[Congressional Record Volume 141, Number 160 (Tuesday, October 17, 1995)]
[House]
[Pages H10147-H10208]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                               AMENDMENTS

  Under clause 6 of rule XXIII, proposed amendments were submitted as 
follows:

                                H.R. 39

                          Offered By: Mr. Goss

       Amendment No. 2: Page 29, line 3, add ``and'' after the 
     semicolon.
       Page 29, strike lines 4 through 7 (and redesignate the 
     subsequent paragraph accordingly).

                                H.R. 39

                       Offered By: Mr. Traficant

       Amendment No. 3: At the end of the bill, add the following 
     new section:

     SEC.   . SENSE OF CONGRESS; REQUIREMENT REGARDING NOTICE.

       (a) In General.--Title IV, as amended by section 19, is 
     further amended by adding at the end the following new 
     section:

     ``SEC. 402. SENSE OF CONGRESS; NOTICE TO RECIPIENTS OF 
                   ASSISTANCE.

       ``(a) Purchase of American-Made Equipment and Products.--It 
     is the sense of the Congress that, to the greatest extent 
     practicable, all equipment and products purchased with funds 
     made available under this Act should be American-made.
       ``(b) Notice to Recipients of Assistance.--In providing 
     financial assistance under this Act, the Secretary, to the 
     greatest extent practicable, shall provide to each recipient 
     of the assistance a notice describing the statement made in 
     subsection (a) by the Congress.''.
       (b) Clerical Amendment.--The table of contents in the first 
     section, as amended by section 19, is further amended by 
     adding at the end the following:

``Sec. 402. Sense of Congress; notice to recipients of assistance.''.

                               H.R. 2425

                         Offered By: Mr. Archer

               (Amendment in the Nature of a Substitute)

       Amendment No. 1: Strike all after the enacting clause and 
     insert the following:

     SECTION 1. PURPOSE.

       The purpose of this Act is to reform the medicare program, 
     in order to preserve and protect the financial stability of 
     the program.
                           TITLE XV--MEDICARE

     SEC. 15000. SHORT TITLE OF TITLE; AMENDMENTS AND REFERENCES 
                   TO OBRA; TABLE OF CONTENTS OF TITLE.

       (a) Short Title.--This title may be cited as the ``Medicare 
     Preservation Act of 1995''.
       (b) Amendments to Social Security Act.--Except as otherwise 
     specifically provided, whenever in this title an amendment is 
     expressed in terms of an amendment to or repeal of a section 
     or other provision, the reference shall be considered to be 
     made to that section or other provision of the Social 
     Security Act.
       (c) References to OBRA.--In this title, the terms ``OBRA-
     1986'', ``OBRA-1987'', ``OBRA-1989'', ``OBRA-1990'', and 
     ``OBRA-1993'' refer to the Omnibus Budget Reconciliation Act 
     of 1986 (Public Law 99-509), the Omnibus Budget 
     Reconciliation Act of 1987 (Public Law 100-203), the Omnibus 
     Budget Reconciliation Act of 1989 (Public Law 101-239), the 
     Omnibus Budget Reconciliation Act of 1990 (Public Law 101-
     508), and the Omnibus Budget Reconciliation Act of 1993 
     (Public Law 103-66), respectively.
       (d) Table of Contents of Title.--The table of contents of 
     this title is as follows:

Sec. 15000. Short title of title; amendments and references to OBRA; 
              table of contents of title.

                    Subtitle A--MedicarePlus Program

          Part 1--Increasing Choice Under the Medicare Program

Sec. 15001. Increasing choice under medicare.
Sec. 15002. MedicarePlus program.

             ``Part C--Provisions Relating to MedicarePlus

``Sec. 1851. Requirements for MedicarePlus organizations; high 
              deductible/medisave products.
``Sec. 1852. Requirements relating to benefits, provision of services, 
              enrollment, and premiums.
``Sec. 1853. Patient protection standards.
``Sec. 1854. Provider-sponsored organizations.
``Sec. 1855. Payments to MedicarePlus organizations.
``Sec. 1856. Establishment of standards for MedicarePlus organizations 
              and products.
``Sec. 1857. MedicarePlus certification.
``Sec. 1858. Contracts with MedicarePlus organizations.
Sec. 15003. Duplication and coordination of medicare-related products.
Sec. 15004. Transitional rules for current medicare HMO program.

    Part 2--Special Rules for MedicarePlus Medical Savings Accounts

Sec. 15011. MedicarePlus MSA's.
Sec. 15012. Certain rebates excluded from gross income.

      Part 3--Special Antitrust Rule for Provider Service Networks

Sec. 15021. Application of antitrust rule of reason to provider service 
              networks.

                          Part 4--Commissions

Sec. 15031. Medicare Payment Review Commission.
Sec. 15032. Commission on the Effect of the Baby Boom Generation on the 
              Medicare Program.
Sec. 15033. Change in appointment of Administrator of HCFA.

Part 5--Treatment of Hospitals Which Participate in Provider-Sponsored 
                             Organizations

Sec. 15041. Treatment of hospitals which participate in provider-
              sponsored organizations.
                 Subtitle B--Preventing Fraud and Abuse
                       Part 1--General Provisions
Sec. 15101. Increasing awareness of fraud and abuse.
Sec. 15102. Beneficiary incentive programs.
Sec. 15103. Intermediate sanctions for medicare health maintenance 
              organizations.
Sec. 15104. Voluntary disclosure program.
Sec. 15105. Revisions to current sanctions.
Sec. 15106. Direct spending for anti-fraud activities under medicare.
Sec. 15107. Permitting carriers to carry out prior authorization for 
              certain items of durable medical equipment.
Sec. 15108. National Health Care Anti-Fraud Task Force.
Sec. 15109. Study of adequacy of private quality assurance programs.
Sec. 15110. Penalty for false certification for home health services.
Sec. 15111. Pilot projects.

                    Part 2--Criminal Law Provisions

Sec. 15121. Offenses involving fraud, false statement, theft, or 
              embezzlement.

                     Subtitle C--Regulatory Relief

              Part 1--Physician Ownership Referral Reform

Sec. 15201. Repeal of prohibitions based on compensation arrangements.
Sec. 15202. Revision of designated health services subject to 
              prohibition.
Sec. 15203. Delay in implementation until promulgation of regulations.
Sec. 15204. Exceptions to prohibition.
Sec. 15205. Repeal of reporting requirements.
Sec. 15206. Preemption of State law.
Sec. 15207. Effective date.

                Part 2--Other Medicare Regulatory Relief

Sec. 15211. Repeal of Medicare and Medicaid Coverage Data Bank.
Sec. 15212. Clarification of level of intent required for imposition of 
              sanctions.
Sec. 15213. Additional exception to anti-kickback penalties for managed 
              care arrangements.
Sec. 15214. Solicitation and publication of modifications to existing 
              safe harbors and new safe harbors.
Sec. 15215. Issuance of advisory opinions under title XI.
Sec. 15216. Prior notice of changes in billing and claims processing 
              requirements for physicians' services.

[[Page H 10148]]


               Part 3--Promoting Physician Self-Policing

Sec. 15221. Exemption from antitrust laws for certain activities of 
              medical self-regulatory entities.

                  Subtitle D--Medical Liability Reform

                       Part 1--General Provisions

Sec. 15301. Federal reform of health care liability actions.
Sec. 15302. Definitions.
Sec. 15303. Effective date.

      Part 2--Uniform Standards for Health Care Liability Actions

Sec. 15311. Statute of limitations.
Sec. 15312. Calculation and payment of damages.
Sec. 15313. Alternative dispute resolution.

     Subtitle E--Teaching Hospitals and Graduate Medical Education

  Part 1--Teaching Hospital and Graduate Medical Education Trust Fund

Sec. 15401. Establishment of Fund; payments to teaching hospitals.

 ``TITLE XXII--TEACHING HOSPITAL AND GRADUATE MEDICAL EDUCATION TRUST 
                                  FUND

                    ``Part A--Establishment of Fund

         ``Sec. 2201. Establishment of Fund.

                ``Part B--Payments to Teaching Hospitals

                  ``Subpart 1--Requirement of Payments

         ``Sec. 2211. Formula payments to teaching hospitals.

  ``Subpart 2--Amount Relating to Indirect Costs of Graduate Medical 
                               Education

         ``Sec. 2221. Determination of amount relating to indirect 
           costs.
         ``Sec. 2222. Indirect costs; special rules regarding 
           determination of hospital-specific percentage.
         ``Sec. 2223. Indirect costs; alternative payments 
           regarding teaching hospitals in certain States.

   ``Subpart 3--Amount Relating to Direct Costs of Graduate Medical 
                               Education

         ``Sec. 2231. Determination of amount relating to direct 
           costs.
         ``Sec. 2232. Direct costs; special rules regarding 
           determination of hospital-specific percentage.
         ``Sec. 2233. Direct costs; authority for payments to 
           consortia of providers.
         ``Sec. 2234. Direct costs; alternative payments regarding 
           teaching hospitals in certain States.

                    ``Subpart 4--General Provisions

         ``Sec. 2241. Adjustments in payment amounts.

                 Part 2--Amendments to Medicare Program

Sec. 15411. Transfers to Teaching Hospital and Graduate Medical 
              Education Trust Fund.
Sec. 15412. Modification in payment policies regarding graduate medical 
              education.

  Part 3--Reform of Federal Policies Regarding Teaching Hospitals and 
                       Graduate Medical Education

Sec. 15421. Establishment of advisory panel for recommending policies.

                        ``Part C--Other Matters

``Sec. 2251. Advisory Panel on Reform in Financing of Teaching 
              Hospitals and Graduate Medical Education.

           Subtitle F--Provisions Relating to Medicare Part A

                           Part 1--Hospitals


          SUBPART A--GENERAL PROVISIONS RELATING TO HOSPITALS

Sec. 15501. Reductions in inflation updates for PPS hospitals.
Sec. 15502. Reductions in disproportionate share payment adjustments.
Sec. 15503. Payments for capital-related costs for inpatient hospital 
              services.
Sec. 15504. Reduction in adjustment for indirect medical education.
Sec. 15505. Treatment of PPS-exempt hospitals.
Sec. 15506. Reduction in payments to hospitals for enrollees' bad 
              debts.
Sec. 15507. Permanent extension of hemophilia pass-through.
Sec. 15508. Conforming amendment to certification of Christian Science 
              providers.


           SUBPART B--PROVISIONS RELATING TO RURAL HOSPITALS

Sec. 15511. Sole community hospitals.
Sec. 15512. Clarification of treatment of EAC and RPC hospitals.
Sec. 15513. Establishment of rural emergency access care hospitals.
Sec. 15514. Classification of rural referral centers.
Sec. 15515. Floor on area wage index.

             Part 2--Payments to Skilled Nursing Facilities

Sec. 15521. Payments for routine service costs.
Sec. 15522. Incentives for cost effective management of covered non-
              routine services.
Sec. 15523. Payments for routine service costs.
Sec. 15524. Reductions in payment for capital-related costs.
Sec. 15525. Treatment of items and services paid for under part B.
Sec. 15526. Certification of facilities meeting revised nursing home 
              reform standards.
Sec. 15527. Medical review process.
Sec. 15528. Report by Medicare Payment Review Commission.
Sec. 15529. Effective date.

         Part 3--Clarification of Credits to Part A Trust Fund

Sec. 15531. Clarification of amount of taxes credited to Federal 
              Hospital Insurance Trust Fund.

           Subtitle G--Provisions Relating to Medicare Part B

                        Part 1--Payment Reforms

Sec. 15601. Payments for physicians' services.
Sec. 15602. Elimination of formula-driven overpayments for certain 
              outpatient hospital services.
Sec. 15603. Payments for durable medical equipment.
Sec. 15604. Reduction in updates to payment amounts for clinical 
              diagnostic laboratory tests.
Sec. 15605. Extension of reductions in payments for costs of hospital 
              outpatient services.
Sec. 15606. Freeze in payments for ambulatory surgical center services.
Sec. 15607. Rural emergency access care hospitals.
Sec. 15608. Ensuring payment for physician and nurse for jointly 
              furnished anesthesia services.
Sec. 15609. Statewide fee schedule area for physicians' services.
Sec. 15609A. Establishment of fee schedule for ambulance services.
Sec. 15609B. Standards for physical therapy services furnished by 
              physicians.

                         Part 2--Part B Premium

Sec. 15611. Extension of part B premium.
Sec. 15612. Income-related reduction in medicare subsidy.

       Part 3--Administration and Billing of Laboratory Services

Sec. 15621. Administrative simplification for laboratory services.
Sec. 15622. Restrictions on direct billing for laboratory services.

        Part 4--Quality Standards for Durable Medical Equipment

Sec. 15631. Recommendations for quality standards for durable medicare 
              equipment.

       Subtitle H--Provisions Relating to Medicare Parts A and B

                Part 1--Payment for Home Health Services

       Sec. 15701. Payment for home health services.
       Sec. 15702. Maintaining savings resulting from temporary 
           freeze on payment increases for home health services.
       Sec. 15703. Extension of waiver of presumption of lack of 
           knowledge of exclusion from coverage for home health 
           agencies.
       Sec. 15704. Report on recommendations for payments and 
           certification for home health services of Christian 
           Science providers.
       Sec. 15705. Extension of period of home health agency 
           certification.

             Part 2--Medicare Secondary Payer Improvements

       Sec. 15711. Extension and expansion of existing 
           requirements.
       Sec. 15712. Improvements in recovery of payments.
       Sec. 15713. Prohibiting retroactive application of policy 
           regarding ESRD beneficiaries enrolled in primary plans.

                            Part 3--Failsafe

       Sec. 15721. Failsafe budget mechanism.

                 Part 4--Administrative Simplification

       Sec. 15731. Standards for medicare information transactions 
           and data elements.

           Part 5--Other Provisions Relating to Parts A and B

       Sec. 15741. Clarification of medicare coverage of items and 
           services associated with certain medical devices 
           approved for investigational use.
       Sec. 15742. Additional exclusion from coverage.
       Sec. 15743. Competitive bidding for certain items and 
           services.
       Sec. 15744. Disclosure of criminal convictions relating to 
           provision of home health services.
       Sec. 15745. Requiring renal dialysis facilities to make 
           services available on a 24-hour basis.

                   Subtitle I--Clinical Laboratories

       Sec. 15801. Exemption of physician office laboratories.

Subtitle J--Lock-Box Provisions for Medicare Part B Savings from Growth 
                               Reductions

       Sec. 15901. Establishment of Medicare Growth Reduction 
           Trust Fund for Part B savings.
                    Subtitle A--MedicarePlus Program

          PART 1--INCREASING CHOICE UNDER THE MEDICARE PROGRAM

     SEC. 15001. INCREASING CHOICE UNDER MEDICARE.

       (a) In General.--Title XVIII is amended by inserting after 
     section 1804 the following new section:


                   ``providing for choice of coverage

       ``Sec. 1805. (a) Choice of Coverage.--
       ``(1) In general.--Subject to the provisions of this 
     section, every individual who is entitled to benefits under 
     part A and enrolled 

[[Page H 10149]]
     under part B shall elect to receive benefits under this title through 
     one of the following:
       ``(A) Through fee-for-service system.--Through the 
     provisions of parts A and B.
       ``(B) Through a MedicarePlus product.--Through a 
     MedicarePlus product (as defined in paragraph (2)), which may 
     be--
       ``(i) a high deductible/medisave product (and a 
     contribution into a MedicarePlus medical savings account 
     (MSA)),
       ``(ii) a product offered by a provider-sponsored 
     organization,
       ``(iii) a product offered by an organization that is a 
     union, Taft-Hartley plan, or association, or
       ``(iv) a product providing for benefits on a fee-for-
     service or other basis.
       ``(2) MedicarePlus product defined.--For purposes this 
     section and part C, the term `MedicarePlus product' means 
     health benefits coverage offered under a policy, contract, or 
     plan by a MedicarePlus organization (as defined in section 
     1851(a)) pursuant to and in accordance with a contract under 
     section 1858.
       ``(3) Terminology relating to options.--For purposes of 
     this section and part C--
       ``(A) Non-medicare-plus option.--An individual who has made 
     the election described in paragraph (1)(A) is considered to 
     have elected the `Non-MedicarePlus option'.
       ``(B) MedicarePlus option.--An individual who has made the 
     election described in paragraph (1)(B) to obtain coverage 
     through a MedicarePlus product is considered to have elected 
     the `MedicarePlus option' for that product.
       ``(b) Special rules.--
       ``(1) Residence requirement.--Except as the Secretary may 
     otherwise provide, an individual is eligible to elect a 
     MedicarePlus product offered by a MedicarePlus organization 
     only if the organization in relation to the product serves 
     the geographic area in which the individual resides.
       ``(2) Affiliation requirements for certain products.--
       ``(A) In general.--Subject to subparagraph (B), an 
     individual is eligible to elect a MedicarePlus product 
     offered by a limited enrollment MedicarePlus organization (as 
     defined in section 1852(c)(4)(E)) only if--
       ``(i) the individual is eligible under section 1852(c)(4) 
     to make such election, and
       ``(ii) in the case of a MedicarePlus organization that is a 
     union sponsor or a Taft-Hartley sponsor (as defined in 
     section 1852(c)(4)), the individual elected under this 
     section a MedicarePlus product offered by the sponsor during 
     the first enrollment period in which the individual was 
     eligible to make such election with respect to such sponsor.
       ``(B) No reelection after disenrollment for certain 
     products.--An individual is not eligible to elect a 
     MedicarePlus product offered by a MedicarePlus organization 
     that is a union sponsor or a Taft-Hartley sponsor if the 
     individual previously had elected a MedicarePlus product 
     offered by the organization and had subsequently discontinued 
     to elect such a product offered by the organization.
       ``(3) Special rule for certain annuitants.--An individual 
     is not eligible to elect a high deductible/medisave product 
     if the individual is entitled to benefits under chapter 89 of 
     title 5, United States Code, as an annuitant or spouse of an 
     annuitant.
       ``(c) Process for Exercising Choice.--
       ``(1) In general.--The Secretary shall establish a process 
     through which elections described in subsection (a) are made 
     and changed, including the form and manner in which such 
     elections are made and changed. Such elections shall be made 
     or changed only during coverage election periods specified 
     under subsection (e) and shall become effective as provided 
     in subsection (f).
       ``(2) Expedited implementation.--The Secretary shall 
     establish the process of electing coverage under this section 
     during the transition period (as defined in subsection 
     (e)(1)(B)) in such an expedited manner as will permit such an 
     election for MedicarePlus products in an area as soon as such 
     products become available in that area.
       ``(3) Coordination through medicare-plus organizations.--
       ``(A) Enrollment.--Such process shall permit an individual 
     who wishes to elect a MedicarePlus product offered by a 
     MedicarePlus organization to make such election through the 
     filing of an appropriate election form with the organization.
       ``(B) Disenrollment.--Such process shall permit an 
     individual, who has elected a MedicarePlus product offered by 
     a MedicarePlus organization and who wishes to terminate such 
     election, to terminate such election through the filing of an 
     appropriate election form with the organization.
       ``(4) Default.--
       ``(A) Initial election.--
       ``(i) In general.--Subject to clause (ii), an individual 
     who fails to make an election during an initial election 
     period under subsection (e)(1) is deemed to have chosen the 
     Non-MedicarePlus option.
       ``(ii) Seamless continuation of coverage.--The Secretary 
     shall establish procedures under which individuals who are 
     enrolled with a MedicarePlus organization at the time of the 
     initial election period and who fail to elect to receive 
     coverage other than through the organization are deemed to 
     have elected an appropriate MedicarePlus product offered by 
     the organization.
       ``(B) Continuing periods.--An individual who has made (or 
     deemed to have made) an election under this section is 
     considered to have continued to make such election until such 
     time as--
       ``(i) the individual changes the election under this 
     section, or
       ``(ii) a MedicarePlus product is discontinued, if the 
     individual had elected such product at the time of the 
     discontinuation.
       ``(5) Agreements with commissioner of social security to 
     promote efficient administration.--In order to promote the 
     efficient administration of this section and the MedicarePlus 
     program under part C, the Secretary may enter into an 
     agreement with the Commissioner of Social Security under 
     which the Commissioner performs administrative 
     responsibilities relating to enrollment and disenrollment in 
     MedicarePlus products under this section.
       ``(d) Provision of Beneficiary Information to Promote 
     Informed Choice.--
       ``(1) In general.--The Secretary shall provide for 
     activities under this subsection to disseminate broadly 
     information to medicare beneficiaries (and prospective 
     medicare beneficiaries) on the coverage options provided 
     under this section in order to promote an active, informed 
     selection among such options. Such information shall be made 
     available on such a timely basis (such as 6 months before the 
     date an individual would first attain eligibility for 
     medicare on the basis of age) as to permit individuals to 
     elect the MedicarePlus option during the initial election 
     period described in subsection (e)(1).
       ``(2) Use of nonfederal entities.--The Secretary shall, to 
     the maximum extent feasible, enter into contracts with 
     appropriate non-Federal entities to carry out activities 
     under this subsection.
       ``(3) Specific activities.--In carrying out this 
     subsection, the Secretary shall provide for at least the 
     following activities in all areas in which MedicarePlus 
     products are offered:
       ``(A) Information booklet.--
       ``(i) In general.--The Secretary shall publish an 
     information booklet and disseminate the booklet to all 
     individuals eligible to elect the MedicarePlus option under 
     this section during coverage election periods.
       ``(ii) Information included.--The booklet shall include 
     information presented in plain English and in a standardized 
     format regarding--

       ``(I) the benefits (including cost-sharing) and premiums 
     for the various MedicarePlus products in the areas involved;
       ``(II) the quality of such products, including consumer 
     satisfaction information; and
       ``(III) rights and responsibilities of medicare 
     beneficiaries under such products.

       ``(iii) Periodic updating.--The booklet shall be updated on 
     a regular basis (not less often than once every 12 months) to 
     reflect changes in the availability of MedicarePlus products 
     and the benefits and premiums for such products.
       ``(B) Toll-free number.--The Secretary shall maintain a 
     toll-free number for inquiries regarding MedicarePlus options 
     and the operation of part C.
       ``(C) General information in medicare handbook.--The 
     Secretary shall include information about the MedicarePlus 
     option provided under this section in the annual notice of 
     medicare benefits under section 1804.
       ``(e) Coverage Election Periods.--
       ``(1) Initial choice upon eligibility to make election.--
       ``(A) In general.--In the case of an individual who first 
     becomes entitled to benefits under part A and enrolled under 
     part B after the beginning of the transition period (as 
     defined in subparagraph (B)), the individual shall make the 
     election under this section during a period (of a duration 
     and beginning at a time specified by the Secretary) at the 
     first time the individual both is entitled to benefits under 
     part A and enrolled under part B. Such period shall be 
     specified in a manner so that, in the case of an individual 
     who elects a MedicarePlus product during the period, coverage 
     under the product becomes effective as of the first date on 
     which the individual may receive such coverage.
       ``(B) Transition period defined.--In this subsection, the 
     term `transition period' means, with respect to an individual 
     in an area, the period beginning on the first day of the 
     first month in which a MedicarePlus product is first made 
     available to individuals in the area and ending with the 
     month preceding the beginning of the first annual, 
     coordinated election period under paragraph (3).
       ``(2) During transition period.--Subject to paragraph (6)--
       ``(A) Continuous open enrollment into a medicare-plus 
     option.--During the transition period, an individual who is 
     eligible to make an election under this section and who has 
     elected the non-MedicarePlus option may change such election 
     to a MedicarePlus option at any time.
       ``(B) Open disenrollment before end of transition period.--
       ``(i) In general.--During the transition period, an 
     individual who has elected a MedicarePlus option for a 
     MedicarePlus product may change such election to another 
     MedicarePlus product or to the non-MedicarePlus option.
       ``(ii) Special rule.--During the transition period, an 
     individual who has elected a high deductible/medisave product 
     may not change such election to a MedicarePlus product that 
     is not a high deductible/medisave product unless the 
     individual has had such election in effect for 12 months.
       ``(3) Annual, coordinated election period.--
       ``(A) In general.--Subject to paragraph (5), each 
     individual who is eligible to make 

[[Page H 10150]]
     an election under this section may change such election during annual, 
     coordinated election periods.
       ``(B) Annual, coordinated election period.--For purposes of 
     this section, the term `annual, coordinated election period' 
     means, with respect to a calendar year (beginning with 1998), 
     the month of October before such year.
       ``(C) MedicarePlus health fair during october, 1996.--In 
     the month of October, 1996, the Secretary shall provide for a 
     nationally coordinated educational and publicity campaign to 
     inform individuals, who are eligible to elect MedicarePlus 
     products, about such products and the election process 
     provided under this section (including the annual, 
     coordinated election periods that occur in subsequent years).
       ``(4) Special 90-day disenrollment option.--
       ``(A) In general.--In the case of the first time an 
     individual elects a MedicarePlus option (other than a high 
     deductible/medisave product) under this section, the 
     individual may discontinue such election through the filing 
     of an appropriate notice during the 90-day period beginning 
     on the first day on which the individual's coverage under the 
     MedicarePlus product under such option becomes effective.
       ``(B) Effect of discontinuation of election.--An individual 
     who discontinues an election under this paragraph shall be 
     deemed at the time of such discontinuation to have elected 
     the Non-MedicarePlus option.
       ``(5) Special election periods.--An individual may 
     discontinue an election of a MedicarePlus product offered by 
     a MedicarePlus organization other than during an annual, 
     coordinated election period and make a new election under 
     this section if--
       ``(A) the organization's or product's certification under 
     part C has been terminated or the organization has terminated 
     or otherwise discontinued providing the product;
       ``(B) in the case of an individual who has elected a 
     MedicarePlus product offered by a MedicarePlus organization, 
     the individual is no longer eligible to elect the product 
     because of a change in the individual's place of residence or 
     other change in circumstances (specified by the Secretary, 
     but not including termination of membership in a qualified 
     association in the case of a product offered by a qualified 
     association or termination of the individual's enrollment on 
     the basis described in clause (i) or (ii) section 
     1852(c)(3)(B));
       ``(C) the individual demonstrates (in accordance with 
     guidelines established by the Secretary) that--
       ``(i) the organization offering the product substantially 
     violated a material provision of the organization's contract 
     under part C in relation to the individual and the product; 
     or
       ``(ii) the organization (or an agent or other entity acting 
     on the organization's behalf) materially misrepresented the 
     product's provisions in marketing the product to the 
     individual; or
       ``(D) the individual meets such other conditions as the 
     Secretary may provide.
       ``(6) Special rule for high deductible/medisave products.--
     Notwithstanding the previous provisions of this subsection, 
     an individual may elect a high deductible/medisave product 
     only during an annual, coordinated election period described 
     in paragraph (3)(B) or during the month of October, 1996.
       ``(f) Effectiveness of Elections.--
       ``(1) During initial coverage election period.--An election 
     of coverage made during the initial coverage election period 
     under subsection (e)(1)(A) shall take effect upon the date 
     the individual becomes entitled to benefits under part A and 
     enrolled under part B, except as the Secretary may provide 
     (consistent with section 1838) in order to prevent 
     retroactive coverage.
       ``(2) During transition; 90-day disenrollment option.--An 
     election of coverage made under subsection (e)(2) and an 
     election to discontinue a MedicarePlus option under 
     subsection (e)(4) at any time shall take effect with the 
     first calendar month following the date on which the election 
     is made.
       ``(3) Annual, coordinated election period and medisave 
     election.--An election of coverage made during an annual, 
     coordinated election period (as defined in subsection 
     (e)(3)(B)) in a year or for a high deductible/medisave 
     product shall take effect as of the first day of the 
     following year.
       ``(4) Other periods.--An election of coverage made during 
     any other period under subsection (e)(5) shall take effect in 
     such manner as the Secretary provides in a manner consistent 
     (to the extent practicable) with protecting continuity of 
     health benefit coverage.
       ``(g) Effect of Election of MedicarePlus Option.--Subject 
     to the provisions of section 1855(f), payments under a 
     contract with a MedicarePlus organization under section 
     1858(a) with respect to an individual electing a MedicarePlus 
     product offered by the organization shall be instead of the 
     amounts which (in the absence of the contract) would 
     otherwise be payable under parts A and B for items and 
     services furnished to the individual.
       ``(h) Administration.--
       ``(1) In general.--This part and sections 1805 and 1876 
     shall be administered through an operating division (A) that 
     is established or identified by the Secretary in the 
     Department of Health and Human Services, (B) that is separate 
     from the Health Care Financing Administration, and (C) the 
     primary function of which is the administration of this part 
     and such sections. The director of such division shall be of 
     equal pay and rank to that of the individual responsible for 
     overall administration of parts A and B.
       ``(2) Transfer authority.--The Secretary shall transfer 
     such personnel, administrative support systems, assets, 
     records, funds, and other resources in the Health Care 
     Financing Administration to the operating division referred 
     to in paragraph (1) as are used in the administration of 
     section 1876 and as may be required to implement the 
     provisions referred to in such paragraph promptly and 
     efficiently.''.

     SEC. 15002. MEDICAREPLUS PROGRAM.

       (a) In General.--Title XVIII is amended by redesignating 
     part C as part D and by inserting after part B the following 
     new part:

             ``Part C--Provisions Relating to MedicarePlus


``requirements for medicareplus organizations; high deductible/medisave 
                                products

       ``Sec. 1851. (a) MedicarePlus Organization Defined.--In 
     this part, subject to the succeeding provisions of this 
     section, the term `MedicarePlus organization' means a public 
     or private entity that is certified under section 1857 as 
     meeting the requirements and standards of this part for such 
     an organization.
       ``(b) Organized and Licensed Under State Law.--
       ``(1) In general.--A MedicarePlus organization shall be 
     organized and licensed under State law to offer health 
     insurance or health benefits coverage in each State in which 
     it offers a MedicarePlus product.
       ``(2) Exception for union and taft-hartley sponsors.--
     Paragraph (1) shall not apply to an MedicarePlus organization 
     that is a union sponsor or a Taft-Hartley sponsor (as defined 
     in section 1852(c)(4)).
       ``(3) Exception for provider-sponsored organizations.--
     Paragraph (1) shall not apply to a MedicarePlus organization 
     that is a provider-sponsored organization (as defined in 
     section 1854(a)) except to the extent provided under section 
     1857(c).
       ``(4) Exception for qualified associations.--Paragraph (1) 
     shall not apply to a MedicarePlus organization that is a 
     qualified association (as defined in section 1852(c)(4)(C)).
       ``(c) Prepaid Payment.--A MedicarePlus organization shall 
     be compensated (except for deductibles, coinsurance, and 
     copayments) for the provision of health care services to 
     enrolled members by a payment which is paid on a periodic 
     basis without regard to the date the health care services are 
     provided and which is fixed without regard to the frequency, 
     extent, or kind of health care service actually provided to a 
     member.
       ``(d) Assumption of Full Financial Risk.--The MedicarePlus 
     organization shall assume full financial risk on a 
     prospective basis for the provision of the health care 
     services (other than hospice care) for which benefits are 
     required to be provided under section 1852(a)(1), except that 
     the organization--
       ``(1) may obtain insurance or make other arrangements for 
     the cost of providing to any enrolled member such services 
     the aggregate value of which exceeds $5,000 in any year,
       ``(2) may obtain insurance or make other arrangements for 
     the cost of such services provided to its enrolled members 
     other than through the organization because medical necessity 
     required their provision before they could be secured through 
     the organization,
       ``(3) may obtain insurance or make other arrangements for 
     not more than 90 percent of the amount by which its costs for 
     any of its fiscal years exceed 115 percent of its income for 
     such fiscal year, and
       ``(4) may make arrangements with physicians or other health 
     professionals, health care institutions, or any combination 
     of such individuals or institutions to assume all or part of 
     the financial risk on a prospective basis for the provision 
     of basic health services by the physicians or other health 
     professionals or through the institutions.

     In the case of a MedicarePlus organization that is a union 
     sponsor (as defined in section 1852(c)(4)(A)), Taft-Hartley 
     sponsor (as defined in section 1852(c)(4)(B)), a qualified 
     association (as defined in section 1852(c)(4)(C)), this 
     subsection shall not apply with respect to MedicarePlus 
     products offered by such organization and issued by an 
     organization to which subsection (b)(1) applies or by a 
     provider-sponsored organization (as defined in section 
     1854(a)).
       ``(e) Provision Against Risk of Insolvency.--
       ``(1) In general.--Each MedicarePlus organization shall 
     meet standards under section 1856 relating to the financial 
     solvency and capital adequacy of the organization. Such 
     standards shall take into account the nature and type of 
     MedicarePlus products offered by the organization.
       ``(2) Treatment of union and taft-hartley sponsors.--An 
     entity that is a union sponsor or a Taft-Hartley sponsor is 
     deemed to meet the requirement of paragraph (1).
       ``(3) Treatment of certain qualified associations.--An 
     entity that is a qualified association is deemed to meet the 
     requirement of paragraph (1) with respect to MedicarePlus 
     products offered by such association and issued by an 
     organization to which subsection (b)(1) applies or by a 
     provider-sponsored organization.

[[Page H 10151]]

       ``(f) High Deductible/Medisave Product Defined.--
       ``(1) In general.--In this part, the term `high deductible/
     medisave product' means a MedicarePlus product that--
       ``(A) provides reimbursement for at least the items and 
     services described in section 1852(a)(1) in a year but only 
     after the enrollee incurs countable expenses (as specified 
     under the product) equal to the amount of a deductible 
     (described in paragraph (2));
       ``(B) counts as such expenses (for purposes of such 
     deductible) at least all amounts that would have been payable 
     under parts A and B or by the enrollee if the enrollee had 
     elected to receive benefits through the provisions of such 
     parts; and
       ``(C) provides, after such deductible is met for a year and 
     for all subsequent expenses for benefits referred to in 
     subparagraph (A) in the year, for a level of reimbursement 
     that is not less than--
       ``(i) 100 percent of such expenses, or
       ``(ii) 100 percent of the amounts that would have been paid 
     (without regard to any deductibles or coinsurance) under 
     parts A and B with respect to such expenses,

     whichever is less. Such term does not include the 
     MedicarePlus MSA itself or any contribution into such 
     account.
       ``(2) Deductible.--The amount of deductible under a high 
     deductible/medisave product--
       ``(A) for contract year 1997 shall be not more than 
     $10,000; and
       ``(B) for a subsequent contract year shall be not more than 
     the maximum amount of such deductible for the previous 
     contract year under this paragraph increased by the national 
     average per capita growth rate under section 1855(c)(3) for 
     the year.

     If the amount of the deductible under subparagraph (B) is not 
     a multiple of $50, the amount shall be rounded to the nearest 
     multiple of $50.
       ``(g) Organizations Treated as MedicarePlus Organizations 
     During Transition.--Any of the following organizations shall 
     be considered to qualify as a MedicarePlus organization for 
     contract years beginning before January 1, 1998:
       ``(1) Health maintenance organizations.--An organization 
     that is organized under the laws of any State and that is a 
     qualified health maintenance organization (as defined in 
     section 1310(d) of the Public Health Service Act), an 
     organization recognized under State law as a health 
     maintenance organization, or a similar organization regulated 
     under State law for solvency in the same manner and to the 
     same extent as such a health maintenance organization.
       ``(2) Licensed insurers.--An organization that is organized 
     under the laws of any State and--
       ``(A) is licensed by a State agency as an insurer for the 
     offering of health benefit coverage, or
       ``(B) is licensed by a State agency as a service benefit 
     plan,
     but only for individuals residing in an area in which the 
     organization is licensed to offer health insurance coverage.
       ``(3) Current risk-contractors.--An organization that is an 
     eligible organization (as defined in section 1876(b)) and 
     that has a risk-sharing contract in effect under section 1876 
     as of the date of the enactment of this section.
       ``(h) MediGrant Demonstration Projects.--The Secretary 
     shall provide, in at least 10 States, for demonstration 
     projects which would permit MediGrant programs under title 
     XXI to be treated as MedicarePlus organizations under this 
     part for individuals who are qualified to elect the 
     MedicarePlus option and who eligible to receive medical 
     assistance under the MediGrant program, for the purpose of 
     demonstrating the delivery of primary, acute, and long-term 
     care through an integrated delivery network which emphasizes 
     noninstitutional care.


``requirements relating to benefits, provision of services, enrollment, 
                              and premiums

       ``Sec. 1852. (a) Benefits Covered.--
       ``(1) In general.--Except as provided in section 1851(f)(1) 
     with respect to high deductible/medisave products, each 
     MedicarePlus product offered under this part shall provide 
     benefits for at least the items and services for which 
     benefits are available under parts A and B consistent with 
     the standards for coverage of such items and services 
     applicable under this title.
       ``(2) Organization as secondary payer.--Notwithstanding any 
     other provision of law, a MedicarePlus organization may (in 
     the case of the provision of items and services to an 
     individual under this part under circumstances in which 
     payment under this title is made secondary pursuant to 
     section 1862(b)(2)) charge or authorize the provider of such 
     services to charge, in accordance with the charges allowed 
     under such law or policy--
       ``(A) the insurance carrier, employer, or other entity 
     which under such law, plan, or policy is to pay for the 
     provision of such services, or
       ``(B) such individual to the extent that the individual has 
     been paid under such law, plan, or policy for such services.
       ``(3) Satisfaction of requirement.--A MedicarePlus product 
     (other than a high deductible/medisave product) offered by a 
     MedicarePlus organization satisfies paragraph (1) with 
     respect to benefits for items and services if the following 
     requirements are met:
       ``(A) Fee for service providers.--In the case of benefits 
     furnished through a provider that does not have a contract 
     with the organization, the product provides for at least the 
     dollar amount of payment for such items and services as would 
     otherwise be provided under parts A and B.
       ``(B) Participating providers.--In the case of benefits 
     furnished through a provider that has such a contract, the 
     individual's liability for payment for such items and 
     services does not exceed (after taking into account any 
     deductible, which does not exceed any deductible under parts 
     A and B) the lesser of the following:
       ``(i) Non-medicareplus liability.--The amount of the 
     liability that the individual would have had (based on the 
     provider being a participating provider) if the individual 
     had elected the non-MedicarePlus option.
       ``(ii) Medicare coinsurance applied to product payment 
     rates.--The applicable coinsurance or copayment rate (that 
     would have applied under the non-MedicarePlus option) of the 
     payment rate provided under the contract.
       ``(b) Antidiscrimination.--A MedicarePlus organization may 
     not deny, limit, or condition the coverage or provision of 
     benefits under this part based on the health status, claims 
     experience, receipt of health care, medical history, or lack 
     of evidence of insurability, of an individual.
       ``(c) Guaranteed Issue and Renewal.--
       ``(1) In general.--Except as provided in this subsection, a 
     MedicarePlus organization shall provide that at any time 
     during which elections are accepted under section 1805 with 
     respect to a MedicarePlus product offered by the 
     organization, the organization will accept without 
     restrictions individuals who are eligible to make such 
     election.
       ``(2) Priority.--If the Secretary determines that a 
     MedicarePlus organization, in relation to a MedicarePlus 
     product it offers, has a capacity limit and the number of 
     eligible individuals who elect the product under section 1805 
     exceeds the capacity limit, the organization may limit the 
     election of individuals of the product under such section but 
     only if priority in election is provided--
       ``(A) first to such individuals as have elected the product 
     at the time of the determination, and
       ``(B) then to other such individuals in such a manner that 
     does not discriminate among the individuals (who seek to 
     elect the product) on a basis described in subsection (b).
       ``(3) Limitation on termination of election.--
       ``(A) In general.--Subject to subparagraph (B), a 
     MedicarePlus organization may not for any reason terminate 
     the election of any individual under section 1805 for a 
     MedicarePlus product it offers.
       ``(B) Basis for termination of election.--A MedicarePlus 
     organization may terminate an individual's election under 
     section 1805 with respect to a MedicarePlus product it offers 
     if--
       ``(i) any premiums required with respect to such product 
     are not paid on a timely basis (consistent with standards 
     under section 1856 that provide for a grace period for late 
     payment of premiums),
       ``(ii) the individual has engaged in disruptive behavior 
     (as specified in such standards), or
       ``(iii) the product is terminated with respect to all 
     individuals under this part.
     Any individual whose election is so terminated is deemed to 
     have elected the Non-MedicarePlus option (as defined in 
     section 1805(a)(3)(A)).
       ``(C) Organization obligation with respect to election 
     forms.--Pursuant to a contract under section 1858, each 
     MedicarePlus organization receiving an election form under 
     section 1805(c)(2) shall transmit to the Secretary (at such 
     time and in such manner as the Secretary may specify) a copy 
     of such form or such other information respecting the 
     election as the Secretary may specify.
       ``(4) Special rules for limited enrollment medicareplus 
     organizations.--
       ``(A) Unions.--
       ``(i) In general.--Subject to subparagraph (D), a union 
     sponsor (as defined in clause (ii)) shall limit eligibility 
     of enrollees under this part for MedicarePlus products it 
     offers to individuals who are members of the sponsor and 
     affiliated with the sponsor through an employment 
     relationship with any employer or are the spouses of such 
     members.
       ``(ii) Union sponsor.--In this part and section 1805, the 
     term `union sponsor' means an employee organization in 
     relation to a group health plan that is established or 
     maintained by the organization other than pursuant to a 
     collective bargaining agreement.
       ``(B) Taft-hartley sponsors.--
       ``(i) In general.--Subject to subparagraph (D), a 
     MedicarePlus organization that is a Taft-Hartley sponsor (as 
     defined in clause (ii)) shall limit eligibility of enrollees 
     under this part for MedicarePlus products it offers to 
     individuals who are entitled to obtain benefits through such 
     products under the terms of an applicable collective 
     bargaining agreement.
       ``(ii) Taft-Hartley sponsor.--In this part and section 
     1805, the term `Taft-Hartley sponsor' means, in relation to a 
     group health plan that is established or maintained by two or 
     more employers or jointly by one or more employers and one or 
     more employee organizations, the association, committee, 
     joint board of trustees, or other similar group of 
     representatives of parties who establish or maintain the 
     plan.
       ``(C) Qualified associations.--

[[Page H 10152]]

       ``(i) In general.--Subject to subparagraph (D), a 
     MedicarePlus organization that is a qualified association (as 
     defined in clause (iii)) shall limit eligibility of 
     individuals under this part for products it offers to 
     individuals who are members of the association (or who are 
     spouses of such individuals).
       ``(ii) Limitation on termination of coverage.--Such a 
     qualifying association offering a MedicarePlus product to an 
     individual may not terminate coverage of the individual on 
     the basis that the individual is no longer a member of the 
     association except pursuant to a change of election during an 
     open election period occurring on or after the date of the 
     termination of membership.
       ``(iii) Qualified association.--In this part and section 
     1805, the term `qualified association' means an association, 
     religious fraternal organization, or other organization 
     (which may be a trade, industry, or professional association, 
     a chamber of commerce, or a public entity association) that 
     the Secretary finds--

       ``(I) has been formed for purposes other than the sale of 
     any health insurance and does not restrict membership based 
     on the health status, claims experience, receipt of health 
     care, medical history, or lack of evidence of insurability, 
     of an individual,
       ``(II) does not exist solely or principally for the purpose 
     of selling insurance, and
       ``(III) has at least 1,000 individual members or 200 
     employer members.

     Such term includes a subsidiary or corporation that is wholly 
     owned by one or more qualified organizations.
       ``(D) Limitation.--Rules of eligibility to carry out the 
     previous subparagraphs of this paragraph shall not have the 
     effect of denying eligibility to individuals on the basis of 
     health status, claims experience, receipt of health care, 
     medical history, or lack of evidence of insurability.
       ``(E) Limited enrollment medicareplus organization.--In 
     this part and section 1805, the term `limited enrollment 
     MedicarePlus organization' means a MedicarePlus organization 
     that is a union sponsor, a Taft-Hartley sponsor, or a 
     qualified association.
       ``(F) Employer, etc..--In this paragraph, the terms 
     `employer', `employee organization', and `group health plan' 
     have the meanings given such terms for purposes of part 6 of 
     subtitle B of title I of the Employee Retirement Income 
     Security Act of 1974.
       ``(d) Submission and Charging of Premiums.--
       ``(1) In general.--Each MedicarePlus organization shall 
     file with the Secretary each year, in a form and manner and 
     at a time specified by the Secretary--
       ``(A) the amount of the monthly premiums for coverage under 
     each MedicarePlus product it offers under this part in each 
     payment area (as determined for purposes of section 1855) in 
     which the product is being offered; and
       ``(B) the enrollment capacity in relation to the product in 
     each such area.
       ``(2) Amounts of premiums charged.--The amount of the 
     monthly premium charged by a MedicarePlus organization for a 
     MedicarePlus product offered in a payment area to an 
     individual under this part shall be equal to the amount (if 
     any) by which--
       ``(A) the amount of the monthly premium for the product for 
     the period involved, as established under paragraph (3) and 
     submitted under paragraph (1), exceeds
       ``(B)(i) \1/12\ of the annual MedicarePlus capitation rate 
     specified in section 1855(b)(2) for the area and period 
     involved, or (ii) in the case of a high deductible/medisave 
     product, the monthly adjusted MedicarePlus capitation rate 
     specified in section 1855(b)(1) for the individual and period 
     involved.
       ``(3) Uniform premium.--
       ``(A) In general.--Except as provided in subparagraph (B), 
     the premiums charged by a MedicarePlus organization under 
     this part may not vary among individuals who reside in the 
     same payment area.
       ``(B) Exception for high deductible/medisave products.--A 
     MedicarePlus organization shall establish premiums for any 
     high deductible/medisave product it offers in a payment area 
     based on each of the risk adjustment categories established 
     for purposes of determining the amount of the payment to 
     MedicarePlus organizations under section 1855(b)(1) and using 
     the identical demographic and other adjustments among such 
     categories as are used for such purposes.
       ``(4) Terms and conditions of imposing premiums.--Each 
     MedicarePlus organization shall permit the payment of monthly 
     premiums on a monthly basis and may terminate election of 
     individuals for a MedicarePlus product for failure to make 
     premium payments only in accordance with subsection 
     (c)(3)(B).
       ``(5) Relation of premiums and cost-sharing to benefits.--
     In no case may the portion of a MedicarePlus organization's 
     premium rate and the actuarial value of its deductibles, 
     coinsurance, and copayments charged (to the extent 
     attributable to the minimum benefits described in subsection 
     (a)(1) and not counting any amount attributable to balance 
     billing) to individuals who are enrolled under this part with 
     the organization exceed the actuarial value of the 
     coinsurance and deductibles that would be applicable on the 
     average to individuals enrolled under this part with the 
     organization (or, if the Secretary finds that adequate data 
     are not available to determine that actuarial value, the 
     actuarial value of the coinsurance and deductibles applicable 
     on the average to individuals in the area, in the State, or 
     in the United States, eligible to enroll under this part with 
     the organization, or other appropriate data) and entitled to 
     benefits under part A and enrolled under part B if they were 
     not members of a MedicarePlus organization.
       ``(e) Requirement for Additional Benefits, Part B Premium 
     Discount Rebates, or Both.--
       ``(1) Requirement.--
       ``(A) In general.--Each MedicarePlus organization (in 
     relation to a MedicarePlus product it offers) shall provide 
     that if there is an excess amount (as defined in subparagraph 
     (B)) for the product for a contract year, subject to the 
     succeeding provisions of this subsection, the organization 
     shall provide to individuals such additional benefits (as the 
     organization may specify), a monetary rebate (paid on a 
     monthly basis) of the part B monthly premium, or a 
     combination thereof, in an total value which is at least 
     equal to the adjusted excess amount (as defined in 
     subparagraph (C)).
       ``(B) Excess amount.--For purposes of this paragraph, the 
     `excess amount', for an organization for a product, is the 
     amount (if any) by which--
       ``(i) the average of the capitation payments made to the 
     organization under this part for the product at the beginning 
     of contract year, exceeds
       ``(ii) the actuarial value of the minimum benefits 
     described in subsection (a)(1) under the product for 
     individuals under this part, as determined based upon an 
     adjusted community rate described in paragraph (5) (as 
     reduced for the actuarial value of the coinsurance and 
     deductibles under parts A and B).
       ``(C) Adjusted excess amount.--For purposes of this 
     paragraph, the `adjusted excess amount', for an organization 
     for a product, is the excess amount reduced to reflect any 
     amount withheld and reserved for the organization for the 
     year under paragraph (3).
       ``(D) No application to high deductible/medisave product.--
     Subparagraph (A) shall not apply to a high deductible/
     medisave product.
       ``(E) Uniform application.--This paragraph shall be applied 
     uniformly for all enrollees for a product in a service area.
       ``(F) Construction.--Nothing in this subsection shall be 
     construed as preventing a MedicarePlus organization from 
     providing health care benefits that are in addition to the 
     benefits otherwise required to be provided under this 
     paragraph and from imposing a premium for such additional 
     benefits.
       ``(2) Limitation on amount of part b premium discount 
     rebate.--In no case shall the amount of a part B premium 
     discount rebate under paragraph (1)(A) exceed, with respect 
     to a month, the amount of premiums imposed under part B (not 
     taking into account section 1839(b) (relating to penalty for 
     late enrollment) or 1839(h) (relating to affluence testing)), 
     for the individual for the month. Except as provided in the 
     previous sentence, a MedicarePlus organization is not 
     authorized to provide for cash or other monetary rebates as 
     an inducement for enrollment or otherwise.
       ``(3) Stabilization fund.--A MedicarePlus organization may 
     provide that a part of the value of an excess actuarial 
     amount described in paragraph (1) be withheld and reserved in 
     the Federal Hospital Insurance Trust Fund and in the Federal 
     Supplementary Medical Insurance Trust Fund (in such 
     proportions as the Secretary determines to be appropriate) by 
     the Secretary for subsequent annual contract periods, to the 
     extent required to stabilize and prevent undue fluctuations 
     in the additional benefits and rebates offered in those 
     subsequent periods by the organization in accordance with 
     such paragraph. Any of such value of amount reserved which is 
     not provided as additional benefits described in paragraph 
     (1)(A) to individuals electing the MedicarePlus product in 
     accordance with such paragraph prior to the end of such 
     periods, shall revert for the use of such trust funds.
       ``(4) Determination based on insufficient data.--For 
     purposes of this subsection, if the Secretary finds that 
     there is insufficient enrollment experience (including no 
     enrollment experience in the case of a provider-sponsored 
     organization) to determine an average of the capitation 
     payments to be made under this part at the beginning of a 
     contract period, the Secretary may determine such an average 
     based on the enrollment experience of other contracts entered 
     into under this part.
       ``(5) Adjusted community rate.--
       ``(A) In general.--For purposes of this subsection, subject 
     to subparagraph (B), the term `adjusted community rate' for a 
     service or services means, at the election of a MedicarePlus 
     organization, either--
       ``(i) the rate of payment for that service or services 
     which the Secretary annually determines would apply to an 
     individual electing a MedicarePlus product under this part if 
     the rate of payment were determined under a `community rating 
     system' (as defined in section 1302(8) of the Public Health 
     Service Act, other than subparagraph (C)), or
       ``(ii) such portion of the weighted aggregate premium, 
     which the Secretary annually estimates would apply to such an 
     individual, as the Secretary annually estimates is 
     attributable to that service or services,
     but adjusted for differences between the utilization 
     characteristics of the individuals electing coverage under 
     this part and the utilization characteristics of the other 
     enrollees with the organization (or, if the Secretary finds 
     that adequate data are not available to adjust for those 
     differences, the 

[[Page H 10153]]
     differences between the utilization characteristics of individuals 
     selecting other MedicarePlus coverage, or individuals in the 
     area, in the State, or in the United States, eligible to 
     elect MedicarePlus coverage under this part and the 
     utilization characteristics of the rest of the population in 
     the area, in the State, or in the United States, 
     respectively).
       ``(B) Special rule for provider-sponsored organizations.--
     In the case of a MedicarePlus organization that is a 
     provider-sponsored organization, the adjusted community rate 
     under subparagraph (A) for a MedicarePlus product may be 
     computed (in a manner specified by the Secretary) using data 
     in the general commercial marketplace or (during a transition 
     period) based on the costs incurred by the organization in 
     providing such a product.
       ``(f) Rules Regarding Physician Participation.--
       ``(1) Procedures.--Each MedicarePlus organization shall 
     establish reasonable procedures relating to the participation 
     (under an agreement between a physician and the organization) 
     of physicians under MedicarePlus products offered by the 
     organization under this part. Such procedures shall include--
       ``(A) providing notice of the rules regarding 
     participation,
       ``(B) providing written notice of participation decisions 
     that are adverse to physicians, and
       ``(C) providing a process within the organization for 
     appealing adverse decisions, including the presentation of 
     information and views of the physician regarding such 
     decision.
       ``(2) Consultation in medical policies.--A MedicarePlus 
     organization shall consult with physicians who have entered 
     into participation agreements with the organization regarding 
     the organization's medical policy, quality, and medical 
     management procedures.
       ``(3) Limitations on physician incentive plans.--
       ``(A) In general.--Each MedicarePlus organization may not 
     operate any physician incentive plan (as defined in 
     subparagraph (B)) unless the following requirements are met:
       ``(i) No specific payment is made directly or indirectly 
     under the plan to a physician or physician group as an 
     inducement to reduce or limit medically necessary services 
     provided with respect to a specific individual enrolled with 
     the organization.
       ``(ii) If the plan places a physician or physician group at 
     substantial financial risk (as determined by the Secretary) 
     for services not provided by the physician or physician 
     group, the organization--

       ``(I) provides stop-loss protection for the physician or 
     group that is adequate and appropriate, based on standards 
     developed by the Secretary that take into account the number 
     of physicians placed at such substantial financial risk in 
     the group or under the plan and the number of individuals 
     enrolled with the organization who receive services from the 
     physician or the physician group, and
       ``(II) conducts periodic surveys of both individuals 
     enrolled and individuals previously enrolled with the 
     organization to determine the degree of access of such 
     individuals to services provided by the organization and 
     satisfaction with the quality of such services.

       ``(iii) The organization provides the Secretary with 
     descriptive information regarding the plan, sufficient to 
     permit the Secretary to determine whether the plan is in 
     compliance with the requirements of this subparagraph.
       ``(B) Physician incentive plan defined.--In this paragraph, 
     the term `physician incentive plan' means any compensation 
     arrangement between a MedicarePlus organization and a 
     physician or physician group that may directly or indirectly 
     have the effect of reducing or limiting services provided 
     with respect to individuals enrolled with the organization 
     under this part.
       ``(4) Limitation on provider indemnification.--A 
     MedicarePlus organization may not provide (directly or 
     indirectly) for a provider (or group of providers) to 
     indemnify the organization against any liability resulting 
     from a civil action brought by or on behalf of an enrollee 
     under this part for any damage caused to the enrollee by the 
     organization's denial of medically necessary care.
       ``(5) Exception for certain fee-for-service plans.--The 
     previous provisions of this subsection shall not apply in the 
     case of a MedicarePlus organization in relation to a 
     MedicarePlus product if the organization does not have 
     agreements between physicians and the organization for the 
     provision of benefits under the product.
       ``(g) Provision of Information.--A MedicarePlus 
     organization shall provide the Secretary with such 
     information on the organization and each MedicarePlus product 
     it offers as may be required for the preparation of the 
     information booklet described in section 1805(d)(3)(A).
       ``(h) Coordinated Acute and Long-term Care Benefits under a 
     MedicarePlus Product.--Nothing in this part shall be 
     construed as preventing a State from coordinating benefits 
     under its MediGrant program under title XXI with those 
     provided under a MedicarePlus product in a manner that 
     assures continuity of a full-range of acute care and long-
     term care services to poor elderly or disabled individuals 
     eligible for benefits under this title and under such 
     program.
       ``(i) Transitional File and Use for Certain Requirements.--
       ``(1) In general.--In the case of a MedicarePlus product 
     proposed to be offered before the end of the transition 
     period (as defined in section 1805(e)(1)(B)), by a 
     MedicarePlus organization described in section 1851(g)(3) or 
     by a MedicarePlus organization with a contract in effect 
     under section 1858, if the organization submits complete 
     information to the Secretary regarding the product 
     demonstrating that the product meets the requirements and 
     standards under subsections (a), (d), and (e) (relating to 
     benefits and premiums), the product shall be deemed as 
     meeting such requirements and standards under such 
     subsections unless the Secretary disapproves the product 
     within 60 days after the date of submission of the complete 
     information.
       ``(2) Construction.--Nothing in paragraph (1) shall be 
     construed as waiving the requirement of a contract under 
     section 1858 or waiving requirements and standards not 
     referred to in paragraph (1).


                     ``patient protection standards

       ``Sec. 1853. (a) Disclosure to Enrollees.--A MedicarePlus 
     organization shall disclose in clear, accurate, and 
     standardized form, information regarding all of the following 
     for each MedicarePlus product it offers:
       ``(1) Benefits under the MedicarePlus product offered, 
     including exclusions from coverage and, if it is a high 
     deductible/medisave product, a comparison of benefits under 
     such a product with benefits under other MedicarePlus 
     products.
       ``(2) Rules regarding prior authorization or other review 
     requirements that could result in nonpayment.
       ``(3) Potential liability for cost-sharing for out-of-
     network services.
       ``(4) The number, mix, and distribution of participating 
     providers.
       ``(5) The financial obligations of the enrollee, including 
     premiums, deductibles, co-payments, and maximum limits on 
     out-of-pocket losses for items and services (both in and out 
     of network).
       ``(6) Statistics on enrollee satisfaction with the product 
     and organization, including rates of reenrollment.
       ``(7) Enrollee rights and responsibilities, including the 
     grievance process provided under subsection (f).
       ``(8) A statement that the use of the 911 emergency 
     telephone number is appropriate in emergency situations and 
     an explanation of what constitutes an emergency situation.
       ``(9) A description of the organization's quality assurance 
     program under subsection (d).

     Such information shall be disclosed to each enrollee under 
     this part at the time of enrollment and at least annually 
     thereafter.
       ``(b) Access to Services.--
       ``(1) In general.--A MedicarePlus organization offering a 
     MedicarePlus product may restrict the providers from whom the 
     benefits under the product are provided so long as--
       ``(A) the organization makes such benefits available and 
     accessible to each individual electing the product within the 
     product service area with reasonable promptness and in a 
     manner which assures continuity in the provision of benefits;
       ``(B) when medically necessary the organization makes such 
     benefits available and accessible 24 hours a day and 7 days a 
     week;
       ``(C) the product provides for reimbursement with respect 
     to services which are covered under subparagraphs (A) and (B) 
     and which are provided to such an individual other than 
     through the organization, if--
       ``(i) the services were medically necessary and immediately 
     required because of an unforeseen illness, injury, or 
     condition, and
       ``(ii) it was not reasonable given the circumstances to 
     obtain the services through the organization; and
       ``(D) coverage is provided for emergency services (as 
     defined in paragraph (4)) without regard to prior 
     authorization or the emergency care provider's contractual 
     relationship with the organization.
       ``(2) Minimum payment levels where providing point-of-
     service coverage.--If a MedicarePlus product provides 
     benefits for items and services (not described in paragraph 
     (1)(C)) through a network of providers and also permits 
     payment to be made under the product for such items and 
     services not provided through such a network, the payment 
     level under the product with respect to such items and 
     services furnished outside the network shall be at least 70 
     percent (or, if the effective cost-sharing rate is 50 
     percent, at least 40 percent) of the lesser of--
       ``(A) the payment basis (determined without regard to 
     deductibles and cost-sharing) that would have applied for 
     such items and services under parts A and B, or
       ``(B) the amount charged by the entity furnishing such 
     items and services.
       ``(3) Protection of enrollees for certain emergency 
     services.--
       ``(A) Participating providers.--In the case of emergency 
     services described in subparagraph (C) which are furnished by 
     a participating physician or provider of services to an 
     individual enrolled with a MedicarePlus organization under 
     this section, the applicable participation agreement is 
     deemed to provide that the physician or provider of services 
     will accept as payment in full from the organization for such 
     emergency services described in subparagraph (C) the amount 
     that would be payable to the 

[[Page H 10154]]
     physician or provider of services under part B and from the individual 
     under such part, if the individual were not enrolled with 
     such an organization under this part.
       ``(B) Nonparticipating providers.--In the case of emergency 
     services described in subparagraph (C) which are furnished by 
     a nonparticipating physician, the limitations on actual 
     charges for such services otherwise applicable under part B 
     (to services furnished by individuals not enrolled with a 
     MedicarePlus organization under this section) shall apply in 
     the same manner as such limitations apply to services 
     furnished to individuals not enrolled with such an 
     organization.
       ``(C) Emergency services described.--The emergency services 
     described in this subparagraph are emergency services which 
     which are furnished to an enrollee of a MedicarePlus 
     organization under this part by a physician or provider of 
     services that is not under a contract with the organization.
       ``(D) Exception for certain fee-for-service plans.--The 
     previous provisions of this paragraph shall not apply in the 
     case of a MedicarePlus organization in relation to a 
     MedicarePlus product if the organization does not have 
     agreements between physicians and the organization for the 
     provision of benefits under the product.
       ``(4) Definition of emergency services.--In this 
     subsection, the term `emergency services' means, with respect 
     to an individual enrolled with an organization, covered 
     inpatient and outpatient services that--
       ``(A) are furnished by an appropriate source other than the 
     organization,
       ``(B) are needed immediately because of an injury or sudden 
     illness, and
       ``(C) are needed because the time required to reach the 
     organization's providers or suppliers would have meant risk 
     of serious damage to the patient's health.
       ``(c) Confidentiality and Accuracy of Enrollee Records.--
     Each MedicarePlus organization shall establish procedures--
       ``(1) to safeguard the privacy of individually identifiable 
     enrollee information, and
       ``(2) to maintain accurate and timely medical records for 
     enrollees.
       ``(d) Quality Assurance Program.--
       ``(1) In general.--Each MedicarePlus organization must have 
     arrangements, established in accordance with regulations of 
     the Secretary, for an ongoing quality assurance program for 
     health care services it provides to such individuals.
       ``(2) Elements of program.--The quality assurance program 
     shall--
       ``(A) stress health outcomes;
       ``(B) provide for the establishment of written protocols 
     for utilization review, based on current standards of medical 
     practice;
       ``(C) provide review by physicians and other health care 
     professionals of the process followed in the provision of 
     such health care services;
       ``(D) monitors and evaluates high volume and high risk 
     services and the care of acute and chronic conditions;
       ``(E) evaluates the continuity and coordination of care 
     that enrollees receive;
       ``(F) has mechanisms to detect both underutilization and 
     overutilization of services;
       ``(G) after identifying areas for improvement, establishes 
     or alters practice parameters;
       ``(H) takes action to improve quality and assesses the 
     effectiveness of such action through systematic follow-up;
       ``(I) makes available information on quality and outcomes 
     measures to facilitate beneficiary comparison and choice of 
     health coverage options (in such form and on such quality and 
     outcomes measures as the Secretary determines to be 
     appropriate);
       ``(J) is evaluated on an ongoing basis as to its 
     effectiveness; and
       ``(K) provide for external accreditation or review, by a 
     utilization and quality control peer review organization 
     under part B of title XI or other qualified independent 
     review organization, of the quality of services furnished by 
     the organization meets professionally recognized standards of 
     health care (including providing adequate access of enrollees 
     to services).
       ``(3) Exception for certain fee-for-service plans.--
     Paragraph (1) and subsection (c)(2) shall not apply in the 
     case of a MedicarePlus organization in relation to a 
     MedicarePlus product to the extent the organization provides 
     for coverage of benefits without restrictions relating to 
     utilization and without regard to whether the provider has a 
     contract or other arrangement with the plan for the provision 
     of such benefits.
       ``(4) Treatment of accreditation.--The Secretary shall 
     provide that a MedicarePlus organization is deemed to meet 
     the requirements of paragraphs (1) and (2) of this subsection 
     and subsection (c) if the organization is accredited (and 
     periodically reaccredited) by a private organization under a 
     process that the Secretary has determined assures that the 
     organization meets standards that are no less stringent than 
     the standards established under section 1856 to carry out 
     this subsection and subsection (c).
       ``(e) Coverage Determinations.--
       ``(1) Decisions on nonemergency care.--A MedicarePlus 
     organization shall make determinations regarding 
     authorization requests for nonemergency care on a timely 
     basis, depending on the urgency of the situation.
       ``(2) Appeals.--
       ``(A) In general.--Appeals from a determination of an 
     organization denying coverage shall be decided within 30 days 
     of the date of receipt of medical information, but not later 
     than 60 days after the date of the decision.
       ``(B) Physician decision on certain appeals.--Appeal 
     decisions relating to a determination to deny coverage based 
     on a lack of medical necessity shall be made only by a 
     physician.
       ``(C) Emergency cases.--Appeals from such a determination 
     involving a life-threatening or emergency situation shall be 
     decided on an expedited basis.
       ``(f) Grievances and Appeals.--
       ``(1) Grievance mechanism.--Each MedicarePlus organization 
     must provide meaningful procedures for hearing and resolving 
     grievances between the organization (including any entity or 
     individual through which the organization provides health 
     care services) and enrollees under this part.
       ``(2) Appeals.--An enrollee with an organization under this 
     part who is dissatisfied by reason of the enrollee's failure 
     to receive any health service to which the enrollee believes 
     the enrollee is entitled and at no greater charge than the 
     enrollee believes the enrollee is required to pay is 
     entitled, if the amount in controversy is $100 or more, to a 
     hearing before the Secretary to the same extent as is 
     provided in section 205(b), and in any such hearing the 
     Secretary shall make the organization a party. If the amount 
     in controversy is $1,000 or more, the individual or 
     organization shall, upon notifying the other party, be 
     entitled to judicial review of the Secretary's final decision 
     as provided in section 205(g), and both the individual and 
     the organization shall be entitled to be parties to that 
     judicial review. In applying sections 205(b) and 205(g) as 
     provided in this subparagraph, and in applying section 205(l) 
     thereto, any reference therein to the Commissioner of Social 
     Security or the Social Security Administration shall be 
     considered a reference to the Secretary or the Department of 
     Health and Human Services, respectively.
       ``(3) Independent review of certain coverage denials.--The 
     Secretary shall contract with an independent, outside entity 
     to review and resolve appeals of denials of coverage related 
     to urgent or emergency services with respect to MedicarePlus 
     products.
       ``(4) Coordination with secretary of labor.--The Secretary 
     shall consult with the Secretary of Labor so as to ensure 
     that the requirements of this subsection, as they apply in 
     the case of grievances referred to in paragraph (1) to which 
     section 503 of the Employee Retirement Income Security Act of 
     1974 applies, are applied in a manner consistent with the 
     requirements of such section 503.
       ``(g) Information on Advance Directives.--Each MedicarePlus 
     organization shall meet the requirement of section 1866(f) 
     (relating to maintaining written policies and procedures 
     respecting advance directives).
       ``(h) Approval of Marketing Materials.--
       ``(1) Submission.--Each MedicarePlus organization may not 
     distribute marketing materials unless--
       ``(A) at least 45 days before the date of distribution the 
     organization has submitted the material to the Secretary for 
     review, and
       ``(B) the Secretary has not disapproved the distribution of 
     such material.
       ``(2) Review.--The standards established under section 1856 
     shall include guidelines for the review of all such material 
     submitted and under such guidelines the Secretary shall 
     disapprove such material if the material is materially 
     inaccurate or misleading or otherwise makes a material 
     misrepresentation.
       ``(3) Deemed approval (1-stop shopping).--In the case of 
     material that is submitted under paragraph (1)(A) to the 
     Secretary or a regional office of the Department of Health 
     and Human Services and the Secretary or the office has not 
     disapproved the distribution of marketing materials under 
     paragraph (1)(B) with respect to a MedicarePlus product in an 
     area, the Secretary is deemed not to have disapproved such 
     distribution in all other areas covered by the product and 
     organization.
       ``(4) Prohibition of certain marketing practices.--Each 
     MedicarePlus organization shall conform to fair marketing 
     standards in relation to MedicarePlus products offered under 
     this part, included in the standards established under 
     section 1856. Such standards shall include a prohibition 
     against an organization (or agent of such an organization) 
     completing any portion of any election form under section 
     1805 on behalf of any individual.


                   ``provider-sponsored organizations

       ``Sec. 1854. (a) Provider-Sponsored Organization Defined.--
       ``(1) In general.--In this part, the term `provider-
     sponsored organization' means a public or private entity that 
     (in accordance with standards established under subsection 
     (b)) is a provider, or group of affiliated providers, that 
     provides a substantial proportion (as defined by the 
     Secretary under such standards) of the health care items and 
     services under the contract under this part directly through 
     the provider or affiliated group of providers.
       ``(2) Substantial proportion.--In defining what is a 
     `substantial proportion' for purposes of paragraph (1), the 
     Secretary--
       ``(A) shall take into account the need for such an 
     organization to assume responsibility for a substantial 
     proportion of services in order to assure financial stability 
     and the practical difficulties in such an organization 
     integrating a very wide range of service providers; and

[[Page H 10155]]

       ``(B) may vary such proportion based upon relevant 
     differences among organizations, such as their location in an 
     urban or rural area.
       ``(3) Affiliation.--For purposes of this subsection, a 
     provider is `affiliated' with another provider if, through 
     contract, ownership, or otherwise--
       ``(A) one provider, directly or indirectly, controls, is 
     controlled by, or is under common control with the other,
       ``(B) each provider is a participant in a lawful 
     combination under which each provider shares, directly or 
     indirectly, substantial financial risk in connection with 
     their operations,
       ``(C) both providers are part of a controlled group of 
     corporations under section 1563 of the Internal Revenue Code 
     of 1986, or
       ``(D) both providers are part of an affiliated service 
     group under section 414 of such Code.
       ``(4) Control.--For purposes of paragraph (3), control is 
     presumed to exist if one party, directly or indirectly, owns, 
     controls, or holds the power to vote, or proxies for, not 
     less than 51 percent of the voting rights or governance 
     rights of another.
       ``(b) Process for Establishing Standards for Provider-
     Sponsored Organizations.--For process of establishing of 
     standards for provider-sponsored organizations, see section 
     1856(c).
       ``(c) Process for State Certification of Provider-Sponsored 
     Organizations.--For process of State certification of 
     provider-sponsored organizations, see section 1857(c).
       ``(d) Preemption of State Insurance Licensing 
     Requirements.--
       ``(1) In general.--This section supersedes any State law 
     which--
       ``(A) requires that a provider-sponsored organization meet 
     requirements for insurers of health services or health 
     maintenance organizations doing business in the State with 
     respect to initial capitalization and establishment of 
     financial reserves against insolvency, or
       ``(B) imposes requirements that would have the effect of 
     prohibiting the organization from complying with the 
     applicable requirements of this part,
     insofar as such the law applies to individuals enrolled with 
     the organization under this part.
       ``(2) Exception.--Paragraph (1) shall not apply with 
     respect to any State law to the extent that such law provides 
     standards or requirements, or provides for enforcement 
     thereof, so as to meet the requirements of section 1857(c)(2) 
     with respect to approval by the Secretary of State 
     certification requirements thereunder.
       ``(3) Construction.--Nothing in this subsection shall be 
     construed as affecting the operation of section 514 of the 
     Employee Retirement Income Security Act of 1974.


                ``payments to medicareplus organizations

       ``Sec. 1855. (a) Payments.--
       ``(1) In general.--Under a contract under section 1858 the 
     Secretary shall pay to each MedicarePlus organization, with 
     respect to coverage of an individual under this part in a 
     payment area for a month, an amount equal to the monthly 
     adjusted MedicarePlus capitation rate (as provided under 
     subsection (b)) with respect to that individual for that 
     area.
       ``(2) Annual announcement.--The Secretary shall annually 
     determine, and shall announce (in a manner intended to 
     provide notice to interested parties) not later than 
     September 7 before the calendar year concerned--
       ``(A) the annual MedicarePlus capitation rate for each 
     payment area for the year, and
       ``(B) the factors to be used in adjusting such rates under 
     subsection (b) for payments for months in that year.
       ``(3) Advance notice of methodological changes.--At least 
     45 days before making the announcement under paragraph (2) 
     for a year, the Secretary shall provide for notice to 
     MedicarePlus organizations of proposed changes to be made in 
     the methodology or benefit coverage assumptions from the 
     methodology and assumptions used in the previous announcement 
     and shall provide such organizations an opportunity to 
     comment on such proposed changes.
       ``(4) Explanation of assumptions.--In each announcement 
     made under paragraph (2) for a year, the Secretary shall 
     include an explanation of the assumptions (including any 
     benefit coverage assumptions) and changes in methodology used 
     in the announcement in sufficient detail so that MedicarePlus 
     organizations can compute monthly adjusted MedicarePlus 
     capitation rates for classes of individuals located in each 
     payment area which is in whole or in part within the service 
     area of such an organization.
       ``(b) Monthly Adjusted MedicarePlus Capitation Rate.--
       ``(1) In general.--For purposes of this section, the 
     `monthly adjusted MedicarePlus capitation rate' under this 
     subsection, for a month in a year for an individual in a 
     payment area (specified under paragraph (3)) and in a class 
     (established under paragraph (4)), is \1/12\ of the annual 
     MedicarePlus capitation rate specified in paragraph (2) for 
     that area for the year, adjusted to reflect the actuarial 
     value of benefits under this title with respect to 
     individuals in such class compared to the national average 
     for individuals in all classes.
       ``(2) Annual medicareplus capitation rates.--For purposes 
     of this section, the annual MedicarePlus capitation rate for 
     a payment area for a year is equal to the annual MedicarePlus 
     capitation rate for the area for the previous year (or, in 
     the case of 1996, the average annual per capita rate of 
     payment described in section 1876(a)(1)(C) for the area for 
     1995) increased by the per capita growth rate for that area 
     and year (as determined under subsection (c)).
       ``(3) Payment area defined.--In this section, the term 
     `payment area' means a county (or equivalent area specified 
     by the Secretary), except that in the case of the population 
     group described in paragraph (5)(C), the payment area shall 
     be each State.
       ``(4) Classes.--
       ``(A) In general.--For purposes of this section, the 
     Secretary shall define appropriate classes of enrollees, 
     consistent with paragraph (5), based on age, gender, welfare 
     status, institutionalization, and such other factors as the 
     Secretary determines to be appropriate, so as to ensure 
     actuarial equivalence. The Secretary may add to, modify, or 
     substitute for such classes, if such changes will improve the 
     determination of actuarial equivalence.
       ``(B) Research.--The Secretary shall conduct such research 
     as may be necessary to provide for greater accuracy in the 
     adjustment of capitation rates under this subsection. Such 
     research may include research into the addition or 
     modification of classes under subparagraph (A). The Secretary 
     shall submit to Congress a report on such research by not 
     later than January 1, 1997.
       ``(5) Division of medicare population.--In carrying out 
     paragraph (4) and this section, the Secretary shall recognize 
     the following separate population groups:
       ``(A) Aged.--Individuals 65 years of age or older who are 
     not described in subparagraph (C).
       ``(B) Disabled.--Disabled individuals who are under 65 
     years of age and not described in subparagraph (C).
       ``(C) Individuals with end stage renal disease.--
     Individuals who are determined to have end stage renal 
     disease.
       ``(c) Per Capita Growth Rates.--
       ``(1) For 1996.--
       ``(A) In general.--For purposes of this section and subject 
     to subparagraph (B), the per capita growth rates for 1996, 
     for a payment area assigned to a service utilization cohort 
     under subsection (d), shall be the following:
       ``(i) Lowest service utilization cohort.--For areas 
     assigned to the lowest service utilization cohort, 9.7 
     percent plus the additional percent provided under 
     subparagraph (B)(ii).
       ``(ii) Lower service utilization cohort.--For areas 
     assigned to the lower service utilization cohort, 8.0 
     percent.
       ``(iii) Median service utilization cohort.--For areas 
     assigned to the median service utilization cohort, 5.1 
     percent.
       ``(iv) Higher service utilization cohort.--For areas 
     assigned to the higher service utilization cohort, 4.7 
     percent.
       ``(v) Highest service utilization cohort.--For areas 
     assigned to the highest service utilization cohort, 4.0 
     percent.
       ``(B) Budget neutral adjustment.--In order to assure that 
     the total capitation payments under this section during 1996 
     are the same as the amount such payments would have been if 
     the per capita growth rate for all such areas for 1996 were 
     equal to the national average per capita growth rate, 
     specified in paragraph (3) for 1996, the Secretary shall 
     adjust the per capita growth rates for payment areas as 
     follows:
       ``(i) Increase up to floor for lowest service utilization 
     cohort.--First, such additional percent increase as may be 
     necessary to assure that the annual MedicarePlus capitation 
     rate for each payment area is at least 12 times $250 for 
     1996.
       ``(ii) Residual increase to lowest service utilization 
     cohort.--Next, for payment areas assigned to the lowest 
     service utilization cohort, such additional percent increase 
     as will assure that the total capitation payments under this 
     section during 1996 are the same as the amount such payments 
     would have been if the per capita growth rate for all such 
     areas for 1996 were equal to the national average per capita 
     growth rate. The increase under this clause may apply to a 
     payment area described in clause (i) and shall be applied 
     after the increase provided under such clause.
       ``(2) For subsequent years.--
       ``(A) In general.--For purposes of this section and subject 
     to subparagraph (B), the Secretary shall compute a per capita 
     growth rate for each year after 1996, for each payment area 
     as assigned to a service utilization cohort under subsection 
     (d), consistent with the following rules:
       ``(i) Median service utilization cohort set at national 
     average per capita growth rate.--The per capita growth rate 
     for areas assigned to the median service utilization cohort 
     for the year shall be the national average per capita growth 
     rate for the year (as specified under paragraph (3)), subject 
     to subparagraph (C).
       ``(ii) Highest service utilization cohort set at 75 percent 
     of national average per capita growth rate.--The per capita 
     growth rate for areas assigned to the highest service 
     utilization cohort for the year shall be 75 percent of the 
     national average per capita growth rate for the year.
       ``(iii) Lowest service utilization cohort set at 187.5 
     percent of national average per capita growth rate.--The per 
     capita growth rate for areas assigned to the lowest service 
     utilization cohort for the year shall be 187.5 percent of the 
     national average per capita growth rate for the year, subject 
     to subparagraph (C).

[[Page H 10156]]

       ``(iv) Lower service utilization cohort set at 150 percent 
     of national average per capita growth rate.--

       ``(I) In general.--Subject to subclause (II), the per 
     capita growth rate for areas assigned to the lower service 
     utilization cohort for the year shall be 150 percent of the 
     national average per capita growth rate for the year.
       ``(II) Adjustment.--If the Secretary has established under 
     clause (v) the per capita growth rate for areas assigned to 
     the higher service utilization cohort for the year at 75 
     percent of the national average per capita growth rate, the 
     Secretary may provide for a reduced per capita growth rate 
     under subclause (I) to the extent necessary to comply with 
     subparagraph (B).

       ``(v) Higher service utilization cohort.--The per capita 
     growth rate for areas assigned to the higher service 
     utilization cohort for the year shall be such percent (not 
     less than 75 percent) of the national average per capita 
     growth rate, as the Secretary may determine consistent with 
     subparagraph (B).
       ``(B) Average per capita growth rate at national average to 
     assure budget neutrality.--The Secretary shall compute per 
     capita growth rates for a year under subparagraph (A) (before 
     the application of subparagraph (C)) in a manner so that the 
     weighted average per capita growth rate for all areas for the 
     year (weighted to reflect the number of medicare 
     beneficiaries in each area) is equal to the national average 
     per capita growth rate under paragraph (3) for the year.
       ``(C) Final adjustment of growth rates.--After computing 
     per capita growth rates under the previous provisions of this 
     paragraph the Secretary shall--
       ``(i) reduce the per capita growth rate for areas assigned 
     to the median service utilization cohort by the ratio of .1 
     to 5.3, and
       ``(ii) increase the per capita growth rate for areas 
     assigned to the lowest service utilization cohort by such 
     proportion as the Secretary determines will result in an 
     increase in outlays resulting from this clause equal to the 
     reduction in outlays resulting from clause (i) for the year 
     involved.
       ``(3) National average per capita growth rates.--In this 
     subsection, the `national average per capita growth rate' 
     for--
       ``(A) 1996 is 5.3 percent,
       ``(B) 1997 is 3.8 percent,
       ``(C) 1998 is 4.6 percent,
       ``(D) 1999 is 4.3 percent,
       ``(E) 2000 is 3.8 percent,
       ``(F) 2001 is 5.5 percent,
       ``(G) 2002 is 5.6 percent, and
       ``(H) each subsequent year is 5.0 percent.
       ``(d) Assignment of Payment Areas to Service Utilization 
     Cohorts.--
       ``(1) In general.--For purposes of determining per capita 
     growth rates under subsection (c) for areas for a year, the 
     Secretary shall assign each payment area to a service 
     utilization cohort (based on the service utilization index 
     value for that area determined under paragraph (2)) as 
     follows:
       ``(A) Lowest service utilization cohort.--Areas with a 
     service utilization index value of less than .80 shall be 
     assigned to the lowest service utilization cohort.
       ``(B) Lower service utilization cohort.--Areas with a 
     service utilization index value of at least .80 but less than 
     .90 shall be assigned to the lower service utilization 
     cohort.
       ``(C) Median service utilization cohort.--Areas with a 
     service utilization index value of at least .90 but less than 
     1.10 shall be assigned to the median service utilization 
     cohort.
       ``(D) Higher service utilization cohort.--Areas with a 
     service utilization index value of at least 1.10 but less 
     than 1.20 shall be assigned to the higher service utilization 
     cohort.
       ``(E) Highest service utilization cohort.--Areas with a 
     service utilization index value of at least 1.20 shall be 
     assigned to the highest service utilization cohort.
       ``(2) Determination of service utilization index values.--
     In order to determine the per capita growth rate for a 
     payment area for each year (beginning with 1996), the 
     Secretary shall determine for such area and year a service 
     utilization index value, which is equal to--
       ``(A) the annual MedicarePlus capitation rate under this 
     section for the area for the year in which the determination 
     is made (or, in the case of 1996, the average annual per 
     capita rate of payment (described in section 1876(a)(1)(C)) 
     for the area for 1995); divided by
       ``(B) the input-price-adjusted annual national MedicarePlus 
     capitation rate (as determined under paragraph (3)) for that 
     area for the year in which the determination is made.
       ``(3) Determination of input-price-adjusted rates.--
       ``(A) In general.--For purposes of paragraph (2), the 
     `input-price-adjusted annual national MedicarePlus capitation 
     rate' for a payment area for a year is equal to the sum, for 
     all the types of medicare services (as classified by the 
     Secretary), of the product (for each such type) of--
       ``(i) the national standardized Medi-carePlus capitation 
     rate (determined under subparagraph (B)) for the year,
       ``(ii) the proportion of such rate for the year which is 
     attributable to such type of services, and
       ``(iii) an index that reflects (for that year and that type 
     of services) the relative input price of such services in the 
     area compared to the national average input price of such 
     services.
     In applying clause (iii), the Secretary shall, subject to 
     subparagraph (C), apply those indices under this title that 
     are used in applying (or updating) national payment rates for 
     specific areas and localities.
       ``(B) National standardized medicare-plus capitation 
     rate.--In this paragraph, the `national standardized 
     MedicarePlus capitation rate' for a year is equal to--
       ``(i) the sum (for all payment areas) of the product of (I) 
     the annual MedicarePlus capitation rate for that year for the 
     area under subsection (b)(2), and (II) the average number of 
     medicare beneficiaries residing in that area in the year; 
     divided by
       ``(ii) the total average number of medicare beneficiaries 
     residing in all the payment areas for that year.
       ``(C) Special rules for 1996.--In applying this paragraph 
     for 1996--
       ``(i) medicare services shall be divided into 2 types of 
     services: part A services and part B services;
       ``(ii) the proportions described in subparagraph (A)(ii) 
     for such types of services shall be--

       ``(I) for part A services, the ratio (expressed as a 
     percentage) of the average annual per capita rate of payment 
     for the area for part A for 1995 to the total average annual 
     per capita rate of payment for the area for parts A and B for 
     1995, and
       ``(II) for part B services, 100 percent minus the ratio 
     described in subclause (I);

       ``(iii) for the part A services, 70 percent of payments 
     attributable to such services shall be adjusted by the index 
     used under section 1886(d)(3)(E) to adjust payment rates for 
     relative hospital wage levels for hospitals located in the 
     payment area involved;
       ``(iv) for part B services--

       ``(I) 66 percent of payments attributable to such services 
     shall be adjusted by the index of the geographic area factors 
     under section 1848(e) used to adjust payment rates for 
     physicians' services furnished in the payment area, and
       ``(II) of the remaining 34 percent of the amount of such 
     payments, 70 percent shall be adjusted by the index described 
     in clause (iii);

       ``(v) the index values shall be computed based only on the 
     beneficiary population described in subsection (b)(5)(A).
     The Secretary may continue to apply the rules described in 
     this subparagraph (or similar rules) for 1997.
       ``(e) Payment Process.--
       ``(1) In general.--Subject to subsection (f), the Secretary 
     shall make monthly payments under this section in advance and 
     in accordance with the rate determined under subsection (a) 
     to the plan for each individual enrolled with a MedicarePlus 
     organization under this part.
       ``(2) Adjustment to reflect number of enrollees.--
       ``(A) In general.--The amount of payment under this 
     subsection may be retroactively adjusted to take into account 
     any difference between the actual number of individuals 
     enrolled with an organization under this part and the number 
     of such individuals estimated to be so enrolled in 
     determining the amount of the advance payment.
       ``(B) Special rule for certain enrollees.--
       ``(i) In general.--Subject to clause (ii), the Secretary 
     may make retroactive adjustments under subparagraph (A) to 
     take into account individuals enrolled during the period 
     beginning on the date on which the individual enrolls with a 
     MedicarePlus organization under a product operated, 
     sponsored, or contributed to by the individual's employer or 
     former employer (or the employer or former employer of the 
     individual's spouse) and ending on the date on which the 
     individual is enrolled in the organization under this part, 
     except that for purposes of making such retroactive 
     adjustments under this subparagraph, such period may not 
     exceed 90 days.
       ``(ii) Exception.--No adjustment may be made under clause 
     (i) with respect to any individual who does not certify that 
     the organization provided the individual with the disclosure 
     statement described in section 1853(a) at the time the 
     individual enrolled with the organization.
       ``(f) Special Rules for Individuals Electing High 
     Deductible/Medisave Product.--
       ``(1) In general.--In the case of an individual who has 
     elected a high deductible/medisave product, notwithstanding 
     the preceding provisions of this section--
       ``(A) the amount of the payment to the MedicarePlus 
     organization offering the high deductible/medisave product 
     shall not exceed the premium for the product, and
       ``(B) subject to paragraph (2), the difference between the 
     amount of payment that would otherwise be made and the amount 
     of payment to such organization shall be made directly into a 
     MedicarePlus MSA established (and, if applicable, designated) 
     by the individual under paragraph (2).
       ``(2) Establishment and designation of medicareplus medical 
     savings account as requirement for payment of contribution.--
     In the case of an individual who has elected coverage under a 
     high deductible/medisave product, no payment shall be made 
     under paragraph (1)(B) on behalf of an individual for a month 
     unless the individual--
       ``(A) has established before the beginning of the month (or 
     by such other deadline as the Secretary may specify) a 
     MedicarePlus MSA (as defined in section 137(b) of the 
     Internal Revenue Code of 1986), and
       ``(B) if the individual has established more than one 
     MedicarePlus MSA, has designated 

[[Page H 10157]]
     one of such accounts as the individual's MedicarePlus MSA for purposes 
     of this part.

     Under rules under this section, such an individual may change 
     the designation of such account under subparagraph (B) for 
     purposes of this part.
       ``(3) Lump sum deposit of medical savings account 
     contribution.--In the case of an individual electing a high 
     deductible/medisave product effective beginning with a month 
     in a year, the amount of the contribution to the MedicarePlus 
     MSA on behalf of the individual for that month and all 
     successive months in the year shall be deposited during that 
     first month. In the case of a termination of such an election 
     as of a month before the end of a year, the Secretary shall 
     provide for a procedure for the recovery of deposits 
     attributable to the remaining months in the year.
       ``(g) Payments From Trust Fund.--The payment to a 
     MedicarePlus organization under this section for individuals 
     enrolled under this part with the organization, and payments 
     to a MedicarePlus MSA under subsection (f)(1)(B), shall be 
     made from the Federal Hospital Insurance Trust Fund and the 
     Federal Supplementary Medical Insurance Trust Fund in such 
     proportion as the Secretary determines reflects the relative 
     weight that benefits under part A and under part B represents 
     of the actuarial value of the total benefits under this 
     title.
       ``(h) Special Rule for Certain Inpatient Hospital Stays.--
     In the case of an individual who is receiving inpatient 
     hospital services from a subsection (d) hospital (as defined 
     in section 1886(d)(1)(B)) as of the effective date of the 
     individual's--
       ``(1) election under this part of a MedicarePlus product 
     offered by a MedicarePlus organization--
       ``(A) payment for such services until the date of the 
     individual's discharge shall be made under this title through 
     the MedicarePlus product or Non-MedicarePlus option (as the 
     case may be) elected before the election with such 
     organization,
       ``(B) the elected organization shall not be financially 
     responsible for payment for such services until the date 
     after the date of the individual's discharge, and
       ``(C) the organization shall nonetheless be paid the full 
     amount otherwise payable to the organization under this part; 
     or
       ``(2) termination of election with respect to a 
     MedicarePlus organization under this part--
       ``(A) the organization shall be financially responsible for 
     payment for such services after such date and until the date 
     of the individual's discharge,
       ``(B) payment for such services during the stay shall not 
     be made under section 1886(d) or by any succeeding 
     MedicarePlus organization, and
       ``(C) the terminated organization shall not receive any 
     payment with respect to the individual under this part during 
     the period the individual is not enrolled.


   ``establishment of standards for medicare-plus organizations and 
                                products

       ``Sec. 1856. (a) Standards Applicable to State-Regulated 
     Organizations and Products.--
       ``(1) Recommendations of naic.--The Secretary shall request 
     the National Association of Insurance Commissioners to 
     develop and submit to the Secretary, not later than 12 months 
     after the date of the enactment of the Medicare Preservation 
     Act of 1995, proposed standards consistent with the 
     requirements of this part for MedicarePlus organizations 
     (other than union sponsors, Taft-Hartley sponsors, and 
     provider-sponsored organizations) and MedicarePlus products 
     offered by such organizations, except that such proposed 
     standards may relate to MedicarePlus organizations that are 
     qualified associations only with respect to MedicarePlus 
     products offered by them and only if such products are issued 
     by organizations to which section 1851(b)(1) applies.
       ``(2) Review.--If the Association submits such standards on 
     a timely basis, the Secretary shall review such standards to 
     determine if the standards meet the requirements of the part. 
     The Secretary shall complete the review of the standards not 
     later than 90 days after the date of their submission. The 
     Secretary shall promulgate such proposed standards to apply 
     to organizations and products described in paragraph (1) 
     except to the extent that the Secretary modifies such 
     proposed standards because they do not meet such 
     requirements.
       ``(3) Failure to submit.--If the Association does not 
     submit such standards on a timely basis, the Secretary shall 
     promulgate such standards by not later than the date the 
     Secretary would otherwise have been required to promulgate 
     standards under paragraph (2).
       ``(4) Use of interim rules.--For the period in which this 
     part is in effect and standards are being developed and 
     established under the preceding provisions of this 
     subsection, the Secretary shall provide by not later than 
     June 1, 1996, for the application of such interim standards 
     (without regard to any requirements for notice and public 
     comment) as may be appropriate to provide for the expedited 
     implementation of this part. Such interim standards shall not 
     apply after the date standards are established under the 
     preceding provisions of this subsection.
       ``(b) Union and Taft-Hartley Sponsors, Qualified 
     Associations, and Products.--
       ``(1) In general.--The Secretary shall develop and 
     promulgate by regulation standards consistent with the 
     requirements of this part for union and Taft-Hartley 
     sponsors, for qualified associations, and for MedicarePlus 
     products offered by such organizations (other than 
     MedicarePlus products offered by qualified associations that 
     are issued by organizations to which section 1851(b)(1) 
     applies).
       ``(2) Consultation with labor.--The Secretary shall consult 
     with the Secretary of Labor with respect to such standards 
     for such sponsors and products.
       ``(3) Timing.--Standards under this subsection shall be 
     promulgated at or about the time standards are promulgated 
     under subsection (a).
       ``(c) Establishment of Standards for Provider-Sponsored 
     Organizations.--
       ``(1) In general.--The Secretary shall establish, on an 
     expedited basis and using a negotiated rulemaking process 
     under subchapter 3 of chapter 5 of title 5, United States 
     Code, standards that entities must meet to qualify as 
     provider-sponsored organizations under this part.
       ``(2) Publication of notice.--In carrying out the 
     rulemaking process under this subsection, the Secretary, 
     after consultation with the National Association of Insurance 
     Commissioners, the American Academy of Actuaries, 
     organizations representative of medicare beneficiaries, and 
     other interested parties, shall publish the notice provided 
     for under section 564(a) of title 5, United States Code, by 
     not later than 45 days after the date of the enactment of 
     Medicare Preservation Act of 1995.
       ``(3) Target date for publication of rule.--As part of the 
     notice under paragraph (2), and for purposes of this 
     subsection, the `target date for publication' (referred to in 
     section 564(a)(5) of such title) shall be September 1, 1996.
       ``(4) Abbreviated period for submission of comments.--In 
     applying section 564(c) of such title under this subsection, 
     `15 days' shall be substituted for `30 days'.
       ``(5) Appointment of negotiated rulemaking committee and 
     facilitator.--The Secretary shall provide for--
       ``(A) the appointment of a negotiated rulemaking committee 
     under section 565(a) of such title by not later than 30 days 
     after the end of the comment period provided for under 
     section 564(c) of such title (as shortened under paragraph 
     (4)), and
       ``(B) the nomination of a facilitator under section 566(c) 
     of such title by not later than 10 days after the date of 
     appointment of the committee.
       ``(6) Preliminary committee report.--The negotiated 
     rulemaking committee appointed under paragraph (5) shall 
     report to the Secretary, by not later than June 1, 1996, 
     regarding the committee's progress on achieving a concensus 
     with regard to the rulemaking proceeding and whether such 
     consensus is likely to occur before one month before the 
     target date for publication of the rule. If the committee 
     reports that the committee has failed to make significant 
     progress towards such consensus or is unlikely to reach such 
     consensus by the target date, the Secretary may terminate 
     such process and provide for the publication of a rule under 
     this subsection through such other methods as the Secretary 
     may provide.
       ``(7) Final committee report.--If the committee is not 
     terminated under paragraph (6), the rulemaking committee 
     shall submit a report containing a proposed rule by not later 
     than one month before the target publication date.
       ``(8) Interim, final effect.--The Secretary shall publish a 
     rule under this subsection in the Federal Register by not 
     later than the target publication date. Such rule shall be 
     effective and final immediately on an interim basis, but is 
     subject to change and revision after public notice and 
     opportunity for a period (of not less than 60 days) for 
     public comment. In connection with such rule, the Secretary 
     shall specify the process for the timely review and approval 
     of applications of entities to be certified as provider-
     sponsored organizations pursuant to such rules and consistent 
     with this subsection.
       ``(9) Publication of rule after public comment.--The 
     Secretary shall provide for consideration of such comments 
     and republication of such rule by not later than 1 year after 
     the target publication date.
       ``(10) Process for approval of applications for 
     certification.--
       ``(A) In general.--The Secretary shall establish a process 
     for the receipt and approval of applications of entities for 
     certification as provider-sponsored organizations under this 
     part. Under such process, the Secretary shall act upon a 
     complete application submitted within 60 days after the date 
     it is received.
       ``(B) Circulation of proposed application form.--By March 
     1, 1996, the Secretary, after consultation with the 
     negotiated rulemaking committee, shall circulate a proposed 
     application form that could be used by entities considering 
     becoming certified as a provider-sponsored organization under 
     this part.
       ``(d) Coordination Among Final Standards.--In establishing 
     standards (other than on an interim basis) under the previous 
     provisions of this section, the Secretary shall seek to 
     provide for consistency (as appropriate) across the different 
     types of MedicarePlus organizations, in order to promote 
     equitable treatment of different types of organizations and 
     consistent protection for individuals who elect products 
     offered by the different types of MedicarePlus organizations.
       ``(e) Use of Current Standards for Interim Standards.--To 
     the extent practicable and consistent with the requirements 
     of this part, standards established on an interim basis to 
     carry out requirements of this 

[[Page H 10158]]
     part may be based on currently applicable standards, such as the rules 
     established under section 1876 (as in effect as of the date 
     of the enactment of this section) to carry out analogous 
     provisions of such section or standards established or 
     developed for application in the private health insurance 
     market.
       ``(f) Application of New Standards to Entities with a 
     Contract.--In the case of a MedicarePlus organization with a 
     contract in effect under this part at the time standards 
     applicable to the organization under this section are 
     changed, the organization may elect not to have such changes 
     apply to the organization until the end of the current 
     contract year (or, if there is less than 6 months remaining 
     in the contract year, until 1 year after the end of the 
     current contract year).
       ``(g) Relation to State Laws.--The standards established 
     under this section shall supersede any State law or 
     regulation with respect to MedicarePlus products which are 
     offered by MedicarePlus organizations and are issued by 
     organizations to which section 1851(b)(1) applies, to the 
     extent such law or regulation is inconsistent with such 
     standards.


                     ``medicare-plus certification

       ``Sec. 1857. (a) State Certification Process for State-
     Regulated Organizations.--
       ``(1) Approval of state process.--The Secretary shall 
     approve a MedicarePlus certification and enforcement program 
     established by a State for applying the standards established 
     under section 1856 to MedicarePlus organizations (other than 
     union sponsors, Taft-Hartley sponsors, and provider-sponsored 
     organizations) and MedicarePlus products offered by such 
     organizations if the Secretary determines that the program 
     effectively provides for the application and enforcement of 
     such standards in the State with respect to such 
     organizations and products. Such program shall provide for 
     certification of compliance of MedicarePlus organizations and 
     products with the applicable requirements of this part not 
     less often than once every 3 years.
       ``(2) Effect of certification under state process.--A 
     MedicarePlus organization and MedicarePlus product offered by 
     such an organization that is certified under such program is 
     considered to have been certified under this subsection with 
     respect to the offering of the product to individuals 
     residing in the State.
       ``(3) User fees.--The State may impose user fees on 
     organizations seeking certification under this subsection in 
     such amounts as the State deems sufficient to finance the 
     costs of such certification. Nothing in this paragraph shall 
     be construed as restricting a State's authority to impose 
     premium taxes, other taxes, or other levies.
       ``(4) Review.--The Secretary periodically shall review 
     State programs approved under paragraph (1) to determine if 
     they continue to provide for certification and enforcement 
     described in such paragraph. If the Secretary finds that a 
     State program no longer so provides, before making a final 
     determination, the Secretary shall provide the State an 
     opportunity to adopt such a plan of correction as would 
     permit the State program to meet the requirements of 
     paragraph (1). If the Secretary makes a final determination 
     that the State program, after such an opportunity, fails to 
     meet such requirements, the provisions of subsection (b) 
     shall apply to MedicarePlus organizations and products in the 
     State.
       ``(5) Effect of no state program.--Beginning on the date 
     standards are established under section 1856, in the case of 
     organizations and products in States in which a certification 
     program has not been approved and in operation under 
     paragraph (1), the Secretary shall establish a process for 
     the certification of MedicarePlus organizations (other than 
     union sponsors, Taft-Hartley sponsors, and provider-sponsored 
     organizations) and products of such organizations as meeting 
     such standards.
       ``(6) Publication of list of approved state programs.--The 
     Secretary shall publish (and periodically update) a list of 
     those State programs which are approved for purposes of this 
     subsection.
       ``(b) Federal Certification Process for Union Sponsors, 
     Taft-Hartley Sponsors, and Provider-Sponsored 
     Organizations.--
       ``(1) Establishment.--The Secretary shall establish a 
     process for the certification of union sponsors, Taft-Hartley 
     sponsors, and provider-sponsored organizations and 
     MedicarePlus products offered by such sponsors and 
     organizations as meeting the applicable standards established 
     under section 1856.
       ``(2) Involvement of secretary of labor.--Such process 
     shall be established and operated in cooperation with the 
     Secretary of Labor with respect to union sponsors and Taft-
     Hartley sponsors.
       ``(3) Use of state licensing and private accreditation 
     processes.--
       ``(A) In general.--The process under this subsection shall, 
     to the maximum extent practicable, provide that MedicarePlus 
     organizations and products that are licensed or certified 
     through a qualified private accreditation process that the 
     Secretary finds applies standards that are no less stringent 
     than the requirements of this part are deemed to meet the 
     corresponding requirements of this part for such an 
     organization or product.
       ``(B) Periodic accreditation.--The use of an accreditation 
     under subparagraph (A) shall be valid only for such period as 
     the Secretary specifies.
       ``(4) User fees.--The Secretary may impose user fees on 
     entities seeking certification under this subsection in such 
     amounts as the Secretary deems sufficient to finance the 
     costs of such certification.
       ``(c) Certification of Provider-Sponsored Organizations by 
     States.--
       ``(1) In general.--The Secretary shall establish a process 
     under which a State may propose to provide for certification 
     of entities as meeting the requirements of this part to be 
     provider-sponsored organizations.
       ``(2) Conditions for approval.--The Secretary may not 
     approve a State program for certification under paragraph (1) 
     unless the Secretary determines that the certification 
     program applies standards and requirements that are identical 
     to the standards and requirements of this part and the 
     applicable provisions for enforcement of such standards and 
     requirements do not result in a lower level or quality of 
     enforcement than that which is otherwise applicable under 
     this title.
       ``(d) Notice to Enrollees in Case of Decertification.--If a 
     MedicarePlus organization or product is decertified under 
     this section, the organization shall notify each enrollee 
     with the organization and product under this part of such 
     decertification.
       ``(e) Qualified Associations.--In the case of MedicarePlus 
     products offered by a MedicarePlus organization that is a 
     qualified association (as defined in section 1854(c)(4)(C)) 
     and issued by an organization to which section 1851(b)(1) 
     applies or by a provider-sponsored organization (as defined 
     in section 1854(a)), nothing in this section shall be 
     construed as limiting the authority of States to regulate 
     such products.


              ``contracts with medicareplus organizations

       ``Sec. 1858. (a) In General.--The Secretary shall not 
     permit the election under section 1805 of a MedicarePlus 
     product offered by a MedicarePlus organization under this 
     part, and no payment shall be made under section 1856 to an 
     organization, unless the Secretary has entered into a 
     contract under this section with an organization with respect 
     to the offering of such product. Such a contract with an 
     organization may cover more than one MedicarePlus product. 
     Such contract shall provide that the organization agrees to 
     comply with the applicable requirements and standards of this 
     part and the terms and conditions of payment as provided for 
     in this part.
       ``(b) Minimum Enrollment Requirements.--
       ``(1) In general.--Subject to paragraphs (1) and (2), the 
     Secretary may not enter into a contract under this section 
     with a MedicarePlus organization (other than a union sponsor 
     or Taft-Hartley sponsor) unless the organization has at least 
     5,000 individuals (or 1,500 individuals in the case of an 
     organization that is a provider-sponsored organization) who 
     are receiving health benefits through the organization, 
     except that the standards under section 1856 may permit the 
     organization to have a lesser number of beneficiaries (but 
     not less than 500 in the case of an organization that is a 
     provider-sponsored organization) if the organization 
     primarily serves individuals residing outside of urbanized 
     areas.
       ``(2) Exception for high deductible/medisave product.--
     Paragraph (1) shall not apply with respect to a contract that 
     relates only to a high deductible/medisave product.
       ``(3) Allowing transition.--The Secretary may waive the 
     requirement of paragraph (1) during the first 3 contract 
     years with respect to an organization.
       ``(c) Contract Period and Effectiveness.--
       ``(1) Period.--Each contract under this section shall be 
     for a term of at least one year, as determined by the 
     Secretary, and may be made automatically renewable from term 
     to term in the absence of notice by either party of intention 
     to terminate at the end of the current term.
       ``(2) Termination authority.--In accordance with procedures 
     established under subsection (h), the Secretary may at any 
     time terminate any such contract or may impose the 
     intermediate sanctions described in an applicable paragraph 
     of subsection (g) on the MedicarePlus 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 part;
       ``(C) is operating in a manner that is not in the best 
     interests of the individuals covered under the contract; or
       ``(D) no longer substantially meets the applicable 
     conditions of this part.
       ``(3) Effective date of contracts.--The effective date of 
     any contract executed pursuant to this section shall be 
     specified in the contract, except that in no case shall a 
     contract under this section which provides for coverage under 
     a high deductible/medisave account be effective before 
     January 1997 with respect to such coverage.
       ``(4) Previous terminations.--The Secretary may not enter 
     into a contract with a MedicarePlus organization if a 
     previous contract with that organization under this section 
     was terminated at the request of the organization within the 
     preceding five-year period, except in circumstances which 
     warrant 

[[Page H 10159]]
     special consideration, as determined by the Secretary.
       ``(5) No contracting authority.--The authority vested in 
     the Secretary by this part may be performed without regard to 
     such provisions of law or regulations relating to the making, 
     performance, amendment, or modification of contracts of the 
     United States as the Secretary may determine to be 
     inconsistent with the furtherance of the purpose of this 
     title.
       ``(d) Protections Against Fraud and Beneficiary 
     Protections.--
       ``(1) Inspection and audit.--Each contract under this 
     section shall provide that the Secretary, or any person or 
     organization designated by the Secretary--
       ``(A) shall have the right to inspect or otherwise evaluate 
     (i) the quality, appropriateness, and timeliness of services 
     performed under the contract and (ii) the facilities of the 
     organization when there is reasonable evidence of some need 
     for such inspection, and
       ``(B) shall have the right to audit and inspect any books 
     and records of the MedicarePlus organization that pertain (i) 
     to the ability of the organization to bear the risk of 
     potential financial losses, or (ii) to services performed or 
     determinations of amounts payable under the contract.
       ``(2) Enrollee notice at time of termination.--Each 
     contract under this section shall require the organization to 
     provide (and pay for) written notice in advance of the 
     contract's termination, as well as a description of 
     alternatives for obtaining benefits under this title, to each 
     individual enrolled with the organization under this part.
       ``(3) Disclosure.--
       ``(A) In general.--Each MedicarePlus organization shall, in 
     accordance with regulations of the Secretary, report to the 
     Secretary financial information which shall include the 
     following:
       ``(i) Such information as the Secretary may require 
     demonstrating that the organization has a fiscally sound 
     operation.
       ``(ii) A copy of the report, if any, filed with the Health 
     Care Financing Administration containing the information 
     required to be reported under section 1124 by disclosing 
     entities.
       ``(iii) A description of transactions, as specified by the 
     Secretary, between the organization and a party in interest. 
     Such transactions shall include--

       ``(I) any sale or exchange, or leasing of any property 
     between the organization and a party in interest;
       ``(II) any furnishing for consideration of goods, services 
     (including management services), or facilities between the 
     organization and a party in interest, but not including 
     salaries paid to employees for services provided in the 
     normal course of their employment and health services 
     provided to members by hospitals and other providers and by 
     staff, medical group (or groups), individual practice 
     association (or associations), or any combination thereof; 
     and
       ``(III) any lending of money or other extension of credit 
     between an organization and a party in interest.

     The Secretary may require that information reported 
     respecting an organization which controls, is controlled by, 
     or is under common control with, another entity be in the 
     form of a consolidated financial statement for the 
     organization and such entity.
       ``(B) Party in interest defined.--For the purposes of this 
     paragraph, the term `party in interest' means--
       ``(i) any director, officer, partner, or employee 
     responsible for management or administration of a 
     MedicarePlus organization, any person who is directly or 
     indirectly the beneficial owner of more than 5 percent of the 
     equity of the organization, any person who is the beneficial 
     owner of a mortgage, deed of trust, note, or other interest 
     secured by, and valuing more than 5 percent of the 
     organization, and, in the case of a MedicarePlus organization 
     organized as a nonprofit corporation, an incorporator or 
     member of such corporation under applicable State corporation 
     law;
       ``(ii) any entity in which a person described in clause 
     (i)--

       ``(I) is an officer or director;
       ``(II) is a partner (if such entity is organized as a 
     partnership);
       ``(III) has directly or indirectly a beneficial interest of 
     more than 5 percent of the equity; or
       ``(IV) has a mortgage, deed of trust, note, or other 
     interest valuing more than 5 percent of the assets of such 
     entity;

       ``(iii) any person directly or indirectly controlling, 
     controlled by, or under common control with an organization; 
     and
       ``(iv) any spouse, child, or parent of an individual 
     described in clause (i).
       ``(C) Access to information.--Each MedicarePlus 
     organization shall make the information reported pursuant to 
     subparagraph (A) available to its enrollees upon reasonable 
     request.
       ``(4) Loan information.--The contract shall require the 
     organization to notify the Secretary of loans and other 
     special financial arrangements which are made between the 
     organization and subcontractors, affiliates, and related 
     parties.
       ``(e) Additional Contract Terms.--The contract shall 
     contain such other terms and conditions not inconsistent with 
     this part (including requiring the organization to provide 
     the Secretary with such information) as the Secretary may 
     find necessary and appropriate.
       ``(f) Intermediate Sanctions.--
       ``(1) In general.--If the Secretary determines that a 
     MedicarePlus organization with a contract under this 
     section--
       ``(A) fails substantially to provide medically necessary 
     items and services that are required (under law or under the 
     contract) to be provided to an individual covered under the 
     contract, if the failure has adversely affected (or has 
     substantial likelihood of adversely affecting) the 
     individual;
       ``(B) imposes premiums on individuals enrolled under this 
     part in excess of the premiums permitted;
       ``(C) acts to expel or to refuse to re-enroll an individual 
     in violation of the provisions of this part;
       ``(D) engages in any practice that would reasonably be 
     expected to have the effect of denying or discouraging 
     enrollment (except as permitted by this part) by eligible 
     individuals with the organization whose medical condition or 
     history indicates a need for substantial future medical 
     services;
       ``(E) misrepresents or falsifies information that is 
     furnished--
       ``(i) to the Secretary under this part, or
       ``(ii) to an individual or to any other entity under this 
     part;
       ``(F) fails to comply with the requirements of section 
     1852(f)(3); or
       ``(G) employs or contracts with any individual or entity 
     that is excluded from participation under this title under 
     section 1128 or 1128A for the provision of health care, 
     utilization review, medical social work, or administrative 
     services or employs or contracts with any entity for the 
     provision (directly or indirectly) through such an excluded 
     individual or entity of such services;

     the Secretary may provide, in addition to any other remedies 
     authorized by law, for any of the remedies described in 
     paragraph (2).
       ``(2) Remedies.--The remedies described in this paragraph 
     are--
       ``(A) civil money penalties of not more than $25,000 for 
     each determination under paragraph (1) or, with respect to a 
     determination under subparagraph (D) or (E)(i) of such 
     paragraph, of not more than $100,000 for each such 
     determination, plus, with respect to a determination under 
     paragraph (1)(B), double the excess amount charged in 
     violation of such paragraph (and the excess amount charged 
     shall be deducted from the penalty and returned to the 
     individual concerned), and plus, with respect to a 
     determination under paragraph (1)(D), $15,000 for each 
     individual not enrolled as a result of the practice involved,
       ``(B) suspension of enrollment of individuals under this 
     part after the date the Secretary notifies the organization 
     of a determination under paragraph (1) and until the 
     Secretary is satisfied that the basis for such determination 
     has been corrected and is not likely to recur, or
       ``(C) suspension of payment to the organization under this 
     part for individuals enrolled after the date the Secretary 
     notifies the organization of a determination under paragraph 
     (1) and until the Secretary is satisfied that the basis for 
     such determination has been corrected and is not likely to 
     recur.
       ``(3) Other intermediate sanctions.--In the case of a 
     MedicarePlus organization for which the Secretary makes a 
     determination under subsection (c)(2) the basis of which is 
     not described in paragraph (1), the Secretary may apply the 
     following intermediate sanctions:
       ``(A) civil money penalties of not more than $25,000 for 
     each determination under subsection (c)(2) 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;
       ``(B) civil money penalties of not more than $10,000 for 
     each week beginning after the initiation of procedures by the 
     Secretary under subsection (h) during which the deficiency 
     that is the basis of a determination under subsection (c)(2) 
     exists; and
       ``(C) suspension of enrollment of individuals under this 
     part after the date the Secretary notifies the organization 
     of a determination under subsection (c)(2) and until the 
     Secretary is satisfied that the deficiency that is the basis 
     for the determination has been corrected and is not likely to 
     recur.
       ``(4) Procedures for imposing sanctions.--The provisions of 
     section 1128A (other than subsections (a) and (b)) shall 
     apply to a civil money penalty under paragraph (1) or (2) in 
     the same manner as they apply to a civil money penalty or 
     proceeding under section 1128A(a).
       ``(g) Procedures for Imposing Sanctions.--The Secretary may 
     terminate a contract with a MedicarePlus organization under 
     this section or may impose the intermediate sanctions 
     described in subsection (f) on the organization in accordance 
     with formal investigation and compliance procedures 
     established by the Secretary under which--
       ``(1) 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 subsection (c)(2);
       ``(2) the Secretary shall impose more severe sanctions on 
     organizations that have a history of deficiencies or that 
     have not taken steps to correct deficiencies the Secretary 
     has brought to their attention;
       ``(3) there are no unreasonable or unnecessary delays 
     between the finding of a deficiency and the imposition of 
     sanctions; and

[[Page H 10160]]

       ``(4) 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.''.
       (b) Conforming References to Previous Part C.--Any 
     reference in law (in effect before the date of the enactment 
     of this Act) to part C of title XVIII of the Social Security 
     Act is deemed a reference to part D of such title (as in 
     effect after such date).
       (c) Use of Interim, Final Regulations.--In order to carry 
     out the amendment made by subsection (a) in a timely manner, 
     the Secretary of Health and Human Services may promulgate 
     regulations that take effect on an interim basis, after 
     notice and pending opportunity for public comment.
       (d) Advance Directives.--Section 1866(f) (42 U.S.C. 
     1395cc(f)) is amended--
       (1) in paragraph (1)--
       (A) by inserting ``1853(g),'' after ``1833(s),'', and
       (B) by inserting ``, MedicarePlus organization,'' after 
     ``provider of services'', and
       (2) by adding at the end the following new paragraph:
       ``(4) Nothing in this subsection shall be construed to 
     require the provision of information regarding assisted 
     suicide, euthanasia, or mercy killing.''.
       (e) Conforming Amendment.--Section 1866(a)(1)(O) (42 U.S.C. 
     1395cc(a)(1)(O)) is amended by inserting before the semicolon 
     at the end the following: ``and in the case of hospitals to 
     accept as payment in full for inpatient hospital services 
     that are emergency services (as defined in section 
     1853(b)(4)) that are covered under this title and are 
     furnished to any individual enrolled under part C with a 
     MedicarePlus organization which does not have a contract 
     establishing payment amounts for services furnished to 
     members of the organization the amounts that would be made as 
     a payment in full under this title if the individuals were 
     not so enrolled''.

     SEC. 15003. DUPLICATION AND COORDINATION OF MEDICARE-RELATED 
                   PRODUCTS.

       (a) Treatment of Certain Health Insurance Policies as 
     Nonduplicative.--
       (1) In general.--Effective as if included in the enactment 
     of section 4354 of the Omnibus Budget Reconciliation Act of 
     1990, section 1882(d)(3)(A) (42 U.S.C. 1395ss(d)(3)(A)) is 
     amended--
       (A) by amending clause (i) to read as follows:
       ``(i) It is unlawful for a person to sell or issue to an 
     individual entitled to benefits under part A or enrolled 
     under part B of this title or electing a MedicarePlus product 
     under section 1805--
       ``(I) a health insurance policy (other than a medicare 
     supplemental policy) with knowledge that the policy 
     duplicates health benefits to which the individual is 
     otherwise entitled under this title or title XIX,
       ``(II) in the case of an individual not electing a 
     MedicarePlus product, a medicare supplemental policy with 
     knowledge that the individual is entitled to benefits under 
     another medicare supplemental policy, or
       ``(III) in the case of an individual electing a 
     MedicarePlus product, a medicare supplemental policy with 
     knowledge that the policy duplicates health benefits to which 
     the individual is otherwise entitled under this title or 
     under another medicare supplemental policy.'';
       (B) in clause (iii), by striking ``clause (i)'' and 
     inserting ``clause (i)(II)''; and
       (C) by adding at the end the following new clauses:
       ``(iv) For purposes of this subparagraph a health insurance 
     policy shall be considered to `duplicate' benefits under this 
     title only when, under its terms, the policy provides 
     specific reimbursement for identical items and services to 
     the extent paid for under this title, and a health insurance 
     policy providing for benefits which are payable to or on 
     behalf of an individual without regard to other health 
     benefit coverage of such individual is not considered to 
     `duplicate' any health benefits under this title.
       ``(v) For purposes of this subparagraph, a health insurance 
     policy (or a rider to an insurance contract which is not a 
     health insurance policy), including a policy (such as a long-
     term care insurance contract described in section 7702B(b) of 
     the Internal Revenue Code of 1986, as added by the Contract 
     with America Tax Relief Act of 1995 (H.R. 1215)) providing 
     benefits for long-term care, nursing home care, home health 
     care, or community-based care, that coordinates against or 
     excludes items and services available or paid for under this 
     title and (for policies sold or issued after January 1, 1996) 
     that discloses such coordination or exclusion in the policy's 
     outline of coverage, is not considered to `duplicate' health 
     benefits under this title. For purposes of this clause, the 
     terms `coordinates' and `coordination' mean, with respect to 
     a policy in relation to health benefits under this title, 
     that the policy under its terms is secondary to, or excludes 
     from payment, items and services to the extent available or 
     paid for under this title.
       ``(vi) Notwithstanding any other provision of law, no 
     criminal or civil penalty may be imposed at any time under 
     this subparagraph and no legal action may be brought or 
     continued at any time in any Federal or State court if the 
     penalty or action is based on an act or omission that 
     occurred after November 5, 1991, and before the date of the 
     enactment of this clause, and relates to the sale, issuance, 
     or renewal of any health insurance policy during such period, 
     if such policy meets the requirements of clause (iv) or (v).
       ``(vii) A State may not impose, with respect to the sale or 
     issuance of a policy (or rider) that meets the requirements 
     of this title pursuant to clause (iv) or (v) to an individual 
     entitled to benefits under part A or enrolled under part B or 
     enrolled under a MedicarePlus product under part C, any 
     requirement based on the premise that such a policy or rider 
     duplicates health benefits to which the individual is 
     otherwise entitled under this title.''.
       (2) Conforming amendments.--Section 1882(d)(3) (42 U.S.C. 
     1395ss(d)(3)) is amended--
       (A) in subparagraph (B), by inserting ``(including any 
     MedicarePlus product)'' after ``health insurance policies'';
       (B) in subparagraph (C)--
       (i) by striking ``with respect to (i)'' and inserting 
     ``with respect to'', and
       (ii) by striking ``, (ii) the sale'' and all that follows 
     up to the period at the end; and
       (C) by striking subparagraph (D).
       (3) Medicareplus products not treated as medicare 
     supplementary policies.--Section 1882(g) (42 U.S.C. 
     1395ss(g)) is amended by inserting ``a MedicarePlus product 
     or'' after ``and does not include''
       (4) Report on duplication and coordination of health 
     insurance policies that are not medicare supplemental 
     policies.--Not later than 3 years after the date of the 
     enactment of this Act, the Secretary of Health and Human 
     Services shall prepare and submit to Congress a report on the 
     advisability and feasibility of restricting the sale to 
     medicare beneficiaries of health insurance policies that 
     duplicate (within the meaning of section 1882(d)(3)(A) of the 
     Social Security Act) other health insurance policies that 
     such a beneficiary may have. In preparing such report, the 
     Secretary shall seek the advice of the National Association 
     of Insurance Commissioners and shall take into account the 
     standards established under section 1807 of the Social 
     Security Act for the electronic coordination of benefits.
       (b) Additional Rules Relating to Individuals Enrolled in 
     MedicarePlus Products.--Section 1882 (42 U.S.C. 1395ss) is 
     further amended by adding at the end the following new 
     subsection:
       ``(u)(1) Notwithstanding the previous provisions of this 
     section, the following provisions shall not apply to a health 
     insurance policy (other than a medicare supplemental policy) 
     provided to an individual who has elected the MedicarePlus 
     option under section 1805:
       ``(A) Subsections (o)(1), (o)(2), (p)(1)(A)(i), (p)(2), 
     (p)(3), (p)(8), and (p)(9) (insofar as they relate to 
     limitations on benefits or groups of benefits that may be 
     offered).
       ``(B) Subsection (r) (relating to loss-ratios).
       ``(2)(A) It is unlawful for a person to sell or issue a 
     policy described in subparagraph (B) to an individual with 
     knowledge that the individual has in effect under section 
     1805 an election of a high deductible/medisave product.
       ``(B) A policy described in this subparagraph is a health 
     insurance policy that provides for coverage of expenses that 
     are otherwise required to be counted toward meeting the 
     annual deductible amount provided under the high deductible/
     medisave product.''.

     SEC. 15004. TRANSITIONAL RULES FOR CURRENT MEDICARE HMO 
                   PROGRAM.

       (a) Transition from Current Contracts.--
       (1) Limitation on new contracts.--
       (A) No new risk-sharing contracts after new standards 
     established.--The Secretary of Health and Human Services (in 
     this section referred to as the ``Secretary'') shall not 
     enter into any risk-sharing contract under section 1876 of 
     the Social Security Act with an eligible organization for any 
     contract year beginning on or after the date standards for 
     MedicarePlus organizations and products are first established 
     under section 1856(a) of such Act with respect to 
     MedicarePlus organizations that are insurers or health 
     maintenance organizations unless such a contract had been in 
     effect under section 1876 of such Act for the organization 
     for the previous contract year.
       (B) No new cost reimbursement contracts.--The Secretary 
     shall not enter into any cost reimbursement contract under 
     section 1876 of the Social Security Act beginning for any 
     contract year beginning on or after the date of the enactment 
     of this Act.
       (2) Termination of current contracts.--
       (A) Risk-sharing contracts.--Notwithstanding any other 
     provision of law, the Secretary shall not extend or continue 
     any risk-sharing contract with an eligible organization under 
     section 1876 of the Social Security Act (for which a contract 
     was entered into consistent with paragraph (1)(A)) for any 
     contract year beginning on or after 1 year after the date 
     standards described in paragraph (1)(A) are established.
       (B) Cost reimbursement contracts.--The Secretary shall not 
     extend or continue any reasonable cost reimbursement contract 
     with an eligible organization under section 1876 of the 
     Social Security Act for any contract year beginning on or 
     after January 1, 1998.
       (b) Conforming Payment Rates.--
       (1) Risk-sharing contracts.--Notwithstanding any other 
     provision of law, the Secretary shall provide that payment 
     amounts under risk-sharing contracts under section 1876(a) of 
     the Social Security Act for months in a year (beginning with 
     January 1996) shall be computed--
       (A) with respect to individuals entitled to benefits under 
     both parts A and B of title XVIII of such Act, by 
     substituting payment 

[[Page H 10161]]
     rates under section 1855(a) of such Act for the payment rates otherwise 
     established under section 1876(a) of such Act, and
       (B) with respect to individuals only entitled to benefits 
     under part B of such title, by substituting an appropriate 
     proportion of such rates (reflecting the relative proportion 
     of payments under such title attributable to such part) for 
     the payment rates otherwise established under section 1876(a) 
     of such Act.

     For purposes of carrying out this paragraph for payment for 
     months in 1996, the Secretary shall compute, announce, and 
     apply the payment rates under section 1855(a) of such Act 
     (notwithstanding any deadlines specified in such section) in 
     as timely a manner as possible and may (to the extent 
     necessary) provide for retroactive adjustment in payments 
     made not in accordance with such rates.
       (2) Cost contracts.--Notwithstanding any other provision of 
     law, the Secretary shall provide that payment amounts under 
     cost reimbursement contracts under section 1876(a) of the 
     Social Security Act shall take into account adjustments in 
     payment amounts made in parts A and B of title XVIII of such 
     Act pursuant to the amendments made by this title.
       (c) Elimination of 50:50 Rule.--
       (1) In general.--Section 1876 (42 U.S.C. 1395mm) is amended 
     by striking subsection (f).
       (2) Conforming amendments.--Section 1876 is further 
     amended--
       (A) in subsection (c)(3)(A)(i), by striking ``would result 
     in failure to meet the requirements of subsection (f) or'', 
     and
       (B) in subsection (i)(1)(C), by striking ``(e), and (f)'' 
     and inserting ``and (e)''.
       (3) Effective date.--The amendments made by this section 
     shall apply to contract years beginning on or after January 
     1, 1996.

    PART 2--SPECIAL RULES FOR MEDICAREPLUS MEDICAL SAVINGS ACCOUNTS

     SEC. 15011. MEDICAREPLUS MSA'S.

       (a) In General.--Part III of subchapter B of chapter 1 of 
     the Internal Revenue Code of 1986 (relating to amounts 
     specifically excluded from gross income) is amended by 
     redesignating section 137 as section 138 and by inserting 
     after section 136 the following new section:

     ``SEC. 137. MEDICAREPLUS MSA'S.

       ``(a) Exclusion.--Gross income shall not include any 
     payment to the MedicarePlus MSA of an individual by the 
     Secretary of Health and Human Services under section 
     1855(f)(1)(B) of the Social Security Act.
       ``(b) MedicarePlus MSA.--For purposes of this section--
       ``(1) Medicareplus msa.--The term `MedicarePlus MSA' means 
     a trust created or organized in the United States exclusively 
     for the purpose of paying the qualified medical expenses of 
     the account holder, but only if the written governing 
     instrument creating the trust meets the following 
     requirements:
       ``(A) Except in the case of a trustee-to-trustee transfer 
     described in subsection (d)(4), no contribution will be 
     accepted unless it is made by the Secretary of Health and 
     Human Services under section 1855(f)(1)(B) of the Social 
     Security Act.
       ``(B) The trustee is a bank (as defined in section 408(n)), 
     an insurance company (as defined in section 816), or another 
     person who demonstrates to the satisfaction of the Secretary 
     that the manner in which such person will administer the 
     trust will be consistent with the requirements of this 
     section.
       ``(C) No part of the trust assets will be invested in life 
     insurance contracts.
       ``(D) The assets of the trust will not be commingled with 
     other property except in a common trust fund or common 
     investment fund.
       ``(E) The interest of an individual in the balance in his 
     account is nonforfeitable.
       ``(F) Trustee-to-trustee transfers described in subsection 
     (d)(4) may be made to and from the trust.
       ``(2) Qualified medical expenses.--
       ``(A) In general.--The term `qualified medical expenses' 
     means, with respect to an account holder, amounts paid by 
     such holder--
       ``(i) for medical care (as defined in section 213(d)) for 
     the account holder, but only to the extent such amounts are 
     not compensated for by insurance or otherwise, or
       ``(ii) for long-term care insurance for the account holder.
       ``(B) Health insurance may not be purchased from account.--
     Subparagraph (A)(i) shall not apply to any payment for 
     insurance.
       ``(3) Account holder.--The term `account holder' means the 
     individual on whose behalf the MedicarePlus MSA is 
     maintained.
       ``(4) Certain rules to apply.--Rules similar to the rules 
     of subsections (g) and (h) of section 408 shall apply for 
     purposes of this section.
       ``(c) Tax Treatment of Accounts.--
       ``(1) In general.--A MedicarePlus MSA is exempt from 
     taxation under this subtitle unless such MSA has ceased to be 
     a MedicarePlus MSA by reason of paragraph (2). 
     Notwithstanding the preceding sentence, any such MSA is 
     subject to the taxes imposed by section 511 (relating to 
     imposition of tax on unrelated business income of charitable, 
     etc. organizations).
       ``(2) Account assets treated as distributed in the case of 
     prohibited transactions or account pledged as security for 
     loan.--Rules similar to the rules of paragraphs (2) and (4) 
     of section 408(e) shall apply to MedicarePlus MSA's, and any 
     amount treated as distributed under such rules shall be 
     treated as not used to pay qualified medical expenses.
       ``(d) Tax Treatment of Distributions.--
       ``(1) Inclusion of amounts not used for qualified medical 
     expenses.--No amount shall be included in the gross income of 
     the account holder by reason of a payment or distribution 
     from a MedicarePlus MSA which is used exclusively to pay the 
     qualified medical expenses of the account holder. Any amount 
     paid or distributed from a MedicarePlus MSA which is not so 
     used shall be included in the gross income of such holder.
       ``(2) Penalty for distributions not used for qualified 
     medical expenses if minimum balance not maintained.--
       ``(A) In general.--The tax imposed by this chapter for any 
     taxable year in which there is a payment or distribution from 
     a MedicarePlus MSA which is not used exclusively to pay the 
     qualified medical expenses of the account holder shall be 
     increased by 50 percent of the excess (if any) of--
       ``(i) the amount of such payment or distribution, over
       ``(ii) the excess (if any) of--

       ``(I) the fair market value of the assets in the 
     MedicarePlus MSA as of the close of the calendar year 
     preceding the calendar year in which the taxable year begins, 
     over
       ``(II) an amount equal to 60 percent of the deductible 
     under the high deductible/medisave product covering the 
     account holder as of January 1 of the calendar year in which 
     the taxable year begins.

       ``(B) Exceptions.--Subparagraph (A) shall not apply if the 
     payment or distribution is made on or after the date the 
     account holder--
       ``(i) becomes disabled within the meaning of section 
     72(m)(7), or
       ``(ii) dies.
       ``(C) Special rules.--For purposes of subparagraph (A)--
       ``(i) all MedicarePlus MSA's of the account holder shall be 
     treated as 1 account,
       ``(ii) all payments and distributions not used exclusively 
     to pay the qualified medical expenses of the account holder 
     during any taxable year shall be treated as 1 distribution, 
     and
       ``(iii) any distribution of property shall be taken into 
     account at its fair market value on the date of the 
     distribution.
       ``(3) Withdrawal of erroneous contributions.--Paragraphs 
     (1) and (2) shall not apply to any payment or distribution 
     from a MedicarePlus MSA to the Secretary of Health and Human 
     Services of an erroneous contribution to such MSA and of the 
     net income attributable to such contribution.
       ``(4) Trustee-to-trustee transfers.--Paragraphs (1) and (2) 
     shall not apply to any trustee-to-trustee transfer from a 
     MedicarePlus MSA of an account holder to another MedicarePlus 
     MSA of such account holder.
       ``(5) Coordination with medical expense deduction.--For 
     purposes of section 213, any payment or distribution out of a 
     MedicarePlus MSA for qualified medical expenses shall not be 
     treated as an expense paid for medical care.
       ``(e) Treatment of Account After Death of Account Holder.--
       ``(1) Treatment if designated beneficiary is spouse.--
       ``(A) In general.--In the case of an account holder's 
     interest in a MedicarePlus MSA which is payable to (or for 
     the benefit of) such holder's spouse upon the death of such 
     holder, such MedicarePlus MSA shall be treated as a 
     MedicarePlus MSA of such spouse as of the date of such death.
       ``(B) Special rules if spouse not medicare eligible.--If, 
     as of the date of such death, such spouse is not entitled to 
     benefits under title XVIII of the Social Security Act, then 
     after the date of such death--
       ``(i) the Secretary of Health and Human Services may not 
     make any payments to such MedicarePlus MSA, other than 
     payments attributable to periods before such date,
       ``(ii) in applying subsection (b)(2) with respect to such 
     MedicarePlus MSA, references to the account holder shall be 
     treated as including references to any dependent (as defined 
     in section 152) of such spouse and any subsequent spouse of 
     such spouse, and
       ``(iii) in lieu of applying subsection (d)(2), the rules of 
     section 220(f)(2) shall apply.
       ``(2) Treatment if designated beneficiary is not spouse.--
     In the case of an account holder's interest in a MedicarePlus 
     MSA which is payable to (or for the benefit of) any person 
     other than such holder's spouse upon the death of such 
     holder--
       ``(A) such account shall cease to be a MedicarePlus MSA as 
     of the date of death, and
       ``(B) an amount equal to the fair market value of the 
     assets in such account on such date shall be includible--
       ``(i) if such person is not the estate of such holder, in 
     such person's gross income for the taxable year which 
     includes such date, or
       ``(ii) if such person is the estate of such holder, in such 
     holder's gross income for last taxable year of such holder.
       ``(f) Reports.--
       ``(1) In general.--The trustee of a MedicarePlus MSA shall 
     make such reports regarding such account to the Secretary and 
     to the account holder with respect to--
       ``(A) the fair market value of the assets in such 
     MedicarePlus MSA as of the close of each calendar year, and 

[[Page H 10162]]

       ``(B) contributions, distributions, and other matters,

     as the Secretary may require by regulations.
       ``(2) Time and manner of reports.--The reports required by 
     this subsection--
       ``(A) shall be filed at such time and in such manner as the 
     Secretary prescribes in such regulations, and
       ``(B) shall be furnished to the account holder--
       ``(i) not later than January 31 of the calendar year 
     following the calendar year to which such reports relate, and
       ``(ii) in such manner as the Secretary prescribes in such 
     regulations.''
       (b) Exclusion of MedicarePlus MSA's From Estate Tax.--Part 
     IV of subchapter A of chapter 11 of such Code is amended by 
     adding at the end the following new section:

     ``SEC. 2057. MEDICAREPLUS MSA'S.

       ``For purposes of the tax imposed by section 2001, the 
     value of the taxable estate shall be determined by deducting 
     from the value of the gross estate an amount equal to the 
     value of any MedicarePlus MSA (as defined in section 137(b)) 
     included in the gross estate.''
       (c) Tax on Prohibited Transactions.--
       (1) Section 4975 of such Code (relating to tax on 
     prohibited transactions) is amended by adding at the end of 
     subsection (c) the following new paragraph:
       ``(4) Special rule for MedicarePlus MSA's.--An individual 
     for whose benefit a MedicarePlus MSA (within the meaning of 
     section 137(b)) is established shall be exempt from the tax 
     imposed by this section with respect to any transaction 
     concerning such account (which would otherwise be taxable 
     under this section) if, with respect to such transaction, the 
     account ceases to be a MedicarePlus MSA by reason of the 
     application of section 137(c)(2) to such account.''
       (2) Paragraph (1) of section 4975(e) of such Code is 
     amended to read as follows:
       ``(1) Plan.--For purposes of this section, the term `plan' 
     means--
       ``(A) a trust described in section 401(a) which forms a 
     part of a plan, or a plan described in section 403(a), which 
     trust or plan is exempt from tax under section 501(a),
       ``(B) an individual retirement account described in section 
     408(a),
       ``(C) an individual retirement annuity described in section 
     408(b),
       ``(D) a medical savings account described in section 
     220(d),
       ``(E) a MedicarePlus MSA described in section 137(b), or
       ``(F) a trust, plan, account, or annuity which, at any 
     time, has been determined by the Secretary to be described in 
     any preceding subparagraph of this paragraph.''
       (d) Failure To Provide Reports on MedicarePlus MSA's.--
       (1) Subsection (a) of section 6693 of such Code (relating 
     to failure to provide reports on individual retirement 
     accounts or annuities) is amended to read as follows:
       ``(a) Reports.--
       ``(1) In general.--If a person required to file a report 
     under a provision referred to in paragraph (2) fails to file 
     such report at the time and in the manner required by such 
     provision, such person shall pay a penalty of $50 for each 
     failure unless it is shown that such failure is due to 
     reasonable cause.
       ``(2) Provisions.--The provisions referred to in this 
     paragraph are--
       ``(A) subsections (i) and (l) of section 408 (relating to 
     individual retirement plans),
       ``(B) section 220(h) (relating to medical savings 
     accounts), and
       ``(C) section 137(f) (relating to MedicarePlus MSA's).''
       (2) The section heading for section 6693 of such Code is 
     amended to read as follows:

     ``SEC. 6693. FAILURE TO FILE REPORTS ON INDIVIDUAL RETIREMENT 
                   PLANS AND CERTAIN OTHER TAX-FAVORED ACCOUNTS; 
                   PENALTIES RELATING TO DESIGNATED NONDEDUCTIBLE 
                   CONTRIBUTIONS.''

       (e) Clerical Amendments.--
       (1) The table of sections for part III of subchapter B of 
     chapter 1 of such Code is amended by striking the last item 
     and inserting the following:

``Sec. 137. MedicarePlus MSA's.
``Sec. 138. Cross references to other Acts.''

       (2) The table of sections for part 1 of subchapter B of 
     chapter 68 of such Code is amended by striking the item 
     relating to section 6693 and inserting the following new 
     item:

``Sec. 6693. Failure to file reports on individual retirement plans and 
              certain other tax-favored accounts; penalties relating to 
              designated nondeductible contributions.''

       (3) The table of sections for part IV of subchapter A of 
     chapter 11 of such Code is amended by adding at the end the 
     following new item:

``Sec. 2057. MedicarePlus MSA's.''

       (f) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     1996.

     SEC. 15012. CERTAIN REBATES EXCLUDED FROM GROSS INCOME.

       (a) In General.--Section 105 of the Internal Revenue Code 
     of 1986 (relating to amounts received under accident and 
     health plans) is amended by adding at the end the following 
     new subsection:
       ``(j) Certain Rebates Under Social Security Act.--Gross 
     income does not include any rebate received under section 
     1852(e)(1)(A) of the Social Security Act during the taxable 
     year.''
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to amounts received after the date of the 
     enactment of this Act.

      PART 3--SPECIAL ANTITRUST RULE FOR PROVIDER SERVICE NETWORKS

     SEC. 15021. APPLICATION OF ANTITRUST RULE OF REASON TO 
                   PROVIDER SERVICE NETWORKS.

       (a) Rule of Reason Standard.--In any action under the 
     antitrust laws, or under any State law similar to the 
     antitrust laws--
       (1) the conduct of a provider service network in 
     negotiating, making, or performing a contract (including the 
     establishment and modification of a fee schedule and the 
     development of a panel of physicians), to the extent such 
     contract is for the purpose of providing health care services 
     to individuals under the terms of a MedicarePlus PSO product, 
     and
       (2) the conduct of any member of such network for the 
     purpose of providing such health care services under such 
     contract to such extent,

     shall not be deemed illegal per se. Such conduct shall be 
     judged on the basis of its reasonableness, taking into 
     account all relevant factors affecting competition, including 
     the effects on competition in properly defined markets.
       (b) Definitions.--For purposes of subsection (a):
       (1) Antitrust laws.--The term ``antitrust laws'' has the 
     meaning given it in subsection (a) of the first section of 
     the Clayton Act (15 U.S.C. 12), except that such term 
     includes section 5 of the Federal Trade Commission Act (15 
     U.S.C. 45) to the extent that such section 5 applies to 
     unfair methods of competition.
       (2) Health care provider.--The term ``health care 
     provider'' means any individual or entity that is engaged in 
     the delivery of health care services in a State and that is 
     required by State law or regulation to be licensed or 
     certified by the State to engage in the delivery of such 
     services in the State.
       (3) Health care service.--The term ``health care service'' 
     means any service for which payment may be made under a 
     MedicarePlus PSO product including services related to the 
     delivery or administration of such service.
       (4) MedicarePlus program.--The term ``MedicarePlus 
     program'' means the program under part C of title XVIII of 
     the Social Security Act.
       (5) MedicarePlus PSO product.--The term ``MedicarePlus PSO 
     product'' means a MedicarePlus product offered by a provider-
     sponsored organization under part C of title XVIII of the 
     Social Security Act.
       (6) Provider service network.--The term ``provider service 
     network'' means an organization that--
       (A) is organized by, operated by, and composed of members 
     who are health care providers and for purposes that include 
     providing health care services,
       (B) is funded in part by capital contributions made by the 
     members of such organization,
       (C) with respect to each contract made by such organization 
     for the purpose of providing a type of health care service to 
     individuals under the terms of a MedicarePlus PSO product--
       (i) requires all members of such organization who engage in 
     providing such type of health care service to agree to 
     provide health care services of such type under such 
     contract,
       (ii) receives the compensation paid for the health care 
     services of such type provided under such contract by such 
     members, and
       (iii) provides for the distribution of such compensation,
       (D) has established, consistent with the requirements of 
     the MedicarePlus program for provider-sponsored 
     organizations, a program to review, pursuant to written 
     guidelines, the quality, efficiency, and appropriateness of 
     treatment methods and setting of services for all health care 
     providers and all patients participating in such product, 
     along with internal procedures to correct identified 
     deficiencies relating to such methods and such services,
       (E) has established, consistent with the requirements of 
     the MedicarePlus program for provider-sponsored 
     organizations, a program to monitor and control utilization 
     of health care services provided under such product, for the 
     purpose of improving efficient, appropriate care and 
     eliminating the provision of unnecessary health care 
     services,
       (F) has established a management program to coordinate the 
     delivery of health care services for all health care 
     providers and all patients participating in such product, for 
     the purpose of achieving efficiencies and enhancing the 
     quality of health care services provided, and
       (G) has established, consistent with the requirements of 
     the MedicarePlus program for provider-sponsored 
     organizations, a grievance and appeal process for such 
     organization designed to review and promptly resolve 
     beneficiary or patient grievances and complaints.

     Such term may include a provider-sponsored organization.
       (7) Provider-sponsored organization.--The term ``provider-
     sponsored organization'' means a MedicarePlus organization 
     under the MedicarePlus program that is a provider-sponsored 
     organization (as defined in section ____ of the Social 
     Security Act).

[[Page H 10163]]

       (8) State.--The term ``State'' has the meaning given it in 
     section 4G(2) of the Clayton Act (15 U.S.C. 15g(2)).
       (c) Issuance of Guidelines.--Not later than 120 days after 
     the date of the enactment of this Act, the Attorney General 
     and the Federal Trade Commission shall issue jointly 
     guidelines specifying the enforcement policies and analytical 
     principles that will be applied by the Department of Justice 
     and the Commission with respect to the operation of 
     subsection (a).

                          PART 4--COMMISSIONS

     SEC. 15031. MEDICARE PAYMENT REVIEW COMMISSION.

       (a) In General.--Title XVIII, as amended by section 
     15001(a), is amended by inserting after section 1805 the 
     following new section:


                  ``medicare payment review commission

       ``Sec. 1806. (a) Establishment.--There is hereby 
     established the Medicare Payment Review Commission (in this 
     section referred to as the `Commission').
       ``(b) Duties.--
       ``(1) General duties and reports.--
       ``(A) In general.--The Commission shall review, and make 
     recommendations to Congress concerning, payment policies 
     under this title.
       ``(B) Annual reports.--By not later than June 1 of each 
     year, the Commission shall submit a report to Congress 
     containing an examination of issues affecting the medicare 
     program, including the implications of changes in health care 
     delivery in the United States and in the market for health 
     care services on the medicare program.
       ``(C) Additional reports.--The Commission may submit to 
     Congress from time to time such other reports as the 
     Commission deems appropriate. By not later than May 1, 1997, 
     the Commission shall submit to Congress a report on the 
     matter described in paragraph (2)(G).
       ``(D) Secretarial response in rulemaking.--The Secretary 
     shall respond to recommendations of the Commission in notices 
     of rulemaking proceedings under this title.
       ``(2) Specific duties relating to medicareplus program.--
     Specifically, the Commission shall review, with respect to 
     the MedicarePlus program under part C--
       ``(A) the appropriateness of the methodology for making 
     payment to plans under such program, including the making of 
     differential payments and the distribution of differential 
     updates among different payment areas);
       ``(B) the appropriateness of the mechanisms used to adjust 
     payments for risk and the need to adjust such mechanisms to 
     take into account health status of beneficiaries;
       ``(C) the implications of risk selection both among 
     MedicarePlus organizations and between the MedicarePlus 
     option and the non-MedicarePlus option;
       ``(D) in relation to payment under part C, the development 
     and implementation of mechanisms to assure the quality of 
     care for those enrolled with MedicarePlus organizations;
       ``(F) the impact of the MedicarePlus program on access to 
     care for medicare beneficiaries;
       ``(G) the feasibility and desirability of extending the 
     rules for open enrollment that apply during the transition 
     period to apply in each county during the first 2 years in 
     which MedicarePlus products are made available to individuals 
     residing in the county; and
       ``(H) other major issues in implementation and further 
     development of the MedicarePlus program.
       ``(3) Specific duties relating to the failsafe budget 
     mechanism.--Specifically, the Commission shall review, with 
     respect to the failsafe budget mechanism described in section 
     1895--
       ``(A) the appropriateness of the expenditure projections by 
     the Secretary under section 1895(c) for each medicare sector;
       ``(B) the appropriateness of the growth factors for each 
     sector and the ability to take into account substitution 
     across sectors;
       ``(C) the appropriateness of the mechanisms for 
     implementing reductions in payment amounts for different 
     sectors, including any adjustments to reflect changes in 
     volume or intensity resulting for any payment reductions;
       ``(D) the impact of the mechanism on provider participation 
     in parts A and B and in the MedicarePlus program; and
       ``(E) the appropriateness of the medicare benefit budget 
     (under section 1895(c)(2)(C) of the Social Security Act), 
     particularly for fiscal years after fiscal year 2002.
       ``(4) Specific duties relating to the fee-for-service 
     system.--Specifically, the Commission shall review payment 
     policies under parts A and B, including--
       ``(A) the factors affecting expenditures for services in 
     different sectors, including the process for updating 
     hospital, physician, and other fees,
       ``(B) payment methodologies; and
       ``(C) the impact of payment policies on access and quality 
     of care for medicare beneficiaries.
       ``(5) Specific duties relating to interaction of payment 
     policies with health care delivery generally.--Specifically 
     the Commission shall review the effect of payment policies 
     under this title on the delivery of health care services 
     under this title and assess the implications of changes in 
     the health services market on the medicare program.
       ``(c) Membership.--
       ``(1) Number and appointment.--The Commission shall be 
     composed of 15 members appointed by the Comptroller General.
       ``(2) Qualifications.--The membership of the Commission 
     shall include individuals with national recognition for their 
     expertise in health finance and economics, actuarial science, 
     health facility management, health plans and integrated 
     delivery systems, reimbursement of health facilities, 
     allopathic and osteopathic physicians, and other providers of 
     services, and other related fields, who provide a mix of 
     different professionals, broad geographic representation, and 
     a balance between urban and rural representatives, including 
     physicians and other health professionals, employers, third 
     party payors, individuals skilled in the conduct and 
     interpretation of biomedical, health services, and health 
     economics research and expertise in outcomes and 
     effectiveness research and technology assessment. Such 
     membership shall also include representatives of consumers 
     and the elderly.
       ``(3) Considerations in initial appointment.--To the extent 
     possible, in first appointing members to the Commission the 
     Comptroller General shall consider appointing individuals who 
     (as of the date of the enactment of this section) were 
     serving on the Prospective Payment Assessment Commission or 
     the Physician Payment Review Commission.
       ``(4) Terms.--
       ``(A) In general.--The terms of members of the Commission 
     shall be for 3 years except that the Comptroller General 
     shall designate staggered terms for the members first 
     appointed.
       ``(B) Vacancies.--Any member appointed to fill a vacancy 
     occurring before the expiration of the term for which the 
     member's predecessor was appointed shall be appointed only 
     for the remainder of that term. A member may serve after the 
     expiration of that member's term until a successor has taken 
     office. A vacancy in the Commission shall be filled in the 
     manner in which the original appointment was made.
       ``(5) Compensation.--While serving on the business of the 
     Commission (including traveltime), a member of the Commission 
     shall be entitled to compensation at the per diem equivalent 
     of the rate provided for level IV of the Executive Schedule 
     under section 5315 of title 5, United States Code; and while 
     so serving away from home and member's regular place of 
     business, a member may be allowed travel expenses, as 
     authorized by the Chairman of the Commission. Physicians 
     serving as personnel of the Commission may be provided a 
     physician comparability allowance by the Commission in the 
     same manner as Government physicians may be provided such an 
     allowance by an agency under section 5948 of title 5, United 
     States Code, and for such purpose subsection (i) of such 
     section shall apply to the Commission in the same manner as 
     it applies to the Tennessee Valley Authority. For purposes of 
     pay (other than pay of members of the Commission) and 
     employment benefits, rights, and privileges, all personnel of 
     the Commission shall be treated as if they were employees of 
     the United States Senate.
       ``(6) Chairman; vice chairman.--The Comptroller General 
     shall designate a member of the Commission, at the time of 
     appointment of the member, as Chairman and a member as Vice 
     Chairman for that term of appointment.
       ``(7) Meetings.--The Commission shall meet at the call of 
     the Chairman.
       ``(d) Director and Staff; Experts and Consultants.--Subject 
     to such review as the Comptroller General deems necessary to 
     assure the efficient administration of the Commission, the 
     Commission may--
       ``(1) employ and fix the compensation of an Executive 
     Director (subject to the approval of the Comptroller General) 
     and such other personnel as may be necessary to carry out its 
     duties (without regard to the provisions of title 5, United 
     States Code, governing appointments in the competitive 
     service);
       ``(2) seek such assistance and support as may be required 
     in the performance of its duties from appropriate Federal 
     departments and agencies;
       ``(3) enter into contracts or make other arrangements, as 
     may be necessary for the conduct of the work of the 
     Commission (without regard to section 3709 of the Revised 
     Statutes (41 U.S.C. 5));
       ``(4) make advance, progress, and other payments which 
     relate to the work of the Commission;
       ``(5) provide transportation and subsistence for persons 
     serving without compensation; and
       ``(6) prescribe such rules and regulations as it deems 
     necessary with respect to the internal organization and 
     operation of the Commission.
       ``(e) Powers.--
       ``(1) Obtaining official data.--The Commission may secure 
     directly from any department or agency of the United States 
     information necessary to enable it to carry out this section. 
     Upon request of the Chairman, the head of that department or 
     agency shall furnish that information to the Commission on an 
     agreed upon schedule.
       ``(2) Data collection.--In order to carry out its 
     functions, the Commission shall collect and assess 
     information.
       ``(A) utilize existing information, both published and 
     unpublished, where possible, collected and assessed either by 
     its own staff or under other arrangements made in accordance 
     with this section,

[[Page H 10164]]

       ``(B) carry out, or award grants or contracts for, original 
     research and experimentation, where existing information is 
     inadequate, and
       ``(C) adopt procedures allowing any interested party to 
     submit information for the Commission's use in making reports 
     and recommendations.
       ``(3) Access of gao to information.--The Comptroller 
     General shall have unrestricted access to all deliberations, 
     records, and data of the Commission, immediately upon 
     request.
       ``(4) Periodic audit.--The Commission shall be subject to 
     periodic audit by the General Accounting Office.
       ``(f) Authorization of Appropriations.--
       ``(1) Request for appropriations.--The Commission shall 
     submit requests for appropriations in the same manner as the 
     Comptroller General submits requests for appropriations, but 
     amounts appropriated for the Commission shall be separate 
     from amounts appropriated for the Comptroller General.
       ``(2) Authorization.--There are authorized to be 
     appropriated such sums as may be necessary to carry out the 
     provisions of this section. 60 percent of such appropriation 
     shall be payable from the Federal Hospital Insurance Trust 
     Fund, and 40 percent of such appropriation shall be payable 
     from the Federal Supplementary Medical Insurance Trust 
     Fund.''.
       (b) Abolition of ProPAC and PPRC.--
       (1) PROPAC.--
       (A) In general.--Section 1886(e) (42 U.S.C. 1395ww(e)) is 
     amended--
       (i) by striking paragraphs (2) and (6); and
       (ii) in paragraph (3), by striking ``(A) The Commission'' 
     and all that follows through ``(B)''.
       (B) Conforming amendment.--Section 1862 (42 U.S.C. 1395y) 
     is amended by striking ``Prospective Payment Assessment 
     Commission'' each place it appears in subsection (a)(1)(D) 
     and subsection (i) and inserting ``Medicare Payment Review 
     Commission''.
       (2) PPRC.--
       (A) In general.--Title XVIII is amended by striking section 
     1845 (42 U.S.C. 1395w-1).
       (B) Conforming amendments.--
       (i) Section 1834(b)(2) (42 U.S.C. 1395m(b)(2)) is amended 
     by striking ``Physician Payment Review Commission'' and 
     inserting ``Medicare Payment Review Commission''.
       (ii) Section 1842(b) (42 U.S.C. 1395u(b)) is amended by 
     striking ``Physician Payment Review Commission'' each place 
     it appears in paragraphs (9)(D) and (14)(C)(i) and inserting 
     ``Medicare Payment Review Commission''.
       (iii) Section 1848 (42 U.S.C. 1395w@4) is amended by 
     striking ``Physician Payment Review Commission'' and 
     inserting ``Medicare Payment Review Commission'' each place 
     it appears in paragraph (2)(A)(ii), (2)(B)(iii), and (5) of 
     subsection (c), subsection (d)(2)(F), paragraphs (1)(B), (3), 
     and (4)(A) of subsection (f), and paragraphs (6)(C) and 
     (7)(C) of subsection (g).
       (c) Effective Date; Transition.--
       (1) In general.--The Comptroller General shall first 
     provide for appointment of members to the Medicare Payment 
     Review Commission (in this subsection referred to as 
     ``MPRC'') by not later than March 31, 1996.
       (2) Transition.--Effective on a date (not later than 30 
     days after the date a majority of members of the MPRC have 
     first been appointed, the Prospective Payment Assessment 
     Commission (in this subsection referred to as ``ProPAC'') and 
     the Physician Payment Review Commission (in this subsection 
     referred to as ``PPRC''), and amendments made by subsection 
     (b), are terminated. The Comptroller General, to the maximum 
     extent feasible, shall provide for the transfer to the MPRC 
     of assets and staff of ProPAC and PPRC, without any loss of 
     benefits or seniority by virtue of such transfers. Fund 
     balances available to the ProPAC or PPRC for any period shall 
     be available to the MPRC for such period for like purposes.
       (3) Continuing responsibility for reports.--The MPRC shall 
     be responsible for the preparation and submission of reports 
     required by law to be submitted (and which have not been 
     submitted by the date of establishment of the MPRC) by the 
     ProPAC and PPRC, and, for this purpose, any reference in law 
     to either such Commission is deemed, after the appointment of 
     the MPRC, to refer to the MPRC.

     SEC. 15032. COMMISSION ON THE EFFECT OF THE BABY BOOM 
                   GENERATION ON THE MEDICARE PROGRAM.

       (a) Establishment.--There is established a commission to be 
     known as the Commission on the Effect of the Baby Boom 
     Generation on the Medicare Program (in this section referred 
     to as the ``Commission'').
       (b) Duties.--
       (1) In general.--The Commission shall--
       (A) examine the financial impact on the medicare program of 
     the significant increase in the number of medicare eligible 
     individuals which will occur beginning approximately during 
     2010 and lasting for approximately 25 years, and
       (B) make specific recommendations to the Congress 
     respecting a comprehensive approach to preserve the medicare 
     program for the period during which such individuals are 
     eligible for medicare.
       (2) Considerations in making recommendations.--In making 
     its recommendations, the Commission shall consider the 
     following:
       (A) The amount and sources of Federal funds to finance the 
     medicare program, including the potential use of innovative 
     financing methods.
       (B) The most efficient and effective manner of 
     administering the program, including the appropriateness of 
     continuing the application of the failsafe budget mechanism 
     under section 1895 of the Social Security Act for fiscal 
     years after fiscal year 2002 and the appropriate long-term 
     growth rates for contributions electing coverage under 
     MedicarePlus under part C of title XVIII of such Act.
       (C) Methods used by other nations to respond to comparable 
     demographic patterns in eligibility for health care benefits 
     for elderly and disabled individuals.
       (D) Modifying age-based eligibility to correspond to 
     changes in age-based eligibility under the OASDI program.
       (E) Trends in employment-related health care for retirees, 
     including the use of medical savings accounts and similar 
     financing devices.
       (c) Membership.--
       (1) Appointment.--The Commission shall be composed of 15 
     members appointed as follows:
       (A) The President shall appoint 3 members.
       (B) The Majority Leader of the Senate shall appoint, after 
     consultation with the minority leader of the Senate, 6 
     members, of whom not more than 4 may be of the same political 
     party.
       (C) The Speaker of the House of Representatives shall 
     appoint, after consultation with the minority leader of the 
     House of Representatives, 6 members, of whom not more than 4 
     may be of the same political party.
       (2) Chairman and vice chairman.--The Commission shall elect 
     a Chairman and Vice Chairman from among its members.
       (3) Vacancies.--Any vacancy in the membership of the 
     Commission shall be filled in the manner in which the 
     original appointment was made and shall not affect the power 
     of the remaining members to execute the duties of the 
     Commission.
       (4) Quorum.--A quorum shall consist of 8 members of the 
     Commission, except that 4 members may conduct a hearing under 
     subsection (e).
       (5) Meetings.--The Commission shall meet at the call of its 
     Chairman or a majority of its members.
       (6) Compensation and reimbursement of expenses.--Members of 
     the Commission are not entitled to receive compensation for 
     service on the Commission. Members may be reimbursed for 
     travel, subsistence, and other necessary expenses incurred in 
     carrying out the duties of the Commission.
       (d) Staff and Consultants.--
       (1) Staff.--The Commission may appoint and determine the 
     compensation of such staff as may be necessary to carry out 
     the duties of the Commission. Such appointments and 
     compensation may be made without regard to the provisions of 
     title 5, United States Code, that govern appointments in the 
     competitive services, and the provisions of chapter 51 and 
     subchapter III of chapter 53 of such title that relate to 
     classifications and the General Schedule pay rates.
       (2) Consultants.--The Commission may procure such temporary 
     and intermittent services of consultants under section 
     3109(b) of title 5, United States Code, as the Commission 
     determines to be necessary to carry out the duties of the 
     Commission.
       (e) Powers.--
       (1) Hearings and other activities.--For the purpose of 
     carrying out its duties, the Commission may hold such 
     hearings and undertake such other activities as the 
     Commission determines to be necessary to carry out its 
     duties.
       (2) Studies by gao.--Upon the request of the Commission, 
     the Comptroller General shall conduct such studies or 
     investigations as the Commission determines to be necessary 
     to carry out its duties.
       (3) Cost estimates by congressional budget office.--
       (A) Upon the request of the Commission, the Director of the 
     Congressional Budget Office shall provide to the Commission 
     such cost estimates as the Commission determines to be 
     necessary to carry out its duties.
       (B) The Commission shall reimburse the Director of the 
     Congressional Budget Office for expenses relating to the 
     employment in the office of the Director of such additional 
     staff as may be necessary for the Director to comply with 
     requests by the Commission under subparagraph (A).
       (4) Detail of federal employees.--Upon the request of the 
     Commission, the head of any Federal agency is authorized to 
     detail, without reimbursement, any of the personnel of such 
     agency to the Commission to assist the Commission in carrying 
     out its duties. Any such detail shall not interrupt or 
     otherwise affect the civil service status or privileges of 
     the Federal employee.
       (5) Technical assistance.--Upon the request of the 
     Commission, the head of a Federal agency shall provide such 
     technical assistance to the Commission as the Commission 
     determines to be necessary to carry out its duties.
       (6) Use of mails.--The Commission may use the United States 
     mails in the same manner and under the same conditions as 
     Federal agencies and shall, for purposes of the frank, be 
     considered a commission of Congress as described in section 
     3215 of title 39, United States Code.
       (7) Obtaining information.--The Commission may secure 
     directly from any Federal agency information necessary to 
     enable it to carry out its duties, if the information may 

[[Page H 10165]]
     be disclosed under section 552 of title 5, United States Code. Upon 
     request of the Chairman of the Commission, the head of such 
     agency shall furnish such information to the Commission.
       (8) Administrative support services.--Upon the request of 
     the Commission, the Administrator of General Services shall 
     provide to the Commission on a reimbursable basis such 
     administrative support services as the Commission may 
     request.
       (9) Acceptance of donations.--The Commission may accept, 
     use, and dispose of gifts or donations of services or 
     property.
       (10) Printing.--For purposes of costs relating to printing 
     and binding, including the cost of personnel detailed from 
     the Government Printing Office, the Commission shall be 
     deemed to be a committee of the Congress.
       (f) Report.--Not later than May 1, 1997, the Commission 
     shall submit to Congress a report containing its findings and 
     recommendations regarding how to protect and preserve the 
     medicare program in a financially solvent manner until 2030 
     (or, if later, throughout the period of projected solvency of 
     the Federal Old-Age and Survivors Insurance Trust Fund). The 
     report shall include detailed recommendations for appropriate 
     legislative initiatives respecting how to accomplish this 
     objective.
       (g) Termination.--The Commission shall terminate 60 days 
     after the date of submission of the report required in 
     subsection (f).
       (h) Authorization of Appropriations.--There are authorized 
     to be appropriated $1,500,000 to carry out this section. 
     Amounts appropriated to carry out this section shall remain 
     available until expended.

     SEC. 15033. CHANGE IN APPOINTMENT OF ADMINISTRATOR OF HCFA.

       (a) In General.--Section 1117 (42 U.S.C. 1317) is amended 
     by striking ``President by and with the advice and consent of 
     the Senate'' and inserting ``Secretary of Health and Human 
     Services''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall take effect on the date of the enactment of this Act 
     and shall apply to Administrators appointed on or after the 
     date of the enactment of this Act.

PART 5--TREATMENT OF HOSPITALS WHICH PARTICIPATE IN PROVIDER-SPONSORED 
                             ORGANIZATIONS

     SEC. 15041. TREATMENT OF HOSPITALS WHICH PARTICIPATE IN 
                   PROVIDER-SPONSORED ORGANIZATIONS.

       (a) In General.--Section 501 of the Internal Revenue Code 
     of 1986 (relating to exemption from tax on corporations, 
     certain trusts, etc.) is amended by redesignating subsection 
     (n) as subsection (o) and by inserting after subsection (m) 
     the following new subsection:
       ``(n) Treatment of Hospitals Participating in Provider-
     Sponsored Organizations.--An organization shall not fail to 
     be treated as organized and operated exclusively for a 
     charitable purpose for purposes of subsection (c)(3) solely 
     because a hospital which is owned and operated by such 
     organization participates in a provider-sponsored 
     organization (as defined in section 1854(a)(1) of the Social 
     Security Act), whether or not the provider-sponsored 
     organization is exempt from tax. For purposes of subsection 
     (c)(3), any person with a material financial interest in such 
     a provider-sponsored organization shall be treated as a 
     private shareholder or individual with respect to the 
     hospital.''
       (b) Effective Date.--The amendment made by subsection (a) 
     shall take effect on the date of the enactment of this Act.
                 Subtitle B--Preventing Fraud and Abuse

                       PART 1--GENERAL PROVISIONS

     SEC. 15101. INCREASING AWARENESS OF FRAUD AND ABUSE.

       (a) Beneficiary Outreach Efforts.--The Secretary of Health 
     and Human Services (acting through the Administrator of the 
     Health Care Financing Administration and the Inspector 
     General of the Department of Health and Human Services) shall 
     make ongoing efforts (through public service announcements, 
     publications, and other appropriate methods) to alert 
     individuals entitled to benefits under the medicare program 
     of the existence of fraud and abuse committed against the 
     program and the costs to the program of such fraud and abuse, 
     and of the existence of the toll-free telephone line operated 
     by the Secretary to receive information on fraud and abuse 
     committed against the program.
       (b) Clarification of Requirement to Provide Explanation of 
     Medicare Benefits.--The Secretary shall provide an 
     explanation of benefits under the medicare program with 
     respect to each item or service for which payment may be made 
     under the program which is furnished to an individual, 
     without regard to whether or not a deductible or coinsurance 
     may be imposed against the individual with respect to the 
     item or service.
       (c) Provider Outreach Efforts; Publication of Fraud 
     Alerts.--
       (1) Special fraud alerts.--
       (A) In general.--
       (i) Request for special fraud alerts.--Any person may 
     present, at any time, a request to the Secretary to issue and 
     publish a special fraud alert.
       (ii) Special fraud alert defined.--In this section, a 
     ``special fraud alert'' is a notice which informs the public 
     of practices which the Secretary considers to be suspect or 
     of particular concern under the medicare program or a State 
     health care program (as defined in section 1128(h) of the 
     Social Security Act).
       (B) Issuance and publication of special fraud alerts.--
       (i) Investigation.--Upon receipt of a request for a special 
     fraud alert under subparagraph (A), the Secretary shall 
     investigate the subject matter of the request to determine 
     whether a special fraud alert should be issued. If 
     appropriate, the Secretary (in consultation with the Attorney 
     General) shall 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.
       (ii) Criteria for issuance.--In determining whether to 
     issue a special fraud alert upon a request under subparagraph 
     (A), the Secretary may consider--

       (I) 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 15214(b); and
       (II) the extent and frequency of the conduct that would be 
     identified in the special fraud alert.

       (2) Publication of all hcfa fraud alerts in federal 
     register.--Each notice issued by the Health Care Financing 
     Administration which informs the public of practices which 
     the Secretary considers to be suspect or of particular 
     concern under the medicare program or a State health care 
     program (as defined in section 1128(h) of the Social Security 
     Act) shall be published in the Federal Register, without 
     regard to whether or not the notice is issued by a regional 
     office of the Health Care Financing Administration.

     SEC. 15102. BENEFICIARY INCENTIVE PROGRAMS.

       (a) Program to Collect Information on Fraud and Abuse.--
       (1) Establishment of program.--Not later than 3 months 
     after the date of the enactment of this Act, the Secretary of 
     Health and Human Services (hereinafter in this subtitle 
     referred to as the ``Secretary'') shall establish a program 
     under which the Secretary shall encourage individuals to 
     report to the Secretary information on individuals and 
     entities who are engaging or who have engaged in acts or 
     omissions which constitute grounds for the imposition of a 
     sanction under section 1128, section 1128A, or section 1128B 
     of the Social Security Act, or who have otherwise engaged in 
     fraud and abuse against the medicare program for which there 
     is a sanction provided under law. The program shall 
     discourage provision of, and not consider, information which 
     is frivolous or otherwise not relevant or material to the 
     imposition of such a sanction.
       (2) Payment of portion of amounts collected.--If an 
     individual reports information to the Secretary under the 
     program established under paragraph (1) which serves as the 
     basis for the collection by the Secretary or the Attorney 
     General of any amount of at least $100 (other than any amount 
     paid as a penalty under section 1128B of the Social Security 
     Act), the Secretary may pay a portion of the amount collected 
     to the individual (under procedures similar to those 
     applicable under section 7623 of the Internal Revenue Code of 
     1986 to payments to individuals providing information on 
     violations of such Code).
       (b) Program to Collect Information on Program Efficiency.--
       (1) Establishment of program.--Not later than 3 months 
     after the date of the enactment of this Act, the Secretary 
     shall establish a program under which the Secretary shall 
     encourage individuals to submit to the Secretary suggestions 
     on methods to improve the efficiency of the medicare program.
       (2) Payment of portion of program savings.--If an 
     individual submits a suggestion to the Secretary under the 
     program established under paragraph (1) which is adopted by 
     the Secretary and which results in savings to the program, 
     the Secretary may make a payment to the individual of such 
     amount as the Secretary considers appropriate.

     SEC. 15103. INTERMEDIATE SANCTIONS FOR MEDICARE HEALTH 
                   MAINTENANCE ORGANIZATIONS.

       (a) Application of Intermediate Sanctions for Any Program 
     Violations.--
       (1) In general.--Section 1876(i)(1) (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;
       ``(C) is operating in a manner that is not in the best 
     interests of the individuals covered under the contract; or
       ``(D) no longer substantially meets the applicable 
     conditions of subsections (b), (c), and (e).''.
       (2) Other intermediate sanctions for miscellaneous program 
     violations.--Section 1876(i)(6) (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 

[[Page H 10166]]
     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; and
       ``(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) (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--
       ``(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) the Secretary shall impose more severe sanctions on 
     organizations that have a history of deficiencies or that 
     have not taken steps 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.--(A) Section 1876(i)(6)(B) (42 
     U.S.C. 1395mm(i)(6)(B)) is amended by striking the second 
     sentence.
       (B) Section 1876(i)(6) (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).''.
       (b) Effective Date.--The amendments made by this section 
     shall apply with respect to contract years beginning on or 
     after January 1, 1996.

     SEC. 15104. VOLUNTARY DISCLOSURE PROGRAM.

       Title XI (42 U.S.C. 1301 et seq.) is amended by inserting 
     after section 1128B the following new section:


              ``voluntary disclosure of acts or omissions

       ``Sec. 1129. (a) Establishment of Voluntary Disclosure 
     Program.--Not later than 3 months after the date of the 
     enactment of this section, the Secretary shall establish a 
     program to encourage individuals and entities to voluntarily 
     disclose to the Secretary information on acts or omissions of 
     the individual or entity which constitute grounds for the 
     imposition of a sanction described in section 1128, 1128A, or 
     1128B.
       ``(b) Effect of Voluntary Disclosure.--If an individual or 
     entity voluntarily discloses information with respect to an 
     act or omission to the Secretary under subsection (a), the 
     following rules shall apply:
       ``(1) The Secretary may waive, reduce, or otherwise 
     mitigate any sanction which would otherwise be applicable to 
     the individual or entity under section 1128, 1128A, or 1128B 
     as a result of the act or omission involved.
       ``(2) No qui tam action may be brought pursuant to chapter 
     37 of title 31, United States Code, against the individual or 
     entity with respect to the act or omission involved.''.

     SEC. 15105. REVISIONS TO CURRENT SANCTIONS.

       (a) Doubling the Amount of Civil Monetary Penalties.--The 
     maximum amount of civil monetary penalties specified in 
     section 1128A of the Social Security Act or under title XVIII 
     of such Act (as in effect on the day before the date of the 
     enactment of this Act) shall, effective for violations 
     occurring after the date of the enactment of this Act, be 
     double the amount otherwise provided as of such date.
       (b) Establishment of Minimum Period of Exclusion for 
     Certain Individuals and Entities Subject to Permissive 
     Exclusion.--Section 1128(c)(3) (42 U.S.C. 1320a-7(c)(3)) is 
     amended by adding at the end the following new subparagraphs:
       ``(D) In the case of an exclusion of an individual or 
     entity under paragraph (1), (2), or (3) of subsection (b), 
     the period of the exclusion shall be 3 years, unless the 
     Secretary determines in accordance with 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.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply with respect to acts or omissions occurring on or 
     after January 1, 1996.

     SEC. 15106. DIRECT SPENDING FOR ANTI-FRAUD ACTIVITIES UNDER 
                   MEDICARE.

       (a) Establishment of Medicare Integrity Program.--Title 
     XVIII is amended by adding at the end the following new 
     section:


                      ``medicare integrity program

       ``Sec. 1893. (a) Establishment of Program.--There is hereby 
     established the Medicare Integrity Program (hereafter in this 
     section referred to as the `Program') under which the 
     Secretary shall promote the integrity of the medicare program 
     by entering into contracts in accordance with this section 
     with eligible private entities to carry out the activities 
     described in subsection (b).
       ``(b) Activities Described.--The activities described in 
     this subsection are as follows:
       ``(1) Review of activities of providers of services or 
     other individuals and entities furnishing items and services 
     for which payment may be made under this title (including 
     skilled nursing facilities and home health agencies), 
     including medical and utilization review and fraud review 
     (employing similar standards, processes, and technologies 
     used by private health plans, including equipment and 
     software technologies which surpass the capability of the 
     equipment and technologies used in the review of claims under 
     this title as of the date of the enactment of this section).
       ``(2) Audit of cost reports.
       ``(3) Determinations as to whether payment should not be, 
     or should not have been, made under this title by reason of 
     section 1862(b), and recovery of payments that should not 
     have been made.
       ``(4) Education of providers of services, beneficiaries, 
     and other persons with respect to payment integrity and 
     benefit quality assurance issues.
       ``(c) Eligibility of Entities.--An entity is eligible to 
     enter into a contract under the Program to carry out any of 
     the activities described in subsection (b) if--
       ``(1) the entity has demonstrated capability to carry out 
     such activities;
       ``(2) in carrying out such activities, the entity agrees to 
     cooperate with the Inspector General of the Department of 
     Health and Human Services, the Attorney General of the United 
     States, and other law enforcement agencies, as appropriate, 
     in the investigation and deterrence of fraud and abuse in 
     relation to this title and in other cases arising out of such 
     activities;
       ``(3) the entity's financial holdings, interests, or 
     relationships will not interfere with its ability to perform 
     the functions to be required by the contract in an effective 
     and impartial manner; and
       ``(4) the entity meets such other requirements as the 
     Secretary may impose.
       ``(d) Process for Entering Into Contracts.--The Secretary 
     shall enter into contracts under the Program in accordance 
     with such procedures as the Secretary may by regulation 
     establish, except that such procedures shall include the 
     following:
       ``(1) The Secretary shall determine the appropriate number 
     of separate contracts which are necessary to carry out the 
     Program and the appropriate times at which the Secretary 
     shall enter into such contracts.
       ``(2) The provisions of section 1153(e)(1) shall apply to 
     contracts and contracting authority under this section, 
     except that competitive procedures must be used when entering 
     into new contracts under this section, or at any other time 
     considered appropriate by the Secretary.
       ``(3) A contract under this section may be renewed without 
     regard to any provision of law requiring competition if the 
     contractor has met or exceeded the performance requirements 
     established in the current contract.
       ``(e) Limitation on Contractor Liability.--The Secretary 
     shall by regulation provide for the limitation of a 
     contractor's liability for actions taken to carry out a 
     contract under the Program, and such regulation shall, to the 
     extent the Secretary finds appropriate, employ the same or 
     comparable standards and other substantive and procedural 
     provisions as are contained in section 1157.
       ``(f) Transfer of Amounts to Medicare Anti-Fraud and Abuse 
     Trust Fund.--For each fiscal year, the Secretary shall 
     transfer from the Federal Hospital Insurance Trust Fund and 
     the Federal Supplementary Medical Insurance Trust Fund to the 
     Medicare Anti-Fraud and Abuse Trust Fund under subsection (g) 
     such amounts as are necessary to carry out the activities 
     described in subsection (b). Such transfer shall be in an 
     allocation as reasonably reflects the proportion of such 
     expenditures associated with part A and part B.
       ``(g) Medicare Anti-Fraud and Abuse Trust Fund.--
       ``(1) Establishment.--
       ``(A) In general.--There is hereby established in the 
     Treasury of the United States the Anti-Fraud and Abuse Trust 
     Fund (hereafter in this subsection referred to as the `Trust 
     Fund'). The Trust Fund shall consist of such gifts and 
     bequests as may be made as 

[[Page H 10167]]
     provided in subparagraph (B) and such amounts as may be deposited in 
     the Trust Fund as provided in subsection (f), paragraph (3), 
     and title XI.
       ``(B) Authorization to accept gifts and bequests.--The 
     Trust Fund is authorized to accept on behalf of the United 
     States money gifts and bequests made unconditionally to the 
     Trust Fund, for the benefit of the Trust Fund or any activity 
     financed through the Trust Fund.
       ``(2) Investment.--
       ``(A) In general.--The Secretary of the Treasury shall 
     invest such amounts of the Fund as such Secretary determines 
     are not required to meet current withdrawals from the Fund in 
     government account serial securities.
       ``(B) Use of income.--Any interest derived from investments 
     under subparagraph (A) shall be credited to the Fund.
       ``(3) Amounts deposited into trust fund.--In addition to 
     amounts transferred under subsection (f), there shall be 
     deposited in the Trust Fund--
       ``(A) that portion of amounts recovered in relation to 
     section 1128A arising out of a claim under title XVIII as 
     remains after application of subsection (f)(2) (relating to 
     repayment of the Federal Hospital Insurance Trust Fund or the 
     Federal Supplementary Medical Insurance Trust Fund) of that 
     section, as may be applicable,
       ``(B) fines imposed under section 1128B arising out of a 
     claim under this title, and
       ``(C) penalties and damages imposed (other than funds 
     awarded to a relator or for restitution) under sections 3729 
     through 3732 of title 31, United States Code (pertaining to 
     false claims) in cases involving claims relating to programs 
     under title XVIII, XIX, or XXI.
       ``(4) Direct appropriation of funds to carry out program.--
       ``(A) In general.--There are appropriated from the Trust 
     Fund for each fiscal year such amounts as are necessary to 
     carry out the Medicare Integrity Program under this section, 
     subject to subparagraph (B).
       ``(B) Amounts specified.--The amount appropriated under 
     subparagraph (A) for a fiscal year is as follows:
       ``(i) For fiscal year 1996, such amount shall be not less 
     than $430,000,000 and not more than $440,000,000.
       ``(ii) For fiscal year 1997, such amount shall be not less 
     than $490,000,000 and not more than $500,000,000.
       ``(iii) For fiscal year 1998, such amount shall be not less 
     than $550,000,000 and not more than $560,000,000.
       ``(iv) For fiscal year 1999, such amount shall be not less 
     than $620,000,000 and not more than $630,000,000.
       ``(v) For fiscal year 2000, such amount shall be not less 
     than $670,000,000 and not more than $680,000,000.
       ``(vi) For fiscal year 2001, such amount shall be not less 
     than $690,000,000 and not more than $700,000,000.
       ``(vii) For fiscal year 2002, such amount shall be not less 
     than $710,000,000 and not more than $720,000,000.
       ``(5) Annual report.--The Secretary shall submit an annual 
     report to Congress on the amount of revenue which is 
     generated and disbursed by the Trust Fund in each fiscal 
     year.''.
       (b) Elimination of FI and Carrier Responsibility for 
     Carrying out Activities Subject to Program.--
       (1) Responsibilities of fiscal intermediaries under part 
     a.--Section 1816 (42 U.S.C. 1395h) is amended by adding at 
     the end the following new subsection:
       ``(l) No agency or organization may carry out (or receive 
     payment for carrying out) any activity pursuant to an 
     agreement under this section to the extent that the activity 
     is carried out pursuant to a contract under the Medicare 
     Integrity Program under section 1893.''.
       (2) Responsibilities of carriers under part b.--Section 
     1842(c) (42 U.S.C. 1395u(c)) is amended by adding at the end 
     the following new paragraph:
       ``(6) No carrier may carry out (or receive payment for 
     carrying out) any activity pursuant to a contract under this 
     subsection to the extent that the activity is carried out 
     pursuant to a contract under the Medicare Integrity Program 
     under section 1893.''.
       (c) Conforming Amendment.--Section 1128A(f)(3) (42 U.S.C. 
     1320a-7a(f)(3)) is amended by striking ``as miscellaneous 
     receipts of the Treasury of the United States'' and inserting 
     ``in the Anti-Fraud and Abuse Trust Fund established under 
     section 1893(g)''.
       (d) Direct Spending for Medicare-Related Activities of 
     Inspector General.--Section 1893, as added by subsection (a), 
     is amended by adding at the end the following new subsection:
       ``(h) Direct Spending for Medicare-Related Activities of 
     Inspector General.--
       ``(1) In general.--There are appropriated from the Federal 
     Hospital Insurance Trust Fund and the Federal Supplementary 
     Medical Insurance Trust Fund to the Inspector General of the 
     Department of Health and Human Services for each fiscal year 
     such amounts as are necessary to enable the Inspector General 
     to carry out activities relating to the medicare program (as 
     described in paragraph (2)), subject to paragraph (3).
       ``(2) Activities described.--The activities described in 
     this paragraph are as follows:
       ``(A) Prosecuting medicare-related matters through 
     criminal, civil, and administrative proceedings.
       ``(B) Conducting investigations relating to the medicare 
     program.
       ``(C) Performing financial and performance audits of 
     programs and operations relating to the medicare program.
       ``(D) Performing inspections and other evaluations relating 
     to the medicare program.
       ``(E) Conducting provider and conumer education activities 
     regarding the requirements of this title.
       ``(3) Amounts specified.--The amount appropriated under 
     paragraph (1) for a fiscal year is as follows:
       ``(A) For fiscal year 1996, such amount shall be 
     $130,000,000.
       ``(B) For fiscal year 1997, such amount shall be 
     $181,000,000.
       ``(C) For fiscal year 1998, such amount shall be 
     $204,000,000.
       ``(D) For each subsequent fiscal year, the amount 
     appropriated for the previous fiscal year, increased by the 
     percentage increase in aggregate expenditures under this 
     title for the fiscal year involved over the previous fiscal 
     year.
       ``(4) Allocation of payments among trust funds.--The 
     appropriations made under paragraph (1) shall be in an 
     allocation as reasonably reflects the proportion of such 
     expenditures associated with part A and part B.''.

     SEC. 15107. PERMITTING CARRIERS TO CARRY OUT PRIOR 
                   AUTHORIZATION FOR CERTAIN ITEMS OF DURABLE 
                   MEDICAL EQUIPMENT.

       (a) In General.--Section 1834(a)(15) (42 U.S.C. 
     1395m(a)(15)), as amended by section 135(b) of the Social 
     Security Act Amendments of 1994, is amended by adding at the 
     end the following new subparagraphs:
       ``(D) Application by carriers.--A carrier may develop (and 
     periodically update) a list of items under subparagraph (A) 
     and a list of suppliers under subparagraph (B) in the same 
     manner as the Secretary may develop (and periodically update) 
     such lists.
       ``(E) Waiver of publication requirement.--A carrier may 
     make an advance determination under subparagraph (C) with 
     respect to an item or supplier on a list developed by the 
     Secretary or the carrier without regard to whether or not the 
     Secretary has promulgated a regulation with respect to the 
     list, except that the carrier may not make such an advance 
     determination with respect to an item or supplier on a list 
     until the expiration of the 30-day period beginning on the 
     date the Secretary or the carrier places the item or supplier 
     on the list.''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall take effect as if included in the enactment of the 
     Social Security Act Amendments of 1994.

     SEC. 15108. NATIONAL HEALTH CARE ANTI-FRAUD TASK FORCE.

       (a) Establishment.--The Attorney General, in consultation 
     with the Secretary of Health and Human Services, shall 
     establish a national health care anti-fraud task force (in 
     this section referred to as the ``task force''). The Attorney 
     General shall establish the task force within 120 days after 
     the date of the enactment of this Act.
       (b) Composition.--The task force shall include 
     representatives of Federal agencies involved in the 
     investigation and prosecution of persons violating laws 
     relating to health care fraud and abuse, including at least 
     one representative from each of the following agencies:
       (1) The Department of Justice and the Federal Bureau of 
     Investigation.
       (2) The Department of Health and Human Services and the 
     Office of the Inspector General within the Department.
       (3) The office in the Department of Defense responsible for 
     administration of the CHAMPUS program.
       (4) The Department of Veterans' Affairs.
       (5) The United States Postal Inspection Service.
       (6) The Internal Revenue Service.

     The Attorney General (or the designee of the Attorney 
     General) shall serve as chair of the task force.
       (c) Duties.--The task force shall coordinate Federal law 
     enforcement activities relating to health care fraud and 
     abuse in order to better control fraud and abuse in the 
     delivery of health care in the United States. Specifically, 
     the task force shall coordinate activities--
       (1) in order to assure the effective targeting and 
     investigation of persons who organize, direct, finance, or 
     otherwise knowingly engage in health care fraud, and
       (2) in order to assure full and effective cooperation 
     between Federal and State agencies involved in health care 
     fraud investigations.
       (d) Staff.--Each member of the task force who represents an 
     agency shall be responsible for providing for the detail 
     (from the agency) of at least one full-time staff person to 
     staff the task force. Such detail shall be without change in 
     salary, compensation, benefits, and other employment-related 
     matters.

     SEC. 15109. STUDY OF ADEQUACY OF PRIVATE QUALITY ASSURANCE 
                   PROGRAMS.

       (a) In General.--The Administrator of the Health Care 
     Financing Administration (acting through the Director of the 
     Office of Research and Demonstrations) shall enter into an 
     agreement with a private entity to conduct a study during the 
     5-year period beginning on the date of the enactment of this 
     Act of the adequacy of the quality assurance programs and 
     consumer protections used by the MedicarePlus program under 
     part C of title XVIII of the Social Security Act (as inserted 
     by section 15002(a)), and shall include in the study an 
     analysis of the effectiveness of such 

[[Page H 10168]]
     programs in protecting plan enrollees against the risk of insufficient 
     provision of benefits which may result from utilization 
     controls.
       (b) Report.--Not later than 6 months after the conclusion 
     of the 5-year period described in subsection (a), the 
     Administrator shall submit a report to Congress on the study 
     conducted under subsection (a).

     SEC. 15110. PENALTY FOR FALSE CERTIFICATION FOR HOME HEALTH 
                   SERVICES.

       (a) In General.--Section 1128A(b) (42 U.S.C. 1320a-7a(b)) 
     is amended by adding at the end the following new paragraph:
       ``(3)(A) Any physician who executes a document described in 
     subparagraph (B) with respect to an individual knowing that 
     all of the requirements referred to in such subparagraph are 
     not met with respect to the individual shall be subject to a 
     civil monetary penalty of not more than the greater of--
       ``(i) $5,000, or
       ``(ii) three times the amount of the payments under title 
     XVIII for home health services which are made pursuant to 
     such certification.
       ``(B) A document described in this subparagraph is any 
     document that certifies, for purposes of title XVIII, that an 
     individual meets the requirements of section 1814(a)(2)(C) or 
     1835(a)(2)(A) in the case of home health services furnished 
     to the individual.''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to certifications made on or after the date of 
     the enactment of this Act.

     SEC. 15111. PILOT PROJECTS.

       The Secretary of Health and Human Services shall establish 
     and operate 5 pilot projects (in various geographic regions 
     of the United States) under which the Secretary shall 
     implement innovative approaches to monitor payment claims 
     under the medicare program to detect those claims that are 
     wasteful or fraudulent.

                    PART 2--CRIMINAL LAW PROVISIONS

     SEC. 15121. OFFENSES INVOLVING FRAUD, FALSE STATEMENT, THEFT, 
                   OR EMBEZZLEMENT.

       (a) In General.--Part A of title XI is amended by inserting 
     after section 1128B the following:


  ``offenses involving fraud, false statement, theft, or embezzlement

       ``Sec. 1128C. (a) Fraud.--Whoever knowingly and willfully 
     executes, or attempts to execute, a scheme or artifice--
       ``(1) to defraud any person or entity in connection with 
     the delivery of or payment for health care benefits, items, 
     or services under a program under title XVIII or a State 
     health care program (as defined in section 1128(h)), 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 person or 
     entity in connection with the delivery of or payment for 
     health care benefits, items, or services under a program 
     under title XVIII or a State health care program,
     shall be fined under title 18, United States Code, 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 title 18, United States Code), such person may 
     be imprisoned for any term of years.
       ``(b) False Statements.--Whoever, in connection with the 
     delivery of or payment for health care benefits, items, or 
     services under a program under title XVIII or a State health 
     care program, knowingly and willfully--
       ``(1) falsifies, conceals, or covers up by any trick, 
     scheme, or device a material fact,
       ``(2) as to any material fact, makes any false, fictitious, 
     or fraudulent statements or representations, or
       ``(3) makes or uses any false writing or document knowing 
     the same to contain any false, fictitious, or fraudulent 
     statement or entry that is material,
     shall be fined under title 18, United States Code, or 
     imprisoned not more than 5 years, or both.
       ``(c) Theft or Embezzlement.--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 under the custody or control of any person or 
     entity in connection with the delivery of or payment for 
     health care benefits, items, or services under program under 
     title XVIII or a State health care program, shall be fined 
     under title 18, United States Code, or imprisoned not more 
     than 10 years, or both.''.
       (b) Conforming Amendment.--Section 1128(h) (42 U.S.C. 
     1320a-7(h)) is amended by striking ``and 1128B'' and 
     inserting ``, 1128B, and 1128C''.
                     Subtitle C--Regulatory Relief

              PART 1--PHYSICIAN OWNERSHIP REFERRAL REFORM

     SEC. 15201. REPEAL OF PROHIBITIONS BASED ON COMPENSATION 
                   ARRANGEMENTS.

       (a) In General.--Section 1877(a)(2) (42 U.S.C. 
     1395nn(a)(2)) is amended by striking ``is--'' and all that 
     follows through ``equity,'' and inserting the following: ``is 
     (except as provided in subsection (c)) an ownership or 
     investment interest in the entity through equity,''.
       (b) Conforming Amendments.--Section 1877 (42 U.S.C. 1395nn) 
     is amended as follows:
       (1) In subsection (b)--
       (A) in the heading, by striking ``to Both Ownership and 
     Compensation Arrangement Prohibitions'' and inserting ``Where 
     Financial Relationship Exists''; and
       (B) by redesignating paragraph (4) as paragraph (7).
       (2) In subsection (c)--
       (A) by amending the heading to read as follows: ``Exception 
     for Ownership or Investment Interest in Publicly Traded 
     Securities and Mutual Funds''; and
       (B) in the matter preceding paragraph (1), by striking 
     ``subsection (a)(2)(A)'' and inserting ``subsection (a)(2)''.
       (3) In subsection (d)--
       (A) by striking the matter preceding paragraph (1);
       (B) in paragraph (3), by striking ``paragraph (1)'' and 
     inserting ``paragraph (4)''; and
       (C) by redesignating paragraphs (1), (2), and (3) as 
     paragraphs (4), (5), and (6), and by transferring and 
     inserting such paragraphs after paragraph (3) of subsection 
     (b).
       (4) By striking subsection (e).
       (5) In subsection (f)(2)--
       (A) in the matter preceding paragraph (1), by striking 
     ``ownership, investment, and compensation'' and inserting 
     ``ownership and investment'';
       (B) in paragraph (2), by striking ``subsection (a)(2)(A)'' 
     and all that follows through ``subsection (a)(2)(B)),'' and 
     inserting ``subsection (a)(2),''; and
       (C) in paragraph (2), by striking ``or who have such a 
     compensation relationship with the entity''.
       (6) In subsection (h)--
       (A) by striking paragraphs (1), (2), and (3);
       (B) in paragraph (4)(A), by striking clauses (iv) and (vi);
       (C) in paragraph (4)(B), by striking ``rules.--'' and all 
     that follows through ``(ii) Faculty'' and inserting ``rules 
     for faculty''; and
       (D) by adding at the end of paragraph (4) the following new 
     subparagraph:
       ``(C) Member of a group.--A physician is a `member' of a 
     group if the physician is an owner or a bona fide employee, 
     or both, of the group.''.

     SEC. 15202. REVISION OF DESIGNATED HEALTH SERVICES SUBJECT TO 
                   PROHIBITION.

       (a) In General.--Section 1877(h)(6) (42 U.S.C. 
     1395nn(h)(6)) is amended by striking subparagraphs (B) 
     through (K) and inserting the following:
       ``(B) Parenteral and enteral nutrients, equipment, and 
     supplies.
       ``(C) Magnetic resonance imaging and computerized 
     tomography services.
       ``(D) Outpatient physical or occupational therapy 
     services.''.
       (b) Conforming Amendments.--
       (1) Section 1877(b)(2) (42 U.S.C. 1395nn(b)(2)) is amended 
     in the matter preceding subparagraph (A) by striking 
     ``services'' and all that follows through ``supplies)--'' and 
     inserting ``services--''.
       (2) Section 1877(h)(5)(C) (42 U.S.C. 1395nn(h)(5)(C)) is 
     amended--
       (A) by striking ``, a request by a radiologist for 
     diagnostic radiology services, and a request by a radiation 
     oncologist for radiation therapy,'' and inserting ``and a 
     request by a radiologist for magnetic resonance imaging or 
     for computerized tomography'', and
       (B) by striking ``radiologist, or radiation oncologist'' 
     and inserting ``or radiologist''.

     SEC. 15203. DELAY IN IMPLEMENTATION UNTIL PROMULGATION OF 
                   REGULATIONS.

       (a) In General.--Section 13562(b) of OBRA-1993 (42 U.S.C. 
     1395nn note) is amended--
       (1) in paragraph (1), by striking ``paragraph (2)'' and 
     inserting ``paragraphs (2) and (3)''; and
       (2) by adding at the end the following new paragraph:
       ``(3) Promulgation of regulations.--Notwithstanding 
     paragraphs (1) and (2), the amendments made by this section 
     shall not apply to any referrals made before the effective 
     date of final regulations promulgated by the Secretary of 
     Health and Human Services to carry out such amendments.''.
       (b) Effective Date.--The amendments made by subsection (a) 
     shall take effect as if included in the enactment of OBRA-
     1993.

     SEC. 15204. EXCEPTIONS TO PROHIBITION.

       (a) Revisions to Exception for In-office Ancillary 
     Services.--
       (1) Repeal of site-of-service requirement.--Section 1877 
     (42 U.S.C. 1395nn) is amended--
       (A) by amending subparagraph (A) of subsection (b)(2) to 
     read as follows:
       ``(A) that are furnished personally by the referring 
     physician, personally by a physician who is a member of the 
     same group practice as the referring physician, or personally 
     by individuals who are under the general supervision of the 
     physician or of another physician in the group practice, 
     and'', and
       (B) by adding at the end of subsection (h) the following 
     new paragraph:
       ``(7) General supervision.--An individual is considered to 
     be under the `general supervision' of a physician if the 
     physician (or group practice of which the physician is a 
     member) is legally responsible for the services performed by 
     the individual and for ensuring that the individual meets 
     licensure and certification requirements, if any, applicable 
     under other provisions of law, regardless of whether or not 
     the physician is physically present when the individual 
     furnishes an item or service.''.
       (2) Clarification of treatment of physician owners of group 
     practice.--Section 1877(b)(2)(B) (42 U.S.C. 1395nn(b)(2)(B)) 
     is 

[[Page H 10169]]
     amended by striking ``physician or such group practice'' and inserting 
     ``physician, such group practice, or the physician owners of 
     such group practice''.
       (3) Conforming amendment.--Section 1877(b)(2) (42 U.S.C. 
     1395nn(b)(2)) is amended by amending the heading to read as 
     follows: ``Ancillary services furnished personally or through 
     group practice.--''.
       (b) Clarification of Exception for Services Furnished in a 
     Rural Area.--Paragraph (5) of section 1877(b) (42 U.S.C. 
     1395nn(b)), as transferred by section 15201(b)(3)(C), is 
     amended by striking ``substantially all'' and inserting ``not 
     less than 75 percent''.
       (c) Revision of Exception for Certain Managed Care 
     Arrangements.--Section 1877(b)(3) (42 U.S.C. 1395nn(b)(3)) is 
     amended--
       (1) in the heading by inserting ``managed care 
     arrangements'' after ``Prepaid plans'';
       (2) in the matter preceding subparagraph (A), by striking 
     ``organization--'' and inserting ``organization, directly or 
     through contractual arrangements with other entities, to 
     individuals enrolled with the organization--'';
       (3) in subparagraph (A), by inserting ``or part C'' after 
     ``section 1876'';
       (4) by striking ``or'' at the end of subparagraph (C);
       (5) by striking the period at the end of subparagraph (D) 
     and inserting a comma; and
       (6) by adding at the end the following new subparagraphs:
       ``(E) with a contract with a State to provide services 
     under the State plan under title XIX (in accordance with 
     section 1903(m)) or a State MediGrant plan under title XXI; 
     or
       ``(F) which is a MedicarePlus organization under part C or 
     which provides or arranges for the provision of health care 
     items or services pursuant to a written agreement between the 
     organization and an individual or entity if the written 
     agreement places the individual or entity at substantial 
     financial risk for the cost or utilization of the items or 
     services which the individual or entity is obligated to 
     provide, whether through a withhold, capitation, incentive 
     pool, per diem payment, or any other similar risk arrangement 
     which places the individual or entity at substantial 
     financial risk.''.
       (d) New Exception for Shared Facility Services.--
       (1) In general.--Section 1877(b) (42 U.S.C. 1395nn(b)), as 
     amended by section 15201(b)(3)(C), is amended--
       (A) by redesignating paragraphs (4) through (7) as 
     paragraphs (5) through (8); and
       (B) by inserting after paragraph (3) the following new 
     paragraph:
       ``(4) Shared facility services.--In the case of a 
     designated health service consisting of a shared facility 
     service of a shared facility--
       ``(A) that is furnished--
       ``(i) personally by the referring physician who is a shared 
     facility physician or personally by an individual directly 
     employed or under the general supervision of such a 
     physician,
       ``(ii) by a shared facility in a building in which the 
     referring physician furnishes substantially all of the 
     services of the physician that are unrelated to the 
     furnishing of shared facility services, and
       ``(iii) to a patient of a shared facility physician; and
       ``(B) that is billed by the referring physician or a group 
     practice of which the physician is a member.''.
       (2) Definitions.--Section 1877(h) (42 U.S.C. 1395nn(h)), as 
     amended by section 15201(b)(6), is amended by inserting 
     before paragraph (4) the following new paragraph:
       ``(1) Shared facility related definitions.--
       ``(A) Shared facility service.--The term `shared facility 
     service' means, with respect to a shared facility, a 
     designated health service furnished by the facility to 
     patients of shared facility physicians.
       ``(B) Shared facility.--The term `shared facility' means an 
     entity that furnishes shared facility services under a shared 
     facility arrangement.
       ``(C) Shared facility physician.--The term `shared facility 
     physician' means, with respect to a shared facility, a 
     physician (or a group practice of which the physician is a 
     member) who has a financial relationship under a shared 
     facility arrangement with the facility.
       ``(D) Shared facility arrangement.--The term `shared 
     facility arrangement' means, with respect to the provision of 
     shared facility services in a building, a financial 
     arrangement--
       ``(i) which is only between physicians who are providing 
     services (unrelated to shared facility services) in the same 
     building,
       ``(ii) in which the overhead expenses of the facility are 
     shared, in accordance with methods previously determined by 
     the physicians in the arrangement, among the physicians in 
     the arrangement, and
       ``(iii) which, in the case of a corporation, is wholly 
     owned and controlled by shared facility physicians.''.
       (e) New Exception for Services Furnished in Communities 
     With No Alternative Providers.--Section 1877(b) (42 U.S.C. 
     1395nn(b)), as amended by section 15201(b)(3)(C) and 
     subsection (d)(1), is amended--
       (1) by redesignating paragraphs (5) through (8) as 
     paragraphs (6) through (9); and
       (2) by inserting after paragraph (4) the following new 
     paragraph:
       ``(5) No alternative providers in area.--In the case of a 
     designated health service furnished in any area with respect 
     to which the Secretary determines that individuals residing 
     in the area do not have reasonable access to such a 
     designated health service for which subsection (a)(1) does 
     not apply.''.
       (f) New Exception for Services Furnished in Ambulatory 
     Surgical Centers.--Section 1877(b) (42 U.S.C. 1395nn(b)), as 
     amended by section 15201(b)(3)(C), subsection (d)(1), and 
     subsection (e)(1), is amended--
       (1) by redesignating paragraphs (6) through (9) as 
     paragraphs (7) through (10); and
       (2) by inserting after paragraph (5) the following new 
     paragraph:
       ``(6) Services furnished in ambulatory surgical centers.--
     In the case of a designated health service furnished in an 
     ambulatory surgical center described in section 
     1832(a)(2)(F)(i).''.
       (g) New Exception for Services Furnished in Renal Dialysis 
     Facilities.--Section 1877(b) (42 U.S.C. 1395nn(b)), as 
     amended by section 15201(b)(3)(C), subsection (d)(1), 
     subsection (e)(1), and subsection (f), is amended--
       (1) by redesignating paragraphs (7) through (10) as 
     paragraphs (8) through (11); and
       (2) by inserting after paragraph (6) the following new 
     paragraph:
       ``(7) Services furnished in renal dialysis facilities.--In 
     the case of a designated health service furnished in a renal 
     dialysis facility under section 1881.''.
       (h) New Exception for Services Furnished in a Hospice.--
     Section 1877(b) (42 U.S.C. 1395nn(b)), as amended by section 
     15201(b)(3)(C), subsection (d)(1), subsection (e)(1), 
     subsection (f), and subsection (g), is amended--
       (1) by redesignating paragraphs (8) through (11) as 
     paragraphs (9) through (12); and
       (2) by inserting after paragraph (7) the following new 
     paragraph:
       ``(8) Services furnished by a hospice program.--In the case 
     of a designated health service furnished by a hospice program 
     under section 1861(dd)(2).''.
       (i) New Exception for Services Furnished in a Comprehensive 
     Outpatient Rehabilitation Facility.--Section 1877(b) (42 
     U.S.C. 1395nn(b)), as amended by section 15201(b)(3)(C), 
     subsection (d)(1), subsection (e)(1), subsection (f), 
     subsection (g), and subsection (h), is amended--
       (1) by redesignating paragraphs (9) through (12) as 
     paragraphs (10) through (13); and
       (2) by inserting after paragraph (8) the following new 
     paragraph:
       ``(9) Services furnished in a comprehensive outpatient 
     rehabilitation facility.--In the case of a designated health 
     service furnished in a comprehensive outpatient 
     rehabilitation facility (as defined in section 
     1861(cc)(2)).''.
       (i) Definition of Referral.--Section 1877(h)(5)(A) (42 
     U.S.C. 1395nn(h)(5)(A)) is amended--
       (1) by striking ``an item or service'' and inserting ``a 
     designated health service'', and
       (2) by striking ``the item or service'' and inserting ``the 
     designated health service''.

     SEC. 15205. REPEAL OF REPORTING REQUIREMENTS.

       Section 1877 (42 U.S.C. 1395nn) is amended--
       (1) by striking subsection (f); and
       (2) by striking subsection (g)(5).

     SEC. 15206. PREEMPTION OF STATE LAW.

       Section 1877 (42 U.S.C. 1395nn) is amended by adding at the 
     end the following new subsection:
       ``(i) Preemption of State Law.--This section preempts State 
     law to the extent State law is inconsistent with this 
     section.''.

     SEC. 15207. EFFECTIVE DATE.

       Except as provided in section 15203(b), the amendments made 
     by this part shall apply to referrals made on or after August 
     14, 1995, regardless of whether or not regulations are 
     promulgated to carry out such amendments.

                PART 2--OTHER MEDICARE REGULATORY RELIEF

     SEC. 15211. REPEAL OF MEDICARE AND MEDICAID COVERAGE DATA 
                   BANK.

       (a) In General.--Section 1144 (42 U.S.C. 1320b-14) is 
     repealed.
       (c) Conforming Amendments.--
       (1) Medicare.--Section 1862(b)(5) (42 U.S.C. 1395y(b)(5)) 
     is amended--
       (A) in subparagraph (B), by striking ``under--'' and all 
     that follows through the end and inserting ``subparagraph (A) 
     for purposes of carrying out this subsection.'', and
       (B) in subparagraph (C)(i), by striking ``subparagraph 
     (B)(i)'' and inserting ``subparagraph (B)''.
       (2) Medicaid.--Section 1902(a)(25)(A)(i) (42 U.S.C. 
     1396a(a)(25)(A)(i)) is amended by striking ``including the 
     use of'' and all that follows through ``any additional 
     measures''.
       (3) ERISA.--Section 101(f) of the Employee Retirement 
     Income Security Act of 1974 (29 U.S.C. 1021(f)) is repealed.
       (4) Data matches.--Section 552a(a)(8)(B) of title 5, United 
     States Code, is amended--
       (A) by adding ``; or'' at the end of clause (v),
       (B) by striking ``or'' at the end of clause (vi), and
       (C) by striking clause (vii).

     SEC. 15212. CLARIFICATION OF LEVEL OF INTENT REQUIRED FOR 
                   IMPOSITION OF SANCTIONS.

       (a) Clarification of Level of Knowledge Required for 
     Imposition of Civil Monetary Penalties.--
       (1) In general.--Section 1128A(a) (42 U.S.C. 1320a-7a(a)) 
     is amended--

[[Page H 10170]]

       (1) in paragraphs (1) and (2), by inserting ``knowingly'' 
     before ``presents'' each place it appears; and
       (2) in paragraph (3), by striking ``gives'' and inserting 
     ``knowingly gives or causes to be given''.
       (2) Definition of standard.--Section 1128A(i) (42 U.S.C. 
     1320a-7a(i)) is amended by adding at the end the following 
     new paragraph:
       ``(6) The term `should know' means that a person, with 
     respect to information--
       ``(A) acts in deliberate ignorance of the truth or falsity 
     of the information; or
       ``(B) acts in reckless disregard of the truth or falsity of 
     the information,

     and no proof of specific intent to defraud is required.''.
       (b) Clarification of Effect and Application of Safe Harbor 
     Exceptions.--For purposes of section 1128B(b)(3) of the 
     Social Security Act, the specification of any payment 
     practice in regulations promulgated pursuant to section 14(a) 
     of the Medicare and Medicaid Program and Patient Protection 
     Act of 1987 is--
       (1) solely for the purpose of adding additional exceptions 
     to the types of conduct which are not subject to an anti-
     kickback penalty under such section and not for the purpose 
     of limiting the scope of such exceptions; and
       (2) for the purpose of prescribing criteria for qualifying 
     for such an exception notwithstanding the intent of the party 
     involved.
       (c) Limiting Imposition of Anti-kickback Penalties to 
     Actions With Significant Purpose to Induce Referrals.--
     Section 1128B(b)(2) (42 U.S.C. 1320a-7b(b)(2)) is amended in 
     the matter preceding subparagraph (A) by striking ``to 
     induce'' and inserting ``for the significant purpose of 
     inducing''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to acts or omissions occurring on or after 
     January 1, 1996.

     SEC. 15213. ADDITIONAL EXCEPTION TO ANTI-KICKBACK PENALTIES 
                   FOR MANAGED CARE ARRANGEMENTS.

       (a) In General.--Section 1128B(b)(3) (42 U.S.C. 1320a-
     7b(b)(3)) is amended--
       (1) by striking ``and'' at the end of subparagraph (D);
       (2) by striking the period at the end of subparagraph (E) 
     and inserting ``; and''; and
       (3) by adding at the end the following new subparagraph:
       ``(F) any remuneration between an organization and an 
     individual or entity providing services pursuant to a written 
     agreement between the organization and the individual or 
     entity if the organization is a MedicarePlus organization 
     under part C of title XVIII or if the written agreement 
     places the individual or entity at substantial financial risk 
     for the cost or utilization of the items or services which 
     the individual or entity is obligated to provide, whether 
     through a withhold, capitation, incentive pool, per diem 
     payment, or any other similar risk arrangement which places 
     the individual or entity at substantial financial risk.''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to acts or omissions occurring on or after 
     January 1, 1996.

     SEC. 15214. SOLICITATION AND PUBLICATION OF MODIFICATIONS TO 
                   EXISTING SAFE HARBORS AND NEW SAFE HARBORS.

       (a) In General.--
       (1) Solicitations.--Not later than January 1, 1996, and not 
     less than annually thereafter, the Secretary of Health and 
     Human Services shall publish a notice in the Federal Register 
     soliciting proposals, which will be accepted during a 60-day 
     period, for--
       (A) modifications to existing safe harbors issued pursuant 
     to section 14(a) of the Medicare and Medicaid Patient and 
     Program Protection Act of 1987;
       (B) additional safe harbors specifying payment practices 
     that shall not be treated as a criminal offense under section 
     1128B(b) of the Social Security Act and shall not serve as 
     the basis for an exclusion under section 1128(b)(7) of such 
     Act; and
       (C) special fraud alerts to be issued pursuant to section 
     15101(c).
       (2) Publication of proposed modifications and proposed 
     additional safe harbors.--Not later than 120 days after 
     receiving the proposals described in subparagraphs (A) and 
     (B) of paragraph (1), the Secretary, after considering such 
     proposals 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.
       (3) Report.--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, describe the proposals received under subparagraphs (A) 
     and (B) of paragraph (1) and explain which proposals were 
     included in the publication described in paragraph (2), which 
     proposals were not included in that publication, and the 
     reasons for the rejection of the proposals that were not 
     included.
       (b) Criteria for Modifying and Establishing Safe Harbors.--
     In modifying and establishing safe harbors under subsection 
     (a)(2), the Secretary may consider the extent to which 
     providing a safe harbor for the specified payment practice 
     may result in any of the following:
       (1) An increase or decrease in access to health care 
     services.
       (2) An increase or decrease in the quality of health care 
     services.
       (3) An increase or decrease in patient freedom of choice 
     among health care providers.
       (4) An increase or decrease in competition among health 
     care providers.
       (5) An increase or decrease in the cost to health care 
     programs of the Federal Government.
       (6) An increase or decrease in the potential 
     overutilization of health care services.
       (8) Any other factors the Secretary deems appropriate in 
     the interest of preventing fraud and abuse in health care 
     programs of the Federal Government.

     SEC. 15215. ISSUANCE OF ADVISORY OPINIONS UNDER TITLE XI.

       (a) In General.--Title XI (42 U.S.C. 1301 et seq.), as 
     amended by section 15104(a), is amended by inserting after 
     section 1129 the following new section:


                          ``advisory opinions

       ``Sec. 1130. (a) Issuance of Advisory Opinions.--The 
     Secretary shall issue written advisory opinions as provided 
     in this section.
       ``(b) Matters Subject to Advisory Opinions.--The Secretary 
     shall issue advisory opinions as to the following matters:
       ``(1) What constitutes prohibited remuneration within the 
     meaning of section 1128B(b).
       ``(2) Whether an arrangement or proposed arrangement 
     satisfies the criteria set forth in section 1128B(b)(3) for 
     activities which do not result in prohibited remuneration.
       ``(3) Whether an arrangement or proposed arrangement 
     satisfies the criteria which the Secretary has established, 
     or shall establish by regulation for activities which do not 
     result in prohibited remuneration.
       ``(4) What constitutes an inducement to reduce or limit 
     services to individuals entitled to benefits under title 
     XVIII or title XIX or title XXI within the meaning of section 
     1128B(b).
       ``(5) Whether any activity or proposed activity constitutes 
     grounds for the imposition of a sanction under section 1128, 
     1128A, or 1128B.
       ``(c) Matters Not Subject to Advisory Opinions.--Such 
     advisory opinions shall not address the following matters:
       ``(1) Whether the fair market value shall be, or was paid 
     or received for any goods, services or property.
       ``(2) Whether an individual is a bona fide employee within 
     the requirements of section 3121(d)(2) of the Internal 
     Revenue Code of 1986.
       ``(d) Effect of Advisory Opinions.--
       ``(1) Binding as to secretary and parties involved.--Each 
     advisory opinion issued by the Secretary shall be binding as 
     to the Secretary and the party or parties requesting the 
     opinion.
       ``(2) Failure to seek opinion.--The failure of a party to 
     seek an advisory opinion may not be introduced into evidence 
     to prove that the party intended to violate the provisions of 
     sections 1128, 1128A, or 1128B.
       ``(e) Regulations.--
       ``(1) In general.--Not later than 180 days after the date 
     of the enactment of this section, the Secretary shall issue 
     regulations to carry out this section. Such regulations shall 
     provide for--
       ``(A) the procedure to be followed by a party applying for 
     an advisory opinion;
       ``(B) the procedure to be followed by the Secretary in 
     responding to a request for an advisory opinion;
       ``(C) the interval in which the Secretary shall respond;
       ``(D) the reasonable fee to be charged to the party 
     requesting an advisory opinion; and
       ``(E) the manner in which advisory opinions will be made 
     available to the public.
       ``(2) Specific contents.--Under the regulations promulgated 
     pursuant to paragraph (1)--
       ``(A) the Secretary shall be required to respond to a party 
     requesting an advisory opinion by not later than 30 days 
     after the request is received; and
       ``(B) the fee charged to the party requesting an advisory 
     opinion shall be equal to the costs incurred by the Secretary 
     in responding to the request.''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to requests for advisory opinions made on or 
     after January 1, 1996.

     SEC. 15216. PRIOR NOTICE OF CHANGES IN BILLING AND CLAIMS 
                   PROCESSING REQUIREMENTS FOR PHYSICIANS' 
                   SERVICES.

       Except as may be specifically provided by Congress, the 
     Secretary of Health and Human Services may not implement any 
     change in the requirements imposed on the billing and 
     processing of claims for payment for physicians' services 
     under part B of the medicare program unless the Secretary 
     notifies the individuals furnishing such services of the 
     change not later than 120 days before the effective date of 
     the change.

               PART 3--PROMOTING PHYSICIAN SELF-POLICING

     SEC. 15221. EXEMPTION FROM ANTITRUST LAWS FOR CERTAIN 
                   ACTIVITIES OF MEDICAL SELF-REGULATORY ENTITIES.

       (a) Exemption Described.--An activity relating to the 
     provision of health care services shall be exempt from the 
     antitrust laws, and any State law similar to the antitrust 
     laws, if the activity is within the safe harbor described in 
     subsection (b).
       (b) Safe Harbor for Activities of Medical Self-Regulatory 
     Entities.--

[[Page H 10171]]

       (1) In General.--The safe harbor referred to in subsection 
     (a) is, subject to paragraph (2), any activity of a medical 
     self-regulatory entity relating to standard setting or 
     standard enforcement activities that are designed to promote 
     the quality of health care services provided to patients.
       (2) Exception.--No activity of a medical self-regulatory 
     entity may be deemed to fall under the safe harbor 
     established under paragraph (1) if the activity--
       (A) is conducted for purposes of financial gain, or
       (B) interferes with the provision of health care services 
     by any health care provider who is not a member of the 
     specific profession which is subject to the authority of the 
     medical self-regulatory entity.
       (c) Definitions.--For purposes of this section:
       (1) Antitrust Laws.--The term ``antitrust laws'' has the 
     meaning given it in subsection (a) of the first section of 
     the Clayton Act (15 U.S.C. 12(a)), except that such term 
     includes section 5 of the Federal Trade Commission Act (15 
     U.S.C. 45) to the extent such section applies to unfair 
     methods of competition.
       (2) Health benefit plan.--The term ``health benefit plan'' 
     means--
       (A) a hospital or medical expense incurred policy or 
     certificate,
       (B) a hospital or medical service plan contract,
       (C) a health maintenance subscriber contract,
       (D) a multiple employer welfare arrangement or employee 
     benefit plan (as defined under the Employee Retirement Income 
     Security Act of 1974), or
       (E) a MedicarePlus product (offered under part C of title 
     XVIII of the Social Security Act),
     that provides benefits with respect to health care services.
       (3) Health care service.--The term ``health care service'' 
     means any service for which payment may be made under a 
     health benefit plan including services related to the 
     delivery or administration of such service.
       (4) Medical self-regulatory entity.--The term ``medical 
     self-regulatory entity'' means a medical society or 
     association, a specialty board, a recognized accrediting 
     agency, or a hospital medical staff, and includes the 
     members, officers, employees, consultants, and volunteers or 
     committees of such an entity.
       (5) Health care provider.--The term ``health care 
     provider'' means any individual or entity that is engaged in 
     the delivery of health care services in a State and that is 
     required by State law or regulation to be licensed or 
     certified by the State to engage in the delivery of such 
     services in the State.
       (6) Standard setting or standard enforcement activities.-- 
     The term ``standard setting or standard enforcement 
     activities'' means--
       (A) accreditation of health care practitioners, health care 
     providers, medical education institutions, or medical 
     education programs,
       (B) technology assessment and risk management activities,
       (C) the development and implementation of practice 
     guidelines or practice parameters, or
       (D) official peer review proceedings undertaken by a 
     hospital medical staff (or committee thereof) or a medical 
     society or association for purposes of evaluating the 
     professional conduct or quality of health care provided by a 
     medical professional.
                  Subtitle D--Medical Liability Reform

                       PART 1--GENERAL PROVISIONS

     SEC. 15301. FEDERAL REFORM OF HEALTH CARE LIABILITY ACTIONS.

       (a) Applicability.--This subtitle shall apply with respect 
     to any health care liability action brought in any State or 
     Federal court, except that this subtitle shall not apply to--
       (1) an action for damages arising from a vaccine-related 
     injury or death to the extent that title XXI of the Public 
     Health Service Act applies to the action, or
       (2) an action under the Employee Retirement Income Security 
     Act of 1974 (29 U.S.C. 1001 et seq.).
       (b) Preemption.--This subtitle shall preempt any State law 
     to the extent such law is inconsistent with the limitations 
     contained in this subtitle. This subtitle shall not preempt 
     any State law that provides for defenses or places 
     limitations on a person's liability in addition to those 
     contained in this subtitle or otherwise imposes greater 
     restrictions than those provided in this subtitle.
       (c) Effect on Sovereign Immunity and Choice of Law or 
     Venue.--Nothing in subsection (b) shall be construed to--
       (1) waive or affect any defense of sovereign immunity 
     asserted by any State under any provision of law;
       (2) waive or affect any defense of sovereign immunity 
     asserted by the United States;
       (3) affect the applicability of any provision of the 
     Foreign Sovereign Immunities Act of 1976;
       (4) preempt State choice-of-law rules with respect to 
     claims brought by a foreign nation or a citizen of a foreign 
     nation; or
       (5) affect the right of any court to transfer venue or to 
     apply the law of a foreign nation or to dismiss a claim of a 
     foreign nation or of a citizen of a foreign nation on the 
     ground of inconvenient forum.
       (d) Amount in Controversy.--In an action to which this 
     subtitle applies and which is brought under section 1332 of 
     title 28, United States Code, the amount of noneconomic 
     damages or punitive damages, and attorneys' fees or costs, 
     shall not be included in determining whether the matter in 
     controversy exceeds the sum or value of $50,000.
       (e) Federal Court Jurisdiction Not Established on Federal 
     Question Grounds.--Nothing in this subtitle shall be 
     construed to establish any jurisdiction in the district 
     courts of the United States over health care liability 
     actions on the basis of section 1331 or 1337 of title 28, 
     United States Code.

     SEC. 15302. DEFINITIONS.

       As used in this subtitle:
       (1) Actual damages.--The term ``actual damages'' means 
     damages awarded to pay for economic loss.
       (2) Alternative dispute resolution system; adr.--The term 
     ``alternative dispute resolution system'' or ``ADR'' means a 
     system established under Federal or State law that provides 
     for the resolution of health care liability claims in a 
     manner other than through health care liability actions.
       (3) Claimant.--The term ``claimant'' means any person who 
     brings a health care liability action and any person on whose 
     behalf such an action is brought. If such action is brought 
     through or on behalf of an estate, the term includes the 
     claimant's decedent. If such action is brought through or on 
     behalf of a minor or incompetent, the term includes the 
     claimant's legal guardian.
       (4) Clear and convincing evidence.--The term ``clear and 
     convincing evidence'' is that measure or degree of proof that 
     will produce in the mind of the trier of fact a firm belief 
     or conviction as to the truth of the allegations sought to be 
     established. Such measure or degree of proof is more than 
     that required under preponderance of the evidence but less 
     than that required for proof beyond a reasonable doubt.
       (5) Collateral source payments.--The term ``collateral 
     source payments'' means any amount paid or reasonably likely 
     to be paid in the future to or on behalf of a claimant, or 
     any service, product, or other benefit provided or reasonably 
     likely to be provided in the future to or on behalf of a 
     claimant, as a result of an injury or wrongful death, 
     pursuant to--
       (A) any State or Federal health, sickness, income-
     disability, accident or workers' compensation Act;
       (B) any health, sickness, income-disability, or accident 
     insurance that provides health benefits or income-disability 
     coverage;
       (C) any contract or agreement of any group, organization, 
     partnership, or corporation to provide, pay for, or reimburse 
     the cost of medical, hospital, dental, or income disability 
     benefits; and
       (D) any other publicly or privately funded program.
       (6) Drug.--The term ``drug'' has the meaning given such 
     term in section 201(g)(1) of the Federal Food, Drug, and 
     Cosmetic Act (21 U.S.C. 321(g)(1)).
       (7) Economic loss.--The term ``economic loss'' means any 
     pecuniary loss resulting from injury (including the loss of 
     earnings or other benefits related to employment, medical 
     expense loss, replacement services loss, loss due to death, 
     burial costs, and loss of business or employment 
     opportunities), to the extent recovery for such loss is 
     allowed under applicable State law.
       (8) Harm.--The term ``harm'' means any legally cognizable 
     wrong or injury for which punitive damages may be imposed.
       (9) Health benefit plan.--The term ``health benefit plan'' 
     means--
       (A) a hospital or medical expense incurred policy or 
     certificate,
       (B) a hospital or medical service plan contract,
       (C) a health maintenance subscriber contract, or
       (D) a MedicarePlus product (offered under part C of title 
     XVIII of the Social Security Act),
     that provides benefits with respect to health care services.
       (10) Health care liability action.--The term ``health care 
     liability action'' means a civil action brought in a State or 
     Federal court against a health care provider, an entity which 
     is obligated to provide or pay for health benefits under any 
     health benefit plan (including any person or entity acting 
     under a contract or arrangement to provide or administer any 
     health benefit), or the manufacturer, distributor, supplier, 
     marketer, promoter, or seller of a medical product, in which 
     the claimant alleges a claim (including third party claims, 
     cross claims, counter claims, or distribution claims) based 
     upon the provision of (or the failure to provide or pay for) 
     health care services or the use of a medical product, 
     regardless of the theory of liability on which the claim is 
     based or the number of plaintiffs, defendants, or causes of 
     action.
       (11) Health care liability claim.--The term ``health care 
     liability claim'' means a claim in which the claimant alleges 
     that injury was caused by the provision of (or the failure to 
     provide) health care services.
       (12) Health care provider.--The term ``health care 
     provider'' means any person that is engaged in the delivery 
     of health care services in a State and that is required by 
     the laws or regulations of the State to be licensed or 
     certified by the State to engage in the delivery of such 
     services in the State.
       (13) Health care service.--The term ``health care service'' 
     means any service for which payment may be made under a 
     health benefit plan including services related to the 
     delivery or administration of such service.
       (14) Medical device.--The term ``medical device'' has the 
     meaning given such term in 

[[Page H 10172]]
     section 201(h) of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 
     321(h)).
       (15) Noneconomic damages.--The term ``noneconomic damages'' 
     means damages paid to an individual for pain and suffering, 
     inconvenience, emotional distress, mental anguish, loss of 
     consortium, injury to reputation, humiliation, and other 
     nonpecuniary losses.
       (16) Person.--The term ``person'' means any individual, 
     corporation, company, association, firm, partnership, 
     society, joint stock company, or any other entity, including 
     any governmental entity.
       (17) Product seller.--
       (A) In general.--Subject to subparagraph (B), the term 
     ``product seller'' means a person who, in the course of a 
     business conducted for that purpose--
       (i) sells, distributes, rents, leases, prepares, blends, 
     packages, labels, or is otherwise involved in placing, a 
     product in the stream of commerce, or
       (ii) installs, repairs, or maintains the harm-causing 
     aspect of a product.
       (B) Exclusion.--Such term does not include--
       (i) a seller or lessor of real property;
       (ii) a provider of professional services in any case in 
     which the sale or use of a product is incidental to the 
     transaction and the essence of the transaction is the 
     furnishing of judgment, skill, or services; or
       (iii) any person who--

       (I) acts in only a financial capacity with respect to the 
     sale of a product; or
       (II) leases a product under a lease arrangement in which 
     the selection, possession, maintenance, and operation of the 
     product are controlled by a person other than the lessor.

       (18) Punitive damages.--The term ``punitive damages'' means 
     damages awarded against any person not to compensate for 
     actual injury suffered, but to punish or deter such person or 
     others from engaging in similar behavior in the future.
       (19) State.--The term ``State'' means each of the several 
     States, the District of Columbia, Puerto Rico, the Virgin 
     Islands, Guam, American Samoa, the Northern Mariana Islands, 
     and any other territory or possession of the United States.

     SEC. 15303. EFFECTIVE DATE.

       This subtitle will apply to any health care liability 
     action brought in a Federal or State court and to any health 
     care liability claim subject to an alternative dispute 
     resolution system, that is initiated on or after the date of 
     enactment of this subtitle, except that any health care 
     liability claim or action arising from an injury occurring 
     prior to the date of enactment of this subtitle shall be 
     governed by the applicable statute of limitations provisions 
     in effect at the time the injury occurred.

      PART 2--UNIFORM STANDARDS FOR HEALTH CARE LIABILITY ACTIONS

     SEC. 15311. STATUTE OF LIMITATIONS.

       A health care liability action may not be brought after the 
     expiration of the 2-year period that begins on the date on 
     which the alleged injury that is the subject of the action 
     was discovered or should reasonably have been discovered, but 
     in no case after the expiration of the 5-year period that 
     begins on the date the alleged injury occurred.

     SEC. 15312. CALCULATION AND PAYMENT OF DAMAGES.

       (a) Treatment of Noneconomic Damages.--
       (1) Limitation on noneconomic damages.--The total amount of 
     noneconomic damages that may be awarded to a claimant for 
     losses resulting from the injury which is the subject of a 
     health care liability action may not exceed $250,000, 
     regardless of the number of parties against whom the action 
     is brought or the number of actions brought with respect to 
     the injury.
       (2) Joint and several liability.--In any health care 
     liability action brought in State or Federal court, a 
     defendant shall be liable only for the amount of noneconomic 
     damages attributable to such defendant in direct proportion 
     to such defendant's share of fault or responsibility for the 
     claimant's actual damages, as determined by the trier of 
     fact. In all such cases, the liability of a defendant for 
     noneconomic damages shall be several and not joint.
       (b) Treatment of Punitive Damages.--
       (1) General rule.--Punitive damages may, to the extent 
     permitted by applicable State law, be awarded in any health 
     care liability action for harm in any Federal or State court 
     against a defendant if the claimant establishes by clear and 
     convincing evidence that the harm suffered was the result of 
     conduct--
       (A) specifically intended to cause harm, or
       (B) conduct manifesting a conscious, flagrant indifference 
     to the rights or safety of others.
       (2) Proportional awards.--The amount of punitive damages 
     that may be awarded in any health care liability action 
     subject to this subtitle shall not exceed 3 times the amount 
     of damages awarded to the claimant for economic loss, or 
     $250,000, whichever is greater. This paragraph shall be 
     applied by the court and shall not be disclosed to the jury.
       (3) Applicability.--This subsection shall apply to any 
     health care liability action brought in any Federal or State 
     court on any theory where punitive damages are sought. This 
     subsection does not create a cause of action for punitive 
     damages. This subsection does not preempt or supersede any 
     State or Federal law to the extent that such law would 
     further limit the award of punitive damages.
       (4) Bifurcation.--At the request of any party, the trier of 
     fact shall consider in a separate proceeding whether punitive 
     damages are to be awarded and the amount of such award. If a 
     separate proceeding is requested, evidence relevant only to 
     the claim of punitive damages, as determined by applicable 
     State law, shall be inadmissible in any proceeding to 
     determine whether actual damages are to be awarded.
       (5) Drugs and devices.--
       (A) In general.--(i) Punitive damages shall not be awarded 
     against a manufacturer or product seller of a drug or medical 
     device which caused the claimant's harm where--
       (I) such drug or device was subject to premarket approval 
     by the Food and Drug Administration with respect to the 
     safety of the formulation or performance of the aspect of 
     such drug or device which caused the claimant's harm, or the 
     adequacy of the packaging or labeling of such drug or device 
     which caused the harm, and such drug, device, packaging, or 
     labeling was approved by the Food and Drug Administration; or
       (II) the drug is generally recognized as safe and effective 
     pursuant to conditions established by the Food and Drug 
     Administration and applicable regulations, including 
     packaging and labeling regulations.
       (ii) Clause (i) shall not apply in any case in which the 
     defendant, before or after premarket approval of a drug or 
     device--
       (I) intentionally and wrongfully withheld from or 
     misrepresented to the Food and Drug Administration 
     information concerning such drug or device required to be 
     submitted under the Federal Food, Drug, and Cosmetic Act (21 
     U.S.C. 301 et seq.) or section 351 of the Public Health 
     Service Act (42 U.S.C. 262) that is material and relevant to 
     the harm suffered by the claimant, or
       (II) made an illegal payment to an official or employee of 
     the Food and Drug Administration for the purpose of securing 
     or maintaining approval of such drug or device.
       (B) Packaging.--In a health care liability action for harm 
     which is alleged to relate to the adequacy of the packaging 
     or labeling of a drug which is required to have tamper-
     resistant packaging under regulations of the Secretary of 
     Health and Human Services (including labeling regulations 
     related to such packaging), the manufacturer or product 
     seller of the drug shall not be held liable for punitive 
     damages unless such packaging or labeling is found by the 
     court by clear and convincing evidence to be substantially 
     out of compliance with such regulations.
       (c) Periodic Payments for Future Losses.--
       (1) General rule.--In any health care liability action in 
     which the damages awarded for future economic and noneconomic 
     loss exceeds $50,000, a person shall not be required to pay 
     such damages in a single, lump-sum payment, but shall be 
     permitted to make such payments periodically based on when 
     the damages are found likely to occur, as such payments are 
     determined by the court.
       (2) Finality of judgment.--The judgment of the court 
     awarding periodic payments under this subsection may not, in 
     the absence of fraud, be reopened at any time to contest, 
     amend, or modify the schedule or amount of the payments.
       (3) Lump-sum settlements.--This subsection shall not be 
     construed to preclude a settlement providing for a single, 
     lump-sum payment.
       (d) Treatment of Collateral Source Payments.--
       (1) Introduction into evidence.--In any health care 
     liability action, any defendant may introduce evidence of 
     collateral source payments. If any defendant elects to 
     introduce such evidence, the claimant may introduce evidence 
     of any amount paid or contributed or reasonably likely to be 
     paid or contributed in the future by or on behalf of the 
     claimant to secure the right to such collateral source 
     payments.
       (2) No subrogation.--No provider of collateral source 
     payments shall recover any amount against the claimant or 
     receive any lien or credit against the claimant's recovery or 
     be equitably or legally subrogated the right of the claimant 
     in a health care liability action.
       (3) Application to settlements.--This subsection shall 
     apply to an action that is settled as well as an action that 
     is resolved by a fact finder.

     SEC. 15313. ALTERNATIVE DISPUTE RESOLUTION.

       Any ADR used to resolve a health care liability action or 
     claim shall contain provisions relating to statute of 
     limitations, non-economic damages, joint and several 
     liability, punitive damages, collateral source rule, and 
     periodic payments which are identical to the provisions 
     relating to such matters in this subtitle.
     Subtitle E--Teaching Hospitals and Graduate Medical Education

  PART 1--TEACHING HOSPITAL AND GRADUATE MEDICAL EDUCATION TRUST FUND

     SEC. 15401. ESTABLISHMENT OF FUND; PAYMENTS TO TEACHING 
                   HOSPITALS.

       The Social Security Act (42 U.S.C. 300 et seq.) is amended 
     by adding after title XXI the following title:

 ``TITLE XXII--TEACHING HOSPITAL AND GRADUATE MEDICAL EDUCATION TRUST 
                                  FUND

                    ``Part A--Establishment of Fund

     ``SEC. 2201. ESTABLISHMENT OF FUND.

       ``(a) In General.--There is established in the Treasury of 
     the United States a fund to 

[[Page H 10173]]
     be known as the Teaching Hospital and Graduate Medical Education Trust 
     Fund (in this title referred to as the `Fund'), consisting of 
     amounts appropriated to the Fund in subsection (d) and 
     subsection (e)(3), amounts transferred to the Fund under 
     section 1886(j), and such gifts and bequests as may be 
     deposited in the Fund pursuant to subsection (f). Amounts in 
     the Fund are available until expended.
       ``(b) Expenditures From Fund.--Amounts in the Fund are 
     available to the Secretary for making payments under section 
     2211.
       ``(c) Accounts in Fund.--There are established within the 
     Fund the following accounts:
       ``(1) The Indirect-Costs Medical Education Account.
       ``(2) The Medicare Direct-Costs Medical Education Account.
       ``(3) The General Direct-Costs Medical Education Account.
       ``(d) General Transfers to Fund.--
       ``(1) In general.--For fiscal year 1997 and each subsequent 
     fiscal year, there are appropriated to the Fund (effective on 
     the applicable date under paragraph (2)), out of any money in 
     the Treasury not otherwise appropriated, the following 
     amounts (as applicable to the fiscal year involved):
       ``(A) For fiscal year 1997, $1,300,000,000.
       ``(B) For fiscal year 1998, $1,500,000,000.
       ``(C) For fiscal year 1999, $2,300,000,000.
       ``(D) For fiscal year 2000, $3,100,000,000.
       ``(E) For fiscal year 2001, $3,600,000,000.
       ``(F) For fiscal year 2002, $4,000,000,000.
       ``(G) For fiscal year 2003 and each subsequent fiscal year, 
     the greater of the amount appropriated for the preceding 
     fiscal year or an amount equal to the product of--
       ``(i) the amount appropriated for the preceding fiscal 
     year; and
       ``(ii) 1 plus the percentage increase in the nominal gross 
     domestic product for the one-year period ending upon July 1 
     of such preceding fiscal year.
       ``(2) Effective date for annual appropriation.--For 
     purposes of paragraph (1) (and for purposes of section 
     2221(a)(1), and subsections (b)(1)(A) and (c)(1)(A) of 
     section 2231)), the applicable date for a fiscal year is the 
     first day of the fiscal year, exclusive of Saturdays, 
     Sundays, and Federal holidays.
       ``(3) Allocation among certain accounts.--Of the amount 
     appropriated in paragraph (1) for a fiscal year--
       ``(A) there shall be allocated to the Indirect-Costs 
     Medical Education Account the percentage determined under 
     paragraph (4)(B); and
       ``(B) there shall be allocated to the General Direct-Costs 
     Medical Education Account the percentage determined under 
     paragraph (4)(C).
       ``(4) Determination of percentages.--The Secretary of 
     Health and Human Services, acting through the Administrator 
     of the Health Care Financing Administration, shall determine 
     the following:
       ``(A) The total amount of payments that were made under 
     subsections (d)(5)(B) and (h) of section 1886 for fiscal year 
     1994.
       ``(B) The percentage of such total that was constituted by 
     payments under subsection (d)(5)(B) of such section.
       ``(C) The percentage of such total that was constituted by 
     payments under subsection (h) of such section.
       ``(e) Investment.--
       ``(1) In general.--The Secretary of the Treasury shall 
     invest such amounts of the Fund as such Secretary determines 
     are not required to meet current withdrawals from the Fund. 
     Such investments may be made only in interest-bearing 
     obligations of the United States. For such purpose, such 
     obligations may be acquired on original issue at the issue 
     price, or by purchase of outstanding obligations at the 
     market price.
       ``(2) Sale of obligations.--Any obligation acquired by the 
     Fund may be sold by the Secretary of the Treasury at the 
     market price.
       ``(3) Availability of income.--Any interest derived from 
     obligations acquired by the Fund, and proceeds from any sale 
     or redemption of such obligations, are hereby appropriated to 
     the Fund.
       ``(f) Acceptance of Gifts and Bequests.--The Fund may 
     accept on behalf of the United States money gifts and 
     bequests made unconditionally to the Fund for the benefit of 
     the Fund or any activity financed through the Fund.

                ``Part B--Payments to Teaching Hospitals

                  ``Subpart 1--Requirement of Payments

     ``SEC. 2211. FORMULA PAYMENTS TO TEACHING HOSPITALS.

       ``(a) In General.--Subject to subsection (d), in the case 
     of each teaching hospital that in accordance with subsection 
     (b) submits to the Secretary a payment document for fiscal 
     year 1997 or any subsequent fiscal year, the Secretary shall 
     make payments for the year to the teaching hospital for the 
     costs of operating approved medical residency training 
     programs. Such payments shall be made from the Fund, and the 
     total of the payments to the hospital for the fiscal year 
     shall equal the sum of the following:
       ``(1) An amount determined under section 2221 (relating to 
     the indirect costs of graduate medical education).
       ``(2) An amount determined under section 2231 (relating to 
     the direct costs of graduate medical education).
       ``(b) Payment Document.--For purposes of subsection (a), a 
     payment document is a document containing such information as 
     may be necessary for the Secretary to make payments under 
     such subsection to a teaching hospital for a fiscal year. The 
     document is submitted in accordance with this subsection if 
     the document is submitted not later than the date specified 
     by the Secretary, and the document is in such form and is 
     made in such manner as the Secretary may require. The 
     Secretary may require that information under this subsection 
     be submitted to the Secretary in periodic reports.
       ``(c) Administrator of Programs.--This part, and the 
     subsequent parts of this title, shall be carried out by the 
     Secretary acting through the Administrator of the Health Care 
     Financing Administration.
       ``(d) Special Rules.--
       ``(1) Authority regarding payments to consortia of 
     providers.--In the case of payments under subsection (a) that 
     are determined under section 2231:
       ``(A) The requirement under such subsection to make the 
     payments to teaching hospitals is subject to the authority of 
     the Secretary under section 2233(a) to make payments to 
     qualifying consortia.
       ``(B) If the Secretary authorizes such a consortium for 
     purposes of section 2233(a), subsections (a) and (b) of this 
     section apply to the consortium to the same extent and in the 
     same manner as the subsections apply to teaching hospitals.
       ``(2) Certain hospitals.--Paragraph (1) of subsection (a) 
     is subject to sections 2222 and 2223 of subpart 2. Paragraph 
     (2) of subsection (a) is subject to sections 2232 through 
     2234 of subpart 3.
       ``(e) Approved Medical Residency Training Program.--For 
     purposes of this title, the term `approved medical residency 
     training program' has the meaning given such term in section 
     1886(h)(5)(A).

  ``Subpart 2--Amount Relating to Indirect Costs of Graduate Medical 
                               Education

     ``SEC. 2221. DETERMINATION OF AMOUNT RELATING TO INDIRECT 
                   COSTS.

       ``(a) In General.--For purposes of section 2211(a)(1), the 
     amount determined under this section for a teaching hospital 
     for a fiscal year is the product of--
       ``(1) the amount in the Indirect-Costs Medical Education 
     Account on the applicable date under section 2201(d) (once 
     the appropriation under such section is made); and
       ``(2) the percentage determined for the hospital under 
     subsection (b).
       ``(b) Hospital-Specific Percentage.--
       ``(1) In general.--For purposes of subsection (a)(2), the 
     percentage determined under this subsection for a teaching 
     hospital is the mean average of the respective percentages 
     determined under paragraph (3) for each fiscal year of the 
     applicable period (as defined in paragraph (2)), adjusted by 
     the Secretary (upward or downward, as the case may be) on a 
     pro rata basis to the extent necessary to ensure that the sum 
     of the percentages determined under this paragraph for all 
     teaching hospitals is equal to 100 percent. The preceding 
     sentence is subject to sections 2222 and 2223.
       ``(2) Applicable period regarding relevant data; fiscal 
     years 1992 through 1994.--For purposes of this part, the term 
     `applicable period' means the period beginning on the first 
     day of fiscal year 1992 and continuing through the end of 
     fiscal year 1994.
       ``(3) Respective determinations for fiscal years of 
     applicable period.--For purposes of paragraph (1), the 
     percentage determined under this paragraph for a teaching 
     hospital for a fiscal year of the applicable period is the 
     percentage constituted by the ratio of--
       ``(A) the total amount of payments received by the hospital 
     under section 1886(d)(5)(B) for discharges occurring during 
     the fiscal year involved; to
       ``(B) the sum of the respective amounts determined under 
     subparagraph (A) for the fiscal year for all teaching 
     hospitals.
       ``(c) Availability of Data.--If a teaching hospital 
     received the payments specified in subsection (b)(3)(A) 
     during the applicable period but a complete set of the 
     relevant data is not available to the Secretary for purposes 
     of determining an amount under such subsection for the fiscal 
     year involved, the Secretary shall for purposes of such 
     subsection make an estimate on the basis of such data as are 
     available to the Secretary for the applicable period.

     ``SEC. 2222. INDIRECT COSTS; SPECIAL RULES REGARDING 
                   DETERMINATION OF HOSPITAL-SPECIFIC PERCENTAGE.

       ``(a) Special Rule Regarding Fiscal Years 1995 and 1996.--
       ``(1) In general.--In the case of a teaching hospital whose 
     first payments under 1886(d)(5)(B) were for discharges 
     occurring in fiscal year 1995 or in fiscal year 1996 
     (referred to in this subsection individually as a `first 
     payment year'), the percentage determined under paragraph (2) 
     for the hospital is deemed to be the percentage applicable 
     under section 2221(b) to the hospital, except that the 
     percentage under paragraph (2) shall be adjusted in 
     accordance with section 2221(b)(1) to the extent determined 
     by the Secretary to be necessary with respect to a sum that 
     equals 100 percent.
       ``(2) Determination of percentage.--For purposes of 
     paragraph (1), the percentage determined under this paragraph 
     for a teaching hospital is the percentage constituted by the 
     ratio of the amount determined under subparagraph (A) to the 
     amount determined under subparagraph (B), as follows:

[[Page H 10174]]

       ``(A)(i) If the first payment year for the hospital is 
     fiscal year 1995, the amount determined under this 
     subparagraph is the total amount of payments received by the 
     hospital under section 1886(d)(5)(B) for discharges occurring 
     during fiscal year 1995.
       ``(ii) If the first payment year for the hospital is fiscal 
     year 1996, the amount determined under this subparagraph is 
     an amount equal to an estimate by the Secretary of the total 
     amount of payments that would have been paid to the hospital 
     under section 1886(d)(5)(B) for discharges occurring during 
     fiscal year 1995 if such section, as in effect for fiscal 
     year 1996, had applied to the hospital for discharges 
     occurring during fiscal year 1995.
       ``(B)(i) If the first payment year for the hospital is 
     fiscal year 1995, the amount determined under this 
     subparagraph is the aggregate total of the payments received 
     by teaching hospitals under section 1886(d)(5)(B) for 
     discharges occurring during fiscal year 1995.
       ``(ii) If the first payment year for the hospital is fiscal 
     year 1996--
       ``(I) the Secretary shall make an estimate in accordance 
     with subparagraph (A)(ii) for all teaching hospitals; and
       ``(II) the amount determined under this subparagraph is the 
     sum of the estimates made by the Secretary under subclause 
     (I).
       ``(b) New Teaching Hospitals.--
       ``(1) In general.--Subject to paragraph (4), in the case of 
     a teaching hospital that did not receive payments under 
     section 1886(d)(5)(B) for any of the fiscal years 1992 
     through 1996, the percentage determined under paragraph (3) 
     for the hospital is deemed to be the percentage applicable 
     under section 2221(b) to the hospital, except that the 
     percentage under paragraph (3) shall be adjusted in 
     accordance with section 2221(b)(1) to the extent determined 
     by the Secretary to be necessary with respect to a sum that 
     equals 100 percent.
       ``(2) Designated fiscal year regarding data.--The 
     determination under paragraph (3) of a percentage for a 
     teaching hospital described in paragraph (1) shall be made 
     for the most recent fiscal year for which the Secretary has 
     sufficient data to make the determination (referred to in 
     this subsection as the `designated fiscal year').
       ``(3) Determination of percentage.--For purposes of 
     paragraph (1), the percentage determined under this paragraph 
     for the teaching hospital involved is the percentage 
     constituted by the ratio of the amount determined under 
     subparagraph (A) to the amount determined under subparagraph 
     (B), as follows:
       ``(A) The amount determined under this subparagraph is an 
     amount equal to an estimate by the Secretary of the total 
     amount of payments that would have been paid to the hospital 
     under section 1886(d)(5)(B) for the designated fiscal year if 
     such section, as in effect for the first fiscal year for 
     which payments pursuant to this subsection are to be made to 
     the hospital, had applied to the hospital for the designated 
     fiscal year.
       ``(B) The Secretary shall make an estimate in accordance 
     with subparagraph (A) for all teaching hospitals. The amount 
     determined under this subparagraph is the sum of the 
     estimates made by the Secretary under the preceding sentence.
       ``(4) Limitation.-- This subsection does not apply to a 
     teaching hospital described in paragraph (1) if the hospital 
     is in a State for which a demonstration project under section 
     1814(b)(3) is in effect.
       ``(c) Consolidations and Mergers.--In the case of two or 
     more teaching hospitals that have each received payments 
     pursuant to section 2221 for one or more fiscal years and 
     that undergo a consolidation or merger, the percentage 
     applicable to the resulting teaching hospital for purposes of 
     section 2221(b) is the sum of the respective percentages that 
     would have applied pursuant to such section if the hospitals 
     had not undergone the consolidation or merger.

     ``SEC. 2223. INDIRECT COSTS; ALTERNATIVE PAYMENTS REGARDING 
                   TEACHING HOSPITALS IN CERTAIN STATES.

       ``(a) In General.--In the case of a teaching hospital in a 
     State for which a demonstration project under section 
     1814(b)(3) is in effect, this section applies in lieu of 
     section 2221. For purposes of section 2211(a)(1), the amount 
     determined for such a teaching hospital for a fiscal year is 
     the product of--
       ``(1) the amount in the Indirect-Costs Medical Education 
     Account for the fiscal year pursuant to the allocation under 
     section 2201(d)(3)(A) for the year; and
       ``(2) the percentage determined under subsection (b) for 
     the hospital.
       ``(b) Determination of Percentage.--For purposes of 
     subsection (a)(2):
       ``(1) The Secretary shall make an estimate of the total 
     amount of payments that would have been received under 
     section 1886(d)(5)(B) by the hospital involved with respect 
     to each of the fiscal years of the applicable period if such 
     section (as in effect for such fiscal years) had applied to 
     the hospital for such years.
       ``(2) The percentage determined under this subsection for 
     the hospital for a fiscal year is a mean average percentage 
     determined for the hospital in accordance with the 
     methodology of section 2221(b)(1), except that the estimate 
     made by the Secretary under paragraph (1) of this subsection 
     for a fiscal year of the applicable period is deemed to be 
     the amount that applies for purposes of section 2221(b)(3)(A) 
     for such year.
       ``(c) Rule Regarding Payments From Certain Amounts.--In the 
     case of a teaching hospital described in subsection (a), this 
     section does not authorize any payment to the hospital from 
     amounts transferred to the Fund under section 1886(j).
       ``(d) Adjustment Regarding Payments to Other Hospitals.--In 
     the case of a fiscal year for which payments pursuant to 
     subsection (a) are made to one or more teaching hospitals, 
     the following applies:
       ``(1) The Secretary shall determine a percentage equal to 
     the sum of the respective percentages determined for the 
     hospitals under subsection (b).
       ``(2) The Secretary shall determine an amount equal to the 
     product of--
       ``(A) the percentage determined under paragraph (1); and
       ``(B) the amount in the Indirect-Costs Medical Education 
     Account for the fiscal year pursuant to the transfer under 
     section 1886(j)(1).
       ``(3) The Secretary shall, for each hospital (other than 
     hospitals described in subsection (a)), make payments to the 
     hospital in amounts whose sum for the fiscal year is equal to 
     the product of--
       ``(A) the amount determined under paragraph (2); and
       ``(B) the percentage that applies to the hospital for 
     purposes of section 2221(b), except that such percentage 
     shall be adjusted in accordance with the methodology of 
     section 2221(b)(1) to the extent determined by the Secretary 
     to be necessary with respect to a sum that equals 100 
     percent.

   ``Subpart 3--Amount Relating to Direct Costs of Graduate Medical 
                               Education

     ``SEC. 2231. DETERMINATION OF AMOUNT RELATING TO DIRECT 
                   COSTS.

       ``(a) In General.--For purposes of section 2211(a)(2), the 
     amount determined under this section for a teaching hospital 
     for a fiscal year is the sum of--
       ``(1) the amount determined under subsection (b) (relating 
     to the General Direct-Costs Medical Education Account); and
       ``(2) the amount determined under subsection (c) (relating 
     to the Medicare Direct-Costs Medical Education Account).
       ``(b) Payment From General Account.--
       ``(1) In general.--For purposes of subsection (a)(1), the 
     amount determined under this subsection for a teaching 
     hospital for a fiscal year is the product of--
       ``(A) the amount in the General Direct-Costs Medical 
     Education Account on the applicable date under section 
     2201(d) (once the appropriation under such section is made); 
     and
       ``(B) the percentage determined for the hospital under 
     paragraph (2).
       ``(2) Hospital-specific percentage.--
       ``(A) In general.--For purposes of paragraph (1)(B), the 
     percentage determined under this paragraph for a teaching 
     hospital is the mean average of the respective percentages 
     determined under subparagraph (B) for each fiscal year of the 
     applicable period (as defined in section 2221(b)(2)), 
     adjusted by the Secretary (upward or downward, as the case 
     may be) on a pro rata basis to the extent necessary to ensure 
     that the sum of the percentages determined under this 
     subparagraph for all teaching hospitals is equal to 100 
     percent. The preceding sentence is subject to sections 2232 
     through 2234.
       ``(B) Respective determinations for fiscal years of 
     applicable period.--For purposes of subparagraph (A), the 
     percentage determined under this subparagraph for a teaching 
     hospital for a fiscal year of the applicable period is the 
     percentage constituted by the ratio of--
       ``(i) the total amount of payments received by the hospital 
     under section 1886(h) for cost reporting periods beginning 
     during the fiscal year involved; to
       ``(ii) the sum of the respective amounts determined under 
     clause (i) for the fiscal year for all teaching hospitals.
       ``(3) Availability of data.--If a teaching hospital 
     received the payments specified in paragraph (2)(B)(i) during 
     the applicable period but a complete set of the relevant data 
     is not available to the Secretary for purposes of determining 
     an amount under such paragraph for the fiscal year involved, 
     the Secretary shall for purposes of such paragraph make an 
     estimate on the basis of such data as are available to the 
     Secretary for the applicable period.
       ``(c) Payment From Medicare Account.--
       ``(1) In general.--For purposes of subsection (a)(2), the 
     amount determined under this subsection for a teaching 
     hospital for a fiscal year is the product of--
       ``(A) the amount in the Medicare Direct-Costs Medical 
     Education Account on the applicable date under section 
     2201(d) (once the appropriation under such section is made); 
     and
       ``(B) the percentage determined for the hospital under 
     paragraph (2) for the fiscal year.
       ``(2) Hospital-specific percentage.--For purposes of 
     paragraph (1)(B), the percentage determined under this 
     subsection for a teaching hospital for a fiscal year is the 
     percentage constituted by the ratio of--
       ``(A) the estimate made by the Secretary for the hospital 
     for the fiscal year under section 1886(j)(2)(B); to
       ``(B) the sum of the respective estimates referred to in 
     subparagraph (A) for all teaching hospitals.

     ``SEC. 2232. DIRECT COSTS; SPECIAL RULES REGARDING 
                   DETERMINATION OF HOSPITAL-SPECIFIC PERCENTAGE.

       ``(a) Special Rule Regarding Fiscal Years 1995 and 1996.--

[[Page H 10175]]

       ``(1) In general.--In the case of a teaching hospital whose 
     first payments under 1886(h) were for cost reporting period 
     beginning in fiscal year 1995 or in fiscal year 1996 
     (referred to in this subsection individually as a `first 
     payment year'), the percentage determined under paragraph (2) 
     for the hospital is deemed to be the percentage applicable 
     under section 2231(b)(2) to the hospital, except that the 
     percentage under paragraph (2) shall be adjusted in 
     accordance with section 2231(b)(2)(A) to the extent 
     determined by the Secretary to be necessary with respect to a 
     sum that equals 100 percent.
       ``(2) Determination of percentage.--For purposes of 
     paragraph (1), the percentage determined under this paragraph 
     for a teaching hospital is the percentage constituted by the 
     ratio of the amount determined under subparagraph (A) to the 
     amount determined under subparagraph (B), as follows:
       ``(A)(i) If the first payment year for the hospital is 
     fiscal year 1995, the amount determined under this 
     subparagraph is the total amount of payments received by the 
     hospital under section 1886(h) for cost reporting periods 
     beginning in fiscal year 1995.
       ``(ii) If the first payment year for the hospital is fiscal 
     year 1996, the amount determined under this subparagraph is 
     an amount equal to an estimate by the Secretary of the total 
     amount of payments that would have been paid to the hospital 
     under section 1886(h) for cost reporting periods beginning in 
     fiscal year 1995 if such section, as in effect for fiscal 
     year 1996, had applied to the hospital for fiscal year 1995.
       ``(B)(i) If the first payment year for the hospital is 
     fiscal year 1995, the amount determined under this 
     subparagraph is the aggregate total of the payments received 
     by teaching hospitals under section 1886(h) for cost 
     reporting periods beginning in fiscal year 1995.
       ``(ii) If the first payment year for the hospital is fiscal 
     year 1996--
       ``(I) the Secretary shall make an estimate in accordance 
     with subparagraph (A)(ii) for all teaching hospitals; and
       ``(II) the amount determined under this subparagraph is the 
     sum of the estimates made by the Secretary under subclause 
     (I).
       ``(b) New Teaching Hospitals.--
       ``(1) In general.--Subject to paragraph (4), in the case of 
     a teaching hospital that did not receive payments under 
     section 1886(h) for any of the fiscal years 1992 through 
     1996, the percentage determined under paragraph (3) for the 
     hospital is deemed to be the percentage applicable under 
     section 2231(b)(2) to the hospital, except that the 
     percentage under paragraph (3) shall be adjusted in 
     accordance with section 2231(b)(2)(A) to the extent 
     determined by the Secretary to be necessary with respect to a 
     sum that equals 100 percent.
       ``(2) Designated fiscal year regarding data.--The 
     determination under paragraph (3) of a percentage for a 
     teaching hospital described in paragraph (1) shall be made 
     for the most recent fiscal year for which the Secretary has 
     sufficient data to make the determination (referred to in 
     this subsection as the `designated fiscal year').
       ``(3) Determination of percentage.--For purposes of 
     paragraph (1), the percentage determined under this paragraph 
     for the teaching hospital involved is the percentage 
     constituted by the ratio of the amount determined under 
     subparagraph (A) to the amount determined under subparagraph 
     (B), as follows:
       ``(A) The amount determined under this subparagraph is an 
     amount equal to an estimate by the Secretary of the total 
     amount of payments that would have been paid to the hospital 
     under section 1886(h) for the designated fiscal year if such 
     section, as in effect for the first fiscal year for which 
     payments pursuant to this subsection are to be made to the 
     hospital, had applied to the hospital for cost reporting 
     periods beginning in the designated fiscal year.
       ``(B) The Secretary shall make an estimate in accordance 
     with subparagraph (A) for all teaching hospitals. The amount 
     determined under this subparagraph is the sum of the 
     estimates made by the Secretary under the preceding sentence.
       ``(4) Limitation.-- This subsection does not apply to a 
     teaching hospital described in paragraph (1) if the hospital 
     is in a State for which a demonstration project under section 
     1814(b)(3) is in effect.
       ``(c) Consolidations and Mergers.--In the case of two or 
     more teaching hospitals that have each received payments 
     pursuant to section 2231 for one or more fiscal years and 
     that undergo a consolidation or merger, the percentage 
     applicable to the resulting teaching hospital for purposes of 
     section 2231(b) is the sum of the respective percentages that 
     would have applied pursuant to such section if the hospitals 
     had not undergone the consolidation or merger.

     ``SEC. 2233. DIRECT COSTS; AUTHORITY FOR PAYMENTS TO 
                   CONSORTIA OF PROVIDERS.

       ``(a) In General.--In lieu of making payments to teaching 
     hospitals pursuant to section 2231, the Secretary may make 
     payments under this section to consortia that meet the 
     requirements of subsection (b).
       ``(b) Qualifying Consortium.--For purposes of subsection 
     (a), a consortium meets the requirements of this subsection 
     if the consortium is in compliance with the following:
       ``(1) The consortium consists of an approved medical 
     residency training program and one or more of the following 
     entities:
       ``(A) Schools of allopathic medicine or osteopathic 
     medicine.
       ``(B) Teaching hospitals.
       ``(C) Other approved medical residency training programs.
       ``(D) Federally qualified health centers.
       ``(E) Medical group practices.
       ``(F) Managed care entities.
       ``(G) Entities furnishing outpatient services.
       ``(H) Such other entities as the Secretary determines to be 
     appropriate.
       ``(2) The members of the consortium have agreed to 
     participate in the programs of graduate medical education 
     that are operated by the entities in the consortium.
       ``(3) With respect to the receipt by the consortium of 
     payments made pursuant to this section, the members of the 
     consortium have agreed on a method for allocating the 
     payments among the members.
       ``(4) The consortium meets such additional requirements as 
     the Secretary may establish.
       ``(c) Payments From Accounts.--
       ``(1) In general.--Subject to subsection (d), the total of 
     payments to a qualifying consortium for a fiscal year 
     pursuant to subsection (a) shall be the sum of--
       ``(1) the aggregate amount determined for the teaching 
     hospitals of the consortium pursuant to paragraph (1) of 
     section 2231(a); and
       ``(2) an amount determined in accordance with the 
     methodology that applies pursuant to paragraph (2) of such 
     section, except that the estimate used for purposes of 
     subsection (c)(2)(A) of such section shall be the estimate 
     made for the consortium under section 1886(j)(2)(C)(ii).
       ``(d) Limitation on Aggregate Total of Payments to 
     Consortia.--The aggregate total of the amounts paid under 
     subsection (c)(2) to qualifying consortia for a fiscal year 
     may not exceed the sum of--
       ``(1) the aggregate total of the amounts that would have 
     been paid under section 2231(c) for the fiscal year to the 
     teaching hospitals of the consortia if the hospitals had not 
     been participants in the consortia; and
       ``(2) an amount equal to 1 percent of the amount that 
     applies under section 2231(c)(1)(A) for the fiscal year 
     (relating to the Medicare Direct-Costs Medical Education 
     Account).
       ``(e) Definition.--For purposes of this title, the term 
     `qualifying consortium' means a consortium that meets the 
     requirements of subsection (b).

     ``SEC. 2234. DIRECT COSTS; ALTERNATIVE PAYMENTS REGARDING 
                   TEACHING HOSPITALS IN CERTAIN STATES.

       ``(a) In General.--In the case of a teaching hospital in a 
     State for which a demonstration project under section 
     1814(b)(3) is in effect, this section applies in lieu of 
     section 2231. For purposes of section 2211(a)(2), the amount 
     determined for a teaching hospital for a fiscal year is the 
     product of--
       ``(1) the amount in the General Direct-Costs Medical 
     Education Account on the applicable date under section 
     2201(d) (once the appropriation under such section is made); 
     and
       ``(2) the percentage determined under subsection (b) for 
     the hospital.
       ``(b) Determination of Percentage.--For purposes of 
     subsection (a)(2):
       ``(1) The Secretary shall make an estimate of the total 
     amount of payments that would have been received under 
     section 1886(h) by the hospital involved with respect to each 
     of the fiscal years of the applicable period if such section 
     (as in effect for such fiscal years) had applied to the 
     hospital for such years.
       ``(2) The percentage determined under this subsection for 
     the hospital for a fiscal year is a mean average percentage 
     determined for the hospital in accordance with the 
     methodology of section 2231(b)(2)(A), except that the 
     estimate made by the Secretary under paragraph (1) of this 
     subsection for a fiscal year of the applicable period is 
     deemed to be the amount that applies for purposes of section 
     2231(b)(2)(B)(i) for such year.
       ``(c) Rule Regarding Payments From Certain Amounts.--In the 
     case of a teaching hospital described in subsection (a), this 
     section does not authorize any payment to the hospital from 
     amounts transferred to the Fund under section 1886(j).

                    ``Subpart 4--General Provisions

     ``SEC. 2241. ADJUSTMENTS IN PAYMENT AMOUNTS.

       ``(a) Collection of Data on Accuracy of Estimates.--The 
     Secretary shall collect data on whether the estimates made by 
     the Secretary under section 1886(j) for a fiscal year were 
     substantially accurate.
       ``(b) Adjustments.--If the Secretary determines under 
     subsection (a) that an estimate for a fiscal year was not 
     substantially accurate, the Secretary shall, for the first 
     fiscal year beginning after the Secretary makes the 
     determination--
       ``(1) make adjustments accordingly in transfers to the Fund 
     under section 1886(j); and
       ``(2) make adjustments accordingly in the amount of 
     payments to teaching hospitals pursuant to 2231(c) (or, as 
     applicable, to qualifying consortia pursuant to section 
     2233(c)(2)).''.

                 PART 2--AMENDMENTS TO MEDICARE PROGRAM

     SEC. 15411. TRANSFERS TO TEACHING HOSPITAL AND GRADUATE 
                   MEDICAL EDUCATION TRUST FUND.

       Section 1886 (42 U.S.C. 1395ww) is amended--

[[Page H 10176]]

       (1) in subsection (d)(5)(B), in the matter preceding clause 
     (i), by striking ``The Secretary shall provide'' and 
     inserting the following: ``For discharges occurring on or 
     before September 30, 1996, the Secretary shall provide'';
       (2) in subsection (h)--
       (A) in paragraph (1), in the first sentence, by striking 
     ``the Secretary shall provide'' and inserting ``the Secretary 
     shall, subject to paragraph (6), provide''; and
       (B) by adding at the end the following paragraph:
       ``(6) Limitation.--
       ``(A) In general.--The authority to make payments under 
     this subsection applies only with respect to cost reporting 
     periods ending on or before September 30, 1996, except as 
     provided in subparagraph (B).
       ``(B) Rule regarding portion of last cost reporting 
     period.--In the case of a cost reporting period that extends 
     beyond September 30, 1996, payments under this subsection 
     shall be made with respect to such portion of the period as 
     has lapsed as of such date.
       ``(C) Rule of construction.--This paragraph may not be 
     construed as authorizing any payment under section 1861(v) 
     with respect to graduate medical education.''; and
       (3) by adding at the end the following subsection:
       ``(j) Transfers to Teaching Hospital and Graduate Medical 
     Education Trust Fund.--
       ``(1) Indirect costs of medical education.--
       ``(A) In general.--From the Federal Hospital Insurance 
     Trust Fund, the Secretary shall, for fiscal year 1997 and 
     each subsequent fiscal year, transfer to the Indirect-Costs 
     Medical Education Account (under section 2201) an amount 
     determined by the Secretary in accordance with subparagraph 
     (B).
       ``(B) Determination of amounts.--The Secretary shall make 
     an estimate for the fiscal year involved of the nationwide 
     total of the amounts that would have been paid under 
     subsection (d)(5)(B) to hospitals during the fiscal year if 
     such payments had not been terminated for discharges 
     occurring after September 30, 1996. For purposes of 
     subparagraph (A), the amount determined under this 
     subparagraph for the fiscal year is the estimate made by the 
     Secretary under the preceding sentence.
       ``(2) Direct costs of medical education.--
       ``(A) In general.--From the Federal Hospital Insurance 
     Trust Fund and the Federal Supplementary Medical Insurance 
     Trust Fund, the Secretary shall, for fiscal year 1997 and 
     each subsequent fiscal year, transfer to the Medicare Direct-
     Costs Medical Education Account (under section 2201) the sum 
     of--
       ``(i) an amount determined by the Secretary in accordance 
     with subparagraph (B); and
       ``(ii) as applicable, an amount determined by the Secretary 
     in accordance with subparagraph (C)(ii).
       ``(B) Determination of amounts.--For each hospital (other 
     than a hospital that is a member of a qualifying consortium 
     referred to in subparagraph (C)), the Secretary shall make an 
     estimate for the fiscal year involved of the amount that 
     would have been paid under subsection (h) to the hospital 
     during the fiscal year if such payments had not been 
     terminated for cost reporting periods ending on or before 
     September 30, 1996. For purposes of subparagraph (A)(i), the 
     amount determined under this subparagraph for the fiscal year 
     is the sum of all estimates made by the Secretary under the 
     preceding sentence.
       ``(C) Estimates regarding qualifying consortia.--If the 
     Secretary elects to authorize one or more qualifying 
     consortia for purposes of section 2233(a), the Secretary 
     shall carry out the following:
       ``(i) The Secretary shall establish a methodology for 
     making payments to qualifying consortia with respect to the 
     reasonable direct costs of such consortia in carrying out 
     programs of graduate medical education. The methodology shall 
     be the methodology established in subsection (h), modified to 
     the extent necessary to take into account the participation 
     in such programs of entities other than hospitals.
       ``(ii) For each qualifying consortium, the Secretary shall 
     make an estimate for the fiscal year involved of the amount 
     that would have been paid to the consortium during the fiscal 
     year if, using the methodology under clause (i), payments had 
     been made to the consortium for the fiscal year as 
     reimbursements with respect to cost reporting periods. For 
     purposes of subparagraph (A)(ii), the amount determined under 
     this clause for the fiscal year is the sum of all estimates 
     made by the Secretary under the preceding sentence.
       ``(D) Allocation between funds.--In providing for a 
     transfer under subparagraph (A) for a fiscal year, the 
     Secretary shall provide for an allocation of the amounts 
     involved between part A and part B (and the trust funds 
     established under the respective parts) as reasonably 
     reflects the proportion of direct graduate medical education 
     costs of hospitals associated with the provision of services 
     under each respective part.
       ``(3) Applicability of certain amendments.--Amendments made 
     to subsection (d)(5)(B) and subsection (h) that are effective 
     on or after October 1, 1996, apply only for purposes of 
     estimates under paragraphs (1) and (2) and for purposes of 
     determining the amount of payments under 2211. Such 
     amendments do not require any adjustment to amounts paid 
     under subsection (d)(5)(B) or (h) with respect to fiscal year 
     1996 or any prior fiscal year.
       ``(4) Relationship to certain demonstration projects.--In 
     the case of a State for which a demonstration project under 
     section 1814(b)(3) is in effect, the Secretary, in making 
     determinations of the rates of increase under such section, 
     shall include all amounts transferred under this subsection. 
     Such amounts shall be so included to the same extent and in 
     the same manner as amounts determined under subsections 
     (d)(5)(B) and (h) were included in such determination under 
     the provisions of this title in effect on September 30, 
     1996.''.

     SEC. 15412. MODIFICATION IN PAYMENT POLICIES REGARDING 
                   GRADUATE MEDICAL EDUCATION.

       (a) Indirect Costs of Medical Education; Applicable 
     Percentage.--
       (1) Modification regarding 5.6 percent.--Section 
     1886(d)(5)(B)(ii) (42 U.S.C. 1395ww(d)(5)(B)(ii)) is 
     amended--
       (A) by striking ``on or after October 1, 1988,'' and 
     inserting ``on or after October 1, 1999,''; and
       (B) by striking ``1.89'' and inserting ``1.38''.
       (2) Special rule regarding fiscal years 1996 through 1998; 
     modification regarding 6 percent .--Section 
     1886(d)(5)(B)(ii), as amended by paragraph (1), is amended by 
     adding at the end the following: ``In the case of discharges 
     occurring on or after October 1, 1995, and before October 1, 
     1999, the preceding sentence applies to the same extent and 
     in the same manner as the sentence applies to discharges 
     occurring on or after October 1, 1999, except that the term 
     `1.38' is deemed to be `1.48'.''.
       (3) Conforming amendment relating to determination of 
     standardized amounts.--Section 1886(d)(2)(C)(i) (42 U.S.C. 
     1395ww(d)(2)(C)(i)) is amended by striking ``1985'' and 
     inserting the following: ``1985, but (for discharges 
     occurring after September 30, 1995) not taking into account 
     any reductions in such costs resulting from the amendments 
     made by section 15412(a) of the Medicare Preservation Act of 
     1995''.
       (b) Direct Costs of Medical Education.--
       (1) Limitation on number of full-time-equivalent 
     residents.--Section 1886(h)(4) (42 U.S.C. 1395ww(h)(4)) is 
     amended by adding at the end the following new subparagraph:
       ``(F) Limitation on number of residents for certain fiscal 
     years.--
       ``(i) In general.--Such rules shall provide that for 
     purposes of a cost reporting period beginning on or after 
     October 1, 1995, and on or before September 30, 2002, the 
     number of full-time-equivalent residents determined under 
     this paragraph with respect to an approved medical residency 
     training program may not exceed the number of full-time-
     equivalent residents with respect to the program as of August 
     1, 1995 (except that this subparagraph applies only to 
     approved medical residency training programs in the fields of 
     allopathic medicine and osteopathic medicine).
       ``(ii) Disposition of unused residency positions.--In the 
     case of a cost reporting period to which the limitation under 
     clause (i) applies, if for such a period the number of full-
     time-equivalent residents determined under this paragraph 
     with respect to an approved medical residency training 
     program is less than the maximum number applicable to the 
     program under such clause, the Secretary may authorize for 
     one or more other approved medical residency training 
     programs offsetting increases in the respective maximum 
     numbers that otherwise would be applicable under such clause 
     to the programs. In authorizing such increases with respect 
     to a cost reporting period, the Secretary shall ensure that 
     the national total of the respective maximum numbers 
     determined under such clause with respect to approved medical 
     residency training programs is not exceeded.''.
       (2) Exclusion of residents after initial residency 
     period.--Section 1886(h)(4)(C) (42 U.S.C. 1395ww(h)(4)(C)) is 
     amended to read as follows:
       ``(C) Weighting factors for residents.--Effective for cost 
     reporting periods beginning on or after October 1, 1997, such 
     rules shall provide that, in the calculation of the number of 
     full-time-equivalent residents in an approved residency 
     program, the weighting factor for a resident who is in the 
     initial residency period (as defined in paragraph (5)(F)) is 
     1.0 and the weighting factor for a resident who has completed 
     such period is 0.0. (In the case of cost reporting periods 
     beginning before October 1, 1997, the weighting factors that 
     apply in such calculation are the weighting factors that were 
     applicable under this subparagraph on the day before the date 
     of the enactment of the Medicare Preservation Act of 
     1995.)''.
       (3) Reductions in payments for alien residents.--Section 
     1886(h)(4) (42 U.S.C. 1395ww(h)(4)), as amended by paragraph 
     (1), is amended by adding at the end the following new 
     subparagraph:
       ``(G) Special rules for alien residents.--In the case of 
     individuals who are not citizens or nationals of the United 
     States, aliens lawfully admitted to the United States for 
     permanent residence, aliens admitted to the United States as 
     refugees, or citizens of Canada, in the calculation of the 
     number of full-time-equivalent residents in an approved 
     medical residency program, the following rules shall apply 
     with respect to such individuals who are residents in the 
     program:
       ``(i) For a cost reporting period beginning during fiscal 
     year 1996, for each such individual the Secretary shall apply 
     a weighting factor of .75.

[[Page H 10177]]

       ``(ii) For a cost reporting period beginning during fiscal 
     year 1997, for each such individual the Secretary shall apply 
     a weighting factor of .50.
       ``(iii) For a cost reporting period beginning during fiscal 
     year 1998 or any subsequent fiscal year, for each such 
     individual the Secretary shall apply a weighting factor of 
     .25.''.
       (4) Effective date.--Except as provided otherwise in this 
     subsection (or in the amendments made by this subsection), 
     the amendments made by this subsection apply to hospital cost 
     reporting periods beginning on or after October 1, 1995.

  PART 3--REFORM OF FEDERAL POLICIES REGARDING TEACHING HOSPITALS AND 
                       GRADUATE MEDICAL EDUCATION

     SEC. 15421. ESTABLISHMENT OF ADVISORY PANEL FOR RECOMMENDING 
                   POLICIES.

       Title XXII of the Social Security Act, as added by section 
     15401, is amended by adding at the end the following part:

                        ``Part C--Other Matters

     ``SEC. 2251. ADVISORY PANEL ON REFORM IN FINANCING OF 
                   TEACHING HOSPITALS AND GRADUATE MEDICAL 
                   EDUCATION.

       ``(a) Establishment.--The Chair of the Medicare Payment 
     Review Commission under section 1806 shall establish a 
     temporary advisory panel to be known as the Advisory Panel on 
     Financing for Teaching Hospitals and Graduate Medical 
     Education (in this section referred to as the `Panel').
       ``(b) Duties.--The Panel shall develop recommendations on 
     whether and to what extent Federal policies regarding 
     teaching hospitals and graduate medical education should be 
     reformed, including recommendations regarding the following:
       ``(1) The financing of graduate medical education, 
     including consideration of alternative broad-based sources of 
     funding for such education.
       ``(2) The financing of teaching hospitals, including 
     consideration of the difficulties encountered by such 
     hospitals as competition among health care entities 
     increases. Matters considered under this paragraph shall 
     include consideration of the effects on teaching hospitals of 
     the method of financing used for the MedicarePlus program 
     under part C of title XVIII.
       ``(3) The methodology for making payments for graduate 
     medical education, and the selection of entities to receive 
     the payments. Matters considered under this paragraph shall 
     include the following:
       ``(A) The methodology under part B for making payments from 
     the Fund, including the use of data from the fiscal years 
     1992 through 1994, and including the methodology that applies 
     with respect to consolidations and mergers of participants in 
     the program under such part and with respect to the inclusion 
     of additional participants in the program.
       ``(B) Issues regarding children's hospitals, and approved 
     medical residency training programs in pediatrics.
       ``(C) Whether and to what extent payments are being made 
     (or should be made) for graduate training in the various 
     nonphysician health professions.
       ``(4) Federal policies regarding international medical 
     graduates.
       ``(5) The dependence of schools of medicine on service-
     generated income.
       ``(6) The effects of the amendments made by section 15412 
     of the Medicare Preservation Act of 1995, including adverse 
     effects on teaching hospitals that result from modifications 
     in policies regarding international medical graduates.
       ``(7) Whether and to what extent the needs of the United 
     States regarding the supply of physicians will change during 
     the 10-year beginning on October 1, 1995, and whether and to 
     what extent any such changes will have significant financial 
     effects on teaching hospitals.
       ``(8) The appropriate number and mix of residents.
       ``(c) Composition.--Not later than three months after being 
     designated as the initial chair of the Medicare Payment 
     Review Commission, the Chair of the Commission shall appoint 
     to the Panel 19 individuals who are not members of the 
     Commission, who are not officers or employees of the United 
     States, and who possess expertise on matters on which the 
     Panel is to make recommendations under subsection (b). Such 
     individuals shall include the following:
       ``(1) Deans from allopathic and osteopathic schools of 
     medicine.
       ``(2) Chief executive officers (or equivalent 
     administrative heads) from academic health centers, 
     integrated health care systems, approved medical residency 
     training programs, and teaching hospitals that sponsor 
     approved medical residency training programs.
       ``(3) Chairs of departments or divisions from allopathic 
     and osteopathic schools of medicine, schools of dentistry, 
     and approved medical residency training programs in oral 
     surgery.
       ``(4) Individuals with leadership experience from each of 
     the fields of advanced practice nursing, physician 
     assistants, and podiatric medicine.
       ``(5) Individuals with substantial experience in the study 
     of issues regarding the composition of the health care 
     workforce of the United States.
       ``(6) Individuals with expertise on the financing of health 
     care.
       ``(7) Representatives from health insurance organizations 
     and health plan organizations.
       ``(d) Relationship of Panel to Medicare Payment Review 
     Commission.--From amounts appropriated under subsection (n), 
     the Medicare Payment Review Commission shall provide for the 
     Panel such staff and administrative support (including 
     quarters for the Panel) as may be necessary for the Panel to 
     carry out the duties under subsection (b).
       ``(e) Chair.--The Panel shall designate a member of the 
     Panel to serve as the Chair of the Panel.
       ``(f) Meetings.--The Panel shall meet at the call of the 
     Chair or a majority of the members, except that the first 
     meeting of the Panel shall be held not later than three 
     months after the date on which appointments under subsection 
     (c) are completed.
       ``(g) Terms.--The term of a member of the Panel is the 
     duration of the Panel.
       ``(h) Vacancies.--
       ``(1) In general.--A vacancy in the membership of the Panel 
     does not affect the power of the remaining members to carry 
     out the duties under subsection (b). A vacancy in the 
     membership of the Panel shall be filled in the manner in 
     which the original appointment was made.
       ``(2) Incomplete term.--If a member of the Panel does not 
     serve the full term applicable to the member, the individual 
     appointed to fill the resulting vacancy shall be appointed 
     for the remainder of the term of the predecessor of the 
     individual.
       ``(i) Compensation; Reimbursement of Expenses.--
       ``(1) Compensation.--Members of the Panel shall receive 
     compensation for each day (including traveltime) engaged in 
     carrying out the duties of the Committee. Such compensation 
     may not be in an amount in excess of the daily equivalent of 
     the annual maximum rate of basic pay payable under the 
     General Schedule (under title 5, United States Code) for 
     positions above GS-15.
       ``(2) Reimbursement.--Members of the Panel may, in 
     accordance with chapter 57 of title 5, United States Code, be 
     reimbursed for travel, subsistence, and other necessary 
     expenses incurred in carrying out the duties of the Panel.
       ``(j) Consultants.--The Panel may procure such temporary 
     and intermittent services of consultants under section 
     3109(b) of title 5, United States Code, as the Panel may 
     determine to be useful in carrying out the duties under 
     subsection (b). The Panel may not procure services under this 
     subsection at any rate in excess of the daily equivalent of 
     the maximum annual rate of basic pay payable under the 
     General Schedule for positions above GS-15. Consultants under 
     this subsection may, in accordance with chapter 57 of title 
     5, United States Code, be reimbursed for travel, subsistence, 
     and other necessary expenses incurred for activities carried 
     out on behalf of the Panel pursuant to subsection (b).
       ``(k) Powers.--
       ``(1) In general.--For the purpose of carrying out the 
     duties of the Panel under subsection (b), the Panel may hold 
     such hearings, sit and act at such times and places, take 
     such testimony, and receive such evidence as the Panel 
     considers appropriate.
       ``(2) Obtaining official information.--Upon the request of 
     the Panel, the heads of Federal agencies shall furnish 
     directly to the Panel information necessary for the Panel to 
     carry out the duties under subsection (b).
       ``(3) Use of mails.--The Panel may use the United States 
     mails in the same manner and under the same conditions as 
     Federal agencies.
       ``(l) Reports.--
       ``(1) First interim report.--Not later than one year after 
     the date of the enactment of the Medicare Preservation Act of 
     1995, the Panel shall submit to the Congress a report 
     providing the recommendations of the Panel regarding the 
     matters specified in paragraphs (1) through (4) of subsection 
     (b).
       ``(2) Second interim report.--Not later than 2 years after 
     the date of enactment specified in paragraph (1), the Panel 
     shall submit to the Congress a report providing the 
     recommendations of the Panel regarding the matters specified 
     in paragraphs (5) and (6) of subsection (b).
       ``(3) Final report.--Not later than 3 years after the date 
     of enactment specified in paragraph (1), the Panel shall 
     submit to the Congress a final report providing the 
     recommendations of the Panel under subsection (b).
       ``(m) Duration.--The Panel terminates upon the expiration 
     of the 180-day period beginning on the date on which the 
     final report under subsection (l)(3) is submitted to the 
     Congress.
       ``(n) Authorization of Appropriations.--
       ``(1) In general.--Subject to paragraph (2), for the 
     purpose of carrying out this section, there are authorized to 
     be appropriated such sums as may be necessary for each of the 
     fiscal years 1996 through 1999.
       ``(2) Limitation.--The authorization of appropriations 
     established in paragraph (1) is effective only with respect 
     to appropriations made from allocations under section 302(b) 
     of the Congressional Budget Act of 1974--
       ``(A) for the Subcommittee on Labor, Health and Human 
     Services, and Education, Committee on Appropriations of the 
     House of Representatives, in the case of any bill, 
     resolution, or amendment considered in the House; and
       ``(B) for the Subcommittee on Labor, Health and Human 
     Services, and Education, Committee on Appropriations of the 
     Senate, in the case of any bill, resolution, or amendment 
     considered in the Senate.''.
     
[[Page H 10178]]

           Subtitle F--Provisions Relating to Medicare Part A

                           PART 1--HOSPITALS

          Subpart A--General Provisions Relating to Hospitals

     SEC. 15501. REDUCTIONS IN INFLATION UPDATES FOR PPS 
                   HOSPITALS.

       Section 1886(b)(3)(B)(i) (42 U.S.C. 1395ww(b)(3)(B)(i)) is 
     amended by striking subclauses (XI), (XII), and (XIII) and 
     inserting the following:
       ``(XI) for fiscal year 1996, the market basket percentage 
     increase minus 2.5 percentage points for hospitals in all 
     areas,
       ``(XII) for each of the fiscal years 1997 through 2002, the 
     market basket percentage increase minus 2.0 percentage points 
     for hospitals in all areas, and
       ``(XIII) for fiscal year 2003 and each subsequent fiscal 
     year, the market basket percentage increase for hospitals in 
     all areas.''.

     SEC. 15502. REDUCTIONS IN DISPROPORTIONATE SHARE PAYMENT 
                   ADJUSTMENTS.

       (a) In General.--Section 1886(d)(5)(F) (42 U.S.C. 
     1395ww(d)(5)(F)) is amended--
       (1) in clause (ii), by striking ``The amount'' and 
     inserting ``Subject to clause (ix), the amount''; and
       (2) by adding at the end the following new clause:
       ``(ix) In the case of discharges occurring on or after 
     October 1, 1995, the additional payment amount otherwise 
     determined under clause (ii) shall be reduced as follows:
       ``(I) For discharges occurring on or after October 1, 1995, 
     and on or before September 30, 1996, by 20 percent.
       ``(II) For discharges occurring on or after October 1, 
     1996, and on or before September 30, 1997, by 25 percent.
       ``(III) For discharges occurring on or after October 1, 
     1997, by 30 percent.''.
       (b) Conforming Amendment Relating to Determination of 
     Standardized Amounts.--Section 1886(d)(2)(C)(iv) (42 U.S.C. 
     1395ww(d)(2)(C)(iv)) is amended by striking the period at the 
     end and inserting the following: ``, and the Secretary shall 
     not take into account any reductions in the amount of such 
     additional payments resulting from the amendments made by 
     section 15502(a) of the Medicare Preservation Act of 1995.''.

     SEC. 15503. PAYMENTS FOR CAPITAL-RELATED COSTS FOR INPATIENT 
                   HOSPITAL SERVICES.

       (a) Reduction in Payments for PPS Hospitals.--
       (1) Continuation of current reductions.--Section 
     1886(g)(1)(A) (42 U.S.C. 1395ww(g)(1)(A)) is amended in the 
     second sentence--
       (A) by striking ``through 1995'' and inserting ``through 
     2002''; and
       (B) by inserting after ``10 percent reduction'' the 
     following: ``(or a 15 percent reduction in the case of 
     payments during fiscal years 1996 through 2002)''.
       (2) Reduction in base payment rates.--Section 1886(g)(1)(A) 
     (42 U.S.C. 1395ww(g)(1)(A)) is amended by adding at the end 
     the following new sentence: ``In addition to the reduction 
     described in the preceding sentence, for discharges occurring 
     after September 30, 1995, the Secretary shall reduce by 7.47 
     percent the unadjusted standard Federal capital payment rate 
     (as described in 42 CFR 412.308(c), as in effect on the date 
     of the enactment of the Medicare Preservation Act of 1995) 
     and shall reduce by 8.27 percent the unadjusted hospital-
     specific rate (as described in 42 CFR 412.328(e)(1), as in 
     effect on such date of enactment).''.
       (b) Reduction in Payments for PPS-Exempt Hospitals.--
     Section 1886(g) (42 U.S.C. 1395ww(g)) is amended by adding at 
     the end the following new paragraph:
       ``(4)(A) Except as provided in subparagraph (B), in 
     determining the amount of the payments that may be made under 
     this title with respect to all the capital-related costs of 
     inpatient hospital services furnished during fiscal years 
     1996 through 2002 of a hospital which is not a subsection (d) 
     hospital or a subsection (d) Puerto Rico hospital, the 
     Secretary shall reduce the amounts of such payments otherwise 
     determined under this title by 15 percent.
       ``(B) Subparagraph (A) shall not apply to payments with 
     respect to the capital-related costs of any hospital that is 
     a sole community hospital (as defined in subsection 
     (d)(5)(D)(iii) or a rural primary care hospital (as defined 
     in section 1861(mm)(1)).''.
       (c) Hospital-Specific Adjustment for Capital-Related Tax 
     Costs.--Section 1886(g)(1) (42 U.S.C. 1395ww(g)(1)) is 
     amended--
       (1) by redesignating subparagraph (C) as subparagraph (D), 
     and
       (2) by inserting after subparagraph (B) the following:
       ``(C)(i) For discharges occurring after September 30, 1995, 
     such system shall provide for an adjustment in an amount 
     equal to the amount determined under clause (iv) for capital-
     related tax costs for each hospital that is eligible for such 
     adjustment.
       ``(ii) Subject to clause (iii), a hospital is eligible for 
     an adjustment under this subparagraph, with respect to 
     discharges occurring in a fiscal year, if the hospital--
       ``(I) is a hospital that may otherwise receive payments 
     under this subsection,
       ``(II) is not a public hospital, and
       ``(III) incurs capital-related tax costs for the fiscal 
     year.
       ``(iii)(I) In the case of a hospital that first incurs 
     capital-related tax costs in a fiscal year after fiscal year 
     1992 because of a change from nonproprietary to proprietary 
     status or because the hospital commenced operation after such 
     fiscal year, the first fiscal year for which the hospital 
     shall be eligible for such adjustment is the second full 
     fiscal year following the fiscal year in which the hospital 
     first incurs such costs.
       ``(II) In the case of a hospital that first incurs capital-
     related tax costs in a fiscal year after fiscal year 1992 
     because of a change in State or local tax laws, the first 
     fiscal year for which the hospital shall be eligible for such 
     adjustment is the fourth full fiscal year following the 
     fiscal year in which the hospital first incurs such costs.
       ``(iv) The per discharge adjustment under this clause shall 
     be equal to the hospital-specific capital-related tax costs 
     per discharge of a hospital for fiscal year 1992 (or, in the 
     case of a hospital that first incurs capital-related tax 
     costs for a fiscal year after fiscal year 1992, for the first 
     full fiscal year for which such costs are incurred), updated 
     to the fiscal year to which the adjustment applies. Such per 
     discharge adjustment shall be added to the Federal capital 
     rate, after such rate has been adjusted as described in 42 
     CFR 412.312 (as in effect on the date of the enactment of the 
     Medicare Preservation Act of 1995), and before such rate is 
     multiplied by the applicable Federal rate percentage.
       ``(v) For purposes of this subparagraph, capital-related 
     tax costs include--
       ``(I) the costs of taxes on land and depreciable assets 
     owned by a hospital (or related organization) and used for 
     patient care,
       ``(II) payments in lieu of such taxes (made by hospitals 
     that are exempt from taxation), and
       ``(III) the costs of taxes paid by a hospital (or related 
     organization) as lessee of land, buildings, or fixed 
     equipment from a lessor that is unrelated to the hospital (or 
     related organization) under the terms of a lease that 
     requires the lessee to pay all expenses (including mortgage, 
     interest, and amortization) and leaves the lessor with an 
     amount free of all claims (sometimes referred to as a `net 
     net net' or `triple net' lease).

     In determining the adjustment required under clause (i), the 
     Secretary shall not take into account any capital-related tax 
     costs of a hospital to the extent that such costs are based 
     on tax rates and assessments that exceed those for similar 
     commercial properties.
       ``(vi) The system shall provide that the Federal capital 
     rate for any fiscal year after September 30, 1995, shall be 
     reduced by a percentage sufficient to ensure that the 
     adjustments required to be paid under clause (i) for a fiscal 
     year neither increase nor decrease the total amount that 
     would have been paid under this system but for the payment of 
     such adjustments for such fiscal year.''.
       (d) Revision of Exceptions Process Under Prospective 
     Payment System for Certain Projects.--
       (1) In general.--Section 1886(g)(1) (42 U.S.C. 
     1395ww(g)(1)), as amended by subsection (c), is amended--
       (1) by redesignating subparagraph (D) as subparagraph (E), 
     and
       (2) by inserting after subparagraph (C) the following:
       ``(D) The exceptions under the system provided by the 
     Secretary under subparagraph (B)(iii) shall include the 
     provision of exception payments under the special exceptions 
     process provided under 42 CFR 412.348(g) (as in effect on 
     September 1, 1995), except that the Secretary shall revise 
     such process as follows:
       ``(i) A hospital with at least 100 beds which is located in 
     an urban area shall be eligible under such process without 
     regard to its disproportionate patient percentage under 
     subsection (d)(5)(F) or whether it qualifies for additional 
     payment amounts under such subsection.
       ``(ii) The minimum payment level for qualifying hospitals 
     shall be 85 percent.
       ``(iii) A hospital shall be considered to meet the 
     requirement that it completes the project involved no later 
     than the end of the hospital's last cost reporting period 
     beginning after October 1, 2001, if--
       ``(I) the hospital has obtained a certificate of need for 
     the project approved by the State or a local planning 
     authority, and
       ``(II) by September 1, 1995, the hospital has expended on 
     the project at least $750,000 or 10 percent of the estimated 
     cost of the project.
       ``(iv) The amount of the exception payment made shall not 
     be reduced by any offsetting amounts.''.
       (2) Conforming amendment.--Section 1886(g)(1)(B)(iii) (42 
     U.S.C. 1395ww(g)(1)(B)(iii)) is amended by striking ``may 
     provide'' and inserting ``shall provide (in accordance with 
     subparagraph (D))''.

     SEC. 15504. REDUCTION IN ADJUSTMENT FOR INDIRECT MEDICAL 
                   EDUCATION.

       For provisions modifying medicare payment policies 
     regarding graduate medical education, see part 2 of subtitle 
     E.

     SEC. 15505. TREATMENT OF PPS-EXEMPT HOSPITALS.

       (a) Updates.--Section 1886(b)(3)(B)(ii)(V) (42 U.S.C. 
     1395ww(b)(3)(B)(ii)(V)) is amended by striking ``thorugh 
     1997'' and inserting ``through 2002''.
       (b) Rebasing for Certain Long-Term Care Hospitals.--
       (1) In general.--Section 1886(b)(3) (42 U.S.C. 
     1395ww(b)(3)) is amended--
       (A) in subparagraph (A), by striking ``and (E)'' and 
     inserting ``(E), and (F)'';
       (B) in subparagraph (B)(ii), by striking ``(A) and (E)'' 
     and inserting ``(A), (E), and (F)''; and
       (C) by adding at the end the following new subparagraph:

[[Page H 10179]]

       ``(F)(i) In the case of a qualified long-term care hospital 
     (as defined in clause (ii)), the term `target amount' means--
       ``(I) with respect to the first 12-month cost reporting 
     period in which this subparagraph is applied to the hospital, 
     the allowable operating costs of inpatient hospital services 
     (as defined in subsection (a)(4)) recognized under this title 
     for the hospital for the 12-month cost reporting period 
     beginning during fiscal year 1991; or
       ``(II) with respect to a later cost reporting period, the 
     target amount for the preceding cost reporting period, 
     increase by the applicable percentage increase under 
     subparagraph (B)(ii) for that later cost reporting period.
       ``(ii) In clause (i), a `qualified long-term care hospital' 
     means, with respect to a cost reporting period, a hospital 
     described in clause (iv) of subsection (d)(1)(B) during 
     fiscal year 1995 for which the hospital's allowable operating 
     costs of inpatient hospital services recognized under this 
     title for each of the two most recent previous 12-month cost 
     reporting periods exceeded the hospital's target amount 
     determined under this paragraph for such cost reporting 
     periods, if the hospital--
       ``(I) has a disproportionate patient percentage during such 
     cost reporting period (as determined by the Secretary under 
     subsection (d)(5)(F)(vi) as if the hospital were a subsection 
     (d) hospital) of at least 25 percent, or
       ``(II) is located in a State for which no payment is made 
     under the State plan under title XIX for days of inpatient 
     hospital services furnished to any individual in excess of 
     the limit on the number of days of such services furnished to 
     the individual for which payment may be made under this 
     title.''.
       (2) Effective date.--The amendment made by paragraph (1) 
     shall apply to discharges occurring during cost reporting 
     periods beginning on or after October 1, 1995.
       (c) Treatment of Certain Long-Term Care Hospitals Located 
     Within Other Hospitals.--
       (1) In general.--Section 1886(d)(1)(B) (42 U.S.C. 
     1395ww(d)(1)(B)) is amended in the matter following clause 
     (v) by striking the period and inserting the following: ``, 
     or a hospital classified by the Secretary as a long-term care 
     hospital on or before September 30, 1995, and located in the 
     same building as, or on the same campus as, another 
     hospital.''.
       (2) Study by review commission.--Not later than 12 months 
     after the date a majority of the members of the Medicare 
     Payment Review Commission are first appointed, the Commission 
     shall submit a report to Congress containing recommendations 
     for appropriate revisions in the treatment of long-term care 
     hospitals located in the same building as or on the same 
     campus as another hospital for purposes of section 1886 of 
     the Social Security Act.
       (3) Effective date.--The amendment made by paragraph (1) 
     shall apply to discharges occurring on or after October 1, 
     1995.
       (d) Study of Prospective Payment System for Rehabilitation 
     Hospitals and Units.--
       (1) In general.--After consultation with the Prospective 
     Payment Assessment Commission, providers of rehabilitation 
     services, and other appropriate parties, the Secretary of 
     Health and Human Services shall submit to Congress, by not 
     later than June 1, 1996, a report on the advisability and 
     feasibility of providing for payment based on a prospective 
     payment system for inpatient services of rehabilitation 
     hospitals and units under the medicare program.
       (2) Items included.--The report shall include the 
     following:
       (A) The available and preferred systems of classifying 
     rehabilitation patients relative to duration and intensity of 
     inpatient services, including the use of functional-related 
     groups (FRGs).
       (B) The means of calculating medicare program payments to 
     reflect such patient requirements.
       (C) Other appropriate adjustments which should be made, 
     such as for geographic variations in wages and other costs 
     and outliers.
       (D) A timetable under which such a system might be 
     introduced.
       (E) Whether such a system should be applied to other types 
     of providers of inpatient rehabilitation services.

     SEC. 15506. REDUCTION IN PAYMENTS TO HOSPITALS FOR ENROLLEES' 
                   BAD DEBTS.

       (a) In General.--Section 1861(v)(1) (42 U.S.C. 1395x(v)(1)) 
     is amended by adding at the end the following new 
     subparagraph:
       ``(T)(i) In determining such reasonable costs for 
     hospitals, the amount of bad debts otherwise treated as 
     allowable costs which are attributable to the deductibles and 
     coinsurance amounts under this title shall be reduced by--
       ``(I) 75 percent for cost reporting periods beginning 
     during fiscal year 1996,
       ``(II) 60 percent for cost reporting periods beginning 
     during fiscal year 1997, and
       ``(III) 50 percent for subsequent cost reporting periods.
       ``(ii) Clause (i) shall not apply with respect to bad debt 
     of a hospital described in section 1886(d)(1)(B)(iv) if the 
     debt is attributable to uncollectable deductible and 
     coinsurance payments owed by individuals enrolled in a State 
     plan under title XIX or under the MediGrant program under 
     title XXI.''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to hospital cost reporting periods beginning on 
     or after October 1, 1995.

     SEC. 15507. PERMANENT EXTENSION OF HEMOPHILIA PASS-THROUGH.

       Effective as if included in the enactment of OBRA-1989, 
     section 6011(d) of such Act (as amended by section 13505 of 
     OBRA-1993) is amended by striking ``and shall expire 
     September 30, 1994''.

     SEC. 15508. CONFORMING AMENDMENT TO CERTIFICATION OF 
                   CHRISTIAN SCIENCE PROVIDERS.

       (a) Hospitals.--Section 1861(e) (42 U.S.C. 1395x(e)) is 
     amended in the sixth sentence by inserting after 
     ``Massachusetts,'' the following: ``or by the Commission for 
     Accreditation of Christian Science Nursing Organizations/
     Facilities, Inc.,''.
       (b) Skilled Nursing Facilities.--Section 1861(y)(1) is 
     amended by inserting after ``Massachusetts,'' the following: 
     ``or by the Commission for Accreditation of Christian Science 
     Nursing Organizations/Facilities, Inc.,''.

           Subpart B--Provisions Relating to Rural Hospitals

     SEC. 15511. SOLE COMMUNITY HOSPITALS.

       (a) Update.--Section 1886(b)(3)(B)(iv) (42 U.S.C. 
     1395ww(b)(3)(B)(iv)) is amended--
       (A) in subclause (III), by striking ``and'' at the end; and
       (B) by striking subclause (IV) and inserting the following:
       ``(IV) for each of the fiscal years 1996 through 2000, the 
     market basket percentage increase minus 1 percentage points, 
     and
       ``(V) for fiscal year 2001 and each subsequent fiscal year, 
     the applicable percentage increase under clause (i).''.
       (b) Study of Impact of Sole Community Hospital 
     Designations.--
       (1) Study.--The Medicare Payment Review Commission shall 
     conduct a study of the impact of the designation of hospitals 
     as sole community hospitals under the medicare program on the 
     delivery of health care services to individuals in rural 
     areas, and shall include in the study an analysis of the 
     characteristics of the hospitals designated as such sole 
     community hospitals under the program.
       (2) Report.--Not later than 12 months after the date a 
     majority of the members of the Commission are first 
     appointed, the Commission shall submit to Congress a report 
     on the study conducted under paragraph (1).

     SEC. 15512. CLARIFICATION OF TREATMENT OF EAC AND RPC 
                   HOSPITALS.

       Paragraphs (1)(A)(i) and (2)(A)(i) of section 1820(i) (42 
     U.S.C. 1395i@4(i)) are each amended by striking the semicolon 
     at the end and inserting the following: ``, or in a State 
     which the Secretary finds would receive a grant under such 
     subsection during a fiscal year if funds were appropriated 
     for grants under such subsection for the fiscal year;''.

     SEC. 15513. ESTABLISHMENT OF RURAL EMERGENCY ACCESS CARE 
                   HOSPITALS.

       (a) In General.--Section 1861 (42 U.S.C. 1395x) is amended 
     by adding at the end the following new subsection:

  ``Rural Emergency Access Care Hospital; Rural Emergency Access Care 
                           Hospital Services

       ``(oo)(1) The term `rural emergency access care hospital' 
     means, for a fiscal year, a facility with respect to which 
     the Secretary finds the following:
       ``(A) The facility is located in a rural area (as defined 
     in section 1886(d)(2)(D)).
       ``(B) The facility was a hospital under this title at any 
     time during the 5-year period that ends on the date of the 
     enactment of this subsection.
       ``(C) The facility is in danger of closing due to low 
     inpatient utilization rates and operating losses, and the 
     closure of the facility would limit the access to emergency 
     services of individuals residing in the facility's service 
     area.
       ``(D) The facility has entered into (or plans to enter 
     into) an agreement with a hospital with a participation 
     agreement in effect under section 1866(a), and under such 
     agreement the hospital shall accept patients transferred to 
     the hospital from the facility and receive data from and 
     transmit data to the facility.
       ``(E) There is a practitioner who is qualified to provide 
     advanced cardiac life support services (as determined by the 
     State in which the facility is located) on-site at the 
     facility on a 24-hour basis.
       ``(F) A physician is available on-call to provide emergency 
     medical services on a 24-hour basis.
       ``(G) The facility meets such staffing requirements as 
     would apply under section 1861(e) to a hospital located in a 
     rural area, except that--
       ``(i) the facility need not meet hospital standards 
     relating to the number of hours during a day, or days during 
     a week, in which the facility must be open, except insofar as 
     the facility is required to provide emergency care on a 24-
     hour basis under subparagraphs (E) and (F); and
       ``(ii) the facility may provide any services otherwise 
     required to be provided by a full-time, on-site dietitian, 
     pharmacist, laboratory technician, medical technologist, or 
     radiological technologist on a part-time, off-site basis.
       ``(H) The facility meets the requirements applicable to 
     clinics and facilities under subparagraphs (C) through (J) of 
     paragraph (2) of section 1861(aa) and of clauses (ii) and 
     (iv) of the second sentence of such paragraph (or, in the 
     case of the requirements of subparagraph (E), (F), or (J) of 
     such paragraph, 

[[Page H 10180]]
     would meet the requirements if any reference in such subparagraph to a 
     `nurse practitioner' or to `nurse practitioners' were deemed 
     to be a reference to a `nurse practitioner or nurse' or to 
     `nurse practitioners or nurses'); except that in determining 
     whether a facility meets the requirements of this 
     subparagraph, subparagraphs (E) and (F) of that paragraph 
     shall be applied as if any reference to a `physician' is a 
     reference to a physician as defined in section 1861(r)(1).
       ``(2) The term `rural emergency access care hospital 
     services' means the following services provided by a rural 
     emergency access care hospital and furnished to an individual 
     over a continuous period not to exceed 24 hours (except that 
     such services may be furnished over a longer period in the 
     case of an individual who is unable to leave the hospital 
     because of inclement weather):
       ``(A) An appropriate medical screening examination (as 
     described in section 1867(a)).
       ``(B) Necessary stabilizing examination and treatment 
     services for an emergency medical condition and labor (as 
     described in section 1867(b)).''.
       (b) Requiring Rural Emergency Access Care Hospitals To Meet 
     Hospital Anti-Dumping Requirements.--Section 1867(e)(5) (42 
     U.S.C. 1395dd(e)(5)) is amended by striking ``1861(mm)(1))'' 
     and inserting ``1861(mm)(1)) and a rural emergency access 
     care hospital (as defined in section 1861(oo)(1))''.
       (c) Reference to Payment Provisions Under Part B.--For 
     provisions relating to payment for rural emergency access 
     care hospital services under part B, see section 15607.
       (d) Effective Date.--The amendments made by this section 
     shall apply to fiscal years beginning on or after October 1, 
     1995.

     SEC. 15514. CLASSIFICATION OF RURAL REFERRAL CENTERS.

       (a) Prohibiting Denial of Request for Reclassification on 
     Basis of Comparability of Wages.--
       (1) In general.--Section 1886(d)(10)(D) (42 U.S.C. 
     1395ww(d)(10)(D)) is amended--
       (A) by redesignating clause (iii) as clause (iv); and
       (B) by inserting after clause (ii) the following new 
     clause:
       ``(iii) Under the guidelines published by the Secretary 
     under clause (i), in the case of a hospital which is 
     classified by the Secretary as a rural referral center under 
     paragraph (5)(C), the Board may not reject the application of 
     the hospital under this paragraph on the basis of any 
     comparison between the average hourly wage of the hospital 
     and the average hourly wage of hospitals in the area in which 
     it is located.''.
       (2) Effective date.--Notwithstanding section 
     1886(d)(10)(C)(ii) of the Social Security Act, a hospital may 
     submit an application to the Medicare Geographic 
     Classification Review Board during the 30-day period 
     beginning on the date of the enactment of this Act requesting 
     a change in its classification for purposes of determining 
     the area wage index applicable to the hospital under section 
     1886(d)(3)(D) of such Act for fiscal year 1997, if the 
     hospital would be eligible for such a change in its 
     classification under the standards described in section 
     1886(d)(10)(D) (as amended by paragraph (1)) but for its 
     failure to meet the deadline for applications under section 
     1886(d)(10)(C)(ii).
       (b) Continuing Treatment of Previously Designated 
     Centers.--Any hospital classified as a rural referral center 
     by the Secretary of Health and Human Services under section 
     1886(d)(5)(C) of the Social Security Act for fiscal year 1994 
     shall be classified as such a rural referral center for 
     fiscal year 1996 and each subsequent fiscal year.

     SEC. 15515. FLOOR ON AREA WAGE INDEX.

       (a) In General.--For purposes of section 1886(d)(3)(E) of 
     the Social Security Act for discharges occurring on or after 
     October 1, 1995, the area wage index applicable under such 
     section to any hospital which is not located in a rural area 
     (as defined in section 1886(d)(2)(D) of such Act) may not be 
     less than the average of the area wage indices applicable 
     under such section to hospitals located in rural areas in the 
     State in which the hospital is located.
       (b) Budget-Neutrality in Implementation.--The Secretary of 
     Health and Human Services shall adjust the area wage indices 
     referred to in subsection (a) for hospitals not described in 
     such subsection in a manner which assures that the aggregate 
     payments made under section 1886(d) of the Social Security 
     Act in a fiscal year for the operating costs of inpatient 
     hospital services are not greater or less than those which 
     would have been made in the year if this section did not 
     apply.

             PART 2--PAYMENTS TO SKILLED NURSING FACILITIES

     SEC. 15521. PAYMENTS FOR ROUTINE SERVICE COSTS.

       (a) Clarification of Definition of Routine Service Costs.--
     Section 1888 (42 U.S.C. 1395yy) is amended by adding at the 
     end the following new subsection:
       ``(e) For purposes of this section, the `routine service 
     costs' of a skilled nursing facility are all costs which are 
     attributable to nursing services, room and board, 
     administrative costs, other overhead costs, and all other 
     ancillary services (including supplies and equipment), 
     excluding costs attributable to covered non-routine services 
     subject to payment limits under section 1888A.''.
       (b) Conforming Amendment.--Section 1888 (42 U.S.C. 1395yy) 
     is amended in the heading by inserting ``and certain 
     ancillary'' after ``service''.

     SEC. 15522. INCENTIVES FOR COST EFFECTIVE MANAGEMENT OF 
                   COVERED NON-ROUTINE SERVICES.

       (a) In General.--Title XVIII is amended by inserting after 
     section 1888 the following new section:


   ``incentives for cost-effective management of covered non-routine 
                 services of skilled nursing facilities

       ``Sec. 1888A. (a) Definitions.--For purposes of this 
     section:
       ``(1) Covered non-routine services.--The term `covered non-
     routine services' means post-hospital extended care services 
     consisting of any of the following:
       ``(A) Physical or occupational therapy or speech-language 
     pathology services, or respiratory therapy, including 
     supplies and support services incident to such services and 
     therapy.
       ``(B) Prescription drugs.
       ``(C) Complex medical equipment.
       ``(D) Intravenous therapy and solutions (including enteral 
     and parenteral nutrients, supplies, and equipment).
       ``(E) Radiation therapy.
       ``(F) Diagnostic services, including laboratory, radiology 
     (including computerized tomography services and imaging 
     services), and pulmonary services.
       ``(2) SNF market basket percentage increase.--The term `SNF 
     market basket percentage increase' for a fiscal year means a 
     percentage equal to the percentage increase in routine 
     service cost limits for the year under section 1888(a).
       ``(3) Stay.--The term `stay' means, with respect to an 
     individual who is a resident of a skilled nursing facility, a 
     period of continuous days during which the facility provides 
     extended care services for which payment may be made under 
     this title with respect to the individual during the 
     individual's spell of illness.
       ``(b) New Payment Method for Covered Non-Routine 
     Services.--
       ``(1) In general.--Subject to subsection (c), a skilled 
     nursing facility shall receive interim payments under this 
     title for covered non-routine services furnished to an 
     individual during a cost reporting period beginning during a 
     fiscal year (after fiscal year 1996) in an amount equal to 
     the reasonable cost of providing such services in accordance 
     with section 1861(v). The Secretary may adjust such payments 
     if the Secretary determines (on the basis of such estimated 
     information as the Secretary considers appropriate) that 
     payments to the facility under this paragraph for a cost 
     reporting period would substantially exceed the cost 
     reporting period limit determined under subsection (c)(1)(B).
       ``(2) Responsibility of skilled nursing facility to manage 
     billings.--
       ``(A) Clarification relating to part a billing.--In the 
     case of a covered non-routine service furnished to an 
     individual who (at the time the service is furnished) is a 
     resident of a skilled nursing facility who is entitled to 
     coverage under section 1812(a)(2) for such service, the 
     skilled nursing facility shall submit a claim for payment 
     under this title for such service under part A (without 
     regard to whether or not the item or service was furnished by 
     the facility, by others under arrangement with them made by 
     the facility, under any other contracting or consulting 
     arrangement, or otherwise).
       ``(B) Part b billing.--In the case of a covered non-routine 
     service (other than a portable X-ray or portable 
     electrocardiogram treated as a physician's service for 
     purposes of section 1848(j)(3)) furnished to an individual 
     who (at the time the service is furnished) is a resident of a 
     skilled nursing facility who is not entitled to coverage 
     under section 1812(a)(2) for such service but is entitled to 
     coverage under part B for such service, the skilled nursing 
     facility shall submit a claim for payment under this title 
     for such service under part B (without regard to whether or 
     not the item or service was furnished by the facility, by 
     others under arrangement with them made by the facility, 
     under any other contracting or consulting arrangement, or 
     otherwise).
       ``(C) Maintaining records on services furnished to 
     residents.--Each skilled nursing facility receiving payments 
     for extended care services under this title shall document on 
     the facility's cost report all covered non-routine services 
     furnished to all residents of the facility to whom the 
     facility provided extended care services for which payment 
     was made under part A during a fiscal year (beginning with 
     fiscal year 1996) (without regard to whether or not the 
     services were furnished by the facility, by others under 
     arrangement with them made by the facility, under any other 
     contracting or consulting arrangement, or otherwise).
       ``(c) Reconciliation of Amounts.--
       ``(1) Limit based on per stay limit and number of stays.--
       ``(A) In general.--If a skilled nursing facility has 
     received aggregate payments under subsection (b) for covered 
     non-routine services during a cost reporting period beginning 
     during a fiscal year in excess of an amount equal to the cost 
     reporting period limit determined under subparagraph (B), the 
     Secretary shall reduce the payments made to the facility with 
     respect to such services for cost reporting periods beginning 
     during the following fiscal year in an amount equal to such 
     excess. The Secretary 

[[Page H 10181]]
     shall reduce payments under this subparagraph at such times and in such 
     manner during a fiscal year as the Secretary finds necessary 
     to meet the requirement of this subparagraph.
       ``(B) Cost reporting period limit.--The cost reporting 
     period limit determined under this subparagraph is an amount 
     equal to the product of--
       ``(i) the per stay limit applicable to the facility under 
     subsection (d) for the period; and
       ``(ii) the number of stays beginning during the period for 
     which payment was made to the facility for such services.
       ``(C) Prospective reduction in payments.--In addition to 
     the process for reducing payments described in subparagraph 
     (A), the Secretary may reduce payments made to a facility 
     under this section during a cost reporting period if the 
     Secretary determines (on the basis of such estimated 
     information as the Secretary considers appropriate) that 
     payments to the facility under this section for the period 
     will substantially exceed the cost reporting period limit for 
     the period determined under this paragraph.
       ``(2) Incentive payments.--
       ``(A) In general.--If a skilled nursing facility has 
     received aggregate payments under subsection (b) for covered 
     non-routine services during a cost reporting period beginning 
     during a fiscal year in an amount that is less than the 
     amount determined under paragraph (1)(B), the Secretary shall 
     pay the skilled nursing facility in the following fiscal year 
     an incentive payment equal to 50 percent of the difference 
     between such amounts, except that the incentive payment may 
     not exceed 5 percent of the aggregate payments made to the 
     facility under subsection (b) for the previous fiscal year 
     (without regard to subparagraph (B)).
       ``(B) Installment incentive payments.--The Secretary may 
     make installment payments during a fiscal year to a skilled 
     nursing facility based on the estimated incentive payment 
     that the facility would be eligible to receive with respect 
     to such fiscal year.
       ``(d) Determination of Facility Per Stay Limit.--
       ``(1) Limit for fiscal year 1997.--
       ``(A) In general.--Except as provided in subparagraph (B), 
     the Secretary shall establish separate per stay limits for 
     hospital-based and freestanding skilled nursing facilities 
     for the 12-month cost reporting period beginning during 
     fiscal year 1997 that are equal to the sum of--
       ``(i) 50 percent of the facility-specific stay amount for 
     the facility (as determined under subsection (e)) for the 
     last 12-month cost reporting period ending on or before 
     September 30, 1994, increased (in a compounded manner) by the 
     SNF market basket percentage increase for fiscal years 1995 
     through 1997; and
       ``(ii) 50 percent of the average of all facility-specific 
     stay amounts for all hospital-based facilities or all 
     freestanding facilities (whichever is applicable) during the 
     cost reporting period described in clause (i), increased (in 
     a compounded manner) by the SNF market basket percentage 
     increase for fiscal years 1995 through 1997.
       ``(B) Facilities not having 1994 cost reporting period.--In 
     the case of a skilled nursing facility for which payments 
     were not made under this title for covered non-routine 
     services for the last 12-month cost reporting period ending 
     on or before September 30, 1994, the per stay limit for the 
     12-month cost reporting period beginning during fiscal year 
     1997 shall be twice the amount determined under subparagraph 
     (A)(ii).
       ``(2) Limit for subsequent fiscal years.--The per stay 
     limit for a skilled nursing facility for a 12-month cost 
     reporting period beginning during a fiscal year after fiscal 
     year 1997 is equal to the per stay limit established under 
     this subsection for the 12-month cost reporting period 
     beginning during the previous fiscal year, increased by the 
     SNF market basket percentage increase for such subsequent 
     fiscal year minus 2 percentage points.
       ``(3) Rebasing of amounts.--
       ``(A) In general.--The Secretary shall provide for an 
     update to the facility-specific amounts used to determine the 
     per stay limits under this subsection for cost reporting 
     periods beginning on or after October 1, 1999, and every 2 
     years thereafter.
       ``(B) Treatment of facilities not having rebased cost 
     reporting periods.--Paragraph (1)(B) shall apply with respect 
     to a skilled nursing facility for which payments were not 
     made under this title for covered non-routine services for 
     the 12-month cost reporting period used by the Secretary to 
     update facility-specific amounts under subparagraph (A) in 
     the same manner as such paragraph applies with respect to a 
     facility for which payments were not made under this title 
     for covered non-routine services for the last 12-month cost 
     reporting period ending on or before September 30, 1994.
       ``(e) Determination of Facility-Specific Stay Amounts.--The 
     `facility-specific stay amount' for a skilled nursing 
     facility for a cost reporting period is the sum of--
       ``(1) the average amount of payments made to the facility 
     under part A during the period which are attributable to 
     covered non-routine services furnished during a stay; and
       ``(2) the Secretary's best estimate of the average amount 
     of payments made under part B during the period for covered 
     non-routine services furnished to all residents of the 
     facility to whom the facility provided extended care services 
     for which payment was made under part A during the period 
     (without regard to whether or not the services were furnished 
     by the facility, by others under arrangement with them made 
     by the facility, under any other contracting or consulting 
     arrangement, or otherwise), as estimated by the Secretary.
       ``(f) Intensive Nursing or Therapy Needs.--
       ``(1) In general.--In applying subsection (b) to covered 
     non-routine services furnished during a stay beginning during 
     a cost reporting period beginning during a fiscal year to a 
     resident of a skilled nursing facility who requires intensive 
     nursing or therapy services, the per stay limit determined 
     for the fiscal year under the methodology for such resident 
     shall be the per stay limit developed under paragraph (2) 
     instead of the per stay limit determined under subsection 
     (d)(1)(A).
       ``(2) Per stay limit for intensive need residents.--Not 
     later than June 30, 1996, the Secretary, after consultation 
     with the Medicare Payment Review Commission and skilled 
     nursing facility experts, shall develop and publish a 
     methodology for determining on an annual basis a per stay 
     limit for residents of a skilled nursing facility who require 
     intensive nursing or therapy services.
       ``(3) Budget neutrality.--The Secretary shall adjust 
     payments under subsection (b) in a manner that ensures that 
     total payments for covered non-routine services under this 
     section are not greater or less than total payments for such 
     services would have been but for the application of paragraph 
     (1).
       ``(g) Special Treatment for Medicare Low Volume Skilled 
     Nursing Facilities.--This section shall not apply with 
     respect to a skilled nursing facility for which payment is 
     made for routine service costs during a cost reporting period 
     on the basis of prospective payments under section 1888(d).
       ``(h) Exceptions and Adjustments to Limits.--
       ``(1) In general.--The Secretary may make exceptions and 
     adjustments to the cost reporting limits applicable to a 
     skilled nursing facility under subsection (c)(1)(B) for a 
     cost reporting period, except that the total amount of any 
     additional payments made under this section for covered non-
     routine services during the cost reporting period as a result 
     of such exceptions and adjustments may not exceed 5 percent 
     of the aggregate payments made to all skilled nursing 
     facilities for covered non-routine services during the cost 
     reporting period (determined without regard to this 
     paragraph).
       ``(2) Budget neutrality.--The Secretary shall adjust 
     payments under subsection (b) in a manner that ensures that 
     total payments for covered non-routine services under this 
     section are not greater or less than total payments for such 
     services would have been but for the application of paragraph 
     (1).
       ``(i) Special Rule for X-Ray Services.--Before furnishing a 
     covered non-routine service consisting of an X-ray service 
     for which payment may be made under part A or part B to a 
     resident, a skilled nursing facility shall consider whether 
     furnishing the service through a provider of portable X-ray 
     service services would be appropriate, taking into account 
     the cost effectiveness of the service and the convenience to 
     the resident.''.
       (b) Conforming Amendment.--Section 1814(b) (42 U.S.C. 
     1395f(b)) is amended in the matter preceding paragraph (1) by 
     striking ``1813 and 1886'' and inserting ``1813, 1886, 1888, 
     and 1888A''.

     SEC. 15523. PAYMENTS FOR ROUTINE SERVICE COSTS.

       (a) Maintaining Savings Resulting From Temporary Freeze on 
     Payment Increases.--
       (1) Basing updates to per diem cost limits on limits for 
     fiscal year 1993.--
       (A) In general.--The last sentence of section 1888(a) (42 
     U.S.C. 1395yy(a)) is amended by inserting before the period 
     at the end the following: ``(except that such updates may not 
     take into account any changes in the routine service costs of 
     skilled nursing facilities occurring during cost reporting 
     periods which began during fiscal year 1994 or fiscal year 
     1995)''.
       (B) No exceptions permitted based on amendment.--The 
     Secretary of Health and Human Services shall not consider the 
     amendment made by subparagraph (A) in making any adjustments 
     pursuant to section 1888(c) of the Social Security Act.
       (2) Payments determined on prospective basis.--Any change 
     made by the Secretary of Health and Human Services in the 
     amount of any prospective payment paid to a skilled nursing 
     facility under section 1888(d) of the Social Security Act for 
     cost reporting periods beginning on or after October 1, 1995, 
     may not take into account any changes in the costs of 
     services occurring during cost reporting periods which began 
     during fiscal year 1994 or fiscal year 1995.
       (b) Establishment of Schedule for Making Adjustments to 
     Limits.--Section 1888(c) (42 U.S.C. 1395yy(c)) is amended by 
     striking the period at the end of the second sentence and 
     inserting ``, and may only make adjustments under this 
     subsection with respect to a facility which applies for an 
     adjustment during an annual application period established by 
     the Secretary.''.
       (c) Limitation on Aggregate Increase in Payments Resulting 
     from Adjustments to Limits.--Section 1888(c) (42 U.S.C. 
     1395yy(c)) is amended--
       (1) by striking ``(c) The Secretary'' and inserting 
     ``(c)(1) Subject to paragraph (2), the Secretary''; and
       (2) by adding at the end the following new paragraph:

[[Page H 10182]]

       ``(2) The Secretary may not make any adjustments under this 
     subsection in the limits set forth in subsection (a) for a 
     cost reporting period beginning during a fiscal year to the 
     extent that the total amount of the additional payments made 
     under this title as a result of such adjustments is greater 
     than an amount equal to--
       ``(A) for cost reporting periods beginning during fiscal 
     year 1997, the total amount of the additional payments made 
     under this title as a result of adjustments under this 
     subsection for cost reporting periods beginning during fiscal 
     year 1996 increased by the SNF market basket percentage 
     increase (as defined in section 1888A(e)(3)) for fiscal year 
     1997; and
       ``(B) for cost reporting periods beginning during a 
     subsequent fiscal year, the amount determined under this 
     paragraph for the previous fiscal year increased by the SNF 
     market basket percentage increase for such subsequent fiscal 
     year.''.
       (d) Imposition of Limits For All Cost Reporting Periods.--
     Section 1888(a) (42 U.S.C. 1395yy(a)) is amended in the 
     matter preceding paragraph (1) by inserting after ``extended 
     care services'' the following: ``(for any cost reporting 
     period for which payment is made under this title to the 
     skilled nursing facility for such services)''.

     SEC. 15524. REDUCTIONS IN PAYMENT FOR CAPITAL-RELATED COSTS.

       Section 1861(v)(1) (42 U.S.C. 1395x(v)(1)), as amended by 
     section 15506, is amended by adding at the end the following 
     new subparagraph:
       ``(U) Such regulations shall provide that, in determining 
     the amount of the payments that may be made under this title 
     with respect to all the capital-related costs of skilled 
     nursing facilities, the Secretary shall reduce the amounts of 
     such payments otherwise established under this title by 15 
     percent for payments attributable to portions of cost 
     reporting periods occurring during fiscal years 1996 through 
     2002.''.

     SEC. 15525. TREATMENT OF ITEMS AND SERVICES PAID FOR UNDER 
                   PART B.

       (a) Requiring Payment for All Items and Services to Be Made 
     to Facility.--
       (1) In general.--The first sentence of section 1842(b)(6) 
     (42 U.S.C. 1395u(b)(6)) is amended--
       (A) by striking ``and (D)'' and inserting ``(D)''; and
       (B) by striking the period at the end and inserting the 
     following: ``, and (E) in the case of an item or service 
     (other than physicians' services and other than a portable X-
     ray or portable electrocardiogram treated as a physician's 
     service for purposes of section 1848(j)(3)) furnished to an 
     individual who (at the time the item or service is furnished) 
     is a resident of a skilled nursing facility, payment shall be 
     made to the facility (without regard to whether or not the 
     item or service was furnished by the facility, by others 
     under arrangement with them made by the facility, or 
     otherwise).''.
       (2) Exclusion for items and services not billed by 
     facility.--Section 1862(a) (42 U.S.C. 1395y(a)) is amended--
       (A) by striking ``or'' at the end of paragraph (14);
       (B) by striking the period at the end of paragraph (15) and 
     inserting ``; or''; and
       (C) by inserting after paragraph (15) the following new 
     paragraph:
       ``(16) where such expenses are for covered non-routine 
     services (as defined in section 1888A(a)(1)) (other than a 
     portable X-ray or portable electrocardiogram treated as a 
     physician's service for purposes of section 1848(j)(3)) 
     furnished to an individual who is a resident of a skilled 
     nursing facility and for which the claim for payment under 
     this title is not submitted by the facility.''.
       (3) Conforming amendment.--Section 1832(a)(1) (42 U.S.C. 
     1395k(a)(1)) is amended by striking ``(2);'' and inserting 
     ``(2) and section 1842(b)(6)(E);''.
       (b) Reduction in Payments for Items and Services Furnished 
     by or Under Arrangements With Facilities.--Section 1861(v)(1) 
     (42 U.S.C. 1395x(v)(1)), as amended by sections 15506 and 
     15524, is amended by adding at the end the following new 
     subparagraph:
       ``(V) In the case of an item or service furnished by a 
     skilled nursing facility (or by others under arrangement with 
     them made by a skilled nursing facility) for which payment is 
     made under part B in an amount determined in accordance with 
     section 1833(a)(2)(B), the Secretary shall reduce the 
     reasonable cost for such item or service otherwise determined 
     under clause (i)(I) of such section by 5.8 percent for 
     payments attributable to portions of cost reporting periods 
     occurring during fiscal years 1996 through 2002.''.

     SEC. 15526. CERTIFICATION OF FACILITIES MEETING REVISED 
                   NURSING HOME REFORM STANDARDS.

       (a) In General.--Section 1819(a)(3) (42 U.S.C. 
     1395i@3(a)(3)) is amended to read as follows:
       ``(3)(A) is certified by the Secretary as meeting the 
     standards established under subsection (b), or (B) is a 
     State-certified facility (as defined in subsection (d)).''.
       (b) Requirements Described.--Section 1819 (42 U.S.C. 
     1395i@3) is amended by striking subsections (b) through (i) 
     and inserting the following:
       ``(b) Standards for and Certification of Facilities.--
       ``(1) Standards for facilities.--
       ``(A) In general.--The Secretary shall provide for the 
     establishment and maintenance of standards consistent with 
     the contents described in subparagraph (B) for skilled 
     nursing facilities which furnish services for which payment 
     may be made under this title.
       ``(B) Contents of standards.--The standards established for 
     facilities under this paragraph shall contain provisions 
     relating to the following items:
       ``(i) The treatment of resident medical records.
       ``(ii) Policies, procedures, and bylaws for operation.
       ``(iii) Quality assurance systems.
       ``(iv) Resident assessment procedures, including care 
     planning and outcome evaluation.
       ``(v) The assurance of a safe and adequate physical plant 
     for the facility.
       ``(vi) Qualifications for staff sufficient to provide 
     adequate care.
       ``(vii) Utilization review.
       ``(viii) The protection and enforcement of resident rights 
     described in subparagraph (C).
       ``(C) Resident rights described.--The resident rights 
     described in this subparagraph are the rights of residents to 
     the following:
       ``(i) To exercise the individual's rights as a resident of 
     the facility and as a citizen or resident of the United 
     States.
       ``(ii) To receive notice of rights and services.
       ``(iii) To be protected against the misuse of resident 
     funds.
       ``(iv) To be provided privacy and confidentiality.
       ``(v) To voice grievances.
       ``(vi) To examine the results of inspections under the 
     certification program.
       ``(vii) To refuse to perform services for the facility.
       ``(viii) To be provided privacy in communications and to 
     receive mail.
       ``(ix) To have the facility provide immediate access to any 
     resident by any representative of the certification program, 
     the resident's individual physician, the State long term care 
     ombudsman, and any person the resident has designated as a 
     visitor.
       ``(x) To retain and use personal property.
       ``(xi) To be free from abuse, including verbal, sexual, 
     physical and mental abuse, corporal punishment, and 
     involuntary seclusion.
       ``(xii) To be provided with prior written notice of a 
     pending transfer or discharge.
       ``(D) Requiring notice and comment.--The standards 
     established for facilities under this paragraph may only take 
     effect after the Secretary has provided the public with 
     notice and an opportunity for comment.
       ``(2) Certification program.--
       ``(A) In general.--The Secretary shall provide for the 
     establishment and operation of a program consistent with the 
     requirements of subparagraph (B) for the certification of 
     skilled nursing facilities which meet the standards 
     established under paragraph (1) and the decertification of 
     facilities which fail to meet such standards.
       ``(B) Requirements for program.--In addition to any other 
     requirements the Secretary may impose, in establishing and 
     operating the certification program under subparagraph (A), 
     the Secretary shall ensure the following:
       ``(i) The Secretary shall ensure public access (as defined 
     by the Secretary) to the certification program's evaluations 
     of participating facilities, including compliance records and 
     enforcement actions and other reports by the Secretary 
     regarding the ownership, compliance histories, and services 
     provided by certified facilities.
       ``(ii) Not less often than every 4 years, the Secretary 
     shall audit its expenditures under the program, through an 
     entity designated by the Secretary which is not affiliated 
     with the program, as designated by the Secretary.
       ``(c) Intermediate Sanction Authority.--
       ``(1) Authority.--In addition to any other authority, where 
     the Secretary determines that a nursing facility which is 
     certified for participation under this title (whether 
     certified by the Secretary as meeting the standards 
     established under subsection (b) or a State-ceritified 
     facility) no longer or does not substantially meet the 
     requirements for such a facility under this title as 
     specified under subsection (b) and further determines that 
     the facility's deficiencies--
       ``(A) immediately jeopardize the health and safety of its 
     residents, the Secretary shall at least provide for the 
     termination of the facility's certification for participation 
     under this title, or
       ``(B) do not immediately jeopardize the health and safety 
     of its residents, the Secretary may, in lieu of providing for 
     terminating the facility's certification for participation 
     under the plan, provide lesser sanctions including one that 
     provides that no payment will be made under this title with 
     respect to any individual admitted to such facility after a 
     date specified by the Secretary.
       ``(2) Notice.--The Secretary shall not make such a decision 
     with respect to a facility until the facility has had a 
     reasonable opportunity, following the initial determination 
     that it no longer or does not substantially meet the 
     requirements for such a facility under this title, to correct 
     its deficiencies, and, following this period, has been given 
     reasonable notice and opportunity for a hearing.
       ``(3) Effectiveness.--The Secretary's decision to deny 
     payment may be made effective only after such notice to the 
     public and to the facility as may be provided for by the 

[[Page H 10183]]
     Secretary, and its effectiveness shall terminate (A) when the Secretary 
     finds that the facility is in substantial compliance (or is 
     making good faith efforts to achieve substantial compliance) 
     with the requirements for such a facility under this title, 
     or (B) in the case described in paragraph (1)(B), with the 
     end of the eleventh month following the month such decision 
     is made effective, whichever occurs first. If a facility to 
     which clause (B) of the previous sentence applies still fails 
     to substantially meet the provisions of the respective 
     section on the date specified in such clause, the Secretary 
     shall terminate such facility's certification for 
     participation under this title effective with the first day 
     of the first month following the month specified in such 
     clause.
       ``(d) State-Certified Facility Defined.--In subsection (a), 
     a `State-certified facility' means a facility licensed or 
     certified as a skilled nursing facility by the State in which 
     it is located, or a facility which otherwise meets the 
     requirements applicable to providers of nursing facility 
     services under the State plan under title XIX or the 
     MediGrant program under title XXI.''.
       (c) Conforming Amendments.--(1) Section 1861(v)(1)(E) (42 
     U.S.C. 1395x(v)(1)(E)) is amended by striking the second 
     sentence.
       (2) Section 1864 (42 U.S.C. 1395aa) is amended by striking 
     subsection (d).
       (3) Section 1866(f)(1) (42 U.S.C. 1395cc(f)(1)) is amended 
     by striking ``1819(c)(2)(E),''.
       (4) Section 1883(f) (42 U.S.C. 1395tt(f)) is amended--
       (A) in the second sentence, by striking ``such a hospital'' 
     and inserting ``a hospital which enters into an agreement 
     with the Secretary under this section''; and
       (B) by striking the first sentence.
       (d) Effective Date.--The amendments made by this section 
     shall apply with respect to cost reporting periods beginning 
     on or after October 1, 1995.

     SEC. 15527. MEDICAL REVIEW PROCESS.

       In order to ensure that medicare beneficiaries are 
     furnished appropriate extended care services, the Secretary 
     of Health and Human Services shall establish and implement a 
     thorough medical review process to examine the effects of the 
     amendments made by this part on the quality of extended care 
     services furnished to medicare beneficiaries. In developing 
     such a medical review process, the Secretary shall place a 
     particular emphasis on the quality of non-routine covered 
     services for which payment is made under section 1888A of the 
     Social Security Act.

     SEC. 15528. REPORT BY MEDICARE PAYMENT REVIEW COMMISSION.

       Not later than October 1, 1997, the Medicare Payment Review 
     Commission shall submit to Congress a report on the system 
     under which payment is made under the medicare program for 
     extended care services furnished by skilled nursing 
     facilities, and shall include in the report the following:
       (1) An analysis of the effect of the methodology 
     established under section 1888A of the Social Security Act 
     (as added by section 15522) on the payments for, and the 
     quality of, extended care services under the medicare 
     program.
       (2) An analysis of the advisability of determining the 
     amount of payment for covered non-routine services of 
     facilities (as described in such section) on the basis of the 
     amounts paid for such services when furnished by suppliers 
     under part B of the medicare program.
       (3) An analysis of the desirability of maintaining separate 
     limits for hospital-based and freestanding facilities in the 
     costs of extended care services recognized as reasonable 
     under the medicare program.
       (4) An analysis of the quality of services furnished by 
     skilled nursing facilities.
       (5) An analysis of the adequacy of the process and 
     standards used to provide exceptions to the limits described 
     in paragraph (3).

     SEC. 15529. EFFECTIVE DATE.

       Except as otherwise provided in this part, the amendments 
     made by this part shall apply to services furnished during 
     cost reporting periods (or portions of cost reporting 
     periods) beginning on or after October 1, 1996.

         PART 3--CLARIFICATION OF CREDITS TO PART A TRUST FUND

     SEC. 15531. CLARIFICATION OF AMOUNT OF TAXES CREDITED TO 
                   FEDERAL HOSPITAL INSURANCE TRUST FUND.

       Section 121(e)(1)(B) of the Social Security Amendments of 
     1983 (Public Law 98-21) is amended by adding at the end the 
     following: ``The Secretary of the Treasury shall carry out 
     this subparagraph without regard to any amendments to this 
     subsection or to section 86 of the Internal Revenue Code of 
     1986 which take effect on or after January 1, 1994.''.
           Subtitle G--Provisions Relating to Medicare Part B

                        PART 1--PAYMENT REFORMS

     SEC. 15601. PAYMENTS FOR PHYSICIANS' SERVICES.

       (a) Replacement of Volume Performance Standard With 
     Sustainable Growth Rate.--Section 1848(f) (42 U.S.C. 
     1395w@4(f)) is amended to read as follows:
       ``(f) Sustainable Growth Rate.--
       ``(1) Specification of growth rate.--
       ``(A) Fiscal year 1996.--The sustainable growth rate for 
     all physicians' services for fiscal year 1996 shall be equal 
     to the product of--
       ``(i) 1 plus the Secretary's estimate of the percentage 
     change in the medicare economic index for 1996 (described in 
     the fourth sentence of section 1842(b)(3)) (divided by 100),
       ``(ii) 1 plus the Secretary's estimate of the percentage 
     change (divided by 100) in the average number of individuals 
     enrolled under this part (other than private plan enrollees) 
     from fiscal year 1995 to fiscal year 1996,
       ``(iii) 1 plus the Secretary's estimate of the projected 
     percentage growth in real gross domestic product per capita 
     (divided by 100) from fiscal year 1995 to fiscal year 1996, 
     plus 2 percentage points, and
       ``(iv) 1 plus the Secretary's estimate of the percentage 
     change (divided by 100) in expenditures for all physicians' 
     services in fiscal year 1996 (compared with fiscal year 1995) 
     which will result from changes in law, determined without 
     taking into account estimated changes in expenditures due to 
     changes in the volume and intensity of physicians' services 
     or changes in expenditures resulting from changes in the 
     update to the conversion factor under subsection (d),

     minus 1 and multiplied by 100.
       ``(B) Subsequent fiscal years.--The sustainable growth rate 
     for all physicians' services for fiscal year 1997 and each 
     subsequent fiscal year shall be equal to the product of--
       ``(i) 1 plus the Secretary's estimate of the percentage 
     change in the medicare economic index for the fiscal year 
     involved (described in the fourth sentence of section 
     1842(b)(3)) (divided by 100),
       ``(ii) 1 plus the Secretary's estimate of the percentage 
     change (divided by 100) in the average number of individuals 
     enrolled under this part (other than private plan enrollees) 
     from the previous fiscal year to the fiscal year involved,
       ``(iii) 1 plus the Secretary's estimate of the projected 
     percentage growth in real gross domestic product per capita 
     (divided by 100) from the previous fiscal year to the fiscal 
     year involved, plus 2 percentage points, and
       ``(iv) 1 plus the Secretary's estimate of the percentage 
     change (divided by 100) in expenditures for all physicians' 
     services in the fiscal year (compared with the previous 
     fiscal year) which will result from changes in law (including 
     changes made by the Secretary in response to section 1895), 
     determined without taking into account estimated changes in 
     expenditures due to changes in the volume and intensity of 
     physicians' services or changes in expenditures resulting 
     from changes in the update to the conversion factor under 
     subsection (d)(3),

     minus 1 and multiplied by 100.
       ``(2) Exclusion of services furnished to private plan 
     enrollees.--In this subsection, the term `physicians' 
     services' with respect to a fiscal year does not include 
     services furnished to an individual enrolled under this part 
     who has elected to receive benefits under this title for the 
     fiscal year through a MedicarePlus product offered under part 
     C or through enrollment with an eligible organization with a 
     risk-sharing contract under section 1876.''.
       (b) Establishing Update to Conversion Factor to Match 
     Spending Under Sustainable Growth Rate.--
       (1) In general.--Section 1848(d) (42 U.S.C. 1395w@4(d)) is 
     amended--
       (A) by striking paragraph (2);
       (B) by amending paragraph (3) to read as follows:
       ``(3) Update.--
       ``(A) In general.--Subject to subparagraph (E), for 
     purposes of this section the update for a year (beginning 
     with 1997) is equal to the product of--
       ``(i) 1 plus the Secretary's estimate of the percentage 
     increase in the medicare economic index (described in the 
     fourth sentence of section 1842(b)(3)) for the year (divided 
     by 100), and
       ``(ii) 1 plus the Secretary's estimate of the update 
     adjustment factor for the year (divided by 100),

     minus 1 and multiplied by 100.
       ``(B) Update adjustment factor.--The `update adjustment 
     factor' for a year is equal to the quotient of--
       ``(i) the difference between (I) the sum of the allowed 
     expenditures for physicians' services furnished during each 
     of the years 1995 through the year involved and (II) the sum 
     of the amount of actual expenditures for physicians' services 
     furnished during each of the years 1995 through the previous 
     year; divided by
       ``(ii) the Secretary's estimate of allowed expenditures for 
     physicians' services furnished during the year.
       ``(C) Determination of allowed expenditures.--For purposes 
     of subparagraph (B), allowed expenditures for physicians' 
     services shall be determined as follows (as estimated by the 
     Secretary):
       ``(i) In the case of allowed expenditures for 1995, such 
     expenditures shall be equal to actual expenditures for 
     services furnished during the 12-month period ending with 
     June of 1995.
       ``(ii) In the case of allowed expenditures for 1996 and 
     each subsequent year, such expenditures shall be equal to 
     allowed expenditures for the previous year, increased by the 
     sustainable growth rate under subsection (f) for the fiscal 
     year which begins during the year.
       ``(D) Determination of actual expenditures.--For purposes 
     of subparagraph (B), the amount of actual expenditures for 
     physicians' services furnished during a year shall be equal 
     to the amount of expenditures for such services during the 
     12-month period ending with June of the previous year.
       ``(E) Restriction on variation from medicare economic 
     index.--
       ``(i) In general.--Notwithstanding the amount of the update 
     adjustment factor determined under subparagraph (B) for a 
     year, 

[[Page H 10184]]
     the update in the conversion factor under this paragraph for the year 
     may not be--

       ``(I) greater than 103 percent of 1 plus the Secretary's 
     estimate of the percentage increase in the medicare economic 
     index (described in the fourth sentence of section 
     1842(b)(3)) for the year (divided by 100); or
       ``(II) less than the applicable percentage limit of 1 plus 
     the Secretary's estimate of the percentage increase in the 
     medicare economic index (described in the fourth sentence of 
     section 1842(b)(3)) for the year (divided by 100).

       ``(ii) Applicable percentage limit.--In clause (i)(II), the 
     `applicable percentage limit' for a year is--

       ``(I) for 1997, 93 percent;
       ``(II) for 1998, 92.25 percent; and
       ``(III) for 1999 and each succeeding year, 92 percent.''; 
     and

       (C) by adding at the end the following new paragraph:
       ``(4) Reporting requirements.--
       ``(A) In general.--Not later than November 1 of each year 
     (beginning with 1996), the Secretary shall transmit to the 
     Congress a report that describes the update in the conversion 
     factor for physicians' services (as defined in subsection 
     (f)(3)(A)) in the following year.
       ``(B) Commission review.--The Medicare Payment Review 
     Commission shall review the report submitted under 
     subparagraph (A) for a year and shall submit to the Congress, 
     by not later than December 1 of the year, a report containing 
     its analysis of the conversion factor for the following 
     year.''.
       (2) Effective date.--The amendments made by this subsection 
     shall apply to physicians' services furnished on or after 
     January 1, 1996.
       (c) Establishment of Single Conversion Factor for 1996.--
       (1) In general.--Section 1848(d)(1) (42 U.S.C. 
     1395w@4(d)(1)) is amended--
       (A) by redesignating subparagraph (C) as subparagraph (D); 
     and
       (B) by inserting after subparagraph (B) the following new 
     subparagraph:
       ``(C) Special rule for 1996.--For 1996, the conversion 
     factor under this subsection shall be $35.42 for all 
     physicians' services.''.
       (2) Conforming amendments.--Section 1848 (42 U.S.C. 
     1395w@4), as amended by paragraph (1), is amended--
       (A) by striking ``(or factors)'' each place it appears in 
     subsection (d)(1)(A) and (d)(1)(D)(ii);
       (B) in subsection (d)(1)(A), by striking ``or updates'';
       (C) in subsection (d)(1)(D)(ii), by striking ``(or 
     updates)''; and
       (D) in subsection (i)(1)(C), by striking ``conversion 
     factors'' and inserting ``the conversion factor''.

     SEC. 15602. ELIMINATION OF FORMULA-DRIVEN OVERPAYMENTS FOR 
                   CERTAIN OUTPATIENT HOSPITAL SERVICES.

       (a) Ambulatory Surgical Center Procedures.--Section 
     1833(i)(3)(B)(i)(II) (42 U.S.C. 1395l(i)(3)(B)(i)(II)) is 
     amended--
       (1) by striking ``of 80 percent''; and
       (2) by striking the period at the end and inserting the 
     following: ``, less the amount a provider may charge as 
     described in clause (ii) of section 1866(a)(2)(A).''.
       (b) Radiology Services and Diagnostic Procedures.--Section 
     1833(n)(1)(B)(i)(II) (42 U.S.C. 1395l(n)(1)(B)(i)(II)) is 
     amended--
       (1) by striking ``of 80 percent''; and
       (2) by striking the period at the end and inserting the 
     following: ``, less the amount a provider may charge as 
     described in clause (ii) of section 1866(a)(2)(A).''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to services furnished during portions of cost 
     reporting periods occurring on or after October 1, 1995.

     SEC. 15603. PAYMENTS FOR DURABLE MEDICAL EQUIPMENT.

       (a) Reduction in Payment Amounts for Items of Durable 
     Medical Equipment.--
       (1) Freeze in update for covered items.--Section 
     1834(a)(14) (42 U.S.C. 1395m(a)(14)) is amended--
       (A) by striking ``and'' at the end of subparagraph (A);
       (B) in subparagraph (B)--
       (i) by striking ``a subsequent year'' and inserting ``1993, 
     1994, and 1995'', and
       (ii) by striking the period at the end and inserting a 
     semicolon; and
       (C) by adding at the end the following:
       ``(C) for each of the years 1996 through 2002, 0 percentage 
     points; and
       ``(D) for a subsequent year, the percentage increase in the 
     consumer price index for all urban consumers (U.S. urban 
     average) for the 12-month period ending with June of the 
     previous year.''.
       (2) Update for orthotics and prosthetics.--Section 
     1834(h)(4)(A) (42 U.S.C. 1395m(h)(4)(A)) is amended--
       (A) by striking ``and'' at the end of clause (iii);
       (B) by redesignating clause (iv) as clause (v); and
       (C) by inserting after clause (iii) the following new 
     clause:
       ``(iv) for each of the years 1996 through 2002, 1 percent, 
     and''.
       (b) Oxygen and Oxygen Equipment.--Section 1834(a)(9)(C) (42 
     U.S.C. 1395m(a)(9)(C)) is amended--
       (1) by striking ``and'' at the end of clause (iii);
       (2) in clause (iv)--
       (A) by striking ``a subsequent year'' and inserting ``1993, 
     1994, and 1995'', and
       (B) by striking the period at the end and inserting a 
     semicolon; and
       (3) by adding at the end the following new clauses:
       ``(v) in 1996, is 80 percent of the national limited 
     monthly payment rate computed under subparagraph (B) for the 
     item for the year; and
       ``(vi) in a subsequent year, is the national limited 
     monthly payment rate computed under subparagraph (B) for the 
     item for the year.''.
       (c) Payment for Upgraded Durable Medical Equipment.--
     Section 1834(a) (42 U.S.C. 1395m(a)) is amended by inserting 
     after paragraph (15) the following new paragraph:
       ``(16) Payment for certain upgraded items.--
       ``(A) Individual's right to choose upgraded item.--
     Notwithstanding any other provision of this title, effective 
     on the date on which the Secretary issues regulations under 
     subparagraph (C), payment may be made under this part for an 
     upgraded item of durable medical equipment in the same manner 
     as payment may be made for a standard item of durable medical 
     equipment.
       ``(B) Payments to supplier.--In the case of the purchase or 
     rental of an upgraded item under subparagraph (A)--
       ``(i) the supplier shall receive payment under this 
     subsection with respect to such item as if such item were a 
     standard item; and
       ``(ii) the individual purchasing or renting the item shall 
     pay the supplier an amount equal to the difference between 
     the supplier's charge and the amount under clause (i).

     In no event may the supplier's charge for an upgraded item 
     exceed the applicable fee schedule amount (if any) for such 
     item.
       ``(C) Consumer protection safeguards.--The Secretary shall 
     issue regulations providing for consumer protection standards 
     with respect to the furnishing of upgraded equipment under 
     subparagraph (A). Such regulations shall provide for--
       ``(i) full disclosure by the supplier of the availability 
     and price of standard items and proof of receipt of such 
     disclosure information by the beneficiary before the 
     furnishing of the upgraded item;
       ``(ii) conditions of participation for suppliers of 
     upgraded items, including conditions relating to billing 
     procedures;
       ``(iii) sanctions (including exclusion) of suppliers who 
     are determined to have engaged in coercive or abusive 
     practices; and
       ``(iv) such other safeguards as the Secretary determines 
     are necessary.''.
       (d) Payment Freeze for Parenteral and Enteral Nutrients, 
     Supplies, and Equipment.--In determining the amount of 
     payment under part B of title XVIII of the Social Security 
     Act with respect to parenteral and enteral nutrients, 
     supplies, and equipment during each of the years 1996 through 
     2002, the charges determined to be reasonable with respect to 
     such nutrients, supplies, and equipment may not exceed the 
     charges determined to be reasonable with respect to such 
     nutrients, supplies, and equipment during 1993.

     SEC. 15604. REDUCTION IN UPDATES TO PAYMENT AMOUNTS FOR 
                   CLINICAL DIAGNOSTIC LABORATORY TESTS.

       (a) Change in Update.--Section 1833(h)(2)(A)(ii)(IV) (42 
     U.S.C. 1395l(h)(2) (A)(ii)(IV)) is amended by striking ``1994 
     and 1995'' and inserting ``1994 through 2002''.
       (b) Lowering Cap on Payment Amounts.--Section 1833(h)(4)(B) 
     (42 U.S.C. 1395l(h)(4)(B)) is amended--
       (1) in clause (vi), by striking ``and'' at the end;
       (2) in clause (vii)--
       (A) by inserting ``and before January 1, 1997,'' after 
     ``1995,'', and
       (B) by striking the period at the end and inserting ``, 
     and''; and
       (3) by adding at the end the following new clause:
       ``(viii) after December 31, 1996, is equal to 65 percent of 
     such median.''.

     SEC. 15605. EXTENSION OF REDUCTIONS IN PAYMENTS FOR COSTS OF 
                   HOSPITAL OUTPATIENT SERVICES.

       (a) Reduction in Payments for Capital-Related Costs.--
     Section 1861(v)(1)(S)(ii)(I) (42 U.S.C. 
     1395x(v)(1)(S)(ii)(I)) is amended by striking ``through 
     1998'' and inserting ``through 2002''.
       (b) Reduction in Payments for Other Costs.--Section 
     1861(v)(1)(S)(ii)(II) (42 U.S.C. 1395x(v)(1)(S)(ii)(II)) is 
     amended by striking ``through 1998'' and inserting ``through 
     2002''.

     SEC. 15606. FREEZE IN PAYMENTS FOR AMBULATORY SURGICAL CENTER 
                   SERVICES.

       The Secretary of Health and Human Services shall not 
     provide for any inflation update in the payment amounts under 
     subparagraphs (A) and (B) of section 1833(i)(2) of the Social 
     Security Act for any of the fiscal years 1996 through 2002.

     SEC. 15607. RURAL EMERGENCY ACCESS CARE HOSPITALS.

       (a) Coverage Under Part B.--Section 1832(a)(2) (42 U.S.C. 
     1395k(a)(2)) is amended--
       (1) by striking ``and'' at the end of subparagraph (I);
       (2) by striking the period at the end of subparagraph (J) 
     and inserting ``; and''; and
       (3) by adding at the end the following new subparagraph:
       ``(K) rural emergency access care hospital services (as 
     defined in section 1861(oo)(2)).''.
       (b) Payment Based on Payment for Outpatient Rural Primary 
     Care Hospital Services.--
       (1) In general.--Section 1833(a)(6) (42 U.S.C. 1395l(a)(6)) 
     is amended by striking ``services,'' and inserting ``services 
     and rural emergency access care hospital services,''.
       (2) Payment methodology described.--Section 1834(g) (42 
     U.S.C. 1395m(g)) is amended--

[[Page H 10185]]

       (A) in the heading, by striking ``Services'' and inserting 
     ``Services and Rural Emergency Access Care Hospital 
     Services''; and
       (B) by adding at the end the following new sentence: ``The 
     amount of payment for rural emergency access care hospital 
     services provided during a year shall be determined using the 
     applicable method provided under this subsection for 
     determining payment for outpatient rural primary care 
     hospital services during the year.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to services furnished on or after October 1, 
     1995.

     SEC. 15608. ENSURING PAYMENT FOR PHYSICIAN AND NURSE FOR 
                   JOINTLY FURNISHED ANESTHESIA SERVICES.

       (a) Payment for Jointly Furnished Single Case.--
       (1) Payment to physician.--Section 1848(a)(4) (42 U.S.C. 
     1395w@4(a)(4)) is amended by adding at the end the following 
     new subparagraph:
       ``(C) Payment for single case.--Notwithstanding section 
     1862(a)(1)(A), with respect to physicians' services 
     consisting of the furnishing of anesthesia services for a 
     single case that are furnished jointly with a certified 
     registered nurse anesthetist, if the carrier determines that 
     the use of both the physician and the nurse anesthetist to 
     furnish the anesthesia service was not medically necessary, 
     the fee schedule amount for the physicians' services shall be 
     equal to 50 percent (or 55 percent, in the case of services 
     furnished during 1996 or 1997) of the fee schedule amount 
     applicable under this section for anesthesia services 
     personally performed by the physician alone (without regard 
     to this subparagraph). Nothing in this subparagraph may be 
     construed to affect the application of any provision of law 
     regarding balance billing.''.
       (2) Payment to crna.--Section 1833(l)(4)(B) (42 U.S.C. 
     1395l(l)(4)(B)) is amended by adding at the end the following 
     new clause:
       ``(iv) Notwithstanding section 1862(a)(1)(A), in the case 
     of services of a certified registered nurse anesthetist 
     consisting of the furnishing of anesthesia services for a 
     single case that are furnished jointly with a physician, if 
     the carrier determines that the use of both the physician and 
     the nurse anesthetist to furnish the anesthesia service was 
     not medically necessary, the fee schedule amount for the 
     services furnished by the certified registered nurse 
     anesthetist shall be equal to 50 percent (or 40 percent, in 
     the case of services furnished during 1996 or 1997) of the 
     fee schedule amount applicable under section 1848 for 
     anesthesia services personally performed by the physician 
     alone (without regard to this clause).''.
       (b) Effective Date.--The amendments made by subsections (a) 
     shall apply to services furnished on or after July 1, 1996.

     SEC. 15609. STATEWIDE FEE SCHEDULE AREA FOR PHYSICIANS' 
                   SERVICES.

       (a) In General.--Notwithstanding section 1848(j)(2) of the 
     Social Security Act, in the case of the State of Wisconsin, 
     the Secretary of Health and Human Services shall treat the 
     State as a single fee schedule area for purposes of 
     determining the fee schedule amount (as referred to in 
     section 1848(a) of such Act) for physicians' services (as 
     defined in section 1848(j)(3) of such Act) under part B of 
     the medicare program.
       (b) Budget-Neutrality.--Notwithstanding any provision of 
     part B of title XVIII of the Social Security Act, the 
     Secretary shall carry out subsection (a) in a manner that 
     ensures that total payments for physicians' services (as so 
     defined) furnished by physicians in Wisconsin during a year 
     are not greater or less than total payments for such services 
     would have been but for this section.
       (c) Construction.--Nothing in this section shall be 
     construed as limiting the availability (to the Secretary, the 
     appropriate agency or organization with a contract under 
     section 1842 of such Act, or physicians in the State of 
     Wisconsin) of otherwise applicable administrative procedures 
     for modifying the fee schedule area or areas in the State 
     after implementation of subsection (a).
       (d) Effective Date.--This section shall apply with respect 
     to physicians' services furnished on or after January 1, 
     1997.

     SEC. 15609A. ESTABLISHMENT OF FEE SCHEDULE FOR AMBULANCE 
                   SERVICES.

       (a) Payment in Accordance With Fee Schedule.--Section 
     1833(a)(1) (42 U.S.C. 1395l(a)(1)) is amended--
       (1) by striking ``and (P)'' and inserting ``(P)''; and
       (2) by striking the semicolon at the end and inserting the 
     following: ``, and (Q) with respect to ambulance service, the 
     amounts paid shall be 80 percent of the lesser of the actual 
     charge for the services or the amount determined by a fee 
     schedule established by the Secretary for the purposes of 
     this subparagraph (in accordance with section 15608(b) of the 
     Medicare Preservation Act);''.
       (b) Requirements for Establishment of Fee Schedule.--
       (1) In general.--The Secretary of Health and Human Services 
     shall establish the fee schedule for ambulance services under 
     section 1833(a)(1)(Q) of the Social Security Act (as added by 
     subsection (a)) through a negotiated rulemaking process 
     described in title 5, United States Code, and in accordance 
     with the requirements of this subsection.
       (2) Considerations.--In establishing the fee schedule for 
     ambulance services, the Secretary shall--
       (A) establish mechanisms to control increases in 
     expenditures for ambulance services under part B of the 
     medicare program which fairly reflect the changing nature of 
     the ambulance service industry;
       (B) establish definitions for ambulance services which 
     promote efficiency and link payments (including fees for 
     assessment and treatment services) to the type of service 
     provided;
       (C) take into account regional differences which affect 
     cost and productivity, including differences in the costs of 
     resources and the costs of uncompensated care;
       (D) apply dynamic adjustments to payment rates to account 
     for inflation, demographic changes in the population of 
     medicare beneficiaries, and changes in the number of 
     providers of ambulance services participating in the medicare 
     program; and
       (E) phase in the application of the payment rates under the 
     fee schedule in an efficient and fair manner.
       (3) Savings.--In establishing the fee schedule for 
     ambulance services, the Secretary shall--
       (A) ensure that the aggregate amount of payments made for 
     ambulance services under part B of the medicare program 
     during 1998 does not exceed the aggregate amount of payments 
     which would have been made for such services under part B of 
     the program during 1998 if the amendments made by this 
     section were not in effect; and
       (B) set the payment amounts provided under the fee schedule 
     for services furnished in 1999 and each subsequent year at 
     amounts equal to the payment amounts under the fee schedule 
     for service furnished during the previous year, increased by 
     the percentage increase in the consumer price index for all 
     urban consumers (U.S. city average) for the 12-month period 
     ending with June of the previous year.
       (4) Consultation.--In establishing the fee schedule for 
     ambulance services, the Secretary shall consult regularly 
     with the American Ambulance Association, the National 
     Association of State Medical Directors, and other national 
     organizations representing individuals and entities who 
     furnish or regulate ambulance services, and shall share with 
     such associations and organizations the data and data 
     analysis used in establishing the fee schedule, including 
     data on variations in payments for ambulance services under 
     part B of the medicare program for years prior to 1998 among 
     geographic areas and types of ambulance service providers.
       (c) Effective Date.--The amendment made by subsection (a) 
     and the fee schedule described in subsection (b) shall apply 
     to ambulance services furnished on or after January 1, 1998.

     SEC. 15609B. STANDARDS FOR PHYSICAL THERAPY SERVICES 
                   FURNISHED BY PHYSICIANS.

       (a) Application of Standards for Other Providers of 
     Physical Therapy Services to Services Furnished by 
     Physicians.--[Review for previous (and subsequent) 
     amendments!] Section 1862(a) (42 U.S.C. 1395y(a)), as amended 
     by sectio 15525(a)(2), is amended
       (1) by striking ``or'' at the end of paragraph (15);
       (2) by striking the period at the end of paragraph (16) and 
     inserting ``; or''; and
       (3) by inserting after paragraph (16) the following new 
     paragraph:
       ``(17) in the case of physicians' services under section 
     1848(j)(3) consisting of outpatient physical therapy services 
     or outpatient occupational therapy services, which are 
     furnished by a physician who does not meet the requirements 
     applicable under section 1861(p) to a clinic or 
     rehabilitation agency furnishing such services.''.
       (b) Conforming Amendment.--Section 1848(j)(3) (42 U.S.C. 
     1395w@4(j)(3)) is amended by inserting ``(subject to section 
     1862(a)(17))'' after ``(2)(D)''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to services furnished on or after January 1, 
     1996.

                         PART 2--PART B PREMIUM

     SEC. 15611. EXTENSION OF PART B PREMIUM.

       (a) In General.--Section 1839(e)(1) (42 U.S.C. 1395r(e)(1)) 
     is amended--
       (1) in subparagraph (A)--
       (A) by striking ``and prior to January 1999'', and
       (B) by inserting ``(or, if higher, the percent described in 
     subparagraph (C))'' after ``50 percent''; and
       (2) by adding at the end the following new subparagraph:
       ``(C) For purposes of subparagraph (A), the percent 
     described in this subparagraph is the ratio (expressed as a 
     percentage) of the monthly premium established under this 
     section for months in 1995 to the monthly actuarial rate for 
     enrollees age 65 and over applicable to such months (as 
     specified in the most recent report of the Board of Trustees 
     of the Federal Supplementary Medical Insurance Trust Fund 
     published prior to the date of the enactment of the Medicare 
     Preservation Act of 1995).''.
       (b) Effective Date.--The amendments made by subsection (a) 
     apply to premiums for months beginning with January 1996.

     SEC. 15612. INCOME-RELATED REDUCTION IN MEDICARE SUBSIDY.

       (a) In General.--Section 1839 (42 U.S.C. 1395r) is amended 
     by adding at the end the following:
       ``(h)(1) Notwithstanding the previous subsections of this 
     section, in the case of an individual whose modified adjusted 
     gross income for a taxable year ending with or within a 
     calendar year (as initially determined by the Secretary in 
     accordance with paragraph (3)) exceeds the threshold amount 
     described in paragraph (5)(B), the Secretary shall increase 
     the amount of the monthly 

[[Page H 10186]]
     premium for months in the calendar year by an amount equal to the 
     difference between--
       ``(A) 200 percent of the monthly actuarial rate for 
     enrollees age 65 and over as determined under subsection 
     (a)(1) for that calendar year; and
       ``(B) the total of the monthly premiums paid by the 
     individual under this section (determined without regard to 
     subsection (b)) during such calendar year.
       ``(2) In the case of an individual described in paragraph 
     (1) whose modified adjusted gross income exceeds the 
     threshold amount by less than $25,000, the amount of the 
     increase in the monthly premium applicable under paragraph 
     (1) shall be an amount which bears the same ratio to the 
     amount of the increase described in paragraph (1) (determined 
     without regard to this paragraph) as such excess bears to 
     $25,000. In the case of a joint return filed under section 
     6013 of the Internal Revenue Code of 1986 by spouses both of 
     whom are enrolled under this part, the previous sentence 
     shall be applied by substituting `$50,000' for `$25,000'. The 
     preceding provisions of this paragraph shall not apply to any 
     individual whose threshold amount is zero.
       ``(3) The Secretary shall make an initial determination of 
     the amount of an individual's modified adjusted gross income 
     for a taxable year ending with or within a calendar year for 
     purposes of this subsection as follows:
       ``(A) Not later than October 1 of the year preceding the 
     year, the Secretary shall provide notice to each individual 
     whom the Secretary finds (on the basis of the individual's 
     actual modified adjusted gross income for the most recent 
     taxable year for which such information is available or other 
     information provided to the Secretary by the Secretary of the 
     Treasury) will be subject to an increase under this 
     subsection that the individual will be subject to such an 
     increase, and shall include in such notice the Secretary's 
     estimate of the individual's modified adjusted gross income 
     for the year.
       ``(B) If, during the 30-day period beginning on the date 
     notice is provided to an individual under subparagraph (A), 
     the individual provides the Secretary with information on the 
     individual's anticipated modified adjusted gross income for 
     the year, the amount initially determined by the Secretary 
     under this paragraph with respect to the individual shall be 
     based on the information provided by the individual.
       ``(C) If an individual does not provide the Secretary with 
     information under subparagraph (B), the amount initially 
     determined by the Secretary under this paragraph with respect 
     to the individual shall be the amount included in the notice 
     provided to the individual under subparagraph (A).
       ``(4)(A) If the Secretary determines (on the basis of final 
     information provided by the Secretary of the Treasury) that 
     the amount of an individual's actual modified adjusted gross 
     income for a taxable year ending with or within a calendar 
     year is less than or greater than the amount initially 
     determined by the Secretary under paragraph (3), the 
     Secretary shall increase or decrease the amount of the 
     individual's monthly premium under this section (as the case 
     may be) for months during the following calendar year by an 
     amount equal to \1/12\ of the difference between--
       ``(i) the total amount of all monthly premiums paid by the 
     individual under this section during the previous calendar 
     year; and
       ``(ii) the total amount of all such premiums which would 
     have been paid by the individual during the previous calendar 
     year if the amount of the individual's modified adjusted 
     gross income initially determined under paragraph (3) were 
     equal to the actual amount of the individual's modified 
     adjusted gross income determined under this paragraph.
       ``(B) In the case of an individual who is not enrolled 
     under this part for any calendar year for which the 
     individual's monthly premium under this section for months 
     during the year would be increased pursuant to subparagraph 
     (A) if the individual were enrolled under this part for the 
     year, the Secretary may take such steps as the Secretary 
     considers appropriate to recover from the individual the 
     total amount by which the individual's monthly premium for 
     months during the year would have been increased under 
     subparagraph (A) if the individual were enrolled under this 
     part for the year.
       ``(C) In the case of a deceased individual for whom the 
     amount of the monthly premium under this section for months 
     in a year would have been decreased pursuant to subparagraph 
     (A) if the individual were not deceased, the Secretary shall 
     make a payment to the individual's surviving spouse (or, in 
     the case of an individual who does not have a surviving 
     spouse, to the individual's estate) in an amount equal to the 
     difference between--
       ``(i) the total amount by which the individual's premium 
     would have been decreased for all months during the year 
     pursuant to subparagraph (A); and
       ``(ii) the amount (if any) by which the individual's 
     premium was decreased for months during the year pursuant to 
     subparagraph (A).
       ``(5) In this subsection, the following definitions apply:
       ``(A) The term `modified adjusted gross income' means 
     adjusted gross income (as defined in section 62 of the 
     Internal Revenue Code of 1986)--
       ``(i) determined without regard to sections 135, 911, 931, 
     and 933 of such Code, and
       ``(ii) increased by the amount of interest received or 
     accrued by the taxpayer during the taxable year which is 
     exempt from tax under such Code.
       ``(B) The term `threshold amount' means--
       ``(i) except as otherwise provided in this paragraph, 
     $75,000,
       ``(ii) $125,000, in the case of a joint return (as defined 
     in section 7701(a)(38) of such Code), and
       ``(iii) zero in the case of a taxpayer who--
       ``(I) is married at the close of the taxable year but does 
     not file a joint return (as so defined) for such year, and
       ``(II) does not live apart from his spouse at all times 
     during the taxable year.''.
       (b) Conforming Amendment.--Section 1839(f) (42 U.S.C. 
     1395r(f)) is amended by striking ``if an individual'' and 
     inserting the following: ``if an individual (other than an 
     individual subject to an increase in the monthly premium 
     under this section pursuant to subsection (h))''.
       (c) Reporting Requirements for Secretary of the Treasury.--
       (1) In general.--Subsection (l) of section 6103 of the 
     Internal Revenue Code of 1986 (relating to confidentiality 
     and disclosure of returns and return information) is amended 
     by adding at the end the following new paragraph:
       ``(15) Disclosure of return information to carry out 
     income-related reduction in medicare part b premium.--
       ``(A) In general.--The Secretary may, upon written request 
     from the Secretary of Health and Human Services, disclose to 
     officers and employees of the Health Care Financing 
     Administration return information with respect to a taxpayer 
     who is required to pay a monthly premium under section 1839 
     of the Social Security Act. Such return information shall be 
     limited to--
       ``(i) taxpayer identity information with respect to such 
     taxpayer,
       ``(ii) the filing status of such taxpayer,
       ``(iii) the adjusted gross income of such taxpayer,
       ``(iv) the amounts excluded from such taxpayer's gross 
     income under sections 135 and 911,
       ``(v) the interest received or accrued during the taxable 
     year which is exempt from the tax imposed by chapter 1 to the 
     extent such information is available, and
       ``(vi) the amounts excluded from such taxpayer's gross 
     income by sections 931 and 933 to the extent such information 
     is available.
       ``(B) Restriction on use of disclosed information.--Return 
     information disclosed under subparagraph (A) may be used by 
     officers and employees of the Health Care Financing 
     Administration only for the purposes of, and to the extent 
     necessary in, establishing the appropriate monthly premium 
     under section 1839 of the Social Security Act.''
       (2) Conforming amendment.--Paragraphs (3)(A) and (4) of 
     section 6103(p) of such Code are each amended by striking 
     ``or (14)'' each place it appears and inserting ``(14), or 
     (15)''.
       (d) Effective Date.--The amendments made by subsections (a) 
     and (b) shall apply to the monthly premium under section 1839 
     of the Social Security Act for months beginning with January 
     1997.

       PART 3--ADMINISTRATION AND BILLING OF LABORATORY SERVICES

     SEC. 15621. ADMINISTRATIVE SIMPLIFICATION FOR LABORATORY 
                   SERVICES.

       (a) In General.--Not later than 1 year after the date of 
     the enactment of this Act, the Secretary of Health and Human 
     Services (in accordance with the process described in 
     subsection (b)) shall adopt uniform coverage, administration, 
     and payment policies for clinical diagnostic laboratory tests 
     under part B of the medicare program.
       (b) Process for Adoption of Policies.--The Secretary shall 
     adopt uniform policies under subsection (a) in accordance 
     with the following process:
       (1) The Secretary shall select from carriers with whom the 
     Secretary has a contract under part B during 1995 15 medical 
     directors, who will meet and develop recommendations for such 
     uniform policies. The medical directors selected shall 
     represent various geographic areas and have a varied range of 
     experience in relevant medical fields, including pathology 
     and clinical laboratory practice.
       (2) The medical directors selected under paragraph (1) 
     shall consult with independent experts in each major 
     discipline of clinical laboratory medicine, including 
     clinical laboratory personnel, bioanalysts, pathologists, and 
     practicing physicians. The medical directors shall also 
     solicit comments from other individuals and groups who wish 
     to participate, including consumers and other affected 
     parties. This process shall be conducted as a negotiated 
     rulemaking under title 5, United States Code.
       (3) Under the negotiated rulemaking, the recommendations 
     for uniform policies shall be designed to simplify and reduce 
     unnecessary administrative burdens in connection with the 
     following:
       (A) Beneficiary information required to be submitted with 
     each claim.
       (B) Physicians' obligations regarding documentation 
     requirements and recordkeeping.
       (C) Procedures for filing claims and for providing 
     remittances by electronic media.
       (D) The performance of post-payment review of test claims.
       (E) The prohibition of the documentation of medical 
     necessity except when determined 

[[Page H 10187]]
     to be appropriate after identification of aberrant utilization pattern 
     through focused medical review.
       (F) Beneficiary responsibility for payment.
       (4) During the pendency of the adoption by the Secretary of 
     the uniform policies, fiscal intermediaries and carriers 
     under the medicare program may not implement any new 
     requirement relating to the submission of a claim for 
     clinical diagnostic laboratory tests retroactive to January 
     1, 1995, and carriers may not initiate any new coverage, 
     administrative, or payment policy unless the policy promotes 
     the goal of administrative simplification of requirements 
     imposed on clinical laboratories in accordance with the 
     Secretary's promulgation of the negotiated rulemaking.
       (5) Not later than 6 months after the date of the enactment 
     of this Act, the medical directors shall submit their 
     recommendations to the Secretary, and the Secretary shall 
     publish the recommendations and solicit public comment using 
     negotiated rulemaking in accordance with title 5, United 
     States Code. The Secretary shall publish final uniform 
     policies for coverage, administration, and payment of claims 
     for clinical diagnostic laboratory tests, effective after the 
     expiration of the 180-day period which begins on the date of 
     publication.
       (6) After the publication of the final uniform policies, 
     the Secretary shall implement identical uniform documentation 
     and processing policies for all clinical diagnostic 
     laboratory tests paid under the medicare program through 
     fiscal intermediaries or carriers.
       (c) Optional Selection of Single Carrier.--Effective for 
     claims submitted after the expiration of the 90-day period 
     which begins on the date of the enactment of this Act, an 
     independent laboratory may select a single carrier for the 
     processing of all of its claims for payment under part B of 
     the medicare program, without regard to the location where 
     the laboratory or the patient or provider involved resides or 
     conducts business. Such election of a single carrier shall be 
     made by the clinical laboratory and an agreement made between 
     the carrier and the laboratory shall be forwarded to the 
     Secretary of Health and Human Services. Nothing in this 
     subsection shall be construed to require a laboratory to 
     select a single carrier under this subsection.

     SEC. 15622. RESTRICTIONS ON DIRECT BILLING FOR LABORATORY 
                   SERVICES.

       (a) Requirement for Direct Billing.--Section 1833(h) (42 
     U.S.C. 1395l(h)) is amended by adding at the end the 
     following new paragraph:
       ``(7)(A) Effective for services furnished on or October 1, 
     1996, an individual or entity that performs clinical 
     laboratory diagnostic tests shall not present or cause to be 
     presented a claim, bill, or demand for payment to any person, 
     other than the individual receiving such services or the 
     health plan designated by such person, except that (i) in the 
     case of a test performed by one laboratory at the request of 
     another laboratory, which meets the requirements of clause 
     (i), (ii), or (iii) of paragraph (5)(A), payment may be made 
     to the requesting laboratory, and (ii) the Secretary may by 
     regulation establish appropriate exceptions to the 
     requirement of this subparagraph.
       ``(B)(i) Any person that collects any amounts that were 
     billed in violation of paragraph (7)(A) above shall be liable 
     for such amounts to the person from whom such amounts were 
     collected.
       ``(ii) Any person that furnishes clinical laboratory 
     services for which payment is made under paragraph (1)(D)(i) 
     or paragraph (2)(D)(i) that knowingly violates subparagraph 
     (A) is subject to a civil money penalty of not more than 
     $10,000 for each such violation. The provisions of section 
     1128A (other than subsections (a) and (b)) shall apply to a 
     civil money penalty under this paragraph in the same manner 
     as such provisions apply with respect to a penalty or 
     proceeding under section 1128A(a).
       ``(iii)(I) Any individual or entity that the Secretary 
     determines has repeatedly violated subparagraph (A) may be 
     excluded from participation in any Federal health care 
     program . The provisions of section 1128A (other than 
     subsections (a) and (b)) shall apply to an exclusion under 
     this paragraph in the same manner as such provisions apply 
     with respect to a penalty or proceeding under section 
     1128A(a).
       ``(II) The provisions of section 1128(e) of the Social 
     Security Act shall apply to any exclusion under clause 
     (iii)(I) in the same manner as such provisions apply to a 
     proceeding under section 1128.
       ``(iv) If the Secretary finds, after a reasonable notice 
     and opportunity for a hearing, that a laboratory which holds 
     a certificate pursuant to section 353 of the Public Health 
     Service Act has on a repeated basis violated subparagraph 
     (A), the Secretary may suspend, revoke, or limit such 
     certification in accordance with the procedures established 
     in section 353(k) of Public Health Service Act.
       ``(C) For purposes of this paragraph, the following 
     definitions shall apply:
       ``(i) The term `Federal health care program' means--
       ``(I) any plan or program that provides health benefits, 
     whether directly, through insurance, or otherwise, which is 
     funded, in whole or in part, by the United States Government; 
     or
       ``(II) any State health care program, as defined in section 
     1128(h).
       ``(ii) The term `health plan' means any hospital or medical 
     service policy or certificate, hospital or medical service 
     plan contract, or health maintenance organization contract 
     offered by an insurer, except that such term does not include 
     any of the following:
       ``(I) Coverage only for accident, dental, vision, 
     disability income, or long-term care insurance, or any 
     combination thereof.
       ``(II) Medicare supplemental health insurance.
       ``(III) Coverage issued as a supplement to liability 
     insurance.
       ``(IV) Liability insurance, including general liability 
     insurance and automobile liability insurance.
       ``(V) Worker's compensation or similar insurance.
       ``(VI) Automobile medical-payment insurance.
       ``(VII) Coverage for a specified disease or illness.
       ``(VIII) A hospital or fixed indemnity policy.
       (b) Look Back Provisions to Assure Savings.--
       (1) In general.--Section 1833(h)(4)(B) (42 U.S.C. 
     1395l(h)(4)(B)), as amended by section 15604(b), is amended--
       (A) in clause (vii), by striking ``and'' at the end;
       (B) in clause (viii)--
       (i) by inserting ``and before January 1, 2000,'' after 
     ``1996,'', and
       (ii) by striking the period at the end and inserting ``, 
     and''; and
       (C) by adding at the end the following new clause:
       ``(ix) after December 31, 1999, is equal to such percentage 
     of such median as the Secretary establishes under paragraph 
     (8)(B), or, if the Secretary does not act under paragraph 
     (8)(B), is equal to 65 percent of such median.''.
       (2) Process for reductions.--Section 1833(h) (42 U.S.C. 
     1395l(h)), as amended by subsection (a), is amended by adding 
     at the end the following new paragraph:
       ``(8)(A) On July 31, 1999, the Secretary shall estimate--
       ``(i) the amount of expenditures under this section for 
     clinical diagnostic laboratory tests which will be made in 
     the period from January 1, 1997, through September 30, 2002, 
     and
       ``(ii) the amount of expenditures which would have been 
     made under this section for clinical diagnostic laboratory 
     tests in the period from January 1, 997, through September 
     30, 2002, if paragraph (7) had not been enacted.
       ``(B) If the amount estimated under subparagraph (A)(i) is 
     greater than 97 percent of the amount estimated under 
     subparagraph (A)(ii), the Secretary shall establish a 
     limitation amount under paragraph (4)(B)(ix) such that, when 
     such limitation amount is considered, the amount estimated 
     under subparagraph (A)(i) is 97 percent of the amount 
     estimated under subparagraph (A)(ii).
       ``(C) The Director of the Congressional Budget Office 
     (hereafter in this subparagraph referred to as the 
     `Director') shall--
       ``(i) independently estimate the amounts specified in 
     subparagraph (A) and compute any limitation amount required 
     under subparagraph (B), and
       ``(ii) submit a report on such estimates and computation to 
     Congress not later than August 31, 1999.
     The Secretary shall provide the Director with such data as 
     the Director reasonably requires to prepare such estimates 
     and computation.''.

        PART 4--QUALITY STANDARDS FOR DURABLE MEDICAL EQUIPMENT

     SEC. 15631. RECOMMENDATIONS FOR QUALITY STANDARDS FOR DURABLE 
                   MEDICARE EQUIPMENT.

       (a) Appointment of Task Force by Secretary.--
       (1) In general.--The Secretary of Health and Human Services 
     shall establish a broadly based task force to develop 
     recommendations for quality standards for durable medical 
     equipment under part B of the medicare program.
       (2) Composition.--The task force shall include individuals 
     selected by the Secretary from representatives of suppliers 
     of items of durable medical equipment under part B, 
     consumers, and other users of such equipment. In appointing 
     members, the Secretary shall assure representation from 
     various geographic regions of the United States.
       (3) No compensation for service.--Members of the task force 
     shall not receive any compensation for service on the task 
     force.
       (4) Termination.--The task force shall terminate 30 days 
     after it submits the report described in subsection (b).
       (b) Report.--Not later than 1 year after the date of the 
     enactment of this Act, the task force established under 
     subsection (a) shall submit to the Secretary its 
     recommendations for quality standards for durable medicare 
     equipment under part B of the medicare program.
       Subtitle H--Provisions Relating to Medicare Parts A and B

               PART 1--PAYMENTS FOR HOME HEALTH SERVICES

     SEC. 15701. PAYMENT FOR HOME HEALTH SERVICES.

       (a) In General.--Title XVIII (42 U.S.C. 1395 et seq.), as 
     amended by section 15106, is amended by adding at the end the 
     following new section:


                   ``payment for home health services

       ``Sec. 1894. (a) In General.--

[[Page H 10188]]

       ``(1) Per visit payments.--Subject to subsection (c), the 
     Secretary shall make per visit payments beginning with fiscal 
     year 1997 to a home health agency in accordance with this 
     section for each type of home health service described in 
     paragraph (2) furnished to an individual who at the time the 
     service is furnished is under a plan of care by the home 
     health agency under this title (without regard to whether or 
     not the item or service was furnished by the agency or by 
     others under arrangement with them made by the agency, or 
     otherwise).
       ``(2) Types of services.--The types of home health services 
     described in this paragraph are the following:
       ``(A) Part-time or intermittent nursing care provided by or 
     under the supervision of a registered professional nurse.
       ``(B) Physical therapy.
       ``(C) Occupational therapy.
       ``(D) Speech-language pathology services.
       ``(E) Medical social services under the direction of a 
     physician.
       ``(F) To the extent permitted in regulations, part-time or 
     intermittent services of a home health aide who has 
     successfully completed a training program approved by the 
     Secretary.
       ``(b) Establishment of Per Visit Rate for Each Type of 
     Services.--
       ``(1) In general.--The Secretary shall, subject to 
     paragraph (3), establish a per visit payment rate for a home 
     health agency in an area for each type of home health service 
     described in subsection (a)(2). Such rate shall be equal to 
     the national per visit payment rate determined under 
     paragraph (2) for each such type, except that the labor-
     related portion of such rate shall be adjusted by the area 
     wage index applicable under section 1886(d)(3)(E) for the 
     area in which the agency is located (as determined without 
     regard to any reclassification of the area under section 
     1886(d)(8)(B) or a decision of the Medicare Geographic 
     Classification Review Board or the Secretary under section 
     1886(d)(10) for cost reporting periods beginning after 
     October 1, 1995).
       ``(2) National per visit payment rate.--The national per 
     visit payment rate for each type of service described in 
     subsection (a)(2)--
       ``(A) for fiscal year 1997, is an amount equal to the 
     national average amount paid per visit under this title to 
     home health agencies for such type of service during the most 
     recent 12-month cost reporting period ending on or before 
     June 30, 1994, increased (in a compounded manner) by the home 
     health market basket percentage increase for fiscal years 
     1995, 1996, and 1997; and
       ``(B) for each subsequent fiscal year, is an amount equal 
     to the national per visit payment rate in effect for the 
     preceding fiscal year, increased by the home health market 
     basket percentage increase for such subsequent fiscal year 
     minus 2 percentage points.
       ``(3) Rebasing of rates.--The Secretary shall provide for 
     an update to the national per visit payment rates under this 
     subsection for cost reporting periods beginning not later 
     than the first day of the fifth fiscal year which begins 
     after fiscal year 1997, and not later than every 5 years 
     thereafter, to reflect the most recent available data.
       ``(4) Home health market basket percentage increase.--For 
     purposes of this subsection, the term `home health market 
     basket percentage increase' means, with respect to a fiscal 
     year, a percentage (estimated by the Secretary before the 
     beginning of the fiscal year) determined and applied with 
     respect to the types of home health services described in 
     subsection (a)(2) in the same manner as the market basket 
     percentage increase under section 1886(b)(3)(B)(iii) is 
     determined and applied to inpatient hospital services for the 
     fiscal year.
       ``(c) Per Episode Limit.--
       ``(1) Aggregate limit.--
       ``(A) In general.--Except as provided in paragraph (2), a 
     home health agency may not receive aggregate per visit 
     payments under subsection (a) for a fiscal year in excess of 
     an amount equal to the sum of the following products 
     determined for each case-mix category for which the agency 
     receives payments:
       ``(i) The number of episodes of each case-mix category 
     during the fiscal year; multiplied by
       ``(ii) the per episode limit determined for such case-mix 
     category for such fiscal year.
       ``(B) Establishment of per episode limits.--
       ``(i) In general.--The per episode limit for a fiscal year 
     for any case-mix category for the area in which a home health 
     agency is located is equal to--

       ``(I) the mean number of visits for each type of home 
     health service described in subsection (a)(2) furnished 
     during an episode of such case-mix category in such area 
     during fiscal year 1994, adjusted by the case-mix adjustment 
     factor determined in clause (ii) for the fiscal year 
     involved; multiplied by
       ``(II) the per visit payment rate established under 
     subsection (b) for such type of home health service for the 
     fiscal year for which the determination is being made.

       ``(ii) Case mix adjustment factor.--For purposes of clause 
     (i), the case-mix adjustment factor for a year is the factor 
     determined by the Secretary to assure that aggregate payments 
     for home health services under this section during the year 
     will not exceed the payment for such services during the 
     previous year as a result of changes in the number and type 
     of home health visits within case-mix categories over the 
     previous year.
       ``(iii) Rebasing of per episode amounts.--Beginning with 
     fiscal year 1999 and every 2 years thereafter, the Secretary 
     shall revise the mean number of home health visits determined 
     under clause (i)(I) for each type of home health service 
     visit described in subsection (a)(2) furnished during an 
     episode in a case-mix category to reflect the most recently 
     available data on the number of visits.
       ``(iv) Determination of applicable area.--For purposes of 
     determining per episode limits under this subparagraph, the 
     area in which a home health agency is considered to be 
     located shall be such area as the Secretary finds appropriate 
     for purposes of this subparagraph.
       ``(C) Case-mix category.--For purposes of this paragraph, 
     the term `case-mix category' means each of the 18 case-mix 
     categories established under the Phase II Home Health Agency 
     Prospective Payment Demonstration Project conducted by the 
     Health Care Financing Administration. The Secretary may 
     develop an alternate methodology for determining case-mix 
     categories.
       ``(D) Episode.--
       ``(i) In general.--For purposes of this paragraph, the term 
     `episode' means the continuous 120-day period that--

       ``(I) begins on the date of an individual's first visit for 
     a type of home health service described in subsection (a)(2) 
     for a case-mix category, and
       ``(II) is immediately preceded by a 60-day period in which 
     the individual did not receive visits for a type of home 
     health service described in subsection (a)(2).

       ``(ii) Treatment of episodes spanning cost reporting 
     periods.--The Secretary shall provide for such rules as the 
     Secretary considers appropriate regarding the treatment of 
     episodes under this paragraph which begin during a cost 
     reporting period and end in a subsequent cost reporting 
     period.
       ``(E) Exemptions and exceptions.--The Secretary may provide 
     for exemptions and exceptions to the limits established under 
     this paragraph for a fiscal year as the Secretary deems 
     appropriate, to the extent such exemptions and exceptions do 
     not result in greater payments under this section than the 
     exemptions and exceptions provided under section 
     1861(v)(1)(L)(ii) in fiscal year 1994, increased by the home 
     health market basket percentage increase for the fiscal year 
     involved (as defined in subsection (b)(4)).
       ``(2) Reconciliation of amounts.--
       ``(A) Overpayments to home health agencies.--Subject to 
     subparagraph (B), if a home health agency has received 
     aggregate per visit payments under subsection (a) for a 
     fiscal year in excess of the amount determined under 
     paragraph (1) with respect to such home health agency for 
     such fiscal year, the Secretary shall reduce payments under 
     this section to the home health agency in the following 
     fiscal year in such manner as the Secretary considers 
     appropriate (including on an installment basis) to recapture 
     the amount of such excess.
       ``(B) Exception for home health services furnished over a 
     period greater than 165 days.--
       ``(i) In general.--For purposes of subparagraph (A), the 
     amount of aggregate per visit payments determined under 
     subsection (a) shall not include payments for home health 
     visits furnished to an individual on or after a continuous 
     period of more than 165 days after an individual begins an 
     episode described in subsection (c)(1)(D) (if such period is 
     not interrupted by the beginning of a new episode).
       ``(ii) Requirement of certification.--Clause (i) shall not 
     apply if the agency has not obtained a physician's 
     certification with respect to the individual requiring such 
     visits that includes a statement that the individual requires 
     such continued visits, the reason for the need for such 
     visits, and a description of such services furnished during 
     such visits.
       ``(C) Share of savings.--
       ``(i) Bonus payments.--If a home health agency has received 
     aggregate per visit payments under subsection (a) for a 
     fiscal year in an amount less than the amount determined 
     under paragraph (1) with respect to such home health agency 
     for such fiscal year, the Secretary shall pay such home 
     health agency a bonus payment equal to 50 percent of the 
     difference between such amounts in the following fiscal year, 
     except that the bonus payment may not exceed 5 percent of the 
     aggregate per visit payments made to the agency for the year.
       ``(ii) Installment bonus payments.--The Secretary may make 
     installment payments during a fiscal year to a home health 
     agency based on the estimated bonus payment that the agency 
     would be eligible to receive with respect to such fiscal 
     year.
       ``(d) Medical Review Process.--The Secretary shall 
     implement a medical review process (with a particular 
     emphasis on fiscal years 1997 and 1998) for the system of 
     payments described in this section that shall provide an 
     assessment of the pattern of care furnished to individuals 
     receiving home health services for which payments are made 
     under this section to ensure that such individuals receive 
     appropriate home health services. Such review process shall 
     focus on low-cost cases described in subsection (e)(3) and 
     cases described in subsection (c)(2)(B) and shall require 
     recertification by intermediaries at 30, 60, 90, 120, and 165 
     days into an episode described in subsection (c)(1)(D).

[[Page H 10189]]

       ``(e) Adjustment of Payments to Avoid Circumvention of 
     Limits.--
       ``(1) In general.--The Secretary shall provide for 
     appropriate adjustments to payments to home health agencies 
     under this section to ensure that agencies do not circumvent 
     the purpose of this section by--
       ``(A) discharging patients to another home health agency or 
     similar provider;
       ``(B) altering corporate structure or name to avoid being 
     subject to this section or for the purpose of increasing 
     payments under this title; or
       ``(C) undertaking other actions considered unnecessary for 
     effective patient care and intended to achieve maximum 
     payments under this title.
       ``(2) Tracking of patients that switch home health agencies 
     during episode.--
       ``(A) Development of system.--The Secretary shall develop a 
     system that tracks home health patients that receive home 
     health services described in subsection (a)(2) from more than 
     1 home health agency during an episode described in 
     subsection (c)(1)(D).
       ``(B) Adjustment of payments.--The Secretary shall adjust 
     payments under this section to each home health agency that 
     furnishes an individual with a type of home health service 
     described in subsection (a)(2) to ensure that aggregate 
     payments on behalf of such individual during such episode do 
     not exceed the amount that would be paid under this section 
     if the individual received such services from a single home 
     health agency.
       ``(3) Low-cost cases.--The Secretary shall develop a system 
     designed to adjust payments to a home health agency for a 
     fiscal year to eliminate any increase in growth of the 
     percentage of low-cost episodes for which home health 
     services are furnished by the agency over such percentage 
     determined for the agency for the 12-month cost reporting 
     period ending on June 30, 1994. The Secretary shall define a 
     low-cost episode in a manner that provides that a home health 
     agency has an incentive to be cost efficient in delivering 
     home health services and that the volume of such services 
     does not increase as a result of factors other than patient 
     needs.
       ``(f) Report by Medicare Payment Review Commission.--During 
     the first 3 years in which payments are made under this 
     section, the Medicare Payment Review Commission shall 
     annually submit a report to Congress on the effectiveness of 
     the payment methodology established under this section that 
     shall include recommendations regarding the following:
       ``(1) Case-mix and volume increases.
       ``(2) Quality monitoring of home health agency practices.
       ``(3) Whether a capitated payment for home care patients 
     receiving care during a continuous period exceeding 165 days 
     is warranted.
       ``(4) Whether public providers of service are adequately 
     reimbursed.
       ``(5) The adequacy of the exemptions and exceptions to the 
     limits provided under subsection (c)(1)(E).
       ``(6) The appropriateness of the methods provided under 
     this section to adjust the per episode limits and annual 
     payment updates to reflect changes in the mix of services, 
     number of visits, and assignment to case categories to 
     reflect changing patterns of home health care.
       ``(7) The geographic areas used to determine the per 
     episode limits.
       ``(g) No Effect on Non-Medicare Services.--Nothing in this 
     section may be construed to affect the provision of or 
     payment for home health services for which payment is not 
     made under this title.''.
       (b) Payment for Prosthetics and Orthotics Under Part A.--
     Section 1814(k) (42 U.S.C. 1395f(k)) is amended--
       (1) by inserting ``and prosthetics and orthotics'' after 
     ``durable medical equipment''; and
       (2) by inserting ``and 1834(h), respectively'' after 
     ``1834(a)(1)''.
       (c) Conforming Amendments.--
       (1) Payments under part a.--Section 1814(b) (42 U.S.C. 
     1395f(b)), as amended by section 15522(b), is amended in the 
     matter preceding paragraph (1) by striking ``1888 and 1888A'' 
     and inserting ``1888, 1888A, and 1894''.
       (2) Treatment of items and services paid under part b.--
       (A) Payments under part b.--Section 1833(a)(2) (42 U.S.C. 
     1395l(a)(2)) is amended--
       (i) by amending subparagraph (A) to read as follows:
       ``(A) with respect to home health services--
       ``(i) that are a type of home health service described in 
     section 1894(a)(2), and which are furnished to an individual 
     who (at the time the item or service is furnished) is under a 
     plan of care of a home health agency, the amount determined 
     under section 1894; or
       ``(ii) that are not described in clause (i) (other than a 
     covered osteoporosis drug) (as defined in section 1861(kk)), 
     the lesser of--

       ``(I) the reasonable cost of such services, as determined 
     under section 1861(v), or
       ``(II) the customary charges with respect to such 
     services;''.

       (ii) by striking ``and'' at the end of subparagraph (E);
       (iii) by adding ``and'' at the end of subparagraph (F); and
       (iv) by adding at the end the following new subparagraph:
       ``(G) with respect to items and services described in 
     section 1861(s)(10)(A), the lesser of--
       ``(i) the reasonable cost of such services, as determined 
     under section 1861(v), or
       ``(ii) the customary charges with respect to such services,

     or, if such services are furnished by a public provider of 
     services, or by another provider which demonstrates to the 
     satisfaction of the Secretary that a significant portion of 
     its patients are low-income (and requests that payment be 
     made under this provision), free of charge or at nominal 
     charges to the public, the amount determined in accordance 
     with section 1814(b)(2);''.
       (B) Requiring payment for all items and services to be made 
     to agency.--
       (i) In general.--The first sentence of section 1842(b)(6) 
     (42 U.S.C. 1395u(b)(6)), as amended by section 15525(a)(1), 
     is amended--

       (I) by striking ``and (E)'' and inserting ``(E)''; and
       (II) by striking the period at the end and inserting the 
     following: ``, and (F) in the case of types of home health 
     services described in section 1894(a)(2) furnished to an 
     individual who (at the time the item or service is furnished) 
     is under a plan of care of a home health agency, payment 
     shall be made to the agency (without regard to whether or not 
     the item or service was furnished by the agency, by others 
     under arrangement with them made by the agency, or 
     otherwise).''.

       (ii) Conforming amendment.--Section 1832(a)(1) (42 U.S.C. 
     1395k(a)(1)), as amended by section 15525(a)(3), is amended 
     by striking ``section 1842(b)(6)(E);'' and inserting 
     ``subparagraphs (E) and (F) of section 1842(b)(6);''.
       (C) Exclusions from coverage.--Section 1862(a) (42 U.S.C. 
     1395y(a)), as amended by section 15525(a)(2) and section 
     15609B(a), is amended--
       (i) by striking ``or'' at the end of paragraph (16);
       (ii) by striking the period at the end of paragraph (17) 
     and inserting ``; or''; and
       (iii) by adding at the end the following new paragraph:
       ``(18) where such expenses are for home health services 
     furnished to an individual who is under a plan of care of the 
     home health agency if the claim for payment for such services 
     is not submitted by the agency.''.
       (3) Sunset of reasonable cost limitations.--Section 
     1861(v)(1)(L) (42 U.S.C. 1395x(v)(1)(L)) is amended by adding 
     at the end the following new clause:
       ``(iv) This subparagraph shall apply only to services 
     furnished by home health agencies during cost reporting 
     periods ending on or before September 30, 1996.''.
       (d) Limitation on Part A Coverage.--
       (1) In general.--Section 1812(a)(3) (42 U.S.C. 1395d(a)(3)) 
     is amended by striking the semicolon and inserting ``for up 
     to 165 days during any spell of illness;''.
       (2) Conforming amendment.--Section 1812(b) (42 U.S.C. 
     1395d(b)) is amended--
       (A) by striking ``or'' at the end of paragraph (2),
       (B) by striking the period at the end of paragraph (3) and 
     inserting ``; or'', and
       (C) by adding at the end the following new paragraph:
       ``(4) home health services furnished to the individual 
     during such spell after such services have been furnished to 
     the individual for 165 days during such spell.''.
       (3) Exclusion of additional part b costs from determination 
     of part b monthly premium.--Section 1839(a) (42 U.S.C. 
     1395r(a)) is amended--
       (A) in the second sentence of paragraph (1), by striking 
     ``enrollees.'' and inserting ``enrollees (except as provided 
     in paragraph (5)).''; and
       (B) by adding at the end the following new paragraph:
       ``(5) In estimating the benefits and administrative costs 
     which will be payable from the Federal Supplementary Medical 
     Insurance Trust Fund for a year (beginning with 1996), the 
     Secretary shall exclude an estimate of any benefits and costs 
     attributable to home health services for which payment would 
     have been made under part A during the year but for paragraph 
     (4) of section 1812(b).''.
       (4) Effective date.--The amendments made by this subsection 
     shall apply to spells of illness beginning on or after 
     October 1, 1995.
       (e) Effective Date.--Except as provided in subsection 
     (d)(4), the amendments made by this section shall apply to 
     cost reporting periods beginning on or after October 1, 1996.

     SEC. 15702. MAINTAINING SAVINGS RESULTING FROM TEMPORARY 
                   FREEZE ON PAYMENT INCREASES FOR HOME HEALTH 
                   SERVICES.

       (a) Basing Updates to Per Visit Cost Limits on Limits for 
     Fiscal Year 1993.--Section 1861(v)(1)(L)(iii) (42 U.S.C. 
     1395x(v)(1)(L)(iii)) is amended by adding at the end the 
     following sentence: ``In establishing limits under this 
     subparagraph, the Secretary may not take into account any 
     changes in the costs of the provision of services furnished 
     by home health agencies with respect to cost reporting 
     periods which began on or after July 1, 1994, and before July 
     1, 1996.''.
       (b) No Exceptions Permitted Based on Amendment.--The 
     Secretary of Health and Human Services shall not consider the 
     amendment made by subsection (a) in making any exemptions and 
     exceptions pursuant to section 1861(v)(1)(L)(ii) of the 
     Social Security Act.

     SEC. 15703. EXTENSION OF WAIVER OF PRESUMPTION OF LACK OF 
                   KNOWLEDGE OF EXCLUSION FROM COVERAGE FOR HOME 
                   HEALTH AGENCIES.

       Section 9305(g)(3) of OBRA-1986, as amended by section 
     426(d) of the Medicare Catastrophic Coverage Act of 1988 and 
     section 

[[Page H 10190]]
     4207(b)(3) of OBRA-1990 (as renumbered by section 160(d)(4) of the 
     Social Security Act Amendments of 1994), is amended by 
     striking ``December 31, 1995'' and inserting ``September 30, 
     1996''.

     SEC. 15704. REPORT ON RECOMMENDATIONS FOR PAYMENTS AND 
                   CERTIFICATION FOR HOME HEALTH SERVICES OF 
                   CHRISTIAN SCIENCE PROVIDERS.

       Not later than July 1, 1996, the Secretary of Health and 
     Human Services shall submit recommendations to Congress 
     regarding an appropriate methodology for making payments 
     under the medicare program for home health services furnished 
     by Christian Science providers who meet applicable 
     requirements of the First Church of Christ, Scientist, 
     Boston, Massachusetts, and appropriate criteria for the 
     certification of such providers for purposes of the medicare 
     program.

     SEC. 15705. EXTENSION OF PERIOD OF HOME HEALTH AGENCY 
                   CERTIFICATION.

       Section 1891(c)(2)(A) (42 U.S.C. 1395bbb(c)(2)(A)) is 
     amended--
       (1) by striking ``15 months'' and inserting ``36 months''; 
     and
       (2) by striking the second sentence and inserting the 
     following: ``The Secretary shall establish a frequency for 
     surveys of home health agencies within this 36-month interval 
     commensurate with the need to assure the delivery of quality 
     home health services.''.

             PART 2--MEDICARE SECONDARY PAYER IMPROVEMENTS

     SEC. 15711. EXTENSION AND EXPANSION OF EXISTING REQUIREMENTS.

       (a) Data Match.--
       (1) Section 1862(b)(5)(C) (42 U.S.C. 1395y(b)(5)(C)) is 
     amended by striking clause (iii).
       (2) Section 6103(l)(12) of the Internal Revenue Code of 
     1986 is amended by striking subparagraph (F).
       (b) Application to Disabled Individuals in Large Group 
     Health Plans.--
       (1) In general.--Section 1862(b)(1)(B) (42 U.S.C. 
     1395y(b)(1)(B)) is amended--
       (A) in clause (i), by striking ``clause (iv)'' and 
     inserting ``clause (iii)'',
       (B) by striking clause (iii), and
       (C) by redesignating clause (iv) as clause (iii).
       (2) Conforming amendments.--Paragraphs (1) through (3) of 
     section 1837(i) (42 U.S.C. 1395p(i)) and the second sentence 
     of section 1839(b) (42 U.S.C. 1395r(b)) are each amended by 
     striking ``1862(b)(1)(B)(iv)'' each place it appears and 
     inserting ``1862(b)(1)(B)(iii)''.
       (c) Expansion of Period of Application to Individuals With 
     End Stage Renal Disease.--Section 1862(b)(1)(C) (42 U.S.C. 
     1395y(b)(1)(C)) is amended--
       (1) in the first sentence, by striking ``12-month'' each 
     place it appears and inserting ``24-month'', and
       (2) by striking the second sentence.

     SEC. 15712. IMPROVEMENTS IN RECOVERY OF PAYMENTS.

       (a) Permitting Recovery Against Third Party Administrators 
     of Primary Plans.--Section 1862(b)(2)(B)(ii) (42 U.S.C. 
     1395y(b)(2)(B)(ii)) is amended--
       (1) by striking ``under this subsection to pay'' and 
     inserting ``(directly, as a third-party administrator, or 
     otherwise) to make payment'', and
       (2) by adding at the end the following: ``The United States 
     may not recover from a third-party administrator under this 
     clause in cases where the third-party administrator would not 
     be able to recover the amount at issue from the employer or 
     group health plan for whom it provides administrative 
     services due to the insolvency or bankruptcy of the employer 
     or plan.''.
       (b) Extension of Claims Filing Period.--Section 
     1862(b)(2)(B) (42 U.S.C. 1395y(b)(2)(B)) is amended by adding 
     at the end the following new clause:
       ``(v) Claims-filing period.--Notwithstanding any other time 
     limits that may exist for filing a claim under an employer 
     group health plan, the United States may seek to recover 
     conditional payments in accordance with this subparagraph 
     where the request for payment is submitted to the entity 
     required or responsible under this subsection to pay with 
     respect to the item or service (or any portion thereof) under 
     a primary plan within the 3-year period beginning on the date 
     on which the item or service was furnished.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to items and services furnished on or after the 
     date of the enactment of this Act.

     SEC. 15713. PROHIBITING RETROACTIVE APPLICATION OF POLICY 
                   REGARDING ESRD BENEFICIARIES ENROLLED IN 
                   PRIMARY PLANS.

       For purposes of carrying out section 1862(b)(1)(C) of the 
     Social Security Act, the Secretary of Health and Human 
     Services shall apply the policy directive issued by the 
     Administrator of the Health Care Financing Administration on 
     April 24, 1995, only with respect to items and services 
     furnished on or after such date.

                            PART 3--FAILSAFE

     SEC. 15721. FAILSAFE BUDGET MECHANISM.

       (a) In General.--Title XVIII, as amended by sections 
     15106(a) and 15701(a), is amended by adding at the end the 
     following new section:


                      ``failsafe budget mechanism

       ``Sec. 1895. (a) Requirement of Payment Adjustments to 
     Achieve Medicare Budget Targets.--If the Secretary determines 
     under subsection (e)(3)(C) before a fiscal year (beginning 
     with fiscal year 1998) that--
       ``(1) the fee-for-service expenditures (as defined in 
     subsection (f)) for a sector of medicare services (as defined 
     in subsection (b)) for the fiscal year, will exceed
       ``(2) the allotment specified under subsection (c)(2) for 
     such fiscal year (taking into account any adjustment in the 
     allotment under subsection (h) for that fiscal year),

     then, notwithstanding any other provision of this title, 
     there shall be an adjustment (consistent with subsection (d)) 
     in applicable payment rates or payments for items and 
     services included in the sector in the fiscal year so that 
     such expenditures for the sector for the year will be reduced 
     by 133\1/3\ percent of the amount of such excess.
       ``(b) Sectors of Medicare Services Described.--
       ``(1) In general.--For purposes of this section, items and 
     services included under each of the following subparagraphs 
     shall be considered to be a separate `sector' of medicare 
     services:
       ``(A) Inpatient hospital services.
       ``(B) Home health services.
       ``(C) Extended care services (for inpatients of skilled 
     nursing facilities).
       ``(D) Hospice care.
       ``(E) Physicians' services (including services and supplies 
     described in section 1861(s)(2)(A)) and services of other 
     health care professionals (including certified registered 
     nurse anesthetists, nurse practitioners, physician 
     assistants, and clinical psychologists) for which separate 
     payment is made under this title.
       ``(F) Outpatient hospital services and ambulatory facility 
     services.
       ``(G) Durable medical equipment and supplies, including 
     prosthetic devices and orthotics.
       ``(H) Diagnostic tests (including clinical laboratory 
     services and x-ray services).
       ``(I) Other items and services.
       ``(2) Classification of items and services.--The Secretary 
     shall classify each type of items and services covered and 
     paid for separately under this title into one of the sectors 
     specified in paragraph (1). After publication of such 
     classification under subsection (e)(1), the Secretary is not 
     authorized to make substantive changes in such 
     classification.
       ``(c) Allotment.--
       ``(1) Allotments for each sector.--For purposes of this 
     section, subject to subsection (h)(1), the allotment for a 
     sector of medicare services for a fiscal year is equal to the 
     product of--
       ``(A) the total allotment for the fiscal year established 
     under paragraph (2), and
       ``(B) the allotment proportion (specified under paragraph 
     (3)) for the sector and fiscal year involved.
       ``(2) Total allotment.--
       ``(A) In general.--For purposes of this section, the total 
     allotment for a fiscal year is equal to--
       ``(i) the medicare benefit budget for the fiscal year (as 
     specified under subparagraph (B)), reduced by
       ``(ii) the amount of payments the Secretary estimates will 
     be made in the fiscal year under the MedicarePlus program 
     under part C.

     In making the estimate under clause (ii), the Secretary shall 
     take into account estimated enrollment and demographic 
     profile of individuals electing MedicarePlus products.
       ``(B) Medicare benefit budget.--For purposes of this 
     subsection, subject to subparagraph (C), the `medicare 
     benefit budget'--
       ``(i) for fiscal year 1997 is $208.0 billion;
       ``(ii) for fiscal year 1998 is $217.1 billion;
       ``(iii) for fiscal year 1999 is $228.4 billion;
       ``(iv) for fiscal year 2000 is $246.4 billion;
       ``(v) for fiscal year 2001 is $265.5 billion;
       ``(vi) for fiscal year 2002 is $288.0 billion; and
       ``(vii) for a subsequent fiscal year is equal to the 
     medicare benefit budget under this subparagraph for the 
     preceding fiscal year increased by the product of (I) 1.05, 
     and (II) 1 plus the annual percentage increase in the average 
     number of medicare beneficiaries from the previous fiscal 
     year to the fiscal year involved.
       ``(3) Medicare allotment proportion defined.--
       ``(A) In general.--For purposes of this section and with 
     respect to a sector of medicare services for a fiscal year, 
     the term `medicare allotment proportion' means the ratio of--
       ``(i) the baseline-projected medicare expenditures (as 
     determined under subparagraph (B)) for the sector for the 
     fiscal year, to
       ``(ii) the sum of such baseline expenditures for all such 
     sectors for the fiscal year.
       ``(B) Baseline-projected medicare expenditures.--In this 
     paragraph, the `baseline, projected medicare expenditures' 
     for a sector of medicare services--
       ``(i) for fiscal year 1996 is equal to fee-for-service 
     expenditures for such sector during fiscal year 1995, 
     increased by the baseline annual growth rate for such sector 
     of medicare services for fiscal year 1996 (as specified in 
     table in subparagraph (C)); and
       ``(ii) for a subsequent fiscal year is equal to the 
     baseline-projected medicare expenditures under this 
     subparagraph for the sector for the previous fiscal year 
     increased by the baseline annual growth rate for such sector 
     for the fiscal year involved (as specified in such table).
       ``(C) Baseline annual growth rates.--The following table 
     specifies the baseline annual growth rates for each of the 
     sectors for different fiscal years:

                                                                                                                                                                                                

[[Page H 10191]]
----------------------------------------------------------------------------------------------------------------
                                                         Baseline annual growth rates for fiscal year--         
                                               -----------------------------------------------------------------
         ``For the following sector--                                                                  2002 and 
                                                  1996     1997     1998     1999     2000     2001   thereafter
----------------------------------------------------------------------------------------------------------------
(A) Inpatient hospital services...............     5.7%     5.6%     6.0%     6.1%     5.7%     5.5%       5.2% 
(B) Home health services......................    17.2%    15.1%    11.7%     9.1%     8.4%     8.1%       7.9% 
(C) Extended care services....................    19.7%    12.3%     9.3%     8.7%     8.6%     8.4%       8.0% 
(D) Hospice care..............................    32.0%    24.0%    18.0%    15.0%    12.0%    10.0%       9.0% 
(E) Physicians' services......................    12.4%     9.7%     8.7%     9.0%     9.3%     9.6%      10.1% 
(F) Outpatient hospital services..............    14.7%    13.9%    14.5%    15.0%    14.1%    13.9%      14.0% 
(G) Durable medical equipment and supplies....    16.1%    15.5%    13.7%    12.4%    13.2%    13.9%      14.5% 
(H) Diagnostic tests..........................    13.1%    11.3%    11.0%    11.4%    11.4%    11.5%      11.9% 
(I) Other items and services..................    11.2%    10.2%    10.9%    12.0%    11.6%    11.6%      11.8% 
----------------------------------------------------------------------------------------------------------------


       ``(d) Manner of Payment Adjustment.--
       ``(1) In general.--Subject to the succeeding provisions of 
     this subsection, the Secretary shall apply a payment 
     reduction for a sector for a fiscal year in such a manner as 
     to--
       ``(A) make a change in payment rates (to the maximum extent 
     practicable) at the time payment rates are otherwise changed 
     or subject to change for that fiscal year; and
       ``(B) provide for the full appropriate adjustment so that 
     the fee-for-service expenditures for the sector for the 
     fiscal year will approximate (and not exceed) the allotment 
     for the sector for the fiscal year.
       ``(2) Taking into account volume and cash flow.--In 
     providing for an adjustment in payments under this subsection 
     for a sector for a fiscal year, the Secretary shall take into 
     account (in a manner consistent with actuarial projections)--
       ``(A) the impact of such an adjustment on the volume or 
     type of services provided in such sector (and other sectors), 
     and
       ``(B) the fact that an adjustment may apply to items and 
     services furnished in a fiscal year (payment for which may 
     occur in a subsequent fiscal year),

     in a manner that is consistent with assuring that total fee-
     for-services expenditures for each sector for the fiscal year 
     will not exceed the allotment under subsection (c)(1) for 
     such sector for such year.
       ``(3) Proportionality of reductions within a sector.--In 
     making adjustments under this subsection in payment for items 
     and services included within a sector of medicare services 
     for a fiscal year, the Secretary shall provide for such an 
     adjustment that results (to the maximum extent feasible) in 
     the same percentage reductions in aggregate Federal payments 
     under parts A and B for the different classes of items and 
     services included within the sector for the fiscal year.
       ``(4) Application to payments made based on prospective 
     payment rates determined on a fiscal year basis.--
       ``(A) In general.--In applying subsection (a) with respect 
     to items and services for which payment is made under part A 
     or B on the basis of rates that are established on a 
     prospective basis for (and in advance of) a fiscal year, the 
     Secretary shall provide for the payment adjustment under such 
     subsection through an appropriate reduction in such rates 
     established for items and services furnished (or, in the case 
     of payment for operating costs of inpatient hospital services 
     of subsection (d) hospitals and subsection (d) Puerto Rico 
     hospitals (as defined in paragraphs (1)(B) and (9)(A) of 
     section 1886(d)), discharges occurring) during such year.
       ``(B) Description of application to specific services.--The 
     payment adjustment described in subparagraph (A) applies for 
     a fiscal year to at least the following:
       ``(i) Update factor for payment for operating costs of 
     inpatient hospital services of pps hospitals.--To the 
     computation of the applicable percentage increase specified 
     in section 1886(d)(3)(B)(i) for discharges occurring in the 
     fiscal year.
       ``(ii) Home health services.--To the extent payment amounts 
     for home health services are based on per visit payment rates 
     under section 1894, to the computation of the increase in the 
     national per visit payment rates established for the year 
     under section 1894(b)(2)(B).
       ``(iii) Hospice care.--To the update of payment rates for 
     hospice care under section 1814(i) for services furnished 
     during the fiscal year.
       ``(iv) Update factor for payment of operating costs of 
     inpatient hospital services of pps-exempt hospitals.--To the 
     computation of the target amount under section 1886(b)(3) for 
     discharges occurring during the fiscal year.
       ``(v) Covered non-routine services of skilled nursing 
     facilities.--To the computation of the facility per stay 
     limits for the year under section 1888A(d) for covered non-
     routine services of a skilled nursing facility (as described 
     in such section).
       ``(5) Application to payments made based on prospective 
     payment rates determined on a calendar year basis.--
       ``(A) In general.--In applying subsection (a) for a fiscal 
     year with respect to items and services for which payment is 
     made under part A or B on the basis of rates that are 
     established on a prospective basis for (and in advance of) a 
     calendar year, the Secretary shall provide for the payment 
     adjustment under such subsection through an appropriate 
     reduction in such rates established for items and services 
     furnished at any time during such calendar year as follows:
       ``(i) For fiscal year 1997, the reduction shall be made for 
     payment rates during calendar year 1997 in a manner so as to 
     achieve the necessary payment reductions for such fiscal year 
     for items and services furnished during the first 3 quarters 
     of calendar year 1997.
       ``(ii) For a subsequent fiscal year, the reduction shall be 
     made for payment rates during the calendar year in which the 
     fiscal year ends in a manner so as to achieve the necessary 
     payment reductions for such fiscal year for items and 
     services furnished during the first 3 quarters of the 
     calendar year, but also taking into account the payment 
     reductions made in the first quarter of the fiscal year 
     resulting from payment reductions made under this paragraph 
     for the previous calendar year.
       ``(iii) Payment rate reductions effected under this 
     subparagraph for a calendar year and applicable to the last 3 
     quarters of the fiscal year in which the calendar year ends 
     shall continue to apply during the first quarter of the 
     succeeding fiscal year.
       ``(B) Application in specific cases.--The payment 
     adjustment described in subparagraph (A) applies for a fiscal 
     year to at least the following:
       ``(i) Update in conversion factor for physicians' 
     services.--To the computation of the conversion factor under 
     subsection (d) of section 1848 used in the fee schedule 
     established under subsection (b) of such section, for items 
     and services furnished during the calendar year in which the 
     fiscal year ends.
       ``(ii) Payment rates for other health care professionals.--
     To the computation of payments for professional services of 
     certified registered nurse anesthetists under section 
     1833(l), nurse midwives, physician assistants, nurse 
     practitioners and clinical nurse specialists under section 
     1833(r), clinical psychologists, clinical social workers, 
     physical or occupational therapists, and any other health 
     professionals for which payment rates are based (in whole or 
     in part) on payments for physicians' services, for services 
     furnished during the calendar year in which the fiscal year 
     ends.
       ``(iii) Update in lab fee schedule.--To the computation of 
     the fee schedule amount under section 1833(h)(2) for clinical 
     diagnostic laboratory services furnished during the calendar 
     year in which the fiscal year ends.
       ``(iv) Update in reasonable charges for vaccines.--To the 
     computation of the reasonable charge for vaccines described 
     in section 1861(s)(10) for vaccines furnished during the 
     calendar year in which the fiscal year ends.
       ``(v) Durable medical equipment-related items.--To the 
     computation of the payment basis under section 1834(a)(1)(B) 
     for covered items described in section 1834(a)(13), for items 
     furnished during the calendar year in which the fiscal year 
     ends.
       ``(vi) Radiologist services.--To the computation of 
     conversion factors for radiologist services under section 
     1834(b), for services furnished during the calendar year in 
     which the fiscal year ends.
       ``(vii) Screening mammography.--To the computation of 
     payment rates for screening mammography under section 
     1834(c)(1)(C)(ii), for screening mammography performed during 
     the calendar year in which the fiscal year ends.
       ``(viii) Prosthetics and orthotics.--To the computation of 
     the amount to be recognized under section 1834(h) for payment 
     for prosthetic devices and orthotics and prosthetics, for 
     items furnished during the calendar year in which the fiscal 
     year ends.
       ``(ix) Surgical dressings.--To the computation of the 
     payment amount referred to in section 1834(i)(1)(B) for 
     surgical dressings, for items furnished during the calendar 
     year in which the fiscal year ends.
       ``(x) Parenteral and enteral nutrition.--To the computation 
     of reasonable charge screens for payment for parenteral and 
     enteral nutrition under section 1834(h), for nutrients 
     furnished during the calendar year in which the fiscal year 
     ends.
       ``(xi) Ambulance services.--To the computation of limits on 
     reasonable charges for ambulance services, for services 
     furnished during the calendar year in which the fiscal year 
     ends.

[[Page H 10192]]

       ``(6) Application to payments made based on costs during a 
     cost reporting period.--
       ``(A) In general.--In applying subsection (a) for a fiscal 
     year with respect to items and services for which payment is 
     made under part A or B on the basis of costs incurred for 
     items and services in a cost reporting period, the Secretary 
     shall provide for the payment adjustment under such 
     subsection for a fiscal year through an appropriate 
     proportional reduction in the payment for costs for such 
     items and services incurred at any time during each cost 
     reporting period any part of which occurs during the fiscal 
     year involved, but only (for each such cost reporting period) 
     in the same proportion as the fraction of the cost reporting 
     period that occurs during the fiscal year involved.
       ``(B) Application in specific cases.--The payment 
     adjustment described in subparagraph (A) applies for a fiscal 
     year to at least the following:
       ``(i) Capital-related costs of hospital services.--To the 
     computation of payment amounts for inpatient and outpatient 
     hospital services under sections 1886(g) and 1861(v) for 
     portions of cost reporting periods occurring during the 
     fiscal year.
       ``(ii) Operating costs for pps-exempt hospitals.--To the 
     computation of payment amounts under section 1886(b) for 
     operating costs of inpatient hospital services of PPS-exempt 
     hospitals for portions of cost reporting periods occurring 
     during the fiscal year.
       ``(iii) Direct graduate medical education.--To the 
     computation of payment amounts under section 1886(h) for 
     reasonable costs of direct graduate medical education costs 
     for portions of cost reporting periods occurring during the 
     fiscal year.
       ``(iv) Inpatient rural primary care hospital services.--To 
     the computation of payment amounts under section 1814(j) for 
     inpatient rural primary care hospital services for portions 
     of cost reporting periods occurring during the fiscal year.
       ``(v) Extended care services of a skilled nursing 
     facility.--To the computation of payment amounts under 
     section 1861(v) for post-hospital extended care services of a 
     skilled nursing facility (other than covered non-routine 
     services subject to section 1888A) for portions of cost 
     reporting periods occurring during the fiscal year.
       ``(vi) Reasonable cost contracts.--To the computation of 
     payment amounts under section 1833(a)(1)(A) for organizations 
     for portions of cost reporting periods occurring during the 
     fiscal year.
       ``(vii) Home health services.--Subject to paragraph 
     (4)(B)(ii), for payment amounts for home health services, for 
     portions of cost reporting periods occurring during such 
     fiscal year.
       ``(7) Other.--In applying subsection (a) for a fiscal year 
     with respect to items and services for which payment is made 
     under part A or B on a basis not described in a previous 
     paragraph of this subsection, the Secretary shall provide for 
     the payment adjustment under such subsection through an 
     appropriate proportional reduction in the payments (or 
     payment bases for items and services furnished) during the 
     fiscal year.
       ``(8) Adjustment of payment limits.--The Secretary shall 
     provide for such proportional adjustment in any limits on 
     payment established under part A or B for payment for items 
     and services within a sector as may be appropriate based on 
     (and in order to properly carry out) the adjustment on the 
     amount of payment under this subsection in the sector.
       ``(9) References to payment rates.--Except as the Secretary 
     may provide, any reference in this title (other than this 
     section) to a payment rate is deemed a reference to such a 
     rate as adjusted under this subsection.
       ``(e) Publication of Determinations; Judicial Review.--
       ``(1) One-time publication of sectors and general payment 
     adjustment methodology.--Not later than October 1, 1996, the 
     Secretary shall publish in the Federal Register the 
     classification of medicare items and services into the 
     sectors of medicare services under subsection (b) and the 
     general methodology to be used in applying payment 
     adjustments to the different classes of items and services 
     within the sectors.
       ``(2) Inclusion of information in president's budget.--
       ``(A) In general.--With respect to fiscal years beginning 
     with fiscal year 1999, the President shall include in the 
     budget submitted under section 1105 of title 31, United 
     States Code, information on--
       ``(i) the fee-for-service expenditures, within each sector, 
     for the second previous fiscal year, and how such 
     expenditures compare to the adjusted sector allotment for 
     that sector for that fiscal year; and
       ``(ii) actual annual growth rates for fee-for-service 
     expenditures in the different sectors in the second previous 
     fiscal year.
       ``(B) Recommendations regarding growth factors.--The 
     President may include in such budget for a fiscal year 
     (beginning with fiscal year 1998) recommendations regarding 
     percentages that should be applied (for one or more fiscal 
     years beginning with that fiscal year) instead of the 
     baseline annual growth rates under subsection (c)(3)(C). Such 
     recommendations shall take into account medically appropriate 
     practice patterns.
       ``(3) Determinations concerning payment adjustments.--
       ``(A) Recommendations of commission.--By not later than 
     March 1 of each year (beginning with 1997), the Medicare 
     Payment Review Commission shall submit to the Secretary and 
     the Congress a report that analyzes the previous operation 
     (if any) of this section and that includes recommendations 
     concerning the manner in which this section should be applied 
     for the following fiscal year.
       ``(B) Preliminary notice by secretary.--Not later than May 
     15 preceding the beginning of each fiscal year (beginning 
     with fiscal year 1998), the Secretary shall publish in the 
     Federal Register a notice containing the Secretary's 
     preliminary determination, for each sector of medicare 
     services, concerning the following:
       ``(i) The projected allotment under subsection (c) for such 
     sector for the fiscal year.
       ``(ii) Whether there will be a payment adjustment for items 
     and services included in such sector for the fiscal year 
     under subsection (a).
       ``(iii) If there will be such an adjustment, the size of 
     such adjustment and the methodology to be used in making such 
     a payment adjustment for classes of items and services 
     included in such sector.
       ``(iv) Beginning with fiscal year 1999, the fee-for-service 
     expenditures for such sector for the second preceding fiscal 
     year.

     Such notice shall include an explanation of the basis for 
     such determination. Determinations under this subparagraph 
     and subparagraph (C) shall be based on the best data 
     available at the time of such determinations.
       ``(C) Final determination.--Not later than September 1 
     preceding the beginning of each fiscal year (beginning with 
     fiscal year 1998), the Secretary shall publish in the Federal 
     Register a final determination, for each sector of medicare 
     services, concerning the matters described in subparagraph 
     (B) and an explanation of the reasons for any differences 
     between such determination and the preliminary determination 
     for such fiscal year published under subparagraph (B).
       ``(4) Limitation on administrative or judicial review.--
     There shall be no administrative or judicial review under 
     section 1878 or otherwise of--
       ``(A) the classification of items and services among the 
     sectors of medicare services under subsection (b),
       ``(B) the determination of the amounts of allotments for 
     the different sectors of medicare services under subsection 
     (c),
       ``(C) the determination of the amount (or method of 
     application) of any payment adjustment under subsection (d), 
     or
       ``(D) any adjustment in an allotment effected under 
     subsection (h).
       ``(f) Fee-for-Service Expenditures Defined.--In this 
     section, the term `fee-for-service expenditures', for items 
     and services within a sector of medicare services in a fiscal 
     year, means amounts payable for such items and services which 
     are furnished during the fiscal year, and--
       ``(1) includes types of expenses otherwise reimbursable 
     under parts A and B (including administrative costs incurred 
     by organizations described in sections 1816 and 1842) with 
     respect to such items and services, and
       ``(2) does not include amounts paid under part C.
       ``(g) Expedited Process for Adjustment of Sector Growth 
     Rates.--
       ``(1) Optional inclusion of legislative proposal.--The 
     President may include in recommendations under subsection 
     (e)(2)(B) submitted with respect to a fiscal year a specific 
     legislative proposal that provides only for the substitution 
     of percentages specified in the proposal for one or more of 
     the baseline annual growth rates (specified in the table in 
     subsection (c)(3)(C) or in a previous legislative proposal 
     under this subsection) for that fiscal year or any subsequent 
     fiscal year.
       ``(2) Congressional consideration.--
       ``(A) In general.--The percentages contained in a 
     legislative proposal submitted under paragraph (1) shall 
     apply under this section if a joint resolution (described in 
     subparagraph (B)) approving such proposal is enacted, in 
     accordance with the provisions of subparagraph (C), before 
     the end of the 60-day period beginning on the date on which 
     such proposal was submitted. For purposes of applying the 
     preceding sentence and subparagraphs (B) and (C), the days on 
     which either House of Congress is not in session because of 
     an adjournment of more than three days to a day certain shall 
     be excluded in the computation of a period.
       ``(B) Joint resolution of approval.--A joint resolution 
     described in this subparagraph means only a joint resolution 
     which is introduced within the 10-day period beginning on the 
     date on which the President submits a proposal under 
     paragraph (1) and--
       ``(i) which does not have a preamble;
       ``(ii) the matter after the resolving clause of which is as 
     follows: `That Congress approves the proposal of the 
     President providing for substitution of percentages for 
     certain baseline annual growth rates under section 1895 of 
     the Social Security Act, as submitted by the President on 
     ______________.', the blank space being filled in with the 
     appropriate date; and
       ``(iii) the title of which is as follows: `Joint resolution 
     approving Presidential proposal to substitute certain 
     specified percentages for baseline annual growth rates under 
     section 1895 of the Social Security Act, as submitted by the 
     President on ______________.', the blank space being filled 
     in with the appropriate date.
       ``(C) Procedures for consideration of resolution of 
     approval.--Subject to subparagraph (D), the provisions of 
     section 2908 

[[Page H 10193]]
     (other than subsection (a)) of the Defense Base Closure and Realignment 
     Act of 1990 shall apply to the consideration of a joint 
     resolution described in subparagraph (B) in the same manner 
     as such provisions apply to a joint resolution described in 
     section 2908(a) of such Act.
       ``(D) Special rules.--For purposes of applying subparagraph 
     (C) with respect to such provisions--
       ``(i) any reference to the Committee on Armed Services of 
     the House of Representatives shall be deemed a reference to 
     an appropriate Committee of the House of Representatives 
     (specified by the Speaker of the House of Representatives at 
     the time of submission of a legislative proposal under 
     paragraph (1)) and any reference to the Committee on Armed 
     Services of the Senate shall be deemed a reference to the 
     Committee on Finance of the Senate;
       ``(ii) any reference to a resolution of which a committee 
     shall be discharged from further consideration shall be 
     deemed to be a reference to the first such resolution 
     introduced; and
       ``(iii) any reference to the date on which the President 
     transmits a report shall be deemed a reference to the date on 
     which the President submits the legislative proposal under 
     paragraph (1).
       ``(h) Look-Back Adjustment in Allotments to Reflect Actual 
     Expenditures.--
       ``(1) In general.--If the Secretary determines under 
     subsection (e)(3)(B) with respect to a particular fiscal year 
     (beginning with fiscal year 1999) that the fee-for-service 
     expenditures for a sector of medicare services for the second 
     preceding fiscal year--
       ``(A) exceeded the adjusted allotment for such sector for 
     such year (as defined in paragraph (2)), then the allotment 
     for the sector for the particular fiscal year shall be 
     reduced by 133\1/3\ percent of the amount of such excess, or
       ``(B) was less than the adjusted allotment for such sector 
     for such year, then the allotment for the sector for the 
     particular fiscal year shall be increased by the amount of 
     such deficit.
       ``(2) Adjusted allotment.--The adjusted allotment under 
     this paragraph for a sector for a fiscal year is--
       ``(A) the amount that would be computed as the allotment 
     under subsection (c) for the sector for the fiscal year if 
     the actual amount of payments made in the fiscal year under 
     the MedicarePlus program under part C in the fiscal year were 
     substituted for the amount described in subsection 
     (c)(2)(A)(ii) for that fiscal year,
       ``(B) adjusted to take into account the amount of any 
     adjustment under paragraph (1) for that fiscal year (based on 
     expenditures in the second previous fiscal year).
       ``(i) Prospective Application of Certain National Coverage 
     Determinations.--In the case of a national coverage 
     determination that the Secretary projects will result in 
     significant additional expenditures under this title (taking 
     into account any substitution for existing procedures or 
     technologies), such determination shall not become effective 
     before the beginning of the fiscal year that begins after the 
     date of such determination and shall apply to contracts under 
     part C entered into (or renewed) after the date of such 
     determination.''.
       (b) Report of Trustees on Growth Rate in Part A 
     Expenditures.--Section 1817 (42 U.S.C. 1395i) is amended by 
     adding at the end the following new subsection:
       ``(k) Each annual report provided in subsection (b)(2) 
     shall include information regarding the annual rate of growth 
     in program expenditures that would be required to maintain 
     the financial solvency of the Trust Fund and the extent to 
     which the provisions of section 1895 restrain the rate of 
     growth of expenditures under this part in order to achieve 
     such solvency.''.

                 PART 4--ADMINISTRATIVE SIMPLIFICATION

     SEC. 15731. STANDARDS FOR MEDICARE INFORMATION TRANSACTIONS 
                   AND DATA ELEMENTS.

       Title XVIII, as amended by section 15031, is amended by 
     inserting after section 1806 the following new section:


  ``standards for medicare information transactions and data elements

       ``Sec. 1807. (a) Adoption of Standards for Data Elements.--
       ``(1) In general.--Pursuant to subsection (b), the 
     Secretary shall adopt standards for information transactions 
     and data elements of medicare information and modifications 
     to the standards under this section that are--
       ``(A) consistent with the objective of reducing the 
     administrative costs of providing and paying for health care; 
     and
       ``(B) developed or modified by a standard setting 
     organization (as defined in subsection (h)(8)).
       ``(2) Special rule relating to data elements.--The 
     Secretary may adopt or modify a standard relating to data 
     elements that is different from the standard developed by a 
     standard setting organization, if--
       ``(A) the different standard or modification will 
     substantially reduce administrative costs to health care 
     providers and health plans compared to the alternative; and
       ``(B) the standard or modification is promulgated in 
     accordance with the rulemaking procedures of subchapter III 
     of chapter 5 of title 5, United States Code.
       ``(3) Security standards for health information network.--
       ``(A) In general.--Each person, who maintains or transmits 
     medicare information or data elements of medicare information 
     and is subject to this section, shall maintain reasonable and 
     appropriate administrative, technical, and physical 
     safeguards--
       ``(i) to ensure the integrity and confidentiality of the 
     information;
       ``(ii) to protect against any reasonably anticipated--

       ``(I) threats or hazards to the security or integrity of 
     the information; and
       ``(II) unauthorized uses or disclosures of the information; 
     and

       ``(iii) to otherwise ensure compliance with this section by 
     the officers and employees of such person.
       ``(B) Security standards.--The Secretary shall establish 
     security standards and modifications to such standards with 
     respect to medicare information network services, health 
     plans, and health care providers that--
       ``(i) take into account--

       ``(I) the technical capabilities of record systems used to 
     maintain medicare information;
       ``(II) the costs of security measures;
       ``(III) the need for training persons who have access to 
     medicare information; and
       ``(IV) the value of audit trails in computerized record 
     systems; and

       ``(ii) ensure that a medicare information network service, 
     if it is part of a larger organization, has policies and 
     security procedures which isolate the activities of such 
     service with respect to processing information in a manner 
     that prevents unauthorized access to such information by such 
     larger organization.

     The security standards established by the Secretary shall be 
     based on the standards developed or modified by standard 
     setting organizations. If such standards do not exist, the 
     Secretary shall rely on the recommendations of the Medicare 
     Information Advisory Committee (established under subsection 
     (g)) and shall consult with appropriate government agencies 
     and private organizations in accordance with paragraph (5).
       ``(4) Implementation specifications.--The Secretary shall 
     establish specifications for implementing each of the 
     standards and the modifications to the standards adopted 
     pursuant to paragraph (1) or (3).
       ``(5) Assistance to the secretary.--In complying with the 
     requirements of this section, the Secretary shall rely on 
     recommendations of the Medicare Information Advisory 
     Committee established under subsection (g) and shall consult 
     with appropriate Federal and State agencies and private 
     organizations. The Secretary shall publish in the Federal 
     Register the recommendations of the Medicare Information 
     Advisory Committee regarding the adoption of a standard under 
     this section.
       ``(b) Standards for Information Transactions and Data 
     Elements.--
       ``(1) In general.--The Secretary shall adopt standards for 
     transactions and data elements to make medicare information 
     uniformly available to be exchanged electronically, that is--
       ``(A) appropriate for the following financial and 
     administrative transactions: claims (including coordination 
     of benefits) or equivalent encounter information, enrollment 
     and disenrollment, eligibility, premium payments, and 
     referral certification and authorization; and
       ``(B) related to other financial and administrative 
     transactions determined appropriate by the Secretary 
     consistent with the goals of improving the operation of the 
     health care system and reducing administrative costs.
       ``(2) Unique health identifiers.--
       ``(A) Adoption of standards.--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 medicare information system. In 
     developing unique health identifiers for each health plan and 
     health care provider, the Secretary shall take into account 
     multiple uses for identifiers and multiple locations and 
     specialty classifications for health care providers.
       ``(B) Penalty for improper disclosure.--A person who 
     knowingly uses or causes to be used a unique health 
     identifier under subparagraph (A) for a purpose that is not 
     authorized by the Secretary shall--
       ``(i) be fined not more than $50,000, imprisoned not more 
     than 1 year, or both; or
       ``(ii) if the offense is committed under false pretenses, 
     be fined not more than $100,000, imprisoned not more than 5 
     years, or both.
       ``(3) Code sets.--
       ``(A) In general.--The Secretary, in consultation with the 
     Medicare Information Advisory Committee, experts from the 
     private sector, and Federal and State agencies, shall--
       ``(i) select code sets for appropriate data elements from 
     among the code sets that have been developed by private and 
     public entities; or
       ``(ii) establish code sets for such data elements if no 
     code sets for the data elements have been developed.
       ``(B) Distribution.--The Secretary shall establish 
     efficient and low-cost procedures for distribution (including 
     electronic distribution) of code sets and modifications made 
     to such code sets under subsection (c)(2).
       ``(4) Electronic signature.--
       ``(A) In general.--The Secretary, after consultation with 
     the Medicare Information 

[[Page H 10194]]
     Advisory Committee, 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 section and written signatures on enrollment and 
     disenrollment forms.
       ``(B) Payments for services and premiums.--Nothing in this 
     section shall be construed to prohibit the payment of health 
     care services or health plan premiums by debit, credit, 
     payment card or numbers, or other electronic means.
       ``(5) Transfer of information between health plans.--The 
     Secretary shall develop rules and procedures--
       ``(A) for determining the financial liability of health 
     plans when health care benefits are payable under two or more 
     health plans; and
       ``(B) for transferring among health plans appropriate 
     standard data elements needed for the coordination of 
     benefits, the sequential processing of claims, and other data 
     elements for individuals who have more than one health plan.
       ``(6) Coordination of benefits.--If, at the end of the 5-
     year period beginning on the date of the enactment of this 
     section, the Secretary determines that additional transaction 
     standards for coordinating benefits are necessary to reduce 
     administrative costs or duplicative (or inappropriate) 
     payment of claims, the Secretary shall establish further 
     transaction standards for the coordination of benefits 
     between health plans.
       ``(7) Protection of trade secrets.--Except as otherwise 
     required by law, the standards adopted under this section 
     shall not require disclosure of trade secrets or confidential 
     commercial information by an entity operating a medicare 
     information network.
       ``(c) Timetables for Adoption of Standards.--
       ``(1) Initial standards.--Not later than 18 months after 
     the date of the enactment of this section, the Secretary 
     shall adopt standards relating to the information 
     transactions, data elements of medicare information and 
     security described in subsections (a) and (b).
       ``(2) Additions and modifications to standards.--
       ``(A) In general.--The Secretary shall review the standards 
     adopted under this section and shall adopt additional or 
     modified standards, that have been developed or modified by a 
     standard setting organization, as determined appropriate, but 
     not more frequently than once every 12 months. Any addition 
     or modification to such standards shall be completed in a 
     manner which minimizes the disruption and cost of compliance.
       ``(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 paragraph, the modified code set shall include 
     instructions on how data elements of medicare information 
     that were encoded prior to the modification may be converted 
     or translated so as to preserve the informational value of 
     the data elements that existed before the modification. Any 
     modification to a code set under this paragraph shall be 
     implemented in a manner that minimizes the disruption and 
     cost of complying with such modification.
       ``(d) Requirements for Health Plans.--
       ``(1) In general.--If a person desires to conduct any of 
     the information transactions described in subsection (b)(1) 
     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 of medicare information.
       ``(2) Satisfaction of requirements.--A health plan may 
     satisfy the requirement imposed on such plan under paragraph 
     (1) by directly transmitting standard data elements of 
     medicare information or submitting nonstandard data elements 
     to a medicare information network service for processing into 
     standard data elements and transmission.
       ``(3) Timetables for compliance with requirements.--Not 
     later than 24 months after the date on which standards are 
     adopted under subsections (a) and (b) with respect to any 
     type of information transaction or data element of medicare 
     information or with respect to security, a health plan shall 
     comply with the requirements of this section with respect to 
     such transaction or data element.
       ``(4) Compliance with modified standards.--If the Secretary 
     adopts a modified standard under subsection (a) or (b), 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. However, the time 
     determined appropriate under the preceding sentence shall be 
     not earlier than the last day of the 180-day period beginning 
     on the date such modified standard is adopted. The Secretary 
     may extend the time for compliance for small health plans, if 
     the Secretary determines such extension is appropriate.
       ``(e) General Penalty for Failure to Comply With 
     Requirements and Standards.--
       ``(1) General penalty.--
       ``(A) In general.--Except as provided in paragraph (2), the 
     Secretary shall impose on any person that violates a 
     requirement or standard--
       ``(i) with respect to medicare information transactions, 
     data elements of medicare information, or security imposed 
     under subsection (a) or (b); or
       ``(ii) with respect to health plans imposed under 
     subsection (d);

     a penalty of not more than $100 for each such violation of a 
     specific standard or requirement, but the total amount 
     imposed for all such violations of a specific standard or 
     requirement during the calendar year shall not exceed 
     $25,000.
       ``(B) Procedures.--The provisions of section 1128A (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 paragraph in the same manner as such 
     provisions apply to the imposition of a penalty under such 
     section 1128A.
       ``(C) Denial of payment.--Except as provided in paragraph 
     (2), the Secretary may deny payment under this title for an 
     item or service furnished by a person if the person fails to 
     comply with an applicable requirement or standard for 
     medicare information relating to that item or service.
       ``(2) Limitations.--
       ``(A) Noncompliance not discovered.--A penalty may not be 
     imposed under paragraph (1) 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 paragraph (1).
       ``(B) Failures due to reasonable cause.--
       ``(i) In general.--Except as provided in clause (ii), a 
     penalty may not be imposed under paragraph (1) 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 first date the person liable for the 
     penalty knew, or by exercising reasonable diligence would 
     have known, that the failure to comply occurred.

       ``(ii) Extension of period.--

       ``(I) No penalty.--The period referred to in clause (i)(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)(II). Such 
     assistance shall be provided in any manner determined 
     appropriate by the Secretary.

       ``(C) Reduction.--In the case of a failure to comply which 
     is due to reasonable cause and not to willful neglect, any 
     penalty under paragraph (1) that is not entirely waived under 
     subparagraph (B) may be waived to the extent that the payment 
     of such penalty would be excessive relative to the compliance 
     failure involved.
       ``(f) Effect on State Law.--
       ``(1) General effect.--
       ``(A) General rule.--Except as provided in subparagraph 
     (B), a provision, requirement, or standard under this section 
     shall supersede any contrary provision of State law, 
     including 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.
       ``(B) Exceptions.--A provision, requirement, or standard 
     under this section shall not supersede a contrary provision 
     of State law if the Secretary determines that the provision 
     of State law should be continued for any reason, including 
     for reasons relating to prevention of fraud and abuse or 
     regulation of controlled substances.
       ``(2) Public health reporting.--Nothing in this section 
     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.
       ``(g) Medicare Information Advisory Committee.--
       ``(1) Establishment.--There is established a committee to 
     be known as the Medicare Information Advisory Committee (in 
     this subsection referred to as the `committee').
       ``(2) Duties.--The committee shall--
       ``(A) advise the Secretary in the development of standards 
     under this section; and
       ``(B) be generally responsible for advising the Secretary 
     and the Congress on the status and the future of the medicare 
     information network.
       ``(3) Membership.--
       ``(A) In general.--The committee shall consist of 9 members 
     of whom--
       ``(i) 3 shall be appointed by the President;
       ``(ii) 3 shall be appointed by the Speaker of the House of 
     Representatives after consultation with the minority leader 
     of the House of Representatives; and
       ``(iii) 3 shall be appointed by the President pro tempore 
     of the Senate after consultation with the minority leader of 
     the Senate.

     The appointments of the members shall be made not later than 
     60 days after the date of the enactment of this section. The 
     President shall designate 1 member as the Chair.
       ``(B) Expertise.--The membership of the committee shall 
     consist of individuals who are of recognized standing and 
     distinction in the areas of information systems, information 
     networking and integration, consumer 

[[Page H 10195]]
     health, or health care financial management, and who possess the 
     demonstrated capacity to discharge the duties imposed on the 
     committee.
       ``(C) 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 not more than 3 members expire at one time.
       ``(D) Initial meeting.--Not later than 30 days after the 
     date on which a majority of the members have been appointed, 
     the committee shall hold its first meeting.
       ``(4) Reports.--Not later than 1 year after the date of the 
     enactment of this section, and annually thereafter, the 
     committee shall submit to Congress and the Secretary a report 
     regarding--
       ``(A) the extent to which entities using the medicare 
     information network are meeting the standards adopted under 
     this section and working together to form an integrated 
     network that meets the needs of its users;
       ``(B) the extent to which such entities are meeting the 
     security standards established pursuant to this section and 
     the types of penalties assessed for noncompliance with such 
     standards;
       ``(C) any problems that exist with respect to 
     implementation of the medicare information network; and
       ``(D) the extent to which timetables under this section are 
     being met.

     Reports made under this subsection shall be made available to 
     health care providers, health plans, and other entities that 
     use the medicare information network to exchange medicare 
     information.
       ``(h) Definitions.--For purposes of this section:
       ``(1) Code set.--The term `code set' means any set of codes 
     used for encoding data elements, such as tables of terms, 
     enrollment information, and encounter data.
       ``(2) Coordination of benefits.--The term `coordination of 
     benefits' means determining and coordinating the financial 
     obligations of health plans when health care benefits are 
     payable under such a plan and under this title (including 
     under a MedicarePlus product).
       ``(3) Medicare information.--The term `medicare 
     information' means any information that relates to the 
     enrollment of individuals under this title (including 
     information relating to elections of MedicarePlus products 
     under section 1805) and the provision of health benefits 
     (including benefits provided under such products) under this 
     title.
       ``(4) Medicare information network.--The term `medicare 
     information network' means the medicare information system 
     that is formed through the application of the requirements 
     and standards established under this section.
       ``(5) Medicare information network service.--The term 
     `medicare information network service' means a public or 
     private entity that--
       ``(A) processes or facilitates the processing of 
     nonstandard data elements of medicare information into 
     standard data elements;
       ``(B) provides the means by which persons may meet the 
     requirements of this section; or
       ``(C) provides specific information processing services.
       ``(6) Health plan.--The term `health plan' means a plan 
     which provides, or pays the cost of, health benefits. Such 
     term includes the following, or any combination thereof:
       ``(A) Part A or part B of this title, and includes a 
     MedicarePlus product.
       ``(B) The medicaid program under title XIX and the 
     MediGrant program under title XXI.
       ``(C) A medicare supplemental policy (as defined in section 
     1882(g)(1)).
       ``(D) Worker's compensation or similar insurance.
       ``(E) Automobile or automobile medical-payment insurance.
       ``(F) A long-term care policy, other than a fixed indemnity 
     policy.
       ``(G) The Federal Employees Health Benefit Plan under 
     chapter 89 of title 5, United States Code.
       ``(H) An employee welfare benefit plan, as defined in 
     section 3(1) of the Employee Retirement Income Security Act 
     of 1974 (29 U.S.C. 1002(1)), but only to the extent the plan 
     is established or maintained for the purpose of providing 
     health benefits.
       ``(7) Individually identifiable medicare information.--The 
     term `individually identifiable medicare information' means 
     medicare enrollment information, including demographic 
     information collected from an individual, that--
       ``(A) is created or received by a health care provider, 
     health plan, employer, or medicare information network 
     service, and
       ``(B) identifies an individual.
       ``(8) Standard setting organization.--The term `standard 
     setting organization' means a standard setting organization 
     accredited by the American National Standards Institute.
       ``(9) Standard transaction.--The term `standard 
     transaction' means, when referring to an information 
     transaction or to data elements of medicare information, any 
     transaction that meets the requirements and implementation 
     specifications adopted by the Secretary under subsections (a) 
     and (b).''.

           PART 5--OTHER PROVISIONS RELATING TO PARTS A AND B

     SEC. 15741. CLARIFICATION OF MEDICARE COVERAGE OF ITEMS AND 
                   SERVICES ASSOCIATED WITH CERTAIN MEDICAL 
                   DEVICES APPROVED FOR INVESTIGATIONAL USE.

       (a) Coverage.--Nothing in title XVIII of the Social 
     Security Act may be construed to prohibit coverage under part 
     A or part B of the medicare program of items and services 
     associated with the use of a medical device in the furnishing 
     of inpatient hospital services (as defined for purposes of 
     part A of the medicare program) solely on the grounds that 
     the device is not an approved device, if--
       (1) the device is an investigational device; and
       (2) the device is used instead of an approved device.
       (b) Clarification of Payment Amount.--Notwithstanding any 
     other provision of title XVIII of the Social Security Act, 
     the amount of payment made under the medicare program for any 
     item or service associated with the use of an investigational 
     device in the furnishing of inpatient hospital services (as 
     defined for purposes of part A of the medicare program) may 
     not exceed the amount of the payment which would have been 
     made under the program for the item or service if the item or 
     service were associated with the use of an approved device.
       (c) Definitions.--In this section--
       (1) the term ``approved device'' means a medical device 
     which has been approved for marketing under pre-market 
     approval under the Federal Food, Drug, and Cosmetic Act or 
     cleared for marketing under a 510(k) notice under such Act; 
     and
       (2) the term ``investigational device'' means a medical 
     device (other than a device described in paragraph (1)) which 
     is approved for investigational use under section 520(g) of 
     the Federal Food, Drug, and Cosmetic Act.

     SEC. 15742. ADDITIONAL EXCLUSION FROM COVERAGE.

       (a) In General.--Section 1862(a) (42 U.S.C. 1395y(a)), as 
     amended by section 15525(a)(2), section 15609B(a), and 
     section 15701(c)(2)(C), is amended--
       (1) by striking ``or'' at the end of paragraph (17),
       (2) by striking the period at the end of paragraph (18) and 
     inserting ``; or'', and
       (3) by inserting after paragraph (18) the following new 
     paragraph:
       ``(19) where such expenses are for items or services, or to 
     assist in the purchase, in whole or in part, of health 
     benefit coverage that includes items or services, for the 
     purpose of causing, or assisting in causing, the death, 
     suicide, euthanasia, or mercy killing of a person.''.
       (b) Effective Date.--The amendments made by subsection (a) 
     shall apply to payment for items and services furnished on or 
     after the date of the enactment of this Act.

     SEC. 15743. COMPETITIVE BIDDING FOR CERTAIN ITEMS AND 
                   SERVICES.

       (a) Establishment of Demonstration.--Not later than 1 year 
     after the date of the enactment of this Act, the Secretary of 
     Health and Human Services shall establish and operate over a 
     2-year period a demonstration project in 2 geographic regions 
     selected by the Secretary under which (notwithstanding any 
     provision of title XVIII of the Social Security Act to the 
     contrary) the amount of payment made under the medicare 
     program for a selected item or service (other than clinical 
     diagnostic laboratory tests) furnished in the region shall be 
     equal to the price determined pursuant to a competitive 
     bidding process which meets the requirements of subsection 
     (b).
       (b) Requirements for Competitive Bidding Process.--The 
     competitive bidding process used under the demonstration 
     project under this section shall meet such requirements as 
     the Secretary may impose to ensure the cost-effective 
     delivery to medicare beneficiaries in the project region of 
     items and services of high quality.
       (c) Determination of Selected Items or Services.--The 
     Secretary shall select items and services to be subject to 
     the demonstration project under this section if the Secretary 
     determines that the use of competitive bidding with respect 
     to the item or service under the project will be appropriate 
     and cost-effective. In determining the items or services to 
     be selected, the Secretary shall consult with an advisory 
     taskforce which includes representatives of providers and 
     suppliers of items and services (including small business 
     providers and suppliers) in each geographic region in which 
     the project will be effective.

     SEC. 15744. DISCLOSURE OF CRIMINAL CONVICTIONS RELATING TO 
                   PROVISION OF HOME HEALTH SERVICES.

       (a) In General.--Section 1891 (42 U.S.C. 1395bbb) is 
     amended by adding at the end the following new subsection:
       ``(g) The Secretary, and each State or local survey agency 
     or other State agency responsible for monitoring compliance 
     of home health agencies with requirements, shall make 
     available, upon request of any person, information the 
     Secretary or agency has on individuals who have been 
     convicted of felonies relating to the provision of home 
     health services.''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall take effect on the date of the enactment of this Act.

     SEC. 15745. REQUIRING RENAL DIALYSIS FACILITIES TO MAKE 
                   SERVICES AVAILABLE ON A 24-HOUR BASIS.

       (a) In General.--Section 1881(b)(1) (42 U.S.C. 
     1395rr(b)(1)) is amended by striking the period at the end 
     and inserting the following: ``, together with a requirement 
     (in the case of a renal dialysis facility) that the facility 
     make institutional dialysis services and supplies available 
     on a 24-hour basis (either directly or through arrangements 
     with 

[[Page H 10196]]
     providers of services or other renal dialysis facilities that meet the 
     requirements of such subparagraph) and that the facility 
     provide notice informing its patients of the other providers 
     of services or renal dialysis facilities (if any) with whom 
     the facility has made such arrangements.''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to items and services furnished on or after 
     January 1, 1996.
                   Subtitle I--Clinical Laboratories

     SEC. 15801. EXEMPTION OF PHYSICIAN OFFICE LABORATORIES.

       Section 353(d) of the Public Health Service Act (42 U.S.C. 
     263a(d)) is amended--
       (1) by redesignating paragraphs (2), (3), and (4) as 
     paragraphs (3), (4), and (5) and by adding after paragraph 
     (1) the following:
       ``(2) Exemption of physician office laboratories.--
       ``(A) In general.--Except as provided in subparagraph (B), 
     a clinical laboratory in a physician's office (including an 
     office of a group of physicians) which is directed by a 
     physician and in which examinations and procedures are either 
     performed by a physician or by individuals supervised by a 
     physician solely as an adjunct to other services provided by 
     the physician's office is exempt from this section.
       ``(B) Exception.--A clinical laboratory described in 
     subparagraph (A) is not exempt from this section when it 
     performs a pap smear (Papanicolaou Smear) analysis.
       ``(C) Definition.--For purposes of subparagraph (A), the 
     term `physician' has the same meaning as is prescribed for 
     such term by section 1861(r) of the Social Security Act (42 
     U.S.C. 1395x(r)).'';
       (2) in paragraph (3) (as so redesignated) by striking 
     ``(3)'' and inserting ``(4)''; and
       (3) in paragraphs (4) and (5) (as so redesignated) by 
     striking ``(2)'' and inserting ``(3)''.
Subtitle J--Lock-Box Provisions for Medicare Part B Savings from Growth 
                               Reductions

     SEC. 15901. ESTABLISHMENT OF MEDICARE GROWTH REDUCTION TRUST 
                   FUND FOR PART B SAVINGS.

       Part B of title XVIII is amended by inserting after section 
     1841 the following new section:


                 ``medicare growth reduction trust fund

       ``Sec. 1841A. (a)(1) There is hereby created on the books 
     of the Treasury of the United States a trust fund to be known 
     as the `Federal Medicare Growth Reduction Trust Fund' (in 
     this section referred to as the `Trust Fund'). The Trust Fund 
     shall consist of such gifts and bequests as may be made as 
     provided in section 201(i)(1) and amounts appropriated under 
     paragraph (2).
       ``(2) There are hereby appropriated to the Trust Fund, out 
     of any amounts in the Treasury not otherwise appropriated, 
     amounts equivalent to 100 percent of the Secretary's estimate 
     of the reductions in outlays under this part that are 
     attributable to the Medicare Preservation Act of 1995. The 
     amounts appropriated by the preceding sentence shall be 
     transferred from time to time (not less frequently than 
     monthly) from the general fund in the Treasury to the Trust 
     Fund.
       ``(3)(A) Subject to subparagraph (B), with respect to 
     monies transferred to the Trust Fund, no transfers, 
     authorizations of appropriations, or appropriations are 
     permitted.
       ``(B) Beginning with fiscal year 2003, the Secretary may 
     expend funds in the Trust Fund to carry out this title, but 
     only to the extent provided by Congress in advance through a 
     specific amendment to this section.
       ``(b) The provisions of subsections (b) through (e) of 
     section 1841 shall apply to the Trust Fund in the same manner 
     as they apply to the Federal Supplementary Medical Insurance 
     Trust Fund, except that the Board of Trustees and Managing 
     Trustee of the Trust Fund shall be composed of the members of 
     the Board of Trustees and the Managing Trustee, respectively, 
     of the Federal Supplementary Medical Insurance Trust Fund.''.

                               H.R. 2425

                        Offered By: Mr. Gibbons

               (Amendment in the Nature of a Substitute)

       Amendment No. 2: Strike all after the enacting clause and 
     insert the following:
                           TITLE XV--MEDICARE

     SEC. 15000. SHORT TITLE OF TITLE; AMENDMENTS AND REFERENCES 
                   TO OBRA; TABLE OF CONTENTS OF TITLE.

       (a) Short Title.--This title may be cited as the ``Medicare 
     Enhancement Act of 1995''.
       (b) Amendments to Social Security Act.--Except as otherwise 
     specifically provided, whenever in this title an amendment is 
     expressed in terms of an amendment to or repeal of a section 
     or other provision, the reference shall be considered to be 
     made to that section or other provision of the Social 
     Security Act.
       (c) References to OBRA.--In this title, the terms ``OBRA-
     1986'', ``OBRA-1987'', ``OBRA-1989'', ``OBRA-1990'', and 
     ``OBRA-1993'' refer to the Omnibus Budget Reconciliation Act 
     of 1986 (Public Law 99-509), the Omnibus Budget 
     Reconciliation Act of 1987 (Public Law 100-203), the Omnibus 
     Budget Reconciliation Act of 1989 (Public Law 101-239), the 
     Omnibus Budget Reconciliation Act of 1990 (Public Law 101-
     508), and the Omnibus Budget Reconciliation Act of 1993 
     (Public Law 103-66), respectively.
       (d) Table of Contents of Title.--The table of contents of 
     this title is as follows:

           Subtitle A--Provisions Relating to Medicare Part A

Sec. 15001. Reductions in inflation updates for inpatient hospital 
              services.
Sec. 15002. Continuation of current reduction in payments for capital-
              related costs for inpatient hospital services.
Sec. 15003. Elimination of certain additional payments for outlier 
              cases.
Sec. 15004. Clarification of treatment of transfers.
Sec. 15005. Prospective payment for skilled nursing facilities.
Sec. 15006. Maintaining savings resulting from temporary freeze on 
              payment increases for skilled nursing facilities.

           Subtitle B--Provisions Relating to Medicare Part B

Sec. 15101. Payment for physicians' services.
Sec. 15102. Freeze in updates to payment amounts for certain items and 
              services.
Sec. 15103. Reduction in effective beneficiary coinsurance rate for 
              certain hospital outpatient services.
Sec. 15104. Expanding coverage of preventive benefits.
Sec. 15105. Reduction in payment for capital-related costs of hospital 
              outpatient services.
Sec. 15106. Part B premium.
Sec. 15107. Ensuring payment for physician and nurse for jointly 
              furnished anesthesia services.

            Subtitle C--Provisions Relating to Parts A and B

                    Part 1--Medicare Secondary Payor

Sec. 15201. Extension of existing secondary payer requirements.
Sec. 15202. Clarification of time and filing limitations.
Sec. 15203. Clarification of liability of third party-administrators.
Sec. 15204. Clarification of payment amounts to medicare.
Sec. 15205. Conditions for double damages.

           Part 2--Other Provisions Relating to Parts A and B

Sec. 15221. Making additional choices of health plans available to 
              beneficiaries.
Sec. 15222. Teaching hospital and graduate medical education trust 
              fund.
Sec. 15223. Revisions in determination of amount of payment for medical 
              education.
Sec. 15224. Payments for home health services.
Sec. 15225. Requiring health maintenance organizations to cover 
              appropriate range of services.
Sec. 15226. Clarification of medicare coverage of items and services 
              associated with certain medical devices approved for 
              investigational use.
Sec. 15227. Commission on the Future of Medicare and the Protection of 
              the Health of the Nation's Senior Citizens.

                 Subtitle D--Preventing Fraud and Abuse

  Part 1--Amendments to Anti-Fraud and Abuse Provisions Applicable to 
           Medicare, Medicaid, and State Health Care Programs

Sec. 15301. Anti-kickback statutory provisions.
Sec. 15302. Civil money penalties.
Sec. 15303. Private right of action.
Sec. 15304. Amendments to exclusionary provisions in fraud and abuse 
              program.
Sec. 15305. Sanctions against practitioners and persons for failure to 
              comply with statutory obligations relating to quality of 
              care.
Sec. 15306. Revisions to criminal penalties.
Sec. 15307. Definitions.
Sec. 15308. Effective date.

      Part 2--Interpretive Rulings on Kickbacks and Self-referral

Sec. 15311. Establishment of process for issuance of interpretive 
              rulings.
Sec. 15312. Effect of issuance of interpretive ruling.
Sec. 15313. Imposition of fees.

    Part 3--Direct Spending for Anti-Fraud Activities Under Medicare

Sec. 15321. Direct spending for anti-fraud activities under medicare.

   Part 4--Preemption of State Corporate Practice Laws Under Medicare

Sec. 15331. Preemption of State laws prohibiting corporate practice of 
              medicine for purposes of medicare.

            Part 5--Medicare Anti-Fraud and Abuse Commission

Sec. 15341. Establishment of Medicare Anti-Fraud and Abuse Commission.
Sec. 15342. Functions of Commission.
Sec. 15343. Organization and compensation.
Sec. 15344. Staff of Commission.
Sec. 15345. Authority of Commission.
Sec. 15346. Termination.
Sec. 15347. Authorization of appropriations.
           Subtitle A--Provisions Relating to Medicare Part A

     SEC. 15001. REDUCTIONS IN INFLATION UPDATES FOR INPATIENT 
                   HOSPITAL SERVICES.

       (a) PPS Hospitals.--Section 1886(b) (3)(B)(i) (42 U.S.C. 
     1395ww(b)(3)(B)(i)) is amended by striking subclauses (XI), 
     (XII), and (XIII) and inserting the following:
       ``(XI) for each of the fiscal years 1996 through 2002, the 
     market basket percentage increase minus 0.5 percentage point 
     for hospitals located in a rural area and the market 

[[Page H 10197]]
     basket percentage increase minus 1.0 percentage point for all other 
     hospitals, and
       ``(XII) for fiscal year 2003 and each subsequent fiscal 
     year, the market basket percentage increase for hospitals in 
     all areas.''.
       (b) PPS-Exempt Hospitals.--Section 1886(b)(3)(B)(ii) (42 
     U.S.C. 1395ww(b)(3)(B)(ii)) is amended--
       (1) in subclause (V)--
       (A) by striking ``thorugh 1997'' and inserting ``through 
     1995'', and
       (B) by striking ``and'' at the end;
       (2) by redesignating subclause (VI) as subclause (VII); and
       (3) by inserting after subclause (V) the following new 
     subclause:
       ``(VI) fiscal years 1996 through 2002, is the market basket 
     percentage increase minus 0.5 percentage point for hospitals 
     located in a rural area and the market basket percentage 
     increase minus 1.0 percentage point for all other hospitals, 
     and''.

     SEC. 15002. CONTINUATION OF CURRENT REDUCTION IN PAYMENTS FOR 
                   CAPITAL-RELATED COSTS FOR INPATIENT HOSPITAL 
                   SERVICES.

       (a) Reduction in Payments for PPS Hospitals.--Section 
     1886(g)(1)(A) (42 U.S.C. 1395ww(g)(1)(A)) is amended in the 
     second sentence by striking ``through 1995'' and inserting 
     ``through 2002''.
       (b) Reduction in Payments for PPS-Exempt Hospitals.--
     Section 1886(g) (42 U.S.C. 1395ww(g)) is amended by adding at 
     the end the following new paragraph:
       ``(4)(A) Except as provided in subparagraph (B), in 
     determining the amount of the payments that may be made under 
     this title with respect to all the capital-related costs of 
     inpatient hospital services furnished during fiscal years 
     1996 through 2002 of a hospital which is not a subsection (d) 
     hospital or a subsection (d) Puerto Rico hospital, the 
     Secretary shall reduce the amounts of such payments otherwise 
     determined under this title by 10 percent.
       ``(B) Subparagraph (A) shall not apply to payments with 
     respect to the capital-related costs of any hospital that is 
     a sole community hospital (as defined in subsection 
     (d)(5)(D)(iii) or a rural primary care hospital (as defined 
     in section 1861(mm)(1)).''.

     SEC. 15003. ELIMINATION OF CERTAIN ADDITIONAL PAYMENTS FOR 
                   OUTLIER CASES.

       (a) Indirect Medical Education.--Section 
     1886(d)(5)(B)(i)(I) (42 U.S.C. 1395ww(d)(5)(B)(i)(I)) is 
     amended--
       (1) by striking ``the sum of''; and
       (2) by striking ``and the amount paid to the hospital under 
     subparagraph (A)''.
       (b) Disproportionate Share Adjustments.--Section 
     1886(d)(5)(F)(ii)(I) (42 U.S.C. 1395ww(d)(5)(F)(ii)(I)) is 
     amended--
       (1) by striking ``the sum of''; and
       (2) by striking ``and the amount paid to the hospital under 
     subparagraph (A) for that discharge''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to discharges occurring on or after October 1, 
     1995.

     SEC. 15004. CLARIFICATION OF TREATMENT OF TRANSFERS.

       (a) In General.--Section 1886(d)(5)(I) (42 U.S.C. 
     1395ww(d)(5)(I)) is amended by adding at the end the 
     following new clause:
       ``(iii) In making adjustments under clause (i) for transfer 
     cases, the Secretary shall treat as a transfer any transfer 
     to a hospital (without regard to whether or not the hospital 
     is a subsection (d) hospital), a unit thereof, or a skilled 
     nursing facility.''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to discharges occurring on or after October 1, 
     1995.

     SEC. 15005. PROSPECTIVE PAYMENT FOR SKILLED NURSING 
                   FACILITIES.

       Section 1888 (42 U.S.C. 1395yy) is amended by adding at the 
     end the following:
       ``(e) Notwithstanding any other provision of this title, 
     the Secretary shall, for cost reporting periods beginning on 
     or after October 1, 1996, provide for payment for routine 
     costs of extended care services in accordance with a 
     prospective payment system established by the Secretary, 
     subject to the limitations in subsections (f) through (h).
       ``(f)(1) The amount of payment under subsection (e) shall 
     be determined on a per diem basis.
       ``(2) The Secretary shall compute the routine costs per 
     diem in a base year (determined by the Secretary) for each 
     skilled nursing facility, and shall update the per diem rate 
     on the basis of a market basket and other factors as the 
     Secretary determines appropriate.
       ``(3) The per diem rate applicable to a skilled nursing 
     facility may not exceed the following limits--
       ``(A) With respect to skilled nursing facilities located in 
     rural areas, the limit shall be equal to 112 percent of the 
     mean per diem routine costs in a base year (determined by the 
     Secretary) for freestanding skilled nursing facilities 
     located in rural areas within the same region, as updated by 
     the same percentage determined under paragraph (2).
       ``(B) With respect to skilled nursing facilities located in 
     urban areas, the limit shall be equal to 112 percent of the 
     mean per diem routine costs in a base year (determined by the 
     Secretary) for freestanding skilled nursing facilities 
     located in urban areas within the same region, updated by the 
     same percentage determined under paragraph (2).
       ``(g) In the case of a hospital-based skilled nursing 
     facility or a skilled nursing facility receiving payment 
     under subsection (d) as of the date of enactment of this 
     provision, the amount of payment to the facility based on 
     application of subsections (e) and (f) may not be less than 
     the per diem rate applicable to the facility for routine 
     costs on the date of enactment of this provision.
       ``(h) Notwithstanding any other provision of this title, 
     the Secretary shall, for cost reporting periods beginning on 
     or after October 1, 1998, provide for payment for all costs 
     of extended care services (including routine service costs, 
     ancillary costs, and capital-related costs) in accordance 
     with a prospective payment system established by the 
     Secretary. The Secretary shall adjust the payment amounts 
     under this subsection in a manner to assure that the 
     aggregate payments made under this subsection in a fiscal 
     year result in a 5 percent reduction (as estimated by the 
     Secretary) in the amount of payments that would otherwise 
     have been made for such fiscal year.
       ``(i) The Secretary may provide for such exceptions as the 
     Secretary determines appropriate to the amount of payment 
     based on application of subsections (e) though (h).''

     SEC. 15006. MAINTAINING SAVINGS RESULTING FROM TEMPORARY 
                   FREEZE ON PAYMENT INCREASES FOR SKILLED NURSING 
                   FACILITIES.

       (a) Basing Updates to Per Diem Cost Limits on Limits for 
     Fiscal Year 1993.--
       (1) In general.--The last sentence of section 1888(a) (42 
     U.S.C. 1395yy(a)) is amended by adding at the end the 
     following: ``(except that such updates may not take into 
     account any changes in the routine service costs of skilled 
     nursing facilities occurring during cost reporting periods 
     which began during fiscal year 1994 or fiscal year 1995).''.
       (2) No exceptions permitted based on amendment.--The 
     Secretary of Health and Human Services shall not consider the 
     amendment made by paragraph (1) in making any adjustments 
     pursuant to section 1888(c) of the Social Security Act.
       (b) Payments Determined on Prospective Basis.--Any change 
     made by the Secretary of Health and Human Services in the 
     amount of any prospective payment paid to a skilled nursing 
     facility under section 1888(d) of the Social Security Act for 
     cost reporting periods beginning on or after October 1, 1995, 
     may not take into account any changes in the costs of 
     services occurring during cost reporting periods which began 
     during fiscal year 1994 or fiscal year 1995.
           Subtitle B--Provisions Relating to Medicare Part B

     SEC. 15101. PAYMENT FOR PHYSICIANS' SERVICES.

       (a) Replacement of Volume Performance Standard With 
     Cumulative Expenditure Target.--Section 1848(f)(2) (42 U.S.C. 
     1395w@4(f)(2)) is amended to read as follows:
       ``(f) Cumulative Expenditure Target.--
       ``(1) Specification of target.--
       ``(A) Fiscal year 1996.--The cumulative expenditure target 
     for all physicians' services and for each category of such 
     services for fiscal year 1996 shall be equal to the product 
     of--
       ``(i) 1 plus the Secretary's estimate of the percentage 
     change in the medicare economic index for 1996 (described in 
     the fourth sentence of section 1842(b)(3)) (divided by 100),
       ``(ii) 1 plus the Secretary's estimate of the percentage 
     change (divided by 100) in the average number of individuals 
     enrolled under this part (other than private plan enrollees) 
     from fiscal year 1995 to fiscal year 1996,
       ``(iii) 1 plus the Secretary's estimate of the projected 
     percentage growth in real gross domestic product per capita 
     (divided by 100) from fiscal year 1995 to fiscal year 1996, 
     plus 2 percentage points, and
       ``(iv) 1 plus the Secretary's estimate of the percentage 
     change (divided by 100) in expenditures for all physicians' 
     services or of the category of physicians' services in fiscal 
     year 1996 (compared with fiscal year 1995) which will result 
     from changes in law, determined without taking into account 
     estimated changes in expenditures due to changes in the 
     volume and intensity of physicians' services or changes in 
     expenditures resulting from changes in the update to the 
     conversion factor under subsection (d),

     minus 1 and multiplied by 100.
       ``(B) Subsequent fiscal years.--The cumulative expenditure 
     target for all physicians' services and for each category of 
     physicians' services for fiscal year 1997 and each subsequent 
     fiscal year shall be equal to the cumulative expenditure 
     target determined under this paragraph for the previous 
     fiscal year, increased by the product of--
       ``(i) 1 plus the Secretary's estimate of the percentage 
     change in the medicare economic index for the fiscal year 
     involved (described in the fourth sentence of section 
     1842(b)(3)) (divided by 100),
       ``(ii) 1 plus the Secretary's estimate of the percentage 
     change (divided by 100) in the average number of individuals 
     enrolled under this part (other than private plan enrollees) 
     from the previous fiscal year to the fiscal year involved,
       ``(iii) 1 plus the Secretary's estimate of the projected 
     percentage growth in real gross domestic product per capita 
     (divided by 100) from the previous fiscal year to the fiscal 
     year involved, plus 2 percentage points, and
       ``(iv) 1 plus the Secretary's estimate of the percentage 
     change (divided by 100) in expenditures for all physicians' 
     services or of the category of physicians' services in the 
     fiscal year (compared with the previous fiscal year) which 
     will result from changes in law, determined without taking 
     into account estimated changes in expenditures due to changes 
     in the volume and intensity of physicians' services or 
     changes in expenditures resulting from changes in the update 
     to the conversion factor under subsection (d)(3),


[[Page H 10198]]

     minus 1 and multiplied by 100.''.
       ``(2) Exclusion of services furnished to private plan 
     enrollees.--In this subsection, the term `physicians' 
     services' with respect to a fiscal year does not include 
     services furnished to an individual enrolled under this part 
     who has elected to receive benefits under this title for the 
     fiscal year through enrollment with an eligible organization 
     with a risk-sharing contract under section 1876.''.
       (b) Establishing Update to Conversion Factor to Match 
     Spending Under Cumulative Expenditure Target.--
       (1) In general.--Section 1848(d) (42 U.S.C. 1395w@4(d)(3)) 
     is amended--
       (A) by striking paragraph (2);
       (B) by amending paragraph (3) to read as follows:
       ``(3) Update.--
       ``(A) In general.--Subject to subparagraph (E), for 
     purposes of this section the update for a year (beginning 
     with 1997) is equal to the product of--
       ``(i) 1 plus the Secretary's estimate of the percentage 
     increase in the medicare economic index (described in the 
     fourth sentence of section 1842(b)(3)) for the year (divided 
     by 100), and
       ``(ii) 1 plus the Secretary's estimate of the update 
     adjustment factor for the year (divided by 100),
     minus 1 and multiplied by 100.
       ``(B) Update adjustment factor.--The `update adjustment 
     factor' for a year for a category of physicians' services is 
     equal to the quotient of--
       ``(i) the difference between (I) the sum of the allowed 
     expenditures for physicians' services in such category 
     furnished during each of the years 1995 through the year 
     involved and (II) the sum of the amount of actual 
     expenditures for physicians' services furnished in such 
     category during each of the years 1995 through the previous 
     year; divided by
       ``(ii) the Secretary's estimate of allowed expenditures for 
     physicians' services in such category furnished during the 
     year.
       ``(C) Determination of allowed expenditures.--For purposes 
     of subparagraph (B), allowed expenditures for physicians' 
     services in a category of physicians' services shall be 
     determined as follows (as estimated by the Secretary):
       ``(i) In the case of allowed expenditures for 1995, such 
     expenditures shall be equal to actual expenditures for 
     services furnished during the 12-month period ending with 
     June of 1995.
       ``(ii) In the case of allowed expenditures for 1996 and 
     each subsequent year, such expenditures shall be equal to 
     allowed expenditures for the previous year, increased by the 
     cumulative expenditure target under subsection (f) for the 
     fiscal year which begins during the year.
       ``(D) Determination of actual expenditures.--For purposes 
     of subparagraph (B), the amount of actual expenditures for 
     physicians' services in a category of physicians' services 
     furnished during a year shall be equal to the amount of 
     expenditures for such services during the 12-month period 
     ending with June of the previous year.
       ``(E) Restriction on variation from medicare economic 
     index.--Notwithstanding the amount of the update adjustment 
     factor determined under subparagraph (B) for a year, the 
     update in the conversion factor under this paragraph for the 
     year may not be--
       ``(i) greater than 103 percent of the Secretary's estimate 
     of the percentage increase in the medicare economic index 
     (described in the fourth sentence of section 1842(b)(3)) for 
     the year; or
       ``(ii) less than 92.5 percent of the Secretary's estimate 
     of the percentage increase in the medicare economic index 
     (described in the fourth sentence of section 1842(b)(3)) for 
     the year.''; and
       (C) by adding at the end the following new paragraph:
       ``(4) Reporting requirements.--
       ``(A) In general.--Not later than November 1 of each year 
     (beginning with 1996), the Secretary shall transmit to the 
     Congress a report that describes the update in the conversion 
     factor for physicians' services (as defined in subsection 
     (f)(3)(A)) in the following year.
       ``(B) Commission review.--The Medicare Payment Review 
     Commission shall review the report submitted under 
     subparagraph (A) for a year and shall submit to the Congress, 
     by not later than December 1 of the year, a report containing 
     its analysis of the conversion factor for the following 
     year.''.
       (2) Effective date.--The amendments made by this subsection 
     shall apply to physicians' services furnished on or after 
     January 1, 1997.
       (c) Establishment of Single Conversion Factor for 1996.--
     Section 1848(d)(1) (42 U.S.C. 1395w@4(d)(1)) is amended--
       (1) by redesignating subparagraph (C) as subparagraph (D); 
     and
       (2) by inserting after subparagraph (B) the following new 
     subparagraph:
       ``(C) Special rule for 1996.--For 1996, the conversion 
     factor under this subsection shall be $34.60 for all 
     physicians' services.''.

     SEC. 15102. FREEZE IN UPDATES TO PAYMENT AMOUNTS FOR CERTAIN 
                   ITEMS AND SERVICES.

       (a) Clinical Diagnostic Laboratory Tests.--Section 
     1833(h)(2)(A)(ii)(IV) (42 U.S.C. 1395l(h)(2)(A)(ii)(IV)) is 
     amended striking ``1994 and 1995'' and inserting ``1994, 
     1995, 1996, and 1997''.
       (b) Durable Medical Equipment.--
       (1) Covered items.--Section 1834(a)(14) (42 U.S.C. 
     1395m(a)(14)) is amended--
       (A) by striking ``and'' at the end of subparagraph (A);
       (B) in subparagraph (B)--
       (i) by striking ``a subsequent year'' and inserting ``1993, 
     1994, and 1995'', and
       (ii) by striking the period at the end and inserting ``; 
     and''; and
       (C) by adding at the end the following:
       ``(C) for 1996 and 1997, 0 percentage points; and
       ``(D) for a subsequent year, the percentage increase in the 
     consumer price index for all urban consumers (U.S. urban 
     average) for the 12-month period ending with June of the 
     previous year.''.
       (2) Orthotics and prosthetics.--Section 1834(h)(4)(A)(iii) 
     (42 U.S.C. 1395m(h)(4)(A)(iii)) is amended by striking ``1994 
     and 1995'' and inserting ``1994, 1995, 1996, and 1997''.
       (c) Ambulatory Surgical Center Services.--The Secretary of 
     Health and Human Services shall not provide for any inflation 
     update in the payment amounts under subparagraphs (A) and (B) 
     of section 1833(i)(2) of the Social Security Act for fiscal 
     years 1996 and 1997.

     SEC. 15103. REDUCTION IN EFFECTIVE BENEFICIARY COINSURANCE 
                   RATE FOR CERTAIN HOSPITAL OUTPATIENT SERVICES.

       (a) In General.--
       (1) Ambulatory surgical center procedures.--Section 
     1833(i)(3)(B)(i)(II) (42 U.S.C. 1395l(i)(3)(B)(i)(II)) is 
     amended--
       (A) by striking ``of 80 percent''; and
       (B) by striking the period at the end and inserting the 
     following: ``, less the amount a provider may charge as 
     described in clause (ii) of section 1866(a)(2)(A).''.
       (2) Radiology services and diagnostic procedures.--Section 
     1833(n)(1)(B)(i)(II) (42 U.S.C. 1395l(n)(1)(B)(i)(II)) is 
     amended--
       (A) by striking ``of 80 percent''; and
       (B) by striking the period at the end and inserting the 
     following: ``, less the amount a provider may charge as 
     described in clause (ii) of section 1866(a)(2)(A).''.
       (b) Reduction in Beneficiary Coinsurance Rate.--Section 
     1866(a)(2) (42 U.S.C. 1395cc(a)(2)) is amended by adding at 
     the end the following new subparagraph:
       ``(E)(i) In the case of services furnished during a year 
     for which the amount of payment under part B is determined 
     under section 1833(i) or section 1833(n), clause (ii) of 
     subparagraph (A) shall be applied by reducing `20 percent' by 
     the percentage established for the year under clause (ii).
       ``(ii) The percentage established for a year under this 
     clause shall be the percentage which, if applied for the 
     year, will result in a reduction in projected total 
     coinsurance payments under part B during the year in an 
     amount equal to the Secretary's estimate of the reduction in 
     expenditures under part B which would have occurred as a 
     result of the enactment of section 15103(a) of the Medicare 
     Enhancement Act of 1995 if this subparagraph were not in 
     effect for the year.
       ``(iii) The Secretary shall establish and publish the 
     percentage established for a year under this clause not later 
     than October 1 preceding the year involved (or not later than 
     December 1, 1995, in the case of the percentage established 
     for 1996).''.
       (c) Effective Date.--The amendments made by subsections (a) 
     and (b) shall apply to services furnished during portions of 
     cost reporting periods occurring on or after January 1, 1996.

     SEC. 15104. EXPANDING COVERAGE OF PREVENTIVE BENEFITS.

       (a) Providing Annual Screening Mammography for Women Over 
     Age 49.--Section 1834(c)(2)(A) (42 U.S.C. 1395m(c)(2)(A)) is 
     amended--
       (1) in clause (iv), by striking ``but under 65 years of 
     age,''; and
       (2) by striking clause (v).
       (b) Coverage of Screening Pap Smear and Pelvic Exams.--
       (1) Coverage of pelvic exam; increasing frequency of 
     coverage of pap smear.--Section 1861(nn) (42 U.S.C. 
     1395x(nn)) is amended--
       (A) in the heading, by striking ``Smear'' and inserting 
     ``Smear; Screening Pelvic Exam'';
       (B) by striking ``(nn)'' and inserting ``(nn)(1)'';
       (C) by striking ``3 years'' and all that follows and 
     inserting ``3 years, or during the preceding year in the case 
     of a woman described in paragraph (3).''; and
       (D) by adding at the end the following new paragraphs:
       ``(2) The term `screening pelvic exam' means an pelvic 
     examination provided to a woman if the woman involved has not 
     had such an examination during the preceding 3 years, or 
     during the preceding year in the case of a woman described in 
     paragraph (3), and includes a clinical breast examination.
       ``(3) A woman described in this paragraph is a woman who--
       ``(A) is of childbearing age and has not had a test 
     described in this subsection during each of the preceding 3 
     years that did not indicate the presence of cervical cancer; 
     or
       ``(B) is at high risk of developing cervical cancer (as 
     determined pursuant to factors identified by the 
     Secretary).''.
       (2) Waiver of deductible.--The first sentence of section 
     1833(b) (42 U.S.C. 1395l(b)), as amended by subsection 
     (a)(2), is amended--
       (A) by striking ``and (5)'' and inserting ``(5)''; and
       (B) by striking the period at the end and inserting the 
     following: ``, and (6) such deductible shall not apply with 
     respect to screening pap smear and screening pelvic exam (as 
     described in section 1861(nn)).''.

[[Page H 10199]]

       (3) Conforming amendments.--(A) Section 1861(s)(14) (42 
     U.S.C. 1395x(s)(14)) is amended by inserting ``and screening 
     pelvic exam'' after ``screening pap smear''.
       (B) Section 1862(a)(1)(F) (42 U.S.C. 1395y(a)(1)(F)) is 
     amended by inserting ``and screening pelvic exam'' after 
     ``screening pap smear''.
       (c) Coverage of Colorectal Screening.--
       (1) In general.--Section 1834 (42 U.S.C. 1395m) is amended 
     by inserting after subsection (c) the following new 
     subsection:
       ``(d) Frequency and Payment Limits for Screening Fecal-
     Occult Blood Tests, Screening Flexible Sigmoidoscopies, and 
     Screening Colonoscopy.--
       ``(1) Frequency limits for screening fecal-occult blood 
     tests.--Subject to revision by the Secretary under paragraph 
     (4), no payment may be made under this part for a screening 
     fecal-occult blood test provided to an individual for the 
     purpose of early detection of colon cancer if the test is 
     performed--
       ``(A) in the case of an individual under 65 years of age, 
     more frequently than is provided in a periodicity schedule 
     established by the Secretary for purposes of this 
     subparagraph; or
       ``(B) in the case of any other individual, within the 11 
     months following the month in which a previous screening 
     fecal-occult blood test was performed.
       ``(2) Screening flexible sigmoidoscopies.--
       ``(A) Payment amount.--The Secretary shall establish a 
     payment amount under section 1848 with respect to screening 
     flexible sigmoidoscopies provided for the purpose of early 
     detection of colon cancer that is consistent with payment 
     amounts under such section for similar or related services, 
     except that such payment amount shall be established without 
     regard to subsection (a)(2)(A) of such section.
       ``(B) Frequency limits.--Subject to revision by the 
     Secretary under paragraph (4), no payment may be made under 
     this part for a screening flexible sigmoidoscopy provided to 
     an individual for the purpose of early detection of colon 
     cancer if the procedure is performed--
       ``(i) in the case of an individual under 65 years of age, 
     more frequently than is provided in a periodicity schedule 
     established by the Secretary for purposes of this 
     subparagraph; or
       ``(ii) in the case of any other individual, within the 59 
     months following the month in which a previous screening 
     flexible sigmoidoscopy was performed.
       ``(3) Screening colonoscopy for individuals at high risk 
     for colorectal cancer.--
       ``(A) Payment amount.--The Secretary shall establish a 
     payment amount under section 1848 with respect to screening 
     colonoscopy for individuals at high risk for colorectal 
     cancer (as determined in accordance with criteria established 
     by the Secretary) provided for the purpose of early detection 
     of colon cancer that is consistent with payment amounts under 
     such section for similar or related services, except that 
     such payment amount shall be established without regard to 
     subsection (a)(2)(A) of such section.
       ``(B) Frequency limit.--Subject to revision by the 
     Secretary under paragraph (4), no payment may be made under 
     this part for a screening colonoscopy for individuals at high 
     risk for colorectal cancer provided to an individual for the 
     purpose of early detection of colon cancer if the procedure 
     is performed within the 47 months following the month in 
     which a previous screening colonoscopy was performed.
       ``(C) Factors considered in establishing criteria for 
     determining individuals at high risk.--In establishing 
     criteria for determining whether an individual is at high 
     risk for colorectal cancer for purposes of this paragraph, 
     the Secretary shall take into consideration family history, 
     prior experience of cancer, a history of chronic digestive 
     disease condition, and the presence of any appropriate 
     recognized gene markers for colorectal cancer.
       ``(4) Revision of frequency.--
       ``(A) Review.--The Secretary shall review periodically the 
     appropriate frequency for performing screening fecal-occult 
     blood tests, screening flexible sigmoidoscopies, and 
     screening colonoscopy based on age and such other factors as 
     the Secretary believes to be pertinent.
       ``(B) Revision of frequency.--The Secretary, taking into 
     consideration the review made under clause (i), may revise 
     from time to time the frequency with which such tests and 
     procedures may be paid for under this subsection.''.
       (2) Conforming amendments.--(A) Paragraphs (1)(D) and 
     (2)(D) of section 1833(a) (42 U.S.C. 1395l(a)) are each 
     amended by striking ``subsection (h)(1),'' and inserting 
     ``subsection (h)(1) or section 1834(d)(1),''.
       (B) Clauses (i) and (ii) of section 1848(a)(2)(A) (42 
     U.S.C. 1395w-4(a)(2)(A)) are each amended by striking ``a 
     service'' and inserting ``a service (other than a screening 
     flexible sigmoidoscopy provided to an individual for the 
     purpose of early detection of colon cancer or a screening 
     colonoscopy provided to an individual at high risk for 
     colorectal cancer for the purpose of early detection of colon 
     cancer)''.
       (C) Section 1862(a) (42 U.S.C. 1395y(a)) is amended--
       (i) in paragraph (1)--
       (I) in subparagraph (E), by striking ``and'' at the end;
       (II) in subparagraph (F), by striking the semicolon at the 
     end and inserting ``, and''; and
       (III) by adding at the end the following new subparagraph:
       ``(G) in the case of screening fecal-occult blood tests, 
     screening flexible sigmoidoscopies, and screening colonoscopy 
     provided for the purpose of early detection of colon cancer, 
     which are performed more frequently than is covered under 
     section 1834(d);''; and
       (ii) in paragraph (7), by striking ``paragraph (1)(B) or 
     under paragraph (1)(F)'' and inserting ``subparagraphs (B), 
     (F), or (G) of paragraph (1)''.
       (d) Prostate Cancer Screening Tests.--
       (1) In general.--Section 1861(s)(2) (42 U.S.C. 1395x(s)(2)) 
     is amended--
       (A) by striking ``and'' at the end of subparagraph (N) and 
     subparagraph (O); and
       (B) by inserting after subparagraph (O) the following new 
     subparagraph:
       ``(P) prostate cancer screening tests (as defined in 
     subsection (oo)); and''.
       (2) Tests described.--Section 1861 (42 U.S.C. 1395x) is 
     amended by adding at the end the following new subsection:

                   ``Prostate Cancer Screening Tests

       ``(oo) The term `prostate cancer screening test' means a 
     test that consists of a digital rectal examination or a 
     prostate-specific antigen blood test (or both) provided for 
     the purpose of early detection of prostate cancer to a man 
     over 40 years of age who has not had such a test during the 
     preceding year.''.
       (3) Payment for prostate-specific antigen blood test under 
     clinical diagnostic laboratory test fee schedules.--Section 
     1833(h)(1)(A) (42 U.S.C. 1395l(h)(1)(A)) is amended by 
     inserting after ``laboratory tests'' the following: 
     ``(including prostate cancer screening tests under section 
     1861(oo) consisting of prostate-specific antigen blood 
     tests)''.
       (4) Conforming amendment.--Section 1862(a) (42 U.S.C. 
     1395y(a)), as amended by subsection (c)(3)(C), is amended--
       (A) in paragraph (1)--
       (i) in subparagraph (F), by striking ``and'' at the end,
       (ii) in subparagraph (G), by striking the semicolon at the 
     end and inserting ``, and'', and
       (iii) by adding at the end the following new subparagraph:
       ``(H) in the case of prostate cancer screening test (as 
     defined in section 1861(oo)) provided for the purpose of 
     early detection of prostate cancer, which are performed more 
     frequently than is covered under such section;''; and
       (B) in paragraph (7), by striking ``or (G)'' and inserting 
     ``(G), or (H)''.
       (e) Diabetes Screening Benefits.--
       (1) Diabetes outpatient self-management training 
     services.--
       (A) In general.--Section 1861(s)(2) (42 U.S.C. 
     1395x(s)(2)), as amended by subsection (d)(1), is amended--
       (i) by striking ``and'' at the end of subparagraph (N);
       (ii) by striking ``and'' at the end of subparagraph (O); 
     and
       (iii) by inserting after subparagraph (O) the following new 
     subparagraph:
       ``(P) diabetes outpatient self-management training services 
     (as defined in subsection (pp)); and''.
       (B) Definition.--Section 1861 (42 U.S.C. 1395x), as amended 
     by subsection (d)(2), is amended by adding at the end the 
     following new subsection:


        ``diabetes outpatient self-management training services

       ``(pp)(1) The term `diabetes outpatient self-management 
     training services' means educational and training services 
     furnished to an individual with diabetes by or under 
     arrangements with a certified provider (as described in 
     paragraph (2)(A)) in an outpatient setting by an individual 
     or entity who meets the quality standards described in 
     paragraph (2)(B), but only if the physician who is managing 
     the individual's diabetic condition certifies that such 
     services are needed under a comprehensive plan of care 
     related to the individual's diabetic condition to provide the 
     individual with necessary skills and knowledge (including 
     skills related to the self-administration of injectable 
     drugs) to participate in the management of the individual's 
     condition.
       ``(2) In paragraph (1)--
       ``(A) a `certified provider' is an individual or entity 
     that, in addition to providing diabetes outpatient self-
     management training services, provides other items or 
     services for which payment may be made under this title; and
       ``(B) an individual or entity meets the quality standards 
     described in this paragraph if the individual or entity meets 
     quality standards established by the Secretary, except that 
     the individual or entity shall be deemed to have met such 
     standards if the individual or entity meets applicable 
     standards originally established by the National Diabetes 
     Advisory Board and subsequently revised by organizations who 
     participated in the establishment of standards by such Board, 
     or is recognized by the American Diabetes Association as 
     meeting standards for furnishing the services.''.
       (C) Consultation with organizations in establishing payment 
     amounts for services provided by physicians.--In establishing 
     payment amounts under section 1848(a) of the Social Security 
     Act for physicians' services consisting of diabetes 
     outpatient self-management training services, the Secretary 
     of Health and Human Services shall 

[[Page H 10200]]
     consult with appropriate organizations, including the American Diabetes 
     Association, in determining the relative value for such 
     services under section 1848(c)(2) of such Act.
       (2) Blood-testing strips for individuals with diabetes.--
       (A) Including strips as durable medical equipment.--Section 
     1861(n) (42 U.S.C. 1395x(n)) is amended by striking the 
     semicolon in the first sentence and inserting the following: 
     ``, and includes blood-testing strips for individuals with 
     diabetes without regard to whether the individual has Type I 
     or Type II diabetes (as determined under standards 
     established by the Secretary in consultation with the 
     American Diabetes Association);''.
       (2) Payment for strips based on methodology for inexpensive 
     and routinely purchased equipment.--Section 1834(a)(2)(A) (42 
     U.S.C. 1395m(a)(2)(A)) is amended--
       (A) by striking ``or'' at the end of clause (ii);
       (B) by adding ``or'' at the end of clause (iii); and
       (C) by inserting after clause (iii) the following new 
     clause:
       ``(iv) which is a blood-testing strip for an individual 
     with diabetes,''.
       (e) Effective Date.--The amendments made by this section 
     shall apply to items and services furnished on or after 
     January 1, 1996.

     SEC. 15105. REDUCTION IN PAYMENT FOR CAPITAL-RELATED COSTS OF 
                   HOSPITAL OUTPATIENT SERVICES.

       Section 1861(v)(1)(S)(ii)(I) (42 U.S.C. 
     1395x(v)(1)(S)(ii)(I)) is amended by striking ``through 
     1998'' and inserting ``through 2002''.

     SEC. 15106. PART B PREMIUM.

       Section 1839(e)(1) (42 U.S.C. 1395r(e)(1)) is amended--
       (1) in subparagraph (A), by striking ``1995'' and inserting 
     ``1996'', and
       (2) in subparagraph (B)(v), by inserting ``and 1996'' after 
     ``1995''.

     SEC. 15107. ENSURING PAYMENT FOR PHYSICIAN AND NURSE FOR 
                   JOINTLY FURNISHED ANESTHESIA SERVICES.

       (a) Payment for Jointly Furnished Single Case.--
       (1) Payment to physician.--Section 1848(a)(4) (42 U.S.C. 
     1395w@4(a)(4)) is amended by adding at the end the following 
     new subparagraph:
       ``(C) Payment for single case.--Notwithstanding section 
     1862(a)(1)(A), with respect to physicians' services 
     consisting of the furnishing of anesthesia services for a 
     single case that are furnished jointly with a certified 
     registered nurse anesthetist, if the carrier determines that 
     the use of both the physician and the nurse anesthetist to 
     furnish the anesthesia service was not medically necessary, 
     the fee schedule amount for the physicians' services shall be 
     equal to 50 percent (or 55 percent, in the case of services 
     furnished during 1996 or 1997) of the fee schedule amount 
     applicable under this section for anesthesia services 
     personally performed by the physician alone (without regard 
     to this subparagraph). Nothing in this subparagraph may be 
     construed to affect the application of any provision of law 
     regarding balance billing.''.
       (2) Payment to crna.--Section 1833(l)(4)(B) (42 U.S.C. 
     1395l(l)(4)(B)) is amended by adding at the end the following 
     new clause:
       ``(iv) Notwithstanding section 1862(a)(1)(A), in the case 
     of services of a certified registered nurse anesthetist 
     consisting of the furnishing of anesthesia services for a 
     single case that are furnished jointly with a physician, if 
     the carrier determines that the use of both the physician and 
     the nurse anesthetist to furnish the anesthesia service was 
     not medically necessary, the fee schedule amount for the 
     services furnished by the certified registered nurse 
     anesthetist shall be equal to 50 percent (or 40 percent, in 
     the case of services furnished during 1996 or 1997) of the 
     fee schedule amount applicable under section 1848 for 
     anesthesia services personally performed by the physician 
     alone (without regard to this clause).''.
       (b) Effective Date.--The amendments made by subsections (a) 
     shall apply to services furnished on or after July 1, 1996.
            Subtitle C--Provisions Relating to Parts A and B

                    PART 1--MEDICARE SECONDARY PAYER

     SEC. 15201. EXTENSION OF EXISTING SECONDARY PAYER 
                   REQUIREMENTS.

       (a) Data Match.--
       (1) Section 1862(b)(5)(C) (42 U.S.C. 1395y(b)(5)(C)) is 
     amended by striking clause (iii).
       (2) Section 6103(l)(12) of the Internal Revenue Code of 
     1986 is amended by striking subparagraph (F).
       (b) Application to Disabled Individuals in Large Group 
     Health Plans.--
       (1) In general.--Section 1862(b)(1)(B) (42 U.S.C. 
     1395y(b)(1)(B)) is amended--
       (A) in clause (i), by striking ``clause (iv)'' and 
     inserting ``clause (iii)'',
       (B) by striking clause (iii), and
       (C) by redesignating clause (iv) as clause (iii).
       (2) Conforming amendments.--Paragraphs (1) through (3) of 
     section 1837(i) (42 U.S.C. 1395p(i)) and the second sentence 
     of section 1839(b) (42 U.S.C. 1395r(b)) are each amended by 
     striking ``1862(b)(1)(B)(iv)'' each place it appears and 
     inserting ``1862(b)(1)(B)(iii)''.
       (c) Period of Application to Individuals with End Stage 
     Renal Disease.--Section 1862(b)(1)(C) (42 U.S.C. 
     1395y(b)(1)(C)) is amended--
       (1) in the first sentence, by striking ``12-month'' each 
     place it appears and inserting ``18-month'', and
       (2) by striking the second sentence.

     SEC. 15202. CLARIFICATION OF TIME AND FILING LIMITATIONS.

       (a) In General.--Section 1862(b)(2)(B) (42 U.S.C. 
     1395y(b)(2)(B)) is amended by adding at the end the following 
     new clause:
       ``(v) Time, filing, and related provisions under primary 
     plan.--Requirements under a primary plan as to the filing of 
     a claim, time limitations for the filing of a claim, 
     information not maintained by the Secretary, or notification 
     or pre-admission review, shall not apply to a claim by the 
     United States under clause (ii) or (iii).''.
       (b) Effective Date.--The amendment made by subsection (a) 
     applies to items and services furnished after 1993.

     SEC. 15203. CLARIFICATION OF LIABILITY OF THIRD PARTY-
                   ADMINISTRATORS.

       (a) In General.--Section 1862(b)(2)(B)(ii) (42 U.S.C. 
     1395y(b)(2)(B)(ii)) is amended by inserting ``, or which 
     determines claims under the primary plan'' after ``primary 
     plan''.
       (b) Claims Between Parties Other Than the United States.-- 
     Section 1862(b)(2)(B) (42 U.S.C. 1395y(b)(2)(B)), (as amended 
     by section 15201(a)) is further amended by adding at the end 
     the following new clause:
       ``(vi) Claims between parties other than the United 
     States.--A claim by the United States under clause (ii) or 
     (iii) shall not preclude claims between other parties.''.
       (c) Effective Date.--The amendments made by the previous 
     subsections apply to items and services furnished after 1993.

     SEC. 15204. CLARIFICATION OF PAYMENT AMOUNTS TO MEDICARE.

       (a) In General.--Section 1862(b)(2)(B)(i) (42 U.S.C. 
     1395y(b)(2)(B)(i)) is amended to read as follows:
       ``(i) Repayment required.--

       ``(I) Any payment under this title, with respect to any 
     item or service for which payment by a primary plan is 
     required under the preceding provisions of this subsection, 
     shall be conditioned on reimbursement to the appropriate 
     Trust Fund established by this title when notice or other 
     information is received that payment for that item or service 
     has been or should have been made under those provisions. If 
     reimbursement is not made to the appropriate Trust Fund 
     before the expiration of the 60-day period that begins on the 
     date such notice or other information is received, the 
     Secretary may charge interest (beginning with the date on 
     which the notice or other information is received) on the 
     amount of the reimbursement until reimbursement is made (at a 
     rate determined by the Secretary in accordance with 
     regulations of the Secretary of the Treasury applicable to 
     charges for late payments).
       ``(II) The amount owed by a primary plan under the first 
     sentence of subclause (I) is the lesser of the full primary 
     payment required (if that amount is readily determinable) and 
     the amount paid under this title for that item or service.''.

       (b) Conforming and Technical Amendments.--
       (1) Subparagraphs (A)(i)(I) and (B)(i) of section 
     1862(b)(1) (42 U.S.C. 1395y(b)(1)) are each amended by 
     inserting ``(or eligible to be covered)'' after ``covered''.
       (2) Section 1862(b)(1)(C)(ii) (42 U.S.C. 
     1395y(b)(1)(C)(ii)) is amended by striking ``covered by such 
     plan''.
       (3) The matter in section 1861(b)(2)(A) (42 U.S.C. 
     1395x(b)(2)(A)) preceding clause (i) is amended by striking 
     ``, except as provided in subparagraph (B),''.
       (c) Effective Date.--The amendments made by the previous 
     subsections apply to items and services furnished after 1993.

     SEC. 15205. CONDITIONS FOR DOUBLE DAMAGES.

       (a) In General.--Section 1862(b)(2)(B)(ii) (42 U.S.C. 
     1395y(b)(2)(B)(ii)) is amended--
       (1) by striking ``, in accordance with paragraph (3)(A)'', 
     and
       (2) by inserting ``, unless the entity demonstrates that it 
     did not know, and could not have known, of its obligation to 
     pay'' after ``against that entity''.
       (b) Conforming Amendment.--Section 1862(b)(3)(A) (42 U.S.C. 
     1395y(b)(3)(A)) is amended by striking ``(or appropriate 
     reimbursement)''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to items and services furnished after 1993.

           PART 2--OTHER PROVISIONS RELATING TO PARTS A AND B

     SEC. 15221. MAKING ADDITIONAL CHOICES OF HEALTH PLANS 
                   AVAILABLE TO BENEFICIARIES.

       (a) Definition of PPO.--Section 1876 (42 U.S.C. 1395mm) is 
     amended by adding at the end the following new subsection:
       ``(k)(1) A preferred provider organization (as defined in 
     paragraph (2)) shall be considered to be an eligible 
     organization under this section.
       ``(2) In this section, the term `preferred provider 
     organization' means an organization that--
       ``(A) would be an eligible organization (as defined in 
     subsection (b)) if--
       ``(i) clauses (ii) through (iv) of subsection (b)(2)(A) did 
     not apply,
       ``(ii) subsection (b)(2)(C) did not apply, and
       ``(iii) subsection (b)(2)(D) only applied (in the case of 
     services not provided under this title) to the physicians' 
     services the organization provides; and
       ``(B) permits enrollees to obtain benefits through any 
     lawful provider.

     Nothing in subparagraph (B) shall be construed as requiring 
     that the benefits for services provided through providers 
     that do not 

[[Page H 10201]]
     have a contract with the organization be the same as those for services 
     provided through providers that have such contracts so long 
     as an enrollee's liabilities do not exceed the liabilities 
     that the enrollee would have under parts A and B if the 
     individual were not enrolled under this section.''.
       (b) Partial Risk Payment Methods.--Section 1876 (42 U.S.C. 
     1395mm) is further amended by adding at the end the following 
     new subsection:
       ``(l) Notwithstanding the previous provisions of this 
     section, at the election of an eligible organization the 
     Secretary may establish an alternative partial-risk-sharing 
     mechanism for making payment to the organization under this 
     section. Under such mechanism fee-for-service payments would 
     be made to the organization for some services provided under 
     the contract, under such conditions and subject to such 
     restrictions as the Secretary may determine.''.
       (c) Conforming Amendment.--Section 1876 (42 U.S.C. 1395mm) 
     is further amended--
       (1) in the heading by striking ``Organizations and 
     Competitive Medical Plans'' and inserting ``Organizations, 
     Competitive Medical Plans, and Preferred Provider 
     Organizations'', and
       (2) in subsection (c)(3)(E)(ii), by inserting ``(if any)'' 
     after ``the restrictions''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to contract years beginning on or after January 
     1, 1996.

     SEC. 15222. TEACHING HOSPITAL AND GRADUATE MEDICAL EDUCATION 
                   TRUST FUND.

       (a) Teaching Hospital and Graduate Medical Education Trust 
     Fund.--The Social Security Act (42 U.S.C. 300 et seq.) is 
     amended by adding at the end the following title:

  ``TITLE XXI--TEACHING HOSPITAL AND GRADUATE MEDICAL EDUCATION TRUST 
                                  FUND

                    ``Part A--Establishment of Fund

     ``SEC. 2101. ESTABLISHMENT OF FUND.

       ``(a) In General.--There is established in the Treasury of 
     the United States a fund to be known as the Teaching Hospital 
     and Graduate Medical Education Trust Fund (in this title 
     referred to as the `Fund'), consisting of amounts transferred 
     to the Fund under subsection (c), amounts appropriated to the 
     Fund pursuant to subsections (d) and (e)(3), and such gifts 
     and bequests as may be deposited in the Fund pursuant to 
     subsection (f). Amounts in the Fund are available until 
     expended.
       ``(b) Expenditures From Fund.--Amounts in the Fund are 
     available to the Secretary for making payments under section 
     2111.
       ``(c) Transfers to Fund.--
       ``(1) In general.--From the Federal Hospital Insurance 
     Trust Fund and the Federal Supplementary Medical Insurance 
     Trust Fund, the Secretary shall, for fiscal year 1996 and 
     each subsequent fiscal year, transfer to the Fund an amount 
     determined by the Secretary for the fiscal year involved in 
     accordance with paragraph (2).
       ``(2) Determination of amounts.--For purposes of paragraph 
     (1), the amount determined under this paragraph for a fiscal 
     year is an estimate by the Secretary of an amount equal to 75 
     percent of the difference between--
       ``(A) the nationwide total of the amounts that would have 
     been paid under section 1876(a)(4) during the year but for 
     the exclusion of medical education payments from the adjusted 
     average per capita cost pursuant to section 
     1876(a)(4)(B)(ii); and
       ``(B) the nationwide total of the amounts paid under 
     section 1876(a)(4) during the year.
       ``(3) Allocation between medicare trust funds.--In 
     providing for a transfer under paragraph (1) for a fiscal 
     year, the Secretary shall provide for an allocation of the 
     amounts involved between part A and part B of title XVIII 
     (and the trust funds established under the respective parts) 
     as reasonably reflects the proportion of payments for the 
     indirect costs of medical education and direct graduate 
     medical education costs of hospitals associated with the 
     provision of services under each respective part.
       ``(d) Authorization of Appropriations.--There are 
     authorized to be appropriated to the Fund such sums as may be 
     necessary for each of the fiscal years 1996 through 2002.
       ``(e) Investment.--
       ``(1) In general.--The Secretary of the Treasury shall 
     invest such amounts of the Fund as such Secretary determines 
     are not required to meet current withdrawals from the Fund. 
     Such investments may be made only in interest-bearing 
     obligations of the United States. For such purpose, such 
     obligations may be acquired on original issue at the issue 
     price, or by purchase of outstanding obligations at the 
     market price.
       ``(2) Sale of obligations.--Any obligation acquired by the 
     Fund may be sold by the Secretary of the Treasury at the 
     market price.
       ``(3) Availability of income.--Any interest derived from 
     obligations acquired by the Fund, and proceeds from any sale 
     or redemption of such obligations, are hereby appropriated to 
     the Fund.
       ``(f) Acceptance of Gifts and Bequests.--The Fund may 
     accept on behalf of the United States money gifts and 
     bequests made unconditionally to the Fund for the benefit of 
     the Fund or any activity financed through the Fund.

                ``Part B--Payments to Teaching Hospitals

     ``SEC. 2111. FORMULA PAYMENTS TO TEACHING HOSPITALS.

       ``(a) In General.--In the case of each teaching hospital 
     that in accordance with subsection (b) submits to the 
     Secretary a payment document for fiscal year 1996 or any 
     subsequent fiscal year, the Secretary shall make payments for 
     the year to the teaching hospital for the direct and indirect 
     costs of operating approved medical residency training 
     programs. Such payments shall be made from the Fund, and 
     shall be made in accordance with a formula established by the 
     Secretary.
       ``(b) Payment Document.--For purposes of subsection (a), a 
     payment document is a document containing such information as 
     may be necessary for the Secretary to make payments under 
     such subsection to a teaching hospital for a fiscal year. The 
     document is submitted in accordance with this subsection if 
     the document is submitted not later than the date specified 
     by the Secretary, and the document is in such form and is 
     made in such manner as the Secretary may require. The 
     Secretary may require that information under this subsection 
     be submitted to the Secretary in periodic reports.''.
       (b) National Advisory Council on Postgraduate Medical 
     Education.--
       (1) In general.--There is established within the Department 
     of Health and Human Services an advisory council to be known 
     as the National Advisory Council on Postgraduate Medical 
     Education (in this title referred to as the ``Council'').
       (2) Duties.--The council shall provide advice to the 
     Secretary on appropriate policies for making payments for the 
     support of postgraduate medical education in order to assure 
     an adequate supply of physicians trained in various 
     specialities, consistent with the health care needs of the 
     United States.
       (3) Composition.--
       (A) In general.--The Secretary shall appoint to the Council 
     15 individuals who are not officers or employees of the 
     United States. Such individuals shall include not less than 1 
     individual from each of the following categories of 
     individuals or entities:
       (i) Organizations representing consumers of health care 
     services.
       (ii) Physicians who are faculty members of medical schools, 
     or who supervise approved physician training programs.
       (iii) Physicians in private practice who are not physicians 
     described in clause (ii).
       (iv) Practitioners in public health.
       (v) Advanced-practice nurses.
       (vi) Other health professionals who are not physicians.
       (vii) Medical schools.
       (viii) Teaching hospitals.
       (ix) The Accreditation Council on Graduate Medical 
     Education.
       (x) The American Board of Medical Specialities.
       (xi) The Council on Postdoctoral Training of the American 
     Osteopathic Association.
       (xii) The Council on Podiatric Medical Education of the 
     American Podiatric Medical Association.
       (B) Requirements regarding representative membership.--To 
     the greatest extent feasible, the membership of the Council 
     shall represent the various geographic regions of the United 
     States, shall reflect the racial, ethnic, and gender 
     composition of the population of the United States, and shall 
     be broadly representative of medical schools and teaching 
     hospitals in the United States.
       (C) Ex officio members; other federal officers or 
     employees.--The membership of the Council shall include 
     individuals designated by the Secretary to serve as members 
     of the Council from among Federal officers or employees who 
     are appointed by the President, or by the Secretary (or by 
     other Federal officers who are appointed by the President 
     with the advice and consent of the Senate). Individuals 
     designated under the preceding sentence shall include each of 
     the following officials (or a designee of the official):
       (i) The Secretary of Health and Human Services.
       (ii) The Secretary of Veterans Affairs.
       (iii) The Secretary of Defense.
       (4) Chair.--The Secretary shall, from among members of the 
     council appointed under paragraph (3)(A), designate an 
     individual to serve as the chair of the council.
       (5) Termination.--The Council terminates December 31, 1999.
       (c) Remove Medical Education and Disproportionate Share 
     Hospital Payments From Calculation of Adjusted Average Per 
     Capita Cost.--
       (1) In general.--Section 1876(a)(4) (42 U.S.C. 
     1395mm(a)(4)) is amended--
       (A) by striking ``(4)'' and inserting ``(4)(A)''; and
       (B) by adding at the end the following new subparagraph:
       ``(B) In determining the adjusted average per capita cost 
     for a contract year under subparagraph (A), the Secretary 
     shall exclude any amounts which the Secretary estimates would 
     be payable under this title during the year for--
       ``(i) payment adjustments under section 1886(d)(5)(F) for 
     hospitals serving a disproportionate share of low-income 
     patients; and
       ``(ii) the indirect costs of medical education under 
     section 1886(d)(5)(B) or for direct graduate medical 
     education costs under section 1886(h).''.
       (2) Payments to hospitals of amounts attributable to dsh.--
     Section 1886 (42 U.S.C. 1395ww) is amended by adding at the 
     end the following new subsection:

[[Page H 10202]]

       ``(j)(1) In addition to amounts paid under subsection 
     (d)(5)(F), the Secretary is authorized to pay hospitals which 
     are eligible for such payments for a fiscal year supplemental 
     amounts that do not exceed the limit provided for in 
     paragraph (2).
       ``(2) The sum of the aggregate amounts paid pursuant to 
     paragraph (1) for a fiscal year shall not exceed the 
     Secretary's estimate of 75 percent of the amount excluded 
     from the adjusted average per capita cost for the fiscal year 
     pursuant to section 1876(a)(4)(B)(i).''.

     SEC. 15223. REVISIONS IN DETERMINATION OF AMOUNT OF PAYMENT 
                   FOR MEDICAL EDUCATION.

       (a) Indirect Medical Education.--
       (1) In general.--Section 1886(d)(5)(B) (42 U.S.C. 
     1395ww(d)(5)(B)) is amended by adding at the end the 
     following new clauses:
       ``(v) In determining such adjustment with respect to a 
     hospital for discharges occurring on or after October 1, 
     1995, and on or before September 30, 2002--
       ``(I) the total number of interns and residents counted by 
     the Secretary may not exceed the number of interns and 
     residents counted with respect to the hospital as of August 
     1, 1995, and
       ``(II) the number of interns and residents counted by the 
     Secretary who are not primary care residents (as defined in 
     subsection (h)(5)(H)) may not exceed the number of such 
     residents counted with respect to the hospital as of such 
     date.
       ``(vi) In calculating the number of full-time-equivalent 
     interns and residents of a hospital in determining such 
     adjustment with respect to the hospital, the Secretary shall 
     provide for a weighting factor of .50 with respect to each 
     intern and resident who is not in an initial residency period 
     (as defined in subsection (h)(5)(F)).''.
       (2) Payment for interns and residents providing off-site 
     services.--Section 1886(d)(5)(B)(iv) (42 U.S.C. 
     1395ww(d)(5)(B)(iv)) is amended by striking ``any entity'' 
     and all that follows through ``and residents)'' and inserting 
     ``any other entity under an agreement with the hospital''.
       (b) Direct Medical Education.--
       (1) Limitation on number of residents.--Section 1886(h)(4) 
     (42 U.S.C. 1395ww(h)(4)) is amended by adding at the end the 
     following new subparagraph:
       ``(F) Limitation on number of residents for certain fiscal 
     years.--Such rules shall provide that for purposes of a cost 
     reporting period beginning on or after October 1, 1995, and 
     on or before September 30, 2002--
       ``(i) the total number of full-time-equivalent residents 
     determined under this paragraph with respect to an approved 
     medical residency training program may not exceed the number 
     of full-time-equivalent residents with respect to the program 
     as of August 1, 1995, and
       ``(ii) the number of full-time-equivalent residents 
     determined under this paragraph with respect to the program 
     who are not primary care residents (as defined in paragraph 
     (5)(H)) may not exceed the number of such residents counted 
     with respect to the program as of such date.''.
       (2) Continuation of freeze on updates to fte resident 
     amounts.--Section 1886(h)(2)(D)(ii) (42 U.S.C. 
     1395ww(h)(2)(D)(ii)) is amended by striking ``fiscal year 
     1994 or fiscal year 1995'' and inserting ``fiscal years 1994, 
     1995, 1996, or 1997''.
       (3) Permitting payment to non-hospital providers.--Section 
     1886 (42 U.S.C. 1395ww) is amended by adding at the end the 
     following new subsection:
       ``(j) Beginning with cost reporting periods beginning on or 
     after July 1, 1996, notwithstanding any other provision of 
     this title, the Secretary may make payments (in such amounts 
     and in such form as the Secretary considers appropriate) to 
     entities other than hospitals for the direct costs of medical 
     education, if such costs are incurred in the operation of an 
     approved medical residency training program described in 
     subsection (h).''.
       (c) Expanding Definition of Primary Care Residents.--
     Section 1886(h)(5)(H) (42 U.S.C. 1395ww(h)(5)(H)) is amended 
     by inserting ``obstetrics and gynecology,'' after ``geriatric 
     medicine,''.
       (d) Effective Date.--Except as provided otherwise in this 
     section (or in the amendments made by this section), the 
     amendments made by this section apply to hospital cost 
     reporting periods beginning on or after October 1, 1995.

     SEC. 15224. PAYMENTS FOR HOME HEALTH SERVICES.

       (a) Reductions in Cost Limits.--Section 1861(v)(1)(L)(i) 
     (42 U.S.C. 1395x(v)(1)(L)(i)) is amended--
       (1) by inserting ``and before October 1, 1996,'' after 
     ``July 1, 1987'' in subclause (III),
       (2) by striking the period at the end of the matter 
     following subclause (III), and inserting ``, and'',
       (3) by adding at the end the following new subclause:

       ``(IV) October 1, 1996, 105 percent of the median of the 
     labor-related and nonlabor per visit costs for free standing 
     home health agencies.''.

       (b) Delay in Updates.--Section 1861(v)(1)(L)(iii) (42 
     U.S.C. 1395x(v)(1)(L)(iii)) is amended by striking ``July 1, 
     1996'' and inserting ``October 1, 1996''.
       (c) Additions to Cost Limits.--Section 1861(v)(1)(L) (42 
     U.S.C. 1395x(v)(1)(L)) is amended by adding at the end the 
     following new clauses:
       ``(iv) For services furnished by home health agencies for 
     cost reporting periods beginning on or after October 1, 1996, 
     the Secretary shall provide for an interim system of limits. 
     Payment shall be the lower of--

       ``(I) costs determined under the preceding provisions of 
     this subparagraph, or
       ``(II) an agency-specific per beneficiary annual limit 
     calculated from the agency's 12-month cost reporting period 
     ending on or after January 1, 1994 and on or before December 
     31, 1994 based on reasonable costs (including non-routine 
     medical supplies), updated by the home health market basket 
     index. The per beneficiary limitation shall be multiplied by 
     the agency's unduplicated census count of Medicare patients 
     for the year subject to the limitation. The limitation shall 
     represent total Medicare reasonable costs divided by the 
     unduplicated census count of Medicare patients.

       ``(v) For services furnished by home health agencies for 
     cost reporting periods beginning on or after October 1, 1996, 
     the following rules shall apply:

       ``(I) For new providers and those providers without a 12-
     month cost reporting period ending in calendar year 1994, the 
     per beneficiary limit shall be equal to the mean of these 
     limits (or the Secretary's best estimates thereof) applied to 
     home health agencies as determined by the Secretary. Home 
     health agencies that have altered their corporate structure 
     or name may not be considered new providers for payment 
     purposes.
       ``(II) For beneficiaries who use services furnished by more 
     than one home health agency, the per beneficiary limitation 
     shall be pro-rated among agencies.

       ``(vi) Home health agencies whose cost or utilization 
     experience is below 125 percent of the mean national or 
     census region aggregate per beneficiary cost or utilization 
     experience for 1994, or best estimates thereof, and whose 
     year-end reasonable costs are below the agency-specific per 
     beneficiary limit, shall receive payment equal to 50 percent 
     of the difference between the agency's reasonable costs and 
     its limit for fiscal years 1996, 1997, 1998, and 1999. Such 
     payments may not exceed 5 percent of an agency's aggregate 
     Medicare reasonable cost in a year.
       ``(vii) Effective January 1, 1997, or as soon as feasible, 
     the Secretary shall modify the agency specific per 
     beneficiary annual limit described in clause (iv) to provide 
     for regional or national variations in utilization. For 
     purposes of determining payment under clause (iv), the limit 
     shall be calculated through a blend of 75 percent of the 
     agency-specific cost or utilization experience in 1994 with 
     25 percent of the national or census region cost or 
     utilization experience in 1994, or the Secretary's best 
     estimates thereof.''.
       (d) Use of Interim Final Regulations.--The Secretary shall 
     implement the payment limits described in section 
     1861(v)(1)(L)(iv) of the Social Security Act by publishing in 
     the Federal Register a notice of interim final payment limits 
     by August 1, 1996 and allowing for a period of public 
     comments thereon. Payments subject to these limits will be 
     effective for cost reporting periods beginning on or after 
     October 1, 1996, without the necessity for consideration of 
     comments received, but the Secretary shall, by Federal 
     Register notice, affirm or modify the limits after 
     considering those comments.
       (e) Studies.--The Secretary shall expand research on a 
     prospective payment system for home health agencies that 
     shall tie prospective payments to an episode of care, 
     including an intensive effort to develop a reliable case mix 
     adjuster that explains a significant amount of the variances 
     in costs. The Secretary shall develop such a system for 
     implementation in fiscal year 2000.
       (f) Payments Determined on Prospective Basis.--Title XVIII 
     is amended by adding at the end the following new section:


             ``Prospective Payment for Home Health Services

       ``Sec. 1893. (a) Notwithstanding section 1861(v), the 
     Secretary shall, for cost reporting periods beginning on or 
     after fiscal year 2000, provide for payments for home health 
     services in accordance with a prospective payment system, 
     which pays home health agencies on a per episode basis, 
     established by the Secretary.
       ``(b) Such a system shall include the following:
       ``(1) Per episode rates under the system shall be 15 
     percent less than those that would otherwise occur under 
     fiscal year 2000 Medicare expenditures for home health 
     services.
       ``(2) All services covered and paid on a reasonable cost 
     basis under the Medicare home health benefit as of the date 
     of the enactment of the Medicare Enhancement Act of 1995, 
     including medical supplies, shall be subject to the per 
     episode amount. In defining an episode of care, the Secretary 
     shall consider an appropriate length of time for an episode 
     the use of services and the number of visits provided within 
     an episode, potential changes in the mix of services provided 
     within an episode and their cost, and a general system design 
     that will provide for continued access to quality services. 
     The per episode amount shall be based on the most current 
     audited cost report data available to the Secretary.
       ``(c) The Secretary shall employ an appropriate case mix 
     adjuster that explains a significant amount of the variation 
     in cost.
       ``(d) The episode payment amount shall be adjusted annually 
     by the home health market basket index. The labor portion of 
     the episode amount shall be adjusted for geographic 
     differences in labor-related costs based on the most current 
     hospital wage index.

[[Page H 10203]]

       ``(e) The Secretary may designate a payment provision for 
     outliers, recognizing the need to adjust payments due to 
     unusual variations in the type or amount of medically 
     necessary care.
       ``(f) A home health agency shall be responsible for 
     coordinating all care for a beneficiary. If a beneficiary 
     elects to transfer to, or receive services from, another home 
     health agency within an episode period, the episode payment 
     shall be pro-rated between home health agencies.''.
       (g) Limitation on Part A Coverage.--
       (1) In general.--Section 1812(a)(3) (42 U.S.C. 1395d(a)(3)) 
     is amended by striking the semicolon and inserting ``for up 
     to 160 visits during any spell of illness;''.
       (2) Conforming amendment.--Section 1812(b) (42 U.S.C. 
     1395d(b)) is amended--
       (A) by striking ``or'' at the end of paragraph (2),
       (B) by striking the period at the end of paragraph (3) and 
     inserting ``; or'', and
       (C) by adding at the end the following new paragraph:
       ``(4) home health services furnished to the individual 
     during such spell after such services have been furnished to 
     the individual for 160 visits during such spell.''.
       (3) Exclusion of additional part b costs from determination 
     of part b monthly premium.--Section 1839(a) (42 U.S.C. 
     1395r(a)) is amended--
       (A) in the second sentence of paragraph (1), by striking 
     ``enrollees.'' and inserting ``enrollees (except as provided 
     in paragraph (5)).''; and
       (B) by adding at the end the following new paragraph:
       ``(5) In estimating the benefits and administrative costs 
     which will be payable from the Federal Supplementary Medical 
     Insurance Trust Fund for a year (beginning with 1996), the 
     Secretary shall exclude an estimate of any benefits and costs 
     attributable to home health services for which payment would 
     have been made under part A during the year but for paragraph 
     (4) of section 1812(b).''.
       (4) Effective date.--The amendments made by this subsection 
     shall apply to spells of illness beginning on or after 
     October 1, 1995.
       (h) Requiring Billing and Payment to be Based on Site Where 
     Service Furnished.--Section 1891 (42 U.S.C. 1395bbb) is 
     amended by adding at the end the following new subsection:
       ``(g) A home health agency shall submit claims for payment 
     for home health services under this title only on the basis 
     of the geographic location at which the service is 
     furnished.''.
       (i) Maintaining Savings Resulting From Temporary Freeze on 
     Payment Increases.--
       (1) Basing updates to per visit cost limits on limits for 
     fiscal year 1993.--Section 1861(v)(1)(L)(iii) (42 U.S.C. 
     1395x(v)(1)(L)(iii)) is amended by adding at the end the 
     following sentence: ``In establishing limits under this 
     subparagraph, the Secretary may not take into account any 
     changes in the costs of the provision of services furnished 
     by home health agencies with respect to cost reporting 
     periods which began on or after July 1, 1994, and before July 
     1, 1996.''.
       (2) No exceptions permitted based on amendment.--The 
     Secretary of Health and Human Services shall not consider the 
     amendment made by paragraph (1) in making any exemptions and 
     exceptions pursuant to section 1861(v)(1)(L)(ii) of the 
     Social Security Act.

     SEC. 15225. REQUIRING HEALTH MAINTENANCE ORGANIZATIONS TO 
                   COVER APPROPRIATE RANGE OF SERVICES.

       (a) In General.--Section 1876(c) (42 U.S.C. 1395mm(c)) is 
     amended by adding at the end the following new paragraph:
       ``(9) The organization shall not deny any health care 
     professionals, based solely on the license or certification 
     as applicable under State law, the ability to participate in 
     providing services covered under the contract under this 
     section, or be reimbursed or indemnified or by a network plan 
     for providing such services under the contract.''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to risk-sharing contracts under section 1876 of 
     the Social Security Act which entered into or renewed on or 
     after January 1, 1996.

     SEC. 15226. CLARIFICATION OF MEDICARE COVERAGE OF ITEMS AND 
                   SERVICES ASSOCIATED WITH CERTAIN MEDICAL 
                   DEVICES APPROVED FOR INVESTIGATIONAL USE.

       (a) Coverage.--Nothing in title XVIII of the Social 
     Security Act may be construed to prohibit coverage under part 
     A or part B of the medicare program of items and services 
     associated with the use of a medical device in the furnishing 
     of inpatient or outpatient hospital services (including 
     outpatient diagnostic imaging services) for which payment may 
     be made under the program solely on the grounds that the 
     device is not an approved device, if--
       (1) the device is an investigational device; and
       (2) the device is used instead of either an approved device 
     or a covered procedure.
       (b) Clarification of Payment Amount.--Notwithstanding any 
     other provision of title XVIII of the Social Security Act, 
     the amount of payment made under the medicare program for any 
     item or service associated with the use of an investigational 
     device in the furnishing of inpatient or outpatient hospital 
     services (including outpatient diagnostic imaging services) 
     for which payment may be made under the program may not 
     exceed the amount of the payment which would have been made 
     under the program for the item or service if the item or 
     service were associated with the use of an approved device or 
     a covered procedure.
       (c) Definitions.--In this section--
       (1) the term ``approved device'' means a medical device (or 
     devices) which has been approved for marketing under pre-
     market approval under the Federal Food, Drug, and Cosmetic 
     Act or cleared for marketing under a 510(k) notice under such 
     Act; and
       (2) the term ``investigational device'' means--
       (A) a medical device or devices (other than a device 
     described in paragraph (1)) approved for investigational use 
     under section 520(g) of the Federal Food, Drug, and Cosmetic 
     Act, or
       (B) an investigational combination product under section 
     503(g) of the Federal Food, Drug, and Cosmetic Act which 
     includes a device (or devices) authorized for use under 
     section 505(i) of such Act.

     SEC. 15227. COMMISSION ON THE FUTURE OF MEDICARE AND THE 
                   PROTECTION OF THE HEALTH OF THE NATION'S SENIOR 
                   CITIZENS.

       (a) Establishment.--There is established a commission to be 
     known as the Commission on the Future of Medicare and the 
     Protection of the Health of the Nation's Senior Citizens (in 
     this section referred to as the ``Commission'').
       (b) Duties.--
       (1) In general.--The Commission shall--
       (A) analyze indicators of the health status of individuals 
     in the United States who are eligible for benefits under the 
     medicare program;
       (B) make specific recommendations on actions which may be 
     taken to improve the medicare program which would promote the 
     health of medicare beneficiaries;
       (C) analyze the effect of changes in the medicare program 
     (including changes in medicare payments) on the access to and 
     delivery of health care services to individuals who are not 
     medicare beneficiaries;
       (D) examine the financial impact on the medicare program of 
     the significant increase in the number of medicare eligible 
     individuals which will occur beginning approximately during 
     2010 and lasting for approximately 25 years, and
       (E) make specific recommendations to the Congress 
     respecting a comprehensive approach to preserve the medicare 
     program for the period during which such individuals are 
     eligible for medicare.
       (2) Considerations in making recommendations.--In making 
     its recommendations, the Commission shall consider the 
     following:
       (A) The amount and sources of Federal funds to finance the 
     medicare program.
       (B) The most efficient and effective manner of 
     administering the program.
       (C) Methods used by other nations to finance the delivery 
     of health care services to their citizens.
       (D) The financial impact on the medicare program of 
     increases in the number of individuals in the United States 
     without health insurance coverage.
       (c) Membership.--
       (1) Appointment.--The Commission shall be composed of 15 
     members appointed as follows:
       (A) The President shall appoint 3 members.
       (B) The Majority Leader of the Senate shall appoint 3 
     members.
       (C) The Minority Leader of the Senate shall appoint 3 
     members.
       (D) The Speaker of the House of Representatives shall 
     appoint 3 members.
       (E) The Minority Leader of the House of Representatives 
     shall appoint 3 members.
       (2) Chairman and vice chairman.--The Commission shall elect 
     a Chairman and Vice Chairman from among its members.
       (3) Vacancies.--Any vacancy in the membership of the 
     Commission shall be filled in the manner in which the 
     original appointment was made and shall not affect the power 
     of the remaining members to execute the duties of the 
     Commission.
       (4) Quorum.--A quorum shall consist of 8 members of the 
     Commission, except that 4 members may conduct a hearing under 
     subsection (e).
       (5) Meetings.--The Commission shall meet at the call of its 
     Chairman or a majority of its members.
       (6) Compensation and reimbursement of expenses.--Members of 
     the Commission are not entitled to receive compensation for 
     service on the Commission. Members may be reimbursed for 
     travel, subsistence, and other necessary expenses incurred in 
     carrying out the duties of the Commission.
       (d) Staff and Consultants.--
       (1) Staff.--The Commission may appoint and determine the 
     compensation of such staff as may be necessary to carry out 
     the duties of the Commission. Such appointments and 
     compensation may be made without regard to the provisions of 
     title 5, United States Code, that govern appointments in the 
     competitive services, and the provisions of chapter 51 and 
     subchapter III of chapter 53 of such title that relate to 
     classifications and the General Schedule pay rates.
       (2) Consultants.--The Commission may procure such temporary 
     and intermittent services of consultants under section 
     3109(b) 

[[Page H 10204]]
     of title 5, United States Code, as the Commission determines to be 
     necessary to carry out the duties of the Commission.
       (e) Powers.--
       (1) Hearings and other activities.--For the purpose of 
     carrying out its duties, the Commission may hold such 
     hearings and undertake such other activities as the 
     Commission determines to be necessary to carry out its 
     duties.
       (2) Studies by gao.--Upon the request of the Commission, 
     the Comptroller General shall conduct such studies or 
     investigations as the Commission determines to be necessary 
     to carry out its duties.
       (3) Cost estimates by congressional budget office.--
       (A) Upon the request of the Commission, the Director of the 
     Congressional Budget Office shall provide to the Commission 
     such cost estimates as the Commission determines to be 
     necessary to carry out its duties.
       (B) The Commission shall reimburse the Director of the 
     Congressional Budget Office for expenses relating to the 
     employment in the office of the Director of such additional 
     staff as may be necessary for the Director to comply with 
     requests by the Commission under subparagraph (A).
       (4) Detail of federal employees.--Upon the request of the 
     Commission, the head of any Federal agency is authorized to 
     detail, without reimbursement, any of the personnel of such 
     agency to the Commission to assist the Commission in carrying 
     out its duties. Any such detail shall not interrupt or 
     otherwise affect the civil service status or privileges of 
     the Federal employee.
       (5) Technical assistance.--Upon the request of the 
     Commission, the head of a Federal agency shall provide such 
     technical assistance to the Commission as the Commission 
     determines to be necessary to carry out its duties.
       (6) Use of mails.--The Commission may use the United States 
     mails in the same manner and under the same conditions as 
     Federal agencies and shall, for purposes of the frank, be 
     considered a commission of Congress as described in section 
     3215 of title 39, United States Code.
       (7) Obtaining information.--The Commission may secure 
     directly from any Federal agency information necessary to 
     enable it to carry out its duties, if the information may be 
     disclosed under section 552 of title 5, United States Code. 
     Upon request of the Chairman of the Commission, the head of 
     such agency shall furnish such information to the Commission.
       (8) Administrative support services.--Upon the request of 
     the Commission, the Administrator of General Services shall 
     provide to the Commission on a reimbursable basis such 
     administrative support services as the Commission may 
     request.
       (9) Acceptance of donations.--The Commission may accept, 
     use, and dispose of gifts or donations of services or 
     property.
       (10) Printing.--For purposes of costs relating to printing 
     and binding, including the cost of personnel detailed from 
     the Government Printing Office, the Commission shall be 
     deemed to be a committee of the Congress.
       (f) Report.--Not later than May 1, 1997, the Commission 
     shall submit to Congress a report containing its findings and 
     recommendations regarding how to protect and preserve the 
     medicare program in a financially solvent manner until 2030 
     (or, if later, throughout the period of projected solvency of 
     the Federal Old-Age and Survivors Insurance Trust Fund). The 
     report shall include detailed recommendations for appropriate 
     legislative initiatives respecting how to accomplish this 
     objective.
       (g) Termination.--The Commission shall terminate 60 days 
     after the date of submission of the report required in 
     subsection (f).
       (h) Authorization of Appropriations.--There are authorized 
     to be appropriated $1,500,000 to carry out this section. 
     Amounts appropriated to carry out this section shall remain 
     available until expended.
                 Subtitle D--Preventing Fraud and Abuse

  PART 1--AMENDMENTS TO ANTI-FRAUD AND ABUSE PROVISIONS APPLICABLE TO 
           MEDICARE, MEDICAID, AND STATE HEALTH CARE PROGRAMS

     SEC. 15301. ANTI-KICKBACK STATUTORY PROVISIONS.

       (a) Revision to Penalties.--
       (1) Permitting secretary to impose civil monetary 
     penalty.--Section 1128A(a) (42 U.S.C. 1320a-7a(a)) is 
     amended--
       (A) by striking ``or'' at the end of paragraphs (1) and 
     (2);
       (B) by striking the semicolon at the end of paragraph (3) 
     and inserting ``; or''; and
       (C) by inserting after paragraph (3) the following new 
     paragraph:
       ``(4) carries out any activity in violation of paragraph 
     (1) or (2) of section 1128B(b);''.
       (2) Description of civil monetary penalty applicable.--
     Section 1128A(a) (42 U.S.C. 1320a-7a(a)) is amended--
       (A) by striking ``given).'' at the end of the first 
     sentence and inserting the following: ``given or, in cases 
     under paragraph (4), $50,000 for each such violation).''; and
       (B) by striking ``claim.'' at the end of the second 
     sentence and inserting the following: ``claim (or, in cases 
     under paragraph (4), damages of not more than three times the 
     total amount of remuneration offered, paid, solicited, or 
     received.''.
       (3) Increase in criminal penalty.--Paragraphs (1) and (2) 
     of section 1128B(b) (42 U.S.C. 1320a-7b(b)) are each 
     amended--
       (A) by striking ``$25,000'' and inserting ``$50,000''; and
       (B) by striking the period at the end and inserting the 
     following: ``, and shall be subject to damages of not more 
     than three times the total remuneration offered, paid, 
     solicited, or received.''.
       (b) Revisions to Exceptions.--
       (1) Exception for discounts.--Section 1128B(b)(3)(A) (42 
     U.S.C. 1320a-7b(b)(3)(A)) is amended by striking ``program;'' 
     and inserting ``program and is not in the form of a cash 
     payment;''.
       (2) Exception for payments to employees.--Section 
     1128B(b)(3)(B) (42 U.S.C. 1320a-7b(b)(3)(B)) is amended by 
     inserting at the end ``if the amount of remuneration under 
     the arrangement is consistent with the fair market value of 
     the services and is not determined in a manner that takes 
     into account (directly or indirectly) the volume or value of 
     any referrals, except that such employee can be paid 
     remuneration in the form of a productivity bonus based on 
     services personally performed by the employee.''.
       (3) Exception for waiver of coinsurance by certain 
     providers.--Section 1128B(b)(3)(D) (42 U.S.C. 1320a-
     7b(b)(3)(D)) is amended to read as follows:
       ``(D) a waiver or reduction of any coinsurance or other 
     copayment if--
       ``(i) the waiver or reduction is made pursuant to a public 
     schedule of discounts which the person is obligated as a 
     matter of law to apply to certain individuals,
       ``(ii) the waiver or reduction is made pursuant to an 
     established program and applies to a defined group of 
     individuals whose incomes do not exceed 150 percent (or such 
     higher percentage as the Secretary may permit) of the 
     official poverty line (as defined by the Office of Management 
     and Budget, and revised annually in accordance with section 
     673(2) of the Omnibus Budget Reconciliation Act of 1981) 
     applicable to a family of the size involved,
       ``(iii) the waiver or reduction of coinsurance is not 
     offered as part of any advertisement or solicitation and the 
     person offering the waiver or reduction determines in good 
     faith that the individual is in financial need,
       ``(iv) the person offering the waiver or reduction fails to 
     collect the coinsurance or other payment after making 
     reasonable collection efforts, or
       ``(v) the waiver or reduction of coinsurance is in 
     accordance with a cost sharing schedule or a supplemental 
     benefit package which may be offered by a managed care plan 
     (as defined in section 1128(j)); and''.
       (4) New exception for capitated payments.--Section 
     1128B(b)(3) (42 U.S.C. 1320a-7b(b)(3)) is amended--
       (A) by striking ``and'' at the end of subparagraph (D);
       (B) by striking the period at the end of subparagraph (E) 
     and inserting ``; and''; and
       (C) by adding at the end the following new subparagraphs:
       ``(F) any reduction in cost sharing or increased benefits 
     given to an individual, any amounts paid to a provider for an 
     item or service furnished to an individual, or any discount 
     or reduction in price given by the provider for such an item 
     or service, if the individual is enrolled with and such item 
     or service is covered under any of the following:
       ``(i) A health plan which is furnishing items or services 
     under a risk-sharing contract under section 1876 or section 
     1903(m).
       ``(ii) A health plan receiving payments on a prepaid basis, 
     under a demonstration project under section 402(a) of the 
     Social Security Amendments of 1967 or under section 222(a) of 
     the Social Security Amendments of 1972; and
       ``(G) any amounts paid to a provider for an item or service 
     furnished to an individual or any discount or reduction in 
     price given by the provider for such an item or service, if 
     the individual is enrolled with and such item or service is 
     covered under a health plan under which the provider 
     furnishing the item or service is paid by the health plan for 
     furnishing the item or service only on a capitated basis 
     pursuant to a written arrangement between the plan and the 
     provider in which the provider assumes financial risk for 
     furnishing the item or service.''.
       (c) Authorization for the Secretary To Issue Regulations.--
     Section 1128B(b) (42 U.S.C. 1320a-7b(b)) is amended by adding 
     at the end the following new paragraph:
       ``(4) The Secretary is authorized to impose by regulation 
     such other requirements as needed to protect against program 
     or patient abuse with respect to any of the exceptions 
     described in paragraph (3).''.
       (d) Clarification of Other Elements of Offense.--Section 
     1128B(b) (42 U.S.C. 1320a-7b(b)) is amended--
       (1) in paragraph (1)(A), by striking ``in return for 
     referring'' and inserting ``to refer'';
       (2) in paragraph (1)(B), by striking ``in return for 
     purchasing, leasing, ordering, or arranging for or 
     recommending'' and inserting ``to purchase, lease, order, or 
     arrange for or recommend''; and
       (3) by adding at the end of paragraphs (1) and (2) the 
     following sentence: ``A violation exists under this paragraph 
     if one or more purposes of the remuneration is unlawful under 
     this paragraph.''.

     SEC. 15302. CIVIL MONEY PENALTIES.

       (a) Prohibition Against Offering Inducements to Individuals 
     Enrolled Under Plans.--
       (1) Offer of remuneration.--Section 1128A(a) (42 U.S.C. 
     1320a-7a(a)), as amended by section 15301(a)(1), is amended--
       (A) by striking ``; or'' at the end of paragraph (3) and 
     inserting a semicolon;

[[Page H 10205]]

       (B) by striking the semicolon at the end of paragraph (4) 
     and inserting ``; or''; and
       (C) by inserting after paragraph (4) the following new 
     paragraph:
       ``(5) offers, pays, or transfers remuneration to any 
     individual eligible for benefits under title XVIII of this 
     Act, or under a State health care program (as defined in 
     section 1128(h)) that such person knows or should know is 
     likely to influence such individual to order or receive from 
     a particular provider, practitioner, or supplier any item or 
     service for which payment may be made, in whole or in part, 
     under title XVIII, or a State health care program, other than 
     to influence an individual enrolled in a managed care plan or 
     a point-of-service plan (as defined in section 1128(j)) to 
     receive benefits under the plan in accordance with 
     established practice patterns for the delivery of medically 
     necessary services;''.
       (2) Remuneration defined.--Section 1128A(i) (42 U.S.C. 
     1320a-7a(i)) is amended by adding at the end the following 
     new paragraph:
       ``(6) The term `remuneration' includes the waiver or 
     reduction of coinsurance amounts, and transfers of items or 
     services for free or for other than fair market value, except 
     that such term does not include the waiver or reduction of 
     coinsurance amounts by a person or entity, if--
       ``(A) the waiver or reduction is made pursuant to a public 
     schedule of discounts which the person is obligated as a 
     matter of law to apply to certain individuals,
       ``(B) the waiver or reduction is made pursuant to an 
     established program and applies to a defined group of 
     individuals whose incomes do not exceed 150 percent (or such 
     higher percentage as the Secretary may permit) of the 
     official poverty line (as defined by the Office of Management 
     and Budget, and revised annually in accordance with section 
     673(2) of the Omnibus Budget Reconciliation Act of 1981) 
     applicable to a family of the size involved,
       ``(C) the waiver or reduction of coinsurance is not offered 
     as part of any advertisement or solicitation and the person 
     offering the waiver or reduction determines in good faith 
     that the individual is in financial need,
       ``(D) the person offering the waiver or reduction fails to 
     collect the coinsurance or other payment after making 
     reasonable collection efforts, or
       ``(E) the waiver or reduction of coinsurance is in 
     accordance with a cost sharing schedule or a supplemental 
     benefit package which may be offered by a managed care plan 
     under section 1128(j).''.
       (b) Additional Offenses.--Section 1128A(a) of such Act, as 
     amended by section 15301(a)(1) and subsection (a)(1), is 
     further amended--
       (1) by striking ``or'' at the end of paragraph (4);
       (2) by striking the semicolon at the end of paragraph (5) 
     and inserting ``; or''; and
       (3) by inserting after paragraph (5) the following new 
     paragraphs:
       ``(6) engages in a practice which has the effect of 
     limiting or discouraging (as compared to other plan 
     enrollees) the utilization of medically necessary health care 
     services covered by law or under the service contract by 
     title XIX or other publicly subsidized patients, including 
     but not limited to differential standards for the location 
     and hours of service offered by providers participating in 
     the plan;
       ``(7) substantially fails to cooperate with a quality 
     assurance program or a utilization review activity; or
       ``(8) engaging in a pattern of failing substantially to 
     provide or authorize medically necessary items and services 
     that are required to be provided to an individual covered 
     under a health plan (as defined in section 1128(j)) or public 
     program for the delivery of or payment for health care items 
     or services, if the failure has adversely affected (or had a 
     substantial likelihood of adversely affecting) the 
     individual;''.
       ``(9) submits false or fraudulent statements, data or 
     information on claims to the Secretary, a State health care 
     agency, or any other Federal, State or local agency charged 
     with implementation or oversight of a health plan or a public 
     program that the person knows or should know is 
     fraudulent;''.
       (c) Modifications of Amounts of Penalties and 
     Assessments.--Section 1128A(a) (42 U.S.C. 1320a-7a(a)), as 
     amended by section 15301(a), subsection (a)(1), and 
     subsection (b), is amended in the matter following paragraph 
     (9)--
       (1) by striking ``$2,000'' and inserting ``$10,000'';
       (2) by inserting after ``under paragraph (4), $50,000 for 
     each such violation'' the following: ``; in cases under 
     paragraph (5), $10,000 for each such offer, payment, or 
     transfer; in cases under paragraphs (6) through (9), an 
     amount not to exceed $10,000 for each such determination by 
     the Secretary''; and
       (3) by striking ``twice the amount'' and inserting ``three 
     times the amount''.
       (d) Interest on Penalties.--Section 1128A(f) (42 U.S.C. 
     1320a-7a(f)) is amended by adding after the first sentence 
     the following: ``Interest shall accrue on the penalties and 
     assessments imposed by a final determination of the Secretary 
     in accordance with an annual rate established by the 
     Secretary under the Federal Claims Collection Act. The rate 
     of interest charged shall be the rate in effect on the date 
     the determination becomes final and shall remain fixed at 
     that rate until the entire amount due is paid. In addition, 
     the Secretary is authorized to recover the costs of 
     collection in any case where the penalties and assessments 
     are not paid within 30 days after the determination becomes 
     final, or in the case of a compromised amount, where payments 
     are more than 90 days past due. In lieu of actual costs, the 
     Secretary is authorized to impose a charge of up to 10 
     percent of the amount of penalties and assessments owed to 
     cover the costs of collection.''.
       (e) Authorization To Act.--
       (1) In general.--The first sentence of section 1128A(c)(1) 
     (42 U.S.C. 1320a-7a(c)(1)) is amended by striking all that 
     follows ``(b)'' and inserting the following: ``unless, within 
     one year after the date the Secretary presents a case to the 
     Attorney General for consideration, the Attorney General 
     brings an action in a district court of the United States.''.
       (2) Effective date.--The amendment made by this paragraph 
     (1) shall apply to cases presented by the Secretary of Health 
     and Human Services for consideration on or after the date of 
     the enactment of this Act.
       (f) Clarification of Penalty Imposed on Excluded Provider 
     Furnishing Services.--Section 1128A(a)(1)(D) (42 U.S.C. 
     1320a-7a(a)(1)(D)) is amended by inserting ``who furnished 
     the service'' after ``in which the person''.

     SEC. 15303. PRIVATE RIGHT OF ACTION.

       Section 1128A (42 U.S.C. 1320a-7a) is amended by adding at 
     the end the following new subsection:
       ``(m)(1) Subject to paragraphs (2) and (3), a carrier 
     offering an insured health plan and the sponsor of a self-
     insured health plan that suffers financial harm as a direct 
     result of the submission of claims by an individual or entity 
     for payment for items and services furnished under the plan 
     which makes the individual or entity subject to a civil 
     monetary penalty under this section may, in a civil action 
     against the individual or entity in the United States 
     District Court, obtain damages against the individual or 
     entity and such equitable relief as is appropriate.
       ``(2) A carrier or sponsor may bring a civil action under 
     this subsection only if the carrier or sponsor provides the 
     Secretary and the Attorney General with written notice of the 
     intent to bring an action under this subsection, the 
     identities of the individuals or entities the carrier or 
     sponsor intends to name as defendants to the action, and all 
     information the carrier or sponsor possesses regarding the 
     activity that is the subject of the action that may 
     materially affect the Secretary's decision to initiate a 
     proceeding to impose a civil monetary penalty under this 
     section against the defendants.
       ``(3) A carrier or sponsor may bring a civil action under 
     this subsection only if any of the following conditions are 
     met:
       ``(A) During the 60-day period that begins on the date the 
     Secretary receives the written notice described in paragraph 
     (2), the Secretary does not notify the carrier or sponsor 
     that the Secretary intends to initiate a proceeding to impose 
     a civil monetary penalty under this section against the 
     defendants.
       ``(B) If the Secretary notifies the carrier or sponsor 
     during the 60-day period described in subparagraph (A) that 
     the Secretary intends to initiate a proceeding to impose a 
     civil monetary penalty under this section against the 
     defendants, the Secretary subsequently notifies the carrier 
     or sponsor that the Secretary no longer intends to initiate 
     such a proceeding against the defendants.
       ``(C) After the expiration of the 2-year period that begins 
     on the date the Secretary notifies the carrier or sponsor 
     that the Secretary intends to initiate a proceeding to impose 
     a civil monetary penalty under this section against the 
     defendants, the Secretary has not made a good faith effort to 
     initiate such a proceeding against the defendants.
       ``(4) No action may be brought under this subsection more 
     than 6 years after the date of the activity with respect to 
     which the action is brought.''.

     SEC. 15304. AMENDMENTS TO EXCLUSIONARY PROVISIONS IN FRAUD 
                   AND ABUSE PROGRAM.

       (a) Mandatory Exclusion of Individual Convicted of Criminal 
     Offense Related to Health Care Fraud.--
       (1) In general.--Section 1128(a) (42 U.S.C. 1320a-7(a)) is 
     amended by adding at the end the following new paragraph:
       ``(3) Felony conviction relating to fraud.--Any individual 
     or entity that has been convicted under Federal or State law, 
     in connection with the delivery of a health care item or 
     service on or after January 1, 1997, or with respect to any 
     act or omission on or after such date in a program operated 
     by or financed in whole or in part by any Federal, State, or 
     local government agency, of a criminal offense consisting of 
     a felony relating to fraud, theft, embezzlement, breach of 
     fiduciary responsibility, or other financial misconduct.''.
       (2) Conforming amendment.--Section 1128(b)(1) (42 U.S.C. 
     1320a-7(b)(1)) is amended--
       (A) in the heading, by striking ``Conviction'' and 
     inserting ``Misdemeanor conviction''; and
       (B) by striking ``criminal offense'' and inserting 
     ``criminal offense consisting of a misdemeanor''.
       (b) Establishment of Minimum Period of Exclusion for 
     Certain Individuals and Entities Subject to Permissive 
     Exclusion From Medicare and State Health Care Programs.--

[[Page H 10206]]

       (1) In general.--Section 1128(c)(3) (42 U.S.C. 1320a-
     7(c)(3)) is amended by adding at the end the following new 
     subparagraphs:
       ``(D) In the case of an exclusion of an individual or 
     entity under paragraphs (1), (2), or (3) of subsection (b), 
     the period of exclusion shall be a minimum of 3 years, unless 
     the Secretary determines that an alternative period is 
     appropriate because of aggravating or mitigating 
     circumstances.
       ``(E) In the case of an exclusion of an individual or 
     entity under paragraph (4) or (5) of subsection (b), the 
     period of the exclusion shall not be less than the period 
     during which the individual's or entity's license to provide 
     health care is revoked, suspended, or surrendered, or the 
     individual or the entity is excluded or suspended from a 
     Federal or State health care program.
       ``(F) In the case of an exclusion of an individual or 
     entity under subsection (b)(6)(B), the period of the 
     exclusion shall be not less than 1 year.''.
       (2) Conforming amendment.--Section 1128(c)(3)(A) (42 U.S.C. 
     1320a-7(c)(3)(A)) is amended by striking ``subsection 
     (b)(12)'' and inserting ``paragraph (1), (2), (3), (4), 
     (6)(B), or (12) of subsection (b)''.

     SEC. 15305. SANCTIONS AGAINST PRACTITIONERS AND PERSONS FOR 
                   FAILURE TO COMPLY WITH STATUTORY OBLIGATIONS 
                   RELATING TO QUALITY OF CARE.

       (a) Minimum Period of Exclusion for Practitioners and 
     Persons Failing To Meet Statutory Obligations.--
       (1) In general.--The second sentence of section 1156(b)(1) 
     (42 U.S.C. 1320c-5(b)(1)) is amended by striking ``may 
     prescribe)'' and inserting ``may prescribe, except that such 
     period may not be less than one year)''.
       (2) Conforming amendment.--Section 1156(b)(2) (42 U.S.C. 
     1320c-5(b)(2)) is amended by striking ``shall remain'' and 
     inserting ``shall (subject to the minimum period specified in 
     the second sentence of paragraph (1)) remain''.
       (b) Amount of Civil Money Penalty.--Section 1156(b)(3) (42 
     U.S.C. 1320c-5(b)(3)) is amended by striking ``the actual or 
     estimated cost'' and inserting the following: ``$10,000 for 
     each instance''.
       (c) Repeal of ``Unwilling or Unable'' Condition for 
     Imposition of Sanction.--Section 1156(b)(1) (42 U.S.C. 1320c-
     5(b)(1)) is amended--
       (1) in the second sentence, by striking ``and determines'' 
     and all that follows through ``such obligations,'' and
       (2) by striking the third sentence.

     SEC. 15306. REVISIONS TO CRIMINAL PENALTIES.

       (a) Treble Damages for Criminal Sanctions.--Section 1128B 
     (42 U.S.C. 1320a-7b) is amended by adding at the end the 
     following new subsection:
       ``(f) In addition to the fines that may be imposed under 
     subsection (a) or (c) any individual found to have violated 
     the provisions of any of such subsections may be subject to 
     treble damages.''.
       (b) Identification of Community Service Opportunities.--
     Section 1128B (42 U.S.C. 1320a-7b), as amended by subsection 
     (a), is further amended by adding at the end the following 
     new subsection:
       ``(g) The Secretary shall--
       ``(1) in consultation with State and local health care 
     officials, identify opportunities for the satisfaction of 
     community service obligations that a court may impose upon 
     the conviction of an offense under this section, and
       ``(2) make information concerning such opportunities 
     available to Federal and State law enforcement officers and 
     State and local health care officials.''.

     SEC. 15307. DEFINITIONS.

       Section 1128 (42 U.S.C. 1320a-7) is amended by adding at 
     the end the following new subsection:
       ``(j) Other Definitions Relating to Health Plans.--
       ``(1) Health plan.--The term `health plan' means--
       ``(A) any contract of health insurance, including any 
     hospital or medical service policy or certificate, hospital 
     or medical service plan contract, or health maintenance 
     organization group contract, that is provided by a carrier in 
     a State; or
       ``(B) an employee welfare benefit plan or other arrangement 
     insofar as the plan or arrangement provides health benefits 
     in a State and is funded in a manner other than through the 
     purchase of one or more policies or contracts described in 
     subparagraph (A).
       ``(2) Managed care plan.--The term `managed care plan' 
     means a health plan that provides for items and services 
     covered under the plan primarily through providers in the 
     provider network of the plan.
       ``(3) Point-of-service plan.--The term `point-of-service 
     plan' means a health plan other than a managed care plan that 
     permits an enrollee to receive benefits through a provider 
     network.
       ``(4) Provider network.--The term `provider network' means, 
     with respect to a health plan, providers who have entered 
     into an agreement with the plan under which such providers 
     are obligated to provide items and services covered under the 
     plan to individuals enrolled in the plan.''.

     SEC. 15308. EFFECTIVE DATE.

       The amendments made by this part shall take effect January 
     1, 1997.

      PART 2--INTERPRETIVE RULINGS ON KICKBACKS AND SELF-REFERRAL

     SEC. 15311. ESTABLISHMENT OF PROCESS FOR ISSUANCE OF 
                   INTERPRETIVE RULINGS.

       (a) Establishment.--Not later than 1 year after the date of 
     the enactment of this Act, the Secretary of Health and Human 
     Services (acting through the Inspector General of the 
     Department of Health and Human Services) shall establish a 
     process under which individuals and entities may submit a 
     request to the Secretary for an interpretive ruling regarding 
     the provisions of section 1128B(b) of the Social Security Act 
     or part 3 which relate to kickbacks, bribes, and rebates, or 
     the provisions of section 1877 of the Social Security Act.
       (b) Deadline for Rejection of Request.--If the Secretary of 
     Health and Human Services rejects a request for an 
     interpretive ruling submitted under this section, the 
     Secretary shall notify the individual submitting the request 
     of the rejection not later than 60 days after receiving the 
     request.

     SEC. 15312. EFFECT OF ISSUANCE OF INTERPRETIVE RULING.

       (a) No Legal Effect.--If the Secretary of Health and Human 
     Services issues an interpretive ruling under section 15311, 
     the ruling shall not be binding upon the Secretary, the party 
     requesting the ruling, or any other party.
       (b) Publication of Rulings.--The Secretary of Health and 
     Human Services shall publish each interpretive ruling issued 
     under section 15311 in the Federal Register.

     SEC. 15313. IMPOSITION OF FEES.

       (a) In General.--The Secretary of Health and Human Services 
     shall require an individual or entity requesting an 
     interpretive ruling under section 15311 to submit a fee.
       (b) Amount.--The amount of the fee required under 
     subsection (a) shall be equal to the costs incurred by the 
     Secretary in responding to the request.

    PART 3--DIRECT SPENDING FOR ANTI-FRAUD ACTIVITIES UNDER MEDICARE

     SEC. 15321. DIRECT SPENDING FOR ANTI-FRAUD ACTIVITIES UNDER 
                   MEDICARE.

       Title XVIII (42 U.S.C. 1395 et seq.), as amended by section 
     15224(f), is amended by adding at the end the following new 
     section:


             ``appropriations for combating fraud and abuse

       ``Sec. 1894. (a) Direct Spending for Payment Safeguard 
     Activities.--
       ``(1) In general.--There are appropriated from the Federal 
     Hospital Insurance Trust Fund and the Federal Supplementary 
     Medical Insurance Trust Fund for each fiscal year such 
     amounts as are necessary to carry out the payment safeguard 
     activities described in paragraph (2), subject to paragraph 
     (3).
       ``(2) Activities described.--The payment safeguard 
     activities described in this paragraph are as follows:
       ``(A) Review of activities of providers of services or 
     other individuals and entities furnishing items and services 
     for which payment may be made under this title (including 
     skilled nursing facilities and home health agencies), 
     including medical and utilization review and fraud review.
       ``(B) Audit of cost reports.
       ``(C) Determinations as to whether payment should not be, 
     or should not have been, made under this title by reason of 
     section 1862(b), and recovery of payments that should not 
     have been made.
       ``(D) Education of providers of services, beneficiaries, 
     and other persons with respect to payment integrity and 
     benefit quality assurance issues.
       ``(3) Amounts specified.--The amount appropriated under 
     paragraph (1) for a fiscal year is as follows:
       ``(A) For fiscal year 1996, such amount shall be not less 
     than $430,000,000 and not more than $440,000,000.
       ``(B) For fiscal year 1997, such amount shall be not less 
     than $490,000,000 and not more than $500,000,000.
       ``(C) For fiscal year 1998, such amount shall be not less 
     than $550,000,000 and not more than $560,000,000.
       ``(D) For fiscal year 1999, such amount shall be not less 
     than $620,000,000 and not more than $630,000,000.
       ``(E) For fiscal year 2000, such amount shall be not less 
     than $670,000,000 and not more than $680,000,000.
       ``(F) For fiscal year 2001, such amount shall be not less 
     than $690,000,000 and not more than $700,000,000.
       ``(G) For fiscal year 2002, such amount shall be not less 
     than $710,000,000 and not more than $720,000,000.
       ``(b) Direct Spending for Medicare-Related Activities of 
     Inspector General.--
       ``(1) In general.--There are appropriated from the Federal 
     Hospital Insurance Trust Fund and the Federal Supplementary 
     Medical Insurance Trust Fund to the Inspector General of the 
     Department of Health and Human Services for each fiscal year 
     such amounts as are necessary to enable the Inspector General 
     to carry out activities relating to the medicare program (as 
     described in paragraph (2)), subject to paragraph (3).
       ``(2) Activities described.--The activities described in 
     this paragraph are as follows:
       ``(A) Prosecuting medicare-related matters through 
     criminal, civil, and administrative proceedings.
       ``(B) Conducting investigations relating to the medicare 
     program.
       ``(C) Performing financial and performance audits of 
     programs and operations relating to the medicare program.
       ``(D) Performing inspections and other evaluations relating 
     to the medicare program.

[[Page H 10207]]

       ``(E) Conducting provider and consumer education activities 
     regarding the requirements of this title.
       ``(3) Amounts specified.--The amount appropriated under 
     paragraph (1) for a fiscal year is as follows:
       ``(A) For fiscal year 1996, such amount shall be 
     $130,000,000.
       ``(B) For fiscal year 1997, such amount shall be 
     $181,000,000.
       ``(C) For fiscal year 1998, such amount shall be 
     $204,000,000.
       ``(D) For each subsequent fiscal year, the amount 
     appropriated for the previous fiscal year, increased by the 
     percentage increase in aggregate expenditures under this 
     title for the fiscal year involved over the previous fiscal 
     year.
       ``(c) Allocation of Payments Among Trust Funds.--The 
     appropriations made under subsection (a) and subsection (b) 
     shall be in an allocation as reasonably reflects the 
     proportion of such expenditures associated with part A and 
     part B.''.

   PART 4--PREEMPTION OF STATE CORPORATE PRACTICE LAWS UNDER MEDICARE

     SEC. 15331. PREEMPTION OF STATE LAWS PROHIBITING CORPORATE 
                   PRACTICE OF MEDICINE FOR PURPOSES OF MEDICARE.

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


            ``permitting corporations to serve as providers

       ``Sec. 1893. The Secretary may not refuse to treat any 
     individual or entity as a provider of services under this 
     title or refuse to make payment under this title to the 
     individual or entity on the grounds that the individual or 
     entity is prohibited from practicing medicine under a 
     provision of State or local law which prohibits a corporation 
     from practicing medicine.''.

            PART 5--MEDICARE ANTI-FRAUD AND ABUSE COMMISSION

     SEC. 15341. ESTABLISHMENT OF MEDICARE ANTI-FRAUD AND ABUSE 
                   COMMISSION

       (a) In General.--There is established a commission to be 
     known as the ``Medicare Anti-Fraud and Abuse Commission'' (in 
     this title referred to as the ``Commission'').
       (b) Composition.--The Commission shall be composed of 8 
     members as follows:
       (1) Officials.--
       (A) The Secretary of Health and Human Services (or the 
     Secretary's designee).
       (B) The Inspector General of the Department of Health and 
     Human Services (or the Inspector General's designee).
       (C) The Administrator of the Health Care Financing 
     Administration (or the Administrator's designee).
       (2) Public members.--Five members, appointed by the 
     President, of which--
       (A) one shall be a representative of physicians;
       (B) one shall be a representative of hospital 
     administrators;
       (C) one shall be a representative of medicare carriers;
       (D) one shall be a representative of medicare peer review 
     organizations; and
       (E) one shall be a representative of medicare 
     beneficiaries.

     In making appointments under this paragraph of an individual 
     who is a representative of persons or organizations, the 
     President shall consider the recommendations of national 
     organizations that represent such persons or organizations. 
     The President shall report to Congress, within 90 days after 
     the date of the enactment of this Act, the names of the 
     members appointed under this paragraph.
       (c) Terms.--Each member shall be appointed for the life of 
     the Commission. A vacancy in the Commission shall be filled 
     in the manner in which the original appointment was made.

     SEC. 15342. FUNCTIONS OF COMMISSION.

       (a) In General.--The Commission shall--
       (1) investigate the nature, magnitude, and cost of health 
     care fraud and abuse in the medicare program, and
       (2) identify and develop the most effective methods of 
     preventing, detecting, and prosecuting or litigating such 
     fraud and abuse, with particular emphasis on coordinating 
     public and private prevention, detection, and enforcement 
     efforts.
       (b) Particulars.--Among other items, the Commission shall 
     examine at least the following:
       (1) Mechanisms to provide greater standardization of claims 
     administration in order to accommodate fraud prevention and 
     detection.
       (2) Mechanisms to allow more freedom of the medicare 
     program to exchange information for coordinating case 
     development and prosecution or litigation efforts, without 
     undermining patient and provider privacy protections or 
     violating anti-trust laws.
       (3) Criteria for physician referrals to facilities in which 
     they (or family members) have a financial interest.
       (4) The availability of resources to the medicare program 
     to combat fraud and abuse.
       (c) Report.--After approval by a majority vote, a quorum 
     being present, the Commission shall transmit to Congress a 
     report on its activities. The report shall be transmitted not 
     later than 18 months after the date that a majority of the 
     public members of the Commission have been appointed. The 
     report shall contain a detailed statement of the Commission's 
     findings, together with such recommendations as the 
     Commission considers appropriate.

     SEC. 15343. ORGANIZATION AND COMPENSATION.

       (a) Organization.--
       (1) Quorum.--A majority of the members of the Commission 
     shall constitute a quorum but a lesser number may hold 
     hearings.
       (2) Chairman.--The Commission shall elect one of its 
     members to serve as chairman of the Commission.
       (3) Meetings.--The Commission shall meet at the call of the 
     chairman or a majority of its members. Meetings of the 
     Commission are open to the public under section 10(a)(10) of 
     the Federal Advisory Committee Act, except that the 
     Commission may conduct meetings in executive session but only 
     if a majority of the members of the Commission (a quorum 
     being present) approve going into executive session.
       (b) Compensation of Members.--Members of the Commission 
     shall serve without compensation, but shall be reimbursed for 
     travel, subsistence, and other necessary expenses incurred in 
     the performance of their duties as members of the Commission.

     SEC. 15344. STAFF OF COMMISSION.

       (a) In General.--The Commission may appoint and fix the 
     compensation of a staff director and such other additional 
     personnel as may be necessary to enable the Commission to 
     carry out its functions, without regard to the laws, rules, 
     and regulations governing appointment and compensation and 
     other conditions of service in the competitive service.
       (b) Detail of Federal Employees.--Upon request of the 
     chairman, any Federal employee who is subject to such laws, 
     rules, and regulations, may be detailed to the Commission to 
     assist it in carrying out its functions under this title, and 
     such detail shall be without interruption or loss of civil 
     service status or privilege.
       (c) Experts and Consultants.--The Commission may procure 
     temporary and intermittent services under section 3109(b) of 
     title 5, United States Code, but at rates for individuals not 
     to exceed the daily equivalent of 120 percent of the maximum 
     annual rate of basic pay payable for GS-15 of the General 
     Schedule.

     SEC. 15345. AUTHORITY OF COMMISSION.

       (a) Hearings and Sessions.--The Commission may, for the 
     purpose of carrying out this title, hold hearings, sit and 
     act at times and places, take testimony, and receive evidence 
     as the Commission considers appropriate. The Commission may 
     administer oaths or affirmations to witnesses appearing 
     before it.
       (b) Obtaining Official Data.--
       (1) In general.--The Commission may secure directly from 
     any department or agency of the United States information 
     necessary to enable it to carry out this title. Upon request 
     of the chairman of the Commission, the head of that 
     department or agency shall furnish that information to the 
     Commission.
       (2) Access to information.--Information obtained by the 
     Commission is available to the public in the same manner in 
     which information may be made available under sections 552 
     and 552a of title 5, United States Code.
       (c) Gifts, Bequests, and Devises.--The Commission may 
     accept, use, and dispose of gifts, bequests, or devises of 
     services or property for the purpose of aiding or 
     facilitating the work of the Commission.
       (d) Mails.--The Commission may use the United States mails 
     in the same manner and under the same conditions as other 
     departments and agencies of the United States.
       (e) Administrative Support Services.--Upon the request of 
     the Commission, the Administrator of General Services shall 
     provide to the Commission, on a reimbursable basis, the 
     administrative support services necessary for the Commission 
     to carry out its responsibilities under this title.
       (f) Subpoena Power.--
       (1) In general.--The Commission may issue subpoenas 
     requiring the attendance and testimony of witnesses and the 
     production of any evidence relating to any matter which the 
     Commission is authorized to investigate under this title. The 
     attendance of witnesses and the production of evidence may be 
     required from any place within the United States at any 
     designated place of hearing within the United States.
       (2) Failure to obey a subpoena.--If a person refuses to 
     obey a subpoena issued under paragraph (1), the Commission 
     may apply to a United States district court for an order 
     requiring that person to appear before the Commission to give 
     testimony, produce evidence, or both, relating to the matter 
     under investigation. The application may be made within the 
     judicial district where the hearing is conducted or where 
     that person is found, resides, or transacts business. Any 
     failure to obey the order of the court may be punished by the 
     court as civil contempt.
       (3) Service of subpoenas.--The subpoenas of the Commission 
     shall be served in the manner provided for subpoenas issued 
     by a United States district court under the Federal Rules of 
     Civil Procedure for the United States district courts.
       (4) Service of process.--All process of any court to which 
     application is to be made under paragraph (2) may be served 
     in the judicial district in which the person required to be 
     served resides or may be found.

     SEC. 15346. TERMINATION.

       The Commission shall terminate 90 days after the date the 
     report is submitted under section 15342(c).
     
[[Page H 10208]]


     SEC. 15347. AUTHORIZATION OF APPROPRIATIONS.

       There are authorized to be appropriated to the Commission 
     such sums as are necessary to carry out its functions, to 
     remain available until expended.

                               H.R. 2425

                         Offered By: Mr. Rangel

               (Amendment in the Nature of a Substitute)

       Amendment No. 3: Strike all after the enacting clause and 
     insert the following:

                           TITLE XV--MEDICARE

     SEC. 15001. COMMISSION ON THE FUTURE OF MEDICARE AND THE 
                   PROTECTION OF THE HEALTH OF THE NATION'S SENIOR 
                   CITIZENS.

       (a) Establishment.--There is established a commission to be 
     known as the Commission on the Future of Medicare and the 
     Protection of the Health of the Nation's Senior Citizens (in 
     this section referred to as the `'Commission'').
       (b) Duties.--
       (1) In general.--The Commission shall--
       (A) analyze indicators of the health status of individuals 
     in the United States who are eligible for benefits under the 
     medicare program;
       (B) make specific recommendations on actions which may be 
     taken to improve the medicare program which would promote the 
     health of medicare beneficiaries;
       (C) analyze the effect of changes in the medicare program 
     (including changes in medicare payments) on the access to and 
     delivery of health care services to individuals who are not 
     medicare beneficiaries;
       (D) examine the financial impact on the medicare program of 
     the significant increase in the number of medicare eligible 
     individuals which will occur beginning approximately during 
     2010 and lasting for approximately 25 years, and
       (E) make specific recommendations to the Congress 
     respecting a comprehensive approach to preserve the medicare 
     program for the period during which such individuals are 
     eligible for medicare.
       (2) Considerations in making recommendations.--In making 
     its recommendations, the Commission shall consider the 
     following:
       (A) The amount and sources of Federal funds to finance the 
     medicare program.
       (B) The most efficient and effective manner of 
     administering the program.
       (C) Methods used by other nations to finance the delivery 
     of health care services to their citizens.
       (D) The financial impact on the medicare program of 
     increases in the number of individuals in the United States 
     without health insurance coverage.
       (c) Membership.--
       (1) Appointment.--The Commission shall be composed of 15 
     members appointed as follows:
       (A) The President shall appoint 3 members.
       (B) The Majority Leader of the Senate shall appoint 3 
     members.
       (C) The Minority Leader of the Senate shall appoint 3 
     members.
       (D) The Speaker of the House of Representatives shall 
     appoint 3 members.
       (E) The Minority Leader of the House of Representatives 
     shall appoint 3 members.
       (2) Chairman and vice chairman.--The Commission shall elect 
     a Chairman and Vice Chairman from among its members.
       (3) Vacancies.--Any vacancy in the membership of the 
     Commission shall be filled in the manner in which the 
     original appointment was made and shall not affect the power 
     of the remaining members to execute the duties of the 
     Commission.
       (4) Quorum.--A quorum shall consist of 8 members of the 
     Commission, except that 4 members may conduct a hearing under 
     subsection (e).
       (5) Meetings.--The Commission shall meet at the call of its 
     Chairman or a majority of its members.
       (6) Compensation and reimbursement of expenses.--Members of 
     the Commission are not entitled to receive compensation for 
     service on the Commission. Members may be reimbursed for 
     travel, subsistence, and other necessary expenses incurred in 
     carrying out the duties of the Commission.
       (d) Staff and Consultants.--
       (1) Staff.--The Commission may appoint and determine the 
     compensation of such staff as may be necessary to carry out 
     the duties of the Commission. Such appointments and 
     compensation may be made without regard to the provisions of 
     title 5, United States Code, that govern appointments in the 
     competitive services, and the provisions of chapter 51 and 
     subchapter III of chapter 53 of such title that relate to 
     classifications and the General Schedule pay rates.
       (2) Consultants.--The Commission may procure such temporary 
     and intermittent services of consultants under section 
     3109(b) of title 5, United States Code, as the Commission 
     determines to be necessary to carry out the duties of the 
     Commission.
       (e) Powers.--
       (1) Hearings and other activities.--For the purpose of 
     carrying out its duties, the Commission may hold such 
     hearings and undertake such other activities as the 
     Commission determines to be necessary to carry out its 
     duties.
       (2) Studues by gao.--Upon the request of the Commission, 
     the Comptroller General shall conduct such studies or 
     investigations as the Commission determines to be necessary 
     to carry out its duties.
       (3) Cost estimates by congressional budget office.--
       (A) Upon the request of the Commission, the Director of the 
     Congressional Budget Office shall provide to the Commission 
     such cost estimates as the Commission determines to be 
     necessary to carry out its duties.
       (B) The Commission shall reimburse the Director of the 
     Congressional Budget Office for expenses relating to the 
     employment in the office of the Director of such additional 
     staff as may be necessary for the Director to comply with 
     requests by the Commission under subparagraph (A).
       (4) Detail of federal employees.--Upon the request of the 
     Commission, the head of any Federal agency is authorized to 
     detail, without reimbursement, any of the personnel of such 
     agency to the Commission to assist the Commission in carrying 
     out its duties. Any such detail shall not interrupt or 
     otherwise affect the civil service status or privileges of 
     the Federal employee.
       (5) Technical assistance.--Upon the request of the 
     Commission, the head of a Federal agency shall provide such 
     technical assistance to the Commission as the Commission 
     determines to be necessary to carry out its duties.
       (6) Use of mails.--The Commission may use the United States 
     mails in the same manner and under the same conditions as 
     Federal agencies and shall, for purposes of the frank, be 
     considered a commission of Congress as described in section 
     3215 of title 39, United States Code.
       (7) Obtaining information.--The Commission may secure 
     directly from any Federal agency information necessary to 
     enable it to carry out its duties, if the information may be 
     disclosed under section 552 of title 5, United States Code. 
     Upon request of the Chairman of the Commission, the head of 
     such agency shall furnish such information to the Commission.
       (8) Administrative support services.--Upon the request of 
     the Commission, the Administrator of General Services shall 
     provide to the Commission on a reimbursable basis such 
     administrative support services as the Commission may 
     request.
       (9) Acceptance of donations.--The Commission may accept, 
     use, and dispose of gifts or donations of services or 
     property.
       (10) Printing.--For purposes of costs relating to printing 
     and binding, including the cost of personnel detailed from 
     the Government Printing Office, the Commission shall be 
     deemed to be a committee of the Congress.
       (f) Report.--Not later than May 1, 1997, the Commission 
     shall submit to Congress a report containing its findings and 
     recommendations regarding how to protect and preserve the 
     medicare program in a financially solvent manner until 2030 
     (or, if later, throughout the period of projected solvency of 
     the Federal Old-Age and Survivors Insurance Trust Fund). The 
     report shall include detailed recommendations for appropriate 
     legislative initiatives respecting how to accomplish this 
     objective.
       (g) Termination.--The Commission shall terminate 60 days 
     after the date of submission of the report required in 
     subsection (f).
       (h) Authorization of Appropriations.--There are authorized 
     to be appropriated $1,500,000 to carry out this section. 
     Amounts appropriated to carry out this section shall remain 
     available until expended.

     SEC. 15002. LIMITATION ON TAX BENEFITS; APPROPRIATION OF 
                   SAVINGS TO MEDICARE PART A TRUST FUND.

       (a) In General.--Notwithstanding any other provision of 
     law--
       (1) the reduction in a taxpayer's net tax liability for any 
     taxable period or event by reason of a provision referred to 
     in subsection (c) shall not exceed the applicable fraction of 
     the amount of such reduction (determined without regard to 
     this section), and
       (2) any increase in such liability for any taxable period 
     or event by reason of such a provision shall not exceed the 
     applicable fraction of such increase (determined without 
     regard to this section).
       (b) Applicable Fraction.--For purposes of subsection (a), 
     the term ``applicable fraction'' means \155/245\.
       (c) Provisions.--The provisions referred to in this 
     subsection are any provision of this Act or of any Act 
     hereafter enacted which is the same as or comparable to any 
     provision contained in subtitle A, B, C, or D of title VI of 
     H.R. 1215 of the 104th Congress, as passed by the House of 
     Representatives.
       (d) Net Tax Liability.--For purposes of subsection (a), the 
     term ``net tax liability'' means the liability for tax under 
     the Internal Revenue Code of 1986 determined--
       (1) after the application of any credit against such tax 
     other than the credits under sections 31, 33, and 34, and
       (2) in the case of tax imposed by chapter 1 of such Code, 
     before crediting any payment of estimated tax.
       (e) Appropriation of Savings to Medicare Part A Trust 
     Fund.--There are hereby appropriated to the Federal Hospital 
     Insurance Trust Fund established pursuant to section 1817 of 
     the Social Security Act amounts equal to the aggregate 
     increase in tax liabilities under chapter 1 of the Internal 
     Revenue Code of 1986 which is attributable to the application 
     of subsection (a). Such appropriated amounts shall be 
     transferred from the general fund of the Treasury on the 
     basis of estimates of such tax liabilities made by the 
     Secretary of the Treasury. Transfers shall be made pursuant 
     to a schedule made by the Secretary of the Treasury that 
     takes into account estimated timing of collection of such 
     liabilities.