     of individuals under this section, of at least 30 days 
     duration every year. The plan must also have additional 
     enrollment periods in accordance with the enrollment periods 
     required under clauses (ii), (iii), and (iv) of section 
     1876(c)(3)(A).
       ``(2) Termination.--An individual may only terminate an 
     individual's enrollment with a medicare drug benefit plan 
     during an open enrollment period described in paragraph (1).
       ``(3) Nondiscrimination.--The medicare drug benefit plan 
     must provide assurances to the Secretary that it will not 
     discriminate against any individual because of the 
     individual's health status, requirements for covered 
     outpatient drugs, claims experience, medical history, or 
     other factors that are generally related to the need for 
     covered outpatient drugs and that it will notify each 
     individual of such fact at the time of the individual's 
     enrollment.
       ``(4) Notice of rights, etc.--Each medicare drug benefit 
     plan with a contract under this section shall provide each 
     enrollee, at the time of enrollment and not less frequently 
     than annually thereafter, an explanation of the enrollee's 
     rights under this section, including an explanation of--
       ``(A) the enrollee's rights to benefits from the plan,
       ``(B) the restrictions on payments under this title for 
     covered outpatient drugs furnished other than by or through 
     the plan,
       ``(C) out-of-plan coverage provided by the plan, and
       ``(E) appeal rights of enrollees.
       ``(f) Membership Requirements.--
       ``(1) Non-medicare requirement.--
       ``(A) In general.--Each entity with a contract under this 
     section shall provide that at least \1/2\ of the individuals 
     who are provided with drug coverage by the entity are 
     individuals who are not enrolled in a medicare drug benefit 
     plan under this section.
       ``(B) Suspension of enrollment.--If the Secretary 
     determines that a medicare drug benefit plan with a contract 
     under this section has failed to comply with the requirements 
     of this subsection, the Secretary may provide for the 
     suspension of enrollment of individuals under this section or 
     of payment to the plan under this section for individuals 
     newly enrolled with the plan, after the date the Secretary 
     notifies the plan of such noncompliance.
       ``(2) 5000 individuals.--Each medicare drug benefit plan 
     with a contract under this section shall provide covered 
     outpatient drug coverage to at least 5000 individuals, except 
     that the Secretary may enter into such a contract with a 
     medicare drug benefit plan that has fewer enrollees if the 
     plan primarily serves members residing outside of urbanized 
     areas.
       ``(g) Payment Rules for Plans.--
       ``(1) Subrogation rights.--Notwithstanding any other 
     provision of law, the medicare drug benefit plan may, (in the 
     case of the provision of covered outpatient drugs to an 
     individual enrolled under this section for a drug for which 
     the member is entitled to benefits under a workmen's 
     compensation law or plan of the United States or a State, 
     under an automobile or liability insurance policy or plan, 
     including a self-insured plan, under no fault insurance, or 
     under a primary plan (as defined in section 1862(b)(2)(A)) 
     charge or authorize the provider of such services to charge, 
     in accordance with the charges allowed under such law or 
     policy--
       (A) the insurance carrier, employer, or other entity which 
     under such law, plan, or policy is to pay for the provision 
     of such services, or
       (B) such enrollee to the extent that the enrollee has been 
     paid under such law, plan, or policy for such services.
       ``(2) Prompt payment requirement.--
       ``(A) In general.--A contract under this section shall 
     require the medicare drug benefit plan to provide prompt 
     payment (consistent with the provisions of section 
     1842(c)(4)) of claims submitted for covered outpatient drugs 
     furnished to individuals pursuant to such contract, if the 
     drugs are not furnished under a contract between the plan and 
     the provider or supplier.
       ``(B) Failure.--In the case of a plan which the Secretary 
     determines, after notice and opportunity for a hearing, has 
     failed to make payments of amounts in compliance with 
     subparagraph (A), the Secretary may provide for direct 
     payment of the amounts owed to providers and suppliers for 
     such covered services furnished to individuals enrolled under 
     this section under the contract. If the Secretary provides 
     for such direct payments, the Secretary shall provide for an 
     appropriate reduction in the amount of payments otherwise 
     made to the plan under this section to reflect the amount of 
     the Secretary's payments (and costs incurred by the Secretary 
     in making such payments).
       ``(h) Duration, Termination, Effective Date, and Terms of 
     Contract; Powers and Duties of Secretary.--
       ``(1) Duration and termination.--
       ``(A) In general.--Except as provided in subparagraph (B), 
     each contract under this section shall be for a term of at 
     least one year, as determined by the Secretary, and may be 
     made automatically renewable from term to term in the absence 
     of notice by either party of intention to terminate at the 
     end of the current term.
       ``(B) Exception.--The Secretary may terminate a contract at 
     any time (after such reasonable notice and opportunity for 
     hearing to the medicare drug benefit plan involved as the 
     Secretary may provide in regulations), if the Secretary finds 
     that the plan--
       ``(i) has failed substantially to carry out the contract,
       ``(ii) is carrying out the contract in a manner 
     inconsistent with the efficient and effective administration 
     of this section, or
       ``(iii) no longer substantially complies with the 
     requirements of this section.
       ``(2) Effective date.--The effective date of any contract 
     executed pursuant to this section shall be specified in the 
     contract.
       ``(3) Terms.--Each contract under this section--
       ``(A) shall provide that the Secretary, or any person or 
     organization designated by the Secretary--
       ``(i) shall have the right to inspect or otherwise 
     evaluate--

       ``(I) the quality, appropriateness, and timeliness of drugs 
     provided under the contract, and
       ``(II) the facilities of the organization when there is 
     reasonable evidence of some need for such inspection, and

       ``(ii) shall have the right to audit and inspect any books 
     and records of the medicare drug benefit plan that pertain--

       ``(I) to the ability of the plan to bear the risk of 
     potential financial losses, or
       ``(II) to drugs provided or determinations of amounts 
     payable under the contract;

       ``(B) shall require the plan with a contract to provide 
     (and pay for) written notice in advance of the contract's 
     termination, as well as a description of alternatives for 
     obtaining benefits under this title, to each individual 
     enrolled under this section with the plan;
       ``(C)(i) shall require the plan to comply with subsections 
     (a) and (c) of section 1318 of the Public Health Service Act 
     (relating to disclosure of certain financial information) and 
     with the requirement of section 1301(c)(8) of such Act 
     (relating to liability arrangements to protect members);
       ``(ii) shall require the plan to provide and supply 
     information determined appropriate by the Secretary in the 
     manner determined appropriate by the Secretary; and
       ``(iii) shall require the plan to notify the Secretary of 
     loans and other special financial arrangements which are made 
     between the plan and subcontractors, affiliates, and related 
     parties; and
       ``(D) shall contain such other terms and conditions not 
     inconsistent with this section (including requiring the 
     organization to provide the Secretary with such information) 
     as the Secretary may find necessary and appropriate.
       ``(4) Period of disqualification.--The Secretary may not 
     enter into a contract with a medicare drug benefit plan if a 
     previous contract with that plan under this section was 
     terminated at the request of the plan within the preceding 5-
     year period or if the plan submits a bid under subsection 
     (b)(2)(C) and does not enter into a contract, except in 
     circumstances which warrant special consideration, as 
     determined by the Secretary.
       ``(5) Disregard of certain inconsistent laws, etc.--The 
     authority vested in the Secretary by this section may be 
     performed without regard to such provisions of law or 
     regulations relating to the making, performance, amendment, 
     or modification of contracts of the United States as the 
     Secretary may determine to be inconsistent with the 
     furtherance of the purpose of this title.
       ``(6) Findings of failure.--
       ``(A) In general.--If the Secretary determines that 
     medicare drug benefit plan with a contract under this 
     section--
       ``(i) fails substantially to provide medically necessary 
     covered outpatient drugs that are required (under law or 
     under the contract) to be provided to an individual covered 
     under the contract, if the failure has adversely affected (or 
     has substantial likelihood of adversely affecting) the 
     individual;
       ``(ii) imposes premiums on individuals enrolled under this 
     section in excess of the premiums permitted;
       ``(iii) acts to expel or to refuse to re-enroll an 
     individual in violation of the provisions of this section;
       ``(iv) engages 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 plan whose medical condition or history 
     indicates a need for substantial future covered outpatient 
     drugs;
       ``(v) misrepresents or falsifies information that is 
     furnished--

       ``(I) to the Secretary under this section, or
       ``(II) to an individual or to any other entity under this 
     section;

       ``(vi) employs or contracts with any individual or entity 
     that is excluded from participation under this title under 
     section 1128 or 1128A for the provision of health care, 
     utilization review, medical social work, or administrative 
     services or employs or contracts with any entity for the 
     provision (directly or indirectly) through such an excluded 
     individual or entity of such services;
     the Secretary may provide, in addition to any other remedies 
     authorized by law, for any of the remedies described in 
     subparagraph (B).
       ``(B) Remedies.--The remedies described in this 
     subparagraph are--
       ``(i) civil money penalties of not more than $25,000 for 
     each determination under subparagraph (A) or, with respect to 
     a determination under clause (iv) or (v)(I) of such 
     subparagraph, of not more than $100,000 for each such 
     determination, plus, with respect to a determination under 
     subparagraph (A)(ii), double the excess amount charged in 
     violation of such subparagraph (and the excess amount charged 
     shall be deducted from the penalty and returned to the 
     individual concerned), and plus, with respect to a 
     determination under subparagraph (A)(iv), $15,000 for each 
     individual not enrolled as a result of the practice involved,
       ``(ii) suspension of enrollment of individuals under this 
     section after the date the Secretary notifies the plan of a 
     determination under subparagraph (A) and until the Secretary 
     is satisfied that the basis for such determination has been 
     corrected and is not likely to recur, or
       ``(iii) suspension of payment to the plan under this 
     section for individuals enrolled after the date the Secretary 
     notifies the plan of a determination under subparagraph (A) 
     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 clause 
     (i) in the same manner as they apply to a civil money penalty 
     or proceeding under section 1128A(a).
       ``(i) Other General Requirements on Plans.--
       ``(1) Grievance procedures.--Each medicare drug benefit 
     plan with a contract under this section must provide 
     meaningful procedures for hearing and resolving grievances 
     between the plan (including any entity or individual through 
     which the plan provides health care services) and individuals 
     enrolled with the plan under this section.
       ``(2) Appeals.--An individual enrolled with a medicare drug 
     benefit plan under this section who is dissatisfied by reason 
     of the individual's failure to receive any covered outpatient 
     drug to which the individual believes the individual is 
     entitled and at no greater charge than the individual 
     believes the individual is required to pay is entitled, if 
     the amount in controversy is $100 or more, to a hearing 
     before the Secretary to the same extent as is provided in 
     section 205(b), and in any such hearing the Secretary shall 
     make the plan a party. If the amount in controversy is $1,000 
     or more, the individual or plan shall, upon notifying the 
     other party, be entitled to judicial review of the 
     Secretary's final decision as provided in section 205(g), and 
     both the individual and the plan shall be entitled to be 
     parties to that judicial review.
       ``(3) Additional requirements.--Not later then January 1, 
     1998, the Secretary shall establish standards for additional 
     requirements for medicare drug benefit plans with contracts 
     under this section, that to the extent possible are 
     consistent with the standards relating to eligible 
     organizations that have entered into risk contracts under 
     section 1876, and which provide that a medicare drug benefit 
     plan--
       ``(A) must demonstrate financial solvency;
       ``(B) must demonstrate the ability to provide benefits to 
     all potential enrollees throughout the State served by the 
     plan;
       ``(C) must not engage in marketing or other practices 
     designed to discourage or limit the issuance of a medicare 
     outpatient drug coverage plan to any potential enrollee on 
     the basis of health status, claims experience, medical 
     history, or other factors that are generally related to 
     utilization of covered outpatient drugs;
       ``(D) must inform individuals eligible to enroll with the 
     plan about the plan only in accordance with procedures and 
     conditions determined by the Secretary and may not distribute 
     promotional or informational material unless--
       ``(i) at least 45 days before its distribution, the plan 
     has submitted the material to the Secretary for review,
       ``(ii) the material is made available to all individuals 
     eligible to enroll in the plan in the State served by the 
     plan, and
       ``(iii) the Secretary has not disapproved the distribution 
     of the material due to a determination that in the 
     Secretary's discretion, the material is materially inaccurate 
     or misleading or otherwise makes a material 
     misrepresentation; and
       ``(E) must provide convenient access to pharmacies for 
     individuals in each zip code region of the State taking into 
     account the special needs of individuals who are enrolled in 
     part B;
       ``(F) in addition to the access described in subparagraph 
     (E), may provide enrollees with a mail-order pharmacy option;
       ``(G) may establish a formulary system (to be maintained 
     throughout the 1-year contract period) which ensures that--
       ``(i) the formulary shall cover at least one covered 
     outpatient drug in each therapeutic class of drugs 
     representing a unique mechanism of action (as defined by the 
     Secretary); and
       ``(ii) that any covered outpatient drug excluded by the 
     formulary is subject to a prior authorization process in 
     which the plan may not deny approval of any drug unless the 
     plan complies with the process described in section 
     1834(d)(7)(C)(iii);
       ``(H) must disclose any special relationships or 
     arrangements with drug manufacturers, including ownership 
     arrangements, distribution arrangements, or alliances;
       ``(I) must have standards to assure the appropriate use of 
     outpatient prescription medications, including a program of 
     prospective and retrospective drug use review, consistent 
     with standards under the drug use review program developed by 
     the Secretary under section 1834(d)(7), including for any 
     mail order services operated or used by the plan; and
       ``(J) is able to process claims for outpatient prescription 
     drugs under the program through an on-line real time point of 
     sale system, and has developed a process for processing out-
     of-area claims.
       (c) Effective Date.--The amendments made by this section 
     shall be effective with respect to contracts which became 
     effective on or after January 1, 1999.

     SEC. 2007. PAYMENT FOR COVERED OUTPATIENT DRUG BENEFIT UNDER 
                   MEDICARE CONTRACTS WITH HMOS AND CMPS.

       (a) In General.--In providing for payments for the covered 
     outpatient drug benefit, as added by section 2001, to 
     entities with risk contracts under section 1876 of the Social 
     Security Act, the Secretary of Health and Human Services may 
     base such payment on classes of enrollees or geographic 
     factors that are different than the classes or geographic 
     factors otherwise utilized for determining payment under such 
     section.
       (b) Effective Date.--This section shall apply to contracts 
     entered into on or after January 1, 1999.

     SEC. 2008. MAINTENANCE OF EFFORT.

       (a) Maintenance of Effort with Respect to Prescription 
     Drugs.--Section 1862(b)(1) (42 U.S.C. 1395y(b)(1)) is amended 
     by adding at the end the following new subparagraph:
       ``(F) Prescription drugs.--
       ``(i) In general.--A group health plan may not take into 
     account that an individual (or the individual's spouse) who 
     is covered under the plan by virtue of the individual's 
     current retirement status with an employer may be eligible to 
     receive covered outpatient drug coverage under part B, except 
     that this subparagraph shall not prohibit a plan from taking 
     into account that an individual is eligible to receive 
     covered outpatient drug coverage under part B on or after 
     January 1, 2002. To the extent that the group health plan 
     furnishes prescription drugs pursuant to a collectively 
     bargained agreement, this subparagraph shall prohibit a plan 
     from taking into account that an individual is eligible to 
     receive covered outpatient drug coverage under part B for the 
     greater of the period of the agreement or until January 1, 
     2002.
       ``(ii) Current retirement status.--An individual has 
     `current retirement status' with an employer if the 
     individual no longer has current employment status due to the 
     individual's retirement from such employment status.''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to group health plans offering prescription drug 
     coverage on or after January 1, 1994.
             Subtitle B--Home and Community-Based Services

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

     SEC. 2101. STATE PROGRAMS FOR HOME AND COMMUNITY-BASED 
                   SERVICES FOR INDIVIDUALS WITH DISABILITIES.

       (a) In General.--Each State that has a plan for home and 
     community-based services for individuals with disabilities 
     submitted to and approved by the Secretary under section 
     2102(b) is entitled to payment in accordance with section 
     2108.
       (b) Entitlement to Services.--Nothing in this subtitle 
     shall be construed to create a right to services for 
     individuals or a requirement that a State with an approved 
     plan expend the entire amount of funds to which it is 
     entitled under this subtitle.
       (c) Designation of Agency.--Not later than 6 months after 
     the date of enactment of this subtitle, the Secretary shall 
     designate an agency responsible for program administration 
     under this subtitle.

     SEC. 2102. STATE PLANS.

       (a) Plan Requirements.--In order to be approved under 
     subsection (b), a State plan for home and community-based 
     services for individuals with disabilities must meet the 
     following requirements:
       (1) State maintenance of effort.--
       (A) In general.--A State plan under this subtitle shall 
     provide that the State will, during any fiscal year that the 
     State is furnishing services under this subtitle, make 
     expenditures of State funds in an amount equal to the State 
     maintenance of effort amount for the year determined under 
     subparagraph (B) for furnishing the services described in 
     subparagraph (C) under the State plan under this subtitle or 
     the State plan under title XIX of the Social Security Act.
       (B) State maintenance of effort amount.--
       (i) In general.--The maintenance of effort amount for a 
     State for a fiscal year is an amount equal to--

       (I) for fiscal year 1998, the base amount for the State (as 
     determined under clause (ii)) updated through the midpoint of 
     fiscal year 1998 by the estimated percentage change in the 
     index described in clause (iii) during the period beginning 
     on October 1, 1994, and ending at that midpoint; and
       (II) for succeeding fiscal years, an amount equal to the 
     amount determined under this clause for the previous fiscal 
     year updated through the midpoint of the year by the 
     estimated percentage change in the index described in clause 
     (iii) during the 12-month period ending at that midpoint, 
     with appropriate adjustments to reflect previous 
     underestimations or overestimations under this clause in the 
     projected percentage change in such index.

       (ii) State base amount.--The base amount for a State is an 
     amount equal to the total expenditures from State funds made 
     under the State plan under title XIX of the Social Security 
     Act during fiscal year 1994 with respect to medical 
     assistance consisting of the services described in 
     subparagraph (C).
       (iii) Index described.--For purposes of clause (i), the 
     Secretary shall develop an index which reflects the projected 
     increases in spending for services under subparagraph (C), 
     adjusted for differences among the States.
       (C) Medicaid services described.--The services described in 
     this subparagraph are the following:
       (i) Personal care services (as described in section 
     1905(a)(24) of the Social Security Act).
       (ii) Home or community-based services furnished under a 
     waiver granted under subsection (c), (d), or (e) of section 
     1915 of such Act.
       (iii) Home and community care furnished to functionally 
     disabled elderly individuals under section 1929 of such Act.
       (iv) Community supported living arrangements services under 
     section 1930 of such Act.
       (2) Eligibility.--
       (A) In general.--Except as provided in subparagraph (B), 
     within the amounts provided by the State and under section 
     2108 for such plan, the plan shall provide that services 
     under the plan will be available to individuals with 
     disabilities (as defined in section 2103(a)) in the State.
       (C) Initial screening.--The plan shall provide a process 
     for the initial screening of an individual who appears to 
     have some reasonable likelihood of being an individual with 
     disabilities. Any such process shall require the provision of 
     assistance to individuals who wish to apply but whose 
     disability limits their ability to apply. The initial 
     screening and the determination of disability (as defined 
     under section 2103(b)(1)) shall be conducted by a public 
     agency.
       (D) Restrictions.--The plan may not limit the eligibility 
     of individuals with disabilities based on--
       (i) income,
       (ii) age,
       (iii) residential setting (other than an institutional 
     setting), or
       (iv) other grounds specified by the Secretary.
       (E) Continuation of services.--The plan must provide 
     assurances that, in the case of an individual receiving 
     medical assistance for home and community-based services 
     under the State medicaid plan under title XIX of the Social 
     Security Act as of the date a State's plan is approved under 
     this subtitle, the State will continue to make available 
     (either under this plan, under the State medicaid plan, or 
     otherwise) to such individual an appropriate level of 
     assistance for home and community-based services, taking into 
     account the level of assistance provided as of such date and 
     the individual's need for home and community-based services.
       (3) Services.--
       (A) Needs assessment.--Not later than the end of the second 
     year of implementation, the plan or its amendments shall 
     include the results of a statewide assessment of the needs of 
     individuals with disabilities in a format required by the 
     Secretary. The needs assessment shall include demographic 
     data concerning the number of individuals within each 
     category of disability described in this subtitle, and the 
     services available to meet the needs of such individuals.
       (B) Specification.--Consistent with section 2104, the plan 
     shall specify--
       (i) the services made available under the plan,
       (ii) the extent and manner in which such services are 
     allocated and made available to individuals with 
     disabilities, and
       (iii) the manner in which services under the plan are 
     coordinated with each other and with health and long-term 
     care services available outside the plan for individuals with 
     disabilities.
       (C) Taking into account informal care.--A State plan may 
     take into account, in determining the amount and array of 
     services made available to covered individuals with 
     disabilities, the availability of informal care.
       (D) Allocation.--The State plan--
       (i) shall specify how services under the plan will be 
     allocated among covered individuals with disabilities,
       (ii) shall attempt to meet the needs of individuals with a 
     variety of disabilities within the limits of available 
     funding,
       (iii) shall include services that assist all categories of 
     individuals with disabilities, regardless of their age or the 
     nature of their disabling conditions,
       (iv) shall demonstrate that services are allocated 
     equitably, in accordance with the needs assessment required 
     under subparagraph (A), and
       (v) shall ensure that--

       (I) the proportion of the population of low-income 
     individuals with disabilities in the State that represents 
     individuals with disabilities who are provided home and 
     community-based services either under the plan, under the 
     State medicaid plan, or under both, is not less than,
       (II) the proportion of the population of the State that 
     represents individuals who are low-income individuals.

       (E) Limitation on licensure or certification.--The State 
     may not subject consumer-directed providers of personal 
     assistance services to licensure, certification, or other 
     requirements which the Secretary finds not to be necessary 
     for the health and safety of individuals with disabilities.
       (F) Consumer choice.--To the extent feasible, the State 
     shall follow the choice of an individual with disabilities 
     (or that individual's designated representative who may be a 
     family member) regarding which covered services to receive 
     and the providers who will provide such services.
       (4) Cost sharing.--The plan shall impose cost sharing with 
     respect to covered services in accordance with section 2105.
       (5) Types of providers and requirements for 
     participation.--The plan shall specify--
       (A) the types of service providers eligible to participate 
     in the program under the plan, which shall include consumer-
     directed providers of personal assistance services, except 
     that the plan--
       (i) may not limit benefits to services provided by 
     registered nurses or licensed practical nurses; and
       (ii) may not limit benefits to services provided by 
     agencies or providers certified under title XVIII; and
       (B) any requirements for participation applicable to each 
     type of service provider.
       (6) Provider reimbursement.--
       (A) Payment methods.--The plan shall specify the payment 
     methods to be used to reimburse providers for services 
     furnished under the plan. Such methods may include 
     retrospective reimbursement on a fee-for-service basis, 
     prepayment on a capitation basis, payment by cash or vouchers 
     to individuals with disabilities, or any combination of these 
     methods. In the case of payment to consumer-directed 
     providers of personal assistance services, including payment 
     through the use of cash or vouchers, the plan shall specify 
     how the plan will assure compliance with applicable 
     employment tax and health care coverage provisions.
       (B) Payment rates.--The plan shall specify the methods and 
     criteria to be used to set payment rates for--
       (i) agency administered services furnished under the plan; 
     and
       (ii) consumer-directed personal assistance services 
     furnished under the plan, including cash payments or vouchers 
     to individuals with disabilities, except that such payments 
     shall be adequate to cover amounts required under applicable 
     employment tax and health care coverage provisions.
       (C) Plan payment as payment in full.--The plan shall 
     restrict payment under the plan for covered services to those 
     providers that agree to accept the payment under the plan (at 
     the rates established pursuant to subparagraph (B)) and any 
     cost sharing permitted or provided for under section 2105 as 
     payment in full for services furnished under the plan.
       (7) Quality assurance and safeguards.--The State plan shall 
     provide for quality assurance and safeguards for applicants 
     and beneficiaries in accordance with section 2106.
       (8) Advisory group.--The State plan shall--
       (A) assure the establishment and maintenance of an advisory 
     group under section 2107(b), and
       (B) include the documentation prepared by the group under 
     section 2107(b)(4).
       (9) Administration and access.--
       (A) State agency.--The plan shall designate a State agency 
     or agencies to administer (or to supervise the administration 
     of) the plan.
       (B) Coordination.--The plan shall specify how it will--
       (i) coordinate services provided under the plan, including 
     eligibility prescreening, service coordination, and referrals 
     for individuals with disabilities who are ineligible for 
     services under this subtitle with the State medicaid plan 
     under title XIX of the Social Security Act, 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 
     disabilities, and
       (ii) coordinate with health plans.
       (C) Administrative expenditures.--Effective beginning with 
     fiscal year 2004, the plan shall contain assurances that not 
     more than 10 percent of expenditures under the plan for all 
     quarters in any fiscal year shall be for administrative 
     costs.
       (10) Reports and information to secretary; audits.--The 
     plan shall provide that the State will furnish to the 
     Secretary--
       (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 a uniform format as specified by the Secretary.
       (11) Use of state funds for matching.--The plan shall 
     provide assurances that Federal funds will not be used to 
     provide for the State share of expenditures under this 
     subtitle.
       (12) Health care worker redeployment.--The plan shall 
     provide for the following:
       (A) Before initiating the process of implementing the State 
     program under such plan, negotiations will be commenced with 
     labor unions representing the employees of the affected 
     hospitals or other facilities.
       (B) Negotiations under subparagraph (A) will address the 
     following:
       (i) The impact of the implementation of the program upon 
     the workforce.
       (ii) Methods to redeploy workers to positions in the 
     proposed system, in the case of workers affected by the 
     program, including procedures to assist any employees who may 
     be displaced in exercising rights under section 3093.
       (C) The plan will provide evidence that there has been 
     compliance with subparagraphs (A) and (B), including a 
     description of the results of the negotiations.
       (13) Terminology.--The plan shall adhere to uniform 
     definitions of terms, as specified by the Secretary.
       (b) Approval of Plans.--The Secretary shall approve a plan 
     submitted by a State if the Secretary determines that the 
     plan--
       (1) was developed by the State after a public comment 
     period of not less than 30 days, and
       (2) meets the requirements of subsection (a).

     The approval of such a plan shall take effect as of the first 
     day of the first fiscal year beginning after the date of such 
     approval (except that any approval made before January 1, 
     1998, shall be effective as of January 1, 1998). In order to 
     budget funds allotted under this subtitle, the Secretary 
     shall establish a deadline for the submission of such a plan 
     before the beginning of a fiscal year as a condition of its 
     approval effective with that fiscal year. Any significant 
     changes to the State plan shall be submitted to the Secretary 
     in the form of plan amendments and shall be subject to 
     approval by the Secretary.
       (c) Monitoring.--The Secretary shall annually monitor the 
     compliance of State plans with the requirements of this 
     subtitle according to specified performance standards. In 
     accordance with section 2108(e), States that fail to comply 
     with such requirements may be subject to a reduction in the 
     Federal matching rates available to the State under section 
     2108(a) or the withholding of Federal funds for services or 
     administration until such time as compliance is achieved.
       (d) Technical assistance.--The Secretary shall ensure the 
     availability of ongoing technical assistance to States under 
     this section. Such assistance shall include serving as a 
     clearinghouse for information regarding successful practices 
     in providing long-term care services.
       (e) Regulations.--The Secretary shall issue such 
     regulations as may be appropriate to carry out this subtitle 
     on a timely basis.

     SEC. 2103. INDIVIDUALS WITH DISABILITIES DEFINED.

       (a) In General.--For purposes of this subtitle, the term 
     `individual with disabilities' means any individual within 
     one or more of the following categories of individuals:
       (1) Individuals requiring help with activities of daily 
     living.--An individual of any age who--
       (A) requires hands-on or standby assistance, supervision, 
     or cueing (as defined in regulations) to perform three or 
     more activities of daily living (as defined in subsection 
     (d)), and
       (B) is expected to require such assistance, supervision, or 
     cueing over a period of at least 90 days.
       (2) Individuals with severe cognitive or mental 
     impairment.--An individual of any age--
       (A) whose score, on a standard mental status protocol (or 
     protocols) appropriate for measuring the individual's 
     particular condition specified by the Secretary, indicates 
     either severe cognitive impairment or severe mental 
     impairment, or both;
       (B) who--
       (i) requires hands-on or standby assistance, supervision, 
     or cueing with one or more activities of daily living,
       (ii) requires hands-on or standby assistance, supervision, 
     or cueing with at least such instrumental activity (or 
     activities) of daily living related to cognitive or mental 
     impairment as the Secretary specifies, or
       (iii) displays symptoms of one or more serious behavioral 
     problems (that is on a list of such problems specified by the 
     Secretary) which create a need for supervision to prevent 
     harm to self or others; and
       (C) who is expected to meet the requirements of 
     subparagraphs (A) and (B) over a period of at least 90 days.

     Not later than 2 years after the date of enactment of this 
     subtitle, the Secretary shall make recommendations regarding 
     the most appropriate duration of disability under this 
     paragraph.
       (3) Individuals with severe or profound mental 
     retardation.--An individual of any age who has severe or 
     profound mental retardation (as determined according to a 
     protocol specified by the Secretary).
       (4) Young children with severe disabilities.--An individual 
     under 6 years of age who--
       (A) has a severe disability or chronic medical condition 
     that limits functioning in a manner that is comparable in 
     severity to the standards established under paragraphs (1), 
     (2), or (3), and
       (B) is expected to have such a disability or condition and 
     require such services over a period of at least 90 days.
       (b) Determination.--
       (1) In general.--In formulating eligibility criteria under 
     subsection (a), the Secretary shall establish criteria for 
     assessing the functional level of disability among all 
     categories of individuals with disabilities that are 
     comparable in severity, regardless of the age or the nature 
     of the disabling condition of the individual. The 
     determination of whether an individual is an individual with 
     disabilities shall be made by a public or nonprofit agency 
     that is specified under the State plan and that is not a 
     provider of home and community-based services under this 
     subtitle and by using a uniform protocol consisting of an 
     initial screening and a determination of disability specified 
     by the Secretary. A State may not impose cost sharing with 
     respect to a determination of disability. A State may collect 
     additional information, at the time of obtaining information 
     to make such determination, in order to provide for the 
     assessment and plan described in section 2104(b) or for other 
     purposes.
       (2) Periodic reassessment.--The determination that an 
     individual is an individual with disabilities shall be 
     considered to be effective under the State plan for a period 
     of not more than 6 months (or for such longer period in such 
     cases as a significant change in an individual's condition 
     that may affect such determination is unlikely). A 
     reassessment shall be made if there is a significant change 
     in an individual's condition that may affect such 
     determination.
       (c) Eligibility Criteria.--The Secretary shall reassess the 
     validity of the eligibility criteria described in subsection 
     (a) as new knowledge regarding the assessments of functional 
     disabilities becomes available. The Secretary shall report to 
     the Congress on its findings under the preceding sentence as 
     determined appropriate by the Secretary.
       (d) Activity of Daily Living Defined.--For purposes of this 
     subtitle, the term `activity of daily living' means any of 
     the following: eating, toileting, dressing, bathing, and 
     transferring.

     SEC. 2104. HOME AND COMMUNITY-BASED SERVICES COVERED UNDER 
                   STATE PLAN.

       (a) Specification.--
       (1) In general.--Subject to the succeeding provisions of 
     this section, the State plan under this subtitle shall 
     specify--
       (A) the home and community-based services available under 
     the plan to individuals with disabilities (or to such 
     categories of such individuals), and
       (B) any limits with respect to such services.
       (2) Flexibility in meeting individual needs.--Subject to 
     subsection (e)(2), such services may be delivered in an 
     individual's home, a range of community residential 
     arrangements, or outside the home.
       (b) Requirement for Needs Assessment and Plan of Care.--
       (1) In general.--The State plan shall provide for home and 
     community-based services to an individual with disabilities 
     only if the following requirements are met:
       (A) Comprehensive assessment.--A comprehensive assessment 
     of an individual's need for home and community-based services 
     (regardless of whether all need services are available under 
     the plan) shall be made in accordance with a uniform, 
     comprehensive assessment tool that shall be used by a State 
     under this paragraph with the approval of the Secretary. The 
     Secretary shall provide guidance to the States with regard to 
     the appropriate qualifications for individuals who conduct 
     comprehensive assessments.
       (B) Individualized plan of care.--An individualized plan of 
     care based on the assessment made under subparagraph (A) 
     shall be developed. A plan of care under this subparagraph 
     shall--
       (i) specify which services included under the individual 
     plan will be provided under the State plan under this 
     subtitle,
       (ii) identify (to the extent possible) how the individual 
     will be provided any services specified under the plan of 
     care and not provided under the State plan,
       (iii) specify how the provision of services to the 
     individual under the plan will be coordinated with the 
     provision of other health care services to the individual, 
     and
       (iv) be reviewed and updated every 6 months (or more 
     frequently if there is a change in the individual's 
     condition).

     The State shall make reasonable efforts to identify and 
     arrange for services described in clause (ii). Nothing in 
     this subsection shall be construed as requiring a State 
     (under the State plan or otherwise) to provide all the 
     services specified in such a plan.
       (C) Involvement of individuals.--The individualized plan of 
     care under subparagraph (B) for an individual with 
     disabilities shall--
       (i) be developed by qualified individuals (specified under 
     the State plan),
       (ii) be developed and implemented in close consultation 
     with the individual (or the individual's designated 
     representative), and
       (iii) be approved by the individual (or the individual's 
     designated representative).
       (c) Requirement for Care Management.--
       (1) In general.--The State shall make available to each 
     category of individuals with disabilities care management 
     services that at a minimum include--
       (A) arrangements for the provision of such services, and
       (B) monitoring of the delivery of services.
       (2) Care management services.--
       (A) In general.--Except as provided in subparagraph (B), 
     the care management services described in paragraph (1) shall 
     be provided by a public or private entity that is not 
     providing home and community-based services under this 
     subtitle.
       (B) Exception.--A person who provides home and community-
     based services under this subtitle may provide care 
     management services if--
       (i) the State determines that there is an insufficient pool 
     of entities willing to provide such services in an area due 
     to a low population of individuals eligible for home and 
     community-based services under this subtitle residing in such 
     area; and
       (ii) the State plan specifies procedures that the State 
     will implement in order to avoid conflicts of interest.
       (d) Mandatory Coverage of Personal Assistance Services.--
     The State plan shall include, in the array of services made 
     available to each category of individuals with disabilities, 
     both agency-administered and consumer-directed personal 
     assistance services (as defined in subsection (h)).
       (e) Additional Services.--
       (1) Types of services.--Subject to subsection (f), services 
     available under a State plan under this subtitle may include 
     any (or all) of the following:
       (A) Homemaker and chore assistance.
       (B) Home modifications.
       (C) Respite services.
       (D) Assistive devices, as defined in the Technology Related 
     Assistance for Individuals with Disabilities Act.
       (E) Adult day services.
       (F) Habilitation and rehabilitation.
       (G) Supported employment.
       (H) Home health services.
       (I) Transportation.
       (J) Any other care or assistive services specified by the 
     State and approved by the Secretary that will help 
     individuals with disabilities to remain in their homes and 
     communities.
       (2) Criteria for selection of services.--The State electing 
     services under paragraph (1) shall specify in the State 
     plan--
       (A) the methods and standards used to select the types, and 
     the amount, duration, and scope, of services to be covered 
     under the plan and to be available to each category of 
     individuals with disabilities, and
       (B) how the types, and the amount, duration, and scope, of 
     services specified, within the limits of available funding, 
     provide substantial assistance in living independently to 
     individuals within each of the categories of individuals with 
     disabilities.
       (f) Exclusions and Limitations.--A State plan may not 
     provide for coverage of--
       (1) room and board,
       (2) services furnished in a hospital, nursing facility, 
     intermediate care facility for the mentally retarded, or 
     other institutional setting specified by the Secretary, or
       (3) items and services to the extent coverage is provided 
     for the individual under a health plan or the medicare 
     program.
       (g) Payment for Services.--In order to pay for covered 
     services, a State plan may provide for the use of--
       (1) vouchers,
       (2) cash payments directly to individuals with 
     disabilities,
       (3) capitation payments to health plans, and
       (4) payment to providers.
       (h) Personal Assistance Services.--
       (1) In general.--For purposes of this subtitle, the term 
     `personal assistance services' means those services specified 
     under the State plan as personal assistance services and 
     shall include at least hands-on and standby assistance, 
     supervision, and cueing with activities of daily living, 
     whether agency-administered or consumer-directed (as defined 
     in paragraph (2)).
       (2) Consumer-directed.--For purposes of this subtitle:
       (A) In general.--The term `consumer-directed' means, with 
     reference to personal assistance services or the provider of 
     such services, services that are provided by an individual 
     who is selected and managed (and, at the option of the 
     service recipient, trained) by the individual receiving the 
     services.
       (B) State responsibilities.--A State plan shall ensure that 
     where services are provided in a consumer-directed manner, 
     the State shall create or contract with an entity, other than 
     the consumer or the individual provider, to--
       (i) inform both recipients and providers of rights and 
     responsibilities under all applicable Federal labor and tax 
     law; and
       (ii) assume responsibility for providing effective billing, 
     payments for services, tax withholding, unemployment 
     insurance, and workers' compensation coverage, and act as the 
     employer of the home care provider.
       (C) Right of consumers.--Notwithstanding the State 
     responsibilities described in subparagraph (B), service 
     recipients, and, where appropriate, their designated 
     representative, shall retain the right to independently 
     select, hire, terminate, and direct (including manage, train, 
     schedule, and verify services provided) the work of a home 
     care provider.
       (3) Agency administered.--For purposes of this subtitle, 
     the term `agency-administered' means, with respect to such 
     services, services that are not consumer-directed.

     SEC. 2105. COST SHARING.

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

     SEC. 2106. QUALITY ASSURANCE AND SAFEGUARDS.

       (a) Quality Assurance.--
       (1) In general.--The State plan shall specify how the State 
     will ensure and monitor the quality of services, including--
       (A) safeguarding the health and safety of individuals with 
     disabilities,
       (B) setting the minimum standards for agency providers and 
     how such standards will be enforced,
       (C) setting the minimum competency requirements for agency 
     provider employees who provide direct services under this 
     subtitle and how the competency of such employees will be 
     enforced,
       (D) obtaining meaningful consumer input, including consumer 
     surveys that measure the extent to which participants receive 
     the services described in the plan of care and participant 
     satisfaction with such services,
       (E) establishing a process to receive, investigate, and 
     resolve allegations of neglect and/or abuse,
       (F) establishing optional training programs for individuals 
     with disabilities in the use and direction of consumer 
     directed providers of personal assistance services,
       (G) establishing an appeals procedure for eligibility 
     denials and a grievance procedure for disagreements with the 
     terms of an individualized plan of care;
       (H) providing for participation in quality assurance 
     activities, and
       (I) specifying the role of the long-term care ombudsman 
     (under the Older Americans Act of 1965) and the Protection 
     and Advocacy Agency (under the Developmental Disabilities 
     Assistance and Bill of Rights Act) in assuring quality of 
     services and protecting the rights of individuals with 
     disabilities.
       (2) Issuance of regulations.--Not later than 1 year after 
     the date of enactment of this subtitle, the Secretary shall 
     issue regulations implementing the quality provisions of this 
     subsection.
       (b) Federal Standards.--The State plan shall adhere to 
     Federal quality standards in the following areas:
       (1) Case review of a specified sample of client records.
       (2) The mandatory reporting of abuse, neglect, or 
     exploitation.
       (3) The development of a registry of provider agencies or 
     home care workers and consumer directed providers of personal 
     assistance services against whom any complaints have been 
     sustained, which shall be available to the public.
       (4) Sanctions to be imposed on States or providers, 
     including disqualification from the program, if minimum 
     standards are not met.
       (5) Surveys of client satisfaction.
       (6) State optional training programs for informal 
     caregivers.
       (c) Client Advocacy.--
       (1) In general.--The State plan shall provide that the 
     State will expend the amount allocated under section 
     2109(b)(2) for client advocacy activities. The State may use 
     such funds to augment the budgets of the long-term care 
     ombudsman (under the Older Americans Act of 1965) and the 
     Protection and Advocacy Agency (under the Developmental 
     Disabilities Assistance and Bill of Rights Act) or may 
     establish a separate and independent client advocacy office 
     in accordance with paragraph (2) to administer a new program 
     designed to advocate for client rights.
       (2) Client advocacy office.--
       (A) In general.--A client advocacy office established under 
     this paragraph shall--
       (i) identify, investigate, and resolve complaints that--

       (I) are made by, or on behalf of, clients; and
       (II) relate to action, inaction, or decisions, that may 
     adversely affect the health, safety, welfare, or rights of 
     the clients (including the welfare and rights of the clients 
     with respect to the appointment and activities of guardians 
     and representative payees), of--

       (aa) providers, or representatives of providers, of long-
     term care services;
       (bb) public agencies; or
       (cc) health and social service agencies;
       (ii) provide services to assist the clients in protecting 
     the health, safety, welfare, and rights of the clients;
       (iii) inform the clients about means of obtaining services 
     provided by providers or agencies described in clause (i)(II) 
     or services described in clause (ii);
       (iv) ensure that the clients have regular and timely access 
     to the services provided through the office and that the 
     clients and complainants receive timely responses from 
     representatives of the office to complaints; and
       (v) represent the interests of the clients before 
     governmental agencies and seek administrative, legal, and 
     other remedies to protect the health, safety, welfare, and 
     rights of the clients with regard to the provisions of this 
     subtitle.
       (B) Contracts and arrangements.--
       (i) In general.--Except as provided in clause (ii), the 
     State agency may establish and operate the office, and carry 
     out the program, directly, or by contract or other 
     arrangement with any public agency or nonprofit private 
     organization.
       (B) Licensing and certification organizations; 
     associations.--The State agency may not enter into the 
     contract or other arrangement described in clause (i) with an 
     agency or organization that is responsible for licensing, 
     certifying, or providing long-term care services in the 
     State.
       (d) Safeguards.--
       (1) 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.
       (2) Safeguards against abuse.--The State plans shall 
     provide safeguards against physical, emotional, or financial 
     abuse or exploitation (specifically including appropriate 
     safeguards in cases where payment for program benefits is 
     made by cash payments or vouchers given directly to 
     individuals with disabilities). All providers of services 
     shall be required to register with the State agency.
       (3) Regulations.--Not later than January 1, 1998, the 
     Secretary shall promulgate regulations with respect to the 
     requirements on States under this subsection.
       (e) Specified Rights.--The State plan shall provide that in 
     furnishing home and community-based services under the plan 
     the following individual rights are protected:
       (1) The right to be fully informed in advance, orally and 
     in writing, of the care to be provided, to be fully informed 
     in advance of any changes in care to be provided, and (except 
     with respect to an individual determined incompetent) to 
     participate in planning care or changes in care.
       (2) The right to--
       (A) voice grievances with respect to services that are (or 
     fail to be) furnished without discrimination or reprisal for 
     voicing grievances,
       (B) be told how to complain to State and local authorities, 
     and
       (C) prompt resolution of any grievances or complaints.
       (3) The right to confidentiality of personal and clinical 
     records and the right to have access to such records.
       (4) The right to privacy and to have one's property treated 
     with respect.
       (5) The right to refuse all or part of any care and to be 
     informed of the likely consequences of such refusal.
       (6) The right to education or training for oneself and for 
     members of one's family or household on the management of 
     care.
       (7) The right to be free from physical or mental abuse, 
     corporal punishment, and any physical or chemical restraints 
     imposed for purposes of discipline or convenience and not 
     included in an individual's plan of care.
       (8) The right to be fully informed orally and in writing of 
     the individual's rights.
       (9) The right to a free choice of providers.
       (10) The right to direct provider activities when an 
     individual is competent and willing to direct such 
     activities.

     SEC. 2107. ADVISORY GROUPS.

       (a) Federal Advisory Group.--
       (1) Establishment.--The Secretary shall establish an 
     advisory group, to advise the Secretary and States on all 
     aspects of the program under this subtitle.
       (2) Composition.--The group shall be composed of 
     individuals with disabilities and their representatives, 
     providers, Federal and State officials, and local community 
     implementing agencies. A majority of its members shall be 
     individuals with disabilities and their representatives.
       (b) State Advisory Groups.--
       (1) In general.--Each State plan shall provide for the 
     establishment and maintenance of an advisory group to advise 
     the State on all aspects of the State plan under this 
     subtitle.
       (2) Composition.--Members of each advisory group shall be 
     appointed by the Governor (or other chief executive officer 
     of the State) and shall include individuals with disabilities 
     and their representatives, providers, State officials, and 
     local community implementing agencies. A majority of its 
     members shall be individuals with disabilities and their 
     representatives. The members of the advisory group shall be 
     selected from the those nominated as described in paragraph 
     (3).
       (3) Selection of members.--Each State shall establish a 
     process whereby all residents of the State, including 
     individuals with disabilities and their representatives, 
     shall be given the opportunity to nominate members to the 
     advisory group.
       (4) Particular concerns.--Each advisory group shall--
       (A) before the State plan is developed, advise the State on 
     guiding principles and values, policy directions, and 
     specific components of the plan,
       (B) meet regularly with State officials involved in 
     developing the plan, during the development phase, to review 
     and comment on all aspects of the plan,
       (C) participate in the public hearings to help assure that 
     public comments are addressed to the extent practicable,
       (D) report to the Governor and make available to the public 
     any differences between the group's recommendations and the 
     plan,
       (E) report to the Governor and make available to the public 
     specifically the degree to which the plan is consumer-
     directed, and
       (F) meet regularly with officials of the designated State 
     agency (or agencies) to provide advice on all aspects of 
     implementation and evaluation of the plan.

     SEC. 2108. PAYMENTS TO STATES.

       (a) In General.--Subject to section 2102(a)(9)(C) (relating 
     to limitation on payment for administrative costs), the 
     Secretary, in accordance with the Cash Management Improvement 
     Act, shall authorize payment to each State with a plan 
     approved under this subtitle, for each quarter (beginning on 
     or after January 1, 1998), from its allotment under section 
     2109(b), an amount equal to--
       (1)(A) with respect to the amount demonstrated by State 
     claims to have been expended during the year for home and 
     community-based services under the plan for individuals with 
     disabilities that does not exceed 20 percent of the amount 
     allotted to the State under section 2109(b), 100 percent of 
     such amount; and
       (B) with respect to the amount demonstrated by State claims 
     to have been expended during the year for home and community-
     based services under the plan for individuals with 
     disabilities that exceeds 20 percent of the amount allotted 
     to the State under section 2109(b), the Federal home and 
     community-based services matching percentage (as defined in 
     subsection (b)) of such amount; plus
       (2) an amount equal to 90 percent of the amount 
     demonstrated by the State to have been expended during the 
     quarter for quality assurance activities under the plan; plus
       (3) an amount equal to 90 percent of amount expended during 
     the quarter under the plan for activities (including 
     preliminary screening) relating to determination of 
     eligibility and performance of needs assessment; plus
       (4) an amount equal to 90 percent (or, beginning with 
     quarters in fiscal year 2004, 75 percent) of the amount 
     expended during the quarter for the design, development, and 
     installation of mechanical claims processing systems and for 
     information retrieval; plus
       (5) an amount equal to 50 percent of the remainder of the 
     amounts expended during the quarter as found necessary by the 
     Secretary for the proper and efficient administration of the 
     State plan.
       (b) Federal Home and Community-Based Services Matching 
     Percentage.--In subsection (a), the term `Federal home and 
     community-based services matching percentage' means, with 
     respect to a State, the State's Federal medical assistance 
     percentage (as defined in section 1905(b) of the Social 
     Security Act) increased by 15 percentage points, except that 
     the Federal home and community-based services matching 
     percentage shall in no case be more than 95 percent.
       (c) Payments on Estimates with Retrospective Adjustments.--
     The method of computing and making payments under this 
     section shall be as follows:
       (1) The Secretary shall, prior to the beginning of each 
     quarter, estimate the amount to be paid to the State under 
     subsection (a) for such quarter, based on a report filed by 
     the State containing its estimate of the total sum to be 
     expended in such quarter, and such other information as the 
     Secretary may find necessary.
       (2) From the allotment available therefore, the Secretary 
     shall provide for payment of the amount so estimated, reduced 
     or increased, as the case may be, by any sum (not previously 
     adjusted under this section) by which the Secretary finds 
     that the estimate of the amount to be paid the State for any 
     prior period under this section was greater or less than the 
     amount which should have been paid.
       (d) Application of Rules Regarding Limitations on Provider-
     Related Donations and Health Care Related Taxes.--The 
     provisions of section 1903(w) of the Social Security Act 
     shall apply to payments to States under this section in the 
     same manner as they apply to payments to States under section 
     1903(a) of such Act.
       (e) Failure To Comply With State Plan.--If a State 
     furnishing home and community-based services under this 
     subtitle fails to comply with the State plan approved under 
     this subtitle, the Secretary may either reduce the Federal 
     matching rates available to the State under subsection (a) or 
     withhold an amount of funds determined appropriate by the 
     Secretary from any payment to the State under this section.

     SEC. 2109. APPROPRIATIONS; ALLOTMENTS TO STATES.

       (a) Appropriations.--
       (1) Fiscal years 1998 through 2004.--Subject to paragraph 
     (5)(C), for purposes of this subtitle, the appropriation 
     authorized under this subtitle for each of fiscal years 1998 
     through 2004 is the following:
       (A) For fiscal year 1998, $1,800,000,000.
       (B) For fiscal year 1999, $2,900,000,000.
       (C) For fiscal year 2000, $3,600,000,000.
       (D) For fiscal year 2001, $5,000,000,000.
       (E) For fiscal year 2002, $7,900,000,000.
       (F) For fiscal year 2003, $11,400,000,000.
       (G) For fiscal year 2004, $15,400,000,000.
       (2) Subsequent fiscal years.--For purposes of this 
     subtitle, the appropriation authorized for State plans under 
     this subtitle for each fiscal year after fiscal year 2004 is 
     the appropriation authorized under this subsection for the 
     preceding fiscal year multiplied by--
       (A) a factor (described in paragraph (3)) reflecting the 
     change in the consumer price index for the fiscal year, and
       (B) a factor (described in paragraph (4)) reflecting the 
     change in the number of individuals with disabilities for the 
     fiscal year.
       (3) CPI increase factor.--For purposes of paragraph (2)(A), 
     the factor described in this paragraph for a fiscal year is 
     the ratio of--
       (A) the annual average index of the consumer price index 
     for the preceding fiscal year, to--
       (B) such index, as so measured, for the second preceding 
     fiscal year.
       (4) Disabled population factor.--For purposes of paragraph 
     (2)(B), the factor described in this paragraph for a fiscal 
     year is 100 percent plus (or minus) the percentage increase 
     (or decrease) change in the disabled population of the United 
     States (as determined for purposes of the most recent update 
     under subsection (b)(3)(D)).
       (5) Additional funds due to medicaid offsets.--
       (A) In general.--Each participating State must provide the 
     Secretary with information concerning offsets and reductions 
     in the medicaid program resulting from home and community-
     based services provided disabled individuals under this 
     subtitle, that would have been paid for such individuals 
     under the State medicaid plan but for the provision of 
     similar services under the program under this subtitle. At 
     the time a State first submits its plan under this subtitle 
     and before each subsequent fiscal year (through fiscal year 
     2004), the State also must provide the Secretary with such 
     budgetary information (for each fiscal year through fiscal 
     year 2004), as the Secretary determines to be necessary to 
     carry out this paragraph.
       (B) Reports.--Each State with a program under this subtitle 
     shall submit such reports to the Secretary as the Secretary 
     may require in order to monitor compliance with subparagraph 
     (A). The Secretary shall specify the format of such reports 
     and establish uniform data reporting elements.
       (C) Adjustments to appropriation.--
       (i) In general.--For each fiscal year (beginning with 
     fiscal year 1998 and ending with fiscal year 2004) and based 
     on a review of information submitted under subparagraph (A), 
     the Secretary shall determine the amount by which the 
     appropriation authorized under subsection (a) will increase. 
     The amount of such increase for a fiscal year shall be 
     limited to the reduction in Federal expenditures of medical 
     assistance (as determined by Secretary) that would have been 
     made under part A of title XIX for home and community based 
     services for disabled individuals but for the provision of 
     similar services under the program under this subtitle.
       (ii) Annual publication.--The Secretary shall publish 
     before the beginning of such fiscal year, the revised 
     appropriation authorized under this subsection for such 
     fiscal year.
       (D) Construction.--Nothing in this subsection shall be 
     construed as requiring States to determine eligibility for 
     medical assistance under the State medicaid plan on behalf of 
     individuals receiving assistance under this subtitle.
       (b) Allotments to States.--
       (1) In general.--The Secretary shall allot the amounts 
     available under the appropriation authorized for the fiscal 
     year (specified in subsection (a)) to the States with plans 
     approved under this subtitle in accordance with an allocation 
     formula developed by the Secretary which takes into account--
       (A) the percentage of the total number of individuals with 
     disabilities in all States that reside in a particular State;
       (B) the per capita costs of furnishing home and community-
     based services to individuals with disabilities in the State; 
     and
       (C) the percentage of all individuals with incomes at or 
     below 150 percent of the official poverty line (as described 
     in section 2105(a)(2)) in all States that reside in a 
     particular State.
       (2) Allocation for client advocacy activities.--Each State 
     with a plan approved under this subtitle shall allocate one-
     half of one percent of the State's total allotment under 
     paragraph (1) for client advocacy activities as described in 
     section 2106(c).
       (3) No duplicate payment.--No payment may be made to a 
     State under this section for any services provided to an 
     individual to the extent that the State received payment for 
     such services under section 1903(a) of the Social Security 
     Act.
       (4) Reallocations.--Any amounts allotted to States under 
     this subsection for a year that are not expended in such year 
     shall remain available for State programs under this subtitle 
     and may be reallocated to States as the Secretary determines 
     appropriate.
       (c) State Entitlement.--This subtitle constitutes budget 
     authority in advance of appropriations Acts, and represents 
     the obligation of the Federal Government to provide for the 
     payment to States of amounts described in subsection (a).

     SEC. 2110. FEDERAL EVALUATIONS.

       (a) In General.--Not later than December 31, 2003, December 
     31, 2006, and each December 31 thereafter, the Secretary 
     shall provide to Congress analytical reports that evaluate--
       (1) the extent to which individuals with low incomes and 
     disabilities are equitably served;
       (2) the adequacy and equity of service plans to individuals 
     with similar levels of disability across States;
       (3) the comparability of program participation across 
     States, described by level and type of disability; and
       (4) the ability of service providers to sufficiently meet 
     the demand for services.
       (b) Geriatric Assessments.--Not later than 18 months after 
     the date of enactment of this part, the Secretary shall 
     report to Congress concerning the feasibility of providing 
     reimbursement under health plans and other payers of health 
     services for full geriatric assessment, when recommended by a 
     physician.

PART 2--GRANTS RELATING TO THE DEVELOPMENT OF HOSPITAL LINKAGE PROGRAMS

     SEC. 2111. INFORMATION AND TECHNICAL ASSISTANCE GRANTS 
                   RELATING TO DEVELOPMENT OF HOSPITAL LINKAGE 
                   PROGRAMS.

       (a) Findings.--Congress finds that--
       (1) demonstration programs and projects have been developed 
     to offer care management to hospitalized individuals awaiting 
     discharge who are in need of long-term health care services 
     that meet individual needs and preferences in home and 
     community-based settings as an alternative to long-term 
     nursing home care or institutional placement; and
       (2) there is a need to disseminate information and 
     technical assistance to hospitals and State and local 
     community organizations regarding such programs and projects 
     and to provide incentive grants to State and local public and 
     private agencies, including area agencies on aging, to 
     establish and expand programs that offer care management to 
     individuals awaiting discharge from acute care hospitals who 
     are in need of long-term care so that services to meet 
     individual needs and preferences can be arranged in home and 
     community-based settings as an alternative to long-term 
     placement in nursing homes or other institutional settings.
       (b) Dissemination of Information, Technical Assistance, and 
     Incentive Grants To Assist in the Development of Hospital 
     Linkage Programs.--Part C of title III of the Public Health 
     Service Act (42 U.S.C. 248 et seq.) is amended by adding at 
     the end thereof the following new section:

     ``SEC. 327B. DISSEMINATION OF INFORMATION, TECHNICAL 
                   ASSISTANCE AND INCENTIVE GRANTS TO ASSIST IN 
                   THE DEVELOPMENT OF HOSPITAL LINKAGE PROGRAMS.

       ``(a) Dissemination of Information.--The Secretary shall 
     compile, evaluate, publish and disseminate to appropriate 
     State and local officials and to private organizations and 
     agencies that provide services to individuals in need of 
     long-term health care services, such information and 
     materials as may assist such entities in replicating 
     successful programs that are aimed at offering care 
     management to hospitalized individuals who are in need of 
     long-term care so that services to meet individual needs and 
     preferences can be arranged in home and community-based 
     settings as an alternative to long-term nursing home 
     placement. The Secretary may provide technical assistance to 
     entities seeking to replicate such programs.
       ``(b) Incentive Grants to Assist in the Development of 
     Hospital Linkage Programs.--The Secretary shall establish a 
     program under which incentive grants may be awarded to assist 
     private and public agencies, including area agencies on 
     aging, and organizations in developing and expanding programs 
     and projects that facilitate the discharge of individuals in 
     hospitals or other acute care facilities who are in need of 
     long-term care services and placement of such individuals 
     into home and community-based settings.
       ``(c) Administrative Provisions.--
       ``(1) Eligible entities.--To be eligible to receive a grant 
     under subsection (b) an entity shall be--
       ``(A)(i) a State agency as defined in section 102(43) of 
     the Older Americans Act of 1965; or
       ``(ii) a State agency responsible for administering home 
     and community care programs under title XIX of the Social 
     Security Act; or
       ``(B) if no State agency described in subparagraph (A) 
     applies with respect to a particular State, a public or 
     nonprofit private entity.
       ``(2) Applications.--To be eligible to receive an incentive 
     grant under subsection (b), an entity 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) an assessment of the need within the community to be 
     served for the establishment or expansion of a program to 
     facilitate the discharge of individuals in need of long-term 
     care who are in hospitals or other acute care facilities into 
     home and community-care programs that provide individually 
     planned, flexible services that reflect individual choice or 
     preference rather than nursing home or institutional 
     settings;
       ``(B) a plan for establishing or expanding a program for 
     identifying individuals in hospital or acute care facilities 
     who are in need of individualized long-term care provided in 
     home and community-based settings rather than nursing homes 
     or other institutional settings and undertaking the planning 
     and management of individualized care plans to facilitate 
     discharge into such settings;
       ``(C) assurances that nongovernmental case management 
     agencies funded under grants awarded under this section are 
     not direct providers of home and community-based services;
       ``(D) satisfactory assurances that adequate home and 
     community-based long term care services are available, or 
     will be made available, within the community to be served so 
     that individuals being discharged from hospitals or acute 
     care facilities under the proposed program can be served in 
     such home and community-based settings, with flexible, 
     individualized care which reflects individual choice and 
     preference;
       ``(E) a description of the manner in which the program to 
     be administered with amounts received under the grant will be 
     continued after the termination of the grant for which such 
     application is submitted; and
       ``(F) a description of any waivers or approvals necessary 
     to expand the number of individuals served in federally 
     funded home and community-based long term care programs in 
     order to provide satisfactory assurances that adequate home 
     and community-based long term care services are available in 
     the community to be served.
       ``(3) Awarding of grants.--
       ``(A) Preferences.--In awarding grants under subsection 
     (b), the Secretary shall give preference to entities 
     submitting applications that--
       ``(i) demonstrate an ability to coordinate activities 
     funded using amounts received under the grant with programs 
     providing individualized home and community-based case 
     management and services to individuals in need of long term 
     care with hospital discharge planning programs; and
       ``(ii) demonstrate that adequate home and community-based 
     long term care management and services are available, or will 
     be made available to individuals being served under the 
     program funded with amounts received under subsection (b).
       ``(B) Distribution.--In awarding grants under subsection 
     (b), the Secretary shall ensure that such grants--
       ``(i) are equitably distributed on a geographic basis;
       ``(ii) include projects operating in urban areas and 
     projects operating in rural areas; and
       ``(iii) are awarded for the expansion of existing hospital 
     linkage programs as well as the establishment of new 
     programs.
       ``(C) Expedited consideration.--The Secretary shall provide 
     for the expedited consideration of any waiver application 
     that is necessary under title XIX of the Social Security Act 
     to enable an applicant for a grant under subsection (b) to 
     satisfy the assurance required under paragraph (1)(D).
       ``(4) Use of grants.--An entity that receives amounts under 
     a grant under subsection (b) may use such amounts for 
     planning, development and evaluation services and to provide 
     reimbursements for the costs of one or more case mangers to 
     be located in or assigned to selected hospitals who would--
       ``(A) identify patients in need of individualized care in 
     home and community-based long-term care;
       ``(B) assess and develop care plans in cooperation with the 
     hospital discharge planning staff; and
       ``(C) arrange for the provision of community care either 
     immediately upon discharge from the hospital or after any 
     short term nursing-home stay that is needed for recuperation 
     or rehabilitation;
       ``(5) Direct services subject to reimbursements.--None of 
     the amounts provided under a grant under this section may be 
     used to provide direct services, other than case management, 
     for which reimbursements are otherwise available under title 
     XVIII or XIX of the Social Security Act.
       ``(6) Limitations.--
       ``(A) Term.--Grants awarded under this section shall be for 
     terms of less than 3 years.
       ``(B) Amount.--Grants awarded to an entity under this 
     section shall not exceed $300,000 per year. The Secretary may 
     waive the limitation under this subparagraph where an 
     applicant demonstrates that the number of hospitals or 
     individuals to be served under the grant justifies such 
     increased amounts.
       ``(C) Supplanting of funds.--Amounts awarded under a grant 
     under this section may not be used to supplant existing State 
     funds that are provided to support hospital link programs.
       ``(d) Evaluation and Reports.--
       ``(1) By grantees.--An entity that receives a grant under 
     this section shall evaluate the effectiveness of the services 
     provided under the grant in facilitating the placement of 
     individuals being discharged from hospitals or acute care 
     facilities into home and community-based long term care 
     settings rather than nursing homes. Such entity shall prepare 
     and submit to the Secretary a report containing such 
     information and data concerning the activities funded under 
     the grant as the Secretary determines appropriate.
       ``(2) By secretary.--Not later than the end of the third 
     fiscal year for which funds are appropriated under subsection 
     (e), the Secretary shall prepare and submit to the 
     appropriate committees of Congress, a report concerning the 
     results of the evaluations and reports conducted and prepared 
     under paragraph (1).
       ``(e) Authorization of Appropriations.--There are 
     authorized to be appropriated to carry out this section, 
     $5,000,000 for each of the fiscal years 1994 through 1996.''.
  Subtitle C--Long-Term Care Insurance Improvement and Accountability

     SEC. 2200. SHORT TITLE.

       This subtitle may be cited as the ``Long-Term Care 
     Insurance Improvement and Accountability Act''.

          PART 1--PROMULGATION OF STANDARDS AND MODEL BENEFITS

     SEC. 2201. STANDARDS.

       (a) Application of Standards.--
       (1) In general.--Except as provided in paragraph (2), the 
     Secretary, in consultation with the NAIC, shall develop and 
     publish specific standards to implement the standards 
     specified in this subtitle.
       (2) State standards.--Nothing in this subtitle shall be 
     construed as preventing a participating State from applying 
     standards that provide greater protection to insured 
     individuals under long-term care insurance policies than the 
     standards promulgated under this subtitle, except that such 
     State standards may not be inconsistent with any of the 
     standards specified in this subtitle.
       (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 subtitle;
       (2) standards for the enhanced protection of consumers with 
     long-term care insurance; and
       (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.
       (d) Consultation.--In establishing standards and models of 
     benefits under this section, the Secretary shall, after 
     consultation with representatives of carriers, consumer 
     groups, and providers of long-term care services--
       (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 the regulation of 
     the insurance aspects of supported housing arrangements; and
       (4) perform such other activities as determined appropriate 
     by the Secretary.

 PART 2--ESTABLISHMENT AND IMPLEMENTATION OF LONG-TERM CARE INSURANCE 
                            POLICY STANDARDS

     SEC. 2211. IMPLEMENTATION OF POLICY STANDARDS.

       (a) In General.--
       (1) Regulatory program.--No long-term care policy (as 
     defined in section (2221)) 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 2201(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 2201(a); and
       (ii) complies with the requirements of subsection (b);
     by the date specified in section 2201(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 2201(a) by 
     the date specified in section 2201(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 
     shall review regulatory programs described in paragraph 
     (1)(A) at least biannually to determine if they continue to 
     provide for the application and enforcement of the standards 
     and procedures established under section 2201(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 2201 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 to such complaints within 90 days;
       (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 2218) in the case of a carrier, 
     agent, or association or its subsidiary determined to have 
     violated the standards.
       (3) Private actions.--An individual may commence a civil 
     action in an appropriate State or United States district 
     court to enforce the provisions of this title and may be 
     awarded appropriate relief and reasonable attorney's fees.
       (4) Consumer access to compliance information.--
       (A) In general.--A State regulatory program shall 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.
       (5) 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, including a financial report on expenditures;
       (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 Secretary, in consultation with 
     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.
       (6) 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.
       (7) Access to other information.--The State regulatory 
     program shall provide for consumer access to actuarial 
     memoranda, including financial information, provided under 
     paragraph (4).
       (8) 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 subtitle;
       (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 subtitle 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 subtitle, 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 subtitle, 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 subtitle 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. 2212. REGULATION OF SALES PRACTICES.

       (a) Duty of Good Faith and Fair Dealing.--
       (1) In general.--Each agent (as defined in section 2233) 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) Policy replacement form.--With respect to any 
     individual 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 individual 
     completes a policy replacement form developed by the 
     Secretary, in consultation with the NAIC. A copy of such form 
     shall be provided to such individual 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.
       (3) 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.--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 individual to 
     retain or effect a change with respect to a long-term care 
     insurance policy.
       (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 Secretary, in 
     consultation with the NAIC.
       (b) Financial Needs Standards.--The Secretary, in 
     consultation with the NAIC, shall develop recommended minimum 
     financial needs standards (including both income and asset 
     criteria) for the purpose of advising individuals as to the 
     costs and amounts of insurance needed when 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 sale a long-term care insurance policy without providing 
     to every individual purchaser or potential purchaser (or 
     representative) an outline of coverage that complies with the 
     standards established under section 2201(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. Nothing 
     in this subsection shall be construed as preempting or 
     otherwise limiting the penalties that may be imposed by a 
     State for conduct that violates this section.
       (h) Agent Training and Certification Requirements.--The 
     Secretary, in consultation with 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 and recertifying 
     agents who have completed such training and who are qualified 
     to sell or offer for sale long-term care insurance policies.

     SEC. 2213. 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 2217, the carrier shall, 
     not later than 30 days after the date of the denial or 
     return, refund directly to the applicant, or in the case of 
     an employer to whomever remits the premium, any premiums paid 
     with respect to such a policy (or certificate). Any such 
     refund shall not be made by delivery by the carrier.
       (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 each individual applicant the policy (or 
     certificate) of insurance and outline of coverage 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 15 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;
       (2) make available all medical and patient records directly 
     relating to such denial; and
       (3) provide a written explanation of the manner in which to 
     appeal the denial.

     Except as provided in subsection (e) of section 2215, 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 Secretary, in consultation with 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 Secretary, 
     in consultation with 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 2201(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.--Until the Secretary, in consultation with 
     the NAIC, promulgates mandatory standards concerning 
     compensation for the sale of long-term care policies, 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--
       (A) 200 percent of the commission or other compensation 
     paid for selling or servicing the policy in the second year, 
     or
       (B) 50 percent of the premium paid on the first year 
     policy.
       (2) Subsequent years.--The commission or other compensation 
     provided for the sale of long-term care policies to an 
     individual during each of the years during the 5-year period 
     subsequent to the first year of the policy shall be the same 
     as that provided in the second subsequent year.
       (3) Limitation.--No carrier shall provide compensation to 
     its agents for the sale of a long-term care policy which 
     replaces an existing policy, and no agent shall receive 
     compensation for such sale greater than the renewal 
     compensation payable by the replacing carrier on renewal 
     policies.
       (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. 2214. RENEWABILITY STANDARDS FOR ISSUANCE, AND BASIC 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 premiums 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 not less than, 
     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 individuals 
     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 Secretary, in 
     consultation with 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.
       (3) Rate stabilization.--The Secretary, in consultation 
     with the NAIC, shall establish standards for premium rate 
     stabilization.
       (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 2201(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. 2215. BENEFIT STANDARDS.

       (a) Use of Standard Definitions and Terminology, Uniform 
     Format, and Standard Benefits.--Pursuant to standards 
     established under section 2201(a), each long-term care 
     insurance policy shall, with respect to services, providers 
     or facilities--
       (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; 
     and
       (2) use a uniform format for presenting the outline of 
     coverage under such a policy;
     as prescribed under guidelines issued by the Secretary, in 
     consultation with 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 to each individual policyholder under 
     such policy that meets the applicable standards established 
     pursuant to section 2201(a), complies with the requirements 
     of subparagraph (B), and is in a uniform format as prescribed 
     in guidelines issued by the Secretary, in consultation with 
     the NAIC, and periodically updated.
       (B) Contents.--The outline of coverage for each long-term 
     care policy shall substantially and accurately reflect the 
     contents of the policy or the master policy and shall include 
     at least the following:
       (i) A description of the benefits and coverage under the 
     policy.
       (ii) A statement of the 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) Consumer protection information, including the manner 
     in which to file a claim and to register complaints.
       (v) 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 
     and not a contract of insurance, and that the policy (or 
     master policy) contains the contractual provisions that 
     govern.
       (vi) A description of the terms, specified in section 2217, 
     under which a policy or certificate may be returned and 
     premium refunded.
       (vii) Information on--

       (I) national average costs for nursing facility and home 
     health care and information (in graph form) on the 
     relationship of the value of the benefits provided under the 
     policy to such national average costs and State average 
     costs; and
       (II) other public and private long-term care insurance 
     products and long-term care programs where made available by 
     the Federal Government or by a State government.

       (viii) 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 benefits, and the guaranteed lifetime benefits (if any) 
     for each covered individual; and
       (C) any exclusions, reductions, and limitations on benefits 
     of long-term care.
       (4) Additional information.--The Secretary, in consultation 
     with 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, or if no State licensure or certification laws exists, 
     developed by the Secretary, in consultation with 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 a home care worker who is licensed or 
     certified under State licensure or certification laws, or if 
     no such laws exist, who is in compliance with qualifications 
     developed by the Secretary, in consultation with 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) shall provide, at a minimum--
       (i) benefits for personal care services (including home 
     health aide and home care worker services as defined by the 
     Secretary, in consultation with the NAIC), home health 
     services, adult day care, and respite care in an individual's 
     home or in another setting in the community; or
       (ii) any of such benefits on a respite care basis.
       (3) Nursing facility services.--If a long-term care policy 
     provides benefits for the payment of specified nursing 
     facility services, the policy shall provide such benefits 
     with respect to all nursing facilities in the State. Except 
     as provided by the Secretary, in consultation with the NAIC, 
     under uniform language and definitions established under 
     section 2215(a)(1)), the term `nursing facilities' has the 
     meaning given such term by section 1919(a) of the Social 
     Security Act.
       (4) Per diem policies.--
       (A) Definition.--For purposes of this subtitle, 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, limit or otherwise 
     exclude benefit payments based on the receipt of any type 
     services from any type providers of long-term care service 
     providers.
       (d) Prohibition of Discrimination.--A long-term care 
     insurance policy may not, with respect to benefits under the 
     policy, treat 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 a 
     functional impairment for which such 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.--A long-term care policy or certificate 
     issued under this subtitle may impose a limitation or 
     exclusion of benefits relating to treatment of a condition 
     based on the fact that the condition preexisted the effective 
     date of the policy or certificate with respect to an 
     individual if--
       (i) a condition that was diagnosed or treated during the 6-
     month period ending on the day before the first date of 
     coverage under the policy or certificate; and
       (ii) the limitation or exclusion extends for a period not 
     more than 6 months after the date of coverage under the 
     policy or certificate.
       (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 periods, 
     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 
     functional or cognitive abilities. Such initial assessment 
     shall be conducted by an individual or entity, meeting the 
     qualifications established by the Secretary, in consultation 
     with 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.
       (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 Secretary, in consultation with 
     the NAIC, for individuals who dispute the results of the 
     claims review conducted under paragraph (3) or the 
     policyholder'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 functional or 
     cognitive abilities.
       (C) Conduct.--An independent assessment under subparagraph 
     (B) shall be conducted by an individual or entity meeting the 
     qualifications established by the Secretary, in consultation 
     with 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 certificate holder 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 subtitle, the advisory committee 
     established under section 2201(d) shall recommend uniform 
     needs assessment mechanisms for the determination of 
     eligibility for benefits under such assessments.
       (6) Control defined.--For purposes of paragraphs (2) and 
     (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 at least 10 percent of 
     the voting securities of another person.
       (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 long-term care insurance 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 subtitle:
       (A) A comparison (shown as a graph) 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.--Benefit increases under a 
     policy described in paragraph (1) 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.--A policy described in paragraph (1) 
     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. 2216. 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 2201(a)), the policy will 
     provide, without payment of any additional premiums, 
     nonforfeiture benefits as determined appropriate by the 
     Secretary, in consultation with the NAIC.
       (b) Establishment of Standards.--The standards under 
     section 2201(a) shall provide that the percentage or amount 
     of benefits under subsection (a) shall increase based upon 
     the policyholder's equity in the policy.

     SEC. 2217. 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 intentional misrepresentation 
     relating to the issuance of the policy unless notice of such 
     fraud or misrepresentation is provided within a time period 
     to be determined by the Secretary, in consultation with 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. 2218. 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 
     2213(a);
       (2) fails to transmit a policy in accordance with section 
     2213(b);
       (3) fails to provide, make available, or report information 
     in accordance with subsections (c) or (d) of section 2213;
       (4) provides a commission or compensation in violation of 
     section 2213(e);
       (5) fails to provide an outline of coverage in violation of 
     section 2215(b)(1); or
       (6) issues a policy without obtaining certain information 
     in violation of section 2215(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 
     2213(a);
       (2) fails to transmit a policy in accordance with section 
     2213(b);
       (3) fails to provide, make available, or report information 
     in accordance with subsections (c) or (d) of section 2213;
       (4) fails to provide an outline of coverage in violation of 
     section 2215(b)(1); or
       (5) issues a policy without obtaining certain information 
     in violation of section 2215(f);
     is subject to a civil money penalty of not to exceed $15,000 
     for each such violation.
       (c) Effect on State Law.--Nothing in this section shall be 
     construed as preempting or otherwise limiting the penalties 
     that may be imposed by a State for the types of conduct 
     described in this section.

 PART 3--LONG-TERM CARE INSURANCE POLICIES, DEFINITION AND ENDORSEMENTS

     SEC. 2221. 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 individual 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--
       (1) 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,
       (2) that provide the option of a lump-sum payment for those 
     benefits, or
       (3) with respect to 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 subtitle, this subtitle shall apply to any product 
     advertised, marketed or offered as a long-term insurance 
     policy, rider or certificate.

     SEC. 2222. CODE OF CONDUCT WITH RESPECT TO ENDORSEMENTS.

       Not later than 1 year after the date of enactment of this 
     subtitle, the Secretary, in consultation with the NAIC, shall 
     issue guidelines that shall apply to organizations and 
     associations (other than employers and labor organizations 
     that do not accept compensation) 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.
                         Subtitle D--Life Care

     SEC. 2301. SHORT TITLE.

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

     SEC. 2302. LIFE CARE: PUBLIC INSURANCE PROGRAM FOR NURSING 
                   HOME CARE.

       The Public Health Service Act is amended by adding at the 
     end thereof the following new title:
  ``TITLE XXVII--LIFE CARE: PUBLIC INSURANCE PROGRAM FOR NURSING HOME 
                                  CARE

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

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

     ``SEC. 2702. BENEFITS.

       ``(a) In General.--
       ``(1) Entitlement to Benefits.--An individual who is 
     eligible for benefits under this program pursuant to section 
     2703 shall be entitled to coverage in accordance with 
     subsection (c) for necessary services des ribed in subsection 
     (b) that are provided to the individual by a nursing facility 
     while the individual is an inpatient of the facility.
       ``(2) Nonforfeiture.--The Secretary shall establish 
     standards to ensure the nonforfeiture of benefits for which 
     premiums have been paid.
       ``(b) Types.--Coverage may be provided under this part 
     for--
       ``(1) nursing care provided by or under the supervision of 
     a registered professional nurse;
       ``(2) physical, occupational, or speech therapy furnished 
     by a facility or by others under arrangements with a 
     facility;
       ``(3) medical social work services;
       ``(4) drug, biological, supply, appliance, and equipment 
     for use in the facility, that is ordinarily furnished by the 
     facility for the care and treatment of an inpatient;
       ``(5) such other services necessary to the functioning of a 
     patient, including personal care and assistance with 
     activities of daily living, as are generally provided by a 
     nursing home facility; and
       ``(6) with respect to the initial 6 months of covered 
     residence in a nursing facility, such room and board costs as 
     are not covered by beneficiary copayment.
       ``(c) Coverage.--
       ``(1) In general.--An individual eligible for benefits 
     under this program shall be entitled, subject to subsection 
     (d), to have payments made, for services described in 
     subsection (b), up to an amount (based on the election made 
     by the individual equal to $30,000, $60,000, or $90,000 (or 
     to such greater amount as adjusted by the Secretary to 
     reflect increases in the Consumer Price Index for fiscal 
     years after fiscal year 1995); and
       ``(2) to asset protection in accordance with section 2708.
       ``(d) Waiting Period.--
       ``(1) Coverage Purchased During Initial Period.--Benefits 
     under individual coverage purchased under this part during 
     the initial period specified in section 2703A(a)(2) shall be 
     unavailable during the 3-year period following the date of 
     such purchase, except as provided in paragraph (3).
       ``(2) All Other Coverage.--In the case of individual 
     coverage under this part purchased after the initial bperiod 
     specified in section 2703A(a)(2), the Secretary may provide 
     for a waiting period (of not longer than 3 years) after such 
     purchase during which covered benefits are unavailable, if 
     necessary to ensure the affordability or actuarial soundness 
     of such coverage or to prevent adverse selection among 
     purchasers.
       ``(3) Secretary's Discretion to Shorten Waiting Period.--
     The Secretary may reduce or eliminate any waiting established 
     under this subsection if the Secretary determines that such 
     reduction or elimination will not adversely affect the 
     actuarial soundness of coverage under this part.
       ``(e) Payment.--Amounts provided under this part with 
     respect to an eligible individual for the services described 
     in subsection (b) shall be paid from the general fund of the 
     Treasury of the United States.
       ``(f) Residential Care Facilities.--The Secretary shall 
     consider the feasibility of making payments under this part 
     for services delivered in residential care facilities. Not 
     later than 2 years after the date of enactment of this Act, 
     the Secretary shall report its findings to the Congress with 
     respect to the feasibility of making such payments.

     ``SEC. 2703. ELIGIBILITY.

       ``(a) In General.--An individual who is a legal resident of 
     the United States and has purchased coverage under this part 
     in accordance with section 2703A shall be eligible for 
     benefits under this part if--
       ``(1) the individual has been determined by a Screening 
     Agency through a screening process (conducted in accordance 
     with section 2707)--
       ``(A) to require hands-on or stanby assistance, 
     supervision, or cueing (as defined in regulations) to perform 
     three or more activities of daily living; or
       ``(B)(i) to have achieved a score, on a standard mental 
     status protocol (or protocols) appropriate for measuring the 
     individual's particular condition specified by the Secretary, 
     that indicates either severe cognitive impairment or sever 
     mental impairment, or both; and
       ``(ii)(I) to require handson or standby assistance, 
     supervision, or cueing with at least one activity of daily 
     living or with at least such instrumental activity of daily 
     living or with at least such instrumental activity (or 
     activities) of daily living related to cognitive or mental 
     impairment as the Secretary Specifies; or
       ``(II) to display symptoms of one or more seriours 
     behavioral problems (that is on a list 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) to require such assistance, supervision, or cueing 
     over a period of at least 90 days; and
       ``(2) an application for such benefits has been filed--
       ``(A) by such individual, or
       ``(B) on behalf or such individual by the individual's 
     legal guardian (or representative, in the case of an 
     individual who is cognitively impaird.
       ``(C) Public Education.--In the 12 months preceding the 
     initial enrollment period, the Secretary shall, either 
     directly or through grants and contracts, conduct a public 
     service and education campaign designed to inform potentially 
     eligible individuals as to the nature of the benefits and the 
     limited enrollment period. In conducting such campaigns the 
     Secretary shall make information available to individuals 
     through the open enrollment process for obtaining health care 
     benefits under this Act.

     ``SEC. 2703A. PURCHASE OF COVERAGE.

       ``(a) Period of Availability.--
       ``(1) In general.--An individual may purchase coverage 
     under this part, subject to subsection (b), when the 
     individual is within 6 months of the individual's 35th, 45th, 
     55th, or 65th birthday.
       ``(2) Initial period.--Any individual aged 35 or older may 
     purchase coverage under this part, subject to subsection 
     (b)--
       ``(A) during the 1-year period beginning on the date of 
     publication of final regulations implementing this part; or
       ``(B) in the case of such an individual who at no time 
     during such 1-year period is eligible, for at least 60 
     consecutive days, during the subsequent 1-year period.
       ``(b) Coverage Not Available to Institutionalized 
     Individuals.--An individual shall not be eligible to purchase 
     coverage under this part--
       ``(1) while an inpatient in a hospital or nursing home;
       ``(2) within the 6-month period after the individual's 
     discharge from a nursing home; or
       ``(3) within the 90-day period after the individual's 
     discharge from a hospital.
       ``(c) Public Education.--In the 12 months preceding the 
     initial enrollment period, the Secretary shall, either 
     directly or through grants and contracts, conduct a public 
     service and education campaign designed to inform potentially 
     eligible individuals as to the nature of the benefits and the 
     limited enrollment period. In conducting such campaigns the 
     Secretary shall make information available to individuals 
     through the open enrollment process for obtaining health care 
     benefits under this Act.

     ``SEC. 2704. PREMIUM RATES.

       ``(a) Establishment of Rates.--The Secretary shall 
     determine one actuarially fair, age-rated premium for the 
     initial year of coverage under this part for each of the 
     following age groups;
       ``(1) for individuals who initially purchase such coverage, 
     after the initial period specified in section 2703A(a)(2), at 
     ages 35, 45, 55, and 65; and
       ``(2) for individuals in each one-year age group for ages 
     35 and higher who initially purchase such coverage during 
     such initial period.
       ``(b) Revision.--The Secretary shall revise premium rates 
     annually to increase such rates to reflect the amount of the 
     increase in the cost of living adjustment with respect to 
     benefits under title II of the Social Security Act.
       ``(c) Rates.--In developing premium rates under the program 
     established under this part, the Secretary shall establish 
     rates that are expected to cover 100 percent of the 
     reimbursement amount provided under this part for nursing 
     home stays for those individuals enrolled in the program.
       ``(d) Waiver.--An individual electing to purchase coverage 
     under this part shall not be required to pay premiums during 
     any period in which such individual is receiving benefits 
     under this part.
       ``(e) Payment.--Premiums shall be paid under this section 
     into the general fund of the Treasury of the United States.

     ``SEC. 2705. QUALIFIED SERVICE PROVIDERS.

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

     ``SEC. 2706. REIMBURSEMENT.

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

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

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

     ``SEC. 2708. ASSET PROTECTION.

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

     ``SEC. 2709. RELATION TO PRIVATE INSURANCE.

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

     ``SEC. 2710. DEFINITIONS.

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

     ``SEC. 2711. REPORTS.

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

     SEC. 2401. STUDY OF ISSUES RELATED TO END OF LIFE CARE.

       (a) Study.--
       (1) In general.--Within 6 months after the date of the 
     enactment of this Act, the Secretary shall enter into an 
     agreement with the Institute of Medicine of the National 
     Academy of Sciences (or with another nonprofit, 
     nongovernmental organization or consortium of institutions if 
     the Institute declines to perform the study) to investigate 
     and report on issues relating to appropriate care at the end 
     of life, including how to determine the appropriateness of 
     curative or life-prolonging or palliative services for 
     gravely or terminally ill or injured persons of all ages.
       (2) Specific issues.--The study described in paragraph (1) 
     shall specifically include an examination of the following 
     issues:
       (A) The epidemiology of dying.
       (B) The feasibility and utility of clinical practice 
     guidelines for appropriate care.
       (C) Conditions that promote or impede appropriate care 
     (such as professional training and beliefs, financing and 
     organization of services, patient and public knowledge and 
     attitudes).
       (D) Priorities for research on the issues described in the 
     preceding subparagraphs.
       (E) Concerns of health care practitioners and providers, 
     medical educators, the general public, and those responsible 
     for public and private decisions about the organization, 
     financing, and quality of health care in the United States.
       (b) Report.--The Institute of Medicine (or the organization 
     conducting the study under this section) shall submit to the 
     Secretary and the Congress a report on the study described in 
     subsection (a) within 27 months after the date of the 
     enactment of this Act.
       (c) Authorization of Appropriations.--There are authorized 
     to be appropriated such sums as are necessary to carry out 
     the purposes of this section.
 TITLE III--HEALTH PROFESSIONS WORKFORCE AND PUBLIC HEALTH INITIATIVES
        Subtitle A--Workforce Priorities Under Federal Payments

     SEC. 3000. DEFINITIONS.

       For purposes of this subtitle:
       (1) The term ``academic year'' has the meaning given such 
     term in section 3012(b)(3)(A).
       (2) The term ``allocation period'' has the meaning given 
     such term in section 3015(d).
       (3) The term ``annual number of specialty positions'' has 
     the meaning given such term in section 3013(g)(1).
       (4) The term ``approved physician training program'' has 
     the meaning given such term in section 3012(b)(1).
       (5) The term ``consumer price index'' has the meaning given 
     such term in section 3033(e)(1).
       (6) The term ``designation period'' has the meaning given 
     such term in section 3013(g)(2).
       (7) The term ``funding agreement'' has the meaning given 
     such term in section 3012(b)(3)(B).
       (8) The term ``general health care inflation factor'' has 
     the meaning given such term in section 3033(e)(4).
       (9) The term ``medical school'' has the meaning given such 
     term in section 3001(e)(2).
       (10) The term ``medical specialty'' has the meaning given 
     such term in section 3012(b)(3)(C).
       (11) The term ``National Council'' has the meaning given 
     such term in section 3001(e)(3).
       (12) The term ``primary health care'' has the meaning given 
     such term in section 3013(g)(3).
       (13) The term ``qualified applicant'' has the meaning given 
     such term in section 3012(b)(2), in the case of subpart B; 
     and has the meaning given such term in section 3031(c), in 
     the case of subpart C.
       (14) The term ``specialty position'' has the meaning given 
     such term in section 3013(g)(4).
       (15) The term ``training participant'' has the meaning 
     given such term in section 3013(g)(5).

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

       Subpart A--National Council Regarding Workforce Priorities

     SEC. 3001. NATIONAL COUNCIL ON GRADUATE MEDICAL EDUCATION.

       (a) In General.--There is established within the Department 
     of Health and Human Services a council to be known as the 
     National Council on Graduate Medical Education.
       (b) Duties.--The Secretary shall carry out subpart B acting 
     through the National Council.
       (c) Composition.--
       (1) In general.--The membership of the National Council 
     shall include between 12 and 16 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 in the following 
     proportions:
       (A) One-quarter composed of consumers of health care 
     services, at least one of whom resides in a rural area.
       (B) One-quarter composed of primary health care physicians 
     who are faculty members of medical schools (including 
     officials of medical schools and executive officers of 
     teaching hospitals) and primary health care physicians who 
     are practicing and are not faculty members of medical 
     schools, at least one of whom resides in a rural area.
       (C) One-quarter composed of non-primary health care 
     specialty physicians who are faculty members of medical 
     schools, non-primary health care specialty physicians who are 
     not faculty members of medical schools, officials of medical 
     schools, and executive officers of teaching hospitals.
       (D) One-quarter composed of officers and employees of 
     health plans, and officers or members of purchasing 
     cooperatives.
       (2) Ex officio members; other federal officers or 
     employees.--The membership of the National Council shall 
     include individuals designated by the Secretary to serve as 
     members of the Council from among Federal officers or 
     employees who are appointed by the President, or by the 
     Secretary or other Federal officers who are appointed by the 
     President with the advice and consent of the Senate.
       (d) Chair.--The Secretary shall, from among members of the 
     National Council appointed under subsection (c)(1), designate 
     an individual to serve as the Chair of the Council.
       (e) Definitions.--For purposes of this subtitle:
       (1) The term ``academic health center'' means an entity 
     defined in section 3051(c)(1).
       (2) The term ``medical school'' means a school of medicine 
     (as defined in section 799 of the Public Health Service Act) 
     or a school of osteopathic medicine (as defined in such 
     section).
       (3) The term ``National Council'' means the council 
     established in subsection (a).
       (f) Conforming Amendment Repealing the Council on Graduate 
     Medical Education (COGME).--Effective on the date of the 
     first meeting of the National Council, section 30 of the 
     Health Professions Education Extension Amendments of 1992 
     (Public Law 102-408) is repealed.

         Subpart B--Authorized Positions in Specialty Training

     SEC. 3012. COOPERATION REGARDING APPROVED PHYSICIAN TRAINING 
                   PROGRAMS.

       (a) In General.--With respect to an approved physician 
     training program in a medical specialty, a funding agreement 
     with a qualified applicant for payments under section 3031 
     and section 3051 for a calendar year is that the qualified 
     applicant will ensure that the number of individuals enrolled 
     in the program in the subsequent academic year is in 
     accordance with this subpart.
       (b) Definitions.--
       (1) Approved program.--For purposes of this subtitle:
       (A) The term ``approved physician training program'', with 
     respect to the medical specialty involved, means a residency 
     or other postgraduate program that trains physicians and 
     meets the following conditions:
       (i) Participation in the program may be counted toward 
     certification in the medical specialty as determined under 
     the applicable standards of the American Board of Medical 
     Specialties or the Council on Postdoctoral Training of the 
     American Osteopathic Association.
       (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.
       (B) The term ``approved physician training program'' 
     includes any postgraduate program described in subparagraph 
     (A) that provides health services in an ambulatory setting, 
     without regard to whether the program provides inpatient 
     hospital services.
       (C) The term ``approved physician training program'' 
     includes any postgraduate program described in subparagraph 
     (A), whether operated by academic health centers, teaching 
     hospitals, group practices, ambulatory care providers, 
     prepaid health plans, or other entities.
       (D) The term ``approved physician training program'' 
     includes any postgraduate program described in subparagraph 
     (A) that provides fellowship training in family medicine, 
     general internal medicine or general pediatrics, and provides 
     training for a faculty position in family medicine, general 
     internal medicine, or general pediatrics.
       (2) Qualified applicant; subpart definition.--For purposes 
     of this subpart, the term ``qualified applicant'', with 
     respect to an academic year, means an entity that trains 
     individuals in an approved physician program that receives 
     payments under subpart C for the calendar year in which the 
     academic year begins.
       (3) Other definitions.--For purposes of this subtitle:
       (A)(i) Except as provided in clause (iii), the term 
     ``academic year'' means the 1-year period beginning on July 
     1. The academic year beginning July 1, 1993, is academic year 
     1993-1994.
       (ii) With respect to the funding agreement described in 
     subsection (a), the term ``subsequent academic year'' means 
     the academic year beginning July 1 of the calendar year for 
     which payments are to be made under the agreement.
       (iii) For purposes of determining the academic year in 
     which a training participant enters an approved physician 
     training program, the academic year is the 1-year period 
     beginning on or after June 1.
       (B) The term ``funding agreement'', with respect to 
     payments under section 3031 and 3051 to a qualified 
     applicant, means that the Secretary may make the payments 
     only if the qualified applicant signs the agreement involved.
       (C) The term ``medical specialty'' includes all medical, 
     surgical, and other physician specialties and subspecialties.

     SEC. 3013. ANNUAL AUTHORIZATION OF NUMBER OF SPECIALTY 
                   POSITIONS; REQUIREMENTS REGARDING PRIMARY 
                   HEALTH CARE.

       (a) Annual Authorization of Number of Positions.--In the 
     case of each medical specialty, the National Council shall, 
     pursuant to section 3012, designate for academic year 1998-
     1999 and each subsequent academic year the number of 
     individuals nationwide who are authorized to be enrolled in 
     eligible programs in each medical specialty for the academic 
     year involved.
       (b) Primary Health Care.--
       (1) Requirement across specialities.--In carrying out 
     subsection (a) for an academic year, the National Council 
     shall ensure that, of the class of training participants 
     entering all eligible programs for their first year of 
     graduate medical education for academic year 1998-1999 or any 
     subsequent academic year, the percentage of such class that 
     completes eligible programs in primary health care and does 
     not subsequently enter a non-primary health care training 
     program, is not less than the following, as applicable to the 
     academic year involved:
       (A) For academic year 1998-1999, 39 percent.
       (B) For academic year 1999-2000, 44 percent.
       (C) For academic year 2000-2001, 49 percent.
       (D) For academic year 2001-2002 and each subsequent 
     academic year, 55 percent, except as provided in section 
     3014.
       (2) Rule of construction.--The requirement of paragraph (1) 
     regarding a percentage applies in the aggregate to training 
     participants entering eligible programs for the academic year 
     involved, and not individually to any eligible program.
       (c) Designations Regarding 3-Year Periods.--
       (1) Designation periods.--For each medical specialty, the 
     National Council shall make the annual designations under 
     subsection (a) for periods of 3 academic years.
       (2) Initial period.--The first designation period 
     established by the National Council after the date of the 
     enactment of this Act shall be the academic years 1998-1999 
     through 2000-2001.
       (d) Certain Considerations in Designating Annual Numbers.--
       (1) In general.--Factors considered by the National Council 
     in designating the annual number of specialty positions for 
     an academic year for a medical specialty shall include the 
     extent to which there is a need for additional practitioners 
     in the speciality, as indicated by the following:
       (A) The characteristics of diseases, disorders, or health 
     conditions treated, including--
       (i) the incidence and prevalence (in the general population 
     and in various other populations) of the diseases, disorders, 
     or other health conditions with which the specialty is 
     concerned;
       (ii) the intensity of care required for each of these 
     diseases, disorders, or health conditions;
       (iii) the relevant training received and experience 
     attained by primary health care and specialist physicians in 
     caring for each of these diseases, disorders, or health 
     conditions; and
       (iv) should sufficient data become available, the extent to 
     which individuals with certain diseases, disorders, or health 
     conditions have better health outcomes when treated by non-
     primary health care physicians than by primary health care 
     physicians.
       (B) The number of physicians who will be practicing in the 
     specialty in the academic year.
       (C) The number of physicians who will be practicing in the 
     specialty at the end of the 5-year period beginning on the 
     first day of the academic year.
       (D) Whether, after examining medical specialty 
     requirements, the National Council determines that specialty 
     is a medical shortage specialty (as defined by the National 
     Council).
       (2) Recommendations of private organizations.--In 
     designating the annual number of specialty positions for an 
     academic year for a medical specialty, the National Council 
     shall consider the recommendations of organizations 
     representing physicians in the specialty, organizations 
     representing academic medicine, and the recommendations of 
     organizations representing consumers of the services of such 
     physicians.
       (3) Total of respective annual numbers.--
       (A) In general.--For academic year 1998-1999 and subsequent 
     academic years, the National Council shall ensure that the 
     total of the respective annual numbers designated under 
     subsection (a) for an academic year is a total that--
       (i) bears a relationship to the number of individuals who 
     graduated from medical schools in the United States in the 
     academic year 1997-1998; and
       (ii) is consistent with the purposes of this subpart.
       (B) Reduction.--For each of the academic years 1998-1999 
     through 2001-2002, the total determined under subparagraph 
     (A) shall be reduced by a percentage determined by the 
     National Council.
       (e) Voluntary Compliance.--
       (1) Establishment of the positions for first designation 
     period.--Not later than June 1, 1996, the National Council 
     shall establish the number of positions in each medical 
     specialty that will be allocated under subsection (a) for the 
     academic years 1998-1999, 1999-2000, and 2000-2001.
       (2) Voluntary compliance.--A medical specialty shall not be 
     subject to the mandatory allocation system described in 
     section 3015 if--
       (A) by June 1, 1997, each eligible approved physician 
     training program has submitted to the National Council a 
     proposal for first year positions in approved physician 
     training programs in that particular medical specialty for 
     the academic years 1998-99, 1999-2000, and 2000-2001 and the 
     total proposed number of all such positions for the specialty 
     does not exceed the number of positions established for such 
     specialty under paragraph (1) for each such academic year; 
     and
       (B) in subsequent academic years, the total proposed number 
     of first year positions in approved physician training 
     programs in that particular medical specialty does not exceed 
     the number of individuals nationwide who are authorized to be 
     enrolled in approved medical training programs for such 
     medical specialty for such year pursuant to subsection (a).
       (3) Loss of compliance.--The National Council may, at any 
     time, determine that a specialty is not in compliance with 
     the number of positions established by the Council under 
     paragraph (1) or subsection (a) and initiate, with respect to 
     that specialty, the system of mandatory allocations described 
     in section 3015.
       (f) Study.--Not later than January 1, 2005, the Secretary 
     shall arrange for the completion, by the Institute of 
     Medicine or other similar entity, of an independent study 
     concerning the effect of medical workforce regulation and 
     planning in general and in particular geographic areas. The 
     results of such study together with recommendations 
     concerning the appropriateness of modifying or eliminating 
     workforce regulations shall be compiled in a report and 
     transmitted by the Secretary to the President and the 
     Congress.
       (g) Definitions.--For purposes of this subtitle:
       (1) The term ``annual number of specialty positions'', with 
     respect to a medical specialty, means the number designated 
     by the National Council under subsection (a) for eligible 
     programs for the academic year involved.
       (2) The term ``designation period'' means a 3-year period 
     under subsection (c)(1) for which designations under 
     subsection (a) are made by the National Council.
       (3) The term ``primary health care'' means the following 
     medical specialties: Family medicine, general internal 
     medicine, general pediatrics, geriatric medicine, and 
     obstetrics and gynecology. Only those participants in 
     programs with a significant primary care training emphasis 
     will be considered to have completed an eligible program in 
     primary care for the purposes of subsection (b)(1). 
     Determination of the meaning of a ``significant primary care 
     training emphasis'' will be made by the National Council.
       (4) The term ``specialty position'' means a position as a 
     training participant.
       (5) The term ``training participant'' means an individual 
     who is enrolled in an approved physician training program.

     SEC. 3014. NATIONAL COUNCIL RECOMMENDATION OF NUMBER OF 
                   GRADUATE MEDICAL EDUCATION POSITIONS.

       (a) In General.--
       (1) Recommendations.--Beginning with academic year 2001-
     2002 and each subsequent academic year, the National Council 
     may after considering the factors described in paragraph (2) 
     annually recommend to the Secretary a change in accordance 
     with subsection (b), the distribution of positions among 
     medical specialties determined under section 3013(a) and 
     3013(b)(1)(D).
       (2) Factors for consideration.--In developing a 
     recommendation under paragraph (1), the Secretary shall 
     consider the impact on rural, inner city, and public 
     hospitals of reducing numbers of individuals authorized to 
     enter approved physician training programs and the 
     appropriate supply of physicians in the aggregate and in 
     particular medical specialties.
       (b) Limitations on Recommended Percent for Primary Care for 
     Academic Year 2001-2002.--For the academic year 2001-2002, 
     the number that the National Council may recommend under 
     subsection (a)(1) may not be more than 5 percentage points 
     less or 5 percentage points more than the number described in 
     section 3013(b)(1)(D).
       (c) Consideration and Implementation by the Secretary.--The 
     Secretary shall in the Secretary's discretion implement the 
     recommendations by the National Council under subsection (a) 
     in accordance with section 3013(b)(1). The Secretary may not 
     modify such recommendations.

     SEC. 3015. ALLOCATIONS AMONG SPECIALITIES AND PROGRAMS.

       (a) In General.--Subject to the provisions of section 3013, 
     for each academic year, the National Council shall for each 
     medical specialty make allocations among eligible programs of 
     the annual number of specialty positions that the Council has 
     designated for such year. The preceding sentence is subject 
     to subsection (b)(3).
       (b) Allocations Regarding 3-Year Period.--
       (1) In general.--For each medical specialty, the National 
     Council shall make the annual allocations under subsection 
     (a) for periods of 3 academic years.
       (2) Advance notice to programs.--With respect to the first 
     academic year of an allocation period established by the 
     National Council, the National Council shall, not later than 
     July 1 of the preceding academic year, notify each eligible 
     program of the allocations made for the program for each of 
     the academic years of the period.
       (3) Initial period.--The first allocation period 
     established by the National Council after the date of the 
     enactment of this Act shall be the academic years 1998-1999 
     through 2000-2001.
       (c) Certain Considerations.--
       (1) Geographic areas.--In making allocations under 
     subsection (a) for eligible programs of the various 
     geographic areas, the National Council shall include among 
     the factors considered the--
       (A) distribution of approved physician training programs 
     with respect to population and community need; and
       (B) historical distribution of approved physician training 
     programs among the geographic areas.
       (2) Quality of programs.--In making allocations under 
     subsection (a) for eligible programs, the National Council 
     shall consider the quality of such programs.
       (3) Underrepresentation of minority groups and women.--In 
     making an allocation under subsection (a) for an eligible 
     program, the National Council shall include among the factors 
     considered the following:
       (A) The extent to which the population of training 
     participants in the program includes training participants 
     who are members of racial or ethnic minority groups and 
     women.
       (B) With respect to a racial or ethnic group or women 
     represented among the training participants, the extent to 
     which the group is underrepresented in the field of medicine 
     generally and in the various medical specialities.
       (4) Underserved rural and inner-city communities.--In 
     making allocations under subsection (a) for eligible 
     programs, the National Council shall consider the extent to 
     which the population of training participants in the program 
     includes training participants who have resided in rural or 
     inner-city communities for a substantial period, as defined 
     by the Council and the proportion of past participants in the 
     program who are practicing in rural or inner-city 
     communities.
       (5) Recommendations of private organizations.--In making 
     allocations under subsection (a) for eligible programs, the 
     National Council shall consider the recommendations of 
     organizations representing physicians in the medical 
     specialties, the recommendations of organizations 
     representing academic medicine and the recommendations of 
     organizations representing consumers of the services of such 
     physicians.
       (d) Definitions.--For purposes of this subtitle, the term 
     ``allocation period'' means a 3-year period under subsection 
     (b)(1) for which allocations under subsection (a) are made by 
     the National Council.

             Subpart C--Costs of Graduate Medical Education

      CHAPTER 1--OPERATION OF APPROVED PHYSICIAN TRAINING PROGRAMS

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

       (a) In General.--In the case of a qualified entity that in 
     accordance with section 3032 submits to the Secretary an 
     application for calendar year 1997 or any subsequent calendar 
     year, the Secretary shall make payments for such year to the 
     qualified entity for the purpose specified in subsection (b). 
     The Secretary shall make the payments in an amount determined 
     in accordance with section 3033 and 3034, and may administer 
     the payments as a contract, grant, or cooperative agreement.
       (b) Payments for Operation of Approved Physician Training 
     Programs.--The purpose of payments under subsection (a) is to 
     assist a qualified applicant with the costs of operation of 
     an approved physician training program. A funding agreement 
     for such payments is that the qualified applicant involved 
     will expend the payments only for such purpose or for such 
     other related purposes as the Secretary may authorize.
       (c) Qualified Applicant; Subpart Definition.--
       (1) In general.--For purposes of this subpart, the term 
     ``qualified applicant'', with respect to the calendar year 
     involved, means an entity--
       (A) that trains individuals in approved physician training 
     programs; and
       (B) that submits to the Secretary an application for such 
     year in accordance with section 3032.
       (2) Entities included.--The term ``qualified applicant'' 
     may include an approved physician training program, teaching 
     hospital, medical school, group practice, an entity 
     representing two or more parties engaged in a formal 
     association, a community health center or another entity 
     operating an approved physician training program.
       (d) Treatment of Podiatric and Dental Residency Programs.--
     Except as provided in section 3034, for the purposes of this 
     subpart, an approved physician training program includes 
     training programs approved by the Commission on Dental 
     Accreditation or the Council of Podiatric Medical Education 
     of the American Podiatric Medical Association. This 
     subsection shall not apply for purposes of subpart B.

     SEC. 3032. APPLICATION FOR PAYMENTS.

       (a) In General.--
       (1) In general.--For purposes of section 3031(a), an 
     application for payments under such section for a calendar 
     year is in accordance with this section if--
       (A) the eligible entity involved submits the application 
     not later than the date specified by the Secretary;
       (B) the application demonstrates that the condition 
     described in subsection (b) is met with respect to the 
     program;
       (C) the application contains each funding agreement 
     described in this part and the application provides such 
     assurances of compliance with the agreements as the Secretary 
     may require; and
       (D) the application is in such form, is made in such 
     manner, and contains such agreements, assurances, and 
     information as the Secretary determines to be necessary to 
     carry out this part.
       (2) Certain entities.--If an applicant under paragraph (1) 
     is an entity representing two or more parties--
       (A) the application shall contain a written agreement, 
     signed by all participants, in which all of the participants 
     agree as to the manner in which the payments will be 
     allocated; and
       (B) the applicant shall agree to submit additional 
     documentation, if requested by the National Council, that 
     demonstrates that the funds are distributed in the manner 
     agreed upon by all participants.
       (b) Certain Conditions.--An eligible entity meets the 
     condition described in this subsection for receiving payments 
     under section 3031 for a calendar year if--
       (1) the entity agrees to use such funds only to support an 
     approved physician training program;
       (2) with respect to--
       (A) a specialty for which programs have received 
     allocations under section 3015, the entity agrees that funds 
     will be used only to support approved training programs for 
     which the number of specialists in training is consistent 
     with the allotment under section 3015; and
       (B) a specialty for which a voluntary program has received 
     allocations under section 3013(e), the entity agrees that 
     funds will only be used to support approved training programs 
     for which the number of specialists in training is consistent 
     with the allocations under section 3013(e); and
       (3) the entity notifies each residency training program 
     director of each approved physician training program operated 
     by the entity of the amount of payments received by the 
     entity under this section and sections 3051 and 3055 that is 
     attributable to the number of training participants in the 
     program.
       (c) Compliance With Specialty Allocations.--A funding 
     agreement for payments under section 3031 is that an eligible 
     institution that operates or is affiliated with an approved 
     physician training program shall receive such payments only 
     if the number of specialists in such a program is consistent 
     with the allotment under section 3015 or 3013(e).
       (d) Residency Training Program Director.--For purposes of 
     this section, the term ``residency training program 
     director'' means an individual specified in the application 
     of the entity as the official with primary administrative 
     responsibility for an approved physician training program.

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

       (a) Graduate Medical Education Account.--
       (1) In general.--Subject to paragraph (2) and except as 
     provided in section 3034, the following amounts shall be 
     available for a calendar year for making payments under 
     sections 3031 and 3055 from the Graduate Medical Education 
     Account established under section 9551(a)(2)(A) of the 
     Internal Revenue Code of 1986:
       (A) In the case of calendar year 1997, $3,200,000,000.
       (B) In the case of calendar year 1998, $3,600,000,000.
       (C) In the case of calendar year 1999, $5,800,000,000.
       (D) In the case of calendar year 2000, $6,100,000,000.
       (E) In the case of calendar year 2001, $6,500,000,000.
       (F) In the case of each subsequent calendar year, the 
     amount specified in subparagraph (E) increased by the product 
     of such amount and the general health care inflation factor 
     for such year (as defined in subsection (e)).
       (2) Allocation of account for payments to training programs 
     and for transitional payments.--If the sum of the amounts 
     specified in subsection (b), section 3034(c), and section 
     3055(a) exceeds the amounts available for such calendar year 
     in the Graduate Medical Education Account established under 
     section 9551(a)(2)(A) of the Internal Revenue Code of 1986, 
     then each such amount shall be reduced by an amount which 
     bears the same ratio to such amount as the amounts available 
     bear to the sum of such amounts.
       (b) Amount of Payments for Individual Eligible Entities.--
       (1) In general.--Except as provided in section 3034, 
     payment amounts with respect to any physician training 
     program under this section shall be equal to the product of 
     the number of full time equivalent training participants in 
     the program, and the per resident amount for the training 
     program.
       (2) Per resident amount.--
       (A) In general.--Except as provided under subparagraph (B), 
     the per resident amount for a training program shall be equal 
     to--
       (i) with respect to--

       (I) the first calendar year during which the program 
     receives payment under subsection (a), 90 percent;
       (II) the second calendar year during which the program 
     receives payment under subsection (a), 80 percent;
       (III) the third calendar year during which the program 
     receives payment under subsection (a), 70 percent;
       (IV) the fourth calendar year during which the program 
     receives payment under subsection (a), 60 percent; and
       (V) the fifth and subsequent calendar year during which the 
     program receives payment under subsection (a), 50 percent;

     of the approved FTE resident amount that would have been 
     determined under section 1886(h)(2)(D) of the Social Security 
     Act (42 U.S.C. 1395ww(h)(2)(D)) for the hospital operating 
     such approved physician training program for a cost reporting 
     period beginning in such calendar year if the amendments made 
     by section 4306 of the Health Security Act had not been made; 
     and
       (ii) with respect to--

       (I) the first calendar year during which the program 
     receives payment under subsection (a), 10 percent;
       (II) the second calendar year during which the program 
     receives payment under subsection (a), 20 percent;
       (III) the third calendar year during which the program 
     receives payment under subsection (a), 30 percent;
       (IV) the fourth calendar year during which the program 
     receives payment under subsection (a), 40 percent; and
       (V) the fifth and subsequent calendar years during which 
     the program receives payment under subsection (a), 50 
     percent;

     of the geographically adjusted national average per resident 
     amount.
       (B) Minimum per resident amount.--Notwithstanding the 
     provisions of subparagraph (A), the per resident amount for a 
     training program shall not be less than 75 percent of the 
     geographically adjusted national average per resident amount 
     determined in accordance with subparagraph (A)(ii).
       (C) No historic payment basis.--For purposes of 
     subparagraph (A)(i), the Secretary shall determine the 
     appropriate per resident amount applicable to an entity 
     that--
       (i) trains individuals in an approved physician training 
     program that is sponsored by or is affiliated with more than 
     one entity that had a per resident amount determined under 
     section 1886(h) of the Social Security Act which reflects the 
     average per resident amounts under such section for such 
     entities; or
       (ii) trains individuals in an approved physician training 
     program that is sponsored by or is affiliated with an entity 
     that did not have a per resident amount determined under such 
     section for cost reporting periods beginning before 1996 
     which reflects the national average per resident amount.
       (3) Adjustment factor.--Payments under this section shall 
     be subject to an adjustment factor, as determined by the 
     Secretary, so that total payments in any year will not exceed 
     the amounts specified in subsection (a) and as provided in 
     subsection (d).
       (4) Additional provisions regarding national average 
     cost.--
       (A) Determination of national average cost.--The Secretary 
     shall in accordance with clause (ii) of subsection (b)(2)(A) 
     determine, for academic year 1992-1993, an amount equal to 
     the geographically adjusted national average per resident 
     amount described in such clause with respect to training a 
     participant in an approved physician training program. The 
     national average applicable under such clause for a calendar 
     year for such programs is, subject to subparagraph (B), the 
     amount determined under the preceding sentence increased by 
     the amount necessary to offset the effects of inflation 
     occurring since academic year 1992-1993, as determined 
     through use of the consumer price index.
       (B) Geographic adjustment.--The national average determined 
     under subparagraph (A) and applicable to a calendar year 
     shall, in the case of the eligible entity involved, be 
     adjusted by a factor to reflect regional differences in the 
     applicable wage and wage-related costs.
       (5) Funding level and allocation method.--Not later than 
     January 1, 1998, the Secretary shall complete a study to 
     determine the effect and appropriateness of the funding level 
     and allocation method described in subsection (a) and 
     paragraphs (1), (2), (3), and (4) of this subsection on the 
     operation of training programs and on national workforce 
     goals and shall compile the findings and recommendations 
     derived from such study in a report to be submitted to the 
     President and the Congress.
       (c) Determination of Full-Time-Equivalent Training 
     Participants.--
       (1) Rules.--The Secretary shall establish rules consistent 
     with this subsection for the computation of the number of 
     full-time-equivalent training participants in approved 
     physician training programs under subsection (b)(1).
       (2) Adjustment for part-year or part-time training 
     participants.--Such rules shall take into account individuals 
     who serve as training participants for only a portion of a 
     period in an approved physician training program or 
     simultaneously with more than one such program.
       (3) Weighting factors for certain training participants.--
       (A) In general.--Subject to paragraph (4), such rules shall 
     provide, in calculating the number of full-time-equivalent 
     training participants in an approved physician training 
     program--
       (i) for a training participant who is in the participant's 
     initial training period, the weighting factor is 1.00,
       (ii) except as provided in clause (iii), for a training 
     participant who is not in the participant's initial training 
     period, the weighting factor is 0.75, and
       (iii) in an academic year in which the total number of 
     training participant positions in all approved physician 
     training programs in all medical specialities does not 
     exceed--

       (I) 134 percent of United States medical school graduates 
     in academic year 1997-1998, the weighting factor for a 
     training participant who is not in the training participant's 
     initial training period is 0.85;
       (II) 126 percent of United States medical school graduates 
     in academic year 1997-1998, the weighting factor for such a 
     participant is 0.90;
       (III) 118 percent of United States medical school graduates 
     in 1997-1998, the weighting factor for such a participant is 
     0.95 percent; and
       (IV) 110 percent of United States medical school graduates 
     in academic year 1997-1998, the weighting factor for such a 
     participant, the weighting factor is 1.0.

       (B) Study.--Not later than January 1, 1998, the Secretary 
     shall complete a study to determine the effect that applying 
     weighting factors in calculating the number of full-time-
     equivalent training participants would have on supporting 
     national workforce goals.
       (4) International medical graduates required to pass fmgems 
     examination.--Such rules shall provide that, in the case of 
     an individual who is an international medical graduate, the 
     individual shall not be counted as a training participant 
     unless--
       (A) the individual has passed the FMGEMS examination or the 
     U.S. Medical Licensing Examination, or
       (B) the individual has previously received certification 
     from, or has previously passed the examination of, the 
     Educational Commission for Foreign Medical Graduates.
       (5) Counting time spent in outpatient settings.--Such rules 
     shall provide that only time spent in activities relating to 
     patient care shall be counted and that all the time so spent 
     by a training participant under an approved physician 
     training program shall be counted towards the determination 
     of full-time equivalency, without regard to the setting in 
     which the activities are performed.
       (d) Limitation.--Subject to subsection (a), if the amount 
     available from the Graduate Medical Education Account 
     established under section 9551(a)(2)(A) of the Internal 
     Revenue Code of 1986 for a calendar year is insufficient for 
     providing each eligible entity with the amount of payments 
     determined under subsection (b) for the entity for such year, 
     the Secretary shall make such pro rata reductions in the 
     amounts so determined as may be necessary to ensure that the 
     total of payments made under section 3031 for such year 
     equals the amount specified under section 3033(a).
       (e) Definitions.--For purposes of this subtitle:
       (1) Consumer price index.--The term ``consumer price 
     index'' means the Consumer Price Index for All Urban 
     Consumers (U.S. city average).
       (2) International medical graduate.--The term 
     ``international medical graduate'' means a training 
     participant who is a graduate of a school of medicine, school 
     of osteopathy, school of dentistry, or school of podiatry 
     that is not--
       (A) a school of medicine accredited by the Liaison 
     Committee on Medical Education of the American Medical 
     Association and the Association of American Medical Colleges 
     (or approved by such Committee as meeting the standards 
     necessary for such accreditation),
       (B) a school of osteopathic medicine accredited by the 
     American Osteopathic Association, or approved by such 
     Association as meeting the standards necessary for such 
     accreditation,
       (C) a school of dentistry which is accredited by the 
     Commission on Dental Accreditation, or
       (D) a school of podiatric medicine which is accredited by 
     the Council of Podiatric Medical Education of the American 
     Podiatric Medical Association.
       (3) FMGEMS examination.--The term ``FMGEMS examination'' 
     means parts I and II of the Foreign Medical Graduate 
     Examination in the Medical Sciences or any successor 
     examination recognized by the Secretary for this purpose.
       (4) General health care inflation factor.--(A) The term 
     ``general health care inflation factor'', with respect to a 
     year, means the percentage increase in the consumer price 
     index for the year plus the following:
       (i) For 1997, 1.0 percentage points.
       (ii) For 1998, 0.5 percentage points.
       (iii) For 1999 and for 2000, 0 percentage points.
       (B) Years after 2000.--
       (i) Recommendation to congress.--In 1999, the Secretary 
     shall submit to Congress recommendations, after consultation 
     with the Federal Reserve Board, on what the general health 
     care inflation factor should be for years beginning with 
     2001.
       (ii) Failure of congress to act.--If the Congress fails to 
     enact a law specifying the general health care inflation 
     factor for a year after 2000, the Secretary, in January of 
     the year before the year involved, shall compute such factor 
     for the year involved. Such factor shall be the product of 
     the factors described in subparagraph (C) for that fiscal 
     year, minus 1.
       (iii) Study by federal reserve board.--Not later than 
     January 1, 1999, the Federal Reserve Board shall conduct a 
     study, and report to the Secretary, concerning what the 
     general health care inflation factor should be for years 
     beginning with 2001. Such study shall consider whether 
     continued indexing with respect to such factor is advisable 
     and whether the consumer price index should be used (in whole 
     or in part, modified or unmodified) with respect to premium 
     caps for future years. The recommendations of the Federal 
     Reserve Board under such study shall be considered in the 
     recommendations submitted under clause (i).
       (C) Factors.--The factors described in this subparagraph 
     for a year are the following:
       (i) CPI.--1 plus the percentage change in the CPI for the 
     year, determined based upon the percentage change in the 
     average of the CPI for the 12-month period ending with August 
     31 of the previous fiscal year over such average for the 
     preceding 12-month period.
       (ii) Real gdp per capita.--1 plus the average annual 
     percentage change in the real, per capita gross domestic 
     product of the United States during the 3-year period ending 
     in the preceding calendar year, determined by the Secretary 
     based on data supplied by the Department of Commerce.
       (5) Initial training period.--The term ``initial training 
     period'' means the period of time required for board 
     eligibility, except that--
       (A) except as provided in subparagraph (B), in no case 
     shall the initial period of participation exceed an aggregate 
     period of formal training of more than 5 years for any 
     individual, and
       (B) a period, of not more than 2 years, during which an 
     individual is in a--
       (i) residency or fellowship program in geriatric medicine, 
     preventive medicine, or adolescent medicine, or
       (ii) a fellowship program in family medicine, general 
     internal medicine or general pediatrics, which provides 
     training for a faculty position in family medicine, general 
     internal medicine or general pediatrics,

     shall be treated as part of the initial training 
     participation period, but shall not be counted against any 
     limitation on the initial training period.

     The initial training period shall be determined, with respect 
     to a training participant, as of the time the training 
     participant enters any approved physician training program.
       (6) Period of time required for board eligibility.--
       (A) General rule.--Subject to subparagraphs (B) and (C), 
     the term ``period of time required for board eligibility'' 
     means, for a training participant, the minimum number of 
     years of formal training necessary to satisfy the 
     requirements for initial board eligibility in the particular 
     specialty for which the training participant is training.
       (B) Application of 1985-1986 directory.--Except as provided 
     in subparagraph (C), the period of time required for board 
     eligibility shall be such period specified in the 1985-1986 
     Directory of Residency Training Programs published by the 
     Accreditation Council on Graduate Medical Education or a more 
     current version of such Directory or the equivalent directory 
     regarding postdoctoral training for osteopathic physician 
     training programs.
       (C) Changes in period of time required for board 
     eligibility.--If the Accreditation Council on Graduate 
     Medical Education, in its Directory of Residency Training 
     Programs or the equivalent directory regarding postdoctoral 
     training for osteopathic physician training programs--
       (i) increases the minimum number of years of formal 
     training necessary to satisfy the requirements for a 
     specialty, above the period specified in its 1985-1986 
     Directory, the Secretary may increase the period of time 
     required for board eligibility for that specialty, but not to 
     exceed the period of time required for board eligibility 
     specified in that later Directory, or
       (ii) decreases the minimum number of years of formal 
     training necessary to satisfy the requirements for a 
     specialty, below the period specified in its 1985-1986 
     Directory, the Secretary may decrease the period of time 
     required for board eligibility for that specialty, but not 
     below the period of time required for board eligibility 
     specified in that later Directory.

     SEC. 3034. PAYMENTS FOR DENTAL AND PODIATRIC POSITIONS.

       (a) In General.--Except as provided in subsections (b) and 
     (c), the provisions of this chapter shall apply with respect 
     to dental and podiatric medicine training programs.
       (b) Limitation.--Subject to the amount made available under 
     section 3033(a), the aggregate amount available for making 
     payments to all approved physician training programs in 
     dentistry and podiatric medicine may not exceed $200,000,000 
     in any calendar year.
       (c) Payment Methodology.--The Secretary shall determine the 
     amount to be paid to approved dental and podiatric training 
     programs on the basis of a methodology to be developed by the 
     Secretary that is equivalent to the methodology described in 
     section 3033(b)(4).

CHAPTER 2--FEDERAL FORMULA PAYMENTS FOR NURSING AND HEALTH PROFESSIONS 
                               EDUCATION

     SEC. 3041. FEDERAL FORMULA PAYMENTS FOR NURSING AND HEALTH 
                   PROFESSIONS EDUCATION.

       (a) In General.--The Secretary shall make payments for 
     calendar year 1997 and each subsequent calendar year to an 
     eligible entity that submits an application in accordance 
     with subsection (b) for the purpose specified in subsection 
     (c). The Secretary shall make such payments in accordance 
     with section 3042.
       (b) Eligible Entity.--For purposes of this chapter, the 
     term ``eligible entity'' means an entity that would have been 
     eligible to receive payments for nursing or health 
     professions education under section 1861(v)(1) of the Social 
     Security Act (42 U.S.C. 1395x(v)(1)) (as in effect on the day 
     before the date of the enactment of the Health Security Act).
       (c) Purpose.--The purpose specified in this subsection is 
     to assist an eligible entity with the costs of nursing or 
     health professions education.

     SEC. 3042. AVAILABILITY OF FUNDS FOR PAYMENTS; AMOUNT OF 
                   PAYMENTS.

       (a) In General.--The following amounts shall be available 
     for making payments under section 3041 from the Nursing and 
     Health Professions Education Account established under 
     section 9551(a)(2)(C) of the Internal Revenue Code of 1986:
       (1) In the case of calendar year 1997, the amount of 
     payments that were made under title XVIII of the Social 
     Security Act in the previous calendar year that were 
     attributable to payments made pursuant to section 1861(v)(1) 
     of such Act (42 U.S.C. 1395x(v)(1)) for the purpose described 
     in section 3041(c) in the previous calendar year, updated by 
     the annual expected rate of growth in such payments, based 
     upon the average rate of growth in such payments over the 
     previous 4 calendar years.
       (2) In subsequent calendar years, the amount of payments 
     that were made under this subsection in the previous calendar 
     year, updated by the annual expected rate of growth in such 
     payments, based upon the average rate of growth over the 
     previous 4 calendar years.
       (b) Amount of Payments for Individual Eligible Entities.--
       (1) In general.--Subject to paragraph (2), the payment 
     amount with respect to any eligible entity under this section 
     shall be equal to the amount that the entity would have 
     received for such calendar year under the payment methodology 
     for payments under section 1861(v)(1) of the Social Security 
     Act (42 U.S.C. 1395x(v)(1)) (as in effect on the day before 
     the date of the enactment of the Health Security Act) for 
     such payments.
       (2) Adjustment factor.--Payments under paragraph (1) shall 
     be subject to an adjustment factor, as determined by the 
     Secretary, so that total payments in any year will not exceed 
     the amounts specified in subsection (a).

   CHAPTER 3--ACADEMIC HEALTH CENTERS AND OTHER ELIGIBLE INSTITUTIONS

     SEC. 3051. FEDERAL FORMULA PAYMENTS TO ACADEMIC HEALTH 
                   CENTERS AND OTHER ELIGIBLE INSTITUTIONS.

       (a) In General.--In the case of an eligible institution 
     that in accordance with section 3052 submits to the Secretary 
     a written request for calendar year 1997 or any subsequent 
     calendar year, the Secretary shall make payments for such 
     year to the eligible institution for the purpose specified in 
     subsection (b). The Secretary shall make the payments in an 
     amount determined in accordance with section 3053, and may 
     administer the payments as a contract, grant, or cooperative 
     agreement.
       (b) Payments for Costs Incurred by Eligible Institutions.--
       (1) Costs attributable to academic nature of 
     institutions.--With respect to an eligible institution that 
     is a qualified academic health center or a qualified teaching 
     hospital, the purpose of payments under subsection (a) is to 
     assist such institutions with costs that are not routinely 
     incurred by other entities in providing health services, but 
     are incurred by such institutions in providing health 
     services by virtue of the academic nature of such 
     institutions. Such costs include--
       (A) with respect to productivity in the provision of health 
     services, costs resulting from the reduced rate of 
     productivity of faculty due to teaching responsibilities;
       (B) the uncompensated costs of clinical research; and
       (C) exceptional costs associated with the treatment of 
     health conditions with respect to which an eligible 
     institution has specialized expertise (including treatment of 
     rare diseases, treatment of unusually severe conditions, and 
     providing other specialized health care).
       (2) High intensity nonteaching rural hospital.--With 
     respect to an eligible institution that is a high intensity 
     nonteaching rural hospital, the purpose of payments under 
     subsection (a) is to assist the institution with the costs of 
     treating a substantial number of severely ill patients.
       (c) Definitions.--
       (1) Academic health center.--For purposes of this subtitle, 
     the term ``academic health center'' means an entity that 
     operates a teaching hospital that sponsors or is affiliated 
     with an approved physician training program.
       (2) Eligible institution.--For purposes of this subtitle, 
     the term ``eligible institution'', with respect to a calendar 
     year, means a qualified academic health center, qualified 
     teaching hospital, or high intensity nonteaching rural 
     hospital that submits to the Secretary a written request in 
     accordance with section 3052.
       (3) High intensity nonteaching rural hospital.--For 
     purposes of this subtitle, the term ``high intensity 
     nonteaching rural hospital'' means a nonteaching hospital 
     located in a rural area as defined in section 1886(d)(2)(D) 
     of the Social Security Act (42 U.S.C. 1395ww(d)(2)(D)) that 
     the Secretary determines has a case-mix index (defined as the 
     average weight of all cases in the hospital for all 
     diagnosis-related groups as determined in accordance with 
     section 1886(d)(4) of such Act (42 U.S.C. 1395ww(d)(4)) of 
     greater than 120 percent of the national average case-mix 
     index for all rural hospitals.
       (4) Qualified center or hospital.--For purposes of this 
     subtitle:
       (A) The term ``qualified academic health center'' means an 
     academic health center that operates a teaching hospital.
       (B) The term ``qualified teaching hospital'' means any 
     teaching hospital other than a teaching hospital that is 
     operated by an academic health center.
       (6) Teaching hospital.--For purposes of this subtitle, the 
     term ``teaching hospital'' means a hospital that sponsors or 
     is affiliated with an approved physician training program (as 
     defined in section 3012(b) or section 3031(d)).

     SEC. 3052. REQUEST FOR PAYMENTS.

       (a) In General.--For purposes of section 3051, a written 
     request for payments under such section is in accordance with 
     this section if--
       (1) the eligible institution involved submits the request 
     not later than the date specified by the Secretary;
       (2) the request is accompanied by each funding agreement 
     described in this part; and
       (3) the request is in such form, is made in such manner, 
     and contains such agreements, assurances, and information as 
     the Secretary determines to be necessary to carry out this 
     part.
       (b) Continued Status as Eligible Institution.--A funding 
     agreement for payments under section 3051 is that the 
     eligible institution involved will maintain status as such an 
     eligible institution. For purposes of this subtitle, the term 
     ``funding agreement'', with respect to payments under section 
     3051 to such an eligible institution, means that the 
     Secretary may make the payments only if the eligible 
     institution makes the agreement involved.
       (c) Compliance With Specialty Allocations.--A funding 
     agreement for payments under section 3051 is that an eligible 
     institution that operates or is affiliated with an approved 
     physician training program shall receive such payments only 
     if the number of specialists in such a program is consistent 
     with the allotment under section 3015 or 3013(e).

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

       (a) Annual Academic Health Center Account.--
       (1) Availability of funds from account.--Except as provided 
     in paragraph (2), the following amounts shall be available 
     for a calendar year for making payments under section 3051 
     from the Academic Health Center Account established under 
     section 9551(a)(2)(B) of the Internal Revenue Code of 1986 is 
     the following, as applicable to the calendar year:
       (A) In the case of calendar year 1997, $6,300,000,000.
       (B) In the case of calendar year 1998, $7,300,000,000.
       (C) In the case of calendar year 1999, $8,200,000,000.
       (D) In the case of calendar year 2000, $9,400,000,000.
       (E) In the case of calendar year 2001, $10,600,000,000.
       (F) In the case of each subsequent calendar year, the 
     amount specified in subparagraph (E) increased by the product 
     of such amount and the general health care inflation factor 
     (as defined in subsection (d)).
     Each of the amounts specified under the preceding 
     subparagraphs for a calendar year shall be reduced by an 
     amount equal to the amount specified under section 3041(a) 
     for such year.
       (2) Special allotments.--Of the amounts available for a 
     calendar year for making payments under subsection (a) 
     pursuant to paragraph (1)--
       (A) such amounts as are necessary shall be reserved to make 
     payments to eligible institutions that are high intensity 
     nonteaching rural hospitals; and
       (C) the remainder of the amounts available for making 
     payments under subsection (a), shall be expended for making 
     payments under section 3051 to other eligible institutions.
       (b) Amount of Payments for Individual Eligible 
     Institutions.--
       (1) Qualified academic health centers and qualified 
     teaching hospitals.--The amount of payments required in 
     section 3051 to be made to a qualified academic health center 
     or a qualified teaching hospital for a calendar year is an 
     amount equal to the product of--
       (A) the amount available for making such payments for the 
     calendar year from the Academic Health Center Account 
     established under section 9551(a)(2)(B) of the Internal 
     Revenue Code of 1986; and
       (B) the percentage constituted by the ratio of--
       (i) the product of--

       (I) the sum, for all discharges of individuals, of the 
     amounts otherwise paid on behalf of such individuals; and

       (II) an adjustment factor equal to (e raised to the power 
     (.405 r) -1), where ``r'' is the ratio of the qualified 
     academic health center's or the qualified teaching hospital's 
     full-time equivalent training participants to beds and ``e'' 
     is the natural log of one; and

       (ii) the sum of the respective amounts determined under 
     clause (i) for qualified academic health centers and 
     qualified teaching hospitals.
       (2) High intensity nonteaching rural hospital.--Subject to 
     the annual amount reserved for high intensity nonteaching 
     rural hospitals under subsection (a)(2)(A) for a calendar 
     year, the amount required under section 3051 to be made to a 
     high intensity nonteaching rural hospital is an amount equal 
     to 5 percent of the inpatient costs of patient care for all 
     patients of the hospital.
       (3) Adjustment factor.--Payments under this section shall 
     be subject to an adjustment factor, as determined by the 
     Secretary, so that total payments in any year will not exceed 
     the amounts specified in 3053(a).
       (c) Report Regarding Modifications in Formula.--Not later 
     than July 1, 2000, the Secretary shall submit to the Congress 
     a report containing any recommendations of the Secretary for 
     the modification of the program of formula payments described 
     in this chapter. In preparing such report the Secretary shall 
     consider--
       (1) the costs described in section 3051(b) incurred by 
     academic health centers;
       (2) the adequacy of the formula payments established in 
     this chapter to cover such costs, taking into account any 
     additional revenues to cover such costs paid by other payers, 
     including private health plans;
       (3) the impact of the current payment methodology on 
     training in the ambulatory setting of national workforce 
     goals, and its effect on the education and training of 
     primary care physicians;
       (4) the importance to the maintenance of a quality national 
     health care system of academic health centers in providing 
     for the training of health professionals, in conducting 
     clinical research, and in providing innovative, technically 
     advanced care; and
       (5) the overall impact of the reformed health care system 
     on the ability of academic health centers to perform such 
     functions.
       (d) General Health Care Inflation Factor.--For purposes of 
     this subtitle, the term ``general health care inflation 
     factor'', with respect to a year, has the meaning given such 
     term in section 3033(e)(4) for such year.

                   Subpart D--Transitional Provisions

     SEC. 3055. TRANSITIONAL PAYMENTS TO INSTITUTIONS.

       (a) Payments Regarding Effects of Subpart B Allocations.--
     For each of the calendar years specified in subsection 
     (b)(2), in the case of an eligible entity that submits to the 
     Secretary an application for such year in accordance with 
     subsection (d), the Secretary shall make payments for the 
     year to the entity for the purpose specified in subsection 
     (c). The Secretary shall make the payments in an amount 
     determined in accordance with subsection (e), and may 
     administer the payments as a contract, grant, or cooperative 
     agreement.
       (b) Eligible Entities Losing Specialty Positions; Relevant 
     Years Regarding Payments.--
       (1) Eligible entities losing specialty positions.--The 
     Secretary may make payments under subsection (a) to an 
     eligible entity only if, with respect to the calendar year 
     involved, the entity meets the following conditions:
       (A) During the year preceding the initiation of 
     transitional payments, the entity--
       (i) received payments under section 1886(h) of the Social 
     Security Act (42 U.S.C. 1395ww(h)) for residents in one or 
     more approved programs, or
       (ii) sponsored or was affiliated with one or more approved 
     physician training programs that received payments under 
     section 3031.
       (B) The aggregate number of full-time-equivalent training 
     participant positions in such programs has been reduced below 
     the aggregate number of full-time-equivalent training 
     participant positions for the academic year 1993-1994.
       (C) The aggregate number of full-time-equivalent training 
     participant positions in such programs spent in patient care 
     activities at the entity has been reduced below the aggregate 
     number of full-time-equivalent training participant positions 
     for the academic year 1993-1994, as a result of allocations 
     under subpart B, or as a result of voluntary changes under 
     section 3013(e) prior to January 1, 2002.
       (2) Relevant years.--Except as provided in subsection 
     (e)(3), the Secretary may make payments under subsection (a) 
     to an eligible entity only for the first four calendar years 
     after the initial calendar year for which the entity meets 
     the conditions described in paragraph (1).
       (3) Eligible entity.--For purposes of this section, the 
     term ``eligible entity'' means a qualified academic health 
     center or teaching hospital entity that submits to the 
     Secretary an application in accordance with subsection (d).
       (c) Purpose of Payments.--The purpose of payments under 
     subsection (a) is to assist an eligible entity with the costs 
     of operation. A funding agreement for such payments is that 
     the entity involved will expend the payments only for such 
     purpose.
       (d) Application for Payments.--For purposes of subsection 
     (a), an application for payments under such subsection is in 
     accordance with this subsection if--
       (1) the eligible entity involved submits the application 
     not later than the date specified by the Secretary;
       (2) the application demonstrates that the entity meets the 
     conditions described in subsection (b)(1) and that the entity 
     has cooperated with the approved physician training programs 
     of the entity in meeting the condition described in section 
     3032(b);
       (3) the application contains each funding agreement 
     described in this subpart and the application provides such 
     assurances of compliance with the agreements as the Secretary 
     may require; and
       (4) the application is in such form, is made in such 
     manner, and contains such agreements, assurances, and 
     information as the Secretary determines to be necessary to 
     carry out this subpart.
       (e) Amount of Payments.--
       (1) In general.--Subject to the amounts available from the 
     Graduate Medical Education Account established under section 
     9551(a)(2)(A) of the Internal Revenue Code of 1986 in the 
     calendar year involved, the amount of payments required in 
     subsection (a) to be made to an eligible entity for such year 
     is the product of the amount determined under paragraph (2) 
     and the applicable percentage specified in paragraph (3).
       (2) Number of specialty positions lost.--For purposes of 
     paragraph (1), the amount determined under this paragraph for 
     an eligible entity for the calendar year involved is the 
     product of--
       (A) an amount equal to the aggregate number of full-time 
     equivalent specialty positions lost; and
       (B) the amount that would be received under section 3033 
     for each speciality position lost.
       (3) Applicable percentage.--
       (A) In general.--Except as provided under subparagraph (B), 
     for purposes of paragraph (1), the applicable percentage for 
     a calendar year is the following, as applicable to such year:
       (i) For the first calendar year after calendar year 1996 
     for which the eligible entity involved meets the conditions 
     described in subsection (b)(1), 100 percent.
       (ii) For the second such year, 75 percent.
       (iii) For the third such year, 50 percent.
       (iv) For the fourth such year, 25 percent.
       (B) Exceptions.--
       (i) Urban or rural underserved communities.--If the 
     Secretary determines that access to health care in a rural or 
     urban underserved community would be impaired by the annual 
     reductions of the applicable percentage described in 
     subparagraph (A), the Secretary may eliminate such annual 
     reduction or adjust such percentage (at the discretion of the 
     Secretary) to eligible institutions in such a community.
       (ii) Voluntary compliance positions.--For the number of 
     positions determined in paragraph (4)(A) that result from 
     voluntary reductions in the number of specialty positions 
     under section 3013(e), the applicable percentage for a 
     calendar year is the following as applicable to such year:

       (I) For the first 2 calendar years after calendar year 1996 
     for which the eligible entity involved meets the conditions 
     described in subsection (b)(1), 100 percent.
       (II) For the third such year, 75 percent.
       (III) For the fourth such year, 50 percent.
       (IV) For the fifth such year, 25 percent.

       (4) Determination of specialty positions lost.--
       (A) For purposes of this paragraph, the aggregate number of 
     specialty positions lost, with respect to a calendar year, is 
     the difference between--
       (i) the aggregate number of specialty positions described 
     in subparagraph (B) for the eligible entity involved for the 
     academic year beginning in such calendar year; and
       (ii) the aggregate number of such specialty positions at 
     the entity for academic year 1993-1994.
       (B) For purposes of subparagraph (A), the specialty 
     positions described in this subparagraph are specialty 
     positions in the medical specialities with respect to which 
     payments under section 3031 are made to the approved 
     physician training programs of the eligible entities 
     involved.
       (C) The total number of positions lost for all eligible 
     entities may not exceed the number by which the aggregate 
     number of specialty positions with respect to which payments 
     are made under section 3031 for the academic year beginning 
     in such calendar year is below the number of full-time-
     equivalent positions for the academic year 1993-1994.

     SEC. 3056. WAIVER OF FOREIGN COUNTRY RESIDENCE REQUIREMENT 
                   WITH RESPECT TO INTERNATIONAL MEDICAL 
                   GRADUATES.

       (a) Waiver.--Section 212(e) of the Immigration and 
     Nationality Act (8 U.S.C. 1182(e)) is amended--
       (1) in the first proviso by inserting ``(or, in the case of 
     an alien described in clause (iii), pursuant to the request 
     of an interested State agency)'' after ``interested United 
     States Government agency''; and
       (2) by inserting after ``public interest'' the following: 
     ``except that in the case of a waiver requested by an 
     interested State agency the waiver shall be subject to the 
     requirements of section 214(k)''.
       (b) Restrictions on Waiver.--Section 214 of that Act (8 
     U.S.C. 1184) is amended by adding at the end the following:
       ``(k)(1) In the case of a request by an interested State 
     agency for a waiver of the two-year foreign residence 
     requirement under section 212(e) with respect to an alien 
     described in clause (iii) of that section, the Attorney 
     General shall not grant such waiver unless--
       ``(A) in the case of an alien who is otherwise 
     contractually obligated to return to a foreign country the 
     Director of such country furnishes a statement in writing 
     that it has no objection to such waiver;
       ``(B) the alien demonstrates a bona fide offer of full-time 
     employment at a health facility and agrees to begin 
     employment at such facility within 90 days of receiving such 
     waiver and agrees to continue to work in accordance with 
     paragraph (2) at the health care facility in which the alien 
     is employed for a total of not less than 3 years (unless the 
     Attorney General determines that extenuating circumstances 
     such as the closure of the facility or hardship to the alien 
     would justify a lesser period of time);
       ``(C) the alien agrees to practice medicine in accordance 
     with paragraph (2) for a total of not less than 3 years only 
     in the geographic area or areas which are designated by the 
     Secretary of Health and Human Services as having a shortage 
     of health care professionals; and
       ``(D) the grant of such waiver would not cause the number 
     of waivers allotted for that State for that fiscal year to 
     exceed twenty.
       ``(2) Whenever an interested State agency requests the 
     waiver of the two-year residence requirement under section 
     212(e) with respect to an alien described in clause (iii) of 
     that section, the Attorney General shall change the status of 
     the alien to that of an alien described in section 
     101(a)(15)(H)(b).
       ``(3) If an alien whose status was changed under paragraph 
     (2) demonstrates that the alien has worked for a period of 5 
     years in a health professional shortage area, then the 
     Attorney General may approve a petition filed on the alien's 
     behalf by the health care facility in which the alien is 
     employed seeking change of the alien's status to that of a 
     special immigrant described in section 101(a)(27)(L).
       ``(4) Notwithstanding any other provision of this 
     subsection, the two-year foreign residence requirement under 
     section 212(e) shall apply with respect to an alien described 
     in clause (iii) of that section, who has not otherwise been 
     accorded status under section 101(a)(27)(L), if at any time 
     the alien practices medicine in an area other than an area 
     described in paragraph (1)(C).''.
       (c) Special Immigrant Status.--Section 101(a)(27) of the 
     Immigration and Nationality Act is amended by adding at the 
     end the following new subparagraph:
       ``(L) immigrants whose status have been changed from that 
     of an alien described in paragraph (15)(H)(b) pursuant to 
     section 214(k)(2), except that not more than 500 immigrants 
     may be admitted in any fiscal year under this 
     subparagraph.''.
       (d) Grounds for Deportation.--Section 241(a) of the 
     Immigration and Nationality Act (8 U.S.C. 1251(a)) is amended 
     by adding at the end the following new subparagraph:
       ``(I) Failure to maintain employment as a health care 
     professional.--Any alien described in section 212(e)(iii) who 
     fails to maintain employment in accordance with subparagraphs 
     (B) and (C) of section 212(k)(1).''.
       (e) Effective Date.--The amendments made by this section 
     shall apply to aliens admitted to the United States under 
     section 101(a)(15)(J) of the Immigration and Nationality Act, 
     or acquiring such status after admission to the United 
     States, before, on, or after the date of enactment of this 
     Act and before June 1, 2005.

              PART 2--HEALTH PROFESSIONS SCHOOLS PAYMENTS

                 Subpart A--Payments to Medical Schools

     SEC. 3061. FEDERAL PAYMENTS TO MEDICAL SCHOOLS.

       (a) Entitlement.--Each eligible medical school that in 
     accordance with section 3062 submits to the Secretary an 
     application for academic year 1997, or any subsequent 
     academic year, shall be entitled to payments for such year 
     for the purpose specified in subsection (b). The Secretary 
     shall make such payments in an amount determined in 
     accordance with section 3063, and shall administer the 
     payments as a grant. The preceding sentence constitutes 
     budget authority in advance of appropriations Acts and 
     represents the obligation of the Federal Government to 
     provide funding for such payments in the amounts, and for the 
     years specified in this subpart.
       (b) Payments to Medical Schools.--The purpose specified in 
     this subsection is to assist an eligible medical school with 
     the direct costs of academic programs including the education 
     of medical students (especially in primary health care and 
     ambulatory training), graduate students in biomedical 
     sciences, and otherwise unfunded faculty research. Payments 
     under this section shall supplement and not supplant existing 
     resources for this purpose. A funding agreement for such 
     payments is that the medical school involved will expend the 
     payments received pursuant to section 3063(b) as follows:
       (1) 50 percent shall be expended for primary health care 
     education (including prevention), and peer reviewed primary 
     care research in departments and divisions of primary care, 
     including family medicine departments, and divisions of 
     general internal medicine, geriatric medicine, and general 
     pediatrics, or in medical schools in which primary care 
     activities are primarily performed by other organizational 
     units of the medical school, such other units. The medical 
     school will distribute such amounts among the departments, 
     divisions, or other units of primary care so that the 
     distribution of such amounts bears a reasonable relationship 
     to the amount of ambulatory primary care education of medical 
     students in such departments and divisions and the national 
     workforce goals and shall specify such information and the 
     distribution of funds in the application under section 3062.
       (2) 25 percent shall be expended for other ambulatory 
     training. The medical school shall give priority for 
     expending such amounts to funding ambulatory care training in 
     community and rural area health centers.
       (3) 25 percent shall be expended for the support of peer-
     reviewed faculty research in biomedicine and health services.
       (c) Per Capita Payments by Medical Schools for Off-School 
     Education.--A funding agreement for payments under subsection 
     (a) for an eligible medical school for an academic year is 
     that if, for the academic year, one or more students is 
     enrolled (or accepted for enrollment) in the medical 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 medical school, and if the medical school provides 
     credit toward a doctorate in medicine for the hours 
     successfully completed at such other institution, then the 
     medical school will pay to the other institution for such 
     academic year an amount equal to the product of--
       (1) the product of--
       (A) the number of such students attending the other 
     institution for such academic year; and
       (B) the percentage of the academic year spent at the other 
     institution; and
       (2) the quotient of--
       (A) the amount of payments made to the medical school under 
     subsection (a) for the academic year; over
       (B) the number of students in the eligible medical school 
     in the academic year (including students described in this 
     subsection).
       (d) Eligible Medical School; Subpart Definition.--For 
     purposes of this subpart, the term ``eligible medical 
     school'' with respect to the academic year involved, means an 
     approved medical school that submits to the Secretary an 
     application for such year in accordance with section 3062.

     SEC. 3062. APPLICATION FOR PAYMENTS.

       For purposes of section 3061(a), an application for 
     payments under such section for an academic year is in 
     accordance with this section if--
       (1) the dean (or appropriate presiding official) of the 
     eligible medical school submits the application not later 
     than the date specified by the Secretary;
       (2) the application contains each funding agreement 
     described in this subpart and provides such assurances of 
     compliance with the agreements as the Secretary may require; 
     and
       (3) the application is in such form, is made in such 
     manner, and contains such agreements, assurances, and 
     information as the Secretary determines to be necessary to 
     carry out this part.

     SEC. 3063. AUTHORIZATION OF APPROPRIATIONS; ANNUAL AMOUNT OF 
                   PAYMENTS.

       (a) Authorization of Appropriations.--
       (1) In general.--The appropriation authorized for each of 
     the following academic years for making payments pursuant to 
     section 3061(a) shall not be less than or in excess of the 
     following:
       (A) In the case of academic year 1997, $200,000,000.
       (B) In the case of academic year 1998, $300,000,000.
       (C) In the case of academic year 1998, $400,000,000.
       (D) In the case of academic year 2000, $500,000,000.
       (E) In the case of academic year 2001, $600,000,000.
       (F) In the case of each subsequent academic year, the 
     amount specified in subparagraph (F) increased by the product 
     of such amount and the general health care inflation factor 
     (as defined in subsection (d)).
       (b) Amount of Payments for Individual Eligible Programs.--
     Subject to the annual amount available for making payments 
     pursuant to subsection (a) for an academic year, the amount 
     of the payment required under section 3041 to be made to an 
     eligible medical school for the academic year is an amount 
     equal to the sum of--
       (1) the product of \1/2\ of the amount available for the 
     academic year pursuant to subsection (a) and the proportion 
     of students (as determined by the Secretary) at the eligible 
     medical school in academic year 1993-1994 compared to all 
     students enrolled in eligible medical schools nationwide in 
     academic year 1993-1994;
       (2) the product of \1/4\ of the amount available for the 
     academic year pursuant to subsection (a) and the proportion 
     of peer-reviewed research conducted by the faculty at the 
     eligible medical school (including health services research) 
     compared to all such research conducted by the faculty at all 
     eligible medical schools nationwide; and
       (3) the product of \1/4\ of the amount available for the 
     academic year pursuant to subsection (a) and the proportion 
     of the eligible medical school's number of graduates in 
     primary care specialties from the class graduating 6 years 
     prior to such academic year who complete eligible programs in 
     primary health care and do not subsequently enter a 
     nonprimary health care training program compared to such 
     number of graduates of all eligible medical schools 
     nationwide in such year.

     The Secretary shall establish a method for measuring faculty 
     research contributions.
       (c) Studies.--
       (1) Funding level and allocation method.--Not later than 
     January 1, 1998, the Secretary shall arrange for an 
     independent study and report to be completed, by the 
     Institute of Medicine or other similar entity, concerning the 
     amount of and allocation method for medical school funding, 
     and the impact of the payments under this part on national 
     workforce goals, including the education and training of 
     primary care physicians. Such report shall be submitted to 
     the President and the Congress and shall include findings and 
     recommendations as to the appropriateness of modifying 
     funding levels or allocations.
       (2) Impact of health care reform on medical education.--Not 
     later than January 1, 2000, the Secretary shall arrange for 
     an independent study and report to be completed, by the 
     Institute of Medicine or other similar entity, concerning the 
     impact of health reform on undergraduate medical education. 
     Such report shall be submitted to the President and the 
     Congress and shall include appropriate findings and 
     recommendations.
       (d) General Health Care Inflation Factor.--As used in this 
     subtitle, the term ``general health care inflation factor'' 
     with respect to a year, has the meaning given such term in 
     section 3033(e)(4) for such year.

                Subpart B--Payments to Nursing Programs

     SEC. 3071. FEDERAL PAYMENTS TO GRADUATE NURSE TRAINING 
                   PROGRAMS.

       (a) Federal Payments to Graduate Nurse Training Programs.--
       (1) Entitlement.--Each eligible graduate nurse training 
     program that in accordance with paragraph (2) submits to the 
     Secretary an application for calendar year 1997 or any 
     subsequent calendar year shall be entitled to payments for 
     such year to the program for the purpose specified in 
     paragraph (3). The Secretary shall make such payments in an 
     amount determined in accordance with subsection (b), and 
     shall administer the payments as a grant. The preceding 
     sentence constitutes budget authority in advance of 
     appropriations Acts and represents the obligation of the 
     Federal Government to provide funding for such payments in 
     the amounts, and for the years specified in this subpart.
       (2) Application for payments.--For purposes of paragraph 
     (1), an application for payments for a calendar year is in 
     accordance with this paragraph if--
       (A) the eligible graduate nurse training program involved 
     submits the application not later than the date specified by 
     the Secretary;
       (B) the application provides such assurances as the 
     Secretary may require that the program will expend payments 
     only for the purpose described in paragraph (3);
       (C) the application contains each funding agreement 
     described in this subpart and the application provides such 
     assurances of compliance with the agreements as the Secretary 
     may require;
       (D) the application contains an assurance that the graduate 
     nurse training program shall annually submit a report on the 
     costs of clinical training of nurses in such manner as the 
     Secretary may require; and
       (E) 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.
       (3) Payments for operation of graduate nurse training 
     programs.--The purpose of payments under paragraph (1) is to 
     assist an eligible graduate nurse training program with the 
     costs of the clinical portions of training programs and 
     supporting full-time enrollees in such training programs.
       (b) Authorization of Appropriations; Annual Amount of 
     Payments.--
       (1) In general.--The appropriation authorized for each of 
     the following calendar years for making payments pursuant to 
     subsection (a)(1) shall not be less than or in excess of the 
     following:
       (A) In the case of calendar year 1997, $200,000,000.
       (B) In the case of each subsequent calendar year, the 
     amount specified in subparagraph (A) increased by the product 
     of such amount and the general health care inflation factor 
     as defined in subsection (c).
       (2) Amount of payments for individual eligible programs.--
     Subject to the annual amount available under paragraph (1) 
     for a calendar year, the amount of payments required under 
     subsection (a) to be made to an eligible graduate nurse 
     training program that submits to the Secretary an application 
     for such year in accordance with subsection (a)(2) is an 
     amount equal to the product of--
       (A) the number of full-time enrollees in the program; and
       (B) the estimated national average per full-time enrollee 
     cost of each graduate nurse training program described in 
     subsection (c)(1) for the calendar year (as determined by the 
     Secretary), adjusted by a factor to reflect regional 
     differences in the applicable wage and wage related costs.
       (3) Limitation.--If the annual amount available under 
     paragraph (1) for a calendar year is insufficient for 
     providing each eligible graduate nurse training program that 
     submits to the Secretary an application for such year in 
     accordance with subsection (a)(2) with the amount of payments 
     determined under paragraph (2) for the program for such year, 
     the Secretary shall make such pro rata reductions in the 
     amounts so determined as may be necessary to ensure that the 
     total of payments made under subsection (a) for such year 
     equals the total of such amount.
       (c) Definitions.--For purposes of this part:
       (1) Eligible graduate nurse training program.--The term 
     ``eligible graduate nurse training program'' means programs 
     in advanced practice nurse education that are programs for 
     education as nurse practitioners, programs for education as 
     nurse midwives, programs for education as nurse anesthetists, 
     and programs for training clinical nurse specialists that 
     are--
       (A) designated by the Secretary as eligible graduate nurse 
     training programs;
       (B) accredited programs that award a master degree or a 
     post-master certificate and provide training preparing an 
     individual for practice as an advanced practice nurse; and
       (C) existing programs funded in 1994 under section 822 or 
     831 of the Public Health Service Act that do not award a 
     master degree may also be designated eligible programs.
       (2) Programs for education as nurse practitioners.--The 
     term ``programs for education as nurse practitioners'' means 
     programs meeting the conditions to be programs for which 
     awards of grants and contracts may be made under section 822 
     of the Public Health Service Act for education as a nurse 
     practitioners.
       (3) Programs for education as nurse midwives.--The term 
     ``programs for education as nurse midwives'' means programs 
     meeting the conditions to be programs for which awards of 
     grants and contracts may be made under section 822 of the 
     Public Health Service Act for education as nurse midwives.
       (4) Programs for education as nurse anesthetists.--The term 
     ``programs for education as nurse anesthetists'' means 
     programs meeting the conditions to be programs for which 
     awards of grants may be made under section 831 of the Public 
     Health Service Act for education as nurse anesthetists.
       (5) Programs for training clinical nurse specialists.--The 
     term ``programs for training clinical nurse specialists'' 
     means programs in advanced practice nurse education meeting 
     the conditions to be programs for which awards of grants and 
     contracts may be made under section 821 of the Public Health 
     Service Act.
       (6) Full-time enrollee.--The term ``full-time enrollee'' 
     means an individual who is enrolled in an advanced nurse 
     training program and qualifies as a full-time student at the 
     institution operating such program.
       (7) General health care inflation factor.--The term 
     ``general health care inflation factor'', with respect to a 
     year, has the meaning given such term in section 3033(e)(4) 
     for such year.

     SEC. 3072. NATIONAL COUNCIL ON GRADUATE NURSE TRAINING.

       (a) In General.--There is established within the Department 
     of Health and Human Services a council to be known as the 
     National Council on Graduate Nurse Training.
       (b) Duties.--The National Council on Graduate Nurse 
     Training shall--
       (1) collect and analyze data on trends of supply and demand 
     for advanced practice nurses;
       (2) analyze and consider the supply of advanced practice 
     nurses in the context of changes in the overall supply of 
     health professionals;
       (3) recommend priorities for support of graduate nurse 
     training by type of programs described in section 3071(c);
       (4) report to Congress annually and include in its report 
     the number of students who graduated the previous year from 
     funded programs; and
       (5) consider and recommend appropriate standards for 
     assessing the quality of advanced practice nursing clinical 
     training programs.
       (c) Composition.--
       (1) In general.--The membership of the National Council on 
     Graduate Nurse Training shall include between 12 and 16 
     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--
       (A) a nurse practitioner, a nurse-midwife, a nurse 
     anesthetist, and a clinical nurse specialist; and
       (B) an official of a school of nursing, an official of a 
     teaching hospital or other health services entity, and other 
     experts in health care financing, delivery, and professions 
     training.
       (2) Ex officio members; other federal officers or 
     employees.--The membership of the National Council on 
     Graduate Nurse Training shall include individuals designated 
     by the Secretary, the Secretary of Veterans Affairs, and the 
     Secretary of the Department of Defense to serve as members of 
     the Council from among Federal officers or employees who are 
     appointed by the President, by the Secretary, the Secretary 
     of Veterans Affairs, the Secretary of Defense, or other 
     Federal officers who are appointed by the President with the 
     advice and consent of the Senate.
       (d) Chair.--The Secretary shall, from among members of the 
     National Council on Graduate Nurse Training appointed under 
     subsection (c)(1), designate an individual to serve as the 
     Chair of the Council.

                 Subpart C--Payments to Dental Schools

     SEC. 3073. DENTAL SCHOOLS.

       (a) Federal Payments to Dental Schools.--
       (1) Entitlement.--Each eligible school of dentistry that in 
     accordance with paragraph (2) submits to the Secretary an 
     application for calendar year 1997 or any subsequent calendar 
     year shall be entitled to payments for such year to the 
     program for the purpose specified in paragraph (3). The 
     Secretary shall make such payments in an amount determined in 
     accordance with subsection (b), and shall administer the 
     payments as a grant. The preceding sentence constitutes 
     budget authority in advance of appropriations Acts and 
     represents the obligation of the Federal Government to 
     provide funding for such payments in the amounts, and for the 
     years specified in this subpart.
       (2) Application for payments.--For purposes of paragraph 
     (1), an application for payments for a calendar year is in 
     accordance with this paragraph if--
       (A) the dean (or appropriate presiding official of the 
     eligible school of dentistry involved) submits the 
     application not later than the date specified by the 
     Secretary;
       (B) the application provides such assurances as the 
     Secretary may require that the program will expend payments 
     only for the purpose described in paragraph (3);
       (C) the application contains each funding agreement 
     described in this subpart and the application provides such 
     assurances of compliance with the agreements as the Secretary 
     may require; and
       (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 subpart.
       (3) Purpose.--With respect to an eligible school of 
     dentistry, the purpose of payments under paragraph (1) is to 
     assist such school with the costs of training dental 
     students, including unreimbursed oral health care costs 
     associated with such training. A funding agreement for such 
     payments is that the school of dentistry involved will expend 
     the payments only for direct expenses determined as allowable 
     by the Secretary.
       (4) School of dentistry.--For purposes of this subtitle, 
     the term ``eligible school of dentistry'' means an accredited 
     public or nonprofit private school in a State that provides 
     training leading to a degree of doctor of dentistry or an 
     equivalent degree, and any advanced training relating to such 
     training.
       (b) Authorization of Appropriations; Annual Amount of 
     Payments.--
       (1) In general.--The appropriation authorized for each of 
     the following calendar years for making payments pursuant to 
     subsection (a)(1) shall not be less than or in excess of the 
     following:
       (A) In the case of each of calendar years 1997, 1998, 1999 
     and 2000, $50,000,000.
       (B) In the case of each subsequent calendar year, the 
     amount specified in subparagraph (A) increased by the product 
     of such amount and the general health care inflation factor 
     as defined in subsection (c).
       (2) Amount of payments for individual eligible programs.--
     Subject to the annual amount available under paragraph (1) 
     for a calendar year, the amount of payments required under 
     subsection (a) to be made to an eligible school of dentistry 
     that submits to the Secretary an application for such year in 
     accordance with subsection (a)(2) is an amount equal to the 
     sum of--
       (A) 75 percent of the amount available pursuant to 
     paragraph (1) multiplied by the ratio of the number of full-
     time equivalent training participants in the school of 
     dentistry (determined in accordance with a method to be 
     developed by the Secretary) to the national number of full-
     time equivalent training participants in all schools of 
     dentistry (as determined by the Secretary) in the academic 
     year 1993-1994; and
       (B) 25 percent of the amount available pursuant to 
     paragraph (1) multiplied by the ratio of the unreimbursed 
     oral health care costs of the school of dentistry to the 
     national unreimbursed oral health care costs of all schools 
     of dentistry (as determined by the Secretary).
       (c) Eligible School of Dentistry.--For purposes of this 
     subpart, the term ``eligible school of dentistry'' with 
     respect to a calendar year involved, means a school of 
     dentistry that submits to the Secretary an application for 
     such year in accordance with subsection (a)(2).

            Subpart D--Payments to Schools of Public Health

     SEC. 3074. SCHOOLS OF PUBLIC HEALTH.

       (a) Federal Payments to Schools of Public Health.--
       (1) Entitlement.--Each eligible school of public health 
     that in accordance with paragraph (2) submits to the 
     Secretary an application for calendar year 1997 or any 
     subsequent calendar year shall be entitled to payments for 
     such year to the program for the purpose specified in 
     paragraph (3). The Secretary shall make such payments in an 
     amount determined in accordance with subsection (b), and 
     shall administer the payments as a grant. The preceding 
     sentence constitutes budget authority in advance of 
     appropriations Acts and represents the obligation of the 
     Federal Government to provide funding for such payments in 
     the amounts, and for the years specified in this subpart.
       (2) Application for payments.--For purposes of paragraph 
     (1), an application for payments for a calendar year is in 
     accordance with this paragraph if--
       (A) the dean (or appropriate presiding official of the 
     eligible school of public health involved submits the 
     application not later than the date specified by the 
     Secretary;
       (B) the application provides such assurances as the 
     Secretary may require that the program will expend payments 
     only for the purpose described in paragraph (3);
       (C) the application contains each funding agreement 
     described in this subpart and the application provides such 
     assurances of compliance with the agreements as the Secretary 
     may require; and
       (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 subpart.
       (3) Purpose.--With respect to an eligible school of public 
     health, the purpose of payments under this paragraph is to 
     assist such school with the costs of training public health 
     professionals in disease prevention and health promotion, the 
     management of health services, health care policy and health 
     care organization, public health practice, outcomes and 
     quality of care, and epidemiologic and biostatistical 
     research. A funding agreement for such payments is that the 
     school of public health involved will expend the payments 
     only for direct expenses determined as allowable by the 
     Secretary.
       (4) School of public health.--For purposes of this subpart, 
     the term ``school of public health'' means an accredited 
     public or non-profit private school in a State that--
       (A) is located within a university accredited by one of the 
     recognized regional accrediting bodies;
       (B) has as its central concept the prevention of disease 
     and the promotion of health through research, education and 
     professional practice;
       (C) offers the Master of Public Health degree;
       (D) provides, with sufficient faculty and other resources, 
     education at the master degree level with an emphasis in at 
     least each of the following areas:
       (i) Behavioral sciences.
       (ii) Biostatistics.
       (iii) Environmental and health sciences.
       (iv) Epidemiology.
       (v) Health services administration; and
       (E) offers graduate education at the doctoral degree level 
     in at least 1 of the 5 areas described in subparagraph (D).
       (b) Authorization of Appropriations; Annual Amount of 
     Payments.--
       (1) In general.--The appropriation authorized for each of 
     the following calendar years for making payments pursuant to 
     subsection (a)(1) shall not be less than or in excess of the 
     following:
       (A) In the case of each of calendar years 1997, 1998, 1999 
     and 2000, $25,000,000.
       (B) In the case of each subsequent calendar year, the 
     amount specified in subparagraph (A) increased by the product 
     of such amount and the general health care inflation factor.
       (2) Payments to schools of public health.--
       (A) In general.--The amount required under subsection (a) 
     to be made to an eligible school of public health is an 
     amount equal to the product of--
       (i) the amount available for making such payments for the 
     calendar year pursuant to paragraph (1); and
       (ii) the percentage constituted by the ratio of the number 
     of full-time students enrolled in degree programs in such 
     schools and the number of full-time equivalents of part-time 
     students enrolled in degree programs in such school 
     (determined in accordance with subparagraph (B)) to the 
     national number of all such students in all schools of public 
     health in the academic year beginning in the previous fiscal 
     year.
       (B) Full-time equivalence.--For the purposes of this 
     paragraph, the number of full-time equivalents of part-time 
     students for a school of public health for any school year is 
     a number equal to--
       (i) the total number of credit hours of instructions in 
     such year for which study leading to a graduate degree in 
     public health or an equivalent degree, divided by
       (ii) the number of credit hours of instructions which a 
     student pursuing a full-time course of study leading to a 
     graduate degree in public health or equivalent degree.
       (C) New school.--In the case of a new school of public 
     health which applies for a grant under this section in the 
     fiscal year preceding the fiscal year in which it will admit 
     its first class, the enrollment for purposes of subparagraph 
     (A)(ii) shall be the number of full-time students which the 
     Secretary determines, on the basis of assurances provided by 
     the school, will be enrolled in the school, in the fiscal 
     year after the fiscal year in which the grant is made.
       (c) Eligible School of Public Health.--The term ``eligible 
     school of public health'' with respect to the calendar year 
     involved, means a school of public health that submits to the 
     Secretary for such year in accordance with subsection (a)(2).

                        PART 3--RELATED PROGRAMS

                    Subpart A--Workforce Development

     SEC. 3081. PROGRAMS OF THE SECRETARY OF HEALTH AND HUMAN 
                   SERVICES.

       (a) In General.--
       (1) Funding.--For purposes of carrying out the programs 
     described in this section, there is authorized to be 
     appropriated (in addition to amounts that may otherwise be 
     authorized to be appropriated for carrying out the 
     programs)--
       (A) $126,000,000 in fiscal year 1996;
       (B) $135,000,000 in fiscal year 1997;
       (C) $120,000,000 in fiscal year 1998;
       (D) $115,000,000 in fiscal year 1999;
       (E) $91,500,000 in fiscal year 2000;
       (F) $54,900,000 in fiscal year 2001;
       (G) $32,010,000 in fiscal year 2002; and
       (H) $22,900,000 in each of fiscal years 2003 and 2004.
       (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 Health and Human 
     Services.
       (b) Primary Care Physician and Physician Assistant 
     Training.--For purposes of subsection (a), the programs 
     described in this section include programs to support 
     projects to train additional numbers of primary care 
     physicians and physician assistants, including projects to 
     enhance community-based generalist training for medical 
     students, residents, and practicing physicians; to retrain 
     mid-career physicians previously certified in a nonprimary 
     care medical specialty; to expand the supply of physicians 
     with special training to serve in rural and inner-city 
     medically underserved areas; to support expansion of service-
     linked educational networks that train a range of primary 
     care providers in community settings; to provide for training 
     in managed care, cost-effective practice management, and 
     continuous quality improvement; to provide interdisciplinary 
     training for medical students, residents or practicing 
     physicians, and dental students, residents, and dental 
     hygienists, to deliver primary care to individuals with 
     mental, physical, and developmental disabilities, including 
     mental retardation, particularly those who are more than 18 
     years of age; and to develop additional information on 
     primary care workforce issues as required to meet future 
     needs in health care.
       (c) Training of Underrepresented Racial and Ethnic 
     Minorities and Disadvantaged Persons.--For purposes of 
     subsection (a), the programs described in this section 
     include a program to support projects to increase the number 
     of racial and ethnic underrepresented minority and 
     disadvantaged persons in medicine, osteopathy, dentistry, 
     advanced practice nursing, public health, psychology, and 
     other health professions, including projects to provide 
     continuing financial assistance for such persons entering 
     health professions training programs; for financial 
     assistance for facility renovation or construction; to 
     increase support for recruitment and retention of such 
     persons in the health professions; to maintain efforts to 
     foster interest in health careers among such persons at the 
     preprofessional level; and to increase the number of racial 
     and ethnic minority health professions faculty at programs 
     that have a significant number of underrepresented racial and 
     ethnic minorities.
       (d) Expanding Rural Health Career Opportunities and 
     Retention Efforts.--
       (1) In general.--For purposes of subsection (a), the 
     programs described in this section include programs to 
     support projects to increase the number of individuals living 
     in rural, underserved communities who enter the fields of 
     medicine, osteopathy, dentistry, advanced practice nursing, 
     public health, psychology, and other health professions, and 
     to encourage the retention of such health care professionals 
     in rural, underserved communities.
       (2) Rural health career training.--Projects to increase the 
     number of individuals recruited from rural, underserved areas 
     include projects--
       (A) to provide continuing financial assistance for such 
     persons entering health professions education and training 
     programs;
       (B) to increase efforts to foster interest in health 
     careers among such persons at the preprofessional level;
       (C) to foster the development of training curricula 
     appropriate to rural health care settings; and
       (D) to increase support for recruitment of such persons in 
     the health professions.
       (3) Retention of rural health care providers.--Projects to 
     encourage the retention of individuals providing health care 
     in rural, underserved areas include projects--
       (A) to establish State and regional locum tenans programs 
     in rural health care settings so that substitute health care 
     providers are available when permanent staff is absent from 
     the health care setting;
       (B) to implement programs to foster interdisciplinary team 
     approaches to rural health training and practice; and
       (C) to develop state-of-the-art network telecommunications 
     and telemedicine systems to link rural health professionals 
     to other health care providers and academic health care 
     centers.
       (e) Nurse Training.--For purposes of subsection (a), the 
     programs described in this section include a program to 
     support projects to support midlevel provider training and 
     address priority nursing workforce needs, including projects 
     to train additional nurse practitioners and nurse midwives; 
     to support baccalaureate-level nurse training programs 
     providing preparation for careers in teaching, community 
     health service, and specialized clinical care; to train 
     additional nurse clinicians and nurse anesthetists; to 
     support interdisciplinary school-based community nursing 
     programs; and to promote research on nursing workforce 
     issues.
       (f) Inappropriate Practice Barriers; Full Utilization of 
     Skills.--For purposes of subsection (a), the programs 
     described in this section include a program--
       (1) to develop and encourage the adoption of model 
     professional practice statutes for advanced practice nurses 
     and physician assistants, and to otherwise support efforts to 
     remove inappropriate barriers to practice by such nurses and 
     such physician assistants; and
       (2) to promote the full utilization of the professional 
     education and clinical skills of advanced practice nurses and 
     physician assistants.
       (g) Advisory Board on Health Care Workforce Development.--
       (1) In general.--The Secretary shall establish an Advisory 
     Board known as the National Advisory Board on Health Care 
     Workforce Development to advise, consult with, and make 
     recommendations to the Secretary and to the Secretary of 
     Labor on matters relating to--
       (A) health care worker supply and its adequacy to assure 
     proper health care delivery system staffing in both rural and 
     urban areas; and
       (B) the impact of this Act, and of related changes in law 
     regarding health care, on health care workers and the needs 
     of such workers, including needs regarding education, 
     training, and other career development matters and the 
     relationship of health care workers to health care 
     professionals.
       (2) Composition.--The Board established under paragraph (1) 
     shall be composed of the following members with expertise in 
     health care workforce issues appointed by the Secretary in 
     consultation with the Secretary of Labor:
       (A) Five representatives of labor organizations 
     representing health care workers.
       (B) Five representatives of health care delivery 
     institutions.
       (C) Two representatives from health care education 
     organizations.
       (D) Two representatives from consumer organizations.
       (3) Assistance.--The Secretary shall provide the Board with 
     such administrative assistance as may be necessary for the 
     Board to carry out this subsection.
       (h) Other Programs.--For purposes of subsection (a), the 
     programs described in this section include a program to train 
     health professionals and administrators in managed care, 
     cost-effective practice management, continuous quality 
     improvement practices, and provision of culturally sensitive 
     care.
       (i) Relationship to Existing Programs.--This section may be 
     carried out through programs established in title VII or VIII 
     of the Public Health Service Act, as appropriate and as 
     consistent with the purposes of such programs.
       (j) Mental Retardation and Other Developmental 
     Disabilities.--Title VII of the Public Health Service Act is 
     amended by inserting after section 778, the following new 
     section:

     ``SEC. 779. MENTAL RETARDATION AND OTHER DEVELOPMENTAL 
                   DISABILITIES.

       ``(a) In General.--The Secretary may make grants and enter 
     into contracts with university affiliated programs, schools 
     of medicine, and schools of dentistry to assist in meeting 
     the costs of such programs or schools to--
       ``(1) improve the interdisciplinary training of primary 
     care physicians and dentists in the health care services 
     needs of individuals with mental, physical, and developmental 
     disabilities, including mental retardation, particularly 
     those who are more than 18 years of age;
       ``(2) develop, evaluate, and disseminate curricula relating 
     to the health care service needs of individuals with mental, 
     physical, and developmental disabilities, including mental 
     retardation, particularly those individuals who are more than 
     18 years of age;
       ``(3) support the training and retraining of faculty to 
     provide such instruction; and
       ``(4) support continuing education of health professionals 
     who provide health care services and support to individuals 
     with mental, physical, and developmental disabilities, 
     including mental retardation, particularly those who are more 
     than 18 years of age.
       ``(b) Authorization of Appropriations.--For purposes of 
     carrying out this section, there are authorized to be 
     appropriated, $10,000,000 for each of the fiscal years 1995 
     through 2000.''.

     SEC. 3082. PROGRAMS OF THE SECRETARY OF LABOR.

       (a) In General.--
       (1) Funding.--For purposes of carrying out the programs 
     described in this section, and for carrying out section 3083, 
     there is authorized to be appropriated (in addition to 
     amounts that may otherwise be authorized to be appropriated 
     for carrying out the programs)--
       (A) $252,000,000 in fiscal year 1996;
       (B) $180,000,000 in fiscal year 1997;
       (C) $160,000,000 in fiscal year 1998;
       (D) $153,000,000 in fiscal year 1999;
       (E) $122,000,000 in fiscal year 2000;
       (F) $73,200,000 in fiscal year 2001;
       (G) $42,680,000 in fiscal year 2002; and
       (H) $30,500,000 in each of fiscal years 2003 and 2004.
       (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 (in this 
     section referred to as the ``Secretary'').
       (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 develop and operate health care industry 
     worker job banks in local employment services agencies or 
     one-stop career centers, subject to the following:
       (i) Such job banks shall be available to all health care 
     providers in the community involved.
       (ii) Such job banks shall begin operation not later than 90 
     days after the date of the enactment of this Act.
       (iii)(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 it shall be to develop and operate 
     health and insurance industry worker job banks. Where the 
     impact of health care industry restructuring in the affected 
     community is such that the functions required under this 
     clause cannot be adequately provided by one counselor, 
     additional counselors shall be allocated to carry out such 
     functions.
       (II) Such counselor shall solicit job openings from local 
     health care industry employers, maintain frequent contacts 
     with these and other employers, and monitor and update all 
     job listings appropriate for displaced health care workers 
     seeking employment.
       (III) The local employment service agency or one-stop 
     career center shall provide directly, or facilitate the 
     provision of, labor exchange services to displaced health 
     care industry workers, including assessment, counseling, 
     testing, job-search assistance, job referral and placement, 
     and referral to training and educational programs, where 
     appropriate.
       (IV) The Secretary of Labor shall develop performance goals 
     for the effective performance of such job banks with respect 
     to the number and quality of jobs listed, the degree of 
     participation by employers in the affected community, and 
     success in placement of job bank users in jobs listed, taking 
     into account specific geographic, economic and labor market 
     characteristics of the community served.
       (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.
       (E) A program to collect data regarding the adequacy of the 
     supply of health care workers by occupation and sector of the 
     health industry in light of existing and projected demand for 
     such workers.
       (F)(i) A program to encourage the adoption and utilization 
     of high performance, high quality health care delivery 
     systems, including employee participation committees and 
     employee team systems that will contribute to more effective 
     health care by increasing the role and the area of 
     independent decisionmaking of health care workers.
       (ii) For purposes of this subparagraph, the term ``employee 
     participation committees'' means committees of workers 
     independently selected by and from a facility's nonmanagerial 
     workforce, or selected by unions where collective bargaining 
     agreements are in effect, and which operate independently 
     without employer interference and consult with management on 
     issues of efficiency, productivity, and quality of care, 
     except that an employee participation committee established 
     under and operating in conformity with this subparagraph 
     shall not be considered a labor organization within the 
     meaning of section 2(5) of the National Labor Relations Act 
     or a representative within the meaning of section 1, sixth, 
     of the Railway Labor 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) Certain Requirements for Programs.--In carrying out the 
     programs described in subsection (b), the Secretary shall, 
     with respect to the organizations and employment positions 
     involved, provide for the following:
       (1) Explicit, clearly defined skill requirements developed 
     for all the positions and projections of the number of 
     openings for each position.
       (2) Opportunities for internal career movement.
       (3) Opportunities to work while training or completing an 
     educational program.
       (4) Evaluation and dissemination.
       (5) Training opportunities in several forms, as 
     appropriate.
       (d) Administrative Requirements.--In carrying out the 
     programs described in subsection (b), the Secretary 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.

       Subpart B--Transitional Provisions for Workforce Stability

     SEC. 3091. APPLICATION.

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

     SEC. 3092. DEFINITIONS.

       (a) Health Care Entity.--As used in this subpart, the term 
     ``health care entity'' includes individuals, sole 
     proprietorships, partnerships, associations, business trusts, 
     corporations, governmental institutions, and public agencies 
     (including state governments and political subdivisions 
     thereof) that--
       (1) provide health care services under title I (including 
     nonmandatory health care services under title I) or under the 
     amendments made or programs referred to in titles II, III, 
     IV, and VIII; or
       (2) provide necessary related services, including 
     administrative, food service, janitorial or maintenance 
     services, to an entity that provides health care services (as 
     described in subparagraph (1));

     except that an entity that solely manufactures or provides 
     goods or equipment to a health care entity shall not be 
     considered a health care entity.
       (b) Affiliated Enterprise.--As used in this subpart, the 
     term ``affiliated enterprise'' means a health care entity 
     that, together with the displacing employer, is considered a 
     single employer as defined under 414 of the Internal Revenue 
     Code of 1986. For purposes of this subpart, a health care 
     entity which contracts with a State to provide services 
     pursuant to a State program under part I of subtitle B of 
     title II shall be deemed to be an affiliated enterprise of 
     such State.
       (c) Preference Eligible Employee.--As used in this subpart, 
     the term ``preference eligible employee'' means an employee 
     who--
       (1) has been employed for in excess of 1 year by a health 
     care entity; and
       (2) has been displaced by or has received notice of an 
     impending displacement by such entity.
       (d) Displacement.--As used in this subpart, the term 
     ``displacement'' includes a 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. 3093. OBLIGATIONS OF DISPLACING EMPLOYER AND AFFILIATED 
                   ENTERPRISES IN EVENT OF DISPLACEMENT.

       (a) Notice.--A health care entity which displaces a 
     preference eligible employee shall provide such employee 
     with--
       (1) written notice, no later than the date of displacement, 
     of employment rights under this subpart, including employment 
     rights with respect to affiliated enterprises of the 
     displacing employer; and
       (2) notice of any existing or subsequent vacancies with the 
     displacing employer or an affiliated enterprise, which notice 
     may be given by posting of such vacancies wherever notices to 
     applicants for employment are customarily posted, by listing 
     such vacancies with the local employment services agency, or 
     in such other manner as the Secretary of Labor, by 
     regulation, may hereafter specify.

     Any such vacancy shall remain open for applications by 
     preference eligible employees for not less than 14 calendar 
     days from the date on which the initial notice is provided.
       (b) Hiring Preference.--
       (1) In general.--A qualified preference eligible employee 
     who applies during the notice period described in subsection 
     (a)(2) for a vacant position with the displacing employer or 
     an affiliated enterprise, which position is in the employee's 
     occupational specialty and is located in the same State or 
     Standard Metropolitan Statistical Area in which the employee 
     was employed prior to the displacement, shall be given the 
     right to accept or decline the position before the employer 
     may offer the position to a nonpreference eligible employee.
       (2) Multiple applications.--When considering applications 
     from more than one qualified preference eligible employee, 
     the hiring health care entity shall have discretion as to 
     which of such employees will be offered the position.
       (3) Employment qualifications.--Nothing in this subsection 
     shall be construed to prohibit the hiring health care entity 
     from establishing reasonable employment qualifications for a 
     vacancy to which this subpart applies, except that employees 
     who performed essentially the same work prior to their 
     displacement shall be deemed presumptively qualified for 
     comparable positions.
       (c) Termination of Preference Eligibility.--A displaced 
     employee's preference eligibility shall terminate--
       (1) at such time as the displaced employee obtains 
     substantially equivalent employment with the displacing 
     employer; or
       (2) if the employee does not obtain such employment--
       (A) with respect to health care entities other than the 
     displacing employer, 2 years after the date of the 
     displacement; or
       (B) with respect to the displacing employer, upon the 
     termination of this subpart pursuant to section 3081(a).

     SEC. 3094. EMPLOYMENT WITH SUCCESSORS.

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

     SEC. 3095. COLLECTIVE BARGAINING OBLIGATIONS DURING 
                   TRANSITION PERIOD.

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

     SEC. 3096. GENERAL PROVISIONS.

       (a) Regulations.--Not later than 120 days after the date of 
     enactment of this Act, the Secretary shall promulgate 
     regulations to implement the requirements of section 3093.
       (b) Other Laws.--The standards and requirements of this 
     subpart shall not preempt or excuse noncompliance with any 
     other applicable Federal or State law, regulation or 
     municipal ordinance that establishes additional notice and 
     preference standards or requirements concerning employee 
     dislocation, employee representation, or collective 
     bargaining.
       (c) Rules of Construction.--Nothing in this subpart shall 
     be construed--
       (1) to excuse or otherwise limit the obligation of an 
     employer to comply with any collective bargaining agreement 
     or any employment benefit plan that provides rights to 
     employees in addition to those provided under this subpart; 
     or
       (2) to require an employer to recognize or bargain with a 
     labor organization in violation of State law.
       (d) Enforcement.--Unless otherwise specifically provided in 
     this subpart, the enforcement provisions of section 107 of 
     the Family and Medical Leave Act of 1993 (29 U.S.C. 2617) 
     shall apply with respect to the enforcement of the individual 
     rights, including notice requirements, provided under section 
     3093. The collective bargaining and contractual rights 
     provided under sections 3094 and 3095 shall be enforced 
     through administrative and judicial procedures otherwise 
     provided under Federal or State law with respect to such 
     rights.
                  Subtitle B--Academic Health Centers

     SEC. 3101. DISCRETIONARY GRANTS REGARDING ACCESS TO CENTERS.

       (a) Rural Information and Referral Systems.--The Secretary 
     may make grants to eligible centers for the establishment and 
     operation of information and referral systems to provide the 
     services of such centers to rural health plans.
       (b) Other Purposes Regarding Urban and Rural Areas.--The 
     Secretary may make grants to community- and provider-based 
     health plans as defined in section 1441(c)(2) to carry out 
     activities (other than activities carried out under 
     subsection (a)) for the purpose of providing the services of 
     eligible centers to residents of rural or urban communities 
     who otherwise would not have adequate access to such 
     services.
       (c) Authorization of Appropriations.--For the purpose of 
     carrying out this section, there are authorized to be 
     appropriate, $5,000,000 for each of the fiscal years 1996 and 
     1997, $4,000,000 for each of the fiscal years 1998 and 1999, 
     $3,050,000 for fiscal year 2000, $1,830,000 for fiscal year 
     2001, $1,067,000 for fiscal year 2002, and $760,000 for each 
     of the fiscal years 2003 and 2004.
                Subtitle C--Health Research Initiatives

                 PART 1--PROGRAMS FOR CERTAIN AGENCIES

     SEC. 3201. BIOMEDICAL, BEHAVIORAL AND HEALTH SERVICES 
                   RESEARCH.

       (a) Findings.--Congress finds the following:
       (1) Nearly 4 of 5 peer reviewed research projects deemed 
     worthy of funding by the National Institutes of Health are 
     not funded, and 9 of 10 peer reviewed research projects 
     deemed worthy of funding by the Agency for Health Care Policy 
     and Research are not funded.
       (2) Less than 2 percent of the nearly one trillion dollars 
     our Nation spends on health care is devoted to health 
     research, while the defense industry spends 15 percent of its 
     budget on research.
       (3) Public opinion surveys have shown that Americans want 
     more Federal resources put into health research and support 
     by having a portion of their health insurance premiums set 
     aside for this purpose.
       (4) Ample evidence exists to demonstrate that health 
     research has improved the quality of health care in the 
     United States. Advances such as the development of vaccines, 
     the cure of many childhood cancers, drugs that effectively 
     treat a host of diseases and disorders, a process to protect 
     our Nation's blood supply from the HIV virus, progress 
     against cardiovasculor disease including heart attack and 
     stroke, and new strategies for the early detection and 
     treatment of diseases such as colon, breast, and prostate 
     cancer clearly demonstrates the benefits of health research.
       (5) Among the most effective methods to control health care 
     costs are the prevention of intentional and unintentional 
     injury and the prevention and cure of disease and disability, 
     thus, health research which holds the promise of prevention 
     of intentional and unintentional injury and cure and 
     prevention of disease and disability is a critical component 
     of any comprehensive health care reform plan.
       (6) The state of our Nation's research facilities at the 
     National Institutes of Health and at universities is 
     deteriorating significantly. Renovation and repair of these 
     facilities are badly needed to maintain and improve the 
     quality of research.
       (7) Because the Omnibus Budget Reconciliation Act of 1993 
     freezes discretionary spending for the next 5 years, the 
     Nation's investment in health research through the National 
     Institutes of Health and the Agency for Health Care Policy 
     and Research is likely to decline in real terms unless 
     corrective legislative action is taken.
       (8) A health research fund is needed to maintain our 
     Nation's commitment to health research and to increase the 
     percentage of approved projects which receive funding at the 
     National Institutes of Health and the Agency for Health Care 
     Policy and Research to at least 33 percent.
       (b) Availability of Funds.--
       (1) In general.--With respect to each calendar year, the 
     Secretary shall provide for payment, from funds in the 
     Treasury not otherwise appropriated, for activities under 
     this section, an amount equal to 0.25 percent in 1997 and 
     subsequent years, of all private premiums required to be paid 
     in accordance with the Act.
       (2) Definition.--For purposes of this subsection, the term 
     ``private health premiums'' means all premium related 
     payments made by employers, individuals, and families for 
     coverage under this Act.
       (3) Maintenance of effort.--No amounts made available under 
     this subsection shall replace or reduce the amount of 
     appropriations for the National Institutes of Health or the 
     Agency for Health Care Policy and Research.
       (c) Purposes for Expenditures.--Part A of title IV of the 
     Public Health Service Act (42 U.S.C. 281 et seq.) is amended 
     by adding at the end thereof the following new section:

     ``SEC. 404F. EXPENDITURES FOR BIOMEDICAL AND BEHAVIORAL 
                   RESEARCH.

       ``(a) In General.--With respect to 80 percent of the 
     amounts made available under section 3201 of the Health 
     Security Act in a fiscal year, the Secretary shall 
     distribute--
       ``(1) 2 percent of such amounts during any fiscal year to 
     the Office of the Director of the National Institutes of 
     Health to be allocated at the Director's discretion for the 
     following activities:
       ``(A) for carrying out the responsibilities of the Office 
     of the Director, in including the Office of Research on 
     Women's Health and the Office of Research on Minority Health, 
     the Office of Alternative Medicine and the Office of Rare 
     Diseases Research; and
       ``(B) for construction and acquisition of equipment for or 
     facilities of or used by the National Institutes of Health;
       ``(2) 2 percent of such amounts for transfer to the 
     National Center for Research Resources to carry out section 
     1502 of the National Institutes of Health Revitalization Act 
     of 1993 concerning Biomedical and Behavioral Research 
     Facilities;
       ``(3) 1 percent of such amounts during any fiscal year for 
     carrying out section 301 and part D of title IV with respect 
     to health information communications; and
       ``(4) the remainder of such amounts during any fiscal year 
     to member institutes of the National Institutes of Health and 
     Centers in the same proportion to the total amount received 
     under this section, as the amount of annual appropriations 
     under appropriations Acts for each member institute and 
     Centers for the fiscal year bears to the total amount of 
     appropriations under appropriations Acts for all member 
     institutes and Centers of the National Institutes of Health 
     for the fiscal year.
       ``(b) Plans of Allocation.--The amounts transferred under 
     subsection (a) shall be allocated by the Director of NIH or 
     the various directors of the institutes and centers, as the 
     case may be, pursuant to allocation plans developed by the 
     various advisory councils to such directors, after 
     consultation with such directors.''.

     SEC. 3202. HEALTH SERVICES RESEARCH.

       (a) In General.--The Secretary shall distribute the 
     remainder of the amounts made available under section 3201 in 
     a fiscal year (not to exceed 20 percent of the total of 
     amounts available in a fiscal year under such section), to 
     the Agency for Health Care Policy and Research for policy-
     initiated and investigator-initiated research.
       (b) Research on Health Care Reform.--Section 902 of the 
     Public Health Service Act (42 U.S.C. 299a), as amended by 
     section 2(b) of Public Law 102-410 (106 Stat. 2094), is 
     amended by adding at the end the following subsection:
       ``(f) Research on Health Care Reform.--
       ``(1) In general.--In carrying out section 901(b), the 
     Administrator shall conduct and support research on the 
     reform of the health care system of the United States, as 
     directed by the Secretary.
       ``(2) Priorities.--In carrying out paragraph (1), the 
     Administrator shall give priority to the following:
       ``(A) Conducting and supporting research on the 
     appropriateness and effectiveness of alternative clinical 
     strategies (including community-based programs and preventive 
     services), the quality and outcomes of care, and 
     administrative simplification.
       ``(B) Conducting and supporting research on the 
     appropriateness and effectiveness of alternative community-
     based and clinical strategies including integrating 
     preventive services into primary care, the effectiveness of 
     preventive counseling and health education, and the efficacy 
     and cost-effectiveness of clinical preventive services.
       ``(C) Conducting and supporting research on consumer choice 
     and information resources; on the role of shared decision 
     making in enhancing patient and provider therapeutic options; 
     the effects of health care reform on health delivery systems; 
     methods for risk adjustment; factors influencing access to 
     health care for vulnerable populations, including children, 
     persons with low-income, persons with disabilities, or 
     individuals with chronic or complex health conditions, and 
     primary care.
       ``(D) The development of clinical practice guidelines 
     consistent with section 913, the dissemination of such 
     guidelines consistent with section 903, and the assessment of 
     the effectiveness of such guidelines.''.

     SEC. 3203. AHCPR CONFORMING AMENDMENTS.

       (a) Traineeship Program.--Section 902(c) of such Act (42 
     U.S.C. 299a(c)) is amended--
       (1) by redesignating the matter following the subsection 
     heading as paragraph (1) and realigning the margin of such so 
     as to align with the margin of section 903(a)(1);
       (2) by inserting before ``The Administrator'' the 
     following: ``In general.--''; and
       (3) by adding at the end thereof the following new 
     paragraph:
       ``(2) Traineeship program.--The Administrator shall 
     establish a traineeship program for not to exceed 25 
     investigators, to enable such investigators to carry out 
     research at the Agency that would benefit the mission of the 
     Agency and further the educational needs of such 
     investigators. Such investigator positions shall not be 
     counted against any Federal employment ceilings affecting the 
     Agency.''.
       (b) Printing Services.--Section 902 of such Act (42 U.S.C. 
     299a) is amended by adding at the end thereof the following 
     new subsection:
       ``(f) Authority to Contract for Printing Services.--The 
     Administrator may publish or arrange for the publication of 
     research findings and practice guidelines, without regard to 
     section 501 of title 44, United States Code.''.
       (c) Panels.--Section 913(a) of such Act (42 U.S.C. 299b-
     2(a)) is amended by adding at the end thereof the following 
     new flush sentence:
     ``Panels convened for the purpose of carrying out paragraphs 
     (1) and (2) shall not be considered advisory committees 
     within the meaning of section 3(2) of the Federal Advisory 
     Committee Act (5 U.S.C. App. 3(2)), and prior to publication 
     by the Administrator, clinical practice guidelines, 
     performance measures, and review criteria as described in 
     section 912(a) are not subject to the requirements of section 
     552 of title 5, United States Code.''.
       (d) Arrangements.--Section 913 of such Act (42 U.S.C. 299b-
     2) is amended by adding at the end thereof the following new 
     subsection:
       ``(d) Arrangements.--
       ``(1) In general.--Upon the request of a public or private 
     entity, the Administrator may collect, tabulate, and analyze 
     statistics, perform technology assessments, carry out health 
     services and outcomes and effectiveness research, and 
     facilitate the development of clinical practice guidelines 
     under arrangements with such entities under which such 
     entities compensate the Administrator for the costs of the 
     services provided.
       ``(2) Amounts and personnel.--Amounts collected from 
     payments under this subsection shall be available to the 
     Administrator for obligation until expended, and personnel 
     used to provide such services shall not be counted against 
     any Federal employment ceilings affecting the Agency.''.
       (e) Technical Amendment.--Section 913(c) of such Act (42 
     U.S.C. 299b-2(c)) is amended by moving the first sentence so 
     as appear after the subsection heading.

                      PART 2--FUNDING FOR PROGRAM

     SEC. 3211. AUTHORIZATIONS OF APPROPRIATIONS.

       (a) Relation to Other Funds.--Amounts made available under 
     this subtitle are in addition to any other authorizations of 
     appropriations that are available to carry out section 3202 
     and the amendments made by such section.
       (b) Trigger and Release of Monies.--No expenditure shall be 
     made pursuant to section 3201(b) during any fiscal year in 
     which the annual amount appropriated for the National 
     Institutes of Health and the Agency for Health Care Policy 
     and Research is less than the amount so appropriated for the 
     prior fiscal year. With respect to amounts available for 
     expenditure pursuant to section 3201(b) which, as a result of 
     the application of this subsection remain unexpended, such 
     amounts shall be obligated by the Secretary of Health and 
     Human Services under the public health initiative under 
     subtitle H.

                PART 3--MEDICAL TECHNOLOGY IMPACT STUDY

     SEC. 3221. MEDICAL TECHNOLOGY IMPACT STUDY.

       (a) Assessment of the Standard Impact of Medical 
     Technologies.--
       (1) In general.--The Secretary, acting through the 
     Administrator of the Agency for Health Care Policy and 
     Research (hereafter referred to in this section as the 
     ``Administrator''), shall undertake an interdisciplinary 
     study (to be known as the ``Medical Technology Impact 
     Study'') to assess the overall economic costs, economic 
     benefits, and effect on patient outcomes of medical 
     technologies used in treating each of a list of target 
     diseases and conditions. The Secretary shall submit the 
     report of the Administrator to Congress (in accordance with 
     subsection (c)) concerning the results of the study and may 
     provide any recommendations determined to be necessary to 
     ensure the availability, access, and appropriate use of 
     medical technologies to improve the quality of health care in 
     the United States.
       (2) Purpose.--The purpose of the study under paragraph (1) 
     is to assess the impact of old, new, and emerging medical 
     technologies on health care costs, social costs, and patient 
     outcomes, and to identify the factors, including government 
     and private payor reimbursement policies, that impede or 
     encourage innovation that improves patient outcomes. Congress 
     intends that the study complement the technology assessment, 
     outcomes research, and guideline development activities 
     authorized under title IX of the Public Health Service Act by 
     providing a comprehensive context for understanding the 
     economic and social factors related to the development and 
     use of medical technologies.
       (3) Definitions.--As used in this section:
       (A) Economic benefits.--The term ``economic benefits'' may 
     include, based on available data--
       (i) reductions in the economic costs of disease;
       (ii) increases in employment attributable to the medical 
     technology industry;
       (iii) increases in Federal and State tax revenues 
     attributable to the medical technology industry and its 
     employees;
       (iv) improvements in the balance of trade deficit 
     attributable to the medical technology industry; and
       (v) other benefits that are determined by the Advisory 
     Committee established under subsection (b) to be relevant to 
     assessing the impact of medical technology.
       (B) Economic costs.--The term `economic costs' may include, 
     based on available data--
       (i) the financial costs to the health care system of 
     diagnosing and treating disease, including the costs of 
     nontreatment and palliative care;
       (ii) the financial costs to employers resulting from worker 
     illness, including the costs of productivity losses and 
     worker absenteeism;
       (iii) the financial costs to families resulting from 
     illness of a family member, including costs associated with 
     loss of income, hiring of caretakers, and long term and 
     hospice care;
       (iv) the financial costs to government of illness, 
     including reductions in income tax revenues attributable to 
     worker illness and worker related injuries and increases in 
     transfer payments, including unemployment, disability, 
     welfare, and survivor benefit payments, made to individuals 
     and families on account of illness; and
       (v) other costs that are determined by the Advisory 
     Committee established under subsection (b) to be relevant to 
     assessing the impact of medical technology.
       (C) Medical technologies.--The term `medical technologies' 
     includes drugs, biologics (including vaccines), medical 
     devices, drug delivery systems, and surgical services and 
     other procedures for preventing, diagnosing, and treating 
     diseases or health conditions.
       (D) Medical technology industry.--The term `medical 
     technology industry' includes the biotechnology, 
     pharmaceutical, and medical device industries, and such other 
     industries that invent, develop, or market medical 
     technologies.
       (E) Patient outcomes.--The term `patient outcomes' may 
     include--
       (i) changes in clinical outcomes, including stabilization 
     of patients with progressive disease or health conditions, 
     resulting from the use of safe and effective medical 
     technology in prevention, diagnosis, or treatment;
       (ii) changes in mortality, morbidity, and health service 
     use, including stabilization of patients with progressive 
     diseases;
       (iii) changes in quality of life, including ability to 
     perform activities of daily living, ability to return to 
     work, relief from discomfort or pain, alleviation of fatigue, 
     and improved mental functioning and well-being; and
       (iv) other outcomes that are determined by the Advisory 
     Committee to be relevant to assessing the impact of medical 
     technology.
       (b) Advisory Committee.--
       (1) In general.--The Administrator shall establish an 
     Advisory Committee to assist the Agency for Health Care 
     Policy and Research in preparing the reports required under 
     subsection (c). Except as provided in paragraph (3), no 
     member of the Advisory Committee shall be an employee of the 
     Federal Government.
       (2) Membership.--The Advisory Committee shall be balanced 
     in its representation of interested parties and shall be 
     composed of at least two individuals appointed by the 
     President of the Institute of Medicine and two individuals 
     from each of the following categories to be appointed by the 
     Administrator:
       (A) Experts in medical technology assessment.
       (B) Experts in objective measures of improved patient 
     outcomes, such as clinical outcomes, mortality, morbidity, 
     and health service use.
       (C) Experts in subjective measures of improved patient 
     outcomes, such as quality of life.
       (D) Experts in quantifying the economic costs of disease to 
     the health care system, including public and private payers.
       (E) Experts in quantifying the economic impact of the 
     medical technology industry.
       (F) Experts in health statistics and epidemiology.
       (G) Physicians and other health care providers.
       (H) Officers or employees of health plans and other health 
     care payers.
       (I) Experts in the ethical implications of health care.
       (J) Experts in private sector financial market investment 
     in the medical technology industry.
       (K) Consumers and members of patient advocacy groups.
       (L) Health professional organizations.
       (M) Officers or employees of biotechnology companies.
       (N) Officers or employees of medical device companies.
       (O) Officers or employees of pharmaceutical companies.
       (3) Ex officio.--The following individuals or their 
     designees shall serve as ex officio members of the Advisory 
     Committee:
       (A) The Director of the National Institutes of Health.
       (B) The Commissioner of Food and Drugs.
       (C) The Director of the Centers for Disease Control and 
     Prevention.
       (D) The Administrator of the Health Care Financing 
     Administration.
       (E) The Under Secretary of Commerce for Technology.
       (F) The Director of the Congressional Office of Technology 
     Assessment.
       (c) Interdisciplinary Study and Report.--
       (1) In general.--The Administrator, in consultation with 
     the Advisory Committee established under subsection (b), 
     shall determine which diseases or conditions should be 
     studied in the Medical Technology Impact Study under 
     subsection (a). In carrying out the medical technology 
     assessment required under this subsection, the Administrator 
     shall consider various factors, including those outlined in 
     section 904(b)(2) of the Public Health Service Act and 
     government and private payor reimbursement policies that 
     impede or encourage innovation that improves patient 
     outcomes. The diseases or conditions studied in such Study 
     shall be those considered to be high priority according to 
     the following criteria:
       (A) Aggregate economic costs to the United States.
       (B) Overall importance to public heath.
       (C) Potential for improvements in patient outcomes.
       (D) Significant changes expected in management of the 
     condition.
       (E) Other criteria identified by the Advisory Committee.
       (2) Design.--The Administrator, in consultation with the 
     Advisory Committee established under subsection (b), and the 
     Institute of Medicine pursuant to paragraph (3), shall 
     develop a design, based on the list of target diseases and 
     conditions, for undertaking the Medical Technology Impact 
     Study under subsection (a).
       (3) Contract.--The Secretary shall request the Institute of 
     Medicine of the National Academy of Sciences to enter into a 
     contract to review the design of the Medical Technology 
     Impact Study under subsection (a) and report to the 
     Administrator concerning any recommendations for revising 
     such design, in the interest of assuring that it reflects the 
     best available scientific methodologies.
       (4) Publication.--The Administrator shall publish the study 
     design under this section and list of target diseases and 
     conditions, the recommendations of the Institute of Medicine, 
     and the response of the Administrator to such recommendations 
     in the Federal Register for a 60-day period for public 
     comment. Any such comments shall be considered by the 
     Administrator in completing the proposed study design for 
     submission to the Secretary.
       (5) Design report.--The Secretary shall report to Congress 
     concerning the proposed design of the Medical Technology 
     Impact Study, together with recommendations for 
     appropriations necessary to carry out the Study.
       (6) Grants and contracts.--Beginning in the first fiscal 
     year for which Congress appropriates funds under subsection 
     (d), and ending on September 30 of that year, the 
     Administrator shall enter into grants and contracts with 
     appropriate entities to conduct any investigations and 
     analyses that may be required to carry out the design of the 
     Medical Technology Impact Study under subsection (a).
       (7) Report on findings.--The Administrator, in consultation 
     with the Advisory Committee established under subsection (b), 
     shall develop a draft comprehensive report concerning the 
     findings of the Medical Technology Impact Study under 
     subsection (a), shall make copies of the draft report 
     available to the public, and shall publish a notice in the 
     Federal Register providing for a 60-day period of public 
     comment. Any such comments shall be considered by the 
     Administrator in completing and submitting the final report 
     to the Secretary.
       (8) Final report.--Not later than 3 years after the date of 
     enactment of this section, the Secretary shall submit the 
     report of the Administrator under this section to Congress, 
     and may include any recommendations determined necessary to 
     assure the availability, access and appropriate use of 
     medical technologies to improve the quality of health care in 
     the United States.
       (d) Authorization of Appropriations.--There are authorized 
     to be appropriated such sums as may be necessary to carry out 
     this section.
    Subtitle D--Core Functions of Public Health Programs; National 
                Initiatives Regarding Preventive Health

                            PART 1--FUNDING

     SEC. 3301. AUTHORIZATIONS OF APPROPRIATIONS.

       (a) Core Functions of Public Health Programs.--For the 
     purpose of carrying out part 2, there are authorized to be 
     appropriated $284,000,000 for fiscal year 1996, $292,000,000 
     for fiscal year 1997, $339,000,000 for fiscal year 1998, 
     $383,000,000 for fiscal year 1999, $381,300,000 for fiscal 
     year 2000, $228,800,000 for fiscal year 2001, $133,370,000 
     for fiscal year 2002, and $95,300,000 for each of the fiscal 
     years 2003 and 2004.
       (b) National Initiatives Regarding Health Promotion and 
     Disease Prevention.--For the purpose of carrying out part 3, 
     there are authorized to be appropriated $158,000,000 for 
     fiscal year 1996, $112,000,000 for fiscal year 1997, 
     $100,000,000 for fiscal year 1998, $115,000,000 for fiscal 
     year 1999, $91,500,000 for fiscal year 2000, $54,900,000 for 
     fiscal year 2001, $32,010,000 for fiscal year 2002, and 
     $22,900,000 for each of the fiscal years 2003 and 2004.
       (c) Relation to Other Funds.--The authorizations of 
     appropriations established in subsections (a) and (b) are in 
     addition to any other authorizations of appropriations that 
     are available for the purposes described in such subsections.

            PART 2--CORE FUNCTIONS OF PUBLIC HEALTH PROGRAMS

     SEC. 3311. PURPOSES.

       Subject to the subsequent provisions of this subtitle, the 
     purposes of this part are to strengthen the capacity of State 
     and local public health agencies to carry out the following 
     functions:
       (1) To monitor and protect the health of communities 
     against communicable diseases and exposure to toxic 
     environmental pollutants, occupational hazards, harmful 
     products, and poor quality health care.
       (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 injury, preventing 
     and controlling disease and the appropriate use of medical 
     services.
       (4) To develop and test new prevention and public health 
     control interventions.
       (5) To integrate and coordinate the prevention programs and 
     services of standard health plans, community-based providers, 
     local health departments, State health departments, 
     purchasing cooperatives, and other sectors of State and local 
     government that affect health, including education, labor, 
     transportation, welfare, criminal justice, environment, 
     agriculture, and housing.
       (6) To conduct research on the effectiveness and cost-
     effectiveness of public health programs.

     SEC. 3312. GRANTS TO STATES FOR CORE FUNCTIONS OF PUBLIC 
                   HEALTH.

       (a) In General.--The Secretary shall make grants to States 
     that submit applications as prescribed in section 3313 in an 
     amount which bears the same ratio to the available amounts 
     for that fiscal year as the amounts provided by the Secretary 
     under the provisions of law listed in section 1902(2) of the 
     Public Health Service Act to the State for fiscal year 1981 
     bear to the total amount appropriated for such provisions of 
     law for fiscal year 1981.
       (b) Core Functions of Public Health Programs.--For purposes 
     of subsection (a), the functions described in this subsection 
     are, subject to subsection (c), as follows:
       (1)(A) Data collection, activities related to population 
     health (including the population of individuals ineligible 
     for the standard benefit package) measurement and outcomes 
     monitoring, including the acquisition and installation of 
     hardware and software, personnel training and technical 
     assistance to operate and support automated and integrated 
     information systems, the regular collection and analysis of 
     public health data, vital statistics, and personal health 
     services data and analysis for planning and needs assessment 
     purposes of data collected from health plans through the 
     information system under title V of this Act.
       (B) Data measures under this paragraph must include an 
     ethnic identifier on all forms. To the extent feasible, 
     ethnic identifiers should be classified by ethnic sub-group 
     populations. Access to data must be ensured for research 
     organizations and data clearinghouses. Population health 
     measurement and outcome monitoring should focus on health 
     status differentials between racial, and ethnic groups, by 
     subpopulation, and gender differences.
       (2) Activities to protect the environment and to assure the 
     safety of housing, workplaces, food and water, including the 
     following activities:
       (A) Monitoring and improving the overall public health 
     quality and safety of communities.
       (B) Assessing exposure to high lead levels and water 
     contamination.
       (C) Providing support for poison control centers.
       (D) Monitoring sewage and solid waste disposal, radiation 
     exposure, radon exposure, and noise levels.
       (E) Abatement of lead-related hazards.
       (F) Assuring recreation, home and worker safety.
       (G) Public information and education programs that help to 
     reduce intentional and unintentional injuries, including 
     training parents and children on use of safety devices.
       (H) Enforcing public health safety and sanitary codes.
       (I) Other activities relating to promoting the public 
     health of communities.
       (3) Investigation and control of adverse health conditions, 
     including improvements in emergency treatment preparedness, 
     injury prevention, cooperative activities to reduce violence 
     levels in homes and communities, activities to control the 
     outbreak of disease, exposure related conditions and other 
     threats to the health status of individuals.
       (4) Public information and education programs to reduce 
     risks to health such as use of tobacco, alcohol and other 
     drugs, sexual activities that increase the risk to HIV 
     transmission and sexually transmitted diseases, domestic 
     violence, poor diet, physical inactivity, and low childhood 
     immunization levels.
       (5) Accountability and quality assurance activities, 
     including monitoring the quality of personal health services 
     furnished by health plans and providers of medical and health 
     services in a manner consistent with the overall quality of 
     care monitoring activities undertaken under title V, and 
     monitoring communities' overall access to health services.
       (6) Provision of public health laboratory services to 
     complement private clinical laboratory services and that 
     screen for diseases and conditions such as metabolic diseases 
     in newborns, provide toxicology assessments of blood lead 
     levels and other environmental toxins, diagnose sexually 
     transmitted diseases, tuberculosis and other diseases 
     requiring partner notification, test for infectious and food-
     borne diseases, and monitor the safety of water and food 
     supplies.
       (7) Training and education to assure provision of care by 
     all health professionals, with special emphasis placed on the 
     training of public health professions including 
     epidemiologists, biostatisticians, health educators, public 
     health administrators, sanitarians and laboratory 
     technicians.
       (8) Leadership, policy development and administration 
     activities, including needs assessment, the setting of public 
     health standards, the development of community public health 
     policies, and the development of community public health 
     coalitions.
       (9) Establishment of programs that encourage partnerships 
     among local law enforcement and community groups for the 
     purpose of developing community response teams to assist 
     victims of domestic violence.
       (c) Restrictions on Use of Grant.--
       (1) In general.--A funding agreement for a grant under 
     subsection (a) for a State is that the grant will not be 
     expended--
       (A) to provide inpatient services;
       (B) to make cash payments to intended recipients of health 
     services;
       (C) to purchase or improve land, purchase, construct, or 
     permanently improve (other than minor remodeling) any 
     building or other facility, or purchase major medical 
     equipment;
       (D) to satisfy any requirement for the expenditure of non-
     Federal funds as a condition for the receipt of Federal 
     funds; or
       (E) to provide financial assistance to any entity other 
     than a public or nonprofit private entity.
       (2) Limitation on administrative expenses.--A funding 
     agreement for a grant under subsection (a) is that the State 
     involved will not expend more than 10 percent of the grant 
     for administrative expenses with respect to the grant.
       (d) Maintenance of Effort.--A funding agreement for a grant 
     under subsection (a) is that the State involved will maintain 
     expenditures of non-Federal amounts for core health functions 
     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 the State receives 
     such a grant.
       (e) Domestic violence.--As used in this section, the term 
     ``domestic violence'' means any intentional violence, 
     controlling, or coercive behavior or pattern of behavior by 
     an individual who is currently or who was previously, in an 
     intimate or acquaintance relationship with the victim. Such 
     behavior may occur at any stage of the lifecycle and may 
     encompass single acts or a syndrome of actual or threatened 
     physical injury, sexual assault, rape, psychological abuse, 
     or neglect. Such term includes behavior which currently may 
     be described as ``child neglect'', ``child abuse'', ``spousal 
     abuse'', ``domestic violence'', ``woman battering'', 
     ``partner abuse'', ``elder abuse'', and ``date rape''.

     SEC. 3313. SUBMISSION OF INFORMATION.

       The Secretary may make a grant under section 3312 only if 
     the State involved submits to the Secretary the following 
     information:
       (1) A description of existing deficiencies in the State's 
     public health system (at the State level and the local 
     level), using standards of sufficiency developed by the 
     Secretary.
       (2) A description of health status measures to be improved 
     within the State (at the State level and the local level) 
     through expanded public health functions.
       (3) Measurable outcomes and process objectives for 
     improving health status and core health functions for which 
     the grant is to be expended.
       (4) Information regarding each such function, which--
       (A) identifies the amount of State and local funding 
     expended on each such function 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 function by both the 
     State and local public health agencies.
       (5) A description of the core health functions to be 
     carried out at the local level, and a specification for each 
     such function of--
       (A) the communities in which the function will be carried 
     out; and
       (B) the amount of the grant to be expended for the function 
     in each community so specified.

     SEC. 3314. REPORTS.

       A funding agreement for a grant under section 3312 is that 
     the States involved will, not later than the date specified 
     by the Secretary, submit to the Secretary a report 
     describing--
       (1) the purposes for which the grant was expended; and
       (2) describing the extent of progress made by the State in 
     achieving measurable outcomes and process objectives 
     described in section 3313(3).

     SEC. 3315. APPLICATION FOR GRANT.

       The Secretary may make a grant under section 3312 only if 
     an application for the grant is submitted to the Secretary, 
     the application contains each agreement described in this 
     part, the application contains the information required in 
     section 3314, 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 part.

     SEC. 3316. ALLOCATIONS FOR CERTAIN ACTIVITIES.

       Of the amounts made available under section 3301 for a 
     fiscal year for carrying out this part, the Secretary may 
     reserve not more than 5 percent for carrying out the 
     following activities:
       (1) Technical assistance with respect to planning, 
     development, and operation of core health functions carried 
     out under section 3312, including provision of biostatistical 
     and epidemiological expertise and provision of laboratory 
     expertise.
       (2) Development and operation of a national information 
     network among State and local health agencies.
       (3) Program monitoring and evaluation of core health 
     functions carried out under section 3312.
       (4) Development of a unified electronic reporting mechanism 
     to improve the efficiency of administrative management 
     requirements regarding the provision of Federal grants to 
     State public health agencies.

     SEC. 3317. DEFINITIONS.

       For purposes of this part:
       (1) The term ``funding agreement'', with respect to a grant 
     under section 3312 to a State, means that the Secretary may 
     make the grant only if the State makes the agreement 
     involved.
       (2) The term ``core health functions'', with respect to a 
     State, means the functions described in section 3312(b).

     SEC. 3318. SINGLE APPLICATION AND UNIFORM REPORTING SYSTEMS 
                   FOR CORE FUNCTIONS OF PUBLIC HEALTH AND PUBLIC 
                   HEALTH CATEGORICAL GRANT PROGRAMS ADMINISTERED 
                   BY THE CENTERS FOR DISEASE CONTROL AND 
                   PREVENTION.

       (a) Single Application.--
       (1) In general.--The Secretary, acting through the Director 
     of the Centers for Disease Control and Prevention, shall 
     establish a single consolidated application to enable States 
     to apply for the Core Functions of Public Health Grants 
     Program and any or all of the Public Health Service Act 
     categorical programs described in subsection (b).
       (2) Requirements.--The application developed under 
     paragraph (1) shall--
       (A) be designed so that information collected will be 
     consistent with the requirements of this part including 
     subsection (b);
       (B) be designed and implemented not later than 1 year after 
     the date of enactment of this Act; and
       (C) be developed with resources made available under 
     section 3316 (not resources made available for the programs 
     described in subsection (b)).
       (3) State public health officers.--In developing the single 
     consolidated application form to be used under this 
     subsection the Secretary shall consult with Federal, State 
     and local public health agencies.''.
       (4) Eligibility.--States and local governments that have 
     grants, contracts or cooperative agreements in effect with 
     the Centers for Disease Control and Prevention on the date of 
     enactment of this Act shall be eligible to use a single 
     application under this section to apply for any or all of the 
     Public Health Service Act categorical programs described in 
     subsection (b).
       (b) Eligible Public Health Service Act Programs.--Eligible 
     Public Health Service Act categorical programs described in 
     this subsection are the following:
       (1) The Preventive Health and Health Services Block Grant 
     under section 1903 of the Public Health Service Act.
       (2) The Childhood Lead Poisoning Prevention Program under 
     section 317A of the Public Health Service Act.
       (3) The Sexually Transmitted Diseases Program under section 
     318 of the Public Health Service Act.
       (4) The Prevention of Sexually Transmitted Diseases-Related 
     Infertility Program under section 318A of the Public Health 
     Service Act.
       (5) The Breast and Cervical Cancer Early Detection Program 
     under sections 1501 through 1509 of the Public Health Service 
     Act.
       (6) The National Program of Cancer Registries under section 
     399H of the Public Health Service Act.
       (7) The Injury Control and Prevention Program under 
     sections 391 through 394 of the Public Health Service Act.
       (8) The preventive health for prostate cancer program under 
     section 317D of the Public Health Service Act.
       (9) The birth defects data program under section 317C of 
     the Public Health Service Act.
       (10) Programs under subtitle D of this title.
       (11) Other relevant programs as determined appropriate by 
     the Secretary.
       (c) Allocation of Funds.--In awarding grants to States and 
     local governments under a single application under this 
     section, the Secretary shall delineate to each grantee the 
     amounts to be dedicated to each of the programs described in 
     subsection (b) and ensure that funding allotments for each of 
     such programs are consistent with the requirements of Federal 
     law.
       (d) Uniform Core Functions of Public Health Reporting 
     System.--
       (1) Development.--The Secretary, acting through the 
     Director of the Office of Disease Prevention and Health 
     Promotion and the Director of the Centers for Disease Control 
     and Prevention, in consultation with other relevant Federal 
     and State health agencies with data collection 
     responsibilities, shall develop and implement a Uniform Core 
     Public Health Functions Reporting System to collect program 
     and fiscal data concerning the programs described in 
     subsection (b).
       (2) Requirements.--The system developed under paragraph (1) 
     shall--
       (A) use outcomes consistent with the goals of Healthy 
     People 2000;
       (B) be designed so that information collected will be 
     consistent with the requirements of this part including 
     subsection (b);
       (C) be designed and implemented not later than 2 years 
     after the date of enactment of this Act; and
       (D) be developed with resources made available under 
     section 3316 of this Act (not resources made available for 
     the programs described in subsection (b)).
       (3) State public health officers.--In developing the data 
     set to be used under Uniform Core Public Health Functions 
     Reporting System the Secretary shall consult with Federal, 
     State and local public health agencies.
       (e) Study.--
       (1) In general.--Within a reasonable period of time after 
     the date of enactment of this Act, the Secretary shall 
     request that the Institute of Medicine conduct a study 
     concerning--
       (A) the effects of consolidating any or all of the grant 
     programs administered by the Centers for Disease Control and 
     Prevention and described in subsection (b) into a Core 
     Functions of Public Health Block Grant Program;
       (B) the development of alternative methods for implementing 
     a block grant program or categorical grant program; and
       (C) alternative formulas for allocating State grants that 
     incorporate measures of health status, population and degree 
     of poverty.
     In particular, the impact of program consolidation on the 
     targeted recipients, including women and vulnerable 
     populations, shall be addressed in the study. If the 
     Institute of Medicine declines to do the study, the Secretary 
     shall make grants to or enter into contracts with a public or 
     nonprofit private entity with relevant expertise for the 
     conduct of such a study.
       (2) Report.--Not later than 1 year after the date of the 
     receipt of the contract under paragraph (1), the contract 
     recipient shall prepare and submit to the Secretary, the 
     Energy and Commerce Committee of the House of 
     Representatives, and the Committee on Labor and Human 
     Resources of the Senate a report that contains the results of 
     the study conducted under paragraph (1).
       (3) Issuance of plan.--Not later than 1 year after the date 
     on which the report under paragraph (2) is received by the 
     Secretary and the committees referred to in such paragraph, 
     the Secretary shall issue a plan in response to the report. 
     Such a plan shall include the identification of relevant 
     changes in authorizing language.

  PART 3--NATIONAL INITIATIVES REGARDING HEALTH PROMOTION AND DISEASE 
                               PREVENTION

                       Subpart A--General Grants

     SEC. 3331. GRANTS FOR NATIONAL PREVENTION INITIATIVES.

       (a) In General.--The Secretary may make grants to entities 
     described in subsection (b) for the purpose of carrying out 
     projects to develop and implement innovative community-based 
     strategies to provide for health promotion and disease 
     prevention activities for which there is a significant need, 
     as identified under section 1701 of the Public Health Service 
     Act.
       (b) Eligible Entities.--The entities referred to in 
     subsection (a) are agencies of State or local government, 
     private nonprofit organizations (including research 
     institutions), and coalitions that link two or more of these 
     groups.
       (c) Certain Activities.--The Secretary shall ensure that 
     projects carried out under subsection (a)--
       (1) reflect approaches that take into account the special 
     needs and concerns of the affected populations;
       (2) are targeted to the most needy and vulnerable 
     population groups and geographic areas of the Nation;
       (3) examine links between various high priority preventable 
     health problems and the potential community-based remedial 
     actions; and
       (4) establish or strengthen the links between the 
     activities of agencies engaged in public health activities 
     with those of purchasing cooperatives, health care providers, 
     and other entities involved in the personal health care 
     delivery system described in title I.

     SEC. 3332. PRIORITIES.

       (a) Establishment.--
       (1) Annual statement.--The Secretary shall for each fiscal 
     year develop a statement of proposed priorities for grants 
     under section 3331 for the fiscal year.
       (2) Allocations among priorities.--With respect to the 
     amounts available under section 3301(b) for the fiscal year 
     for carrying out this part, each statement under paragraph 
     (1) for a fiscal year shall include a specification of the 
     percentage of the amount to be devoted to projects addressing 
     each of the proposed priorities established in the statement.
       (3) Process for establishing priorities.--
       (A) Preference.--In establishing priorities for grants 
     under this part, preference shall be given to projects that--
       (i) reduce the prevalence of chronic diseases including 
     cardiovascular disease, stroke, diabetes, and cancer;
       (ii) prevent violence against women by training providers 
     and other health care professionals to identify victims of 
     domestic violence, to provide appropriate examination and 
     treatment, and to refer the victims for appropriate social 
     and legal services; and
       (iii) establish community health advisor programs described 
     in subparagraph (B).
       (B) Community health advisor programs.--For purposes of 
     subparagraph (A)(iii), the term ``community health advisor 
     program'' means a program that performs the following 
     functions:
       (i) Provides outreach services to inform the community of 
     the availability of program services.
       (ii) Collaborate efforts with health care providers and 
     related entities to facilitate the provision of health 
     services and health related social services.
       (iii) Provide public education on health promotion and 
     disease prevention and efforts to facilitate the use of 
     available health services and health-related social services.
       (iv) Provide health-related counseling.
       (v) Make referrals for available health services and 
     health-related social services.
       (vi) Improve 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.
       (vii) Establish a community health advisor training 
     program.
       (viii) Provide services in the language and cultural 
     context most appropriate for the individuals served by the 
     program.
       (ix) Provide compensation for the services of, and 
     opportunities for training and employment of, community 
     health advisors.
       (x) Such other services as the Secretary determines to be 
     appropriate, which may include transportation and translation 
     services.
       (C) Publication of statement.--Not later than January 1 of 
     each fiscal year, the Secretary shall publish a statement 
     under paragraph (1) in the Federal Register. A period of 60 
     days shall be allowed for the submission of public comments 
     and suggestions concerning the proposed priorities. After 
     analyzing and considering comments on the proposed 
     priorities, the Secretary shall publish in the Federal 
     Register final priorities (and associated reservations of 
     funds) for approval of projects for the following fiscal 
     year.
       (D) Definition of community health advisor.--For purposes 
     of subparagraph (B), the term ``community health advisor'' 
     means an individual--
       (i) who has demonstrated the capacity to carry out one or 
     more of the authorized program services;
       (ii) 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
       (iii) is a member of a socioeconomic group to be served by 
     the program.
       (b) Applicability to Making of Grants.--
       (1) In general.--The Secretary may make grants under 
     section 3331 for projects that the Secretary determines--
       (A) are consistent with the applicable final statement of 
     priorities and otherwise meets the objectives described in 
     subsection (a); and
       (B) will assist in meeting a health need or concern of a 
     population within a defined health care coverage area or 
     other service area.
       (2) Special consideration for certain projects.--In making 
     grants under section 3331, the Secretary shall give special 
     consideration to applicants that will carry out projects 
     that, in addition to being consistent with the applicable 
     published priorities under subsection (a) and otherwise 
     meeting the requirements of this part, have the potential for 
     replication in other communities.

     SEC. 3333. SUBMISSION OF INFORMATION.

       The Secretary may make a grant under section 3331 only if 
     the applicant involved submits to the Secretary the following 
     information:
       (1) A description of the activities to be conducted, and 
     the manner in which the activities are expected to contribute 
     to meeting one or more of the priority health needs specified 
     under section 3332 for the fiscal year for which the grant is 
     initially sought.
       (2) A description of the total amount of Federal funding 
     requested, the geographic area and populations to be served, 
     and the evaluation procedures to be followed.
       (3) Such other information as the Secretary determines to 
     be appropriate.

     SEC. 3334. APPLICATION FOR GRANT.

       The Secretary may make a grant under section 3331 only if 
     an application for the grant is submitted to the Secretary, 
     the application contains each agreement described in this 
     part, the application contains the information required in 
     section 3333, 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 part.

   Subpart B--Development of Telemedicine in Rural Underserved Areas

     SEC. 3341. GRANTS FOR DEVELOPMENT OF RURAL TELEMEDICINE.

       (a) In General.--
       (1) Grants awarded.--The Secretary, acting through the 
     Office of Rural Health Policy, shall award grants to eligible 
     entities that have applications approved under subsection (b) 
     for the purpose of expanding access to health care services 
     for individuals in rural areas through the use of 
     telemedicine. Grants shall be awarded under this section to 
     encourage the initial development of rural telemedicine 
     networks, expand existing networks, link existing networks 
     together, or link such networks to existing fiber optic 
     telecommunications systems.
       (2) Eligible entity.--For purposes of this section, the 
     term ``eligible entity'' includes hospitals and other health 
     care providers in a health care network of community-based 
     providers that includes at least three of the following:
       (A) Community or migrant health centers.
       (B) Local health departments.
       (C) Community mental health centers.
       (D) Nonprofit hospitals.
       (E) Private practice health professionals, including rural 
     health clinics.
       (F) Other publicly funded health or social services 
     agencies.
       (b) Application.--To be eligible to receive a grant under 
     this section an entity 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 the anticipated need for the grant, a description 
     of the use to which the eligible entity would apply any 
     amounts received under such grant, the source and amount of 
     non-Federal funds the entity would pledge for the project, a 
     showing of the long-term viability of the project and 
     evidence of the provider commitment to the network. The 
     applicant should demonstrate the manner in which the project 
     will promote the integration of telemedicine in the community 
     so as to avoid redundancy of technology and achieve economies 
     of scale.
       (c) Preference.--The Secretary shall, in awarding grants 
     under this section, give preference to applicants that--
       (1) are health care providers in rural health care networks 
     or providers that propose to form such networks, and the 
     majority of the providers in such a network are located in a 
     medically underserved or health professional shortage areas;
       (2) can demonstrate broad geographic coverage in the rural 
     areas of the State, or States in which the applicant is 
     located;
       (3) propose to use Federal funds to develop plans for, or 
     to establish, telemedicine systems that will link rural 
     hospitals and rural health care providers to other hospitals 
     and health care providers;
       (4) will use the amounts provided under the grant for a 
     range of health care applications and to promote greater 
     efficiency in the use of health care resources;
       (5) demonstrate the long term viability of projects through 
     use of local matching funds (cash or in-kind); and
       (6) demonstrate financial, institutional, and community 
     support for the long range viability of the network.
       (d) Use of Amounts.--Amounts received under a grant awarded 
     under this section shall be utilized for the development of 
     telemedicine networks. Such amounts may be used to cover the 
     costs associated with the development of telemedicine 
     networks and the acquisition of telemedicine equipment and 
     modifications or improvements of telecommunications 
     facilities including--
       (1) the development and acquisition through lease or 
     purchase of computer hardware and software, audio and visual 
     equipment, computer network equipment, modification or 
     improvements to telecommunications transmission facilities, 
     telecommunications terminal equipments, interactive video 
     equipment, data terminal equipment, and other facilities and 
     equipment that would further the purposes of this section;
       (2) the provision of technical assistance and instruction 
     for the development and use of such programming equipment or 
     facilities;
       (3) the development and acquisition of instructional 
     programming;
       (4) demonstration projects for teaching or training medical 
     students, residents, and other health professions students in 
     rural training sites about the application of telemedicine;
       (5) transmission costs, maintenance of equipment, and 
     compensation of specialists and referring practitioners;
       (6) development of projects to use telemedicine to 
     facilitate collaboration between health care providers; or
       (7) such other uses that are consistent with achieving the 
     purposes of this section as approved by the Secretary.
       (e) Prohibited Uses.--Amounts received under a grant 
     awarded under this section may not be used for any of the 
     following:
       (1) Expenditures to purchase or lease equipment to the 
     extent the expenditures would exceed more than 60 percent of 
     the total grant funds.
       (2) Expenditures for indirect costs (as determined by the 
     Secretary) to the extent the expenditures would exceed more 
     than 10 percent of the total grant funds.

     SEC. 3342. REPORT AND EVALUATION OF TELEMEDICINE.

       Not later than October 1, 1995, the White House Information 
     Infrastructure Task Force shall prepare and submit to 
     Congress a report that evaluates telemedicine. Such report 
     shall evaluate--
       (1) whether telemedicine expands access to health care 
     services;
       (2) the effectiveness and cost effectiveness of 
     telemedicine services;
       (3) the quality of telemedicine services delivered; and
       (4) all Federal activity regarding telemedicine and 
     recommendations for a coordinated Federal strategy to 
     increase access to health care through telemedicine.

     SEC. 3343. REGULATIONS ON REIMBURSEMENT OF TELEMEDICINE.

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

     SEC. 3344. AUTHORIZATION OF APPROPRIATIONS.

       There are authorized to be appropriated such sums as may be 
     necessary to carry out this subpart.

     SEC. 3345. REIMBURSEMENT FOR TELEMEDICINE SERVICES UNDER THE 
                   MEDICARE PROGRAM.

       (a) In General.--The Secretary shall establish 
     demonstration projects under which eligible entities that 
     have received grants under this section may receive payments 
     in accordance with subsection (b) for the purpose of 
     developing appropriate reimbursement and coverage policies 
     for telemedicine services provided under title XVIII of the 
     Social Security Act.
       (b) Development of Payment Methodologies and Payments 
     Provided.--For purposes of subsection (a), the Health Care 
     Financing Administration shall reimburse a provider of 
     telemedicine services from funds made available under 
     subsection (d) in accordance with a methodology or varying 
     methodologies to be developed by the Secretary.
       (c) Report and Evaluation.--Not later than 3 years after 
     the date of the enactment of this Act, the Secretary shall 
     prepare and submit to Congress a repot that evaluates the 
     demonstration projects under this section.
       (d) Transfer.--The Secretary shall transfer not to exceed 
     $10,000,000 from the Hospital Insurance Trust Fund for the 
     purpose of carrying out demonstration programs under this 
     section.

     SEC. 3346. MAINTENANCE OF EFFORT.

       Any funds available for the activities covered by a 
     demonstration project or grant program conducted under this 
     subpart shall supplement, and not supplant, funds that are 
     expended for similar purposes under any State, regional, or 
     local program.

     SEC. 3345. DEFINITION.

       As used in this part the term ``rural health care network'' 
     means a group of rural hospitals or other rural health care 
     providers (including clinics, physicians and non-physicians 
     primary care providers) that have entered into a relationship 
     with each other or with nonrural hospitals and health care 
     providers for the purpose of strengthening the delivery of 
     health care services in rural areas or specifically to 
     improve their patients' access to telemedicine services. At 
     least 75 percent of hospitals and other health care providers 
     participating in the network shall be located in rural areas.
   Subtitle E--Health Services for Medically Underserved Populations

             PART 1--INITIATIVES FOR ACCESS TO HEALTH CARE

               Subpart A--Authorization of Appropriations

     SEC. 3411. AUTHORIZATIONS OF APPROPRIATIONS.

       (a) Improving Access to Health Services.--
       (1) Subpart b.--
       (A) Except as provided in subparagraph (B), for the purpose 
     of carrying out subpart B, there are authorized to be 
     appropriated, $309,000,000 for fiscal year 1996, $346,000,000 
     for fiscal year 1997, $252,000,000 for fiscal year 1998, 
     $188,000,000 for fiscal year 1999, $64,050,000 for fiscal 
     year 2000, $38,430,000 for fiscal year 2001, $22,400,000 for 
     fiscal year 2002, and $16,000,000 for each of the fiscal 
     years 2003 and 2004.
       (B) With respect to awards to federally qualified health 
     centers (as defined in section 1861(aa)(4) of the Social 
     Security Act) under subpart B, there are authorized to be 
     appropriated $132,000,000 for fiscal year 1996, $148,000,000 
     for fiscal year 1997, $108,000,000 for fiscal year 1998, 
     $81,000,000 for fiscal year 1999, $27,450,000 for fiscal year 
     2000, $16,470,000 for fiscal year 2001, $9,600,000 for fiscal 
     year 2002, and $6,860,000 for each of the fiscal years 2003 
     and 2004.
       (2) Subpart c.--For the purpose of providing grants and 
     loans under subpart C, there are authorized to be 
     appropriated $63,000,000 for fiscal year 1996, $45,000,000 
     for fiscal year 1997, $40,000,000 for fiscal year 1998, 
     $38,000,000 for fiscal year 1999, $30,500,000 for fiscal year 
     2000, $18,300,000 for fiscal year 2001, $10,670,000 for 
     fiscal year 2002, and $7,620,000 for each of the fiscal years 
     2003 and 2004.
       (b) Relation to Other Funds.--The authorizations of 
     appropriations established in subsection (a) are in addition 
     to any other authorizations of appropriations that are 
     available for the purpose described in such subsection.
       (c) Eligible Entities.--For purposes of this part, the term 
     ``eligible entities'' means--
       (1) covered entities as defined in section 340B(a)(4) of 
     the Public Health Service Act (42 U.S.C. 256b(a)(4)), except 
     that subsection (a)(4)(L)(iii) and (a)(7) of such section 
     shall not apply;
       (2) school health service sites under title III of this 
     Act;
       (3) nonprofit hospitals meeting the criteria for public 
     hospitals which are eligible entities under section 340B of 
     the Public Health Service Act, except that subsection 
     (a)(4)(L)(iii) of such section shall not apply, and 
     children's hospitals meeting comparable criteria as 
     determined appropriate by the Secretary;
       (4) public and private, nonprofit community mental health 
     centers and substance abuse treatment providers receiving 
     funds from the Substance Abuse and Mental Health Services 
     Administration;
       (5) runaway homeless youth centers or transitional living 
     programs for homeless youth for the provision of health 
     services under the Runaway Homeless Youth Act of 1974 (42 
     U.S.C. 5701 et seq.);
       (6) rural referral centers under section 1886(d)(5)(C) of 
     the Social Security Act, except that such eligibility is 
     restricted to the receipt of grants under section 3441; and
       (7) public or nonprofit entities in nonmetropolitan areas 
     (as defined by the Department of Commerce) in a consortium of 
     community-based providers that includes at least three of the 
     following:
       (A) community or migrant health centers;
       (B) local health departments;
       (C) community mental health centers;
       (D) nonprofit hospitals;
       (E) private practice health professionals;
       (F) rural health clinics; or
       (F) other publicly funded health or social services 
     agencies;

     except that such eligibility is restricted to the receipt of 
     grants or contracts under sections 3421(a) and 3461(a).
       (d) Consideration.--The Secretary shall give adequate 
     assistance to federally qualified health centers in order to 
     ensure the provision of comprehensive primary health care 
     services, other covered services and benefits, and enabling 
     services to medically underserved populations that were 
     served by such centers prior to the date of enactment of this 
     Act, except that such federally qualified health centers must 
     continue to meet the requirements for designation under 
     section 1861(aa)(4) of the Social Security Act.
       (e) Equitable Distribution.--The Secretary shall, in 
     awarding grants, entering into contracts, and making loans 
     under this part, assure an equitable distribution of funds 
     between rural and urban areas.

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

     SEC. 3421. GRANTS AND CONTRACTS FOR DEVELOPMENT OF PLANS AND 
                   NETWORKS AND THE EXPANSION AND DEVELOPMENT OF 
                   HEALTH CARE SITES AND SERVICES.

       (a) Authority.--
       (1) In general.--The Secretary may make grants to and enter 
     into contracts with eligible entities described in section 
     3411(c) for--
       (A) the development of community health groups whose 
     principal purpose is to provide the standard benefit package 
     under title I in one or more health professional shortage 
     areas or to provide such items and services to a significant 
     number of individuals who are members of a medically 
     underserved population; and
       (B) the expansion of existing health delivery sites and 
     services and the development of new health delivery sites and 
     services.
       (2) Consideration by secretary.--In awarding grants or 
     contracts under paragraph (1), the Secretary shall give 
     consideration to--
       (A) the geographic proximity of the grant applicants and 
     recipients;
       (B) cultural and language differences existing within the 
     communities to be served under the grants or contracts; and
       (C) the capacity needs of the communities to be served.
       (b) Service Area.--In making an award under subsection (a), 
     the Secretary shall designate the geographic area with 
     respect to which the community health group involved is to 
     provide health services.
       (c) Priority.--In making awards under subsection (a)(1), 
     the Secretary shall give priority to proposals in which a 
     greater number of eligible entities and other health care 
     providers, especially providers in community-and provider-
     based health plans under section 1441(d)(2), are participants 
     in the community health group, except in areas such as rural 
     areas, where providers are severely limited in number.
       (d) Limitation on Awards.--The Secretary may not make 
     awards under subsection (a)(1) for more than 5 years to the 
     same community health group.
       (e) Definitions.--For purposes of this subpart:
       (1) The term ``community health group'' means--
       (A) a community health network that--
       (i) is a public or nonprofit private consortium of health 
     care providers that principally provides some of the items 
     and services of the standard benefit package to medically 
     underserved populations, and residents of health professional 
     shortage areas;
       (ii) has an agreement with one or more health plans; and
       (iii) has a written agreement governing the participation 
     of health care providers in the consortium to which each 
     participating provider is a party; or
       (B) a community health plan that--
       (i) is a public or nonprofit private entity that 
     principally provides all of the items and services of the 
     standard benefit package to medically underserved 
     populations, and residents of health professional shortage 
     areas;
       (ii) is a participant in one or more health alliances; and
       (iii) has a written agreement governing the participation 
     of health care providers in the consortium to which each 
     participating provider is a party.
       (2) The term ``health professional shortage areas'' means 
     health professional shortage areas designated under section 
     332 of the Public Health Service Act.
       (3) The term ``medically underserved population'' means a 
     medically underserved population designated under section 
     330(b)(3) of the Public Health Service Act, populations 
     residing in health professional shortage areas under section 
     332 of the Public Health Service Act, and populations 
     eligible for premium subsidies and cost sharing reductions 
     based on income under title I.

     SEC. 3422. CERTAIN USES OF AWARDS.

       (a) In General.--Amounts awarded under section 3421 may be 
     expended for--
       (1) the development of a community health group, including 
     entering into contracts between the recipient of the award 
     and health care providers who are to participate in the 
     group;
       (2) the expansion, development and on-going operation of 
     health delivery sites and services; and
       (3) activities under paragraphs (1) and (2) which include--
       (A) the recruitment, compensation, and training of health 
     professionals and administrative staff;
       (B) the purchase and upgrading of equipment, supplies, and 
     information systems including telemedicine systems; and
       (C) the establishment of reserves required for furnishing 
     services on a prepaid or capitated basis, except that 
     eligible entities may use non-cash mechanisms (including 
     bonds, letters of credit and federally guaranteed reinsurance 
     pools) for establishing and maintaining financial reserves.
       (b) Loans and Grants.--The Secretary may provide for 
     payment, in any fiscal year, of not to exceed 10 percent of 
     the amounts appropriated to carry out this subpart to make 
     loans and grants to eligible entities to support the types of 
     activities described in section 3441, subject to the 
     requirements of subpart C, except that, with respect to 
     amounts available for non-federally qualified health center 
     activities, such funds may be used to convert facilities from 
     providers of acute care service to providers of primary, 
     emergency or long-term care.

     SEC. 3423. APPLICATION.

       The Secretary may not make an award to an entity under 
     section 3421 until such entity submits and application to the 
     Secretary, in such form and containing such assurances and 
     information as the Secretary determines appropriate, 
     including--
       (1) an assessment of the need that the medically 
     underserved population or populations proposed to be served 
     by the applicant have for health services and for enabling 
     services (as defined in section 3461);
       (2) a description of how the applicant will design the 
     proposed community health plan or practice network (including 
     the service sites involved) for such populations based on the 
     assessment of need;
       (3) a description of efforts to secure financial and 
     professional assistance and support for the project; and
       (4) evidence of significant community involvement in the 
     initiation, development and ongoing operation of the project.

     SEC. 3424. PURPOSES AND CONDITIONS.

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

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

     SEC. 3441. DIRECT LOANS AND GRANTS.

       (a) In General.--The Secretary shall make grants and loans 
     to--
       (1) eligible entities (as defined in section 3411(c));
       (2) hospitals designated by the Secretary as essential 
     access community hospitals under section 1820(i)(1) of the 
     Social Security Act; or
       (3) rural primary care hospitals under section 1820(i)(2) 
     of such Act;
     for the capital costs of developing community health groups 
     (as defined in section 3421(e)) and expanding existing health 
     delivery sites or developing new health delivery sites.
       (b) Use of Assistance.--
       (1) In general.--The capital costs for which grants and 
     loans made pursuant to subsection (a) may be expended are, 
     subject to paragraphs (2) and (3), the following:
       (A) The acquisition, modernization, expansion or 
     construction of facilities, or the conversion of unneeded 
     hospital facilities to facilities that will assure or enhance 
     the provision and accessibility of health care and enabling 
     services to medically underserved populations.
       (B) The purchase of major equipment, including equipment 
     necessary for the support of external and internal 
     information systems.
       (C) The establishment of reserves required for furnishing 
     services on a prepaid or capitated basis.
       (D) Such other capital costs as the Secretary may determine 
     are necessary to achieve the objectives of this section.
       (2) Priorities regarding use of funds.--In providing grants 
     and loans under subsection (a) for an entity, the Secretary 
     shall give priority to authorizing the use of amounts for 
     projects for the renovation and modernization of medical 
     facilities necessary to prevent or eliminate safety hazards 
     including asbestos removal, avoid noncompliance with 
     licensure or accreditation standards, or projects to replace 
     obsolete facilities.
       (3) Limitation.--The Secretary may authorize the use of 
     grants and loans under subsection (a) for the construction of 
     new buildings only if the Secretary determines that 
     appropriate facilities are not available through acquiring, 
     modernizing, expanding or converting existing buildings, or 
     that construction new buildings will cost less.
       (c) Amount of Assistance.--
       (1) In general.--The principal amount of loans under 
     subsection (a) may cover up to 90 percent of the costs 
     involved.
       (2) Grants.--Grants under this subsection may not exceed 75 
     percent of the costs involved.
       (d) Interest Subsidies.--Amounts provided under this 
     section may be used to provide interest subsidies for loans 
     provided under this section where such subsidies are 
     necessary to make a project financial feasible.

     SEC. 3442. CERTAIN REQUIREMENTS.

       (a) In General.--The Secretary may approve a loan under 
     section 3441 only if--
       (1) the Secretary is reasonably satisfied that the 
     applicant for the project for which the loan would be made 
     will be able to make payments of principal and interest 
     thereon when due; and
       (2) the applicant provides the Secretary with reasonable 
     assurances that there will be available to it such additional 
     funds as may be necessary to complete the project or 
     undertaking with respect to which such loan is requested.
       (b) Terms and Conditions.--Any loan made under section 3441 
     shall, subject to the Federal Credit Reform Act of 1990, meet 
     such terms and conditions (including provisions for recovery 
     in case of default) as the Secretary, in consultation with 
     the Secretary of the Treasury, determines to be necessary to 
     carry out the purposes of such section while adequately 
     protecting the financial interests of the United States. 
     Terms and conditions for such loans shall include provisions 
     regarding the following:
       (1) Security.
       (2) Maturity date.
       (3) Amount and frequency of installments.
       (4) Rate of interest, which shall be at a rate comparable 
     to the rate of interest prevailing on the date the loan is 
     made.

     SEC. 3443. DEFAULTS; RIGHT OF RECOVERY.

       (a) Defaults.--
       (1) In general.--The Secretary may take such action as may 
     be necessary to prevent a default on loans under section 
     3441, including the waiver of regulatory conditions, deferral 
     of loan payments, renegotiation of loans, and the expenditure 
     of funds for technical and consultative assistance, for the 
     temporary payment of the interest and principal on such a 
     loan, and for other purposes.
       (2) Foreclosure.--The Secretary may take such action, 
     consistent with State law respecting foreclosure procedures, 
     as the Secretary deems appropriate to protect the interest of 
     the United States in the event of a default on a loan made 
     pursuant to section 3441, including selling real property 
     pledged as security for such a loan and for a reasonable 
     period of time taking possession of, holding, and using real 
     property pledged as security for such a loan.
       (3) Waivers.--The Secretary may, for good cause, but with 
     due regard to the financial interests of the United States, 
     waive any right of recovery which the Secretary has by 
     reasons of the failure of a borrower to make payments of 
     principal of and interest on a loan made pursuant to section 
     3441, except that if such loan is sold and guaranteed, any 
     such waiver shall have no effect upon the Secretary's 
     guarantee of timely payment of principal and interest.
       (b) Twenty-Year Obligation; Right of Recovery; 
     Subordination; Waivers.--
       (1) In general.--With respect to an eligible entity for 
     which a grant or loan was made under section 3441, the 
     Secretary may award the grant or loan only if the applicant 
     involved agrees that the applicant will be liable to the 
     United States for the amount of the grant or loan, 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 entity--
       (A) ceases to be an eligible entity utilized by a community 
     health group, or by another public or nonprofit private 
     entity that provides health services in one or more health 
     professional shortage areas or that provides such services to 
     a significant number of individuals who are members of a 
     medically underserved population; or
       (B) is sold or transferred to any entity other than an 
     entity that is--
       (i) a community health group or other entity described in 
     subparagraph (A); and
       (ii) approved by the Secretary as a purchaser or transferee 
     regarding the facility.
       (2) Subordination; waivers.--With respect to essential 
     community providers, 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 grant or 
     loan under section 3441, if the Secretary determines that 
     subordination or waiver will further the objectives of this 
     part.

     SEC. 3444. PROVISIONS REGARDING CONSTRUCTION OR EXPANSION OF 
                   FACILITIES.

       (a) Submission of Information.--In the case of a project 
     for construction, conversion, expansion or modernization of a 
     facility, the Secretary may provide loans under section 3441 
     only if the applicant submits to the Secretary the following:
       (1) A description of the site.
       (2) Plans and specifications which meet requirements 
     prescribed by the Secretary.
       (3) Information reasonably demonstrating that title to such 
     site is vested in one or more of the entities filing the 
     application (unless the agreement described in subsection 
     (b)(1) is made).
       (4) A specification of the type of assistance being 
     requested under section 3441.
       (b) Agreements.--In the case of a project for construction, 
     conversion, expansion or modernization of a facility, the 
     Secretary may provide loans under section 3441 only if the 
     applicant makes the following agreements:
       (1) Title to such site will be vested in one or more of the 
     entities filing the application (unless the assurance 
     described in subsection (a)(3) has been submitted under such 
     subsection).
       (2) Adequate financial support will be available for 
     completion of the project and for its maintenance and 
     operation when completed.
       (3) All laborers and mechanics employed by contractors or 
     subcontractors in the performance of work on a project will 
     be paid wages at rates not less than those prevailing on 
     similar construction in the locality as determined by the 
     Secretary of Labor in accordance with the Act of March 3, 
     1931 (40 U.S.C. 276a et seq; commonly known as the Davis-
     Bacon Act), and the Secretary of Labor shall have with 
     respect to such labor standards the authority and functions 
     set forth in Reorganization Plan Numbered 14 of 1950 (15 FR 
     3176; 5 U.S.C. Appendix) and section 276c of title 40.
       (4) The facility will be made available to all persons 
     seeking service regardless of their ability to pay.

     SEC. 3445. APPLICATION FOR ASSISTANCE.

       The Secretary may provide loans under section 3441 only if 
     an application for such assistance is submitted to the 
     Secretary, the application contains each agreement described 
     in this subpart, the application contains the information 
     required in section 3444(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 subpart.

     SEC. 3446. ADMINISTRATION OF PROGRAMS.

       This subpart, and any other program of the Secretary that 
     provides loans, shall be carried out by a centralized loan 
     unit established within the Department of Health and Human 
     Services.

             Subpart D--Enabling and Supplemental Services

     SEC. 3461. GRANTS AND CONTRACTS FOR ENABLING AND SUPPLEMENTAL 
                   SERVICES.

       (a) Authority.--
       (1) In general.--The Secretary may make grants to and enter 
     into contracts with eligible entities described in section 
     3411(c) to assist such entities in providing the services 
     described in subsections (b) and (c) for the purpose of 
     increasing the capacity of individuals to utilize the items 
     and services included in the standard benefits package under 
     title I, and to provide access to essential supplemental 
     services that are not fully reimbursable under title I prior 
     to January 2001.
       (2) Consideration by secretary.--In awarding grants or 
     contracts under paragraph (1), the Secretary shall give 
     consideration to--
       (A) the geographic proximity of the grant applicants and 
     recipients;
       (B) cultural and language differences existing within the 
     communities to be served under the grants or contracts; and
       (C) the capacity needs of the communities to be served.
       (b) Enabling Services.--Enabling services shall include 
     transportation, community and patient outreach, patient and 
     family education, translation services, case management, home 
     visiting, and such other services as the Secretary determines 
     to be appropriate in carrying out the purpose described in 
     such subsection.
       (c) Supplemental Services.--Supplemental services shall 
     include items or services described in section 1106 or 
     section 1118 of this Act that would otherwise be excluded 
     from coverage prior to January 1, 2001.
       (d) Certain Requirements Regarding Project Area.--The 
     Secretary may make an award of a grant or contract under 
     subsection (a) only if the applicant involved--
       (1) submits to the Secretary--
       (A) information demonstrating that the medically 
     underserved populations in the community to be served under 
     the award have a need for enabling services; and
       (B) a proposed budget for providing such services;
       (2) the applicant for the award agrees that the medically 
     underserved residents of the community will be consulted with 
     respect to the design and implementation of the project 
     carried out with the award;
       (3) agrees that the services will not be denied because the 
     individual is unable to pay for such services; and
       (4) agrees that the applicant will utilize existing 
     resources to the maximum extent practicable.
       (e) Application for Awards of Assistance.--The Secretary 
     may make an award of a grant or contract under subsection (a) 
     only if an application for the award is submitted to the 
     Secretary, the application contains each agreement described 
     in this subpart, and the application is in such form, is made 
     in such manner, and contains such agreements, assurances, and 
     information as the Secretary determines to be necessary to 
     carry out this subpart.

     SEC. 3462. AUTHORIZATIONS OF APPROPRIATIONS.

       (a) Enabling Services.--For the purpose of carrying out 
     section 3461(b), there are authorized to be appropriated 
     $88,000,000 for fiscal year 1996, $252,000,000 for fiscal 
     year 1997, $224,000,000 for fiscal year 1998, $215,000,000 
     for fiscal year 1999, $213,500,000 for fiscal year 2000, 
     $128,100,000 for fiscal year 2001, $74,690,000 for fiscal 
     year 2002, and $53,300,000 for each of the fiscal years 2003 
     and 2004.
       (b) Supplemental Services.--For the purpose of carrying out 
     section 3461(c), there are authorized to be appropriated 
     $189,000,000 for fiscal year 1996, $225,000,000 for fiscal 
     year 1997, $200,000,000 for fiscal year 1998, $192,000,000 
     for fiscal year 1999, $152,500,000 for fiscal year 2000, 
     $91,500,000 for fiscal year 2001, $53,350,000 for fiscal year 
     2002, and $38,100,000 for each of the fiscal years 2003 and 
     2004.
       (c) Federally Qualified Health Centers.--With respect to 
     federally qualified health centers (as defined in section 
     1861(aa)(4) of the Social Security Act) for the purpose of 
     carrying out section 3461(b), there are authorized to be 
     appropriated $38,000,000 for fiscal year 1996, $108,000,000 
     for fiscal year 1997, $96,000,000 for fiscal year 1998, 
     $92,000,000 for fiscal year 1999, $91,500,000 for fiscal year 
     2000, $54,900,000 for fiscal year 2001, $32,010,000 for 
     fiscal year 2002, and $22,900,000 for each of the fiscal 
     years 2003 and 2004.
       (d) Relation to Other Funds.--The authorizations of 
     appropriations established in subsection (a) are in addition 
     to any other authorizations of appropriations that are 
     available for the purpose described in such subsection.
       (e) Equitable Distribution.--The Secretary shall, in 
     awarding grants, entering into contracts, and making loans 
     under this part, assure an equitable distribution of funds 
     between rural and urban areas.

          Subpart E--Rural Health Plan Demonstration Projects

     SEC. 3465. RURAL HEALTH PLAN DEMONSTRATION PROJECTS.

       (a) In General.--The Secretary, in consultation with the 
     Secretary of Labor, shall establish and implement not more 
     than 3 demonstration projects for the designation of rural 
     health plan areas. To be designated as a rural health plan 
     area under this section, an area must be a rural area (as 
     defined in section 1866(d)(2)(D) of the Social Security Act) 
     or an underserved nonurban area in accordance with other 
     criteria specified by the Secretary.
       (b) Application.--To be eligible to conduct a demonstration 
     project under this section, an entity 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 ensure that project participants meet the goals 
     described in subsection (d). An application submitted under 
     this section shall--
       (1) identify the area in which the demonstration project 
     will be conducted; and
       (2) provide assurances that the area described in paragraph 
     (1) meets the requirements of subsection (a).
       (c) Requirements.--An entity offering a health plan through 
     a demonstration project under this section shall--
       (1) have a recognized, long-standing relationship with the 
     rural community in which the project is being conducted;
       (2) ensure that the health plan is operated as a standard 
     health plan;
       (3) ensure that the plan meets the requirements for 
     standard health plans under title I;
       (4) ensure that the plan offers enrollment--
       (A) on an experience-rated basis to experience-rated 
     employees of the plan sponsor; and
       (B) on a community-rated basis to community-rated 
     individuals in the community rating area in which such plan 
     operates; and
       (5) meet the requirements of subtitle B of title I.
       (d) Goals.--The goals referred to in this subsection are as 
     follows:
       (1) To develop a reliable supply of health care providers 
     and rural health service delivery infrastructures with a 
     sound financial footing.
       (2) To develop a mechanism to begin to provide the benefits 
     of networking found in urban health systems to rural 
     Americans living in rural health plan areas.
       (e) Duration.--The Secretary may revoke the designation of 
     a rural health plan area if the Secretary determines that the 
     entity conducting the project in such area has failed to 
     comply with the requirements of this section. The Secretary 
     may not designate a rural health plan area under this section 
     after December 31, 1999.
       (f) Evaluations and Reports.--
       (1) Evaluations.--Each entity offering a health plan 
     through a demonstration project under this section shall 
     submit to the Secretary such interim evaluations as the 
     Secretary may require.
       (2) Report.--Not later than 360 days after the date on 
     which the first demonstration project is implemented under 
     this section, and annually thereafter for each year in which 
     a project is being conducted, the Secretary shall submit to 
     Congress a report that evaluates the effectiveness of such 
     projects. Such reports shall include any legislative 
     recommendations determined appropriate by the Secretary.

                 PART 2--NATIONAL HEALTH SERVICE CORPS

     SEC. 3471. AUTHORIZATIONS OF APPROPRIATIONS.

       (a) Additional Funding; General Corps Program; Allocations 
     Regarding Nurses.--For the purpose of carrying out subpart II 
     of part D of title III of the Public Health Service Act, and 
     for the purpose of carrying out section 3472, there are 
     authorized to be appropriated $189,000,000 for fiscal year 
     1996, $135,000,000 for fiscal year 1997, $200,000,000 for 
     fiscal year 1998, $192,000,000 for fiscal year 1999, 
     $152,500,000 for fiscal year 2000, $91,500,000 for fiscal 
     year 2001, $53,350,000 for fiscal year 2002, and $38,100,000 
     for each of the fiscal years 2003 and 2004.
       (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. 3472. ALLOCATION FOR PARTICIPATION OF NURSES IN 
                   SCHOLARSHIP AND LOAN REPAYMENT PROGRAMS.

       Of the amounts appropriated under section 3471, the 
     Secretary shall reserve such amounts as may be necessary to 
     ensure that, of the aggregate number of individuals who are 
     participants in the Scholarship Program under section 338A of 
     the Public Health Service Act, or in the Loan Repayment 
     Program under section 338B of such Act, the total number who 
     are being educated as nurse practitioners, nurse midwives, or 
     nurse anesthetists or are serving as nurse practitioners, 
     nurse midwives, or nurse anesthetists, respectively, is 
     increased to 20 percent.

     SEC. 3473. ALLOCATION FOR PARTICIPATION OF PSYCHIATRISTS, 
                   PSYCHOLOGISTS, AND CLINICAL SOCIAL WORKERS IN 
                   SCHOLARSHIP AND LOAN REPAYMENT PROGRAMS.

       Of the amounts appropriate under section 3471, the 
     Secretary shall reserve such amounts as may be necessary to 
     ensure that of the aggregate number of individuals who are 
     participants in the scholarship program under section 338A of 
     the Public Health Service Act, the number who are being 
     educated as psychiatrists, psychologists, and clinical social 
     workers or are serving as psychiatrists, psychologists, and 
     clinical social workers, respectively, is increased to 15 
     percent.
               Subtitle F--Mental Health; Substance Abuse

           PART 1--AUTHORITIES REGARDING PARTICIPATING STATES

     SEC. 3510. INTEGRATION OF MENTAL HEALTH AND SUBSTANCE ABUSE 
                   SYSTEMS.

       (a) In General.--As a condition of being a participating 
     State under title I, each State shall, not later than January 
     1, 2001, achieve the integration of the mental illness and 
     substance abuse services of the State and its political 
     subdivisions with the mental illness and substance abuse 
     services offered by health plans pursuant to title I of this 
     Act. A State may petition the Secretary for a waiver of the 
     requirement of this subsection under the circumstances 
     described in section 3511(b)(7).
       (b) Certification of Readiness.--
       (1) Petition.--A State may petition the Secretary to 
     integrate the mental illness and substance abuse services of 
     the State and its political subdivisions with the mental 
     illness and substance abuse services offered by health plans 
     pursuant to title I of this Act prior to January 1, 2001.
       (2) State readiness to integrate.--Upon receiving such a 
     petition, the Secretary shall, based on the reports submitted 
     pursuant to subsections (b) and (c) of section 3511 and the 
     criteria promulgated pursuant to paragraph (3), ascertain the 
     State's readiness to integrate its mental illness and 
     substance abuse services with the mental illness and 
     substance abuse services offered by health plans pursuant to 
     title I of this Act and certify whether the State is prepared 
     to conduct such an integration.
       (3) Criteria.--The certification by the Secretary of a 
     State's readiness to integrate under paragraph (2) shall be 
     based on objective criteria promulgated by the Secretary 
     after consultation with the States.
       (c) Application of Provisions.--Upon the issuance of a 
     certification of readiness by the Secretary for a State, the 
     limits set forth in subsections (a)(3)(A)(iii)(I)(aa) and 
     (bb) of section 1213 shall not apply to the provision of 
     mental illness and substance abuse services in the State.

     SEC. 3511. REPORT ON INTEGRATION OF MENTAL HEALTH SYSTEMS.

       (a) In General.--As a condition of being a participating 
     State under title I, each State shall, not later than October 
     1, 1998, submit to the Secretary a report containing the 
     information described in subsection (b) on (including a plan 
     for) the measures to be implemented by the State to achieve 
     the integration of the mental illness and substance abuse 
     services of the State and its political subdivisions with the 
     mental illness and substance abuse services that are included 
     in the standard benefit package under title I. The plan 
     required in the preceding sentence shall meet the conditions 
     described in section 3083(b). In addition, each State shall 
     submit to the Secretary a report containing the information 
     described in subsection (c) for each year up to and including 
     the year 2001 or the date on which an unlimited benefit for 
     mental illness and substance abuse services is provided.
       (b) Required Contents of Integration Report.--With respect 
     to the provision of items and services relating to mental 
     illness and substance abuse, the report of a State under 
     subsection (a) shall, at a minimum, contain the following 
     information:
       (1) Information on the number of individuals served by or 
     through mental illness and substance abuse programs 
     administered by State and local agencies and the proportion 
     who are eligible persons under title I.
       (2) Information on the extent to which each health provider 
     furnishing mental illness and substance abuse services under 
     a State program participates or will participate in one or 
     more health plans, and, in the case of providers that do not 
     so participate, the reasons for the lack of participation.
       (3) With respect to the two years preceding the year in 
     which the State becomes a participating State under title I--
       (A) the amount of funds expended by the State and its 
     political subdivisions for each of such years for items and 
     services that are included in the standard benefit package 
     under such title;
       (B) the amount of funds expended for medically necessary 
     and appropriate items and services not included in such 
     benefit package, including medical care, other health care, 
     and supportive services related to the provision of health 
     care.
       (4) An estimate of the amount that the State will expend to 
     furnish items and services not included in such package once 
     the expansion of coverage for mental illness and substance 
     abuse services is implemented.
       (5) A description of how the State will assure that all 
     individuals served by mental illness and substance abuse 
     programs funded by the State will be enrolled in a health 
     plan and how mental illness and substance abuse services not 
     covered under the benefit package will continue to be 
     furnished to such enrollees.
       (6) A description of the conditions under which the 
     integration of mental illness and substance abuse services 
     can be achieved, and an identification of changes in 
     participation and certification requirements that are needed 
     to achieve the integration of such programs and providers 
     into health plans.
       (7) If the integration of mental illness and substance 
     abuse programs operated by the State into one or more health 
     plans is not medically appropriate or feasible for one or 
     more groups of individuals treated under State programs, a 
     description of the reasons that integration is not feasible 
     or appropriate and a plan for assuring the coordination for 
     such individuals of the care and services covered under the 
     standard benefit package with the additional items and 
     services furnished by such programs.
       (8) A description of the manner in which the resources that 
     the State and its political subdivisions currently spend on 
     mental health and substance abuse services will be used to 
     facilitate integration.
       (c) Required Contents of Transition Report.----With respect 
     to the a report required under this subsection, the report 
     shall, at a minimum, contain the following information:
       (1) The amount of funds expended for substance abuse and 
     mental health services by the source of revenue, including, 
     Federal block grant funds under title XIX of the Public 
     Health Service Act, Federal categorical grant funds, funds 
     under title XIX of the Social Security Act, State and local 
     revenues and health plan payments.
       (2) The amount of funds expended for supportive services to 
     individuals enrolled in substance abuse and mental health 
     treatment programs, including transportation, child care, 
     educational and vocational training and coordination with 
     other public systems such as the social service, child 
     welfare and juvenile and criminal justice systems, by source 
     of revenue.
       (3) The amount of funds expended on medically necessary and 
     appropriate items and services not covered or reimbursed in 
     the standard benefit package by source of revenue.
       (4) The amount of funds expended by the State on substance 
     abuse and mental illness services for individuals who are not 
     eligible to receive the standard benefit package pursuant to 
     this Act, and the source of revenue for such services.
       (d) General Provisions.--Reports under subsections (b) and 
     (c) shall be provided at the time and in the manner 
     prescribed by the Secretary. The Secretary shall also 
     determine what, if any, reports shall be submitted in years 
     following the implementation of an unlimited benefit for 
     mental illness and substance abuse services.
       (e) Reporting Requirement.--Each State shall report 
     annually to the Secretary on the incidence and prevalence of 
     mental illness and substance abuse disorders in the prison 
     population, changes in such incidence and prevalence in the 
     prison population, and potential causative factors with 
     respect to such changes, including an estimate of the extent 
     to which the denial of treatment, or the provision of 
     inadequate treatment, to individuals with mental illness and 
     substance abuse disorders is contributing to the criminal 
     activity of such individuals.
       (f) Redeployment of Health Care Workers.--In addition to 
     any other requirements imposed under this section, the plan 
     described in subsection (a) shall provide for the following:
       (1) Commencement of negotiations.--Before initiating the 
     process of implementing the integration of mental illness and 
     substance abuse services, negotiations shall be commenced 
     with labor unions representing the employees of the affected 
     hospitals or other facilities.
       (2) Requirements with respect to negotiations.--The 
     negotiations described in paragraph (1) shall address--
       (A) the impact of the proposed changes upon the workforce; 
     and
       (B) methods to redeploy workers to positions in the 
     proposed system, in the case of workers affected by the 
     proposed changes, including procedures to assist employees 
     who may be displaced in exercising rights under section 3093.
       (3) Evidence of compliance.--The plan shall provide 
     evidence that there has been compliance with paragraphs (1) 
     and (2), including a description of the results of the 
     negotiations.

PART 2--ASSISTANCE FOR STATE MANAGED MENTAL HEALTH AND SUBSTANCE ABUSE 
                                PROGRAMS

     SEC. 3531. AVAILABILITY OF ASSISTANCE.

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

     SEC. 3532. PLAN REQUIREMENTS.

       In order to receive a grant under this part, a State must 
     have a plan for a comprehensive managed mental health and 
     substance abuse program which is approved by the Secretary. 
     Such plan shall--
       (1) describe the management, access, and referral structure 
     that the State will use to promote and achieve integration of 
     mental health and substance abuse services with the health 
     delivery system established under this Act for eligible 
     individuals in the State;
       (2) describe how the State will ensure that providers of 
     specialized services will meet appropriate standards and 
     provide assurances that the State has complied with section 
     1501 as it affects mental health and substance abuse 
     services;
       (3) describe payment, utilization review, and other 
     mechanisms that the State will use to encourage appropriate 
     service delivery and management of costs;
       (4) describe uniform patient placement criteria that the 
     State will use to ensure placement in appropriate substance 
     abuse treatment programs;
       (5) describe the processes the State will use to ensure 
     that individuals will continue to have access to treatment 
     through referrals from nonhealth public entities, such the 
     juvenile or criminal justice systems, or social service 
     systems;
       (6) specify the methods the State will use to ensure that 
     individuals receiving services under the program have access 
     to all medically necessary and appropriate mental health and 
     substance abuse services;
       (7) define terms that will be used by the State in 
     determining the eligibility of individuals for services under 
     the program;
       (8) describe how health plans will use services under the 
     comprehensive managed mental health and substance abuse 
     programs established under this part;
       (9) describe the role of local government in financing and 
     managing the integrated mental illness and substance abuse 
     treatment system;
       (10) describe the sources of funding, including Medicaid 
     (title XIX of the Social Security Act) and the block grants 
     authorized by title XIX of the Public Health Service Act, 
     that will be used by the State, other than the grant received 
     under this part, to operate the program, and provide the 
     status of any request for a Medicaid waiver made by the State 
     to the Secretary;
       (11) describe how the State provided for broad-based public 
     input in the development of the plan, and the mechanism that 
     will be used for ongoing public comment on and review of 
     amendments to the plan; and
       (12) describe grievance procedures that will be available 
     for individuals dissatisfied with their health plan's 
     participation in the comprehensive managed mental health and 
     substance abuse program, and mechanisms that will be 
     available to review the performance of health plans and fee-
     for-service arrangements to ensure against under treatment.

     SEC. 3533. ADDITIONAL FEDERAL RESPONSIBILITIES.

       The Secretary shall, upon the submission of a State's plan 
     under section 3532, ensure the timely consideration of any 
     Medicaid waiver requests submitted by the State, affirm that 
     section 1501 has been implemented, and ensure the timely 
     implementation of section 1504(d)(3).

     SEC. 3534. AUTHORIZATION OF APPROPRIATIONS.

       There are authorized to be appropriated for grants under 
     this part, $126,000,000 for fiscal year 1996, $90,000,000 for 
     fiscal year 1997, $80,000,000 for fiscal year 1998, 
     $77,000,000 for fiscal year 1999, $61,000,000 for fiscal year 
     2000, $36,600,000 for fiscal year 2001, $21,340,000 for 
     fiscal year 2002, and $15,200,000 for each of the fiscal 
     years 2003 and 2004.
   Subtitle G--Comprehensive School Health Education; School-Related 
                            Health Services

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

     SEC. 3601. PURPOSES.

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

     SEC. 3602. HEALTHY STUDENTS-HEALTHY SCHOOLS GRANTS.

       (a) In General.--The Secretary, in consultation with the 
     Secretary of Education, shall award grants to State 
     educational agencies in eligible States to integrate 
     comprehensive school health education in schools within the 
     State, with priority given within States to those communities 
     in greatest need as defined by section 3683(a).
       (b) Eligible Uses of Funds.--Funds made available under 
     this section shall be used--
       (1) to implement comprehensive school health education 
     programs, as defined in subsection (f)(1) through grants to 
     local educational agencies;
       (2) to provide staff development and technical assistance 
     to local educational agencies, schools, local health 
     agencies, and other community organizations involved in 
     providing comprehensive school health education programs;
       (3) to evaluate and report to the Secretary on the progress 
     made towards attaining the goals and objectives described 
     under subsection (c)(1)(A); and
       (4) to conduct such other activities to achieve the 
     objectives of this subpart as the Secretary may require.
       (c) Application.--An application for a grant under 
     subsection (a), shall be jointly developed by the State 
     educational agency and the State health agencies of the State 
     involved, and shall contain--
       (1) a State plan for comprehensive school health education 
     programs, that outlines--
       (A) the goals and objectives of the State for school health 
     education programs, and the manner in which the State will 
     allocate funds to local educational agencies in order to 
     achieve these goals and objectives;
       (B) the manner in which the State will coordinate programs 
     under this part with other Federal, State and local health 
     education programs and resources, and school health services;
       (C) the manner in which comprehensive school health 
     education programs will be coordinated with other Federal, 
     State and local education programs (such as programs under 
     titles I, II, and IV of the Elementary and Secondary 
     Education Act of 1965), with the school improvement plan of 
     the State, if any, under title III of the Goals 2000: Educate 
     America Act, and with any similar programs;
       (D) the manner in which the State shall work with State and 
     local educational agencies and with State and local health 
     agencies to reduce barriers to implementing school health 
     education programs;
       (E) the manner in which the State will monitor the 
     implementation of such programs by local educational agencies 
     and establish outcome criteria by which to evaluate their 
     effectiveness in achieving progress towards the goals and 
     objectives described in subparagraph (A);
       (F) the manner in which the State will provide staff 
     development and technical assistance to local educational 
     agencies, and build capacity for professional development of 
     health educators; and
       (G) the manner in which such school health education 
     programs will be, to the extent practicable, culturally 
     competent and linguistically appropriate and responsive to 
     the diverse needs of the students served;
       (2) a description of the respective roles of the State 
     educational agency, local educational agencies, the State 
     health agency and local health agencies in developing and 
     implementing the State's school health education plan and 
     resulting programs;
       (3) a description of the input of the local community 
     (including students and parents) in the development and 
     operation of comprehensive school health education programs;
       (4) an assurance that communities identified in section 
     3683(a) receive priority as locations for comprehensive 
     school health education programs for all grades to the extent 
     that a State does not implement a statewide program; and
       (5) an assurance that grants to local educational agencies 
     under subsection (b)(1) are contingent upon submission by 
     such agencies of a plan consistent with the requirements for 
     the State plan as required under this subsection.
       (d) Waivers of Statutory and Regulatory Requirements.--
       (1) Waivers.-- Except as provided in paragraph (4), upon 
     the request of an entity and under a relevant program 
     described in paragraph (2), the Secretary of Health and Human 
     Services and the Secretary of Education may grant to the 
     entity a waiver of any requirement of such program regarding 
     the use of funds, or of the regulations issued for the 
     program by the Secretary involved, if the following 
     conditions are met with respect to such program:
       (A) The Secretary involved determines that the requirements 
     of such program impede the ability of the State educational 
     agency to achieve more effectively the purposes described in 
     section 3601.
       (B) The Secretary involved determines that, with respect to 
     the use of funds under such program, the requested use of the 
     funds by the entity would be consistent with the purposes 
     described in section 3601.
       (C) The State educational agency provides all interested 
     local educational agencies in the State with notice and an 
     opportunity to comment on the proposal and makes these 
     comments available to the Secretary.
       (2) Relevant programs.--For purposes of paragraph (1), the 
     programs described in this subparagraph are the following:
       (A) In the case of programs administered by the Secretary 
     of Health and Human Services, the following:
       (i) The program known as the Prevention, Treatment, and 
     Rehabilitation Model Projects for High Risk Youth, carried 
     out under section 517 of the Public Health Service Act.
       (ii) The program known as the State and Local Comprehensive 
     School Health Programs to Prevent Important Health Problems 
     and Improve Educational Outcomes, carried out under such Act.
       (B) In the case of programs administered by the Secretary 
     of Education, any program carried out under part B of the 
     Drug-Free Schools and Communities Act of 1986, except that a 
     component of such comprehensive school health education must 
     be consistent with the statutory intent and purposes of such 
     Act.
       (3) Waiver period.--A waiver under this paragraph shall be 
     for a period not to exceed 3 years, unless the Secretary 
     involved determines that--
       (A) the waiver has been effective in enabling the State to 
     carry out the activities for which it was requested and has 
     contributed to improved performance of comprehensive health 
     education programs; and
       (B) such extension is in the public interest;
       (4) Waivers not authorized.--The Secretary involved under 
     paragraph (1), may not waive, under this section, any 
     statutory or regulatory requirements relating to--
       (A) comparability of services;
       (B) maintenance of effort;
       (C) parental participation and involvement;
       (D) the distribution of funds to States or to local 
     educational agencies or other recipients of funds under the 
     programs described in paragraph (2);
       (E) maintenance of records;
       (F) applicable civil rights requirements; or
       (G) the requirements of sections 438 and 439 of the General 
     Education Provisions Act.
       (5) Termination of waiver.--The Secretary involved under 
     paragraph (1) shall terminate a waiver under this subsection 
     if the Secretary determines that the performance of the State 
     affected by the waiver has been inadequate to justify a 
     continuation of the waiver or if it is no longer necessary to 
     achieve its original purpose.
       (e) Definitions.--As used in this section:
       (1) Comprehensive school health education.--The term 
     ``comprehensive school health education'' means a planned, 
     sequential program of health education that addresses the 
     physical, emotional and social dimensions of student health 
     in kindergarten through grade 12. Such program shall--
       (A) be designed to assist students in developing the 
     knowledge and behavioral skills needed to make positive 
     health choices and maintain and improve their health, prevent 
     disease and injuries, and reduce risk behaviors which 
     adversely impact health;
       (B) be comprehensive and include a variety of components 
     addressing personal health, community and environmental 
     health, injury prevention and safety, nutritional health, the 
     effects of substance use and abuse, consumer health regarding 
     the benefits and appropriate use of medical services 
     including immunizations and other clinical preventive 
     services, and other components deemed appropriate by the 
     local educational agencies;
       (C) be designed to be linguistically and culturally 
     competent and responsive to the needs of the students served; 
     and
       (D) address locally relevant priorities as determined by 
     parents, students, teachers, and school administrators and 
     health officials.
       (2) Eligible state.--The term ``eligible State'' means a 
     State with a memorandum of understanding or a written 
     cooperative agreement entered into by the agencies 
     responsible for health and education concerning the planning 
     and implementation of comprehensive school health education 
     programs. Among these States a priority shall be given to 
     qualified States as defined in section 3682(c).
       (3) State educational agency.--The term ``State educational 
     agency'' means the officer or agency primarily responsible 
     for the State supervision of public elementary and secondary 
     schools.
       (4) Local educational agency.--The term ``local educational 
     agency'' means a public board of education or other public 
     authority legally constituted within a State for either 
     administrative control or direction of, or to perform a 
     service function for, public elementary or secondary schools 
     in a city, county, township, school district, or other 
     political subdivision of a State, or such combination of 
     school districts or counties as are recognized in a State as 
     an administrative agency for its public elementary or 
     secondary schools. Such term includes any other public 
     institution or agency having administrative control and 
     direction of a public elementary or secondary school.
       (f) Authorized Funding.--For the purpose of carrying out 
     this section, out of the funds available under section 3681, 
     there are made available, not to exceed $15,000,000 for 
     fiscal year 1995, $20,000,000 for fiscal year 1996, 
     $25,000,000 for fiscal year 1997, $30,000,000 for fiscal year 
     1998, $40,000,000 for fiscal year 1999, and $50,000,000 for 
     fiscal year 2000.

     SEC. 3603. HEALTHY STUDENTS-HEALTHY SCHOOLS INTERAGENCY TASK 
                   FORCE.

       (a) Establishment.--Not later than 120 days after the date 
     of enactment of this Act, the Secretary shall establish a 
     Healthy Students-Healthy Schools Interagency Task Force to be 
     composed of representatives of the Office of Disease 
     Prevention and Health Promotion, the National Institutes of 
     Health, the Centers for Disease Control and Prevention, the 
     Health Resources and Services Administration, the Office of 
     School Health Education within the Department of Education, 
     and other Federal agencies and departments which have 
     responsibility for components of school health and education.
       (b) Co-chairpersons.--The Assistant Secretary for Health 
     and the Assistant Secretary for Elementary and Secondary 
     Education shall serve as co-chairpersons of the task force 
     established under subsection (a).
       (c) Functions and Activities.--The task force established 
     under subsection (a) shall--
       (1) review and coordinate all Federal efforts in school 
     health education and health services;
       (2) provide scientific and technical advice concerning the 
     development and implementation of model comprehensive school 
     health education programs and curricula;
       (3) develop model student learning objectives and 
     assessment instruments that shall be made available to all 
     States;
       (4) develop a uniform grant application form (a form that 
     serves as the principal document containing the core 
     information concerning a particular entity) and procedures 
     that may be used with respect to all school health education-
     related programs (including supplementary information 
     procedures to be implemented when an entity that has already 
     submitted an application form is applying for additional 
     assistance) that require the submission of an application; 
     and
       (5) recommend to the Secretary, for inclusion in the 
     biennial report required by section 3604(2), methods for 
     effectively linking school health education and health 
     services research findings at the Federal level with 
     implementation at the State and local levels.
       (d) Consolidation of Initiatives.--Not later than 12 months 
     after the date of enactment of this Act, the task force 
     established under subsection (a) shall prepare and submit to 
     the Congress a report containing the recommendations of the 
     task force for the consolidation of Federal school health 
     education initiatives.
       (d) Consolidation of Initiatives.--Not later than 12 months 
     after the date of enactment of this Act, the task force 
     established under subsection (a) shall prepare and submit to 
     the Congress a report containing the recommendations of the 
     task force for the consolidation of Federal school health 
     education initiatives.

     SEC. 3604. DUTIES OF THE SECRETARY.

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

                 PART 2--SCHOOL-RELATED HEALTH SERVICES

                  Subpart A--Development and Operation

     SEC. 3681. AUTHORIZATION OF APPROPRIATIONS.

       (a) Funding for School-Related Health Services.--For the 
     purpose of carrying out this subpart, there are authorized to 
     be appropriated, $252,000,000 for fiscal year 1996, 
     $292,000,000 for fiscal year 1997, $359,000,000 for fiscal 
     year 1998, $441,000,000 for fiscal year 1999, $427,000,000 
     for fiscal year 2000, $256,200,000 for fiscal year 2001, 
     $149,380,000 for fiscal year 2002, and $107,000,000 for each 
     of the fiscal years 2003 and 2004.
       (b) Funding for Planning and Development Grants.--Of 
     amounts made available under this section, not to exceed 
     $10,000,000 for each of fiscal years 1995 and 1996 may be 
     utilized to carry out section 3684.

     SEC. 3682. ELIGIBILITY FOR GRANTS.

       (a) In General.--
       (1) Planning and development grants.--Entities eligible to 
     apply for and receive grants under section 3684 are--
       (A) State health agencies that apply on behalf of local 
     community partnerships; or
       (B) local community partnerships in States in which health 
     agencies have not successfully applied.
       (2) Operational grants.--Entities eligible to apply for and 
     receive grants under section 3685 are--
       (A) a qualified State as designated under subsection (c) 
     that apply on behalf of local community partnerships; or
       (B) local community partnerships in States that are not 
     designated under subparagraph (A).
       (b) Local Community Partnerships.--
       (1) In general.--A local community partnership under 
     subsection (a)(1)(B) and (a)(2)(B) is an entity that, at a 
     minimum includes--
       (A) a local health care provider, which may be a local 
     public health department, with experience in delivering 
     services to children and youth or medically underserved 
     populations;
       (B) local educational agency on behalf of one or more 
     public schools; and
       (C) one community based organization located in the 
     community to be served that has a history of providing 
     services to at-risk children and youth.
       (2) Rural communities.--In rural communities, local 
     partnerships should seek to include, to the fullest extent 
     practicable, providers and community based organizations with 
     experience in serving the target population.
       (3) Parent and community participation.--An applicant 
     described in subsection (a) shall, to the maximum extent 
     feasible, involve broad-based community participation 
     (including parents of the youth to be served).
       (c) Qualified State.--A qualified State under subsection 
     (a)(2)(A) is a State that, at a minimum--
       (1) demonstrates an organizational commitment (including a 
     strategic plan) to providing a broad range of health, health 
     education and support services to at-risk youth; and
       (2) has a memorandum of understanding or cooperative 
     agreement jointly entered into by the State agencies 
     responsible for health and education regarding the planned 
     delivery of health and support services in school-based or 
     school-linked centers.

     SEC. 3683. PREFERENCES.

       In making grants under sections 3684 and 3685, the 
     Secretary shall give priority to applicants whose-communities 
     to be served show the most substantial level of need for 
     health services among children and youth.

     SEC. 3684. PLANNING AND DEVELOPMENT GRANTS.

       (a) In General.--The Secretary may make grants during 
     fiscal years 1995 and 1996 to entities eligible under section 
     3862 to develop school-based or school-linked health service 
     sites.
       (b) Use of Funds.--Amounts provided under a grant under 
     this section may be used for the following:
       (1) Planning for the provision of school health services, 
     including--
       (A) an assessment of the need for health services among 
     youth in the communities to be served;
       (B) the health services to be provided and how new services 
     will be integrated with existing services;
       (C) assessing and planning for the modernization and 
     expansion of existing facilities and equipment to accommodate 
     such services; and
       (D) an affiliation with relevant health plans.
       (2) recruitment and training of staff for the 
     administration and delivery of school health services;
       (3) the establishment of local community partnerships as 
     described in section 3682 (b);
       (4) in the case of States, the development of memorandums 
     of understanding or cooperative agreements for the 
     coordinated delivery of health and support services through 
     school health service sites; and
       (5) other activities necessary to assume operational 
     status.
       (c) Application for Grants.--To be eligible to receive a 
     grant under this section an entity described in section 3682 
     (a) shall submit an application in a form and manner 
     prescribed by the Secretary.
       (d) Number of Grants.--Not more than one planning grant may 
     be made to a single applicant. A planning grant may not 
     exceed 2 years in duration.
       (e) Amount Available for Development Grant.--The Secretary 
     may award not to exceed--
       (1) $150,000 to entities under section 3682(a)(1)(A) and to 
     localities planning for a citywide or countywide school 
     health services delivery system; and
       (2) $50,000 to entities under section 3682(a)(1)(B).

     SEC. 3685. GRANTS FOR OPERATION OF SCHOOL HEALTH SERVICES.

       (a) In general.--The Secretary may make grants to eligible 
     entities described in section 3682(a)(2) that submit 
     applications consistent with the requirements of this 
     section, to pay the cost of operating school-based or school-
     linked health service sites.
       (b) Use of Grant.--Amounts provided under a grant under 
     this section may be used for the following--
       (1) health services, including diagnosis and treatment of 
     simple illnesses and minor injuries;
       (2) preventive health services, including health screenings 
     follow-up health care, mental health, and preventive health 
     education;
       (3) enabling services, as defined in section 3461(b), and 
     other necessary support services;
       (4) training, recruitment, and compensation of health 
     professionals and other staff necessary for the 
     administration and delivery of school health services; and
       (5) referral services, including the linkage of individuals 
     to health plans, and community-based health and social 
     service providers.
       (c) Application for Grant.--To be eligible to receive a 
     grant under this section an entity described in section 
     3682(a)(2) shall submit an application in a form and manner 
     prescribed by the Secretary. In order to receive a grant 
     under this section, an applicant must include in the 
     application the following information--
       (1) a description of the services to be furnished by the 
     applicant;
       (2) the amounts and sources of funding that the applicant 
     will expend, including estimates of the amount of payments 
     the applicant will receive from health plans and other 
     sources;
       (3) a description of local community partnerships, 
     including parent and community participation;
       (4) a description of the linkages with other health and 
     social service providers; and
       (5) such other information as the Secretary determines to 
     be appropriate.
       (d) Assurances.--In order to receive a grant under this 
     section, an applicant must meet the following conditions--
       (1) school health service sites will, directly or 
     indirectly, provide a broad range of health services, in 
     accordance with the determinations of the local community 
     partnership, that may include--
       (A) diagnosis and treatment of simple illnesses and minor 
     injuries;
       (B) preventive health services, including health screenings 
     and follow-up health care, mental health and preventive 
     health education;
       (C) enabling services, as defined in section 3461(b);
       (D) referrals (including referrals regarding mental health 
     and substance abuse) with follow-up to ensure that needed 
     services are received;
       (2) the applicant provides services recommended by the 
     health provider, in consultation with the local community 
     partnership, and with the approval of the local education 
     agency;
       (3) the applicant provides the services under this 
     subsection to adolescents, and other school age children and 
     their families as deemed appropriate by the local 
     partnership;
       (4) the applicant maintains agreements with community-based 
     health care providers with a history of providing services to 
     such populations for the provision of health care services 
     not otherwise provided directly or during the hours when 
     school health services are unavailable;
       (5) the applicant establishes an affiliation with relevant 
     health plans and will establish reimbursement procedures and 
     will make every reasonable effort to collect appropriate 
     reimbursement for services provided; and
       (6) the applicant agrees to supplement and not supplant the 
     level of State or local funds under the direct control of the 
     applying State or participating local education or health 
     authority expended for school health services as defined by 
     this Act;
       (7) services funded under this Act will be coordinated with 
     existing school health services provided at a participating 
     school; and
       (8) for applicants in rural areas, the assurances required 
     under paragraph (4) shall be fulfilled to the maximum extent 
     possible.
       (e) State Laws.--Notwithstanding any other provision in 
     this part, no school based health clinic may provide 
     services, to any minor, when to do so is a violation of State 
     laws or regulations pertaining to informed consent for 
     medical services to minors.
       (f) Limitation on Administrative Funds.--In the case of a 
     State applying on behalf of local educational partnerships, 
     the applicant may retain not more than 5 percent of grants 
     awarded under this subpart for administrative costs.
       (g) Duration of Grant.--A grant under this section shall be 
     for a period determined appropriate by the Secretary.
       (h) Amount of Grant.--The annual amount of a grant awarded 
     under this section shall not be more than $200,000 per 
     school-based or school-linked health service site.
       (i) Federal Share.--
       (1) In general.--Subject to paragraph (3), a grant for 
     services awarded under this section may not exceed--
       (A) 90 percent of the non-reimbursed cost of the activities 
     to be funded under the program for the first 2 fiscal years 
     for which the program receives assistance under this section; 
     and
       (B) 75 percent of the non-reimbursed cost of such 
     activities for subsequent years for which the program 
     receives assistance under this section.

     The remainder of such costs shall be made available as 
     provided in paragraph (2).
       (2) Form of non-federal share.--The non-Federal share 
     required by paragraph (1) may be in cash or in-kind, fairly 
     evaluated, including facilities, equipment, personnel, or 
     services, but may not include amounts provided by the Federal 
     Government. In-kind contributions may include space within a 
     school facilities, school personnel, program use of school 
     transportation systems, outposted health personnel, and 
     extension of health provider medical liability insurance.
       (3) Waiver.--The Secretary may waive the requirements of 
     paragraph (1) for any year in accordance with criteria 
     established by regulation. Such criteria shall include a 
     documented need for the services provided under this section 
     and an inability of the grantee to meet the requirements of 
     paragraph (1) despite a good faith effort.
       (j) Training and Technical Assistance.--Entities that 
     receive assistance under this section may use not to exceed 
     10 percent of the amount of such assistance to provide staff 
     training and to secure necessary technical assistance. To the 
     maximum extent feasible, technical assistance should be 
     sought through local community-based entities. The limitation 
     contained in this subsection shall apply to individuals 
     employed to assist in obtaining funds under this part. Staff 
     training should include the training of teachers and other 
     school personnel necessary to ensure appropriate referral and 
     utilization of services, and appropriate linkages between 
     class-room activities and services offered.
       (k) Report and Monitoring.--The Secretary will submit to 
     the Committee on Labor and Human Resources in the Senate and 
     the Committee on Energy and Commerce in the House of 
     Representatives a biennial report on the activities funded 
     under this Act, consistent with the ongoing monitoring 
     activities of the Department. Such reports are intended to 
     advise the relevant Committees of the availability and 
     utilization of services, and other relevant information about 
     program activities.

            Subpart B--Capital Costs of Developing Projects

     SEC. 3691. FUNDING.

       Amounts available to the Secretary under section 3412 for 
     the purpose of carrying out subparts B and C of part 2 of 
     subtitle E are, in addition to such purpose, available to the 
     Secretary for the purpose of carrying out this subpart.
              Subtitle H--Public Health Service Initiative

     SEC. 3695. PUBLIC HEALTH SERVICE INITIATIVE.

       (a) In General.--Subject to subsection (c), the Secretary 
     of Health and Human Services shall provide for payment, from 
     funds in the Treasury not otherwise appropriated, to 
     individuals and entities that are eligible to receive 
     assistance pursuant to the provisions referred to in 
     paragraphs (1) through (13) of subsection (b), to the extent 
     of the amounts specified under subsection (b).
       (b) Amounts Specified.--The amounts specified in subsection 
     (a) with respect to a fiscal year shall be--
       (1) with respect to the core functions of public health 
     programs authorized under part 2 of subtitle D of title III, 
     $284,000,000 for fiscal year 1996, $292,000,000 for fiscal 
     year 1997, $339,000,000 for fiscal year 1998, $383,000,000 
     for fiscal year 1999, $381,300,000 for fiscal year 2000, 
     $228,800,000 for fiscal year 2001, $133,370,000 for fiscal 
     year 2002, and $95,300,000 for each of the fiscal years 2003 
     and 2004;
       (2) with respect to the national initiatives regarding 
     health promotion and disease prevention under part 3 of 
     subtitle D of title III, $158,000,000 for fiscal year 1996, 
     $112,000,000 for fiscal year 1997, $100,000,000 for fiscal 
     year 1998, $115,000,000 for fiscal year 1999, $91,500,000 for 
     fiscal year 2000, $54,900,000 for fiscal year 2001, 
     $32,010,000 for fiscal year 2002, and $22,900,000 for each of 
     the fiscal years 2003 and 2004;
       (3) with respect to occupational injury and illness 
     prevention under section 3903, $189,000,000 for fiscal year 
     1996, $135,000,000 for fiscal year 1997, $120,000,000 for 
     fiscal year 1998, $115,000,000 for fiscal year 1999, 
     $91,500,000 for fiscal year 2000, $54,900,000 for fiscal year 
     2001, $32,010,000 for fiscal year 2002, and $22,900,000 for 
     each of the fiscal years 2003 and 2004;
       (4) with respect to activities for the development of plans 
     and networks under subpart B of part 1 of subtitle E of title 
     III--
       (A) $309,000,000 for fiscal year 1996, $346,000,000 for 
     fiscal year 1997, $252,000,000 for fiscal year 1998, 
     $188,000,000 for fiscal year 1999, $64,050,000 for fiscal 
     year 2000, $38,430,000 for fiscal year 2001, $22,400,000 for 
     fiscal year 2002, and $16,000,000 for each of the fiscal 
     years 2003 and 2004; and
       (B) with respect to awards to federally qualified health 
     centers (as defined in section 1861(aa)(4) of the Social 
     Security Act) under subpart B, $132,000,000 for fiscal year 
     1996, $148,000,000 for fiscal year 1997, $108,000,000 for 
     fiscal year 1998, $81,000,000 for fiscal year 1999, 
     $27,450,000 for fiscal year 2000, $16,470,000 for fiscal year 
     2001, $9,600,000 for fiscal year 2002, and $6,860,000 for 
     each of the fiscal years 2003 and 2004;
       (5) with respect to capital costs under subpart C of part 1 
     of subtitle E of title III, $63,000,000 for fiscal year 1996, 
     $45,000,000 for fiscal year 1997, $40,000,000 for fiscal year 
     1998, $38,000,000 for fiscal year 1999, $30,500,000 for 
     fiscal year 2000, $18,300,000 for fiscal year 2001, 
     $10,670,000 for fiscal year 2002, and $7,620,000 for each of 
     the fiscal years 2003 and 2004;
       (6) with respect to enabling services under subpart D of 
     part 1 of subtitle E of title III--
       (A) $88,000,000 for fiscal year 1996, $252,000,000 for 
     fiscal year 1997, $224,000,000 for fiscal year 1998, 
     $215,000,000 for fiscal year 1999, $213,500,000 for fiscal 
     year 2000, $128,100,000 for fiscal year 2001, $74,690,000 for 
     fiscal year 2002, and $53,300,000 for each of the fiscal 
     years 2003 and 2004; and
       (B) with respect to awards to federally qualified health 
     centers (as defined in section 1861(aa)(4) of the Social 
     Security Act), $38,000,000 for fiscal year 1996, $108,000,000 
     for fiscal year 1997, $96,000,000 for fiscal year 1998, 
     $92,000,000 for fiscal year 1999, $91,500,000 for fiscal year 
     2000, $54,900,000 for fiscal year 2001, $32,010,000 for 
     fiscal year 2002, and $22,900,000 for each of the fiscal 
     years 2003 and 2004;
       (7) with respect to supplemental services under subpart D 
     of part 1 of subtitle E of title III $189,000,000 for fiscal 
     year 1996, $225,000,000 for fiscal year 1997, $200,000,000 
     for fiscal year 1998, $192,000,000 for fiscal year 1999, 
     $152,500,000 for fiscal year 2000, $91,500,000 for fiscal 
     year 2001, $53,350,000 for fiscal year 2002, and $38,100,000 
     for each of the fiscal years 2003 and 2004;
       (8) with respect to the National Health Service Corps 
     program referred to under section 3471, $189,000,000 for 
     fiscal year 1996, $135,000,000 for fiscal year 1997, 
     $200,000,000 for fiscal year 1998, $192,000,000 for fiscal 
     year 1999, $152,500,000 for fiscal year 2000, $91,500,000 for 
     fiscal year 2001, $53,350,000 for fiscal year 2002, and 
     $38,100,000 for each of the fiscal years 2003 and 2004;
       (9) with respect to school-related health service programs 
     under subpart A of part 5 of subtitle G of title III, 
     $252,000,000 for fiscal year 1996, $292,000,000 for fiscal 
     year 1997, $359,000,000 for fiscal year 1998, $441,000,000 
     for fiscal year 1999, $427,000,000 for fiscal year 2000, 
     $256,200,000 for fiscal year 2001, $149,380,000 for fiscal 
     year 2002, and $107,000,000 for each of the fiscal years 2003 
     and 2004;
       (10) with respect to the development and operation of 
     comprehensive managed mental health and substance abuse 
     programs under section 3534, $126,000,000 for fiscal year 
     1996, $90,000,000 for fiscal year 1997, $80,000,000 for 
     fiscal year 1998, $77,000,000 for fiscal year 1999, 
     $61,000,000 for fiscal year 2000, $36,600,000 for fiscal year 
     2001, $21,340,000 for fiscal year 2002, and $15,200,000 for 
     each of the fiscal years 2003 and 2004;
       (11) with respect to programs of the Secretary of Health 
     and Human Services under section 3081, $126,000,000 for 
     fiscal year 1996, $135,000,000 for fiscal year 1997, 
     $120,000,000 for fiscal year 1998, $115,000,000 for fiscal 
     year 1999, $91,500,000 for fiscal year 2000, $54,900,000 for 
     fiscal year 2001, $32,010,000 for fiscal year 2002, and 
     $22,900,000 for each of the fiscal years 2003 and 2004;
       (12) with respect to programs of the Secretary of Labor 
     under section 3082, $252,000,000 for fiscal year 1996, 
     $180,000,000 for fiscal year 1997, $160,000,000 for fiscal 
     year 1998, $153,000,000 for fiscal year 1999, $122,000,000 
     for fiscal year 2000, $73,200,000 for fiscal year 2001, 
     $42,680,000 for fiscal year 2002, and $30,500,000 for each of 
     the fiscal years 2003 and 2004;
       (13) with respect to academic health certers access under 
     section 3131, $5,000,000 for fiscal year 1996, $5,000,000 for 
     fiscal year 1997, $4,000,000 for fiscal year 1998, $4,000,000 
     for fiscal year 1999, $3,050,000 for fiscal year 2000, 
     $1,830,000 for fiscal year 2001, $1,067,000 for fiscal year 
     2002, and $760,000 for each of the fiscal years 2003 and 
     2004; and
       (14) with respect to programs of the Indian Health Service 
     under title VIII, $133,330,000 for each of the fiscal years 
     1996 through 2004.
       (c) Authority to Transfer Funds.--The Committee on 
     Appropriations of the House of Representatives and the 
     Committee on Appropriations of the Senate, acting through 
     appropriations Acts, may transfer the amounts specified under 
     subsection (b) in each fiscal year among the programs 
     referred to in such subsection.
       Subtitle I--Additional Provisions Regarding Public Health

     SEC. 3901. CURRICULUM DEVELOPMENT AND IMPLEMENTATION 
                   REGARDING DOMESTIC VIOLENCE AND WOMEN'S HEALTH.

       (a) In General.--The Secretary shall make grants to 
     eligible entities for the purpose of implementing and 
     developing for trainees a curriculum that includes training 
     in identification, treatment and referral of victims of 
     domestic violence, including elder abuse, and women's health 
     needs.
       (b) Eligible Entities.--For purposes of subsection (a), 
     eligible entities are any school of medicine, school of 
     osteopathic medicine, school of public health, graduate 
     program in mental health practice, school of nursing as 
     defined in section 853 of the Public Health Service Act, a 
     program to train physician assistants, a program for training 
     allied health professionals, and a program for training of 
     family medicine physicians, general internists, general 
     pediatricians, geriatricians, and obstetrician/gynecologists.
       (c) Curriculum.--A curriculum developed under this section 
     shall include--
       (1) identification of victims of domestic violence and 
     maintaining complete medical records that include 
     documentation of the examination, treatment provided, and 
     referral made and recording the location and nature of the 
     victim's injuries;
       (2) examining and treating such victims within the scope of 
     the health professional's discipline, training, and practice, 
     including at a minimum providing medical advice regarding the 
     dynamics and nature of domestic violence;
       (3) referring the victims to public and nonprofit entities 
     that provide support services for such victims;
       (4) training in the identification and diagnosis of 
     diseases afflicting women and other medical disorders as they 
     affect women;
       (5) training in the treatment of such diseases and 
     disorders with emphasis on the unique needs of women; and
       (6) research into the causes of such diseases and 
     disorders, including determination of appropriate means of 
     prevention.
       (d) Allocation of Appropriations.--Of the amounts made 
     available under section 3301(b) for a fiscal year, the 
     Secretary shall reserve not to exceed $20,000,000 for a 
     fiscal year for carrying out this section.
       (e) Domestic violence.--As used in this section, the term 
     ``domestic violence'' means any intentional violence, 
     controlling, or coercive behavior or pattern of behavior by 
     an individual who is currently or who was previously, in an 
     intimate or acquaintance relationship with the victim. Such 
     behavior may occur at any stage of the lifecycle and may 
     encompass single acts or a syndrome of actual or threatened 
     physical injury, sexual assault, rape, psychological abuse, 
     or neglect. Such term includes behavior which currently may 
     be described as ``child neglect'', ``child abuse'', ``spousal 
     abuse'', ``domestic violence'', ``woman battering'', 
     ``partner abuse'', ``elder abuse'', and ``date rape''.

     SEC. 3902. COMMUNITY SCHOLARSHIP PROGRAMS.

       Section 338L of the Public Health Service Act (42 U.S.C. 
     254t) is amended--
       (1) in the section heading, by striking ``DEMONSTRATION'';
       (2) in subsection (a)--
       (A) by striking ``for the purpose of carrying out 
     demonstration programs''; and
       (B) by striking ``health manpower shortage areas'' and 
     inserting ``Federally-designated health professional shortage 
     areas'';
       (3) in subsection (c)--
       (A) by striking ``health manpower shortage areas'' and 
     inserting ``Federally-designated health professional shortage 
     areas'' in the matter preceding paragraph (1); and
       (B) by striking ``in the health manpower shortage areas in 
     which the community organizations are located,'' and 
     inserting ``in a Federally-designated health professional 
     shortage area that is served by the community organization 
     awarding the scholarship,'' in paragraph (2);
       (4) in subsection (e)(1)--
       (A) by striking ``health manpower shortage area'' and 
     inserting ``a Federally-designated health professional 
     shortage area''; and
       (B) by striking ``in which the community'' and all that 
     follows through ``located'';
       (5) in subsection (k)(2), by striking ``internal medicine'' 
     and all that follows through the end thereof and inserting 
     ``general internal medicine, general pediatrics, obstetrics 
     and gynecology, dentistry, or mental health, that are 
     provided by physicians or other health professionals.''; and
       (6) in subsection (l)(1), by striking ``$5,000,000'' and 
     all that follows through ``1993'' and inserting ``$1,000,000 
     for fiscal year 1994, and such sums as may be necessary for 
     each fiscal year thereafter''.
               Subtitle J--Occupational Safety and Health

     SEC. 3903. OCCUPATIONAL INJURY AND ILLNESS PREVENTION.

       (a) In General.--The Secretary of Health and Human Services 
     and the Secretary of Labor shall work together 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) provide 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.

     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 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.
       (d) National Advisory Board.--
       (1) Establishment.--There is established a National 
     Advisory Board for Occupational Injury and Illness Prevention 
     to provide oversight, advice and direction on the 
     occupational injury and illness prevention programs and 
     initiatives conducted by the Secretary of Labor and Secretary 
     of Health and Human Services.
       (2) Composition.--The Board shall be composed of 10 members 
     appointed by the Secretary of Labor, 5 of whom are to be 
     designated by the Secretary of Health and Human Services. 
     Such members shall be composed of representatives of 
     employers, employees, and occupational safety and health 
     professionals.
       (e) Director of NIOSH.--The responsibilities of the 
     Secretary of Health and Human Services established under this 
     section shall be carried out by the Director of the National 
     Institute for Occupational Safety and Health.
       (f) Authorization of Appropriations.--For the purposes of 
     carrying out this section there are authorized to be 
     appropriated $189,000,000 for fiscal year 1996, $135,000,000 
     for fiscal year 1997, $120,000,000 for fiscal year 1998, 
     $115,000,000 for fiscal year 1999, $91,500,000 for fiscal 
     year 2000, $54,900,000 for fiscal year 2001, $32,010,000 for 
     fiscal year 2002, and $22,900,000 for each of the fiscal 
     years 2003 and 2004.

     SEC. 3905. FULL FUNDING FOR WIC.

       Section 17 of the Child Nutrition Act of 1966 (42 U.S.C. 
     1786) is amended--
       (1) in the second sentence of subsection (a)--
       (A) by striking ``authorized'' and inserting 
     ``established''; and
       (B) by striking ``, up to the authorization levels set 
     forth in subsection (g) of this section,'' and inserting ``, 
     up to the levels made available under this section,'';
       (2) in subsection (c)--
       (A) in the first sentence of paragraph (1), by striking 
     ``may'' and inserting ``shall'';
       (B) in paragraph (2), by striking ``appropriated'' and 
     inserting ``made available'';
       (3) in subsection (g)--
       (A) by striking paragraph (1) and inserting the following 
     new paragraph:
       ``(1)(A) There are authorized to be --
       ``(i) appropriated to carry out this section such amounts 
     as are necessary for each of fiscal years 1995 through 2000; 
     and
       ``(ii) made available such amounts as are necessary for the 
     Secretary of the Treasury to fulfill the requirements of 
     subparagraph (B).
       ``(B)(i) Out of any money in the Treasury not otherwise 
     appropriated, the Secretary of the Treasury shall provide to 
     the Secretary of Agriculture, on January 1 of each fiscal 
     year, to carry out this subsection--
       ``(I) $349,000,000 for fiscal year 1996;
       ``(II) $507,000,000 for fiscal year 1997;
       ``(III) $521,000,000 for fiscal year 1998;
       ``(IV) $534,000,000 for fiscal year 1999; and
       ``(V) $549,000,000 for fiscal year 2000.
       ``(ii) The Secretary of Agriculture shall be entitled to 
     receive the funds and shall accept the funds.
       ``(C) In lieu of obligating the funds made available under 
     subparagraph (B) to carry out this subsection, if the amount 
     appropriated (other than the amount provided under 
     subparagraph (B)(i)) to carry out this subsection for--
       ``(i) fiscal year 1996 is less than $3,565,000,000, the 
     amount referred to in subparagraph (B)(i)(I) shall be 
     obligated by the Secretary, during the period beginning 
     December 31, 1995, and ending June 30, 1996, to increase the 
     special assistance factor prescribed under section 11(a) of 
     the National School Lunch Act (42 U.S.C. 1759a(a)) for free 
     lunches served under the school lunch program (as established 
     under section 4 of such Act (42 U.S.C. 1753));
       ``(ii) fiscal year 1997 is less than $3,659,000,000, the 
     amount referred to in subparagraph (B)(i)(II) shall be 
     obligated by the Secretary, during the period beginning 
     December 31, 1996, and ending June 30, 1997, to increase the 
     special assistance factor prescribed under section 11(a) of 
     such Act for free lunches served under the school lunch 
     program (as established under section 4 of such Act);
       ``(iii) fiscal year 1998 is less than $3,757,000,000, the 
     amount referred to in subparagraph (B)(i)(III) shall be 
     obligated by the Secretary, during the period beginning 
     December 31, 1997, and ending June 30, 1998, to increase the 
     special assistance factor prescribed under section 11(a) of 
     such Act for free lunches served under the school lunch 
     program (as established under section 4 of such Act);
       ``(iv) fiscal year 1999 is less than $3,859,000,000, the 
     amount referred to in subparagraph (B)(i)(IV) shall be 
     obligated by the Secretary, during the period beginning 
     December 31, 1998, and ending June 30, 1999, to increase the 
     special assistance factor prescribed under section 11(a) of 
     such Act for free lunches served under the school lunch 
     program (as established under section 4 of such Act); and
       ``(v) fiscal year 2000 is less than $3,963,000,000, the 
     amount referred to in subparagraph (B)(i)(V) shall be 
     obligated by the Secretary, during the period beginning 
     December 31, 1999, and ending June 30, 2000, to increase the 
     special assistance factor prescribed under section 11(a) of 
     such Act for free lunches served under the school lunch 
     program (as established under section 4 of such Act).
       ``(D) Any increase in the special assistance factor 
     prescribed under section 11(a) of such Act as a result of 
     subparagraph (C) shall not affect any annual adjustment in 
     the factor under section 11(a)(3) of such Act.
       ``(E) Notwithstanding any other provision of law, no 
     additional amounts shall be made available under this 
     provision for any fiscal year after fiscal year 2000.'';
       (B) in the first sentence of paragraph (4), by striking 
     ``appropriated'' and inserting ``made available''; and
       (C) in paragraph (5), by striking ``appropriated'' and 
     inserting ``made available'';
       (4) in subsection (h)--
       (A) in paragraph (1)--
       (i) in subparagraph (A), by striking ``appropriated'' both 
     places it appears and inserting ``made available''; and
       (ii) in subparagraph (C), by striking ``appropriated'' both 
     places it appears and inserting ``made available''; and
       (B) in the first sentence of paragraph (2)(A), by striking 
     ``1990, 1991, 1992, 1993 and 1994'' and inserting ``1990 
     through 2000''; and
       (5) in subsection (l), by striking ``funds appropriated'' 
     and inserting ``funds made available''.
                 Subtitle L--Border Health Improvement

     SEC. 3908. BORDER HEALTH COMMISSION.

       (a) Establishment.--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.
       (b) 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 and potential health problems that affect the 
     general population of the area;
       (2) to develop and implement a comprehensive plan for 
     carrying out the actions recommended by the needs assessment 
     through--
       (A) assisting in the coordination of public and private 
     efforts to prevent potential health problems and resolve 
     existing health problems,
       (B) assisting in the coordination of public and private 
     efforts to educate the population, in a culturally competent 
     manner, concerning such potential and existing health 
     problems; and
       (C) developing and implementing culturally competent 
     programs to prevent and resolve such health problems and to 
     educate the population, in a culturally competent manner, 
     concerning such health problems where a new program is 
     necessary to meet a need that is not being met through other 
     public or private efforts; 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 could reimburse 
     a public or private person in the other country for the cost 
     of a health care service that such person furnishes to a 
     citizen or resident alien of the first country who is unable, 
     through insurance or otherwise, to pay for the service.
       (c) Other Authorized Functions.--In addition to the duties 
     described in subsection (b), the Commission should be 
     authorized to perform the following functions as the 
     Commission determines to be appropriate--
       (1) to conduct or support investigations, research, or 
     studies designed to identify, study, and monitor, on an on-
     going basis, health problems that affect the general 
     population in the United States-Mexico Border Area;
       (2) to conduct or support a binational, public-private 
     effort to establish a comprehensive and coordinated system, 
     which uses advanced technologies to the maximum extent 
     possible, for gathering health-related data and monitoring 
     health problems in the United States-Mexico Border Area; and
       (3) to provide financial, technical, or administrative 
     assistance to public or private persons who act to prevent or 
     resolve such problems or who educate the population 
     concerning such health problems.
       (d) Membership.--
       (1) 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:
       (A) The Secretary of Health and Human Services or the 
     Secretary's delegate.
       (B) The commissioners of health or chief health officer 
     from the States of Texas, New Mexico, Arizona, and California 
     or such commissioners' delegates.
       (C) Two individuals residing in United States-Mexico Border 
     Area in each of the States of Texas, New Mexico, Arizona, and 
     California who are nominated by the chief executive officer 
     of the respective States and appointed by the President from 
     among individuals--
       (i) who have a demonstrated interest or expertise in health 
     issues of the United States-Mexico Border Area; and
       (ii) whose name appears on a list of 6 nominees submitted 
     to the President by the chief executive officer of the State 
     where the nominees resides.
       (2) 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.
       (3) Compensation.--Members of the United States section of 
     the Commission who are not employees of the United States--
       (A) shall each receive compensation at a rate of not to 
     exceed the daily equivalent of the annual rate of basic pay 
     payable for positions at GS-15 of the General Schedule under 
     section 5332 of title 5, United States Code, for each day 
     such member is engaged in the actual performance of the 
     duties of the Commission; and
       (B) shall be allowed travel expenses, including per diem in 
     lieu of subsistence at rates authorized for employees of 
     agencies under subchapter I of chapter 57 of title 5, United 
     States Code, while away from their homes or regular places of 
     business in the performance of services of the Commission.
       (e) Regional Offices.--The Commission should designate or 
     establish one border health office in each of the States of 
     Texas, New Mexico, Arizona, and California. Such office 
     should be located within the United States-Mexico Border 
     Area, and should be coordinated with--
       (1) State border health offices; and
       (2) local nonprofit organizations designated by the State's 
     governor and directly involved in border health issues.

     If feasible to avoid duplicative efforts, the Commission 
     offices should be located in existing State or local 
     nonprofit offices. The Commission should provide adequate 
     compensation for cooperative efforts and resources.
       (f) 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.
       (g) Definitions.--As used in this section:
       (1) Commission.--The term ``Commission'' means the United 
     States-Mexico Border Health Commission.
       (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. Such 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 quality.
       (3) Resident alien.--The term ``resident alien'', when used 
     in reference to a country, means an alien lawfully admitted 
     for permanent residence to the United States or otherwise 
     permanently residing in the United States under color of law 
     (including residence as an asylee, refugee, or parolee).
       (4) Secretary.--The term ``Secretary'' means the Secretary 
     of Health and Human Services.
       (5) 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--MEDICARE AND MEDICAID

     SEC. 4000. 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 1--INTEGRATION OF MEDICARE BENEFICIARIES

     SEC. 4001. INDIVIDUAL ELECTION TO REMAIN IN CERTAIN HEALTH 
                   PLANS.

       (a) In General.--Section 1876 (42 U.S.C. 1395mm) is amended 
     by adding at the end the following new subsection:
       ``(k)(1) Notwithstanding any other provision of this 
     section, each eligible organization with a risk-sharing 
     contract (or which is eligible to enter into such a contract, 
     as determined by the Secretary) that is the sponsor of a 
     standard health plan under subtitle B of title I of the 
     Health Security Act shall provide each individual who meets 
     the requirements of paragraph (2) with the opportunity to 
     elect (by submitting an application at such time and in such 
     manner as specified by the Secretary) to continue enrollment 
     in such plan (for the same benefits as other individuals 
     enrolled in the plan) and to have payments made by the 
     Secretary to the plan on the individual's behalf in 
     accordance with paragraph (3). The premium imposed with 
     respect to such an individual by the plan shall be in an 
     amount (determined in accordance with rules of the Secretary 
     and notwithstanding other provisions of such Act) which 
     reflects the difference between the premium otherwise 
     established (adjusted by a factor to reflect the actuarial 
     difference between medicare beneficiaries and other plan 
     enrollees) and the amount payable under paragraph (3).
       ``(2) An individual meets the requirements of this 
     paragraph if the individual is--
       ``(A) enrolled in the health plan of an eligible 
     organization in a month in which the individual is either not 
     entitled to benefits under part A, or is an employee (as 
     defined in the Health Security Act) or the spouse or 
     dependent of an employee,
       ``(B) entitled to benefits under part A and enrolled under 
     part B in the succeeding month,
       ``(C) a community-rated individual under the Health 
     Security Act in that succeeding month, and
       ``(D) not an experience-rated employee (as defined in the 
     Health Security Act) or the spouse or dependent of an 
     experience-rated employee in that succeeding month.
       ``(3) The Secretary shall make a payment to an eligible 
     organization on behalf of each individual enrolled with the 
     organization for whom an election is in effect under this 
     subsection in an amount determined by the rate specified by 
     subsection (a)(1)(C) (notwithstanding the second sentence of 
     paragraph (1)). Such payment shall be made from the Federal 
     Hospital Insurance Trust Fund and the Federal Supplementary 
     Medical Insurance Trust Fund as provided under subsection 
     (a)(5) (other than as provided under subparagraph (B) of that 
     paragraph).
       ``(4) The period for which payment may be made under 
     paragraph (3)--
       ``(A) begins with the first month for which the individual 
     meets the requirements of paragraph (2) (or a later month, in 
     the case of a late application, as may be specified by the 
     Secretary); and
       ``(B) ends with the earliest of--
       ``(i) the month following the month--
       ``(I) in which the individual notifies the Secretary that 
     the individual no longer wishes to be enrolled in the health 
     plan of the eligible organization and to have payment made on 
     the individual's behalf under this subsection; and
       ``(II) which is a month specified by the Secretary as a 
     uniform open enrollment period under subsection (c)(3)(A)(i), 
     or
       ``(ii) the month in which the individual ceases to meet the 
     requirements of paragraph (2).
       ``(5) Notwithstanding any other provision of this title, 
     payments to an eligible organization under this subsection on 
     behalf of an individual shall be the sole payments made with 
     respect to items and services furnished to the individual 
     during the period for which the individual's election under 
     this subsection is in effect.''.
       (b) Conforming Amendment.--Section 1838(b) (42 U.S.C. 
     1395q(b)) is amended by inserting after ``section 1843(e)'' 
     the following: ``, 1876(c)(3)(B) or 1876(k)(4)(B)''.

     SEC. 4002. ENROLLMENT AND TERMINATION OF ENROLLMENT.

       (a) Uniform Open Enrollment Periods.--
       (1) For capitated plans.--The first sentence of section 
     1876(c)(3)(A)(i) (42 U.S.C. 1395mm(c)(3)(A)(i)) is amended by 
     inserting ``(which may be specified by the Secretary)'' after 
     ``open enrollment period''.
       (2) For medigap plans.--Section 1882(s) (42 U.S.C. 
     1395ss(s)) is amended--
       (A) in paragraph (3), by striking ``paragraphs (1) and 
     (2)'' and inserting ``paragraph (1), (2), or (3)'',
       (B) by redesignating paragraph (3) as paragraph (4), and
       (C) by inserting after paragraph (2) the following new 
     paragraph:
       ``(3) Each issuer of a medicare supplemental policy shall 
     have an open enrollment period (which shall be the period 
     specified by the Secretary under section 1876(c)(3)(A)(i)), 
     of at least 30 days duration every year, during which the 
     issuer may not deny or condition the issuance or 
     effectiveness of a medicare supplemental policy, or 
     discriminate in the pricing of the policy, because of age, 
     health status, claims experience, receipt of health care, or 
     medical condition. The policy may not provide any time period 
     applicable to pre-existing conditions, waiting periods, 
     elimination periods, and probationary periods (except as 
     provided by paragraph (2)(B)). The Secretary may require 
     enrollment through a third party designated under section 
     1876(c)(3)(B).''.
       (b) Enrollments for New Medicare Beneficiaries and Those 
     Who Move.--Section 1876(c)(3)(A) (42 U.S.C. 1395mm(c)(3)(A)) 
     is amended--
       (1) in clause (i), by striking ``clause (ii)'' and 
     inserting ``clauses (ii) through (iv)'', and
       (2) by adding at the end the following:
       ``(iii) Each eligible organization shall have an open 
     enrollment period for each individual eligible to enroll 
     under subsection (d) during any enrollment period specified 
     by section 1837 that applies to that individual. Enrollment 
     under this clause shall be effective as specified by section 
     1838.
       ``(iv) Each eligible organization shall have an open 
     enrollment period for each individual eligible to enroll 
     under subsection (d) who has previously resided outside the 
     geographic area which the organization serves. The enrollment 
     period shall begin with the beginning of the month that 
     precedes the month in which the individual becomes a resident 
     of that geographic area and shall end at the end of the 
     following month. Enrollment under this clause shall be 
     effective as of the first of the month following the month in 
     which the individual enrolls.''.
       (c) Enrollment Through Third Party; Uniform Termination of 
     Enrollment.--The first sentence of section 1876(c)(3)(B) (42 
     U.S.C. 1395mm(c)(3)(B)) is amended--
       (1) by inserting ``(including enrollment through a third 
     party)'' after ``regulations'', and
       (2) by striking everything after ``with the eligible 
     organization'' and inserting ``during an annual period as 
     prescribed by the Secretary, and as specified by the 
     Secretary in the case of financial insolvency of the 
     organization, if the individual moves from the geographic 
     area served by the organization, or in other special 
     circumstances that the Secretary may prescribe.''.
       (d) Effective Date.--The amendments made by the previous 
     subsections apply to enrollments and terminations of 
     enrollments occurring after 1995 (but only after the 
     Secretary of Health and Human Services has prescribed the 
     relevant annual period), except that the amendments made by 
     subsection (a)(2) apply to enrollments for a medicare 
     supplemental policy made after 1995.

                 PART 2--PROVISIONS RELATING TO PART A

     SEC. 4101. INPATIENT HOSPITAL SERVICES UPDATE FOR PPS 
                   HOSPITALS.

       Section 1886(b)(3)(B)(i) (42 U.S.C. 1395ww(b)(3)(B)(i)) is 
     amended--
       (1) by amending subclauses (XII) and (XIII) to read as 
     follows:
       ``(XII) for fiscal year 1997, the market basket percentage 
     increase minus 1.0 percentage point for hospitals in all 
     areas,'';
       ``(XIII) for fiscal years 1998 through 2004, the market 
     basket percentage increase minus 2.0 percentage points for 
     hospitals in all areas, and''; and
       (2) by adding at the end the following new subclause:
       ``(XIV) for fiscal year 2005 and each subsequent fiscal 
     year, the market basket percentage increase for hospitals in 
     all areas.''.

     SEC. 4102. REDUCTION IN PAYMENTS FOR CAPITAL-RELATED COSTS 
                   FOR INPATIENT HOSPITAL SERVICES.

       (a) PPS Hospitals.--
       (1) Reduction in base payment rates 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 
     Health Security Act) 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) (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 2003, 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) (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 2003.''.

     SEC. 4103. REDUCTIONS IN DISPROPORTIONATE SHARE PAYMENTS.

       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'';
       (2) in clause (vi), by striking ``In'' and inserting 
     ``Subject to clause (x), in''; and
       (3) by adding at the end the following new clauses:
       ``(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 
     for discharges occurring on or after the date on which the 
     State in which such hospital is located becomes a 
     participating State (as such term is defined in title I of 
     the Health Security Act), by 50 percent of such additional 
     payment.
       ``(x) Not later than July 1, 1996, the Secretary and the 
     Prospective Payment Assessment Commission shall submit to the 
     Congress a recommendation on a methodology for measuring and 
     allocating funds for hospitals that receive an additional 
     payment under this paragraph including a replacement for the 
     fraction described in clause (vi)(II).''.

     SEC. 4104. EXTENSION OF FREEZE ON UPDATES TO ROUTINE SERVICE 
                   COST LIMITS FOR SKILLED NURSING FACILITIES.

       (a) Payments Based on Cost Limits.--Section 1888(a) (42 
     U.S.C. 1395yy(a)) is amended by striking ``112 percent'' each 
     place it appears and inserting ``100 percent (adjusted by 
     such amount as the Secretary determines to be necessary to 
     preserve the savings resulting from the enactment of section 
     13503(a)(1) of the Omnibus Budget Reconciliation Act of 
     1993)''.
       (b) Adjustments to Limits.--Section 1888(c) (42 U.S.C. 
     1395yy(c)) is amended by inserting the following sentence at 
     the end: ``The effect of the amendment made by section 
     4104(a) of the Health Security Act shall not be considered by 
     the Secretary in making adjustments pursuant to this 
     subsection.''
       (c) Payments Determined on Prospective Basis.--Section 
     1888(d)(2)(B) (42 U.S.C. 1395yy(d)(2)(B)) is amended by 
     striking ``105 percent'' and inserting ``100 percent 
     (adjusted by such amount as the Secretary determines to be 
     necessary to preserve the savings resulting from the 
     enactment of section 13503(b) of the Omnibus Budget 
     Reconciliation Act of 1993)''.
       (d) Effective Date.--The amendments made by subsections 
     (a), (b), and (c) shall apply to cost reporting periods 
     beginning on or after October 1, 1995.

     SEC. 4105. 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)) 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) Special Treatment Extended.--Section 1886(d)(5)(G) (42 
     U.S.C. 1395ww(d)(5)(G)) is amended--
       (1) in clause (i), by striking ``October 1, 1994'' and 
     inserting ``October 1, 1999''; and
       (2) in clause (ii)(II), by striking ``October 1, 1994'' and 
     inserting ``October 1, 1999''.
       (c) Extension of Target Amount.--Section 1886(b)(3)(D) (42 
     U.S.C. 1395ww(b)(3)(D)) is amended--
       (1) in the matter preceding clause (i), by striking ``March 
     31, 1993'' and inserting ``September 30, 1999''; and
       (2) by amending clause (iii) to read as follows:
       ``(iii) with respect to discharges occurring in fiscal 
     years 1994 through 1999, the target amount for the cost 
     reporting period beginning in the previous fiscal year 
     increased by the applicable percentage increase under 
     subparagraph (B)(iv).''.

     SEC. 4106. 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 the Omnibus Budget 
     Reconciliation Act of 1987 is amended in the matter preceding 
     subparagraph (A) by inserting ``any rural primary care 
     hospital as defined in section 1861(mm)(1), 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 Omnibus Budget Reconciliation Act of 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 the fiscal years 1993 through 1999''.
       (c) Frequency of Required Reports.--Section 4008(e)(8)(B) 
     of the Omnibus Budget Reconciliation Act of 1987 is amended 
     by striking ``every 6 months'' and inserting ``every 12 
     months''.

     SEC. 4107. PAYMENTS FOR SOLE COMMUNITY HOSPITALS WITH 
                   TEACHING PROGRAMS AND MULTIHOSPITAL CAMPUSES.

       (a) In General.--Section 1886(d)(5)(D) (42 U.S.C. 
     1395ww(d)(5)(D)) is amended by adding at the end the 
     following new clause:
       ``(vi) The Secretary shall determine payment under clause 
     (i) for a sole-community hospital that is a part of a multi-
     campus hospital by making the determination under such clause 
     for each facility of the multi-campus hospital if any 
     facility of the hospital would have a value of `r' greater 
     than 0, as `r' is defined in subparagraph (B)(ii). In making 
     a determination for each such facility, the Secretary shall 
     determine the DRG-specific rate applicable to the facility 
     based on its location in accordance with paragraph (3)(D).''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to discharges occurring on or after October 1, 
     1993, from multi-campus hospitals that merged facilities on 
     or after October 1, 1987.

     SEC. 4108. MORATORIUM ON DESIGNATION OF NEW LONG-TERM 
                   HOSPITALS.

       Notwithstanding clause (iv) of section 1886(d)(1)(B) of the 
     Social Security Act (42 U.S.C. 1395ww(d)(1)(B)), a hospital 
     which has an average inpatient length of stay (as determined 
     by the Secretary of Health and Human Services) of greater 
     than 25 days shall not be treated as a hospital described in 
     such clause for purposes of such title unless such hospital 
     was treated as a hospital described in such clause for 
     purposes of such title as of the date of the enactment of 
     this Act.

     SEC. 4109. REVISED PAYMENT METHODOLOGY FOR REHABILITATION AND 
                   LONG-TERM CARE HOSPITALS.

       (a) Rehabilitation Hospitals and Distinct Part Units.--
       (1) Definition.--Section 1886(d)(1)(B) (42 U.S.C. 
     1395ww(d)(1)(B)) is amended by adding at the end the 
     following new sentence: ``In defining a rehabilitation 
     hospital and a rehabilitation unit of a hospital which is a 
     distinct part of a hospital, the Secretary shall take into 
     account the impact of new technologies, survival rates, and 
     changes in the practice of rehabilitation medicine.''.
       (2) Target amount calculation for rehabilitation hospitals 
     and distinct part units.--
       (A) In general.--Section 1886(b)(3) (42 U.S.C. 
     1395ww(b)(3)) is amended--
       (i) in subparagraph (A), by striking ``(D), and (E)'' and 
     inserting ``(D), (E), and (F)'';
       (ii) in subparagraph (B)(ii), by striking ``and (E)'' and 
     inserting ``(E), and (F)''; and
       (iii) by adding at the end the following new subparagraph:
       ``(F)(i) Subject to clause (ii), for cost reporting periods 
     beginning on or after October 1, 1994, in the case of a 
     hospital described in subsection (d)(1)(B)(ii) or a 
     rehabilitation unit described in such subparagraph, the term 
     `target amount' means--
       ``(I) with respect to the first 12-month cost reporting 
     period in which this subparagraph is applied to the hospital 
     or unit--

       ``(aa) the allowable operating costs of inpatient hospital 
     services (as defined in subsection (a)(4)) recognized under 
     this title for the hospital or unit for the 12-month cost 
     reporting period (in this subparagraph referred to as the 
     `base cost reporting period') preceding the first cost 
     reporting period for which this subparagraph was in effect 
     with respect to such hospital, increased (in a compounded 
     manner), by
       ``(bb) the applicable percentage increases applied to such 
     hospital or unit under this paragraph for cost reporting 
     periods after the base cost reporting period and up to and 
     including such first 12-month cost reporting period, or

       ``(II) with respect to a later cost reporting period, the 
     target amount for the preceding 12-month cost reporting 
     period, increased by the applicable percentage increase under 
     subparagraph (B).

     There shall be substituted for the allowable average costs of 
     inpatient hospital services determined under subclause 
     (I)(aa), the average of the allowable average costs of 
     inpatient hospital services (as so defined) recognized under 
     this title for the hospital or unit for cost reporting 
     periods beginning during fiscal years 1990 and 1991 (if any).
       ``(ii)(I) Notwithstanding the provisions of clause (i), in 
     the case of a hospital or unit to which the last sentence of 
     clause (i) applies, the hospital or unit's target amount 
     under such clause for a cost reporting period shall be--
       ``(aa) not less than 70 percent of the national weighted 
     average of all target amounts calculated under such clause 
     for all hospitals and units described in such clause (as 
     determined by the Secretary), and
       ``(bb) not less than the allowable operating costs of 
     inpatient hospital services (as defined in subsection (a)(4) 
     for such hospital or unit in the base cost reporting period 
     (including any payments made to such hospital or unit 
     pursuant to paragraph (1)(A)), multiplied by the applicable 
     percentage increase for such cost reporting period under 
     subparagraph (B).
       ``(II) Notwithstanding the provisions of clause (i), in the 
     case of a hospital or unit that is not described in subclause 
     (I), the hospital or unit's target amount under such clause 
     for a cost reporting period shall be--
       ``(aa) not less than the amount described in subclause 
     (I)(aa), and
       ``(bb) not greater than 110 percent of the national 
     weighted average of all target amounts calculated under 
     clause (i) for all hospitals and units described in such 
     clause (as determined by the Secretary).''.
       (B) Effective date.--The amendments made by subparagraph 
     (A) shall apply with respect to cost reporting periods 
     beginning on or after October 1, 1994.
       (3) Development of national prospective rates for 
     rehabilitation hospitals and distinct part units.--
       (A) Development of proposal.--The Secretary of Health and 
     Human Services (hereafter in this section referred to as the 
     ``Secretary'') shall develop a proposal to replace the 
     current system under which rehabilitation hospitals and 
     rehabilitation units of a hospital which are a distinct part 
     of a hospital (as described in section 1886(d)(1)(B) of the 
     Social Security Act (42 U.S.C. 1395ww(d)(1)(B))) receive 
     payment for the operating and capital-related costs of 
     inpatient hospital services under part A of title XVIII of 
     such Act with a prospective payment system. In developing any 
     proposal under this paragraph to replace the current system 
     with a prospective payment system, the Secretary shall 
     develop a system that provides for--
       (i) a payment on a per-discharge basis, and
       (ii) an appropriate weighting of such payment amount as it 
     relates to the classification of the discharge.
       (B) Reports.--Not later than October 1, 1996, the Secretary 
     shall submit the proposal developed under subparagraph (A) to 
     the Congress.
       (b) Assignment of New Base Year for Certified Long-Stay 
     Hospitals That Also Serve a Significant Proportion of Low-
     Income Patients.--
       (1) Rebasing for long-term hospitals.--
       (A) In general.--Section 1886(b)(3) (42 U.S.C. 
     1395ww(b)(3)), as amended by subsection (a), is further 
     amended--
       (i) in subparagraph (A), by striking ``(E), and (F)'' and 
     inserting ``(E), (F), and (G)'';
       (ii) in subparagraph (B)(ii), by striking ``(E), and (F)'' 
     and inserting ``(E), (F), and (G)''; and
       (iii) by inserting after subparagraph (F) the following new 
     subparagraph:
       ``(G)(i) For cost reporting periods beginning on or after 
     October 1, 1994, in the case of a hospital described in 
     subsection (d)(1)(B)(iv) that--
       ``(I) has not received the additional payment amount 
     described in paragraph (1)(A) for at least the preceding 2 
     consecutive 12-month cost reporting periods; and
       ``(II) for which the sum of the amounts described in 
     subclauses (I) and (II) of subsection (d)(5)(F)(vi) during 
     the period described in clause (I) exceeds 25 percent,

     the term `target amount' has the meaning given such term by 
     clause (ii).
       ``(ii) In the case of a hospital described in clause (i), 
     the term `target amount' means--
       ``(I) with respect to the first 12-month cost reporting 
     period in which this subparagraph is applied to the 
     hospital--

       ``(aa) the average allowable operating costs of inpatient 
     hospital services (as defined in subsection (a)(4)) 
     recognized under this title for the hospital during cost 
     reporting periods of the hospital beginning during fiscal 
     years 1990 and 1991 for such hospital (in this subparagraph 
     referred to as the `base cost reporting period'), increased 
     (in a compounded manner), by
       ``(bb) the applicable percentage increases applied to such 
     hospital or under this paragraph for cost reporting periods 
     after the base cost reporting period and up to and including 
     such first 12-month cost reporting periods, or

       ``(II) with respect to a subsequent 12-month cost reporting 
     period, the target amount for the preceding 12-month cost 
     reporting period, increased by the applicable percentage 
     increase under subparagraph (B).
       ``(iii) Notwithstanding clause (ii)(II), if, after 2 
     consecutive 12-month cost reporting periods, a hospital 
     continues to be described in subclauses (I) and (II) of 
     clause (i), there shall be substituted for the base cost 
     reporting period described in clause (ii)(I)(aa) the most 
     recent preceding 2 12-month cost reporting periods of the 
     hospital for which data is available (as determined by the 
     Secretary), but only if such substituting results in an 
     increase in the target amount for the hospital. The 
     substitution under the preceding sentence may not occur more 
     often than every 2 years.
       ``(iv) Effective October 1, 1994, the Secretary shall take 
     into account the enactment of this subparagraph in making 
     available to the hospital the payments described in section 
     1815(e)(2), and, shall increase such payments as if the 
     target amount of the hospital had been established pursuant 
     to this subparagraph as of such date.''.
       (2) Effective date.--The amendments made by this subsection 
     shall be effective with respect to cost reporting periods 
     beginning on or after October 1, 1994.
       (c) Budget Neutrality.--The Secretary shall reduce the 
     amount of payments to be made under subparagraphs (F) and (G) 
     of section 1886(b)(3) of the Social Security Act for a cost 
     reporting period beginning on or after October 1, 1994, by an 
     amount the Secretary determines necessary so that such 
     payments do not exceed an amount equal to the total amount 
     that would have been paid under such subparagraphs if the 
     amendments made by subsections (a) and (b) had not been 
     enacted.

     SEC. 4110. TERMINATION OF INDIRECT MEDICAL EDUCATION 
                   PAYMENTS.

       (a) In General.--Section 1886(d)(5)(B) (42 U.S.C. 
     1395ww(d)(5)(B)) is amended in the matter preceding clause 
     (i) by striking ``The Secretary'' and inserting ``For 
     discharges occurring before January 1, 1997, the Secretary''.
       (b) Adjustment to Standardized Amounts.--Section 
     1886(d)(2)(C)(i) (42 U.S.C. 1395ww(d)(2)(C)(i)) is amended by 
     striking ``excluding'' and inserting ``for discharges 
     occurring before January 1, 1997, excluding''.

     SEC. 4111. LIMITED SERVICE HOSPITAL PROGRAM.

       (a) Limited Service Hospital Program.--Section 1820 (42 
     U.S.C. 1395l-4) is amended to read as follows:


                   ``limited service hospital program

       ``Sec. 1820. (a) Purpose.--The purpose of this section is 
     to--
       ``(1) make available alternative hospital models to small 
     rural or isolated rural communities in which facilities are 
     relieved of the burden of selected regulatory requirements by 
     limiting the scope of inpatient acute services required to be 
     offered;
       ``(2) alter medicare reimbursement policy to support the 
     financial viability of alternative facilities by limiting the 
     financial risk faced by such small hospitals through the use 
     of reasonable cost reimbursement; and
       ``(3) promote linkages between facilities designated by the 
     State under this section and broader programs supporting the 
     development of and transition to integrated provider 
     networks.
       ``(b) In General.--Any State that submits an application in 
     accordance with subsection (c) may establish a limited 
     service hospital program described in subsection (d).
       ``(c) Application.--A State may establish a limited service 
     hospital program described in subsection (d) 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--
       ``(A) has developed, or is in the process of developing, a 
     State rural health care plan that--
       ``(i) in the case of a State applying to establish a rural 
     primary care hospital program (described in subsection 
     (d)(1)(A)), provides for the creation of one or more rural 
     health networks (as defined in subsection (e)) in the State,
       ``(ii) promotes regionalization of rural health services in 
     the State, and
       ``(iii) improves access to hospital and other health 
     services for rural residents of the State;
       ``(B) has developed the rural health care plan described in 
     subparagraph (A) in consultation with the hospital 
     association of the State, rural hospitals located in the 
     State, and the State Office of Rural Health (or, in the case 
     of a State in the process of developing such plan, that 
     assures the Secretary that it will consult with its State 
     hospital association, rural hospitals located in the State, 
     and the State Office of Rural Health in developing such 
     plan); and
       ``(2) assurances that the State has designated (consistent 
     with the rural health care plan described in paragraph 
     (1)(A)), or is in the process of designating, rural nonprofit 
     or public hospitals or facilities located in the State as 
     rural primary care hospitals facilities or medical assistance 
     facilities; and
       ``(3) such other information and assurances as the 
     Secretary may require.
       ``(d) Limited Service Hospital Program Described.--
       ``(1) In general.--A State that has submitted an 
     application in accordance with subsection (c), may establish 
     a limited service hospital program that includes--
       ``(A) a rural primary care hospital program under which--
       ``(i) at least one facility in the State shall be 
     designated as a rural primary care hospital in accordance 
     with paragraph (2), and
       ``(ii) the State shall develop at least one rural health 
     network (as defined in subsection (e)) in the State;
       ``(B) a medical assistance facility program under which at 
     least one facility in the State shall be designated as a 
     medical assistance facility in accordance with paragraph (2); 
     or
       ``(C) both.
       ``(2) State designation of facilities.--A State may 
     designate one or more facilities as a rural primary care 
     hospital or medical assistance facility in accordance with 
     subparagraph (A) or (B).
       ``(A) Criteria for designation as rural primary care 
     hospital.--A State may designate a facility as a rural 
     primary care hospital only if the facility--
       ``(i) is located in a rural area (as defined in section 
     1886(d)(2)(D)), or is located in a county whose geographic 
     area is substantially larger than the average geographic area 
     for urban counties in the United States and whose hospital 
     service area is characteristic of service areas of hospitals 
     located in rural areas;
       ``(ii) at the time such facility applies to the State for 
     designation as a rural primary care hospital, is a hospital 
     (or, in the case of a facility that closed during the 12-
     month period that ends on the date the facility applies for 
     such designation, at the time the facility closed), with a 
     participation agreement in effect under section 1866(a);
       ``(iii) has in effect an agreement to participate with 
     other hospitals and facilities in a rural health network;
       ``(iv) provides 24-hour emergency services to ill or 
     injured persons prior to admission to the facility or prior 
     to their transportation to a full-service hospital;
       ``(v) provides not more than 15 inpatient beds (meeting 
     such conditions as the Secretary may establish) for providing 
     acute inpatient care;
       ``(vi) provides inpatient care for a period not to exceed 
     an average length of 96 hours (unless a longer period is 
     required because transfer to a hospital is precluded because 
     of inclement weather or other emergency conditions);
       ``(vii) 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 and fully staffed, 
     except insofar as the facility is required to provide 
     emergency care on a 24-hour basis under clause (v) and must 
     have nursing services available on a 24-hour basis, but need 
     not otherwise staff the facility except when an inpatient is 
     present,
       ``(II) the facility may provide any services otherwise 
     required to be provided by a full-time, onsite dietician, 
     pharmacist, laboratory technician, medical technologist, and 
     radiological technologist on a part-time, offsite basis under 
     arrangements as defined in section 1861(w)(1), and
       ``(III) the inpatient care described in clause (vii) may be 
     provided by a physician's assistant, nurse practitioner, or 
     clinical nurse specialist subject to the oversight of a 
     physician who need not be present in the facility; and

       ``(viii) meets the requirements of subparagraphs (C) 
     through (I) of paragraph (2) of section 1861(aa), and of 
     clauses (ii) and (iv) of the second sentence of that 
     paragraph, 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 `physician' is a reference to a physician as 
     defined in section 1861(r)(1).
       ``(B) Criteria for designation as medical assistance 
     facility.--A State may designate a facility as a medical 
     assistance facility only if the facility--
       ``(i) is located in a county (or equivalent unit of local 
     government)--

       ``(I) with fewer than 6 residents per square mile, or
       ``(II) in a rural area (as defined in section 
     1886(d)(2)(D)) that is located more than a 35-mile or 45-
     minute drive from a hospital, a rural primary care hospital, 
     or another facility described in this subsection;

       ``(ii) at the time such facility applies to the State for 
     designation as a medical assistance facility--

       ``(I) is a hospital (or in the case of a facility that 
     closed during the 12-month period that ends on the date the 
     facility applies for such designation, at the time the 
     facility closed), with a participation agreement in effect 
     under section 1866(a); or
       ``(II) is licensed in accordance with applicable State and 
     local laws and regulations;

       ``(iii) meets the requirements of clauses (iv), (vi), and 
     (vii) of subparagraph (A); and
       ``(iv) meets the requirements of subparagraph (I) of 
     paragraph (2) of section 1861(aa).
       ``(e) Rural Health Network Defined.--For purposes of this 
     section, the term `rural health network' means, with respect 
     to a State, an organization--
       ``(1) consisting of--
       ``(A) at least 1 facility that the State has designated or 
     plans to designate as a rural primary care hospital, and
       ``(B) at least 1 hospital that furnishes services that a 
     rural primary care hospital cannot furnish, and
       ``(2) the members of which have entered into agreements 
     regarding--
       ``(A) patient referral and transfer,
       ``(B) the development and use of communications systems, 
     including (where feasible) telemetry systems and systems for 
     electronic sharing of patient data,
       ``(C) the provision of emergency and non-emergency 
     transportation among the members, and
       ``(D) credentialing and quality assurance.
       ``(f) Certification by the Secretary.--The Secretary shall 
     certify a facility as a rural primary care hospital or 
     medical assistance facility (as the case may be) if the 
     facility--
       ``(1) is located in a State that has established a limited 
     service hospital program in accordance with subsection (d);
       ``(2) is designated as a rural primary care hospital or 
     medical assistance facility by the State in which it is 
     located; and
       ``(3) meets such other criteria as the Secretary may 
     require.
       ``(g) Permitting Maintenance of Swing Beds.--Nothing in 
     this section shall be construed to prohibit a State from 
     designating or the Secretary from certifying a facility as a 
     rural primary care hospital or medical assistance facility 
     solely because, at the time the facility applies to the State 
     for designation as a rural primary care hospital or medical 
     assistance facility, 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 in a rural primary care facility pursuant to 
     subsection (d)(2)(A)(vi)). The Secretary may establish 
     additional conditions of participation for rural primary care 
     hospitals with a substantial number of such beds. For 
     purposes of the first 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 or medical assistance facility.
       ``(h) Grants.--
       ``(1) Limited service hospital program.--The Secretary may 
     award grants to States that have submitted applications in 
     accordance with subsection (c) for--
       ``(A) engaging in activities relating to planning and 
     implementing a rural health care plan;
       ``(B) in the case of a rural primary care hospital program 
     described in subsection (d)(1)(A), engaging in activities 
     relating to planning and implementing rural health networks; 
     and
       ``(C) designation of facilities as rural primary care 
     hospitals or medical assistance facilities.
       ``(2) Rural emergency medical services.--
       ``(A) In general.--The Secretary may award grants to States 
     that have submitted applications in accordance with 
     subparagraph (B) for the establishment or expansion of a 
     program for the provision of rural emergency medical 
     services.
       ``(B) Application.--An application is in accordance with 
     this subparagraph if the State submits to the Secretary at 
     such time and in such form as the Secretary may require an 
     application containing the assurances described in 
     subparagraphs (A)(ii), (A)(iii), and (B) of subsection (c)(1) 
     and paragraph (3) of such subsection.
       ``(i) Study on Clinically Based Alternative to 96-Hour 
     Rule.--The Secretary shall conduct a study on the feasibility 
     of admitting patients to rural primary care hospitals and 
     medical assistance facilities on a limited DRG basis instead 
     of using the 96-hour average length of stay criteria 
     described in subsection (d)(2)(A)(vii).
       ``(j) Waiver of Conflicting Part A Provisions.--The 
     Secretary is authorized to waive such provisions of this part 
     and part C as are necessary to conduct the program 
     established under this section.
       ``(k) Authorization of Appropriations.--There are 
     authorized to be appropriated from the Federal Hospital 
     Insurance Trust Fund--
       ``(1) for making grants under subsection (h)(1) to States 
     that have established a rural primary care hospital program 
     in the State under subsection (d)(1)(A), $15,000,000 for each 
     of fiscal years 1993 through 1995; and
       ``(2) for making grants to all States under subsection (h), 
     $25,000,000 in each of the fiscal years 1996 through 1999.''.
       (b) Part A Amendments Relating to Rural Primary Care 
     Hospitals and Medical Assistance Facilities.--
       (1) Definitions.--Section 1861 (42 U.S.C. 1395x) is amended 
     by adding at the end the following new subsection:


  ``medical assistance facility; medical assistance facility services

       ``(oo)(1) The term `medical assistance facility' means a 
     facility certified by the Secretary as a medical assistance 
     facility under section 1820(f).
       ``(2) The term `medical assistance facility services' means 
     items and services, furnished to an inpatient for a medical 
     assistance facility by such facility, that would be inpatient 
     hospital services if furnished to an inpatient of a hospital 
     by a hospital.''.
       (2) Coverage and payment.--(A)(i) Section 1812(a)(1) (42 
     U.S.C. 1395d(a)(1)) is amended by striking ``inpatient 
     hospital services'' the first place it appears and inserting 
     ``, inpatient hospital services and inpatient medical 
     assistance facility services''; and
       (ii) by striking ``inpatient hospital services'' the second 
     place it appears and inserting ``such services''.
       (B) Section 1814 (42 U.S.C. 1395f) is amended--
       (i) in subsection (b), by striking ``inpatient rural 
     primary care hospital services,'' and inserting ``inpatient 
     rural primary care hospital services, other than a medical 
     assistance facility providing inpatient medical assistance 
     facility services,''; and
       (ii) by amending subsection (l) to read as follows:
       ``(l) Payment for Inpatient Rural Primary Care Services and 
     Inpatient Medical Assistance Facility Services.--The amount 
     of payment under this part for inpatient rural primary care 
     services and inpatient medical assistance facility services 
     is the reasonable costs of the rural primary care hospital or 
     medical assistance facility in providing such services.''.
       (3) Treatment of medical assistance facilities as providers 
     of services.--(A) Section 1861(u) (42 U.S.C. 1395x(u)) is 
     amended by inserting ``medical assistance facility,''after 
     ``rural primary care hospital,''.
       (B) The first sentence of section 1864(a) (42 U.S.C. 
     1395aa(a)) is amended by inserting ``a medical assistance 
     facility, as defined in section 1861(oo)(1),'' after 
     ``1861(mm)(1),''.
       (C) The third sentence of section 1865(a) of such Act (42 
     U.S.C. 1395bb(a)) is amended by striking ``or 1861(mm)(1)'' 
     and inserting ``1861(mm)(1), or 1861(oo)(1),''.
       (4) Conforming amendments.--(A) Section 1128A(b)(1) (42 
     U.S.C. 1320a-7a(b)(1)) is amended--
       (i) by striking ``or a rural primary care hospital'' the 
     first place it appears and inserting ``, a rural primary care 
     hospital, or a medical assistance facility''; and
       (ii) by striking ``or a rural primary care hospital'' the 
     second place it appears and inserting ``, the rural primary 
     care hospital, or the medical assistance facility''.
       (B) Section 1128B(c) (42 U.S.C. 1320a-7b(c)) is amended by 
     inserting ``medical assistance facility,'' after ``rural 
     primary care hospital,''.
       (C) Section 1134 (42 U.S.C. 1320b-4) is amended by striking 
     ``or rural primary care hospitals'' each place it appears and 
     inserting ``, rural primary care hospitals, or medical 
     assistance facilities''.
       (D) Section 1138(a)(1) (42 U.S.C. 1320b-8(a)(1)) is 
     amended--
       (i) in the matter preceding subparagraph (A), by striking 
     ``or rural primary care hospital'' and inserting ``, rural 
     primary care hospital, or medical assistance facility'', and
       (ii) in the matter preceding clause (i) of subparagraph 
     (A), by striking ``or rural primary care hospital'' and 
     inserting ``, rural primary care hospital, or medical 
     assistance facility''.
       (E) Section 1164(e) (42 U.S.C. 1320c-13(e)) is amended by 
     inserting ``medical assistance facilities,'' after ``rural 
     primary care hospitals,''.
       (F) Section 1816(c)(2)(C) (42 U.S.C. 1395h(c)(2)(C)) is 
     amended by inserting ``medical assistance facility,'' after 
     ``rural primary care hospital,''.
       (G) Section 1833 (42 U.S.C. 1395l) is amended--
       (i) in subsection (h)(5)(A)(iii)--
       (I) by striking ``or rural primary care hospital'' and 
     inserting ``rural primary care hospital, or medical 
     assistance facility''; and
       (II) by striking ``to the hospital'' and inserting ``to the 
     hospital or the facility'';
       (ii) in subsection (i)(1)(A), by inserting ``medical 
     assistance facility,'' after ``rural primary care 
     hospital,'';
       (iii) in subsection (i)(3)(A), by striking ``or rural 
     primary care hospital services'' and inserting ``rural 
     primary care hospital services, or medical assistance 
     facility services'';
       (iv) in subsection (l)(5)(A), by inserting ``medical 
     assistance facility,'' after ``rural primary care hospital,'' 
     each place it appears; and
       (v) in subsection (l)(5)(C), by striking ``or rural primary 
     care hospital'' each place it appears and inserting ``, rural 
     primary care hospital, or medical assistance facility''.
       (H) Section 1835(c) (42 U.S.C. 1395n(c)) is amended by 
     adding at the end the following: ``A medical assistance 
     facility shall be considered a hospital for purposes of this 
     subsection.''.
       (I) Section 1842(b)(6)(A)(ii) (42 U.S.C. 
     1395u(b)(6)(A)(ii)) is amended by inserting ``medical 
     assistance facility,'' after ``rural primary care 
     hospital,''.
       (J) Section 1861 (42 U.S.C. 1395x) is amended--
       (i) in the last sentence of subsection (e), by striking 
     ``1861(mm)(1))'' and inserting ``1861(mm)(1)) or a medical 
     assistance facility (as defined in section 1861(oo)(1)).'',
       (ii) in subsection (w)(1) by inserting ``medical assistance 
     facility,'' after ``rural primary care hospital,'', and
       (iii) in subsection (w)(2), by striking ``or rural primary 
     care hospital'' each place it appears and inserting ``, rural 
     primary care hospital, or medical assistance facility''.
       (K) Section 1862(a)(14) (42 U.S.C. 1395y(a)(14)) is amended 
     by striking ``or rural primary care hospital'' each place it 
     appears and inserting ``, rural primary care hospital, or 
     medical assistance facility''.
       (L) Section 1866(a)(1) (42 U.S.C 1395cc(a)(1)) is amended--
       (i) in subparagraph (F)(ii), by inserting ``medical 
     assistance facilities,'' after ``rural primary care 
     hospitals,'';
       (ii) in subparagraph (H)--
       (I) in the matter preceding clause (i), by inserting ``and 
     in the case of medical assistance facilities which provide 
     inpatient medical assistance facility services'' after 
     ``rural primary care hospital services''; and
       (II) in clauses (i) and (ii), by striking ``hospital'' each 
     place it appears and inserting ``hospital or facility'';
       (iii) in subparagraph (I)--
       (I) in the matter preceding clause (i), by striking ``or 
     rural primary care hospital'' and inserting ``, a rural 
     primary care hospital, or a medical assistance facility''; 
     and
       (II) in clause (ii), by striking ``the hospital'' and 
     inserting ``the hospital or the facility''; and
       (iv) in subparagraph (N)--
       (I) in the matter preceding clause (i), by striking ``and 
     rural primary hospitals'' and inserting ``, rural primary 
     care hospitals, and medical assistance facilities'';
       (II) in clause (i), by striking ``or rural primary care 
     hospital,'' and inserting ``, rural primary care hospital, or 
     medical assistance facility,''; and
       (III) in clause (ii), by striking ``hospital'' and 
     inserting ``hospital or facility''.
       (M) Section 1866(a)(3) (42 U.S.C 1395cc(a)(3)) is amended--
       (i) by striking ``rural primary care hospital,'' each place 
     it appears in subparagraphs (A) and (B) and inserting ``rural 
     primary care hospital, medical assistance facility,'', and
       (ii) in subparagraph (C)(ii)(II), by striking ``rural 
     primary care hospitals,'' each place it appears and inserting 
     ``rural primary care hospitals, medical assistance 
     facilities''.
       (N) Section 1867(e)(5) (42 U.S.C. 1395dd(e)(5)) is amended 
     by striking ``1861(mm)(1))'' and inserting ``1861(mm)(1)) or 
     a medical assistance facility (as defined in section 
     1861(oo)(1)).''.
       (c) Part B Amendments Relating to Rural Primary Care 
     Hospitals and Medical Assistance Facilities.--
       (1) Coverage.--(A) Section 1861(oo) (42 U.S.C. 1395x(oo)) 
     as added by subsection (b)(1), is amended by adding at the 
     end the following new paragraph:
       ``(3) The term `outpatient medical assistance facility 
     services' means medical and other health services furnished 
     by a medical assistance facility on an outpatient basis.''.
       (B) Section 1832(a)(2) (42 U.S.C. 1395k(a)(2)) is amended--
       (i) in subparagraph (I), by striking ``and'' at the end;
       (ii) in subparagraph (J), by striking the period at the end 
     and inserting ``; and''; and
       (iii) by adding at the end the following new subparagraph:
       ``(K) outpatient medical assistance facility services (as 
     defined in section 1861(oo)(3)).''.
       (2) Payment.--(A) Section 1833(a) (42 U.S.C. 1395l(a)) is 
     amended--
       (i) in paragraph (2), in the matter preceding subparagraph 
     (A), by striking ``and (I)'' and inserting ``(I), and (K)'';
       (ii) in paragraph (6), by striking ``and'' at the end;
       (iii) in paragraph (7), by striking the period at the end 
     and inserting ``; and''; and
       (iv) by adding at the end the following new paragraph:
       ``(8) in the case of outpatient medical assistance facility 
     services, the amounts described in section 1834(g).''.
       (B) Section 1834(g) (42 U.S.C. 1395m(g)) is amended--
       (i) in the subsection heading by inserting ``and Outpatient 
     Medical Assistance Facility Services'' after ``Services'';
       (ii) in paragraph (1), by striking ``provided during a year 
     before 1993 in a rural primary care hospital under this part 
     shall be determined by one of the following methods as 
     elected by the rural primary care hospital'' and inserting 
     ``in a rural primary care hospital or medical assistance 
     facility under this part shall be determined by one of the 
     following methods as elected by the rural primary care 
     hospital or medical assistance facility'';
       (iii) in paragraph (1)(A)(ii), by striking ``outpatient 
     rural primary care hospital services'' each place it appears 
     and inserting ``outpatient rural primary care hospital 
     services or outpatient medical assistance facility 
     services''; and
       (iv) in paragraph (1)(B), by striking ``hospital'' and 
     inserting ``hospital or facility''.
       (d) Payment Continued to Designated EACHs.--
       (1) Termination of each designation.--Section 1820(i)(1)(A) 
     (42 U.S.C. 1395l(4)(i)(1)(A)) is amended by inserting at the 
     end the following new flush sentence:

     ``The Secretary shall not designate any hospital as an 
     essential access community hospital on or after July 1, 1994 
     (October 1, 1994, in the case of a hospital located in a 
     State receiving a grant under this section before July 1, 
     1994).''.
       (2) Permitting payment to prior designated eachs.--Section 
     1886(d)(5)(D) (42 U.S.C. 1395ww(d)(5)(D)) is amended--
       (A) in clause (iii)(III), by inserting ``as in effect on 
     July 2, 1994'' before the period at the end; and
       (B) in clause (v), by inserting ``as in effect on July 2, 
     1994'' after ``1820(i)(1).''
       (3) Effective date.--The amendments made by this subsection 
     shall take effect on July 1, 1994.
       (e) Technical Amendment Relating to Part A Deductible, 
     Coinsurance and Spell of Illness.--(1) Section 1812(a)(1) (42 
     U.S.C. 1395d(a)(1)), as amended by subsection (b)(2)(A), is 
     amended--
       (A) by striking ``inpatient medical assistance facility 
     services'' and inserting ``inpatient medical assistance 
     facility services, inpatient rural primary care hospital 
     services, or inpatient medical assistance facility 
     services''; and
       (B) by striking ``and inpatient rural primary care hospital 
     services''.
       (2) Sections 1813(a) and 1813(b)(3)(A) (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, inpatient rural primary care 
     hospital services, or inpatient medical assistance facility 
     services,''.
       (3) Section 1813(b)(3)(B) (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, inpatient medical assistance 
     facility services,''.
       (4) Section 1861(a) (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, inpatient 
     medical assistance facility services,''; and
       (B) in paragraph (2), by striking ``hospital'' and 
     inserting ``hospital, rural primary care hospital, or medical 
     assistance facility''.
       (f) Repeal of Development of PPS System For Inpatient Rural 
     Primary Care Hospital Services.--
       (1) In general.--Section 1814(l) (42 U.S.C. 1395f(l)) is 
     amended by striking paragraph (2).
       (2) Conforming amendments.--Section 1814(l)(1) (42 U.S.C. 
     1395F(l)(1)) is amended--
       (A) by striking ``(l)(1)'' and inserting ``(l)'';
       (B) by redesignating subparagraphs (A) and (B) as 
     paragraphs (1) and (2), respectively;
       (C) in paragraph (2), as redesignated, by striking 
     ``paragraph'' and inserting ``subsection''; and
       (D) in the last sentence, by striking ``paragraph'' and 
     inserting ``subsection''.
       (g) Repeal of Development and Implementation of All 
     Inclusive PPS System for Outpatient Rural Primary Care 
     Services.--
       (1) In general.--Section 1834(g) (42 U.S.C. 1395m(g)), as 
     amended by subsection (c)(2)(B), is amended by striking 
     paragraph (2).
       (2) Conforming amendments.--Section 1834(g)(1) (42 U.S.C. 
     1395m(g)(1)) is amended--
       (A) by striking ``(1) In general.--''
       (B) by redesignating subparagraph (A) and clauses (i) and 
     (ii) of such subparagraph as paragraph (1) and subparagraphs 
     (A) and (B) of such paragraph, respectively;
       (C) by redesignating subparagraph (B) as paragraph (2);
       (D) in paragraph (1)(A), as redesignated, by striking 
     ``subparagraph (B)''; and
       (E) in paragraph (1)(B), as so redesignated, by striking 
     ``subparagraph'' and inserting ``paragraph''.
       (h) Effective Date.--Except as otherwise provided, the 
     amendments made by this section shall apply to services 
     furnished on or after October 1, 1994.

     SEC. 4112. SUBACUTE CARE STUDY.

       (a) Study.--The Secretary of Health and Human Services 
     (hereafter in this section referred to as the ``Secretary'') 
     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 
     such 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 studied 
     under subsection (a).

     SEC. 4113. 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;''.

                 PART 3--PROVISIONS RELATING TO PART B

     SEC. 4201. UPDATES FOR PHYSICIANS' SERVICES.

       Section 1848(d)(1) (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 for purposes of 
     subsection (j)(1)), the conversion factor established under 
     this subsection for 1994 reduced by 1 percent and 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 4.0 percent and adjusted by the update established 
     under paragraph (3) for 1995.''.

     SEC. 4202. SUBSTITUTION OF REAL GDP TO ADJUST FOR VOLUME AND 
                   INTENSITY; REPEAL OF RESTRICTION ON MAXIMUM 
                   REDUCTION PERMITTED IN DEFAULT UPDATE.

       (a) Use of Real GDP To Adjust for Volume and Intensity.--
     Section 1848(f)(2)(A)(iii) (42 U.S.C. 1395w-4(f)(2)(A)(iii)) 
     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''.
       (b) Repeal of Restriction on Maximum Reduction.--Section 
     1848(d)(3)(B)(ii) (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).
       (c) Repeal of Performance Standard Factor.--
       (1) In general.--Section 1848(f)(2) is amended by striking 
     subparagraph (B) and redesignating subparagraph (C) as 
     subparagraph (B).
       (2) Conforming amendment.--Section 1848(f)(2)(A) is amended 
     in the matter following clause (iv) by striking ``1, 
     multiplied by 100'' and all that follows through 
     ``subparagraph (B))'' and inserting ``1 and multiplied by 
     100''.
       (d) Effective Date.--
       (1) Volume performance standards.--The amendments made by 
     subsections (a) and (c) shall apply with respect to volume 
     performance standards established beginning with fiscal year 
     1995.
       (2) Repeal of restriction on maximum reduction.--The 
     amendments made by subsection (b) shall apply to services 
     furnished on or after January 1, 1997.

     SEC. 4203. PAYMENT FOR PHYSICIANS' SERVICES RELATING TO 
                   INPATIENT STAYS IN CERTAIN HOSPITALS.

       (a) In General.--
       (1) Limitations described.--Part B of title XVIII (42 
     U.S.C. 1831 et seq.) is amended by inserting after section 
     1848 the following new section:


``limitations on payment for physicians' services relating to inpatient 
                       stays in certain hospitals

       ``Sec. 1849. (a) Definitions.--In this section, the 
     following definitions apply:
       ``(1) Hospital.--The term `hospital' means a subsection (d) 
     hospital as defined in section 1886(d)(1)(B).
       ``(2) 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.
       ``(3) Rural area; urban area.--The terms `rural area' and 
     `urban area' have the meaning given such terms under section 
     1886(d)(2)(D).
       ``(4) Teaching hospital.--The term `teaching hospital' 
     means a hospital which has a teaching program approved as 
     specified in section 1861(b)(6).
       ``(b) 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 (c)(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 (c)(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 (d)) 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 of such hospital under paragraph (1).
       ``(c) 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 per admission 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 adjusted for 
     variations in case-mix, disproportionate share status, and 
     teaching status among hospitals (as determined by the 
     Secretary under subparagraph (C)); 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 calendar 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.
       ``(d) 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 (b) during a year 
     shall be reduced by 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 (b)(1) 
     that the hospital medical staff's projected relative value 
     per admission exceeds the allowable average per admission 
     relative value.
       ``(e) 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 relative value 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 (c)(2)(C)).
       ``(2) Reconciliation with reductions taken.--
       ``(A) Reimbursement.--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--
       ``(i) 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 
     (c)(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 (d), including interest at an appropriate rate 
     determined by the Secretary; and
       ``(ii) 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)) exceeded the 
     allowable average per admission relative value applicable to 
     the hospital's medical staff under subsection (c)(1) for the 
     year, the Secretary shall reimburse the fiduciary agent for 
     the medical staff, as a percent of the total amount of 
     payment otherwise determined under this part for physicians' 
     services furnished during the year to inpatients of the 
     hospital by the hospital's medical staff (prior to the 
     reduction under subsection (d)), the difference between 15 
     percentage points and the actual number of percentage points 
     that the medical staff exceeded the allowable average per 
     admission relative value, including interest at any 
     appropriate rate determined by the Secretary.
       ``(B) No reimbursement.--The Secretary shall not pay the 
     fiduciary agent for the medical staff of a hospital any 
     amounts by which payments for physicians' services provided 
     by the medical staff were reduced for a year under this 
     section 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)) exceeded the 
     allowable average per admission relative value applicable to 
     the hospital's medical staff under subsection (c)(1) for the 
     year by 15 percentage points or more.
       ``(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 1 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 amounts withheld 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)(A)(ii) 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.
       ``(f) Claims To Be Submitted Not Later Than 90 Days After 
     End of Year.--Notwithstanding any other provision of law, no 
     payment may be made under this part for any physician's 
     service furnished by a member of the medical staff of a 
     hospital to an inpatient of the hospital during a year unless 
     the hospital submits a claim to the Secretary for the payment 
     for such service not later than 90 days after the last day of 
     the year.''.
       (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. 4204. CHANGES IN UNDERSERVED AREA BONUS PAYMENTS.

       (a) In General.--Section 1833(m) (42 U.S.C. 1395l(m)) is 
     amended--
       (1) by inserting ``(1)'' after ``(m)'',
       (2) by inserting ``described in paragraph (2)'' after 
     ``physicians' services'',
       (3) by striking ``10 percent'' and inserting ``the 
     applicable percent'',
       (4) by striking ``service'' the last place it appears and 
     inserting ``services'', and
       (5) by adding at the end the following new paragraph:
       ``(2)(A) The applicable percent referred to in paragraph 
     (1) 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) The Secretary shall reduce payments for all services 
     (other than primary care services) for which payment may be 
     made under this section by such percentage as the Secretary 
     determines necessary so that, beginning on the date of the 
     enactment of the Health Security Act, the amendments made by 
     section 4204(e) of such Act would not result in expenditures 
     under this section that exceed the amount of such 
     expenditures that would have been made if such amendment had 
     not been made.''.
       (b) Effective Date.--The amendments made by paragraph (1) 
     are effective for services furnished on or after January 1, 
     1995.

     SEC. 4205. CORRECTION OF MVPS UPWARD BIAS.

       (a) In General.--Section 1848(f)(2)(A)(iv) (42 U.S.C. 
     1395w-4(f)(2)(A)(iv)) is amended by striking ``including 
     changes in law and regulations affecting the percentage 
     increase described in clause (i)'' and inserting ``excluding 
     anticipated responses to such changes''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply with respect to performance standard rates of 
     increase determined for fiscal year 1995 and succeeding 
     fiscal years.

     SEC. 4206. DEMONSTRATION PROJECTS FOR MEDICARE STATE-BASED 
                   PERFORMANCE STANDARD RATE OF INCREASE.

       Section 1848(f) (42 U.S.C. 1395w-4(f)) is amended by adding 
     at the end the following new paragraph:
       ``(6) State-based performance standard rates of increase 
     demonstration projects.--The Secretary shall establish 
     demonstration projects in not more than 3 States under which 
     a State elects State-based performance standard rates of 
     increase to substitute for the national performance standard 
     rates of increase established for the year under paragraph 
     (2). The Secretary shall develop criteria for the 
     establishment of such demonstration projects which shall 
     include the requirement of budget-neutrality for payments 
     made under this part with respect to physicians' services 
     furnished in a State participating in the demonstration 
     project.''.

     SEC. 4207. ELIMINATION OF FORMULA-DRIVEN OVERPAYMENTS FOR 
                   CERTAIN OUTPATIENT HOSPITAL SERVICES.

       (a) Ambulatory Surgical Center Procedures.--Section 
     1833(i)(3)(B)(i)(II) (42 U.S.C. 1395l(i)(3)(B)(i)(II)) is 
     amended--
       (1) by striking ``of 80 percent''; and
       (2) by striking the period at the end and inserting the 
     following: ``, less the amount a provider may charge as 
     described in clause (ii) of section 1866(a)(2)(A).''.
       (b) Radiology Services and Diagnostic Procedures.--Section 
     1833(n)(1)(B)(i)(II) (42 U.S.C. 1395l(n)(1)(B)(i)(II)) is 
     amended--
       (1) by striking ``of 80 percent''; and
       (2) by striking the period at the end and inserting the 
     following: ``, less the amount a provider may charge as 
     described in clause (ii) of section 1866(a)(2)(A).''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to services furnished during portions of cost 
     reporting periods occurring on or after July 1, 1994.

     SEC. 4208. EYE OR EYE AND EAR HOSPITALS.

       Section 1833(i)(4)(A) (42 U.S.C. 1395l(i)(4)(A)) is amended 
     in the matter following clause (iii) by striking ``January 1, 
     1995'' and inserting ``September 30, 1997''.

     SEC. 4209. IMPOSITION OF COINSURANCE ON LABORATORY SERVICES.

       (a) In General.--Paragraphs (1)(D) and (2)(D) of section 
     1833(a) (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. 4210. APPLICATION OF COMPETITIVE ACQUISITION PROCESS FOR 
                   PART B ITEMS AND SERVICES.

       (a) General Rule.--Part B of title XVIII is amended by 
     inserting after section 1846 the following:


            ``competition acquisition for items and services

       ``Sec. 1847. (a) Establishment of Bidding Areas.--
       ``(1) In general.--The Secretary shall establish 
     competitive acquisition areas for the purpose of awarding a 
     contract or contracts for the furnishing under this part of 
     the items and services described in subsection (c) on or 
     after January 1, 1995. The Secretary may establish different 
     competitive acquisition areas under this subsection for 
     different classes of items and services under this part.
       ``(2) Criteria for establishment.--The competitive 
     acquisition areas established under paragraph (1) shall--
       ``(A) initially be, or be within, metropolitan statistical 
     areas; and
       ``(B) be chosen based on the availability and accessibility 
     of suppliers and the probable savings to be realized by the 
     use of competitive bidding in the furnishing of items and 
     services in the area.
       ``(b) Awarding of Contracts in Areas.--
       ``(1) In general.--The Secretary shall conduct a 
     competition among individuals and entities supplying items 
     and services under this part for each competitive acquisition 
     area established under subsection (a) for each class of items 
     and services.
       ``(2) Conditions for awarding contract.--The Secretary may 
     not award a contract to any individual or entity under the 
     competition conducted pursuant to paragraph (1) to furnish an 
     item or service under this part unless the Secretary finds 
     that the individual or entity meets quality standards 
     specified by the Secretary for the furnishing of such item or 
     service.
       ``(3) Contents of contract.--A contract entered into with 
     an individual or entity under the competition conducted 
     pursuant to paragraph (1) shall specify (for all of the items 
     and services within a class)--
       ``(A) the quantity of items and services the entity shall 
     provide; and
       ``(B) such other terms and conditions as the Secretary may 
     require.
       ``(c) Services Described.--The items and services to which 
     the provisions of this section shall apply are as follows:
       ``(1) Magnetic resonance imaging tests and computerized 
     axial tomography scans, including a physician's 
     interpretation of the results of such tests and scans.
       ``(2) Enteral and parenteral nutrients and supplies.''.
       (b) Items and Services To Be Furnished Only Through 
     Competitive Acquisition.--Section 1862(a) (42 U.S.C. 
     1395y(a)) is amended--
       (1) by striking ``or'' at the end of paragraph (15);
       (2) by striking the period at the end of paragraph (16) and 
     inserting ``; or''; and
       (3) by inserting after paragraph (16) the following new 
     paragraph:
       ``(17) where such expenses are for an item or service 
     furnished in a competitive acquisition area (as established 
     by the Secretary under section 1847(a)) by an individual or 
     entity other than the supplier with whom the Secretary has 
     entered into a contract under section 1847(b) for the 
     furnishing of such item or service in that area, unless the 
     Secretary finds that such expenses were incurred in a case of 
     urgent need.''.
       (c) Reduction in Payment Amounts if Competitive Acquisition 
     Fails To Achieve Minimum Reduction in Payments.--
     Notwithstanding any other provision of title XVIII of the 
     Social Security Act, if the establishment of competitive 
     acquisition areas under section 1847 of such Act (as added by 
     subsection (a)) and the limitation of coverage for items and 
     services under part B of such title to items and services 
     furnished by providers with competitive acquisition contracts 
     under such section during 1996 does not result in a reduction 
     of at least 10 percent in the projected payment amount that 
     would have applied to the items or services under part B if 
     the items or services had not been furnished through 
     competitive acquisition under such section in such year, the 
     Secretary shall reduce for such year the payment amount for 
     all such services by such percentage as the Secretary 
     determines necessary to result in such a reduction for such 
     year.
       (d) Effective Date.--The amendments made by this section 
     shall apply to items and services furnished under part B of 
     title XVIII of the Social Security Act on or after January 1, 
     1995.

     SEC. 4211. APPLICATION OF COMPETITIVE ACQUISITION PROCEDURES 
                   FOR LABORATORY SERVICES.

       (a) In General.--Section 1847(c), as added by section 4210, 
     is amended by inserting after paragraph (2) the following new 
     paragraph:
       ``(3) Clinical diagnostic laboratory tests.''.
       (b) Reduction in Fee Schedule Amounts if Competitive 
     Acquisition Fails To Achieve Savings.--Section 1833(h) (42 
     U.S.C. 1395l(h)) is amended by adding at the end the 
     following new paragraph:
       ``(7) Notwithstanding any other provision of this 
     subsection, if the Secretary applies the authority provided 
     under section 1847 to establish competitive acquisition areas 
     for the furnishing of clinical diagnostic laboratory tests 
     during 1996 and the application of such authority does not 
     result in a reduction of at least 10 percent in the projected 
     payment amount that would have applied to such tests under 
     this section in such year if the tests had not been furnished 
     through competitive acquisition under section 1847, the 
     Secretary shall reduce for such year each payment amount for 
     all such tests otherwise determined under the fee schedules 
     and negotiated rates established under this subsection by 
     such percentage as the Secretary determines necessary to 
     result in such a reduction for such year.''.

     SEC. 4212. EXPANDED COVERAGE FOR PHYSICIAN ASSISTANTS AND 
                   NURSE PRACTITIONERS.

       (a) Coverage in Outpatient Settings.--Section 1861(s)(2)(K) 
     (42 U.S.C. 1395x(s)(2)(K)) is amended--
       (1) in clause (i)--
       (A) by striking ``or'' at the end of subclause (II); and
       (B) by inserting ``or (IV) in an outpatient setting as 
     defined by the Secretary'' following ``shortage area,''; and
       (2) in clause (ii), by striking ``section 1919(a)'' and 
     inserting ``section 1919(a) or in an outpatient setting as 
     defined by the Secretary''.
       (b) Payment Based on Physician Fee Schedule.--
       (1) Section 1833(a)(1)(O) (42 U.S.C. 1395l(a)(1)(O)) is 
     amended--
       (A) by striking ``section 1861(s)(2)(K)(iii) (relating to 
     nurse practitioner and clinical nurse specialist services 
     provided in a rural area)'' and inserting ``section 
     1861(s)(2)(K)'';
       (B) by striking ``for services furnished on or after 
     January 1, 1992,'' and inserting ``for services described in 
     section 1861(s)(2)(K)(iii) furnished on or after January 1, 
     1992, and for services described in clauses (i), (ii), and 
     (iv) of section 1861(s)(2)(K) furnished on or after January 
     1, 1997,''; and
       (C) by striking ``subsection (r)(2)'' and inserting 
     ``subsection (r)(2) or subparagraph (A) or (B) of section 
     1842(b)(12)''.
       (2) Section 1842(b)(12)(A) (42 U.S.C. 1395u(b)(12)(A)) is 
     amended--
       (A) by striking ``and'' at the end of clause (i);
       (B) in clause (ii) in the matter preceding subclause (I), 
     by striking ``the prevailing'' and inserting ``for services 
     furnished before January 1, 1997, the prevailing'';
       (C) by striking the period at the end of clause (ii)(II) 
     and inserting ``; and''; and
       (D) by inserting at the end the following clause:
       ``(iii) in the case of services furnished on or after 
     January 1, 1997, the fee schedule amount shall be equal to--

       ``(I) in the case of services performed as an assistant at 
     surgery, 65 percent of the amount that would otherwise be 
     recognized if performed by a physician who is serving as an 
     assistance at surgery,
       ``(II) in the case of services performed (other than as an 
     assistant at surgery) in a hospital, 75 percent of the fee 
     schedule amount specified under section 1848, and
       ``(III) in the case of other services, 85 percent of the 
     fee schedule amount specified under section 1848.

       (c) Rural Nurse Practitioners as Assistants at Surgery in 
     Urban Areas.--Section 1861(s)(2)(K)(ii) (42 U.S.C. 
     1395x(s)(2)(K)(ii)), as amended by subsection (a)(2), is 
     further amended by adding ``or services as an assistant at 
     surgery furnished by a nurse practitioner whose primary 
     practice location (as defined by the Secretary) is in a rural 
     area (as defined in section 1886(d)(2)(D)) to an individual 
     who resides in a rural area when the service is furnished to 
     such individual in an urban area by such practitioner when 
     such practitioner refers such individual to an urban area for 
     the furnishing of services'' after ``as defined by the 
     Secretary''.
       (d) Conforming Amendments.--
       (1) Section 1861(b)(4) (42 U.S.C. 1395x(b)(4)) is amended 
     by striking ``subsection (s)(2)(K)(i)'' and inserting 
     ``subsection (s)(2)(K)''.
       (2) Section 1862(a)(14) (42 U.S.C. 1395y(a)(14)), as 
     amended by section 4108(b)(4)(K), is amended by striking 
     ``section 1861(s)(2)(K)(i)'' and inserting ``section 
     1861(s)(2)(K)''.
       (3) Section 1866(a)(1)(H) (42 U.S.C. 1395cc(a)(1)(H)), as 
     amended by section 4108(b)(4)(L)(ii), is further amended by 
     striking ``section 1861(s)(2)(K)(i)'' and inserting ``section 
     1861(s)(2)(K)''.
       (e) Effective Date.--The amendments made by this section 
     shall apply to services furnished on or after January 1, 
     1997.

     SEC. 4213. ELIMINATION OF BALANCE BILLING.

       Effective January 1, 1996, notwithstanding any provision of 
     title XVIII of the Social Security Act (42 U.S.C. 1395 et 
     seq.), a nonparticipating physician, or nonparticipating 
     supplier or other person (as such terms are defined in 
     section 1842(i)(2) of such Act (42 U.S.C. 1395u(i)(2)) may 
     not receive payment for services or items under such title.

     SEC. 4214. 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 physician's 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 
     January 1, 1996, on the methodology developed under paragraph 
     (1) 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. 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.''.
       (2) 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 1997, the 
     practice''.
       (3) 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. 4215. PAYMENTS FOR DURABLE MEDICAL EQUIPMENT.

       (a) In General.--Subparagraph (B) of section 1834(a)(14) 
     (42 U.S.C. 1395m(a)(14)) is amended by striking the period at 
     the end and inserting ``, except that such percentage 
     increase shall--
       ``(i) be reduced by 2 percentage points for each of years 
     1995 and 1996;
       ``(ii) be reduced by 1.5 percentage points for 1997;
       ``(iii) be reduced by 2 percentage points for 1998; and
       ``(iv) be reduced by 1 percentage points for 1999.''.
       (b) Effective Date.--The amendment made by this section 
     shall be effective on the date of the enactment of this Act.

     SEC. 4216. CLARIFICATION OF REGULATIONS TO DISTINGUISH 
                   ORTHOTICS AND PROSTHETICS FROM DURABLE MEDICAL 
                   EQUIPMENT.

       The Secretary of Health and Human Services shall--
       (1) redesignate section 414.228 of title 42, Code of 
     Federal Regulations, as section 414.62 of title 42, Code of 
     Federal Regulations, and shall insert such section, as 
     redesignated, at the end of subpart A of part 414 of 
     subchapter B of chapter IV of title 42, Code of Federal 
     Regulations; and
       (2) shall strike ``and Prosthetic and Orthotic Devices'' 
     from the heading of subpart D of part 414 of subchapter B of 
     chapter IV of title 42, Code of Federal Regulations.

     SEC. 4217. GENERAL PART B PREMIUM.

       Section 1839(e) (42 U.S.C. 1395r(e)) is amended--
       (1) in paragraph (1)(A), by striking ``and prior to January 
     1999''; and
       (2) in paragraph (2), by striking ``prior to January 
     1998''.

              PART 4--PROVISIONS RELATING TO PARTS A AND B

     SEC. 4301. MEDICARE SECONDARY PAYER CHANGES.

       (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) Extension of Period for End Stage Renal Disease 
     Beneficiaries.--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,''.

     SEC. 4302. INCREASE IN MEDICARE SECONDARY PAYER COVERAGE FOR 
                   END STAGE RENAL DISEASE SERVICES TO 24 MONTHS.

       (a) In General.--Section 1862(b)(1)(C) (42 U.S.C. 
     1395y(b)(1)(C)), as amended by section 4301(c), is amended by 
     striking the last sentence and inserting: ``Effective for 
     items and services furnished on or after January 1, 1996 
     (with respect to periods beginning on or after July 1, 1994), 
     this subparagraph shall be applied by substituting `24-month' 
     for `12-month' each place it appears.''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to items and services provided on or after 
     January 1, 1996.

     SEC. 4303. EXPANSION OF CENTERS OF EXCELLENCE.

       (a) In General.--The Secretary of Health and Human Services 
     shall use a competitive process to contract with centers of 
     excellence for cataract surgery, coronary artery by-pass 
     surgery, and such other services as the Secretary determines 
     to be appropriate. Payment under title XVIII of the Social 
     Security Act will be made for services subject to such 
     contracts on the basis of negotiated or all-inclusive rates 
     as follows:
       (1) The center shall cover services provided in an urban 
     area (as defined in section 1886(d)(2)(D) of the Social 
     Security Act) for years beginning with fiscal year 1995.
       (2) The amount of payment made by the Secretary to the 
     center under title XVIII of the Social Security Act for 
     services covered under the contract shall be less than the 
     aggregate amount of the payments that the Secretary would 
     have made to the center for such services had the contract 
     not been in effect.
       (3) The Secretary shall make payments to the center on such 
     a basis for the following services furnished to individuals 
     entitled to benefits under such title:
       (A) Facility, professional, and related services relating 
     to cataract surgery.
       (B) Coronary artery bypass surgery and related services.
       (C) Such other services as the Secretary and the center may 
     agree to cover under the contract.
       (b) Rebate of Portion of Savings.--In the case of any 
     services provided under a contract conducted under subsection 
     (a), the Secretary shall make a payment to each individual to 
     whom such services are furnished (at such time and in such 
     manner as the Secretary may provide) in an amount equal to 10 
     percent of the amount by which--
       (1) the amount of payment that would have been made by the 
     Secretary under title XVIII of the Social Security Act to the 
     center for such services if the services had not been 
     provided under the contract, exceeds
       (2) the amount of payment made by the Secretary under such 
     title to the center for such services.

     SEC. 4304. REDUCTION IN ROUTINE COST LIMITS FOR HOME HEALTH 
                   SERVICES.

       (a) Reduction in Update To Maintain Freeze in 1996.--
     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) Basing Limits in Subsequent Years on Median of Costs.--
       (1) In general.--Section 1861(v)(1)(L)(i) (42 U.S.C. 
     1395x(v)(1)(L)(i)), as amended by subsection (a), is amended 
     in the matter following subclause (IV) by striking ``the 
     mean'' and inserting ``the median''.
       (2) Adjustment to limits.--Section 1861(v)(1)(L)(ii) (42 
     U.S.C. 1395x(v)(1)(L)(ii)) is amended by adding at the end 
     the following new sentence: ``The effect of the amendments 
     made by 656(b) of the Health Security Act shall not be 
     considered by the Secretary in making adjustments pursuant to 
     this clause.''.
       (3) Effective date.--The amendments made by paragraphs (1) 
     and (2) shall apply to cost reporting periods beginning on or 
     after July 1, 1997.

     SEC. 4305. IMPOSITION OF 20 PERCENT COINSURANCE ON HOME 
                   HEALTH SERVICES.

       (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 4108(c)(2), 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 July 1, 1995.

     SEC. 4306. TERMINATION OF MEDICAL EDUCATION PAYMENTS.

       (a) In General.--Section 1886(h) (42 U.S.C. 1395ww(h)) is 
     amended by adding at the end the following new paragraph:
       ``(6) Termination of payments attributable to costs of 
     training physicians.--Notwithstanding any other provision of 
     this section or section 1861(v), no payment may be made under 
     this title for direct graduate medical education costs 
     attributable to an approved medical residency training 
     program for any cost reporting period (or portion thereof) 
     beginning on or after January 1, 1997.''.
       (b) Prohibition Against Recognition of Costs of Training 
     Physicians.--Section 1861(v)(1) (42 U.S.C. 1395x(v)(1)), as 
     amended by section 4102(b), is amended by adding at the end 
     the following new subparagraph:
       ``(U) Such regulations shall not include any provision for 
     specific recognition of the costs of graduate medical 
     education for hospitals for any cost reporting period (or 
     portion thereof) beginning on or after January 1, 1997. 
     Nothing in the previous sentence shall be construed to affect 
     in any way payments to hospitals for the costs of any 
     approved educational activities that are not described in 
     such sentence.''.
       (c) Prohibition Against Recognition of Costs of Nurse 
     Professions or other Health Professions Education.--Section 
     1861(v)(1) (42 U.S.C. 1395x(v)(1)), as amended by section 
     4102(b) and subsection (b) is amended by adding at the end 
     the following new subparagraph:
       ``(V) Such regulations shall not include any provision for 
     specific recognition of the costs of nursing or other health 
     professions education beginning on or after January 1, 
     1997.''.

     SEC. 4307. MEDICARE SELECT.

       (a) Amendments to Provisions Relating to Medicare Select 
     Policies.--
       (1) Permitting medicare select policies in all states.--
     Subsection (c) of section 4358 of the Omnibus Budget 
     Reconciliation Act of 1990 is hereby repealed.
       (2) Requirements of medicare select policies.--Section 
     1882(t)(1) (42 U.S.C. 1395ss(t)(1)) is amended to read as 
     follows:
       ``(1)(A) If a medicare supplemental policy meets the 
     requirements of 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 
     requirements 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).''.
       (b) Renewability of Medicare Select Policies.--Section 
     1882(q)(1) (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) 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; except that, if such 
     individual moves to a geographic area where such issuer, 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.
       ``(ii) For purposes of this subparagraph, the term 
     `affiliate' shall have the meaning given such term by the 
     1991 NAIC Model Regulation.''.
       (c) Civil Penalty.--Section 1882(t)(2) (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 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).''.
       (d) Effective Dates.--
       (1) NAIC standards.--If, within 9 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 ``1995 NAIC 
     Model Regulation'').
       (2) Secretary standards.--If the NAIC does not make changes 
     in the 1991 NAIC Model Regulation (as so defined) within the 
     9-month period specified in paragraph (1), the Secretary of 
     Health and Human Services (hereafter in this subsection 
     referred to 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 on 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 ``1995 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 1995 NAIC Model 
     Regulation or the 1995 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 1995 NAIC Model Regulation or the 1995 
     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, 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.

       PART 5--REPEAL OF MEDICARE AND MEDICAID COVERAGE DATA BANK

     SEC. 4401. REPEAL OF MEDICARE AND MEDICAID COVERAGE DATA 
                   BANK.

       (a) Repeal of Data Bank.--Section 1144 of the Social 
     Security Act (42 U.S.C. 1320b-14), as added by section 13581 
     of the Omnibus Budget Reconciliation Act of 1993, is 
     repealed.
       (b) Conforming Amendments.--
       (1) Medicare.--Section 1862(b)(5) of such Act (42 U.S.C. 
     1395y(b)(5)) is amended--
       (A) in subparagraph (B), by striking ``the information 
     received under'' and all that follows and inserting ``the 
     information received under subparagraph (A) for the purposes 
     of carrying out this subsection.''; and
       (B) in subparagraph (C)(i), by striking ``subparagraph 
     (B)(i)'' and inserting ``subparagraph (B)''.
       (2) Medicaid.--Section 1902(a)(25)(A)(i) of such Act (42 
     U.S.C. 1396(a)(25)(A)(i)) is amended by striking ``(including 
     the use of information collected by the Medicare and Medicaid 
     Coverage Data Bank under section 1144 and any additional 
     measures as specified'' and inserting ``(as specified''.
       (3) Conforming amendment related to data matches.--
     Subsection (a)(8)(B) of section 552a of title 5, United 
     States Code, is amended--
       (A) in clause (v), by adding ``; or'' at the end;
       (B) in clause (vi), by striking ``; or'' and inserting a 
     semicolon; and
       (C) by striking clause (vii).
       (4) Conforming amendment to erisa.--
       (A) Section 101 of the Employee Retirement Income Security 
     Act of 1974 (29 U.S.C. 1031) is amended--
       (i) by striking subsection (f); and
       (ii) by redesignating subsection (g) as subsection (f).
       (B) Section 502(a) of such Act (29 U.S.C. 1132(a)) is 
     amended--
       (i) in paragraph (6), by striking the semicolon at the end 
     and inserting ``; or'';
       (ii) in paragraph (7), by striking ``; or'' and inserting a 
     period; and
       (iii) by striking paragraph (8).
       (C) Section 502(c) of such Act (29 U.S.C. 1132(c)) is 
     amended by striking paragraph (4).
       (D) Section 502(e)(1) of such Act (29 U.S.C. 1132(e)(1)) is 
     amended by striking ``fiduciary, or any person referred to in 
     section 101(f)(1)'' and inserting ``or fiduciary''.
                      Subtitle B--Medicaid Program

PART 1--INTEGRATION OF CERTAIN MEDICAID ELIGIBLES INTO REFORMED HEALTH 
                              CARE SYSTEM

     SEC. 4601. LIMITING COVERAGE UNDER MEDICAID OF ITEMS AND 
                   SERVICES COVERED UNDER STANDARD BENEFIT 
                   PACKAGE.

       (a) In General.--Title XIX (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:


   ``treatment of items and services in the standard benefit package

       ``Sec. 1931. (a) Items and Services Covered Under Standard 
     Benefit Package.--Except as provided in subsection (c), a 
     State plan under this part shall not provide medical 
     assistance consisting of payment for items and services in 
     the standard benefit package described in section 1201(a) of 
     the Health Security Act.
       ``(b) Medical Assistance Not Affected.--Subsection (a) 
     shall not be construed as--
       ``(1) affecting the eligibility of any individual for 
     medical assistance consisting of payment for items and 
     services not covered under the standard benefits package; or
       ``(2) with respect to individuals under the age of 19, 
     prohibiting payment of medical assistance for items and 
     services covered under the standard benefits package to the 
     extent that the items and services under this part exceed the 
     items and services covered under such package with respect to 
     amount, duration, and scope.
       ``(c) Exceptions.--Subsection (a) shall not affect the 
     provision of medical assistance consisting of payment for 
     items and services in the standard benefits package--
       ``(1) which are provided to--
       ``(A) an individual eligible for medical assistance under 
     the State plan who is not a premium subsidy eligible 
     individual (as defined in 6002(a)(2) of the Health Security 
     Act);
       ``(B) an individual with respect to whom supplemental 
     security income benefits are being paid under title XVI; and
       ``(C) an individual who is eligible for benefits under part 
     A of title XVIII; or
       ``(2) which consist of emergency services to certain aliens 
     under section 1903(v)(2).
       ``(d) State Maintenance of Effort.--
       ``(1) In general.--
       ``(A) Reduction in quarterly payments.--For any calendar 
     quarter in an applicable year (as defined in subparagraph 
     (B)), the amount otherwise payable to a State under section 
     1903 for the quarter shall be reduced by the State 
     maintenance of effort amount for the quarter determined under 
     paragraph (2).
       ``(B) Applicable year.--For purposes of this paragraph, the 
     term `applicable year' means 1997 and any succeeding year.
       ``(2) Maintenance of effort amount.--
       ``(A) In general.--The maintenance of effort amount for a 
     State for a calendar quarter in an applicable year shall be 
     equal to 25 percent of the sum of--
       ``(i) the State's AFDC eligibles payment amount for the 
     year determined under paragraph (3); and
       ``(ii) the State's non-cash eligibles payment amount for 
     the year determined under paragraph (4).
       ``(3) State afdc eligibles payment amount.--
       ``(A) In general.--The AFDC eligibles payment amount for a 
     State for a year is an amount equal to the product of--
       ``(i) the adjusted State per capita amount for the year 
     determined under subparagraph (B); multiplied by
       ``(ii) the number of AFDC eligible individuals receiving 
     premium assistance under section 6002 of the Health Security 
     Act during the year (as estimated by the Secretary).
       ``(B) Adjusted state per capita amount.--
       ``(i) In general.--The adjusted State per capita amount for 
     a year is the base State per capita amount determined under 
     clause (ii) updated by the percentage change in the State per 
     capita health expenditures index (as described in paragraph 
     (5)(A)) during the period beginning on October 1, 1994, and 
     ending on December 31 of the year preceding the applicable 
     year (as determined by the Secretary).
       ``(ii) Base state per capita amount.--The base per capita 
     amount for a State shall be an amount, as determined by the 
     Secretary, equal to the quotient of--

       ``(I) the total expenditures from State funds made under 
     the State plan during fiscal year 1994 with respect to 
     medical assistance consisting of items and services of the 
     type included in the standard benefit package for AFDC 
     eligible individuals; divided by
       ``(II) the average total number of AFDC eligible 
     individuals who received such medical assistance under the 
     State plan in any month during fiscal year 1994.

       ``(iii) Disproportionate share payments not included.--In 
     applying clause (ii), payments made under section 1923 shall 
     not be counted in the gross amount of payments.
       ``(C) AFDC eligible defined.--For purposes of this 
     paragraph, the term `AFDC eligible' means an individual who 
     receives aid or assistance under any plan of the State 
     approved under part A or part E of title IV.
       ``(4) Non-cash eligibles payment amount.--
       ``(A) In general.--The non-cash eligibles payment amount 
     for a State for a year is an amount equal to the State's base 
     payment amount (determined under subparagraph (B)) for the 
     applicable year updated by the percentage change in the State 
     per capita health expenditures index (as described in 
     paragraph (5)(A)) and the State population index (as 
     described in paragraph (5)(B)) during the period beginning on 
     October 1, 1994, and ending on December 31 of the year 
     preceding the applicable year (as determined by the 
     Secretary).
       ``(B) State base payment amount.--
       ``(i) In general.--The base payment amount for a State for 
     an applicable year shall be an amount, as determined by the 
     Secretary, equal to the total expenditures from State funds 
     made under the State plan during fiscal year 1994 with 
     respect to medical assistance consisting of items and 
     services of the type included in the standard benefit package 
     for non-cash eligible individuals who would not have received 
     such medical assistance if the provisions of this section and 
     subtitle A of title VI of the Health Security Act had been in 
     effect in fiscal year 1994.
       ``(ii) Disproportionate share payments included.--

       ``(I) In general.--In applying clause (i), the applicable 
     percentage (as determined under subclause (II)) of payments 
     made under section 1923 shall be counted in the gross amount 
     of payments.
       ``(II) Applicable percentage.--The applicable percentage 
     determined under this subclause is the amount (expressed as a 
     percentage) equal to--

       ``(aa) the State's inpatient hospital expenditures for 
     noncash eligible individuals in fiscal year 1994; divided by
       ``(bb) the State's inpatient hospital expenditures for all 
     individuals eligible for medical assistance under the State 
     plan in fiscal year 1994.
       ``(C) Non-cash eligible defined.--For purposes of this 
     paragraph, the term `non-cash eligible' means any individual 
     who received medical assistance under the State plan during 
     fiscal year 1994 other than an AFDC eligible individual or an 
     individual described in subsection (b).
       ``(5) Indexes.--
       ``(A) State per capita health expenditures index.--The 
     Secretary shall establish a State per capita health 
     expenditures index for each State which measures the change 
     in State per capita health expenditures from year to year.
       ``(B) State population index.--The Secretary shall 
     establish a State population index which measures the change 
     in the number of individuals residing in a State from year to 
     year.''.
       (b) No Federal Financial Participation.--Section 1903(i) 
     (42 U.S.C. 1396b(i)) is amended--
       (1) by striking ``or'' at the end of paragraph (14),
       (2) by striking the period at the end of paragraph (15) and 
     inserting ``; or'', and
       (3) by inserting after paragraph (15) the following new 
     paragraph:
       ``(16) with respect to items and services covered under the 
     standard benefit package described in section 1201(a) of the 
     Health Security Act for individuals to whom section 1931(a) 
     applies.''.
       (c) 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, 1997.

   PART 2--COORDINATED CARE SERVICES FOR DISABLED MEDICAID ELIGIBLES

     SEC. 4605. COORDINATED CARE SERVICES FOR DISABLED MEDICAID 
                   ELIGIBLES.

       (a) State Expenditures Limited to Certified Health Plans.--
     Section 1903(m) (42 U.S.C. 1396b) is amended by adding at the 
     end the following new paragraph:
       ``(7) No payment shall be made under this part to a State 
     with respect to expenditures incurred by the State for 
     payment for services provided by an entity with a contract 
     under this subsection unless such entity is a standard health 
     plan (as defined in section 1011(2)(B) of the Health Security 
     Act).''.
       (b) Modification to 75/25 Rule.--Section 1903(m)(2)(A)(ii) 
     (42 U.S.C. 1396b(m)(2)(A)(ii)) is amended by striking ``75 
     percent'' and inserting ``50 percent''.
       (c) Effective Date.--The amendments made by this section 
     shall become effective with respect to payments for calendar 
     quarters beginning on or after January 1, 1997.

      PART 3--PAYMENTS TO HOSPITALS SERVING VULNERABLE POPULATIONS

     SEC. 4611. REPLACEMENT OF DSH PAYMENT PROVISIONS WITH 
                   PROVISIONS RELATING TO PAYMENTS TO HOSPITALS 
                   SERVING VULNERABLE POPULATIONS.

       (a) Amendments to Provisions Requiring States to Make DSH 
     Payment Adjustments.--
       (1) Adjustments to national dsh payment limit.--Section 
     1923(f)(1)(B) (42 U.S.C. 1396r-4(f)(1)(B)) is amended to read 
     as follows:
       ``(B) National dsh payment limit.--
       ``(i) In general.--Except as provided in clause (ii), the 
     national DSH payment limit for a fiscal year is equal to 12 
     percent of the total amount of expenditures under the State 
     plans under this part for medical assistance during the 
     fiscal year.
       ``(ii) Reduction in limit.--For fiscal years ending in a 
     calendar year during which the percentage of individuals 
     covered by insurance, as determined by the National Health 
     Care Cost and Coverage Commission established under section 
     10001 of the Health Security Act--

       ``(I) equals or exceeds 85 percent but is less than 88 
     percent, `10 percent' shall be substituted for `12 percent' 
     in clause (i);
       ``(II) equals or exceeds 88 percent but is less than 90 
     percent, `8 percent' shall be substituted for `12 percent' in 
     clause (i);
       ``(III) equals or exceeds 90 percent but is less than 92 
     percent, `6 percent' shall be substituted for `12 percent' in 
     clause (i); and
       ``(IV) equals or exceeds 92 percent, `4 percent' shall be 
     substituted for `12 percent' in clause (i).

       (2) Adjustments to state allotment limits.--Section 
     1923(f)(2)(B) (42 U.S.C. 1396r-4(f)(2)(B)) is amended to read 
     as follows:
       ``(B) Exceptions.--
       ``(i) In general.--Except as provided in clause (ii), a 
     State DSH allotment under subparagraph (A) for a fiscal year 
     shall not exceed 12 percent of the total amount of 
     expenditures under the State plan for medical assistance 
     during the fiscal year.
       ``(ii) Reduction in limit.--For fiscal years ending in a 
     calendar year during which the percentage of individuals 
     covered by insurance, as determined by the National Health 
     Care Cost and Coverage Commission established under section 
     10001 of the Health Security Act--

       ``(I) equals or exceeds 85 percent but is less than 88 
     percent, `10 percent' shall be substituted for `12 percent' 
     in clause (i);
       ``(II) equals or exceeds 88 percent but is less than 90 
     percent, `8 percent' shall be substituted for `12 percent' in 
     clause (i);
       ``(III) equals or exceeds 90 percent but is less than 92 
     percent, `6 percent' shall be substituted for `12 percent' in 
     clause (i); and
       ``(IV) equals or exceeds 92 percent, `4 percent' shall be 
     substituted for `12 percent' in clause (i).

       (3) Elimination of high dsh states and state supplemental 
     amounts.--
       (A) In general.--Section 1923(f)(2)(A) (42 U.S.C. 1396r-
     4(f)(2)(A)) is amended to read as follows:
       ``(A) In general.--Subject to subparagraph (B), the State 
     DSH allotment for a fiscal year is equal to the State DSH 
     allotment for the previous fiscal year increased by the State 
     growth factor (as defined in paragraph (3)(B)) for the fiscal 
     year.''.
       (B) Conforming amendments.--(i) Section 1923(f) (42 U.S.C. 
     1396r-4(f)) is amended by striking paragraph (3) and 
     redesignating paragraph (4) as paragraph (3).
       (ii) Section 1923(f)(3) (42 U.S.C. 1396r-4(f)(3)), as 
     redesignated by clause (i), is amended by striking 
     subparagraphs (A) and (C) and redesignating subparagraphs 
     (B), (D), and (E) as subparagraphs (A), (B), and (C).
       (iii) Section 1923(f)(3)(B) (42 U.S.C. 1396r-4(f)(3)(B)), 
     as redesignated by clauses (i) and (ii), is amended to read 
     as follows:
       ``(B) State growth amount.--The term `State growth amount' 
     means, with respect to a State for a fiscal year, the product 
     of the State growth factor and the State DSH payment limit 
     for the previous fiscal year.''.
       (iv) Section 1923(f)(1)(A) (42 U.S.C. 1396r-4(f)(1)(A) is 
     amended by striking ``(as defined in paragraph (4)(B))'' and 
     inserting ``(as defined in paragraph (3)(A))''.
       (3) Termination of requirement on states to make dsh 
     payment adjustments.--Section 1923 (42 U.S.C. 1396r-4) is 
     amended by adding at the end the following new subsection:
       ``(h) Termination of Requirement to Make Payment 
     Adjustments.--
       ``(1) In general.--Any requirement imposed by this section 
     on a State to increase the rate or amount of payment for 
     inpatient hospital services provided by a hospital which 
     serves a disproportionate number of low income patients with 
     special needs shall terminate in the year described in 
     paragraph (2).
       ``(2) Year described.--The year described in this paragraph 
     is the first year beginning after the year during which the 
     percentage of individuals covered by insurance, as determined 
     by the National Health Care Cost and Coverage Commission 
     established under section 100001 of the Health Security Act, 
     equals or exceeds 92 percent.''.
       (4) No federal financial participation.--Section 1903(i) 
     (42 U.S.C. 1396b(i)), as amended by section 4601(b), is 
     amended--
       (1) by striking ``or'' at the end of paragraph (15),
       (2) by striking the period at the end of paragraph (16) and 
     inserting ``; or'', and
       (3) by inserting after paragraph (16) the following new 
     paragraph:
       ``(17) during or after the year described in section 
     1923(h)(2) with respect to any payment made by a State to a 
     hospital which serves a disproportionate number of low income 
     patients with special needs that is in excess of the payment 
     otherwise required under this part.''.
       (5) Effective date.--The amendments made by this section 
     shall be effective for calendar quarters beginning on or 
     after January 1, 1997.
       (b) Payments to Hospitals Serving Vulnerable Populations.--
     Title XIX (42 U.S.C. 1396 et seq.) is amended by adding at 
     the end the following new part:

     ``PART B--PAYMENTS TO HOSPITALS SERVING VULNERABLE POPULATIONS

     ``SEC. 1951. PAYMENTS TO HOSPITALS.

       ``(a) Entitlement Status.--The Secretary shall provide for 
     payment in accordance with this part to eligible hospitals 
     described in section 1952. The preceding sentence constitutes 
     budget authority in advance of appropriations Acts and 
     represents the obligation of the Federal Government to 
     provide funding for such payments in the amounts, and for the 
     fiscal years, specified in subsection (b).
       ``(b) Amount of Entitlement.--For purposes of subsection 
     (a), the amounts and fiscal years specified in this 
     subsection are (in the aggregate for all eligible hospitals) 
     $2,500,000,000 for the first applicable fiscal year (as 
     defined in section 1954) and for each subsequent fiscal year.
       ``(c) Payments Made on Quarterly Basis.--Payments to an 
     eligible hospital under this section for a year shall be made 
     on a quarterly basis during the year.

     ``SEC. 1952. IDENTIFICATION OF ELIGIBLE HOSPITALS.

       ``(a) Hospitals in Participating States.--In order to be an 
     eligible hospital under this part, a hospital must be located 
     in a State that is a participating State under title I of the 
     Health Security Act.
       ``(b) State Identification.--In accordance with the 
     criteria described in subsection (c) and such procedures as 
     the Secretary may require, each State shall identify the 
     hospitals in the State that meet such criteria and provide 
     the Secretary with a list of such hospitals.
       ``(c) Criteria for Eligibility.--A hospital meets the 
     criteria described in this subsection if the hospital's low-
     income utilization rate for the base year under section 
     1923(b)(3) (as such section is in effect on the day before 
     the date of the enactment of this part) is not less than 25 
     percent.

     ``SEC. 1953. AMOUNT OF PAYMENTS.

       ``(a) In General.--The total amount available for payments 
     under this part in a year shall be allocated to hospitals for 
     low-income assistance in accordance with this subsection.
       ``(b) Determination of Hospital Payment Amount.--The amount 
     of payment to an eligible hospital during a year shall be the 
     equal to the hospital's low-income percentage (as defined in 
     subsection (c)) of the total amount available for payments 
     under this part for the year.
       ``(c) Low-Income Percentage Defined.--
       ``(1) In general.--For purposes of this section, an 
     eligible hospital's `low-income percentage' for a year is 
     equal to the amount (expressed as a percentage) of the total 
     low-income days for all eligible hospitals for the year that 
     are attributable to the hospital.
       ``(2) Low-income days described.--For purposes of paragraph 
     (1), an eligible hospital's low-income days for a year shall 
     be equal to the product of--
       ``(A) the total number of inpatient days for the hospital 
     for the year (as reported to the Secretary by the State in 
     which the hospital is located, in accordance with a reporting 
     schedule and procedures established by the Secretary); and
       ``(B) the hospital's low-income utilization rate for the 
     base year under section 1923(b)(3) (as such section is in 
     effect on the day before the date of the enactment of this 
     part).

     ``SEC. 1954. DEFINITIONS.

       ``For purposes of this part:
       ``(1) Base year.--The term `base year' means 1996.
       ``(2) First applicable fiscal year--The term `first 
     applicable fiscal year' means first fiscal year that begins 
     after the fiscal year ending in the calendar year during 
     which the percentage of individuals covered by insurance, as 
     determined by the National Health Care Cost and Coverage 
     Commission established under section 10001 of the Health 
     Security Act, equals or exceeds 92 percent.''.
       (c) Conforming Amendments.--(1) Title XIX (42 U.S.C. 1396 
     et seq.) is amended by striking the title and inserting the 
     following:
  ``TITLE XIX--MEDICAL ASSISTANCE PROGRAMS AND PAYMENTS TO HOSPITALS 
                    SERVING VULNERABLE POPULATIONS''

     ``PART A--GRANTS TO STATES FOR MEDICAL ASSISTANCE PROGRAMS''.

       (2) Title XIX (42 U.S.C. 1396 et seq.) is amended by 
     striking each reference to ``this title'' and inserting 
     ``this part''.

               PART 4--MEDICAID LONG-TERM CARE PROVISIONS

     SEC. 4615. INCREASED RESOURCE DISREGARD FOR INDIVIDUALS 
                   RECEIVING CERTAIN SERVICES.

       (a) In general.--Section 1902(a)(10) (42 U.S.C. 
     1396a(a)(10)) is amended--
       (1) by striking ``and'' at the end of subparagraph (E);
       (2) by adding ``and'' at the end of subparagraph (F); and
       (3) by adding at the end the following new subparagraph:
       ``(G) provide that, in determining the eligibility of any 
     unmarried individual who has applied for or is receiving 
     medical assistance consisting of community-based services 
     furnished under a waiver under subsection (c) or (d) of 
     section 1915, personal care services described in section 
     1905(a)(24), or home and community care for functionally 
     disabled elderly individuals under section 1929, the first 
     $4,000 of resources may, at the option of the State, be 
     disregarded.''.
       (b) Effective Date.--The amendments made by subsection (a) 
     shall apply to payments for medical assistance for calendar 
     quarters beginning on or after January 1, 1995.

     SEC. 4616. FRAIL ELDERLY DEMONSTRATION PROJECT WAIVERS.

       (a) Expansion of Number of Waivers.--Section 9412(b)(1) of 
     the Omnibus Budget Reconciliation Act of 1986 is amended by 
     striking ``15'' and inserting ``40''.
       (b) Development of Protocols and Model Certification 
     Guidelines.--Section 9412(b) of the Omnibus Budget 
     Reconciliation Act of 1986 is amended by adding at the end 
     the following new paragraphs:
       ``(5) The Secretary, in consultation with the States and 
     organizations operating projects in accordance with waivers 
     under this subsection shall develop and publish a waiver 
     protocol that will establish minimum standard requirements 
     that an organization must meet to be eligible for a waiver 
     under this subsection. In developing the protocol under the 
     preceding sentence, the Secretary shall incorporate standards 
     for organizations to deliver integrated acute and long-term 
     care services for the elderly, children, and young adults.
       ``(6) The Secretary shall develop model guidelines that 
     shall be available to States that choose to establish a 
     comprehensive procedure for the licensure and certification 
     of an organization operating a demonstration project under a 
     waiver granted pursuant to this subsection. Such guidelines 
     shall encompass the range of services provided by such an 
     organization.
       (c) Evaluations and Reports.--Section 9412(b) of the 
     Omnibus Budget Reconciliation Act of 1986, as amended by 
     subsection (b), is amended by adding at the end the following 
     new paragraph:
       ``(7)(A) The Secretary shall develop standard evaluation 
     protocols to assess the cost-effectiveness and quality of 
     service provided under--
       ``(i) demonstration projects operating on the date of the 
     enactment of this paragraph under waivers granted pursuant to 
     this subsection; and
       ``(ii) demonstration projects granted waivers after the 
     date of the enactment of this paragraph.
       ``(B) The Secretary shall conduct evaluations of the 
     demonstration projects in accordance with the protocols 
     developed under subparagraph (A) and based on the results of 
     such evaluations, report to the Committee on Finance of the 
     Senate, the Committee on Ways and Means of the House of 
     Representatives, and the Subcommittee on Health and the 
     Environment of the Committee on Energy and Commerce of the 
     House of Representatives by--
       ``(i) not later than January 1, 1998, with respect to 
     demonstration projects described in subparagraph (A)(i); and
       ``(ii) not later than January 1, 2003, with respect to 
     demonstration projects described in subparagraph (A)(ii);

     on the desirability of granting permanent status under titles 
     XVIII and XIX of the Social Security Act to such 
     demonstration projects that the Secretary has determined to 
     be successful.''.
       (d) Effective Date.--The amendments made by this section 
     shall take effect on the date of the enactment of this Act.

     SEC. 4617. 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, 
     1995.

     SEC. 4618. ELIMINATION OF RULE REGARDING AVAILABILITY OF BEDS 
                   IN CERTAIN INSTITUTIONS.

       (a) In General.--The first sentence of section 1915(c)(1) 
     (42 U.S.C. 1396n(c)(1)) is amended by inserting the following 
     before the end period: ``(at the option of the State, such 
     determination may be made without regard to the availability 
     of beds in such a hospital, nursing facility, or intermediate 
     care facility for the mentally retarded located in the 
     State)''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall be effective with respect to waivers granted or renewed 
     on or after January 1, 1995.

     SEC. 4619. PREADMISSION SCREENING FOR MENTALLY RETARDED 
                   INDIVIDUALS.

       (a) In General.--Section 1919(b)(3)(F)(ii) (42 U.S.C. 
     1396r(b)(3)(F)(ii)) is amended by striking ``that, because'' 
     and all that follows through the period at the end and 
     inserting ``that the individual's primary need is for medical 
     services that are at the level provided by the nursing 
     facility and that the nursing facility has the capability to 
     provide any specialized services necessary for habilitation 
     of the individual.''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to admissions on or after July 1, 1995.

                         PART 5--MISCELLANEOUS

     SEC. 4621. MEDICAID COVERAGE OF ALL CERTIFIED NURSE 
                   PRACTITIONER AND CLINICAL NURSE SPECIALIST 
                   SERVICES.

       (a) In General.--Paragraph (21) of section 1905(a) (42 
     U.S.C. 1396d(a)) is amended to read as follows:
       ``(21) services furnished by all certified nurse 
     practitioners (as defined by the Secretary) or clinical nurse 
     specialists (as defined in subsection (t)) which the 
     certified nurse practitioner or clinical nurse specialist is 
     legally authorized to perform under State law (or the State 
     regulatory mechanism provided by State law), whether or not 
     the certified nurse practitioner or clinical nurse specialist 
     is under the supervision of, or associated with, a physician 
     or other health care provider;''.
       (b) Clinical Nurse Specialist Defined.--Section 1905 (42 
     U.S.C. 1396) is amended by adding at the end the following 
     new subsection:
       ``(t) The term `clinical nurse specialist' means an 
     individual who--
       ``(1) is a registered nurse and is licensed to practice 
     nursing in the State in which the clinical nurse specialist 
     services are performed; and
       ``(2) holds a master's degree in a defined clinical area of 
     nursing from an accredited educational institution.''.
       (c) Effective Date.--The amendments made by this section 
     shall become effective with respect to payments for calendar 
     quarters beginning on or after January 1, 1995.

     SEC. 4622. 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 (using the methods specified by 
     the Secretary under subsection (aa)) 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;''.
       (b) Methods for Demonstration.--Section 1902(a) (42 U.S.C. 
     1396a(a)) is amended by adding at the end the following new 
     subsection:
       ``(aa) The Secretary shall specify in regulations the 
     methods by which a State may demonstrate that it is not cost-
     effective in the aggregate to seek reimbursement for medical 
     assistance paid for case management services under subsection 
     (a)(25)(B)(ii). The methods specified by the Secretary under 
     the preceding sentence shall include allowing a State to 
     demonstrate that case management services are not generally 
     covered by health insurers in the State.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to payments for medical assistance for calendar 
     quarters beginning on or after January 1, 1995.

     SEC. 4623. EXTENSION OF MORATORIUM ON TREATMENT OF CERTAIN 
                   FACILITIES AS INSTITUTIONS FOR MENTAL DISEASES.

       Section 6408(a)(3) of the Omnibus Budget Reconciliation Act 
     of 1989, as amended by section 13642 of the Omnibus Budget 
     Reconciliation Act of 1993, is amended by striking ``December 
     31, 1995'' and inserting ``the year described in section 
     1923(h)(2) of the Social Security Act''.

     SEC. 4624. ALLOWING CERTAIN ENTITIES TO PARTICIPATE IN A 
                   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).''.
                TITLE V--QUALITY AND CONSUMER PROTECTION
             Subtitle A--Quality Management and Improvement

     SEC. 5001. NATIONAL QUALITY COUNCIL.

       (a) Establishment.--Not later than 1 year after the date of 
     enactment of this Act, the Secretary of Health and Human 
     Services shall establish a council to be known as the 
     National Quality Council to oversee a national program of 
     quality management and improvement designed to enhance the 
     quality, appropriateness, and effectiveness of health care 
     services and access to such services in the United States.
       (b) Appointment.--The National Quality Council shall 
     consist of 15 members appointed by the President, with the 
     advice and consent of the Senate, who are broadly 
     representative of the population of the United States and 
     shall include the following:
       (1) Individuals and health care providers distinguished in 
     the fields of medicine, public health, health care quality, 
     and related fields of health services research. Such members 
     shall constitute at least one-third of the Council's 
     membership.
       (2) Individuals representing consumers of health care 
     services. Such members shall constitute at least one-third of 
     the Council's membership.
       (3) Other individuals representing purchasers of health 
     care, health plans, States, and nationally recognized health 
     care accreditation organizations.
       (c) Duties.--The National Quality Council shall--
       (1) develop national goals and performance measures of 
     quality;
       (2) develop uniform quality goals and performance measures 
     for plans;
       (3) oversee the design and implementation of a program of 
     national surveys of plans and consumers;
       (4) oversee the design and production of Consumer Report 
     Cards;
       (5) oversee Quality Improvement Foundations;
       (6) oversee National and State-based Consumer Information 
     and Advocacy Centers; and
       (7) oversee the evaluation of the impact of the 
     implementation of this Act on the quality of health care 
     services in the United States and the access of consumers to 
     such services.
       (d) Coordination and Consultation.--
       (1) Coordination with medicare.--The Secretary shall 
     promulgate regulations necessary to ensure the coordination 
     and eventual integration of the functions and activities of 
     the Council established under this part with respect to 
     Medicare and non-Medicare populations.
       (2) Consultation.--In carrying out the duties under this 
     section, the National Quality Council shall establish a 
     process of consultation with appropriate interested parties.
       (e) Terms.--
       (1) In general.--Except as provided in paragraph (2), 
     members of the Council shall serve for a term of 4 years.
       (2) Staggered rotation.--Of the members first appointed to 
     the Council under subsection (b), the President shall appoint 
     members to serve for a term of between 1 and 4 years so that 
     no more than one third of the Council seats are vacated each 
     year.
       (3) Service beyond term.--A member of the Council may 
     continue to serve after the expiration of the term of the 
     member until a successor is appointed.
       (f) Vacancies.--If a member of the Council does not serve 
     the full term applicable under subsection (e), the individual 
     appointed to fill the resulting vacancy shall be appointed 
     for the remainder of the term of the predecessor of the 
     individual.
       (g) Chair.--The President shall designate an individual to 
     serve as the chair of the Council.
       (h) Meetings.--The Council shall meet not less than once 
     during each 4-month period and shall otherwise meet at the 
     call of the President or the chair.
       (i) Compensation and Reimbursement of Expenses.--Members of 
     the Council shall receive compensation for each day 
     (including travel time) 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 level IV 
     of the Executive Schedule under section 5315 of title 5, 
     United States Code.
       (j) Conflicts of Interest.--Members of the Council shall 
     disclose upon appointment to the Council or at any subsequent 
     time that it may occur, conflicts of interest.
       (k) Executive Director; Staff.--
       (1) Executive director.--
       (A) In general.--The Council shall, without regard to 
     section 5311(b) of title 5, United States Code, appoint an 
     Executive Director.
       (B) Pay.--The Executive Director shall be paid at a rate 
     equivalent to a rate for the Senior Executive Service.
       (2) Staff.--
       (A) In general.--Subject to subparagraphs (B) and (C), the 
     Executive Director, with the approval of the Council, may 
     appoint and fix the pay of additional personnel.
       (B) Pay.--The Executive Director may make such appointments 
     without regard to the provisions of title 5, United States 
     Code, governing appointments in the competitive service, and 
     any personnel so appointed may be paid without regard to the 
     provisions of chapter 51 and subchapter III of chapter 53 of 
     such title, relating to classification and General Schedule 
     pay rates, except that an individual so appointed may not 
     receive pay in excess of 120 percent of the annual rate of 
     basic pay payable for GS-15 of the General Schedule.
       (C) Detailed personnel.--Upon request of the Executive 
     Director, the head of any Federal department or agency may 
     detail any of the personnel of that department or agency to 
     the Council to assist the Council in carrying out its duties 
     under this Act.
       (l) Contract Authority.--To the extent provided in advance 
     in appropriations Acts, the Council may contract with any 
     person (including an agency of the Federal Government) for 
     studies and analysis as required to execute its functions. 
     Any employee of the Executive Branch may be detailed to the 
     Council to assist the Council in carrying out its duties.
       (m) Consultations with Experts.--The Council may consult 
     with any outside expert individuals or groups that the 
     Council determines appropriate in performing its duties under 
     this section. The Council may establish advisory committees.
       (n) Access to Information.--The Council may secure directly 
     from any department or agency of the United States 
     information necessary to enable it to carry out its 
     functions, to the extent such information is otherwise 
     available to a department or agency of the United States. 
     Upon request of the chair, the head of that department or 
     agency shall furnish that information to the Council.
       (o) Delegation of Authority.--Except as otherwise provided, 
     the Council may delegate any function to such officers and 
     employees as the Council may designate and may authorize such 
     successive redelegations of such functions with the Council 
     as the Council deems to be necessary or appropriate. No 
     delegation of functions by the Council shall relieve the 
     Council of responsibility for the administration of such 
     functions.
       (p) Rulemaking.--The Council is authorized to establish 
     such rules as may be necessary to carry out this section.
       (q) Health Care Provider.--For purposes of this subtitle, 
     the term ``health care provider'' means an individual who, or 
     entity that, provides an item or service to an individual 
     that is covered under the health plan (as defined in section 
     1111) in which the individual is enrolled.

     SEC. 5002. NATIONAL GOALS AND PERFORMANCE MEASURES OF 
                   QUALITY.

       (a) In General.--The National Quality Council shall develop 
     a set of national quality goals and performance measures of 
     quality for both the general population and for population 
     subgroups defined by demographic characteristics and health 
     status. The goals and measures shall incorporate goals 
     identified by the Secretary of Health and Human Services for 
     meeting public health objectives utilizing, but not limited 
     to, goals delineated in Healthy People 2000.
       (b) Subject of Measures.--National measures of quality 
     performance shall be developed under subsection (a) in a 
     manner that provides statistical and other information on at 
     least the following subjects:
       (1) Outcomes of health care services and procedures.
       (2) Population health status.
       (3) Health promotion.
       (4) Prevention of diseases, disorders, disabilities, 
     injuries, and other health conditions.
       (5) Access to care and appropriateness of care.
       (6) Consumer satisfaction.
       (c) Accuracy of Measures.--A State shall periodically audit 
     the national measures of quality performance to assure 
     accuracy.

     SEC. 5003. STANDARDS AND PERFORMANCE MEASURES FOR HEALTH 
                   PLANS.

       (a) Development.--
       (1) In general.--The National Quality Council shall 
     establish national standards and performance measures for 
     health plans, which may be used to assess the provision of 
     health care services and access to such services, both for 
     the general population and population subgroups defined by 
     demographic characteristics and health status. In subject 
     matter areas with which the National Quality Council 
     determines that sufficient information and consensus exist, 
     the Council shall establish goals for performance by health 
     plans consistent with the national goals and performance 
     measures established under section 5002.
       (2) Measures and standards.--
       (A) Measures.--Quality measures under this section shall 
     relate, at a minimum, to:
       (i) Access by consumers to health care services and 
     providers.
       (ii) Appropriateness of health care services.
       (iii) Consumer satisfaction.
       (iv) Outcomes of care.
       (v) Disease prevention and health promotion.
       (B) Standards.--Quality standards under this section at a 
     minimum shall relate to:
       (i) Health plan compliance with members' rights under this 
     Act.
       (ii) Quality improvement and accountability.
       (iii) Documentation and review of provider credentialing 
     and competency.
       (iv) Management of clinical, and administrative and 
     financial information.
       (b) Certification of Plans.--The National Quality Council 
     shall provide information and technical assistance to the 
     Secretary and the States concerning the use of national 
     standards and performance measures developed under this 
     section for State certification of health plans.

     SEC. 5004. PLAN DATA ANALYSIS AND CONSUMER SURVEYS.

       (a) In General.--The National Quality Council shall oversee 
     the design and conduct of periodic surveys of health care 
     consumers and plans to gather information concerning the 
     quality measures established under sections 5002 and 5003. 
     The surveys shall monitor consumer reaction to the 
     implementation of this Act and, in coordination with relevant 
     data from health plans and other sources, be designed to 
     assess the impact of this Act both for the general population 
     of the United States and for populations vulnerable to 
     discrimination or to receiving inadequate care due to health 
     status, demographic characteristics, or geographic location.
       (b) Survey Administration and Data Analysis.--The National 
     Quality Council shall approve a standard design for the 
     consumer surveys and sampling of relevant plan data described 
     in subsection (a) which shall be administered by the 
     Administrator of the Agency for Health Care Policy and 
     Research or such other appropriate entity as the Council 
     shall designate on a plan-by-plan and State-by-State basis. 
     Sufficient consumer survey and plan data shall be collected 
     and verified to provide for reliable and valid analysis. A 
     State may add survey questions on quality measures of local 
     interest to surveys conducted in the State. The plan-level 
     survey shall include a subset of consumer survey questions 
     related to consumer satisfaction, perceived health status, 
     access, and such other survey items designated by the 
     Council.
       (c) Sampling Strategies.--The National Quality Council 
     shall approve sampling strategies under subsection (a) that 
     ensure that appropriate survey samples adequately measure 
     populations that are considered to be at risk of receiving 
     inadequate health care or may be difficult to reach through 
     consumer-sampling methods, including individuals who--
       (1) fail to enroll in a health plan;
       (2) resign from a plan; or
       (3) are vulnerable to discrimination or to receiving 
     inadequate care due to health status, demographic 
     characteristics, or geographic location.
       (d) Survey Integration.--To the extent feasible, the 
     consumer and plan surveys developed under this section shall 
     be integrated with existing Federal surveys.

     SEC. 5005. EVALUATION AND REPORTING OF QUALITY PERFORMANCE.

       (a) Health Plan Reports.--Each State annually shall publish 
     and make available to the public and Consumer Information and 
     Advocacy Centers a performance report, in a standard format 
     designated by the National Quality Council, outlining the 
     performance of each health plan offered in the State with 
     respect to the set of national measures of quality 
     performance developed under sections 5002 and 5003. The 
     report shall include--
       (1) the results of a smaller number of such measures for 
     health care providers if the available information is 
     statistically meaningful; and
       (2) the results of consumer surveys and an analysis of the 
     plan data collected in section 5004.
       (b) Consumer Report Cards.--The health plan reports under 
     subsection (a) shall be summarized in a consumer report card 
     as specified by the National Quality Council and made 
     available by the State through the Consumer Information and 
     Advocacy Centers to all individuals in the State.
       (c) Quality Reports.--The National Quality Council annually 
     shall provide recommendations to the Congress, the National 
     Health Benefits Board, and the Secretary in the form of a 
     summary report that--
       (1) outlines in a standard format the performance of each 
     State;
       (2) discusses State-level and national trends relating to 
     health care quality; and
       (3) presents data for each State from health plan reports 
     and consumer surveys that were conducted during the year.

     SEC. 5006. DEVELOPMENT AND DISSEMINATION OF PRACTICE 
                   GUIDELINES.

       (a) In General.--The National Quality Council may advise 
     the Secretary and the Administrator of the Agency for Health 
     Care Policy and Research concerning priorities for the 
     development and periodic review and updating of clinically 
     relevant guidelines established under section 912 of the 
     Public Health Service Act.
       (b) Rule of construction.--Nothing in this section shall be 
     construed as precluding other agencies in the Public Health 
     Service from carrying out guidelines and activities under the 
     Public Health Service Act and the Federal Food, Drug, and 
     Cosmetic Act.

     SEC. 5007. RESEARCH ON HEALTH CARE QUALITY.

       The National Quality Council may make recommendations to 
     the Secretary and the Administrator of the Agency for Health 
     Care Policy and Research concerning priorities for research 
     with respect to the quality, appropriateness, and 
     effectiveness of health care.

     SEC. 5008. QUALITY IMPROVEMENT FOUNDATIONS.

       (a) Establishment.--The National Quality Council shall 
     oversee the operation of quality improvement foundations in 
     performing the duties specified in subsection (c).
       (b) Structure and Membership.--
       (1) Grant process.--The Secretary, in consultation with the 
     Council, shall, through a competitive grantmaking process, 
     award grants for the establishment and operation of a quality 
     improvement foundation in each State or region (as defined in 
     paragraph (2)(B)).
       (2) Establishment of geographic areas.--The Secretary shall 
     establish throughout the United States geographic areas with 
     respect to which grants 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 only 
     where the Secretary determines that volume of activity or 
     other relevant factors justifies such an establishment.
       (3) Eligible applicants.--To be eligible to receive a grant 
     for the establishment of a quality improvement foundation 
     under paragraph (1), an applicant entity shall meet the 
     following conditions:
       (A) Not-for-profit.--The entity shall be a not-for-profit 
     entity operating within the State or region involved.
       (B) Board.--The entity shall have a board which includes--
       (i) representatives of health care providers from 
     throughout the State or region involved, including both 
     practicing providers and experts in the field of quality 
     measurement and improvement, which together shall comprise at 
     least one-fourth of the board's membership;
       (ii) at least one representative of Academic Health 
     Centers, Schools of Public Health or other schools as defined 
     in section 799 of the Public Health Service Act operating 
     within the State or region involved (or operating outside of 
     the State or region if no such Centers or schools operate 
     within the State or region), which shall comprise up to one-
     fourth of the membership;
       (iii) representatives of consumers residing within the 
     State or region involved, who shall comprise one-fourth of 
     the membership; and
       (iv) representatives of purchasers of health care, health 
     plans, State or local health departments, and other 
     interested parties residing within the State or region 
     involved, and representatives of the State or States within a 
     region.
       (C) Staffing.--Each entity shall have sufficient, competent 
     staff of experts possessing the skills and knowledge 
     necessary to enable the foundation to perform its duties.
       (c) Duties.--
       (1) In general.--Each quality improvement foundation shall 
     carry out the duties described in paragraph (2) for the State 
     or region in which the foundation is located. The foundation 
     shall establish a program of activities incorporating such 
     duties and shall be able to demonstrate the involvement of a 
     broad cross-section of the providers and health care 
     institutions throughout the State or region. A foundation may 
     apply for and conduct research described in section 5007.
       (2) Duties described.--The duties described in this 
     paragraph include the following:
       (A) Collaboration with and technical assistance to 
     providers and health plans in ongoing efforts to improve the 
     quality of health care provided to individuals in the State.
       (B) Population-based monitoring of practice patterns and 
     patient outcomes,on an other than a case-by-case basis.
       (C) Developing programs in lifetime learning for health 
     professionals to improve the quality of health care by 
     ensuring that health professionals remain informed about new 
     knowledge, acquire new skills, and adopt new roles as 
     technology and societal demands change.
       (D) Disseminating information about successful quality 
     improvement programs, practice guidelines, and research 
     findings, including information on innovative staffing of 
     health professionals.
       (E) Assist in developing innovative patient education 
     systems that enhance patient involvement in decisions 
     relating to their health care, including an emphasis on 
     shared decisionmaking between patients and health care 
     providers.
       (F) Issuing a report to the public regarding the 
     foundation's activities for the previous year including areas 
     of success during the previous year and areas for 
     opportunities in improving health outcomes for the community, 
     and the adoption of guidelines.
       (G) Providing notice to the State or appropriate entity if 
     the foundation determines, after reasonable opportunities for 
     improvement, that the quality of a provider or plan remains 
     so inadequate that the patients or enrollees of such a 
     provider or plan are potentially subject to substantial harm 
     in utilizing the services of such provider or services under 
     such plan.
       (d) Restrictions on Disclosure.--The restrictions on 
     disclosure of information under section 1160 of the Social 
     Security Act shall apply to quality improvement foundations 
     under this section, except that--
       (1) such foundations shall make data available to qualified 
     organizations and individuals for research for public 
     benefit;
       (2) individuals and qualified organizations shall meet 
     standards consistent with the Public Health Service Act and 
     policies regarding the conduct of scientific research, 
     including provisions related to confidentiality, privacy, 
     protection of humans and shall pay reasonable costs for data; 
     and
       (3) such foundations may exchange information with other 
     quality improvement foundations.

     SEC. 5009. CONSUMER INFORMATION AND ADVOCACY.

       (a) Establishment.--
       (1) In general.--The Secretary shall establish (by grant or 
     contract) and oversee a National Center of Consumer 
     Information and Advocacy to provide technical assistance, 
     adequate training and support to States and Consumer 
     Information and Advocacy Centers in each State (hereafter 
     referred to in this section as the ``Center'') to carry out 
     the duties of this section, including providing public 
     education to consumers concerning this Act.
       (2) Requirements for national center.--The National Center 
     of Consumer Information and Advocacy shall be a national non-
     profit organization with public education and health advocacy 
     expertise and shall have sufficient staff to carry out its 
     duties and a demonstrated ability to represent and work with 
     a broad spectrum of consumers, including vulnerable and 
     underserved populations.
       (3) State-based centers.--The Consumer Information and 
     Advocacy Center in each State shall disseminate State reports 
     on quality performance (as defined in section 5005(4)) and 
     health plan consumer report cards (as defined in section 
     5005(2)) in order to facilitate consumer choice of health 
     plans, perform public outreach and provide education and 
     assistance regarding consumer rights and responsibilities 
     under this Act, and assist consumers in dealing with problems 
     that arise with consumer purchasing cooperatives, large group 
     purchasers, health plans, insurance agents, and health care 
     providers operating in such State.
       (b) Contracts.--
       (1) Solicitation.--The Secretary shall solicit contracts 
     from private non-profit organizations based in each State to 
     fulfill the duties of the Center in the State. The Secretary 
     may develop such regulations and guidelines as necessary to 
     oversee the process of considering and awarding competitive 
     contracts under this section. In awarding such contracts, the 
     Secretary shall consult with the National Center of Consumer 
     Information and Advocacy and shall, at a minimum, consider 
     the demonstrated ability of the organization to represent and 
     work with a broad spectrum of consumers, including vulnerable 
     and underserved populations.
       (2) Contract period.--The contract period for the State-
     based Consumer Information and Advocacy Centers and the 
     National Center of Consumer Information and Advocacy under 
     this section shall be not less than 4 years and not more than 
     7 years.
       (c) Functions and Responsibilities.--
       (1) Dissemination of reports.--Each Center shall 
     disseminate State reports on quality performance (as defined 
     in section 5005(2)) and health plan consumer report cards (as 
     defined in section 5005(2)) in order to facilitate consumer 
     choice of health plans.
       (2) Staff, offices and hotlines.--Each Center shall have 
     sufficient staff, local offices throughout the State, and a 
     State-wide toll-free hotline to carry out the advocacy duties 
     of this section. Through direct contact and the hotline, the 
     Center shall provide the following services in the State, 
     including appropriate assistance to individuals with limited 
     English language ability--
       (A) outreach and education relating to consumer rights and 
     responsibilities under this Act, including such rights and 
     services available through the Center;
       (B) assistance with enrollment in health plans, or 
     obtaining services or reimbursement from health plans;
       (C) assistance with filing an application for premium or 
     cost sharing subsidies;
       (D) information to enrollees about existing grievance 
     procedures and coordination with other entities to assist in 
     identifying, investigating, and resolving enrollee grievances 
     under this Act (including grievances before State medical 
     boards);
       (E) referrals to appropriate local providers of legal 
     assistance and to appropriate State and Federal agencies 
     which may be of assistance to aggrieved individuals in the 
     area; and
       (F) conduct public hearings no less frequently than once a 
     year to identify and address community health care needs.
       (d) Access to Information.--The Secretary and the States 
     shall ensure that, for purposes of carrying out the Center's 
     duties under this section, the Center (and officers and 
     employees of the Center in local offices) have appropriate 
     access to necessary information subject to protections for 
     confidentiality of enrollee information. Each Center shall 
     have the capability to accept electronic quality data from 
     plans as required under subtitle B.
       (e) Evaluation and Report.--The Secretary shall have the 
     right to evaluate the quality and effectiveness of the 
     organization in carrying out the functions specified in the 
     contract. The Center shall report to the Secretary and the 
     State annually on the nature and patterns of consumer 
     complaints received in the Center and its local offices 
     during each year and any policy, regulatory, and legislative 
     recommendations for needed improvements together with a 
     record of the activities of the Center.
       (f) Conflicts of Interest.--The Secretary shall ensure that 
     no individual involved in the designation of a State Center, 
     the Center itself, or of any delegate thereof is subject to a 
     conflict of interest, including affiliation with (through 
     ownership or common control) a health care facility, managed 
     care organization, health insurance company or association of 
     health care facilities or providers. No grantee under this 
     section may have a direct involvement with the licensing, 
     certification, or accreditation of a health care facility, a 
     health care plan, or a provider of health care services .
       (g) Legal Counsel.--The Secretary shall ensure that 
     adequate legal counsel is available, and is able, without 
     conflict of interest, to assist the Center, and the local 
     offices thereof in the performance of their official duties.
       (h) Coordination.--The Center shall coordinate its 
     activities with all appropriate entities including Quality 
     Improvement Foundations (established under section 5008) and 
     the State agencies designated to carry out client advocacy 
     activities pursuant to section 2106.
       (i) Construction.--Nothing in this section shall replace 
     grievance procedures established or otherwise required under 
     this Act.

     SEC. 5010. AUTHORIZATION OF APPROPRIATIONS.

       (a) National Quality Council.--For the purpose of carrying 
     out this subtitle with respect to the establishment and 
     activities of the National Quality Council, there are 
     authorized to be appropriated $4,000,000 for each of the 
     fiscal years 1995 through 2000.
       (b) Quality Improvement Foundations.--For the purpose of 
     carrying out section 5008, the are authorized to be 
     appropriated $100,000,000 for fiscal year 1996, $200,000,000 
     for fiscal year 1997, and $300,000,000 for each of the fiscal 
     years 1998 through 2000.
       (c) Consumer Information and Advocacy Centers.--For the 
     purpose of carrying out section 5009, the are authorized to 
     be appropriated $100,000,000 for fiscal year 1996, 
     $200,000,000 for fiscal year 1997, $300,000,000 for each of 
     the fiscal years 1998 through 2000, of which $4,000,000 for 
     each fiscal year shall be made available to the National 
     Center of Consumer Information and Advocacy.

     SEC. 5011. ROLE OF HEALTH PLANS IN QUALITY MANAGEMENT.

       Each health plan shall--
       (1) measure and disclose performance on quality measures as 
     designated by this Act;
       (2) furnish information required under subtitles B and of 
     this title and provide such other reports and information on 
     the quality of care delivered by health care providers who 
     are members of a provider network of the plan as may be 
     required under this Act; and
       (3) maintain quality management systems that--
       (A) use the national measures of quality performance 
     developed by the National Quality Council under section 5003; 
     and
       (B) measure the quality of health care furnished to 
     enrollees under the plan by all health care providers of the 
     plan where practical.

     SEC. 5012. INFORMATION ON HEALTH CARE PROVIDERS.

       (a) State Obligations.--Each State shall make available to 
     consumers, upon request, information concerning providers of 
     health care services or supplies. Such information shall 
     include--
       (1) the identity of any provider that has been convicted, 
     under Federal or State law, of a criminal offense relating to 
     fraud, corruption, breach of fiduciary responsibility, or 
     other financial misconduct in connection with the delivery of 
     a health care service or supply;
       (2) the identity of any provider that has been convicted, 
     under Federal or State law, of a criminal offense relating to 
     neglect or abuse of patients in connection with the delivery 
     of a health care service or supply;
       (3) the identity of any provider that has been convicted, 
     under Federal or State law, of a criminal offense relating to 
     the unlawful manufacture, distribution, prescription, or 
     dispensing of a controlled substance; and
       (4) the identity of any provider whose license to provide 
     health care services or supplies has been revoked, suspended, 
     restricted, or not renewed, by a State licensing authority 
     for reasons relating to the provider's professional 
     competence, professional performance, or financial integrity, 
     or any provider who surrendered such a license while a formal 
     disciplinary proceeding was pending before such an authority, 
     if the proceeding concerned the provider's professional 
     competence, professional performance, or financial integrity.
       (b) Public Availability of Information in National 
     Practitioner Data Bank on Defendants, Awards, and 
     Settlements.--
       (1) In general.--Section 427(a) of the Health Care Quality 
     Improvement Act (42 U.S.C. 11137 (a)) is amended by adding at 
     the end the following new sentence: ``Not later the January 
     1, 1996, the Secretary shall promulgate regulations under 
     which individuals seeking to enroll in health plans under the 
     Health Security Act shall be able to obtain information 
     reported under this part with respect to physicians and other 
     licensed health practitioners participating in such plans for 
     whom information has been reported under this part on 
     repeated occasions.''.
       (2) Access to data bank for point-of-service contractors 
     under medicare.--Section 427(a) of such Act (42 U.S.C. 
     11137(a)) is amended--
       (A) by inserting ``to sponsors of point-of-service networks 
     under section 1990 of the Social Security Act,'', and
       (B) in the heading, by inserting ``Related'' after 
     ``Care''.

     SEC. 5013. CONFORMING AMENDMENTS TO PUBLIC HEALTH SERVICE 
                   ACT.

       Title IX of the Public Health Service Act is amended--
       (1) in section 903(a)(4) (42 U.S.C. 299a-1(a)(4)), by 
     inserting ``and Quality Improvement Foundations'' after 
     ``health agencies'';
       (2) in section 904(c)(1) (42 U.S.C. 299a-2(c)(1)), by 
     inserting ``the National Quality Council and'' after ``in 
     consultation with'';
       (3) in section 912(b)(4) (42 U.S.C. 299b-1(b)(4))--
       (A) by inserting ``outcomes,'' before ``risks''; and
       (B) by inserting before the semicolon ``to the extent 
     feasible given the availability of unbiased, reliable, and 
     valid data'';
       (4) in section 914 (42 U.S.C. 299b-3)--
       (A) in subsection (a)(2)(B)--
       (i) by inserting ``the National Quality Council,'' after 
     ``shall consult with''; and
       (ii) by inserting before the period ``and relevant sections 
     of the Health Security Act'';
       (B) in subsection (c), by inserting ``Quality Improvement 
     Foundations and other'' after ``carried out through''; and
       (C) in subsection (f)--
       (i) by striking ``to Administrator'' in the subsection 
     heading;
       (ii) by striking ``Administrator'' and inserting ``National 
     Quality Council and the''; and
       (5) in section 927 (42 U.S.C. 299c-6), by adding at the end 
     thereof the following new paragraphs:
       ``(5) The term `National Quality Council' means the Council 
     established under section 5001 of the Health Security Act.
       ``(6) The term ``Quality Improvement Foundations'' means 
     the Foundations established under section 5008 of the Health 
     Security Act.''.
               Subtitle B--Administrative Simplification

                    PART 1--PURPOSE AND DEFINITIONS

     SEC. 5101. PURPOSE.

       It is the purpose of this subtitle to improve the 
     efficiency and effectiveness of the health care system by 
     encouraging the development of a health information network 
     through the establishment of standards and requirements for 
     the electronic transmission of certain health information.

     SEC. 5102. DEFINITIONS.

       For purposes of this subtitle:
       (1) Code set.--The term ``code set'' means any set of codes 
     used for encoding data elements, such as tables of terms, 
     medical concepts, medical diagnostic codes, or medical 
     procedure codes.
       (2) Coordination of benefits.--The term ``coordination of 
     benefits'' means determining and coordinating the financial 
     obligations of health plans when health care benefits are 
     payable under 2 or more health plans.
       (3) Health care provider.--The term ``health care 
     provider'' includes a provider of services (as defined in 
     section 1861(u) of the Social Security Act), a provider of 
     medical or other health services (as defined in section 
     1861(s) of the Social Security Act), and any other person 
     furnishing health care services or supplies.
       (4) Health information.--The term ``health information'' 
     means any information, whether oral or recorded in any form 
     or medium that--
       (A) is created or received by a health care provider, 
     health plan, health oversight agency (as defined in section 
     5202), health researcher, public health authority (as defined 
     in section 5202), employer, life insurer, school or 
     university, or health information network service certified 
     under section 5141; and
       (B) relates to the past, present, or future physical or 
     mental health or condition of an individual, the provision of 
     health care to an individual, or the past, present, or future 
     payment for the provision of health care to an individual.
       (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 subtitle.
       (6) Health information protection organization.--The term 
     ``health information protection organization'' means a 
     private entity or an entity operated by a State that accesses 
     standard data elements of health information through the 
     health information network, processes such information into 
     non-identifiable health information, and may store such 
     information.
       (7) Health information network service.--The term ``health 
     information network service''--
       (A) means a private entity or an entity operated by a State 
     that enters into contracts to--
       (i) process or facilitate the processing of nonstandard 
     data elements of health information into standard data 
     elements;
       (ii) provide the means by which persons are connected to 
     the health information network for purposes of meeting the 
     requirements of this subtitle, including the holding of 
     standard data elements of health information;
       (iii) provide authorized access to health information 
     through the health information network; or
       (iv) provide specific information processing services, such 
     as automated coordination of benefits and claims transaction 
     routing; and
       (B) includes a health information protection organization.
       (8) Health plan.--The term ``health plan'' has the meaning 
     given such term in section 1011(1)(B) except that such term 
     shall include clauses (iii), (iv), (v), (vi), and (viii) of 
     such section.
       (9) Non-identifiable health information.--The term ``non-
     identifiable health information'' means health information 
     that is not protected health information as defined in 
     section 5202.
       (10) Health researcher.--The term ``health researcher'' 
     shall have the meaning given such term under section 5202.
       (11) Patient medical record information.--The term 
     ``patient medical record information'' means health 
     information derived from a clinical encounter that relates to 
     the physical or mental condition of an individual.
       (12) Standard.--The term ``standard'' when referring to an 
     information transaction or to data elements of health 
     information means the transaction or data elements meet any 
     standard adopted by the Secretary under part 2 that applies 
     to such information transaction or data elements.

    PART 2--STANDARDS FOR DATA ELEMENTS AND INFORMATION TRANSACTIONS

     SEC. 5111. GENERAL REQUIREMENTS ON SECRETARY.

       (a) In General.--The Secretary shall adopt standards and 
     modifications to standards under this subtitle that--
       (1) are consistent with the objective of reducing the costs 
     of providing and paying for health care;
       (2) give priority to standards in use and generally 
     accepted or developed or modified by the standards setting 
     organizations accredited by the American National Standard 
     Institute (ANSI); and
       (3) are consistent with the objective of protecting the 
     privacy of protected health information (as defined in 
     section 5202).
       (b) Initial Standards.--The Secretary may develop an 
     expedited process for the adoption of initial standards under 
     this subtitle.
       (c) Failsafe.--If the Secretary is unable to adopt 
     standards or modified standards in accordance with subsection 
     (a) that meet the requirements of this subtitle--
       (1) the Secretary may develop or modify such standards and, 
     after providing public notice and after an adequate period 
     for public comment, adopt such standards; and
       (2) if the Secretary adopts standards under paragraph (1), 
     the Secretary shall submit a report to the appropriate 
     committees of Congress on the actions taken by the Secretary 
     under this subsection.
       (d) Paper formats.--The Secretary--
       (1) shall develop written forms that are consistent with 
     the standards adopted by the Secretary under this subtitle 
     for use prior to the date on which the health information 
     network is fully operational; and
       (2) after the health information network is fully 
     operational, may develop methods by which a person may use 
     the standards adopted by the Secretary under this subtitle 
     with respect to health information that is in written rather 
     than electronic form.

     SEC. 5112. STANDARDS FOR DATA ELEMENTS OF HEALTH INFORMATION.

       (a) In General.--The Secretary shall adopt standards 
     necessary to make data elements of the following health 
     information uniform and compatible for electronic 
     transmission through the health information network:
       (1) the health information that is appropriate for 
     transmission in connection with transactions described in 
     subsections (a), (b), and (d) of section 5121;
       (2) the quality information required to be submitted by a 
     health plan under title I and subtitle A of this title; and
       (3) patient medical record information.
       (b) Additions.--
       (1) In general.--The Secretary may make additions to the 
     sets 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.
       (2) Data elements required for risk adjustment, etc.--The 
     additions to the sets of data elements made by the Secretary 
     under paragraph (1) may include the data elements required 
     for risk adjustment or reinsurance and reconciliation of 
     payments and subsidies under titles VI and X.
       (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, health plan, and 
     health care provider for use in the health care system. The 
     personal health identifier for an individual shall be an 
     encrypted form of the social security account number assigned 
     to the individual by the Secretary under section 205(c)(2) of 
     the Social Security Act.
       (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 such code sets under section 5115(c).

     SEC. 5113. INFORMATION TRANSACTION STANDARDS.

       (a) In General.--The Secretary shall adopt technical 
     standards relating to the method by which data elements of 
     health information that have been standardized under section 
     5112 may be transmitted electronically, including standards 
     with respect to the format in which such data elements shall 
     be transmitted.
       (b) Special Rule for Coordination of Benefits.--Any 
     standards adopted by the Secretary under paragraph (1) that 
     relate to coordination of benefits shall provide that a claim 
     for reimbursement for medical services furnished is tested by 
     an algorithm specified by the Secretary against all records 
     of enrollment and eligibility for the individual who received 
     such services 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 will be 
     deemed to satisfy State and Federal statutory requirements 
     for written signatures with respect to information 
     transactions required by this Act and written signatures on 
     medical records and prescriptions.

     SEC. 5114. STANDARDS RELATING TO WRITTEN EXPLANATIONS OF 
                   BENEFITS.

       The Secretary shall adopt standard methods and formats 
     which shall be used by health plans to submit a written 
     explanation of benefits to an enrollee.

     SEC. 5115. 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 5112(a)(1) not later than 9 months after the date of 
     the enactment of this subtitle (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 subtitle);
       (2) the data elements for the information described in 
     section 5112(a)(2) not later than 9 months after the date of 
     the enactment of this subtitle;
       (3) data elements for patient medical record information 
     not earlier than 24 months and not later than 7 years after 
     the date of the enactment of this subtitle; and
       (4) 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 5113 not later than 9 months after 
     the date of the enactment of this subtitle (except in the 
     case of standards for claims attachments which shall be 
     adopted not later than 24 months after the date of the 
     enactment of this subtitle).
       (c) Standards for Written Claims and Explanations of 
     Benefits.--The Secretary shall adopt standard methods and 
     formats described in section 5114 not later than 9 months 
     after the date of the enactment of this subtitle.
       (d) Modifications to Standards.--
       (1) In general.--Except as provided in paragraph (2), the 
     Secretary shall review the standards adopted under this 
     subtitle and shall adopt modified standards as determined 
     appropriate, but no more frequently than once every 6 months. 
     Any modification to standards shall be completed in a manner 
     which minimizes the disruption and cost of compliance.
       (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 shall not adopt any 
     modifications to standards adopted under this subtitle during 
     the 12-month period beginning on the date such standards are 
     adopted unless the Secretary determines that a modification 
     is necessary in order to permit compliance with requirements 
     relating to the standards.
       (B) Additions and modifications to code sets.--
       (i) In general.--The Secretary shall ensure that procedures 
     exist for the routine maintenance, testing, enhancement, and 
     expansion of code sets to accommodate changes in biomedical 
     science and health care delivery.
       (ii) Additional Rules.--If a code set is modified under 
     this subsection, the modified code set shall include 
     instructions on how data elements that were encoded prior to 
     the modification are to be converted or translated so as to 
     preserve the value of the data elements. Any modification to 
     a code set under this subsection shall be implemented in a 
     manner that minimizes the disruption and cost of complying 
     with such modification.
       (e) Evaluation of Standards.--The Secretary may establish a 
     process to measure or verify the consistency of standards 
     adopted or modified under this subtitle. Such process may 
     include demonstration projects and analysis of the cost of 
     implementing such standards and modifications.

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

     SEC. 5121. REQUIREMENTS WITH RESPECT TO CERTAIN TRANSACTIONS 
                   AND INFORMATION.

       (a) Requirements on Plans and Providers Relating to 
     Financial and Administrative Transactions.--If a health care 
     provider or a health plan conducts any of the following 
     transactions, such transactions shall be standard 
     transactions and the information transmitted or received in 
     connection with such transaction shall be in the form of 
     standard data elements:
       (1) Claims (including coordination of benefits).
       (2) Claims attachments.
       (3) Responses to research inquiries by a health researcher.
       (4) Other transactions determined appropriate by the 
     Secretary consistent with the goal of improving the functions 
     of the health care system or reducing administrative costs.
       (b) Requirement Only on Plans Relating to Financial and 
     Administrative Transactions.--If a person desires to conduct 
     any of the following transactions with a health plan as a 
     standard transaction, the health plan shall conduct such 
     standard transaction and the information transmitted or 
     received in connection with such transaction shall be in the 
     form of standard data elements:
       (1) Enrollment and disenrollment.
       (2) Eligibility.
       (3) Payment and remittance advice.
       (4) Premium payments.
       (5) First report of injury.
       (6) Claims status.
       (7) Referral certification and authorization.
       (8) Other transactions determined appropriate by the 
     Secretary consistent with the goal of improving the functions 
     of the health care system or reducing administrative costs.
       (c) Requirement on Plans Relating to Quality Information.--
     Any quality information required to be submitted by a health 
     plan under title I or subtitle A of this title shall be in 
     the form of standard data elements and the transmission of 
     such data shall be in the form of a standard transaction.
       (d) Requirement Only on Purchasing Cooperatives.--If a 
     person desires to conduct any of the following transactions 
     with a purchasing cooperative (as defined in section 
     1013(12)) as a standard transaction, the cooperative shall 
     conduct such standard transaction and the information 
     transmitted or received in connection with such transaction 
     shall be in the form of standard data elements:
       (1) Enrollment and disenrollment.
       (2) Premium payments.
       (e) Requirement with Respect to Disclosure of 
     Information.--
       (1) In general.--A health plan or health care provider 
     shall make the standard data elements transmitted or received 
     by such plan or provider in connection with the transactions 
     described in subsections (a), (b), and (c) or acquired under 
     section 5164(a) available for disclosure as authorized by 
     this subtitle.
       (2) Special rule.--In the case of a health care provider 
     that does not file claims, such provider shall be responsible 
     for making standard data elements for encounter information 
     available for disclosure as authorized by this subtitle.
       (f) Satisfaction of Requirements.--A health care provider, 
     health plan, or consumer purchasing cooperative may satisfy 
     the requirement imposed on such provider, plan, or 
     cooperative under subsection (a), (b), (c), (d), or (e) by--
       (1) directly transmitting standard data elements;
       (2) submitting nonstandard data elements to a health 
     information network service certified under section 5141 for 
     processing into standard data elements and transmission; or
       (3) in the case of a provider, submitting data elements to 
     a plan which satisfies the requirements imposed on such 
     provider on the provider's behalf.
       (g) Timeliness.--A health care provider or health plan 
     shall be determined to have satisfied a requirement imposed 
     under this section only if the action required is completed 
     in a timely manner, as determined by the Secretary. In 
     setting standards for timeliness, the Secretary shall take 
     into consideration the age and the amount of information 
     being requested.

     SEC. 5122. 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 part 2 with respect to a 
     type of transaction or data elements for a type of health 
     information, a health plan, health care provider, or 
     purchasing cooperative shall comply with the requirements of 
     this subtitle 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 part 2, a 
     health plan, health care provider, or purchasing cooperative 
     shall comply with the requirements of this subtitle using 
     such data elements.
       (b) Compliance with Modified Standards.--
       (1) In general.--If the Secretary adopts a modified 
     standard under part 2, a health plan, health care provider, 
     or purchasing cooperative shall be required to comply with 
     the modified standard at such time as the Secretary 
     determines appropriate taking into account the time needed to 
     comply due to the nature and extent of the modification.
       (2) Special rule.--In the case of modifications to 
     standards that do not occur within the 12-month period 
     beginning on the date such standards are adopted, the time 
     determined appropriate by the Secretary under paragraph (1) 
     shall be no sooner than the last day of the 90-day period 
     beginning on the date such modified standard is adopted and 
     no later than the last day of the 12 month period beginning 
     on the date such modified standard is adopted.

                  PART 4--ACCESSING HEALTH INFORMATION

     SEC. 5131. ACCESSING HEALTH INFORMATION FOR AUTHORIZED 
                   PURPOSES.

       (a) In General.--The Secretary shall adopt technical 
     standards for appropriate persons, including health plans, 
     health care providers, health information network services 
     certified under section 5141, health researchers, and Federal 
     and State agencies, to locate and access the health 
     information that is available through the health information 
     network due to the requirements of this subtitle. Such 
     technical standards shall ensure that any request to locate 
     or access information shall be authorized under subtitle C.
       (b) Procurement Rule for Government Agencies.--
       (1) In general.--Health information protection 
     organizations certified under section 5141 shall make 
     available to a Federal or State agency pursuant to a Federal 
     Acquisition Regulation (or an equivalent State system), any 
     non-identifiable health information that is requested by such 
     agency.
       (2) Certain information available at low cost.--If a health 
     information protection organization described in paragraph 
     (1) needs information from a health plan or health care 
     provider in order to comply with a request of a Federal or 
     State agency that is necessary to comply with a requirement 
     under this Act, such plan or provider shall make such 
     information available to such organization for a charge that 
     does not exceed the reasonable cost of transmitting the 
     information. If requested, a health information protection 
     organization that receives information under the preceding 
     sentence must make such information available to any other 
     such organization that is certified under section 5141 for a 
     charge that does not exceed the reasonable cost of 
     transmitting the information.
       (c) Functional Separation.--The standards adopted by the 
     Secretary under subsection (a) shall ensure that any health 
     information disclosed under such subsection shall not, after 
     such disclosure, be used or released for an administrative, 
     regulatory, or law enforcement purpose unless such disclosure 
     was made for such purpose.
       (d) Public Use Functions.--Nothing in this subtitle shall 
     be construed to limit the authority of a Federal or State 
     agency to make non-identifiable health information available 
     for public use functions.

     SEC. 5132. RESPONDING TO ACCESS REQUESTS.

       (a) In General.--The Secretary may adopt, and modify as 
     appropriate, standards under which a health care provider or 
     health plan shall respond to requests for access to health 
     information consistent with this subtitle and subtitle C.
       (b) Standards Described.--The standards under subsection 
     (a) shall provide--
       (1) for a standard format under which a provider or plan 
     will respond to each request either by satisfying the request 
     or responding with an explanation of the specific restriction 
     which results in a failure to satisfy the request; and
       (2) that any restrictions will not prevent a plan or 
     provider from responding to a request in a timely manner 
     taking into account the age and amount of the information 
     being requested.
       (c) Construction.--Nothing in this section shall be 
     construed as permitting a health care provider or health plan 
     to refuse to disclose any health information that is required 
     to be disclosed by law.

     SEC. 5133. LENGTH OF TIME INFORMATION SHOULD BE ACCESSIBLE.

       The Secretary shall adopt standards with respect to the 
     length of time any standard data elements for a type of 
     health information should be accessible through the health 
     information network.

     SEC. 5134. TIMETABLES FOR ADOPTION OF STANDARDS AND 
                   COMPLIANCE.

       (a) Initial Standards.--The Secretary shall adopt standards 
     under this part not later than 9 months after the date of the 
     enactment of this subtitle and such standards shall be 
     effective upon adoption.
       (b) Modifications to Standards.--
       (1) In general.--Except as provided in paragraph (2), the 
     Secretary shall review the standards adopted under this part 
     and shall adopt modified standards as determined appropriate, 
     but no more frequently than once every 6 months. Any 
     modification to standards shall be completed in a manner 
     which minimizes the disruption and cost of compliance. Any 
     modifications to standards adopted under this part shall be 
     effective upon adoption.
       (2) Special rule.--The Secretary shall not adopt 
     modifications to any standards adopted under this part during 
     the 12-month period beginning on the date such standards are 
     adopted unless the Secretary determines that a modification 
     is necessary in order to permit compliance with the 
     requirements of this part.

   PART 5--STANDARDS AND CERTIFICATION FOR HEALTH INFORMATION NETWORK

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

       (a) Standards for Operation.--The Secretary shall establish 
     standards with respect to the operation of health information 
     network services, including standards ensuring that--
       (1) such services develop, operate, and cooperate with one 
     another to form the health information network;
       (2) such services meet all of the requirements under 
     subtitle C that are applicable to such services;
       (3) such services 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) such services have security procedures that are 
     consistent with the privacy requirements under subtitle C, 
     including secure methods of access to and transmission of 
     data;
       (5) such services, if they are part of a larger 
     organization, have policies and procedures in place which 
     isolate their activities with respect to processing 
     information in a manner that prevents access to such 
     information by such larger organization.
       (b) Certification by the Secretary.--
       (1) Establishment.--Not later than 12 months after the date 
     of the enactment of this subtitle, the Secretary shall 
     establish a certification procedure for health information 
     network services which ensures that certified services are 
     qualified to meet the requirements of this subtitle 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 subtitle, 
     subtitle C, and the standards established by the Secretary 
     under this section.
       (4) Recertification.--A health information network service 
     must be recertified under this subsection at least every 3 
     years.
       (c) Loss of certification.--
       (1) Mandatory termination.--Except as provided in paragraph 
     (3), if a health information network service violates a 
     requirement imposed on such service under subtitle C, its 
     certification under this section shall be terminated unless 
     the Secretary determines that appropriate corrective action 
     has been taken.
       (2) Discretionary termination.--If a health information 
     network service violates a requirement or standard imposed 
     under this subtitle and a penalty has been imposed under 
     section 5151, the Secretary shall review the certification of 
     such service and may terminate such certification.
       (3) 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 paragraphs (1) or (2). 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.

     SEC. 5142. ENSURING AVAILABILITY OF INFORMATION.

       The Secretary shall establish a procedure under which a 
     health plan or health care provider which does not have the 
     ability to transmit standard data elements directly or does 
     not have access to a health information network service 
     certified under section 5141 shall be able to make health 
     information available for disclosure as authorized by this 
     subtitle.

                           PART 6--PENALTIES

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

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

                    PART 7--MISCELLANEOUS PROVISIONS

     SEC. 5161. IMPOSITION OF ADDITIONAL REQUIREMENTS.

       (a) Data Element Standards.--A person may not impose a 
     standard on another person that is in addition to the 
     standards adopted by the Secretary under section 5112 
     unless--
       (1) such person voluntarily agrees to such standard; or
       (2) a waiver is granted under subsection (c) to impose such 
     standard.
       (b) Transactions and Access Standards.--A person may not 
     impose a standard on another person that is in addition to 
     the standards adopted by the Secretary under section 5113 or 
     5131 unless such person voluntarily agrees to such standard.
       (c) Conditions for Waivers.--
       (1) In general.--A person may request a waiver from the 
     Secretary in order to require another person to comply with a 
     standard that is in addition to the standards adopted by the 
     Secretary under section 5112.
       (2) Consideration of waiver requests.--No waiver may be 
     granted unless the Secretary determines that the value of the 
     data to be exchanged for research or other purposes 
     significantly outweighs the administrative cost of the 
     additional standard taking into consideration the burden of 
     the timing of the imposition of the additional standard.
       (3) Anonymous reporting.--If a person attempts to impose a 
     standard in addition to the standards adopted by the 
     Secretary under section 5112, the person on whom such 
     additional standard is being imposed may contact the 
     Secretary. The Secretary shall develop a procedure under 
     which the contacting person shall remain anonymous. The 
     Secretary shall notify the person imposing the additional 
     standard that the additional standard may not be imposed 
     unless the other person voluntarily agrees to such standard 
     or a waiver is obtained under this subsection.

     SEC. 5162. EFFECT ON STATE LAW.

       (a) In General.--A provision, requirement, or standard 
     under this subtitle shall supersede any contrary provision of 
     State law, including--
       (1) a provision of State law that requires medical or 
     health plan records (including billing information) to be 
     maintained or transmitted in written rather than electronic 
     form, and
       (2) a provision of State law which provides for 
     requirements or standards that are more stringent than the 
     requirements or standards under this subtitle;

     except where the Secretary determines that the provision is 
     necessary to prevent fraud and abuse, with respect to 
     controlled substances, or for other purposes.
       (b) Public Health Reporting.--Nothing in this subtitle 
     shall be construed to invalidate or limit the authority, 
     power, or procedures established under any law providing for 
     the reporting of disease or injury, child abuse, birth, or 
     death, public health surveillance, or public health 
     investigation or intervention.

     SEC. 5164. HEALTH INFORMATION CONTINUITY.

       (a) Information Held by Health Plans and Providers.--If a 
     health plan or health care provider takes any action that 
     would threaten the continued availability of the standard 
     data elements of health information held by such plan or 
     provider, such data elements shall be obtained by the State 
     in which such plan or provider is located. The State shall 
     ensure that such data elements are transferred to a health 
     plan or health care provider in accordance with procedures 
     established by the Secretary.
       (b) Information Held by Health Information Network 
     Services.--If a health information network service certified 
     under section 5141 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 section 
     5141, as designated by the Secretary.

     SEC. 5165. PROTECTION OF COMMERCIAL INFORMATION.

       In adopting standards under this subtitle, the Secretary 
     shall not require disclosure of trade secrets and 
     confidential commercial information by entities operating in 
     the health information network except as required by law.

     SEC. 5166. PAYMENT FOR HEALTH CARE SERVICES OR HEALTH PLAN 
                   PREMIUMS.

       Nothing in this subtitle shall be construed to prohibit 
     payments for health care services or health plan premiums 
     from being made by debit, credit, or other payment cards or 
     numbers or other electronic payment means.

     SEC. 5167. HEALTH SECURITY CARDS.

       (a) In General.--The Secretary shall establish standards 
     relating to the form of health security cards issued by 
     health plans and the information to be encoded electronically 
     on such cards.
       (b) Form Described.--The standard form for a health 
     security card shall be a card which--
       (1) is made of plastic or a similar durable material with a 
     useful life of at least 5 years;
       (2) is resistant to counterfeiting;
       (3) can store information that can be encoded and retrieved 
     electronically;
       (4) can be produced in a cost-effective manner and used in 
     all types of health care locations; and
       (5) specifies on its face the social security account 
     number assigned to the individual who is the cardholder by 
     the Secretary under section 205(c)(2) of the Social Security 
     Act.
       (b) Information Described.--The information electronically 
     encoded on a health security card shall include the identity 
     of the individual to whom the card was issued, including such 
     individual's personal health identifier specified under 
     section 5112(c)(1), and may include any other information 
     that the Secretary determines may be useful in order for the 
     card to serve the purpose of easing access to and paying for 
     health care services. A health plan shall make available to 
     an individual cardholder, upon demand by such individual, a 
     printed copy of all information electronically encoded on 
     such individual's health security card.

     SEC. 5168. MISUSE OF HEALTH SECURITY CARD OR PERSONAL HEALTH 
                   IDENTIFIER.

       (a) Health Security Card.--A person who--
       (1) requires the display of, requires the use of, or uses a 
     health security card for any purpose other than obtaining or 
     paying for health care;
       (2) falsely makes, forges, counterfeits or alters a health 
     security card;
       (3) without lawful authority prints, photographs, or makes 
     any impression in the likeness of any health security card; 
     or
       (4) sells, transfers, or otherwise delivers a false, 
     forged, counterfeited, or altered health security card 
     knowing that the card is false, forged, counterfeited, or 
     altered;

     shall be fined not more than $25,000, imprisoned not more 
     than 2 years, or both.
       (b) Personal Health Identifier.--A person who requires the 
     disclosure of, requires the use of, or uses an individual's 
     personal health identifier for any purpose that is not 
     authorized by the Secretary, shall be fined not more than 
     $25,000, imprisoned not more than 2 years, or both.

     SEC. 5169. DIRECT BILLING FOR CLINICAL LABORATORY SERVICES.

       (a) In General.--
       (1) Requirement.--Except as provided in paragraph (2), in 
     the case of a claim for payment for a clinical diagnostic 
     laboratory test for which payment may otherwise be made, 
     payment may be made only to the person who, or entity which, 
     performed or supervised the test.
       (2) Exception.--Payment for a clinical diagnostic 
     laboratory test may be made to a physician with whom the 
     physician who performed the test shares a practice.
       (b) Additional Exceptions.--The Secretary may, by 
     regulation, establish exceptions to the requirement under 
     subsection (a)(1) that are in addition to the exception under 
     subsection (a)(2). In establishing such exceptions the 
     Secretary shall take into account--
       (1) circumstances in which an individual's privacy might be 
     violated; or
       (2) the need for confidentiality on the part of the person 
     furnishing the test.

     SEC. 5170. AUTHORIZATION OF APPROPRIATIONS.

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

                  PART 8--ASSISTANCE TO THE SECRETARY

     SEC. 5171. GENERAL REQUIREMENT ON SECRETARY.

       In complying with any requirements imposed under this 
     subtitle, the Secretary shall rely on recommendations of the 
     Health Information Advisory Committee established under 
     section 5172 and shall consult with appropriate Federal 
     agencies.

     SEC. 5172. 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 subtitle 
     and subtitle C;
       (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 subtitle. The President 
     shall designate 1 member as the Chair.
       (2) Expertise.--The membership of the committee shall 
     consist of individuals who are of recognized standing and 
     distinction 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 subtitle, including whether the 
     network is fulfilling the purpose described in section 5101;
       (B) the savings and costs of the network;
       (C) the activities of health information network services 
     certified under section 5141, health care providers, health 
     plans, and other entities using the network to exchange 
     health information;
       (D) the extent to which entities described in subparagraph 
     (C) are meeting the standards adopted under this subtitle 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 
     subtitle C;
       (F) the number and types of penalties assessed for 
     noncompliance with the standards adopted under this subtitle;
       (G) whether the Federal Government and State Governments 
     are receiving information of sufficient quality to meet their 
     responsibilities under the Health Security Act;
       (H) any problems with respect to implementation of the 
     network;
       (I) the extent to which timetables under this subtitle for 
     the adoption and implementation of standards are being met; 
     and
       (J) 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.
       (i) Authorization of Appropriations.--
       (1) In general.--There are authorized to be appropriated 
     such sums as may be necessary to carry out the purposes of 
     this section.
       (2) Availability.--Any sums appropriated under the 
     authorization contained in this subsection shall remain 
     available, without fiscal year limitation, until expended.

PART 9--DEMONSTRATION PROJECTS FOR COMMUNITY-BASED CLINICAL INFORMATION 
                                SYSTEMS

     SEC. 5181. 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 part 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 
     part 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 part 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 
     part, 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 part with the provisions of this part. The 
     Secretary shall establish a procedure for determining whether 
     such a person has failed to comply substantially within the 
     provisions of this part 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 part.
       (g) Authorization of Appropriations.--There are authorized 
     to be appropriated such sums as may be necessary to carry out 
     the purposes of this section.
               Subtitle C--Privacy of Health Information

                    PART 1--FINDINGS AND DEFINITIONS

     SEC. 5201. FINDINGS AND PURPOSES.

       (a) Findings.--The Congress finds as follows:
       (1) The improper disclosure of individually identifiable 
     health care information may cause significant harm to an 
     individual's interests in privacy, health care, and 
     reputation and may unfairly affect the ability of an 
     individual to obtain employment, education, insurance, and 
     credit.
       (2) The movement of people and health care related 
     information across State lines, the availability of, access 
     to, and exchange of health care related information with 
     Federally funded health care systems, the medicare program 
     under title XVIII of the Social Security Act, and the 
     medicaid program under title XIX of such Act, through 
     automated data banks and networks, and the emergence of other 
     multistate health care providers and payors create a need for 
     a uniform Federal law governing the disclosure of health care 
     information.
       (b) Purpose.--The purpose of this subtitle is to establish 
     effective mechanisms to protect the privacy of individuals 
     with respect to individually identifiable health care 
     information that is created or maintained as part of health 
     treatment, enrollment, payment, testing, or research 
     processes.

     SEC. 5202. DEFINITIONS.

       (a) Terms Relating to Protected Health Information.--In 
     this subtitle:
       (1) Protected health information.--The term ``protected 
     health information'' means any information, including 
     demographic information collected from an individual, whether 
     oral or recorded in any form or medium, that--
       (A) is created or received by a health care provider, 
     health plan, health oversight agency, health researcher, 
     public health authority, employer, life insurer, school or 
     university, or certified health information network service; 
     and
       (B) relates to the past, present, or future physical or 
     mental health or condition of an individual, the provision of 
     health care to an individual, or the past, present, or future 
     payment for the provision of health care to an individual, 
     and--
       (i) identifies an individual; or
       (ii) with respect to which there is a reasonable basis to 
     believe that the information can be used to identify an 
     individual.
       (2) Disclose.--The term ``disclose'', when used with 
     respect to protected health information, means to provide 
     access to the information, but only if such access is 
     provided to a person other than the individual who is the 
     subject of the information.
       (b) Terms Relating to Health Care System Participants.--In 
     this subtitle:
       (1) Health information trustee.--The term ``health 
     information trustee'' means--
       (A) a health care provider, health plan, health oversight 
     agency, certified health information network service, 
     employer, life insurer, or school or university insofar as it 
     creates, receives, maintains, uses, or transmits protected 
     health information;
       (B) any person who obtains protected health information 
     under section 5213, 5217, 5218, 5221, 5222, 5226, or 5231; 
     and
       (C) any employee or agent of a person covered under 
     subparagraphs (A) or (B).
       (2) Health care.--The term ``health care''--
       (A) means--
       (i) a preventative, diagnostic, therapeutic, 
     rehabilitative, maintenance, or palliative care, counseling, 
     service, or procedure--

       (I) with respect to the physical or mental condition of an 
     individual; or
       (II) affecting the structure or function of the human body 
     or any part of the human body; 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 examining, maintaining, or 
     improving the health of an individual.
       (3) Health care provider.--The term ``health care 
     provider'' means 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.
       (4) Health oversight agency.--The term ``health oversight 
     agency'' means a person who--
       (A) performs or oversees the performance of an assessment, 
     evaluation, determination, or investigation relating to the 
     licensing, accreditation, or certification of health care 
     providers; or
       (B)(i) performs or oversees the performance of an 
     assessment, evaluation, determination, 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 or relating to health care 
     fraud or fraudulent claims for payment regarding health; and
       (ii) is a public agency, acting on behalf of a public 
     agency, acting pursuant to a requirement of a public agency, 
     or carrying out activities under a Federal or State law 
     governing the assessment, evaluation, determination, or 
     investigation described in clause (i).
       (5) Health plan.--The term ``health plan'' shall have the 
     meaning given such term under section 5102.
       (6) Health researcher.--The term ``health researcher'' 
     means a person who conducts a biomedical, public health, 
     epidemiological, health services, or health statistics 
     research project or a research project on social and 
     behavioral factors relating to health.
       (7) Institutional review board.--The term ``institutional 
     review board'' means--
       (A) a board established in accordance with regulations of 
     the Secretary under section 491(a) of the Public Health 
     Service Act;
       (B) a similar board established by the Secretary for the 
     protection of human subjects in research conducted by the 
     Secretary; or
       (C) a similar board established under regulations of a 
     Federal Government authority other than the Secretary.
       (8) Public health authority.--The term ``public health 
     authority'' means an authority or instrumentality of the 
     United States, a State, or a political subdivision of a State 
     that is (A) responsible for public health matters; and (B) 
     engaged in such activities as injury reporting, public health 
     surveillance, and public health investigation or 
     intervention.
       (c) References to Certified Entities.--In this subtitle:
       (1) Certified health information network service.--The term 
     ``certified health information network service'' means a 
     health information service (as defined under section 5102) 
     that is certified under section 5141.
       (2) Certified health information protection organization.--
     The term ``certified health information protection 
     organization'' means a health information protection 
     organization (as defined in section 5102) that is certified 
     under section 5141.
       (d) Other Terms.--In this subtitle:
       (1) Individual representative.--The term ``individual 
     representative'' means any individual legally empowered to 
     make decisions concerning the provision of health care to an 
     individual (where the individual lacks the legal capacity 
     under State law to make such decisions) or the administrator 
     or executor of the estate of a deceased individual.
       (2) Law enforcement inquiry.--The term ``law enforcement 
     inquiry'' means an investigation or official proceeding 
     inquiring into whether there is 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.
       (3) Person.--The term ``person'' includes an authority of 
     the United States, a State, or a political subdivision of a 
     State.

                     PART 2--AUTHORIZED DISCLOSURES

                     Subpart A--General Provisions

     SEC. 5206. GENERAL RULES REGARDING DISCLOSURE.

       (a) General Rule.--A health information trustee may 
     disclose protected health information only for a purpose that 
     is authorized under this subtitle.
       (b) Disclosure within a trustee.--A health information 
     trustee may disclose protected health information to an 
     officer, employee, or agent of the trustee, but only for a 
     purpose that is compatible with and related to the purpose 
     for which the information was collected or received by that 
     trustee.
       (c) Scope of disclosure.--
       (1) In general.--Every disclosure of protected health 
     information by a health information trustee shall be limited 
     to the minimum amount of information necessary to accomplish 
     the purpose for which the information is disclosed.
       (2) Regulations.--The Secretary, after notice and 
     opportunity for public comment, may issue regulations under 
     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 disclosure.
       (d) No General Requirement to Disclose.--Nothing in this 
     subtitle that permits a disclosure of health information 
     shall be construed to require such disclosure.
       (e) Use and Redisclosure of Information.--The protected 
     health information received under a disclosure permitted by 
     the subtitle may not be used or disclosed unless the use or 
     disclosure is necessary to fulfill the purpose for which the 
     information was obtained and is not otherwise prohibited by 
     law. Protected health information about an individual that is 
     disclosed under this subtitle may not be used in, or 
     disclosed to any person for use in, any administrative, 
     civil, or criminal action or investigation directed against 
     the individual unless specifically permitted by this 
     subtitle.
       (f) Identification of Disclosed Information as Protected 
     Information.--
       (1) In general.--Except with respect to protected health 
     information that is disclosed under section 5213 and except 
     as provided in paragraph (2), a health information trustee 
     may not disclose protected health information unless such 
     information is clearly identified as protected health 
     information that is subject to this subtitle.
       (2) Routine disclosures subject to written agreement.--A 
     health information trustee who routinely discloses protected 
     health information to a person may satisfy the identification 
     requirement in paragraph (1) through a written agreement 
     between the trustee and the person with respect to the 
     protected health information.
       (g) Construction.--Nothing in this subtitle shall be 
     construed to limit the ability of a health information 
     trustee to charge a reasonable fee for the disclosure or 
     reproduction of health information.
       (h) Information in Which Providers are Identified.--The 
     Secretary, after notice and opportunity for public comment, 
     may issue regulations protecting information identifying 
     providers in order to promote the availability of health care 
     services.

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

       (a) Written Authorizations.--A health information trustee 
     may disclose protected health information pursuant to an 
     authorization executed by the individual who is the subject 
     of the information, if each of the following requirements is 
     met:
       (1) Writing.--The authorization is in writing, signed by 
     the individual who is the subject of the information, 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 disclosures.--The authorization 
     contains an acknowledgment that the individual who is the 
     subject of the information has read a statement of the 
     disclosures that the person to receive the protected health 
     information intends to make, which statement shall be in 
     writing, on a form that is distinct from the authorization 
     for disclosure, and which statement must be received by the 
     individual authorizing the disclosure on or before such 
     authorization is executed.
       (6) Information described.--The information to be disclosed 
     is described in the authorization.
       (7) Expiration date specified.--The authorization specifies 
     a date or event upon which the authorization expires, which 
     shall not exceed 2 years from the date of the execution of 
     the authorization.
       (8) Authorization timely received.--The authorization is 
     received by the trustee during a period described in 
     subsection (c)(1).
       (9) Disclosure timely made.--The disclosure occurs during a 
     period described in subsection (c)(2).
       (b) Authorizations Requested in Connection With Provision 
     of Health Care.--
       (1) In general.--A health information trustee may not 
     request that an individual provide to any other person an 
     authorization described in subsection (a) on a day on which--
       (A) the trustee provides health care to the individual 
     requested to provide the authorization; or
       (B) in the case of a trustee that is a health facility, the 
     individual is admitted into the facility as a resident or 
     inpatient in order to receive health care.
       (2) Exception.--Paragraph (1) does not apply if a health 
     information trustee requests that an individual provide an 
     authorization described in subsection (a) for the purpose of 
     assisting the individual in obtaining counseling or social 
     services from a person other than the trustee.
       (c) Time Limitations on Authorizations.--
       (1) Receipt by trustee.--For purposes of subsection (a)(8), 
     an authorization is timely received if it is received by the 
     trustee during--
       (A) the 1-year period beginning on the date on which the 
     authorization is signed under subsection (a)(1), if the 
     authorization permits the disclosure of protected health 
     information to a person who provides health counseling or 
     social services to individuals; or
       (B) the 30-day period beginning on the date on which 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)(9), a disclosure is timely made if it occurs before the 
     date or event specified in the authorization upon which the 
     authorization expires.
       (d) Revocation or Amendment of Authorization.--
       (1) In general.--An individual may in writing revoke or 
     amend an authorization described in subsection (a), in whole 
     or in part, at any time, except when--
       (A) disclosure of protected health information has been 
     authorized to permit validation of expenditures for health 
     care; or
       (B) action has been taken in reliance on the authorization.
       (2) Notice of revocation.--A health information trustee who 
     discloses protected health information pursuant to 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 subtitle.
       (e) Deceased Individual.--The Secretary shall develop and 
     establish through regulation a procedure for obtaining 
     protected health information relating to a deceased 
     individual when there is no individual representative for 
     such individual.
       (f) Model Authorizations.--The Secretary, after notice and 
     opportunity for public comment, shall develop and disseminate 
     model written authorizations of the type described in 
     subsection (a) and model statements of intended disclosures 
     of the type described in subsection (a)(5).
       (g) Copy.--A health information trustee who discloses 
     protected health information pursuant to an authorization 
     under this section shall maintain a copy of the 
     authorization.

     SEC. 5208. CERTIFIED HEALTH INFORMATION NETWORK SERVICES.

       (a) In General.--A health information trustee may disclose 
     protected health information to a certified health 
     information network service acting as an agent of the trustee 
     for any purpose permitted by this subtitle. Such a service, 
     acting as an agent of a trustee, may disclose protected 
     health information to another person as permitted under this 
     subtitle to facilitate the completion of the purpose for 
     which such information was disclosed to the service.
       (b) Certified Health Information Protection 
     Organizations.--A health information trustee may disclose 
     protected health information to a certified health 
     information protection organization for the purpose of 
     creating non-identifiable health information (as defined in 
     section 5102).

          Subpart B--Specific Disclosures Relating to Patient

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

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

     SEC. 5212. NEXT OF KIN AND DIRECTORY INFORMATION.

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

     SEC. 5213. EMERGENCY CIRCUMSTANCES.

       (a) In General.--A health care provider, health plan, 
     employer, or person who receives protected health information 
     under this section may disclose protected health information 
     in emergency circumstances when necessary to protect the 
     health or safety of an individual from imminent harm.
       (b) Scope of Disclosure.--The disclosure of protected 
     health information under this section shall be limited to 
     persons who need the information to take action to protect 
     the health or safety of the individual.

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

     SEC. 5216. OVERSIGHT.

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

     SEC. 5217. PUBLIC HEALTH.

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

     SEC. 5218. HEALTH RESEARCH.

       (a) In General.--A health information trustee may disclose 
     protected health information to a health researcher if an 
     institutional review board determines that the research 
     project engaged in by the health researcher--
       (1) requires use of the protected health information for 
     the effectiveness of the project; and
       (2) is of sufficient importance to outweigh the intrusion 
     into the privacy of the individual who is the subject of the 
     information that would result from the disclosure.
       (b) Research Requiring Direct Contact.--A health 
     information trustee may disclose protected health information 
     to a health researcher for a research project that includes 
     direct contact with an individual who is the subject of 
     protected health information if an institutional review board 
     determines that--
       (1) the research project meets the requirements of 
     paragraphs (1) and (2) of subsection (a);
       (2) direct contact is necessary to accomplish the research 
     purpose; and
       (3) the direct contact will be made in a manner that 
     minimizes the risk of harm, embarrassment, or other adverse 
     consequences to the individual.
       (c) Use of Health Information Network.--
       (1) In general.--A health information trustee may disclose 
     protected health information to a health researcher using the 
     health information network (as defined in section 5102) only 
     if an institutional review board certified by the Secretary 
     under paragraph (2) determines that the research project 
     engaged in by the health researcher meets the requirements of 
     this section.
       (2) Certification of institutional review boards.--
       (A) Regulations.--The Secretary, after notice and 
     opportunity for public comment, shall issue regulations 
     establishing certification requirements for institutional 
     review boards under this subtitle. Such regulations shall be 
     based on regulations issued under section 491(a) of the 
     Public Health Service Act and shall ensure that institutional 
     review boards certified under this paragraph have the 
     qualifications to access and protect the confidentiality of 
     research subjects.
       (B) Certification.--The Secretary shall certify an 
     institutional review board that meets the certification 
     requirements established by the Secretary under subparagraph 
     (A).
       (d) Obligations of Recipient.--A person who receives 
     protected health information pursuant to subsection (a)--
       (1) shall remove or destroy, at the earliest opportunity 
     consistent with the purposes of the project, information that 
     would enable an individual to be identified, unless--
       (A) an institutional review board has determined that there 
     is a health or research justification for retention of such 
     identifiers; and
       (B) there is an adequate plan to protect the identifiers 
     from disclosure that is inconsistent with this section; and
       (2) shall use protected health information solely for 
     purposes of the health research project for which disclosure 
     was authorized under this section.

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

     SEC. 5221. JUDICIAL AND ADMINISTRATIVE PURPOSES.

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

     SEC. 5222. LAW ENFORCEMENT.

       (a) In General.--A health care provider, health plan, 
     health oversight agency, employer, or person who receives 
     protected health information under section 5213 may disclose 
     protected health information to a law enforcement agency 
     (other than a health oversight agency governed by section 
     5216) if the information is requested for use--
       (1) in an investigation or prosecution of a health 
     information trustee;
       (2) in the identification of a victim or witness in a law 
     enforcement inquiry; or
       (3) in connection with the investigation of criminal 
     activity committed against the trustee or on premises 
     controlled by the trustee.
       (b) Certification.--When a law enforcement agency (other 
     than a health oversight agency) requests that a health 
     information trustee disclose protected health information 
     under this section, the law enforcement agency shall provide 
     the trustee with a written certification that--
       (1) specifies the information requested;
       (2) states that the information is needed for a lawful 
     purpose under this section; and
       (3) is signed by a supervisory official of a rank 
     designated by the head of the agency.
       (c) Restrictions on Additional Disclosure.--Notwithstanding 
     section 5206(e), protected health information about an 
     individual that is disclosed to a law enforcement agency 
     under this section may be used in, or disclosed for, an 
     administrative, civil, or criminal action or investigation 
     against the individual if the action or investigation arises 
     out of and is directly related to the action or investigation 
     for which the information was obtained.

    Subpart E--Disclosure Pursuant to Government Subpoena or Warrant

     SEC. 5226. GOVERNMENT SUBPOENAS AND WARRANTS.

       (a) In General.--A health care provider, health plan, 
     health oversight agency, employer, or person who receives 
     protected health information under section 5213 may disclose 
     protected health information under this section if the 
     disclosure is pursuant to--
       (1) a subpoena issued under the authority of a grand jury, 
     and the trustee is provided a written certification by the 
     grand jury seeking the information that the grand jury has 
     complied with the applicable access provisions of section 
     5227;
       (2) an administrative subpoena or a judicial subpoena or 
     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 
     5227; or
       (3) an administrative subpoena or a judicial subpoena or 
     warrant, and the disclosure otherwise meets the conditions of 
     section 5216, 5217, 5221, or 5222.
       (b) Restrictions on Additional Disclosure.--
       (1) Actions or investigations.--Notwithstanding section 
     5206(c), protected health information about an individual 
     that is received under subsection (a) may be disclosed for, 
     or used in, any administrative, civil, or criminal action or 
     investigation against the individual if the action or 
     investigation arises out of and is directly related to the 
     inquiry for which the information was obtained.
       (2) Special rule.--Protected health information about an 
     individual that is received under subsection (a)(3) may not 
     be disclosed by the recipient unless the recipient complies 
     with the conditions and restrictions on disclosure with which 
     the recipient would have been required to comply if the 
     disclosure had been made under section 5216, 5217, 5221, or 
     5222.

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

       (a) Probable Cause Requirement.--A government authority may 
     not obtain protected health information about an individual 
     under paragraph (1) or (2) of section 5226(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.--A government authority that obtains 
     protected health information about an individual under 
     circumstances described in subsection (a) and pursuant to a 
     warrant shall, not later than 30 days after the date the 
     warrant was executed, serve the individual with, or mail to 
     the last known address of the individual, a notice that 
     protected health information about the individual was so 
     obtained, together with a notice of the individual's right to 
     challenge the warrant in accordance with section 5228.
       (c) Subpoenas.--Except as provided in subsection (d), a 
     government authority may not obtain protected health 
     information about an individual under circumstances described 
     in subsection (a) and pursuant to a subpoena unless a copy of 
     the subpoena has been served on the individual on or before 
     the date of return of the subpoena, together with a notice of 
     the individual's right to challenge the subpoena in 
     accordance with section 5228, and--
       (1) 15 days have passed since the date of service on the 
     individual and within that time period the individual has not 
     initiated a challenge in accordance with section 5228; or
       (2) disclosure is ordered by a court after challenge under 
     section 5228.
       (d) Application for Delay.--
       (1) In general.--A government authority may apply ex parte 
     and under seal to an appropriate court to delay (for an 
     initial period of not longer than 90 days) serving a notice 
     or copy of a subpoena required under subsection (b) or (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 notice, an order 
     prohibiting the disclosure of the request for, or disclosure 
     of, the protected health information, and an order requiring 
     the disclosure of the protected health information if the 
     court finds that--
       (A) the inquiry being conducted is within the lawful 
     jurisdiction of the government authority seeking the 
     protected health information;
       (B) there is probable cause to believe that the protected 
     health information being sought is relevant to a legitimate 
     law enforcement inquiry;
       (C) the government authority's need for the information 
     outweighs the privacy interest of the individual who is the 
     subject of the information; and
       (D) there is reasonable ground to believe that receipt of 
     notice by the individual will result in--
       (i) endangering the life or physical safety of any 
     individual;
       (ii) flight from prosecution;
       (iii) destruction of or tampering with evidence or the 
     information being sought; or
       (iv) intimidation of potential witnesses.

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

       (a) Motion To Quash.--Within 15 days after the date of 
     service of a notice of execution or a copy of a subpoena of a 
     government authority seeking protected health information 
     about an individual under paragraph (1) or (2) of section 
     5226(a), the individual may file a motion to quash--
       (1) in the case of a State judicial warrant or subpoena, in 
     the court which issued the warrant or subpoena;
       (2) in the case of a warrant or subpoena issued under the 
     authority of a State that is not a State judicial warrant or 
     subpoena, in a court of competent jurisdiction; or
       (3) in the case of any other warrant or subpoena issued 
     under the authority of a Federal court or the United States, 
     in the United States district court for the district in which 
     the individual resides or in which the warrant or subpoena 
     was issued.
       (b) Copy.--A copy of the motion shall be served by the 
     individual upon the government authority by registered or 
     certified mail.
       (c) Proceedings.--The government authority may file with 
     the court such papers, including affidavits and other sworn 
     documents, as sustain the validity of the warrant or 
     subpoena. The individual may file with the court reply papers 
     in response to the government authority's filing. The court, 
     upon the request of the individual or the government 
     authority or both, may proceed in camera. The court may 
     conduct such proceedings as it deems appropriate to rule on 
     the motion, but shall endeavor to expedite its determination.
       (d) Standard for Decision.--A court may deny a motion under 
     subsection (a) if it finds there is probable cause to believe 
     the protected health information is relevant to a legitimate 
     law enforcement inquiry being conducted by the government 
     authority, unless the court finds 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 by the government authority for the 
     information.
       (e) Specific Considerations With Respect to Privacy 
     Interest.--In reaching its determination, the court shall 
     consider--
       (1) the particular purpose for which the information was 
     collected;
       (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.
       (f) Attorney's Fees.--In the case of a motion brought under 
     subsection (a) in which the individual has substantially 
     prevailed, the court may assess against the government 
     authority a reasonable attorney's fee and other litigation 
     costs (including expert's fees) reasonably incurred.
       (g) No Interlocutory Appeal.--A ruling denying a motion to 
     quash under this section shall not be deemed to be a final 
     order, and no interlocutory appeal may be taken therefrom by 
     the individual. 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 protected health information disclosed.

        Subpart F--Disclosure Pursuant to Private Party Subpoena

     SEC. 5231. PRIVATE PARTY SUBPOENAS.

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

     SEC. 5232. ACCESS PROCEDURES FOR PRIVATE PARTY SUBPOENAS.

       A private party may not obtain protected health information 
     about an individual pursuant to a subpoena unless a copy of 
     the subpoena together with a notice of the individual's right 
     to challenge the subpoena in accordance with section 5233 has 
     been served upon the individual on or before the date of 
     return of the subpoena, and--
       (1) 15 days have passed since the date of service on the 
     individual, and within that time period the individual has 
     not initiated a challenge in accordance with section 5233; or
       (2) disclosure is ordered by a court under section 5233.

     SEC. 5233. CHALLENGE PROCEDURES FOR PRIVATE PARTY SUBPOENAS.

       (a) Motion To Quash Subpoena.--Within 15 days after service 
     of a copy of the subpoena seeking protected health 
     information under section 5231, the individual who is the 
     subject of the protected health information may file in any 
     court of competent jurisdiction a motion to quash the 
     subpoena and serve a copy of the motion on the person seeking 
     the information.
       (b) Standard for Decision.--The court shall grant a motion 
     under subsection (a) unless the respondent demonstrates 
     that--
       (1) there is reasonable ground to believe the information 
     is relevant to a lawsuit or other judicial or administrative 
     proceeding; and
       (2) the need of the respondent for the information 
     outweighs the privacy interest of the individual.
       (c) Specific Considerations With Respect to Privacy 
     Interest.--In determining under subsection (b) whether the 
     need of the respondent for the information outweighs the 
     privacy interest of the individual, the court shall 
     consider--
       (1) the particular purpose for which the information was 
     collected;
       (2) the degree to which disclosure of the information would 
     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 relevant factor.
       (d) Attorney's Fees.--In the case of a motion brought under 
     subsection (a) in which the individual has substantially 
     prevailed, the court may assess against the respondent a 
     reasonable attorney's fee and other litigation costs and 
     expenses (including expert's fees) reasonably incurred.

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

                 Subpart A--Establishment of Safeguards

     SEC. 5236. ESTABLISHMENT OF SAFEGUARDS.

       (a) In General.--A health information trustee shall 
     establish and maintain appropriate administrative, technical, 
     and physical safeguards--
       (1) to ensure the integrity and confidentiality of 
     protected health information created or received by the 
     trustee; and
       (2) to protect against any anticipated threats or hazards 
     to the security or integrity of such information.
       (b) Regulations.--The Secretary shall promulgate 
     regulations regarding security measures for protected health 
     information.

     SEC. 5237. ACCOUNTING FOR DISCLOSURES.

       (a) In general.--
       (1) Requirement to create or maintain record.--A health 
     information trustee shall create and maintain, with respect 
     to any protected health information disclosed in exceptional 
     circumstances (as described in paragraph (2)), a record of--
       (A) the date and purpose of the disclosure;
       (B) the name of the person to whom or to which the 
     disclosure was made;
       (C) the address of the person to whom or to which the 
     disclosure was made or the location to which the disclosure 
     was made; and
       (D) the information disclosed, if the recording of the 
     information disclosed is practicable, taking into account the 
     technical capabilities of the system used to maintain the 
     record and the costs of such maintenance.
       (2) Exceptional circumstances described.--For purposes of 
     paragraph (1) protected health information is disclosed in 
     exceptional circumstances if the disclosure--
       (A) is not a routine part of doing business, as determined 
     in accordance with guidelines promulgated by the Secretary; 
     or
       (B) is permitted under sections 5213 and 5217.
       (b) Disclosure record part of information.--A record 
     created and maintained under paragraph (a) shall be 
     maintained as part of the protected health information to 
     which the record pertains.

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

     SEC. 5241. INSPECTION OF PROTECTED HEALTH INFORMATION.

       (a) In General.--Except as provided in subsection (c), a 
     health care provider or health plan--
       (1) shall permit an individual who is the subject of 
     protected health information to inspect any such information 
     that the provider or plan maintains;
       (2) shall permit the individual to have a copy of the 
     information;
       (3) shall permit a person who has been designated in 
     writing by the individual who is the subject of the 
     information to inspect, or to have a copy of, 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) Additional Requests.--Except as provided in subsection 
     (c), a health plan or health care provider shall, upon 
     written request of an individual--
       (1) determine the identity of previous providers to the 
     individual; and
       (2) obtain protected health information regarding the 
     individual.
       (c) Exceptions.--A health care provider or health plan is 
     not required by this section to permit inspection or copying 
     of protected health information if any of the following 
     conditions apply:
       (1) Mental health treatment notes.--The information 
     consists of psychiatric, psychological, or mental health 
     treatment notes, and the provider or plan determines, based 
     on reasonable medical judgment, that inspection or copying of 
     the notes would cause sufficient harm to the individual who 
     is the subject of the notes so as to outweigh the 
     desirability of permitting access, and the provider or plan 
     has not disclosed 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 individual seeking to inspect or 
     have a copy of the information and the provider or plan 
     determines, based on reasonable medical judgment, that 
     inspection or copying of the information would cause 
     sufficient harm to 1 or both of the individuals so as to 
     outweigh the desirability of permitting access.
       (3) Endangerment to life or safety.--The provider or plan 
     determines that disclosure of the information could 
     reasonably be expected to endanger the life or physical 
     safety of any individual.
       (4) Confidential source.--The information identifies or 
     could reasonably lead to the identification of a person 
     (other than a health care provider) who provided information 
     under a promise of confidentiality to a health care provider 
     concerning the individual who is the subject of the 
     information.
       (5) Administrative purposes.--The information--
       (A) is used by the provider or plan solely for 
     administrative purposes and not in the provision of health 
     care to the individual who is the subject of the information; 
     and
       (B) has not been disclosed by the provider or plan to any 
     other person.
       (d) Inspection and Copying of Segregable Portion.--A health 
     care provider or health plan 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 (c).
       (e) Conditions.--A health care provider or health plan may 
     require a written request for the inspection and copying of 
     protected health information under this subsection. The 
     health care provider or health plan may require a cost 
     reimbursement for such inspection and copying.
       (f) Statement of reasons for denial.--If a health care 
     provider or health plan denies a request for inspection or 
     copying under this section, the provider or plan shall 
     provide the individual who made the request (or the 
     individual's designated representative) with a written 
     statement of the reasons for the denial.
       (g) Deadline.--A health care provider or health plan 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 on which the provider or 
     plan receives the request.

     SEC. 5242. AMENDMENT OF PROTECTED HEALTH INFORMATION.

       (a) In general.--A health care provider or health plan 
     shall, within the 45-day period beginning on the date on 
     which the provider or plan receives from an individual a 
     written request that the provider or plan correct or amend 
     the information--
       (1) make the correction or amendment requested;
       (2) inform the individual of the correction or amendment 
     that has been made; and
       (3) inform any person who is identified by the individual, 
     who is not an officer, employee or agent of the provider or 
     plan, and to whom the uncorrected or unamended portion of the 
     information was previously disclosed, of the correction or 
     amendment that has been made.
       (b) Refusal to correct.--If the provider or plan refuses to 
     make the corrections, the provider or plan shall inform the 
     individual of--
       (1) the reasons for the refusal of the provider or plan to 
     make the correction or amendment;
       (2) any procedures for further review of the refusal; and
       (3) the individual's right to file with the provider or 
     plan a concise statement setting forth the requested 
     correction or amendment and the individual's reasons for 
     disagreeing with the refusal of the provider or plan.
       (c) Bases for request to correct or amend.--An individual 
     may request correction or amendment of protected health 
     information about the individual under paragraph (a) if the 
     information is not timely, accurate, relevant to the system 
     of records, or complete.
       (d) Statement of disagreement.--After an individual has 
     filed a statement of disagreement under paragraph (b)(3), the 
     provider or plan, in any subsequent disclosure of the 
     disputed portion of the information--
       (1) shall include a copy of the individual's statement; and
       (2) may include a concise statement of the reasons of the 
     provider or plan for not making the requested correction or 
     amendment.
       (e) Rule of construction.--This section shall not be 
     construed to require a health care provider or health plan to 
     conduct a formal, informal, or other hearing or proceeding 
     concerning a request for a correction or amendment to 
     protected health information the provider or plan maintains.
       (f) Correction.--For purposes of paragraph (a), a 
     correction is deemed to have been made to protected health 
     information when information that is not timely, accurate, 
     relevant to the system of records, or complete is clearly 
     marked as incorrect or when supplementary correct information 
     is made part of the information.

     SEC. 5243. NOTICE OF INFORMATION PRACTICES.

       (a) Preparation of Written Notice.--A health care provider 
     or health plan shall prepare a written notice of information 
     practices describing the following:
       (1) Personal rights of an individual.--The rights under 
     this subpart of an 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) Procedures of provider or plan.--The procedures 
     established by the provider or plan for the exercise of the 
     rights of individuals about whom protected health information 
     is maintained.
       (3) Authorized disclosures.--The disclosures of protected 
     health information that are authorized.
       (b) Dissemination of Notice.--A health care provider or 
     health plan--
       (1) shall, upon request, provide any individual with a copy 
     of the notice of information practices described in 
     subsection (a); and
       (2) shall make reasonable efforts to inform individuals in 
     a clear and conspicuous manner of the existence and 
     availability of the notice.
       (c) Model Notice.--The Secretary, after notice and 
     opportunity for public comment, shall develop and disseminate 
     a model notice of information practices for use by health 
     care providers and health plans under this section.

            Subpart C--Standards for Electronic Disclosures

     SEC. 5246. STANDARDS FOR ELECTRONIC DISCLOSURES.

       The Secretary shall promulgate standards for disclosing 
     protected health information in accordance with this subtitle 
     in electronic form. Such standards shall include standards 
     relating to the creation, transmission, receipt, and 
     maintenance, of any written document required or authorized 
     under this subtitle.

                           PART 4--SANCTIONS

            Subpart A--No Sanctions for Permissible Actions

     SEC. 5251. NO LIABILITY FOR PERMISSIBLE DISCLOSURES.

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

     SEC. 5252. NO LIABILITY FOR INSTITUTIONAL REVIEW BOARD 
                   DETERMINATIONS.

       If the members of an institutional review board make a 
     determination in good faith that--
       (1) a health research project is of sufficient importance 
     to outweigh the intrusion into the privacy of an individual; 
     and
       (2) the effectiveness of the project requires use of 
     protected health information,

     the members, the board, and the parent institution of the 
     board shall not be liable to the individual as a result of 
     the determination.

     SEC. 5253. RELIANCE ON CERTIFIED ENTITY.

       If a health information trustee contracts with a certified 
     health information network service to make a disclosure of 
     any protected health information on behalf of such trustee in 
     accordance with this subtitle and such service makes a 
     disclosure of such information that is in violation of this 
     subtitle, the trustee shall not be liable for to the 
     individual who is the subject of the information for such 
     unlawful disclosure.

                       Subpart B--Civil Sanctions

     SEC. 5256. CIVIL PENALTY.

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

     SEC. 5257. CIVIL ACTION.

       (a) In General.--An individual who is aggrieved by conduct 
     in violation of this subtitle may bring a civil action to 
     recover--
       (1) the greater of actual damages or liquidated damages of 
     $5,000;
       (2) punitive damages;
       (3) a reasonable attorney's fee and expenses of litigation;
       (4) costs of litigation; and
       (5) such preliminary and equitable relief as the court 
     determines to be appropriate.
       (b) Limitation.--No action may be commenced under this 
     section more than 3 years after the date on which the 
     violation was or should reasonably have been discovered.

                     Subpart C--Criminal Sanctions

     SEC. 5261. WRONGFUL DISCLOSURE OF PROTECTED HEALTH 
                   INFORMATION.

       (a) Offense.--A person who knowingly--
       (1) obtains protected health information relating to an 
     individual in violation of this subtitle; or
       (2) discloses protected health information to another 
     person in violation of this subtitle,

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

                   PART 5--ADMINISTRATIVE PROVISIONS

     SEC. 5266. RELATIONSHIP TO OTHER LAWS.

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

     SEC. 5267. RIGHTS OF INCOMPETENTS.

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

     SEC. 5268. EXERCISE OF RIGHTS.

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

                      PART 1--IMPROVED ENFORCEMENT

     SEC. 5301. HEALTH CARE FRAUD AND ABUSE AFFECTING FEDERAL 
                   OUTLAY PROGRAMS.

       (a) In General.--Not later than January 1, 1995, the 
     Secretary and the Attorney General of the United States shall 
     establish a joint program--
       (1) to coordinate Federal, State, and local law enforcement 
     programs to control fraud and abuse affecting Federal outlay 
     programs,
       (2) to conduct investigations (including consumer complaint 
     investigations), audits, evaluations, and inspections 
     relating to the delivery of and payment for health care 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 Law Enforcement Agencies.--In 
     carrying out the program under subsection (a), the Secretary 
     and 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 Purchasing Cooperatives and Certified 
     Health Plans.--In carrying out the program under subsection 
     (a), the Secretary and the Attorney General shall consult 
     with, and arrange for the sharing of data with 
     representatives of purchasing cooperatives and certified 
     standard health plans.
       (d) Authorities of Attorney General and Secretary.--In 
     carrying out duties under subsection (a), the Attorney 
     General and the Secretary--
       (1) shall conduct, supervise, and coordinate audits, civil 
     and criminal investigations, inspections, and evaluations 
     relating to the program established under such subsection;
       (2) shall have access (including on-line access as 
     requested and available) to all records available to 
     purchasing cooperatives and certified standard health plans 
     relating to the activities described in paragraph (1) 
     (subject to restrictions based on the confidentiality of 
     certain information under subtitles B and C of this title); 
     and
       (3) may issue advisory opinions, fraud alerts, and other 
     appropriate educational material to assist in compliance with 
     the provisions of this subtitle.
       (e) 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 
     the 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 2.
       (f) Use of Powers Under Inspector General Act of 1978.--In 
     carrying out duties and responsibilities under the program 
     established under subsection (a), the Inspector General is 
     authorized to exercise all powers granted under the Inspector 
     General Act of 1978 to the same manner and extent as provided 
     in that Act.
       (g) Definitions.--In this subtitle:
       (1) Certified standard health plans; purchasing 
     cooperatives.--The terms ``certified standard health plan'' 
     and ``purchasing cooperative'' have the meanings given such 
     terms by sections 1011(2) and 1013(16), respectively.
       (2) Federal outlay programs.--The term `Federal outlay 
     programs' means--
       (A) any program under title XVIII of the Social Security 
     Act,
       (B) any State health care program (as defined in section 
     1128(h) of the Social Security Act),
       (C) any program under the Public Health Service Act, and
       (D) any program under this Act, including any State program 
     approved under title I which certifies standard health plans, 
     supplemental health benefits plans, and long-term care 
     policies.
       (3) Inspector general.--The term ``Inspector General'' 
     means the Inspector General of the Department of Health and 
     Human Services.

     SEC. 5302. ESTABLISHMENT OF FEDERAL OUTLAY PROGRAM FRAUD AND 
                   ABUSE CONTROL ACCOUNT.

       (a) Establishment.--
       (1) In general.--There is hereby established an account to 
     be known as the ``Federal Outlay Program Fraud and Abuse 
     Control Account'' (in this section referred to as the ``Anti-
     Fraud Account''). The Anti-Fraud Account shall consist of--
       (A) such gifts and bequests as may be made as provided in 
     paragraph (2);
       (B) such amounts as may be deposited in the Anti-Fraud 
     Account as provided in section 5311(d)(2) and title IX of the 
     Social Security Act; and
       (C) such amounts as are transferred to the Anti-Fraud 
     Account under paragraph (3).
       (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.
       (3) Transfer of amounts.--
       (A) In general.--Subject to the limitation in subparagraph 
     (B), the Secretary of the Treasury shall transfer to the 
     Anti-Fraud Account an amount equal to the sum of the 
     following:
       (i) Criminal fines imposed in cases involving a Federal 
     health care offense (as defined in subsection (d)).
       (ii) 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).
       (iii) Administrative penalties and assessments imposed 
     under section 5311 (except as otherwise provided by law).
       (iv) Amounts resulting from the forfeiture of property by 
     reason of a Federal health care offense.
       (B) Limitation.--The Secretary of the Treasury shall not 
     transfer more than the $75,000,000, plus 50 percent of the 
     excess (if any) of the amount described in subparagraph (A) 
     for any fiscal year (beginning in fiscal year 1995).
       (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 the Attorney General 
     of the United States in carrying out the Federal Outlay 
     Program Fraud and Abuse Control Program established under 
     section 5301 (including the administration of the Program), 
     and may be used to cover costs incurred in operating the 
     Program, including costs of--
       (A) prosecuting health care matters (through criminal, 
     civil, and administrative proceedings);
       (B) investigations;
       (C) financial and performance audits of health care 
     programs and operations;
       (D) inspections and other evaluations;
       (E) rewards paid under section 5304; and
       (F) provider and consumer education (including the 
     provision of advisory opinions) regarding compliance with the 
     provisions of this subtitle.

     Not more than twenty percent of the amounts available in the 
     Anti-Fraud Account for any fiscal year shall be used for 
     costs described in subparagraph (F).
       (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 Secretary and the Attorney General 
     shall submit jointly an annual report to Congress on the 
     amount of revenue which is generated and disbursed by the 
     Anti-Fraud Account in each fiscal year.
       (d) Federal Health Care Offense Defined.--For purposes of 
     subsection (a)(3)(A)(i), 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.

     SEC. 5303. USE OF FUNDS BY INSPECTOR GENERAL.

       (a) Reimbursements for Investigations.--
       (1) In general.--The Inspector General is authorized to 
     receive and retain for current use reimbursement for the 
     costs of conducting investigations, when such restitution is 
     ordered by a court, voluntarily agreed to by the payer, or 
     otherwise.
       (2) Crediting.--Funds received by the Inspector General as 
     reimbursement for costs of conducting investigations shall be 
     deposited to the credit of the appropriation from which 
     initially paid, or to appropriations for similar purposes 
     currently available at the time of deposit, and shall remain 
     available for obligation for 1 year from the date of their 
     deposit.
       (3) Exception for forfeitures.--This subsection does not 
     apply to investigative costs paid to the Inspector General 
     from the Department of Justice Asset Forfeiture Fund, which 
     monies shall be deposited and expended in accordance with 
     subsection (b).
       (b) HHS Office of Inspector General Asset Forfeiture 
     Proceeds Fund.--
       (1) In general.--There is hereby established the ``HHS 
     Office of Inspector General Asset Forfeiture Proceeds Fund'', 
     to be administered by the Inspector General, which shall be 
     available to the Inspector General without fiscal year 
     limitation for expenses relating to the investigation of 
     matters within the jurisdiction of the Inspector General.
       (2) Deposits.--There shall be deposited in the Fund all 
     proceeds from forfeitures that have been transferred to the 
     Inspector General from the Department of Justice Asset 
     Forfeiture Fund under section 524 of title 28, United States 
     Code.

     SEC. 5304. REWARDS FOR INFORMATION LEADING TO PROSECUTION AND 
                   CONVICTION.

       (a) In General.--In special circumstances, the Secretary 
     and the Attorney General of the United States may jointly 
     make a payment of up to $10,000 to a person who furnishes 
     information unknown to the Government relating to a possible 
     prosecution of a Federal health care offense (as defined in 
     section 5302(d)).
       (b) Ineligible persons.--A person is not eligible for a 
     payment under subsection (a) if--
       (1) 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;
       (2) the person knowingly participated in the offense;
       (3) the information furnished by the person consists of 
     allegations or transactions that have been disclosed to the 
     public--
       (A) in a criminal, civil, or administrative proceeding;
       (B) in a congressional, administrative, or General 
     Accounting Office report, hearing, audit, or investigation; 
     or
       (C) by the news media, unless the person is the original 
     source of the information; or
       (4) 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.
       (c) Definition.--For the purposes of subsection (b)(3)(C), 
     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.
       (d) No Judicial Review.--Neither the failure of the 
     Secretary and the Attorney General to authorize a payment 
     under subsection (a) nor the amount authorized shall be 
     subject to judicial review.

              PART 2--CIVIL PENALTIES AND RIGHTS OF ACTION

     SEC. 5311. CIVIL MONETARY PENALTIES.

       (a) Actions Subject to Penalty.--
       (1) In general.--Any person who is determined by the 
     Secretary to have committed any action with respect to a 
     certified standard health plan or certified long-term care 
     plan or long-term care services provided under this Act that 
     would subject the person to a penalty under paragraphs (1) 
     through (11) of section 1128A 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 a penalty in accordance 
     with subsection (b).
       (2) Treatment of amounts recovered.--Any amounts recovered 
     under the preceding sentence shall be paid to the Secretary 
     and such portions of the amounts recovered as is determined 
     to have been improperly paid from a certified standard health 
     plan or certified long-term care policy for the delivery of 
     or payment for health care items or services shall be repaid 
     to such plan or policy (and enrollees of such plan or policy 
     as appropriate) and the remainder of the amounts recovered 
     shall be deposited in the Federal Outlays Program Fraud and 
     Abuse Control Account established under section 5302.
       (b) Penalties.--
       (1) General rule.--In the case of a person who the 
     Secretary determines has committed an action described in 
     subsection (a), the person shall be subject to the civil 
     monetary penalty (together with any additional assessment) to 
     which the person would be subject to under section 1128A of 
     the Social Security Act if the action was taken with respect 
     to title V, XVIII, XIX, or XX of such Act.
       (2) Penalties described.--Section 1128A(a) of the Social 
     Security Act (42 U.S.C. 1320a-7a(a)) is amended--
       (A) by striking ``$2,000'' and inserting ``$10,000''; and
       (B) by striking ``twice the amount claimed'' and inserting 
     ``3 times the amount claimed''.
       (3) Interest on penalties.--Section 1128A(f) of such Act 
     (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 such 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 such penalties and assessments owed 
     to cover the costs of collection.''.
       (c) Additional Offenses.--
       (1) In general.--Section 1128A(a) of the Social Security 
     Act (42 U.S.C. 1320a-7a(a)) is amended--
       (A) by striking ``or'' at the end of paragraphs (1) and 
     (2);
       (B) by striking the comma at the end of paragraph (2) and 
     inserting a semicolon; and
       (C) by inserting after paragraph (3) the following new 
     paragraphs:
       ``(4) offers, pays, or transfers remuneration to any 
     individual eligible for benefits under title XVIII of this 
     Act, or under a Federal outlay program (as defined in section 
     5301(g)(1) of the Health Security Act) 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 Federal outlay 
     program;
       ``(5) in the case of a person who is not an organization, 
     agency, or other entity, who is excluded from participating 
     in a program under title XVIII or a Federal outlay program in 
     accordance with this section, section 1128, or section 1156 
     and who, during the period of exclusion, retains either a 
     direct or indirect ownership or control interest of 5 percent 
     or more in, or an ownership or control interest (as defined 
     in section 1124(a)(3)) in, or who is an officer, director, 
     agent, or managing employee (as defined in section 1126(b)) 
     of, an entity that is participating in a program under title 
     XVIII;
       ``(6) engages in a practice that circumvents a payment 
     methodology intended to reimburse for two or more discreet 
     medical items or services at a single or fixed amount, 
     including but not limited to, multiple admissions or 
     readmission to hospitals and other institutions reimbursed on 
     a diagnosis reimbursement grouping basis;
       ``(7) engages in a practice which has the effect of 
     limiting (as compared to other plan enrollees) the 
     appropriate utilization of 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;
       ``(8) fails to comply with a quality assurance program or a 
     utilization review activity;
       ``(9) employs or contracts with any individual or entity 
     who is excluded from participating in a program under title 
     XVIII or a Federal outlay program in accordance with this 
     section, section 1128, or section 1156, for the provision of 
     any services (including but not limited to health care, 
     utilization review, medical social work, or administrative), 
     or employs or contracts with any entity for the direct or 
     indirect provision of such services, through such an excluded 
     individual or entity; or
       ``(10) submits false or fraudulent statements, data or 
     information, or claims to the Secretary, the Secretary of 
     Labor, any other Federal agency, a State health care agency, 
     a purchasing cooperative, or any other Federal, State or 
     local agency charged with implementation or oversight of a 
     certified health plan under this Act or a public program that 
     the person knows or should know is fraudulent;''.
       (4) 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 of 
     coinsurance and deductible amounts (or any part thereof), and 
     transfers of items or services for free or for other than 
     fair market value, except that such term does not include the 
     waiver of coinsurance or deductible amounts by a person or 
     entity, if--
       ``(A) the waiver is not offered as part of any 
     advertisement or solicitation;
       ``(B) the person does not routinely waive coinsurance or 
     deductible amounts; and
       ``(C) the person--
       ``(i) waives the coinsurance and deductible amounts after 
     determining in good faith that the individual is indigent;
       ``(ii) fails to collect coinsurance or deductible amounts 
     after making reasonable collection efforts; or
       ``(iii) provides for any permissible waiver as specified in 
     section 1128B(b)(3) or in regulations issued by the 
     Secretary.''.
       (5) Claim for item or service based on incorrect coding or 
     medically unnecessary services.--Section 1128A(a)(1) of such 
     Act (42 U.S.C. 1320a-7a(a)(1)) is amended--
       (A) in subparagraph (A), by striking ``claimed,'' and 
     inserting the following: ``claimed, including any person who 
     presents or causes to be presented a claim for an item or 
     service which includes a procedure or diagnosis code that the 
     person knows or should know will result in a greater payment 
     to the person than the code applicable to the item or service 
     actually provided or actual patient medical condition,'';
       (B) in subparagraph (C), by striking ``or'' at the end;
       (C) in subparagraph (D), by striking ``; or'' and inserting 
     ``, or''; and
       (D) by inserting after subparagraph (D) the following new 
     subparagraph:
       ``(E) is for a medical or other item or service that a 
     person knows or should know is not medically necessary; or''.
       (c) Procedures for Imposition of Penalties.--
       (1) Applicability of procedures under social security 
     act.--Except as otherwise provided in paragraph (2), 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, assessment, or exclusion under this section 
     in the same manner as such provisions apply with respect to 
     the imposition of a penalty, assessment, or exclusion under 
     section 1128A of such Act.
       (4) Authority of secretary of labor to impose penalties, 
     assessments, and exclusions.--
       (A) In general.--The Secretary of Labor may initiate an 
     action to impose a civil monetary penalty, assessment, or 
     exclusion under this section with respect to actions relating 
     to a certified multistate self-insured health plan if 
     authorized by the Attorney General of the United States and 
     the Secretary pursuant to regulations promulgated by the 
     Secretary in consultation with the Attorney General.
       (B) Regulations described.--Under the regulations 
     promulgated under subparagraph (A), the Attorney General and 
     the Secretary shall review an action proposed by the 
     Secretary of Labor, and not later than 60 days after 
     receiving notice of the proposed action from the Secretary of 
     Labor, shall--
       (i) approve the proposed action to be taken by the 
     Secretary of Labor;
       (ii) disapprove the proposed action; or
       (iii) assume responsibility for initiating a criminal, 
     civil, or administrative action based on the information 
     provided in the notice.
       (C) Action deemed approved.--If the Attorney General and 
     the Secretary fail to respond to a proposed action by the 
     Secretary of Labor within the period described in paragraph 
     (2), the Attorney General and the Secretary shall be deemed 
     to have approved the proposed action to be taken by the 
     Secretary of Labor.
       (e) Notification of Licensing Authorities.--Whenever the 
     Secretary's determination to impose a penalty, assessment, or 
     exclusion 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, assessment, or exclusion has become final and the 
     reasons therefore.

     SEC. 5312. PERMITTING PARTIES TO BRING ACTIONS ON OWN BEHALF.

       (a) In General.--Subject to subsections (b) and (c), a 
     certified standard health plan (as defined in section 
     1011(2)) or an experience-rated employer (as defined in 
     section 1011(5)(E)) that suffers harm or monetary loss 
     exceeding the sum or value of $10,000 (excluding interest) as 
     a result of any activity of an individual or entity which 
     makes the individual or entity subject to a civil monetary 
     penalty under section 5311 may, in a civil action against the 
     individual or entity in the United States District Court, 
     obtain treble damages and costs including attorneys' fees 
     against the individual or entity and such equitable relief as 
     is appropriate.
       (b) Requirements for Bringing Action.--A person may bring a 
     civil action under this section only if--
       (1) the person provides the Secretary with written notice 
     of--
       (A) the person's intent to bring an action under this 
     section,
       (B) the identities of the individuals or entities the 
     person intends to name as defendants to the action, and
       (C) all information the person 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 section 
     5311 against the defendants, and
       (2) one of the following conditions is met:
       (A) During the 60-day period that begins on the date the 
     Secretary receives the written notice described in paragraph 
     (1), the Secretary does not notify the person that the 
     Secretary intends to initiate an investigation to determine 
     whether to impose a civil monetary penalty under section 5311 
     against the defendants.
       (B) The Secretary notifies the person during the 60-day 
     period described in subparagraph (A) that the Secretary 
     intends to initiate an investigation to determine whether to 
     impose a civil monetary penalty under such section against 
     the defendants, and the Secretary subsequently notifies the 
     person that the Secretary no longer intends to initiate an 
     investigation or proceeding to impose a civil monetary 
     penalty against the defendants.
       (C) After the expiration of the 1-year period that begins 
     on the date written notice is provided to the Secretary, the 
     Secretary has not initiated a proceeding to impose a civil 
     monetary penalty against the defendants.
       (c) Treatment of Excess Awards.--If a person is awarded any 
     amounts in an action brought under this section that are in 
     excess of the damages suffered by the person as a result of 
     the defendant's activities, 20 percent of such amounts shall 
     be withheld from the person for payment into the Federal 
     Outlays Program Fraud and Abuse Control Account established 
     under section 5302.
       (d) 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.
       (e) No Limitation on Other Actions.--Nothing in this 
     section shall limit the right of any person to pursue any 
     other right of action or remedy available under the law.
       (f) Pendant Jurisdiction.--Nothing in this section shall be 
     construed, by reason of a claim arising under this section, 
     to confer on the Courts of the United States jurisdiction 
     over any State law claim.

     SEC. 5313. EXCLUSION FROM PROGRAM PARTICIPATION.

       (a) Mandatory Exclusion.--
       (1) In general.--Except as provided in paragraph (2), the 
     Secretary shall exclude and individual or entity from 
     participating in any applicable health plan if the individual 
     or entity--
       (A) is excluded from participation in a public program 
     under, or is otherwise described in, section 1128(a) of the 
     Social Security Act (relating to individuals and entities 
     convicted of health care-related crimes or patient abuse);
       (B) has been convicted after the date of the enactment of 
     this section, under Federal or State law, in connection with 
     the delivery of a health care item or service of a criminal 
     offense consisting of a felony relating to fraud, theft, 
     embezzlement, breach of fiduciary responsibility, or other 
     financial misconduct; or
       (C) has been convicted after such date, 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) Waiver permitted.--
       (A) In general.--When, in the opinion of the Secretary, 
     mandatory exclusion under paragraph (1) of an individual or 
     entity would significantly harm the public health or pose a 
     significant risk to the public health, the Secretary may 
     waive such exclusion and shall apply such other appropriate 
     penalties as authorized under this subtitle.
       (B) Application for waiver of exclusion.--
       (i) In general.--An individual or entity subject to 
     mandatory exclusion under this subsection may apply to the 
     Secretary, in a manner specified by the Secretary in 
     regulations, for waiver of the exclusion.
       (ii) Secretarial response.--The Secretary may waive the 
     exclusion for the reasons described in subparagraph (A).
       (b) Permissive Exclusion.--The Secretary may exclude and 
     individual or entity from participating in any applicable 
     health plan if the individual or entity--
       (1) is excluded from participation in a public program 
     under, or is otherwise described in, section 1128(b) of the 
     Social Security Act (other than paragraphs (3), (6)(A), 
     (6)(C), (6)(D), (10), or (13) of such section);
       (2) has been convicted after the date of the enactment of 
     this section, under Federal or State law, in connection with 
     the delivery of a health care item or service of a criminal 
     offense consisting of a misdemeanor relating to fraud, theft, 
     embezzlement, breach of fiduciary responsibility, or other 
     financial misconduct; or
       (3) has been convicted after the date of the enactment of 
     this section, under Federal or State law, of a criminal 
     offense consisting of a misdemeanor relating to the unlawful 
     manufacture, distribution, prescription, or dispensing of a 
     controlled substance.
       (c) Period of Exclusion.--
       (1) Notice of exclusion.--An exclusion under this section 
     shall be effective at such time and upon such reasonable 
     notice to the public and to the individual or entity excluded 
     as may be specified in regulations consistent with paragraph 
     (2).
       (2) Effective date of exclusion.--Such an exclusion shall 
     be effective with respect to services furnished to an 
     individual on or after the effective date of the exclusion.
       (3) Period of exclusion.--
       (A) In general.--The Secretary shall specify, in the notice 
     of exclusion under paragraph (1), the minimum period (or, in 
     the case of an exclusion of an individual excluded from 
     participation in a public program under, or is otherwise 
     described in, section 1128(b)(12) of the Social Security Act, 
     the period) of the exclusion.
       (B) Minimum period for mandatory exclusions.--In the case 
     of a mandatory exclusion under subsection (a), the minimum 
     period of exclusion shall be not less than 2 years.
       (C) Minimum period for certain permissive exclusions.--
       (i) Fraud, obstruction of investigation, and controlled 
     substance conviction.--In the case of an exclusion of an 
     individual excluded from participation in a public program 
     under, or is otherwise described in, paragraph (1) or (2) of 
     section 1128(b) of the Social Security Act or paragraph (1), 
     (2), or (3) of subsection (b) of this section, the period of 
     exclusion shall be a minimum of 1 year, unless the Secretary 
     determines that a longer period is necessary because of 
     aggravating circumstances.
       (ii) Suspensions.--In the case of an exclusion of an 
     individual or entity excluded from participation in a public 
     program under, or is otherwise described in, paragraph (4), 
     (5)(A), or (5)(B) of section 1128(b) of the Social Security 
     Act, 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.
       (iii) Unnecessary services.--In the case of an exclusion of 
     an individual or entity described in paragraph (6)(B) of 
     section 1128(b) of the Social Security Act, the period of the 
     exclusion shall be not less than 1 year.
       (d) Notice to Entities Administering Public Programs for 
     the Delivery of or Payment for Health Care Items or 
     Services.--
       (1) In general.--The Secretary shall exercise the authority 
     under this section in a manner that results in an 
     individual's or entity's exclusion from all certified 
     standard health plans under such program for the delivery of 
     or payment for health care items or services.
       (2) Notification.--The Secretary shall promptly notify each 
     sponsor of an applicable health plan and each entity that 
     administers a State health care program described in section 
     1128(h) of the Social Security Act of the fact and 
     circumstances of each exclusion (together with the period 
     thereof) effected against an individual or entity under this 
     section or under section 5311(b)(3).
       (e) Notice to State Licensing Agencies.--The provisions of 
     section 1128(e) of the Social Security Act shall apply to 
     this section in the same manner as such provisions apply to 
     sections 1128 and 1128A of such Act.
       (f) Notice, Hearing, and Judicial Review.--
       (1) In general.--Subject to paragraph (2), any individual 
     or entity that is excluded (or directed to be excluded) from 
     participation under this section is entitled to reasonable 
     notice and opportunity for a hearing thereon by the Secretary 
     to the same extent as is provided in section 205(b) of the 
     Social Security Act, and to judicial review of the 
     Secretary's final decision after such hearing as is provided 
     in section 205(g) of such Act, except that such action shall 
     be brought in the Court of Appeals of the United States for 
     the judicial circuit in which the individual or entity 
     resides, or has a principal place of business, or, if the 
     individual or entity does not reside or have a principal 
     place of business within any such judicial circuit, in the 
     United States Court of Appeals for the District of Columbia 
     Circuit.
       (2) Administrative hearing.--Unless the Secretary 
     determines that the health or safety of individuals receiving 
     services warrants the exclusion taking effect earlier, any 
     individual or entity that is the subject of an adverse 
     determination based on paragraphs (6)(B), (7), (8), (9), 
     (11), (12), (14), or (15) of section 1128(b) of the Social 
     Security Act, shall be entitled to a hearing by an 
     administrative law judge (as provided under section 205(b) of 
     the Social Security Act) on the determination before any 
     exclusion based upon the determination takes effect. If a 
     hearing is requested, the exclusion shall be effective upon 
     the issuance of an order by the administrative law judge 
     upholding the determination of the Secretary to exclude.
       (g) Convicted Defined.--In this section, the term 
     ``convicted'' has the meaning given such term in section 
     1128(i) of the Social Security Act.
       (h) Request for Exclusion.--
       (1) In general.--The sponsor of any standard health plan, 
     the board of any purchasing cooperative, and the Secretary of 
     Labor in the case of a multistate self-insured health plan 
     may request that the Secretary of Health and Human Services 
     exclude an individual or entity with respect to actions under 
     a certified health plan in accordance with this section.
       (2) Response by secretary.--
       (A) In general.--An individual or entity excluded (or 
     directed to be excluded) from participation under this 
     section or section 5411(b)(3) may apply to the Secretary, in 
     a manner specified by the Secretary in regulations and at the 
     end of the minimum period of exclusion (or, in the case of an 
     individual or entity described in section 1128(b)(12) of the 
     Social Security Act, the period of exclusion) provided under 
     this section or section 5411(b)(3) and at such other times as 
     the Secretary may provide, for termination of the exclusion.
       (B) Secretarial response.--The Secretary may terminate the 
     exclusion if the Secretary determines, on the basis of the 
     conduct of the applicant which occurred after the date of the 
     notice of exclusion or which was unknown to the Secretary at 
     the time of the exclusion, that--
       (i) there is no basis under this section or section 
     5411(b)(3) for a continuation of the exclusion, and
       (ii) there are reasonable assurances that the types of 
     actions which formed the basis for the original exclusion 
     have not recurred and will not recur.
       (C) Notification of termination.--The Secretary shall 
     promptly notify each sponsor of an applicable health plan and 
     each entity that administers a State health care program 
     described in section 1128(h) of the Social Security Act of 
     each termination of exclusion made under this paragraph.
       (i) Effect of Exclusion.--Notwithstanding any other 
     provision of this Act, no payment may be made under a 
     certified standard health plan for the delivery of or payment 
     for any item or service (other than an emergency item or 
     service, not including items or services furnished in an 
     emergency room of a hospital) furnished--
       (1) by an individual or entity during the period when such 
     individual or entity is excluded pursuant to this section 
     from participation in a certified standard health plan; or
       (2) at the medical direction or on the prescription of a 
     physician during the period when the physician is excluded 
     pursuant to this section from participation in a certified 
     health plan and the person furnishing the item or service 
     knew or had reason to know of the exclusion (after a 
     reasonable time period after reasonable notice has been 
     furnished to the person).

                   PART 3--AMENDMENTS TO CRIMINAL LAW

     SEC. 5321. 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 purchasing cooperative, certified 
     standard health plan, certified long-term care insurance 
     policy, 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 purchasing 
     cooperative, certified standard health plan, certified long-
     term care insurance policy, 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 any term of years.
       ``(b) As used in this section the terms `purchasing 
     cooperative', `certified standard health plan', and 
     `certified long-term care insurance policy' have the meanings 
     given those terms in sections 1013(16), 1011(2), and 1011(4) 
     of the Health Security Act, respectively.''.
       (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. 5322. 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 
     purchasing cooperative, certified standard health plan, 
     certified long-term care insurance policy, or of any fund 
     connected with such a cooperative, plan, or policy, shall be 
     fined under this title or imprisoned not more than 10 years, 
     or both.
       ``(b) As used in this section, the terms `purchasing 
     cooperative', `certified standard health plan', and 
     `certified long-term care insurance policy' have the meanings 
     given those terms in sections 1013(16), 1011(2), and 1011(4) 
     of the Health Security Act, respectively.''.
       (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. 5323. 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 purchasing 
     cooperative, certified standard health plan, or certified 
     long-term care insurance policy, 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 terms `purchasing 
     cooperative', `certified standard health plan', and 
     `certified long-term care insurance policy' have the meanings 
     given those terms in sections 1013(16), 1011(2), and 1011(4) 
     of the Health Security Act, respectively.''.
       (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. 5324. 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 purchasing 
     cooperative, certified standard health plan, or certified 
     long-term care insurance policy;
       ``(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 purchasing 
     cooperative, certified standard health plan, or certified 
     long-term care insurance policy; 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 purchasing 
     cooperative, certified standard health plan, or certified 
     long-term care insurance policy, 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 purchasing 
     cooperative, certified standard health plan, or certified 
     long-term care insurance policy;
       ``(B) an officer, counsel, agent, or employee, of an 
     organization that provides services under contract to any 
     purchasing cooperative, certified standard health plan, or 
     certified long-term care insurance policy;
       ``(C) an official or employee of a State agency having 
     regulatory authority over any purchasing cooperative, 
     certified standard health plan, or certified long-term care 
     insurance policy;
       ``(D) an officer, counsel, agent, or employee of a health 
     care sponsor;
       ``(2) the term `health care sponsor' means any individual 
     or entity serving as the sponsor of a certified health plan 
     for purposes of the Health Security Act, and includes the 
     joint board of trustees or other similar body used by two or 
     more employers to administer a certified standard health plan 
     for purposes of such Act; and
       ``(3) the terms `purchasing cooperative', `certified 
     standard health plan', and `certified long-term care 
     insurance policy' have the meanings given those terms in 
     sections 1013(16), 1011(2), and 1011(4) of the Health 
     Security Act, respectively.''.
       (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. 5325. 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 5302(d) of the Health Security 
     Act);''.

     SEC. 5326. 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 5302(d) of 
     the Health Security Act).''.

     SEC. 5327. FORFEITURES FOR VIOLATIONS OF FRAUD STATUTES.

       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 
     5302(d) of the Health Security Act), shall order such person 
     to forfeit to the United States any property, real or 
     personal, constituting or traceable to the gross proceeds 
     obtained, directly or indirectly, as a result of the 
     commission of the offense, if the violation results in 
     serious bodily injury (as defined in section 1365).''.

              PART 4--AMENDMENTS TO CIVIL FALSE CLAIMS ACT

     SEC. 5331. 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 certified 
     standard health plan or certified long-term care insurance 
     policy'' after ``property to the Government'';
       (2) in the matter following subsection (a)(7), by inserting 
     ``or certified standard health plan or certified long-term 
     care insurance policy'' before ``sustains because of the act 
     of that person,'';
       (3) at the end of the first sentence of subsection (a), by 
     inserting ``or certified standard health plan or certified 
     long-term care insurance policy'' 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 certified standard health plan or certified long-term 
     care insurance policy.''; and
       (5) by adding at the end the following:
       ``(f) Certified Standard Health Plan and Certified Long-
     Term Care Insurance Policy Defined.--For purposes of this 
     section, the terms `purchasing cooperative', `certified 
     standard health plan', and `certified long-term care 
     insurance policy' have the meanings given those terms in 
     sections 1013(16), 1011(2), and 1011(4) of the Health 
     Security Act, respectively.''.

                         PART 5--EFFECTIVE DATE

     SEC. 5341. EFFECTIVE DATE.

       Except as otherwise provided in this subtitle, the 
     provisions of, and amendments made by, this subtitle shall be 
     effective on and after January 1, 1996.
                  Subtitle E--Medical Liability Reform

                         PART 1--SYSTEM REFORMS

     SEC. 5401. FEDERAL TORT REFORM.

       (a) Applicability.--
       (1) In general.--Except as provided in section 5402, this 
     subtitle shall apply with respect to any medical malpractice 
     liability action brought in any State or Federal court, 
     except that this subtitle shall not apply to a claim or 
     action for damages arising from a vaccine-related injury or 
     death to the extent that title XXI of the Public Health 
     Service Act applies to the claim or action.
       (2) Effect on sovereign immunity and choice of law or 
     venue.--Nothing in this subtitle shall be construed to--
       (A) waive or affect any defense of sovereign immunity 
     asserted by any State under any provision of law;
       (B) waive or affect any defense of sovereign immunity 
     asserted by the United States;
       (C) affect the applicability of any provision of the 
     Foreign Sovereign Immunities Act of 1976;
       (D) preempt State choice-of-law rules with respect to 
     claims brought by a foreign nation or a citizen of a foreign 
     nation; or
       (E) affect the right of any court to transfer venue or to 
     apply the law of a foreign nation or to dismiss a claim of a 
     foreign nation or of a citizen of a foreign nation on the 
     ground of inconvenient forum.
       (3) Federal court jurisdiction not established on federal 
     question grounds.--Nothing in this subtitle shall be 
     construed to establish any jurisdiction in the district 
     courts of the United States over medical malpractice 
     liability actions on the basis of section 1331 or 1337 of 
     title 28, United States Code.
       (b) Definitions.--In this subtitle, the following 
     definitions apply:
       (1) Alternative dispute resolution system; ADR.--The term 
     ``alternative dispute resolution system'' or ``ADR'' means a 
     system that provides for the resolution of medical 
     malpractice claims in a manner other than through medical 
     malpractice liability actions.
       (2) Claimant.--The term ``claimant'' means any person who 
     alleges a medical malpractice claim, and any person on whose 
     behalf such a claim is alleged, including the decedent in the 
     case of an action brought through or on behalf of an estate.
       (3) Health care professional.--The term ``health care 
     professional'' means any individual who provides health care 
     services in a State and who is required by the laws or 
     regulations of the State to be licensed or certified by the 
     State to provide such services in the State.
       (4) Health care provider.--The term ``health care 
     provider'' means any organization or institution that is 
     engaged in the delivery of health care services in a State 
     and that is required by the laws or regulations of the State 
     to be licensed or certified by the State to engage in the 
     delivery of such services in the State.
       (5) Injury.--The term ``injury'' means any illness, 
     disease, or other harm that is the subject of a medical 
     malpractice liability action or a medical malpractice claim.
       (6) Medical malpractice liability action.--The term 
     ``medical malpractice liability action'' means a cause of 
     action brought in a State or Federal court against a health 
     care provider or health care professional by which the 
     plaintiff brings a medical malpractice claim.
       (7) Medical malpractice claim.--The term ``medical 
     malpractice claim'' means a claim brought against a health 
     care provider or health care professional in which a claimant 
     alleges that injury was caused by the provision of (or the 
     failure to provide) health care services, except that such 
     term does not include--
       (A) any claim based on an allegation of an intentional 
     tort;
       (B) any claim based on an allegation that a product is 
     defective that is brought against any individual or entity 
     that is not a health care professional or health care 
     provider; or
       (C) any claim brought pursuant to subtitle F.

     SEC. 5402. STATE-BASED ALTERNATIVE DISPUTE RESOLUTION 
                   MECHANISMS.

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

     SEC. 5403. REQUIREMENT OF CERTIFICATE OF MERIT.

       (a) Requiring Submission With Complaint.--Except as 
     provided in subsection (c) and subject to the penalties of 
     subsection (e), no medical malpractice liability action may 
     be brought by any individual unless, at the time the 
     individual commences such action, 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 claim with a 
     qualified specialist (as defined in subsection (d));
       (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 determination that, based upon a review of the 
     available medical record and other relevant material, a 
     reasonable medical interpretation of the facts supports a 
     finding that the claim against the defendant is meritorious 
     and based on good cause; and
       (3) on the basis of the qualified specialist's review and 
     consultation, the individual (or the individual's attorney) 
     has concluded that the claim is meritorious and based on good 
     cause.
       (b) Identity of Specialist.--Only upon a showing of good 
     cause may a court order that the identity of the specialist 
     used for purposes of subsection (a) be revealed. In such an 
     event, such identity shall be reviewed by the court on an in 
     camera basis only.
       (c) 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) despite good faith efforts, the individual is unable to 
     obtain the written report before the expiration of the 
     applicable statute of limitations;
       (B) despite good faith efforts, at the time the individual 
     commences the action, the individual has been unable to 
     obtain medical records or other information necessary, 
     pursuant to any applicable law, to prepare the written report 
     requested; or
       (C) the court of competent jurisdiction determines that the 
     affidavit requirement shall be extended upon a showing of 
     good cause.
       (2) Deadline for submission where extension applies.--In 
     the case of an individual who brings an action to which 
     paragraph (1) applies, the action shall be dismissed unless 
     the individual submits the affidavit described in subsection 
     (a) not later than--
       (A) in the case of an action to which subparagraph (A) of 
     paragraph (1) applies, 90 days after commencing the action; 
     or
       (B) in the case of an action to which subparagraph (B) of 
     paragraph (1) applies, 90 days after obtaining the 
     information described in such subparagraph or when good cause 
     for an extension no longer exists.
       (d) Qualified Specialist Defined.--
       (1) In general.--As used in subsection (a), the term 
     ``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) to have expertise in the same 
     or substantially similar area of practice to that involved in 
     the action.
       (2) Evidence of expertise.--For purposes of paragraph (1), 
     evidence of required expertise may include evidence that the 
     individual--
       (A) practices (or has practiced) or teaches (or has taught) 
     in the same or substantially similar area of health care or 
     medicine to that involved in the action; or
       (B) is otherwise qualified by experience or demonstrated 
     competence in the relevant practice area.
       (e) Sanctions for Submitting False Affidavit.--Upon the 
     motion of any party or on its own initiative, the court in a 
     medical malpractice liability action may impose a sanction on 
     a party, the party's attorney, or both, for--
       (1) any knowingly false statement made in an affidavit 
     described in subsection (a);
       (2) making any false representations in order to obtain a 
     qualified specialist's report; or
       (3) failing to have the qualified specialist's written 
     report in his or her custody and control;

     and may require that the sanctioned party reimburse the other 
     party to the action for costs and reasonable attorney's fees.

     SEC. 5404. LIMITATION ON AMOUNT OF ATTORNEY'S CONTINGENCY 
                   FEES.

       (a) In General.--An attorney who represents, on a 
     contingency fee basis, a plaintiff in a medical malpractice 
     liability action may not charge, demand, receive, or collect 
     for services rendered in connection with such action 
     (including the resolution of the claim that is the subject of 
     the action under any alternative dispute resolution system) 
     in excess of--
       (1) 33\1/3\ percent of the first $150,000 of the total 
     amount recovered by judgment or settlement in such action; 
     plus
       (2) 25 percent of any amount recovered above the amount 
     described in paragraph (1);

     unless otherwise determined under State law. Such amount 
     shall be computed after deductions are made for all the 
     expenses associated with the claim other than those 
     attributable to the normal operating expenses of the 
     attorney.
       (b) Calculation of periodic payments.--In the event that a 
     judgment or settlement includes periodic or future payments 
     of damages, the amount recovered for purposes of computing 
     the limitation on the contingency fee under subsection (a) 
     may, in the discretion of the court, be based on the cost of 
     the annuity or trust established to make the payments. In any 
     case in which an annuity or trust is not established to make 
     such payments, such amount shall be based on the present 
     value of the payments.
       (c) Contingency Fee Defined.--As used in this section, the 
     term ``contingency fee'' means any fee for professional legal 
     services which is, in whole or in part, contingent upon the 
     recovery of any amount of damages, whether through judgment 
     or settlement.

     SEC. 5405. PERIODIC PAYMENT OF AWARDS.

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

     SEC. 5406. FEDERAL STUDY ON MEDICAL NEGLIGENCE.

       (a) Study.--To improve the level of empirical data on the 
     incidence and effect of medical negligence in the United 
     States, the Secretary of Health and Human Services shall 
     commission and oversee a nationwide interdisciplinary study 
     to evaluate--
       (1) the incidence of injuries resulting from medical 
     treatment, including a determination of the percentage of 
     such injuries that resulted from the negligence of a 
     physician, other health care provider or health care 
     institution;
       (2) the costs of medical expenses and lost wages to the 
     victims of medical negligence and their families, and their 
     compensation for such losses under the current malpractice 
     system;
       (3) methods to reduce the incidence and costs of medical 
     negligence; and
       (4) methods to promote the efficient and fair resolution of 
     legal claims stemming from the incidence of medical 
     negligence.
       (b) Access to Records.--For the purposes of the study 
     conducted under subsection (a), the Secretary of Health and 
     Human Services shall have the powers necessary to access 
     hospital patients' records while maintaining patient 
     confidentiality.
       (c) Report to Congress.--Not later than 3 years after the 
     commission of the study under subsection (a), the study shall 
     be completed and the Secretary of Health and Human Services 
     shall prepare and submit to Congress a report describing the 
     findings of the study.

PART 2--DEMONSTRATION PROJECT RELATING TO MEDICAL MALPRACTICE LIABILITY

     SEC. 5411. PILOT PROGRAM APPLYING PRACTICE GUIDELINES TO 
                   MEDICAL MALPRACTICE LIABILITY ACTIONS.

       (a) Establishment.--Not later than 1 year after the 
     Secretary of Health and Human Services determines that 
     appropriate practice guidelines are available and were 
     developed with the input of health care providers, legal 
     professionals and consumer representatives, the Secretary 
     shall establish pilot programs under which the Secretary 
     shall provide funds (in such amounts as the Secretary 
     determines 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.--To be eligible to participate in 
     a pilot program under subsection (a), a State shall prepare 
     and submit to the Secretary an application at such time, in 
     such manner, and containing such information as the Secretary 
     may require, including--
       (1) assurances that, under the law of the State, in the 
     resolution of any medical malpractice liability action, 
     compliance or noncompliance with an appropriate practice 
     guideline shall be admissible by either party at trial as 
     presumptive evidence of nonliability or liability for medical 
     negligence; and
       (2) such other information and assurances as the Secretary 
     may require.
       (c) Reports to Congress.--Not later than 3 months after the 
     last day of each year for which a pilot program established 
     under subsection (a) is in effect, the Secretary of Health 
     and Human Services shall prepare and submit to Congress a 
     report describing the operation of the program during the 
     year for which the report is submitted. Such report shall 
     contain such recommendations as the Secretary considers 
     appropriate, include recommendations relating to revisions to 
     the laws governing medical practice liability.

     SEC. 5412. ENTERPRISE LIABILITY DEMONSTRATION PROJECT.

       (a) Establishment.--The Secretary of Health and Human 
     Services shall establish a demonstration project under which 
     the Secretary shall provide funds (in such amount as the 
     Secretary considers appropriate) to one or more eligible 
     States to demonstrate whether substituting liability for 
     medical malpractice on the part of the health plan in which a 
     physician participates for the personal liability of the 
     physician will result in improvements in the quality of care 
     provided under the plan, reductions in defensive medical 
     practices, and better risk management.
       (b) Eligibility of State.--A State is eligible to 
     participate in the demonstration project 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 such information and assurances as the 
     Secretary may require, including assurances that the State--
       (1) has entered into an agreement with a health plan (other 
     than a fee-for-service plan) operating in the State under 
     which the plan assumes legal liability with respect to any 
     medical malpractice claim arising from the provision of (or 
     failure to provide) services under the plan by any physician 
     participating in the plan;
       (2) has provided that, under the law of the State, a 
     physician participating in a plan that has entered into an 
     agreement with the State under paragraph (1) may not be 
     liable in damages or otherwise for such a claim and the plan 
     may not require such physician to indemnify the plan for any 
     such liability; and
       (3) will provide the Secretary with such reports on the 
     operation of the project as the Secretary may require.
       (c) Authorization of Appropriations.--There are authorized 
     to be appropriated such sums as may be necessary to carry out 
     demonstration projects under this section.
                  Subtitle F--Remedies and Enforcement

   PART 1--REVIEW OF BENEFIT DETERMINATIONS FOR ENROLLED INDIVIDUALS

                        Subpart A--General Rules

     SEC. 5501. HEALTH PLAN CLAIMS PROCEDURE.

       (a) Definitions.--For purposes of this section--
       (1) Claim.--The term ``claim'' means a claim for payment or 
     provision of benefits under a health plan, a request for 
     preauthorization of items or services which is submitted to a 
     health plan prior to receipt of the items or services, or the 
     denial, reduction or termination of any service or request 
     for a referral or reimbursement.
       (2) Individual claimant.--The term ``individual claimant'' 
     with respect to a claim means any individual who submits the 
     claim to a health plan in connection with the individual's 
     enrollment under the plan, or on whose behalf the claim is 
     submitted to the plan by a provider.
       (3) Provider claimant.--The term ``provider claimant'' with 
     respect to a claim means any provider who submits the claim 
     to a health plan with respect to items or services provided 
     to an individual enrolled under the plan.
       (b) General Rules Governing Treatment of Claims.--
       (1) Adequate notice of disposition of claim.--In any case 
     in which a claim is submitted in complete form to a health 
     plan, the plan shall provide to the individual claimant and 
     any provider claimant with respect to the claim a written 
     notice of the plan's approval or denial of the claim within 
     15 days after the date of the submission of the claim. The 
     notice to the individual claimant shall be written in 
     language calculated to be understood by the typical 
     individual enrolled under the plan and in a form which takes 
     into account accessibility to the information by individuals 
     whose primary language is not English. In the case of a 
     denial of the claim, the notice shall be provided within 5 
     days after the date of the determination to deny the claim, 
     and shall set forth the specific reasons for the denial. Such 
     notice shall include an explanation of the specific reasons 
     and facts underlying the decision to reduce or fail to 
     provide services or pay the claim. The notice of a denial 
     shall clearly explain the right to appeal the denial under 
     paragraph (2) and a description of the process for appealing 
     such decision sufficient to allow the claimant to initiate an 
     appeal and submit evidence to the decision maker in support 
     of the position of the claimant. Failure by any plan to 
     comply with the requirements of this paragraph with respect 
     to any claim submitted to the plan shall be treated as 
     approval by the plan of the claim.
       (2) Plan's duty to review denials upon timely request.--The 
     plan shall review its denial of the claim if an individual 
     claimant or provider claimant with respect to the claim 
     submits to the plan a written request for reconsideration of 
     the claim after receipt of written notice from the plan of 
     the denial. The plan shall allow any such claimant not less 
     than 60 days, after receipt of written notice from the plan 
     of the denial, to submit the claimant's request for 
     reconsideration of the claim.
       (3) Time limit for review.--The plan shall complete any 
     review required under paragraph (2), and shall provide the 
     individual claimant and any provider claimant with respect to 
     the claim written notice of the plan's decision on the claim 
     after reconsideration pursuant to the review, within 30 days 
     after the date of the receipt of the request for 
     reconsideration.
       (4) De novo reviews.--Any review required under paragraph 
     (2)--
       (A) shall be de novo,
       (B) shall be conducted by an individual who did not make 
     the initial decision denying the claim and who is authorized 
     to approve the claim, and
       (C) shall include review by a qualified physician in the 
     same speciality as the treating physician if the resolution 
     of any issues involved requires medical expertise.
       (c) Treatment of Urgent Requests to Plans for 
     Preauthorization.--
       (1) In general.--This subsection applies in the case of any 
     claim submitted by an individual claimant or a provider 
     claimant consisting of a request for preauthorization of 
     items or services which is accompanied by an attestation 
     that--
       (A) failure to immediately provide the items or services 
     could reasonably be expected to result in--
       (i) placing the health of the individual claimant (or, with 
     respect to an individual claimant 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
       (B) immediate provision of the items or services is 
     necessary because the individual claimant has made or is at 
     serious risk of making an attempt to harm such individual 
     claimant or another individual.
       (2) Shortened time limit for consideration of requests for 
     preauthorization.--Notwithstanding subsection (b)(1), a 
     health plan shall approve or deny any claim described in 
     paragraph (1) within 12 hours after submission of the claim 
     to the plan. Failure by the plan to comply with the 
     requirements of this paragraph with respect to the claim 
     shall be treated as approval by the plan of the claim.
       (3) Expedited exhaustion of plan remedies.--Any claim 
     described in paragraph (1) which is denied by the plan shall 
     be treated as a claim with respect to which all remedies 
     under the plan provided pursuant to this section are 
     exhausted, irrespective of any review provided under 
     subsection (b)(2).
       (4) Denial of previously authorized claims not permitted.--
     In any case in which a health plan approves a claim described 
     in paragraph (1)--
       (A) the plan may not subsequently deny payment or provision 
     of benefits pursuant to the claim, unless the plan makes a 
     showing of an intentional misrepresentation of a material 
     fact by the individual claimant, and
       (B) in the case of a violation of subparagraph (A) in 
     connection with the claim, all remedies under the plan 
     provided pursuant to this section with respect to the claim 
     shall be treated as exhausted.
       (d) Time Limit for Determination of Incompleteness of 
     Claim.--For purposes of this section--
       (1) any claim submitted by an individual claimant and 
     accepted by a provider serving under contract with a health 
     plan and any claim described in subsection (b)(1) shall be 
     treated with respect to the individual claimant as submitted 
     in complete form, and
       (2) any other claim for benefits under the plan shall be 
     treated as filed in complete form as of 10 days after the 
     date of the submission of the claim, unless the plan provides 
     to the individual claimant and any provider claimant, within 
     such period, a written notice of any required matter 
     remaining to be filed in order to complete the claim.

     Any filing by the individual claimant or the provider 
     claimant of additional matter requested by the plan pursuant 
     to paragraph (2) shall be treated for purposes of this 
     section as an initial filing of the claim.
       (e) Additional Notice and Disclosure Requirements for 
     Health Plans.--In the case of a denial of a claim for 
     benefits under a health plan, the plan shall include, 
     together with the specific reasons provided to the individual 
     claimant and any provider claimant under subsection (b)(1)--
       (1) if the denial is based in whole or in part on a 
     determination that the claim is for an item or service which 
     is not covered by the standard benefit package or exceeds 
     payment rates under the applicable fee schedule, the factual 
     basis for the determination,
       (2) if the denial is based in whole or in part on exclusion 
     of coverage with respect to services because the services are 
     determined to comprise an experimental treatment or 
     investigatory procedure, the medical basis for the 
     determination and a description of the process used in making 
     the determination, and
       (3) if the denial is based in whole or in part on a 
     determination that the treatment is not medically necessary 
     or appropriate or is inconsistent with the plan's practice 
     guidelines, the medical basis for the determination, the 
     guidelines used in making the determination, and a 
     description of the process used in making the determination.
       (f) Waiver of Rights Prohibited.--A health plan may not 
     require any party to waive any right under the plan or this 
     Act as a condition for approval of any claim under the plan, 
     except to the extent otherwise specified in a formal 
     settlement agreement.

     SEC. 5502. REVIEW IN AREA COMPLAINT REVIEW OFFICES OF 
                   GRIEVANCES BASED ON ACTS OR PRACTICES BY HEALTH 
                   PLANS.

       (a) Complaint Review Offices.--
       (1) In general.--In accordance with rules which shall be 
     prescribed by the Secretary of Labor, each State shall 
     establish and maintain a complaint review office for each 
     community rating area established by such State. According to 
     designations which shall be made by each State under 
     regulations of the Secretary of Labor, the complaint review 
     office for a community rating area established by such State 
     shall also serve as the complaint review office for large 
     group sponsors operating in the State with respect to 
     individuals who are enrolled under health plans maintained by 
     such sponsors and who reside within the area of the community 
     rating area.
       (2) Health Systems not established by States.--In the case 
     of any health care system established in any State by the 
     Secretary of Health and Human Services, the Secretary of 
     Health and Human Services shall assume all duties and 
     obligations of such State under this part in accordance with 
     the applicable regulations of the Secretary of Labor under 
     this part.
       (b) Filings of Complaints by Aggrieved Persons.--In the 
     case of any person who is aggrieved by--
       (1) any act or practice engaged in by any health plan which 
     consists of or results in denial of payment or provision of 
     benefits under the plan or delay in the payment or provision 
     of benefits, or
       (2) any act or practice engaged in by any other plan 
     maintained in a community rating area or by a large group 
     sponsor which consists of or results in denial of payment or 
     provision of benefits under a supplemental benefit policy or 
     a cost sharing policy or delay in the payment or provision of 
     the benefits,

     if the claimant alleges that the denial or delay consists of 
     a failure to comply with the terms of the plan (including the 
     provision of benefits in full when due in accordance with the 
     terms of the plan), or with the applicable requirements of 
     this Act, such person may file a complaint with the 
     appropriate complaint review office.
       (c) Exhaustion of Plan Remedies.--Any complaint including a 
     claim to which section 5501 applies may not be filed until 
     the complainant has exhausted all remedies provided under the 
     plan with respect to the claim in accordance with such 
     section.
       (d) Form of Complaint.--The complaint shall be in writing 
     under oath or affirmation, shall set forth the complaint in a 
     manner calculated to give notice of the nature of the 
     complaint, and shall contain such information as may be 
     prescribed in regulations of the Secretary of Labor.
       (e) Notice of Filing.--The complaint review office shall 
     serve by certified mail a notice of the complaint (including 
     the date, place, and circumstances of the alleged violation) 
     on the person or persons alleged in the complaint to have 
     committed the violation within 10 days after the filing of 
     the complaint.
       (f) Time Limitation.--Complaints may not be brought under 
     this section with respect to any violation later than one 
     year after the date on which the complaining party knows or 
     should have reasonably known that a violation has occurred. 
     This subsection shall not prevent the subsequent amending of 
     a complaint.

     SEC. 5503. INITIAL PROCEEDINGS IN COMPLAINT REVIEW OFFICES.

       (a) Elections.--Whenever a complaint is brought to the 
     complaint review office under section 5502(b), 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 of Labor, to elect one of the 
     following:
       (1) To forego further proceedings in the complaint review 
     office and rely on remedies available in a court of competent 
     jurisdiction.
       (2) To submit the complaint as a dispute under the Early 
     Resolution Program established under subpart B and thereby 
     suspend further review proceedings under this section pending 
     termination of proceedings under the Program.
       (3) In any case in which an election under paragraph (1) or 
     (2) is not made, or an election under paragraph (2) was made 
     but resolution of all matters in the complaint was not 
     obtained upon termination of proceedings pursuant to the 
     election by settlement agreement or otherwise, to proceed 
     with the complaint to a hearing in the complaint review 
     office under section 5504 regarding the unresolved matters.
       (b) Duty of Complaint Review Office.--The complaint review 
     office shall provide (in a linguistically appropriate manner) 
     an explanation to complainants bringing complaints to the 
     office concerning the legal and other ramifications of each 
     option available under this section.
       (c) Effect of Participation in Early Resolution Program.--
     Any matter in a complaint brought to the complaint review 
     office which is included in a dispute which is timely 
     submitted to the Early Resolution Program established under 
     subpart B shall not be assigned to a hearing under section 
     5504 unless the proceedings under the Program with respect to 
     the dispute are terminated without settlement or resolution 
     of the dispute with respect to such matter. Upon termination 
     of any proceedings regarding a dispute submitted to the 
     Program, the applicability of this section to any matter in a 
     complaint which was included in the dispute shall not be 
     affected by participation in the proceedings, except to the 
     extent otherwise required under the terms of any settlement 
     agreement or other formal resolution obtained in the 
     proceedings.

     SEC. 5504. HEARINGS BEFORE HEARING OFFICERS IN COMPLAINT 
                   REVIEW OFFICES.

       (a) Hearing Process.--
       (1) Assignment of complaints to hearing officers and notice 
     to parties.--
       (A) In general.--In the case of an election under section 
     5503(a)(3)--
       (i) the complaint review office shall assign the complaint, 
     and each motion in connection with the complaint, to a 
     hearing officer employed by the State in the office; and
       (ii) the hearing officer shall have the power to issue and 
     cause to be served upon the plan named in the complaint a 
     copy of the complaint and a notice of hearing before the 
     hearing officer at a place fixed in the notice, not less than 
     5 days after the serving of the complaint.
       (B) Qualifications for hearing officers.--No individual may 
     serve in a complaint review office as a hearing officer 
     unless the individual meets standards which shall be 
     prescribed by the Secretary of Labor. Such standards shall 
     include experience, training, ability to communicate with the 
     enrollee, affiliations, diligence, absence of actual or 
     potential conflicts of interest, and other qualifications 
     deemed relevant by the Secretary of Labor. At no time shall a 
     hearing officer have any official, financial, or personal 
     conflict of interest with respect to issues in controversy 
     before the hearing officer.
       (2) Amendment of complaints.--Any such complaint may be 
     amended by the hearing officer conducting the hearing, upon 
     the motion of the complainant, in the hearing officer's 
     discretion at any time prior to the issuance of an order 
     based thereon.
       (3) Answers.--The party against whom the complaint is filed 
     shall have the right to file an answer to the original or 
     amended complaint and to appear in person or otherwise and 
     give testimony at the place and time fixed in the complaint.
       (b) Additional Parties.--In the discretion of the hearing 
     officer conducting the hearing, any other person may be 
     allowed to intervene in the proceeding and to present 
     testimony.
       (c) Hearings.--
       (1) De novo hearing.--Each hearing officer shall hear 
     complaints and motions de novo.
       (2) Testimony.--The testimony taken by the hearing officer 
     shall be reduced to writing. Thereafter, the hearing officer, 
     in his or her discretion, upon notice may provide for the 
     taking of further testimony or hear argument.
       (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, an appropriate district court of the United 
     States may issue an order requiring compliance with the 
     subpoena and any failure to obey the order may be punished by 
     the court as a contempt thereof. The hearing officer may also 
     seek enforcement of the subpoena in a State court of 
     competent jurisdiction.
       (4) Expedited hearings.--Notwithstanding section 5503 and 
     the preceding provisions of this section, upon receipt of a 
     complaint containing a claim described in section 5501(c)(1), 
     the complaint review office shall promptly provide the 
     complainant with the opportunity to make an election under 
     section 5503(a)(3) 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 not later than 3 days after the receipt of 
     a complaint, the Complaint Review Office shall provide a 
     decision.
       (d) Decision of Hearing Officer.--
       (1) In general.--Not later than 120 days after the date on 
     which a complaint is assigned under this section, the hearing 
     officer shall decide if the preponderance of the evidence 
     justifies the denial of services and whether to decide in 
     favor of the complainant with respect to each alleged act or 
     practice. Each such decision--
       (A) shall include the hearing officer's findings of fact, 
     and
       (B) shall constitute the hearing officer's final 
     disposition of the proceedings.
       (2) Decisions finding in favor of complainant.--If the 
     hearing officer's decision includes a determination that any 
     party named in the complaint has engaged in or is engaged in 
     an act or practice described in section 5502(b), the hearing 
     officer shall issue and cause to be served on such party an 
     order which requires such party--
       (A) to cease and desist from such act or practice,
       (B) to provide the benefits due under the terms of the plan 
     and to otherwise comply with the terms of the plan and the 
     applicable requirements of this Act,
       (C) to pay to the complainant prejudgment interest on the 
     actual costs incurred in obtaining the items and services at 
     issue in the complaint,
       (D) to pay to the prevailing complainant a reasonable 
     attorney's fee, reasonable expert witness fees, and other 
     reasonable costs relating to the hearing on the charges on 
     which the complainant prevails, and
       (E) to provide other appropriate relief.
       (3) Decisions not in favor of complainant.--If the hearing 
     officer's decision includes a determination that the party 
     named in the complaint has not engaged in or is not engaged 
     in an act or practice referred to in section 5502(b), the 
     hearing officer--
       (A) shall include in the decision a dismissal of the charge 
     in the complaint relating to the act or practice, and
       (B) upon a finding that such charge is frivolous, shall 
     issue and cause to be served on the complainant an order 
     which requires the complainant to pay to such party a 
     reasonable attorney's fee, reasonable expert witness fees, 
     and other reasonable costs relating to the proceedings on 
     such charge.
       (4) Submission and service of decisions.--The hearing 
     officer shall submit each decision to the complaint review 
     office at the conclusion of the proceedings and the office 
     shall cause a copy of the decision to be served on the 
     parties to the proceedings.
       (e) Final Decision.--The decision of the hearing officer 
     shall be final and binding upon all parties.
       (f) Court Enforcement of Orders.--
       (1) In general.--The complainant may petition any court of 
     competent jurisdiction for enforcement of the order. In any 
     such proceeding, the order of the hearing officer shall not 
     be subject to review.
       (2) Awarding of costs.--In any action for court enforcement 
     under this subsection, a prevailing complainant shall be 
     entitled to a reasonable attorney's fee, reasonable expert 
     witness fees, and other reasonable costs relating to such 
     action.

     SEC. 5505. CIVIL MONEY PENALTIES.

       (a) Denial or Delay in Payment or Provision of Benefits.--
       (1) In general.--The Secretary of Labor may assess a civil 
     penalty against any health plan, or against any other plan in 
     connection with benefits provided thereunder under a 
     supplemental benefit policy or a cost sharing policy, for 
     unreasonable denial or delay in the payment or provision of 
     benefits thereunder, 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 plan, and
       (B) in the case of a finding of a pattern or practice of 
     such violations engaged in by the plan, $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) Civil action to enforce civil penalty.--The Secretary 
     of Labor may commence a civil action in any court of 
     competent jurisdiction to enforce a civil penalty assessed 
     under paragraph (1).
       (3) Supplemental plans.--Nothing in this section shall be 
     construed to limit the rights and remedies available under 
     State law with respect to supplemental benefit plans.
       (b) Civil Penalties for Certain Other Actions.--The 
     Secretary of Labor may assess a civil penalty described in 
     section 5505(b)(1) against any experience-rated health plan, 
     or against any other plan sponsored by a large employer group 
     purchaser in connection with benefits provided thereunder 
     under a cost sharing policy, for any action described in 
     section 5505(a). The Secretary of Labor may initiate 
     proceedings to impose such penalty in the same manner as the 
     Secretary of Health and Human Services may initiate 
     proceedings under section 5505 with respect to actions 
     described in section 5505(a).

                  Subpart B--Early Resolution Programs

     SEC. 5511. ESTABLISHMENT OF EARLY RESOLUTION PROGRAMS IN 
                   COMPLAINT REVIEW OFFICES.

       (a) Establishment of Programs.--Each State shall establish 
     and maintain an Early Resolution Program in each complaint 
     review office in such State. The Program shall include--
       (1) the establishment and maintenance of forums for 
     mediation of disputes in accordance with this subpart, and
       (2) the establishment and maintenance of such forums for 
     other forms of alternative dispute resolution (including 
     binding arbitration) as may be prescribed in regulations of 
     the Secretary of Labor.

     Each State shall ensure that the standards applied in Early 
     Resolution Programs administered in such State which apply to 
     any form of alternative dispute resolution described in 
     paragraph (2) and which relate to time requirements, 
     qualifications of facilitators, arbitrators, or other 
     mediators, and confidentiality are at least equivalent to the 
     standards which apply to mediation proceedings under this 
     subpart.
       (b) Duties of Complaint Review Offices.--Each complaint 
     review office in a State--
       (1) shall administer its Early Resolution Program in 
     accordance with regulations of the Secretary of Labor,
       (2) shall, pursuant to subsection (a)(1)--
       (A) recruit and train individuals to serve as facilitators 
     for mediation proceedings under the Early Resolution Program 
     from attorneys who have the requisite expertise for such 
     service, which shall be specified in regulations of the 
     Secretary of Labor,
       (B) provide meeting sites, maintain records, and provide 
     facilitators with administrative support staff, and
       (C) establish and maintain attorney referral panels,
       (3) shall ensure that, upon the filing of a complaint with 
     the office, the complainant is adequately apprised of the 
     complainant's options for review under this part, and
       (4) shall monitor and evaluate the Program on an ongoing 
     basis.

     SEC. 5512. INITIATION OF PARTICIPATION IN MEDIATION 
                   PROCEEDINGS.

       (a) Eligibility of Cases for Submission to Early Resolution 
     Program.--A dispute may be submitted to the Early Resolution 
     Program only if the following requirements are met with 
     respect to the dispute:
       (1) Nature of dispute.--The dispute consists of--
       (A) an assertion by an individual enrolled under a health 
     plan of one or more claims against the health plan for 
     payment or provision of benefits, or against any other health 
     plan with respect to benefits provided under a supplemental 
     benefit policy or a cost sharing policy, based on alleged 
     coverage under the plan; and
       (B) a denial by the plan of the claims, or a denial of 
     appropriate reimbursement based on the claims, by the plan.
       (2) Nature of disputed claim.--Each claim consists of--
       (A) a claim for payment or provision of benefits under the 
     plan; or
       (B) a request for information or documents the disclosure 
     of which is required under this Act (including claims of 
     entitlement to disclosure based on colorable claims to rights 
     to benefits under the plan).
       (b) Filing of Election.--A complainant with a dispute which 
     is eligible for submission to the Early Resolution Program 
     may make the election under section 5503(a)(2) to submit the 
     dispute to mediation proceedings under the Program not later 
     than 15 days after the date the complaint is filed with the 
     complaint review office under section 5502(b).
       (c) Agreement to Participate.--
       (1) Election by claimant.--A complainant may elect 
     participation in the mediation proceedings only by entering 
     into a written participation agreement (including an 
     agreement to comply with the rules of the Program and consent 
     for the complaint review office to contact the health plan 
     regarding the agreement), and by releasing plan records to 
     the Program for the exclusive use of the facilitator assigned 
     to the dispute.
       (2) Participation by plans or health benefits 
     contractors.--Each party whose participation in the mediation 
     proceedings has been elected by a claimant pursuant to 
     paragraph (1) shall participate in, and cooperate fully with, 
     the proceedings. The claims review office shall provide such 
     party with a copy of the participation agreement described in 
     paragraph (1), together with a written description of the 
     Program. Such party shall submit the copy of the agreement, 
     together with its authorized signature signifying receipt of 
     notice of the agreement, to the claims review office, and 
     shall include in the submission to the claims review office a 
     copy of the written record of the plan claims procedure 
     completed pursuant to section 5501 with respect to the 
     dispute and all relevant plan documents. The relevant 
     documents shall include 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 care 
     providers.

     SEC. 5513. MEDIATION PROCEEDINGS.

       (a) Role of Facilitator.--In the course of mediation 
     proceedings under the Early Resolution Program, the 
     facilitator assigned to the dispute shall prepare the parties 
     for a conference regarding the dispute and serve as a neutral 
     mediator at such conference, with the goal of achieving 
     settlement of the dispute.
       (b) Preparations for Conference.--In advance of convening 
     the conference, after identifying the necessary parties and 
     confirming that the case is eligible for the Program, the 
     facilitator shall analyze the record of the claims procedure 
     conducted pursuant to section 5501 and any position papers 
     submitted by the parties 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.
       (c) Conference.--Upon convening the conference, the 
     facilitator shall assist the parties in identifying 
     undisputed issues and exploring settlement. If settlement is 
     reached, the facilitator shall assist in the preparation of a 
     written settlement agreement. If no settlement is reached, 
     the facilitator shall present the facilitator's evaluation, 
     including an assessment of the parties' positions, the likely 
     outcome of further administrative action or litigation, and 
     suggestions for narrowing the issues in dispute.
       (d) Time Limit.--The facilitator shall ensure that 
     mediation proceedings with respect to any dispute under the 
     Early Resolution Program shall be completed within 120 days 
     after the election to participate. The parties may agree to 
     one extension of the proceedings by not more than 30 days if 
     the proceedings are suspended to obtain an agency ruling or 
     to reconvene the conference in a subsequent session.
       (e) Inapplicability of Formal Rules.--Formal rules of 
     evidence shall not apply to mediation proceedings under the 
     Early Resolution Program. All statements made and evidence 
     presented in the proceedings shall be admissible in the 
     proceedings. The facilitator shall be the sole judge of the 
     proper weight to be afforded to each submission. The parties 
     to mediation proceedings under the Program shall not be 
     required to make statements or present evidence under oath.
       (f) Representation.--Parties may participate pro se or be 
     represented by attorneys throughout the proceedings of the 
     Early Resolution Program.
       (g) Confidentiality.--
       (1) In general.--Under regulations of the Secretary of 
     Labor, rules similar to the rules under section 574 of title 
     5, United States Code (relating to confidentiality in dispute 
     resolution proceedings) shall apply to the mediation 
     proceedings under the Early Resolution Program.
       (2) Civil remedies.--The Secretary of Labor may assess a 
     civil penalty against any person who discloses information in 
     violation of the regulations prescribed pursuant to paragraph 
     (1) in the amount of three times the amount of the claim 
     involved. The Secretary of Labor may bring a civil action to 
     enforce such civil penalty in any court of competent 
     jurisdiction.

     SEC. 5514. LEGAL EFFECT OF PARTICIPATION IN MEDIATION 
                   PROCEEDINGS.

       (a) Process Nonbinding.--Findings and conclusions made in 
     the mediation proceedings of 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 
     Program.
       (b) Resolution Through Settlement Agreement.--If a case is 
     settled through participation in 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 5515.
       (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 subpart A, or any other 
     right under this Act or the plan, with respect to any person 
     who is not a party to the settlement agreement.

     SEC. 5515. ENFORCEMENT OF SETTLEMENT AGREEMENTS.

       (a) Enforcement.--Any party to a settlement agreement 
     entered pursuant to mediation proceedings under this subpart 
     may petition any court of competent jurisdiction for the 
     enforcement of the agreement, by filing in the court a 
     written petition praying that the agreement be enforced. In 
     such a proceeding, the order of the hearing officer shall not 
     be subject to review.
       (b) Court Review.--It shall be the duty of the court to 
     advance on the docket and to expedite to the greatest 
     possible extent the disposition of any petition filed under 
     this section, with due deference to the role of settlement 
     agreements under this part in achieving prompt resolution of 
     disputes involving health plans.
       (c) Awarding of Attorney's Fees and Other Costs and 
     Expenses.--In any action by an individual enrolled under a 
     health plan for court enforcement under this section, a 
     prevailing plaintiff shall be entitled to reasonable costs 
     and expenses (including a reasonable attorney's fee and 
     reasonable expert witness fees) on the charges on which the 
     plaintiff prevails.

     SEC. 5516. DUE PROCESS FOR HEALTH CARE PROVIDERS.

       (a) Publicly Available Standards and Process.--Each health 
     plan shall establish and utilize--
       (1) publicly available standards for contracting with 
     health care providers; and
       (2) a publicly available process for dismissing such 
     providers or failing to renew contracts with such providers.
       (b) Notice Requirement.--
       (1) In general.--The process established by a health plan 
     under subsection (a) shall include reasonable notification to 
     a health care provider of a decision to dismiss such provider 
     or not to renew a contract with such provider before such 
     decision takes effect.
       (2) Exception.--The notice required under paragraph (1) 
     shall not apply if failure to dismiss a provider or renewing 
     a provider's contract would adversely affect the health or 
     safety of a patient.
       (3) Contents of notice.--Each notice to a health care 
     provider under paragraph (1) shall contain the reasons for 
     the dismissal or failure to renew. Such reasons shall be 
     consistent with the standards established under subsection 
     (a).
       (c) Review.--The process established by a health plan under 
     subsection (a) shall include an opportunity for review of the 
     health plan's action by a health care provider who is 
     dismissed by a health plan or with respect to whom a health 
     plan fails to renew a contract. Such review shall be 
     conducted by--
       (1) the provider's peers who have contracts with, or are 
     employed by, the health plan; and
       (2) if there is mutual consent of the provider and the 
     health plan, one or more enrollees in the health plan.

     A health care provider may have an attorney present in 
     connection with any review under this subsection if the 
     provider notifies the health plan that an attorney will be 
     present in advance of the review proceeding.
       (d) Effect on Other Laws.--The provisions of this section 
     shall not supersede any other provision of Federal or State 
     law.

         PART 2--ADDITIONAL REMEDIES AND ENFORCEMENT PROVISIONS

     SEC. 5531. JUDICIAL REVIEW OF FEDERAL ACTION ON STATE 
                   SYSTEMS.

       (a) In General.--Any State that is aggrieved by a 
     determination by the Secretary under subpart B of part 1 of 
     subtitle E of title I shall be entitled to judicial review of 
     such determination in accordance with this section.
       (b) Judicial Review.--
       (1) Jurisdiction.--The courts of appeals of the United 
     States (other than the United States Court of Appeals for the 
     Federal Circuit) shall have jurisdiction to review a 
     determination described in subsection (a), to affirm the 
     determination, or to set it aside, in whole or in part. A 
     judgment of a court of appeals in such an action 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.
       (2) Petition for review.--A State that desires judicial 
     review of a determination described in subsection (a) shall, 
     within 30 days after it has been notified of such 
     determination, file with the United States court of appeals 
     for the circuit in which the State is located a petition for 
     review of such determination. A copy of the petition shall be 
     transmitted by the clerk of the court to the Secretary, and 
     the Secretary shall file in the court the record of the 
     proceedings on which the determination or action was based, 
     as provided in section 2112 of title 28, United States Code.
       (3) Scope of review.--The findings of fact of the 
     Secretary, if supported by substantial evidence, shall be 
     conclusive; but the court, for good cause shown, may remand 
     the case to the Secretary to take further evidence, and the 
     Secretary may make new or modified findings of fact and may 
     modify its previous action, and shall certify to the court 
     the record of the further proceedings. Such new or modified 
     findings of fact shall likewise be conclusive if supported by 
     substantial evidence.

     SEC. 5532. CIVIL ENFORCEMENT.

       (a) In General.--Unless otherwise provided in this Act, the 
     district courts of the United States shall have jurisdiction 
     of civil actions brought by--
       (1) the Secretary of Labor to enforce any final order of 
     such Secretary or to collect any civil monetary penalty 
     assessed by such Secretary under this Act; and
       (2) the Secretary of Health and Human Services to enforce 
     any final order of such Secretary or to collect any civil 
     monetary penalty assessed by such Secretary under this Act.
       (b) ERISA.--Section 502(a)(1)(B) of the Employee Retirement 
     Income Security Act of 1974 (29 U.S.C. 1132(a)(1)(B)) is 
     amended by inserting ``except in the case of an action by any 
     participant, beneficiary, or fiduciary to which subtitle F of 
     title V of the Health Security Act applies,'' before ``to 
     recover''.

     SEC. 5533. PRIORITY OF CERTAIN BANKRUPTCY CLAIMS.

       Section 507(a)(8) of title 11, United States Code, is 
     amended to read as follows:
       ``(8) Eighth, allowed unsecured claims--
       ``(A) based upon any commitment by the debtor to the 
     Federal Deposit Insurance Corporation, the Resolution Trust 
     Corporation, the Director of the Office of Thrift 
     Supervision, the Comptroller of the Currency, or the Board of 
     Governors of the Federal Reserve System, or their 
     predecessors or successors, to maintain the capital of an 
     insured depository institution; or
       ``(B) for payments under title X of the Health Security Act 
     owed to a State.''.

     SEC. 5534. PRIVATE RIGHT TO ENFORCE STATE RESPONSIBILITIES.

       The failure of a participating State to carry out a 
     responsibility applicable to participating States under this 
     Act constitutes a deprivation of rights secured by this Act 
     for the purposes of section 1977 of the Revised Statutes of 
     the United States (42 U.S.C. 1983). In an action brought 
     under such section, 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. 5535. PRIVATE RIGHT TO ENFORCE FEDERAL RESPONSIBILITIES 
                   IN OPERATING A SYSTEM IN A STATE.

       (a) In General.--The failure of the Secretary of Health and 
     Human Services to carry out a responsibility under subpart C 
     of part 1 of subtitle E of title I, confers an enforceable 
     right of action on any person who is aggrieved by such 
     failure. Such a person may commence a civil action against 
     the Secretary in an appropriate State court or district court 
     of the United States.
       (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) Relief.--In an action under subsection (a), if the 
     court finds that a failure described in such subsection has 
     occurred, the aggrieved person may recover compensatory 
     damages and the court may award any other appropriate relief.
       (d) Attorney's Fees.--In an action under subsection (a), 
     the court, in its discretion, may allow the prevailing party, 
     other than the United States, 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.

     SEC. 5536. PRIVATE RIGHT TO ENFORCE RESPONSIBILITIES OF 
                   COOPERATIVES AND HEALTH PLANS.

       (a) In General.--The failure of a purchasing cooperative or 
     health plan to carry out a responsibility applicable to the 
     entity under this Act confers an enforceable right of action 
     on any person who is aggrieved by such failure. Such a person 
     may commence a civil action against the cooperative or health 
     plan in an appropriate State court or district court of the 
     United States.
       (b) Exhaustion of Remedies.--
       (1) In general.--Except as provided in paragraph (2), in an 
     action under subsection (a) the court may not exercise 
     jurisdiction until the aggrieved person has exhausted any 
     administrative remedies that may be provided by law.
       (2) No exhaustion required.--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 if the action 
     relates to--
       (A) whether the person is a community-rated or experience-
     rated individual;
       (B) whether the person is eligible for a subsidy or premium 
     discount under title VI of X;
       (C) whether the person is eligible for a reduction in cost 
     sharing; or
       (D) enrollment or disenrollment in a health plan.
       (c) Relief.--In an action under subsection (a), if the 
     court finds that a failure described in such subsection has 
     occurred, the court may award any appropriate relief.
       (d) Attorney's Fees.--In any action under subsection (a), 
     the court, in its discretion, may allow the prevailing party, 
     other than the United States, 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.

     SEC. 5537. ENFORCEMENT OF CONSUMER PROTECTIONS.

       (a) Covered Violations.--The provisions of this section 
     shall apply with respect to a health plan that fails to 
     fulfill a duty imposed on the plan under section 1122 and 
     subtitle A of this title.
       (b) Administrative Enforcement and Civil Penalties.--The 
     penalties described in section 1867(d)(1) of the Social 
     Security Act and the procedures described in section 1128A of 
     such Act (other than the first two sentences of subsection 
     (a) and subsection (b)) shall apply to health plans described 
     in subsection (a). In addition to such penalties, an amount 
     not to exceed $1,000,000 may be assessed in the case of a 
     finding of a pattern or practice of such violations. The 
     Secretary shall establish procedures whereby, when a consumer 
     has disenrolled from a health plan violating the duties 
     described in subsection (a), successor health plans may 
     recover from the original health plan for health care costs 
     attributable to such violations.
       (c) Correction of Substantial Violations.--Upon an 
     administrative or judicial finding of a substantial violation 
     of the duties described in subsection (a), the State or court 
     may--
       (1) inform all current enrollees of the plan of the 
     violation and that they may disenroll immediately from that 
     plan and enroll with another community-rated health plan; and
       (2) notify the health plan that it shall immediately cease 
     enrollment activities until it has obtained certifications 
     from the appropriate certifying entity or court that the 
     violation has been corrected.

     Such actions shall not be taken without providing the health 
     plan with a reasonable opportunity to correct such 
     violations, except where providing such an opportunity would 
     risk health or safety.

     SEC. 5538. DISCRIMINATION CLAIMS.

       (a) Civil Action by Aggrieved Person.--
       (1)  In general.--Any person who is aggrieved by a 
     violation of section 1602 may commence a civil action against 
     the party or parties committing such violation in an 
     appropriate State court or district court of the United 
     States.
       (2) Standards.--The standards used to determine whether a 
     violation has occurred in a complaint alleging discrimination 
     on the basis of age or disability under section 1602 shall be 
     the standards applied under the Age Discrimination Act of 
     1975 (42 U.S.C. 6101 et seq.) and the Americans with 
     Disabilities Act of 1990 (42 U.S.C. 12101 et. seq.).
       (3) Relief.--In any action under paragraph (1), if the 
     court finds a violation of section 1602, the court may award 
     such equitable and injunctive relief as it deems appropriate, 
     and may award to the aggrieved person any sums lost as a 
     result of the violation. If the court finds that the party or 
     parties committing a violation engaged in intentional 
     discrimination in violation of section 1602, the aggrieved 
     person may recover compensatory damages. If the court finds 
     that the party or parties committing such violation did so 
     with malice or reckless indifference to the federally 
     protected rights of the aggrieved person, the aggrieved 
     person may recover punitive damages under this section 
     against a defendant other than a government, government 
     agency or political subdivision.
       (4)  Attorneys' fees.--In any action under paragraph (1), 
     the court, in its discretion, may allow the prevailing party, 
     other than the United States, a reasonable attorney's fee 
     (including expert fees and other litigation expenses) as part 
     of the costs, and the United States shall be liable for costs 
     the same as a private person.
       (b) Action by Secretary.--Whenever the Secretary of Health 
     and Human Services finds that a party has failed to comply 
     with section 1602 or with an applicable regulation issued 
     under such section, the Secretary shall notify the party. If 
     within a reasonable period of time the party fails or refuses 
     to comply, the Secretary may--
       (1) refer the matter to the Attorney General with a 
     recommendation that an appropriate civil action be 
     instituted;
       (2) terminate or limit the participation of such party in 
     the programs authorized by this Act;
       (3) withhold Federal financial assistance to the party; or
       (4) take such other action as may be provided by law.
       (c) Action by Attorney General.--When a matter is referred 
     to the Attorney General under subsection (b)(1), the Attorney 
     General may bring a civil action in a district court of the 
     United States for such relief as may be appropriate, 
     including injunctive relief. In a civil action under this 
     section, the court--
       (1) may grant any equitable relief that the court considers 
     to be appropriate;
       (2) may award such other relief as the court considers to 
     be appropriate, including in cases of intentional 
     discrimination compensatory and punitive damages; and
       (3) may, to vindicate the public interest when requested by 
     the Attorney General, assess a civil money penalty against 
     the party in an amount--
       (A) not exceeding $50,000 for a first violation; and
       (B) not exceeding $100,000 for any subsequent violation.

     SEC. 5539. NONDISCRIMINATION IN FEDERALLY ASSISTED PROGRAMS.

       Federal payments under this Act shall be treated as Federal 
     financial assistance for purposes of section 504 of the 
     Rehabilitation Act of 1973 (29 U.S.C. 794), section 303 of 
     the Age Discrimination Act of 1975 (42 U.S.C. 6102), and 
     section 601 of the Civil Rights Act of 1964 (42 U.S.C. 
     2000d).

     SEC. 5540. CIVIL AND ADMINISTRATION ACTION BY ESSENTIAL 
                   COMMUNITY PROVIDER.

       (a) In General.--An electing essential community provider 
     (as defined in section 1466(d)) who is aggrieved by the 
     failure of a health plan to fulfill a duty imposed on the 
     plan by section 1466 may commence a civil action against the 
     plan in an appropriate State court or district court of the 
     United States.
       (b) Relief.--In an action under subsection (a), if the 
     court finds that the health plan has failed to fulfill a duty 
     imposed on the plan by section 1466, the electing essential 
     community provider may recover compensatory damages and the 
     court may order any other appropriate relief.
       (c) Attorney's Fees.--In any action under subsection (a), 
     the court, in its discretion, may allow the prevailing party, 
     other than the United States, 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.
       (d) State Complaint System required.--Prior to commencing 
     an action under subsection (a), the aggrieved essential 
     community provider may first elect to utilize the 
     administrative process provided under this subsection as 
     follows:
       (1) The Secretary shall prescribe regulations governing 
     administrative grievance actions by essential community 
     providers that shall be consistent with the requirements of 
     section 5504 and that shall provide for the consolidation of 
     complaints (at the election of the essential community 
     providers) in cases involving multiple complaints against a 
     single health plan.
       (2) A State shall make available to each electing essential 
     community provider that is aggrieved by an action of a health 
     plan under section 1466, the opportunity to file a complaint 
     in the complaint review office established under section 
     5502. In the case of essential community providers located in 
     a cooperative established in any State by the Secretary, the 
     Secretary shall assume all of the duties and obligations of 
     such State under this section.

     SEC. 5541. FACIAL CONSTITUTIONAL CHALLENGES.

       (a) Jurisdiction.--The United States District Court for the 
     District of Columbia shall have original and exclusive 
     jurisdiction of any civil action brought to invalidate this 
     Act or a provision of this Act on the ground of its being 
     repugnant to the Constitution of the United States on its 
     face and for every purpose. In any action described in this 
     subsection, the district court may not grant any temporary 
     order or preliminary injunction restraining the enforcement, 
     operation, or execution of this Act or any provision of this 
     Act.
       (b) Convening of Three-Judge Court.--An action described in 
     subsection (a) shall be heard and determined by a district 
     court of three judges in accordance with section 2284 of 
     title 28, United States Code.
       (c) Consolidation.--When actions described in subsection 
     (a) involving a common question of law or fact are pending 
     before a district court, the court shall order all the 
     actions consolidated.
       (d) Direct Appeal to Supreme Court.--In any action 
     described in subsection (a), an appeal may be taken directly 
     to the Supreme Court of the United States from any final 
     judgment, decree, or order in which the district court--
       (1) holds this Act or any provision of this Act invalid; 
     and
       (2) makes a determination that its holding will materially 
     undermine the application of the Act as whole.
       (e) Construction.--This section does not limit--
       (1) the right of any person--
       (A) to a litigation concerning the Act or any portion of 
     the Act; or
       (B) to petition the Supreme Court for review of any holding 
     of a district court by writ of certiorari at any time before 
     the rendition of judgment in a court of appeals; or
       (2) the authority of the Supreme Court to grant a writ of 
     certiorari for the review described in paragraph (1)(B).

     SEC. 5542. TREATMENT OF PLANS AS PARTIES IN CIVIL ACTIONS.

       (a) In General.--A health plan may sue or be sued under 
     this Act as an entity. Service of summons, subpoena, or other 
     legal process of a court or hearing officer upon a trustee or 
     an administrator of any such plan in his or her capacity as 
     such shall constitute service upon the plan. In a case where 
     a plan has not designated in applicable plan documents an 
     individual as agent for the service of legal process, service 
     upon the Secretary of Health and Human Services (in the case 
     of a community-rated health plan) or the Secretary of Labor 
     (in the case of an experienced-rated health plan) shall 
     constitute such service. The Secretary, not later than 15 
     days after receipt of service under the preceding sentence, 
     shall notify the administrator or any trustee of the plan of 
     receipt of such service.
       (b) Other Parties.--Any money judgment under this Act 
     against a plan referred to in subsection (a) shall be 
     enforceable only against the plan as an entity and shall not 
     be enforceable against any other person unless liability 
     against such person is established in his individual capacity 
     under this Act.

     SEC. 5543. WHISTLEBLOWER PROTECTIONS.

       (a) In General.--A health plan may not 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 person 
     acting pursuant to the request of the employee) provided 
     information to any Federal, State or private supervisory 
     agency or entity regarding a possible violation of any 
     provision of this Act or any regulation issued under this 
     Act.
       (b) Civil Action.--An employee or former employee who 
     believes that such employee has been discharged, 
     discriminated or otherwise subject to adverse action in 
     violation of subsection (a) may file a civil action in the 
     appropriate United States district court within 2 years of 
     the date of such discharge, discrimination or adverse action.
       (c) Determination of Court.--If a court in an action under 
     subsection (b) determines that a violation of subsection (a) 
     has occurred, the court may order the health care entity or 
     plan that committed the violation--
       (1) to reinstate the employee to his or her former 
     position;
       (2) to pay compensatory damages to the employee;
       (3) to pay reasonable costs and attorneys fees incurred by 
     the employee in bringing such action; and
       (4) to take such other appropriate actions to remedy any 
     past discrimination.

     SEC. 5544. GENERAL NONPREEMPTION OF RIGHTS AND REMEDIES.

       Nothing in this subtitle shall be construed to deny, 
     impair, or otherwise adversely affect a right or remedy 
     available under law to any person, except to the extent the 
     right or remedy is inconsistent with this title.
                    Subtitle G--Repeal of Exemption

     SEC. 5601. REPEAL OF EXEMPTION FOR HEALTH INSURANCE.

       (a) In General.--Section 3 of the Act of March 9, 1945 (15 
     U.S.C. 1013), known as the McCarran-Ferguson Act, is amended 
     by adding at the end the following:
       ``(c) Notwithstanding that the business of insurance is 
     regulated by State law, nothing in this Act shall limit the 
     applicability of the following Acts to the business of 
     insurance to the extent that such business relates to the 
     provision of health benefits:
       ``(1) The Sherman Act (15 U.S.C. 1 et seq.).
       ``(2) The Clayton Act (15 U.S.C. 12 et seq.).
       ``(3) Federal Trade Commission Act (15 U.S.C. 41 et seq.).
       ``(4) The Act of June 19, 1936 (49 Stat. 1526; 15 U.S.C. 
     21a et seq.), known as the Robinson-Patman Antidiscrimination 
     Act.''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall take effect on the first day of the sixth month 
     beginning after the date of the enactment of this Act.
              TITLE VI--INDIVIDUAL AND EMPLOYER SUBSIDIES

     SEC. 6000. MARKETING FEES AND COOPERATIVE FEES INCLUDED IN 
                   PREMIUM.

       For purposes of this title, the term ``premium'' includes 
     applicable marketing fees (described in section 1112(f)) and 
     purchasing cooperative membership fees (described in section 
     1324).
       Subtitle A--Individual Premium and Cost-Sharing Assistance

     SEC. 6001. REQUIREMENT TO OPERATE STATE PROGRAM.

       (a) In General.--A participating State shall have in effect 
     a program for furnishing premium assistance and cost-sharing 
     assistance in accordance with this subtitle for calendar 
     years beginning after 1996.
       (b) Designation of State Agency.--A State may designate any 
     appropriate State agency to administer the program under this 
     subtitle.

     SEC. 6002. ASSISTANCE WITH CERTIFIED STANDARD HEALTH PLAN 
                   PREMIUMS.

       (a) Eligibility.--
       (1) In general.--An eligible individual (as defined in 
     section 6008(4)) who has been determined by a State under 
     section 6004 to be a premium subsidy eligible individual (as 
     defined in paragraph (2)) shall be eligible for premium 
     assistance in the amount determined under subsection (b).
       (2) Premium subsidy eligible individual.--For purposes of 
     this subtitle, the term ``premium subsidy eligible 
     individual'' means any of the following individuals:
       (A) Individuals with incomes below a certain income 
     threshold.--An eligible individual who has a family income 
     determined under section 6008(3) which does not exceed 200 
     percent of the poverty line (as defined in section 6008(5)).
       (B) Children.--An eligible individual who--
       (i) is a child (as defined in section 6008(2));
       (ii) has a family income determined under section 6008(3) 
     which does not exceed 300 percent of the poverty line; and
       (iii) has not been enrolled in a health plan offered by an 
     employer during the 6-month period ending on the date the 
     individual submits an application to the State for premium 
     assistance under this subtitle.
       (C) Pregnant women.--An eligible individual who--
       (i) is a pregnant woman (as defined in section 6008(6));
       (ii) has a family income determined under section 6008(3) 
     which does not exceed 300 percent of the poverty line; and
       (iii) is not enrolled in a health plan on the date the 
     individual submits an application to the State for premium 
     assistance under this subtitle.
       (3) Special rule with respect to children and pregnant 
     women.--An eligible individual may not be a premium subsidy 
     eligible individual described in subparagraphs (B) or (C) of 
     paragraph (2) if an employer contribution of at least 80 
     percent of the premium under a certified standard health plan 
     that is available to the individual through the employer is 
     made or offered to be made on behalf of the individual.
       (b) Amount of Assistance.--
       (1) In general.--
       (A) Determination of amount.--The amount of premium 
     assistance for a month for a premium subsidy eligible 
     individual is the lesser of--
       (i) the premium assistance amount determined under 
     paragraph (2); or
       (ii) the amount of the premium for coverage under the 
     certified standard health plan (as defined in section 
     6008(1)) in which the individual is enrolled that is not paid 
     (or offered to be paid) on behalf of such individual by an 
     employer.
       (B) Special rules for determining amount of employer 
     payments.--
       (i) Family contributions.--If an employer makes a payment 
     toward the premium for coverage under a certified standard 
     health plan on behalf of a family (rather than any particular 
     individual), such contribution shall be allocated ratably 
     among the individuals in the family.
       (ii) Greatest employer contribution available.--The 
     employer contribution with respect to any individual is the 
     largest employer contribution offered to be made on behalf of 
     the individual by the individual's employer or any employer 
     of any member of the individual's family.
       (2) Premium assistance amount determined.--
       (A) In general.--The premium assistance amount determined 
     under this paragraph is an amount equal to the lesser of--
       (i) the subsidy percentage specified in paragraph (3) 
     multiplied by \1/12\th of the annual premium paid for 
     coverage under a certified standard health plan in which the 
     individual is enrolled, or
       (ii) the subsidy percentage specified in paragraph (3) 
     multiplied by \1/12\th of the weighted average annual premium 
     rate (as defined in subparagraph (B)) for all community-rated 
     certified standard health plans offered in the community 
     rating area in which the individual resides.
       (B) Weighted Average Annual Premium Rate.--For purposes of 
     this paragraph, the term ``weighted average annual premium 
     rate'' means the average premium for the community-rated 
     certified standard health plans offered in the community 
     rating area in which the individual resides, weighted to 
     reflect the total enrollment of community-rated eligible 
     individuals among such plans.
       (3) Subsidy percentage.--For purposes of paragraph (1)(A), 
     the term `subsidy percentage' means the following:
       (A) Individuals with incomes below certain income 
     threshold.--
       (i) In general.--Except as provided in clauses (ii) and 
     (iii), for a premium subsidy eligible individual described in 
     subsection (a)(2)(A), 100 percent reduced (but not below 
     zero) by 1 percentage point for each 1 percentage point (or 
     portion thereof) by which such individual's family income 
     exceeds 100 percent of the poverty line.
       (ii) Afdc recipients.--For a premium subsidy eligible 
     individual described in subsection (a)(2)(A) who is a member 
     of a family receiving aid to families with dependent children 
     under part A or E of title IV of the Social Security Act, the 
     subsidy percentage shall be 100 percent.
       (iii) Non-cash medicaid eligibles.--

       (I) In general.--For a premium subsidy eligible individual 
     described in subsection (a)(2)(A) who is a non-cash medicaid 
     eligible described in subclause (II), the subsidy percentage 
     shall be 100 percent during the 6-month period beginning on 
     January 1, 1997.
       (II) Non-cash medicaid eligible.--The non-cash medicaid 
     eligibles described in this subclause are individuals 
     receiving medical assistance under the State plan under title 
     XIX of the Social Security Act as of December 31, 1996, who 
     are not individuals--

       (aa) who are members of a family receiving aid to families 
     with dependent children under part A or E of title IV of the 
     Social Security Act;
       (bb) with respect to whom supplemental security income 
     benefits are being paid under title XVI of such Act; or
       (cc) eligible for benefits under part A of title XVIII of 
     such Act.
       (B) Children and pregnant women.--For a premium subsidy 
     eligible individual described in subparagraph (B) or (C) of 
     subsection (a)(2), 100 percent reduced (but not below zero) 
     by 0.87 percentage point for each 1 percentage point (or 
     portion thereof) by which such individuals family income 
     exceeds 185 percent of the poverty line.
       (c) Payments.--
       (1) In general.--Except as otherwise provided in this 
     subsection, the amount of the premium assistance available to 
     a premium subsidy eligible individual under subsection (b) 
     shall be paid by the State in which the individual resides 
     directly to the certified standard health plan in which the 
     individual is enrolled. Payments under the preceding sentence 
     shall commence in the first month during which the individual 
     is enrolled in a certified standard health plan and 
     determined under section 6004 to be a premium subsidy 
     eligible individual.
       (2) Enrollment requirement.--No payment shall be made to a 
     certified standard health plan with respect to an individual 
     unless the individual was enrolled in the plan through an 
     employer or a purchasing cooperative (as defined in section 
     1013(12)).
       (3) Special rule with respect to families with multiple 
     children.--If a family includes more than 1 child described 
     in subsection (a)(2)(B), no premium assistance may be paid to 
     a plan under paragraph (1) on behalf of any such child unless 
     such assistance is paid on behalf of all such children.
       (4) Administrative errors.--A State is financially 
     responsible for premium 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.
       (d) Treatment of Certain Eligible Individuals as Insured.--
     All individuals eligible for full premium subsidies under 
     this section shall be considered to have health coverage 
     under a certified standard health plan.

     SEC. 6003. ASSISTANCE WITH COST-SHARING FOR CERTIFIED 
                   STANDARD HEALTH PLANS.

       (a) Non-AFDC Low-Income Individuals.--
       (1) Individuals working for community-rated employers.--
       (A) In general.--If a non-AFDC low-income individual 
     described in subparagraph (B) is enrolled in a community-
     rated certified standard health plan providing a high cost-
     sharing schedule, such individual shall be eligible for cost-
     sharing assistance consisting of a reduction in the cost-
     sharing under such plan to the level of a plan providing a 
     low cost-sharing schedule.
       (B) Individual described.--A non-AFDC low-income individual 
     described in this subparagraph is an individual who is 
     employed by a community-rated employer and who is unable to 
     enroll in a certified standard health plan--
       (i) with a premium at or below the weighted average premium 
     rate for all community-rated certified standard health plans 
     offered through the purchasing cooperative offered by the 
     individual's employer, and
       (ii) providing a low or combination cost-sharing schedule.
       (2) Individuals working for experience-rated employers.--
       (A) In general.--If a non-AFDC low-income individual 
     described in subparagraph (B) is enrolled in an experience-
     rated certified standard health plan providing a high cost-
     sharing schedule, such individual shall be eligible for cost-
     sharing assistance consisting of a reduction in the cost-
     sharing under such plan to the level of a plan providing a 
     low cost-sharing schedule.
       (B) Individual described.--A non-AFDC low-income individual 
     described in this subparagraph is an individual who is 
     employed by an experience-rated employer and who is unable to 
     enroll in a certified standard health plan offered by such 
     employer providing a low or combination cost-sharing 
     schedule.
       (3) Non-working individuals.--
       (A) In general.--If a non-AFDC low-income individual 
     described in subparagraph (B) is enrolled in a community-
     rated certified standard plan providing a high cost-sharing 
     schedule, such individual shall be eligible for cost-sharing 
     assistance consisting of a reduction in the cost-sharing 
     under such plan to the level of a plan providing a low cost-
     sharing schedule.
       (B) Individual described.--A non-AFDC low-income individual 
     described in this subparagraph is an individual who is not 
     employed and who is unable to enroll in a certified standard 
     health plan--
       (i) with a premium at or below the weighted average premium 
     rate for all community-rated certified standard health plans 
     offered in the community rating area in which the individual 
     resides, and
       (ii) providing a low or combination cost-sharing schedule.
       (4) Non-afdc low-income individual.--For purposes of this 
     subsection, the term ``non-AFDC low-income individual'' means 
     an eligible individual who--
       (A) has a family income determined under section 6008(3) 
     which does not exceed 150 percent of the poverty line; and
       (B) is not a member of a family receiving aid to families 
     with dependent children under part A or E of title IV of the 
     Social Security Act.
       (b) AFDC Recipients.--
       (1) Low or combination cost-sharing plan.--An AFDC 
     recipient enrolled in a community-rated certified standard 
     plan--
       (A) with a premium at or below the weighted average premium 
     rate for all community-rated certified standard health plans 
     offered in the community rating area in which the individual 
     resides, and
       (B) providing a low or combination cost-sharing schedule,

     shall be eligible for cost-sharing assistance consisting of a 
     reduction in the amount of copayment applied with respect to 
     an item or service in an amount equal to 20 percent of the 
     copayment amount otherwise applicable under the plan, rounded 
     to the nearest dollar.
       (2) High cost-sharing plan.--If an AFDC recipient is unable 
     to enroll in a health plan described in paragraph (1) and 
     such individual is enrolled in a community-rated certified 
     standard plan providing a high cost-sharing schedule, such 
     individual shall be eligible for cost-sharing assistance 
     consisting of a reduction in the cost-sharing under such plan 
     to the level of a plan providing a low cost-sharing schedule.
       (3) AFDC recipient.--For purposes of this subsection, the 
     term ``AFDC recipient'' means an eligible individual who is a 
     member of a family receiving aid to families with dependent 
     children under part A or E of title IV of the Social Security 
     Act.
       (c) Notification of Health Plans.--If a State determines 
     that an individual is eligible for cost-sharing assistance 
     under this section, the State shall notify the certified 
     standard health plan in which such individual is enrolled of 
     such determination in a timely manner.

     SEC. 6004. ELIGIBILITY DETERMINATIONS.

       (a) In General.--The Secretary shall promulgate regulations 
     specifying requirements for State programs under this 
     subtitle with respect to determining eligibility for premium 
     and cost-sharing assistance.
       (b) Specifications for Regulations.--The regulations 
     promulgated by the Secretary under subsection (a) shall 
     include the following requirements:
       (1) 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.
       (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 
     make applications accessible at locations where individuals 
     are most likely to obtain the applications.
       (4) Requirement to submit revised application.--A State 
     program shall require individuals to submit revised 
     applications 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 assistance based on such a revised application.
       (5) Verification.--A State program shall provide for 
     verification of the information supplied in applications 
     under this subtitle. 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 subtitle 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 eligible for 
     assistance, 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.
       (d) Effectiveness of Eligibility.--A determination by a 
     State that an individual is a premium subsidy eligible 
     individual or an individual eligible for cost-sharing 
     assistance 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 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 subtitle shall be liable to the 
     Federal Government for the amount any assistance 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 assistance 
     received by individual 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 such 
     amount to the Secretary in a timely manner.

     SEC. 6005. END-OF-YEAR RECONCILIATION FOR PREMIUM ASSISTANCE.

       (a) In General.--
       (1) Requirement to file statement.--An individual who 
     received premium assistance under this subtitle 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 subtitle 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 subtitle 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 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 paragraph 
     shall be submitted to the Secretary in a timely manner.
       (3) Underpayment of assistance.--If the total amount of the 
     premium assistance provided was less than the amount computed 
     under paragraph (1), the State shall pay to the individual an 
     amount equal to the amount of the deficit.
       (4) State option.--A State may, in accordance with 
     regulations promulgated by the Secretary, establish a 
     procedure under which any overpayments or underpayments of 
     premium assistance determined under paragraphs (2) and (3) 
     with respect to an individual for a year may be collected or 
     paid, as appropriate, through adjustments to the premium 
     assistance furnished to such individual in the succeeding 
     year.
       (c) Verification.--Each State may use such information as 
     it has available to verify income of individuals with 
     applications filed under this subtitle, 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, 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 subtitle 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 6004(e) for a misrepresentation of 
     material fact described in such section.

     SEC. 6006. ENROLLMENT OUTREACH.

       (a) In General.--The Secretary shall promulgate regulations 
     under which each State operating a program for premium 
     assistance under this subtitle shall have in effect an 
     enrollment outreach system under which individuals may be 
     determined eligible for such assistance by health care 
     providers who furnish services to such individuals.
       (b) Specifications for Regulations.--The regulations 
     promulgated by the Secretary under subsection (a) shall 
     include the following requirements:
       (1) Health care providers.--Each State shall permit only 
     the classes or categories of health care providers determined 
     appropriate by the Secretary (referred to in this subsection 
     as ``eligible health care providers'') to participate in an 
     enrollment outreach system established by the State.
       (2) Application for assistance.--Each State shall develop 
     and make available to eligible health care providers in the 
     State an enrollment package for distribution to potentially 
     eligible individuals which includes a simple form for 
     individuals who receive services from such providers to apply 
     for premium assistance. Such form shall--
       (A) permit an individual completing the form to make a 
     declaration that the individual is eligible for a full 
     subsidy under section 6002; and
       (B) permit an individual to enroll in a community-rated 
     certified standard health plan offered in the community 
     rating area in which the individual resides.
       (3) Submission of completed application.--An individual who 
     receives an enrollment application form from an eligible 
     health care provider may complete the form and submit it to 
     the individual's provider or the State agency operating the 
     program for premium assistance under this subtitle. If a 
     health care provider receives an application under this 
     section the provider shall submit the application to the 
     State agency administering the premium assistance program 
     under this subtitle within a period of time determined 
     appropriate by the Secretary in regulations.
       (4) Selection of health plan.--An individual may select a 
     community-rated certified standard health plan with which to 
     enroll on the date the individual submits an application form 
     under this section or the individual may make such selection 
     at a later date determined appropriate by the Secretary in 
     regulations. If an individual fails to select a health plan 
     with which to enroll by the date determined appropriate by 
     the Secretary, the State agency shall select such a plan for 
     the individual.
       (5) Effective date of enrollment.--An individual who is 
     enrolled in a community-rated certified standard health plan 
     in accordance with the enrollment eligibility system 
     established under this section shall be an enrollee of the 
     plan as of the date the individual submits an application to 
     the State agency or a health care provider.
       (6) Period of eligibility.--An individual who submits an 
     application to a health care provider under an enrollment 
     outreach system under this section shall be eligible for 
     premium assistance under this subtitle for the period 
     beginning on the date such application is submitted and 
     ending 60 days after such date.
       (7) No State responsibility for administrative errors.--
     Section 6002(c)(3) shall not apply to any eligibility 
     determinations made under this section.
       (8) No reconciliation required.--The reconciliation 
     provisions of section 6005 shall not apply to any premium 
     assistance paid on behalf of an individual during a period of 
     eligibility for such assistance under this section.
       (9) Requirement on states.--During a period of eligibility 
     for premium assistance under this section, an individual 
     shall be given an opportunity by a State to apply for 
     continuing eligibility for premium assistance under this 
     subtitle.

     SEC. 6007. PAYMENTS TO STATES.

       (a) In General.--
       (1) Payments from the Secretary.--A State operating a 
     program for furnishing premium assistance under this subtitle 
     shall be entitled to receive payments from the Secretary in 
     an amount equal to the premium assistance paid on behalf of 
     individuals eligible for such assistance under this subtitle. 
     Such payments shall be made at such time and in such form as 
     provided in regulations promulgated by the Secretary.
       (2) 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 operating programs under this subtitle in 
     accordance with this section.
       (b) State Assessments for Administration Costs.--A State 
     operating a program for furnishing premium and cost-sharing 
     assistance under this subtitle may impose a premium 
     assessment on the insured health plans offered in the State 
     in an amount not to exceed one percent of the amount of the 
     premium. Amounts collected pursuant to this subsection may 
     only be used to cover the administrative costs of the State 
     in operating such program.
       (c) Audits.--The Secretary shall conduct regular audits of 
     the activities under the State programs conducted under this 
     subtitle.

     SEC. 6008. DEFINITIONS AND DETERMINATIONS OF INCOME.

       For purposes of this subtitle:
       (1) Certified standard health plan.--The term ``certified 
     standard health plan'' means a certified standard health plan 
     (as defined in section 1011(2)(A)) providing the standard 
     benefits package as described in section 1201(a).
       (2) Child.--The term ``child`` means an individual who is 
     under 19 years of age.
       (3) Determinations of income.--
       (A) Family income.--The term ``family income'' means, with 
     respect to an individual who--
       ``(i) is not a dependent (as defined in subparagraph (B)) 
     of another individual, the sum of the modified adjusted gross 
     incomes (as defined in subparagraph (D)) for the individual, 
     the individual's spouse, and children who are dependents of 
     the individual; or
       (ii) is a dependent of another individual, the sum of the 
     modified adjusted gross incomes for the other individual, the 
     other individual's spouse, and children who are dependents of 
     the other individual.
       (B) Dependent.--The term ``dependent'' shall have the 
     meaning given such term under section 152 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.
       (E) Special rule for individuals temporarily unemployed.--
       (i) In general.--An individual who becomes unemployed (as 
     described in clause (vi)) is eligible for enhanced income 
     protection in accordance with this subparagraph.
       (ii) Enhanced income protection described.--For purposes of 
     determining eligibility for premium assistance under section 
     6002(a)(2)(A) and the subsidy percentage under section 
     6002(b)(3)(A) for a calendar year for an individual who 
     becomes unemployed, such individual's spouse, and children 
     who are dependents of such individual, the family income for 
     such individuals determined under subparagraph (A) shall be 
     reduced--

       (I) for each month during the year before and after the 
     period of unemployment (as defined in clause (iii)), by an 
     amount equal to the lesser of the gross wages of the 
     individual for the month or \1/12\th of the amount equal to 
     75 percent of the poverty line for an individual; and
       (II) for each month during the period of unemployment, by 
     an amount equal to any unemployment compensation under an 
     unemployment compensation law of a State or of the United 
     States received by or on behalf of the unemployed individual.

       (iii) Period of unemployment.--For purposes of this 
     subparagraph, with respect to an individual who becomes 
     unemployed, the ``period of unemployment'' is the lesser of--

       (I) the period beginning on the date the individual becomes 
     unemployed and ending on the date the individual becomes 
     reemployed; or
       (II) 6 months.

       (iv) Special rule.--This subparagraph shall not apply if an 
     employer contribution of at least 80 percent of the premium 
     under a certified standard health plan is available to the 
     unemployed individual through an employer of a member of the 
     individual's family.
       (v) Application of Reconciliation.--The provisions of 
     section 6005 regarding end-of-year reconciliation for premium 
     assistance shall apply to any premium assistance received by 
     an individual by reason of the application of this 
     subparagraph.
       (vi) When individual becomes unemployed.--For purposes of 
     this subparagraph, an individual becomes unemployed when the 
     individual is involuntarily terminated from employment held 
     for at least 6 months.
       (F) Rules relating to disregard of certain income.--The 
     Secretary may promulgate rules under which spousal income may 
     be disregarded in instances where a spouse is not part of a 
     family unit.
       (4) Eligible Individual.--
       (A) In general.--The term ``eligible individual'' means an 
     individual who is residing in the United States and who is--
       (i) a citizen or national of the United States; or
       (ii) 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.
       (5) Poverty line.--The term ``poverty line'' means the 
     income official poverty line (as defined by the Office of 
     Management and Budget, and revised annually in accordance 
     with section 673(2) of the Omnibus Budget Reconciliation Act 
     of 1981) that--
       (A) in the case of a family of less than 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.
       (6) Pregnant woman.--
       (A) In general.--The term ``pregnant woman'' includes a 
     woman deemed to be a pregnant woman under subparagraph (B).
       (B) Period after termination of pregnancy.--For purposes of 
     this subtitle, a woman shall be deemed to be a pregnant woman 
     during the period beginning on the date of the termination of 
     the pregnancy and ending on the first day of the first month 
     that begins more than 90 days after such date.

     SEC. 6009. COORDINATION WITH PREMIUM FINANCING PROVISIONS.

       During any period during which the provisions subtitle B of 
     title X apply to a State--
       (1) the provisions of subparagraphs (B) and (C) of section 
     6002(a)(2) (and any provision relating to such provisions) 
     shall not apply to such State; and
       (2) the provisions of subparagraph (E) of section 6008(3) 
     shall not apply to an individual whose spouse is employed on 
     a full-time basis.
                     Subtitle B--Employer Subsidies

     SEC. 6101. PURPOSE.

       It is the purpose of this subtitle to provide subsidies to 
     eligible employers to assist such employers in providing, or 
     expanding the provision of, health care coverage for the 
     employees of such employers.

     SEC. 6102. ELIGIBLE EMPLOYERS.

       (a) In General.--To be eligible for a subsidy under this 
     subtitle an employer shall--
       (1) comply with the requirements of part 1 of subtitle D of 
     title I;
       (2) contribute to the cost of health care coverage for all 
     employees of the same class (limited to full- or part-time) 
     employed by the employer;
       (3) contribute not less than 50 percent of the cost of 
     health care coverage for each class of enrollment for each 
     employee so covered;
       (4) prepare and submit to the Secretary of Labor an 
     application, at such time, in such manner and containing such 
     information as the Secretary may require.
       (b) Application of Requirements.--
       (1) In general.--The requirements of paragraphs (2) and (3) 
     of subsection (a) shall only apply with respect to employees 
     of the same class (limited to full- or part-time) described 
     in paragraph (2).
       (2) Coverage of employees.--The employees described in this 
     paragraph are those employees--
       (A) for which the employer is contributing to the costs of 
     health care coverage; and
       (B) for which the employer did not make such a contribution 
     prior to the date of enactment of this Act.
       (c) Sole Proprietorships.--A sole proprietorship with not 
     less than 3 full-time employees (including the sole 
     proprietor) shall be eligible for a subsidy under this 
     subtitle if such proprietorship reports the payment of wages, 
     in the year prior to the year for which the subsidy is 
     applied for, in an amount required under regulations 
     promulgated by the Secretary of Labor.
       (d) Ineligibility.--
       (1) Self-employed.--A self-employed individual (as such 
     term is defined in section 1011(c)) shall not be eligible for 
     a subsidy under this subtitle.
       (2) Employee leasing firms.--An employer that is an 
     employee leasing firm as described in section 1011(5)(E)(ii) 
     shall not be eligible for a subsidy under this subtitle.
       (3) State or local governments.--An employer that is a 
     State or local government shall not be eligible for a subsidy 
     under this section.

     SEC. 6103. EMPLOYER CERTIFICATION.

       (a) Requirement.--An employer that submits an application 
     under section 6102(a)(4) shall certify that such employer, 
     prior to the date of enactment of this Act, did not 
     contribute to the costs of health care coverage for the 
     employees for which the employer is applying for the subsidy.
       (b) Contribution Limit.--For purposes of subsection (a), an 
     employer shall be treated as having contributed to the health 
     care coverage of an employee if the amount of such 
     contribution is $500 or more (on an annualized basis).
       (c) Union Sickness Funds.--For purposes of this subtitle, 
     employers that contribute to union sickness funds on behalf 
     of their employees shall be deemed to have contributed to the 
     costs of health care coverage for the employees of such 
     employer.
       (d) Regulations.--For purposes of this section, the 
     Secretary of Labor shall promulgate regulations to enable an 
     employer to determine whether and to what extent an employer 
     contributed to the costs of an employee's health care 
     coverage prior to the date of enactment of this Act. An 
     employer shall utilize such regulations in submitting a 
     certification under this section.

     SEC. 6104. AMOUNT OF SUBSIDY.

       (a) In General.--With respect to an employee for which a 
     subsidy application submitted by an employer has been 
     approved by the Secretary of Labor under this subtitle, the 
     employer shall receive a subsidy (to be paid each year during 
     the 5-year period beginning with the first calendar year 
     after the date of enactment of this Act) in an amount that 
     equals (but not less than zero)--
       (1) with respect to the first 3 calendar years after the 
     date of enactment of this Act--
       (A)(i) in the case of a community-rated employer, 50 
     percent of the least of--
       (I) the weighted average premium rate (as defined in 
     section 6002(b)(1)(C)) for the purchasing cooperative through 
     which the employer has contributed to the employee's health 
     care coverage (for the year involved);
       (II) the community-rate of the standard health plan under 
     which the employee received coverage (for the year involved); 
     or
       (III) the weighted average premium rate of the community 
     rating area in which the employee resides; or
       (ii) in the case of an experience-rated employer, 50 
     percent of the lesser of--
       (I) the weighted average premium rate of the community 
     rating area in which the employee resides; or
       (II) the premium rate for the experience-rated plan under 
     which the employee received coverage (for the year involved);
     less
       (B) 8 percent of the wages of the employee (for the year 
     involved);
       (2) with respect to the fourth calendar year after the date 
     of enactment of this Act--
       (A) 37.5 percent of the lesser of the amounts referred to 
     in subparagraph (A) of paragraph (1) (for the type of 
     employer and the year involved); less
       (B) 8 percent of the wages of the employee (for the year 
     involved); and
       (3) with respect to the fifth calendar year after the date 
     of enactment of this Act--
       (A) 25 percent of the lesser of the amounts referred to in 
     subparagraph (A) of paragraph (1) (for the type of employer 
     and the year involved); less
       (B) 8 percent of the wages of the employee (for the year 
     involved).
       (b) Limitations.--
       (1) Part-time employees.--With respect to subsidies for 
     health care coverage for part-time employee, the Secretary of 
     Labor shall develop a formula for the pro-rata reduction in 
     such subsidies based on the formula described in subsection 
     (a) and the hours of work performed by the employee.
       (2) Single subsidy.--An employer shall not be eligible to 
     receive more than one subsidy under this section. The 
     Secretary of Labor shall promulgate regulations to ensure 
     that no employer will receive a second or subsequent subsidy 
     under this subtitle regardless of whether such employer had 
     previously received the previous subsidy as an employer in a 
     capacity different from that of the employer's present 
     capacity.

     SEC. 6105. DEFINITION.

       For purposes of this Act, an employee who is employed by an 
     employer--
       (1) for at least 120 hours in a month shall be deemed to be 
     employed on a full-time basis with respect to that month, or
       (2) for at least 40 hours, but less than 120 hours, in a 
     month shall be deemed to be employed on a part-time basis.
                     TITLE VII--REVENUE PROVISIONS

     SEC. 7000. 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--Financing Provisions

              PART 1--INCREASE IN TAX ON TOBACCO PRODUCTS

     SEC. 7101. 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 Health 
     Security Act.
       ``(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 Health Security Act 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 Health Security Act.
       ``(4) 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. 7102. MODIFICATIONS OF CERTAIN TOBACCO TAX PROVISIONS.

       (a) Exemption for Exported Tobacco Products and Cigarette 
     Papers and Tubes To Apply Only to Articles Marked for 
     Export.--
       (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) Subpart 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 subpart F of chapter 52 is 
     amended by adding at the end 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) Special Rules Relating to Puerto Rico and the Virgin 
     Islands.--Section 7652 is amended by adding at the end 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 Health Security Act.''
       (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 December 31, 1994.

     SEC. 7103. 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 7101, is amended by redesignating 
     subsections (g) and (h) as subsections (h) and (i) 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 
     the person's 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.

                   PART 2--HEALTH RELATED ASSESSMENTS

     SEC. 7111. ASSESSMENTS ON INSURED AND SELF-INSURED HEALTH 
                   PLANS.

       (a) General Rule.--Subtitle D (relating to miscellaneous 
     excise taxes) is amended by adding after chapter 36 the 
     following new chapter:

                ``CHAPTER 37--HEALTH RELATED ASSESSMENTS

``Subchapter A. Insured and self-insured health plans.

         ``Subchapter A--Insured and Self-Insured Health Plans

``Sec. 4501. Health insurance and health-related administrative 
              services.
``Sec. 4502. Self-insured health plans.
``Sec. 4503. Definitions and special rules.

     ``SEC. 4501. 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 1.75 percent of the premiums received under such policy, 
     and
       ``(2) on each amount received for health-related 
     administrative services, a tax equal to 1.75 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 
     insurance policy providing accident or health insurance 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,
       ``(E) coverage providing wages or payments in lieu of wages 
     for any period during which the employee is absent from work 
     on account of sickness or injury, or
       ``(F) 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 or health 
     coverage, in determining the amount of the tax imposed by 
     subsection (a)(1) on any premium paid under such policy, 
     there shall be excluded the amount of the charge for the 
     nonaccident or health coverage if--
       ``(A) the charge for such nonaccident or 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 paid 
     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 4502(c)) 
     established or maintained by a person other than the person 
     performing the services.

     For purposes of paragraph (1), rules similar to the rules of 
     subsection (c)(3) shall apply.

     ``SEC. 4502. 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 1.75 percent of the sum of--
       ``(1) the accident or 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, or
       ``(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 voluntary employees' beneficiary association under 
     section 501(c)(9), or
       ``(iii) a plan described in subsection (c)(2)(F),

     the association, committee, joint board of trustees, 
     cooperative, or other similar group of representatives of the 
     parties who establish or maintain the plan.
       ``(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, a 
     rural electric cooperative, or a rural telephone cooperative 
     association, as such terms are defined in section 3(40) of 
     the Employee Retirement Income Securities Act of 1974.
       ``(d) Accident or Health Coverage Expenditures.--For 
     purposes of this section--
       ``(1) In general.--The accident or health coverage 
     expenditures of any applicable self-insured health plan for 
     any month are the aggregate expenditures paid in such month 
     for accident or health coverage provided under such plan to 
     the extent such expenditures are not subject to tax under 
     section 4501.
       ``(2) Treatment of reimbursements.--In determining accident 
     or health coverage expenditures during any month of any 
     applicable self-insured health plan, reimbursements (by 
     insurance or otherwise) received during such month shall be 
     taken into account as a reduction in accident or 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 or 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 
     4501. In determining the amount of such expenditures, rules 
     similar to the rules of subsection (d)(3) shall apply.

     ``SEC. 4503. DEFINITIONS AND SPECIAL RULES.

       ``(a) Definitions.--For purposes of this subchapter--
       ``(1) Accident or health coverage.--The term `accident or 
     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 4501(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. Amounts returned where the amount is 
     not fixed in the contract but depends on the experience of 
     the insurer or the discretion of management shall not be 
     included in return premiums.
       ``(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) Exempt governmental programs.--In the case of an 
     exempt governmental program--
       ``(A) no tax shall be imposed under section 4501 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 4502 on any 
     expenditures pursuant to such program.
       ``(3) Exempt governmental program.--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) the medical assistance program established by title 
     XIX of the Social Security Act,
       ``(C) 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
       ``(D) 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.--The table of chapters for subtitle 
     D is amended by inserting after the item relating to chapter 
     36 the following new item:

``Chapter 37. Health related assessments.''

       (c) Effective Date.--The amendments made by this section 
     shall apply with respect to premiums received, and expenses 
     incurred, with respect to coverage for periods after December 
     31, 1995.

     SEC. 7112. HIGH COST HEALTH PLAN ASSESSMENT.

       (a) In General.--Subchapter A of chapter 37 (relating to 
     assessments on insured and self-insured health benefits), as 
     added by section 7111, is amended by adding at the end the 
     following new part:

                   ``PART II--HIGH COST HEALTH PLANS

``Subpart A. Community-rated plans.
``Subpart B. Experience-rated plans.
``Subpart C. Definitions and special rules.

                   ``Subpart A--Community-Rated Plans

``Sec. 4511. Community-rated plans.
``Sec. 4512. Reference premiums.

     ``SEC. 4511. COMMUNITY-RATED PLANS.

       ``(a) Imposition of Tax.--
       ``(1) In general.--If a community-rated certified standard 
     health plan is a high cost plan for any coverage period 
     beginning after December 31, 1996, there is hereby imposed a 
     tax equal to 25 percent of the excess premiums of the plan 
     for the period.
       ``(2) Liability for tax.--The tax imposed by this section 
     shall be paid by the issuer of the high cost plan.
       ``(b) High Cost Plan.--For purposes of this section--
       ``(1) In general.--A plan is a high cost plan for any 
     coverage period if--
       ``(A) it is operating within a noncompetitive community 
     rating area, and
       ``(B) it has excess premiums for the period.
       ``(2) Noncompetitive community rating area.--A community 
     rating area is a noncompetitive community rating area for any 
     coverage period if, for the preceding coverage period--
       ``(A) the average premium for community-rated certified 
     standard health plans in the area, weighted to reflect the 
     total enrollment of community-rated individuals among such 
     plans, exceeded
       ``(B) the weighted average reference premium for all such 
     plans.

     The determination under this paragraph shall be made on the 
     basis of enrollment during the annual open enrollment period 
     for such preceding coverage period and shall take into any 
     applicable plan marketing fees described in section 1112(f) 
     of the Health Security Act and purchasing cooperative 
     membership fees described in section 1324 of such Act.
       ``(c) Excess Premiums.--For purposes of this section--
       ``(1) In general.--The term `excess premiums' means, with 
     respect to a certified standard health plan, the excess (if 
     any) of--
       ``(A) the premiums received under the plan during the 
     coverage period, over
       ``(B) the sum of the amounts determined under paragraph (2) 
     with respect to each class of enrollment.
       ``(2) Excess premium baseline.--
       ``(A) In general.--The amount determined under this 
     paragraph for any class of enrollment for any coverage period 
     is an amount equal to the product of the reference premium 
     for such class and the number of primary insureds in such 
     class for the period.
       ``(B) Proportionate reduction of reference premium.--The 
     reference premium applicable under subparagraph (A) to an 
     individual who was a primary insured for only a portion of 
     the coverage period shall be proportionately reduced to 
     reflect the period the individual was not a primary insured.
       ``(3) Disregard of age adjustment.--The amount determined 
     under paragraph (1)(A) shall be adjusted to reflect the 
     premiums which would have been received if no age adjustment 
     were permitted under section 1116 of the Health Security Act.
       ``(4) Reduction for taxes.--The amount determined under 
     paragraph (1)(A) shall be reduced by the amount of the tax 
     imposed by this section included in determining the amount of 
     the premiums.
       ``(d) Coverage Period.--For purposes of this subpart, the 
     term `coverage period' means, with respect to any community 
     rating area, the 12-month period for which an individual is 
     covered under a standard health plan if the individual 
     enrolls in the plan during the annual open enrollment period 
     for the area under section 1503 of the Health Security Act.
       ``(e) Plans Covering More Than One Area.--For purposes of 
     this subpart, if a community-rated plan covers individuals 
     residing in more than 1 community rating area, the plan shall 
     be treated as a separate plan with respect to each such area.

     ``SEC. 4512. REFERENCE PREMIUMS.

       ``(a) Establishment of Reference Premiums.--For purposes of 
     this subpart--
       ``(1) In general.--The Secretary shall, in consultation 
     with the Secretary of Health and Human Services, establish 
     for each coverage period a reference premium for each class 
     of enrollment for community-rated plans within a community 
     rating area. The Secretary shall publish such reference 
     premiums within a reasonable period of time before the annual 
     open enrollment period for the coverage period.
       ``(2) Method of determining reference premium.--Each 
     reference premium for a class of enrollment for any coverage 
     period shall be the reference premium in effect for such 
     class for the preceding coverage period--
       ``(A) increased by the target growth rate for the coverage 
     period as provided under subsection (b)(1), and
       ``(B) adjusted to reflect--
       ``(i) material changes in the characteristics of community-
     rated individuals as provided under subsection (b)(2), and
       ``(ii) changes in the actuarial value of the standard 
     benefits package as provided under subsection (b)(3).
       ``(b) Annual Adjustments to Reference Premiums.--For 
     purposes of subsection (a)(2)--
       ``(1) Target growth rate.--The target growth rate for any 
     coverage period is the percentage increase in the Consumer 
     Price Index (as defined in section 1(f)(4)) which the 
     Secretary estimates will occur during the coverage period--
       ``(A) increased by 2 percentage points (3 and 2.5 
     percentage points in the case of coverage periods beginning 
     in 1997 and 1998, respectively), and
       ``(B) increased or decreased by the amount the estimate 
     under this paragraph was incorrect for the preceding coverage 
     period.
       ``(2) Material changes.--
       ``(A) In general.--The Secretary may, in consultation with 
     the Secretary of Health and Human Services and pursuant to 
     such method as the Secretary prescribes, adjust the reference 
     premium to reflect--
       ``(i) changes in the demographic characteristics (including 
     factors such as age, gender, and socioeconomic status) of 
     community-rated individuals in the community rating area 
     which are materially different when compared to the average 
     changes in such characteristics in the United States, and
       ``(ii) extraordinary changes in the health status of such 
     individuals (as so compared).
       ``(B) Effect on weighted average.--Any adjustments under 
     subparagraph (A) for any coverage period shall not result in 
     a change in the weighted average of such factors for all 
     community rating areas in the United States.
       ``(3) Changes in benefit package.--If the actuarial value 
     of the standard benefits package is changed pursuant to 
     subtitle C of title I of the Health Security Act, the 
     Secretary shall adjust the reference premiums appropriately 
     to reflect such change.
       ``(c) Computation of Reference Premium for 1996.--
       ``(1) In general.--The Secretary, in consultation with the 
     Secretary of Health and Human Services, shall compute the 
     reference premium for each class of enrollment for 1996. Each 
     such reference premium shall be the reference premium which 
     is adjusted under subsection (a)(2) in determining the 
     reference premium for coverage periods beginning in 1997.
       ``(2) Method of determining reference premiums.--Each 
     reference premium under paragraph (1) shall be equal to the 
     national average per capita current coverage health 
     expenditures for 1994 (determined under subsection (d))--
       ``(A) increased as provided in paragraph (3),
       ``(B) adjusted to reflect the differences in the community 
     rating area as provided in paragraph (4), and
       ``(C) modified to reflect the class of enrollment for which 
     it is being determined in the same manner as premiums are 
     modified under section 1116 of the Health Security Act.
       ``(3) Updating for 1995 and 1996.--The Secretary shall 
     update the national average per capita current coverage 
     health expenditures for 1994 to reflect the annual percentage 
     increases for calendar years 1995 and 1996 in private sector 
     health care spending for items and services included in the 
     standard benefits package. Such increase shall not exceed the 
     current projected increase in per capita private health 
     insurance premiums for such years contained in the estimate 
     of national health insurance expenditures published by the 
     Congressional Budget Office in the fall of 1993.
       ``(4) Area adjustments.--
       ``(A) In general.--The Secretary shall, using information 
     of the type described in subparagraph (B), establish an 
     adjustment for each community rating area which takes into 
     account the differences among community rating areas, 
     including variations in health care expenditures, in rates of 
     uninsurance and underinsurance, and in the proportion of 
     expenditures for services provided by academic health 
     centers.
       ``(B) Type of information.--The type of information 
     described in this subparagraph is--
       ``(i) information on variations in premiums across States 
     and across community rating areas within a State (based on 
     surveys and other data);
       ``(ii) information on variations in per capita health 
     spending by State, as measured by the Secretary;
       ``(iii) information on variations across States in per 
     capita spending under the medicare program and in such 
     spending among community rating areas within a State under 
     such program; and
       ``(iv) area rating factors commonly used by actuaries.
       ``(C) Consultation process.--The Secretary shall, in 
     cooperation with the Secretary of Health and Human Services, 
     consult with representatives of States and community rating 
     areas before establishing the adjustment under this 
     subsection.
       ``(d) Determination of National Average per Capita Current 
     Coverage Health Expenditures.--
       ``(1) In general.--The national average per capita current 
     coverage health expenditures are equal to--
       ``(A) the total amount of covered current health care 
     expenditures described in paragraph (2), divided by
       ``(B) the estimated population in the United States of 
     community-rated individuals as of 1994 (as determined under 
     paragraph (4)) for whom such expenditures were determined.

     The population under subparagraph (B) shall not include SSI 
     recipients.
       ``(2) Covered current health care expenditures.--
       ``(A) In general.--For purposes of paragraph (1), the term 
     `covered current health care expenditures' means the amount 
     of total payments made in the United States during 1994 
     (other than amounts for cost sharing) for items and services 
     included in the standard benefits package.
       ``(B) Removal of certain expenditures not to be covered.--
     The amount determined under subparagraph (A) shall be 
     decreased by the proportion of such amount that is 
     attributable to any of the following:
       ``(i) Medicare beneficiaries.
       ``(ii) SSI recipients.
       ``(iii) Expenditures which are paid for through workers' 
     compensation or automobile or other liability insurance.
       ``(iv) Any other expenditures by parties (including the 
     Federal Government) that the Secretary estimates will not be 
     payable by community-rated plans for coverage under the 
     standard benefits package.
       ``(C) Addition of projected expenditures for uninsured and 
     underinsured individuals.--The amount determined under 
     subparagraph (A) (as adjusted under subparagraph (B)) shall 
     be increased to take into account increased utilization of, 
     and expenditures for, items and services covered under the 
     standard benefits package likely to occur, as a result of 
     coverage under a community-rated plan of individuals who, as 
     of 1994, were uninsured or underinsured with respect to the 
     standard benefits package. In making such determination, such 
     expenditures shall be based on the estimated average cost for 
     such services in 1994 (and not on private payment rates 
     established for such services). In making such determination, 
     the estimated amount of uncompensated care in 1994 shall be 
     reduced to reflect the number and characteristics of the 
     currently uninsured who will become insured by reason of the 
     Health Security Act and will not include adjustments to 
     offset payments below costs by public programs.
       ``(D) Addition of health plan administration costs.--The 
     amount determined under subparagraph (A) (as adjusted under 
     the preceding subparagraphs) shall be increased by an 
     estimated percentage (determined by the Secretary, but no 
     more than 15 percent) that reflects the proportion of 
     premiums that are required for administration and for State 
     premium taxes (which taxes shall be limited to such amounts 
     in 1994 as are attributable to the health benefits to be 
     included in the standard benefits package).
       ``(E) Decrease for cost sharing.--The amount determined 
     under subparagraph (A) (as adjusted under the preceding 
     subparagraphs) shall be decreased by a percentage that 
     reflects (i) the estimated average percentage of total 
     amounts payable for items and services covered under the 
     standard benefits package that will be payments in the form 
     of cost sharing under a certified standard benefit plan with 
     a high cost-sharing option, and (ii) the percentage reduction 
     in utilization estimated to result from the application of 
     such cost sharing.
       ``(3) Special rules.--
       ``(A) Benefits used.--The determinations under this 
     subsection shall be based on the standard benefits package as 
     in effect in 1996.
       ``(B) Assuming no change in expenditure pattern.--The 
     determination under paragraph (2) shall be made without 
     regard to any change in the pattern of expenditures that may 
     result from the enrollment of SSI recipients in community-
     rated plans.
       ``(4) Eligible individuals.--The determination of 
     individuals who are community-rated individuals under this 
     subsection shall be made as though the Health Security Act 
     was fully in effect in each State as of 1994.
       ``(e) Treatment of Certain States.--For purposes of this 
     section--
       ``(1) Nonparticipating states.--In the case of a State that 
     is not a participating State or otherwise has not established 
     community rating areas, the entire State shall be treated as 
     a single community rating area.
       ``(2) Changes in boundaries.--In the case of a State that 
     changes the boundaries of its community rating areas, the 
     Secretary shall provide a method for computing reference 
     premiums for each area affected by such change in a manner 
     that--
       ``(A) reflects the factors taken into account in 
     establishing the adjustment factors under this section, and
       ``(B) results in the weighted average of the newly computed 
     reference premiums for the areas affected by the change being 
     equal to the weighted average of the reference premiums for 
     the areas as previously established.

                  ``Subpart B--Experience-Rated Plans

``Sec. 4515. Experience-rated plans.

     ``SEC. 4515. EXPERIENCE-RATED PLANS.

       ``(a) Imposition of Tax.--
       ``(1) In general.--In the case of any calendar year 
     beginning after December 31, 1999, there is hereby imposed a 
     tax equal to 25 percent of the excess premium equivalents of 
     an experience-rated standard health plan.
       ``(2) Liability for tax.--The tax imposed by this section 
     shall be paid by the plan sponsor.
       ``(b) Excess Premium Equivalents.--For purposes of this 
     section--
       ``(1) In general.--The term `excess premium equivalents' 
     means the excess (if any) of--
       ``(A) the premium equivalents of the plan for the calendar 
     year, over
       ``(B) the product of the reference premium and the number 
     of primary insureds covered by the plan during the calendar 
     year.
       ``(2) Proportionate reduction in reference premium.--The 
     reference premium applicable under paragraph (1)(B) to a 
     primary insured covered under the plan for only a portion of 
     the calendar year shall be proportionately reduced to reflect 
     the period the individual was not a primary insured.
       ``(c) Reference Premium.--For purposes of this section--
       ``(1) In general.--The reference premium for any plan for 
     any calendar year shall be the reference premium in effect 
     for the preceding calendar year--
       ``(A) increased by the target growth rate for the calendar 
     year as provided under paragraph (2), and
       ``(B) adjusted to reflect--
       ``(i) material changes in the characteristics of 
     individuals covered by the plan as provided under paragraph 
     (3), and
       ``(ii) changes in the actuarial value of the standard 
     benefits package as provided under paragraph (4).
       ``(2) Target growth rate.--The target growth rate for any 
     calendar year is the percentage increase in the Consumer 
     Price Index (as defined in section 1(f)(4)) which the 
     Secretary estimates will occur during the calendar year--
       ``(A) increased by 2 percentage points, and
       ``(B) increased or decreased by the amount the estimate 
     under this paragraph was incorrect for the preceding calendar 
     year.
       ``(3) Material changes.--The Secretary may, in consultation 
     with the Secretary of Health and Human Services, establish 
     such method as the Secretary determines appropriate for 
     adjusting the reference premium for any plan to reflect--
       ``(A) changes in the demographic characteristics (including 
     factors such as age, gender, socioeconomic status, and class 
     of enrollment) of individuals in the plan which are 
     materially different when compared to the average changes in 
     such characteristics in the United States, and
       ``(B) extraordinary changes in the health status of such 
     individuals (as so compared).
       ``(4) Changes in benefit package.--If the actuarial value 
     of the standard benefits package is changed pursuant to 
     subtitle C of title I of the Health Security Act, the 
     Secretary shall adjust the reference premiums appropriately 
     to reflect such change.
       ``(d) Reference Premium for 1999.--
       ``(1) In general.--The reference premium for calendar year 
     1999 shall be equal to the average of the per capita premium 
     equivalents for calendar years 1997, 1998, and 1999. Such 
     reference premium shall be the reference premium which is 
     adjusted under subsection (c) for determining the reference 
     premium for calendar year 2000.
       ``(2) Per capita premium equivalent.--
       ``(A) In general.--The per capita premium equivalent for 
     any calendar year shall be equal to the premium equivalent 
     for providing the standard benefits package to each primary 
     insured, adjusted as provided under subparagraph (B).
       ``(B) Growth factors.--The amount determined under 
     subparagraph (A)--
       ``(i) for calendar year 1997 shall be increased by the 
     target growth rates for calendar years 1998 and 1999, and
       ``(ii) for calendar year 1998 shall be increased by the 
     target growth rate for calendar year 1999.
     For purposes of this subparagraph, the target growth rate 
     shall be determined under subsection (c)(2), except that 
     subsection (c)(2)(A) shall be applied for calendar year 1998 
     by substituting `2.5' for `2'.
       ``(e) Premium Equivalents.--For purposes of this section--
       ``(1) In general.--The term `premium equivalents' means, 
     with respect to any calendar year, the sum of--
       ``(A) expenditures described in subsections (d) and (e) of 
     section 4502 with respect to coverage under the plan, and
       ``(B) in the case of any coverage provided through an 
     insurance policy, premiums paid for such coverage.
       ``(2) Exclusion of nonstandard coverage.--The premium 
     equivalents for any calendar year shall not include amounts 
     with respect to--
       ``(A) any coverage other than coverage for the standard 
     benefits package, or
       ``(B) any cost-sharing coverage.
       ``(3) Risk adjustment payments.--The premium equivalents 
     for any calendar year shall include payments under any risk 
     adjustment program established under title I of the Health 
     Security Act.
       ``(4) Taxes disregarded.--The premium equivalents for any 
     calendar year shall not include the amount of any tax imposed 
     by this section.
       ``(f) Special Rules.--For purposes of this section--
       ``(1) Aggregation rules.--
       ``(A) Plans.--All plans maintained by the same plan sponsor 
     shall be treated as 1 plan.
       ``(B) Sponsors.--All plan sponsors which are treated as a 
     single employer under subsection (b) or (c) of section 414 
     shall be treated as 1 plan sponsor.
       ``(2) Startup plans.--If a plan sponsor first begins 
     operation of an experience-rated plan after 1997, the 
     reference premium for the first calendar year for which the 
     plan is in operation and to which this section applies shall, 
     under regulations prescribed by the Secretary, be determined 
     as if the reference premium for the preceding calendar year 
     were equal to the average of the reference premiums for all 
     community-rated plans for the preceding calendar year in the 
     areas in which the plan is operating. The Secretary may, in 
     consultation with the Secretary of Health and Human Services, 
     provide a method for adjusting the reference premium 
     determined under the preceding sentence in a manner similar 
     to the manner under subsection (c)(3).
       ``(3) Acquisitions and dispositions.--The reference premium 
     after an acquisition or disposition described in section 
     41(f)(3) involving the plan sponsor of an experience-rated 
     plan shall be made pursuant to such regulations as the 
     Secretary may prescribe.
       ``(4) Information.--The Secretary may require a plan 
     sponsor of an experience-rated plan to adopt such conventions 
     as are necessary in its accounting practices and financial 
     records to assure that only costs related to the standard 
     benefits package are taken into account in determining the 
     premium equivalents with respect to the plan.

               ``Subpart C--Definitions and Special Rules

``Sec. 4518. Right of recovery.
``Sec. 4519. Definitions and special rules.

     ``SEC. 4518. RIGHT OF RECOVERY FROM PROVIDERS.

       ``(a) General Rule.--Each issuer or plan sponsor of a 
     certified standard health plan shall be entitled to recover 
     from the providers of items or services covered by the plan 
     an amount equal to 50 percent of the amount of any tax 
     imposed by this part on the issuer or sponsor.
       ``(b) Recovery.--For purposes of subsection (a)--
       ``(1) any amount recovered from any provider shall not 
     exceed the provider's proportionate share of items or 
     services provided under the plan for the period the tax was 
     imposed, and
       ``(2) an issuer or plan sponsor may recover an amount from 
     a provider through a reduction in payments under the plan, 
     direct payments from the provider, or such other manner as 
     may be provided under State law adopted pursuant to section 
     1510 of the Health Security Act.
       ``(c) Balance Billing.--For prohibition of balance billing 
     of any amount recovered from a provider under this section, 
     see section 1128(h)(3) of the Health Security Act.

     ``SEC. 4519. DEFINITIONS AND SPECIAL RULES.

       ``(a) Health Plans.--For purposes of this part--
       ``(1) Standard health plan.--The term `standard health 
     plan' has the meaning given such term by section 1011(2)(B) 
     of the Health Security Act, except that such term does not 
     include a plan offering the alternative standard benefit 
     package described in 1201(b) of such Act.
       ``(2) Standard benefits package.--The term `standard 
     benefits package' has the meaning given such term by section 
     1201(a) of such Act.
       ``(b) Community Rating Areas and Plans.--For purposes of 
     this part--
       ``(1) Community rating area.--The term `community rating 
     area' means an area established under section 1502 of the 
     Health Security Act.
       ``(2) Community-rated plan.--The term `community-rated 
     plan' means a plan which is community-rated under section 
     1116 of such Act.
       ``(3) Experience-rated plan.--The term `experience-rated 
     plan' means any plan which is not a community-rated plan.
       ``(c) Premiums.--For purposes of this part--
       ``(1) In general.--The term `premium' has the meaning given 
     such term by section 4503(a)(3).
       ``(2) Administrative costs.--Amounts received for health-
     related administrative services (as defined in section 
     4501(d)) provided in connection with any standard health plan 
     taken into account under section 4511(c)(3) shall be treated 
     as premiums.
       ``(3) Risk adjustment payments.--Payments under a risk 
     adjustment program established under title I of the Health 
     Security Act shall be disregarded in computing the amount of 
     any premiums.
       ``(d) Insurance Policy and Plan Sponsor.--For purposes of 
     this part--
       ``(1) Insurance policy.--The term `insurance policy' has 
     the meaning given such term by section 4503(a)(2).
       ``(2) Plan sponsor.--The term `plan sponsor' has the 
     meaning given such term by section 4502(b)(2), except that in 
     the case of a plan not described in such section, such term 
     means the person or persons who establish or maintain the 
     plan.
       ``(e) Special Rules.--For purposes of this part--
       ``(1) Returns.--A return of any tax imposed by this part 
     shall be filed no later than 2\1/2\ months after the close of 
     the period to which it relates. The Secretary may require 
     returns to be filed more frequently if the Secretary 
     determines it necessary for the effective administration of 
     this part.
       ``(2) Deposits.--The Secretary may require deposits of any 
     taxes imposed by subpart A or B at such times as the 
     Secretary determines appropriate.
       ``(3) Governmental entities subject to tax.--The rules of 
     section 4503(b) shall apply for purposes of this part.
       ``(4) No cover over to possessions.--Notwithstanding any 
     other provision of law, no amount collected under this part 
     shall be covered over to any possession of the United States.
       ``(f) Regulations.--The Secretary shall issue such 
     regulations as are necessary to carry out the provisions of 
     this part, including regulations--
       ``(1) requiring the maintenance of such records, and the 
     reporting of such information as the Secretary determines 
     necessary, and
       ``(2) which provide that 2 or more plans of a person or any 
     related persons must be aggregated, or a plan must be treated 
     as 2 or more separate plans.''
       (b) Conforming Amendments.--
       (1) Subchapter A of chapter 37, as added by section 7111, 
     is amended by inserting after the subchapter heading the 
     following:

``Part I.   Premium and related assessments.
``Part II.  High cost health plans.

              ``PART I--PREMIUM AND RELATED ASSESSMENTS''.

       (2) Section 4503, as so added, is amended by striking 
     ``subchapter'' each place it appears and inserting ``part''.
       (c) Effective Date.--The amendments made by this section 
     shall take effect on January 1, 1996.

           PART 3--RECAPTURE OF CERTAIN HEALTH CARE SUBSIDIES

     SEC. 7121. 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 the following new part:

  ``PART VIII--CERTAIN HEALTH CARE SUBSIDIES RECEIVED BY HIGH-INCOME 
                              INDIVIDUALS

``Sec. 59B. Recapture of certain health care subsidies.

     ``SEC. 59B. 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) Phase-in 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, 
     $80,000,
       ``(B) $100,000 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).
       ``(5) 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 
     1509 of the Health Security Act are met.''
       (b) Transfers to Federal Supplementary Medical Insurance 
     Trust Fund.--
       (1) In general.--There are hereby appropriated to the 
     Federal Supplementary Medical Insurance Trust Fund amounts 
     equivalent to the aggregate increase in liabilities under 
     chapter 1 of the Internal Revenue Code of 1986 which is 
     attributable to the application of section 59B(a) of such 
     Code, as added by this section.
       (2) Transfers.--The amounts appropriated by paragraph (1) 
     to the Federal Supplementary Medical Insurance Trust Fund 
     shall be transferred from time to time (but not less 
     frequently than quarterly) from the general fund of the 
     Treasury on the basis of estimates made by the Secretary of 
     the Treasury of the amounts referred to in paragraph (1). Any 
     quarterly payment shall be made on the first day of such 
     quarter and shall take into account the recapture amounts 
     referred to in such section 59B(a) for such quarter. Proper 
     adjustments shall be made in the amounts subsequently 
     transferred to the extent prior estimates were in excess of 
     or less than the amounts required to be transferred.
       (c) Reporting Requirements.--
       (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.
       (d) 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, 1997, with 
     respect to any underpayment to the extent that such 
     underpayment resulted from section 59B(a) of the Internal 
     Revenue Code of 1986, as added by this section.
       (e) 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 VIII. Certain health care subsidies received by high-income 
              individuals.''

       (f) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     1995.

                        PART 4--OTHER PROVISIONS

     SEC. 7131. INCREASE IN TAX ON CERTAIN HOLLOW POINT AND LARGE 
                   CALIBER HANDGUN AMMUNITION.

       (a) Increase in Manufacturers Tax.--
       (1) In general.--Section 4181 (relating to imposition of 
     tax on firearms) is amended--
       (A) by striking ``Shells, and cartridges'' and inserting 
     ``Shells and cartridges not taxable at 10,000 percent'', and
       (B) by adding at the end the following:
       ``Articles taxable at 10,000 percent.--
       ``Any jacketed, hollow point projectile which may be used 
     in a handgun and the jacket of which is designed to produce, 
     upon impact, sharp-tipped, barb-like projections that extend 
     beyond the diameter of the unfired projectile.
       ``Any cartridge with a projectile measuring .500 inch or 
     greater in diameter which may be used in a handgun.''
       (2) Additional taxes added to the general 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 amendments made 
     by section 7131(a)(1) of the Health Security Act, as 
     estimated by the Secretary.''
       (b) Effective Dates.--
       (1) In general.--The amendments made by this section shall 
     apply to sales after December 31, 1994.
       (2) Floor stocks tax.--
       (A) In general.--In the case of any article held on January 
     1, 1995, which is taxable under section 4181 of the Internal 
     Revenue Code of 1986 on and after such date at a tax rate of 
     10,000 percent, there is hereby imposed a tax equal to the 
     excess of--
       (i) the tax which would be imposed under section 4181 of 
     such Code if the article were sold on such date, over
       (ii) the prior tax (if any) imposed under such section on 
     such article.
       (B) Credit.--Each person shall be allowed as a credit 
     against the taxes imposed by subparagraph (A) an amount equal 
     to the taxes imposed on articles which such person destroys 
     (in such manner as the Secretary may prescribe) after 
     December 31, 1994, and before April 1, 1995.
       (C) Payment.--The taxes imposed by subparagraph (A) on any 
     article shall be paid by the person holding the article on 
     January 1, 1995. Such taxes shall be paid before April 1, 
     1995, in such manner as the Secretary of the Treasury may 
     prescribe.
       (D) 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, 1995, shall be subject to 
     the tax imposed by subparagraph (A) if--
       (i) 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
       (ii) such article is held on such date under the 
     supervision of a customs officer pursuant to the 2d proviso 
     of such section 3(a).
       (E) Controlled groups.--Rules similar to the rules of 
     section 5061(e)(3) of such Code shall apply for purposes of 
     this paragraph.
       (F) 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 to the floor stocks taxes imposed by 
     subparagraph (A), to the same extent as if such taxes were 
     imposed by such section 4181. The Secretary may treat any 
     person who bore the ultimate burden of the tax imposed by 
     subparagraph (A) as the person to whom a credit or refund 
     under such provisions may be allowed or made.

     SEC. 7132. MODIFICATION TO SELF-EMPLOYMENT TAX TREATMENT OF 
                   CERTAIN S CORPORATION SHAREHOLDERS AND 
                   PARTNERS.

       (a) Treatment of Certain S Corporation Shareholders.--
       (1) Amendment to internal revenue code.--Section 1402 
     (relating to definitions) is amended by adding at the end the 
     following new subsection:
       ``(k) Treatment of Certain S Corporation Shareholders.--
       ``(1) In general.--In the case of any individual--
       ``(A) who is a 2-percent shareholder (as defined in section 
     1372(b)) of an S corporation for any taxable year of such 
     corporation, and
       ``(B) who provides significant services to or on behalf of 
     such S corporation during such taxable year,

     such shareholder's net earnings from self-employment shall 
     include such shareholder's pro rata share (as determined 
     under section 1366(a)) of the taxable income or loss of such 
     corporation for such taxable year from the active conduct by 
     such corporation of trades or businesses, and to the extent 
     provided in regulations, for any other taxable year to the 
     extent such income or loss is attributable to such services.
       ``(2) Limitation.--The amount included under paragraph (1) 
     for any taxable year shall not exceed the lesser of--
       ``(A) 30 percent of the contribution and benefit base (as 
     determined under section 230 of the Social Security Act) for 
     the calendar year in which the taxable year begins, or
       ``(B) the excess of--
       ``(i) such contribution and benefit base, over
       ``(ii) the sum of the net earnings from self-employment of 
     the taxpayer for the taxable year (without regard to this 
     subsection) and the wages of the taxpayer for the taxable 
     year.
       ``(3) Certain exceptions to apply.--In determining the 
     amount to be taken into account under paragraph (1), the 
     exceptions provided in subsection (a) shall apply, except 
     that, in the case of the exceptions provided in subsection 
     (a)(5), rules similar to the rules of subparagraph (B) 
     thereof shall apply to shareholders in S corporations.
       ``(4) Application of deferred compensation rules.--For 
     purposes of subchapter D of chapter 1 (and any other 
     provision of this title relating thereto), in the case of an 
     individual who is treated as having net earnings from self-
     employment by reason of paragraph (1)--
       ``(A) such individual shall not be treated as a self-
     employed individual (within the meaning of section 401(c)(1)) 
     with respect to services performed for the S corporation, and
       ``(B) such net earnings shall be treated as compensation 
     received by the individual as an employee of the S 
     corporation.''
       (2) Amendment to social security act.--Section 211 of the 
     Social Security Act is amended by adding at the end the 
     following new subsection:

           ``Treatment of Certain S Corporation Shareholders

       ``(k)(1) In the case of any individual--
       ``(A) who is a 2-percent shareholder (as defined in section 
     1372(b) of the Internal Revenue Code of 1986) of an S 
     corporation for any taxable year of such corporation, and
       ``(B) who provides significant services to or on behalf of 
     such S corporation during such taxable year,

     such shareholder's net earnings from self-employment shall 
     include such shareholder's pro rata share (as determined 
     under section 1366(a) of the Internal Revenue Code of 1986) 
     of the taxable income or loss of such corporation for such 
     taxable year from the active conduct by such corporation of 
     trades or businesses, and to the extent provided in 
     regulations, for any other taxable year to the extent such 
     income or loss is attributable to such services.
       ``(2) The amount included under paragraph (1) for any 
     taxable year shall not exceed the lesser of--
       ``(A) 30 percent of the contribution and benefit base (as 
     determined under section 230) for the calendar year in which 
     the taxable year begins, or
       ``(B) the excess of--
       ``(i) such contribution and benefit base, over
       ``(ii) the sum of the net earnings from self-employment of 
     the taxpayer for the taxable year (without regard to this 
     subsection) and the wages of the taxpayer for the taxable 
     year.
       ``(3) In determining the amount to be taken into account 
     under paragraph (1), the exceptions provided in subsection 
     (a) shall apply, except that, in the case of the exceptions 
     provided in subsection (a)(5), rules similar to the rules of 
     subparagraph (B) thereof shall apply to shareholders in S 
     corporations.''
       (b) Treatment of Certain Limited Partners.--
       (1) Amendment of the internal revenue code.--Paragraph (13) 
     of section 1402(a) is amended to read as follows:
       ``(13) there shall be excluded the distributive share of 
     any item of income or loss of a limited partner, as such, 
     other than--
       ``(A) guaranteed payments described in section 707(c) to 
     that partner for services actually rendered to or on behalf 
     of the partnership to the extent that those payments are 
     established to be in the nature of remuneration for those 
     services, or
       ``(B) in the case of a limited partner who provides 
     significant services to or on behalf of the partnership for 
     any taxable year of the partnership, the limited partner's 
     distributive share (determined without regard to payments 
     described in subparagraph (A)) of the taxable income or loss 
     of such partnership--
       ``(i) for such taxable year from the active conduct by such 
     partnership of trades or businesses, and
       ``(ii) to the extent provided in regulations, for any other 
     taxable year to the extent attributable to such services,

     except that the amount included under this subparagraph for 
     any taxable year shall not exceed the limitation described in 
     subsection (k)(2);''.
       (2) Amendment of the social security act.--Paragraph (12) 
     of section 211(a) of the Social Security Act is amended to 
     read as follows:
       ``(12) there shall be excluded the distributive share of 
     any item of income or loss of a limited partner, as such, 
     other than--
       ``(A) guaranteed payments described in section 707(c) of 
     the Internal Revenue Code of 1986 to that partner for 
     services actually rendered to or on behalf of the partnership 
     to the extent that those payments are established to be in 
     the nature of remuneration for those services, or
       ``(B) in the case of a limited partner who provides 
     significant services to or on behalf of the partnership for 
     any taxable year of the partnership, the limited partner's 
     distributive share (determined without regard to payments 
     described in subparagraph (A)) of the taxable income or loss 
     of such partnership--
       ``(i) for such taxable year from the active conduct by such 
     partnership of trades or businesses, and
       ``(ii) to the extent provided in regulations, for any other 
     taxable year to the extent attributable to such services,
     except that the amount included under this subparagraph for 
     any taxable year shall not exceed the limitation described in 
     subsection (k)(2);''.
       (c) Inventory Income.--Section 1402 (relating to 
     definitions), as amended by subsection (a), is amended by 
     adding at the end the following new subsection:
       ``(l) Inventory Income.--
       ``(1) In general.--The net earnings from self-employment of 
     any taxpayer for any taxable year under subsection (a) 
     (determined without regard to this subsection) shall be 
     reduced by 40 percent of the lesser of--
       ``(A) the taxpayer's allocable share of net inventory 
     income, or
       ``(B) the amount of such net earnings in excess of the 
     applicable amount for the taxable year.
       ``(2) Net inventory income.--
       ``(A) In general.--For purposes of paragraph (1), the term 
     `net inventory income' means net income from the sale of 
     property described in section 1221(1).
       ``(B) Dealers in securities.--For purposes of subparagraph 
     (A)--
       ``(i) any security described in section 475(c)(2) (without 
     regard to the last sentence thereof) which is held by a 
     person as a dealer in securities (as defined in section 
     475(c)(1)) shall be treated as property described in section 
     1221(1), and
       ``(ii) net income from any such security shall be taken 
     into account to the extent otherwise taken into account in 
     computing net earnings from self-employment.
       ``(3) Applicable amount.--For purposes of paragraph (1), 
     the term `applicable amount' means the excess of--
       ``(A) $135,000, adjusted, in the case of any taxable year 
     beginning in any calendar year after 1996, in the same manner 
     as is used in adjusting the contribution and benefit base for 
     the calendar year under section 230(b) of the Social Security 
     Act, over
       ``(B) the amount of wages paid to the individual during the 
     taxable year.''
       (d) Effective Date.--The amendments made by this section 
     shall apply to taxable years of individuals beginning after 
     December 31, 1995, and to taxable years of S corporations and 
     partnerships ending with or within such taxable years of 
     individuals.

     SEC. 7133. 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 September 30, 1995.
       (b) 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 October 1, 1995, 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 
     amendment made by subsection (a), the individual's medicare 
     qualified State or local government employment (as defined in 
     subparagraph (B)) performed before October 1, 1995, 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 October 1995.
       (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 fully 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 September 30, 1995.
       Subtitle B--Tax Treatment of Employer-Provided Health Care

                       PART 1--GENERAL PROVISIONS

     SEC. 7201. LIMITATION ON EXCLUSION FOR EMPLOYER-PROVIDED 
                   HEALTH BENEFITS.

       (a) General Rule.--Section 106 (relating to contributions 
     by employer to accident and health plans) is amended to read 
     as follows:

     ``SEC. 106. CONTRIBUTIONS BY EMPLOYER TO ACCIDENT AND HEALTH 
                   PLANS.

       ``(a) General Rule.--Except as otherwise provided in this 
     section, gross income of an employee does not include 
     employer-provided coverage under an accident or health plan.
       ``(b) Inclusion of Certain Benefits Not Part of Permitted 
     Coverage.--
       ``(1) In general.--Effective on and after January 1, 2004, 
     gross income of an employee shall include employer-provided 
     coverage under any accident or health plan which is not 
     permitted coverage.
       ``(2) Permitted coverage.--For purposes of this subsection, 
     the term `permitted coverage' means any--
       ``(A) coverage under a certified standard health plan (as 
     defined in section 1011(2)(A) of the Health Security Act),
       ``(B) coverage under a certified supplemental health 
     benefit plan (as defined in section 1011(3)(A) of the Health 
     Security Act) which consists of--
       ``(i) the payment of cost sharing amounts under a certified 
     standard health plan (as so defined) providing the standard 
     benefits package described in part 1 of subtitle C of title I 
     of such Act, or
       ``(ii) coverage for vision, dental, or hearing care for an 
     individual age 22 or over to the extent not included under 
     subparagraph (A),
       ``(C) coverage under a qualified long-term care insurance 
     policy (as defined in section 7702B(b)),
       ``(D) coverage providing wages or payments in lieu of wages 
     for any period during which the employee is absent from work 
     on account of sickness or injury,
       ``(E) coverage only for accidental death or dismemberment,
       ``(F) coverage under a medicare supplemental policy (as 
     defined in section 1882(g)(1) of the Social Security Act),
       ``(G) coverage under an equivalent health care program (as 
     defined in section 1013(3) of the Health Security Act), and
       ``(H) other coverage to the extent that the Secretary 
     determines that the continuation of an exclusion for such 
     coverage is not inconsistent with the purposes of this 
     subsection.
       ``(3) Special rules for flexible spending arrangements.--
       ``(A) In general.--To the extent that any employer-provided 
     coverage is provided through a flexible spending or similar 
     arrangement, paragraph (1) shall be applied by substituting 
     `January 1, 1996,' for `January 1, 2004'.
       ``(B) Flexible spending arrangement.--For purposes of this 
     paragraph, a flexible spending arrangement is a benefit 
     program which provides employees with coverage under which--
       ``(i) specified incurred expenses may be reimbursed 
     (subject to reimbursement maximums and other reasonable 
     conditions), and
       ``(ii) 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.''
       (b) Employment Tax Treatment.--
       (1) Social security tax.--
       (A) Subsection (a) of section 3121 is amended by inserting 
     after paragraph (21) 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 (21) 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 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 (16) 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 the following new sentence:
     ``Nothing in the preceding provisions of this subsection 
     shall exclude from the term `wages' any amount which is 
     required to be included in gross income under section 
     106(b).''
       (c) Effective Dates.--
       (1) In general.--The amendments made by this section shall 
     take effect on January 1, 1996.
       (2) Benefits provided pursuant to collective bargaining 
     agreements.--In the case of a 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 paragraph (1) shall not apply to 
     benefits pursuant to any such agreement before the later of--
       (A) January 1, 1996, or
       (B) the earlier of--
       (i) the date on which the last of such agreements terminate 
     (determined without regard to any extension thereof on or 
     after June 30, 1994), or
       (ii) January 1, 1998.

     SEC. 7202. HEALTH BENEFITS MAY NOT BE PROVIDED UNDER 
                   CAFETERIA PLANS.

       (a) General Rule.--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.''
       (b) 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.
       (c) Effective Dates.--
       (1) In general.--The amendments made by this section shall 
     take effect on January 1, 1997.
       (2) Benefits provided pursuant to collective bargaining 
     agreements.--In the case of a cafeteria plan 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 paragraph (1) shall not apply to benefits 
     pursuant to any such agreement before the later of--
       (A) January 1, 1997, or
       (B) the earlier of--
       (i) the date on which the last of such agreements terminate 
     (determined without regard to any extension thereof on or 
     after June 30, 1994), or
       (ii) January 1, 1999.

     SEC. 7203. INCREASE IN DEDUCTION FOR HEALTH INSURANCE COSTS 
                   OF SELF-EMPLOYED INDIVIDUALS.

       (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) Amount of Deduction.--
       (1) In general.--Paragraphs (1) and (2) of section 162(l) 
     are amended to read as follows:
       ``(1) In general.--In the case of an individual who is an 
     employee within the meaning of section 401(c), there shall be 
     allowed as a deduction under this section an amount equal to 
     50 percent of the amount paid during the taxable year for 
     coverage under a certified standard health plan (as defined 
     in section 1011(2)(A) of the Health Security Act).
       ``(2) Limitations.--
       ``(A) Lower percentage in certain cases.--
       ``(i) In general.--If the taxpayer has 1 or more employees 
     in a trade or business with respect to which such taxpayer is 
     treated as an employee within the meaning of section 401(c), 
     the deduction under paragraph (1) shall not exceed the 
     portion of the amount paid which is equivalent to the largest 
     employer contribution made on behalf of any such employee for 
     coverage under a certified standard health plan.
       ``(ii) Equivalent contribution.--For purposes of clause 
     (i), the amount paid is equivalent to a contribution if--

       ``(I) it is the same dollar amount as the contribution,
       ``(II) it represents the same percentage of cost under the 
     plan to which it is made as does the contribution, or
       ``(III) it represents the same percentage of the weighted 
     average premium for the class of enrollment (as defined in 
     section 1113(c) of the Health Security Act) for the community 
     rating area in which the employee works as does the 
     contribution.

     For purposes of applying subclause (II) or (III), any dollar 
     limitation applicable to all employer contributions (whether 
     expressed as a dollar amount or a percentage described in 
     subclause (III)) shall be disregarded.
       ``(B) Deduction limited to earned income.--No deduction 
     shall be allowed under paragraph (1) to the extent that the 
     amount of such deduction exceeds the taxpayer's earned income 
     (within the meaning of section 401(c)).
       ``(C) Other coverage.--Paragraph (1) 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 the taxpayer's 
     spouse.''
       (2) Conforming amendment.--Subparagraph (A) of section 
     162(l)(5) is amended by striking ``shall be treated as such 
     individual's earned income'' and inserting ``shall be 
     included in such individual's earned income''.
       (3) Effective date.--The amendments made by this subsection 
     shall apply to taxable years beginning after December 31, 
     1995.

     SEC. 7204. 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--
       ``(A) the taxpayer pays a premium or other amount which 
     constitutes medical care under paragraph (1), and
       ``(B) 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 or other amount 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.

               PART 2--EMPLOYER HEALTH CARE CONTRIBUTIONS

     SEC. 7211. TAX TREATMENT OF EMPLOYER HEALTH CARE 
                   CONTRIBUTIONS.

       (a) In General.--Chapter 37 (relating to health-related 
     taxes), as added by section 7111, is amended by adding at the 
     end the following new subchapter:

           ``Subchapter B--Employer-Provided Health Benefits

``Sec. 4521. Taxable employer-provided health benefits.
``Sec. 4522. Discriminatory employer practices.
``Sec. 4523. Exceptions.
``Sec. 4524. Definitions and special rules.

     ``SEC. 4521. TAXABLE EMPLOYER-PROVIDED HEALTH BENEFITS.

       ``(a) Imposition of Tax.--There is hereby imposed a tax 
     equal to the product of--
       ``(1) the aggregate employer contributions for coverage 
     described in paragraph (1) or (2) of subsection (b) during 
     any portion of the taxable year during which there is 
     discriminatory permitted coverage, and
       ``(2) the highest rate of tax imposed under section 11(b) 
     for the taxable year.
       ``(b) Applicable Coverage.--This section applies to--
       ``(1) coverage under a certified standard health plan (as 
     defined in section 1011(2)(A) of the Health Security Act), 
     and
       ``(2) coverage under a certified supplemental health 
     benefit plan (as defined in section 1011(3)(A) of such Act).
       ``(c) Discriminatory Permitted Coverage.--For purposes of 
     this section, the term `discriminatory permitted coverage' 
     means, with respect to any period, coverage described in 
     subsection (b) with respect to which the requirements of 
     subsection (a) or (b) of section 4522 are not met during such 
     period.

     ``SEC. 4522. DISCRIMINATORY EMPLOYER PRACTICES.

       ``(a) Health Status Requirements.--For purposes of section 
     4521(c), an employer meets the requirements of this 
     subsection if, with respect to coverage described in such 
     section--
       ``(1) there is no waiting period or denial of coverage with 
     respect to an employee, and
       ``(2) the amount of the employer contribution on behalf of 
     an employee is not conditioned, and does not vary,

     by reason of the employee's health status, claims experience, 
     medical history, receipt of health care, or lack of evidence 
     of insurability.
       ``(b) Uniform Contribution Requirements.--
       ``(1) In general.--For purposes of section 4521(c), an 
     employer meets the requirements of this subsection if the 
     employer contribution on behalf of an employee for coverage 
     described in such section is equivalent to each employer 
     contribution on behalf of all other employees who elect such 
     coverage under plans offered by the employer.
       ``(2) Equivalent contribution.--For purposes of paragraph 
     (1), a contribution is equivalent to any other contribution 
     if--
       ``(A) it is the same dollar amount as the other 
     contribution,
       ``(B) it represents the same percentage of cost under the 
     plan to which it is made as does the other contribution, or
       ``(C) it represents the same percentage of the weighted 
     average premium for the class of enrollment (as defined in 
     section 1113(c) of the Health Security Act) for the community 
     rating area in which the employee works as does the other 
     contribution.

     For purposes of applying subparagraph (B) or (C), any dollar 
     limitation applicable to all employer contributions (whether 
     expressed as a dollar amount or a percentage described in 
     subparagraph (C)) shall be disregarded.
       ``(3) Excluded employees.--
       ``(A) In general.--The following employees of an employer 
     shall be excluded from consideration under this subsection:
       ``(i) Any employee before the employee has completed 6 
     months of service with the employer.
       ``(ii) Any employee who normally works less than 24 hours 
     per week.
       ``(iii) Any employee who normally works during not more 
     than 6 months of any year.
       ``(iv) Any employee who has not attained age 18.
       ``(v) Any employee who is included in a unit of employees 
     covered by an agreement which the Secretary finds to be a 
     collective bargaining agreement between employee 
     representatives and 1 or more employers if there is evidence 
     that employer-provided benefits for standard health benefits 
     coverage was the subject of good faith bargaining between the 
     employee representatives and employer or employers.
       ``(vi) Any employee who is a nonresident alien and who 
     receives no earned income (within the meaning of section 
     911(d)(2)) from the employer which constitutes income from 
     sources within the United States (within the meaning of 
     section 861(a)(3)).
       ``(vii) Any former employee.
       ``(B) Coverage of part-time employees.--
       ``(i) In general.--If an employer makes an employer 
     contribution for any period for coverage described in section 
     4521(c) for any employee who normally works at least 10 hours 
     but less than 24 hours per week, subparagraph (A)(ii) shall 
     be applied by substituting `10 hours' for `24 hours'.
       ``(ii) Requirements may be met separately.--If an employer 
     elects the application of this clause--

       ``(I) the requirements of this subsection shall be applied 
     separately to employees to whom this subsection applies by 
     reason of clause (i), and
       ``(II) such employees shall be excluded in determining 
     whether such requirements are met with respect to any other 
     employees.

       ``(iii) Pro rata contributions permissible.--For purposes 
     of this subsection, contributions on behalf of any employee 
     to which this subsection applies by reason of clause (i) 
     shall not fail to be treated as equivalent solely because 
     they are proportionate to the number of hours the employee 
     works.
       ``(4) Aggregation rules.--For purposes of this subsection--
       ``(A) In general.--All employers treated as a single 
     employer under subsection (b) or (c) of section 414 shall be 
     treated as a single employer.
       ``(B) Affiliated service groups.--All employees of members 
     of an affiliated service group (as defined in section 414(m)) 
     shall be treated as employed by a single employer.
       ``(5) Separate lines of business.--If, under section 
     414(r), an employer is treated as operating separate lines of 
     business for a year, the employer may apply this subsection 
     separately to employees in each separate line of business.

     ``SEC. 4523. EXCEPTIONS.

       ``(a) Exception for Reasonable Diligence.--No tax shall be 
     imposed by this subchapter during any period for which it is 
     established to the satisfaction of the Secretary that the 
     employer did not know, or exercising reasonable diligence 
     would not have known, that the employer had taken any action 
     subject to tax under this subchapter.
       ``(b) Corrections Within 30 Days.--No tax shall be imposed 
     by this subchapter with respect to any action subject to tax 
     under this subchapter if--
       ``(1) such action was due to reasonable cause and not to 
     willful neglect, and
       ``(2) such action is corrected during the 30-day period 
     beginning on the 1st date the employer knew, or exercising 
     reasonable diligence would have known, that such action was 
     subject to such tax.
       ``(c) Waiver by Secretary.--In the case of any action 
     subject to tax under this subchapter which is due to 
     reasonable cause and not to willful neglect, the Secretary 
     may waive part or all of any tax imposed by this subchapter 
     to the extent that the payment of such tax would be excessive 
     relative to the action involved.

     ``SEC. 4524. DEFINITIONS AND SPECIAL RULES.

       ``(a) Definitions.--For purposes of this subchapter--
       ``(1) Employer.--
       ``(A) In general.--The term `employer' means any person or 
     governmental entity for whom an individual performs services, 
     of whatever nature, as an employee (as defined in section 
     3401(c)).
       ``(B) Special rules.--
       ``(i) A partnership shall be treated as the employer of 
     each partner who is an employee within the meaning of section 
     401(c)(1).
       ``(ii) An S corporation shall be treated as the employer of 
     each shareholder who is an employee within the meaning of 
     section 401(c)(1).
       ``(2) Employer contributions.--The term `employer 
     contribution' means, with respect to coverage under a health 
     plan, a reasonable estimate of the portion of the cost of the 
     coverage which is to be provided by the employer.
       ``(b) Liability for Tax.--Any tax imposed by this 
     subchapter shall be paid by the employer.
       ``(c) Taxes To Apply to Governmental and Other Tax-Exempt 
     Entities.--Notwithstanding any other provision of law or rule 
     of law, none of the following shall be exempt from the taxes 
     imposed by this subchapter:
       ``(1) The United States, any State or political subdivision 
     thereof, the District of Columbia, and any agency or 
     instrumentality of any of the foregoing.
       ``(2) Any other entity otherwise exempt from tax under 
     chapter 1.
       ``(d) 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.
       ``(e) Regulations.--The Secretary shall prescribe such 
     regulations as are necessary to carry out the provisions of 
     this subchapter, including regulations providing for the 
     determination of the amount of any employer contribution, the 
     aggregation of governmental and tax-exempt entities, and the 
     prevention of the avoidance of any tax imposed by this 
     subchapter through the use of any arrangement described in 
     section 414(o).''
       (b) Employee Leasing.--Paragraph (3) of section 414(n) 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 at the end the following 
     new subparagraph:
       ``(D) subchapter B of chapter 37.''
       (c) Tax Not Deductible.--Section 275(a) is amended by 
     adding at the end the following new paragraph:
       ``(7) The taxes imposed by section 4521 (relating to 
     taxable employer-provided health benefits).''
       (d) Conforming Amendment.--The table of subchapters for 
     chapter 37 is amended by adding at the end the following new 
     item:

``Subchapter B. Employer-provided health benefits.''

       (e) Effective Date.--The amendments made by this section 
     shall take effect on January 1, 1996.
              Subtitle C--Exempt Health Care Organizations

                       PART 1--GENERAL PROVISIONS

     SEC. 7301. QUALIFICATION AND DISCLOSURE REQUIREMENTS FOR 
                   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) 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, 
     and
       ``(D) such organization does not discriminate against 
     individuals in the provision of emergency health care 
     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 are provided as described in 
     subsection (m)(6)(A).
       ``(3) Definitions and special rule.--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,
       ``(ii) at below cost to individuals who are otherwise 
     unable to afford such services, or
       ``(iii) at emergency care facilities which provide 
     specialty services and which normally operate at a loss.

     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 which consists 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).
       ``(4) Exceptions.--This subsection shall not apply to any 
     organization which--
       ``(A) demonstrates, in a manner not inconsistent with 
     regulations prescribed by the Secretary, that one of its 
     principal purposes is academic training or medical research, 
     or
       ``(B) provides health care services exclusively on an 
     uncompensated basis, regardless of ability to pay.
       ``(5) 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.
       ``(6) 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 (12), 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) such information as the Secretary may require with 
     respect to any taxable inurement (as defined in section 
     4958(d)), 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) and (11) 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.--
       ``(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), and
       ``(II) a copy of the annual return filed under section 
     6033,

     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, and
       ``(ii) with respect to any return, during the 3-year period 
     beginning on the filing date (as defined in paragraph 
     (1)(D)).
       ``(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) Effective Dates.--
       (1) In general.--Except as provided in paragraph (2), the 
     amendments made by this section shall take effect on January 
     1, 1995.
       (2) HMO service requirement.--So much of the amendments 
     made by this section as relates to section 501(n)(2) of the 
     Internal Revenue Code of 1986, as added by this section, 
     shall take effect on the date of the enactment of this Act.

     SEC. 7302. EXCISE TAXES FOR PRIVATE INUREMENT BY TAX-EXEMPT 
                   HEALTH CARE ORGANIZATIONS.

       (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--Private Inurement by Tax-Exempt Health Care 
                             Organizations

``Sec. 4958. Taxes on private inurement.
``Sec. 4959. Other definitions.

     ``SEC. 4958. TAXES ON PRIVATE INUREMENT.

       ``(a) Initial Taxes.--
       ``(1) On the beneficiary.--There is hereby imposed on any 
     taxable inurement a tax equal to 25 percent of the amount 
     thereof. The tax imposed by this paragraph shall be paid by 
     any beneficiary of such inurement.
       ``(2) On the management.--In any case in which there is a 
     tax imposed by paragraph (1), there is hereby imposed on the 
     participation of any organization manager of an organization 
     in any taxable inurement which occurs with respect to such 
     organization, knowing that it is taxable inurement, a tax 
     equal to 2\1/2\ percent of the amount thereof, 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 taxable 
     inurement.
       ``(b) Additional Taxes.--
       ``(1) On the beneficiary.--In any case in which an initial 
     tax is imposed by subsection (a)(1) on any taxable inurement 
     and such inurement is not corrected within the taxable 
     period, there is hereby imposed a tax equal to 200 percent of 
     the amount of the taxable inurement. The tax imposed by this 
     paragraph shall be paid by any beneficiary of such inurement.
       ``(2) On the management.--In any case in which an 
     additional tax is imposed by paragraph (1), if an 
     organization manager refused to agree to part or all of the 
     correction, there is hereby imposed a tax equal to 50 percent 
     of the amount of the taxable inurement. The tax imposed by 
     this paragraph shall be paid by any organization manager who 
     refused to agree to part or all of the correction.
       ``(c) Special Rules Relating to Liability for Tax.--For 
     purposes of this section--
       ``(1) Joint and several liability.--If more than one person 
     is liable under any paragraph of subsection (a) or (b) with 
     respect to any one taxable inurement, all such persons shall 
     be jointly and severally liable under such paragraph with 
     respect to such inurement.
       ``(2) Limit for management.--With respect to any 1 taxable 
     inurement, the maximum amount of the tax imposed by 
     subsection (a)(2) shall not exceed $10,000, and the maximum 
     amount of the tax imposed by subsection (b)(2) shall not 
     exceed $10,000.
       ``(d) Taxable Inurement.--For purposes of this section, the 
     term `taxable inurement' means any inurement not permitted 
     under paragraph (3) or (4) of section 501(c), as the case may 
     be, in a transaction involving an applicable tax-exempt 
     health care organization in which--
       ``(1) the value of any economic benefit provided to or for 
     the use of a disqualified person exceeds the value of the 
     consideration (including the performance of services) 
     received by the organization for providing such benefit, or
       ``(2) 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.

     The amount of any taxable inurement with respect to any such 
     transaction shall be the excess described in paragraph (1) or 
     the amount described in paragraph (2). For purposes of 
     paragraph (1), an economic benefit shall not be treated as 
     provided as consideration for the performance of services 
     unless the organization clearly indicated its intent to so 
     treat such benefit.
       ``(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)--

       ``(I) in a position to exercise substantial influence over 
     the affairs of the organization, or
       ``(II) performing substantial medical services as a 
     physician pursuant to an employment or other contractual 
     relationship with the organization or a related 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 subsection.
       ``(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 halfblood) 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. 4959. 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 taxable inurement) would 
     be described in paragraph (3) or (4) of section 501(c) and 
     exempt from tax under section 501(a).

     Such term does not include a private foundation (as defined 
     in section 509(a)).
       ``(b) Taxable Period; Correction.--For purposes of this 
     subchapter--
       ``(1) Taxable period.--The term `taxable period' means, 
     with respect to any taxable inurement, the period beginning 
     with the date on which the inurement 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 4958, 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 taxable inurement, undoing the 
     inurement to the extent possible, establishing safeguards to 
     prevent future such inurement, and where fully undoing the 
     inurement 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 4958'', and
       (B) by inserting before the period ``or a taxable inurement 
     for purposes of section 4958''.
       (2) Subsections (a), (b), and (c) of section 4963 are each 
     amended by inserting ``4958,'' after ``4955,''.
       (3) Subsection (e) of section 6213 is amended by inserting 
     ``4958 (relating to private inurement),'' before ``4971''.
       (4) Paragraphs (2) and (3) of section 7422(g) are each 
     amended by inserting ``4958,'' after ``4955,''.
       (5) Subsection (b) of section 7454 is amended by inserting 
     ``or whether an organization manager (as defined in section 
     4958(f)) has `knowingly' participated in taxable inurement 
     (as defined in section 4958(d)),'' 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. Private inurement by tax-exempt health care 
              organizations.
``Subchapter E. Abatement of first and second tier taxes in certain 
              cases.''

       (d) Effective Dates.--
       (1) In general.--Except as provided in paragraph (2), the 
     amendments made by this section shall apply to inurement 
     occurring on or after June 30, 1994.
       (2) Application of binding contract rule to tax-exempt 
     health care organizations described in section 501(c)(4).--
     The amendments made by this section shall not apply to any 
     inurement involving an organization described in section 
     501(c)(4) of the Internal Revenue Code of 1986 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. 7303. TREATMENT OF HEALTH MAINTENANCE ORGANIZATIONS, 
                   PARENT ORGANIZATIONS, AND HEALTH INSURANCE 
                   PURCHASING COOPERATIVES.

       (a) Insurance Provided by Health Maintenance 
     Organizations.--
       (1) In general.--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 providing 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,
       ``(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) 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 health insurance purchasing cooperative 
     described in section 1013(12) of the Health Security Act.
       ``(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 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 Health 
     Insurance Purchasing Cooperatives.--A health insurance 
     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 4958 (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. 7304. 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, and
       ``(C) 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,se /then the 1st/ and
       ``(II) substantially all of the risks of the rates of 
     utilization of such services is assumed by such organization 
     or 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 (C)(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 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.
       (B) Treatment of currently taxable companies.--Except as 
     provided in regulations prescribed by the Secretary of the 
     Treasury or his delegate, 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.
       (C) Treatment of currently tax-exempt companies.--Except as 
     provided in regulations prescribed by the Secretary of the 
     Treasury or his delegates, in the case of any organization to 
     which this paragraph applies and which was exempt from tax 
     under chapter 1 of the Internal Revenue Code of 1986 for such 
     organization's last taxable year beginning before January 1, 
     1995--
       (i) no adjustment shall be made under section 481 (or any 
     other provision) of such Code on account of a change in its 
     method of accounting required by this section for its first 
     taxable year beginning after December 31, 1994, and
       (ii) for purposes of determining gain or loss, the adjusted 
     basis of any asset held by such organization on the first day 
     of such taxable year shall be treated as equal to its fair 
     market value as of such day.

     SEC. 7305. REPEAL OF SECTION 833.

       (a) Repeal of Section 833.--
       (1) In general.--Section 833 (relating to treatment of Blue 
     Cross and Blue Shield and similar organizations) is hereby 
     repealed.
       (2) Conforming amendments.--
       (A) Section 56(c) is amended by striking paragraph (3).
       (B) The table of sections for part II of subchapter L of 
     chapter 1 is amended by striking the item relating to section 
     833.
       (b) Application of Section 833 Prior to Repeal.--
       (1) 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 and governed by State laws which are 
     specifically and exclusively applicable to not-for-profit 
     insurance or health-service type organizations, and
       ``(ii) is not a Blue Cross or Blue Shield organization or 
     health maintenance organization.''
       (2) Effective date.--The amendment made by this section 
     shall apply to taxable years beginning after December 31, 
     1986.
       (c) Effective Date of Repeal.--
       (1) In general.--Except as otherwise provided in this 
     subsection, the amendments made by subsection (a) shall apply 
     to taxable years beginning after December 31, 1996.
       (2) Transition rules for blue cross and blue shield and 
     similar organizations.--
       (A) Prior fresh start preserved.--The adjusted basis of any 
     asset determined under section 1012(c)(3)(A)(ii) of the Tax 
     Reform Act of 1986 shall not be affected by the amendments 
     made by this section.
       (B) Recoupment of prior reserve benefit.--In the case of 
     any organization entitled to the benefits of section 
     833(a)(3) of the Internal Revenue Code of 1986 (as in effect 
     after the amendment made by subsection (a)) for such 
     organization's last taxable year beginning before January 1, 
     1997, the amount determined under paragraph (4) of section 
     832(b) of such Code for each of such organization's first 6 
     taxable years beginning after December 31, 1996, shall be 
     increased by an amount equal to 3\1/3\ percent of its 
     unearned premiums on outstanding business as of the close of 
     such organization's last taxable year beginning before 
     January 1, 1997.

     SEC. 7306. TAX EXEMPTION FOR HIGH-RISK INSURANCE POOLS.

       Subsection (c) of section 501 (relating to list of exempt 
     organizations) is amended by adding at the end the following 
     new paragraph:
       ``(27)(A) In the case of taxable years beginning after 
     December 31, 1989, and before January 1, 1997, a qualified 
     high risk health insurance pool.
       ``(B) For purposes of subparagraph (A), the term `qualified 
     high risk health insurance pool' means an entity--
       ``(i) which was established by a State or political 
     subdivision thereof to provide health insurance on a 
     nonprofit basis to persons unable to obtain health insurance 
     because of health conditions,
       ``(ii) with respect to which the State or political 
     subdivision--
       ``(I) participates in the ongoing governance of the entity, 
     and
       ``(II) subsidizes the operation of the entity, and
       ``(iii) no part of the net earnings of which inure to the 
     benefit of any private shareholder, member, or individual.''

            PART 2--TAX TREATMENT OF SECTION 501(c)(3) BONDS

     SEC. 7311. TAX TREATMENT OF 501(c)(3) BONDS SIMILAR TO 
                   GOVERNMENTAL BONDS.

       (a) In General.--Subsection (a) of section 150 (relating to 
     definitions and special rules) is amended by striking 
     paragraphs (2) and (4), by redesignating paragraphs (5) and 
     (6) as paragraphs (4) and (5), respectively, and by inserting 
     after paragraph (1) the following new paragraph:
       ``(2) Exempt person.--
       ``(A) In general.--The term `exempt person' means--
       ``(i) a governmental unit, or
       ``(ii) a 501(c)(3) organization, but only with respect to 
     its activities which do not constitute unrelated trades or 
     businesses as determined by applying section 513(a).
       ``(B) Governmental unit not to include federal 
     government.--The term `governmental unit' does not include 
     the United States or any agency or instrumentality thereof.
       ``(C) 501(c)(3) organization.--The term `501(c)(3) 
     organization' means any organization described in section 
     501(c)(3) and exempt from tax under section 501(a).''
       (b) Repeal of Qualified 501(c)(3) Bond Designation.--
     Section 145 (relating to qualified 501(c)(3) bonds) is 
     repealed.
       (c) Conforming Amendments.--
       (1) Paragraph (3) of section 141(b) is amended--
       (A) by striking ``government use'' in subparagraph 
     (A)(ii)(I) and subparagraph (B)(ii) and inserting ``exempt 
     person use'',
       (B) by striking ``a government use'' in subparagraph (B) 
     and inserting ``an exempt person use'',
       (C) by striking ``related business use'' in subparagraph 
     (A)(ii)(II) and subparagraph (B) and inserting ``related 
     private business use'',
       (D) by striking ``related business use'' in the heading of 
     subparagraph (B) and inserting ``related private business 
     use'', and
       (E) by striking ``government use'' in the heading thereof 
     and inserting ``exempt person use''.
       (2) Subparagraph (A) of section 141(b)(6) is amended by 
     striking ``a governmental unit'' and inserting ``an exempt 
     person''.
       (3) Paragraph (7) of section 141(b) is amended--
       (A) by striking ``government use'' and inserting ``exempt 
     person use'', and
       (B) by striking ``Government use'' in the heading thereof 
     and inserting ``Exempt person use''.
       (4) Section 141(b) is amended by striking paragraph (9).
       (5) Paragraph (1) of section 141(c) is amended by striking 
     ``governmental units'' and inserting ``exempt persons''.
       (6) Section 141 is amended by redesignating subsection (e) 
     as subsection (f) and by inserting after subsection (d) the 
     following new subsection:
       ``(e) Certain Issues Used To Provide Residential Rental 
     Housing for Family Units.--
       ``(1) In general.--Except as provided in paragraph (2), for 
     purposes of this title, the term `private activity bond' 
     includes any bond issued as part of an issue if any portion 
     of the net proceeds of the issue are to be used (directly or 
     indirectly) by an exempt person described in section 
     150(a)(2)(A)(ii) to provide residential rental property for 
     family units. This paragraph shall not apply if the bond 
     would not be a private activity bond if the section 501(c)(3) 
     organization were not an exempt person.
       ``(2) Exception for bonds used to provide qualified 
     residential rental projects.--Paragraph (1) shall not apply 
     to any bond issued as part of an issue if the portion of such 
     issue which is to be used as described in paragraph (1) is to 
     be used to provide--
       ``(A) a residential rental property for family units if the 
     first use of such property is pursuant to such issue,
       ``(B) qualified residential rental projects (as defined in 
     section 142(d)), or
       ``(C) property which is to be substantially rehabilitated 
     in a rehabilitation beginning within the 2-year period ending 
     1 year after the date of the acquisition of such property.
       ``(3) Substantial rehabilitation.--
       ``(A) In general.--Except as provided in subparagraph (B), 
     rules similar to the rules of section 47(c)(1)(C) shall apply 
     in determining for purposes of paragraph (2)(C) whether 
     property is substantially rehabilitated.
       ``(B) Exception.--For purposes of subparagraph (A), clause 
     (ii) of section 47(c)(1)(C) shall not apply, but the 
     Secretary may extend the 24-month period in section 
     47(c)(1)(C)(i) where appropriate due to circumstances not 
     within the control of the owner.
       ``(4) Certain property treated as new property.--Solely for 
     purposes of determining under paragraph (2)(A) whether the 
     1st use of property is pursuant to tax-exempt financing--
       ``(A) In general.--If--
       ``(i) the 1st use of property is pursuant to taxable 
     financing,
       ``(ii) there was a reasonable expectation (at the time such 
     taxable financing was provided) that such financing would be 
     replaced by tax-exempt financing, and
       ``(iii) the taxable financing is in fact so replaced within 
     a reasonable period after the taxable financing was provided,

     then the 1st use of such property shall be treated as being 
     pursuant to the tax-exempt financing.
       ``(B) Special rule where no operating state or local 
     program for tax-exempt financing.--If, at the time of the 1st 
     use of property, there was no operating State or local 
     program for tax-exempt financing of the property, the 1st use 
     of the property shall be treated as pursuant to the 1st tax-
     exempt financing of the property.
       ``(C) Definitions.--For purposes of this paragraph--
       ``(i) Tax-exempt financing.--The term `tax-exempt 
     financing' means financing provided by tax-exempt bonds.
       ``(ii) Taxable financing.--The term `taxable financing' 
     means financing which is not tax-exempt financing.''
       (7) Section 141(f), as redesignated by paragraph (6), is 
     amended--
       (A) by adding ``or'' at the end of subparagraph (E),
       (B) by striking ``, or'' at the end of subparagraph (F), 
     and inserting in lieu thereof a period, and
       (C) by striking subparagraph (G).
       (8) The last sentence of section 144(b)(1) is amended by 
     striking ``(determined'' and all that follows to the period.
       (9) Clause (ii) of section 144(c)(2)(C) is amended by 
     striking ``a governmental unit'' and inserting ``an exempt 
     person''.
       (10) Section 146(g) is amended--
       (A) by striking paragraph (2), and
       (B) by redesignating the remaining paragraphs after 
     paragraph (1) as paragraphs (2) and (3), respectively.
       (11) The heading of section 146(k)(3) is amended by 
     striking ``governmental'' and inserting ``exempt person''.
       (12) The heading of section 146(m) is amended by striking 
     ``Government'' and inserting ``Exempt Person''.
       (13) Subsection (h) of section 147 is amended to read as 
     follows:
       ``(h) Certain Rules Not To Apply to Mortgage Revenue Bonds 
     and Qualified Student Loan Bonds.--Subsections (a), (b), (c), 
     and (d) shall not apply to any qualified mortgage bond, 
     qualified veterans' mortgage bond, or qualified student loan 
     bond.''
       (14) Section 147 is amended by striking paragraph (4) of 
     subsection (b) and redesignating paragraph (5) of such 
     subsection as paragraph (4).
       (15) Subparagraph (F) of section 148(d)(3) is amended--
       (A) by striking ``or which is a qualified 501(c)(3) bond'', 
     and
       (B) by striking ``governmental use bonds and qualified 
     501(c)(3)'' in the heading thereof and inserting ``exempt 
     person''.
       (16) Subclause (II) of section 148(f)(4)(B)(ii) is amended 
     by striking ``(other than a qualified 501(c)(3) bond)''.
       (17) Clause (iv) of section 148(f)(4)(C) is amended--
       (A) by striking ``a governmental unit or a 501(c)(3) 
     organization'' each place it appears and inserting ``an 
     exempt person'',
       (B) by striking ``qualified 501(c)(3) bonds,'', and
       (C) by striking the comma after ``private activity bonds'' 
     the first place it appears.
       (18) Subparagraph (A) of section 148(f)(7) is amended by 
     striking ``(other than a qualified 501(c)(3) bond)''.
       (19) Paragraph (2) of section 149(d) is amended--
       (A) by striking ``(other than a qualified 501(c)(3) 
     bond)'', and
       (B) by striking ``Certain private'' in the heading thereof 
     and inserting ``Private''.
       (20) Section 149(e)(2) is amended--
       (A) by striking ``which is not a private activity bond'' in 
     the second sentence and inserting ``which is a bond issued 
     for an exempt person described in section 150(a)(2)(A)(i)'', 
     and
       (B) by adding at the end the following new sentence: 
     ``Subparagraph (D) shall not apply to any bond which is not a 
     private activity bond but which would be such a bond if the 
     501(c)(3) organization using the proceeds thereof were not an 
     exempt person.''
       (21) The heading of subsection (b) of section 150 is 
     amended by striking ``Tax-Exempt Private Activity Bonds'' and 
     inserting ``Certain Tax-Exempt Bonds''.
       (22) Paragraph (3) of section 150(b) is amended--
       (A) by inserting ``owned by a 501(c)(3) organization'' 
     after ``any facility'' in subparagraph (A),
       (B) by striking ``any private activity bond which, when 
     issued, purported to be a tax-exempt qualified 501(c)(3) 
     bond'' in subparagraph (A) and inserting ``any bond which, 
     when issued, purported to be a tax-exempt bond, and which 
     would be a private activity bond if the 501(c)(3) 
     organization using the proceeds thereof were not an exempt 
     person'', and
       (C) by striking the heading thereof and inserting ``Bonds 
     for exempt persons other than governmental units.--''.
       (23) Paragraph (5) of section 150(b) is amended--
       (A) by striking ``private activity'' in subparagraph (A),
       (B) by inserting ``and which would be a private activity 
     bond if the 501(c)(3) organization using the proceeds thereof 
     were not an exempt person'' after ``tax-exempt bond'' in 
     subparagraph (A),
       (C) by striking subparagraph (B) and inserting the 
     following new subparagraph:
       ``(B) such facility is required to be owned by an exempt 
     person, and'', and
       (D) by striking ``governmental units or 501(c)(3) 
     organizations'' in the heading thereof and inserting ``exempt 
     persons''.
       (24) Section 150 is amended by adding at the end the 
     following new subsection:
       ``(f) Certain Rules To Apply to Bonds for Exempt Persons 
     Other Than Governmental Units.--
       ``(1) In general.--Nothing in section 103(a) or any other 
     provision of law shall be construed to provide an exemption 
     from Federal income tax for interest on any bond which would 
     be a private activity bond if the 501(c)(3) organization 
     using the proceeds thereof were not an exempt person unless 
     such bond satisfies the requirements of subsections (b) and 
     (f) of section 147.
       ``(2) Special rule for pooled financing of 501(c)(3) 
     organization.--
       ``(A) In general.--At the election of the issuer, a bond 
     described in paragraph (1) shall be treated as meeting the 
     requirements of section 147(b) if such bond meets the 
     requirements of subparagraph (B).
       ``(B) Requirements.--A bond meets the requirements of this 
     subparagraph if--
       ``(i) 95 percent or more of the net proceeds of the issue 
     of which such bond is a part are to be used to make or 
     finance loans to 2 or more 501(c)(3) organizations or 
     governmental units for acquisition of property to be used by 
     such organizations,
       ``(ii) each loan described in clause (i) satisfies the 
     requirements of section 147(b) (determined by treating each 
     loan as a separate issue),
       ``(iii) before such bond is issued, a demand survey was 
     conducted which shows a demand for financing greater than an 
     amount equal to 120 percent of the lendable proceeds of such 
     issue, and
       ``(iv) 95 percent or more of the net proceeds of such issue 
     are to be loaned to 501(c)(3) organizations or governmental 
     units within 1 year of issuance and, to the extent there are 
     any unspent proceeds after such 1-year period, bonds issued 
     as part of such issue are to be redeemed as soon as possible 
     thereafter (and in no event later than 18 months after 
     issuance).

     A bond shall not meet the requirements of this subparagraph 
     if the maturity date of any bond issued as part of such issue 
     is more than 30 years after the date on which the bond was 
     issued (or, in the case of a refunding or series of 
     refundings, the date on which the original bond was 
     issued).''
       (25) Section 1302 of the Tax Reform Act of 1986 is 
     repealed.
       (26) Subparagraph (C) of section 57(a)(5) is amended by 
     striking clause (ii) and redesignating clauses (iii) and (iv) 
     as clauses (ii) and (iii), respectively.
       (27) Paragraph (3) of section 103(b) is amended by 
     inserting ``and section 150(f)'' after ``section 149''.
       (28) Paragraph (3) of section 265(b) is amended--
       (A) by striking clause (ii) of subparagraph (B) and 
     inserting the following:
       ``(ii) Certain bonds not treated as private activity 
     bonds.--For purposes of clause (i)(II), there shall not be 
     treated as a private activity bond any obligation issued to 
     refund (or which is part of a series of obligations issued to 
     refund) an obligation issued before August 8, 1986, which was 
     not an industrial development bond (as defined in section 
     103(b)(2) as in effect on the day before the date of the 
     enactment of the Tax Reform Act of 1986) or a private loan 
     bond (as defined in section 103(o)(2)(A), as so in effect, 
     but without regard to any exemption from such definition 
     other than section 103(o)(2)(A)).''; and
       (B) by striking ``(other than a qualified 501(c)(3) bond, 
     as defined in section 145)'' in subparagraph (C)(ii)(I).
       (d) Effective Date.--The amendments made by this section 
     shall apply to bonds (including refunding bonds) issued after 
     December 31, 1994.
   Subtitle D--Tax Treatment of Long-Term Care Insurance and Services

     SEC. 7401. QUALIFIED LONG-TERM CARE SERVICES TREATED AS 
                   MEDICAL CARE.

       (a) General Rule.--Paragraph (1) of section 213(d) 
     (defining medical care) is amended by striking ``or'' at the 
     end of subparagraph (B), by 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 
     subsection (g)), or''.
       (b) Qualified Long-Term Care Services Defined.--Section 213 
     (relating to the deduction for medical, dental, etc., 
     expenses) is amended by adding at the end the following new 
     subsection:
       ``(g) Qualified Long-Term Care Services.--For purposes of 
     this section--
       ``(1) In general.--The term `qualified long-term care 
     services' means necessary diagnostic, curing, mitigating, 
     treating, preventive, therapeutic, and rehabilitative 
     services, and maintenance and personal care services (whether 
     performed in a residential or nonresidential setting) which--
       ``(A) are required by an individual during any period the 
     individual is an incapacitated individual (as defined in 
     paragraph (2)),
       ``(B) have as their primary purpose--
       ``(i) the provision of needed assistance with 1 or more 
     activities of daily living (as defined in paragraph (3)), or
       ``(ii) protection from threats to health and safety due to 
     severe cognitive impairment, and
       ``(C) are provided pursuant to a continuing plan of care 
     prescribed by a licensed professional (as defined in 
     paragraph (4)).
       ``(2) Incapacitated individual.--The term `incapacitated 
     individual' means any individual who--
       ``(A) is unable to perform, without substantial assistance 
     from another individual (including assistance involving 
     cueing or substantial supervision), at least 2 activities of 
     daily living as defined in paragraph (3), or
       ``(B) has severe cognitive impairment as defined by the 
     Secretary in consultation with the Secretary of Health and 
     Human Services.

     Such term shall not include any individual otherwise meeting 
     the requirements of the preceding sentence unless a licensed 
     professional within the preceding 12-month period has 
     certified that such individual meets such requirements.
       ``(3) Activities of daily living.--Each of the following is 
     an activity of daily living:
       ``(A) Eating.
       ``(B) Toileting.
       ``(C) Transferring.
       ``(D) Bathing.
       ``(E) Dressing.
       ``(4) Licensed professional.--The term `licensed 
     professional' means--
       ``(A) a physician or registered professional nurse, or
       ``(B) any other individual who meets such requirements as 
     may be prescribed by the Secretary after consultation with 
     the Secretary of Health and Human Services.
       ``(5) Certain services not included.--The term `qualified 
     long-term care services' shall not include any services 
     provided to an individual--
       ``(A) by a relative (directly or through a partnership, 
     corporation, or other entity) unless the relative is a 
     licensed professional with respect to such services, or
       ``(B) by a corporation or partnership which is related 
     (within the meaning of section 267(b) or 707(b)) to the 
     individual.

     For purposes of this paragraph, the term `relative' means an 
     individual bearing a relationship to the individual which is 
     described in paragraphs (1) through (8) of section 152(a).''
       (c) Technical Amendments.--
       (1) Subparagraph (D) of section 213(d)(1) (as redesignated 
     by subsection (a)) is amended to read as follows:
       ``(D) for insurance (including amounts paid as premiums 
     under part B of title XVIII of the Social Security Act, 
     relating to supplementary medical insurance for the aged) 
     covering medical care referred to in--
       ``(i) subparagraphs (A) and (B), or
       ``(ii) subparagraph (C), but only if such insurance is 
     provided under a qualified long-term care insurance policy 
     (as defined in section 7702B(b)) and the amount paid for such 
     insurance is not disallowed under section 7702B(d)(4).''
       (2) Paragraph (6) of section 213(d) is amended--
       (A) by striking ``subparagraphs (A) and (B)'' and inserting 
     ``subparagraph (A), (B), and (C)'', and
       (B) by striking ``paragraph (1)(C)'' in subparagraph (A) 
     and inserting ``paragraph (1)(D)''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     1995.

     SEC. 7402. TREATMENT OF LONG-TERM CARE INSURANCE.

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

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

       ``(a) In General.--For purposes of this title--
       ``(1) a qualified long-term care insurance policy (as 
     defined in subsection (b)) shall be treated as an accident or 
     health insurance contract,
       ``(2) amounts (other than policyholder dividends (as 
     defined in section 808) or premium refunds) received under a 
     qualified long-term care insurance policy shall be treated as 
     amounts received for personal injuries and sickness and shall 
     be treated as reimbursement for expenses actually incurred 
     for medical care (as defined in section 213(d)),
       ``(3) any plan of an employer providing coverage under a 
     qualified long-term care insurance policy shall be treated as 
     an accident or health plan with respect to such coverage,
       ``(4) except as provided in subsection (d)(4), amounts paid 
     for a qualified long-term care insurance policy providing the 
     benefits described in subsection (b)(6)(B) shall be treated 
     as payments made for insurance for purposes of section 
     213(d)(1)(D), and
       ``(5) a qualified long-term care insurance policy shall be 
     treated as a guaranteed renewable contract subject to the 
     rules of section 816(e).
       ``(b) Qualified Long-Term Care Insurance Policy.--For 
     purposes of this title--
       ``(1) In general.--The term `qualified long-term care 
     insurance policy' means any certified long-term care policy 
     (as defined in section 1011(4)(A)) of the Health Security 
     Act) that--
       ``(A) limits benefits under such policy to individuals who 
     are certified by a licensed professional (as defined in 
     section 213(g)(4)) within the preceding 12-month period--
       ``(i) as being unable to perform, without substantial 
     assistance from another individual (including assistance 
     involving cueing or substantial supervision), 2 or more 
     activities of daily living (as defined in section 213(g)(3)), 
     or
       ``(ii) having a severe cognitive impairment (as defined in 
     section 213(g)(2)(B)), and
       ``(B) satisfies the requirements of paragraphs (2), (3), 
     (4), (5), and (6).
       ``(2) Premium requirements.--The requirements of this 
     paragraph are met with respect to a policy if such policy 
     provides that premium payments may not be made earlier than 
     the date such payments would have been made if the contract 
     provided for level annual payments over the life expectancy 
     of the insured or 20 years, whichever is shorter. A policy 
     shall not be treated as failing to meet the requirements of 
     the preceding sentence solely by reason of a provision in the 
     policy providing for a waiver of premiums if the insured 
     becomes an individual certified in accordance with paragraph 
     (1)(A).
       ``(3) Prohibition of cash value.--The requirements of this 
     paragraph are met if the policy does not provide for a cash 
     value or other money that can be paid, assigned, pledged as 
     collateral for a loan, or borrowed, other than as provided in 
     paragraph (4).
       ``(4) Refunds of premiums and dividends.--The requirements 
     of this paragraph are met with respect to a policy if such 
     policy provides that--
       ``(A) policyholder dividends are required to be applied as 
     a reduction in future premiums or, to the extent permitted 
     under paragraph (6), to increase benefits described in 
     subsection (a)(2),
       ``(B) refunds of premiums upon a partial surrender or a 
     partial cancellation are required to be applied as a 
     reduction in future premiums, and
       ``(C) any refund on the death of the insured, or on a 
     complete surrender or cancellation of the policy, cannot 
     exceed the aggregate premiums paid under the contract.

     Any refund on a complete surrender or cancellation of the 
     policy shall be includible in gross income to the extent that 
     any deduction or exclusion was allowable with respect to the 
     premiums.
       ``(5) Coordination with other entitlements.--The 
     requirements of this paragraph are met with respect to a 
     policy if such policy does not pay, or provide reimbursement 
     for, expenses incurred to the extent that such expenses are 
     also paid or reimbursed under title XVIII of the Social 
     Security Act or are paid or reimbursed under a certified 
     standard health plan (as defined in section 1011(2)(A)) of 
     the Health Security Act).
       ``(6) Maximum benefit.--
       ``(A) In general.--The requirements of this paragraph are 
     met if the benefits payable under the policy for any period 
     (whether on a periodic basis or otherwise) may not exceed the 
     dollar amount in effect for such period.
       ``(B) Nonreimbursement payments permitted.--Benefits shall 
     include all payments described in subsection (a)(2) to or on 
     behalf of an insured individual without regard to the 
     expenses incurred during the period to which the payments 
     relate. For purposes of section 213(a), such payments shall 
     be treated as compensation for expenses paid for medical 
     care.
       ``(C) Dollar amount.--The dollar amount in effect under 
     this paragraph shall be $150 per day (or the equivalent 
     amount within the calendar year in the case of payments on 
     other than a per diem basis).
       ``(D) Adjustments for increased costs.--
       ``(i) In general.--In the case of any calendar year after 
     1996, the dollar amount in effect under subparagraph (C) for 
     any period or portion thereof occurring during such calendar 
     year shall be equal to the sum of--

       ``(I) the amount in effect under subparagraph (C) for the 
     preceding calendar year (after application of this 
     subparagraph), plus
       ``(II) the product of the amount referred to in subclause 
     (I) multiplied by the cost-of-living adjustment for the 
     calendar year.

       ``(ii) Cost-of-living adjustment.--For purposes of clause 
     (i), the cost-of-living adjustment for any calendar year is 
     the percentage (if any) by which the cost index under clause 
     (iii) for the preceding calendar year exceeds such index for 
     the second preceding calendar year.
       ``(iii) Cost index.--The Secretary, in consultation with 
     the Secretary of Health and Human Services, shall before 
     January 1, 1997, establish a cost index to measure increases 
     in costs of nursing home and similar facilities. The 
     Secretary may from time to time revise such index to the 
     extent necessary to accurately measure increases or decreases 
     in such costs.
       ``(iv) Special rule for calendar year 1997.--
     Notwithstanding clause (ii), for purposes of clause (i), the 
     cost-of-living adjustment for calendar year 1997 is the sum 
     of 1.5 percent plus the percentage by which the CPI for 
     calendar year 1996 (as defined in section 1(f)(4)) exceeds 
     the CPI for calendar year 1995 (as so defined).
       ``(E) Period.--For purposes of this paragraph, a period 
     begins on the date that an individual has a condition which 
     would qualify for certification under subsection (b)(1)(A) 
     and ends on the earlier of the date upon which--
       ``(i) such individual has not been so certified within the 
     preceding 12-months, or
       ``(ii) the individual's condition ceases to be such as to 
     qualify for certification under subsection (b)(1)(A).
       ``(F) Aggregation rule.--For purposes of this paragraph, 
     all policies issued with respect to the same insured shall be 
     treated as one policy.
       ``(c) Treatment of Long-Term Care Insurance Policies.--For 
     purposes of this title, any amount received or coverage 
     provided under a long-term care insurance policy that is not 
     a qualified long-term care insurance policy shall not be 
     treated as an amount received for personal injuries or 
     sickness or provided under an accident or health plan and 
     shall not be treated as excludible from gross income under 
     any provision of this title.
       ``(d) Treatment of Coverage Provided as Part of a Life 
     Insurance Contract.--Except as otherwise provided in 
     regulations prescribed by the Secretary, in the case of any 
     long-term care insurance coverage (whether or not qualified) 
     provided by rider on a life insurance contract--
       ``(1) In general.--This section shall apply as if the 
     portion of the contract providing such coverage is a separate 
     contract or policy.
       ``(2) Premiums and charges for long-term care coverage.--
     Premium payments for coverage under a long-term care 
     insurance policy and charges against the life insurance 
     contract's cash surrender value (within the meaning of 
     section 7702(f)(2)(A)) for such coverage shall be treated as 
     premiums for purposes of subsection (b)(2).
       ``(3) Application of section 7702.--Section 7702(c)(2) 
     (relating to the guideline premium limitation) shall be 
     applied by increasing the guideline premium limitation with 
     respect to a life insurance contract, as of any date--
       ``(A) by the sum of any charges (but not premium payments) 
     described in paragraph (2) made to that date under the 
     contract, less
       ``(B) any such charges the imposition of which reduces the 
     premiums paid for the contract (within the meaning of section 
     7702(f)(1)).
       ``(4) Application of section 213.--No deduction shall be 
     allowed under section 213(a) for charges against the life 
     insurance contract's cash surrender value described in 
     paragraph (2), unless such charges are includible in income 
     as a result of the application of section 72(e)(10) and the 
     coverage provided by the rider is a qualified long-term care 
     insurance policy under subsection (b).
       ``(5) Amount of distribution under rider.--This subsection 
     shall not apply to any rider on a life insurance contract 
     unless the percentage reduction in the cash surrender value 
     of the contract by reason of any payment under the rider does 
     not exceed the percentage reduction in the death benefit 
     payable under the contract by reason of the payment.

     For purposes of this subsection, the term `portion' means 
     only the terms and benefits under a life insurance contract 
     that are in addition to the terms and benefits under the 
     contract without regard to the coverage under a long-term 
     care insurance policy, except that the coverage under a rider 
     described in this subsection shall not fail to be treated as 
     such an addition by reason of a reduction in the contract's 
     death benefit or cash surrender value resulting from any 
     payment under the rider.
       ``(e) Regulations.--The Secretary shall prescribe such 
     regulations as may be necessary to carry out the requirements 
     of this section, including regulations to prevent the 
     avoidance of this section by providing long-term care 
     insurance coverage under a life insurance contract and to 
     provide for the proper allocation of amounts between the 
     long-term care and life insurance portions of a contract.''
       (b) Cafeteria Plans.--Section 125(f) is amended by adding 
     at the end the following new sentence: ``Such term does not 
     include any coverage or benefits under a qualified long-term 
     care policy (as defined in section 7702B).''
       (c) Reserves.--Clause (iii) of section 807(d)(3)(A) is 
     amended by inserting ``(other than a qualified long-term care 
     insurance policy within the meaning of section 7702B)'' after 
     ``contract''.
       (d) Clerical Amendment.--The table of sections for chapter 
     79 is amended by inserting after the item relating to section 
     7702A the following new item:

``Sec. 7702B. Treatment of long-term care insurance.''

       (e) Effective Date.--
       (1) In general.--The amendments made by this section shall 
     apply to policies issued after December 31, 1995, except that 
     a policy issued before January 1, 1996, which, on January 1, 
     1996, satisfies the requirements of a qualified long-term 
     care insurance policy as set forth in section 7702B(b) of the 
     Internal Revenue Code of 1986 shall be treated as having been 
     issued on January 1, 1996.
       (2) Transition rule.--If, after the date of enactment of 
     this Act and before January 1, 1996, a policy providing for 
     long-term care insurance coverage is exchanged solely for a 
     qualified long-term care insurance policy (as defined in 
     section 7702B(b) of such Code), no gain or loss shall be 
     recognized on the exchange, except that gain (if any) shall 
     be recognized to the extent of the sum of the money and the 
     fair market value of the other property received. For 
     purposes of this paragraph, the cancellation of a policy 
     providing for long-term care insurance coverage and 
     reinvestment of the cancellation proceeds in a qualified 
     long-term care insurance policy within 60 days thereafter 
     shall be treated as an exchange.
       (3) Issuance of rider not treated as material change.--For 
     purposes of applying section 101(f), 7702, or 7702A of such 
     Code to any contract, the issuance of a rider on a life 
     insurance contract providing long-term care insurance 
     coverage shall not be treated as a modification or material 
     change of such contract.

     SEC. 7403. 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 in the cash surrender value 
     of the contract by reason of the distribution does not exceed 
     the percentage reduction in the death benefit payable under 
     the contract by reason of such distribution.
       ``(B) Present value.--The present value of the reduction in 
     the death benefit shall be determined by--
       ``(i) using a discount rate which is based on an interest 
     rate which does not exceed the highest interest 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 interest 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) Special rules relating to liens.--If a lien is 
     imposed against a life insurance contract with respect to any 
     amount referred to in paragraph (1)--
       ``(i) for purposes of subparagraph (A), the amount of such 
     lien shall be treated as a reduction (at the time of receipt) 
     in the death benefit or cash surrender value to the extent 
     that such benefit or value, as the case may be, is (or may 
     become) subject to the lien, and
       ``(ii) paragraph (1) shall not apply to the amount received 
     unless any rate of interest with respect to any amount in 
     connection with which such lien is imposed does not exceed 
     the highest rate set forth in subparagraph (C).
       ``(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 can reasonably be 
     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 having a 
     financial interest in any trade or business carried on by the 
     taxpayer.''
       (b) Effective Dates.--
       (1) In general.--Except as provided in paragraph (2), the 
     amendment made by this section shall apply to amounts 
     received after the date of the enactment of this Act.
       (2) Delay in application of discount rules.--Clause (i) of 
     section 101(g)(2)(A) of the Internal Revenue Code of 1986 
     shall not apply to any amount received before January 1, 
     1995.
       (3) Issuance of rider not treated as material change.--For 
     purposes of applying section 101(f), 7702, or 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. 7404. TAX TREATMENT OF COMPANIES ISSUING QUALIFIED 
                   ACCELERATED DEATH BENEFIT RIDERS.

       (a) Qualified Accelerated Death Benefit Riders Treated as 
     Life Insurance.--Section 818 (relating to other definitions 
     and special rules) is amended by adding at the end the 
     following new subsection:
       ``(g) Qualified Accelerated Death Benefit Riders Treated as 
     Life Insurance.--For purposes of this part--
       ``(1) In general.--Any reference to a life insurance 
     contract shall be treated as including a reference to a 
     qualified accelerated death benefit rider on such contract.
       ``(2) Qualified accelerated death benefit riders.--For 
     purposes of this subsection, the term `qualified accelerated 
     death benefit rider' means any rider on a life insurance 
     contract which provides for a distribution to an individual 
     upon the insured becoming a terminally ill individual (as 
     defined in section 101(g)(3)).''
       (b) Effective Date.--The amendments made by this section 
     shall take effect on January 1, 1995.
                  Subtitle E--Other Revenue Provisions

                  PART 1--EMPLOYMENT STATUS PROVISIONS

     SEC. 7501. 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 providing statutory 
     standards for the classification of workers as employees or 
     independent contractors.

     SEC. 7502. INCREASE IN SERVICES REPORTING PENALTIES.

       (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.

          PART 2--TAX INCENTIVES FOR HEALTH SERVICES PROVIDERS

     SEC. 7511. 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 eligible 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--
       ``(1) In general.--The term `qualified primary health 
     services provider' means, with respect to any month, any 
     qualified practitioner who--
       ``(A) 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 providing primary health 
     services,
       ``(B) is providing primary health services full time in the 
     health professional shortage area identified in such 
     certification, and
       ``(C) 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.
       ``(2) Special rules relating to shortage areas.--
       ``(A) Areas ceasing to be shortage areas.--For purposes of 
     paragraph (1)(B) and subsection (e)(2), 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 on the first day of the provider's eligible 
     service period.
       ``(B) Areas within metropolitan areas.--A qualified 
     practitioner who is providing services within a metropolitan 
     statistical area (as defined in section 143(k)(2)) shall not 
     be treated as meeting the requirements of paragraph (1)(B) 
     unless such services are provided for, or on behalf of, a 
     governmental or nonprofit entity.
       ``(3) Qualified practitioner.--The term `qualified 
     practitioner' means a physician, a physician assistant, a 
     nurse practitioner, or a certified nurse-midwife.
       ``(c) Eligible Service Period.--For purposes of this 
     section, the term `eligible service period' means the period 
     of 36 consecutive calendar months beginning with the first 
     month the taxpayer is a qualified primary health services 
     provider (as specified in the certification under subsection 
     (b)(1)(A)). A taxpayer shall not have more than 1 eligible 
     service period.
       ``(d) Other 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) Physician.--The term `physician' has the meaning 
     given to such term by section 1861(r) of the Social Security 
     Act.
       ``(3) 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.
       ``(4) 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.
       ``(5) 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.
       ``(6) 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.
       ``(7) Practitioner currently practicing in shortage 
     areas.--In the case of a qualified practitioner who, on 
     December 31, 1994, was providing primary health services in 
     any health professional shortage area--
       ``(A) the practitioner's eligible service period shall 
     begin on January 1, 1995, and
       ``(B) if such practitioner is a physician, subsection 
     (a)(2) shall be applied by substituting `$500' for `$1,000'.
       ``(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 
     aggregate credits allowed to such taxpayer under this section 
     for all prior taxable years.
       ``(2) 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 during any of 
     the first 24 months during the taxpayer's eligible 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.
       ``(3) 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. 7512. 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.--
       ``(A) In general.--For purposes of this section, the term 
     `health care property' means section 179 property--
       ``(i) which is medical equipment used in the screening, 
     monitoring, observation, diagnosis, or treatment of patients 
     in a laboratory, medical, or hospital environment,
       ``(ii) which is owned (directly or indirectly) and used by 
     1 or more physicians (as defined in section 1861(r) of the 
     Social Security Act) in the active conduct of the full-time 
     trade or business of all such physicians 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
       ``(iii) substantially all the use of which is in such area.
       ``(B) Special rule for metropolitan statistical areas.--A 
     physician who is providing services within a metropolitan 
     statistical area (as defined in section 143(k)(2)) shall not 
     be treated as meeting the requirements of subparagraph 
     (A)(ii) unless such services are provided for, or on behalf 
     of, a governmental or nonprofit entity.''
       (c) Recapture.--Paragraph (10) of section 179(d) is amended 
     by inserting ``and with respect to any health care property 
     which ceases (other than by an area failing to be treated as 
     a health professional shortage area) to be health care 
     property at any time'' before the period.
       (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 3--MISCELLANEOUS PROVISIONS

     SEC. 7521. POST-RETIREMENT MEDICAL AND LIFE INSURANCE 
                   RESERVES.

       (a) Minimum Period for Working Lives.--Section 419A(c)(2) 
     (relating to additional reserves 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.

     SEC. 7522. CREDIT FOR COST OF PERSONAL ASSISTANCE SERVICES 
                   REQUIRED BY EMPLOYED INDIVIDUALS.

       (a) In General.--Subpart A of part IV of subchapter A of 
     chapter 1 (relating to nonrefundable personal credits), as 
     amended by section 7511, is amended by inserting after 
     section 23 the following new section:

     ``SEC. 24. COST OF PERSONAL ASSISTANCE SERVICES REQUIRED BY 
                   EMPLOYED INDIVIDUALS.

       ``(a) Allowance of Credit.--
       ``(1) In general.--In the case of an eligible individual, 
     there shall be allowed as a credit against the tax imposed by 
     this chapter for the taxable year an amount equal to the 
     applicable percentage of the personal assistance expenses 
     paid or incurred by the taxpayer during such taxable year.
       ``(2) Applicable percentage.--For purposes of paragraph 
     (1), the term `applicable percentage' means 50 percent 
     reduced (but not below zero) by 10 percentage points for each 
     $5,000 by which the modified adjusted gross income (as 
     defined in section 59B(d)(2)) of the taxpayer for the taxable 
     year exceeds $45,000. In the case of a married individual 
     filing a separate return, the preceding sentence shall be 
     applied by substituting `$2,500' for `$5,000' and `$22,500' 
     for `$45,000'.
       ``(b) Limitation.--The amount of personal assistance 
     expenses for the benefit of an individual which may be taken 
     into account under subsection (a) for the taxable year shall 
     not exceed the lesser of--
       ``(1) $15,000, or
       ``(2) such individual's earned income (as defined in 
     section 32(c)(2)) for the taxable year.
     In the case of a joint return, the amount under the preceding 
     sentence shall be determined separately for each spouse.
       ``(c) Eligible Individual.--For purposes of this section, 
     the term `eligible individual' means any individual (other 
     than a nonresident alien) who, by reason of any medically 
     determinable physical impairment which can be expected to 
     result in death or which has lasted or can be expected to 
     last for a continuous period of not less than 12 months, is 
     unable to engage in any substantial gainful activity without 
     personal assistance services appropriate to carry out 
     activities of daily living. An individual shall not be 
     treated as an eligible individual unless such individual 
     furnishes such proof thereof (in such form and manner, and at 
     such times) as the Secretary may require.
       ``(d) Other Definitions.--For purposes of this section--
       ``(1) Personal assistance expenses.--The term `personal 
     assistance expenses' means expenses for--
       ``(A) personal assistance services appropriate to carry out 
     activities of daily living in or outside the home,
       ``(B) homemaker/chore services incidental to the provision 
     of such personal assistance services,
       ``(C) in the case of an individual with a cognitive 
     impairment, assistance with life skills,
       ``(D) communication services,
       ``(E) work-related support services,
       ``(F) coordination of services described in this paragraph,
       ``(G) assistive technology and devices, including 
     assessment of the need for particular technology and devices 
     and training of family members, and
       ``(H) modifications to the principal place of abode of the 
     individual to the extent the expenses for such modifications 
     would (but for subsection (e)(2)) be expenses for medical 
     care (as defined by section 213) of such individual.
       ``(2) Activities of daily living.--The term `activities of 
     daily living' means eating, toileting, transferring, bathing, 
     and dressing.
       ``(e) Special Rules.--
       ``(1) Payments to related persons.--No credit shall be 
     allowed under this section for any amount paid by the 
     taxpayer to any person who is related (within the meaning of 
     section 267 or 707(b)) to the taxpayer.
       ``(2) Coordination with medical expense deduction.--Any 
     amount taken into account in determining the credit under 
     this section shall not be taken into account in determining 
     the amount of the deduction under section 213.
       ``(3) Basis reduction.--For purposes of this subtitle, if a 
     credit is allowed under this section for any expense with 
     respect to any property, the increase in the basis of such 
     property which would (but for this paragraph) result from 
     such expense shall be reduced by the amount of the credit so 
     allowed.
       ``(f) Cost-of-Living Adjustment.--In the case of any 
     taxable year beginning after 1996, the $45,000 and $22,500 
     amounts in subsection (a)(2) and the $15,000 amount in 
     subsection (b) 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) for the calendar year in which the taxable 
     year begins by substituting `calendar year 1995' for 
     `calendar year 1992' in subparagraph (B) thereof.
     If any increase determined under the preceding sentence is 
     not a multiple of $1,000, such increase shall be rounded to 
     the nearest multiple of $1,000.''
       (b) Technical Amendment.--Subsection (a) of section 1016 is 
     amended by striking ``and'' at the end of paragraph (24), by 
     striking the period at the end of paragraph (25) and 
     inserting ``, and'', and by adding at the end thereof the 
     following new paragraph:
       ``(26) in the case of any property with respect to which a 
     credit has been allowed under section 24, to the extent 
     provided in section 24(e)(3).''
       (c) 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 23 the following 
     new item:

``Sec. 24. Cost of personal assistance services required by employed 
              individuals.''

       (d) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     1995.

     SEC. 7523. DISCLOSURE OF RETURN INFORMATION FOR 
                   ADMINISTRATION OF CERTAIN PROGRAMS UNDER THE 
                   HEALTH SECURITY ACT.

       (a) In General.--Section 6103(l) (relating to disclosure of 
     returns and return information for purposes other than tax 
     administration) is amended by adding at the end the following 
     new paragraph:
       ``(15) Disclosure of return information for purposes of 
     health security act.--
       ``(A) In general.--The Secretary shall, upon written 
     request, disclose current return information described in 
     subparagraph (B) to any Federal, State, or local agency 
     administering an assistance program under the Health Security 
     Act.
       ``(B) Information.--The information described in this 
     subparagraph is information which consists only of adjusted 
     gross income, the untaxed portion of social security 
     benefits, tax-exempt interest income, marital status, and 
     dependents.
       ``(C) Restriction on disclosure.--The Secretary shall 
     disclose return information under subparagraph (A) only for 
     purposes of, and to the extent necessary in, determining 
     eligibility for, or the correct amount of, assistance 
     provided under the Health Security Act.
       ``(D) Exclusion from matching program.--Any matches of 
     information under this paragraph shall not be treated as a 
     matching program for purposes of section 552a of title 5, 
     United States Code.''
       (b) Conforming Amendments.--
       (1) Section 6103(9)(2) is amended by inserting ``or (15)'' 
     after ``subsection (l)(7)(D)''.
       (2) Section 6103(p)(3)(A) is amended by striking ``or 
     (14)'' and inserting ``(14), or (15)''.
       (3) Section 6103(p)(4) is amended--
       (A) by striking ``or (12)'' in the matter preceding 
     subparagraph (A) and inserting ``(12), or (15)'', and
       (B) by striking ``or (14)'' in subparagraph (F)(ii) and 
     inserting ``(14), or (15)''.
       (4) Section 7213(a)(2) is amended by striking ``or (12)'' 
     and inserting ``(12), or (15)''.
  Subtitle F--Graduate Medical Education and Academic Health Centers 
                               Trust Fund

     SEC. 7601. ESTABLISHMENT OF GRADUATE MEDICAL EDUCATION AND 
                   ACADEMIC HEALTH CENTERS TRUST FUND.

       (a) In General.--Subchapter A of chapter 98 (relating to 
     establishment of trust funds) is amended by adding at the end 
     the following new part:

                   ``PART II--HEALTH CARE TRUST FUNDS

``Sec. 9551. Graduate Medical Education and Academic Health Centers 
              Trust Fund

     ``SEC. 9551. GRADUATE MEDICAL EDUCATION AND ACADEMIC HEALTH 
                   CENTERS TRUST FUND.

       ``(a) Creation of Trust Fund.--
       ``(1) In general.--There is established in the Treasury of 
     the United States a trust fund to be known as the `Graduate 
     Medical Education and Academic Health Centers Trust Fund', 
     consisting of such amounts as may be appropriated or credited 
     to the Academic Health Centers Trust Fund as provided in this 
     section or section 9602(b).
       ``(2) Accounts in the trust fund.--The Graduate Medical 
     Education and Academic Health Centers Trust Fund shall 
     consist of the following 3 accounts:
       ``(A) The Graduate Medical Education Account.
       ``(B) The Academic Health Centers Account.
       ``(C) The Nursing and Health Professions Education Account.

     Each such account shall consist of such amounts as are 
     allocated to it under this section.
       ``(b) Transfers to the Trust Fund.--
       ``(1) Taxes.--There are hereby appropriated to the Graduate 
     Medical Education and Academic Health Centers Trust Fund 
     amounts received in the Treasury under sections 4501 and 4502 
     (relating to assessments on insured and self-insured health 
     plans) to the extent attributable to the rates of such taxes 
     not in excess of 1.5 percent.
       ``(2) Transfers from other trust funds.--The Secretary of 
     Health and Human Services shall transfer each fiscal year to 
     the Graduate Medical Education and Academic Health Centers 
     Trust Fund from the Federal Hospital Insurance Trust Fund and 
     the Federal Supplementary Medical Insurance Trust Fund 
     established under the Social Security Act the sum of--
       ``(A) the amount that would have been paid from the Federal 
     Hospital Insurance Trust Fund in such fiscal year under 
     section 1886(d)(5)(B) of such Act (as in effect before the 
     date of the enactment of the Health Security Act), plus
       ``(B) the amount that would have been paid from such trust 
     funds in such fiscal year under section 1886(h) of such Act 
     (as so in effect).
       ``(c) Graduate Medical Education Account.--
       ``(1) Transfers.--There is allocated to the Graduate 
     Medical Education Account each fiscal year an amount equal to 
     the amounts made available under section 3033 of the Health 
     Security Act.
       ``(2) Expenditures.--Amounts in the Graduate Medical 
     Education Account are appropriated to make the payments 
     described in sections 3031 and 3055 of the Health 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.
       ``(d) Academic Health Centers Account.--
       ``(1) Transfers.--There is allocated to the Academic Health 
     Centers Account each fiscal year an amount equal to the 
     amounts made available under section 3053 of the Health 
     Security Act.
       ``(2) Expenditures.--Amounts in the Academic Health Centers 
     Account are appropriated to make the payments described in 
     section 3051 of the Health 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.
       ``(e) Nursing and Health Professions Education Account.--
       ``(1) Transfers.--There is allocated to the Nursing and 
     Health Professions Education Account each fiscal year an 
     amount equal to the amounts made available under section 3042 
     of the Health Security Act.
       ``(2) Expenditures.--Amounts in the Nursing and Health 
     Professions Education Account are appropriated to make the 
     payments described in section 3041 of the Health 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.
       ``(f) Rules Relating To Accounts.--
       ``(1) Insufficient funds.--If, for any fiscal year, the sum 
     of the amounts required to be allocated under subsections 
     (c), (d), and (e) exceeds the amounts received in the 
     Graduate Medical Education and Academic Health Centers Trust 
     Fund, then each of such amounts required to be so allocated 
     shall be reduced to an amount which bears the same ratio to 
     such amount as the amounts received in the trust fund bear to 
     the amounts required to be so allocated (without regard to 
     this paragraph).
       ``(2) Allocation of excess funds and interest.--Amounts 
     received in the Graduate Medical Education and Academic 
     Health Centers Trust Fund in excess of the amounts required 
     to be allocated under subsections (c), (d), and (e), and 
     amounts credited to such trust fund under section 9602(b), 
     for any fiscal year shall be allocated to each account 
     ratably on the basis of the amounts allocated to the account 
     for the fiscal year (without regard to this paragraph).''.
       (b) Conforming Amendment.--Subchapter A of chapter 98 is 
     amended by inserting after the subchapter heading the 
     following new items:

``Part I.  General trust funds.
``Part II. Health care trust funds.

                    ``PART I--GENERAL TRUST FUNDS''.

                   TITLE VIII--OTHER FEDERAL PROGRAMS
                   Subtitle A--Indian Health Service

     SEC. 8101. PURPOSES.

       The purposes of this subtitle are as follows:
       (1) To ensure the delivery of health care services to 
     American Indians and Alaska Natives in a culturally 
     appropriate manner in fulfillment of the unique trust 
     responsibility of the Federal Government and legal obligation 
     to American Indian and Alaska Native people--
       (A) derived from the province of international law; and
       (B) founded in the treaties, Constitution, statutes, and 
     court decisions of the United States.
       (2) To provide sufficient funding for the provision of the 
     standard benefit package as it applies to all eligible 
     beneficiaries under this subtitle.
       (3) To ensure that funding levels for services and benefits 
     that are not part of the standard benefits package described 
     in this subtitle are not diluted or diminished.
       (4) To raise the health status of American Indians and 
     Alaska Natives to the highest possible level.
       (5) To raise the quality of health care delivery to 
     American Indians and Alaska Natives to the highest possible 
     level.
       (6) To ensure that health care services provided to 
     American Indians and Alaska Natives are provided in a manner 
     consistent with, and carries out, the recognized Indian self-
     determination and tribal self-governance policy of the United 
     States.

     SEC. 8102. DEFINITIONS.

       As used in this subtitle:
       (1) American Indian.--The term ``American Indian'' has the 
     meaning provided the term ``Indian'' under paragraph (8).
       (2) Alaska native.--The term ``Alaska Native'' has the 
     meaning provided the term ``Native'' under section 3(b) of 
     the Alaska Native Claims Settlement Act (43 U.S.C. 1602(b)).
       (3) Health program of the indian health service.--The term 
     ``health program of the Indian Health Service'' means a 
     program which provides or is responsible for obtaining health 
     services under this Act or any other applicable law through 
     programs operated by the Indian Health Service, Indian 
     tribes, or tribal organizations, including Indian tribes or 
     tribal organizations operating under the authority of the 
     Indian Self-Determination and Education Assistance Act (25 
     U.S.C. 450 et seq.).
       (4) Reservation.--The term ``reservation'' means the 
     reservation of any federally recognized Indian tribe, former 
     Indian reservations in Oklahoma, and lands held by 
     incorporated Native groups, regional corporations, and 
     village corporations under the provisions of the Alaska 
     Native Claims Settlement Act (43 U.S.C. 1601 et seq.).
       (5) Indian health plan.--The term ``Indian health plan'' 
     means a health plan that is operated by the Secretary under 
     part 1.
       (6) Indian enrollee.--The term ``Indian enrollee'' means an 
     individual enrolled in an Indian health plan.
       (7) Urban indian program.--The term ``urban Indian 
     program'' means any program operated pursuant to title V of 
     the Indian Health Care Improvement Act.
       (8) Other terms.--The terms ``Indian'', ``Indian tribe'', 
     ``tribal organization'', ``urban Indian'', ``urban Indian 
     organization'', and ``service unit'' have the same meaning as 
     given such terms under the Indian Health Care Improvement Act 
     (25 U.S.C. 1601 et seq.).

                      PART 1--INDIAN HEALTH PLANS

     SEC. 8111. ORGANIZATION OF HEALTH CARE FACILITIES AS HEALTH 
                   PLANS.

       (a) Organization and Establishment.--
       (1) In general.--The Secretary may, subject to the 
     availability of appropriations, organize Indian health plans 
     and operate Indian Health Service facilities as or within 
     Indian health plans under this Act.
       (2) Standards.--
       (A) Regulations.--The Secretary may prescribe regulations 
     establishing standards for the operation of Indian Health 
     Service facilities as or within Indian health plans under 
     this Act. In prescribing such standards, the Secretary shall 
     ensure that such standards require the provision of the 
     standard benefit package and conform, to the extent possible, 
     with the requirements for health plans generally set forth in 
     subtitle B of title I.
       (B) Report.--Not later than 30 days after prescribing 
     standards under subparagraph (A), the Secretary shall submit 
     to the Committee on Indian Affairs of the Senate and the 
     appropriate Committee of the House of Representatives a 
     report describing the differences, if any, between such 
     standards and the requirements for health plans generally 
     referred to in subparagraph (A).
       (b) Facilities.--Health care facilities of the Indian 
     Health Service located within an area or region may be 
     organized to operate as a single health plan encompassing all 
     such facilities within that area or region or may be 
     organized to operate as several health plans.
       (c) State Action.--In carrying out responsibilities under 
     this Act, a State (or a State-established entity)--
       (1) may not impose any standard or requirement on an Indian 
     health plan that is inconsistent with this part or any 
     regulation prescribed under this part or other Federal laws 
     regarding the operation of this part; and
       (2) may not deny certification of an Indian health plan 
     under this Act on the basis of a conflict between a rule of a 
     State and this part or regulations prescribed under this part 
     or other Federal laws regarding the operation of this Part.

     SEC. 8112. CONTRACT AUTHORITY FOR FACILITIES OPERATING AS OR 
                   WITHIN HEALTH PLANS.

       (a) Contracts or Agreements.--The Director of the Indian 
     Health Service may enter into contracts and agreements for 
     the provision of care and services to be provided under the 
     Indian health plan and contracts and agreements for other 
     services (including procurement of equipment, maintenance and 
     repair services, and other services related to the provision 
     of health care services) consistent with this part.
       (b) Contracts and Agreements.--Contracts and agreements 
     (including leases) under this section shall not be subject to 
     the following provisions of law:
       (1) Section 702 of title 5, relating to the right of review 
     of agency wrongs by courts of the United States.
       (2) Sections 1346(a)(2) and 1491 of title 28, relating to 
     the jurisdiction of the district courts of the United States 
     and the United States Court of Federal Claims, respectively, 
     for the actions enumerated in such sections.
       (3) Subchapter V of chapter 35 of title 31, relating to 
     adjudication of protests of violations of procurement 
     statutes and regulations.
       (4) Sections 3526 and 3702 of such title, relating to the 
     settlement of accounts and claims, respectively, of the 
     United States.
       (5) Subsections (b)(7), (e), (f), (g), and (h) of section 8 
     of the Small Business Act (15 U.S.C. 637(b)(7), (e), (f), 
     (g), and (h)), relating to requirements with respect to small 
     businesses for contracts for property and services.
       (6) The provisions of law assembled for purposes of 
     codification of the United States Code as section 471 through 
     544 of title 40 that relate to the authority of the 
     Administrator of General Services over the lease and disposal 
     of Federal Government property.
       (7) The provisions of the Office of Federal Procurement 
     Policy Act (41 U.S.C. 401 et seq.), relating to the 
     procurement of property and services by the Federal 
     Government.
       (8) Chapter 3 of the Federal Property and Administrative 
     Services Act of 1949 (41 U.S.C. 251 et seq.), relating to the 
     procurement of property and services by the Federal 
     Government.
       (9) Office of Management and Budget Circular A-76.

     SEC. 8113. RESOURCE SHARING AUTHORITY.

       (a) Agreements With Plans and Providers.--The Secretary may 
     enter into agreements with other health plans, with health 
     care providers, and with other health industry organizations, 
     and with individuals, for the sharing of resources of the 
     Indian Health Service under an Indian health plan.
       (b) Other Agreements.--The Secretary may enter into 
     agreements with other departments and agencies of the Federal 
     Government for the sharing of resources of the Indian Health 
     Service and such departments and agencies in order to provide 
     care and services under an Indian health plan.

     SEC. 8114. ADMINISTRATIVE AND PERSONNEL FLEXIBILITY.

       (a) In General.--Notwithstanding any other provision of 
     law, the Secretary may appoint health care personnel to 
     positions in any facility of the Indian Health Service 
     operating as or within an Indian health plan in accordance 
     with such qualifications for such positions as the Secretary 
     may establish.
       (b) Marketing Activities.--Subject to the provisions of 
     this Act, the Secretary may carry out appropriate 
     promotional, advertising, and marketing activities to inform 
     individuals of the availability of Indian health plans.

     SEC. 8115. EXPENDITURE AUTHORITY.

       (a) Director's Discretion.--
       (1) In general.--To the extent that appropriations are 
     available, the Director of the Indian Health Service may 
     expend funds available to an Indian health plan for any 
     purpose, and in any amount, that the director determines 
     appropriate in order to ensure that the Indian health plan 
     meets the requirements and the requirements of furnishing 
     care and services to Indians.
       (2) Specific expenditures.--Funds may be expended under 
     this subsection in order to cover the following costs:
       (A) The costs of marketing and advertising under an Indian 
     health plan.
       (B) The costs of legal services provided to an Indian 
     health plan.
       (C) The costs of acquisition (including acquisition of 
     land), construction, repair, or renovation of facilities.
       (b) Limitation.--Subsection (a) shall not apply to 
     expenditures of funds provided to a facility by the Secretary 
     exclusively for the purpose of the provision of the following 
     services:
       (1) Services relating to spinal-cord dysfunction.
       (2) Services relating to substance abuse.

     SEC. 8116. INDIAN HEALTH CARE INVESTMENT FUND.

       (a) Establishment.--There is hereby established in the 
     Treasury of the United States a fund to be known as the 
     Indian Health Care Investment Fund (hereafter referred to in 
     this section referred to as the ``Fund'').
       (b) Authorization of Appropriations.--There are hereby 
     authorized to be appropriated to the Secretary, in addition 
     to amounts otherwise authorized to be appropriated to the 
     Secretary, for Indian health plans, such amounts as are 
     necessary for the Secretary of the Treasury to fulfill the 
     requirement of subsection (c).
       (c) Requirements.--For each of fiscal years 1995, 1996, and 
     1997, the Secretary of the Treasury shall, subject to the 
     availability of appropriated funds, credit to the Fund an 
     amount in that fiscal year as follows:
       (1) For fiscal year 1995, $400,000,000.
       (2) For fiscal year 1996, $400,000,000.
       (3) For fiscal year 1997, $400,000,000.
       (d) Availability of Fund.--
       (1) In general.--Subject to paragraph (2), amounts in the 
     Fund shall be available to the Secretary only for the Indian 
     health plans organized and operated under this part.
       (2) Estimation and availability.--
       (A) Estimation.--For each of fiscal years 1996 and 1997, 
     the Secretary shall estimate the total amount to be collected 
     or recovered under this subtitle by reason of the provision 
     of care and services through Indian health plans or the 
     enrollment of individuals in such plans under that part. The 
     Secretary shall estimate the amount to be so collected or 
     recovered with respect to each Indian health plan and with 
     respect to all Indian health plans.
       (B) Availability.--For each such fiscal year, the Secretary 
     shall make available to each Indian health plan an amount 
     that bears the same relationship to the total amount 
     available in the Fund for the fiscal year as the amount 
     estimated to be collected or recovered by the Indian health 
     plan during the fiscal year bears to the total amount 
     estimated to be collected or recovered by all Indian health 
     plans during that fiscal year.
       (e) Report.--Not later than March 1, 1997, the Secretary 
     shall submit to Congress a report concerning the operation of 
     the Indian Health Services health care system in preparing 
     for, and operating under, national health care reform under 
     the Health Security Act during fiscal years 1995 and 1996. 
     The report shall include a discussion of--
       (1) the adequacy of amounts in the Fund for the operation 
     of Indian health plans;
       (2) the quality of care provided by such plans; and
       (3) the ability of such plans to attract patients.

     SEC. 8117. TRIBAL AUTHORITY.

       With respect to the provisions of this part, the Secretary 
     shall promulgate regulations with the consent of tribes or 
     urban Indian organizations prior to the implementation of any 
     authority under this part that effects such tribes or 
     organizations.

               PART 2--ELIGIBILITY, BENEFITS AND COVERAGE

     SEC. 8121. ELIGIBILITY AND HEALTH SERVICE COVERAGE OF 
                   INDIANS.

       (a) Coverage.--The programs of the Indian Health Service 
     shall remain as the principal provider of health care for 
     Indians, except that nothing in this subtitle shall limit the 
     ability of Indians to seek care from providers outside the 
     programs of the Indian Health Service.
       (b) Eligibility.--An Indian is eligible for services under 
     a program of the Indian Health Service or eligible to enroll 
     in an Indian health plan if the individual is--
       (1) eligible to receive services pursuant to sections 36.1 
     through 36.14 of title 42, Code of Federal Regulations (as in 
     effect on the day before the date of enactment of this Act);
       (2) an urban Indian residing in an area served by an urban 
     Indian program; or
       (3) an Indian described in section 809(b) of the Indian 
     Health Care Improvement Act (25 U.S.C. 1679(b)).
       (c) Family Members.--
       (1) In general.--The Secretary may authorize an Indian 
     health plan to enroll members of the family of an enrollee 
     under subsection (b), subject to the payment of premiums, 
     deductibles, copayments, and coinsurance as required under 
     the this Act.
       (2) Family.--For purposes of paragraph (1), an enrollee's 
     family is those individuals (other than the enrollee) 
     included within the term ``family'' as defined in section 
     1113(b).
       (d) Health Programs of the Indian Health Service.--With 
     respect to an individual that elects to enroll in a health 
     program of the Indian Health Service, such program shall be 
     the applicable Indian health plan.
       (e) Limitation on Charges.--An eligible Indian (as defined 
     in subsection (b)) receiving services from or being referred 
     by a health program of the Indian Health Service, or being 
     enrolled in or receiving services covered under an Indian 
     health plan, shall not be subject to any charge for 
     deductibles, copayments, coinsurance, or any other cost for 
     health services provided under such program.

     SEC. 8122. BENEFITS.

       The Secretary shall ensure that each health program of the 
     Indian Health Service and each Indian health plan provide to 
     each enrolled individual the items and services in the 
     standard benefit package, to the extent that such items and 
     services can be provided consistent with appropriations for 
     that purpose. In the event that appropriations are 
     insufficient the Secretary may revise the standard benefit 
     package available to enrolled individuals.

     SEC. 8123. SUPPLEMENTAL INDIAN HEALTH CARE BENEFITS.

       (a) In General.--All individuals described in section 
     8121(b) shall remain eligible for such benefits under the 
     laws administered by the Indian Health Service as supplement 
     to the standard benefit package. The individual shall not be 
     subject to any charge or any other cost for such benefits.
       (b) Maintenance of Effort.--The Secretary shall ensure that 
     the requirements of this subtitle do not result in a 
     reduction of the level of supplemental benefits provided by 
     or through the Indian Health Service.

     SEC. 8124. PREMIUMS, COPAYMENTS, AND OTHER CHARGES.

       (a) In General.--Except as provided in section 8121(c), the 
     Secretary may not impose on or collect from an Indian 
     enrollee a cost-share charge of any kind (whether a premium, 
     copayment, deductible, coinsurance charge, or other charge) 
     for items and services in the standard benefit package that 
     an Indian health plan provides.
       (b) Limitations.--In the case of an Indian enrollee who is 
     not described in section 8121(b), the Secretary shall charge 
     premiums and establish copayments, deductibles, and 
     coinsurance amounts for care and services provided under this 
     subtitle. The premium rate, and the rates for deductibles and 
     copayments, for each Indian health plan shall be established 
     by that health plan based on rules established under the this 
     Act.

     SEC. 8125. PROVISION OF HEALTH SERVICES TO NON-INDIANS.

       (a) Contracts With Health Plans.--A health program of the 
     Indian Health Service may enter into a contract with a health 
     plan for the provision of health care services to individuals 
     enrolled in such health plan if--
       (1) the appropriate official of the program determines that 
     the provision of such health services will not result in a 
     denial or diminishment of health services to any individual 
     described in section 8111(b); and
       (2) each tribe or urban Indian organization served by the 
     program authorizes or has authorized the provision of 
     services to such individuals.
       (b) Family Treatment.--A health program of the Indian 
     Health Service may provide health care services to insured 
     non-Indian family members of individuals described in section 
     8111(b) under the same restrictions as those described in 
     subsection (a).
       (c) Applicable Individual Charges.--Non-Indians receiving 
     services in a program under subsection (b) shall be subject 
     to any applicable deductibles, copayments, coinsurance, or 
     any other cost for health services provided.

     SEC. 8126. ESSENTIAL COMMUNITY PROVIDERS.

       A health program of the Indian Health Service automatically 
     certified as an essential community provider under section 
     1462 may elect to accept certification--
       (1) only for eligible individuals described in section 
     8111(b);
       (2) for non-Indian individuals if each tribe or tribal 
     organization served by the program authorizes or has 
     authorized serving non-Indians; or
       (3) for eligible individuals described in section 8111(b) 
     and family members of such individuals described in section 
     8111(b) who are enrolled in a plan other than a health 
     program of the Indian Health Service, if each tribe or urban 
     Indian organization served by the program authorizes or has 
     authorized serving such family members.

     SEC. 8127. PAYMENT BY OTHER PROVIDERS.

       (a) Payment for Services Provided by Indian Health Service 
     Programs.--Nothing in this subtitle shall be construed as 
     amending section 206, 401, or 402 of the Indian Health Care 
     Improvement Act (25 U.S.C. 1621e, 1641, or 1642) or any other 
     provision of law relating to payments on behalf of Indians 
     for health services from other Federal programs or from other 
     third party payers.
       (b) Payment for Services Provided by Contractors.--Nothing 
     in this subtitle shall be construed as affecting any other 
     provision of law, regulation, or judicial or administrative 
     interpretation of law or policy concerning the status of the 
     Indian Health Service as the payer of last resort for Indians 
     eligible for contract health services under a health program 
     of the Indian Health Service.
       (c) Payment for Services by Medicare.--Programs of the 
     Indian Health Service shall be eligible for payments for 
     services provided to Medicare beneficiaries.
       (d) Retention of Receipts.--Notwithstanding any other 
     provision of law, the collections made by a health program of 
     the Indian Health Service shall remain with the health 
     program.
       (e) Collection.--Each health program of the Indian Health 
     Service shall make every reasonable effort to collect 
     appropriate reimbursement for its costs in providing health 
     services to persons who are covered by public or private 
     health insurance programs.
       (f) Payor of Last Resort.--The payor of last resort rule 
     described in subsection (b) shall not be applied to require--
       (1) enrollment in a Federal or State health plan; or
       (2) travel of more than 50 miles or 50 minutes to utilize 
     alternative Indian outpatient health resources.

     SEC. 8128. CONTRACTING AUTHORITY.

       Section 601(d)(1)(B) of the Indian Health Care Improvement 
     Act (25 U.S.C. 1661(d)(1)(B)) is amended by inserting 
     ``(including personal services for the provision of direct 
     health care services)'' after ``goods and services''.

     SEC. 8129. CONSULTATION.

       (a) OMB and Secretary.--The Director of the Office of 
     Management and Budget and the Secretary shall consult, on an 
     annual basis, with representatives of Indian tribes, tribal 
     organizations, and urban Indian organizations concerning 
     health care reform initiatives that affect Indian 
     communities, and policy, funding, and administration of 
     health programs of the Indian Health Service. The Secretary 
     shall solicit and consider the views and recommendations 
     provided by Indian tribes, tribal organizations, and 
     representatives of urban Indian organizations in making 
     determinations that affect Indians and Indian tribes.
       (b) Federal Advisory Group.--
       (1) Establishment.--The Secretary shall establish an 
     advisory group to assess all aspects of the development and 
     administration of the budget for programs of the Indian 
     Health Service and advise the Office of Management and 
     Budget, the Secretary and Congress with respect to such 
     aspects.
       (2) Composition.--The advisory group shall be comprised 
     of--
       (A) not less than one representative from each area of the 
     Indian Health Service to be appointed by the Secretary from 
     nominees of tribes and tribal organizations in the respective 
     areas;
       (B) not less than one urban Indian representative from each 
     area the Indian Health Service with an urban Indian (as 
     defined in section 4(f) of the Indian Health Care Improvement 
     Act (25 U.S.C. 1603(f)) program to be appointed by the 
     Secretary; and
       (C) such other appointees as the Secretary determines 
     appropriate, on the condition that a majority of the members 
     are selected from nominations submitted to the Secretary by a 
     tribe or tribal organization.

     SEC. 8130. TRANSITIONAL STUDIES.

       (a) In General.--The Secretary shall conduct planning, 
     feasibility, or similar health services studies related to 
     the transition of the health programs of the Indian Health 
     Service under health care reform. Such studies shall take 
     into account the measurements and the means to accomplish the 
     Healthy People 2000 objectives as required under sections 3 
     and 214 of the Indian Health Care Improvement Act. Such 
     studies shall include an assessment of--
       (1) the feasibility of developing an Indian health plan or 
     plans;
       (2) the financing necessary to provide the same level of 
     standard benefits to American Indians and Alaska Natives as 
     will be available to all other Americans;
       (3) the staffing, program and infrastructure enhancements 
     required to deliver the standard benefits package;
       (4) the facility and capital construction needs necessary 
     to provide the standard benefit package; and
       (5) the administrative improvements necessary to network, 
     share and access patient data, quality management and 
     improvement data, and financial information.
       (b) Advisory Group.--
       (1) Establishment.--The Secretary shall establish an 
     advisory group to provide the Secretary with advise 
     concerning the focus, content and conduct of studies under 
     subsection (a).
       (2) Composition.--The advisory group shall be comprised 
     of--
       (A) not less than one representative from each area of the 
     Indian Health Service to be appointed by the Secretary from 
     among nominees of tribes and tribal organizations in the 
     respective areas;
       (B) not less than one urban Indian representative from each 
     area of the Indian Health Service which an urban Indian (as 
     defined in section 4(f) of the Indian Health Care Improvement 
     Act (25 U.S.C. 1603(f)) program to appointed by the 
     Secretary; and
       (C) other appointees as the Secretary determines 
     appropriate, except that the Secretary shall ensure that a 
     majority of the members so appointed are selected from 
     nominations submitted to the Secretary by tribes or tribal 
     organizations.
       (c) Recommendations.--Not later than June 30, 1997, the 
     Secretary shall submit to Congress recommendations based on 
     the studies conducted under this section, including 
     recommendations for changes in the structure of Indian Health 
     Services. A time-table for implementing health care reform 
     activities shall be included in such final recommendations.

     SEC. 8131. LOANS AND LOAN GUARANTEES.

       The Secretary may make loans, and guarantee the payment of 
     principal and interest, to Federal and non-Federal lenders on 
     behalf of health programs of the Indian Health Service or 
     Indian health plans for the purpose of improving and 
     expanding such facilities. Loans and loan guarantees under 
     this section shall be provided under such terms and 
     conditions as the Secretary may prescribe.

     SEC. 8132. SIMPLIFICATION OF BILLING.

       The Secretary shall take such action as may be necessary to 
     ensure that health programs of the Indian Health Service and 
     Indian health plans may submit all claims for benefits or 
     payment for services entitled to reimbursement in a manner 
     consistent with that of all other health care providers.

     SEC. 8133. LONG-TERM CARE DEMONSTRATIONS.

       Subject to the availability of appropriations under 
     subtitle B of title II (for home and community-based long-
     term care services), the Secretary shall establish a 
     demonstration program to provide five grants to health 
     programs of the Indian Health Service to enable such programs 
     to plan and implement innovative methods of providing 
     enhanced home and community-based long-term care services.

     SEC. 8134. TECHNICAL ASSISTANCE.

       Indian tribes shall be eligible for funds made available 
     under this Act for technical assistance or transitional 
     support.

     SEC. 8135. PUBLIC HEALTH PROGRAMS.

       Health programs of the Indian Health Service shall be 
     eligible to apply for funding under public health programs 
     authorized under title III of this Act, as deemed appropriate 
     by the Secretary.

     SEC. 8136. SURVEY OF HEALTH SERVICES AVAILABLE TO INDIAN 
                   VETERANS.

       (a) 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.
       (b) Report.--Not later than 180 days after the date of 
     enactment of this Act, the Secretary shall submit a report to 
     Congress that shall include recommendations concerning the 
     survey conducted under subsection (a).

     SEC. 8137. RULE OF CONSTRUCTION.

       Unless otherwise provided in this Act, no part of this Act 
     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 
     (25 U.S.C. 450 et seq).

                PART 3--AUTHORIZATION OF APPROPRIATIONS

     SEC. 8141. AUTHORIZATION OF APPROPRIATIONS.

       (a) Authorization.--
       (1) In general.--For the purpose of carrying out this 
     subtitle, including transitional costs and the purchase of 
     additional contract health care services for individual 
     eligible Indians, there are authorized to be appropriated 
     $515,000,000 for fiscal year 1995, $930,000,000 for fiscal 
     year 1996, and $1,150,000,000 for each of the fiscal years 
     1997 through 2004.
       (2) Supplemental indian health care benefits.--In addition 
     to amounts otherwise authorized to be appropriated (including 
     the amounts authorized to be appropriated under paragraph 
     (1)), for the purpose of carrying out section 8123, there are 
     authorized to be appropriated $360,000,000 for fiscal year 
     1995, $400,000,000 for each of the fiscal years 1996 through 
     1999, and such sums as may be necessary for fiscal year 2000 
     and each fiscal year thereafter.
       (3) Loans and loan guarantees.--In addition to amounts 
     otherwise authorized to be appropriated (including the 
     amounts authorized to be appropriated under paragraph (1)), 
     for the purpose of carrying out section 8131, there are 
     authorized to be appropriated $500,000,000 for the principal 
     of the loan. The authority of the Secretary to make loans and 
     to guarantee loans under such section shall be subject to 
     such amounts as may be provided for in each fiscal year in 
     advance in an appropriations Act.
       (b) Relation to Other Funds.--The authorizations of 
     appropriations established under this subtitle are in 
     addition to any other authorizations of appropriations that 
     are available for the purposes of carrying out this subtitle.

     SEC. 8142. FUNDING METHODOLOGY.

       The Secretary shall establish new methodologies, consistent 
     with the Indian Health Care Improvement Act, for the 
     distribution to Indian tribes of all new funds that become 
     available for health care initiatives under this subtitle. 
     New distribution methodologies should consider differences in 
     local resources, status of health (as declared under section 
     3 of such Act), socioeconomic status of tribal people, and 
     facilities, equipment and staff available in concert with the 
     establishment of Indian epidemiological centers under such 
     Act.
               Subtitle B--Department of Veterans Affairs

     SEC. 8201. SHORT TITLE.

       This Act may be cited as the ``Veterans Health Care Reform 
     Act of 1994''.

     SEC. 8202. BENEFITS AND ELIGIBILITY THROUGH DEPARTMENT OF 
                   VETERANS AFFAIRS MEDICAL SYSTEM.

       (a) Department of Veterans Affairs 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 HEALTH SECURITY ACT

                        ``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 health benefits plans.
``1824. Limitation regarding veterans enrolled with health plans 
              outside Department.

                   ``SUBCHAPTER IV--FINANCIAL MATTERS

``1831. Premiums, copayments, and other charges.
``1832. Medicare coverage and reimbursement.
``1833. Recovery of cost of certain care and services.
``1834. Health Plan Fund.

                        ``SUBCHAPTER I--GENERAL

     ``Sec. 1801. Definitions

       ``For purposes of this chapter:
       ``(1) The term `health plan' means an entity that has been 
     certified under the Health Security Act as a health plan.
       ``(2) The term `VA health plan' means a health plan that is 
     operated by the Secretary under section 7341 of this title.
       ``(3) The term `VA enrollee' means an individual enrolled 
     under the Health Security Act in a VA health plan.
       ``(4) The term `standard benefit package' means the package 
     of benefits required to be provided by a health plan under 
     the Health Security Act.

                      ``SUBCHAPTER II--ENROLLMENT

     ``Sec. 1811. Enrollment: veterans

       ``Each veteran may enroll with a VA health plan. A veteran 
     who wants to receive the standard benefit package through the 
     Department shall enroll with a VA health plan.

     ``Sec. 1812. Enrollment: CHAMPVA eligibles

       ``An individual who is eligible for benefits under section 
     1713 of this title may enroll with a VA health plan in the 
     same manner as a veteran.

     ``Sec. 1813. Enrollment: family members

       ``(a) The Secretary may authorize a VA health plan to 
     enroll members of the family of an enrollee under section 
     1811 or 1812 of this title, subject to payment of premiums, 
     deductibles, copayments, and coinsurance as required under 
     the Health Security Act.
       ``(b) For purposes of subsection (a), an enrollee's family 
     is those individuals (other than the enrollee) included 
     within the term `family' as defined in section 1113(b) of the 
     Health Security Act.

                       ``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 standard benefit package under the Health 
     Security Act, to the extent that such items and services can 
     be provided consistent with appropriations for that purpose. 
     In the event that appropriations are insufficient the 
     Secretary may revise the standard benefit package available 
     to enrolled individuals.

     ``Sec. 1822. Chapter 17 benefits

       ``The Secretary shall provide to a veteran the care and 
     services not included in the standard benefit package that 
     are authorized to be provided under chapter 17 of this title 
     in accordance with the terms and conditions applicable to 
     that veteran and that care under such chapter, to the extent 
     that such items and services can be provided consistent with 
     appropriations for that purpose. In the event that 
     appropriations are insufficient the Secretary may revise the 
     standard benefit package available to enrolled individuals.

     ``Sec. 1823. Supplemental health benefits plans

       ``(a) As part of a VA health plan, the Secretary may offer 
     to veterans--
       ``(1) supplemental health benefits plans (as that term is 
     defined in section 1011(3)(B) of the Health Security Act) for 
     the care and services described in subsection (b); and
       ``(2) cost-sharing plans consistent with the requirements 
     of part 4 of subtitle B of title I of the Health Security 
     Act.
       ``(b) The care and services referred to in subsection (a) 
     are care and services that--
       ``(1) are not available under the standard benefit package; 
     and
       ``(2) can be provided by the Secretary at reasonable cost.

     ``Sec. 1824. Limitation regarding veterans enrolled with 
       health plans outside Department

       ``A veteran who is residing in a community-rated area in 
     which the Department operates a health plan and who is 
     enrolled in a health plan that is not operated by the 
     Department may be provided the items and services in the 
     standard benefit package by a VA health plan only if the plan 
     is reimbursed for the care provided.

                   ``SUBCHAPTER IV--FINANCIAL MATTERS

     ``Sec. 1831. Premiums, copayments, and other charges

       ``(a) Except as provided in paragraph (2), the Secretary 
     may not impose on or collect from a veteran described in 
     subsection (b) who is a VA enrollee a cost-share charge of 
     any kind (whether a premium, copayment, deductible, 
     coinsurance charge, or other charge) for items and services 
     in the standard benefit package that a VA health plan 
     provides.
       ``(b) The veterans referred to in subsection (a) are the 
     following:
       ``(1) Any veteran with a compensable 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.
       ``(7) Any veteran referred to in subparagraph (A), (B), or 
     (C) of section 1710(e) of this title.
       ``(c)(1) Except as provided in paragraph (2), in the case 
     of a VA enrollee who is not described in subsection (b), the 
     Secretary shall charge premiums and establish copayments, 
     deductibles, and coinsurance amounts for care and services 
     provided under this chapter. The premium rate, and the rates 
     for deductibles and copayments, for each VA health plan shall 
     be established by that health plan based on rules established 
     under the Health Security Act.
       ``(2) The Secretary may not charge a veteran referred to in 
     paragraph (1) a premium for any care or service that the 
     Secretary provides the veteran under a supplemental health 
     benefits plan offered under section 1823 of this title if the 
     Secretary is required to provide such care or service under 
     chapter 17 of this title.

     ``Sec. 1832. Medicare coverage and reimbursement

       ``(a) For purposes of any program administered by the 
     Secretary of Health and Human Services under title XVIII of 
     the Social Security Act (42 U.S.C. 1395 et seq.), a 
     Department facility shall be deemed to be a Medicare 
     provider.
       ``(b)(1) A VA health plan shall be considered to be a 
     Medicare HMO.
       ``(2) For purposes of this section, the term `Medicare HMO' 
     means an eligible organization under section 1876 of the 
     Social Security Act.
       ``(c) In the case of care provided under this chapter to a 
     veteran (other than a veteran described in section 1831(b) of 
     this title), or to a family member of a veteran, who is 
     eligible for benefits under the Medicare program under title 
     XVIII of the Social Security Act, the Secretary of Health and 
     Human Services shall reimburse a VA health plan or Department 
     health-care facility providing services as a Medicare 
     provider or Medicare HMO in the same amounts and under the 
     same terms and conditions as that Secretary reimburses other 
     Medicare providers or Medicare HMOs, respectively. The 
     Secretary of Health and Human Services shall include with 
     each such reimbursement a Medicare explanation of benefits.
       ``(d) When the Secretary provides care to a veteran, or a 
     family member of a veteran, for which the Secretary receives 
     reimbursement under this section, the Secretary shall require 
     the veteran to pay to the Department any applicable 
     deductible or copayment that is not covered by Medicare.

     ``Sec. 1833. Recovery of cost of certain care and services

       ``(a) In the case of an individual provided care or 
     services through a VA health plan who has coverage under a 
     supplemental health benefits plan pursuant to part 4 of 
     subtitle B of title I of the Health Security Act, a Medicare 
     supplemental health insurance plan, or any other provision of 
     law, 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) In the case of a veteran referred to in section 
     1831(b) of this title who is enrolled in a health plan other 
     than a VA health plan and who is provided care or services 
     for a service-connected disability by a VA health plan, the 
     Secretary has the right to recover or collect charges for 
     such care and services from the party operating the health 
     plan to the extent that the veteran (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.
       ``(c) 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) or (b) in the same 
     manner as they apply to claims under subsection (a) of that 
     section.

     ``Sec. 1834. Health Plan Fund

       ``(a) There is hereby established in the Treasury a 
     revolving fund to be known as the `Department of Veterans 
     Affairs Health Plan Fund'.
       ``(b)(1) Subject to paragraphs (2) and (3), amounts 
     collected or recovered by the Department under this 
     subchapter by reason of the furnishing of care and services 
     to an individual by a VA health plan or the enrollment of an 
     individual with a VA health plan (including amounts received 
     as premiums, premium discount payments, copayments or 
     coinsurance, and deductibles, amounts received as third-party 
     reimbursements or reimbursements from Medicare, and amounts 
     received as reimbursements from another health plan for care 
     furnished to one of its enrollees) shall be credited to the 
     revolving fund.
       ``(2) Premiums collected by the Department under this 
     subchapter during fiscal year 1996 or 1997 by reason of the 
     furnishing of care and services under a VA health plan to a 
     veteran referred to in section 1831(b) of this title shall be 
     credited to the revolving fund established under subsection 
     (a) only if the amount of funds appropriated to the Veterans 
     Health Care Investment Fund established under subsection 
     (a)(1) of section 7346 of this title for the fiscal year 
     concerned is less than the amount specified to be credited to 
     that fund for that fiscal year under subsection (c) of such 
     section 7346.
       ``(3) Premiums received by the Department under this 
     subchapter in any fiscal year after fiscal year 1997 by 
     reason of the furnishing of care and services under a VA 
     health plan to a veteran referred to in paragraph (2) shall 
     be credited to the revolving fund established under 
     subsection (a) only if the cost of providing such care and 
     services is not covered by appropriations. The amount so 
     credited shall be the amount of such premiums received that 
     is necessary to cover the difference between the cost of such 
     care and services and such appropriations.
       ``(c) The Secretary shall establish in the revolving fund a 
     separate account for each VA health plan. The Secretary shall 
     credit any amount received under subsection (b) by reason of 
     the furnishing of care and services in or through a VA health 
     plan or the enrollment of an individual with a VA health 
     plan.
       ``(d) Amounts credited to the account of the revolving fund 
     for a VA health plan under subsection (b) are hereby made 
     available to the VA health plan for the expenses of the 
     delivery by the VA health plan of the items and services in 
     the standard benefit package and any supplemental health 
     benefits plan offered by the VA health plan.''.
       (2) The table of chapters at the beginning of title 38, 
     United States Code, and at the beginning of part II of such 
     title, is amended by inserting after the item relating to 
     chapter 17 the following new item:

``18. Benefits and Eligibility Under Health Security Act...1801.''.....

       (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

       ``The provisions of this chapter shall apply with respect 
     to the furnishing of care and services by any facility of the 
     Department when it is not operating as or within a health 
     plan certified as a health plan under the Health Security 
     Act.''.
       (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.''.

     SEC. 8203. 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 IV:

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

     ``Sec. 7341. Organization of health care facilities as health 
       plans

       ``(a)(1) The Secretary may, subject to the availability of 
     appropriations, organize health plans and operate Department 
     facilities as or within health plans under the Health 
     Security Act.
       ``(2)(A) The Secretary may prescribe regulations 
     establishing standards for the operation of Department health 
     care facilities as or within health plans under that Act. In 
     prescribing such standards, the Secretary shall ensure that 
     they conform, to the extent possible under the requirements 
     of section 1821, to the requirements for health plans 
     generally set forth in part 1 of subtitle B of title I of the 
     Health Security Act.
       ``(B) Not later than 30 days after prescribing such 
     standards, the Secretary shall submit to the Committees on 
     Veterans' Affairs of the Senate and the House of 
     Representatives a report describing the differences, if any, 
     between such standards and the requirements for health plans 
     generally referred to in subparagraph (A).
       ``(b) Health care facilities of the Department located 
     within an 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.
       ``(c) In carrying out responsibilities under the Health 
     Security Act, a State (or a State-established entity)--
       ``(1) may not impose any standard or requirement on a VA 
     health plan that is inconsistent with this chapter or any 
     regulation prescribed under this chapter or other Federal 
     laws regarding the operation of this chapter; and
       ``(2) may not deny certification of a VA health plan under 
     the Health Security Act on the basis of a conflict between a 
     rule of a State and this chapter or regulations prescribed 
     under this chapter or other Federal laws regarding the 
     operation of this chapter.

     ``Sec. 7342. Contract authority for facilities operating as 
       or within health plans

       ``(a) The Secretary shall designate a health plan director 
     for each VA health plan organized and operated under this 
     subchapter.
       ``(b) The health plan director of a VA health plan may 
     enter into contracts and agreements for the provision of care 
     and services to be provided under the VA health plan and 
     contracts and agreements for other services (including 
     procurement of equipment, maintenance and repair services, 
     and other services related to the provision of health care 
     services) consistent with section 1821 of this title.
       ``(c) Contracts and agreements (including leases) under 
     subsection (a) shall not be subject to the following 
     provisions of law:
       ``(1) Section 8110(c) of this title, relating to the 
     contracting of services at Department health-care facilities.
       ``(2) Section 8122(a)(1) of this title, relating to the 
     lease of Department property.
       ``(3) Section 8125 of this title, relating to local 
     contracts for the procurement of health-care items.
       ``(4) Section 702 of title 5, relating to the right of 
     review of agency wrongs by courts of the United States.
       ``(5) Sections 1346(a)(2) and 1491 of title 28, relating to 
     the jurisdiction of the district courts of the United States 
     and the United States Court of Federal Claims, respectively, 
     for the actions enumerated in such sections.
       ``(6) Subchapter V of chapter 35 of title 31, relating to 
     adjudication of protests of violations of procurement 
     statutes and regulations.
       ``(7) Sections 3526 and 3702 of such title, relating to the 
     settlement of accounts and claims, respectively, of the 
     United States.
       ``(8) Subsections (b)(7), (e), (f), (g), and (h) of section 
     8 of the Small Business Act (15 U.S.C. 637(b)(7), (e), (f), 
     (g), and (h)), relating to requirements with respect to small 
     businesses for contracts for property and services.
       ``(9) The provisions of law assembled for purposes of 
     codification of the United States Code as section 471 through 
     544 of title 40 that relate to the authority of the 
     Administrator of General Services over the lease and disposal 
     of Federal Government property.
       ``(10) The provisions of the Office of Federal Procurement 
     Policy Act (41 U.S.C. 401 et seq.), relating to the 
     procurement of property and services by the Federal 
     Government.
       ``(11) Chapter 3 of the Federal Property and Administrative 
     Services Act of 1949 (41 U.S.C. 251 et seq.), relating to the 
     procurement of property and services by the Federal 
     Government.
       ``(12) Office of Management and Budget Circular A-76.
       ``(c)(1) Contracts and agreements for the provision of care 
     and services under subsection (a) may include any contract or 
     other agreement that the health plan director of a VA health 
     plan determines is consistent with section 1821 of this title 
     and appropriate in order to provide care and services under 
     the VA health plan.
       ``(2) Contracts and agreements under this subsection may be 
     entered into without prior review by the Central Office of 
     the Department.
       ``(d)(1) The entry into a contract or agreement under this 
     section for services other than the services referred to in 
     subsection (c) (including contracts and agreements for 
     procurement of equipment, maintenance and repair services, 
     and other services related to the provision of health care 
     services) shall not be subject to prior review by the Central 
     Office if the contract is consistent with section 1821 of 
     this title and the amount of the contract or agreement is 
     less than $250,000.
       ``(2) The Central Office may conduct a prior review of a 
     contract or agreement referred to in paragraph (1) if the 
     amount of the contract or agreement is $250,000 or greater.

     ``Sec. 7343. Resource sharing authority

       ``(a) The Secretary may, consistent with section 1821 of 
     this title, enter into agreements under section 8153 of this 
     title with other health care plans, with health care 
     providers, and with other health industry organizations, and 
     with individuals, for the sharing of resources of the 
     Department under a VA health plan.
       ``(b) The Secretary may, consistent with section 1821 of 
     this title, enter into agreements with other departments and 
     agencies of the Federal Government for the sharing of 
     resources of the Department and such departments and agencies 
     in order to provide care and services under a VA health plan.

     ``Sec. 7344. Administrative and personnel flexibility

       ``(a) Notwithstanding any other provision of law, the 
     Secretary may--
       ``(1) appoint health care personnel to positions in any 
     facility of the Department operating as or within a VA health 
     plan in accordance with such qualifications for such 
     positions as the Secretary may establish; and
       ``(2) promote and advance personnel serving in such 
     positions in accordance with such qualifications as the 
     Secretary may establish.
       ``(b) Subject to the provisions of section 1125 of the 
     Health Security Act, the Secretary may carry out appropriate 
     promotional, advertising, and marketing activities to inform 
     individuals of the availability of VA health plans.

     ``Sec. 7345. Expenditure authority

       ``(a)(1) To the extent that appropriations are available, 
     the director of a VA health plan may expend funds available 
     to a VA health plan (including funds available under section 
     1834(c) of this title, funds available under section 
     7346(d)(2)(B) of this title, and funds otherwise made 
     available to the VA health plan by the Secretary) for any 
     purpose, and in any amount, that the director determines 
     appropriate in order to ensure that the VA health plan meets 
     the requirements and the requirements of furnishing care and 
     services to veterans under chapter 17 of this title.
       ``(2) Funds may be expended under this subsection in order 
     to cover the following costs:
       ``(A) The costs of marketing and advertising under a VA 
     health plan.
       ``(B) The costs of legal services provided to a VA health 
     plan by the General Counsel of the Department.
       ``(C) The costs of acquisition (including acquisition of 
     land), construction, repair, or renovation of facilities.
       ``(3) The exercise by a health plan director of the 
     authority provided in paragraph (1) shall not be subject to 
     prior review by the Central Office of the Department.
       ``(b) Subsection (a) shall not apply to expenditures of 
     funds provided to a facility by the Central Office of the 
     Department exclusively for the purpose of the provision of 
     the following services:
       ``(1) Services relating to post-traumatic stress disorder.
       ``(2) Services relating to spinal-cord dysfunction.
       ``(3) Services relating to substance abuse.
       ``(4) Services relating to the rehabilitation of blind 
     veterans.

     ``Sec. 7346. Veterans Health Care Investment Fund

       ``(a) There is hereby established in the Treasury of the 
     United States a fund to be known as the Veterans Health Care 
     Investment Fund (in this section referred to as the `Fund').
       ``(b) There is hereby authorized to be appropriated to the 
     Department, in addition to amounts otherwise authorized to be 
     appropriated to the Department for VA health plans, such 
     amounts as are necessary for the Secretary of the Treasury to 
     fulfill the requirement of subsection (c).
       ``(c) For each of fiscal years 1995, 1996, and 1997, the 
     Secretary of the Treasury shall, subject to the availability 
     of appropriated funds, credit to the Fund an amount in that 
     fiscal year as follows:
       ``(1) For fiscal year 1995, $1,225,000,000.
       ``(2) For fiscal year 1996, $600,000,000.
       ``(3) For fiscal year 1997, $1,700,000,000.
       ``(d)(1) Subject to paragraph (2), amounts in the Fund 
     shall be available to the Secretary only for the VA health 
     plans organized and operated under this subchapter.
       ``(2)(A) For each of fiscal years 1996 and 1997, the 
     Secretary shall estimate the total amount to be collected or 
     recovered under sections 1831, 1832, and 1833 of this title 
     by reason of the provision of care and services through VA 
     health plans under chapter 18 of this title or the enrollment 
     of individuals in such plans under that chapter. The 
     Secretary shall estimate the amount to be so collected or 
     recovered with respect to each VA health plan and with 
     respect to all VA health plans.
       ``(B) For each such fiscal year, the Secretary shall make 
     available to each VA health plan an amount that bears the 
     same relationship to the total amount available in the Fund 
     for the fiscal year as the amount estimated to be collected 
     or recovered by the VA health plan during the fiscal year 
     bears to the total amount estimated to be collected or 
     recovered by all VA health plans during that fiscal year.
       ``(e) Not later than March 1, 1997, the Secretary shall 
     submit to Congress 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 Health Security Act during fiscal years 1995 
     and 1996. 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; and
       ``(3) the ability of such plans to attract patients.

     ``Sec. 7347. 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 health 
     plans operated by the Government 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. Contract authority for facilities operating as or within health 
              plans.
``7343. Resource sharing authority.
``7344. Administrative and personnel flexibility.
``7345. Expenditure authority.
``7346. Veterans Health Care Investment Fund.
``7347. Funding provisions: grants and other sources of assistance.

                ``Subchapter V--Research Corporations''.

  TITLE IX--WORKERS COMPENSATION AND AUTOMOBILE INSURANCE COORDINATION
           Subtitle A--Workers Compensation Medical Services

     SEC. 9001. APPLICATION OF INFORMATION REQUIREMENTS.

       (a) In General.--The provisions of subtitle B of title V 
     shall apply to the provision of workers compensation medical 
     services provided by a health plan or health care provider in 
     the same manner as such provisions apply with respect to the 
     provision of services included in the standard benefit 
     package.
       (b) Information.--Subject to the provisions of subtitle C 
     of title V, health plans and health care providers that 
     render workers compensation medical services shall provide to 
     the worker and to the workers compensation carrier, the 
     employer or both, as appropriate, relevant health care 
     information necessary to assist the worker in the safe and 
     timely return to work.
       (c) Compliance With Duties and Requirements.--A health plan 
     to which this section applies and its providers shall comply 
     with legal duties and reporting requirements under State 
     workers compensation laws, and other Federal and State laws, 
     including laws regarding the reporting of occupational 
     injuries and diseases.
       (d) Rules.--The Secretary of Labor shall promulgate rules 
     to clarify the responsibilities of health plans and health 
     care providers in carrying out the provisions referred to in 
     subsection (a).

     SEC. 9002. PROVISION OF CARE IN DISPUTED CASES.

       (a) In General.--In cases in which a workers compensation 
     claim is challenged by the employer, the workers compensation 
     carrier, or both, a health plan shall provide or pay for all 
     medical care included in the standard benefit package 
     according to the applicable workers compensation fee 
     schedule, if any, until such time as a determination is made 
     through the adjudication process that the claim is 
     compensable as a workers compensation claim. If such a 
     determination is made, the workers compensation carrier (or 
     the employer, if self-insured) shall reimburse the health 
     plan (for the cost of services delivered to the member for 
     the work-related illness or injury) and the worker (for any 
     copayments, deductibles or coinsurance costs incurred for 
     such services).
       (b) Applicability.--Subsection (a) shall not apply in a 
     case where compensation has been accepted by the insurer or 
     the employer, or paid without prejudice.

     SEC. 9003. DEMONSTRATION PROJECTS.

       (a) Authorization.--The Secretary of Health and Human 
     Services and the Secretary of Labor are authorized to conduct 
     demonstration projects under this section in one or more 
     States with respect to treatment of work-related injuries and 
     illnesses.
       (b) Development of Work-Related Protocols.--
       (1) In general.--The Secretary of Health and Human Services 
     and the Secretary of Labor, in consultation with the States 
     and such experts on work-related injuries and illnesses as 
     each such Secretary finds appropriate, shall develop 
     protocols for the appropriate treatment of work-related 
     conditions.
       (2) Testing of protocols.--The Secretary of Health and 
     Human Services and the Secretary of Labor shall enter into 
     contracts with one or more community-rated health plans to 
     test the validity of the protocols developed under subsection 
     (a).
       (c) Development of Capitation Payment Models.--The 
     Secretary of Health and Human Services and the Secretary of 
     Labor shall develop, using protocols developed under 
     subsection (b) if possible, methods of providing for payment 
     by workers compensation carriers to health plans on a per 
     case basis, capitated payment for the treatment of specified 
     work-related injuries and illnesses.

     SEC. 9004. COMMISSION ON WORKERS COMPENSATION MEDICAL 
                   SERVICES.

       (a) Establishment.--There is hereby established a 
     Commission on Workers Compensation Medical Services 
     (hereafter in this section referred to as the 
     ``Commission'').
       (b) Composition.--
       (1) In general.--The Commission shall consist of 15 members 
     appointed in accordance with paragraph (2). Members of the 
     Commission shall include--
       (A) one or more individuals representing State workers 
     compensation commissioners;
       (B) one or more individuals representing State workers 
     compensation funds;
       (C) one or more individuals representing labor 
     organizations;
       (D) one or more individuals representing employers (other 
     than workers compensation insurance carriers);
       (E) one or more individuals representing workers 
     compensation insurance carriers;
       (F) one or more members of the medical profession having 
     expertise in occupational health; and
       (G) one or more educators or researchers having expertise 
     in the field of occupational health.

     Eight members of the Commission shall constitute a quorum.
       (2) Appointments.--Members of the Commission shall be 
     appointed by the President and shall include--
       (A) three members appointed from among individuals 
     recommended by the Speaker of the House of Representatives;
       (B) three members appointed from among individuals 
     recommended by the Minority Leader of the House of 
     Representatives;
       (C) three members appointed from among individuals 
     recommended by the Majority Leader of the Senate; and
       (D) three members appointed from among individuals 
     recommended by the Minority Leader of the Senate.
       (3) No compensation except travel expenses.--Members of the 
     Commission shall serve without compensation, but 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.
       (c) Duties.--
       (1) In general.--The Commission shall study the 
     relationship of workers compensation medical services to the 
     new health system under this Act in terms of impact on the 
     cost of workers compensation medical services, access to 
     appropriate care for injured workers, and quality of medical 
     care and its impact on functional and vocational outcomes for 
     injured workers.
       (2) Evaluation issues to be addressed.--In its 
     deliberations under paragraph (1), the Commission shall 
     consider the following issues in examining the relationship 
     between health plans and workers compensation medical 
     services:
       (A) The impact of health reform on workers compensation 
     medical costs and premium rates charged to employers for 
     workers compensation insurance.
       (B) The extent and impact of cost-shifting and price 
     discrimination between the workers compensation medical 
     system and traditional health insurers.
       (C) The impact of experience rating adjustments resulting 
     from workers compensation medical services on workplace 
     safety.
       (D) The advantages and disadvantages of maintaining 
     separate financing, payment and delivery systems for workers 
     compensation medical services, including the impact on--
       (i) the quality of medical care delivered to workers 
     injured or made ill on the job;
       (ii) the incentives for employers to maintain safe work-
     places; and
       (iii) workers compensation indemnity benefit costs, medical 
     costs and the overall costs of the workers compensation 
     system.
       (E) The advisability and appropriateness of transferring 
     financial responsibility for some or all workers compensation 
     medical benefits to health plans.
       (F) The impact of State-to-State variations in medical and 
     rehabilitation benefits on costs, access and quality of care.
       (G) The options that are available to accomplish the 
     delivery of workers compensation benefits not included in the 
     standard benefit package in integrated systems
       (H) Whether capitated rates can be developed for workers 
     compensation medical benefits, and the impact of using such 
     rates on medical and indemnity costs, access, and quality of 
     care.
       (I) The impact of provider choice, with respect to an 
     injured worker, on workers compensation medical costs, wage-
     loss benefits costs, and quality of care.
       (d) Staff Support.--The Secretary of Health and Human 
     Services and the Secretary of Labor shall provide staff 
     support for the Commission.
       (e) Reports.--Not later than October 1, 2000, the 
     Commission shall submit a final report on its work to the 
     President, the Committee on Labor and Human Resources of the 
     Senate and the Committee on Education and Labor of the House 
     of Representatives. Such report shall include a 
     recommendation as to whether a transfer of financial 
     responsibility for some or all medical benefits to health 
     plans should be effected, and a detailed implementation plan 
     should such a transfer be recommended. Prior to the 
     submission of the final report, the Commission shall submit 
     such interim reports on issues addressed by the Commission as 
     the members of the Commission determine to be appropriate.
                    Subtitle G--Automobile Insurance

     SEC. 9101. DEFINITIONS.

       In this subtitle:
       (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 
     certified standard 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 who is enrolled in a certified standard health 
     plan is entitled under such 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) Certified standard health plan.--The term ``certified 
     standard health plan'' has the meaning given to such term by 
     section 1011(2)(A).

 PART 1--REQUIREMENTS RELATING TO AUTOMOBILE INSURANCE MEDICAL SERVICES

     SEC. 9111. PROVISION OF AUTOMOBILE INSURANCE MEDICAL SERVICES 
                   THROUGH HEALTH PLANS.

       (a) In General.--
       (1) Health plans.--An individual enrolled in a certified 
     standard health plan shall receive automobile insurance 
     medical services under the terms generally applicable to the 
     provision (or arrangement for the provision) of such services 
     by such health plan.
       (2) Medicare and medicaid.--Paragraph (1) shall not prevent 
     a participating State from requiring automobile insurance 
     carriers to make direct payment to health care providers for 
     automobile insurance medical services that are covered both 
     by (i) medicare under title XVIII of the Social Security Act 
     or a State medicaid program under title XIX of the Social 
     Security Act, and (ii) an 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.
       (b) Alternative Permitted.--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 certified standard health plan in 
     which the individual is enrolled.

     SEC. 9112. 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 
     certified standard health plan shall make payment to such 
     health plan for such services to the extent of its 
     obligations under the applicable automobile insurance 
     contract.
       (b) Reimbursement for Cost-Sharing.--Each automobile 
     insurance carrier shall be liable for the reimbursement or 
     payment of any deductibles, copayments, or coinsurance paid 
     or owed by an injured individual for automobile insurance 
     medical services to the extent of the applicable automobile 
     insurance contract.
       (c) Limitation of Liability.--Except as provided in 
     subsections (a) and (b), nothing in this subtitle 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 exclusively in accordance with any fee schedule 
     or schedules established by the plan or the participating 
     State for health care services generally.
       (2) Medicare fee schedules.--If the injured individual is a 
     medicare beneficiary under title XVIII of the Social Security 
     Act, an automobile insurance carrier may use the appropriate 
     fee schedule for health care services established under such 
     title.
       (3) 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 
     subtitle or any other provision of law shall impair the right 
     of a certified standard health plan or automobile insurance 
     carrier to seek reimbursement from any individual 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 subtitle 
     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 
     subtitle.

                         PART 2--ADMINISTRATION

     SEC. 9121. PAYMENT FACILITATION.

       (a) In General.--Each participating State shall establish a 
     system for payment of automobile insurance medical services 
     by automobile insurance carriers to certified standard health 
     plans, including mechanisms for prompt resolution of any 
     issues or disputes that may arise in connection with such 
     payment. Such systems shall require that automobile insurance 
     carriers have an affirmative obligation to identify to such 
     health plans the automobile insurance carrier or carriers 
     liable for payment for automobile insurance medical services, 
     through the use of computer data programs where appropriate 
     and cost effective.
       (b) Sanctions.--Each participating State shall authorize 
     appropriate sanctions for the failure of a health plan, 
     automobile insurance carrier, or any other person to comply 
     with the requirements established pursuant to subsection (a).
                       TITLE X--PREMIUM FINANCING
     Subtitle A--National Health Care Cost and Coverage Commission

     SEC. 10001. NATIONAL HEALTH CARE COST AND COVERAGE 
                   COMMISSION.

       There is established a commission to be known as the 
     National Health Care Cost and Coverage Commission (hereafter 
     in this title referred to as the ``Commission'').

     SEC. 10002. COMPOSITION.

       (a) Composition.--The Commission shall be composed of 7 
     members appointed by the President and confirmed by the 
     Senate. Members shall be appointed not later than 9 months 
     after the date of the enactment of this Act based on their 
     expertise and national recognition in the fields of health 
     economics including insurance practices, health care benefit 
     design, health care provider organization and reimbursement, 
     and labor markets. In appointing members of the Commission, 
     the President shall ensure that no more than 4 members of the 
     Commission are affiliated with the same political party.
       (b) Chairperson.--The President shall designate 1 
     individual described in subsection (a) who shall serve as 
     Chairperson of the Commission.
       (c) Terms.--
       (1) In general.--The terms of members of the Commission 
     shall be for 6 years to commence on January 1, 1996, except 
     that of the members first appointed, 3 shall be appointed for 
     an initial term of 4 years, 3 shall be appointed for an 
     initial term of 5 years and the chairperson shall be appoint 
     for an initial term of 6 years.
       (2) Continuation in office.--Upon the expiration of a term 
     of office, a member shall continue to serve until a successor 
     is appointed and qualified.
       (d) Vacancies.--
       (1) In general.--A vacancy in the Commission shall be 
     filled in the same manner as the original appointment, but 
     the individual appointed to fill the vacancy shall serve only 
     for the unexpired portion of the term for which the 
     individual's predecessor was appointed.
       (2) No impairment of function.--A vacancy in the membership 
     of the Commission does not impair the authority of the 
     remaining members to exercise all of the powers of the 
     Commission.
       (3) Acting chairperson.--The Commission may designate a 
     member to act as Chairperson during any period in which there 
     is no Chairperson designated by the President.

     SEC. 10003. DUTIES OF COMMISSION.

       (a) In General.--The general duties of the Commission are 
     to monitor and respond to--
       (1) trends in health care coverage; and
       (2) changes in per-capita premiums and other indicators of 
     health care inflation.

     The Commission may be advised by individuals with expertise 
     concerning the economic, demographic, and insurance market 
     factors that affect the cost and coverage of health 
     insurance.
       (b) Annual Reports.--
       (1) In general.--The Commission shall report to Congress 
     annually on January 1 (beginning in 1997) concerning trends 
     in health care coverage and costs. Such reports shall 
     categorize such information on a national basis, a State by 
     State basis, and a community rating area basis.
       (2) Health care coverage.--For purposes of this title, the 
     term ``health care coverage'' means coverage under--
       (A) a certified standard health plan providing a standard 
     benefits package or an alternative standard benefits package;
       (B) the medicare program under title XVIII of the Social 
     Security Act;
       (C) the medicaid program under title XIX of the Social 
     Security Act;
       (D) the health care program for active military personnel 
     under title 10, United States Code;
       (E) the veterans health care program under chapter 17 of 
     title 38, United States Code;
       (F) the Civilian Health and Medical Program of the 
     Uniformed Services (CHAMPUS), as defined in section 1073(4) 
     of title 10, United States Code;
       (G) the Indian health service program under the Indian 
     Health Care Improvement Act (25 U.S.C. 1601 et seq.);
       (H) a State single-payer system approved under subpart B of 
     part 3 of subtitle F of title I; or
       (I) any governmental health care program for 
     institutionalized individuals.
       (3) Contents of report.--Each report under paragraph (1) 
     shall include the findings of the Commission with respect to 
     the following:
       (A) Demographics and employment status of the uninsured 
     individuals, and findings on why such individuals are 
     uninsured.
       (B) Structure of delivery systems.
       (C) Status of insurance reforms.
       (D) Development and operation of purchasing cooperatives 
     and other buyer reforms.
       (E) Success of market and other mechanisms in expanding 
     coverage and controlling health expenditures and premium 
     costs among employers and families.
       (F) Success of the tax imposed under section 4521 of the 
     Internal Revenue Code of 1986.
       (G) Success and adequacy of the individual and employer 
     subsidy programs under title VI in expanding coverage through 
     employers and families.
       (H) Per capita cost of health care, including--
       (i) the rate of growth in health care costs categorized by 
     type of health care provider and type of payor in States and 
     community rating areas;
       (ii) the expected rate of growth in per capita health care 
     costs;
       (iii) the causes of such growth; and
       (iv) proposed strategies for controlling such growth.
       (I) The percentage of the resident population in the United 
     States, and each State, that has health care coverage.
       (4) Benefits issues.--The Commission shall consult with the 
     National Health Benefits Board in gathering data and in 
     making recommendations concerning issues that effect the 
     standard benefit package.
       (c) Affordability Reports.--
       (1) In general.--As part of each annual report under 
     subsection (b), beginning with the report for 1999, the 
     Commission shall include information on--
       (A) the affordability of health care coverage for families 
     and employers; and
       (B) the success of market incentives and other provisions 
     of this Act in achieving health care cost containment.
       (2) Determination and recommendations.--If the Commission 
     determines for any year that health care coverage is 
     unaffordable (as described in paragraph (3)) or that cost 
     containment efforts under this Act are unsuccessful, the 
     Commission shall submit recommendations in the annual report 
     for systematic improvements as provided for in paragraph (4).
       (3) Cost of coverage.--The Commission shall make a 
     determination of unaffordability under paragraph (2) if the 
     Commission finds that, with respect to the year for which the 
     report is submitted, fewer than 35 percent of those eligible 
     to enroll in community-rated health plans were able to enroll 
     in plans with a premium that was at or below the reference 
     premium for the community rating area involved.
       (4) Recommendations.--If the Commission makes a finding 
     under paragraph (3) with respect to any year, the Commission 
     shall recommend to Congress a means of controlling health 
     care costs in order to ensure that the growth in the per 
     capita premium for community-rated plans is at or below the 
     growth in the reference premium for the community rating area 
     involved. The Commission may recommend alternative reference 
     premium growth if the Commission determines that such 
     alternative would be more appropriate.
       (5) Congressional consideration.--The recommendations of 
     the Commission under paragraph (4) shall be submitted to 
     Congress in the form of an implementing bill which contains 
     such statutory provisions as the Commission determines are 
     necessary or appropriate to implement such recommendations. 
     Such bill shall be considered under the procedures 
     established under section 10004.
       (d) Coverage Trigger.--
       (1) Commission determination.--By January 1, 2000, the 
     Commission shall, on the basis of the most recent data 
     available, make a determination as to the percentage of the 
     resident population in the United States, and each State, 
     that has health care coverage.
       (2) Attainment of coverage goal.--
       (A) In general.--If, under paragraph (1), the Commission 
     determines that health care coverage of at least 95 percent 
     of the resident population in the United States has been 
     attained, the Commission shall submit recommendations 
     described in subparagraph (B) in its annual report to 
     Congress on January 1, 2000.
       (B) Recommendation requirement.--The recommendations of the 
     Commission under subparagraph (A) shall include methods to 
     expand health care coverage to those who are not covered. 
     Such recommendations shall address all relevant parties, 
     including States, employers, employees, unemployed and low-
     income individuals, and public program participants.
       (3) Coverage goal not attained.--
       (A) In general.--If, under paragraph (1), the Commission 
     determines that health care coverage of at least 95 percent 
     of the resident population in the United States has not been 
     attained, the Commission shall submit recommendations 
     described in subparagraph (B) in its annual report to 
     Congress not later than May 15, 2000.
       (B) Recommendation requirements.--The recommendations of 
     the Commission under paragraph (1) shall include one or more 
     legislative proposals for expanding health care coverage to 
     cover the remaining uninsured population. Such 
     recommendations shall address all relevant parties, including 
     States, employers, employees, unemployed and low-income 
     individuals, and public program participants.
       (C) Congressional consideration.--The recommendations of 
     the Commission under subparagraph (A) shall be submitted to 
     Congress in the form of one or more implementing bills which 
     contain such statutory provisions as the Commission 
     determines are necessary or appropriate to implement such 
     recommendations. Such bill shall be considered under the 
     procedures established under section 10004.

     SEC. 10004. CONGRESSIONAL CONSIDERATION OF COMMISSION 
                   RECOMMENDATIONS.

       (a) Implementing Bills.--
       (1) In general.--Except as provided in paragraph (2), an 
     implementing bill described in section 10003(c)(5) or section 
     10003(d)(3)(C) shall be considered by Congress under the 
     procedures for consideration described in subsection (b), 
     except that with respect to an implementing bill described in 
     section 10003(c)(5), the date described in subsection (b)(3) 
     shall not apply.
       (2) GAO consideration.--With respect to an implementing 
     bill described in section 10003(d)(3)(C), to be eligible for 
     Congressional consideration under subsection (b), the General 
     Accounting Office must certify that, if implemented, the 
     legislative proposals in such bill would expand health care 
     coverage to cover the remaining uninsured population.
       (b) Congressional Consideration.--
       (1) Rules of house of representatives and senate.--This 
     subsection is enacted by Congress--
       (A) as an exercise of the rulemaking power of the House of 
     Representatives and the Senate, respectively, and as such is 
     deemed a part of the rules of each House, respectively, but 
     applicable only with respect to the procedure to be followed 
     in that House in the case of an implementing bill described 
     in subsection (a), and supersedes other rules only to the 
     extent that such rules are inconsistent therewith; and
       (B) with full recognition of the constitutional right of 
     either House to change the rules (so far as relating to the 
     procedure of that House) at any time, in the same manner and 
     to the same extent as in the case of any other rule of that 
     House.
       (2) Introduction and referral.--On the day on which the 
     implementing bill described in subsection (a) is transmitted 
     to the House of Representatives and the Senate, such bill 
     shall be introduced (by request) in the House of 
     Representatives by the Majority Leader of the House, for 
     himself or herself and the Minority Leader of the House, or 
     by Members of the House designated by the Majority Leader and 
     Minority Leader of the House and shall be introduced (by 
     request) in the Senate by the Majority Leader of the Senate, 
     for himself or herself and the Minority Leader of the Senate, 
     or by Members of the Senate designated by the Majority Leader 
     and Minority Leader of the Senate. If either House is not in 
     session on the day on which the implementing bill is 
     transmitted, the bill shall be introduced in that House, as 
     provided in the preceding sentence, on the first day 
     thereafter on which that House is in session. If the 
     implementing bill is not introduced within 5 days of its 
     transmission, any Member of the House and of the Senate may 
     introduce such bill. The implementing bill introduced in the 
     House of Representatives and the Senate shall be referred to 
     the appropriate committees of each House.
       (3) Period for committee consideration.--If the committee 
     or committees of either House to which an implementing bill 
     has been referred have not reported the bill at the close of 
     July 1, 2000 (or if such House is not in session, the next 
     day such House is in session), such committee or committees 
     shall be automatically discharged from further consideration 
     of the implementing bill and it shall be placed on the 
     appropriate calendar.
       (4) Floor consideration in the senate.--
       (A) In general.--Within 5 days after the implementing bill 
     is placed on the calendar, the Majority Leader, at a time to 
     be determined by the Majority Leader in consultation with the 
     Minority Leader, shall proceed to the consideration of the 
     bill. If on the sixth day after the bill is placed on the 
     calendar, the Senate has not proceeded to consideration of 
     the bill, then the presiding officer shall automatically 
     place the bill before the Senate for consideration. A motion 
     in the Senate to proceed to the consideration of an 
     implementing bill shall be privileged and not debatable. An 
     amendment to the motion shall not be in order, nor shall it 
     be in order to move to reconsider the vote by which the 
     motion is agreed to or disagreed to.
       (B) Time limitation on consideration of bill.--
       (i) In general.--Debate in the Senate on an implementing 
     bill, and all amendments and debatable motions and appeals in 
     connection therewith, shall be limited to not more than 30 
     hours. The time shall be equally divided between, and 
     controlled by, the Majority Leader and the Minority Leader or 
     their designees.
       (ii) Debate of amendments, motions, points of order, and 
     appeals.--In the Senate, no amendment which is not relevant 
     to the bill shall be in order. Debate in the Senate on any 
     amendment, debatable motion or appeal, or point of order in 
     connection with an implementing bill shall be limited to--

       (I) not more than 2 hours for each first degree relevant 
     amendment,
       (II) one hour for each second degree relevant amendment, 
     and
       (III) 30 minutes for each debatable motion or appeal, or 
     point of order submitted to the Senate,

     to be equally divided between, and controlled by, the mover 
     and the manager of the implementing bill, except that in the 
     event the manager of the implementing bill is in favor of any 
     such amendment, motion, appeal, or point of order, the time 
     in opposition thereto, shall be controlled by the Minority 
     Leader or designee of the Minority Leader. The Majority 
     Leader and Minority Leader, or either of them, may, from time 
     under their control on the passage of an implementing bill, 
     allot additional time to any Senator during the consideration 
     of any amendment, debatable motion or appeal, or point of 
     order.
       (C) Other motions.--A motion to recommit an implementing 
     bill is not in order.
       (D) Final passage.--Upon the expiration of the 30 hours 
     available for consideration of the implementing bill, it 
     shall not be in order to offer or vote on any amendment to, 
     or motion with respect to, such bill. Immediately following 
     the conclusion of debate in the Senate on an implementing 
     bill that was introduced in the Senate, such bill shall be 
     deemed to have been read a third time and the vote on final 
     passage of such bill shall occur without any intervening 
     action or debate.
       (E) Debate on differences between the houses.--Debate in 
     the Senate on motions and amendments appropriate to resolve 
     the differences between the Houses, at any particular stage 
     of the proceedings, shall be limited to not more than 5 
     hours.
       (F) Debate on conference report.--Debate in the Senate on 
     the conference report shall be limited to not more than 10 
     hours.
       (5) Floor consideration in the house of representatives.--
       (A)  Proceed to consideration.--On the sixth day after the 
     implementing bill is placed on the calendar, it shall be 
     privileged for any Member to move without debate that the 
     House resolve itself into the Committee of the Whole House on 
     the State of the Union, for the consideration of the bill, 
     and the first reading of the bill shall be dispensed with.
       (B) General debate.--After general debate, which shall be 
     confined to the implementing bill and which shall not exceed 
     4 hours, to be equally divided and controlled by the Chairman 
     and Ranking Minority Member of the Committee or Committees to 
     which the bill had been referred, the bill shall be 
     considered for amendment by title under the 5-minute rule and 
     each title shall be considered as having been read. The total 
     time for considering all amendments shall be limited to 26 
     hours of which the total time for debating each amendment 
     under the 5-minute rule shall not exceed one hour.
       (C) Rise and report.--At the conclusion of the 
     consideration of the implementing bill for amendment, the 
     Committee of the Whole on the State of the Union shall rise 
     and report the bill to the House with such amendments as may 
     have been adopted, and the previous question shall be 
     considered as ordered on the bill and the amendments thereto, 
     and the House shall proceed to vote on final passage without 
     intervening motion except one motion to recommit.
       (6) Computation of days.--For purposes of this subsection, 
     in computing a number of days in either House, there shall be 
     excluded--
       (A) the days on which either House is not in session 
     because of an adjournment of more than 3 days to a day 
     certain, or an adjournment of the Congress sine die, and
       (B) any Saturday and Sunday not excluded under subparagraph 
     (A) when either House is not in session.
       (7) Points of order based on expanding coverage.--
       (A) In general.--It shall not be in order in the Senate to 
     consider--
       (i) any bill;
       (ii) any bill prior to third reading; or
       (iii) any conference report;

     under the procedures described in this subsection if such 
     bill or conference report has not been certified by the 
     General Accounting Office under subsection (a)(2) as 
     expanding coverage to cover the remaining uninsured.
       (B) Waiver or suspension.--Subparagraph (A) may be waived 
     or suspended in the Senate only by the affirmative vote of 
     \3/5\ of the members duly chosen and sworn. An affirmative 
     vote of \3/5\ of the members of the Senate duly chosen and 
     sworn shall be required in the Senate to sustain an appeal of 
     the ruling of the chair on a point of order raised under this 
     paragraph.
       (c) Failure to Enact Legislation.--If Congress fails to 
     enact legislation with respect to an implementing bill under 
     section 10003(d)(3)(C) by December 31, 2000, the employer and 
     individual premium financing provisions of subtitle B shall 
     become effective on January 1, 2002 with respect to those 
     States determined by the Commission under 10003(d)(3)(A) to 
     have health care coverage for less than 95 percent of the 
     resident populations of each such State.

     SEC. 10005. OPERATION OF THE COMMISSION.

       (a) Meetings; Quorum.--
       (1) Meetings.--The Chairperson shall preside at meetings of 
     the Commission, and in the absence of the Chairperson, the 
     Commission shall elect a member to act as Chairperson pro 
     tempore.
       (2) Quorum.--Four members of the Commission shall 
     constitute a quorum thereof.
       (b) Administrative Provisions.--
       (1) Faca not applicable.--The Federal Advisory Committee 
     Act (5 U.S.C. App.) shall not apply to the Commission.
       (2) Pay and travel expenses.--
       (A) Pay.--Each member of the Commission shall be paid at a 
     rate equal to the daily equivalent of the minimum annual rate 
     of basic pay payable for level IV of the Executive Schedule 
     under section 5315 of title 5, United States Code, for each 
     day (including travel time) during which the member is 
     engaged in the actual performance of duties vested in the 
     Commission.
       (B) Travel expenses.--Members of the Commission 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) Executive director.--
       (A) In general.--The Commission shall, without regard to 
     section 5311(b) of title 5, United States Code, appoint an 
     Executive Director.
       (B) Pay.--The Executive Director shall be paid at a rate 
     equivalent to a rate for the Senior Executive Service.
       (4) Staff.--
       (A) In general.--Subject to subparagraphs (B) and (C), the 
     Executive Director, with the approval of the Commission, may 
     appoint and fix the pay of additional personnel.
       (B) Pay.--The Executive Director may make such appointments 
     without regard to the provisions of title 5, United States 
     Code, governing appointments in the competitive service, and 
     any personnel so appointed may be paid without regard to the 
     provisions of chapter 51 and subchapter III of chapter 53 of 
     such title, relating to classification and General Schedule 
     pay rates, except that an individual so appointed may not 
     receive pay in excess of 120 percent of the annual rate of 
     basic pay payable for GS-15 of the General Schedule.
       (C) Detailed personnel.--Upon request of the Executive 
     Director, the head of any Federal department or agency may 
     detail any of the personnel of that department or agency to 
     the Commission to assist the Commission in carrying out its 
     duties under this Act.
       (5) Other authority.--
       (A) Contract services.--The Commission may procure by 
     contract, to the extent funds are available, the temporary or 
     intermittent services of experts or consultants pursuant to 
     section 3109 of title 5, United States Code.
       (B) Leases and property.--The Commission may lease space 
     and acquire personal property to the extent funds are 
     available.
       (c) Authorization of Appropriations.--There are authorized 
     to be appropriated such sums as are necessary for the 
     operation of the Commission.
Subtitle B--Employer and Individual Premium Requirements and Assistance

     SEC. 10101. APPLICATION OF SUBTITLE.

       (a) In General.--The provisions of this subtitle shall 
     apply as provided in section 10004(c).
       (b) Eligible Individuals.--
       (1) Limitation to lawful residents.--
       (A) In general.--In this subtitle, the term ``eligible 
     individual'' means an individual who is residing in a State 
     involved 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.
       (B) Exceptions.--The term ``eligible individual'' shall not 
     include--
       (i) an individual who is an inmate of a public institution 
     (except as a patient of a medical institution),
       (ii) an individual covered under an equivalent health care 
     program, or
       (iii) an individual granted a qualified religious 
     exemption.
       (2) Alien permanently residing in the united states under 
     color of law.--For purposes of paragraph (1), 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) Equivalent health care program.--For purposes of 
     paragraph (1), the term ``equivalent health care program'' 
     means--
       (A) part A or part B of the medicare program under title 
     XVIII of the Social Security Act,
       (B) the medicaid program under title XIX of the Social 
     Security Act,
       (C) the health care program for active military personnel 
     under title 10, United States Code,
       (D) the veterans health care program under chapter 17 of 
     title 38, United States Code,
       (E) the Civilian Health and Medical Program of the 
     Uniformed Services (CHAMPUS), as defined in section 1073(4) 
     of title 10, United States Code,
       (F) the Indian health service program under the Indian 
     Health Care Improvement Act (25 U.S.C. 1601 et seq.), and
       (G) a State single-payer system approved by the Secretary 
     under subpart B of part 3 of subtitle F.
       (4) Qualified religious exemption.--For purposes of 
     paragraph (1)--
       (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.
       (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).
       (c) Individual Responsibilities.--With respect to a State 
     to which this subtitle applies, each eligible individual--
       (1) must enroll in (or be covered under) a certified 
     standard health plan, and
       (2) must pay any premium required, consistent with this 
     Act, with respect to such enrollment.

     SEC. 10102. DEFINITIONS.

       For purposes of this title:
       (1) Definitions relating to employees.--
       (A) Qualifying employee.--The term ``qualifying employee'' 
     means, with respect to any contributing employer (as defined 
     in section 10111(b)) for a month, an employee who is employed 
     by the employer for at least 40 hours in the month.
       (B) Full-time employee.--The term ``full-time employee'' 
     means, with respect to an employer for any month, an employee 
     who is employed by the employer for at least 120 hours.
       (C) Part-time employee.--The term ``part-time employee'' 
     means, with respect to an employer for any month, an employee 
     who is employed by the employer for at least 40 hours but 
     less than 120 hours.
       (D) Full-time equivalent employees.--The term ``full-time 
     equivalent employee'' means a full-time employee, except that 
     a part-time employee shall be treated as that fraction of a 
     full-time equivalent employee which bears the same ratio to 
     one as the number of hours of employment of the part-time 
     employee for the month bears to 120 hours.
       (E) Consideration of industry practice.--As provided under 
     rules established by the Secretary of Labor, an employee who 
     is not a full-time or part-time employee (without regard to 
     this subparagraph) shall be considered to be employed on a 
     full-time or part-time basis by an employer (and to be a 
     full-time or part-time employee of an employer) for a month 
     (or for all months in a 12-month period) if the employee is 
     employed by that employer on a continuing basis that, taking 
     into account the structure or nature of employment in the 
     industry, represents full or part-time employment in that 
     industry.
       (2) Family adjusted income.--
       (A) In general.--Except as otherwise provided, the term 
     ``family adjusted income'' means, with respect to a family, 
     the sum of the adjusted incomes (as defined in subparagraph 
     (B)) for all members of the family.
       (B) Adjusted income.--In subparagraph (A), the term 
     ``adjusted income'' means, with respect to an individual, 
     adjusted gross income (as defined in section 62(a) of the 
     Internal Revenue Code of 1986)--
       (i) determined without regard to sections 135, 162(l), 911, 
     931, and 933 of such Code, and
       (ii) increased by the amount of interest received or 
     accrued by the individual which is exempt from tax.
       (C) Presence of additional dependents.--At the option of an 
     individual, a family may include (and not be required to 
     separate out) the income of other individuals who are claimed 
     as dependents of the family for income tax purposes, but such 
     individuals shall not be counted as part of the family for 
     purposes of determining the size of the family.
       (3) Enrolling and nonenrolling employees.--
       (A) Enrolling employee.--The term ``enrolling employee'' 
     means, with respect to any employer, a qualifying employee 
     who enrolls in a health plan made available by the employer 
     in accordance with the provisions of section 1301(a)(1)(A).
       (B) Nonenrolling employee.--The term ``nonenrolling 
     employee'' means, with respect to any employer, a qualifying 
     employee who is not an enrolling employee.
       (C) Special rule for part-time employees.--A nonenrolling 
     part-time employee of an employer shall be treated as an 
     enrolling employee unless such employee is enrolled in a 
     health plan through the employer of such employee's spouse.
       (4) Reference premium.--The term ``reference premium'' 
     means the reference premium established under section 4512 of 
     the Internal Revenue Code of 1986.
       (5) Secretary.--The term ``Secretary'' means the Secretary 
     of Labor.
       (6) Self-employed individual.--The term ``self-employed 
     individual'' means, for a year, an individual who has net 
     earnings from self-employment (as defined in section 1402(a) 
     of the Internal Revenue Code of 1986) for the year.
       (7) Weighted average premium.--The term ``weighted average 
     premium'' has the same meaning given such term in section 
     6002(b)(1)(C).

                   PART 1--EMPLOYER PREMIUM PAYMENTS

     SEC. 10111. OBLIGATION.

       (a) In General.--Except as otherwise provided in this 
     subtitle, a contributing employer (as defined in subsection 
     (b)) shall make health care coverage premium payments on 
     behalf of the qualifying employees of the employer in 
     accordance with this part.
       (b) Contributing Employer.--As used in subsection (a), the 
     term ``contributing employer'' means an employer that--
       (1) employs, on average, 25 or more employees; or
       (2) employs less than 25 employees and elects under 
     subsection (c) to be a contributing employer.
       (c) Election.--
       (1) In general.--An employer described in subsection (b)(2) 
     may elect to be treated as a community-rated contributing 
     employer under the procedures to be developed by the 
     Secretary.
       (2) Time election takes effect.--An employer making an 
     election under paragraph (1) shall be treated as a community-
     rated contributing employer as of the first date of the first 
     year following such election.
       (3) Self-employed.--A self-employed individual that does 
     not employ at least one full-time employee may not make an 
     election under paragraph (1).

     SEC. 10112. COMMUNITY-RATED EMPLOYERS.

       (a) Minimum Requirement.--Each community-rated contributing 
     employer for a month shall pay not less than an amount equal 
     to the sum of the amounts determined under subsection (b) for 
     each qualifying employee of the employer. Such payments shall 
     be made in accordance with standards established by the 
     Secretary.
       (b) Minimum Premium Payment Amount.--
       (1) General rule.--Except as otherwise provided in this 
     subsection, the amount of the minimum employer premium 
     payment under subsection (a) for a month for each qualifying 
     employee of the employer who is residing in a community 
     rating area shall be equal to--
       (A) in the case of an enrolling employee, 50 percent of the 
     weighted average premium (for the applicable class of 
     enrollment) of the purchasing cooperative through which the 
     employer offered health plan coverage with respect to 
     employees in such area; and
       (B) in the case of a nonenrolling employee, 50 percent of 
     the weighted average premium (for the individual class of 
     enrollment) of the purchasing cooperative through which the 
     employer offered health plan coverage with respect to 
     employees in such area.
       (2) Employer collection shortfall add-on.--The minimum 
     employer premium payment under subsection (a) for a month for 
     any qualifying employee shall be increased by an amount equal 
     to 50 percent of \1/12\ of the amount described in section 
     10134 with respect to each such employee.
       (3) Credit for enrolled couples.--
       (A) In general.--The minimum employer premium payment under 
     subsection (a) for any month for each qualifying employee 
     (other than a nonenrolling employee) in the couple or two-
     parent class of enrollment shall be reduced by the per capita 
     nonenrolling employee credit for the month.
       (B) Per capita nonenrolling employee credit.--With respect 
     to any community rating area, the term ``per capita 
     nonenrolling employee credit'' means, with respect to each 
     class of enrollment described in subparagraph (A), an amount 
     equal to \1/12\ of--
       (i) the sum of--

       (I) the total of the employer premium payments in the 
     community rating area for nonenrolling qualifying employees 
     in that class of enrollment, plus
       (II) the total of the employer premium payments in the 
     community rating area which represent payments by employers 
     in such area for part-time employees enrolling through 
     employers in that class of enrollment, except that payments 
     shall only be taken into account for purposes of this 
     subclause with respect to any part-time employee to the 
     extent they exceed 50 percent of the total premium for the 
     employee, divided by

       (ii) an amount equal to 12 times the monthly average number 
     of qualifying full-time equivalent employees in that class of 
     enrollment (determined under rules established by the 
     Secretary of Labor).
       (C) State estimates.--Each State shall estimate for each 
     community rating area the amount of the per capita 
     nonenrolling employee credit for each applicable class of 
     enrollment for a calendar year and shall publish the amount 
     of each such credit within a reasonable period of time before 
     the beginning of the year. Such estimate shall correct any 
     error in the estimate for the preceding calendar year.
       (4) Part-time employees.--With respect to a part-time 
     employee, the payment required under paragraph (1) shall be 
     equal to the amount which bears the same ratio to the amount 
     which would be required to be paid if the employee were a 
     full-time employee as the number of hours worked by the 
     employee for the employer for the month bears to 120 hours.

     SEC. 10113. EXPERIENCE RATED EMPLOYERS.

       (a) Requirement.--Each experience-rated employer that in a 
     month employs a qualifying employee who is--
       (1) enrolled in an experienced-rated health plan sponsored 
     by the employer, shall provide for a payment toward the 
     premium for the plan for such employee in an amount not less 
     than the amount specified under subsection (b); or
       (2) a nonenrolling employee, shall make employer premium 
     payments with respect to such employee in an amount not less 
     than the amount that is equal to 50 percent of the weighted 
     average premium (for the individual class of enrollment) of 
     the community rating area in which the employee resides.
       (b) Minimum Premium Payment Amount.--
       (1) General rule.--The amount of the minimum experience-
     rated employer premium payment under subsection (a)(1) for a 
     month for each qualifying employee of the employer shall be 
     equal to 50 percent of the weighted average premium for the 
     applicable class of enrollment of the health plans offered by 
     the employer.
       (2) Self-insured plans.--In the case of a self-insured 
     health plan, the amount of the premium under subsection (a) 
     shall be equal to the premium equivalent of the self-insured 
     health plan.
       (3) Premium areas.--An experience-rated plan sponsor 
     employer may, based on regulations promulgated by the 
     Secretary, establish premium areas. Experience-rated 
     employers may base their payments under this section on the 
     weighted average premium of the health plans offered in such 
     premium areas.
       (c) Credit for Enrolled Couples.--
       (1) In general.--The minimum employer premium payment under 
     subsection (a)(1) for any month for each qualifying employee 
     (other than a nonenrolling employee) in the couple or two-
     parent class of enrollment shall be reduced by the per capita 
     nonenrolling employee credit for the month.
       (2) Self-insured plans.--In the case of a self-insured 
     health plan, the employer shall receive a credit in an amount 
     equal to the premium reduction otherwise allowable under 
     paragraph (1). The Secretary shall provide for the method of 
     payment of the credit under section 10114(c).
       (3) Per capita nonenrolling employee credit.--For purposes 
     of paragraph (1), the per capita nonenrolling employee credit 
     for any month shall be determined in the same manner as under 
     section 10112(b)(3).
       (d) Part-Time Employees.--With respect to a part-time 
     employee, the minimum payment required under subsection (a) 
     shall be equal to the amount which bears the same ratio to 
     the amount which would be required to be paid if the employee 
     were a full-time employee as the number of hours worked by 
     the employee for the employer for the month bears to 120 
     hours.

     SEC. 10114. PAYMENTS RELATING TO NONENROLLING EMPLOYEES.

       (a) Community-Rated Employers.--Each community-rated 
     employer shall make the minimum employer premium payment 
     described in section 10112(b)(1)(B) for a nonenrolling 
     employee to the purchasing cooperative or other entity in the 
     community rating area in which the employee resides which is 
     designated by the State as the entity to which such premiums 
     are to be paid.
       (b) Experience-Rated Employers.--Each experience-rated 
     employer shall make the minimum employer premium payment 
     described in section 10113(a)(2) for nonenrolling employees--
       (1) to the entities described in subsection (a), or
       (2) at the election of the employer, to one entity 
     described in subsection (a) selected by the employer.

     Any entity receiving payments under paragraph (2) with 
     respect to any employees shall transfer such payments to the 
     entities described in subsection (a) covering such employees.
       (c) Allocation to Health Plans.--Payments received by an 
     entity under subsection (a) or (b) shall be paid, pursuant to 
     such method as the Secretary may prescribe--
       (1) to health plans in amounts proportionate to the 
     reduction in premiums to the plans by reason of the credits 
     under sections 10112(b)(3) and 10113(c), and
       (2) to self-insured health plans for payments described in 
     section 10113(c)(2).

     SEC. 10115. RULES OF CONSTRUCTION.

       Nothing in this Act, or any amendment made by this Act, 
     shall be construed--
       (1) to allow any employer to reduce benefits or premium 
     payments provided by the employer in excess of the minimum 
     benefits or payments required under this Act or any amendment 
     made by this Act, or
       (2) to discourage employers from adopting or retaining 
     health benefits programs that provide for benefits or premium 
     payments by the employer that are greater than such minimum 
     benefits or payments.

                PART 2--FAMILY PAYMENT RESPONSIBILITIES

     SEC. 10131. ENROLLMENT AND PREMIUM PAYMENTS.

       (a) Requirement.--Each family enrolled in a community-rated 
     health plan or in a experienced-rated health plan in a class 
     of enrollment is responsible for payment of the family share 
     of premium payable with respect to such enrollment. Such 
     premium may be paid by an employer or other person on behalf 
     of such a family.
       (b) Family Share of Premium Defined.--In this part, the 
     term ``family share of premium'' means, with respect to each 
     class of enrollment--
       (1) in a community-rated health plan, the amount specified 
     in section 10132(a) for the class; or
       (2) in an experienced-rated health plan, the amount 
     specified in section 10132(b) for the class.

     SEC. 10132. FAMILY SHARE OF PREMIUMS.

       (a) In General.--The family share of premiums for any 
     calendar year is an amount equal to--
       (1) the total of the monthly premiums for the health plans 
     in which any member of the family was enrolled in during the 
     calendar year, reduced by
       (2) the sum of--
       (A) the required premium payments by employers for members 
     of the family who were enrolling employees during the 
     calendar year (as determined under part 1 without regard to 
     section 10112(b)(2)), but only to the extent such payments do 
     not exceed 50 percent of the amount determined under 
     paragraph (1), plus
       (B) any subsidy payments made under title VI on behalf of 
     members of the family, plus
       (C) any voluntary premium payments made on behalf of any 
     family member by an enrolling employer or any other person.
       (b) Applicable Collection Shortfall Add-On.--The family 
     share of premiums under subsection (a) for any calendar year 
     shall be increased by an amount equal to 50 percent of the 
     amount described in section 10134 with respect to each such 
     employee. For purposes of title VI, the amount of any premium 
     subsidy shall be determined without regard to any increase in 
     the premium under this subsection.

     SEC. 10133. AMOUNT OF PREMIUM.

       (a) Community-Rated Plans.--The amount of the applicable 
     premium charged by a community-rated health plan for a class 
     of enrollment under a community-rated health plan offered in 
     the health care coverage area is equal to the product of--
       (1) the final community rate for the plan; and
       (2) the premium class factor established by the Secretary 
     of Health and Human Service for that class under subpart D of 
     part 1 of subtitle E of title I,

     increased for any applicable plan marketing fees (described 
     in section 1112(f)) and purchasing cooperative membership 
     fees (described in section 1324).
       (b) Reference to Other Premiums.--The amount of the premium 
     charged by an experience-rated employer for a class of 
     enrollment under an experience-rated health plan shall be the 
     premium charged by the plan (or in the case of a self-insured 
     plan, the premium equivalent).

     SEC. 10134. COLLECTION SHORTFALL ADD-ON.

       (a) In General.--The collection shortfall add-on for a 
     community rating area for a class of enrollment for a year is 
     a per enrollee amount (determined under rules developed by 
     the Secretary of Health and Human Services), adjusted 
     proportionately by the premium class factors described in 
     section 10133(a)(2), such that the total of the adjusted per 
     enrollee amounts in the community rating area equals the 
     aggregate collection shortfall as determined under subsection 
     (b).
       (b) Aggregate Collection Shortfall.--
       (1) In general.--Each State shall estimate, for each 
     community rating area for each year (beginning with the first 
     year for which this section applies) the total amount of 
     payments which the State can reasonably identify as owed to 
     community-rated health plans under this Act for the year and 
     not likely to be collected during a period specified by the 
     Secretary beginning on the first day of the year.
       (2) Exclusion of government debts.--The amount under 
     paragraph (1) shall not include any payments owed to a 
     community-rated health plan by the Federal, State, or local 
     governments.
       (3) Adjustment for previous shortfall estimation 
     discrepancy.--The amount estimated under this subsection for 
     a year shall be adjusted to reflect over (or under) 
     estimations in the amounts so computed under this subsection 
     for previous years (based on actual collections), taking into 
     account interest payable based upon borrowings (or savings) 
     attributable to such over or under estimations.

     SEC. 10135. NO LOSS OF COVERAGE.

       In no case shall the failure to pay amounts owed under this 
     Act result in an individual's or family's loss of coverage.

                           PART 3--REPORTING

     SEC. 10141. REPORTING REQUIREMENTS.

       The Secretary shall require employees, health plans, and 
     purchasing cooperatives to provide such information to such 
     persons as are necessary to carry out the provisions of the 
     subtitle.
            TITLE XI--ENSURING HEALTH CARE REFORM FINANCING

     SEC. 11001. ENSURING HEALTH CARE REFORM FINANCING.

       (a) Purpose.--The purpose of this section is to ensure that 
     the enactment of this Act does not result in unanticipated 
     increases in the Federal deficit.
       (b) Legal Entitlements Contingent.--Any entitlement 
     provided by this Act, including those to premium assistance, 
     shall be subject to the operation of this section.
       (c) Determination of Unfinanced Health Spending.--
       (1) Initial health care estimate.--Not later than the date 
     that is 60 days after the date of enactment of this Act, the 
     President shall, using up-to-date estimates, issue an order 
     setting forth the initial health care estimate for fiscal 
     year 1995 and for each subsequent fiscal year through 2004, 
     which shall consist of estimates (for each year) projecting 
     the following:
       (A) total direct spending outlays resulting from this Act 
     and under the Medicare and Medicaid programs; and
       (B) total revenues resulting from this Act.
       (2) President's budget to include a current health care 
     estimate.--When the President submits the budget for fiscal 
     year 1997 (as required by section 1105 of title 31), and for 
     each fiscal year through 2004, the President shall include--
       (A) a current health care estimate (as specified in 
     paragraph (3)) with respect to the current fiscal year, the 
     upcoming fiscal year, and the 4 following fiscal years; and
       (B) an estimate of the difference between the current 
     health care estimate and the initial health care estimate for 
     the current fiscal year, the upcoming fiscal year, and the 4 
     following fiscal years.
       (3) Current health care estimate.--The current health care 
     estimate shall, for the applicable fiscal year, consist of--
       (A) updated spending and revenue amounts contained in the 
     initial projection (as set forth in paragraph (1)); plus or 
     minus
       (B) other outlays or revenue changes contained in 
     legislation enacted after the date of enactment of this Act 
     offsetting outlays or revenues resulting from this Act.
       (4) Comparing initial and current health care estimates.--
     Any difference between the initial and current health care 
     estimates shall be adjusted so that it does not reflect any 
     health care variable not attributable either to this Act or 
     to any legislation described in paragraph (3)(B).
       (d) Offsetting Unfinanced Health Spending.--
       (1) Requirement for reductions to fully offset unfinanced 
     health spending.--
       (A) In general.--Except as provided in subparagraph (B), if 
     the President's budget includes a determination that the 
     current health care estimate exceeds the initial health care 
     estimate pursuant to subsection (c) for the current fiscal 
     year, the upcoming fiscal year, or both, such determination 
     shall be accompanied by a proposed order to become effective 
     on October 1 of that calendar year which fully offsets in the 
     upcoming fiscal year and the following fiscal year the sum of 
     such excess (for the upcoming fiscal year and the current 
     fiscal year) in the manner provided in this subsection. Such 
     proposed order shall be accompanied by such proposed 
     regulations as the President deems necessary to carry out the 
     reduction.
       (B) Administrative efficiency.--If, for any year, the 
     Director of the Office of Management and Budget determines 
     that the offsets described in subparagraph (A) would not be 
     administratively cost efficient because the excess described 
     in subparagraph (A) is such a small amount, such offsets 
     shall not be made for that year.
       (2) Offsets.--
       (A) In general.--The offsets required by this subsection 
     shall be accomplished through a combination of--
       (i) subject to the provisions of subparagraph (B), in the 
     case of the premium assistance program, reducing the 
     percentages otherwise in effect for the fiscal year under 
     subparagraphs (A), (B), and (C) of section 6002(a)(2) of this 
     Act;
       (ii) increasing the percentage under paragraphs (1)(B), 
     (2)(B), and (3)(B) of section 6104(a) of this Act (relating 
     to employer subsidy program);
       (iii) reducing the percentage under section 162(l)(1) of 
     the Internal Revenue Code of 1986 (relating to deduction for 
     health insurance costs of self-employed individuals);
       (iv) adjusting the deductible for Medicare drugs as 
     provided in section 1834(d)(1)(B)(i) of the Social Security 
     Act; and
       (v) reducing all other direct spending resulting from this 
     Act by a uniform percentage,

     to the extent (subject to paragraph (3)) necessary to 
     accomplish all of the reductions necessary to fully offset 
     the amounts required during the upcoming and following fiscal 
     year.
       (B) Eligibility percentage for pregnant women and children 
     reduced last.--Any reduction under subparagraph (A)(i)--
       (i) shall be made first by reducing the percentages under 
     section 6002(a)(2)(A) of this Act; and
       (ii) to the extent sufficient offsets may not be made under 
     subparagraph (A), shall then be made by reducing the 
     percentages under section 6002(a)(2) (B) and (C) of this Act.
       (3) Proportionality.--The President shall apply the offset 
     mechanisms provided in paragraph (2)(A) (i), (ii), (iii), 
     (iv), and (v) proportionally (based on the ratio of the 
     outlays caused by each program to the total outlays of all 
     programs subject to reduction under paragraph (2)(A)), to the 
     extent possible, in the upcoming fiscal year and the 
     following fiscal year, but in no case shall the total amount 
     of offsets be less than the amount required by paragraph (1).
       (4) Effective period.--For purposes of a fiscal year not 
     subject to an order under this section following a fiscal 
     year subject to an order under this section, this Act and the 
     amendments made by this Act shall be assumed to continue as 
     if the order had not been issued.
       (5) Consultation.--The President shall confer with the 
     National Health Benefits Board and the National Health Care 
     Cost and Coverage Commission in carrying out this subsection.
       (e) Final Reduction Determination.--Using the same economic 
     and technical assumptions as used in making the preliminary 
     determination under subsection (c), the President shall 
     reestimate the current health care estimates on September 15 
     based on legislation in effect as of September 10. If the 
     President determines that the current estimates exceeds the 
     initial estimates in the current fiscal year, the upcoming 
     fiscal year, or both, the President shall issue a final order 
     (and accompanying final regulations) following the procedure 
     set forth in subsection (d) (including paragraph (1)(B) 
     thereof).
       (f) Suspension in the event of war or low growth.--
       (1) Low growth.--The President shall not issue either a 
     proposed or final order under this section if the Office of 
     Management and Budget notifies the Congress that--
       (A) during the period consisting of the quarter during 
     which such notification is given, the quarter preceding such 
     notification, and the 4 quarters following such notification, 
     the Office of Management and Budget has determined that real 
     economic growth is projected or estimated to be less than 
     zero with respect to each of any 2 consecutive quarters 
     within such period; or
       (B) the most recent of the Department of Commerce's advance 
     preliminary or final reports of actual real economic growth 
     indicate that the rate of real economic growth for each of 
     the most recently reported quarter and the immediately 
     preceding quarter is less than 1 percent.
       (2) War.--The President shall not issue either a proposed 
     or final order under this section if a declaration of war is 
     in effect.
       (g) Recommendations for Alternative Reductions.--If the 
     President's budget for a fiscal year is accompanied by an 
     order under subsection (d)(1), the National Health Benefits 
     Board shall, within a reasonable time, transmit to the 
     President, the Speaker of the House of Representatives, and 
     the President of the Senate a report including alternative 
     proposals to offset the projected excess set forth in 
     subsection (c)(4).
       (h) GAO Audit of Reductions.--If the President has issued 
     an 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 
     budget, an analysis of whether the order has fully complied 
     with the requirements of this section.
       (i) Additional OMB Reporting Requirements To Be Included in 
     President's Budget.--
       (1) Adjusted estimate of total Federal health care costs.--
       (A) In general.--When the President submits the budget for 
     fiscal year 1997, and each fiscal thereafter through 2004, 
     the President shall include an estimate of total Federal 
     health care costs as described in subparagraph (B).
       (B) Total federal health care costs.--Total Federal health 
     care costs are--
       (i) Federal spending in the current health care estimate 
     (as determined under subsection (c)(3)); plus
       (ii) discretionary health care spending on--

       (I) the health care program for active military personnel 
     under title 10, United States Code;
       (II) the veterans health care program under chapter 17 of 
     title 38, United States Code;
       (III) the Civilian Health and Medical Program of the 
     Uniformed Services (CHAMPUS), as defined in section 1073(4) 
     of title 10, United States Code;
       (IV) the Federal Employee Health Benefit Plan under chapter 
     89 of title 5, United States Code (FEHB); and
       (V) the Indian health service program under the Indian 
     Health Care Improvement Act (25 U.S.C. 1601 et seq.).

       (2) Cost as a percent of total revenues.--The President 
     shall include with the estimate required by this subsection a 
     calculation by the Director of the Office of Management and 
     Budget of the percentage of personal and corporate income 
     taxes needed to pay for total Federal health care costs, as 
     adjusted by this subsection, in excess of dedicated health 
     revenues. The Director shall assume that all dedicated health 
     revenues resulting from amendments made by this Act will be 
     allocated for total Federal health care costs, as adjusted by 
     this subsection.
       (j) Additional Commission Reporting Requirements.--
     Effective beginning in 1997, the National Health Care Cost 
     and Coverage Commission shall report annually on how health 
     care expenses are being financed. Among other things, this 
     report shall include--
       (1) how much is spent annually in premiums, out-of-pocket 
     expenses, and third party expenses; and
       (2) the number of businesses that provide health insurance 
     and a profile of businesses that do not provide health 
     insurance, including the earnings of such businesses.
                                 ______


                  DODD (AND OTHERS) AMENDMENT NO. 2561

  Mr. DODD (for himself, Mr. Kennedy, Mr. Riegle, Mrs. Murray, Mr. 
Simon, Mrs. Boxer, Mr. Wofford, Mr. Daschle, Mr. Mitchell, and Mr. 
Levin) proposed an amendment to amendment No. 2560 proposed by Mr. 
Mitchell to the bill S. 2351, supra; as follows:

       At the end of section 1201, insert the following new 
     subsection:
       (d) Application of Interim Standards.--
       (1) In general.--During the interim standards application 
     period, a health plan sponsor may only issue or renew a 
     health plan in a State if such plan covers clinical 
     preventive services according to a periodicity schedule 
     established under paragraph (3), including prenatal care, 
     well baby care, and immunizations, for pregnant women and 
     children without imposing cost-sharing requirements on such 
     services.
       (2) Interim standards application period.--The interim 
     standards application period is on or after July 1, 1995, and 
     before January 1, 1997.
       (3) Periodicity schedule.--
       (A) In general.--Not later than July 1, 1995, the Secretary 
     shall establish a schedule of periodicity that reflects the 
     general, appropriate frequency with which clinical preventive 
     services should be provided routinely to children. In 
     establishing the schedule under the preceding sentence the 
     Secretary shall consult with the American Academy of 
     Pediatrics regarding children's preventive care.
       (B) Effectiveness.--The schedule established by the 
     Secretary under subparagraph (A) shall be effective until the 
     Board develops a periodicity schedule under section 
     1213(a)(2).
       (4) Application of rules.--Paragraphs (4), (5), and (6) of 
     section 1111(e) shall apply to this subsection.

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