[Congressional Record Volume 141, Number 18 (Monday, January 30, 1995)]
[Senate]
[Pages S1758-S1789]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


          STATEMENTS ON INTRODUCED BILLS AND JOINT RESOLUTIONS

      By Mr. CONRAD (for himself, Mr. Daschle, Mr. Dorgan, Mr. Pell, 
        Mr. Akaka, Mr. Jeffords, and Mr. Graham):
  S. 293. A bill to amend title 38, United States Code, to authorize 
the payment to States of per diem for veterans receiving adult day 
health care, and for other purposes; to the Committee on Veterans' 
Affairs.


                        state veterans home act

  Mr. CONRAD. Mr. President, today I rise to introduce the State 
Veterans Home Act of 1995. The bill extends discretionary authority to 
the Department of Veterans Affairs to provide a per diem payment for 
adult day health care for veterans. The bill also authorizes the use of 
funds from the Extended Care Facilities Grants Program, section 8131, 
to construct or renovate existing facilities to provide adult day care 
for veterans.
  The legislation I am introducing today is similar to S. 852 
introduced at the beginning of the 103d Congress. In the last Congress, 
S. 852 was reported to the Senate as section 205 of S. 1030--Veterans 
Health Programs Improvement Act of 1993--and passed by the Senate on 
May 25, 1994. Regrettably due to the legislative log-jam at the end of 
the 103d Congress, it was not incorporated into the veterans health 
benefits measure, H.R. 3313, that passed the House in the closing days 
of the 103d Congress.
   [[Page S1759]] I am very pleased that the bill I am introducing 
today is cosponsored by Senators Daschle, Dorgan, Akaka, Jeffords, 
Pell, and Graham.
  This legislation received support in the 103d Congress from veterans 
and their families in North Dakota, and from all major national 
veterans organizations during a hearing by the Senate Committee on 
Veterans' Affairs on June 23, 1993. I am hoping the 104th Congress will 
act expeditiously to pass this important health care measure for 
veterans. I am enclosing a letter of support from the National 
Association of State Veterans Homes.
  Currently, under section 1741, the Department of Veterans Affairs is 
required to pay a per diem to States for each veteran that is assisted 
through the State Home Facilities Program with hospital, nursing home, 
or domiciliary care. The per diem payment is $15.11 for domiciliary 
care, and $35.37 for nursing home and hospital care. Under section 
8131, State home facilities, the Department of Veterans Affairs is also 
authorized to provide matching grant assistance for the construction, 
expansion, or remodeling of existing facilities for domiciliary, 
nursing home, or hospital care for veterans who are eligible to reside 
in State veterans facilities.
  Under the legislation that I am introducing today, the State Veterans 
Home Program would be amended to authorize a per diem payment for 
veterans that are assisted by States who provide adult day care 
including health care as needed. States would also be authorized to 
apply for matching grant assistance to provide facilities for adult day 
care. In fiscal year 1995, Congress appropriated $47.3 million under 
the State Home Facilities Program for the construction or expansion of 
State extended care facilities for veterans.
  Mr. President, I have discussed the proposed legislation to amend the 
State Veterans Home Program relating to adult day care health care with 
State veterans officials in North Dakota and representatives of the 
National Association of State Veterans Homes. The arguments in support 
of amending the State Veterans Home Program to authorize adult day 
health care are compelling.
  The opportunity for adult day health care services for veterans 
during the daytime hours in a community setting would enable many 
veterans to remain at home with their families in a supportive 
environment as an alternative to nursing home placement.
  I ask my colleagues, how many people do each of us know who are in 
this circumstance? If the family could get relief during the day for a 
veteran who is ill or who is starting to fail, and would have a chance 
to have a place to go during the day, the family could take care of 
that individual at night, thereby preventing nursing home placement.
  For a veteran who may be in the early stages of Alzheimer's disease 
or require limited supervision in a post-operative period, the 
opportunity for adult day health care would meet the requirements of a 
growing number of our veterans population, and at less cost than 
nursing and residential home care. Equally important, adult day health 
care would provide respite for the primary care givers of veterans.
  People have often said to me: Senator, if we just had a chance to 
have a break, if we just had a chance to be able to go to work and have 
our loved one be able to be at home with us in the evening, we would be 
able to take care of him. We would be able to save a lot of money for 
the Government. There is no sense putting all these people in nursing 
homes. Our family would love to be able to take care of our grandfather 
or our father. We would love to have him at home but we work during the 
day, both spouses work during the day. The kids are at school. Nobody 
is home.
  If we had a chance to have that veteran in a setting where he could 
be cared for during the day we would take care of him at night and save 
lots of money--save money for the families, save money for the 
Government.
  Mr. President, as the health care requirements of our veterans 
population change, and the demands on limited Department of Veterans 
Affairs resources increase, I believe it important that States have the 
flexibility to provide adult day health care services for veterans.
  We have heard a lot in the last 24 hours about State flexibility. Why 
should they not have flexibility with respect to a program like this? 
They are asking for it. Why do we not give it to them?
  The 71 State veterans homes across the country have a proven record 
of providing excellent domiciliary, nursing home, and hospital care. 
They also have the expertise in geriatrics, and specialized health care 
that is required to provide the adult day health care services.
  I urge the Senate Committee on Veterans' Affairs to support these 
amendments to the State Veterans Home Program, and to report 
legislation to authorize adult day health care services for veterans as 
soon as possible.
  I ask unanimous consent Mr. President, that the full text of my bill 
along with a letter in support of this initiative from the National 
Association of State Veterans Homes be printed in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                                 S. 293

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

     SECTION 1. PAYMENT TO STATES OF PER DIEM FOR VETERANS 
                   RECEIVING ADULT DAY HEALTH CARE.

       (a) Payment of Per Diem for Veterans Receiving Adult Day 
     Care.--Section 1741 of title 38, United States Code, is 
     amended--
     (1) by inserting ``(1)'' after ``(a)'';
     (2) by redesignating paragraphs (1) and (2) as subparagraphs 
     (A) and (B), respectively; and
     (3) by adding at the end the following new paragraph (2):
       ``(2) The Secretary may pay each State per diem at a rate 
     determined by the Secretary for each veteran receiving adult 
     day health care in a State home, if such veteran is eligible 
     for such care under laws administered by the Secretary.''.
       (b) Assistance to States for Construction of Adult Day Care 
     Facilities.--(1) Section 8131(3) of title 38, United States 
     Code, is amended by inserting ``adult day health,'' before 
     ``or hospital care''.
       (2) Section 8132 of such title is amended by inserting 
     ``adult day health,'' before ``or hospital care''.
       (3) Section 8135(b) of such title is amended--
     (A) in paragraph (2)(C), by inserting ``or adult day health 
     care facilities'' after ``domiciliary beds''; and
     (B) in paragraph (3)(A), by inserting ``or construction 
     (other than new construction) of adult day health care 
     buildings'' before the semicolon.
                                                                    ____

                                           National Association of


                                         State Veterans Homes,

                                 Marquette, MI, December 16, 1994.
     Hon. Kent Conrad,
     U.S. Senator, Hart Senate Office Building,Washington, DC.
       Dear Senator Conrad: This letter is in response to your 
     recent inquiry regarding the National Association of State 
     Veterans Homes (NASVH) position on re-introduction of 
     proposed legislation to allow State Homes to develop an Adult 
     Day Health Program.
       As noted in Mr. Jack Dack's previous letter dated April 26, 
     1993, a 1993 survey had 38 State Homes respond positively out 
     of 48 responses from 52 homes surveyed. We again recommend 
     that Section 1741 be amended to authorize State Homes Adult 
     Day Health Care. The section should be amended to provide for 
     a per diem payment for Adult Day Health Care and additional 
     construction grant monies to support expansion/remodeling to 
     permit States to provide Adult Day Health Care.
       This letter is offered as a reaffirmation of the NASVH 
     commitment to providing this needed service to veterans 
     pursuant to the aforementioned changes in Title 38 United 
     States Code, Section 1741.
       If you have any questions, please let me know.
           Sincerely,

                             Clifford A. Kinney, II, MPA, NHA,

                                               Chairperson, NASVH,
     Legislative Committee.
                                                                    ____

                                           National Association of


                                         State Veterans Homes,

                                 Marshalltown, IA, April 26, 1993.
     Hon. Kent Conrad,
     U.S. Senate, Hart Office Building,
     Washington, DC.
       Dear Senator Conrad. This is to express the views of the 
     National Association of State Veterans Homes pertinent to 
     proposed legislation to improve (3) the State Home Program.
       (A) Title 38 United States Code, Section 1741, authorizes 
     per diem to State Homes for domiciliary, nursing home care 
     and hospital care. We endorse legislation to provide 
     authority to the Secretary, Department of Veterans Affairs, 
     to provide a per diem payment for adult day health care and 
     construction grant support for expansion, remodeling or 
     alteration of existing buildings to permit provision of adult 
     day health care.
       A survey conducted by the National Association of State 
     Veterans Homes in 1984 overwhelmingly supported an adult day 
     health 
     [[Page S1760]] care initiative if an appropriate 
     reimbursement system through the Veterans Administration 
     could be developed for State Homes. Of the 48 responses from 
     52 Homes surveyed, 38 responded positively.
       It is recommended that Section 1741 be amended to include 
     authorization for State Home Adult Day Health Care.
       Often times, family and loved ones are the primary 
     caregivers for adult persons. Trying to maintain adults in 
     the home can be very stressful and care can be difficult to 
     provide both physically and psychologically. Resources can be 
     extremely limited, especially in rural communities and 
     families may not be aware of what resources are available. 
     Adult ``day care'' has been one concept implemented to 
     address dependent adult care.
       The seventy-one State Veterans Homes in forty-one states 
     being long-term care facilities employ clinicians with 
     expertise in geriatrics and staff with years of experience in 
     working with dependent, infirm, and/or handicapped 
     individuals. The Homes have the potential to offer adult day 
     health care in a safe,
      structured environment with trained, caring staff. There 
     could be provisions for meals and nutritious snacks, 
     medication dispensing, exercise programming and the 
     offering of health assessment and patient/family teaching. 
     There could be planned activities and social interactions 
     for adult participation.
       Such a program would be an ideal option for the elderly 
     veterans who are: in need of social stimulation to combat 
     depression; in need of supervision and/or personal care; 
     post-operative in need of supervision or medication; victims 
     of early Alzheimer's Disease.
       Involvement in adult day health care would provide a peace 
     of mind and respite for the working and non-working 
     caregivers.
       The provisions of these services during daytime hours in a 
     congregate setting would enable veterans to be maintained at 
     home in a supportive environment and be an alternative to a 
     nursing home placement. Participation in an Adult Day Health 
     Care Program could possibly prolong the ability of the 
     veteran to stay in his home thereby lowering the demands on 
     the Department of Veterans Affairs system.
       Besides providing respite for the primary caregivers, 
     veterans could be screened and referred for medical and/or 
     community resources, including Department of Veteran's 
     Affairs medical care facilities. Pre-assessment for admission 
     could take place if the veteran desires to make application 
     for permanent living in the State Home. Other advantages to 
     the individuals and family members are networking with family 
     members and professionals, participation in support groups, 
     gaining knowledge about community resources and how to access 
     the system.
       The National Association of State Veterans Homes supports 
     that provisions in United States Code 38, Section 1741, be 
     amended to authorize State Home Adult Day Health Care; per 
     diem payments to states for providing same; and to permit the 
     Department of Veterans Affairs to provide grants for 
     expansion, remodeling or alteration of existing buildings to 
     permit provision of such care.
       We in the State Home Program do not know the level of 
     participation by the states at this time; however, it is 
     anticipated there would be activity initially by five to ten 
     Homes in this area. Since the Department of Veterans is 
     unable to approve requests for construction grants totaling 
     more
      than the amount specifically appropriated by the Congress 
     for that fiscal year, any additional grant requests for 
     construction for adult day health care over the specified 
     funding allowed would probably require a waiting period. 
     This waiting period would allow an opportunity for the 
     Department of Veterans Affairs and State Home Program to 
     bring the increased need for additional construction funds 
     to the attention of the Veterans Affairs' Committees for 
     consideration.
       The State Home Program has a proven track record of being 
     able to blend Federal, State and private resources to 
     maximize the resources available for providing care for the 
     veterans of this Nation. Because of this track record, it is 
     always wise to look for opportunities to expand the 
     relationship, so as to further enhance the efficient use of 
     the Department of Veterans Affairs' resources in its 
     provision of care for veterans. The establishment of a per 
     diem for these services is an expansion of the already 
     successful State Home Program with the Department of Veterans 
     Affairs. With this per diem as a starting point, the State 
     Home Program in partnership with the Department of Veterans 
     Affairs has the potential to move towards an efficient, 
     effective means of providing this necessary service for its 
     constituents.
       (B) Sharing: While the United States Congress has been 
     generous in providing for its veterans, and the Department of 
     Veterans Affairs has done a commendable job within the 
     confines of the budgeted amounts in taking care of the 
     Nation's veterans, the resources to do so are becoming more 
     limited. We must continue to work closer together, share 
     ideas, stretch and share resources and assist one another if 
     we are going to fulfill our mutual obligation to provide the 
     necessary health care services for the Nation's veterans. 
     This sharing proposal is an initiative to formalize a closer-
     working relationship between the Department of Veterans 
     Affairs Medical Centers in states where State Veterans Homes 
     presently exist. It will strengthen the long and successful 
     partnership between the Department of Veterans Affairs and 
     State Homes which has long been recognized as a vital 
     resource for the Department of Veterans Affairs in providing 
     care for the chronically ill, elderly veterans.
       Since many State Homes are located within a radius of one 
     hundred miles of a Department of Veterans Affairs medical 
     facility, it is felt that sharing of services would result in 
     service, efficiency and economy in provision of care. The 
     ability to have Department of Veterans Affairs clinics, such 
     as Urology, Psychiatric Consultation, Physical Medicine/
     Rehabilitation Consultation, etc., located within a State 
     Veterans Home, would enhance continuity of care for the 
     benefit of the veterans in State Homes. Chronically ill, 
     debilitated, infirm veterans would not have to experience 
     traveling to and from the medical centers for some clinics if 
     such a sharing was possible. Other areas of sharing could be 
     in non-clinical services such as laundry, Life/Safety, 
     Quality Assurance programming, housekeeping, etc.
       It is felt that by permitting the Department of Veterans' 
     Affairs and the State Home Program to expand, their sharing 
     will result in greater efficiencies and enhance care for 
     veterans. The National Association of State Veterans Homes 
     supports enactment of the concept of sharing in this proposed 
     legislation and believes it to be a benefit to veterans, the 
     Department of Veterans Affairs and the State Home Program.
       On behalf of the National Association of State Veterans 
     Homes, thank you for the opportunity to support legislation 
     to improve the State Veterans Home Program.
           Sincerely,
                                                     Jack J. Dack,
                               Chairperson, Legislative Committee.
                                 ______

      By Mr. COHEN:
  S. 294. A bill to increase the availability and affordability of 
health care coverage for individuals and their families, to reduce 
paperwork and simplify the administration of health care claims, to 
increase access to care in rural and underserved areas, to improve 
quality and protect consumers from health care fraud and abuse, to 
promote preventive care, to make long-term care more affordable, and 
for other purposes; to the Committee on Finance.


                  access to affordable health care act

  Mr. COHEN. Mr. President, as the 104th Congress opened, it did so 
with a great deal of fanfare this month. Much of the discussion has 
been devoted to congressional reform, tax cuts, the balanced budget 
amendment, unfunded mandates, and welfare reform, but on one issue our 
colleagues have been notably silent.
  I say that with one notable exception, my colleague from Illinois, 
who has just spoken rather eloquently on the whole subject of health 
care reform, which is what I would like to talk about this afternoon.
  Health care reform was a dominant topic on everyone's mind during the 
last Congress. As I mentioned just a moment ago, today it is barely a 
whisper. I believe that this is a mistake. I think it is time for the 
Senate to put the issue back on the front burner of the public agenda.
  Health care reform may not be a major clause in the House 
Republican's Contract With America, but rising health care costs and 
expanding gaps in coverage are still very much on the minds of the 
American people. In fact, postelection polls conducted for the Health 
Care Leadership Council and by the Washington Post and ABC News show 
that health care remains a top priority--as important even as cutting 
taxes, passing a balanced budget amendment, or enacting welfare reform.
  Abraham Lincoln once observed that ``with public sentiment nothing 
can fail, and without it nothing can succeed.''
  I think the American people wisely rejected the big-government 
approach advocated last year by the administration. More Government is 
clearly not the way to lower health care costs.
  And when I say they rejected big government, this is a copy of the 
bill that in fact was being debated last year, some 1,443 pages long. 
The public did not understand it. They felt also that we were moving 
toward, if I can use that Tofflerian phrase, demasification of the 
centralized health care system. The fact is, they rejected it.
  The fact is that Government spending on health care, with all of its 
bureaucratic endeavors and controls, has risen much faster than private 
health care spending. In fact, between 1970 and 1991 Medicare and 
Medicaid grew 427 percent, more than double the amount of 165 percent 
in the private sector. So we have seen a real disparity in terms of 
Government sponsored and funded 
[[Page S1761]] programs versus that of the private sector.
  But the public rejection of the Clinton health care plan does not 
mean that American people do not want health care reform.
  As my colleague from California, Senator Diane Feinstein, observed, 
the main reason the President's health care reform efforts collapsed 
was that the ``Democrats listened to the 15 percent of the public who 
had no coverage, while the Republicans listened to the 85 percent who 
did.'' What some Democrats in Washington derided as merely incremental 
was, to the American public, essential.
  Susan Sontag wrote:

       Illness is the night-side of life, a more onerous 
     citizenship. Everyone who is born holds dual citizenship, in 
     the kingdom of the well and the kingdom of the sick. Although 
     we all prefer to use only the good passport, sooner or later 
     each of us is obliged, at least for a spell, to identify 
     ourselves as citizens of that other place.

  As such, the flaws in our health care system are ones that will--
sooner or later--touch every American family.
  The American people want health care reform, but they want something 
they can understand and afford. They want a program that gives them 
some reassurance against their growing sense of financial insecurity 
against potential illness--a program that gives them some protection 
should they cross over into that kingdom of the sick.
  When the American people say they want reform, they mean: ``If I lose 
my job or get sick, I want to keep my health insurance and I do not 
want it to cost so much.'' They want Congress to enact targeted reforms 
to contain health care costs and to ensure that they do not lose the 
health care coverage that they have.
  Health care reform, I think, as my colleague from Illinois has 
pointed out, is pretty familiar to most of us now. We have spent over 4 
years studying the problem, countless hours of staff researching the 
issue, debating the issue, drafting legislation, negotiating 
compromise. We have something, I think, very valuable to show for that 
effort.
  Despite the partisan and sometimes bitter debate in the last 
Congress, there is broad-based, bipartisan agreement on some key steps 
that can and should be taken to contain health care costs and increase 
access for millions of Americans. In fact, I believe that action could 
have been taken on these changes 3 years ago if some had not insisted 
that there be comprehensive reform, or no reform at all.
  Today I am introducing legislation outlining a blueprint for reform 
that is based on principles upon which I believe a bipartisan majority 
in Congress could agree. The plan takes significant strides toward the 
goal of universal coverage by bringing millions more Americans into the 
system. While some might characterize these reforms as incremental, 
they are by no means insignificant.
  They would include insurance market reforms to make insurance 
portable and prohibit insurers from denying, canceling, or limiting 
coverage or otherwise discriminating against individuals on the basis 
of their health status.
  They would include refundable tax credits for low-income families and 
full tax deductibility for the self-employed to make insurance coverage 
more affordable.
  They would include voluntary purchasing cooperatives to give 
individuals and small businesses access to more affordable coverage; 
administrative reforms to reduce costs and paperwork and make the 
system more efficient.
  They would include malpractice reforms to reduce the costly practice 
of defensive medicine; expanded access to care in rural areas; more 
affordable long-term care; and, finally, stronger efforts to combat 
fraud and abuse, which currently rob our system of as much as $100 
billion every year.
  Many of my colleagues have heard me take the floor time and time 
again to complain about health care fraud in this country. In fact, 
just last week I introduced separate legislation dealing with health 
care fraud, because we are losing $100 billion every year to health 
care fraud. It amounts to $275 million a day, $11.5 million every 
single hour.
  We could have taken action last year. We did not take action last 
year. The said wait until health care reform comes. Health care reform 
did not come. So by the time this legislation or some variation of this 
legislation is finally adopted, we will lost another $100 billion to 
health care fraud and abuse.
  Many of the principles involved in this legislation--and, by the way, 
Mr. President, this contains about 200 typewritten pages--could have 
been adopted more than 4\1/2\ years ago when I first introduced it. In 
fact, it could have been adopted when Senator Lloyd Bentsen passed his 
version of the bill back in 1992.
  Although action on health care reform has been deferred in the past. 
It simply cannot be deferred any longer.
  The new Republican-controlled Congress has both the obligation and 
the political opportunity to enact health care reform, but the window 
of opportunity will not be open long. We simply cannot afford to repeat 
past mistakes and allow the issue to become complicated or obfuscated 
by election-year politics.
  I listened with great interest to my colleagues from Illinois outline 
some of the letters he has received from constituents and others 
pointing out it is not a Republican or Democratic issue, it is an 
American problem.
  Last month, one of my constituents, Leslie Mansfield, of Bar Harbor, 
testified before the Maine Health Care Reform Commission about the
 importance of health care reform for her family. Since her son was 
diagnosed with juvenile diabetes 6 years ago, the family has faced 
mounting insurance and medical bills. Even though the rest of the 
family is healthy, in 3 short years they have seen their insurance 
premiums jump from $190 to $600 a month, and they fear that they will 
soon be either dropped by their insurer or priced out of the market 
entirely.

  If the new Congress does not move quickly on health care reform, 
millions of Americans like Leslie Mansfield and her family will be 
worse off, not better off.
  Health care costs, which last year topped $1 trillion, will continue 
to rise, placing an increasing strain on families, employers, and 
governments alike, and pricing millions more Americans out of the 
market. Insurers and businesses will be able to continue to cut costs 
by avoiding customers at greater risk. People with preexisting medical 
conditions like heart disease and diabetes will face even steeper 
premiums or could lose their coverage entirely. And we will continue to 
lose an estimated $275 million a day--that is $11.5 million every 
hour--to health care fraud.
  Health care reform does not have to be an all-or-nothing proposition. 
That mistake was made both in 1992 and in 1994 and should not be 
repeated. By building upon our areas of agreement, we can take major 
steps to contain costs, expand choice and extend access to care to 
millions more Americans.
  We have come a long way to reach this point in the health care debate 
and we should move forward. While to do nothing may not be a breach of 
the Contract With America, it most certainly would be a
 breach of trust with the American people.

  I urge my colleagues to join me in cosponsoring the Access to 
Affordable Health Care Act and ask unanimous consent that a section-by-
section summary as well as the full text of the bill be printed in the 
Congressional Record.
  Mr. SIMON. Mr. President, will the Senator yield for 30 seconds? I 
want to commend the Senator for his statement.
  Mr. COHEN. I yield to the Senator.
  Mr. SIMON. I, obviously, have not read the bill. But if we recognize 
the problem and work together, we can do something for the American 
people in this session of Congress. I commend him for his leadership.
  Mr. COHEN. Mr. President, I thank my friend for his comments. Let me 
conclude with a few observations.
  There has been so much partisanship discussed in the House and the 
Senate on various other issues. There was a great deal of partisanship 
on the health care debate as well. I remember when Senator Dole asked 
the committee to put together a task force headed up by John Chafee to 
meet with our Democratic counterpart; we ran into a stonewall.
  [[Page S1762]] It was not open to negotiation. There was no 
compromise. It was all-or-nothing, comprehensive or nothing at all. As 
a result, we had nothing at all. One of the members of the Democratic 
task force came to me just a couple of days ago and said, ``You know, 
if we had done what you had suggested 2 years ago, it would have been a 
great step forward.'' We did not do it then. We ought to do it now.
  Let Senators put aside the partisanship and reach across the aisle 
and do something the American people will support--Republican, 
Democrat, independent, it does not matter. We need the relief. We need 
the reform. We ought not to defer this any longer. I yield the floor.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:
                                 S. 294
       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE AND TABLE OF CONTENTS.

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

Sec. 1. Short title and table of contents.

                TITLE I--HEALTH INSURANCE MARKET REFORM

                 Subtitle A--Insurance Market Standards

Sec. 1001. Nondiscrimination based on health status.
Sec. 1002. Guaranteed issue and renewal
Sec. 1003. Rating limitations.
Sec. 1004. Delivery system quality standards.
Sec. 1005. Risk adjustment.
Sec. 1006. Effective dates.

         Subtitle B--Establishment and Application of Standards

Sec. 1011. General rules.
Sec. 1012. Encouragement of State reforms.
Sec. 1013. Enforcement of standards.

                        Subtitle C--Definitions

Sec. 1021. Definitions.

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

Sec. 2001. Grants to States for small group health insurance purchasing 
              arrangements.

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

Sec. 3001. Permanent extension and increase of deduction for health 
              insurance costs of self-employed individuals.
Sec. 3002. Credit for health insurance expenses.

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

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

                TITLE V--QUALITY AND CONSUMER PROTECTION

              Subtitle A--Quality Improvement Foundations

Sec. 5001. Quality improvement foundations.

               Subtitle B--Administrative Simplification

                    Part 1--Purpose and Definitions

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

    Part 2--Standards for Data Elements and Information Transactions

Sec. 5111. General requirements on secretary.
Sec. 5112. Standards for transactions and data elements.
Sec. 5113. Timetables for adoption of standards.

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

Sec. 5121. Requirements on health plans.
Sec. 5122. Timetables for compliance with requirements.

                  Part 4--Accessing Health Information

Sec. 5131. Access for authorized purposes.
Sec. 5132. Responding to access requests.
Sec. 5133. Timetables for adoption of standards and compliance.

   Part 5--Standards and Certification for Health Information Network

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

                           Part 6--Penalties

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

                    Part 7--Miscellaneous Provisions

Sec. 5161. Effect on State law.
Sec. 5162. Health information continuity.
Sec. 5163. Health Information Advisory Committee.
Sec. 5164. Authorization of appropriations.

               Subtitle C--Privacy of Health Information

                          Part 1--Definitions

Sec. 5201. Definitions.

                     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, 
              subpoenas, and summons.


            SUBPART F--DISCLOSURE PURSUANT TO PARTY SUBPOENA

Sec. 5231. Party subpoenas.
Sec. 5232. Access procedures for party subpoenas.
Sec. 5233. Challenge procedures for party subpoenas.

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


                       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--Health Care Fraud Prevention

Sec. 5301. Short title; table of contents.

           Part A--All-Payer Fraud and Abuse Control Program

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

       Part B--Revisions to Current Sanctions for Fraud and Abuse

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

          Part C--Administrative and Miscellaneous Provisions

Sec. 5331. Establishment of the health care fraud and abuse data 
              collection program.

                    Part D--Civil Monetary Penalties

Sec. 5341. Civil monetary penalties.

                   Part E--Amendments to Criminal Law

Sec. 5351. Health care fraud.
[[Page S1763]] Sec. 5352. Forfeitures for Federal health care offenses.
Sec. 5353. Injunctive relief relating to Federal health care offenses.
Sec. 5354. Grand jury disclosure.
Sec. 5355. False Statements.
Sec. 5356. Voluntary disclosure program.
Sec. 5357. Obstruction of criminal investigations of Federal health 
              care offenses.
Sec. 5358. Theft or embezzlement.
Sec. 5359. Laundering of monetary instruments.

       Part F--Payments for State Health Care Fraud Control Units

Sec. 5361. Establishment of State fraud units.
Sec. 5362. Requirements for State fraud units.
Sec. 5363. Scope and purpose.
Sec. 5364. Payments to States.

                      TITLE VI--MALPRACTICE REFORM

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

           TITLE VII--HEALTH PROMOTION AND DISEASE PREVENTION

Sec. 7001. Disease prevention and health promotion programs treated as 
              medical care.
Sec. 7002. Worksite wellness grant program.
Sec. 7003. Expanding and improving school health education.

             TITLE VIII--TAX INCENTIVES FOR LONG-TERM CARE

Sec. 8001. Short title.
Sec. 8002. Amendment of 1986 Code.

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

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

           Subtitle B--Standards For Long-Term Care Insurance

Sec. 8201. National Long-Term Care Insurance Advisory Council.
Sec. 8202. Additional requirements for issuers of long-term care 
              insurance policies.
Sec. 8203. Coordination with State requirements.
Sec. 8204. Uniform language and definitions.

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

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

                       Subtitle D--Effective Date

Sec. 8401. Effective date of tax provisions.

                      TITLE IX--BUDGET NEUTRALITY

Sec. 9001. Assurance of budget neutrality.
                TITLE I--HEALTH INSURANCE MARKET REFORM
                 Subtitle A--Insurance Market Standards

     SEC. 1001. NONDISCRIMINATION BASED ON HEALTH STATUS.

       (a) In General.--Except as provided in subsection (b) and 
     section 1003(d), a health plan may not deny, limit, or 
     condition the coverage under (or benefits of) the plan, or 
     vary the premium, for an individual based on the health 
     status, medical condition, claims experience, receipt of 
     health care, medical history, anticipated need for health 
     care services, disability, or lack of evidence of 
     insurability.
       (b) Treatment of Preexisting Condition Exclusions for All 
     Services.--
       (1) In general.--A health plan may impose a limitation or 
     exclusion of benefits relating to treatment of a condition 
     based on the fact that the condition preexisted the effective 
     date of the plan with respect to an individual only if--
       (A) the condition was diagnosed or treated during the 3-
     month period ending on the day before the date of enrollment 
     under the plan;
       (B) the limitation or exclusion extends for a period not 
     more than 6 months after the date of enrollment under the 
     plan;
       (C) the limitation or exclusion does not apply to an 
     individual who, as of the date of birth, was covered under 
     the plan; or
       (D) the limitation or exclusion does not apply to 
     pregnancy.
       (2) Crediting of previous coverage.--A health plan shall 
     provide that if an individual under such plan is in a period 
     of continuous coverage as of the date of enrollment under 
     such plan, any period of exclusion of coverage with respect 
     to a preexisting condition shall be reduced by 1 month for 
     each month in the period of continuous coverage.
       (3) Definitions.--For purposes of this subsection:
       (A) Period of continuous coverage.--
       (i) In general.--The term ``period of continuous coverage'' 
     means the period beginning on the date an individual is 
     enrolled under a health plan or an equivalent health care 
     program and ends on the date the individual is not so 
     enrolled for a continuous period of more than 3 months.
       (ii) Equivalent health care program.--The term ``equivalent 
     health care program'' means--

       (I) part A or part B of the medicare program under title 
     XVIII of the Social Security Act (42 U.S.C. 1395 et seq.),
       (II) the medicaid program under title XIX of the Social 
     Security Act (42 U.S.C. 1396 et seq.),
       (III) the health care program for active military personnel 
     under title 10, United States Code,
       (IV) the veterans health care program under chapter 17 of 
     title 38, United States Code,
       (V) the Civilian Health and Medical Program of the 
     Uniformed Services (CHAMPUS), as defined in section 1073(4) 
     of title 10, United States Code, and
       (VI) the Indian health service program under the Indian 
     Health Care Improvement Act (25 U.S.C. 1601 et seq.).

       (B) Preexisting condition.--The term ``preexisting 
     condition'' means, with respect to coverage under a health 
     plan, a condition which was diagnosed, or which was treated, 
     within the 3-month period ending on the day before the date 
     of enrollment (without regard to any waiting period).
       (c) Limitations Prohibited.--
       (1) In general.--A health plan may not impose a lifetime 
     limitation on the provision of benefits under the plan.
       (2) Rule of construction.--The prohibition contained in 
     paragraph (1) shall not be construed as prohibiting 
     limitations on the scope or duration of particular items or 
     services covered by a health plan.

     SEC. 1002. GUARANTEED ISSUE AND RENEWAL

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

     SEC. 1003. RATING LIMITATIONS.

       (a) In General.--A health plan offering coverage in the 
     small group market shall comply with the standards developed 
     under this section.
       (b) Role of NAIC.--The Secretary shall request that the 
     NAIC--
       (1) develop specific standards in the form of a model Act 
     and model regulations that provide for the implementation of 
     the rating limitations described in subsection (d); and
       (2) report to the Secretary concerning such standards 
     within 6 months after the date of enactment of this Act.
       (c) Role of the Secretary.--The Secretary, upon review of 
     the report received under subsection (b)(2), shall not later 
     than January 1, 1997, promulgate final standards implementing 
     this section. Such standards shall be the applicable health 
     plan standards under this section.
       (d) Rating Standards.--The standards described in this 
     section shall provide for the following:
       (1) A determination of factors that health plans may use to 
     vary the premium rates of such plans. Such factors--
       (A) shall be applied in a uniform fashion to all enrollees 
     covered by a plan;
       (B) shall include age (as specified in paragraph (3)), 
     family type, and geography; and
     [[Page S1764]]   (C) except as provided in paragraph (2)(A), 
     shall not include gender, health status, or health 
     expenditures.
       (2)(A) Factors prohibited under paragraph (1)(C) shall be 
     phased out over a period not to exceed 3 years after the 
     effective date of this section.
       (B) Other rating factors (other than age) may be phased out 
     to the extent necessary to minimize market disruption and 
     maximize coverage rates.
       (3) Uniform age categories and age adjustment factors that 
     reflect the relative actuarial costs of benefit packages 
     among enrollees. By the end of the 3-year period beginning on 
     the effective date of this section, for individuals who have 
     attained age 18 but not age 65, the highest age adjustment 
     factor may not exceed 3 times the lowest age adjustment 
     factor.
       (e) Discounts.--Standards developed under this section 
     shall permit health plans to provide premium discounts based 
     on workplace health promoting activities.

     SEC. 1004. DELIVERY SYSTEM QUALITY STANDARDS.

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

     SEC. 1005. RISK ADJUSTMENT.

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

     SEC. 1006. EFFECTIVE DATES.

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

     SEC. 1011. GENERAL RULES.

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

     SEC. 1012. ENCOURAGEMENT OF STATE REFORMS.

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

     SEC. 1013. ENFORCEMENT OF STANDARDS.

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

     SEC. 1021. DEFINITIONS.

       (a) Health Plan.--For purposes of this title and title II, 
     the term ``health plan'' means a plan that provides, or pays 
     the cost of, health benefits. Such term does not include the 
     following, or any combination thereof:
       (1) Coverage only for accidental death, dismemberment, 
     dental, or vision.
       (2) Coverage providing wages or payments in lieu of wages 
     for any period during which the employee is absent from work 
     on account of sickness or injury.
       (3) A medicare supplemental policy (as defined in section 
     1882(g)(1) of the Social Security Act (42 U.S.C. 
     1395ss(g)(1)).
       (4) Coverage issued as a supplement to liability insurance.
       (5) Worker's compensation or similar insurance.
       (6) Automobile medical-payment insurance.
       (7) A long-term care insurance policy, including a nursing 
     home fixed indemnity policy (unless the Secretary determines 
     that such a policy provides sufficiently comprehensive 
     coverage of a benefit so that it should be treated as a 
     health plan).
       (8) Any plan or arrangement not described in any preceding 
     subparagraph which provides for benefit payments, on a 
     periodic basis, for a specified disease or illness or period 
     of hospitalization without regard to the costs incurred or 
     services rendered during the period to which the payments 
     relate.
       (9) Such other plan or arrangement as the Secretary 
     determines is not a health plan.
       (b) Terms and Rules Relating to the Small Group and Large 
     Employer Markets.--For purposes of this title and title II:
       (1) Small group market.--The term ``small group market'' 
     means the market for health plans which is composed of small 
     employers and individual purchasers.
       (2) Small employer.--The term ``small employer'' means, 
     with respect to any calendar year, any employer if, on each 
     of 20 days during the preceding calendar year (each day being 
     in a different week), such employer (or any predecessor) 
     employed less than 51 employees for some portion of the day.
       (3) Individual purchaser.--The term ``individual 
     purchaser'' means an individual who is not eligible to enroll 
     in a health plan sponsored by a large or small employer.
       (4) Large employer market.--The term ``large employer 
     market'' means the market for health plans which is composed 
     of large employers.
       (5) Large employer.--The term ``large employer''--
       (A) means an employer that is not a small employer; and
       (B) includes a multiemployer plan as defined in section 
     3(37) of the Employment Retirement Income Security Act of 
     1974 (29 U.S.C. 1002(37)) and a plan which is maintained by a 
     rural electric cooperative or a rural telephone cooperative 
     association (within the meaning of section 3(40) of such Act 
     (29 U.S.C. 1002(40)).
       (c) Additional Definitions.--For purposes of this title and 
     title II:
       (1) NAIC.--The term ``NAIC'' means the National Association 
     of Insurance Commissioners.
       (2) Secretary.--The term ``Secretary'' means the Secretary 
     of Health and Human Services.
TITLE II--GRANTS TO STATES FOR SMALL GROUP HEALTH INSURANCE PURCHASING 
                              ARRANGEMENTS

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

       (a) In General.--The Secretary shall make grants to States 
     that submit applications meeting the requirements of this 
     section for the establishment and operation of small group 
     health insurance purchasing arrangements.
       (b) Use of Funds.--Grant funds awarded under this section 
     to a State may be used to finance administrative costs 
     associated with developing and operating a small group health 
     insurance purchasing arrangement, including the costs 
     associated with--
       (1) engaging in marketing and outreach efforts to inform 
     individuals and small employers about the small group health 
     insurance purchasing arrangement, which may include the 
     payment of sales commissions;
       (2) negotiating with insurers to provide health insurance 
     through the small group health insurance purchasing 
     arrangement; or
     [[Page S1765]]   (3) providing administrative functions, such 
     as eligibility screening, claims administration, and customer 
     service.
       (c) Application Requirements.--An application submitted by 
     a State to the Secretary shall describe--
       (1) whether the program will be operated directly by the 
     State or through 1 or more State-sponsored private 
     organizations and the details of such operation;
       (2) program goals for reducing the cost of health insurance 
     for, and increasing insurance coverage in, the small group 
     market;
       (3) the approaches proposed for enlisting participation by 
     insurers and small employers, including any plans to use 
     State funds to subsidize the cost of insurance for 
     participating individuals and employers; and
       (4) the methods proposed for evaluating the effectiveness 
     of the program in reducing the number of uninsured in the 
     State and on lowering the cost of health insurance for the 
     small group market in the State.
       (d) Grant Criteria.--In awarding grants, the Secretary 
     shall consider the potential impact of the State's proposal 
     on the cost of health insurance for the small group market 
     and on the number of uninsured, and the need for regional 
     variation in the awarding of grants. To the extent the 
     Secretary deems appropriate, grants shall be awarded to fund 
     programs employing a variety of approaches for establishing 
     small group health insurance purchasing arrangements.
       (e) Prohibition on Grants.--No grant funds shall be paid to 
     States that do not meet the requirements of this title with 
     respect to small group health plans, or to States with group 
     purchasing programs involving small group health plans that 
     do not meet the requirements of this title.
       (f) Annual Report by States.--States receiving grants under 
     this section shall report to the Secretary annually on the 
     numbers and rates of participation by eligible insurers and 
     small employers, on the estimated impact of the program on 
     reducing the number of uninsured, and on the cost of 
     insurance available to the small group market in the State.
       (g) Authorization of Appropriations.--There are authorized 
     to be appropriated for each of the fiscal years 1996, 1997, 
     and 1998, such sums as may be necessary to carry out this 
     section.
       (h) Secretarial Report.--The Secretary shall report to 
     Congress by not later than January 1, 1997, on the number and 
     amount of grants awarded under this section, and include with 
     such report an evaluation of the impact of the grant program 
     on the number of uninsured and cost of health insurance to 
     small group markets in participating States.
TITLE III--TAX INCENTIVES TO ENCOURAGE THE PURCHASE OF HEALTH INSURANCE

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

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

The applicable percentage is:n:
2594, 1995 and 1996....................................................
5097...................................................................
7598 and 1999..........................................................
100.''nd thereafter....................................................
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     1993.

     SEC. 3002. CREDIT FOR HEALTH INSURANCE EXPENSES.

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

       ``(a) Allowance of Credit.--
       ``(1) In general.--In the case of an eligible individual, 
     there shall be allowed as a credit against the tax imposed by 
     this subtitle for the taxable year an amount equal to the 
     applicable percentage of the qualified health insurance 
     expenses paid by such individual during the taxable year.
       ``(2) Applicable percentage.--For purposes of paragraph 
     (1), the term `applicable percentage' means 60 percent 
     reduced (but not below zero) by 10 percentage points for each 
     $1,000 (or fraction thereof) by which the taxpayer's adjusted 
     gross income for the taxable year exceeds the applicable 
     dollar amount.
       ``(3) Applicable dollar amount.--For purposes of this 
     subsection, the term `applicable dollar amount' means--
       ``(A) in the case of a taxpayer filing a joint return, 
     $28,000,
       ``(B) in the case of any other taxpayer (other than a 
     married individual filing a separate return), $18,000, and
       ``(C) in the case of a married individual filing a separate 
     return, zero.

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

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

       ``(a) General Rule.--Except as otherwise provided in this 
     section, every employer making payment of wages with respect 
     to whom a health insurance expenses eligibility certificate 
     is in effect shall, at the time of paying such wages, make an 
     additional payment equal to such employee's dependent care 
     advance amount.
       ``(b) Health Insurance Expenses Eligibility Certificate.--
     For purposes of this title, a health insurance expenses 
     eligibility certificate is a statement furnished by an 
     employee to the employer which--
       ``(1) certifies that the employee will be eligible to 
     receive the credit provided by section 34A for the taxable 
     year,
       ``(2) certifies that the employee does not have a health 
     insurance expenses eligibility certificate in effect for the 
     calendar year with respect to the payment of wages by another 
     employer,
       ``(3) states whether or not the employee's spouse has a 
     health insurance expenses eligibility certificate in effect, 
     and
       ``(4) estimates the amount of qualified health insurance 
     expenses (as defined in section 34A(b)) for the calendar 
     year.

     For purposes of this section, a certificate shall be treated 
     as being in effect with respect to a spouse if such a 
     certificate will be in effect on the first status 
     determination date following the date on which the employee 
     furnishes the statement in question.
       ``(c) Health Insurance Expenses Advance Amount.--
       ``(1) In general.--For purposes of this title, the term 
     `health insurance expenses advance amount' means, with 
     respect to any payroll period, the amount determined--
       ``(A) on the basis of the employee's wages from the 
     employer for such period,
       ``(B) on the basis of the employee's estimated qualified 
     health insurance expenses included in the health insurance 
     expenses eligibility certificate, and
       ``(C) in accordance with tables provided by the Secretary.
       ``(2) Advance amount tables.--The tables referred to in 
     paragraph (1)(C) shall be similar in form to the tables 
     prescribed under section 3402(a) and, to the maximum extent 
     feasible, shall be coordinated with such tables and the 
     tables prescribed under section 3507(c).
       ``(d) Other Rules.--For purposes of this section, rules 
     similar to the rules of subsections (d) and (e) of section 
     3507 shall apply.
       ``(e) Regulations.--The Secretary shall prescribe such 
     regulations as may be necessary to carry out the purposes of 
     this section.''.
       (2) Conforming amendment.--The table of sections for 
     chapter 25 of such Code is 
     [[Page S1766]] amended by adding after the item relating to 
     section 3507 the following new item:

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

``Sec. 34A. Health insurance expenses.''.
       (e) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     1995.
 TITLE IV--INCENTIVES TO INCREASE THE ACCESS OF RURAL AND UNDERSERVED 
                          AREAS TO HEALTH CARE

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

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

     ``SEC. 23. PRIMARY HEALTH SERVICES PROVIDERS.

       ``(a) Allowance of Credit.--There shall be allowed as a 
     credit against the tax imposed by this chapter for the 
     taxable year an amount equal to the product of--
       ``(1) the number of months during such taxable year--
       ``(A) during which the taxpayer is a qualified primary 
     health services provider, and
       ``(B) which are within the taxpayer's mandatory service 
     period, and
       ``(2) $1,000 ($500 in the case of a qualified practitioner 
     who is not a physician).
       ``(b) Qualified Primary Health Services Provider.--For 
     purposes of this section, the term `qualified primary health 
     services provider' means, with respect to any month, any 
     qualified practitioner who--
       ``(1) has in effect a certification by the Bureau as a 
     provider of primary health services and such certification 
     is, when issued, for a health professional shortage area in 
     which the qualified practitioner is commencing the providing 
     of primary health services,
       ``(2) is providing primary health services full time in the 
     health professional shortage area identified in such 
     certification, and
       ``(3) has not received a scholarship under the National 
     Health Service Corps Scholarship Program or any loan 
     repayments under the National Health Service Corps Loan 
     Repayment Program.

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

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

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

     SEC. 4002. EXPENSING OF MEDICAL EQUIPMENT.

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

     SEC. 4003. EXPANDED SERVICES FOR MEDICALLY UNDERSERVED 
                   INDIVIDUALS.

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

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

       ``(a) Establishment of Health Services Access Program.--
     From amounts appropriated under this section, the Secretary 
     shall, acting through the Bureau of Health Care Delivery 
     Assistance, award grants under this section to federally 
     qualified health centers (hereinafter referred to in this 
     section as `FQHC's') and other entities and organizations 
     submitting applications under this section (as described in 
     subsection (c)) for the purpose of providing access to 
     services for medically underserved populations (as defined in 
     section 330(b)(3)) or in high impact areas (as defined in 
     section 329(a)(5)) not currently being served by a FQHC.
       ``(b) Eligibility for Grants.--
       ``(1) In general.--The Secretary shall award grants under 
     this section to entities or organizations described in this 
     paragraph and paragraph (2) which have submitted a proposal 
     to the Secretary to expand such entities or organizations 
     operations (including 
     [[Page S1767]] expansions to new sites (as determined 
     necessary by the Secretary)) to serve medically underserved 
     populations or high impact areas not currently served by a 
     FQHC and which--
       ``(A) have as of January 1, 1991, been certified by the 
     Secretary as a FQHC under section 1905(l)(2)(B) of the Social 
     Security Act; or
       ``(B) have submitted applications to the Secretary to 
     qualify as FQHC's under such section 1905(l)(2)(B); or
       ``(C) have submitted a plan to the Secretary which provides 
     that the entity will meet the requirements to qualify as a 
     FQHC when operational.
       ``(2) Non fqhc entities.--
       ``(A) Eligibility.--The Secretary shall also make grants 
     under this section to public or private nonprofit agencies, 
     health care entities or organizations which meet the 
     requirements necessary to qualify as a FQHC except, the 
     requirement that such entity have a consumer majority 
     governing board and which have submitted a proposal to the 
     Secretary to provide those services provided by a FQHC as 
     defined in section 1905(l)(2)(B) of the Social Security Act 
     and which are designed to promote access to primary care 
     services or to reduce reliance on hospital emergency rooms or 
     other high cost providers of primary health care services, 
     provided such proposal is developed by the entity or 
     organizations (or such entities or organizations acting in a 
     consortium in a community) with the review and approval of 
     the Governor of the State in which such entity or 
     organization is located.
       ``(B) Limitation.--The Secretary shall provide in making 
     grants to entities or organizations described in this 
     paragraph that no more than 10 percent of the funds provided 
     for grants under this section shall be made available for 
     grants to such entities or organizations.
       ``(c) Application Requirements.--
       ``(1) In general.--In order to be eligible to receive a 
     grant under this section, a FQHC or other entity or 
     organization must submit an application in such form and at 
     such time as the Secretary shall prescribe and which meets 
     the requirements of this subsection.
       ``(2) Requirements.--An application submitted under this 
     section must provide--
       ``(A)(i) for a schedule of fees or payments for the 
     provision of the services provided by the entity designed to 
     cover its reasonable costs of operations; and
       ``(ii) for a corresponding schedule of discounts to be 
     applied to such fees or payments, based upon the patient's 
     ability to pay (determined by using a sliding scale formula 
     based on the income of the patient);
       ``(B) assurances that the entity or organization provides 
     services to persons who are eligible for benefits under title 
     XVIII of the Social Security Act, for medical assistance 
     under title XIX of such Act or for assistance for medical 
     expenses under any other public assistance program or private 
     health insurance program; and
       ``(C) assurances that the entity or organization has made 
     and will continue to make every reasonable effort to collect 
     reimbursement for services--
       ``(i) from persons eligible for assistance under any of the 
     programs described in subparagraph (B); and
       ``(ii) from patients not entitled to benefits under any 
     such programs.
       ``(d) Limitations on Use of Funds.--
       ``(1) In general.--From the amounts awarded to an entity or 
     organization under this section, funds may be used for 
     purposes of planning but may only be expended for the costs 
     of--
       ``(A) assessing the needs of the populations or proposed 
     areas to be served;
       ``(B) preparing a description of how the needs identified 
     will be met; and
       ``(C) development of an implementation plan that 
     addresses--
       ``(i) recruitment and training of personnel; and
       ``(ii) activities necessary to achieve operational status 
     in order to meet FQHC requirements under 1905(l)(2)(B) of the 
     Social Security Act.
       ``(2) Recruiting, training and compensation of staff.--From 
     the amounts awarded to an entity or organization under this 
     section, funds may be used for the purposes of paying for the 
     costs of recruiting, training and compensating staff 
     (clinical and associated administrative personnel (to the 
     extent such costs are not already reimbursed under title XIX 
     of the Social Security Act or any other State or Federal 
     program)) to the extent necessary to allow the entity to 
     operate at new or expended existing sites.
       ``(3) Facilities and equipment.--From the amounts awarded 
     to an entity or organization under this section, funds may be 
     expended for the purposes of acquiring facilities and 
     equipment but only for the cost of--
       ``(A) construction of new buildings (to the extent that new 
     construction is found to be the most cost-efficient approach 
     by the Secretary);
       ``(B) acquiring, expanding, and modernizing of existing 
     facilities;
       ``(C) purchasing essential (as determined by the Secretary) 
     equipment; and
       ``(D) amortization of principal and payment of interest on 
     loans obtained for purposes of site construction, 
     acquisition, modernization, or expansion, as well as 
     necessary equipment.
       ``(4) Services.--From the amounts awarded to an entity or 
     organization under this section, funds may be expanded for 
     the payment of services but only for the costs of--
       ``(A) providing or arranging for the provision of all 
     services through the entity necessary to qualify such entity 
     as a FQHC under section 1905(l)(2)(B) of the Social Security 
     Act;
       ``(B) providing or arranging for any other service that a 
     FQHC may provide and be reimbursed for under title XIX of 
     such Act; and
       ``(C) providing any unreimbursed costs of providing 
     services as described in section 330(a) to patients.
       ``(e) Priorities in the Awarding of Grants.--
       ``(1) Certified fqhc's.--The Secretary shall give priority 
     in awarding grants under this section to entities which have, 
     as of January 1, 1991, been certified as a FQHC under section 
     1905(l)(2)(B) of the Social Security Act and which have 
     submitted a proposal to the Secretary to expand their 
     operations (including expansion to new sites) to serve 
     medically underserved populations for high impact areas not 
     currently served by a FQHC. The Secretary shall give first 
     priority in awarding grants under this section to those FQHCs 
     or other entities which propose to serve populations with the 
     highest degree of unmet need, and which can demonstrate the 
     ability to expand their operations in the most efficient 
     manner.
       ``(2) Qualified fqhc's.--The Secretary shall give second 
     priority in awarding grants to entities which have submitted 
     applications to the Secretary which demonstrate that the 
     entity will qualify as a FQHC under section 1905(l)(2)(B) of 
     the Social Security Act before it provides or arranges for 
     the provision of services supported by funds awarded under 
     this section, and which are serving or proposing to serve 
     medically underserved populations or high impact areas which 
     are not currently served (or proposed to be served) by a 
     FQHC.
       ``(3) Expanded services and projects.--The Secretary shall 
     give third priority in awarding grants in subsequent years to 
     those FQHCs or other entities which have provided for 
     expanded services and project and are able to demonstrate 
     that such entity will incur significant unreimbursed costs in 
     providing such expanded services.
       ``(f) Return of Funds to Secretary for Costs Reimbursed 
     From Other Sources.--To the extent that an entity or 
     organization receiving funds under this section is reimbursed 
     from another source for the provision of services to an 
     individual, and does not use such increased reimbursement to 
     expand services furnished, areas served, to compensate for 
     costs of unreimbursed services provided to patients, or to 
     promote recruitment, training, or retention of personnel, 
     such excess revenues shall be returned to the Secretary.
       ``(g) Termination of Grants.--
       ``(1) Failure to meet fqhc requirements.--
       ``(A) In general.--With respect to any entity that is 
     receiving funds awarded under this section and which 
     subsequently fails to meet the requirements to qualify as a 
     FQHC under section 1905(l)(2)(B) or is an entity that is not 
     required to meet the requirements to qualify as a FQHC under 
     section 1905(l)(2)(B) of the Social Security Act but fails to 
     meet the requirements of this section, the Secretary shall 
     terminate the award of funds under this section to such 
     entity.
       ``(B) Notice.--Prior to any termination of funds under this 
     section to an entity, the entities shall be entitled to 60 
     days prior notice of termination and, as provided by the 
     Secretary in regulations, an opportunity to correct any 
     deficiencies in order to allow the entity to continue to 
     receive funds under this section.
       ``(2) Requirements.--Upon any termination of funding under 
     this section, the Secretary may (to the extent practicable)--
       ``(A) sell any property (including equipment) acquired or 
     constructed by the entity using funds made available under 
     this section or transfer such property to another FQHC, 
     provided, that the Secretary shall reimburse any costs which 
     were incurred by the entity in acquiring or constructing such 
     property (including equipment) which were not supported by 
     grants under this section; and
       ``(B) recoup any funds provided to an entity terminated 
     under this section.
       ``(h) Authorization of Appropriations.--There are 
     authorized to be appropriated such sums as may be necessary 
     for each of the fiscal years 1996 through 1999 to carry out 
     this section.''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall become effective with respect to services furnished by 
     a federally qualified health center or other qualifying 
     entity described in this section beginning on or after 
     October 1, 1996.

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

       (a) National Health Service Corps.--Section 338H(b)(1) of 
     the Public Health Service Act (42 U.S.C. 254q(b)(1)) is 
     amended--
       (1) by striking ``1991, and'' and inserting ``1991,''; and
       (2) by striking ``through 2000'' and inserting ``, 1994, 
     and 1995, and $20,000,000 for each of the fiscal years 1996 
     through 2000''.
       (b) Area Health Education Centers.--Section 746(i)(1) of 
     such Act (42 U.S.C. 293j(i)(1)) is amended--
       (1) in subparagraph (A), by striking ``1995'' and inserting 
     ``1995, and $20,000,000 for each of the fiscal years 1996 
     through 2000''; and
     [[Page S1768]]   (2) in subparagraph (C), by striking ``and 
     1995'' and inserting ``1995, and $20,000,000 for each of the 
     fiscal years 1996 through 2000''.

     SEC. 4005. ASSISTANT SECRETARY FOR RURAL HEALTH.

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

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

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

     SEC. 5001. QUALITY IMPROVEMENT FOUNDATIONS.

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

                    PART 1--PURPOSE AND DEFINITIONS

     SEC. 5101. PURPOSE.

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

     SEC. 5102. DEFINITIONS.

       For purposes of this subtitle:
       (1) Certified.--The term ``certified'' means, with respect 
     to a health information network service, that such service is 
     certified under section 5141.
       (2) Code set.--The term ``code set'' means any set of codes 
     used for encoding data elements, such as tables of terms, 
     medical concepts, medical diagnostic codes, or medical 
     procedure codes.
       (3) Coordination of benefits.--The term ``coordination of 
     benefits'' means determining and coordinating the financial 
     obligations of health plans when health care benefits are 
     payable under two or more health plans.
       (4) Health care provider.--The term ``health care 
     provider'' includes a provider of services (as defined in 
     section 1861(u) of the Social Security Act), a provider of 
     medical or other health services (as defined in section 
     1861(s) of the Social Security Act), and any other person 
     furnishing health care services or supplies.
       (5) Health information.--The term ``health information'' 
     means any information, whether oral or recorded in any form 
     or medium that--
       (A) is created or received by a health care provider, 
     health plan, health oversight agency (as defined in section 
     5202), health researcher, public health authority (as defined 
     in section 5202), employer, life insurer, school or 
     university, or certified health information network service; 
     and
       (B) relates to the past, present, or future physical or 
     mental health or condition of an individual, the provision of 
     health care to an individual, or the past, present, or future 
     payment for the provision of health care to an individual.
       (6) Health information network.--The term ``health 
     information network'' means the health information system 
     that is formed through the application of the requirements 
     and standards established under this subtitle.
       (7) Health information protection organization.--The term 
     ``health information protection organization'' means a 
     private entity or an entity operated by a State that accesses 
     standard data elements of health information through the 
     health information network and--
       (A) processes such information into non-identifiable health 
     information and discloses such information;
       (B) if such information is protected health information (as 
     defined in section 5202), discloses such information only in 
     accordance with subtitle C; and
       (C) may store such information
       (8) Health information network service.--The term ``health 
     information network service''--
       (A) means a private entity or an entity operated by a State 
     that enters into contracts to--
       (i) process or facilitate the processing of nonstandard 
     data elements of health information into standard data 
     elements;
       (ii) provide the means by which persons are connected to 
     the health information network 
     [[Page S1769]] for purposes of meeting the requirements of 
     this subtitle, including the holding of standard data 
     elements of health information;
       (iii) provide authorized access to health information 
     through the health information network; or
       (iv) provide specific information processing services, such 
     as automated coordination of benefits and claims transaction 
     routing; and
       (B) includes a health information protection organization.
       (9) Health plan.--The term ``health plan'' has the meaning 
     given such term in section 1021(a).
       (10) Non-identifiable health information.--The term ``non-
     identifiable health information'' means health information 
     that is not protected health information as defined in 
     section 5202.
       (11) Patient medical record information.--The term 
     ``patient medical record information'' means health 
     information derived from a clinical encounter that relates to 
     the physical or mental condition of an individual.
       (12) Standard.--The term ``standard'' when referring to an 
     information transaction or to data elements of health 
     information means the transaction or data elements meet any 
     standard adopted by the Secretary under part 2 that applies 
     to such information transaction or data elements.

    PART 2--STANDARDS FOR DATA ELEMENTS AND INFORMATION TRANSACTIONS

     SEC. 5111. GENERAL REQUIREMENTS ON SECRETARY.

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

     SEC. 5112. STANDARDS FOR TRANSACTIONS AND DATA ELEMENTS.

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

     SEC. 5113. TIMETABLES FOR ADOPTION OF STANDARDS.

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

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

     SEC. 5121. REQUIREMENTS ON HEALTH PLANS.

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

     SEC. 5122. TIMETABLES FOR COMPLIANCE WITH REQUIREMENTS.

       (a) Initial Compliance.--Not later than 12 months after the 
     date on which standards are adopted under part 2 with respect 
     to any type of transaction or data elements, a health plan 
     shall comply with the requirements of this subtitle with 
     respect to such transaction or data elements.
       (b) Compliance with Modified Standards.--
       (1) In general.--If the Secretary adopts a modified 
     standard under part 2, a health plan shall be required to 
     comply with the modified standard at such time as the 
     Secretary determines appropriate taking into account the time 
     needed to comply due to the nature and extent of the 
     modification.
       (2) Special rule.--In the case of modifications to 
     standards that do not occur within 
     [[Page S1770]] the 12-month period beginning on the date such 
     standards are adopted, the time determined appropriate by the 
     Secretary under paragraph (1) shall be no sooner than the 
     last day of the 90-day period beginning on the date such 
     modified standard is adopted and no later than the last day 
     of the 12 month period beginning on the date such modified 
     standard is adopted.

                  PART 4--ACCESSING HEALTH INFORMATION

     SEC. 5131. ACCESS FOR AUTHORIZED PURPOSES.

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

     SEC. 5132. RESPONDING TO ACCESS REQUESTS.

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

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

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

   PART 5--STANDARDS AND CERTIFICATION FOR HEALTH INFORMATION NETWORK

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

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

     SEC. 5142. ENSURING AVAILABILITY OF INFORMATION.

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

                           PART 6--PENALTIES

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

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

                    PART 7--MISCELLANEOUS PROVISIONS

     SEC. 5161. EFFECT ON STATE LAW.

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

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

     SEC. 5162. HEALTH INFORMATION CONTINUITY.

       (a) Health Plans.--If a health plan takes any action that 
     would threaten the continued availability of standard data 
     elements of health information held by such plan, such data 
     elements shall be transferred to a health plan in accordance 
     with procedures established by the Secretary.
       (b) Health Information Network Services.--If a certified 
     health information network service loses its certified status 
     or takes any action that would threaten the 
     [[Page S1771]] continued availability of the standard data 
     elements of health information held by such service, such 
     data elements shall be transferred to another such service, 
     as designated by the Secretary.

     SEC. 5163. HEALTH INFORMATION ADVISORY COMMITTEE.

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

     SEC. 5164. AUTHORIZATION OF APPROPRIATIONS.

       There are authorized to be appropriated such sums as may be 
     necessary to carry out the purposes of this subtitle.
               Subtitle C--Privacy of Health Information

                          PART 1--DEFINITIONS

     SEC. 5201. DEFINITIONS.

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

                     PART 2--AUTHORIZED DISCLOSURES

                     Subpart A--General Provisions

     SEC. 5206. GENERAL RULES REGARDING DISCLOSURE.

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

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

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

     SEC. 5208. CERTIFIED HEALTH INFORMATION NETWORK SERVICES.

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

          Subpart B--Specific Disclosures Relating to Patient

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

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

     SEC. 5212. NEXT OF KIN AND DIRECTORY INFORMATION.

       (a) Next of Kin.--A health care provider or person who 
     receives protected health information under section 5213 may 
     disclose protected health information to the next of kin, an 
     individual representative of the individual who is the 
     subject of the information, or an individual with whom that 
     individual has a close personal relationship if--
       (1) the individual who is the subject of the information--
       (A) has been notified of the individual's right to object 
     and has not objected to the disclosure;
       (B) is not competent to be notified about the right to 
     object; or
       (C) exigent circumstances exist such that it would not be 
     practicable to notify the individual of the right to object; 
     and
       (2) the information disclosed relates to health care 
     currently being provided to that individual.
       (b) Directory Information.--A health care provider and a 
     person receiving protected health information under section 
     5213 may disclose protected health information to any person 
     if--
       (1) the information does not reveal specific information 
     about the physical or mental condition of the individual who 
     is the subject of the information or health care provided to 
     that person;
       (2) the individual who is the subject of the information--
     [[Page S1772]]   (A) has been notified of the individual's 
     right to object and has not objected to the disclosure;
       (B) is not competent to be notified about the right to 
     object; or
       (C) exigent circumstances exist such that it would not be 
     practicable to notify the individual of the right to object; 
     and
       (3) the information consists only of 1 or more of the 
     following items:
       (A) The name of the individual who is the subject of the 
     information.
       (B) If the individual who is the subject of the information 
     is receiving health care from a health care provider on a 
     premises controlled by the provider--
       (i) the location of the individual on the premises; and
       (ii) the general health status of the individual, described 
     as critical, poor, fair, stable, or satisfactory or in terms 
     denoting similar conditions.
       (c) Identification of Deceased Individual.--A health care 
     provider, health plan, employer, or life insurer, may 
     disclose protected health information if necessary to assist 
     in the identification of a deceased individual.

     SEC. 5213. EMERGENCY CIRCUMSTANCES.

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

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

     SEC. 5216. OVERSIGHT.

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

     SEC. 5217. PUBLIC HEALTH.

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

     SEC. 5218. HEALTH RESEARCH.

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

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

     SEC. 5221. JUDICIAL AND ADMINISTRATIVE PURPOSES.

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

     SEC. 5222. LAW ENFORCEMENT.

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

    Subpart E--Disclosure Pursuant to Government Subpoena or Warrant

     SEC. 5226. GOVERNMENT SUBPOENAS AND WARRANTS.

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

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

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

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

       (a) Motion To Quash.--Within 15 days after the date of 
     service of a notice of execution or 
     [[Page S1773]] a copy of a warrant, subpoena, or summons of a 
     government authority seeking protected health information 
     about an individual under paragraph (1) or (2) of section 
     5226, the individual may file a motion to quash.
       (b) Standard for Decision.--The court shall grant a motion 
     under subsection (a) unless the government demonstrates that 
     there is probable cause to believe the protected health 
     information is relevant to a legitimate law enforcement 
     inquiry being conducted by the government authority and the 
     government authority's need for the information outweighs the 
     privacy interest of the individual.
       (c) Attorney's Fees.--In the case of a motion brought under 
     subsection (a) in which the individual has substantially 
     prevailed, the court may assess against the government 
     authority a reasonable attorney's fee and other litigation 
     costs (including expert's fees) reasonably incurred.
       (d) No Interlocutory Appeal.--A ruling denying a motion to 
     quash under this section shall not be deemed to be a final 
     order, and no interlocutory appeal may be taken therefrom by 
     the individual.

            Subpart F--Disclosure Pursuant to Party Subpoena

     SEC. 5231. PARTY SUBPOENAS.

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

     SEC. 5232. ACCESS PROCEDURES FOR PARTY SUBPOENAS.

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

     SEC. 5233. CHALLENGE PROCEDURES FOR PARTY SUBPOENAS.

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

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

                 Subpart A--Establishment of Safeguards

     SEC. 5236. ESTABLISHMENT OF SAFEGUARDS.

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

     SEC. 5237. ACCOUNTING FOR DISCLOSURES.

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

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

     SEC. 5241. INSPECTION OF PROTECTED HEALTH INFORMATION.

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

     SEC. 5242. AMENDMENT OF PROTECTED HEALTH INFORMATION.

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

     SEC. 5243. NOTICE OF INFORMATION PRACTICES.

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

            Subpart C--Standards for Electronic Disclosures

     SEC. 5246. STANDARDS FOR ELECTRONIC DISCLOSURES.

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

                           PART 4--SANCTIONS

            Subpart A--No Sanctions for Permissible Actions

     SEC. 5251. NO LIABILITY FOR PERMISSIBLE DISCLOSURES.

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

                       Subpart B--Civil Sanctions

     SEC. 5256. CIVIL PENALTY.

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

     SEC. 5257. CIVIL ACTION.

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

                     Subpart C--Criminal Sanctions

     SEC. 5261. WRONGFUL DISCLOSURE OF PROTECTED HEALTH 
                   INFORMATION.

       (a) Offense.--A person who knowingly--
       (1) obtains protected health information relating to an 
     individual in violation of this subtitle; or
       (2) discloses protected health information to another 
     person in violation of this subtitle,

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

                   PART 5--ADMINISTRATIVE PROVISIONS

     SEC. 5266. RELATIONSHIP TO OTHER LAWS.

       (a) State Law.--Except as provided in subsections (b), (c), 
     and (d), this subtitle preempts State law.
       (b) Laws Relating to Public or Mental Health.--Nothing in 
     this subtitle shall be construed to preempt or operate to the 
     exclusion of any State law relating to public 
     [[Page S1774]] health or mental health that prevents or 
     regulates disclosure of protected health information 
     otherwise allowed under this subtitle.
       (c) Privileges.--Nothing in this subtitle is intended to 
     preempt or modify State common or statutory law to the extent 
     such law concerns a privilege of a witness or person in a 
     court of the State. This subtitle does not supersede or 
     modify Federal common or statutory law to the extent such law 
     concerns a privilege of a witness or person in a court of the 
     United States. Authorizations pursuant to section 5207 shall 
     not be construed as a waiver of any such privilege.
       (d) Certain Duties Under State or Federal Law.--This 
     subtitle shall not be construed to preempt, supersede, or 
     modify the operation of--
       (1) any law that provides for the reporting of vital 
     statistics such as birth or death information;
       (2) any law requiring the reporting of abuse or neglect 
     information about any individual;
       (3) subpart II of part E of title XXVI of the Public Health 
     Service Act (relating to notifications of emergency response 
     employees of possible exposure to infectious diseases); or
       (4) any Federal law or regulation governing confidentiality 
     of alcohol and drug patient records.

     SEC. 5267. RIGHTS OF INCOMPETENTS.

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

     SEC. 5268. EXERCISE OF RIGHTS.

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

     SEC. 5301. SHORT TITLE.

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

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

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

       (a) Establishment of Program.--
       (1) In general.--Not later than January 1, 1996, the 
     Secretary of Health and Human Services (in this title 
     referred to as the ``Secretary''), acting through the Office 
     of the Inspector General of the Department of Health and 
     Human Services, and the Attorney General shall establish a 
     program--
       (A) to coordinate Federal, State, and local law enforcement 
     programs to control fraud and abuse with respect to the 
     delivery of and payment for health care in the United States,
       (B) to conduct investigations, audits, evaluations, and 
     inspections relating to the delivery of and payment for 
     health care in the United States,
       (C) to facilitate the enforcement of the provisions of 
     sections 1128, 1128A, and 1128B of the Social Security Act 
     and other statutes applicable to health care fraud and abuse, 
     and
       (D) to provide for the modification and establishment of 
     safe harbors and to issue interpretative rulings and special 
     fraud alerts pursuant to section 5313.
       (2) Coordination with health plans.--In carrying out the 
     program established under paragraph (1), the Secretary and 
     the Attorney General shall consult with, and arrange for the 
     sharing of data with representatives of health plans.
       (3) Regulations.--
       (A) In general.--The Secretary and the Attorney General 
     shall by regulation establish standards to carry out the 
     program under paragraph (1).
       (B) Information standards.--
       (i) In general.--Such standards shall include standards 
     relating to the furnishing of information by health plans, 
     providers, and others to enable the Secretary and the 
     Attorney General to carry out the program (including 
     coordination with health plans under paragraph (2)).
       (ii) Confidentiality.--Such standards shall include 
     procedures to assure that such information is provided and 
     utilized in a manner that appropriately protects the 
     confidentiality of the information and the privacy of 
     individuals receiving health care services and items.
       (iii) Qualified immunity for providing information.--The 
     provisions of section 1157(a) of the Social Security Act 
     (relating to limitation on liability) shall apply to a person 
     providing information to the Secretary or the Attorney 
     General in conjunction with their performance of duties under 
     this section.
       (C) Disclosure of ownership information.--
       (i) In general.--Such standards shall include standards 
     relating to the disclosure of ownership information described 
     in clause (ii) by any entity providing health care services 
     and items.
       (ii) Ownership information described.--The ownership 
     information described in this clause includes--

       (I) a description of such items and services provided by 
     such entity;
       (II) the names and unique physician identification numbers 
     of all physicians with a financial relationship (as defined 
     in section 1877(a)(2) of the Social Security Act) with such 
     entity;
       (III) the names of all other individuals with such an 
     ownership or investment interest in such entity; and
       (IV) any other ownership and related information required 
     to be disclosed by such entity under section 1124 or section 
     1124A of the Social Security Act, except that the Secretary 
     shall establish procedures under which the information 
     required to be submitted under this subclause will be reduced 
     with respect to health care provider entities that the 
     Secretary determines will be unduly burdened if such entities 
     are required to comply fully with this subclause.

       (4) Authorization of appropriations for investigators and 
     other personnel.--In addition to any other amounts authorized 
     to be appropriated to the Secretary, the Attorney General, 
     the Director of the Federal Bureau of Investigation, and the 
     Inspectors General of the Departments of Defense, Labor, and 
     Veterans Affairs and of the Office of Personnel Management, 
     for health care anti-fraud and abuse activities for a fiscal 
     year, there are authorized to be appropriated additional 
     amounts, from the Health Care Fraud and Abuse Account 
     described in subsection (b), as may be necessary to enable 
     the Secretary, the Attorney General, and such Inspectors 
     General to conduct investigations and audits of allegations 
     of health care fraud and abuse and otherwise carry out the 
     program established under paragraph (1) in a fiscal year.
       (5) Ensuring access to documentation.--The Inspector 
     General of the Department of Health and Human Services is 
     authorized to exercise the authority described in paragraphs 
     (4) and (5) of section 6 of the Inspector General Act of 1978 
     (relating to subpoenas and administration of oaths) with 
     respect to the activities under the all-payer fraud and abuse 
     control program established under this subsection to the same 
     extent as such Inspector General may exercise such 
     authorities to perform the functions assigned by such Act.
       (6) Authority of inspector general.--Nothing in this Act 
     shall be construed to diminish the authority of any Inspector 
     General, including such authority as provided in the 
     Inspector General Act of 1978.
       (7) Health plan defined.--For the purposes of this 
     subsection, the term ``health plan'' shall have the meaning 
     given such term in section 1128(i) of the Social Security 
     Act.
       (b) Health Care Fraud and Abuse Control Account.--
       (1) Establishment.--
       (A) In general.--There is hereby established an account to 
     be known as the ``Health Care Fraud and Abuse Control 
     Account'' (in this section referred to as the ``Anti-Fraud 
     Account''). The Anti-Fraud Account shall consist of--
       (i) such gifts and bequests as may be made as provided in 
     subparagraph (B);
       (ii) such amounts as may be deposited in the Anti-Fraud 
     Account as provided in subsection (a)(4), sections 5311(b) 
     and 5312(b), and title XI of the Social Security Act; and
       (iii) such amounts as are transferred to the Anti-Fraud 
     Account under subparagraph (C).
       (B) Authorization to accept gifts.--The Anti-Fraud Account 
     is authorized to accept on behalf of the United States money 
     gifts and bequests made unconditionally to the Anti-Fraud 
     Account, for the benefit of the Anti-Fraud Account or any 
     activity financed through the Anti-Fraud Account.
       (C) Transfer of amounts.--
       (i) In general.--The Secretary of the Treasury shall 
     transfer to the Anti-Fraud Account an amount equal to the sum 
     of the following:

       (I) Criminal fines imposed in cases involving a Federal 
     health care offense (as defined in section 982(a)(6)(B) of 
     title 18, United States Code).

       (ii) Administrative penalties and assessments imposed under 
     titles XI, XVIII, and XIX of the Social Security Act (except 
     as otherwise provided by law).
     [[Page S1775]]   (iii) Amounts resulting from the forfeiture 
     of property by reason of a Federal health care offense.
       (iv) Penalties and damages imposed under the False Claims 
     Act (31 U.S.C. 3729 et seq.), in cases involving claims 
     related to the provision of health care items and services 
     (other than funds awarded to a relator or for restitution).
       (2) Use of funds.--
       (A) In general.--Amounts in the Anti-Fraud Account shall be 
     available to carry out the health care fraud and abuse 
     control program established under subsection (a) (including 
     the administration of the program), and may be used to cover 
     costs incurred in operating the program, including costs 
     (including equipment, salaries and benefits, and travel and 
     training) of--
       (i) prosecuting health care matters (through criminal, 
     civil, and administrative proceedings);
       (ii) investigations;
       (iii) financial and performance audits of health care 
     programs and operations;
       (iv) inspections and other evaluations; and
       (v) provider and consumer education regarding compliance 
     with the provisions of this part.
       (B) Funds used to supplement agency appropriations.--It is 
     intended that disbursements made from the Anti-Fraud Account 
     to any Federal agency be used to increase and not supplant 
     the recipient agency's appropriated operating budget.
       (3) Annual report.--The Secretary and the Attorney General 
     shall submit jointly an annual report to Congress on the 
     amount of revenue which is generated and disbursed by the 
     Anti-Fraud Account in each fiscal year.
       (4) Use of funds by inspector general.--
       (A) Reimbursements for Investigations.--The Inspector 
     General is authorized to receive and retain for current use 
     reimbursement for the costs of conducting investigations, 
     when such restitution is ordered by a court, voluntarily 
     agreed to by the payer, or otherwise.
       (B) Crediting.--Funds received by the Inspector General or 
     the Inspectors General of the Departments of Defense, Labor, 
     and Veterans Affairs and of the Office of Personnel 
     Management, as reimbursement for costs of conducting 
     investigations shall be deposited to the credit of the 
     appropriation from which initially paid, or to appropriations 
     for similar purposes currently available at the time of 
     deposit, and shall remain available for obligation for 1 year 
     from the date of their deposit.

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

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

     SEC. 5313. HEALTH CARE FRAUD AND ABUSE GUIDANCE.

       (a) Solicitation and Publication of Modifications to 
     Existing Safe Harbors and New Safe Harbors.--
       (1) In general.--
       (A) Solicitation of proposals for safe harbors.--Not later 
     than January 1, 1996, and not less than annually thereafter, 
     the Secretary shall publish a notice in the Federal Register 
     soliciting proposals, which will be accepted during a 60-day 
     period, for--
       (i) modifications to existing safe harbors issued pursuant 
     to section 14(a) of the Medicare and Medicaid Patient and 
     Program Protection Act of 1987 (42 U.S.C. 1320a-7b note);
       (ii) additional safe harbors specifying payment practices 
     that shall not be treated as a criminal offense under section 
     1128B(b) of the Social Security Act the (42 U.S.C. 1320a-
     7b(b)) and shall not serve as the basis for an exclusion 
     under section 1128(b)(7) of such Act (42 U.S.C. 1320a-
     7(b)(7));
       (iii) interpretive rulings to be issued pursuant to 
     subsection (b); and
       (iv) special fraud alerts to be issued pursuant to 
     subsection (c).
       (B) Publication of proposed modifications and proposed 
     additional state harbors.--After considering the proposals 
     described in clauses (i) and (ii) of subparagraph (A), the 
     Secretary, in consultation with the Attorney General, shall 
     publish in the Federal Register proposed modifications to 
     existing safe harbors and proposed additional safe harbors, 
     if appropriate, with a 60-day comment period. After 
     considering any public comments received during this period, 
     the Secretary shall issue final rules modifying the existing 
     safe harbors and establishing new safe harbors, as 
     appropriate.
       (C) Report.--The Inspector General of the Department of 
     Health and Human Services (hereafter in this section referred 
     to as the ``Inspector General'') shall, in an annual report 
     to Congress or as part of the year-end semiannual report 
     required by section 5 of the Inspector General Act of 1978 (5 
     U.S.C. App.), describe the proposals received under clauses 
     (i) and (ii) of subparagraph (A) and explain which proposals 
     were included in the publication described in subparagraph 
     (B), which proposals were not included in that publication, 
     and the reasons for the rejection of the proposals that were 
     not included.
       (2) Criteria for modifying and establishing safe harbors.--
     In modifying and establishing safe harbors under paragraph 
     (1)(B), the Secretary may consider the extent to which 
     providing a safe harbor for the specified payment practice 
     may result in any of the following:
       (A) An increase or decrease in access to health care 
     services.
       (B) An increase or decrease in the quality of health care 
     services.
       (C) An increase or decrease in patient freedom of choice 
     among health care providers.
       (D) An increase or decrease in competition among health 
     care providers.
       (E) An increase or decrease in the ability of health care 
     facilities to provide services in medically underserved areas 
     or to medically underserved populations.
       (F) An increase or decrease in the cost to Government 
     health care programs.
       (G) An increase or decrease in the potential 
     overutilization of health care services.
       (H) The existence or nonexistence of any potential 
     financial benefit to a health care professional or provider 
     which may vary based on their decisions of--
       (i) whether to order a health care item or service; or
       (ii) whether to arrange for a referral of health care items 
     or services to a particular practitioner or provider.
       (I) Any other factors the Secretary deems appropriate in 
     the interest of preventing fraud and abuse in Government 
     health care programs.
       (b)  Interpretive Rulings.--
       (1) In general.--
       (A) Request for interpretive ruling.--Any person may 
     present, at any time, a request to the Inspector General for 
     a statement of the Inspector General's current interpretation 
     of the meaning of a specific aspect of the application of 
     sections 1128A and 1128B of the Social Security Act 
     (hereafter in this section referred to as an ``interpretive 
     ruling'').
       (B) Issuance and effect of interpretive ruling.--
       (i) In general.--If appropriate, the Inspector General 
     shall in consultation with the Attorney General, issue an 
     interpretive ruling in response to a request described in 
     subparagraph (A). Interpretive rulings shall not have the 
     force of law and shall be treated as an interpretive rule 
     within the meaning of section 553(b) of title 5, United 
     States Code. All interpretive rulings issued pursuant to this 
     provision shall be published in the Federal Register or 
     otherwise made available for public inspection.
       (ii) Reasons for denial.--If the Inspector General does not 
     issue an interpretive ruling in response to a request 
     described in subparagraph (A), the Inspector General shall 
     notify the requesting party of such decision and shall 
     identify the reasons for such decision.
       (2) Criteria for interpretive rulings.--
       (A) In general.--In determining whether to issue an 
     interpretive ruling under paragraph (1)(B), the Inspector 
     General may consider--
       (i) whether and to what extent the request identifies an 
     ambiguity within the language of the statute, the existing 
     safe harbors, or previous interpretive rulings; and
       (ii) whether the subject of the requested interpretive 
     ruling can be adequately addressed by interpretation of the 
     language of the statute, the existing safe harbor rules, or 
     previous interpretive rulings, or whether the request would 
     require a substantive ruling not authorized under this 
     subsection.
     [[Page S1776]]   (B) No rulings on factual issues.--The 
     Inspector General shall not give an interpretive ruling on 
     any factual issue, including the intent of the parties or the 
     fair market value of particular leased space or equipment.
       (c) Special Fraud Alerts.--
       (1) In general.--
       (A) Request for special fraud alerts.--Any person may 
     present, at any time, a request to the Inspector General for 
     a notice which informs the public of practices which the 
     Inspector General considers to be suspect or of particular 
     concern under section 1128B(b) of the Social Security Act (42 
     U.S.C. 1320a-7b(b)) (hereafter in this subsection referred to 
     as a ``special fraud alert'').
       (B) Issuance and publication of special fraud alerts.--Upon 
     receipt of a request described in subparagraph (A), the 
     Inspector General shall investigate the subject matter of the 
     request to determine whether a special fraud alert should be 
     issued. If appropriate, the Inspector General shall in 
     consultation with the Attorney General, issue a special fraud 
     alert in response to the request. All special fraud alerts 
     issued pursuant to this subparagraph shall be published in 
     the Federal Register.
       (2) Criteria for special fraud alerts.--In determining 
     whether to issue a special fraud alert upon a request 
     described in paragraph (1), the Inspector General may 
     consider--
       (A) whether and to what extent the practices that would be 
     identified in the special fraud alert may result in any of 
     the consequences described in subsection (a)(2); and
       (B) the volume and frequency of the conduct that would be 
     identified in the special fraud alert.

     SEC. 5314. REPORTING OF FRAUDULENT ACTIONS UNDER MEDICARE.

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

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

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

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

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

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

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

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

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

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

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

       (a) Application of Intermediate Sanctions for Any Program 
     Violations.--
       (1) In general.--Section 1876(i)(1) of the Social Security 
     Act (42 U.S.C. 1395mm(i)(1)) is amended by striking ``the 
     Secretary may terminate'' and all that follows and inserting 
     the following: ``in accordance with procedures established 
     under paragraph (9), the Secretary may at any time terminate 
     any such contract or may impose the intermediate sanctions 
     described in paragraph (6)(B) or (6)(C) (whichever is 
     applicable) on the eligible organization if the Secretary 
     determines that the organization--
       ``(A) has failed substantially to carry out the contract;
       ``(B) is carrying out the contract in a manner inconsistent 
     with the efficient and effective administration of this 
     section; or
       ``(C) no longer substantially meets the applicable 
     conditions of subsections (b), (c), (e), and (f).''.
       (2) Other intermediate sanctions for miscellaneous program 
     violations.--Section 1876(i)(6) of such Act (42 U.S.C. 
     1395mm(i)(6)) is amended by adding at the end the following 
     new subparagraph:
       ``(C) In the case of an eligible organization for which the 
     Secretary makes a determination under paragraph (1) the basis 
     of which is not described in subparagraph (A), the Secretary 
     may apply the following intermediate sanctions:
       ``(i) Civil money penalties of not more than $25,000 for 
     each determination under paragraph (1) if the deficiency that 
     is the basis of the determination has directly adversely 
     affected (or has the substantial likelihood of adversely 
     affecting) an individual covered under the organization's 
     contract.
       ``(ii) Civil money penalties of not more than $10,000 for 
     each week beginning after the initiation of procedures by the 
     Secretary under paragraph (9) during which the deficiency 
     that is the basis of a determination under paragraph (1) 
     exists.
       ``(iii) Suspension of enrollment of individuals under this 
     section after the date the Secretary notifies the 
     organization of a determination under paragraph (1) and until 
     the Secretary is satisfied that the deficiency that is the 
     basis for the determination has been corrected and is not 
     likely to recur.''.
       (3) Procedures for imposing sanctions.--Section 1876(i) of 
     such Act (42 U.S.C. 1395mm(i)) is amended by adding at the 
     end the following new paragraph:
       ``(9) The Secretary may terminate a contract with an 
     eligible organization under this section or may impose the 
     intermediate sanctions described in paragraph (6) on the 
     organization in accordance with formal investigation and 
     compliance procedures established by the Secretary under 
     which--
     [[Page S1777]]   ``(A) the Secretary provides the 
     organization with the opportunity to develop and implement a 
     corrective action plan to correct the deficiencies that were 
     the basis of the Secretary's determination under paragraph 
     (1);
       ``(B) in deciding whether to impose sanctions, the 
     Secretary considers aggravating factors such as whether an 
     entity has a history of deficiencies or has not taken action 
     to correct deficiencies the Secretary has brought to their 
     attention;
       ``(C) there are no unreasonable or unnecessary delays 
     between the finding of a deficiency and the imposition of 
     sanctions; and
       ``(D) the Secretary provides the organization with 
     reasonable notice and opportunity for hearing (including the 
     right to appeal an initial decision) before imposing any 
     sanction or terminating the contract.''.
       (4) Conforming amendments.--Section 1876(i)(6)(B) of such 
     Act (42 U.S.C. 1395mm(i)(6)(B)) is amended by striking the 
     second sentence.
       (b) Agreements With Peer Review Organizations.--
       (1) Requirement for written agreement.--Section 
     1876(i)(7)(A) of the Social Security Act (42 U.S.C. 
     1395mm(i)(7)(A)) is amended by striking ``an agreement'' and 
     inserting ``a written agreement''.
       (2) Development of model agreement.--Not later than July 1, 
     1996, the Secretary shall develop a model of the agreement 
     that an eligible organization with a risk-sharing contract 
     under section 1876 of the Social Security Act must enter into 
     with an entity providing peer review services with respect to 
     services provided by the organization under section 
     1876(i)(7)(A) of such Act.
       (3) Report by gao.--
       (A) Study.--The Comptroller General of the United States 
     shall conduct a study of the costs incurred by eligible 
     organizations with risk-sharing contracts under section 
     1876(b) of such Act of complying with the requirement of 
     entering into a written agreement with an entity providing 
     peer review services with respect to services provided by the 
     organization, together with an analysis of how information 
     generated by such entities is used by the Secretary to assess 
     the quality of services provided by such eligible 
     organizations.
       (B) Report to congress.--Not later than July 1, 1998, the 
     Comptroller General shall submit a report to the Committee on 
     Ways and Means and the Committee on Energy and Commerce of 
     the House of Representatives and the Committee on Finance and 
     the Special Committee on Aging of the Senate on the study 
     conducted under subparagraph (A).
       (c) Effective Date.--The amendments made by this section 
     shall apply with respect to contract years beginning on or 
     after January 1, 1996.

     SEC. 5326. EFFECTIVE DATE.

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

          PART C--ADMINISTRATIVE AND MISCELLANEOUS PROVISIONS

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

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

                    PART D--CIVIL MONETARY PENALTIES

     SEC. 5341. CIVIL MONETARY PENALTIES.

       (a) General Civil Monetary Penalties.--Section 1128A of the 
     Social Security Act (42 U.S.C. 1320a-7a) is amended as 
     follows:
       (1) In subsection (a)(1), by inserting ``or of any health 
     plan (as defined in section 1128(i)),'' after ``subsection 
     (i)(1)),''.
       (2) In subsection (f)--
       (A) by redesignating paragraph (3) as paragraph (4); and
      [[Page S1778]]   (B) by inserting after paragraph (2) the 
     following new paragraphs:
       ``(3) With respect to amounts recovered arising out of a 
     claim under a health plan, the portion of such amounts as is 
     determined to have been paid by the plan shall be repaid to 
     the plan, and the portion of such amounts attributable to the 
     amounts recovered under this section by reason of the 
     amendments made by the Health Care Fraud Prevention Act of 
     1995 (as estimated by the Secretary) shall be deposited into 
     the Health Care Fraud and Abuse Control Account established 
     under section 101(b) of such Act.''.
       (3) In subsection (i)--
       (A) in paragraph (2), by inserting ``or under a health 
     plan'' before the period at the end, and
       (B) in paragraph (5), by inserting ``or under a health 
     plan'' after ``or XX''.
       (b) Excluded Individual Retaining Ownership or Control 
     Interest in Participating Entity.--Section 1128A(a) of the 
     Social Security Act (42 U.S.C. 1320a-7a(a)) is amended--
       (1) by striking ``or'' at the end of paragraph (1)(D);
       (2) by striking ``, or'' at the end of paragraph (2) and 
     inserting a semicolon;
       (3) by striking the semicolon at the end of paragraph (3) 
     and inserting ``; or''; and
       (4) by inserting after paragraph (3) the following new 
     paragraph:
       ``(4) in the case of a person who is not an organization, 
     agency, or other entity, is excluded from participating in a 
     program under title XVIII or a State health care program in 
     accordance with this subsection or under section 1128 and 
     who, at the time of a violation of this subsection, retains a 
     direct or indirect ownership or control interest of 5 percent 
     or more, or an ownership or control interest (as defined in 
     section 1124(a)(3)) in, or who is an officer, director, 
     agent, or managing employee (as defined in section 1126(b)) 
     of, an entity that is participating in a program under title 
     XVIII or a State health care program;''.
       (c) Modifications of Amounts of Penalties and 
     Assessments.--Section 1128A(a) of the Social Security Act (42 
     U.S.C. 1320a-7a(a)), as amended by subsection (b), is amended 
     in the matter following paragraph (4)--
       (1) by striking ``$2,000'' and inserting ``$10,000'';
       (2) by inserting ``; in cases under paragraph (4), $10,000 
     for each day the prohibited relationship occurs'' after 
     ``false or misleading information was given''; and
       (3) by striking ``twice the amount'' and inserting ``3 
     times the amount''.
       (d) Claim for Item or Service Based on Incorrect Coding or 
     Medically Unnecessary Services.--Section 1128A(a)(1) of the 
     Social Security Act (42 U.S.C. 1320a-7a(a)(1)) is amended--
       (1) in subparagraph (A) by striking ``claimed,'' and 
     inserting the following: ``claimed, including any person who 
     repeatedly presents or causes to be presented a claim for an 
     item or service that is based on a code that the person knows 
     or should know will result in a greater payment to the person 
     than the code the person knows or should know is applicable 
     to the item or service actually provided,'';
       (2) in subparagraph (C), by striking ``or'' at the end;
       (3) in subparagraph (D), by striking ``; or'' and inserting 
     ``, or''; and
       (4) by inserting after subparagraph (D) the following new 
     subparagraph:
       ``(E) is for a medical or other item or service that a 
     person repeatedly knows or should know is not medically 
     necessary; or''.
       (e) Permitting Secretary To Impose Civil Monetary 
     Penalty.--Section 1128A(b) of the Social Security Act (42 
     U.S.C. 1320a-7a(a)) is amended by adding the following new 
     paragraph:
       ``(3) Any person (including any organization, agency, or 
     other entity, but excluding a beneficiary as defined in 
     subsection (i)(5)) who the Secretary determines has violated 
     section 1128B(b) of this title shall be subject to a civil 
     monetary penalty of not more than $10,000 for each such 
     violation. In addition, such person shall be subject to an 
     assessment of not more than twice the total amount of the 
     remuneration offered, paid, solicited, or received in 
     violation of section 1128B(b). The total amount of 
     remuneration subject to an assessment shall be calculated 
     without regard to whether some portion thereof also may have 
     been intended to serve a purpose other than one proscribed by 
     section 1128B(b).''.
       (f) Sanctions Against Practitioners and Persons for Failure 
     To Comply With Statutory Obligations.--Section 1156(b)(3) of 
     the Social Security Act (42 U.S.C. 1320c-5(b)(3)) is amended 
     by striking ``the actual or estimated cost'' and inserting 
     the following: ``up to $10,000 for each instance''.
       (g) Procedural Provisions.--Section 1876(i)(6) of such Act 
     (42 U.S.C. 1395mm(i)(6)) is further amended by adding at the 
     end the following new subparagraph:
       ``(D) The provisions of section 1128A (other than 
     subsections (a) and (b)) shall apply to a civil money penalty 
     under subparagraph (A) or (B) in the same manner as they 
     apply to a civil money penalty or proceeding under section 
     1128A(a).''.
       (h) Prohibition Against Offering Inducements to Individuals 
     Enrolled Under Programs or Plans.--
       (1) Offer of remuneration.--Section 1128A(a) of the Social 
     Security Act (42 U.S.C. 1320a-7a(a)) is amended--
       (A) by striking ``or'' at the end of paragraph (1)(D);
       (B) by striking ``, or'' at the end of paragraph (2) and 
     inserting a semicolon;
       (C) by striking the semicolon at the end of paragraph (3) 
     and inserting ``; or''; and
       (D) by inserting after paragraph (3) the following new 
     paragraph:
       ``(4) offers to or transfers remuneration to any individual 
     eligible for benefits under title XVIII of this Act, or under 
     a State health care program (as defined in section 1128(h)) 
     that such person knows or should know is likely to influence 
     such individual to order or receive from a particular 
     provider, practitioner, or supplier any item or service for 
     which payment may be made, in whole or in part, under title 
     XVIII, or a State health care program;''.
       (2) Remuneration defined.--Section 1128A(i) of such Act (42 
     U.S.C. 1320a-7a(i)) is amended by adding the following new 
     paragraph:
       ``(6) The term `remuneration' includes the waiver of 
     coinsurance and deductible amounts (or any part thereof), and 
     transfers of items or services for free or for other than 
     fair market value. The term `remuneration' does not include--
       ``(A) the waiver of coinsurance and deductible amounts by a 
     person, if--
       ``(i) the waiver is not offered as part of any 
     advertisement or solicitation;
       ``(ii) the person does not routinely waive coinsurance or 
     deductible amounts; and
       ``(iii) the person--

       ``(I) waives the coinsurance and deductible amounts after 
     determining in good faith that the individual is in financial 
     need;
       ``(II) fails to collect coinsurance or deductible amounts 
     after making reasonable collection efforts; or
       ``(III) provides for any permissible waiver as specified in 
     section 1128B(b)(3) or in regulations issued by the 
     Secretary;

       ``(B) differentials in coinsurance and deductible amounts 
     as part of a benefit plan design as long as the differentials 
     have been disclosed in writing to all third party payors to 
     whom claims are presented and as long as the differentials 
     meet the standards as defined in regulations promulgated by 
     the Secretary; or
       ``(C) incentives given to individuals to promote the 
     delivery of preventive care as determined by the Secretary in 
     regulations.''.
       (i) Effective Date.--The amendments made by this section 
     shall take effect January 1, 1996.

                   PART E--AMENDMENTS TO CRIMINAL LAW

     SEC. 5351. HEALTH CARE FRAUD.

       (a) In General.--
       (1)  Fines and imprisonment for health care fraud 
     violations.--Chapter 63 of title 18, United States Code, is 
     amended by adding at the end the following new section:

     ``Sec. 1347. Health care fraud

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

``1347. Health care fraud.''.

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

     SEC. 5352. FORFEITURES FOR FEDERAL HEALTH CARE OFFENSES.

       (a) In General.--Section 982(a) of title 18, United States 
     Code, is amended by adding after paragraph (5) the following 
     new paragraph:
       ``(6)(A) The court, in imposing sentence on a person 
     convicted of a Federal health care offense, shall order the 
     person to forfeit property, real or personal, that--
       ``(i) is used in the commission of the offense if the 
     offense results in a financial loss or gain of $50,000 or 
     more; or
       ``(ii) constitutes or is derived from proceeds traceable to 
     the commission of the offense.
       ``(B) For purposes of this paragraph, the term `Federal 
     health care offense' means a violation of, or a criminal 
     conspiracy to violate--
       ``(i) section 1347 of this title;
       ``(ii) section 1128B of the Social Security Act;
       ``(iii) sections 287, 371, 664, 666, 1001, 1027, 1341, 
     1343, or 1954 of this title if the violation or conspiracy 
     relates to health care fraud; and
     [[Page S1779]]   ``(iv) section 501 or 511 of the Employee 
     Retirement Income Security Act of 1974, if the violation or 
     conspiracy relates to health care fraud.''.
       (b) Property Forfeited Deposited in Health Care Fraud and 
     Abuse Control Account.--The Secretary of the Treasury shall 
     deposit into the Health Care Fraud and Abuse Control Account 
     established under section 5311(b) an amount equal to amounts 
     resulting from forfeiture of property by reason of a Federal 
     health care offense pursuant to section 982(a)(6) of title 
     18, United States Code.

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

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

     SEC. 5354. GRAND JURY DISCLOSURE.

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

     SEC. 5355. FALSE STATEMENTS.

       (a) In General.--Chapter 47, of title 18, United States 
     Code, is amended by adding at the end the following:

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

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

``1033. False statements relating to health care matters.''.
     SEC. 5356. VOLUNTARY DISCLOSURE PROGRAM.

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

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

       (a) In General.--Chapter 73 of title 18, United States 
     Code, is amended by adding at the end the following new 
     section:

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

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

``1518. Obstruction of Criminal Investigations of Federal Health Care 
              Offenses.''.
     SEC. 5358. THEFT OR EMBEZZLEMENT.

       (a) In General.--Chapter 31 of title 18, United States 
     Code, is amended by adding at the end the following new 
     section:

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

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

``669. Theft or Embezzlement in Connection with Health Care.''.
     SEC. 5359. LAUNDERING OF MONETARY INSTRUMENTS.

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

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

     SEC. 5361. ESTABLISHMENT OF STATE FRAUD UNITS.

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

     SEC. 5362. REQUIREMENTS FOR STATE FRAUD UNITS.

       (a) In General.--The State Fraud Unit must--
       (1) be a single identifiable entity of the State 
     government;
       (2) be separate and distinct from any State agency with 
     principal responsibility for the administration of any 
     Federally-funded or mandated health care program;
       (3) meet the other requirements of this section.
       (b) Specific Requirements Described.--The State Fraud Unit 
     shall--
       (1) be a Unit of the office of the State Attorney General 
     or of another department of State government which possesses 
     statewide authority to prosecute individuals for criminal 
     violations;
       (2) if it is in a State the constitution of which does not 
     provide for the criminal prosecution of individuals by a 
     statewide authority and has formal procedures, (A) assure its 
     referral of suspected criminal violations to the appropriate 
     authority or authorities in the State for prosecution, and 
     (B) assure its assistance of, and coordination with, such 
     authority or authorities in such prosecutions; or
       (3) have a formal working relationship with the office of 
     the State Attorney General or the appropriate authority or 
     authorities for prosecution and have formal procedures 
     (including procedures for its referral of suspected criminal 
     violations to such office) which provide effective 
     coordination of activities between the Fraud Unit and such 
     office with respect to the detection, investigation, and 
     prosecution of suspected criminal violations relating to any 
     Federally-funded or mandated health care programs.
       (c) Staffing Requirements.--The State Fraud Unit shall--
       (1) employ attorneys, auditors, investigators and other 
     necessary personnel; and
       (2) be organized in such a manner and provide sufficient 
     resources as is necessary to promote the effective and 
     efficient conduct of State Fraud Unit activities.
       (d) Cooperative Agreements; Memoranda of Understanding.--
     The State Fraud Unit shall have cooperative agreements with--
       (1) Federally-funded or mandated health care programs;
       (2) similar Fraud Units in other States, as exemplified 
     through membership and participation in the National 
     Association of Medicaid Fraud Control Units or its successor; 
     and
       (3) the Secretary.
       (e) Reports.--The State Fraud Unit shall submit to the 
     Secretary an application and an annual report containing such 
     information as the Secretary determines to be necessary to 
     determine whether the State Fraud Unit meets the requirements 
     of this section.
       (f) Funding Source; Participation in All-Payer Program.--In 
     addition to those sums expended by a State under section 
     5364(a) for purposes of determining the amount of the 
     Secretary's payments, a State Fraud Unit may receive funding 
     for its activities from other sources, the identity of which 
     shall be reported to the Secretary in its application or 
     annual report. The State Fraud Unit shall participate in the 
     all-payer fraud and abuse control program established under 
     section 5311.
     [[Page S1780]] SEC. 5363. SCOPE AND PURPOSE.

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

     SEC. 5364. PAYMENTS TO STATES.

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

     SEC. 6001. ALTERNATIVE DISPUTE RESOLUTION.

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

     SEC. 6002. BASIC REQUIREMENTS.

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

     SEC. 6003. ALTERNATIVE DISPUTE RESOLUTION ADVISORY BOARD.

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

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

       (a) Certification.--
       (1) Application by state.--Each State shall submit an 
     application to the ADR Advisory Board describing its 
     alternative dispute resolution system and containing such 
     information as the ADR Advisory Board may require to make a 
     recommendation regarding whether the system meets the 
     requirements of this title.
       (2) Basis for certification.--Not later than October 1 of 
     each year (beginning with 1995), the Secretary, taking into 
     consideration the recommendations of the ADR Advisory Board, 
     shall certify a State's alternative dispute resolution system 
     under this subsection for the following calendar year if the 
     Secretary determines that the system meets the requirements 
     of section 6002.
       (b) Applicability of Alternative Federal System.--
       (1) Establishment and applicability.--Not later than 
     October 1, 1995, the Secretary, taking into consideration the 
     model alternative Federal system submitted by the ADR 
     Advisory Board under section 6003(c)(2)(B), shall establish 
     by rule an alternative Federal ADR system for the resolution 
     of medical malpractice liability claims during a calendar 
     year in States that do not have in effect an alternative 
     dispute resolution system certified under subsection (a) for 
     the year.
       (2) Requirements for system.--Under the alternative Federal 
     ADR system established under paragraph (1)--
       (A) paragraphs (1), (2), (6), and (7) of section 6002(a) 
     shall apply to claims brought under the system;
       (B) if the system provides for the resolution of claims 
     through arbitration, the claims brought under the system 
     shall be heard and resolved by arbitrators appointed by the 
     Secretary in consultation with the Attorney General; and
       (C) with respect to a State in which the system is in 
     effect, the Secretary may (at the State's request) modify the 
     system to take into account the existence of dispute 
     resolution procedures in the State that affect the resolution 
     of medical malpractice liability claims.
       (3) Treatment of states with alternative system in 
     effect.--If the alternative 
     [[Page S1781]] Federal ADR system established under this 
     subsection is applied with respect to a State for a calendar 
     year, the State shall make a payment to the United States (at 
     such time and in such manner as the Secretary may require) in 
     an amount equal to 110 percent of the costs incurred by the 
     United States during the year as a result of the application 
     of the system with respect to the State.

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

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

     SEC. 6006. OPTIONAL APPLICATION OF PRACTICE GUIDELINES.

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

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

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

     SEC. 7002. WORKSITE WELLNESS GRANT PROGRAM.

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

     SEC. 7003. EXPANDING AND IMPROVING SCHOOL HEALTH EDUCATION.

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

     SEC. 8001. SHORT TITLE.

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

     SEC. 8002. AMENDMENT OF 1986 CODE.

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

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

       (a) General Rule.--Paragraph (1) of section 213(d) 
     (defining medical care) is amended by striking ``or'' at the 
     end of subparagraph (B), by striking subparagraph (C), and by 
     inserting after subparagraph (B) the following new 
     subparagraphs:
       ``(C) for qualified long-term care services (as defined in 
     subsection (f)),
       ``(D) for insurance covering medical care referred to in--
       ``(i) subparagraphs (A) and (B), or
       ``(ii) subparagraph (C), but only if such insurance is 
     provided under a qualified long-term care insurance policy 
     (as defined in section 7702B(b)) and the deduction under this 
     section for amounts paid for such insurance is not disallowed 
     under section 7702B(d)(4), or
       ``(E) for premiums under part B of title XVIII of the 
     Social Security Act, relating to 
     [[Page S1782]] supplementary medical insurance for the 
     aged.''.
       (b) Qualified Long-Term Care Services Defined.--Section 213 
     (relating to the deduction for medical, dental, etc., 
     expenses) is amended by adding at the end the following new 
     subsection:
       ``(f) Qualified Long-Term Care Services.--For purposes of 
     this section--
       ``(1) In general.--The term `qualified long-term care 
     services' means necessary diagnostic, curing, mitigating, 
     treating, preventive, therapeutic, and rehabilitative 
     services, and maintenance and personal care services (whether 
     performed in a residential or nonresidential setting), 
     which--
       ``(A) are required by an individual during any period the 
     individual is an incapacitated individual (as defined in 
     paragraph (2)),
       ``(B) have as their primary purpose--
       ``(i) the provision of needed assistance with 1 or more 
     activities of daily living (as defined in paragraph (3)), or
       ``(ii) protection from threats to health and safety due to 
     severe cognitive impairment, and
       ``(C) are provided pursuant to a continuing plan of care 
     prescribed by a licensed professional (as defined in 
     paragraph (4)).
       ``(2) Incapacitated individual.--The term `incapacitated 
     individual' means any individual who has been certified by a 
     licensed professional as--
       ``(A) being unable to perform, without substantial 
     assistance from another individual, at least 2 activities of 
     daily living (as defined in paragraph (3)),
       ``(B) having moderate cognitive impairment as defined by 
     the Secretary in consultation with the Secretary of Health 
     and Human Services, or
       ``(C) having a level of disability similar (as determined 
     by the Secretary in consultation with the Secretary of Health 
     and Human Services) to the level of disability described in 
     subparagraph (A).
       ``(3) Activities of daily living.--
       ``(A) In general.--Each of the following is an activity of 
     daily living:
       ``(i) Eating.
       ``(ii) Toileting.
       ``(iii) Transferring.
       ``(iv) Bathing.
       ``(v) Dressing.
       ``(vi) Continence.
       ``(B) Definitions.--For purposes of this paragraph:
       ``(i) Eating.--The term `eating' means the process of 
     getting food from a plate or its equivalent into the mouth.
       ``(ii) Toileting.--The term `toileting' means the act of 
     going to the toilet room for bowel and bladder function, 
     transferring on and off of the toilet, cleaning oneself after 
     elimination, and arranging clothes.
       ``(iii) Transferring.--The term `transferring' means the 
     process of getting in and out of bed or in and out of a chair 
     or wheelchair.
       ``(iv) Bathing.--The term `bathing' means the overall 
     complex behavior of using water for cleansing the whole body, 
     including cleansing as part of a bath, shower, or sponge 
     bath, getting to, in, and out of a tub or shower, and washing 
     and drying oneself.
       ``(v) Dressing.--The term `dressing' means the overall 
     complex behavior of getting clothes from closets and drawers 
     and then getting dressed.
       ``(vi) Continence.--The term `continence' means the ability 
     to voluntarily control bowel and bladder function and to 
     maintain a reasonable level of personal hygiene.
       ``(4) Licensed professional.--
       ``(A) In general.--The term `licensed professional' means--
       ``(i) a physician or registered professional nurse,
       ``(ii) a qualified community care case manager (as defined 
     in subparagraph (B)), or
       ``(iii) any other individual who meets such requirements as 
     may be prescribed by the Secretary after consultation with 
     the Secretary of Health and Human Services.
       ``(B) Qualified community care case manager.--The term 
     `qualified community care case manager' means an individual 
     or entity which--
       ``(i) has experience or has been trained in providing case 
     management services and in preparing individual care plans,
       ``(ii) has experience in assessing individuals to determine 
     their functional and cognitive impairment, and
       ``(iii) meets such requirements as may be prescribed by the 
     Secretary after consultation with the Secretary of Health and 
     Human Services.
       ``(5) Certain services not included.--The term `qualified 
     long-term care services' shall not include any services 
     provided to an individual--
       ``(A) by a relative (directly or through a partnership, 
     corporation, or other entity) unless the relative is a 
     licensed professional with respect to such services, or
       ``(B) by a corporation or partnership which is related 
     (within the meaning of section 267(b) or 707(b)) to the 
     individual.

     For purposes of this paragraph, the term `relative' means an 
     individual bearing a relationship to the individual which is 
     described in paragraphs (1) through (8) of section 152(a).''.
       (c) Technical Amendments.--Paragraph (6) of section 213(d) 
     is amended--
       (1) by striking ``subparagraphs (A) and (B)'' and inserting 
     ``subparagraphs (A), (B), and (C)'', and
       (2) by striking ``paragraph (1)(C) applies'' in 
     subparagraph (A) and inserting ``subparagraphs (C) and (D) of 
     paragraph (1) apply''.
     SEC. 8102. TREATMENT OF LONG-TERM CARE INSURANCE.

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

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

       ``(a) In General.--For purposes of this subtitle--
       ``(1) a qualified long-term care insurance policy (as 
     defined in subsection (b)) shall be treated as an accident 
     and health insurance contract,
       ``(2) any plan of an employer providing coverage under a 
     qualified long-term care insurance policy shall be treated as 
     an accident and health plan with respect to such coverage,
       ``(3) amounts (other than policyholder dividends (as 
     defined in section 808) or premium refunds) received under a 
     qualified long-term care insurance policy (including 
     nonreimbursement payments described in subsection (b)(6)) 
     shall be treated--
       ``(A) as amounts received for personal injuries and 
     sickness, and
       ``(B) as amounts received for the permanent loss of a 
     function of the body and as amounts computed with reference 
     to the nature of injury under section 105(c) to the extent 
     that such amounts do not exceed the dollar amount in effect 
     under subsection (f) for the taxable year,
       ``(4) amounts paid for a qualified long-term care insurance 
     policy described in subsection (b)(11) shall be treated as 
     payments made for insurance for purposes of section 
     213(d)(1)(D), and
       ``(5) a qualified long-term care insurance policy shall be 
     treated as a guaranteed renewable contract subject to the 
     rules of section 816(e).
       ``(b) Qualified Long-Term Care Insurance Policy.--For 
     purposes of this title--
       ``(1) In general.--The term `qualified long-term care 
     insurance policy' means any long-term care insurance policy 
     (as defined in paragraph (10)) that--
       ``(A) limits benefits under such policy to incapacitated 
     individuals (as defined in section 213(f)(2)), and
       ``(B) satisfies the requirements of paragraphs (2) through 
     (9).
       ``(2) Premium requirements.--The requirements of this 
     paragraph are met with respect to a long-term care insurance 
     policy if such policy provides that premium payments may not 
     be made earlier than the date such payments would have been 
     made if the policy provided for level annual payments over 
     the life expectancy of the insured or 20 years, whichever is 
     shorter. A policy shall not be treated as failing to meet the 
     requirements of the preceding sentence solely by reason of a 
     provision in the policy providing for a waiver of premiums if 
     the insured becomes an incapacitated individual (as defined 
     in section 213(f)(2)).
       ``(3) Prohibition of cash value.--The requirements of this 
     paragraph are met with respect to a long-term care insurance 
     policy if such policy does not provide for a cash value or 
     other money that can be paid, assigned, pledged as collateral 
     for a loan, or borrowed, other than as provided in paragraph 
     (4).
       ``(4) Refunds of premiums and dividends.--The requirements 
     of this paragraph are met with respect to a long-term care 
     insurance policy if such policy provides that--
       ``(A) policyholder dividends are required to be applied as 
     a reduction in future premiums or to increase benefits 
     described in subsection (a)(2),
       ``(B) refunds of premiums upon a partial surrender or a 
     partial cancellation are required to be applied as a 
     reduction in future premiums, and
       ``(C) any refund on the death of the insured, or on a 
     complete surrender or cancellation of the policy, cannot 
     exceed the aggregate premiums paid under the policy.

     Any refund on a complete surrender or cancellation of the 
     policy shall be includable in gross income to the extent that 
     any deduction or exclusion was allowable with respect to the 
     premiums.
       ``(5) Coordination with other entitlements.--The 
     requirements of this paragraph are met with respect to a 
     long-term care insurance policy if such policy does not cover 
     expenses incurred to the extent that such expenses are also 
     covered under title XVIII of the Social Security Act. For 
     purposes of this paragraph, a long-term care insurance policy 
     which coordinates expenses incurred under such policy with 
     expenses incurred under title XVIII of such Act shall not be 
     considered to duplicate such expenses.
       ``(6) Requirements of model regulation and act.--
       ``(A) In general.--The requirements of this paragraph are 
     met with respect to a long-term care insurance policy if such 
     policy meets--
       ``(i) Model regulation.--The following requirements of the 
     model regulation:

       ``(I) Section 7A (relating to guaranteed renewal or 
     noncancellability), and the requirements of section 6B of the 
     model Act relating to such section 7A.
       ``(II) Section 7B (relating to prohibitions on limitations 
     and exclusions).
       ``(III) Section 7C (relating to extension of benefits).
       ``(IV) Section 7D (relating to continuation or conversion 
     of coverage).
       ``(V) Section 7E (relating to discontinuance and 
     replacement of policies).
       ``(VI) Section 8 (relating to unintentional lapse).
     [[Page S1783]]   ``(VII) Section 9 (relating to disclosure), 
     other than section 9F thereof.
       ``(VIII) Section 10 (relating to prohibitions against post-
     claims underwriting).
       ``(IX) Section 11 (relating to minimum standards).
       ``(X) Section 12 (relating to requirement to offer 
     inflation protection), except that any requirement for a 
     signature on a rejection of inflation protection shall permit 
     the signature to be on an application or on a separate form.
       ``(XI) Section 23 (relating to prohibition against 
     preexisting conditions and probationary periods in 
     replacement policies or certificates).

       ``(ii) Model act.--The following requirements of the model 
     Act:

       ``(I) Section 6C (relating to preexisting conditions).
       ``(II) Section 6D (relating to prior hospitalization).

       ``(B) Definitions.--For purposes of this paragraph--
       ``(i) Model provisions.--The terms `model regulation' and 
     `model Act' mean the long-term care insurance model 
     regulation, and the long-term care insurance model Act, 
     respectively, promulgated by the National Association of 
     Insurance Commissioners (as adopted in January of 1993).
       ``(ii) Coordination.--Any provision of the model regulation 
     or model Act listed under clause (i) or (ii) of subparagraph 
     (A) shall be treated as including any other provision of such 
     regulation or Act necessary to implement the provision.
       ``(7) Tax disclosure requirement.--The requirement of this 
     paragraph is met with respect to a long-term care insurance 
     policy if such policy meets the requirements of section 
     4980C(d)(1).
       ``(8) Nonforfeiture requirements.--
       ``(A) In general.--The requirements of this paragraph are 
     met with respect to a long-term care insurance policy, if the 
     issuer of such policy offers to the policyholder, including 
     any group policyholder, a nonforfeiture provision meeting the 
     requirements specified in subparagraph (B).
       ``(B) Requirements of provision.--The requirements 
     specified in this subparagraph are as follows:
       ``(i) The nonforfeiture provision shall be appropriately 
     captioned.
       ``(ii) The nonforfeiture provision shall provide for a 
     benefit available in the event of a default in the payment of 
     any premiums and the amount of the benefit may be adjusted 
     subsequent to being initially granted only as necessary to 
     reflect changes in claims, persistency, and interest as 
     reflected in changes in rates for premium paying policies 
     approved by the Secretary for the same policy form.
       ``(iii) The nonforfeiture provision shall provide at least 
     1 of the following:

       ``(I) Reduced paid-up insurance.
       ``(II) Extended term insurance.
       ``(III) Shortened benefit period.
       ``(IV) Other similar offerings approved by the Secretary.
       ``(9) Rate stabilization.--
       ``(A) In general.--The requirements of this paragraph are 
     met with respect to a long-term care insurance policy, 
     including any group master policy, if--
       ``(i) such policy contains the minimum rate guarantees 
     specified in subparagraph (B), and
       ``(ii) the issuer of such policy meets the requirements 
     specified in subparagraph (C).
       ``(B) Minimum rate guarantees.--The minimum rate guarantees 
     specified in this subparagraph are as follows:
       ``(i) Rates under the policy shall be guaranteed for a 
     period of at least 3 years from the date of issue of the 
     policy.
       ``(ii) After the expiration of the 3-year period required 
     under clause (i), any rate increase shall be guaranteed for a 
     period of at least 2 years from the effective date of such 
     rate increase.
       ``(iii) In the case of any individual age 75 or older who 
     has maintained coverage under a long-term care insurance 
     policy for 10 years, rate increases under such policy shall 
     not exceed 10 percent in any 12-month period.
       ``(C) Increases in premiums.--The requirements specified in 
     this subparagraph are as follows:
       ``(i) In general.--If an issuer of a long-term care 
     insurance policy, including any group master policy, plans to 
     increase the premium rates for a policy, such issuer shall, 
     at least 90 days before the effective date of the rate 
     increase, offer to each individual policyholder under such 
     policy the option to remain insured under the policy at a 
     reduced level of benefits that maintains the premium rate at 
     the rate in effect on the day before the effective date of 
     the rate increase.
       ``(ii) Increases of more than 50 percent.--If an issuer of 
     a long-term care insurance policy, including any group master 
     policy, increases premium rates for a policy by more than 50 
     percent in any 3-year period--

       ``(I) in the case of an individual long-term care insurance 
     policy, the issuer shall discontinue issuing all individual 
     long-term care policies in any State in which the issuer 
     issues such policy for a period of 2 years from the effective 
     date of such premium increase, and
       ``(II) in the case of a group master long-term care 
     insurance policy, the issuer shall discontinue issuing all 
     group master long-term care insurance policies in any State 
     in which the issuer issues such policy for a period of 2 
     years from the effective date of such premium increase.

     This clause shall apply to any issuer of long-term care 
     insurance policies or any other person that purchases or 
     otherwise acquires any long-term care insurance policies from 
     another issuer or person.
       ``(D) Modifications or waivers of requirements.--The 
     Secretary may modify or waive any of the requirements under 
     this paragraph if--
       ``(i) such requirements will adversely affect an issuer's 
     solvency,
       ``(ii) such modification or waiver is required for the 
     issuer to meet other State or Federal requirements,
       ``(iii) medical developments, new disabling diseases, 
     changes in long-term care delivery, or a new method of 
     financing long-term care will result in changes to mortality 
     and morbidity patterns or assumptions,
       ``(iv) judicial interpretation of a policy's benefit 
     features results in unintended claim liabilities, or
       ``(v) in the case of a purchase or other acquisition of 
     long-term care insurance policies of an issuer or other 
     person, the continued sale of other long-term care insurance 
     policies by the purchasing issuer or person is in the best 
     interests of individual consumers.
       ``(10) Long-term care insurance policy defined.--
       ``(A) In general.--For purposes of this section, the term 
     `long-term care insurance policy' means any product which is 
     advertised, marketed, or offered as long-term care insurance 
     (as defined in subparagraph (B)).
       ``(B) Long-term care insurance.--
       ``(i) In general.--The term `long-term care insurance' 
     means any insurance policy or rider--

       ``(I) advertised, marketed, offered, or designed to provide 
     coverage for not less than 12 consecutive months for each 
     covered person on an expense incurred, indemnity, prepaid or 
     other basis for 1 or more necessary or medically necessary 
     diagnostic, preventive, therapeutic, rehabilitative, 
     maintenance, or personal care services provided in a setting 
     other than an acute care unit of a hospital, and
       ``(II) issued by insurers, fraternal benefit societies, 
     nonprofit health, hospital, and medical service corporations, 
     prepaid health plans, health maintenance organizations or any 
     similar organization to the extent such organizations are 
     otherwise authorized to issue life or health insurance.

     Such term includes group and individual annuities and life 
     insurance policies or riders which provide directly or which 
     supplement long-term care insurance and includes a policy or 
     rider which provides for payment of benefits based on 
     cognitive impairment or the loss of functional capacity.
       ``(ii) Exclusions.--The term `long-term care insurance' 
     shall not include--

       ``(I) any insurance policy which is offered primarily to 
     provide basic coverage to supplement coverage under the 
     medicare program under title XVIII of the Social Security 
     Act, basic hospital expense coverage, basic medical-surgical 
     expense coverage, hospital confinement coverage, major 
     medical expense coverage, disability income or related asset-
     protection coverage, accident only coverage, specified 
     disease or specified accident coverage, or limited benefit 
     health coverage, or
       ``(II) life insurance policies--

       ``(aa) which accelerate the death benefit specifically for 
     1 or more of the qualifying events of terminal illness or 
     medical conditions requiring extraordinary medical 
     intervention or permanent institutional confinement,
       ``(bb) which provide the option of a lump-sum payment for 
     such benefits, and
       ``(cc) under which neither such benefits nor the 
     eligibility for the benefits is conditioned upon the receipt 
     of long-term care.
       ``(11) Nonreimbursement payments permitted.--For purposes 
     of subsection (a)(4), a policy is described in this paragraph 
     if, under the policy, payments are made to (or on behalf of) 
     an insured individual on a per diem or other periodic basis 
     without regard to the expenses incurred or services rendered 
     during the period to which the payments relate.
       ``(c) Treatment of Long-Term Care Insurance Policies.--For 
     purposes of this title, any amount received or coverage 
     provided under a long-term care insurance policy that is not 
     a qualified long-term care insurance policy shall not be 
     treated as an amount received for personal injuries or 
     sickness or provided under an accident and health plan and 
     shall not be treated as excludable from gross income under 
     any provision of this title.
       ``(d) Treatment of Coverage Provided as Part of a Life 
     Insurance Contract.--Except as otherwise provided in 
     regulations, in the case of any long-term care insurance 
     coverage provided by rider on a life insurance contract, the 
     following rules shall apply:
       ``(1) In general.--This section shall apply as if the 
     portion of the contract providing such coverage is a separate 
     contract or policy.
       ``(2) Premiums and charges for long-term care coverage.--
     Premium payments for long-term care insurance policy coverage 
     and charges against the life insurance contract's cash 
     surrender value (within the meaning of section 7702(f)(2)(A)) 
     for such coverage, shall be treated as premiums for purposes 
     of subsection (b)(2).
       ``(3) Application of 7702.--Section 7702(c)(2) (relating to 
     the guideline premium limitation) shall be applied by 
     increasing, as of any date, the guideline premium limitation 
     with 
     [[Page S1784]] respect to a life insurance contract by an 
     amount equal to--
       ``(A) the sum of any charges (but not premium payments) 
     described in paragraph (2) made to that date under the 
     contract, reduced by
       ``(B) any such charges the imposition of which reduces the 
     premiums paid for the contract (within the meaning of section 
     7702(f)(1)).
       ``(4) Application of section 213.--No deduction shall be 
     allowed under section 213(a) for charges against the life 
     insurance contract's cash surrender value described in 
     paragraph (2), unless such charges are includable in income 
     as a result of the application of section 72(e)(10) and the 
     coverage provided by the rider is a qualified long-term care 
     insurance policy under subsection (b).

     For purposes of this subsection, the term `portion' means 
     only the terms and benefits under a life insurance contract 
     that are in addition to the terms and benefits under the 
     contract without regard to the coverage under a qualified 
     long-term care insurance policy.
       ``(e) Employer Plans Not Treated as Deferred Compensation 
     Plans.--For purposes of this title, a plan of an employer 
     providing coverage under a qualified long-term care insurance 
     policy shall not be treated as a plan which provides for 
     deferred compensation by reason of providing such coverage.
       ``(f) Dollar Amount for Purposes of Gross Income 
     Exclusion.--
       ``(1) Dollar amount.--
       ``(A) In general.--The dollar amount in effect under this 
     subsection shall be $200 per day.
       ``(B) Inflation adjustments.--In the case of any taxable 
     year beginning in a calendar year after 1996, the dollar 
     amount contained in subparagraph (A) shall be increased by an 
     amount equal to--
       ``(i) such dollar amount, multiplied by
       ``(ii) the cost-of-living adjustment determined under 
     section 1(f)(3) for the calendar year in which the taxable 
     year begins, by substituting `calendar year 1995' for 
     `calendar year 1992' in subparagraph (B) thereof.
       ``(2) Aggregation rule.--For purposes of this subsection, 
     all policies issued with respect to the same taxpayer shall 
     be treated as 1 policy.
       ``(g) Regulations.--The Secretary shall prescribe such 
     regulations as may be necessary to carry out the requirements 
     of this section, including regulations to prevent the 
     avoidance of this section by providing long-term care 
     insurance coverage under a life insurance contract and to 
     provide for the proper allocation of amounts between the 
     long-term care and life insurance portions of a contract.''.
       (b) Clerical Amendment.--The table of sections for chapter 
     79 is amended by inserting after the item relating to section 
     7702A the following new item:

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

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

       (a) Exclusion From COBRA Continuation Requirements.--
     Subparagraph (A) of section 4980B(f)(2) (defining 
     continuation coverage) is amended by adding at the end the 
     following new sentence: ``The coverage shall not include 
     coverage for qualified long-term care services (as defined in 
     section 213(f)).''.
       (b) Benefits Included in Cafeteria Plans.--Section 125(f) 
     (defining qualified benefits) is amended by adding at the end 
     the following new sentence: ``Such term includes coverage 
     under a qualified long-term care insurance policy (as defined 
     in section 7702B(b)) which is includible in gross income only 
     because it exceeds the dollar limitation of section 
     105(c)(2).''.
     SEC. 8104. TAX RESERVES FOR QUALIFIED LONG-TERM CARE 
                   INSURANCE POLICIES.

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

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

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

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

       (a) Qualified Accelerated Death Benefit Riders Treated as 
     Life Insurance.--Section 818 (relating to other definitions 
     and special rules) is amended by adding at the end the 
     following new subsection:
       ``(g) Qualified Accelerated Death Benefit Riders Treated as 
     Life Insurance.--For purposes of this part--
       ``(1) In general.--Any reference to a life insurance 
     contract shall be treated as including a reference to a 
     qualified accelerated death benefit rider on such contract.
       ``(2) Qualified accelerated death benefit riders.--For 
     purposes of this subsection, the term `qualified accelerated 
     death benefit rider' means any rider on a life insurance 
     contract which provides for a distribution to an individual 
     upon the insured becoming a terminally ill individual (as 
     defined in section 101(g)(3)).''.
       (b) Definitions of Life Insurance and Modified Endowment 
     Contracts.--Paragraph (5)(A) of section 7702(f) (defining 
     qualified additional benefits) is amended by striking ``or'' 
     at the end of clause (iv), by redesignating clause (v) as 
     clause (vi), and by inserting after clause (iv) the following 
     new clause:
       ``(v) any qualified accelerated death benefit rider (as 
     defined in section 818(g)), or''.
       (c) Effective Date.--
       (1) In general.--The amendments made by this section shall 
     apply to contracts issued after December 31, 1995.
     [[Page S1785]]   (2) Transitional rule.--For purposes of 
     determining whether section 7702 or 7702A of the Internal 
     Revenue Code of 1986 applies to any contract, the issuance, 
     whether before, on, or after December 31, 1995, of a rider on 
     a life insurance contract permitting the acceleration of 
     death benefits (as described in section 101(g) of such Code 
     (as added by section 8105)) shall not be treated as a 
     modification or material change of such contract.
           Subtitle B--Standards For Long-Term Care Insurance

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

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

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

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

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

       ``(a) General Rule.--There is hereby imposed on the issuer 
     of any qualified long-term care insurance policy with respect 
     to which any requirement of subsection (c) or (d) is not met 
     a tax in the amount determined under subsection (b).
       ``(b) Amount of Tax.--
       ``(1) In general.--
       ``(A) Per policy.--The amount of the tax imposed by 
     subsection (a) shall be $100 per policy for each day any 
     requirement of subsection (c) or (d) is not met with respect 
     to the policy.
       ``(B) Limitations.--
       ``(i) Per carrier.--The amount of the tax imposed under 
     subparagraph (A) against any insurance carrier, association, 
     or any subsidiary thereof, shall not exceed $25,000 per 
     policy.
       ``(ii) Per agent.--The amount of the tax imposed under 
     subparagraph (A) against insurance agent or broker shall not 
     exceed $15,000 per policy.
       ``(2) Waiver.--In the case of a failure which is due to 
     reasonable cause and not to willful neglect, the Secretary 
     may waive part or all of the tax imposed by subsection (a) to 
     the extent that payment of the tax would be excessive 
     relative to the failure involved.
       ``(c) Additional Responsibilities.--The requirements of 
     this subsection with respect to any qualified long-term care 
     insurance policy are as follows:
       ``(1) Requirements of model provisions.--
       ``(A) Model regulation.--The following requirements of the 
     model regulation shall be met:
       ``(i) Section 13 (relating to application forms and 
     replacement coverage).
       ``(ii) Section 14 (relating to reporting requirements), 
     except that the issuer shall also report at least annually 
     the number of claims denied during the reporting period for 
     each class of business (expended as a percentage of claims 
     denied), other than claims denied for failure to meet the 
     waiting period or because of any applicable preexisting 
     condition.
       ``(iii) Section 20 (relating to filing requirements for 
     marketing).
       ``(iv) Section 21 (relating to standards for marketing), 
     including inaccurate completion of medical histories, other 
     than sections 21C(1) and 21C(6) thereof, except that--

       ``(I) in addition to such requirements, no person shall, in 
     selling or offering to sell a qualified long-term care 
     insurance policy, misrepresent a material fact; and
       ``(II) no such requirements shall include a requirement to 
     inquire or identify whether a prospective applicant or 
     enrollee for qualified long-term care insurance has accident 
     and sickness insurance.

       ``(v) Section 22 (relating to appropriateness of 
     recommended purchase).
       ``(vi) Section 24 (relating to standard format outline of 
     coverage).
       ``(vii) Section 25 (relating to requirement to deliver 
     shopper's guide).
       ``(B) Model act.--The following requirements of the model 
     Act must be met:
       ``(i) Section 6F (relating to right to return), except that 
     such section shall also apply to denials of applications and 
     any refund shall be made within 30 days of the return or 
     denial.
       ``(ii) Section 6G (relating to outline of coverage).
       ``(iii) Section 6H (relating to requirements for 
     certificates under group plans).
       ``(iv) Section 6I (relating to policy summary).
       ``(v) Section 6J (relating to monthly reports on 
     accelerated death benefits).
       ``(vi) Section 7 (relating to incontestability period).
       ``(C) Definitions.--For purposes of this paragraph, the 
     terms `model regulation' and `model Act' have the meanings 
     given such terms by section 7702B(b)(6)(B).
       ``(2) Delivery of policy.--If an application for a 
     qualified long-term care insurance policy (or for a 
     certificate under a group qualified long-term care insurance 
     policy) is approved, the issuer shall deliver to the 
     applicant (or policyholder or certificate-holder) the policy 
     (or certificate) of insurance not later than 30 days after 
     the date of the approval.
       ``(3) Information on denials of claims.--If a claim under a 
     qualified long-term care insurance policy is denied, the 
     issuer shall, within 60 days of the date of a written request 
     by the policyholder or certificate-holder (or 
     representative)--
       ``(A) provide a written explanation of the reasons for the 
     denial, and
       ``(B) make available all information directly relating to 
     such denial.
       ``(d) Disclosure.--The requirements of this subsection are 
     met with respect to any qualified long-term care insurance 
     policy if the following statement is prominently displayed on 
     the front page of the policy and in the outline of coverage 
     required under subsection (c)(1)(B)(ii):
       ```This is a federally qualified long-term care insurance 
     contract. The policy meets all the Federal consumer 
     protection standards necessary to receive favorable tax 
     treatment under section 7702B(b) of the Internal Revenue Code 
     of 1986.'.
       ``(e) Qualified Long-Term Care Insurance Policy Defined.--
     For purposes of this section, the term `qualified long-term 
     care insurance policy' has the meaning given such term by 
     section 7702B(b).''.
       (b) Conforming Amendment.--The table of sections for 
     chapter 43 is amended by adding at the end the following new 
     item:

``Sec. 4980C. Failure to meet requirements for long-term care insurance 
              policies.''.
     SEC. 8203. COORDINATION WITH STATE REQUIREMENTS.

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

     SEC. 8204. UNIFORM LANGUAGE AND DEFINITIONS.

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

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

       (a) Medicaid Estate Recoveries.--
       (1) In general.--Section 1917(b) of the Social Security Act 
     (42 U.S.C. 1396p(b)) is amended--
       (A) in paragraph (1), by striking subparagraph (C);
       (B) in paragraph (3), by striking ``(other than paragraph 
     (1)(C))''; and
       (C) in paragraph (4)(B), by striking ``(and shall include, 
     in the case of an individual to whom paragraph (1)(C)(i) 
     applies)''.
       (2) Effective date.--Section 1917(b) of the Social Security 
     Act (42 U.S.C. 1396p(b)) shall be applied and administered as 
     if the provisions stricken by paragraph (1) had not been 
     enacted.
       (b) Reporting Requirements for Certain Asset Protection 
     Programs.--Section 1902 of the Social Security Act (42 U.S.C. 
     1396a) is amended by adding at the end the following new 
     subsection:
       ``(aa)(1) The Secretary shall not approve any State plan 
     amendment providing for an 
     [[Page S1786]] asset protection program (as described in 
     paragraph (2)) unless the State requires all insurers 
     participating in such program to submit reports to the State 
     and the Secretary at such times, and containing such 
     information, as the Secretary determines appropriate. The 
     information included in the reports required to be submitted 
     under the preceding sentence shall be submitted in accordance 
     with the data standards established by the Secretary under 
     paragraph (3).
       ``(2) An asset protection program described in this 
     paragraph is a program under which an individual's assets and 
     resources are disregarded for purposes of the program under 
     this subtitle--
       ``(A) to the extent that payments are made under a 
     qualified long-term care insurance policy (as defined in 
     section 7702B(b) of the Internal Revenue Code of 1986); or
       ``(B) because an individual has received (or is entitled to 
     receive) benefits under a qualified long-term care insurance 
     policy (as defined in section 7702B(b) of such Code).
       ``(3)(A) Not later than 90 days after the date of the 
     enactment of the Private Long-Term Care Family Protection Act 
     of 1995, the Secretary shall select data standards for the 
     information required to be included in reports submitted in 
     accordance with paragraph (1). Such data standards shall be 
     selected from the data standards included in the Long-Term 
     Care Insurance Uniform Data Set developed by the University 
     of Maryland Center on Aging and Laguna Research Associates, 
     and used by the States of California, Connecticut, Indiana, 
     and New York for reports submitted by insurers under the 
     asset protection programs conducted by such States.
       ``(B) The Secretary shall modify the standards selected 
     under subparagraph (A) as the Secretary determines 
     appropriate.''.

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

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

     SEC. 8401. EFFECTIVE DATE OF TAX PROVISIONS.

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

     SEC. 9001. ASSURANCE OF BUDGET NEUTRALITY.

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

  The Access to Affordable Health Care Act of 1995--Section-by-Section

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


                title i--health insurance market reform

              a. Non-discrimination based on health status

       In general, a health plan may not deny, limit, or condition 
     the coverage under the plan (or vary the premium) for an 
     individual on the basis of their health status, medical 
     condition, claims experience, receipt of health care, medical 
     history, anticipated need for services, disability, or lack 
     of insurability.
       The plan may limit or exclude benefits relating to a pre-
     existing condition that was diagnosed or treated during the 
     3-month period prior to enrollment in that plan for up to 6 
     months. However, if the individual had been in a period of 
     continuous coverage under another health plan prior to 
     enrollment, the exclusion period would be reduced by 1 month 
     for each month of continuous coverage.

                    b. Guaranteed issue and renewal

       Health plans offering coverage in the small group market 
     shall guarantee each individual purchaser and small employer 
     (and each employee of that small employer) access to the 
     plan. In addition, health plans must be renewed at the option 
     of the employer or individual if they remain eligible for 
     coverage under the plan. Plans may refuse to renew a policy 
     in the case of: nonpayment of premiums; fraud on the part of 
     the employer or individual related to the plan; or 
     misrepresentation by the employer or individual of material 
     facts relating to an application for coverage of a claim or 
     benefit.

                         c. Rating limitations

       The Secretary of HHS shall request that the National 
     Association of Insurance Commissioners develop specific 
     standards in the form of a model Act and model regulations to 
     implement rating stands for the small group market. Factors 
     that health plans may use to vary premium rates include age 
     (not to exceed a 3:1 ratio), family type and geography. 
     Health plans would be prohibited from using gender, health 
     status or health expenditures to vary rates. These factors 
     would be phased out within three years in order to minimize 
     market disruption and
      maximize coverage rates. The standards developed would also 
permit health plans to provide premium discounts based on workplace 
health promotion activities.

                   d. Encouragement of State efforts

       None of the provisions of the bill shall be construed as 
     preempting State law unless that State law directly conflicts 
     with the bills' requirements. In addition, the following 
     state consumer protection laws shall not be considered to 
     directly conflict with any such requirement and are 
     specifically not preempted: laws that limit the exclusions or 
     limitations for preexisting medical conditions to periods 
     that are less than those provided in this title; laws that 
     limit variations in premium rates beyond the variations 
     permitted in this title; and laws that would expand the small 
     group market in excess of that provided for under this title. 
     In addition, nothing in this bill shall be construed as 
     prohibiting States from enacting health care reform measures 
     that exceed the measures established in the bill, including 
     reforms that expand access to health care services, control 
     health care costs, and enhance quality of care.


title ii--grants to states for small group health insurance purchasing 
                              arrangements

       Authorizes the Secretary of Health and Human Services to 
     make grants to States for the establishment and operation of 
     small group health insurance purchasing arrangements to 
     increase access to more affordable coverage for small 
     businesses and individuals.


title iii--tax incentives to encourage the purchase of health insurance

       Insurance would be made more affordable for low and middle-
     income individuals (individuals with incomes up to $23,000 
     and families with incomes up to $33,000) by providing a 
     refundable tax credit to those without employer-provided 
     insurance. A credit of 60 percent would apply to premiums of 
     up to $1,200 a year for individuals and $2,400 for families. 
     Individuals with adjusted gross incomes of less than $18,000 
     and families with adjusted gross incomes of less than $28,000 
     would be eligible for the full credit. The credit would be 
     phased out for individuals with incomes between $18,000 and 
     $23,000 and families with incomes between $28,000 and 
     $33,000.
       [[Page S1787]] Also makes the tax deduction for health 
     insurance costs for self-employed individuals permanent 
     (retroactive to 1994) and phases it up from the current 25% 
     level to 100% by 2000.
 title vi--incentives to increase the access of rural and underserved 
                          areas to health care

       Provides a special tax credit and other incentives for 
     physicians and other primary care providers serving in rural 
     and other underserved areas. Increased funding is also 
     provided to expand the National Health Service Corps and Area 
     Health Education Centers, which will also help to increase 
     the number of health care professionals in medically 
     underserved areas. Increased grant funding would also be 
     available to expand the number of community health centers, 
     which provide comprehensive health services in rural and 
     inner-city neighborhoods to millions of Americans who need 
     care regardless of their ability to pay.


                title v--quality and consumer protection

       Authorizes the Secretary of Health and Human Services to 
     award demonstration grants for the establishment and 
     operation of regional Quality Improvement Foundations.
       Improves the efficiency and effectiveness of the health 
     care system by encouraging the development of a national 
     health information network to reduce administrative 
     complexity, paperwork, and costs; to provide information on 
     cost and quality; and to provide information tools that allow 
     improved fraud detection, outcomes research, and quality of 
     care.
       Establishes a stronger, better coordinated federal effort 
     to combat fraud and abuse in our health care system. This 
     section expands criminal and civil penalties for health care 
     fraud to provide a stronger deterrent to the billing of 
     fraudulent claims and to deter fraudulent utilization of 
     health care services.


                      title vi--malpractice reform

       Encourages states to establish alternative dispute 
     resolution mechanisms like prelitigation screening panels, 
     which have had great success in a number of states in 
     reducing medical malpractice costs. Also allows health care 
     providers to use practice guidelines approved by the 
     Secretary of HHS as a rebuttable defense in medical liability 
     cases.


           title vii--health promotion and disease prevention

       Encourages participation in qualified health promotion and 
     prevention programs by clarifying that expenditures for these 
     programs are considered amounts paid for medical care for tax 
     purposes. Also establishes a new grant program for states to 
     provide assistance to small businesses in the establishment 
     and operation of worksite wellness programs for their 
     employees. And finally, expands the comprehensive school 
     health education programs administered by the Centers for 
     Disease Control.


            title viii--access to affordable long-term care

       Removes tax barriers and creates incentives for individuals 
     and their families to finance their future long-term care 
     needs. Long-term care policies that meet federal consumer 
     protection standards would receive favorable tax treatment. 
     Like health insurance, business expenditures on premiums 
     would be deductible as a business expense and employer-
     provided long-term care insurance would be excluded from an 
     employee's taxable income. Also allows States to develop 
     programs under which individuals can keep more of their 
     assets and still qualify for Medicaid if they take steps to 
     finance their own long-term care needs. And finally, provides 
     various incentives, such as tax-free withdrawals from IRAs, 
     401(k) plans, and other qualified pension plans to promote 
     the purchase of private long-term care insurance.


                title ix--assurance of budget neutrality

       No amendment or provision made by the bill will take effect 
     until legislation is enacted which provides for budget 
     neutrality.
                                 ______

      By Mrs. KASSEBAUM (for herself, Mr. Jeffords, Mr. Gregg, and Mr. 
        Gorton):
  S. 295. A bill to permit labor management cooperative efforts that 
improve America's economic competitiveness to continue to thrive, and 
for other purposes; to the Committee on Labor and Human Resources.


               TEAMWORK FOR EMPLOYEES AND MANAGEMENT ACT

  Mrs. KASSEBAUM. Mr. President, I rise today to introduce, along with 
Senators Jeffords, Gregg, and Gorton, the Teamwork for Employees And 
Management [TEAM] Act, a bill to encourage worker-management 
cooperation.
  Mr. President, when I served many years ago on the school board in 
Maize, KS, we frequently met on an informal basis with teachers to 
discuss problems the teachers faced in the classroom. The teachers had 
an important perspective to share, and we addressed their concerns. 
Sometimes we agreed with them and implemented their recommendations, 
and sometimes we agreed to disagree. But the important thing was that 
we felt free to exchange information.
  School boards and teachers are governed by State law and not Federal 
law, so we did not face the problems on the school board that private 
sector workers and supervisors face today. We had the benefit of being 
able to work cooperatively with our teachers, and I continue to believe 
that we improved the quality of education for our students and enhanced 
the quality of work life for our teachers.
  Mr. President, our current Federal labor laws do not allow this sort 
of cooperative effort, because our labor laws assume that labor and 
management have an adversarial relationship. This may have been true 50 
years ago, but today, employers recognize that productivity and 
efficiency improve when workers operate in partnership with management, 
and that partnership occurs best in a cooperative rather than an 
adversarial environment. Yet our labor laws currently prohibit these 
cooperative efforts.
  Mr. President, the TEAM Act responds to a National Labor Relations 
Board [NLRB] decision in 1992 called Electromation that has had 
significant consequences for attempts to improve cooperation between 
workers and employers. Specifically, the NLRB held that employer-
employee committees, where workers met with management to discuss 
attendance, compensation and no-smoking policies, violated the National 
Labor Relations Act's [NLRA] prohibition against ``employer-dominated'' 
labor organizations.
  The TEAM Act amends our Federal labor laws to permit these types of 
voluntary programs to continue. The legislation allows employers and 
employees to meet together to address issues of mutual interest, 
including issues related to quality, productivity, and efficiency, as 
long as the committees or other joint programs do not engage in 
collective bargaining.
  I believe that our Federal labor laws should not stand in the way of 
work place cooperative efforts, such as quality circles and employee 
involvement programs. Our workers like to have input on their working 
conditions and our international competitors use employee involvement 
to improve plant productivity.
  I urge my colleagues to support the TEAM Act.
  I ask unanimous consent that the full text of the bill be printed in 
the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:
                                 S. 295

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

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Teamwork for Employees And 
     Management Act of 1995''.

     SEC. 2. FINDINGS AND PURPOSES.

       (a) Findings.--Congress finds that--
       (1) the escalating demands of global competition have 
     compelled an increasing number of American employers to make 
     dramatic changes in workplace and employer-employee 
     relationships;
       (2) these changes involve an enhanced role for the employee 
     in workplace decisionmaking, often referred to as ``employee 
     involvement'', which has taken many forms, including self-
     managed work teams, quality-of-worklife, quality circles, and 
     joint labor-management committees;
       (3) employee involvement structures, which operate 
     successfully in both unionized and non-unionized settings, 
     have been established by over 80 percent of the largest 
     employers of the United States and exist in an estimated 
     30,000 workplaces;
       (4) in addition to enhancing the productivity and 
     competitiveness of American businesses, employee involvement 
     structures have had a positive impact on the lives of those 
     employees, better enabling them to reach their potential in 
     their working lives;
       (5) recognizing that foreign competitors have successfully 
     utilized employee involvement techniques, Congress has 
     consistently joined business, labor and academic leaders in 
     encouraging and recognizing successful employee involvement 
     structures in the workplace through such incentives as the 
     Malcolm Baldridge National Quality Award;
       (6) employers who have instituted legitimate employee 
     involvement structures have not done so to interfere with the 
     collective bargaining rights guaranteed by the labor laws, as 
     was the case in the 1930s when employers established 
     deceptive sham ``company unions'' to avoid unionization; and
       (7) employee involvement is currently threatened by 
     interpretations of the prohibition against employer-dominated 
     ``company unions''.
        [[Page S1788]] (b) Purposes.--It is the purpose of this 
     Act to--
       (1) protect legitimate employee involvement structures 
     against governmental interference;
       (2) preserve existing protections against deceptive, 
     coercive employer practices; and
       (3) permit legitimate employee involvement structures where 
     workers may discuss issues involving terms and conditions of 
     employment, to continue to evolve and proliferate.

     SEC. 3. AMENDMENT TO SECTION 8(a)(2) OF THE NATIONAL LABOR 
                   RELATIONS ACT.

       Section 8(a)(2) of the National Labor Relations Act (29 
     U.S.C. 158(a)(2)) is amended by adding at the end thereof the 
     following: ``Provided further, That it shall not constitute 
     or be evidence of an unfair labor practice under this 
     paragraph for an employer to establish, assist, maintain or 
     participate in any organization or entity of any kind, in 
     which employees participate to address matters of mutual 
     interest (including issues of quality, productivity and 
     efficiency) and which does not have, claim or seek authority 
     to negotiate or enter into collective bargaining agreements 
     under this Act with the employer or to amend existing 
     collective bargaining agreements between the employer and any 
     labor organization;''.

     SEC. 4. CONSTRUCTION CLAUSE LIMITING EFFECT OF ACT.

       Nothing in the amendment made by section 3 shall be 
     construed as affecting employee rights and responsibilities 
     under the National Labor Relations Act other than those 
     contained in section 8(a)(2) of such Act.
                                 ______

      By Mr. KENNEDY (for himself, Mr. Akaka, Mr. Bingaman, Mrs. Boxer, 
        Mr. Bradley, Mr. Campbell, Mr. Dodd, Mr. Feingold, Mr. Harkin, 
        Mr. Inouye, Mr. Lautenberg, Mr. Leahy, Ms. Mikulski, Ms. 
        Moseley-Braun, Mr. Moynihan, Mrs. Murray, Mr. Packwood, Mr. 
        Pell, Mr. Robb, Mr. Simon, and Mr. Wellstone):
  S. 296. A bill to amend section 1977A of the Revised Statutes to 
equalize the remedies available to all victims of intentional 
employment discrimination, and for other purposes; to the Committee on 
Labor and Human Resources.


                           equal remedies act

  Mr. KENNEDY. Mr. President, on behalf of myself and 20 other 
Senators, it is an honor to reintroduce the Equal Remedies Act to 
repeal the caps on the amount of damages available in employment 
discrimination cases brought under the Civil Rights Act of 1991.
  The Civil Rights Act of 1991 for the first time gave women, religious 
minorities, and the disabled the right to recover compensatory and 
punitive damages when they suffer intentional discrimination on the 
job--but only up to specified limits. Victims of discrimination on the 
basis of race or national origin, by contrast, can recover such damages 
without such limits. No similar caps on damages exist in other civil 
rights laws, and they are not appropriate in this instance.
  The Equal Remedies Act will end this double standard by removing the 
caps on damages for victims of intentional discrimination on the basis 
of sex, religion, or disability.
  The caps on damages deny an adequate remedy to the most severely 
injured victims of discrimination. For example, if a woman proves that 
as a result of discrimination or sexual harassment she needs extensive 
medical treatment exceeding the caps, she will be limited to receiving 
only partial compensation for her injury.
  In addition, the caps on punitive damages limit the extent to which 
employers who intentionally discriminate--particularly the worst 
violators--are punished for their discriminatory acts and deterred from 
engaging in such conduct in the future. The more offensive the conduct 
and the greater the damages inflicted, the more the employer benefits 
from the caps.
  The caps on damages in the Civil Rights Act of 1991 were a compromise 
necessitated by concern about passing a bill that President Bush would 
sign. The issue was only one of the important issues covered in that 
piece of legislation, which also reversed a series of Supreme Court 
decisions that had made it far more difficult for working Americans to 
challenge discrimination.
  The bill as a whole represented a significant advance in the ongoing 
battle to overcome discrimination in the workplace. In order to 
guarantee that the bill would become law, the unfortunate compromise on 
damages was included. However, many of us made clear that we intended 
to work for enactment of separate legislation to remove the caps. By 
reintroducing the Equal Remedies Act today, we reaffirm our commitment. 
We must end the double standard that relegates women, religious 
minorities, and the disabled to second-class remedies under the civil 
rights laws.
  Mr. President, I ask unanimous consent that the text of the bill be 
printed in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                 S. 296

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

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Equal Remedies Act of 
     1995''.

     SEC. 2. EQUALIZATION OF REMEDIES.

       Section 1977A of the Revised Statutes (42 U.S.C. 1981a), as 
     added by section 102 of the Civil Rights Act of 1991, is 
     amended--
       (1) in subsection (b)--
       (A) by striking paragraph (3), and
       (B) by redesignating paragraph (4) as paragraph (3), and
       (2) in subsection (c), by striking ``section--'' and all 
     that follows through the period and inserting ``section, any 
     party may demand a jury trial.''.
                                 ______

      By Mr. ROCKEFELLER (for himself, Mr. Daschle, Mr. Graham, Mr. 
        Akaka, Mr. Campbell, Mr. Jeffords, Mr. Leahy, and Mr. 
        Bingaman):
  S. 297. A bill to amend the Internal Revenue Code of 1986 to clarify 
the exclusion from gross income for veterans' benefits; to the 
Committee on Finance.


                       veterans' tax fairness act

 Mr. ROCKEFELLER. Mr. President, as the ranking minority member 
of the Committee on Veterans' Affairs, I am introducing today the 
proposed Veterans' Tax Fairness Act of 1995. I am enormously pleased 
that a number of my colleagues, both members of the committee and 
others, have joined me as original cosponsors of this important 
measure--Senators Tom Daschle, Bob Graham, Daniel Akaka, Ben Nighthorse 
Campbell, Jim Jeffords, Pat Leahy, and Jeff Bingaman. This bill would 
clarify and reiterate the longstanding rule that veterans benefits are 
not taxable--a rule that, until action taken in 1992 by the Internal 
Revenue Service, had never been questioned.
  On February 27, 1992, the Internal Revenue Service, in a letter to 
the general counsel of the Department of Veterans Affairs, 
reinterpreted a 1986 law and reached a conclusion that could jeopardize 
the historical tax-exempt status of many veterans benefits, including 
various benefits provided to service-disabled veterans, dependency and 
indemnity compensation for survivors, veterans and survivors pensions, 
education benefits under the Montgomery GI bill, and veterans medical 
care.
  The IRS ruling addressed a narrow issue of whether veterans must pay 
taxes when VA forgives a debt the veteran owes to the Federal 
Government after VA pays a guaranty on the Veteran's home loan. 
Congress liberalized the criteria for VA debt waivers in 1989. In the 
February 1992 opinion, IRS interpreted a 1986 tax code provision as 
requiring taxation of any debt waiver granted under the 1989 law that 
would not have been granted under the old law. IRS concluded that any 
modification or adjustment of a veterans benefit would make the benefit 
taxable.
  Mr. President, our committee strongly disagreed with the IRS 
interpretation, for reasons stated in a May 13, 1992, letter from then-
Chairman Alan Cranston to then-Secretary of the Treasury Nicholas F. 
Brady.
  Mr. President, although the IRS opinion attempts to address only the 
narrow question of the taxability of VA debt waivers, its conclusions 
could support IRS assessing taxes for many other veterans benefits that 
have been modified or adjusted after September 9, 1986.
  Since 1986, for example, Congress has expanded and increased 
education benefits paid under the GI bill on rehabilitation benefits 
provided to disabled veterans; adjusted the categories of eligibility 
for VA medical care; overhauled the survivors Dependency and Indemnity 
Compensation [DIC] Program and made several adjustments in the rates of 
DIC; expanded various health care services; and increased other 
benefits, such as housing and 
[[Page S1789]] automobile grants for certain veterans with every severe 
service-connected disabilities. The IRS interpretation would exempt 
adjustment based on an inflation index, but fails to protect the many 
VA benefits that are adjusted without reference to an index. Under the 
February 27, 1992 IRS opinion, any of these modifications or 
adjustments might have made the benefits involved taxable.
  Section 5301 of title 38, United States Code, explicitly exempts 
veterans benefits and services from taxation. The provision of the tax 
code interpreted by IRS concerns military benefits, and it seems clear 
to me that Congress did not intend to make veterans benefits taxable 
for the first time in our Nation's history through enactment of a tax 
code provision addressing military benefits. Veterans benefits, 
provided to veterans and their survivors under laws administered by VA, 
always have been distinct from military pay and benefits provided to 
active-duty or retired servicemembers under laws administered by the 
Department of Defense.
  In fact, Mr. President, another tax code provision, section 136, 
explicitly references the title 38 provision exempting veterans 
benefits from taxation. I am not aware of any previous suggestion that 
the tax code section that IRS has interpreted was intended to make 
veterans benefits taxable. If Congress had wanted to make such a 
radical change in the tax-exempt status of veterans benefits, it 
certainly would have done so much more explicitly than through an 
ambiguously worded provision that does not even mention veterans or the 
Department of Veterans Affairs.
  Mr. President, it is clear that, before February 1992, in previous 
administration had interpreted this tax code provision to require 
taxation of veterans benefits. During the almost 7 years since the 
provision took effect, IRS has not collected or attempted to collect 
any taxes based on the receipt of VA-administered benefits--even in 
connection with VA debt waivers, which the IRS opinion had concluded 
could be subject to taxation in certain circumstances.
  In fact, every official IRS publication of which I am aware that 
mentions veterans benefits, including ``Publication 17--Your Income 
Taxes'' and a 1988 IRS private letter ruling, explicitly states that 
veterans benefits are not taxable. Many IRS publications even list all 
available veterans benefits to indicate that each is nontaxable.
  Mr. President, in 1992, the committee found a very receptive ally in 
then-Senator Lloyd Bentsen, who chaired the Finance Committee. Senator 
Bentsen successfully inserted a version of our clarifying legislation 
into 1992's tax bill, H.R. 11. Unfortunately, President Bush vetoed 
H.R. 11.
  Mr. President, during the last Congress, efforts were made, both by 
the administration--where Senator Bentsen was then serving as Secretary 
of Treasury--which submitted proposed legislation substantively 
identical to H.R. 11, and by me in the introduction of such legislation 
in S. 1083, to replicate the success we had with H.R. 11. 
Unfortunately, no action was taken on that legislation during the 103d 
Congress.
  The legislation I am introducing today is substantively identical to 
H.R. 11, the legislation recommended by the administration last 
Congress, and to S. 1083, and I am hopeful that action will be taken on 
it in the first appropriate tax legislation.
  I believe it is vitally important to reiterate and clarify by statute 
the tax-exempt status of all veterans benefits and services, in order 
to preclude any future tinkering with these most fundamental benefits, 
particularly in the current climate of anything goes in the name of 
deficit reduction.
  Mr. President, it is obvious that, since IRS previously has not 
collected or attempted to collect taxes on veterans benefits, this 
legislation will not affect Federal revenues.
  Mr. President, in closing, I acknowledge and thank Senator Moynihan 
and the fine Finance Committee staff for the technical assistance 
provided in connection with the development of this measure. I urge my 
colleagues to support this bill and pledge to do all I can to see it 
enacted quickly.
  Mr. President, I ask unanimous consent that a copy of the bill be 
printed in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                 S. 297

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

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Veterans' Tax Fairness Act 
     of 1995''.

     SEC. 2. CLARIFICATION OF TREATMENT OF VETERANS' BENEFITS.

       (a) In General.--Subsection (a) of section 134 of the 
     Internal Revenue Code of 1986 (relating to certain military 
     benefits) is amended to read as follows:
       ``(a) General Rule.--Gross income shall not include--
       ``(1) any qualified military benefit, and
       ``(2) any allowance or benefit administered by the 
     Secretary of Veterans Affairs which is received by a veteran 
     (as defined in section 101 of title 38, United States Code) 
     or a dependent or survivor of a veteran.''
       (b) Technical Amendment.--Paragraph (3) of section 137(a) 
     of such Code is amended to read as follows:
       ``(3) Benefits under laws administered by the Secretary of 
     Veterans Affairs, see section 5301 of title 38, United States 
     Code.''
       (c) Effective Date.--The amendment made by subsection (a) 
     shall apply to taxable years beginning after December 31, 
     1984.
     

                          ____________________